XML 40 R25.htm IDEA: XBRL DOCUMENT
v3.7.0.1

Subsequent Events | 12 Months Ended
--- | ---
Dec. 31, 2016
Subsequent Events [Abstract] |
Subsequent Events | 18. SUBSEQUENT EVENTS Acquisition of assets of Conexio Genomics Pty. Ltd In January 2017, the Company completed a transaction to acquire Conexio business assets that the Company needed in order to continue selling the SBT product line. The Company purchased rights to many of the assets, such as machinery, facilities leases, know-how and the opportunity to retain key Conexio employees to continue producing and selling the SBT line of products. The Company will pay, by July 1, 2017, up to $0.3 million for finished goods and by December 31, 2017 up to $0.2 million for unfinished inventory purchased from Conexio. In addition, the Company will make quarterly payments to Conexio of 20% of the gross revenue from the sale of the SBT line of products using the purchased assets up to an aggregate total of $0.7 million. The Company will assume all obligations under the lease of the Conexio facilities, and any liabilities for product warranty claims related to the sale of these products up to $35,000. The Company expects to account for this transaction as a business combination. From 2011 to January 2017, Allenex, through Olerup SSB AB, was the exclusive global distributor of the HLA sequence-based typing products SBT Resolver and Assign SBT from Conexio, Illumina, Inc. acquired Conexio, Inc. and, in January 2017, the Company acquired from Illumina the elements necessary to continue offering the SBT line of products. Settlement of outstanding litigation On April 25, 2016, Oberland filed a breach of contract claim against the Company in the Supreme Court of the State of New York, County of New York (the “Complaint”). Oberland alleged, among other things, that the Company breached certain provisions of the amended and restated commitment letter and the restated fee letter that it entered into with Oberland on February 8, 2016. Pursuant to the Complaint, Oberland sought damages against the Company in the amount of at least $1.4 million, plus costs and expenses, including the fees and expenses of Oberland’s attorneys. As a result, the Company previously accrued the amount being claimed by Oberland of $1.4 million. On July 15, 2016, the Company filed an answer and made counterclaims against Oberland (the “Answer”), generally denying the claims asserted by Oberland in the Complaint and asserting fraudulent inducement and breach of contract counterclaims against Oberland. Pursuant to the Answer, the Company sought dismissal of the Complaint in its entirety, rescission of all agreements with Oberland and damages of not less than $1.3 million, together with interest and punitive damages, if deemed appropriate under applicable law, and costs and disbursements of the action, including reasonable attorneys’ fees. Effective as of March 2, 2017, the Company and Oberland settled the matters covered by the Complaint and the Answer (the “Settlement”). Pursuant to the Settlement, the Company paid Oberland $0.6 million and each party agreed to release claims asserted in the Complaint and the Answer. The Company subsequently adjusted its accrual from $1.4 million to $0.6 million as of December 31, 2016. Debt financing (JGB Debt) On March 15, 2017, the Company entered into a Securities Purchase Agreement (the “SPA”) pursuant to which, the Company issued Senior Secured Debentures with an aggregate principal amount of $27.8 million (the “Debentures”) and warrants (the “Warrants”) to purchase up to an aggregate of 1.25 million shares of the Company’s common stock for net proceeds of $24.0 million. The Company used $11.2 million of the net proceeds from the Financing to repay its existing indebtedness under the Loan Agreement with East West Bank and is required to maintain restricted cash of $9.4 million. The Debentures mature on February 28, 2020, accrue interest at 9.5% per year and are convertible into shares of the Company’s common stock at a price of $4.56 per share (the “Conversion Price”) at the holder’s option. Additionally, after September 1, 2017, upon the satisfaction of certain conditions, including the volume weighted average price of the Company’s common stock exceeding 250% of the Conversion Price for twenty consecutive trading days, the Company can require that the Debentures be converted into shares of the Company’s common stock, subject to certain limitations. Commencing on March 1, 2018, each of the holders of the Debentures shall have the right, at its option, to require the Company to redeem up to $937,500 of the outstanding principal amount of its Debenture per month. The Company will be required to promptly, but in any event no more than one trading day after the holder delivers a redemption notice to the Company, pay the applicable redemption amount in cash or, at the Company’s election and subject to certain conditions, in shares of the Company’s common stock. If the Company elects to pay the redemption amount in shares of the Company’s common stock, then the shares will be delivered based on a price equal to the lowest of (a) 88% of the average of the three lowest volume weighted average prices of the Company’s common stock over the prior 20 trading days, (b) 88% of the prior trading day’s volume weighted average price, or (c) the Conversion Price. The Company may only opt for payment in shares of the Company’s common stock if certain conditions are met. The Company’s obligations under the Debentures can be accelerated upon the occurrence of certain events of default as specified in the agreement. In the event of