v2.3.0.11
DOCUMENT AND ENTITY INFORMATION
 9 Months Ended
Sep. 30, 2011
Nov. 09, 2011
Entity Information    
Entity Registrant Name TRANSGENOMIC INC  
Entity Central Index Key 0001043961  
Current Fiscal Year End Date --12-31  
Entity Filer Category Smaller Reporting Company  
Document Type 10-Q  
Document Period End Date Sep. 30, 2011
Document Fiscal Year Focus 2011  
Document Fiscal Period Focus Q3  
Amendment Flag false  
Entity Common Stock, Shares Outstanding   49,379,822
v2.3.0.11
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands
Sep. 30, 2011
Dec. 31, 2010
CURRENT ASSETS:    
Cash and cash equivalents $ 1,423 $ 3,454
Accounts receivable, net 7,591 7,601
Inventories, net 3,306 3,344
Other current assets 1,336 635
Total current assets 13,656 15,034
PROPERTY AND EQUIPMENT:    
Equipment 10,105 9,820
Furniture, fixtures & leasehold improvements 3,723 3,479
Property, Plant and Equipment, Gross 13,828 13,299
Less: accumulated depreciation (12,231) (11,697)
Property, Plant and Equipment, Net 1,597 1,602
OTHER ASSETS:    
Goodwill 6,275 6,275
Intangibles (net of accumulated amortization of $1,142 and $519, respectively) 8,325 8,962
Other assets 121 154
Assets 29,974 32,027
CURRENT LIABILITIES:    
Accounts payable 1,721 1,360
Accrued compensation 1,058 875
Short term debt 247 989
Current maturities of long term debt 1,234 0
Accrued liabilities 3,834 3,231
Contractual obligation 1,363 1,628
Current portion of lease obligations 197 170
Accrued preferred stock dividend 450 0
Total current liabilities 10,104 8,253
LONG TERM LIABILITIES:    
Long term debt less current maturities 7,405 8,640
Preferred stock conversion feature 8,000 1,983
Preferred stock warrant liability 3,200 2,351
Other long-term liabilities 974 843
Total liabilities 29,683 22,070
Redeemable Series A convertible preferred stock, $.01 par value, 3,879,307 shares authorized, 2,586,205 shares issued and outstanding 1,796 1,457
STOCKHOLDERS’ EQUITY (DEFICIT):    
Preferred stock, $.01 par value, 15,000,000 shares authorized, 2,586,205 shares issued and outstanding 0 0
Common stock, $.01 par value, 100,000,000 shares authorized, 49,379,822 and 49,289,672 shares issued and outstanding, respectively 499 498
Additional paid-in capital 140,486 139,730
Accumulated other comprehensive income 1,675 1,589
Accumulated deficit (144,165) (133,317)
Total stockholders’ equity (deficit) (1,505) 8,500
Liabilities and Equity $ 29,974 $ 32,027
v2.3.0.11
CONDENSED CONSOLIDATED BALANCE SHEETS PARENTHETICAL (USD $)
In Thousands, except Share data
Sep. 30, 2011
Dec. 31, 2010
OTHER ASSETS:    
Accumulated amortization on intangibles $ 1,142 $ 519
LIABILITIES:    
Redeemable Series A convertible preferred stock, par value $ 0.01 $ 0.01
Redeemable Series A convertible preferred stock, shares authorized 3,879,307 3,879,307
Redeemable Series A convertible preferred stock, shares issued 2,586,205 2,586,205
Redeemable Series A convertible preferred stock, shares outstanding 2,586,205 2,586,205
STOCKHOLDERS’ EQUITY (DEFICIT):    
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 49,379,822 49,289,672
Common stock, shares outstanding 49,379,822 49,289,672
Preferred stock, par value $ 0.01 $ 0.01
Preferred stock, shares authorized 15,000,000 15,000,000
Preferred stock, shares issued 2,586,205 2,586,205
Preferred stock, shares outstanding 2,586,205 2,586,205
v2.3.0.11
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Thousands, except Share data
 3 Months Ended 9 Months Ended
Sep. 30, 2011
Sep. 30, 2010
Sep. 30, 2011
Sep. 30, 2010
NET SALES $ 8,253 $ 4,419 $ 23,400 $ 14,956
COST OF GOODS SOLD 3,808 2,402 10,248 7,568
Gross profit 4,445 2,017 13,152 7,388
OPERATING EXPENSES:        
Selling, general and administrative 4,364 2,159 14,272 7,623
Research and development 515 613 1,650 1,952
Restructuring Charges 5 72 40 72
Operating Expenses 4,884 2,844 15,962 9,647
LOSS FROM OPERATIONS (439) (827) (2,810) (2,259)
OTHER INCOME (EXPENSE):        
Interest income (expense), net (238) 0 (720) 1
Expense on preferred stock (600) 0 (6,866) 0
Other, net (2) 0 231 0
Other Income (Expense) (840) 0 (7,355) 1
LOSS BEFORE INCOME TAXES (1,279) (827) (10,165) (2,258)
INCOME TAX EXPENSE (BENEFIT) (9) 71 (120) 109
NET LOSS (1,270) (898) (10,045) (2,367)
PREFERRED STOCK DIVIDENDS AND ACCRETION (275) 0 (803) 0
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS $ (1,545) $ (898) $ (10,848) $ (2,367)
BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.03) $ (0.02) $ (0.22) $ (0.05)
BASIC AND DILUTED WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING 49,327,527 49,289,672 49,306,861 49,228,561
v2.3.0.11
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $)
In Thousands, except Share data
Total
Common Stock
Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Balance at Dec. 31, 2010 $ 8,500 $ 498 $ 139,730 $ (133,317) $ 1,589
Balance, shares at Dec. 31, 2010 49,289,672 49,289,672      
Increase (Decrease) in Stockholders' Equity          
Net loss (10,045)     (10,045) (10,045)
Other comprehensive income (loss):          
Foreign currency translation adjustment, net of tax 86       86
Comprehensive loss         (9,959)
Non-cash stock-based compensation 734 0 734 0 0
Issuance of stock, shares   90,150      
Issuance of stock, amount 23 1 22    
Preferred stock accretion (353)     (353)  
Dividends on preferred stock (450)     (450)  
Balance at Sep. 30, 2011 $ (1,505) $ 499 $ 140,486 $ (144,165) $ 1,675
Balance, shares at Sep. 30, 2011 49,379,822 49,379,822      
v2.3.0.11
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands
 9 Months Ended
Sep. 30, 2011
Sep. 30, 2010
CASH FLOWS USED IN OPERATING ACTIVITIES:    
Net loss $ (10,045) $ (2,367)
Adjustments to reconcile net loss to net cash flows provided by (used in) operating activities:    
Depreciation and amortization 1,506 523
Non-cash, stock based compensation 734 (29)
Provision for losses on doubtful accounts 1,432 29
Provision for losses on inventory obsolescence 47 78
Preferred stock revaluation 6,866 0
Changes in operating assets and liabilities:    
Accounts receivable (1,418) 940
Inventories (44) (245)
Prepaid expenses and other current assets (269) 90
Accounts payable 137 (121)
Accrued liabilities (131) 242
Other long term liabilities 268 (44)
Long term deferred income taxes 18 20
Net cash flows used in operating activities (899) (884)
CASH FLOWS USED IN INVESTING ACTIVITIES:    
Purchase of property and equipment (147) (141)
Change in other assets (256) (25)
Net cash flows used in investing activities (403) (166)
CASH FLOWS USED IN FINANCING ACTIVITIES:    
Principal payments on capital lease obligations (165) (57)
Issuance of common stock 23 42
Principal payment on note payable (659) 0
Net cash flows used in financing activities (801) (15)
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH 72 12
NET CHANGE IN CASH AND CASH EQUIVALENTS (2,031) (1,053)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,454 5,642
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,423 4,589
Cash paid during the period for:    
Interest 495 0
Income taxes, net 106 4
SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION    
Acquisition of equipment through capital leases 388 286
Dividends payable on preferred stock $ 450 $ 0
v2.3.0.11
BUSINESS DESCRIPTION
 9 Months Ended
Sep. 30, 2011
Business Description [Abstract]  
Business Description and Basis of Presentation [Text Block]
BUSINESS DESCRIPTION
Business Description.
Transgenomic, Inc. is a global biotechnology company advancing personalized medicine in cancer and inherited diseases through its proprietary molecular technologies and world-class clinical and research services. We have three complementary business segments.
•
Clinical Laboratories. Our clinical laboratories specialize in genetic testing for cardiology, neurology, mitochondrial disorders, and oncology. Located in New Haven, Connecticut and Omaha, Nebraska the molecular clinical reference laboratories are certified under the Clinical Laboratory Improvement Amendment (CLIA) as high complexity labs and our Omaha facility is accredited by CAP (College of American Pathologists).
•
Pharmacogenomics Services. Pharmacogenomics research services are provided by our Contract Research Organization located in Omaha, Nebraska. This lab specializes in pharmacogenomic, biomarker and mutation discovery research serving the pharmaceutical and biomedical industries world-wide for disease research, drug and diagnostic development and clinical trial support.
•
Diagnostic Tools. Our proprietary product is the WAVE® System which has broad applicability to genetic variation detection in both molecular genetic research and molecular diagnostics. There is a worldwide installed base of over 1,500 WAVE Systems as of September 30, 2011. We also distribute bioinstruments produced by other manufacturers (“OEM Equipment”) through our sales and distribution network. Service contracts to maintain installed systems are sold and supported by our technical support personnel. The installed WAVE base and some OEM Equipment platforms generate a demand for consumables that are required for the continued operation of the bioinstruments. We develop, manufacture and sell these consumable products. In addition, we manufacture and sell consumable products that can be used on multiple, independent platforms. These products include SURVEYOR® Nuclease and a range of chromatography columns.
v2.3.0.11
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 9 Months Ended
Sep. 30, 2011
Summary of Significant Accounting Policies [Abstract]  
Significant Accounting Policies [Text Block]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation.
The consolidated financial statements include the accounts of Transgenomic, Inc. and its wholly owned subsidiary. All intercompany balances and transactions have been eliminated in consolidation.
Risks and Uncertainties.
Certain risks and uncertainties are inherent in our day-to-day operations and to the process of preparing our financial statements.

The preparation of consolidated financial statements requires management to make estimates 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 and the reported amounts of net sales and expenses during the reporting period. In addition, estimates and assumptions associated with the determination of the fair value of certain assets and related impairments require considerable judgment by management. Actual results could differ from the estimates and assumptions used in preparing these consolidated financial statements.
Fair Value.
Unless otherwise specified, book value approximates fair market value. The preferred stock conversion feature and warrant liability are recorded at fair value. See Footnote I.
Basis of Presentation.
The condensed consolidated balance sheet as of December 31, 2010 was derived from our audited balance sheet as of that date. The accompanying consolidated financial statements as of and for the three and nine months ended September 30, 2011 and 2010 are unaudited and reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim periods. These unaudited consolidated financial statements and notes should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2010 contained in our Annual Report on Form 10-K. The results of operations for the interim periods presented are not necessarily indicative of the results for the entire year.
Cash and Cash Equivalents.
Cash and cash equivalents include cash and investments with original maturities at the date of acquisition of three months or less. Such investments presently consist of temporary overnight investments.
Accounts Receivable.
The following is a summary of activity for the allowance for doubtful accounts during the three and nine months ended September 30, 2011 and 2010:
 
 
Dollars in Thousands
 
Beginning
Balance
 
Provision
 
Write Offs
 
Ending
Balance
Three Months Ended September 30, 2011
$
1,387

 
$
205

 
$
(113
)
 
$
1,479

Three Months Ended September 30, 2010
$
295

 
$
40

 
$
—

 
$
335

Nine Months Ended September 30, 2011
$
334

 
$
1,433

 
$
(288
)
 
$
1,479

Nine Months Ended September 30, 2010
$
310

 
$
29

 
$
(4
)
 
$
335

While payment terms are generally 30 days, we have also provided extended payment terms of up to 90 days in certain cases. We operate globally and some of the international payment terms may be greater than 90 days. Accounts receivable are carried at original invoice amount and shown net of allowance for doubtful accounts and contractual allowances. The estimate made for doubtful accounts is based on a review of all outstanding amounts on a quarterly basis. We determine the allowance for doubtful accounts and contractual allowances by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions. Accounts receivable are written off when deemed uncollectible. Recoveries of accounts receivable previously written off are recorded when received.
Inventories.
Inventories are stated at the lower of cost or market net of allowance for obsolete inventory. Cost is computed using standard costs for finished goods and average or latest actual cost for raw materials and work in process, which approximates the first-in, first-out (FIFO) method.
 
The following is a summary of activity for the allowance for obsolete inventory during the three and nine months ended September 30, 2011 and 2010: 

 
Dollars in Thousands
 
Beginning
Balance
 
Provision
 
Write Offs
 
Ending
Balance
Three Months Ended September 30, 2011
$
520

 
$
(2
)
 
$
(4
)
 
$
514

Three Months Ended September 30, 2010
$
536

 
$
12

 
$
(28
)
 
$
520

Nine Months Ended September 30, 2011
$
518

 
$
47

 
$
(51
)
 
$
514

Nine Months Ended September 30, 2010
$
507

 
$
78

 
$
(65
)
 
$
520

We determine the allowance for obsolescence by evaluating inventory quarterly for items deemed to be slow moving or obsolete.
Property and Equipment.
Property and equipment are carried at cost. Depreciation is computed by the straight-line method over the estimated useful lives of the related assets as follows:
 
Leasehold improvements
1 to 10 years
Furniture and fixtures
3 to 7 years
Production equipment
3 to 7 years
Computer equipment
3 to 7 years
Research and development equipment
2 to 7 years
Depreciation expense related to property and equipment during the three months ended September 30, 2011 and 2010 was $0.2 million and $0.1 million, respectively. Included in depreciation for the three months ended September 30, 2011 was less than $0.1 million related to equipment acquired under capital leases. Depreciation expense related to property and equipment during the nine months ended September 30, 2011 and 2010 was $0.5 million and $0.3 million, respectively. Included in depreciation for the nine months ended September 30, 2011 was $0.1 million related to equipment acquired under capital leases.
Goodwill.
Goodwill is the excess of the purchase price over fair value of assets acquired and is not amortized. Goodwill is tested for impairment annually. We perform this impairment analysis during the fourth quarter of each year or when a significant event occurs that may impact goodwill. Impairment occurs when the carrying value is determined to be not recoverable thereby causing the carrying value of the goodwill to exceed its fair value. If impaired, the asset’s carrying value is reduced to its fair value. We recorded no impairment charges related to goodwill as of December 31, 2010. No events have transpired in the nine months ended September 30, 2011 that would require an impairment analysis prior to our scheduled review.
Stock Based Compensation.
All stock options awarded to date have exercise prices equal to the market price of our common stock on the date of grant and have ten-year contractual terms. Unvested options as of September 30, 2011 had vesting periods of one or three years from date of grant. None of the stock options outstanding at September 30, 2011 are subject to performance or market-based vesting conditions.
We measure and recognize compensation expense for all stock-based awards made to employees and directors, including stock options. Compensation expense is based on the calculated fair value of the awards as measured at the grant date and is expensed ratably over the service period of the awards (generally the vesting period).
During the three months ended September 30, 2011, we recorded the recapture of compensation expense of less than $0.1 million within selling, general and administrative expense. During the nine months ended September 30, 2011, we recorded compensation expense of $0.7 million within selling, general and administrative expense as a result of the vesting of options exercisable for the purchase of 3.6 million shares. During the nine months ended September 30, 2010, we recorded compensation expense recovery of less than $0.1 million within selling, general and administrative expense as a result of the vesting of options exercisable for the purchase of 1.3 million shares. As of September 30, 2011, there was $1.2 million of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average period of nearly three years.
No stock options were granted during the quarters ended September 30, 2011 and 2010. The fair value of the options granted during the nine months ended September 30, 2011and 2010 was estimated on the respective grant dates using the Black-Scholes option pricing model. We granted 2.2 million stock options during the second quarter of 2011. These stock options were granted to our entire employee base with the bulk being granted to our senior management team. The Black-Scholes model was used with the following assumptions: risk-free interest rates of 1.87% based on the U.S. Treasury yield in effect at the time of grant; dividend yields of zero percent; expected lives of four years, based on expected exercise activity behavior; and volatility of 105% based on the historical volatility of our stock over a time that is consistent with the expected life of the option. A small group of senior executives hold the majority of the stock options and are expected to hold the options for five years. Forfeitures of 1.10% have been assumed.
There were 75,000 stock options granted during the quarter ended June 30, 2010. The Black-Scholes model was used with the following assumptions: risk-free interest rates of 1.98% based on the U.S. Treasury yield in effect at the time of grant; dividend yields of zero percent; expected life of five years, based on historical exercise activity behavior; and volatility of 102.69% based on the historical volatility of our stock over a time that is consistent with the expected life of the option. A small group of senior executives held the majority of the stock options and are expected to hold the options until they are vested. Forfeitures of 2.2% were assumed in the calculation.
Net Sales Recognition.
Revenue is realized and earned when all of the following criteria are met:
•
Persuasive evidence of an arrangement exists
•
Delivery has occurred or services have been rendered
•
The seller’s price to the buyer is fixed or determinable, and
•
Collectability is reasonably assured.

Net sales from our Clinical Laboratories are recognized on an individual test basis and takes place when the test report is completed, reviewed and sent to the client less the reserve for insurance, Medicare and Medicaid contractual adjustments. There are no deferred net sales associated with our Clinical Laboratories. Adjustments to the allowances, based on actual receipts from third party payers, are recorded upon settlement.
In our Pharmacogenomics Services, we perform services on a project by project basis. When we receive payment in advance, we recognize revenue when we deliver the service. These projects typically do not extend beyond one year. At September 30, 2011 and 2010, deferred net sales associated with pharmacogenomics research projects, included in the balance sheet in other accrued liabilities, was $0.1 million and less than $0.1 million, respectively.
Net sales of Diagnostic Tools products are recognized in accordance with the terms of the sales arrangement. Such recognition is based on receipt of an unconditional customer order and transfer of title and risk of ownership to the customer, typically upon shipment of the product under a purchase order. Our sales terms do not provide for the right of return unless the product is damaged or defective. Net sales from certain services associated with the analytical instruments, to be performed subsequent to shipment of the products, is deferred and recognized when the services are provided. Such services, mainly limited to installation and training services that are not essential to the functionality of the instruments, typically are performed in a timely manner subsequent to shipment of the instrument. We also enter into various service contracts that cover installed instruments. These contracts cover specific time periods and net sales associated with these contracts are deferred and recognized ratably over the service period. At September 30, 2011 and 2010, deferred net sales, mainly associated with our service contracts, included in the balance sheet in accrued liabilities, was approximately $1.4 million for each period.
Taxes collected from customers and remitted to government agencies for specific net sales producing transactions are recorded net with no effect on the income statement.
Preferred Stock.
We entered into a Series A Convertible Preferred Stock Purchase Agreement on December 29, 2010, as discussed in Note I, selling shares and issuing warrants to purchase a certain number of shares of Series A Preferred Stock. The Series A Preferred Stock meets the definition of mandatorily redeemable stock as it is preferred capital stock which is redeemable at the option of the holder and should be reported outside of equity. Preferred stock is accreted to its redemption value. The warrants do not qualify to be treated as equity, and accordingly, are recorded as a liability. A preferred stock conversion feature is embedded within the Series A Preferred Stock that meets the definition of a derivative. The preferred stock, warrant liability and preferred stock conversion feature are all recorded separately and were initially recorded at fair value using the Black Scholes model. We are required to record these instruments at fair value at each reporting date and changes will be recorded as an adjustment to earnings. The warrant liability and preferred stock conversion feature are considered level three financial instruments. See Footnote I.
Translation of Foreign Currency.
Our foreign subsidiary uses the local currency of the country in which it is located as its functional currency. Its assets and liabilities are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. A cumulative translation gain of approximately $0.1 million is reported as accumulated other comprehensive income on the accompanying consolidated balance sheet as of September 30, 2011. A cumulative translation loss of less than $0.1 million was reported as accumulated other comprehensive income for the nine months ended September 30, 2010. Revenues and expenses are translated at the average rates during the period. For transactions that are not denominated in the functional currency, we recognized less than $0.1 million as foreign currency transaction gain in the determination of net loss for the nine months ending September 30, 2011 and $0.3 million as foreign currency transaction loss in the determination of net loss for the nine months ending September 30, 2010.
Other Income.
Other income consists primarily of interest income from cash and cash equivalents invested in overnight instruments. Other income in the nine months ended September 30, 2011 includes an award of a federal grant under the Qualifying Therapeutic Discovery Project related to COLD-PCR, Surveyor Scan kit development for detecting key cancer pathway gene mutations and mtDNA damage assays. Income related to this federal grant was $0.2 million, net of consulting fees. Other income for the three months ended September 30, 2011 was less than $0.1 million. Other income for the three and nine months ending September 30, 2010 was less than $0.1 million.
 
Earnings Per Share.
Basic earnings per share is calculated based on the weighted-average number of common shares outstanding during each period. Diluted earnings per share include shares issuable upon exercise of outstanding stock options, warrants or conversion rights that have exercise or conversion prices below the market value of our common stock. Options, warrants and conversion rights pertaining to 17,751,940 and 10,598,156 shares of our common stock have been excluded from the computation of diluted earnings per share at September 30, 2011 and 2010, respectively. The options, warrants and conversion rights that were exercisable in 2011 and 2010 were not included because the effect would be anti-dilutive due to the net loss.

Recently adopted accounting pronouncements.
In October 2009, the FASB issued ASU No. 2009-13, Revenue Recognition (ASC 605): Multiple-Deliverable Revenue Arrangements (a consensus of the FASB Emerging Issues Task Force); effective for years beginning after June 15, 2010. Vendors often provide multiple products and/or services to their customers as part of a single arrangement. These deliverables may be provided at different points in time or over different time periods. The existing guidance regarding how and whether to separate these deliverables and how to allocate the overall arrangement consideration to each was originally captured in EITF Issue No. 00-21, Revenue Arrangements with Multiple Deliverables, which is now codified at ASC 605-25, Revenue Recognition – Multiple-Element Arrangements. The issuance of ASU 2009-13 amends ASC 605-25 and represents a significant shift from the existing guidance that was considered abuse-preventative and heavily geared toward ensuring that revenue recognition was not accelerated. The application of this new guidance is expected to result in accounting for multiple-deliverable revenue arrangements that better reflects their economics as more arrangements will be separated into individual units of accounting. Our adoption of ASU No. 2009-13 did not have a material impact on our consolidated financial statements.
In October 2009, the FASB issued ASU No. 2009-14, Software (ASC 985): Certain Revenue Arrangements That Include Software Elements (a consensus of the FASB Emerging Issues Task Force); effective for years beginning after June 15, 2010. ASU 2009-14 modifies the existing scope guidance in ASC 985-605, Software Revenue Recognition, for revenue arrangements with tangible products that include software elements. This modification was made primarily due to the changes in ASC 605-25 noted previously, which further differentiated the separation and allocation guidance applicable to non-software arrangements as compared to software arrangements. Prior to the modification of ASC 605-25, the separation and allocation guidance for software and non-software arrangements was more similar. Under ASC 985-605, which was originally issued as AICPA Statement of position 97-2, Software Revenue Recognition, an arrangement to sell a tangible product along with software was considered to be in its scope if the software was more than incidental to the product as a whole. Our adoption of ASU No. 2009-14 did not have a material impact on our consolidated financial statements.
In January 2010, the FASB issued guidance to amend the disclosure requirements related to fair value measurements, effective for years beginning after December 15, 2010. The guidance requires the disclosure of roll forward activities on purchases, sales, issuance, and settlements of the assets and liabilities measured using significant unobservable inputs (Level Three fair value measurements). We adopted the new disclosure provisions with the filing of our Form 10-Q for the three months ended March 31, 2011.

Recently issued accounting pronouncements not yet adopted.
In June 2011, the FASB issued guidance on the presentation of comprehensive income. The new guidance eliminates the current option to report other comprehensive income and its components in the statement of changes in equity. Instead, an entity will be required to present either a continuous statement of net income and other comprehensive income or in two separate but consecutive statements. The new guidance is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2011 and will have presentation changes only.
In July 2011, the FASB issued guidance on the presentation of net patient service revenue. The new guidance requires a change in presentation of the statement of operations by reclassifying the provision for bad debts associated with patient service revenue from an operating expense to a deduction from patient service revenue (net of contractual allowances and discounts). Additionally, enhanced disclosure about policies for recognizing revenue and assessing bad debts are required. Disclosures of patient service revenue (net of contractual allowances and discounts) as well as qualitative and quantitative information about changes in the allowance for doubtful accounts will be required. The new guidance is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2011.
In September 2011, the FASB issued guidance on Intangibles including goodwill and other intangibles. The new guidance will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. The new guidance is effective for fiscal years beginning after December 15, 2011. Early adoption is permitted.


v2.3.0.11
INVENTORIES
 9 Months Ended
Sep. 30, 2011
Inventories [Abstract]  
Inventory Disclosure [Text Block]
INVENTORIES
Inventories (net of allowance for obsolescence) consisted of the following:
 
 
Dollars in Thousands
 
September 30,
2011

 
December 31,
2010

Finished goods
$
2,063

 
$
2,119

Raw materials and work in process
1,469

 
1,531

Demonstration inventory
288

 
212

 
$
3,820

 
$
3,862

Less allowance for obsolescence
(514
)
 
(518
)
Total
$
3,306

 
$
3,344
v2.3.0.11
INTANGIBLES AND OTHER ASSETS
 9 Months Ended
Sep. 30, 2011
Intangibles and Other Assets [Abstract]  
Intangibles And Other Assets [Text Block]
INTANGIBLES AND OTHER ASSETS
Long-lived intangible assets and other assets consisted of the following:
 
 
Dollars in Thousands
 
September 30, 2011
 
December 31, 2010
 
Cost
 
Accumulated
Amortization
 
Net Book
Value
 
Cost
 
Accumulated
Amortization
 
Net Book
Value
Intangibles—acquired technology
$
6,535

 
$
683

 
$
5,852

 
$
6,535

 
$
—

 
$
6,535

Intangibles—assay royalties
1,434

 
154

 
1,280

 
1,434

 
—

 
1,434

Intangibles—third party payor relationships
367

 
—

 
367

 
367

 
—

 
367

Intangibles—tradenames and trademarks
344

 
37

 
307

 
344

 
—

 
344

Patents
767

 
263

 
504

 
511

 
245

 
266

Intellectual property
20

 
5

 
15

 
290

 
274

 
16

 
$
9,467

 
$
1,142

 
$
8,325

 
$
9,481

 
$
519

 
$
8,962

 
 
 
 
Estimated Useful Life
Intellectual property
10 years
Patents
7 years
Intangibles—acquired technology
7 – 8 years
Intangibles—third party payor relationships
Indefinite
Intangibles—assay royalties
7 years
Intangibles—tradenames and trademarks
7 years
Other assets include U.S. security deposits and deferred tax assets, net of applicable valuation allowances.

The intangible assets were each valued separately using valuation approaches most appropriate for each specific asset.

 
 
 
Intangibles—acquired technology
 
Income Approach - Multi-period Excess Earnings Method
Intangibles—third party payor relationships
 
Cost Approach - Replacement Cost Method
Intangibles—assay royalties
 
Income Approach - Multi-period Excess Earnings Method
Intangibles—tradenames and trademarks
 
Income Approach - Relief from Royalty Method

Income Approach
The income approach is based upon the economic principle of anticipation. In this approach, the value of the subject intangible asset is the present value of the expected economic income to be earned from that intangible asset. This expectation is then converted into a present value through the selection of an investor's required rate of return given the risk and/or uncertainty associated with the subject intangible asset. In valuing an intangible asset using the income approach, the following elements should be considered: (i) remaining useful life, (ii) legal rights, (iii) position of the intangible asset in its respective life cycle, (iv) appropriate capital charges, (v) allocations of income, and (vi) whether any tax amortization benefit should be included in the analysis.

Cost Approach
The cost approach to intangible asset analysis is based upon the economic principles of substitution and price equilibrium. These basic economic principles assert that an investor pay no more for an investment than the cost to obtain an investment of equal utility. Within the cost approach there are several related analytical methods. Two of the most common and widely accepted include the reproduction cost and replacement cost methods. All cost based approaches typically involve a comprehensive analysis of the relevant cost components, which typically include: (i) materials, (ii) labor, (iii) overhead, (iv) intangible asset developer's profit, and (v) an adequate return on the asset developer's capital.

Reproduction cost contemplates the construction of an exact replica of the subject intangible asset. Before appropriate adjustments are made for the purposes of deriving an indication of value, reproduction cost does not consider either the market demand for or the market acceptance of the subject intangible. Therefore, before the requisite adjustments, the reproduction cost estimate does not answer the question of whether anyone would be interested in an exact replica of the subject interest.

Unlike the reproduction cost method, the replacement cost method does consider market demand and market acceptance for the subject intangible. In other words, if there are elements or components of the subject intangible that generate little or no demand, they are not included in the subject intangible.

Excess Earnings Method
The Excess Earnings Method, a form of the Income Approach, reflects the present value of the projected cash flows that are expected to be generated by the intangible asset, less charges representing the contribution of other assets to those cash flows. As part of our analysis, we determined individual rates of return applicable to each acquired asset and estimate the effective “capital charge” to be applied to the earnings of the identified intangibles.

Relief-from-Royalty Method
The Relief-from-Royalty method, a form of the Income Approach, estimates the cost of licensing the acquired intangible asset from an independent third party using a royalty rate. Since the company owns the intangible asset, it is relieved from making royalty payments. The resulting cash flow savings attributed to the owned intangible asset are estimated over the intangible asset's remaining useful life and discounted to present value.
Amortization expense for intangible assets was $0.3 million and less than $0.1 million during the three months ended September 30, 2011 and 2010, respectively. Amortization expense for intangible assets was $1.0 million and less than $0.1 million during the nine months ended September 30, 2011 and 2010, respectively. Amortization expense for intangible assets is expected to be $1.2 million in each of the years 2011 through 2017.
v2.3.0.11
CAPITAL LEASES
 9 Months Ended
Sep. 30, 2011
Capital Leases [Abstract]  
Capital Leases in Financial Statements of Lessee Disclosure [Text Block]
CAPITAL LEASES
 
The following is an analysis of the property acquired under capital leases.

 
Dollars in Thousands
 
Asset Balances at
Classes of Property
September 30,
2011

 
December 31,
2010

Equipment
$
782

 
$
394

Less: Accumulated amortization
(119
)
 
(13
)
Total
$
663

 
$
381

The following is a schedule by years of future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of September 30, 2011.
Year ending December 31:
 
Dollars in Thousands
2011
$
75

2012
224

2013
209

2014
35

Total minimum lease payments
$
543

Less: Amount representing interest
(79
)
Present value of net minimum lease payments
$
464
v2.3.0.11
COMMITMENTS AND CONTINGENCIES
 9 Months Ended
Sep. 30, 2011
Commitments and Contingencies [Abstract]  
Commitments and Contingencies Disclosure [Text Block]
COMMITMENTS AND CONTINGENCIES
We are subject to a number of claims of various amounts, which arise out of the normal course of business. In the opinion of management, the disposition of pending claims will not have a material adverse effect on our financial position, results of operations or cash flows.
We lease certain equipment, vehicles and operating facilities under non-cancellable operating leases that expire on various dates through 2016. The future minimum lease payments required under these leases are approximately $0.3 million in 2011, $1.1 million in 2012, $0.6 million in 2013, $0.4 million in 2014 , $0.4 million in 2015 and $0.3 million in 2016. Rent expense for the three months ended September 30, 2011 and 2010 was $0.2 million and $0.2 million, respectively. Rent expense for each of the nine months ended September 30, 2011 and 2010 was $0.7 million and $0.6 million, respectively.
We have entered into an employment agreement with Craig J. Tuttle, our President and Chief Executive Officer. The current term of Mr. Tuttle’s employment agreement ends on July 12, 2012. The employment agreement provides that Mr. Tuttle will be entitled to receive a severance payment from the Company if his employment is terminated involuntarily except if such termination is based on “just cause”, as that term is defined in his employment agreement. The severance payment payable in the event of involuntary termination without just cause is equal to his annual base salary at the time of termination and will be paid over a twelve-month period. The employment agreement provides that the severance payment provision will be honored if the Company is acquired by, or merged into, another company and his position is eliminated as a result of such acquisition or merger. In addition we have one employee who is entitled to a severance payment of less than $0.1 million if the employee’s position is eliminated prior to July 2012.
At September 30, 2011, firm commitments to vendors to purchase components used in WAVE Systems and instruments manufactured by others totaled $0.5 million.
v2.3.0.11
INCOME TAXES
 9 Months Ended
Sep. 30, 2011
Income Taxes [Abstract]  
Income Tax Disclosure [Text Block]
INCOME TAXES
We file income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and various foreign jurisdictions. We have statutes of limitation open for federal income tax returns related to tax years 2007 through 2010. We have state income tax returns subject to examination primarily for tax years 2007 through 2010. Open tax years related to foreign jurisdictions, primarily the United Kingdom, remain subject to examination for the tax years 2007 through 2010.
Income tax benefit for the nine months ended September 30, 2011 was $0.1 million. This is the result of the change in deferred tax assets and liabilities reported in financial statements of our subsidiary outside the U.S. We believe the tax benefit recorded will be offset in future periods by a tax expense related to income reported in financial statements of our subsidiary outside the U.S. Income tax expense for the nine months ended September 30, 2010 was less than $0.1 million. The effective tax rate for the nine months ended September 30, 2011 is 1.14%, which is primarily the result of valuation allowances against the net operating losses for the U.S.
During the three and nine months ended September 30, 2011 and 2010, there were no material changes to the liability for uncertain tax positions.
v2.3.0.11
STOCKHOLDERS' EQUITY
 9 Months Ended
Sep. 30, 2011
Stockholders' Equity Attributable to Parent [Abstract]  
Stockholders' Equity Note Disclosure [Text Block]
STOCKHOLDERS’ EQUITY
Preferred Stock.
The Company’s Board of Directors is authorized to issue up to 15,000,000 shares of preferred stock in one or more series, from time to time, with such designations, powers, preferences and rights and such qualifications, limitations and restrictions as may be provided in a resolution or resolutions adopted by the Board of Directors. The authority of the Board of Directors includes, but is not limited to, the determination or fixing of the following with respect to shares of such class or any series thereof: (i) the number of shares; (ii) the dividend rate, whether dividends shall be cumulative and, if so, from which date; (iii) whether shares are to be redeemable and, if so, the terms and amount of any sinking fund providing for the purchase or redemption of such shares; (iv) whether shares shall be convertible and, if so, the terms and provisions thereof; (v) what restrictions are to apply, if any, on the issue or reissue of any additional preferred stock; and (vi) whether shares have voting rights. The preferred stock may be issued with a preference over the common stock as to the payment of dividends. The Company has no current plans to issue any additional preferred stock. Classes of stock such as the preferred stock may be used, in certain circumstances, to create voting impediments on extraordinary corporate transactions or to frustrate persons seeking to effect a merger or otherwise to gain control of the Company. For the foregoing reasons, any additional preferred stock issued by the Company could have an adverse effect on the rights of the holders of the common stock.

On December 29, 2010, we entered into a transaction with affiliates of Third Security, LLC (the “Investors”), pursuant to the terms of Series A Convertible Preferred Stock Purchase Agreement (“Series A Purchase Agreement”), in which we: (i) sold an aggregate of 2,586,205 shares of Series A Convertible Preferred Stock (the “Series A Preferred”) at a price of $2.32 per share; and (ii) issued a warrant to purchase up to an aggregate of 1,293,102 shares of Series A Preferred (the “Warrant”) having an exercise price of $2.32 per share (the sale of Series A Preferred and issuance of the Warrant hereafter referred to as the “Financing”). The Warrant may be exercised at any time from December 29, 2010 until December 28, 2015 and contains a “cashless exercise” feature. The gross proceeds from the Financing were $6.0 million. The $0.2 million of costs incurred to complete the Financing were recorded as a reduction in the value of the Series A Preferred. We used the net proceeds from the financing to acquire the FAMILION family of genetic tests from PGxHealth, a subsidiary of Clinical Data, Inc.The Series A Preferred meets the definition of mandatorily redeemable stock as it is preferred capital stock that is redeemable at the option of the holder through December 2015 and should be reported outside of equity. The Series A Preferred is accreted to its redemption value of $6.0 million. The Warrant does not qualify to be treated as equity and, accordingly, is recorded as a liability. A preferred stock anti-dilution feature is embedded within the Series A Preferred that meets the definition of a derivative.

In connection with the Financing, we filed a Certificate of Designation of Series A Convertible Preferred Stock (the “Certificate of Designation”) with the Secretary of State of the State of Delaware, designating 3,879,307 shares of our preferred stock as Series A Convertible Preferred Stock. The Series A Preferred, including the Series A Preferred issuable upon exercise of the Warrant, is convertible into shares of our common stock at a rate of 4-for-1, which conversion rate is subject to further adjustment as set forth in the Certificate of Designation. Certain rights of the holders of the Series A Preferred are senior to the rights of the holders of common stock. The Series A Preferred has a liquidation preference equal to its original price per share, plus any accrued and unpaid dividends thereon. The holders of the Series A Preferred are entitled to receive quarterly dividends, which accrue at the rate of 10.0% of the original price per share per annum, whether or not declared, shall compound annually and shall be cumulative. In any calendar quarter, we are required to pay from funds legally available a cash dividend in the amount of 50% of the distributable cash flow as defined in the Series A Purchase Agreement or the aggregate amount of dividends accrued on the Series A Preferred. During the nine months ended September 30, 2011, we recorded $0.5 million in accrued dividends.
Generally, the holders of the Series A Preferred are entitled to vote together with the holders of common stock, as a single group, on an as-converted basis. However, the Certificate of Designation provides that we shall not perform some activities, subject to certain exceptions, without the affirmative vote of a majority of the holders of the outstanding shares of Series A Preferred. The holders of the Series A Preferred also are entitled to elect or appoint, as a single group, two (2) of the five (5) directors of the Company.
In connection with the Financing, we also entered into a registration rights agreement with the Investors (the “Registration Rights Agreement”). Pursuant to the terms of the Registration Rights Agreement, the Company has granted the Investors certain demand, “piggyback” and S-3 registration rights covering the resale of the shares of common stock underlying the Series A Preferred issued pursuant to the Series A Purchase Agreement and issuable upon exercise of the Warrants and all shares of common stock issuable upon any dividend or other distribution with respect thereto.
Common Stock.
The Company’s Board of Directors is authorized to issue up to 100,000,000 shares of common stock, from time to time, as provided in a resolution or resolutions adopted by the Board of Directors.
Common Stock Warrants.
No common stock warrants were issued during the three and nine months ended September 30, 2011. Laurus Master Fund, Ltd. exercised its warrants during the third quarter of 2011 in a cashless exercise for 60,150 shares of stock. No common stock warrants were issued or exercised during the three and nine months ended September 30, 2010. A warrant to purchase 5,172,408 shares of common stock was outstanding at September 30, 2011.
 
