|
|
|
|
|
Delaware
|
|
27-3019889
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
9920 Jefferson Blvd
Culver City, California
|
|
90232
|
(Address of principal executive offices)
|
|
(Zip Code)
|
|
Large accelerated filer
|
o
|
Accelerated filer
|
x
|
|
|
|
|
Non-accelerated filer
|
o
|
Smaller reporting company
|
x
|
|
|
Emerging growth company
|
x
|
|
|
|
Page
|
PART I.
|
|
|
|
|
|
Item 1.
|
||
|
|
|
|
||
|
|
|
|
||
|
|
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|
||
|
|
|
|
Condensed Consolidated Statements of Stockholders' Equity
|
|
|
|
|
|
||
|
|
|
|
||
|
|
|
Item 2.
|
||
|
|
|
Item 3.
|
||
|
|
|
Item 4.
|
||
|
|
|
|
|
|
PART II.
|
|
|
|
|
|
Item 1.
|
||
|
|
|
Item 1A.
|
||
|
|
|
Item 2.
|
||
|
|
|
Item 3.
|
||
|
|
|
Item 4.
|
||
|
|
|
Item 5.
|
||
|
|
|
Item 6.
|
||
|
|
|
•
|
the structural change in the market for healthcare in the United States, including uncertainty in the healthcare regulatory framework and regulatory developments in the United States and foreign countries;
|
•
|
the evolving treatment paradigm for cancer, including physicians’ use of molecular information and targeted oncology therapeutics and the market size for molecular information products;
|
•
|
physicians’ need for precision medicine products and any perceived advantage of our solutions over those of our competitors, including the ability of our comprehensive platform to help physicians treat their patients’ cancers;
|
•
|
our ability to generate revenue from sales of products enabled by our molecular and biometric information platforms to physicians in clinical settings;
|
•
|
our ability to increase the commercial success and to accelerate commercial growth of our sequencing and molecular analysis solutions and our other products and services;
|
•
|
our plans or ability to obtain reimbursement for our sequencing and molecular analysis solutions, including expectations as to our ability or the amount of time it will take to achieve successful reimbursement from third-party payors, such as commercial insurance companies and health maintenance organizations, and government insurance programs, such as Medicare and Medicaid;
|
•
|
our ability to effectively manage our growth, including the rate and degree of market acceptance of our solutions;
|
•
|
our ability to offer new and innovative products and services, including new features and functionality for our existing products and services;
|
•
|
our ability to attract new partners and clients;
|
•
|
our ability to estimate the size of our target market;
|
•
|
our ability to maintain and enhance our reputation and brand recognition;
|
•
|
consolidation in the healthcare industry;
|
•
|
competition which could limit our ability to maintain or expand market share within our industry;
|
•
|
restrictions and penalties as a result of privacy and data protection laws;
|
•
|
our use of “open source” software;
|
•
|
our ability to use, disclose, de-identify or license data and to integrate third-party technologies;
|
•
|
data loss or corruption due to failures or errors in our systems and service disruptions at our data centers;
|
•
|
breaches or failures of our security measures;
|
•
|
our reliance on Internet infrastructure, bandwidth providers, data center providers, other third parties and our own systems for providing services to our users;
|
•
|
risks related to future acquisition opportunities;
|
•
|
the requirements of being a public company;
|
•
|
our ability to attract and retain key personnel;
|
•
|
our expectation regarding the period during which we qualify as an emerging growth company under the JOBS Act;
|
•
|
our ability to obtain and maintain intellectual property protection for our solutions and not infringe upon the intellectual property of others;
|
•
|
our ability to implement our comprehensive restructuring plan that includes a wide range of organizational efficiency initiatives and other cost reduction opportunities; and
|
•
|
our financial performance expectations, including our expectations regarding our revenue, cost of revenue, gross profit or gross margin, operating expenses, including changes in research and development, sales and marketing and general and administrative expenses, and our ability to achieve and maintain future profitability.
|
|
September 30,
2018 |
|
December 31,
2017 |
||||
|
(Unaudited)
|
|
|
||||
Assets
|
|
|
|
||||
Current assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
22,841
|
|
|
$
|
61,660
|
|
Accounts receivable, net
|
17,202
|
|
|
11,491
|
|
||
Inventories
|
654
|
|
|
839
|
|
||
Deferred implementation costs
|
11
|
|
|
1,960
|
|
||
Related party receivables, net
|
1,293
|
|
|
585
|
|
||
Prepaid expenses and other current assets
|
5,188
|
|
|
5,358
|
|
||
Total current assets
|
47,189
|
|
|
81,893
|
|
||
Property, plant, and equipment, net
|
24,942
|
|
|
18,517
|
|
||
Deferred implementation costs, net of current
|
3
|
|
|
3,951
|
|
||
Goodwill
|
115,930
|
|
|
114,625
|
|
||
Intangible assets, net
|
66,990
|
|
|
69,424
|
|
||
Investment in related party
|
59,000
|
|
|
156,863
|
|
||
Related party receivable, net of current
|
1,611
|
|
|
1,727
|
|
||
Other assets
|
1,848
|
|
|
2,195
|
|
||
Total assets
|
$
|
317,513
|
|
|
$
|
449,195
|
|
|
|
|
|
||||
Liabilities and Stockholders' Equity
|
|
|
|
||||
Current liabilities
|
|
|
|
||||
Accounts payable
|
$
|
2,222
|
|
|
$
|
3,164
|
|
Accrued and other current liabilities
|
15,562
|
|
|
18,134
|
|
||
Deferred revenue
|
14,866
|
|
|
10,057
|
|
||
Related party payables, net
|
5,283
|
|
|
4,504
|
|
||
Total current liabilities
|
37,933
|
|
|
35,859
|
|
||
Deferred revenue, net of current
|
8,061
|
|
|
7,126
|
|
||
Related party liabilities
|
16,138
|
|
|
11,500
|
|
||
Related party promissory note
|
112,666
|
|
|
112,666
|
|
||
Related party convertible note, net
|
8,265
|
|
|
7,947
|
|
||
Convertible notes, net
|
78,230
|
|
|
74,845
|
|
||
Deferred income taxes, net
|
2,637
|
|
|
5,838
|
|
||
Other liabilities
|
2,388
|
|
|
112
|
|
||
Total liabilities
|
266,318
|
|
|
255,893
|
|
||
|
|
|
|
||||
Stockholders' equity
|
|
|
|
||||
Common stock, $0.0001 par value per share, 750,000,000 shares authorized;
109,491,277
and 108,383,602 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively (including 3,490 shares of restricted stock at both dates)
|
11
|
|
|
10
|
|
||
Additional paid-in capital
|
886,363
|
|
|
886,669
|
|
||
Accumulated deficit
|
(834,999
|
)
|
|
(693,233
|
)
|
||
Accumulated other comprehensive loss
|
(180
|
)
|
|
(144
|
)
|
||
Total stockholders' equity
|
51,195
|
|
|
193,302
|
|
||
Total liabilities and stockholders' equity
|
$
|
317,513
|
|
|
$
|
449,195
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Revenue:
|
|
|
|
|
|
|
|
||||||||
Software-as-a-service related
|
$
|
15,937
|
|
|
$
|
15,205
|
|
|
$
|
48,323
|
|
|
$
|
44,948
|
|
Software and hardware related
|
1,450
|
|
|
1,523
|
|
|
3,790
|
|
|
5,400
|
|
||||
Maintenance
|
2,522
|
|
|
2,696
|
|
|
7,357
|
|
|
8,183
|
|
||||
Total software-related revenue
|
19,909
|
|
|
19,424
|
|
|
59,470
|
|
|
58,531
|
|
||||
Sequencing and molecular analysis
|
742
|
|
|
1,025
|
|
|
2,506
|
|
|
1,985
|
|
||||
Home health care services
|
1,641
|
|
|
1,311
|
|
|
4,627
|
|
|
3,862
|
|
||||
Total net revenue
|
22,292
|
|
|
21,760
|
|
|
66,603
|
|
|
64,378
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Cost of Revenue:
|
|
|
|
|
|
|
|
||||||||
Software-as-a-service related
|
5,863
|
|
|
5,859
|
|
|
18,205
|
|
|
17,287
|
|
||||
Software and hardware related
|
737
|
|
|
1,757
|
|
|
2,412
|
|
|
3,785
|
|
||||
Maintenance
|
234
|
|
|
274
|
|
|
683
|
|
|
564
|
|
||||
Amortization of developed technologies
|
1,233
|
|
|
1,143
|
|
|
3,700
|
|
|
4,029
|
|
||||
Total software-related cost of revenue
|
8,067
|
|
|
9,033
|
|
|
25,000
|
|
|
25,665
|
|
||||
Sequencing and molecular analysis
|
2,323
|
|
|
1,757
|
|
|
5,443
|
|
|
4,862
|
|
||||
Home health care services
|
836
|
|
|
682
|
|
|
2,435
|
|
|
2,116
|
|
||||
Total cost of revenue
|
11,226
|
|
|
11,472
|
|
|
32,878
|
|
|
32,643
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Gross Profit
|
11,066
|
|
|
10,288
|
|
|
33,725
|
|
|
31,735
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Operating Expenses:
|
|
|
|
|
|
|
|
||||||||
Selling, general and administrative
|
17,001
|
|
|
17,521
|
|
|
56,123
|
|
|
54,181
|
|
||||
Research and development
|
4,835
|
|
|
7,749
|
|
|
15,875
|
|
|
25,051
|
|
||||
Amortization of acquisition-related assets
|
1,054
|
|
|
1,054
|
|
|
3,163
|
|
|
3,163
|
|
||||
Total operating expenses
|
22,890
|
|
|
26,324
|
|
|
75,161
|
|
|
82,395
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Loss from operations
|
(11,824
|
)
|
|
(16,036
|
)
|
|
(41,436
|
)
|
|
(50,660
|
)
|
||||
Interest expense, net
|
(4,306
|
)
|
|
(4,067
|
)
|
|
(12,766
|
)
|
|
(12,049
|
)
|
||||
Other income (expense), net
|
226
|
|
|
60
|
|
|
(928
|
)
|
|
308
|
|
||||
Loss from related party equity method investment, including impairment
|
(83,306
|
)
|
|
(2,942
|
)
|
|
(89,512
|
)
|
|
(46,353
|
)
|
||||
Loss from continuing operations before income taxes
|
(99,210
|
)
|
|
(22,985
|
)
|
|
(144,642
|
)
|
|
(108,754
|
)
|
||||
Benefit from income taxes
|
(1,778
|
)
|
|
30
|
|
|
(3,429
|
)
|
|
85
|
|
||||
Net loss from continuing operations
|
(97,432
|
)
|
|
(23,015
|
)
|
|
(141,213
|
)
|
|
(108,839
|
)
|
||||
Loss from discontinued operations, net of tax
|
(32
|
)
|
|
(19,383
|
)
|
|
(1,817
|
)
|
|
(44,738
|
)
|
||||
Net loss
|
$
|
(97,464
|
)
|
|
$
|
(42,398
|
)
|
|
$
|
(143,030
|
)
|
|
$
|
(153,577
|
)
|
|
|
|
|
|
|
|
|
||||||||
Net loss per share:
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
|
|
|
|
|
|
|
||||||||
Basic and diluted - common stock
|
$
|
(0.89
|
)
|
|
$
|
(0.20
|
)
|
|
$
|
(1.29
|
)
|
|
$
|
(0.91
|
)
|
Discontinued operations
|
|
|
|
|
|
|
|
||||||||
Basic and diluted - common stock
|
$
|
—
|
|
|
$
|
(0.17
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.37
|
)
|
Total net income (loss) per share
|
|
|
|
|
|
|
|
||||||||
Basic and diluted - common stock
|
$
|
(0.89
|
)
|
|
$
|
(0.37
|
)
|
|
$
|
(1.31
|
)
|
|
$
|
(1.28
|
)
|
|
|
|
|
|
|
|
|
||||||||
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic and diluted - common stock
|
109,471,712
|
|
|
115,924,122
|
|
|
109,060,408
|
|
|
119,745,231
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Net loss
|
$
|
(97,464
|
)
|
|
$
|
(42,398
|
)
|
|
$
|
(143,030
|
)
|
|
$
|
(153,577
|
)
|
Share in related party equity investment - other comprehensive income (loss)
|
77
|
|
|
(302
|
)
|
|
77
|
|
|
(302
|
)
|
||||
Amounts reclassified from accumulated other comprehensive income
|
—
|
|
|
(977
|
)
|
|
—
|
|
|
(977
|
)
|
||||
Other comprehensive income (loss) from foreign currency translation gain (loss)
|
(15
|
)
|
|
210
|
|
|
(113
|
)
|
|
290
|
|
||||
Total other comprehensive income (loss)
|
62
|
|
|
(1,069
|
)
|
|
(36
|
)
|
|
(989
|
)
|
||||
Comprehensive loss
|
$
|
(97,402
|
)
|
|
$
|
(43,467
|
)
|
|
$
|
(143,066
|
)
|
|
$
|
(154,566
|
)
|
|
Common Stock
|
|
Additional
Paid-In Capital
|
|
Accumulated Deficit
|
|
Accumulated
Other
Comprehensive Income (Loss)
|
|
Total Equity
|
|||||||||||||
|
Shares
|
|
Amount
|
|
|
|
|
|||||||||||||||
Balance at December 31, 2017
|
108,383,602
|
|
|
$
|
10
|
|
|
$
|
886,669
|
|
|
$
|
(693,233
|
)
|
|
$
|
(144
|
)
|
|
$
|
193,302
|
|
Modified retrospective adjustment on adoption of ASC 606
|
—
|
|
|
—
|
|
|
—
|
|
|
1,263
|
|
|
—
|
|
|
1,263
|
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
2,655
|
|
|
—
|
|
|
—
|
|
|
2,655
|
|
|||||
Shares issued in connection with employee stock plans, net of shares withheld for employee taxes
|
208,344
|
|
|
—
|
|
|
(339
|
)
|
|
—
|
|
|
—
|
|
|
(339
|
)
|
|||||
Assignment of NantHealth Labs (formerly Liquid Genomics (see Note 18))
|
—
|
|
|
—
|
|
|
(3,785
|
)
|
|
—
|
|
|
—
|
|
|
(3,785
|
)
|
|||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
110
|
|
|
110
|
|
|||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(22,168
|
)
|
|
—
|
|
|
(22,168
|
)
|
|||||
Balance at March 31, 2018
|
108,591,946
|
|
|
10
|
|
|
885,200
|
|
|
(714,138
|
)
|
|
(34
|
)
|
|
171,038
|
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
1,808
|
|
|
—
|
|
|
—
|
|
|
1,808
|
|
|||||
Shares issued in connection with employee stock plans, net of shares withheld for employee taxes
|
793,614
|
|
|
1
|
|
|
(1,657
|
)
|
|
—
|
|
|
—
|
|
|
(1,656
|
)
|
|||||
Assignment of NantHealth Labs (formerly Liquid Genomics (see Note 18))
|
—
|
|
|
—
|
|
|
536
|
|
|
—
|
|
|
—
|
|
|
536
|
|
|||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(208
|
)
|
|
(208
|
)
|
|||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(23,397
|
)
|
|
—
|
|
|
(23,397
|
)
|
|||||
Balance at June 30, 2018
|
109,385,560
|
|
|
11
|
|
|
885,887
|
|
|
(737,535
|
)
|
|
(242
|
)
|
|
148,121
|
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
485
|
|
|
—
|
|
|
—
|
|
|
485
|
|
|||||
Shares issued in connection with employee stock plans, net of shares withheld for employee taxes
|
105,717
|
|
|
—
|
|
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
(9
|
)
|
|||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
62
|
|
|
62
|
|
|||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(97,464
|
)
|
|
—
|
|
|
(97,464
|
)
|
|||||
Balance at September 30, 2018
|
109,491,277
|
|
|
$
|
11
|
|
|
$
|
886,363
|
|
|
$
|
(834,999
|
)
|
|
$
|
(180
|
)
|
|
$
|
51,195
|
|
|
Nine Months Ended
September 30, |
||||||
|
2018
(2)
|
|
2017
(2)
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net loss
|
$
|
(143,030
|
)
|
|
$
|
(153,577
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
||||
Depreciation and amortization
|
16,486
|
|
|
23,288
|
|
||
Amortization of debt discounts and deferred financing offering cost
|
3,702
|
|
|
3,260
|
|
||
Change in fair value of derivatives liability
|
(7
|
)
|
|
(245
|
)
|
||
Stock-based compensation
|
4,805
|
|
|
(4,076
|
)
|
||
Deferred income taxes, net
|
(3,594
|
)
|
|
6,988
|
|
||
Provision for bad debt expense
|
141
|
|
|
155
|
|
||
Inventory provision
|
—
|
|
|
692
|
|
||
Loss from related party equity method investment including impairment
|
89,512
|
|
|
46,353
|
|
||
Loss on sale of business and dissolution of a business component
|
—
|
|
|
10,673
|
|
||
Other noncash expense
|
219
|
|
|
—
|
|
||
Impairment of equity securities (see note 10)
|
1,750
|
|
|
—
|
|
||
Accounts receivable, net
|
(1,644
|
)
|
|
(500
|
)
|
||
Inventories
|
185
|
|
|
61
|
|
||
Related party receivables, net
|
(592
|
)
|
|
637
|
|
||
Prepaid expenses and other current assets
|
1,678
|
|
|
(494
|
)
|
||
Deferred implementation costs
|
33
|
|
|
(1,951
|
)
|
||
Accounts payable
|
(988
|
)
|
|
(966
|
)
|
||
Accrued and other current liabilities
|
(3,126
|
)
|
|
(4,127
|
)
|
||
Deferred revenue
|
530
|
|
|
(2,053
|
)
|
||
Related party payables, net
|
5,014
|
|
|
2,108
|
|
||
Other assets and liabilities
|
2,579
|
|
|
305
|
|
||
Net cash used in operating activities
|
(26,347
|
)
|
|
(73,469
|
)
|
||
Cash flows from investing activities:
|
|
|
|
||||
Purchase of property and equipment including internal use software
|
(9,394
|
)
|
|
(12,556
|
)
|
||
Proceeds from sale of business, net of cash disposed
|
—
|
|
|
1,721
|
|
||
Assignment of NantHealth Labs (formerly Liquid Genomics), net of cash assigned (see Note 18)
|
68
|
|
|
—
|
|
||
Net cash used in investing activities
|
(9,326
|
)
|
|
(10,835
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Tax payments related to stock issued, net of stock withheld, for vested equity awards
|
(2,005
|
)
|
|
(2,740
|
)
|
||
Capital lease obligation payments
|
(93
|
)
|
|
—
|
|
||
Net cash used in financing activities
|
(2,098
|
)
|
|
(2,740
|
)
|
||
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
(262
|
)
|
|
184
|
|
||
Net decrease in cash, cash equivalents and restricted cash
|
(38,033
|
)
|
|
(86,860
|
)
|
||
Cash, cash equivalents and restricted cash, beginning of period
(1)
|
62,010
|
|
|
160,703
|
|
||
Cash, cash equivalents and restricted cash, end of period
(1)
|
$
|
23,977
|
|
|
$
|
73,843
|
|
|
Nine Months Ended
September 30, |
||||||
|
2018
|
|
2017
(2)
|
||||
Supplemental disclosure of cash flow information:
|
|
|
|
||||
Interest paid
|
$
|
(2,943
|
)
|
|
$
|
(2,836
|
)
|
Interest received
|
11
|
|
|
62
|
|
||
Noncash investing and financing activities:
|
|
|
|
||||
Purchase of property and equipment (including internal use software)
|
285
|
|
|
811
|
|
||
Noncash consideration (common stock) from sale of Business (see Note 3) and subsequent retirement of stock
|
—
|
|
|
42,750
|
|
|
As Reported December 31, 2017
|
|
Adjustments due to ASC 606
|
|
Balance as at January 1, 2018
|
||||||
Balance Sheet
|
|
|
|
|
|
||||||
Accounts receivable, net
|
$
|
11,491
|
|
|
$
|
5,247
|
|
|
$
|
16,738
|
|
Deferred implementation costs, current
|
1,960
|
|
|
(1,960
|
)
|
|
—
|
|
|||
Prepaid expenses and other current assets
|
5,358
|
|
|
1,117
|
|
|
6,475
|
|
|||
Property, plant, and equipment, net
|
18,517
|
|
|
5,827
|
|
|
24,344
|
|
|||
Deferred implementation costs, net of current
|
3,951
|
|
|
(3,949
|
)
|
|
2
|
|
|||
Other assets
|
2,195
|
|
|
562
|
|
|
2,757
|
|
|||
Deferred revenue, current
|
10,057
|
|
|
3,184
|
|
|
13,241
|
|
|||
Deferred revenue, net of current
|
7,126
|
|
|
2,030
|
|
|
9,156
|
|
|||
Deferred income taxes
|
5,838
|
|
|
367
|
|
|
6,205
|
|
|
As of September 30, 2018
|
||||||||||
|
As Reported
|
|
Adjustments due to ASC 606
|
|
Without new Revenue Standard
|
||||||
Balance Sheet
|
|
|
|
|
|
||||||
Accounts receivable, net
|
$
|
17,202
|
|
|
$
|
(5,623
|
)
|
|
$
|
11,579
|
|
Deferred implementation costs, current
|
11
|
|
|
2,430
|
|
|
2,441
|
|
|||
Prepaid expenses and other current assets
|
5,188
|
|
|
(1,105
|
)
|
|
4,083
|
|
|||
Property, plant, and equipment, net
|
24,942
|
|
|
(6,176
|
)
|
|
18,766
|
|
|||
Deferred implementation costs, net of current
|
3
|
|
|
3,939
|
|
|
3,942
|
|
|||
Other assets
|
1,848
|
|
|
(627
|
)
|
|
1,221
|
|
|||
Deferred revenue, current
|
14,866
|
|
|
(3,134
|
)
|
|
11,732
|
|
|||
Deferred revenue, net of current
|
8,061
|
|
|
(886
|
)
|
|
7,175
|
|
|||
Deferred income taxes
|
2,637
|
|
|
(715
|
)
|
|
1,922
|
|
|
Three Months Ended September 30, 2018
|
||||||||||
|
As Reported
|
|
Adjustments due to ASC 606
|
|
Without new Revenue Standard
|
||||||
Statement of Operations
|
|
|
|
|
|
||||||
Total net revenue
|
$
|
22,292
|
|
|
$
|
(258
|
)
|
|
$
|
22,034
|
|
Cost of revenue
|
11,226
|
|
|
(29
|
)
|
|
11,197
|
|
|||
Operating expenses
|
22,890
|
|
|
(59
|
)
|
|
22,831
|
|
|||
Benefit from income taxes
|
(1,778
|
)
|
|
(110
|
)
|
|
(1,888
|
)
|
|
Nine Months Ended September 30, 2018
|
||||||||||
|
As Reported
|
|
Adjustments due to ASC 606
|
|
Without new Revenue Standard
|
||||||
Statement of Operations
|
|
|
|
|
|
||||||
Total net revenue
|
$
|
66,603
|
|
|
$
|
(1,615
|
)
|
|
$
|
64,988
|
|
Cost of revenue
|
32,878
|
|
|
(111
|
)
|
|
32,767
|
|
|||
Operating expenses
|
75,161
|
|
|
425
|
|
|
75,586
|
|
|||
Benefit from income taxes
|
(3,429
|
)
|
|
(349
|
)
|
|
(3,778
|
)
|
•
|
Software-as-a-service (“SaaS”) related
- SaaS related revenue is generated from customers’ access to and usage of the Company’s hosted software solutions on a subscription basis for a specified contract term. In SaaS arrangements, the customer cannot take possession of the software during the term of the contract and generally has the right to access and use the software and receive any software upgrades published during the subscription period.
|
•
|
Software and hardware related
- Software and hardware related revenue is generated from the license of the Company’s software, on a perpetual basis, the sale of hardware and professional services that are complementary to the software and may or may not be required for the software to function as desired by the customer. The services are generally provided in the form of implementation and training services and do not include maintenance revenue. The software is installed on the customer’s site or the customer’s designated vendor’s site and is not hosted by the Company or by a vendor contracted by the Company. See the section below “
Contracts with Software, Hardware, and Implementation Services”
for details of management’s judgments and recognition of revenue relating to this category.
|
•
|
Maintenance
- Maintenance revenue includes ongoing post contract client support (“PCS”) or maintenance on software and hardware during the PCS term. Additionally, PCS includes ongoing development of software updates and upgrades provided to the client on a when-and-if-available basis. Revenue is recognized over the maintenance term.
|
•
|
Sequencing and molecular analysis
- Sequencing and molecular analysis revenue is generated by providing customers with reports of the results of performing sequencing and analysis of whole genome DNA, RNA, and/or proteomic testing under the Company's reseller agreement with NantOmics, LLC ("NantOmics"), and
from blood samples via its liquid/blood-based tumor profiling platform
through the Company’s subsidiary, NantHealth Labs, Inc. ("NantHealth Labs", formerly Liquid Genomics, Inc.) (see Note 18). Revenue is recognized at a point in time, when reports of results are transferred to the ordering physician or institution, or when cash is received as described below; or ratably over time for the period of a stand-ready obligation to provide blood-based tumor profiling services.
|
•
|
Home health care services
- Home health care services revenue includes the sale of nursing and therapy services provided to patients in a home care setting. These revenues are recognized at a point in time or over time, as services are provided.
|
•
|
Software-as-a-service related
- SaaS related cost of revenue includes personnel-related costs, amortization of deferred implementation costs, depreciation of internal use software, and other direct costs associated with the delivery and hosting of the Company's subscription services.
|
•
|
Software and hardware related
- Software and hardware related cost of revenue includes third-party software and hardware costs directly associated with solutions, including purchasing and receiving costs, and includes direct costs associated with the Company’s software implementation services provided to our customers. Software and hardware related cost of revenue also includes hardware costs directly related to bringing manufactured products to their final selling destination.
|
•
|
Maintenance
- Maintenance cost of revenue includes personnel-related costs and other direct costs associated with the ongoing support or maintenance provided to the Company’s customers.
|
•
|
Sequencing and molecular analysis
- Sequencing and molecular analysis cost of revenue includes personnel-related costs associated with fulfillment of these services, including those of the Company's subsidiary, NantHealth Labs, and amounts due to NantOmics under the reseller agreement (see Note 18) for the sequencing and analysis of whole genome, DNA, RNA, and/or proteomic results. It also includes depreciation of internal use software and lab equipment.
|
•
|
Home health care services
- Home health care services cost of revenue includes personnel-related, as well as direct expenses relating to the Company’s nursing and therapy services provided to patients in a home care setting.
|
Cash received as consideration
|
$
|
1,742
|
|
Deferred consideration related to working capital adjustments
|
1,021
|
|
|
Estimated costs to be incurred by the Company to fulfill certain customer service obligations of
the Business post-closing |
(883
|
)
|
|
Fair value of common stock
|
42,750
|
|
|
Net consideration received
|
44,630
|
|
|
Less: Carrying value of net assets sold
|
(55,255
|
)
|
|
Plus: Reclassification of cumulative translation adjustments of foreign subsidiaries
|
117
|
|
|
Loss from sale of Business
|
$
|
(10,508
|
)
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Major line items constituting loss from discontinued operations
|
|
|
|
|
|
|
|
||||||||
Net revenue
|
$
|
—
|
|
|
$
|
1,498
|
|
|
$
|
—
|
|
|
$
|
7,619
|
|
Cost of revenue
|
—
|
|
|
1,787
|
|
|
—
|
|
|
16,318
|
|
||||
Selling, general and administrative
|
32
|
|
|
1,515
|
|
|
1,817
|
|
|
8,675
|
|
||||
Research and development
|
—
|
|
|
(372
|
)
|
|
—
|
|
|
7,571
|
|
||||
Amortization of software license and acquisition-related assets
|
—
|
|
|
458
|
|
|
—
|
|
|
1,978
|
|
||||
Other (income) expense
|
—
|
|
|
216
|
|
|
—
|
|
|
134
|
|
||||
Loss from sale of Business
|
|
|
|
11,533
|
|
|
—
|
|
|
11,533
|
|
||||
Gain from dissolution of a business component
|
—
|
|
|
(860
|
)
|
|
—
|
|
|
(860
|
)
|
||||
Loss from discontinued operations, before income taxes
|
(32
|
)
|
|
(12,779
|
)
|
|
(1,817
|
)
|
|
(37,730
|
)
|
||||
Provision for income taxes
|
—
|
|
|
6,604
|
|
|
—
|
|
|
7,008
|
|
||||
Loss from discontinued operations, net of income taxes
|
$
|
(32
|
)
|
|
$
|
(19,383
|
)
|
|
$
|
(1,817
|
)
|
|
$
|
(44,738
|
)
|
|
Nine Months Ended
September 30, |
||||||
|
2018
|
|
2017
|
||||
Depreciation and amortization from discontinued operations
|
$
|
—
|
|
|
$
|
8,829
|
|
Loss from sale of the Business
|
—
|
|
|
11,533
|
|
||
Proceeds from sale of the Business
|
—
|
|
|
1,721
|
|
||
Capital expenditures
|
—
|
|
|
4,668
|
|
|
September 30,
2018 |
|
December 31,
2017 |
||||
|
|
|
|
||||
Prepaid expenses
|
$
|
1,657
|
|
|
$
|
2,791
|
|
Restricted cash
(1)
|
—
|
|
|
350
|
|
||
Other current assets
|
3,531
|
|
|
2,217
|
|
||
Prepaid expenses and other current assets
|
$
|
5,188
|
|
|
$
|
5,358
|
|
|
September 30,
2018 |
|
December 31,
2017 |
||||
|
|
|
|
||||
Payroll and related costs
|
$
|
5,964
|
|
|
$
|
7,051
|
|
NaviNet acquisition accrued earnout
|
1,275
|
|
|
5,408
|
|
||
Other accrued and other current liabilities
|
8,323
|
|
|
5,675
|
|
||
Accrued and other current liabilities
|
$
|
15,562
|
|
|
$
|
18,134
|
|
|
September 30,
2018 |
|
December 31,
2017 |
||||
|
|
|
|
||||
Computer equipment and software
|
$
|
13,912
|
|
|
$
|
13,998
|
|
Furniture and equipment
|
4,296
|
|
|
3,211
|
|
||
Leasehold and building improvements
|
7,520
|
|
|
4,233
|
|
||
Property, plant, and equipment, excluding internal use software
|
25,728
|
|
|
21,442
|
|
||
Less: Accumulated depreciation and amortization
|
(17,718
|
)
|
|
(15,248
|
)
|
||
Property, plant and equipment, excluding internal use software, net
|
8,010
|
|
|
6,194
|
|
||
Internal use software
|
30,168
|
|
|
17,690
|
|
||
Construction in Progress - Internal use software
|
1,116
|
|
|
629
|
|
||
Less: Accumulated depreciation and amortization, internal use software
|
(14,352
|
)
|
|
(5,996
|
)
|
||
Internal use software, net
|
16,932
|
|
|
12,323
|
|
||
Property, plant, and equipment, net
|
$
|
24,942
|
|
|
$
|
18,517
|
|
|
September 30,
2018 |
|
December 31,
2017 |
||||
|
|
|
|
||||
Customer relationships
|
$
|
52,000
|
|
|
$
|
52,000
|
|
Developed technologies
|
36,700
|
|
|
32,000
|
|
||
Trade name
|
3,000
|
|
|
3,000
|
|
||
|
91,700
|
|
|
87,000
|
|
||
Less: Accumulated amortization
|
(24,710
|
)
|
|
(17,576
|
)
|
||
Intangible assets, net
|
$
|
66,990
|
|
|
$
|
69,424
|
|
|
Amounts
|
||
Remainder of 2018
|
$
|
2,286
|
|
2019
|
9,150
|
|
|
2020
|
8,400
|
|
|
2021
|
8,400
|
|
|
2022
|
8,400
|
|
|
Thereafter
|
30,354
|
|
|
Total future intangible amortization expense
|
$
|
66,990
|
|
|
Trailing nine months ended June 30
|
||||||
|
2018
|
|
2017
|
||||
Revenues
|
$
|
4,231
|
|
|
$
|
5,294
|
|
Gross loss
|
(7,615
|
)
|
|
(4,330
|
)
|
||
Loss from operations
|
(38,278
|
)
|
|
(33,262
|
)
|
||
Impairment on equity investments
|
(19,976
|
)
|
|
—
|
|
||
Net loss
|
(54,482
|
)
|
|
(41,420
|
)
|
||
Net loss attributable to NantOmics
|
(53,120
|
)
|
|
(39,088
|
)
|
||
Other comprehensive gain
|
754
|
|
|
—
|
|
|
Related party
|
|
Others
|
|
Total
|
||||||
Balance as of September 30, 2018
|
|
|
|
|
|
||||||
Gross proceeds
|
$
|
10,000
|
|
|
$
|
97,000
|
|
|
$
|
107,000
|
|
Unamortized debt discounts and deferred financing offering costs
|
(1,735
|
)
|
|
(18,770
|
)
|
|
(20,505
|
)
|
|||
Net carrying amount
|
$
|
8,265
|
|
|
$
|
78,230
|
|
|
$
|
86,495
|
|
|
|
|
|
|
|
||||||
Balance as of December 31, 2017
|
|
|
|
|
|
||||||
Gross proceeds
|
$
|
10,000
|
|
|
$
|
97,000
|
|
|
$
|
107,000
|
|
Unamortized debt discounts and deferred financing offering costs
|
(2,053
|
)
|
|
(22,155
|
)
|
|
(24,208
|
)
|
|||
Net carrying amount
|
$
|
7,947
|
|
|
$
|
74,845
|
|
|
$
|
82,792
|
|
|
Three Months Ended September 30, 2018
|
|
Nine Months Ended September 30, 2018
|
||||||||||||||||||||
|
Related party
|
|
Others
|
|
Total
|
|
Related party
|
|
Others
|
|
Total
|
||||||||||||
Accrued coupon interest expense
|
$
|
137
|
|
|
$
|
1,334
|
|
|
$
|
1,471
|
|
|
$
|
412
|
|
|
$
|
4,001
|
|
|
$
|
4,413
|
|
Amortization of debt discounts
|
71
|
|
|
1,020
|
|
|
1,091
|
|
|
274
|
|
|
2,966
|
|
|
3,240
|
|
||||||
Amortization of deferred financing offering costs
|
3
|
|
|
144
|
|
|
147
|
|
|
8
|
|
|
419
|
|
|
427
|
|
||||||
Total convertible notes interest expense
|
$
|
211
|
|
|
$
|
2,498
|
|
|
$
|
2,709
|
|
|
$
|
694
|
|
|
$
|
7,386
|
|
|
$
|
8,080
|
|
|
Three Months Ended September 30, 2017
|
|
Nine Months Ended September 30, 2017
|
||||||||||||||||||||
|
Related party
|
|
Others
|
|
Total
|
|
Related party
|
|
Others
|
|
Total
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Accrued coupon interest expense
|
$
|
137
|
|
|
$
|
1,334
|
|
|
$
|
1,471
|
|
|
$
|
412
|
|
|
$
|
4,001
|
|
|
$
|
4,413
|
|
Amortization of debt discounts
|
94
|
|
|
897
|
|
|
991
|
|
|
275
|
|
|
2,608
|
|
|
2,883
|
|
||||||
Amortization of deferred financing offering costs
|
3
|
|
|
127
|
|
|
130
|
|
|
8
|
|
|
369
|
|
|
377
|
|
||||||
|
$
|
234
|
|
|
$
|
2,358
|
|
|
$
|
2,592
|
|
|
$
|
695
|
|
|
$
|
6,978
|
|
|
$
|
7,673
|
|
|
September 30, 2018
|
||||||||||||||
|
Total
fair value
|
|
Quoted price in active markets for identical assets
(Level 1)
|
|
Significant other observable inputs
(Level 2)
|
|
Significant unobservable inputs
(Level 3)
|
||||||||
Assets
- Cash equivalents
|
$
|
22,841
|
|
|
$
|
22,841
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Assets
- Marketable securities
|
1,136
|
|
|
—
|
|
|
1,136
|
|
|
—
|
|
|
December 31, 2017
|
||||||||||||||
|
Total
fair value
|
|
Quoted price in active markets for identical assets
(Level 1)
|
|
Significant other observable inputs
(Level 2)
|
|
Significant unobservable inputs
(Level 3)
|
||||||||
Assets
- Cash equivalents
|
$
|
57,683
|
|
|
$
|
57,683
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Assets
- Marketable securities
|
361
|
|
|
—
|
|
|
361
|
|
|
—
|
|
||||
Liabilities
- Interest make-whole derivative
|
7
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
|
June 30, 2018
|
|
Additions
|
|
Change in fair value
|
|
September 30, 2018
|
||||||||
Interest make-whole derivative - related party and others
|
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
(5
|
)
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
December 31, 2017
|
|
Additions
|
|
Change in fair value
|
|
September 30, 2018
|
||||||||
Interest make-whole derivative - related party and others
|
|
$
|
7
|
|
|
$
|
—
|
|
|
$
|
(7
|
)
|
|
$
|
—
|
|
|
|
Fair value
|
|
Carrying value
|
|
Face value
|
||||||
|
|
|
|
|
|
|
|
|
|
|||
5.5% convertible senior notes due December 15, 2021:
|
|
|
|
|
|
|
||||||
Balance as of September 30, 2018
|
|
|
|
|
|
|
||||||
Related party
|
|
$
|
6,306
|
|
|
$
|
8,265
|
|
|
$
|
10,000
|
|
Others
|
|
61,169
|
|
|
78,230
|
|
|
97,000
|
|
|||
|
|
$
|
67,475
|
|
|
$
|
86,495
|
|
|
$
|
107,000
|
|
Balance as of December 31, 2017
|
|
|
|
|
|
|
||||||
Related party
|
|
$
|
7,327
|
|
|
$
|
7,947
|
|
|
$
|
10,000
|
|
Others
|
|
71,076
|
|
|
74,845
|
|
|
97,000
|
|
|||
|
|
$
|
78,403
|
|
|
$
|
82,792
|
|
|
$
|
107,000
|
|
|
Amounts
|
||
2018
|
$
|
860
|
|
2019
|
2,693
|
|
|
2020
|
2,574
|
|
|
2021
|
2,532
|
|
|
2022
|
2,374
|
|
|
Thereafter
|
5,139
|
|
|
Total minimum rental commitments
|
$
|
16,172
|
|
|
Three Months Ended
September 30, |
|
Nine months ended September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Restricted Stock:
|
|
|
|
|
|
|
|
||||||||
Research and development
|
$
|
28
|
|
|
$
|
34
|
|
|
$
|
79
|
|
|
$
|
80
|
|
Phantom units:
|
|
|
|
|
|
|
|
||||||||
Cost of revenue
|
52
|
|
|
(239
|
)
|
|
302
|
|
|
247
|
|
||||
Selling, general and administrative
|
(484
|
)
|
|
(11
|
)
|
|
(69
|
)
|
|
(655
|
)
|
||||
Research and development
|
(13
|
)
|
|
44
|
|
|
313
|
|
|
(110
|
)
|
||||
Discontinued operations
|
—
|
|
|
(4,792
|
)
|
|
—
|
|
|
(3,591
|
)
|
||||
Total phantom units stock-based compensation expense
|
(445
|
)
|
|
(4,998
|
)
|
|
546
|
|
|
(4,109
|
)
|
||||
Stock options:
|
|
|
|
|
|
|
|
||||||||
Selling, general and administrative
|
—
|
|
|
2
|
|
|
—
|
|
|
(47
|
)
|
||||
Restricted Stock Units:
|
|
|
|
|
|
|
|
||||||||
Cost of revenue
|
4
|
|
|
—
|
|
|
22
|
|
|
—
|
|
||||
Selling, general and administrative
|
759
|
|
|
—
|
|
|
3,983
|
|
|
—
|
|
||||
Research and development
|
27
|
|
|
—
|
|
|
175
|
|
|
—
|
|
||||
Total restricted stock units stock-based compensation expense
|
790
|
|
|
—
|
|
|
4,180
|
|
|
—
|
|
||||
Total stock-based compensation expense
|
373
|
|
|
(4,962
|
)
|
|
4,805
|
|
|
(4,076
|
)
|
||||
Amount capitalized to internal-use software
|
149
|
|
|
(68
|
)
|
|
410
|
|
|
661
|
|
||||
Total stock-based compensation cost
|
$
|
522
|
|
|
$
|
(5,030
|
)
|
|
$
|
5,215
|
|
|
$
|
(3,415
|
)
|
|
Number of Units
|
|
Weighted
Average Grant
date value per
phantom unit
|
|||
Unvested phantom units outstanding - December 31, 2017
|
1,292,784
|
|
|
$
|
15.01
|
|
Vested
|
(320,856
|
)
|
|
$
|
15.75
|
|
Forfeited
|
(33,863
|
)
|
|
$
|
14.61
|
|
Unvested phantom units outstanding - March 31, 2018
|
938,065
|
|
|
$
|
14.76
|
|
Vested
|
(188,426
|
)
|
|
$
|
14.24
|
|
Forfeited
|
(58,014
|
)
|
|
$
|
14.34
|
|
Unvested phantom units outstanding - June 30, 2018
|
691,625
|
|
|
$
|
14.94
|
|
Vested
|
(9,091
|
)
|
|
$
|
15.84
|
|
Forfeited
|
(81,182
|
)
|
|
$
|
14.80
|
|
Unvested phantom units outstanding - September 30, 2018
|
601,352
|
|
|
$
|
14.95
|
|
|
Number of Units
|
|
Weighted-Average Grant-Date
Fair Value
|
|||
Unvested restricted stock units outstanding - December 31, 2017
|
3,106,024
|
|
|
$
|
3.43
|
|
Vested
|
(42,717
|
)
|
|
$
|
4.33
|
|
Forfeited
|
(147,186
|
)
|
|
$
|
3.39
|
|
Unvested restricted stock units outstanding - March 31, 2018
|
2,916,121
|
|
|
$
|
3.42
|
|
Vested
|
(1,222,745
|
)
|
|
$
|
3.42
|
|
Forfeited
|
(43,812
|
)
|
|
$
|
3.39
|
|
Unvested restricted stock units outstanding - June 30, 2018
|
1,649,564
|
|
|
$
|
3.42
|
|
Granted
|
293,736
|
|
|
$
|
1.89
|
|
Vested
|
(143,970
|
)
|
|
$
|
2.61
|
|
Forfeited
|
(197,154
|
)
|
|
$
|
3.39
|
|
Unvested restricted stock units outstanding - September 30, 2018
|
1,602,176
|
|
|
$
|
3.22
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
Common Stock
|
|
Common Stock
|
|
Common Stock
|
|
Common Stock
|
||||||||
Net loss per share numerator:
|
|
|
|
|
|
|
|
||||||||
Net loss from continuing operations
|
$
|
(97,432
|
)
|
|
$
|
(23,015
|
)
|
|
$
|
(141,213
|
)
|
|
$
|
(108,839
|
)
|
Net loss from discontinued operations
|
(32
|
)
|
|
(19,383
|
)
|
|
(1,817
|
)
|
|
(44,738
|
)
|
||||
Net loss for basic and diluted net loss per share
|
$
|
(97,464
|
)
|
|
$
|
(42,398
|
)
|
|
$
|
(143,030
|
)
|
|
$
|
(153,577
|
)
|
Weighted-average shares for basic net loss per share
|
109,471,712
|
|
|
115,924,122
|
|
|
109,060,408
|
|
|
119,745,231
|
|
||||
Effect of dilutive securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Weighted-average shares for dilutive net loss per share
|
109,471,712
|
|
|
115,924,122
|
|
|
109,060,408
|
|
|
119,745,231
|
|
||||
Basic and diluted net loss per share from continuing operations
|
$
|
(0.89
|
)
|
|
$
|
(0.20
|
)
|
|
$
|
(1.29
|
)
|
|
$
|
(0.91
|
)
|
Basic and diluted net loss per share from discontinued operations
|
$
|
—
|
|
|
$
|
(0.17
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.37
|
)
|
Basic and diluted total net loss per share
|
$
|
(0.89
|
)
|
|
$
|
(0.37
|
)
|
|
$
|
(1.31
|
)
|
|
$
|
(1.28
|
)
|
|
September 30,
|
||||
|
2018
|
|
2017
|
||
Unvested restricted stock
|
3,490
|
|
|
6,976
|
|
Unvested phantom units
|
601,352
|
|
|
1,651,090
|
|
Unvested restricted stock units
|
1,602,176
|
|
|
—
|
|
Unexercised stock options
|
—
|
|
|
500,000
|
|
Convertible notes
|
8,815,655
|
|
|
8,815,655
|
|
|
Amounts
|
||
NantOmics Series A-2 shares transferred, or to be transferred, to NantOmics
|
$
|
8,956
|
|
Assets and liabilities of NantHealth Labs at assignment:
|
|
||
Goodwill
|
1,305
|
|
|
Intangible asset
|
4,429
|
|
|
Other assets
|
251
|
|
|
Liabilities assumed
|
(814
|
)
|
|
Net assets acquired at assignment
|
5,171
|
|
|
Recorded as distribution from additional paid-in capital
|
$
|
3,785
|
|
•
|
introduce new marketing, education and engagement efforts and foster relationships across the oncology community to drive adoption of molecular sequencing and analysis services;
|
•
|
pursue reimbursement of molecular sequencing and analysis services from regional and national third-party payers and government payers;
|
•
|
publish scientific and medical advances;
|
•
|
strengthen our commercial organization to increase our NantHealth solutions client base and to broaden usage of our solutions by existing clients; and
|
•
|
develop new features and functionality for NantHealth solutions to address the needs of current and future healthcare provider and payor, self-insured employer and biopharmaceutical company clients.
|
(Dollars in thousands, except per share amounts)
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net loss from continuing operations
|
$
|
(97,432
|
)
|
|
$
|
(23,015
|
)
|
|
$
|
(141,213
|
)
|
|
$
|
(108,839
|
)
|
Adjustments to GAAP net loss:
|
|
|
|
|
|
|
|
|
|
||||||
Loss from related party equity method investment including impairment loss
|
83,306
|
|
|
2,942
|
|
|
89,512
|
|
|
46,353
|
|
||||
Stock-based compensation expense from continuing operations
|
373
|
|
|
(170
|
)
|
|
4,805
|
|
|
(485
|
)
|
||||
Corporate restructuring from continuing operations
|
—
|
|
|
807
|
|
|
—
|
|
|
2,396
|
|
||||
Acquisition related sales incentive
|
425
|
|
|
727
|
|
|
995
|
|
|
2,061
|
|
||||
Change in fair value of derivatives liability
|
(5
|
)
|
|
(6
|
)
|
|
(7
|
)
|
|
(245
|
)
|
||||
Noncash interest expense related to convertible notes
|
1,273
|
|
|
1,121
|
|
|
3,702
|
|
|
3,260
|
|
||||
Intangible amortization from continuing operations
|
2,287
|
|
|
2,197
|
|
|
6,863
|
|
|
7,192
|
|
||||
Securities litigation costs
|
887
|
|
|
500
|
|
|
1,709
|
|
|
685
|
|
||||
Impairment of equity securities
|
—
|
|
|
—
|
|
|
1,750
|
|
|
—
|
|
||||
Tax benefit resulting from certain noncash tax items
|
(1,943
|
)
|
|
—
|
|
|
(3,649
|
)
|
|
—
|
|
||||
Total adjustments to GAAP net loss from continuing operations
|
86,603
|
|
|
8,118
|
|
|
105,680
|
|
|
61,217
|
|
||||
Net loss - Non-GAAP from continuing operations
|
$
|
(10,829
|
)
|
|
$
|
(14,897
|
)
|
|
$
|
(35,533
|
)
|
|
$
|
(47,622
|
)
|
|
|
|
|
|
|
|
|
||||||||
Weighted average shares outstanding
|
109,471,712
|
|
|
115,924,122
|
|
|
109,060,408
|
|
|
119,745,231
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net loss per share from continuing operations - Non-GAAP
|
$
|
(0.10
|
)
|
|
$
|
(0.13
|
)
|
|
$
|
(0.33
|
)
|
|
$
|
(0.40
|
)
|
(Dollars in thousands, except per share amounts)
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net loss per common share from continuing operations
|
$
|
(0.89
|
)
|
|
$
|
(0.20
|
)
|
|
$
|
(1.29
|
)
|
|
$
|
(0.91
|
)
|
Adjustments to GAAP net loss per common share from continuing operations:
|
|
|
|
|
|
|
|
||||||||
Loss from related party equity method investment including impairment loss
|
0.77
|
|
|
0.03
|
|
|
0.82
|
|
|
0.39
|
|
||||
Stock-based compensation expense from continuing operations
|
—
|
|
|
—
|
|
|
0.04
|
|
|
—
|
|
||||
Corporate restructuring from continuing operations
|
—
|
|
|
0.01
|
|
|
—
|
|
|
0.02
|
|
||||
Acquisition related sales incentive
|
—
|
|
|
0.01
|
|
|
0.01
|
|
|
0.02
|
|
||||
Change in fair value of derivatives liability
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Noncash interest expense related to convertible notes
|
0.01
|
|
|
0.01
|
|
|
0.03
|
|
|
0.03
|
|
||||
Intangible amortization from continuing operations
|
0.02
|
|
|
0.01
|
|
|
0.05
|
|
|
0.04
|
|
||||
Securities litigation costs
|
0.01
|
|
|
—
|
|
|
0.02
|
|
|
0.01
|
|
||||
Impairment of equity securities
|
—
|
|
|
—
|
|
|
0.02
|
|
|
—
|
|
||||
Tax benefit resulting from certain noncash tax items
|
(0.02
|
)
|
|
—
|
|
|
(0.03
|
)
|
|
—
|
|
||||
Total adjustments to GAAP net loss per common share from continuing operations
|
0.79
|
|
|
0.07
|
|
|
0.96
|
|
|
0.51
|
|
||||
Net loss per common share from continuing operations - Non-GAAP
|
$
|
(0.10
|
)
|
|
$
|
(0.13
|
)
|
|
$
|
(0.33
|
)
|
|
$
|
(0.40
|
)
|
(Dollars in thousands, except per share amounts)
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Revenue:
|
|
|
|
|
|
|
|
||||||||
Software-as-a-service related
|
$
|
15,937
|
|
|
$
|
15,205
|
|
|
$
|
48,323
|
|
|
$
|
44,948
|
|
Software and hardware related
|
1,450
|
|
|
1,523
|
|
|
3,790
|
|
|
5,400
|
|
||||
Maintenance
|
2,522
|
|
|
2,696
|
|
|
7,357
|
|
|
8,183
|
|
||||
Total software-related revenue
|
19,909
|
|
|
19,424
|
|
|
59,470
|
|
|
58,531
|
|
||||
Sequencing and molecular analysis
|
742
|
|
|
1,025
|
|
|
2,506
|
|
|
1,985
|
|
||||
Home health care services
|
1,641
|
|
|
1,311
|
|
|
4,627
|
|
|
3,862
|
|
||||
Total net revenue
|
22,292
|
|
|
21,760
|
|
|
66,603
|
|
|
64,378
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Cost of Revenue:
|
|
|
|
|
|
|
|
||||||||
Software-as-a-service related
|
5,863
|
|
|
5,859
|
|
|
18,205
|
|
|
17,287
|
|
||||
Software and hardware related
|
737
|
|
|
1,757
|
|
|
2,412
|
|
|
3,785
|
|
||||
Maintenance
|
234
|
|
|
274
|
|
|
683
|
|
|
564
|
|
||||
Amortization of developed technologies
|
1,233
|
|
|
1,143
|
|
|
3,700
|
|
|
4,029
|
|
||||
Total software-related cost of revenue
|
8,067
|
|
|
9,033
|
|
|
25,000
|
|
|
25,665
|
|
||||
Sequencing and molecular analysis
|
2,323
|
|
|
1,757
|
|
|
5,443
|
|
|
4,862
|
|
||||
Home health care services
|
836
|
|
|
682
|
|
|
2,435
|
|
|
2,116
|
|
||||
Total cost of revenue
|
11,226
|
|
|
11,472
|
|
|
32,878
|
|
|
32,643
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Gross Profit
|
11,066
|
|
|
10,288
|
|
|
33,725
|
|
|
31,735
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Operating Expenses:
|
|
|
|
|
|
|
|
||||||||
Selling, general and administrative
|
17,001
|
|
|
17,521
|
|
|
56,123
|
|
|
54,181
|
|
||||
Research and development
|
4,835
|
|
|
7,749
|
|
|
15,875
|
|
|
25,051
|
|
||||
Amortization of acquisition-related assets
|
1,054
|
|
|
1,054
|
|
|
3,163
|
|
|
3,163
|
|
||||
Total operating expenses
|
22,890
|
|
|
26,324
|
|
|
75,161
|
|
|
82,395
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Loss from operations
|
(11,824
|
)
|
|
(16,036
|
)
|
|
(41,436
|
)
|
|
(50,660
|
)
|
||||
Interest expense, net
|
(4,306
|
)
|
|
(4,067
|
)
|
|
(12,766
|
)
|
|
(12,049
|
)
|
||||
Other income (expense), net
|
226
|
|
|
60
|
|
|
(928
|
)
|
|
308
|
|
||||
Loss from related party equity method investment, including impairment
|
(83,306
|
)
|
|
(2,942
|
)
|
|
(89,512
|
)
|
|
(46,353
|
)
|
||||
Loss from continuing operations before income taxes
|
(99,210
|
)
|
|
(22,985
|
)
|
|
(144,642
|
)
|
|
(108,754
|
)
|
||||
(Benefit from) provision for income taxes
|
(1,778
|
)
|
|
30
|
|
|
(3,429
|
)
|
|
85
|
|
||||
Net loss from continuing operations
|
(97,432
|
)
|
|
(23,015
|
)
|
|
(141,213
|
)
|
|
(108,839
|
)
|
||||
Loss from discontinued operations, net of tax
|
(32
|
)
|
|
(19,383
|
)
|
|
(1,817
|
)
|
|
(44,738
|
)
|
||||
Net loss
|
$
|
(97,464
|
)
|
|
$
|
(42,398
|
)
|
|
$
|
(143,030
|
)
|
|
$
|
(153,577
|
)
|
|
|
|
|
|
|
|
|
||||||||
Net loss per share:
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
|
|
|
|
|
|
|
||||||||
Basic and diluted - common stock
|
$
|
(0.89
|
)
|
|
$
|
(0.20
|
)
|
|
$
|
(1.29
|
)
|
|
$
|
(0.91
|
)
|
|
|
|
|
|
|
|
|
||||||||
Discontinued operations
|
|
|
|
|
|
|
|
||||||||
Basic and diluted - common stock
|
$
|
—
|
|
|
$
|
(0.17
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.37
|
)
|
|
|
|
|
|
|
|
|
||||||||
Total net income (loss) per share
|
|
|
|
|
|
|
|
||||||||
Basic and diluted - common stock
|
$
|
(0.89
|
)
|
|
$
|
(0.37
|
)
|
|
$
|
(1.31
|
)
|
|
$
|
(1.28
|
)
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic and diluted - common stock
|
109,471,712
|
|
|
115,924,122
|
|
|
109,060,408
|
|
|
119,745,231
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||
Revenue:
|
|
|
|
|
|
|
|
||||
Software-as-a-service related
|
71.5
|
%
|
|
69.9
|
%
|
|
72.6
|
%
|
|
69.8
|
%
|
Software and hardware related
|
6.5
|
%
|
|
7.0
|
%
|
|
5.7
|
%
|
|
8.4
|
%
|
Maintenance
|
11.3
|
%
|
|
12.4
|
%
|
|
11.0
|
%
|
|
12.7
|
%
|
Total software-related revenue
|
89.3
|
%
|
|
89.3
|
%
|
|
89.3
|
%
|
|
90.9
|
%
|
Sequencing and molecular analysis
|
3.3
|
%
|
|
4.7
|
%
|
|
3.8
|
%
|
|
3.1
|
%
|
Home health care services
|
7.4
|
%
|
|
6.0
|
%
|
|
6.9
|
%
|
|
6.0
|
%
|
Total net revenue
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
||||
Cost of Revenue:
|
|
|
|
|
|
|
|
||||
Software-as-a-service related
|
26.3
|
%
|
|
26.9
|
%
|
|
27.3
|
%
|
|
26.9
|
%
|
Software and hardware related
|
3.3
|
%
|
|
8.1
|
%
|
|
3.6
|
%
|
|
5.9
|
%
|
Maintenance
|
1.0
|
%
|
|
1.3
|
%
|
|
1.0
|
%
|
|
0.9
|
%
|
Amortization of developed technologies
|
5.6
|
%
|
|
5.3
|
%
|
|
5.6
|
%
|
|
6.2
|
%
|
Total software-related cost of revenue
|
36.2
|
%
|
|
41.5
|
%
|
|
37.5
|
%
|
|
39.9
|
%
|
Sequencing and molecular analysis
|
10.4
|
%
|
|
8.1
|
%
|
|
8.2
|
%
|
|
7.6
|
%
|
Home health care services
|
3.8
|
%
|
|
3.1
|
%
|
|
3.7
|
%
|
|
3.3
|
%
|
Total cost of revenue
|
50.4
|
%
|
|
52.7
|
%
|
|
49.4
|
%
|
|
50.7
|
%
|
|
|
|
|
|
|
|
|
||||
Gross Profit
|
49.6
|
%
|
|
47.3
|
%
|
|
50.6
|
%
|
|
49.3
|
%
|
|
|
|
|
|
|
|
|
||||
Operating Expenses:
|
|
|
|
|
|
|
|
||||
Selling, general and administrative
|
76.2
|
%
|
|
80.6
|
%
|
|
84.3
|
%
|
|
84.2
|
%
|
Research and development
|
21.7
|
%
|
|
35.6
|
%
|
|
23.8
|
%
|
|
38.9
|
%
|
Amortization of acquisition-related assets
|
4.7
|
%
|
|
4.8
|
%
|
|
4.7
|
%
|
|
4.9
|
%
|
Total operating expenses
|
102.6
|
%
|
|
121.0
|
%
|
|
112.8
|
%
|
|
128.0
|
%
|
|
|
|
|
|
|
|
|
||||
Loss from operations
|
(53.0
|
)%
|
|
(73.7
|
)%
|
|
(62.2
|
)%
|
|
(78.7
|
)%
|
Interest expense, net
|
(19.3
|
)%
|
|
(18.7
|
)%
|
|
(19.2
|
)%
|
|
(18.7
|
)%
|
Other income (expense), net
|
1.0
|
%
|
|
0.3
|
%
|
|
(1.4
|
)%
|
|
0.5
|
%
|
Loss from related party equity method investment, including impairment
|
(373.7
|
)%
|
|
(13.5
|
)%
|
|
(134.4
|
)%
|
|
(72.0
|
)%
|
Loss from continuing operations before income taxes
|
(445.0
|
)%
|
|
(105.6
|
)%
|
|
(217.2
|
)%
|
|
(168.9
|
)%
|
(Benefit from) provision for income taxes
|
(7.9
|
)%
|
|
0.1
|
%
|
|
(5.1
|
)%
|
|
0.2
|
%
|
Net loss from continuing operations
|
(437.1
|
)%
|
|
(105.7
|
)%
|
|
(212.1
|
)%
|
|
(169.1
|
)%
|
Loss from discontinued operations, net of tax
|
(0.1
|
)%
|
|
(89.1
|
)%
|
|
(2.7
|
)%
|
|
(69.5
|
)%
|
Net loss
|
(437.2
|
)%
|
|
(194.8
|
)%
|
|
(214.8
|
)%
|
|
(238.6
|
)%
|
|
|
|
|
|
|
|
Period-To-Period Change
|
||||||||||||||||||||||
(Dollars in thousands)
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
Amount
|
|
Amount
|
|
Percent
|
|
Amount
|
|
Percent
|
||||||||||||||
Software-as-a-service related
|
$
|
15,937
|
|
|
$
|
15,205
|
|
|
$
|
48,323
|
|
|
$
|
44,948
|
|
|
$
|
732
|
|
|
4.8
|
%
|
|
$
|
3,375
|
|
|
7.5
|
%
|
Software and hardware related
|
1,450
|
|
|
1,523
|
|
|
3,790
|
|
|
5,400
|
|
|
(73
|
)
|
|
(4.8
|
)%
|
|
(1,610
|
)
|
|
(29.8
|
)%
|
||||||
Maintenance
|
2,522
|
|
|
2,696
|
|
|
7,357
|
|
|
8,183
|
|
|
(174
|
)
|
|
(6.5
|
)%
|
|
(826
|
)
|
|
(10.1
|
)%
|
||||||
Total software-related revenue
|
19,909
|
|
|
19,424
|
|
|
59,470
|
|
|
58,531
|
|
|
485
|
|
|
2.5
|
%
|
|
939
|
|
|
1.6
|
%
|
||||||
Sequencing and molecular analysis
|
742
|
|
|
1,025
|
|
|
2,506
|
|
|
1,985
|
|
|
(283
|
)
|
|
(27.6
|
)%
|
|
521
|
|
|
26.2
|
%
|
||||||
Home health care services
|
1,641
|
|
|
1,311
|
|
|
4,627
|
|
|
3,862
|
|
|
330
|
|
|
25.2
|
%
|
|
765
|
|
|
19.8
|
%
|
||||||
Total net revenue
|
$
|
22,292
|
|
|
$
|
21,760
|
|
|
$
|
66,603
|
|
|
$
|
64,378
|
|
|
$
|
532
|
|
|
2.4
|
%
|
|
$
|
2,225
|
|
|
3.5
|
%
|
|
|
|
|
|
|
|
|
|
Period-To-Period Change
|
||||||||||||||||||||
(Dollars in thousands)
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, 2018 |
||||||||||||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
Amount
|
|
Amount
|
|
Percentage
|
|
Amount
|
|
Percentage
|
||||||||||||||
Software-as-a-service related
|
$
|
5,863
|
|
|
$
|
5,859
|
|
|
$
|
18,205
|
|
|
$
|
17,287
|
|
|
$
|
4
|
|
|
0.1
|
%
|
|
$
|
918
|
|
|
5.3
|
%
|
Software and hardware related
|
737
|
|
|
1,757
|
|
|
2,412
|
|
|
3,785
|
|
|
(1,020
|
)
|
|
(58.1
|
)%
|
|
(1,373
|
)
|
|
(36.3
|
)%
|
||||||
Maintenance
|
234
|
|
|
274
|
|
|
683
|
|
|
564
|
|
|
(40
|
)
|
|
(14.6
|
)%
|
|
119
|
|
|
21.1
|
%
|
||||||
Amortization of developed technologies
|
1,233
|
|
|
1,143
|
|
|
3,700
|
|
|
4,029
|
|
|
90
|
|
|
7.9
|
%
|
|
(329
|
)
|
|
(8.2
|
)%
|
||||||
Total software-related cost of revenue
|
8,067
|
|
|
9,033
|
|
|
25,000
|
|
|
25,665
|
|
|
(966
|
)
|
|
(10.7
|
)%
|
|
(665
|
)
|
|
(2.6
|
)%
|
||||||
Sequencing and molecular analysis
|
2,323
|
|
|
1,757
|
|
|
5,443
|
|
|
4,862
|
|
|
566
|
|
|
32.2
|
%
|
|
581
|
|
|
11.9
|
%
|
||||||
Home health care services
|
836
|
|
|
682
|
|
|
2,435
|
|
|
2,116
|
|
|
154
|
|
|
22.6
|
%
|
|
319
|
|
|
15.1
|
%
|
||||||
Total cost of revenue
|
$
|
11,226
|
|
|
$
|
11,472
|
|
|
$
|
32,878
|
|
|
$
|
32,643
|
|
|
$
|
(246
|
)
|
|
(2.1
|
)%
|
|
$
|
235
|
|
|
0.7
|
%
|
|
|
|
|
|
|
|
|
|
Period-To-Period Change
|
||||||||||||||||||||
(Dollars in thousands)
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
Amount
|
|
Amount
|
|
Percentage
|
|
Amount
|
|
Percentage
|
||||||||||||||
Selling, general and administrative
|
$
|
17,001
|
|
|
$
|
17,521
|
|
|
$
|
56,123
|
|
|
$
|
54,181
|
|
|
$
|
(520
|
)
|
|
(3.0
|
)%
|
|
$
|
1,942
|
|
|
3.6
|
%
|
|
|
|
|
|
|
|
|
|
Period-To-Period Change
|
||||||||||||||||||||
(Dollars in thousands)
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
Amount
|
|
Amount
|
|
Percentage
|
|
Amount
|
|
Percentage
|
||||||||||||||
Research and development
|
$
|
4,835
|
|
|
$
|
7,749
|
|
|
$
|
15,875
|
|
|
$
|
25,051
|
|
|
$
|
(2,914
|
)
|
|
(37.6
|
)%
|
|
$
|
(9,176
|
)
|
|
(36.6
|
)%
|
|
|
|
|
|
|
|
|
|
Period-To-Period Change
|
||||||||||||||||||||
(Dollars in thousands)
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
Amount
|
|
Amount
|
|
Percentage
|
|
Amount
|
|
Percentage
|
||||||||||||||
Interest expense, net
|
$
|
4,306
|
|
|
$
|
4,067
|
|
|
$
|
12,766
|
|
|
$
|
12,049
|
|
|
$
|
239
|
|
|
5.9
|
%
|
|
$
|
717
|
|
|
6.0
|
%
|
|
|
|
|
|
|
|
|
|
Period-To-Period Change
|
||||||||||||||||
(Dollars in thousands)
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
Amount
|
|
Amount
|
|
Percentage
|
|
Amount
|
|
Percentage
|
||||||||||
Other income (expense), net
|
$
|
226
|
|
|
$
|
60
|
|
|
$
|
(928
|
)
|
|
$
|
308
|
|
|
$
|
166
|
|
|
276.7%
|
|
$(1,236)
|
|
(401.3)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
(Dollars in thousands)
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
Amount
|
|
Amount
|
|
Percentage
|
|
Amount
|
|
Percentage
|
||||||||||
Loss from related party equity method Investment including impairment loss
|
$
|
83,306
|
|
|
$
|
2,942
|
|
|
$
|
89,512
|
|
|
$
|
46,353
|
|
|
$
|
80,364
|
|
|
2,731.6%
|
|
$43,159
|
|
93.1%
|
|
|
|
|
|
|
|
|
|
Period-To-Period Change
|
||||||||||||||||||||
(Dollars in thousands)
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
Amount
|
|
Amount
|
|
Percentage
|
|
Amount
|
|
Percentage
|
||||||||||||||
(Benefit from) provision for income taxes
|
$
|
(1,778
|
)
|
|
$
|
30
|
|
|
$
|
(3,429
|
)
|
|
$
|
85
|
|
|
$
|
(1,808
|
)
|
|
(6,026.7
|
)%
|
|
$
|
(3,514
|
)
|
|
(4,134.1
|
)%
|
|
|
|
|
|
|
|
|
|
Period-To-Period Change
|
||||||||||||||||||||
(Dollars in thousands)
|
Three Months Ended
September 30, 2018 |
|
Nine Months Ended
September 30, 2018 |
|
Three Months Ended
September 30, 2018 |
|
Nine Months Ended
September 30, 2018 |
||||||||||||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
Amount
|
|
Amount
|
|
Percentage
|
|
Amount
|
|
Percentage
|
||||||||||||||
Loss from discontinued operations, net of tax
|
$
|
(32
|
)
|
|
$
|
(19,383
|
)
|
|
$
|
(1,817
|
)
|
|
$
|
(44,738
|
)
|
|
$
|
19,351
|
|
|
(99.8
|
)%
|
|
$
|
42,921
|
|
|
(95.9
|
)%
|
(Dollars in thousands)
|
|
Nine Months Ended
September 30, |
||||||
|
|
2018
|
|
2017
|
||||
Cash provided by (used in):
|
|
|
|
|
||||
Operating activities
|
|
$
|
(26,347
|
)
|
|
$
|
(73,469
|
)
|
Investing activities
|
|
(9,326
|
)
|
|
(10,835
|
)
|
||
Financing activities
|
|
(2,098
|
)
|
|
(2,740
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
|
(262
|
)
|
|
184
|
|
||
Net decrease in cash and cash equivalents
|
|
$
|
(38,033
|
)
|
|
$
|
(86,860
|
)
|
•
|
Software-as-a-service related (“SaaS”)
- SaaS related revenue is generated from customers’ access to and usage of our hosted software solutions on a subscription basis for a specified contract term. In SaaS arrangements, the customer cannot take possession of the software during the term of the contract and generally has the right to access and use the software and receive any software upgrades published during the subscription period.
|
•
|
Software and hardware related
- Software and hardware related revenue is generated from the license of our software, on a perpetual basis, the sale of hardware and professional services that are complementary to the software and may or may not be required for the software to function as desired by the customer. The services are generally provided in the form of implementation and training services and do not include maintenance revenue. The software is installed on the customer’s site or the customer’s designated vendor’s site and is not hosted by us or by a vendor contracted by us. See the section below “
Contracts with Software, Hardware, and Implementation Services”
for details of our judgments and recognition of revenue relating to this category.
|
•
|
Maintenance
- Maintenance revenue includes ongoing post contract client support (“PCS”) or maintenance on software and hardware during the PCS term. Additionally, PCS includes ongoing development of software updates and upgrades provided to the client on a when-and-if-available basis. Revenue is recognized over the maintenance term.
|
•
|
Sequencing and molecular analysis
- Sequencing and molecular analysis revenue is generated by providing customers with reports of the results of performing sequencing and analysis of whole genome DNA, RNA and/or proteomic testing under our reseller agreement with NantOmics, LLC ("NantOmics"), and from blood samples via its liquid/blood-based tumor profiling platform through our subsidiary, NantHealth Labs, Inc. ("NantHealth Labs", previously named Liquid Genomics, Inc.) (see Note 18 of the financial statements). Revenue is recognized at a point in time, when reports of results are transferred to the ordering physician or institution, or when cash is received as described below, or ratably over time for the period of stand-ready obligation to provide blood-based tumor profiling services.
|
•
|
Home health care services
- Home health care services revenue includes the sale of nursing and therapy services provided to patients in a home care setting. These revenues are recognized at a point in time or over time, as services are provided.
|
•
|
increase our sales and marketing efforts to drive market adoption of NantHealth solutions (including GPS Cancer, Liquid GPS and NantHealth software solutions);
|
•
|
our success in driving adoption of our sequencing and molecular analysis solutions, including GPS Cancer and Liquid GPS;
|
•
|
our ability to convince key thought leaders, physicians and caregivers and other key oncology stakeholders of the clinical utility of our entire product offering and its potential advantages over existing sequencing tests, specifically, the advantages of our RNA sequencing, which maps oncology disease pathways versus a patient’s own germline, and our liquid tumor profiling tests;
|
•
|
the willingness of physicians, self-insured employers, payers and healthcare providers to utilize our sequencing and molecular analysis services; and
|
•
|
the willingness of commercial third-party payers and government payers to reimburse for our molecular services, the scope and amount of which will affect patients’ willingness or ability to pay for our molecular analysis services and likely heavily influence our customers’ decisions to recommend our molecular analysis services.
|
•
|
our continued ability to access the pricing and claims data necessary to enable us to deliver reliable data in our cost estimation and price transparency offering to customers;
|
•
|
our failure to predict physician and patient market demand accurately in terms of test platform functionality and to supply a test platform that meets this demand in a timely fashion;
|
•
|
failing to keep our sequencing and molecular analysis solutions up to date and on pace with current clinical and market developments;
|
•
|
tariffs and trade barriers, export regulations and other regulatory and contractual limitations on our ability to sell our products;
|
•
|
greater risk of a failure of foreign employees to comply with both U.S. and foreign laws, including export and antitrust regulations, the FCPA and any trade regulations ensuring fair trade practices;
|
•
|
heightened risk of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, or irregularities in, financial statements;
|
•
|
potentially adverse tax consequences, including multiple and possibly overlapping tax structures; and
|
•
|
political and economic instability, political unrest and terrorism.
|
•
|
our diligence obligations with respect to the use of the licensed technology in relation to our development and commercialization of our product candidates, and what activities satisfy those diligence obligations.
|
•
|
breach of our contractual obligations to clients, which may cause our clients to terminate their relationship with us and may result in potentially significant financial obligations to our clients;
|
•
|
investigation by the federal and state regulatory authorities empowered to enforce HIPAA and other data privacy and security laws, which include the U.S. Department of Health and Human Services, or HHS, the Federal Trade Commission and state attorneys general, and the possible imposition of civil and criminal penalties;
|
•
|
private litigation by individuals adversely affected by any misuse of their personal health information for which we are responsible; and
|
•
|
negative publicity, which may decrease the willingness of current and potential future customers to work with us and negatively affect our sales and operating results.
|
•
|
requires each medical device manufacturer to pay an excise tax equal to 2.3% of the price for which such manufacturer sells its medical devices. This tax may apply to GPS Cancer and some or all of our products which are in development. The excise tax was been temporarily suspended for calendar years 2016 and 2017. On January 22, 2018, the United States Congress extended the suspension for an additional two years. Accordingly, the medical device excise tax does not apply to the sale of taxable medical devices by the manufacturer, producer or importer of the device during the period beginning on January 1, 2016 and ending on December 31, 2019, but will be reinstated in 2020 without additional Congressional action.
|
•
|
mandates a reduction in payments for clinical laboratory services paid under the Medicare Clinical Laboratory Fee Schedule of 1.75% for the years 2011 through 2015. In addition, a productivity adjustment is made to the fee schedule payment amount.
|
•
|
creates initiatives to promote quality indicators in payment methodologies and the coordination and promotion of research on comparative clinical effectiveness of different technologies and procedures.
|
•
|
announcements by us or our competitors of new products, significant contracts, commercial relationships or capital commitments and the timing of these introductions or announcements;
|
•
|
adverse regulatory or reimbursement announcements;
|
•
|
announcements by us or our competitors of significant acquisitions, strategic collaborations, joint ventures or capital commitments;
|
•
|
the results of our efforts to develop additional offerings;
|
•
|
our dependence on our customers, partners and collaborators;
|
•
|
regulatory or legal developments in the United States or other countries;
|
•
|
reimbursement decisions regarding our molecular profiling solutions, including GPS Cancer;
|
•
|
developments or disputes concerning patent applications, issued patents or other proprietary rights;
|
•
|
the recruitment or departure of key management or other personnel;
|
•
|
our ability to successfully commercialize our future products;
|
•
|
the level of expenses related to any of our products;
|
•
|
actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;
|
•
|
actual or anticipated quarterly variations in our financial results or those of our competitors;
|
•
|
any change to the composition of the board of directors or key personnel;
|
•
|
sales of common stock by us or our stockholders in the future, as well as the overall trading volume of our common stock;
|
•
|
changes in the structure of healthcare payment systems;
|
•
|
commencement of, or our involvement in, litigation, including claims by our equityholders pertaining to our conversion from a Delaware limited liability company into a Delaware corporation or the pending class action litigation;
|
•
|
general economic, industry and market conditions and other factors that may be unrelated to our operating performance or the operating performance of our competitors, including changes in market valuations of similar companies; and
|
•
|
the other factors described in this “Risk Factors” section.
|
•
|
being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;
|
•
|
not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;
|
•
|
not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;
|
•
|
reduced disclosure obligations regarding executive compensation; and
|
•
|
exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
|
•
|
a requirement that special meetings of stockholders be called only by the board of directors, the president or the chief executive officer;
|
•
|
advance notice requirements for stockholder proposals and nominations for election to our board of directors; and
|
•
|
the authority of the board of directors to issue preferred stock on terms determined by the board of directors without stockholder approval and which preferred stock may include rights superior to the rights of the holders of common stock.
|
•
|
We will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by Delaware law. Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the registrant and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful.
|
•
|
We may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law.
|
•
|
We are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification.
|
•
|
We will not be obligated pursuant to our amended and restated bylaws to indemnify a person with respect to proceedings initiated by that person against us or our other indemnitees, except with respect to proceedings authorized by our board of directors or brought to enforce a right to indemnification.
|
•
|
The rights conferred in our amended and restated bylaws are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such persons.
|
•
|
We may not retroactively amend our bylaw provisions to reduce our indemnification obligations to directors, officers, employees and agents.
|
Period
|
(a) Total number of shares (or units) purchased
|
(b) Average price paid per share (or unit)
|
(c) Total number of shares (or units) purchased as part of publicly announced plans or programs
|
(d) Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs
|
|||||
January 1, 2018 to January 31, 2018
|
10,000
|
|
$
|
3.52
|
|
—
|
|
90,000
|
|
February 1, 2018 to February 28, 2018
|
10,000
|
|
$
|
3.02
|
|
—
|
|
80,000
|
|
March 1, 2018 to March 31, 2018
|
10,000
|
|
$
|
3.56
|
|
—
|
|
70,000
|
|
April 1, 2018 to April 30, 2018
|
10,000
|
|
$
|
3.04
|
|
—
|
|
60,000
|
|
May 1, 2018 to May 31, 2018
|
10,000
|
|
$
|
3.41
|
|
—
|
|
50,000
|
|
June 1, 2018 to June 30, 2018
|
10,000
|
|
$
|
3.49
|
|
—
|
|
40,000
|
|
July 1, 2018 to July 31, 2018
|
10,000
|
|
$
|
3.54
|
|
—
|
|
30,000
|
|
August 1, 2018 to August 31, 2018
|
10,000
|
|
$
|
3.15
|
|
—
|
|
20,000
|
|
September 1, 2018 to September 30, 2018
|
10,000
|
|
$
|
1.89
|
|
—
|
|
10,000
|
|
TOTAL:
|
90,000
|
|
|
|
|
|
|
|
|
Incorporated by Reference
|
|
|
||||
Number
|
|
Exhibit Title
|
|
Form
|
|
Exhibit
|
|
Filing
|
|
Filed
|
Date
|
Herewith
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
10-Q
|
|
10.1
|
|
2018-08-09
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|
|
|
101.INS**
|
|
XBRL Instance Document.
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
101.SCH**
|
|
XBRL Taxonomy Extension Schema Document.
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
101.CAL**
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
101.DEF**
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
101.LAB**
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
101.PRE**
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
|
|
|
|
|
|
X
|
+
|
Indicates a management contract or compensatory plan.
|
Date:
|
November 21, 2018
|
|
|
|
|
|
|
|
|
By:
|
/s/ Patrick Soon-Shiong
|
|
|
Name:
|
Patrick Soon-Shiong
|
|
|
Its:
|
Chairman, Chief Executive Officer and Director
|
|
|
|
(Principal Executive Officer)
|
Date:
|
November 21, 2018
|
|
|
|
|
By:
|
/s/ Bob Petrou
|
|
|
Name:
|
Bob Petrou
|
|
|
Its
|
Interim Chief Financial Officer
|
|
|
|
(Principal Financial and Accounting Officer)
|
|
|
|
|
COMPANY
NantHealth, Inc.
|
|
CONSULTANT
Bob Petrou
|
9920 Jefferson Blvd.
|
|
|
Culver City, CA 90232
|
|
|
|
|
|
|
|
|
/s/ Ron Louks
|
|
/s/ Bob Petrou
|
Signature
|
|
Signature
|
By: Ron Louks
|
|
By: Bob Petrou
|
Its: Chief Operating Officer
|
|
Its: Consultant
|
|
|
|
•
|
Direct all financial functions of the corporation while partnering with the executive leadership team and the board of directors towards execution of the company’s strategic plan.
|
•
|
Perform as the Company’s Principle Accounting Officer for purposes of reporting requirements with the Securities Exchange Commission.
|
•
|
Ensure that all financial reporting including quarterly and annual reports are accurate and accordance with generally accepted accounting principles issued by the Financial Accounting Standards Board, the Securities and Exchange Commission, and other regulatory and advisory organizations and in accordance with financial management techniques and practices appropriate within the industry.
|
•
|
Plan, develop, organize, implement, direct and evaluate the organization's fiscal function and performance.
|
•
|
Participate in the development of the corporation's plans and programs as a strategic partner.
|
•
|
Evaluate and advise on the impact of long range planning, introduction of new programs/strategies and regulatory action.
|
•
|
Develop credibility for the finance group by providing timely and accurate analysis of budgets, financial reports and financial trends in order to assist the CEO/COO, the Board and other senior executives in performing their responsibilities.
|
•
|
Enhance and/or develop, implement and enforce policies and procedures of the organization by way of systems that will improve the overall operation and effectiveness of the corporation.
|
•
|
Establish credibility throughout the organization and with the Board as an effective developer of solutions to business challenges.
|
•
|
Provide technical financial advice and knowledge to others within the financial discipline.
|
•
|
Continual improvement of the budgeting process through education of department managers on financial issues impacting department budgets.
|
•
|
Provide strategic financial input and leadership on decision making issues affecting the organization; i.e., evaluation of potential alliances acquisitions and/or mergers and pension funds and investments.
|
•
|
Optimize the handling of bank and deposit relationships and initiate appropriate strategies to enhance cash position.
|
•
|
Develop a reliable cash flow projection process and reporting mechanism that includes minimum cash threshold to meet operating needs.
|
•
|
Be an advisor from the financial perspective on any contracts into which the corporation may enter.
|
•
|
Evaluate the finance division structure and team plan for continual improvement of the efficiency and effectiveness of the group as well as provide individuals with professional and personal growth with emphasis on opportunities (where possible) of individuals.
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
November 21, 2018
|
By:
|
/s/ Patrick Soon-Shiong
|
|
|
|
Dr. Patrick Soon-Shiong
|
|
|
|
Chairman, Chief Executive Officer and Director
|
|
|
|
(Principal Executive Officer)
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
November 21, 2018
|
By:
|
/s/ Bob Petrou
|
|
|
|
Bob Petrou
|
|
|
|
Interim Chief Financial Officer
|
|
|
|
(Principal Financial and Accounting Officer)
|
(i)
|
the Company’s Quarterly Report on Form 10-Q of NantHealth, Inc for the quarter ended
September 30, 2018
to which this Certification is attached as Exhibit 32.1 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Exchange Act, and
|
(ii)
|
that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of NantHealth, Inc.
|
Date:
|
November 21, 2018
|
By:
|
/s/ Patrick Soon-Shiong
|
|
|
|
Dr. Patrick Soon-Shiong
|
|
|
|
Chairman, Chief Executive Officer and Director
|
|
|
|
(Principal Executive Officer)
|
(i)
|
the Company’s Quarterly Report on Form 10-Q of NantHealth, Inc. for the quarter ended
September 30, 2018
to which this Certification is attached as Exhibit 32.2 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Exchange Act, and
|
(ii)
|
that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of NantHealth, Inc.
|
Date:
|
November 21, 2018
|
By:
|
/s/ Bob Petrou
|
|
|
|
Bob Petrou
|
|
|
|
Interim Chief Financial Officer
|
|
|
|
(Principal Financial and Accounting Officer)
|