default and acceleration of the Company’s obligations, the Company would be required to pay (i) 115% of all amounts of principal and interest then outstanding under the Debentures in cash if the Debenture is accelerated prior to March 1, 2018, (ii) 108% of all amounts of principal and interest then outstanding under the Debentures in cash if the Debenture is accelerated after March 1, 2018, but prior to March 1, 2019, and (iii) 105% of all amounts of principal and interest then outstanding under the Debentures in cash if the Debenture is accelerated after March 1, 2019. The Company’s obligations under the Debentures are secured under a Security Agreement by a senior lien on all of the Company’s assets, other than its interest in CareDx International AB (formerly known as Allenex AB), which is subject to a negative pledge prohibiting the incurrence of additional or replacement debt. The Debentures contain customary affirmative and restrictive covenants and representations and warranties, including financial reporting obligations, a restriction on the Company’s ability to pay cash dividends on our common stock and limitations on indebtedness, liens, investments, distributions, transfers, corporate changes, deposit accounts and subsidiaries. The Company must also maintain a minimum cash amount at all times, achieve commercialization of AlloSure by a certain date and achieve certain gross profit targets for sales of its AlloMap product. The Warrants have an exercise price of $5.00 (subject to adjustment in certain circumstances), become exercisable commencing on September 16, 2017 and expire on September 15, 2022. Pursuant to the SPA, the Company also agreed to seek approval of its stockholders for the issuance of the shares of Common Stock that may be issued by the Company upon the conversion or redemption of the Debentures or the exercise of the Warrants in excess of 4,269,522 shares. In connection with the Financing, on March 15, 2017, the Company and the Purchasers entered into a Registration Rights Agreement (the “Registration Rights Agreement”) pursuant to which, among other things, the Company agreed to prepare and file one or more registration statements with the Securities and Exchange Commission for the purpose of registering for resale any shares of Common Stock that may be issued by the Company upon the conversion or redemption of the Debentures or the exercise of the Warrants. Craig Hallum Capital Group LLC (the “Placement Agent”) acted as the placement agent for the offering of the Debentures and the Warrants and the Company agreed to pay the Placement Agent a fee equal to 3% of the gross proceeds actually received by the Company from the sale of the Debentures. The agreement is a senior secured facility and calls for covenants, including additional debt and cash maintenance covenants. Beginning in March 2018, JGB has the option to require the company to repay up to $0.9 million per month. These repayments can be honored in cash or, subject to certain limitations, the Company’s common stock at the Company’s election. As part of the new debt facility, the Company will issue to JGB 1,250,000 warrants to purchase shares of common stock. The warrants are exercisable 185 days from grant date and have a 5.5 year term at $5.00 per share. Failure to Timely File Annual Report on Form 10-K The Company did not timely file its Annual Report on Form 10-K for the year ended December 31, 2016, which was due on April 17, 2017. As a result, the Company is currently ineligible to file new short form registration statements on Form S-3, is unable to conduct “off the shelf” offerings under Rule 415 of the Securities Act of 1933, as amended, using its currently effective registration statement on Form S-3 (File No. 333-206277) and its resale registration statement on Form S-3 covering the sale of up to 8,534,261 shares of common stock by selling stockholders, including stockholders who acquired common stock in connection with private placements, cannot currently be used by such selling stockholders to resell such shares of common stock. In addition, the failure to timely file the Form 10-K constituted a breach of the Company’s covenant under the SPA to make all required Securities Exchange Act of 1934, as amended (the “Exchange Act”), filings with the Securities and Exchange Commission on a timely basis. As a result of the Company’s failure to file its Annual Report on Form 10-K for the year ended December 31, 2016 by April 17, 2017, the Company breached its obligation under the SPA to make all required Exchange Act filings with the SEC on a timely basis. Failure to Timely File Registration Statement Pursuant to the Company’s Registration Rights Agreement, dated March 15, 2017, with JGB, which was entered into in connection with the SPA and the Debentures, the Company is required to file a registration statement with the SEC registering for resale the Company’s common stock underlying the securities issued or issuable to JGB in the financing. Because the Company failed to file the registration statement with the SEC by April 17, 2017, commencing on April 18, 2017, the Company began accruing liquidated damages payable to JGB at a rate of approximately $7,000 per day. These damages will continue to accrue at the same rate on a daily basis until the registration statement is filed with the SEC.

X
- References No definition available. + Details
Name: | us-gaap_SubsequentEventsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business. + References No definition available. + Details
Name: | us-gaap_SubsequentEventsTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration