UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, ~~2017~~2019

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

For the transition period from _______________ to _______________

Commission File Number: 000-24249

~~Interpace Diagnostics Group, Inc.~~

~~(Exact name of registrant as specified in its charter)~~

Interpace Biosciences, Inc.

(Exact name of registrant as specified in its charter)

Delaware

22-2919486

(State or other jurisdiction of

Incorporation or organization)

(I.R.S. Employer

Identification No.)

~~Morris Corporate Center 1, Building C~~

~~300 Interpace Parkway, Parsippany, NJ 07054~~

~~(Address of principal executive offices and zip code)~~

Morris Corporate Center 1, Building C

300 Interpace Parkway, Parsippany, NJ 07054

(Address of principal executive offices and zip code)

(855) 776-6419

(Registrant’s telephone number, including area code)

Interpace Diagnostics Group, Inc.

(Registrant’s former name)

~~(855) 776-6419~~

~~(Registrant’s telephone number, including area code)~~

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	IDXG	The Nasdaq Stock Market LLC

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

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes [X] No [ ]

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

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class

Shares Outstanding

November ~~3, 2017~~8, 2019

Common ~~stock,~~Stock, par value $0.01 ~~par value~~per share

~~26,849,025~~

38,196,038

INTERPACE BIOSICENCES, INC. (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

FORM 10-Q FOR PERIOD ENDED SEPTEMBER 30, ~~2017~~2019

TABLE OF CONTENTS

		Page No.
	PART I - FINANCIAL INFORMATION	3

Item 1.	Unaudited Interim Condensed Consolidated Financial Statements	3

	Condensed Consolidated Balance Sheets at September 30, ~~2017~~2019 (unaudited) and December 31, ~~2016~~2018	3

	Condensed Consolidated Statements of ~~Comprehensive Loss~~Operations for the three- and nine-month periods ended September 30, ~~2017~~2019 and ~~2016~~2018 (unaudited)	4

	Condensed Consolidated ~~Statement~~Statements of Stockholders’ Equity for the three- and nine-month ~~period~~periods ended September 30, ~~2017~~2019 and 2018 (unaudited)	5

	Condensed Consolidated Statements of Cash Flows for the ~~nine- month~~nine-month periods ended September 30, ~~2017~~2019 and ~~2016~~2018 (unaudited)	6

	Notes to Unaudited Interim Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3026

Item 4.	Controls and Procedures	4238

	PART II - OTHER INFORMATION	43

Item 1.	Legal Proceedings	4338

Item 1A.	Risk Factors	4338

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4338

Item 3.	Defaults Upon Senior Securities	38

Item 4.	Mine Safety Disclosures	38

Item 5.	Other Information	39

Item 6.	Exhibits	4439

Signatures	45	40

~~PART I - FINANCIAL INFORMATION~~

~~Item 1. Unaudited Interim Condensed Consolidated Financial Statements~~

INTERPACE BIOSCIENCES, INC. (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

September 30, 2017 December 31, 2016
(unaudited)

ASSETS
Current assets:
Cash and cash equivalents $ 11,703 $ 602
Accounts receivable, net 2,803 2,209
Other current assets 1,267 1,415
Current assets from discontinued operations - 14
Total current assets 15,773 4,240
Property and equipment, net 668 929
Other intangible assets, net 33,919 36,358
Other long-term assets 31 251
Total assets $ 50,391 $ 41,778

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 704 $ 2,326
Accrued salary and bonus 984 3,551
Other accrued expenses 5,331 6,236
Current liabilities from discontinued operations 1,283 4,128
Total current liabilities 8,302 16,241
Contingent consideration 1,157 7,254
Long-term debt, net of debt discount - 7,908
Other long-term liabilities 4,554 3,844
Total liabilities 14,013 35,247

Commitments and contingencies (Note 6)

Stockholders’ equity:
Preferred stock, $.01 par value; 5,000,000 shares authorized, no shares issued and outstanding - -
Common stock, $.01 par value; 100,000,000 shares authorized; 22,975,754 and 2,230,506 shares issued, respectively; 22,911,404 and 2,176,252 shares outstanding, respectively 230 22
Additional paid-in capital 164,611 127,736
Accumulated deficit (126,792 ) (119,584 )
Accumulated other comprehensive income - -
Treasury stock, at cost (64,350 and 54,254 shares, respectively) (1,671 ) (1,643 )
Total stockholders’ equity 36,378 6,531
Total liabilities and stockholders’ equity $ 50,391 $ 41,778

	September 30,			December 31,
	2019			2018
	(unaudited)

ASSETS
Current assets:
Cash and cash equivalents	$	2,358		$	6,068
Accounts receivable, net		14,701			9,483
Other current assets		3,522			2,170
Total current assets		20,581			17,721
Property and equipment, net		7,033			837
Other intangible assets, net		34,532			29,853
Goodwill		8,273			-
Operating lease assets		4,212			-
Other long-term assets		42			31
Total assets	$	74,673		$	48,442

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	5,020		$	1,059
Accrued salary and bonus		2,087			1,424
Other accrued expenses		9,423			5,091
Current liabilities from discontinued operations		766			918
Total current liabilities		17,296			8,492
Contingent consideration		2,465			2,693
Operating lease liabilities		2,791			-
Line of credit		3,750			-
Excess consideration note		6,822			-
Other long-term liabilities		4,791			4,319
Total liabilities		37,915			15,504

Commitments and contingencies (Note 8)

Preferred stock, $.01 par value; 5,000,000 shares authorized, Series A Preferred Stock 60 shares issued and outstanding; Series A-1 Preferred Stock 80 shares issued and outstanding		13,161			-

Stockholders’ equity:
Common stock, $.01 par value; 100,000,000 shares authorized; 38,295,006 and 28,767,344 shares issued, respectively;38,196,038 and 28,694,275 shares outstanding, respectively		383			287
Additional paid-in capital		182,361			175,820
Accumulated deficit		(157,435	)		(141,489	)
Treasury stock, at cost (98,968 and 73,069 shares, respectively)		(1,712	)		(1,680	)
Total stockholders’ equity		23,597			32,938
Total liabilities and stockholders’ equity	$	61,512		$	48,442

Total liabilities, preferred stock and stockholders equity	$	74,673		$	48,442

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

INTERPACE BIOSCIENCES, INC. (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

CONDENSED CONSOLIDATED STATEMENTS OF ~~COMPREHENSIVE LOSS~~OPERATIONS

(unaudited, in thousands, except for per share data)

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016

Revenue, net $ 4,202 $ 3,316 $ 11,527 $ 9,963
Cost of revenue (excluding amortization of $813 and $970 for the three months and $2,439 and $2,909 for the nine months, respectively) 2,069 1,846 5,719 4,866
Gross profit 2,133 1,470 5,808 5,097
Operating expenses:
Sales and marketing 1,816 1,282 4,507 4,186
Research and development 483 659 1,202 1,339
General and administrative 2,116 2,858 6,431 7,655
Acquisition related amortization expense 813 970 2,439 2,909
Asset impairment - 3,363 - 3,363
Change in fair value of contingent consideration - (1,174 ) (5,776 ) (1,174 )
Total operating expenses 5,228 7,958 8,803 18,278

Operating loss (3,095 ) (6,488 ) (2,995 ) (13,181 )
Interest expense (40 ) (539 ) (433 ) (1,601 )
Loss on extinguishment of debt - - (4,278 ) -
Other (loss) income, net (294 ) 4 (414 ) 14
Loss from continuing operations before tax (3,429 ) (7,023 ) (8,120 ) (14,768 )
(Benefit) provision for income taxes (42 ) 173 (340 ) (54 )
Loss from continuing operations (3,387 ) (7,196 ) (7,780 ) (14,714 )
Income (loss) from discontinued operations, net of tax 71 (297 ) 572 101
Net loss $ (3,316 ) $ (7,493 ) $ (7,208 ) $ (14,613 )

Net Loss and Comprehensive Loss $ (3,316 ) $ (7,493 ) $ (7,208 ) $ (14,613 )

Basic and Diluted (loss) income per share of common stock:
From continuing operations $ (0.15 ) $ (3.96 ) $ (0.65 ) $ (8.16 )
From discontinued operations 0.00 (0.16 ) 0.05 0.06
Net loss per basic and diluted share of common stock $ (0.15 ) $ (4.13 ) $ (0.60 ) $ (8.10 )

Weighted average number of common shares and common share equivalents outstanding:
Basic 22,028 1,816 12,022 1,803
Diluted 22,028 1,816 12,022 1,803

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018


Revenue, net	$	7,725		$	5,753		$	20,005		$	16,062
Cost of revenue (excluding amortization of $995 and $813 for the three months and $2,621 and $2,439 for the nine months, respectively)		4,835			2,763			10,489			7,590
Gross profit		2,890			2,990			9,516			8,472
Operating expenses:
Sales and marketing		2,757			2,048			8,127			6,135
Research and development		857			510			2,032			1,528
General and administrative		4,492			2,084			9,790			5,981
Acquisition related expense		838			-			2,534			-
Acquisition related amortization expense		995			813			2,621			2,439
Total operating expenses		9,939			5,455			25,104			16,083

Operating loss		(7,049	)		(2,465	)		(15,588	)		(7,611	)
Accretion expense		(111	)		(248	)		(331	)		(248	)
Other (expense) income, net		(135	)		(288	)		(12	)		(143	)
Loss from continuing operations before tax		(7,295	)		(3,001	)		(15,931	)		(8,002	)
Provision for income taxes		9			7			19			21
Loss from continuing operations		(7,304	)		(3,008	)		(15,950	)		(8,023	)

Loss from discontinued operations, net of tax		(58	)		(34	)		(51	)		(129	)

Net loss	$	(7,362	)	$	(3,042	)	$	(16,001	)	$	(8,152	)

Net loss attributable to preferred shareholders	$	(7,362	)	$	-		$	(16,001	)	$	-

Less dividends on preferred stock	$	(75	)	$	-		$	(75	)	$	-

Net loss attributable to common shareholders	$	(7,437	)	$	-		$	(16,076	)	$	-

Basic and diluted (loss) income per share of common stock:
From continuing operations	$	(0.19	)	$	(0.11	)	$	(0.43	)	$	(0.29	)
From discontinued operations		(0.00	)		(0.00	)		(0.00	)		(0.00	)
Net loss per basic and diluted share of common stock	$	(0.19	)	$	(0.11	)	$	(0.43	)	$	(0.29	)
Weighted average number of common shares and common share equivalents outstanding:
Basic		38,196			28,215			37,169			28,002
Diluted		38,196			28,215			37,169			28,002

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

INTERPACE BIOSCIENCES, INC. (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited, in thousands)

For The Nine Months Ended
September 30, 2017
Shares Amount
Common stock:
Balance at January 1 2,230 $ 22
Common stock issued 34 1
Common stock issued through offerings 13,568 135
Shares issued in debt exchange 3,795 38
Exercise of warrants 3,348 34
Balance at September 30 22,975 230
Treasury stock:
Balance at January 1 54 (1,643 )
Treasury stock purchased 10 (28 )
Balance at September 30 64 (1,671 )
Additional paid-in capital:
Balance at January 1 127,736
Common stock issued through offerings, net of expenses 13,984
Issuance of warrants 7,553
Shares issued in debt exchange 11,605
Exercise of warrants 3,256
Stock-based compensation expense 477
Balance at September 30 164,611
Accumulated deficit:
Balance at January 1 (119,584 )
Net loss (7,208 )
Balance at September 30 (126,792 )

Total stockholders’ equity $ 36,378

	For The Nine Months Ended					For The Nine Months Ended
	September 30, 2019					September 30, 2018
	Shares		Amount			Shares		Amount
Common stock:
Balance at January 1		28,767	$	287			27,901	$	278
Common stock issued		95		1			41		1
Common stock issued through offerings		9,333		94			-		-
Balance at March 31		38,195		382			27,942		279
Common stock issued		100		1			325		3
Balance at June 30		38,295		383			28,267		282
Common stock issued		-		-			100		1
Balance at September 30		38,295		383			28,367		283
Treasury stock:
Balance at January 1		73		(1,680	)		64		(1,671	)
Treasury stock purchased		26		(32	)		9		(9	)
Balance at March 31		99		(1,712	)		73		(1,680	)
Treasury stock purchased		-		-			-		-
Balance at June 30		99		(1,712	)		73		(1,680	)
Treasury stock purchased		-		-			-		-
Balance at September 30		99		(1,712	)		73		(1,680	)
Additional paid-in capital:
Balance at January 1				175,820					173,062
Common stock issued through offerings, net of expenses				5,868					-
Stock-based compensation expense				266					597
Balance at March 31				181,954					173,659
Common Stock issued				72					282
Stock-based compensation expense				205					419
Balance at June 30				182,231					174,360
Common stock issued through offerings, net of expenses				-					144
Dividends accrued				(75	)				-
Stock-based compensation expense				205					374
Balance at September 30				182,361					174,878
Accumulated deficit:
Balance at January 1				(141,489	)				(131,800	)
Net loss				(3,419	)				(3,193	)
Adoption of ASC 606				-					2,500
Adoption of ASC 842				55					-
Balance at March 31				(144,853	)				(132,493	)
Net loss				(5,220	)				(1,917	)
Balance at June 30				(150,073	)				(134,410	)
Net loss				(7,362	)				(3,042	)
Balance at September 30				(157,435	)				(137,452	)

Total stockholders’ equity			$	23,597				$	36,029

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

INTERPACE BIOSCIENCES, INC. (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(~~unaudited,~~ in thousands)

Nine Months Ended
September 30,
2017 2016

Cash Flows Used in Operating Activities
Net loss $ (7,208 ) $ (14,613 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 2,813 3,490
Realignment accrual accretion - 29
Interest accretion 312 1,601
Provision for bad debt (6 ) 482
Mark to market on warrants 401 -
Amortization of debt issuance costs 117 -
Mark to market on derivatives 61 -
Loss on extinguishment of debt 4,278 -
Reversal of severance accrual (2,034 ) -
Non-employee share-based payment 216 -
Stock-based compensation 477 109
Asset impairment - 3,363
Change in fair value of contingent consideration (5,776 ) (1,174 )
Other gains and expenses, net - (4 )
Other changes in assets and liabilities:
(Increase) decrease in accounts receivable (588 ) 4,639
Decrease in unbilled receivable - 16
Decrease in other current assets 162 1,272
Decrease in other long-term assets 220 754
Decrease in accounts payable (2,208 ) (761 )
Decrease in unearned contract revenue - (11 )
Decrease in accrued salaries and bonus (1,805 ) (685 )
Decrease in accrued liabilities (2,210 ) (4,561 )
Decrease in long-term liabilities (106 ) (563 )
Net cash used in operating activities (12,884 ) (6,617 )

Cash Flows Used in Investing Activities
Purchase of property and equipment (29 ) -
Net cash used in investing activities (29 ) -

Cash Flows From Financing Activities
Issuance of common stock, net of expenses 24,042 -
Cash paid for repurchase of restricted shares (28 ) -
Net cash provided by financing activities 24,014 -

Net increase (decrease) in cash and cash equivalents 11,101 (6,617 )
Cash and cash equivalents – beginning 602 8,310
Cash and cash equivalents – ending $ 11,703 $ 1,693
Cash paid for interest $ - $ -

	For The Nine Months Ended September 30,
	2019			2018

Cash Flows From Operating Activities
Net loss	$	(16,001	)	$	(8,152	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,911			2,580
Interest accretion		331			248
Reversal of DOJ accrual		-			(350	)
Bad debt expense		499			-
Mark to market on warrants		(35	)		259
Stock-based compensation		1,246			1,564
Other gains and expenses, net		18			-
Other changes in operating assets and liabilities:
Increase in accounts receivable		(1,986	)		(2,703	)
Increase in other current assets		(417	)		(174	)
Increase in long-term assets		(11	)		-
(Decrease) increase in accounts payable		(766	)		674
Increase (decrease) in accrued salaries and bonus		228			(248	)
Increase (decrease) in accrued liabilities		981			(680	)
Increase in long-term liabilities		446			182
Net cash used in operating activities		(12,556	)		(6,800	)

Cash Flows From Investing Activity
Acquisition of Biopharma, net of expenses		(13,829	)		-
Purchase of property and equipment		(105	)		(388	)
Sale of property and equipment		13			-
Net cash used in investing activity		(13,921	)		(388	)

Cash Flows From Financing Activities
Issuance of common stock, net of expenses		5,962			-
Issuance of preferred shares, net of expenses		13,087			-
Cash paid for repurchase of restricted shares		(32	)		(9	)
Borrowings on Line of Credit		3,750			-
Net cash provided by (used in) financing activities		22,767			(9	)

Net decrease in cash and cash equivalents		(3,710	)		(7,197	)
Cash and cash equivalents – beginning		6,068			15,199
Cash and cash equivalents – ending	$	2,358		$	8,002

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

INTERPACE BIOSICENCES, INC (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular information in thousands, except per share amounts)

~~(unaudited)~~

1.	BASIS OF PRESENTATION

The accompanying unaudited interim condensed consolidated financial statements and related notes (the “Interim Financial Statements”) should be read in conjunction with the consolidated financial statements of Interpace Biosciences, Inc. (formerly known as Interpace Diagnostics Group, Inc.) (the “Company” or “Interpace”), and its wholly-owned subsidiaries, Interpace Diagnostics Lab Inc., Interpace Diagnostics Corporation, Interpace ~~Diagnostics Lab,~~Pharma Solutions, Inc. (formerly known as Interpace BioPharma, Inc.) and Interpace Diagnostics, LLC, and related notes as included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2018, as filed with the U.S. Securities and Exchange Commission (“SEC”) on March ~~31, 2017, as amended~~21, 2019 (the “Form 10-K”) and the special purpose statements and Pro Forma financial information in Form 8-K/A filed on ~~April 28, 2017.~~September 20, 2019.

The condensed Interim Financial Statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial reporting and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The condensed Interim Financial Statements include all normal recurring adjustments that, in the judgment of management, are necessary for a fair presentation of such interim financial statements. Discontinued operations include the Company’s ~~wholly-owned~~wholly owned subsidiaries: Group DCA, LLC, (“or Group ~~DCA”);~~DCA; InServe Support ~~Solutions (“Pharmakon”);~~Solutions; and TVG, Inc. ~~(“TVG”, dissolved December 31, 2014)~~ and its Commercial Services ~~Organization~~ (“CSO”) business unit which was sold on December 22, 2015. All significant intercompany balances and transactions have been eliminated in consolidation. ~~Results of operations, cash flows and comprehensive income~~Operating results for the ~~three and~~ nine-month ~~periods~~period ended September 30, ~~2017~~2019 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, ~~2017.~~2019.

2.	~~LIQUIDITY~~ACQUISITION

~~The accompanying condensed consolidated financial statements have been prepared on a basis that assumes that~~On July 15, 2019, the Company ~~will continue as a going concern, which contemplates the continuity of operations, the realization of~~entered into an Asset Purchase Agreement (“APA”) to acquire certain assets and assumed certain liabilities relating to Cancer Genetics, Inc.’s (“CGI”) BioPharma services business (“BioPharma”) for $23.5 million less certain closing adjustments of $1.98 million (the “Base Purchase Price”). At the ~~satisfaction~~closing the Company used the proceeds from an initial tranche of ~~liabilities~~preferred stock financing and ~~commitments~~paid $13.8 million. Additionally, the Company issued a subordinated seller note to CGI in the ~~normal course~~amount of ~~business. As~~$7,692,300.

The BioPharma business (presently known as Interpace Pharma Solutions, Inc. or “Pharma Solutions”) provides pharmaceutical and biotech companies and non-profit entities performing clinical trials with lab testing services for patient stratification and treatment selection through an extensive suite of ~~September~~molecular and biomarker-based testing services, DNA- and RNA- extraction and customized assay development and trial design consultation.

The Base Purchase Price is subject to two additional adjustments following the closing: for the finalized net worth (assets less liabilities) of BioPharma as of June 30, ~~2017,~~2019 (the “NWA”), subject to a cap of $775,000, and for certain older accounts receivable, in the aggregate amount of approximately $830,000, still uncollected as of December 31, 2019 (the “ARA”). Any amounts due to the Company ~~had cash~~under the NWA were to be set off against the Excess Consideration Note (seeNote 19, Subsequent Events,for description), and cash equivalents of $11.7 million, net accounts receivable of $2.8 million, total current assets of $15.8 million and total current liabilities of $8.3 million. For the nine months ended September 30, 2017,any amounts due to the Company ~~had a net loss of $7.2 million and cash used~~under the ARA were to be either set off against the Excess Consideration Note or, if it is no longer outstanding, satisfied through an AR Holdback (as defined in ~~operating activities was $12.9 million.~~the Asset Purchase Agreement) mechanism, in each case as further set forth in the Asset Purchase Agreement.

~~During~~The transaction is being accounted for using the ~~nine months ended September 30, 2017,~~acquisition method of accounting for business combinations in accordance with GAAP. Under this method, the ~~Company closed~~total consideration transferred to consummate the acquisition is being allocated to the identifiable tangible and intangible assets acquired and liabilities assumed based on ~~four equity offerings raising gross proceeds~~their respective fair values as of ~~$27.9 million.~~the closing date of the acquisition. The ~~details are~~acquisition method of accounting requires extensive use of estimates and judgments to allocate the consideration transferred to the identifiable tangible and intangible assets acquired and liabilities assumed.

INTERPACE BIOSICENCES, INC (formerly known as ~~follows:~~

	●	On January 6, 2017, the Company completed a registered direct public offering (the “Second Registered Direct Offering”), to sell 630,000 shares of its common stock at a price of $6.81 per share to certain institutional investors, which resulted in gross proceeds to the Company of approximately $4.2 million.

	●	On January 25, 2017, the Company completed a registered direct public offering (the “Third Registered Direct Offering”), to sell 855,000 shares of its common stock and a concurrent private placement of warrants to purchase 855,000 shares of its common stock (the “Concurrent Warrants”), to the same investors participating in the Third Registered Direct Offering, (or the “Private Placement”). The Concurrent Warrants and the shares of its common stock issuable upon the exercise of the Concurrent Warrants were not registered under the Securities Act and were sold pursuant to the exemption provided in Section 4(a)(2) under the Securities Act and Rule 506(b) of Regulation D promulgated thereunder. The shares of common stock sold in the Third Registered Direct Offering and the Concurrent Warrants issued in the concurrent Private Placement were issued separately but sold together at a combined purchase price of $4.69 per share of common stock and accompanying Concurrent Warrant. The 855,000 unregistered Concurrent Warrants also have an exercise price of $4.69 and have a five-year term. The Third Registered Direct Offering and the Private Placement together resulted in gross proceeds to the Company of approximately $4.0 million. The Company used approximately $1.0 million of the proceeds to satisfy the severance obligations due to five former senior executives.

INTERPACE DIAGNOSTICS GROUP, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(continued)~~

(Tabular information in thousands, except per share amounts)

~~(unaudited)~~ In connection with the transaction, the Company has preliminarily recorded $8.3 million of goodwill and $7.3 million of finite lived intangible assets. Finite lived intangible assets have a combined weighted-average amortization period of 8.4 years, which consists of ten years for tradenames and eight years for customer relationships. Goodwill results largely from a trained workforce in place and expected synergies from new lines of business. Goodwill recorded in conjunction with the acquisition is deductible for income tax purposes. SeeNote 5, Goodwill and Other Intangible Assets, for more information. Business transaction expenses of approximately $2.5 million incurred in connection with the acquisition was expensed as incurred.

	●	On February 8, 2017, the Company completed an underwritten, confidentially marketed public offering (“CMPO”), to sell 1,200,000 shares of its common stock at a price of $3.00 per share. In addition, the Company granted the underwriters an option to purchase up to an additional 9% of the total number of shares of common stock sold by the Company in the CMPO, solely for the purpose of covering over-allotments, if any. The underwriters exercised the over-allotment option in full. The CMPO resulted in gross proceeds to the Company of approximately $3.9 million, including the over-allotment.

	●	On June 21, 2017, pursuant to its S-1 filing of its preliminary prospectus to register shares on May 22, 2017, as amended thereafter, the Company completed a public offering (the “Offering”) for 9,900,000 shares of common stock together with an equal number of common warrants (the “Base Warrants”), to purchase shares of its common stock (and the shares of common stock that are issuable from time to time upon exercise of the common warrants) for $1.10 per share. Each Base Warrant upon exercise at a price of $1.25 will result in the issuance of one share of common stock to the holder. A public trading market for the Base Warrants was established on July 5, 2017 on the OTC market under the trading symbol IDGGW. As part of the Offering, which closed on June 21, 2017, the related underwriters purchased the full over-allotment of 1,875,000 Base Warrants available to them for the specified $.01 per warrant. 2,600,000 of Pre-Funded Warrants were also sold at the specified $1.09 per warrant. The combined gross proceeds of the Offering totaled $13.7 million with approximately $12.3 million of net funds available to the Company after deducting underwriting discounts and other stock issuance expenses. As of July 7, 2017 all of the 2,600,000 Pre-Funded Warrants were exercised for the $.01 per warrant exercise price and all 2,600,000 common shares related to the warrants have been issued. On July 31, the Company and the underwriters closed on the exercise of the underwriters’ over-allotment option to purchase an additional 875,000 shares of common stock at a price of $1.09 per share for gross proceeds of $0.960 million.

The reconciliation of consideration given for BioPharma to the preliminary allocation of the purchase price of assets and liabilities acquired based on their relative fair values is as follows:

Cash		$	13,829
Subordinated note payable			6,822
Total consideration		$	20,651

Assets acquired
Accounts receivable		$	3,731
Accrued revenue			289
Lab supplies			877
Prepaid expenses			266
Property and equipment			6,412
Operating lease assets			2,187
Acquired identifiable intangible assets:
Trademarks and trade name	1,600
Customer relationships	5,700
Total acquired identifiable intangible assets			7,300
Goodwill			8,273
Total assets acquired			29,335

Liabilities assumed
Accounts payable			(4,535	)
Accrued liabilities			(435	)
Deferred revenue			(1,076	)
Operating lease liabilities			(2,187	)
Finance lease liabilities			(451	)
Total liabilities assumed			(8,684	)
Net assets acquired		$	20,651

The estimated fair values of assets acquired and liabilities assumed are considered preliminary and are based on the most recent information available. The provisional measurements of fair value set forth above are subject to change. We expect to finalize the valuation as soon as practicable, but no later than one-year from the acquisition date.

INTERPACE BIOSICENCES, INC (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(continued)~~

(Tabular information in thousands, except per share amounts)

~~(unaudited)~~

The following unaudited pro forma consolidated revenues for the three and nine months ended September 30, 2019 and 2018 assume that the Company had acquired the BioPharma business as of January 1, 2018. The pro forma revenues include estimates and assumptions which management believes are reasonable. However, pro forma revenues are not necessarily indicative of the revenues that would have occurred if the acquisition had been consummated as of the date indicated, nor are they necessarily indicative of future revenues.

		Three Months Ended September 30, 2019				Nine Months Ended September 30, 2019				Three Months Ended September 30, 2018				Nine Months Ended September 30, 2018
Revenue		$	8,010			$	27,648			$	9,741			$	27,551

The BioPharma business had not historically been accounted for as a separate entity, subsidiary or division of CGI. In addition, stand-alone financial statements related to BioPharma have not been prepared previously as CGI’s financial system was not designed to provide complete financial information of BioPharma. Therefore, the Company was not able to estimate the pro forma impact to net loss or the net loss per share of BioPharma (presently called Interpace Pharma Solutions) for the three and nine months ended September 30, 2019 and 2018.

●

~~During September 2017 the Company received approximately $0.9 million from the exercise of 747,800 Base Warrants issued as part of the Offering.~~

~~Subsequent to September 2017 the Company received approximately $6.2 million from the exercise of Base~~LIQUIDITY~~Warrants issued as part of the Offering, as follows:~~

	●	~~During October 2017 the Company received approximately $1.2 million from the exercise of approximately 925,000 Base Warrants.~~

	●	On October 12, 2017 the Company entered into an agreement with certain holders of Base Warrants to exercise 4 million Base Warrants at the exercise price of $1.25 in exchange for 3.2 million additional private placement warrants with an exercise price of $1.80, resulting in gross proceeds to the Company of $5.0 million. The new warrants may not be exercised for six months from the issue date and expire in five and one-half years from their issuance date.

As ~~part~~ of ~~our acquisition~~September 30, 2019, the Company had cash and cash equivalents of ~~RedPath Integrated Pathology, Inc., we issued a non-negotiable subordinated secured, non-interest bearing, promissory note, dated as~~$2.4 million, net accounts receivable of ~~October 31, 2014, with an aggregate principal amount~~$14.7 million, total current assets of $10.7 million outstanding (the “RedPath Note”). In December 2016 we repaid $1.33 million in principal of the RedPath Note resulting in an outstanding balance of $9.34 million. The RedPath Note was subsequently acquired by a single institutional investor (the “Investor”) for $8.87 million on March 22, 2017. Also on that date we and the Investor exchanged the RedPath Note for a senior secured convertible note in the aggregate principal amount of $5.32$20.6 million and total current liabilities of $17.3 million. For the nine months ended September 30, 2019, the Company had a ~~senior secured non-convertible note~~net loss of $16.0 million and cash used in ~~the aggregate principal amount of $3.55~~operating activities was $12.6 million. On April 18, 2017, we and the Investor exchanged the senior secured non-convertible note for $3.55 million of our senior secured convertible note. Between March 23, 2017 and April 18, 2017, the senior secured convertible notes were converted in full for 3,795,429 shares of our common stock. We no longer have any outstanding secured debt, and any security interests and liens related to our former secured debt have been fully settled.

~~The~~On July 15, 2019 the Company entered into a ~~Credit~~Securities Purchase Agreement ~~with SCM Specialty Finance Opportunities Fund, L.P. (the “Credit Agreement”)~~for $27 million in Preferred Stock closing in two tranches on ~~September 28, 2016~~July 15, 2019 for ~~$1.2~~$14 million and on October 16, 2019 for $13 million. ~~The Credit Agreement contains customary representations and warranties in favor~~After the purchase price of $23.5 million less certain closing adjustments of $1.98 million was paid to Cancer Genetics, Inc. the balance of the ~~Lender~~proceeds were used to pay down a $3.75 million balance in the revolving line of credit and ~~certain covenants,~~for general corporate purposes, including ~~among other things, financial covenants relating to loan turnover rates, liquidity and revenue targets. As~~the integration of the BioPharma business.

On September ~~30, 2017~~20, 2019, the Company ~~is renegotiating terms~~entered into an Equity Distribution Agreement (the “Agreement”) with Oppenheimer & Co. Inc., as sales agent (the “Agent”), pursuant to which the Company may, from time to time, issue and sell shares of its common stock, par value $0.01 per share, in an aggregate offering price of up to $4.8 million (the “Shares”) through the ~~Credit Agreement and has not borrowed any funds~~Agent. To date, no shares have been sold under the ~~Credit~~ Agreement.

~~While the Company has significantly increased its cash balance and has eliminated its long term indebtedness, the~~The Company does not expect to generate positive cash flows from operations for the year ending December 31, ~~2017.~~2019. The Company intends to meet ~~its~~ongoing capital needs by using proceeds under the Securities Purchase Agreement, additional borrowings under the line of credit resulting from the additional accounts receivable acquired in the BioPharma acquisition, selling shares under the Agreement, revenue growth and margin improvement, collecting accounts receivable, containing costs ~~entering into strategic alliances~~ as well as exploring other ~~options, including the possibility of raising additional debt or equity capital as necessary. There is, however, no assurance~~financing options. Management believes that the Company ~~will~~has sufficient cash on hand and available to sustain operations through at least November 30, 2020. However, there is no guarantee that additional capital can be ~~successful in meeting its capital requirements prior~~raised to ~~becoming cash flow positive.~~

fund our future operations.

INTERPACE BIOSICENCES, INC (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(continued)~~

(Tabular information in thousands, except per share amounts)

~~(unaudited)~~

3.4.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities reported and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management’s estimates are based on historical experience, facts and circumstances available at the time, and various other assumptions that are believed to be reasonable under the circumstances. Significant estimates include ~~best estimate of selling price in multiple element arrangements,~~accounting for valuation allowances related to deferred income taxes, ~~self-insurance loss accruals,~~contingent consideration, allowances for doubtful accounts, revenue recognition, unrecognized tax benefits, and ~~notes, income tax accruals, acquisition accounting, useful lives and~~asset impairments ~~of long-lived assets and facilities realignment accruals.~~involving other intangible assets. The Company periodically reviews these matters and reflects changes in estimates in earnings as appropriate. Actual results could materially differ from those estimates.

Revenue Recognition

~~Through~~Our Services

Our Diagnostics business is a fully integrated commercial and bioinformatics business unit that provides clinically useful molecular diagnostic tests, bioinformatics and pathology services for evaluating risk of cancer by leveraging the ~~Company aims to provide physicians~~latest technology in personalized medicine for improved patient diagnosis and ~~patients with diagnostic options for detecting genetic~~management. The genomic tests that we develop and ~~other molecular alterations that are associated with gastrointestinal, endocrine and lung cancers, which~~commercialize as well as related first line assays are principally focused on early detection of patients with indeterminate biopsies and at high risk of cancer. ~~Customers~~Our tests and services provide mutational analysis of genomic material contained in these “suspicious” cysts, nodules and lesions with the goal of better informing treatment decisions in patients at risk of thyroid, pancreatic, and other cancers and in many cases avoiding unnecessary surgical treatment in patients at low risk.

We currently have four commercialized molecular diagnostic tests in the marketplace for which we are receiving reimbursement: PancraGEN^®, which is a pancreatic cyst and pancreaticobiliary solid lesion genomic test that helps physicians better assess risk of pancreaticobiliary cancers using our proprietary PathFinderTG^® platform; ThyGeNEXT^®, which is an expanded oncogenic mutation panel that helps identify potentially malignant thyroid nodules, ThyraMIR^®, which assesses thyroid nodules for risk of malignancy utilizing a proprietary microRNA gene expression assay. THyGeNEXT^® and ThyraMIR^®are typically used in conjunction; and RespriDx^®, which is a genomic test that helps physicians differentiate metastatic or recurrent lung cancer from the presence of newly formed primary lung cancer and which also utilizes our PathFinderTG^®platform to compare the genomic fingerprint of two or more sites of lung cancer.

BarreGEN^®, is our esophageal cancer risk classifier for Barrett’s Esophagus that also utilizes our PathFinder TG^® platform and is currently in a Clinical Evaluation Program or (“CEP”) whereby we gather information from physicians using BarreGEN^®to assist us in positioning our product for full launch, partnering and potentially supporting improved reimbursement with payers.

Our recently acquired BioPharma or now called Pharma Solutions business provides pharmacogenomics testing, genotyping, biorepository and other customized services to the pharmaceutical and biotech industries and advances personalized medicine by partnering with pharmaceutical, academic, and technology leaders to effectively integrate pharmacogenomics into their drug development and clinical trial programs with the goals of delivering safer, more effective drugs to market more quickly, and improving patient care.

Therefore, the Company’s primary source of revenue is generated from the performance of its proprietary molecular diagnostic tests for its clinical customers and its DNA-based pharma testing services in support of clinical trials for its BioPharma customers. The Company’s performance obligation is fulfilled upon completion, review and release of test results and subsequent billing to the third-party payer, hospital or contracting customer.

INTERPACE BIOSICENCES, INC (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular information in thousands, except per share amounts)

Clinical Performance Obligations and Revenue Recognition

Under ASC 606, the Company recognizes revenue for billings less contractual allowances and estimated uncollectable amounts for all third party payer groups on the accrual basis based upon a thorough analysis of historical receipts. The net amount derived and used for revenue recognition is referred to as the Net Realizable Value (NRV) for the particular test and payer group from which reimbursement is received. This derived NRV is evaluated quarterly or as needed and then applied to future periods until recalculated.

BIoPharma Performance Obligations and Revenue Recognition

Performance obligations are satisfied at a point in time as the Company processes samples delivered by the customer. Project level activities, including study setup and project management, are satisfied over the life of the contract. Revenues are recognized at a point in time when the test results or other deliverables are reported to the customer. Project level fee revenue is recognized ratably over the life of the contract.

Deferred revenue from BioPharma Contracts is recorded at fair value and represents payments received in advance of services rendered.

Revenue from Contracts with Customers (ASC 606)

Our Diagnostics business derives its revenues from the performance of its proprietary assays or tests. The Company’s performance obligation is fulfilled upon completion, review and release of test results to the customer. The Company subsequently bills third-party payers or direct-bill payers for the tests performed. Revenue is recognized based on the estimated transaction price or net realizable value (“NRV”), which is determined based on historical collection rates by each payer category for each proprietary test offered by the Company. To the extent the transaction price includes variable consideration, for all third party and direct-bill payers and proprietary tests, the Company estimates the amount of variable consideration that should be included in the transaction price using the expected value method based on historical experience.

For our Diagnostics business, we regularly review the ultimate amounts received from the third-party and direct-bill payers and related estimated reimbursement rates and adjust the NRV’s and related contractual allowances accordingly. If actual collections and related NRV’s vary significantly from our estimates, we will adjust the estimates of contractual allowances, which would affect net revenue in the period such variances become known.

INTERPACE BIOSICENCES, INC (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular information in thousands, except per share amounts)

Disaggregated Revenues

We operate in a single operating segment and, therefore, the results of our operations are reported on a consolidated basis for purposes of segment reporting, which is consistent with internal management reporting.

Deferred Revenue

Deferred revenue is recorded at fair value and represents payments received in advance of services rendered.

Financing and Payment

For non-Medicare claims, our payment terms vary by payer category. Payment terms for direct-payers in our clinical or diagnostics business ~~consist primarily of physicians, hospitals~~are typically thirty days and ~~clinics. Under current GAAP, we recognize revenue~~in our BioPharma business, up to sixty days. Commercial third-party-payers are required to respond to a claim within a time period established by their respective state regulations, generally between thirty to sixty days. However, payment for commercial third-party claims may be subject to a denial and appeal process, which could take up to two years in some instances where multiple appeals are submitted. The Company generally appeals all denials from ~~services rendered~~commercial third-party payers.

Costs to Obtain or Fulfill a Customer Contract

Sales commissions are expensed when incurred because the ~~following four revenue recognition criteria are met: persuasive evidence of an arrangement or contract exists; services~~amortization period would have been ~~rendered;~~one year or less. These costs are recorded in sales and marketing expense in the ~~selling price is fixed~~condensed consolidated statements of operations.

Accounts Receivable

The Company’s accounts receivable represent unconditional rights to consideration and are generated using its clinical or ~~determinable;~~diagnostics and ~~collectability is reasonably assured.~~BioPharma tests. The Company’s services are ~~generally considered rendered~~fulfilled upon completion of the test, ~~and~~ review and release of the test ~~results, at which time~~results. In conjunction with fulfilling these services, the Company bills the third-party payer or ~~hospital. We recognize revenue on an accrual basis when we are able to make a reasonable estimate of reimbursement at~~directly bills the ~~time delivery~~hospital or contracting customer. Accounts receivable is ~~complete. In the first period in which revenue is accrued~~recognized for ~~a particular~~all payer or test, there generally is a one-time increase in revenue. Until we have contracts with payers or can reasonably estimate the amount that will ultimately be received, we recognize the related revenue on the cash basis. Because the timing and amount of cash payments received from payers as well as one-time increases in revenue from newly accrued payers are difficult to predict, we expect that our revenue may fluctuate significantly in any given quarter.

~~The Company currently recognizes revenue and accounts receivable related to billings for Medicare and Medicare Advantage, on an accrual basis,~~groups net of contractual adjustment ~~as well as for hospitals (direct-bill clients), when collectability is reasonably assured.~~and net of estimated uncollectable amounts. Contractual adjustments represent the difference between the list prices and the reimbursement rate set by third party payers, including Medicare, ~~and Medicare Advantage,~~commercial payers, or ~~the~~ amounts billed directly to ~~hospitals.~~hospitals and service providers. Specific accounts may be written off after several appeals, which in some cases may take longer than twelve months.

~~Specifically by test, PancraGEN® revenues have been recorded~~Leases

The Company determines if an arrangement contains a lease in whole or in part at the inception of the contract. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term while lease liabilities represent our obligation to make lease payments arising from the lease. All leases with terms greater than twelve months result in the recognition of a ROU asset and a liability at the lease commencement date based on the ~~accrual basis in each of these categories since its acquisition in 2014. ThyGenX~~^® ~~has been recorded on an accrual basis since its Medicare approval in 2015 in two~~present value of the ~~payer categories, Medicare and Medicare Advantage, and ThyraMIR®,~~lease payments over the lease term. Unless a ~~newer test, approved for Medicare~~lease provides all of the information required to determine the implicit interest rate, we use our incremental borrowing rate based on the information available at the commencement date in ~~2016, has been moved from cash basis to accrual basis~~determining the present value of the lease payments. We use the implicit interest rate in the ~~same categories as ThyGenX, Medicare~~lease when readily determinable.

Our lease terms include all non-cancelable periods and ~~Medicare Advantage in 2017, effective~~may include options to extend (or to not terminate) the lease when it is reasonably certain that we will exercise that option. Leases with terms of twelve months or less at the commencement date are expensed on a straight-line basis over the lease term and do not result in the ~~current quarter. As~~recognition of ~~September 30, 2017 there are no revenues for the Company’s lung assay called RespriDX™~~an asset or liability. See Note 7,Leases.

INTERPACE BIOSICENCES, INC (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(continued)~~

(Tabular information in thousands, except per share amounts)

~~(unaudited)~~

The Company also provides services by way of commercial insurance carriers or governmental programs that may or may not have a contract or coverage in place for its proprietary tests. As contracts and coverage progress for payers in these categories, the Company will evaluate their collection history to determine the appropriate time to begin to recognized specific payers on the accrual basis as well. Currently, all are recognized on the cash basis. The Company does not enter into direct agreements with patients that commit them to pay any portion of the cost of the tests in the event that their commercial insurance carrier or governmental program does not pay the Company for its services; however, the Company does offer patients that do not have adequate insurance coverage the opportunity to pay cash for our services at a reduced rate.

~~Accounts Receivable~~

The Company recognizes Accounts Receivable as revenue is accrued, based upon its criteria for revenue recognition. The Company also records an Allowance for Doubtful Accounts based on the collection history for its accrual basis payer. For non-paying roster accounts, balances are generally written off after twelve months. Medicare and Medicare Advantage accounts are currently written off after eighteen months to allow for the appeal process, which in some cases requires several appeals prior to collection.

Other Current Assets

Other current assets consisted of the following as of September 30, ~~2017~~2019 and December 31, ~~2016:~~2018:

September 30, 2017 December 31, 2016
Indemnification assets $ 875 $ 875
Other receivables 247 325
Other 145 215
$ 1,267 $ 1,415

	September 30, 2019		December 31, 2018
		(unaudited)
Indemnification assets	$	875	$	875
Prepaid expenses		2,571		1,230
Other		76		65
Total other current assets	$	3,522	$	2,170

Long-Lived Assets, including Finite-Lived Intangible Assets

Finite-lived intangible assets are stated at cost less accumulated amortization. Amortization of finite-lived acquired intangible assets is recognized on a straight-line basis, using the estimated useful lives of the assets of approximately two years to ~~nine~~ten years in acquisition related amortization expense in the condensed consolidated statements of ~~comprehensive loss.~~operations.

The Company reviews the recoverability of long-lived assets and finite-lived intangible assets whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the asset, an impairment loss is recognized by reducing the recorded value of the asset to its fair value measured by future discounted cash flows. This analysis requires estimates of the amount and timing of projected cash flows and, where applicable, judgments associated with, among other factors, the appropriate discount rate. Such estimates are critical in determining whether any impairment charge should be recorded and the amount of such charge if an impairment loss is deemed to be necessary.

~~INTERPACE DIAGNOSTICS GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(Tabular information in thousands, except per share amounts)~~

~~(unaudited)~~

Discontinued Operations

The Company accounts for business dispositions and its businesses held for sale in accordance with ASC 205-20,Discontinued ~~Operations.~~Operations (“ASC 205-20”). ASC 205-20 requires the results of operations of business dispositions to be segregated from continuing operations and reflected as discontinued operations in current and prior periods. See Note ~~11,~~13,Discontinued Operations for further information.

Basic and Diluted ~~(Loss) Income~~Net Loss per Share

A reconciliation of the number of shares of common stock, par value $0.01 per share (the “Common Stock”) used in the calculation of basic and diluted ~~(loss) income~~loss per share for the three- and nine-month periods ended September 30, ~~2017~~2019 and ~~2016~~2018 is as follows:

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Basic weighted average number of common shares 22,028 1,816 12,022 1,803
Potential dilutive effect of stock-based awards - - - -
Diluted weighted average number of common shares 22,028 1,816 12,022 1,803

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
	(unaudited)
Basic weighted average number of of common shares		38,196		28,215		37,169		28,002
Potential dilutive effect of stock-based awards		-		-		-		-
Diluted weighted average number of common shares		38,196		28,215		37,169		28,002

INTERPACE BIOSICENCES, INC (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular information in thousands, except per share amounts)

The following outstanding stock-based awards were excluded from the computation of the effect of dilutive securities on ~~(loss) income~~loss per share for the following periods because they would have been anti-dilutive:

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Options 1,496 - 1,496 -
Stock-settled stock appreciation rights (SARs) 84 103 84 103
Restricted stock and restricted stock units (RSUs) 68 115 68 115
Warrants 15,267 - 15,267 -
16,915 218 16,915 218

~~INTERPACE DIAGNOSTICS GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(Tabular information in thousands, except per share amounts)~~

~~(unaudited)~~

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
	(unaudited)
Options		3,936		2,256		3,936		2,256
Stock-settled stock appreciation rights (SARs)		22		59		22		59
Restricted stock units (RSUs)		544		220		544		220
Warrants		14,196		13,542		14,196		13,542
		18,698		16,077		18,698		16,077

4.5.	GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill is attributable to the acquisition of the BioPharma business from CGI in July 2019. The carrying value of the intangible assets acquired was $15.6 million, with goodwill of approximately $8.3 million and identifiable intangible assets of approximately $7.3 million. The net carrying value of the identifiable intangible assets from all acquisitions as of September 30, ~~2017~~2019 and December 31, ~~2016~~2018 are as follows:

As of September 30, 2017 As of December 31, 2016
Life Carrying Carrying
(Years) Value Value
Diagnostic assets:
Asuragen acquisition:
Thyroid 9 $ 8,519 $ 8,519
RedPath acquisition:
Pancreas test 7 16,141 16,141
Barrett’s test 9 18,351 18,351
Total $ 43,011 $ 43,011
Diagnostic lab:
CLIA Lab 2.3 $ 609 $ 609

Accumulated Amortization $ (9,701 ) $ (7,262 )

Net Carrying Value $ 33,919 $ 36,358

		As of September 30, 2019			As of December 31, 2018
		(unaudited)
	Life	Carrying			Carrying
	(Years)	Amount			Amount

Asuragen acquisition:
Thyroid	9	$	8,519		$	8,519
RedPath acquisition:
Pancreas test	7		16,141			16,141
Barrett's test	9		18,351			18,351
BioPharma acquisition:
Trademarks	10		1,600			-
Customer relationships	8		5,700			-

CLIA Lab	2.3	$	609		$	609

Total		$	50,920		$	43,620

Accumulated Amortization		$	(16,388	)	$	(13,767	)

Net Carrying Value		$	34,532		$	29,853

Amortization expense was approximately ~~$0.8~~$1.0 million and ~~$1.0~~$0.8 million for the three-month periods ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, and approximately ~~$2.4~~$2.6 million and ~~$2.9~~$2.4 million for the nine-month periods ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively. Amortization of our diagnostic assets begins upon launch of the product. Estimated amortization expense for the next five years is as follows, based on current assumptions of future product launches:

2017 2018 2019 2020 2021
$ 3,252 $ 3,252 $ 5,292 $ 5,292 $ 4,908

2019		2020		2021		2022		2023		2024
	(remaining)
$	1,031	$	5,145	$	5,781	$	3,859	$	3,859	$	3,149

INTERPACE BIOSICENCES, INC (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular information in thousands, except per share amounts)

5.6.	FAIR VALUE MEASUREMENTS

Cash and cash equivalents, accounts receivable, and accounts payable approximate fair value due to their relative short-term nature. The ~~Company's~~Company’s financial ~~assets and~~ liabilities reflected at fair value in the condensed consolidated financial statements ~~include: cash~~include contingent consideration and ~~cash equivalents; accounts receivable; other current assets; accounts payable; and contingent consideration.~~warrant liability. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various methods including market, income and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated, or generally unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based upon observable inputs used in the valuation techniques, the Company is required to provide information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values into three broad levels as follows:

~~INTERPACE DIAGNOSTICS GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(Tabular information in thousands, except per share amounts)~~

~~(unaudited)~~

	Level 1:	Valuations for assets and liabilities traded in active markets from readily available pricing sources for market transactions involving identical assets or liabilities.

	Level 2:	Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third-party pricing services for identical or similar assets or liabilities.

	Level 3:	Valuations ~~which~~ incorporate ~~unobservable inputs that reflect management~~certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. The valuation methodologies used for the Company’s financial ~~assets and liabilities~~instruments measured on a recurring basis at fair value, including the general classification of such instruments pursuant to the valuation hierarchy, is set forth in the tables below:

As of September 30, 2017 Fair Value Measurements
Carrying Fair As of September 30, 2017
Amount Value Level 1 Level 2 Level 3
Assets:
Cash and cash equivalents:
Cash $ 11,703 $ 11,703 $ 11,703 $ - $ -
$ 11,703 $ 11,703 $ 11,703 $ - $ -
Liabilities:
Contingent consideration:
Asuragen $ 1,407 $ 1,407 $ - $ - $ 1,407
Other long-term liabilities:
Warrant liability 733 733 - - 733
$ 2,140 $ 2,140 $ - $ - $ 2,140

	As of September 30, 2019				Fair Value Measurements
	Carrying		Fair		As of September 30, 2019
	Amount		Value		Level 1		Level 2		Level 3
					(unaudited)
Liabilities:
Contingent consideration:
Asuragen⁽¹⁾	$	3,024	$	3,024	$	-	$	-	$	3,024
Other long-term liabilities:
Warrant liability⁽²⁾		326		326		-		-		326
	$	3,350	$	3,350	$	-	$	-	$	3,350

INTERPACE BIOSICENCES, INC (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(continued)~~

(Tabular information in thousands, except per share amounts)

~~(unaudited)~~

As of December 31, 2016 Fair Value Measurements
Carrying Fair As of December 31, 2016
Amount Value Level 1 Level 2 Level 3
Assets:
Cash and cash equivalents:
Cash $ 602 $ 602 $ 602 $ - $ -
$ 602 $ 602 $ 602 $ - $ -
Liabilities:
Contingent consideration:
Asuragen $ 1,545 $ 1,545 $ - $ - $ 1,545
RedPath 5,969 5,969 - - 5,969
$ 7,514 $ 7,514 $ - $ - $ 7,514

	As of December 31, 2018				Fair Value Measurements
	Carrying		Fair		As of December 31, 2018
	Amount		Value		Level 1		Level 2		Level 3
Liabilities:
Contingent consideration:
Asuragen⁽¹⁾	$	3,127	$	3,127	$	-	$	-	$	3,127
Other long-term liabilities:
Warrant liability⁽²⁾		361		361		-		-		361
	$	3,488	$	3,488	$	-	$	-	$	3,488

~~Cash~~⁽¹⁾⁽²⁾See Note 9,Accrued Expenses and cash equivalents are valued using market prices in active markets (level 1). As of September 30, 2017, the Company did not have any marketable securities in less active markets (level 2) or without observable market values that would require a high level of judgment to determine fair value (level 3).Long-Term Liabilities

In connection with the acquisition of certain assets from Asuragen, ~~and the acquisition of RedPath,~~ the Company recorded contingent consideration related to contingent payments and other ~~revenue based~~revenue-based payments. The Company determined the fair value of the contingent consideration based on a probability-weighted income approach derived from revenue estimates. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement. On March 22, 2017, the Company entered into a Termination Agreement with the RedPath Equityholder Representative. Under the terms of the Termination Agreement, the RedPath Equityholder Representative agreed to terminate all royalty and milestone rights under the contingent consideration agreement. As a result the Company reversed approximately $6.0 million in Redpath contingent consideration liabilities in the first quarter of 2017, of which $5.8 million was a reversal within operating expenses in the Condensed Consolidated Statement of Comprehensive Loss.

~~On March 23, 2017, in connection with the Company entering into the Exchange Agreement, related to the RedPath Note (See Note 2,~~~~Liquidity~~ ~~and Note 12,~~~~Long-Term Debt~~) with the Investor, an embedded conversion option derivative liability was recorded due to a certain embedded conversion feature. The embedded conversion option is considered a liability and valued using the Black-Scholes Option-Pricing Model, the inputs for which include exercise price of the conversion feature, market price of the underlying common shares, expected term, volatility based on the Company’s historical market price, and the risk-free rate corresponding to the expected term of the Exchange Agreement. Any changes to the estimated fair value of this liability were recorded in Interest Expense. Between March 23, 2017 and April 18, 2017, the Investor had fully converted all outstanding debt, and as a result there are no liabilities remaining subsequent to April 18, 2017.

