Quarterly Report (10-q)

Date : 08/12/2019 @ 10:01AM
Source : Edgar (US Regulatory)
Stock : Fulgent Genetics Inc (FLGT)
Quote : 13.57  -0.07 (-0.51%) @ 1:00AM
Fulgent Genetics share price Chart

Quarterly Report (10-q)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                              to                             

Commission File Number: 001-37894

 

FULGENT GENETICS, INC.

(exact name of registrant as specified in its charter)

 

 

Delaware

81-2621304

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

4978 Santa Anita Avenue, Suite 205

Temple City, CA

91780

(Address of principal executive offices)

(Zip Code)

(626) 350-0537

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

 

FLGT

 

The Nasdaq Stock Market 
(Nasdaq Global Market)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes       No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes       No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes       No  

As of August 1, 2019, there were 18,421,792 outstanding shares of the registrant’s common stock.

 

 

 

 


 

Table of Contents

 

 

 

 

 

 

i


 

PART I—FINANCIA L INFORMATION

Item 1. Financial Statements.

FULGENT GENETICS, INC.

Condensed Consolidated Balance Sheets

(in thousands, except par value data)

(unaudited)

 

 

June 30,

 

 

December 31,

 

 

2019

 

 

2018

 

Assets

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash and cash equivalents

$

9,165

 

 

$

6,736

 

Marketable securities

 

17,820

 

 

 

24,298

 

Trade accounts receivable, net of allowance for doubtful accounts of $585 and $590, as of

  June 30, 2019 and December 31, 2018, respectively

 

5,543

 

 

 

5,948

 

Other current assets

 

2,267

 

 

 

2,561

 

Total current assets

 

34,795

 

 

 

39,543

 

Marketable securities, long-term

 

11,697

 

 

 

6,386

 

Equity method investments

 

1,084

 

 

 

1,512

 

Fixed assets, net

 

5,937

 

 

 

6,446

 

Operating lease right-of-use asset

 

2,756

 

 

 

 

Other long-term assets

 

167

 

 

 

17

 

Total assets

$

56,436

 

 

$

53,904

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Accounts payable

$

1,175

 

 

$

1,313

 

Accrued liabilities

 

1,333

 

 

 

1,425

 

Operating lease liabilities, short-term

 

401

 

 

 

 

Total current liabilities

 

2,909

 

 

 

2,738

 

Operating lease liabilities, long-term

 

2,385

 

 

 

 

Other long-term liabilities

 

 

 

 

14

 

Total liabilities

 

5,294

 

 

 

2,752

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

Common stock, $0.0001 par value per share, 50,000 shares authorized, 18,393 and 18,172

   shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively

 

2

 

 

 

2

 

Preferred stock, $0.0001 par value per share, 1,000 shares authorized, no shares issued or

   outstanding at June 30, 2019 and December 31, 2018

 

 

 

 

 

Additional paid-in capital

 

115,532

 

 

 

114,203

 

Accumulated other comprehensive income (loss)

 

203

 

 

 

(35

)

Accumulated deficit

 

(64,595

)

 

 

(63,018

)

Total stockholders’ equity

 

51,142

 

 

 

51,152

 

Total liabilities and stockholders’ equity

$

56,436

 

 

$

53,904

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

1


 

FULGENT GENETICS, INC.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenue

$

8,424

 

 

$

5,400

 

 

$

13,794

 

 

$

10,053

 

Cost of revenue

 

3,620

 

 

 

2,544

 

 

 

6,588

 

 

 

5,316

 

Gross profit

 

4,804

 

 

 

2,856

 

 

 

7,206

 

 

 

4,737

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

1,574

 

 

 

1,212

 

 

 

2,998

 

 

 

2,670

 

Selling and marketing

 

1,304

 

 

 

1,279

 

 

 

2,576

 

 

 

2,409

 

General and administrative

 

1,631

 

 

 

1,366

 

 

 

3,160

 

 

 

2,853

 

Total operating expenses

 

4,509

 

 

 

3,857

 

 

 

8,734

 

 

 

7,932

 

Operating income (loss)

 

295

 

 

 

(1,001

)

 

 

(1,528

)

 

 

(3,195

)

Interest and other income, net

 

192

 

 

 

98

 

 

 

399

 

 

 

193

 

Income (loss) before income taxes and equity loss in investee

 

487

 

 

 

(903

)

 

 

(1,129

)

 

 

(3,002

)

Provision for (benefit from) income taxes

 

7

 

 

 

(100

)

 

 

20

 

 

 

(534

)

Income (loss) before equity loss in investee

 

480

 

 

 

(803

)

 

 

(1,149

)

 

 

(2,468

)

Equity loss in investee

 

(149

)

 

 

(246

)

 

 

(428

)

 

 

(491

)

Net income (loss)

$

331

 

 

$

(1,049

)

 

$

(1,577

)

 

$

(2,959

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.02

 

 

$

(0.06

)

 

$

(0.09

)

 

$

(0.17

)

Diluted

$

0.02

 

 

$

(0.06

)

 

$

(0.09

)

 

$

(0.17

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

18,343

 

 

 

17,919

 

 

 

18,286

 

 

 

17,891

 

Diluted

 

19,021

 

 

 

17,919

 

 

 

18,286

 

 

 

17,891

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

2


 

FULGENT GENETICS, INC.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income (loss)

$

331

 

 

$

(1,049

)

 

$

(1,577

)

 

$

(2,959

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation gain (loss)

 

(14

)

 

 

(43

)

 

 

1

 

 

 

(21

)

Net unrealized gain (loss) on marketable securities, net of tax

 

122

 

 

 

48

 

 

 

237

 

 

 

(17

)

Comprehensive income (loss)

$

439

 

 

$

(1,044

)

 

$

(1,339

)

 

$

(2,997

)

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


 

FULGENT GENETICS, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands)

(unaudited)

 

 

 

Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional

Paid-In Capital

 

 

Accumulated

Other Comprehensive

Income (Loss)

 

 

Accumulated

Deficit

 

 

Total

Equity

 

Balance at March 31, 2019

 

 

18,286

 

 

$

2

 

 

$

114,790

 

 

$

95

 

 

$

(64,926

)

 

$

49,961

 

Equity-based compensation

 

 

 

 

 

 

 

 

737

 

 

 

 

 

 

 

 

 

737

 

Exercise of common stock options

 

 

15

 

 

 

 

 

 

5

 

 

 

 

 

 

 

 

 

5

 

Restricted stock awards

 

 

92

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive gain, net

 

 

 

 

 

 

 

 

 

 

 

108

 

 

 

 

 

 

108

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

331

 

 

 

331

 

Balance at June 30, 2019

 

 

18,393

 

 

$

2

 

 

$

115,532

 

 

$

203

 

 

$

(64,595

)

 

$

51,142

 

 

 

 

Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional

Paid-In Capital

 

 

Accumulated

Other Comprehensive

Income (Loss)

 

 

Accumulated

Deficit

 

 

Total

Equity

 

Balance at March 31, 2018

 

 

17,876

 

 

 

2

 

 

 

112,431

 

 

 

(87

)

 

 

(59,321

)

 

 

53,025

 

Equity-based compensation

 

 

 

 

 

 

 

 

573

 

 

 

 

 

 

 

 

 

573

 

Exercise of common stock options

 

 

18

 

 

 

 

 

 

7

 

 

 

 

 

 

 

 

 

7

 

Restricted stock awards

 

 

69

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive gain, net

 

 

 

 

 

 

 

 

 

 

 

5

 

 

 

 

 

 

5

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,049

)

 

 

(1,049

)

Balance at June 30, 2018

 

 

17,963

 

 

 

2

 

 

 

113,011

 

 

$

(82

)

 

$

(60,370

)

 

$

52,561

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4


 

FULGENT GENETICS, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands)

(unaudited)

 

 

 

Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional

Paid-In Capital

 

 

Accumulated

Other Comprehensive

Income (Loss)

 

 

Accumulated

Deficit

 

 

Total

Equity

 

Balance at December 31, 2018

 

 

18,172

 

 

$

2

 

 

$

114,203

 

 

$

(35

)

 

$

(63,018

)

 

$

51,152

 

Equity-based compensation

 

 

 

 

 

 

 

 

1,320

 

 

 

 

 

 

 

 

 

1,320

 

Exercise of common stock options

 

 

24

 

 

 

 

 

 

9

 

 

 

 

 

 

 

 

 

9

 

Restricted stock awards

 

 

197

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss, net

 

 

 

 

 

 

 

 

 

 

 

238

 

 

 

 

 

 

238

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,577

)

 

 

(1,577

)

Balance at June 30, 2019

 

 

18,393

 

 

$

2

 

 

$

115,532

 

 

$

203

 

 

$

(64,595

)

 

$

51,142

 

 

 

 

Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional

Paid-In Capital

 

 

Accumulated

Other Comprehensive

Loss

 

 

Accumulated

Deficit

 

 

Total

Equity

 

Balance at December 31, 2017

 

 

17,847

 

 

$

2

 

 

$

111,884

 

 

$

(44

)

 

$

(57,664

)

 

$

54,178

 

Equity-based compensation

 

 

 

 

 

 

 

 

1,118

 

 

 

 

 

 

 

 

 

1,118

 

Exercise of common stock options

 

 

23

 

 

 

 

 

 

9

 

 

 

 

 

 

 

 

 

9

 

Restricted stock awards

 

 

93

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cumulative effect of accounting

   change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

327

 

 

 

327

 

Cumulative tax effect of accounting

   change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(74

)

 

 

(74

)

Other comprehensive income, net

 

 

 

 

 

 

 

 

 

 

 

(38

)

 

 

 

 

 

(38

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,959

)

 

 

(2,959

)

Balance at June 30, 2018

 

 

17,963

 

 

$

2

 

 

$

113,011

 

 

$

(82

)

 

$

(60,370

)

 

$

52,561

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5


 

FULGENT GENETICS, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

2018

 

Cash flow from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(1,577

)

 

$

(2,959

)

Adjustments to reconcile net loss to net cash provided by (used in)

   operating activities:

 

 

 

 

 

 

 

 

Equity-based compensation

 

 

1,320

 

 

 

1,118

 

Depreciation

 

 

1,046

 

 

 

1,078

 

Noncash lease expense

 

 

201

 

 

 

 

Loss on disposal of fixed asset

 

 

11

 

 

 

55

 

Amortization of premium of marketable securities

 

 

44

 

 

 

160

 

Provision for bad debt

 

 

 

 

 

230

 

Deferred taxes

 

 

 

 

 

(535

)

Equity loss in investee

 

 

428

 

 

 

491

 

Other

 

 

38

 

 

 

38

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

368

 

 

 

(990

)

Other current and long-term assets

 

 

183

 

 

 

22

 

Accounts payable

 

 

(124

)

 

 

(1,344

)

Accrued liabilities

 

 

(20

)

 

 

1,288

 

Operating lease liabilities

 

 

(188

)

 

 

 

Net cash provided by (used in) operations

 

 

1,730

 

 

 

(1,348

)

Cash flow from investing activities:

 

 

 

 

 

 

 

 

Purchases of fixed assets

 

 

(633

)

 

 

(1,152

)

Purchase of marketable securities

 

 

(10,178

)

 

 

(11,470

)

Maturities of marketable securities

 

 

11,500

 

 

 

11,656

 

Purchase of equipment contributed to Equity Method Investee

 

 

 

 

 

(510

)

Net cash (used in) provided by investing activities

 

 

689

 

 

 

(1,476

)

Cash flow from financing activities:

 

 

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

9

 

 

 

9

 

Net cash provided by financing activities

 

 

9

 

 

 

9

 

Effect of exchange rate changes on cash and cash equivalents

 

 

1

 

 

 

(21

)

Net decrease in cash

 

 

2,429

 

 

 

(2,836

)

Cash balance at beginning of period

 

 

6,736

 

 

 

6,490

 

Cash balance at end of period

 

$

9,165

 

 

$

3,654

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Income taxes paid

 

$

20

 

 

$

1

 

Supplemental disclosures of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Fixed assets included in accounts payable

 

$

5

 

 

$

1,011

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

6


 

FULGENT GENETICS, INC.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

 

Note 1. Overview and Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). These financial statements include the assets, liabilities, revenues and expenses of all wholly-owned subsidiaries and entities in which the Company has a controlling financial interest or is deemed to be the primary beneficiary. In determining whether the Company is the primary beneficiary of an entity, the Company applies a qualitative approach that determines whether it has both (1) the power to direct the economically significant activities of the entity and (2) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to that entity. The Company uses the equity method to account for its investments in entities that it does not control, but in which it has the ability to exercise significant influence over operating and financial policies. All significant intercompany accounts and transactions are eliminated from the accompanying condensed consolidated financial statements.

Nature of the Business

Fulgent Genetics, Inc., together with its subsidiaries (collectively referred to as the “Company,” unless otherwise noted or the context otherwise requires), is a growing technology company offering comprehensive genetic testing and providing physicians with clinically actionable diagnostic information they can use to improve the quality of patient care. The Company has developed a proprietary technology platform that allows us to offer a broad and flexible test menu and continually expand and improve its proprietary genetic reference library, while maintaining accessible pricing, high accuracy and competitive turnaround times. Combining next generation sequencing, or NGS, with our technology platform, the Company performs full-gene sequencing with deletion/duplication analysis in single-gene tests; pre-established, multi-gene, disease-specific panels; and customized panels that can be tailored to meet specific customer needs. The Company believes its test menu offers more genes for testing than its competitors in today’s market, which enables it to provide expansive options for test customization and clinically actionable results. A cornerstone of the Company’s business is its ability to provide expansive options and flexibility for all clients’ unique genetic testing needs.

Unaudited Interim Financial Information

The accompanying unaudited interim condensed consolidated financial statements have been prepared on the same basis as the Company’s audited consolidated financial statements as of and for the fiscal year ended December 31, 2018, which are included in the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission on March 22, 2019 (the “2018 Annual Report”), and, in the opinion of management, include all adjustments, which are normal and recurring in nature , necessary for a fair presentation of the Company’s financial position and results of operations. Operating results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year or any other period. The accompanying condensed consolidated balance sheet as of December 31, 2018 has been derived from the Company’s audited consolidated financial statements at that date but does not include all of the disclosures required by U.S. GAAP. As such, the information included in this quarterly report on Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements included in the 2018 Annual Report, including the notes thereto.

 

 

 

Note 2. Summary of Significant Accounting Policies

See the summary of the Company’s significant accounting policies set forth in the notes to its consolidated financial statements included in the 2018 Annual Report.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting periods. These estimates, judgments and assumptions are based on historical data and experience available at the date of the accompanying condensed consolidated financial statements, as well as various other factors management believes to be reasonable under the circumstances. Actual results could differ from these estimates.

On an on-going basis, management evaluates its estimates, primarily those related to: (i) revenue recognition criteria, (ii) accounts receivable and allowances for doubtful accounts, (iii) the useful lives of fixed assets, (iv) estimates of tax liabilities and (v) equity method investments.

7


 

Foreign Currency Translation and Foreign Currency Transactions

The Company translates the assets and liabilities of its non-U.S. dollar functional currency subsidiaries into U.S. dollars using exchange rates in effect at the end of each period. Expenses for these subsidiaries are translated using rates that approximate those in effect during the period. Gains and losses from these translations are recognized in foreign currency translation included in other comprehensive income (loss) in the accompanying condensed consolidated statements of stockholders’ equity. Gains and losses from these translations were not significant in the first six months of 2019 and 2018. The Company and its subsidiaries that use the U.S. dollar as their functional currency remeasure monetary assets and liabilities at exchange rates in effect at the end of each period, and inventories, property and nonmonetary assets and liabilities at historical rates. Losses from these remeasurements were not significant in the first six months of 2019 and 2018.

Leases

The Company determines if an arrangement is a lease at inception. Operating leases are included as operating lease right-of-use (“ROU”) assets, operating lease liabilities, short-term, and operating lease liabilities, long-term, on the Company’s condensed consolidated balance sheets.

ROU lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating ROU lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term, including options to extend the lease when it is reasonably certain that the Company will exercise that option. The Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments since our leases do not provide an implicit rate. The ROU lease asset includes any base rent payments made and excludes lease incentives and variable operating expenses. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Concentration of Customers

In certain periods, a small number of customers has accounted for a significant portion of the Company’s revenue. In the three months ended June 30, 2019 , after aggregating customers that are under common control or are affiliates, two customers contributed 32% and 15%, respectively, of our revenue for the period. In the six months ended June 30, 2019, after aggregating customers that are under common control or are affiliates, two customers contributed 27% and 10%, respectively, of our revenue for the period. In the three and six months ended June 30, 2018 , after aggregating customers that are under common control or are affiliates, one customer contributed 13% of our revenue.

Revenue from Contracts with Customers

Disaggregation of Revenue

The Company classifies its customers into three payor types, Clinical Institutional, Patients who pay directly or Clinical Insurance, as we believe this best depicts how the nature, amount, timing, and uncertainty of our revenue and cash flows are affected by economic factors. The following table summarizes revenue from contracts with customers by payor type for the in the first six months of 2019 and 2018 .

 

 

Three months ended June 30,

 

 

2019

 

 

2018

 

 

(in thousands)

 

Genetic Testing Services by payor

 

 

 

 

 

 

 

Institutional

$

8,160

 

 

$

4,782

 

Patient

 

143

 

 

 

156

 

Insurance

 

121

 

 

 

462

 

Total Revenue

$

8,424

 

 

$

5,400

 

 

 

Six months ended June 30,

 

 

2019

 

 

2018

 

 

(in thousands)

 

Genetic Testing Services by payor

 

 

 

 

 

 

 

Institutional

$

13,279

 

 

$

9,247

 

Patient

 

245

 

 

 

272

 

Insurance

 

270

 

 

 

534

 

Total Revenue

$

13,794

 

 

$

10,053

 

8


 

 

Contract Balances

Receivables from contracts with customers   - As of June 30, 2019 and December 31, 2018, receivables from contracts with customers were approximately $5.5 million and $5.9 million, respectively, and are included within Trade accounts receivable on the Condensed Consolidated Balance Sheets.

Contracts assets and liabilities - As of June 30, 2019 and December 31, 2018, contract assets and liabilities from contracts with customers were not material.

Transaction Price Allocated to Future Performance Obligations

The Company does not have material future obligations associated with Genetic Testing Services that extend beyond one year.

Recent Accounting Pronouncements Adopted

ASU No. 2016-02

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes ASC 840, Leases . The FASB has issued subsequent amendments to improve and clarify the implementation guidance of Topic 842. The new standard requires an entity to recognize leases on the balance sheet and to disclose key information about the entity's leasing arrangements. The Company adopted this standard as of January 1, 2019 using the modified retrospective transition approach, including certain practical expedients, for all leases existing as of January 1, 2019, the effective and initial application date. Prior period financial statements were not recast under the new guidance. The Company elected to apply practical expedients, to not separate non-lease components from lease components, and to not reassess lease classification, treatment of initial direct costs, or whether an existing or expired contract contains a lease. The Company also elected to use the short-term exemption for all class assets. The adoption of the new standard resulted in recognition of operating lease liabilities of approximately $3.0 million with corresponding right-of-use assets of approximately the same amount. There was no impact to retained earnings upon adoption. This standard had a material impact on the condensed consolidated balance sheets and did not have a material impact on the Company’s condensed consolidated statements of operations and consolidated statements of cash flows.

See Note 9, Leases, for further information.

ASU No. 2017-08

In March 2017, the FASB issued ASU No. 2017-08, Receivables–Nonrefundable Fees and Other Costs (Subtopic 310-20) . Under the ASU, entities must amortize to the earliest call date the premium on certain purchased callable debt securities. The ASU does not require any accounting change for debt securities held at a discount. The guidance calls for a modified retrospective transition approach under which a cumulative-effect adjustment will be made to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The ASU is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company’s marketable security portfolio amortizes to the earliest call date the premium on certain purchased callable debt securities. The adoption of this ASU did not have a material impact on our condensed consolidated financial statements or disclosure.

ASU No. 2018-02

In February 2018, the FASB issued ASU 2018-02 Income Statement - Reporting Comprehensive Income (ASC 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (AOCI), which gives entities the option to reclassify to retained earnings the tax effects resulting from the Tax Act related to items in Additional Other Comprehensive Income (AOCI) that the FASB refers to as having been “stranded” in AOCI.  The guidance is effective for annual and interim periods beginning after December 15, 2018, and is applicable to the Company in fiscal year 2019; however, early adoption is permitted. The Company adopted ASU 2018-02 as of January 1, 2019 and elected not to reclassify the income tax effect of the Tax Act from AOCI to retained earnings. The adoption of ASU 2018-02 resulted in no impact to the Company's financial statements.

Recent Accounting Pronouncements

The Company evaluates all Accounting Standards Updates (ASUs) issued by the Financial Accounting Standards Board (FASB) for consideration of their applicability. ASUs not included in the Company’s disclosures were assessed and determined to be either not applicable or are not expected to have a material impact on its Condensed Consolidated Financial Statements.

9


 

ASU No. 2016-13

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments . ASU No. 2016-13 replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses. The update is intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. In May 2019, the FASB issued ASU 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief . This update adds optional transition relief for entities to elect the fair value option for certain financial assets previously measured at amortized cost basis to increase comparability of similar financial assets. The standard will be effective for annual reporting periods beginning after December 15, 2019, including interim periods within those reporting periods. Early adoption is permitted. The Company has not yet evaluated the effect this ASU will have on its consolidated financial statements and related disclosures.

ASU No. 2018-15

In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract , which provides new guidance on the accounting for implementation, set-up, and other upfront costs incurred in a hosted cloud computing arrangement. Under the new guidance, entities will apply the same criteria for capitalizing implementation costs as they would for an internal-use software license arrangement. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. This ASU can be adopted prospectively to eligible costs incurred on or after the date of adoption or retrospectively. The Company does not expect the adoption of the new guidance under the standard to materially affect its financial position or results of operations.

 

Note 3. Marketable Securities

The Company’s marketable securities consisted of the following:

 

 

June 30, 2019

 

 

Amortized

Cost Basis

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Aggregate

Fair Value

 

 

(in thousands)

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market accounts

$

3,722

 

 

 

 

 

 

 

 

$

3,722

 

United States Treasury

 

999

 

 

 

 

 

 

 

 

 

999

 

U.S. government agency securities

 

797

 

 

 

1

 

 

 

 

 

 

798

 

Corporate debt securities

 

16,014

 

 

 

22

 

 

 

(13

)

 

 

16,023

 

Less: Cash equivalents

 

(3,722

)

 

 

 

 

 

 

 

 

(3,722

)

Total short-term marketable securities

 

17,810

 

 

 

23

 

 

 

(13

)

 

 

17,820

 

Corporate debt securities

 

11,561

 

 

 

136

 

 

 

 

 

 

11,697

 

Total long-term marketable securities

 

11,561

 

 

 

136

 

 

 

 

 

 

11,697

 

Total marketable securities

$

29,371

 

 

$

159

 

 

$

(13

)

 

$

29,517