Warrant Holder
 
Issue Year
 
Expiration
 
Underlying
Shares
 
Exercise
Price
Affiliates of Third Security, LLC (1)
 
2010
 
December 2015
 
5,172,408
 
$0.58
(1)
This Warrant was issued in connection with the Financing. The number of shares shown reflects the post-conversion shares.
v2.3.0.11
FAIR VALUE
 9 Months Ended
Sep. 30, 2011
Fair Value [Abstract]  
Financial Instruments Disclosure [Text Block]
FAIR VALUE

Financial Accounting Standards Board (“FASB”) guidance on fair value measurements, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements for our financial assets and liabilities, as well as for other assets and liabilities that are carried at fair value on a recurring basis in our consolidated financial statements.
FASB guidance establishes a three-level fair value hierarchy based upon the assumptions (inputs) used to price assets or liabilities. The three levels of inputs used to measure fair value are as follows:
Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities,
Level 2—Observable inputs other than those included in Level 1, such as quoted prices for similar assets and liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets, and
Level 3—Unobservable inputs reflecting our own assumptions and best estimate of what inputs market participants would use in pricing the asset or liability.
The preferred stock warrant liability and preferred stock conversion feature are recorded separately at fair value. We are required to record these instruments at fair value at each reporting date and changes are recorded as an adjustment to earnings. The gains or losses included in earnings are reported in other income (expense) in our Statement of Operations.
The preferred stock warrant liability and preferred stock conversion feature are considered Level 3 financial instruments and are valued using the Black Scholes call option pricing formula, which approximates a binomial model for the preferred stock conversion feature. This method is among the most common and widely used valuation approaches for call options. The model relates an option's value to five variables: the current price of the underlying asset, the strike price of the option, the time to expiration or exercise of the option, a risk free interest rate, and the volatility of the underlying asset.
The following assumptions were used in the September 30, 2011valuation of the preferred stock conversion feature: the closing share price of our stock for the quarter ended September 30, 2011 discounted 15% due to the lack of marketability and liquidity, an exercise price of $0.39, expected term of 4.25 years, risk-free interest rate of 0.96% based on a 5 year U.S. Treasury and volatility of 103%.
The following assumptions were used in the September 30, 2011valuation of the preferred stock warrants: an exercise price of $2.32, expected term of 1.5 years, risk-free interest rate of 0.25% based on a 2 year U.S. Treasury and volatility of 50%.

During the three months ended September 30, 2011, the changes in the fair value of the liabilities measured using significant unobservable inputs (Level 3) were comprised of the following:
 
 
Dollars in Thousands
 
For the three months ended
 
September 30, 2011
 
Preferred
Stock
Conversion
Feature
 
Preferred
Stock
Warrant
Liability
 
Total
Beginning balance at June 1, 2011
$
7,600

 
$
3,000

 
$
10,600

Total gains or losses:
 
 
 
 
 
Recognized in earnings
400

 
200

 
600

Balance at September 30, 2011
$
8,000

 
$
3,200

 
$
11,200



During the nine months ended September 30, 2011, the changes in the fair value of the liabilities measured using significant unobservable inputs (Level 3) were comprised of the following:
 
 
Dollars in Thousands
 
For the nine months ended
 
September 30, 2011
 
Preferred
Stock
Conversion
Feature
 
Warrants
 
Total
Beginning balance at January 1, 2011
$
1,983

 
$
2,351

 
$
4,334

Total gains or losses:
 
 
 
 
 
Recognized in earnings
6,017

 
849

 
6,866

Balance at September 30, 2011
$
8,000

 
$
3,200

 
$
11,200

We had no Level 3 liabilities at September 30, 2010. There were no purchases, sales, issuances or settlements of Level 3 liabilities in the three or nine months ended September 30, 2011 and 2010. The unrealized gains or losses of Level 3 liabilities are included in earnings are reported in other income (expense) in our Statement of Operations.
v2.3.0.11
STOCK OPTIONS
 9 Months Ended
Sep. 30, 2011
Stock Options [Abstract]  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
STOCK OPTIONS
 
The following table summarizes stock option activity during the nine months ended September 30, 2011:
 
 
Number of
Options
 
Weighted Average
Exercise Price
Balance at January 1, 2011
2,565,001

 
$
2.11

Granted
2,335,500

 
1.17

Exercised
(30,000
)
 
(0.76
)
Forfeited
(334,501
)
 
(1.66
)
Cancelled
(363,000
)
 
(6.79
)
Balance at September 30, 2011
4,173,000

 
$
1.20

Exercisable at September 30, 2011
2,234,712

 
$
1.26

During the nine months ended September 30, 2011, we granted options exercisable to purchase 2,335,500 shares of common stock at a weighted average exercise price of $1.17 under our 2006 Equity Incentive Plan. No options were granted in the third quarter of 2011.
v2.3.0.11
OPERATING SEGMENT AND GEOGRAPHIC INFORMATION
 9 Months Ended
Sep. 30, 2011
Operating Segment and Geographic Information [Abstract]  
Operating Segment And Geographic Information [Text Block]
OPERATING SEGMENT AND GEOGRAPHIC INFORMATION
Our company’s chief operating decision-maker is the Chief Executive Officer, who regularly evaluates our performance based on net sales and gross profit. The preparation of this segment analysis requires management to make estimates and assumptions around expenses below the gross profit level. While we believe the segment information to be directionally correct, actual results could differ from the estimates and assumptions used in preparing this information.
The accounting policies of the segments are the same as the policies discussed in Footnote B – Summary of Significant Accounting Policies.
We have three reportable operating segments, Clinical Laboratories, Pharmacogenomic Services and Diagnostic Tools. During the third quarter of 2011, we changed the manner in which we report segment results internally. Accordingly, segment results of the prior period have been reclassified to reflect these changes. Beginning with the third quarter of 2011 our company's chief operating decision-maker is now reviewing our business as having three segments. The change in segments was driven by our corporate strategy to advance personalized medicine through proprietary molecular technologies and world-class clinical and research services. These lines of business are complementary with the Pharmacogenomics Services driving innovation and leading to kit production in our Diagnostic Tools segment and new tests in our Clinical Laboratories.
 
Segment information for the three months ended September 30, 2011 and 2010 is as follows:
 
 
Dollars in Thousands
 
2011
 
Clinical Laboratories
 
Pharmacogenomic Services
 
Diagnostic
Tools
 
Total
Net Sales
$
4,085

 
$
552

 
$
3,616

 
$
8,253

Gross Profit
2,456

 
241

 
1,748

 
4,445

Net Income (Loss) before Taxes
(1,472
)
 
122

 
71

 
(1,279
)
Income Tax Expense (Benefit)
(20
)
 
—

 
11

 
(9
)
Net Income (Loss)
$
(1,452
)
 
$
122

 
$
60

 
$
(1,270
)
Depreciation/Amortization
350

 
75

 
56

 
481

Restructure
2

 
—

 
3

 
5

Interest Income (Expense)
(238
)
 
—

 
—

 
(238
)

 
Dollars in Thousands
 
2010
 
Clinical Laboratories
 
Pharmacogenomic Services
 
Diagnostic
Tools
 
Total
Net Sales
$
918

 
$
346

 
$
3,155

 
$
4,419

Gross Profit
248

 
(80
)
 
1,849

 
2,017

Net Loss before Taxes
(662
)
 
(135
)
 
(30
)
 
(827
)
Income Tax Expense (Benefit)
—

 
—

 
71

 
71

Net Loss
$
(662
)
 
$
(135
)
 
$
(101
)
 
$
(898
)
Depreciation/Amortization
32

 
45

 
47

 
124

Restructure
34

 
—

 
38

 
72

Interest Income (Expense)
—

 
—

 
—

 
—


Segment information for the nine months ended September 30, 2011 and 2010 is as follows:

 
Dollars in Thousands
 
2011
 
Clinical
Laboratories
 
Pharmacogenomic
Services
 
Diagnostic
Tools
 
Total
Net Sales
$
11,435

 
$
1,824

 
$
10,141

 
$
23,400

Gross Profit
6,787

 
764

 
5,601

 
13,152

Net Income (Loss) before Taxes
(11,331
)
 
615

 
551

 
(10,165
)
Income Tax Expense (Benefit)
—

 
—

 
(120
)
 
(120
)
Net Income (Loss)
$
(11,331
)
 
$
615

 
$
671

 
$
(10,045
)
Depreciation/Amortization
1,113

 
184

 
151

 
1,448

Restructure
28

 
—

 
12

 
40

Interest Income (Expense)
(720
)
 
—

 
—

 
(720
)
 
9/30/2011
Total Assets
$
20,822

 
$
953

 
$
8,199

 
$
29,974

 
Dollars in Thousands
 
2010
 
Clinical
Laboratories
 
Pharmacogenomic
Services
 
Diagnostic
Tools
 
Total
Net Sales
$
2,790

 
$
986

 
$
11,180

 
$
14,956

Gross Profit
1,159

 
(91
)
 
6,320

 
7,388

Net Loss before Taxes
(1,471
)
 
(444
)
 
(343
)
 
(2,258
)
Income Tax Expense (Benefit)
—

 
—

 
109

 
109

Net Loss
$
(1,471
)
 
$
(444
)
 
$
(452
)
 
$
(2,367
)
Depreciation/Amortization
98

 
131

 
151

 
380

Restructure
34

 
—

 
38

 
72

Interest Income (Expense)
—

 
—

 
1

 
1

 
9/30/2010
Total Assets
$
5,777

 
$
1,088

 
$
7,072

 
$
13,937


 
Net sales for the three and nine months ended September 30, 2011 and 2010 by country were as follows:
 
 
Dollars in Thousands
 
Dollars in Thousands
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2011
 
2010
 
2011
 
2010
United States
$
6,034

 
$
2,082

 
$
16,738

 
$
6,483

Italy
762

 
813

 
2,373

 
2,300

United Kingdom
193

 
224

 
451

 
991

France
166

 
209

 
579

 
812

Germany
187

 
194

 
581

 
1,099

United Arab Emirates
—

 
4

 
—

 
778

All Other Countries
911

 
893

 
2,678

 
2,493

Total
$
8,253

 
$
4,419

 
$
23,400

 
$
14,956

No other country accounted for more than 5% of total net sales.

More than 95% of our long-lived assets are located within the United States. Substantially all of the remaining long-lived assets are located within Europe.
v2.3.0.11
SUBSEQUENT EVENTS
 9 Months Ended
Sep. 30, 2011
Subsequent Events [Abstract]  
Subsequent Events [Text Block]
SUBSEQUENT EVENTS
Events or transactions that occur after the balance sheet date, but before the financial statements are complete, are reviewed to determine if they should be recognized.
In November 2011, we entered into a transaction with the Investors, pursuant to an Agreement Regarding Preferred Stock (the “Amendment Agreement”), in which the Investors agreed to (i) waive their rights to enforce the anti-dilution and redemption features of the Series A Preferred and (ii) at the next annual shareholder meeting, vote to amend the Certificate of Designation to remove the anti-dilution and redemption features of the Series A Preferred. In exchange, the Company issued shares of common stock to the Investors having an aggregate market value of $0.3 million.
As a result of the Amendment Agreement, the value of the Series A Preferred and Warrant, including the preferred stock conversion feature and preferred stock warrant liability, will be reclassified into shareholders equity as of the date of the Amendment Agreement. The following table sets forth a summary of the balance sheet as reported and pro-forma as if the Amendment Agreement had occurred on September 30, 2011.

 
As reported
 
Pro-Forma
 
Dollars in Thousands
 
September 30, 2011
 
September 30, 2011

Total Assets
$29,974
 
$29,974
 
 
 
 
Total Liabilities
29,683

 
18,483

Redeemable Series A convertible preferred stock
1,796

 
—

Total Stockholders' Equity (Deficit)
(1,505
)
 
11,491

 
$
29,974

 
29,974