On June 21, 2017, the Company ~~closed on an Offering (See Note 2,~~~~Liquidity~~~~), issuing both Pre-Funded Warrants and~~issued 575,000 Underwriters Warrants, related to ~~purchase 2,600,000 shares and 575,000 shares of~~a public offering on the ~~Company’s common stock, respectively. Both the Pre-Funded and Underwriters Warrants include~~same date that included a cash settlement feature in the event of certain circumstances. Accordingly, ~~both~~ the ~~Pre-Funded and~~ Underwriters Warrants are classified as liabilities and were fair valued using the Black Scholes Option-Pricing Model, the inputs for which include exercise price of the respective warrants, market price of the underlying common shares, expected term, volatility based on the Company’s historical market price, and the risk-free rate corresponding to the expected term of the ~~Exchange Agreement.~~underlying exchange agreement. Changes to the fair value of the warrant liabilities were recorded toin Other ~~(loss)~~ income (expense), net. ~~The Pre-Funded~~

A roll forward of the carrying value of the Contingent Consideration Liability and the Underwriters’ Warrants ~~were fully exercised as of~~to September 30, ~~2017 and therefore the Company has no remaining liability associated with those warrants.~~

2019 is as follows:

								Cancellation		Adjustment
								of Obligation/		to Fair Value/
	December 31, 2018		Payments			Accretion		Conversions Exercises		Mark to Market			September 30, 2019
	(unaudited)
Asuragen	$	3,127	$	(434	)	$	331	$	-	$	-		$	3,024

Underwriters Warrants		361		-			-		-		(35	)		326
	$	3,488	$	(434	)	$	331	$	-	$	(35	)	$	3,350

Certain of the Company’s non-financial assets, such as other intangible assets and goodwill, are measured at fair value on a nonrecurring basis when there is an indicator of impairment and recorded at fair value only when an impairment charge is recognized.

INTERPACE BIOSICENCES, INC (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(continued)~~

(Tabular information in thousands, except per share amounts)

LEASES

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which establishes a ROU model that requires a lessee to record a ROU asset and a lease liability, measured on a discounted basis, on the balance sheet for all leases with terms longer than 12 months. Effective January 1, 2019, the Company adopted the provisions of Topic 842 using the alternative modified transition method, with a cumulative effect adjustment to the opening balance of retained earnings on the date of adoption, and prior periods not restated, as allowed under the provisions of Topic 842. The Company also elected to use the practical expedients permitted under the transition guidance of Topic 842, which provides for the following: the carryforward of the Company’s historical lease classification, no requirement for reassessment of whether an expired or existing contract contains an embedded lease, no reassessment of initial direct costs for any leases that exist prior to the adoption of the new standard, and the election to consolidate lease and non-lease components. The Company also elected to keep all leases with an initial term of 12 months or less off the balance sheet.

The Company recorded $2.4 million of right-of-use lease assets and $2.5 million of lease liabilities upon adoption, primarily relating to rentals of space for our corporate headquarters and laboratories, as well as equipment leases, all under operating leases. In addition, the Company recorded a cumulative adjustment to opening accumulated deficit of $0.1 million. With the acquisition of the BioPharma business of CGI in 2019, the Company added $2.2 million of operating lease assets and liabilities and $0.5 million of finance lease assets and liabilities to its balance sheet. Finance lease assets are included in fixed assets, net of accumulated depreciation.

The table below presents the lease-related assets and liabilities recorded in the Condensed Consolidated Balance Sheet:

	Classification on the Balance Sheet	September 30, 2019
		(unaudited)
Assets
Financing lease assets	Property and equipment, net	$	998
Operating lease assets	Operating lease assets		4,212
Total lease assets		$	5,210

Liabilities
Current
Financing lease liabilities	Other accrued expenses	$	247
Operating lease liabilities	Other accrued expenses		1,367
Total current lease liabilities		$	1,614
Noncurrent
Financing lease liabilities	Other long-term liabilities		173
Operating lease liabilities	Operating lease liabilities		2,791
Total long-term lease liabilities			2,964
Total lease liabilities		$	4,578

The weighted average remaining lease term for the Company’s operating leases was 2.8 years as of September 30, 2019 and the weighted average discount rate for those leases was 6.0%. The Company’s operating lease expenses are recorded within cost of revenue and general and administrative expenses.

~~(unaudited)~~INTERPACE BIOSICENCES, INC (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular information in thousands, except per share amounts)

The table below reconciles the undiscounted cash flows to the lease liabilities recorded on the Company’s Condensed Consolidated Balance Sheet as of September 30, 2019:

~~A roll forward~~

	Operating Leases		Financing Leases
2019 (remaining)	$	412	$	90
2020		1,431		226
2021		1,258		120
2022		1,192		13
2023		344		-
Total minimum lease payments		4,637		449
Less: amount of lease payments representing effects of discounting		479		29
Present value of future minimum lease payments		4,158		420
Less: current obligations under leases		1,367		247
Long-term lease obligations	$	2,791	$	173

As of ~~the carrying value of the contingent consideration, embedded conversion option and warrant liabilities from~~ December 31, ~~2016 to September 30, 2017 is~~2018, contractual obligations with terms exceeding one year and estimated minimum future rental payments required by non-cancelable operating leases with initial or remaining lease terms exceeding one year were as follows:

December 31, 2016 Initial Liability Payments Accretion Cancellation
of Obligation/
Conversions Exercises Mark to Market September 30, 2017
Contingent consideration:
Asuragen $ 1,545 $ (260 ) $ 122 $ - $ - $ 1,407
Redpath 5,969 - - (5,969 ) - -
Embedded conversion option - 208 - - (269 ) 61 -
Pre-Funded Warrants - 2,247 - - (2,337 ) 90 -
Underwriters Warrants - 422 - - - 311 733
$ 7,514 $ 2,877 $ (260 ) $ 122 $ (8,575 ) $ 462 $ 2,140

The Company’s non-financial instruments, which primarily consist of intangible assets and property and equipment, are not required to be measured at fair value on a recurring basis and are reported at carrying value. However, on a periodic basis whenever events or changes in circumstances indicate that their carrying value may not be fully recoverable (and at least annually for indefinite-lived intangible assets), non-financial instruments are assessed for impairment and, if applicable, written-down to and recorded at fair value, considering market participant assumptions.

			Less than		1 to 3		3 to 5		After
	Total		1 Year		Years		Years		5 Years
Operating lease obligations	$	2,814	$	613	$	1,322	$	879	$	-

6.8.	COMMITMENTS AND CONTINGENCIES

Litigation

Due to the nature of the businesses in which the Company is engaged it is subject to certain risks. Such risks include, among others, risk of liability for personal injury or death to persons using products or services the Company promotes or commercializes. There can be no assurance that substantial claims or liabilities will not arise in the future due to the nature of the Company’s business activities and recent increases in litigation related to healthcare products. As part of the closeout of its CSO business, the Company seeks to reduce its potential liability under its service agreements through measures such as contractual indemnification provisions with customers (the scope of which may vary from customer to customer,products and ~~the performance of which is not secured) and insurance.~~ related intellectual property.

The Company could ~~however,~~ also be held liable for errors and omissions of its employees in connection with the services it performs that are outside the scope of any indemnity or insurance policy. The Company could be materially adversely affected if it were required to pay damages or incur defense costs in connection with a claim that is outside the scope of an indemnification agreement; if the indemnity, although applicable, is not performed in accordance with its terms; or if the Company’s liability exceeds the amount of applicable insurance or indemnity.

~~INTERPACE DIAGNOSTICS GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(Tabular information in thousands, except per share amounts)~~

~~(unaudited)~~

The Company routinely assesses its litigation and threatened litigation as to the probability of ultimately incurring a liability, and records its best estimate of the ultimate loss in situations where the Company assesses the likelihood of loss as probable. The Company accrues for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Significant judgment is required in both the determination of probability and the determination as to whether a loss is reasonably estimable. In addition, in the event the Company determines that a loss is not probable, but is reasonably possible, and it becomes possible to develop what the Company believes to be a reasonable range of possible loss, then the Company will include disclosures related to such matter as appropriate and in compliance with ASC 450. To the extent there is a reasonable possibility that the losses could exceed the amounts already accrued, the Company will, as applicable, adjust the accrual in the period the determination is made, disclose an estimate of the additional loss or range of loss, indicate that the estimate is immaterial with respect to its financial statements as a whole or, if the amount of such adjustment cannot be reasonably estimated, disclose that an estimate cannot be made. As of September 30, ~~2017,~~2019, the ~~Company's~~Company’s accrual for litigation and threatened litigation was not material to the condensed consolidated financial statements.

In connection with the October 31, 2014 acquisition of RedPath, the Company assumed a liability for the settlement agreement (the “Settlement Agreement”) entered into by the former owners of RedPath with the Department of Justice (“DOJ”). Under the terms of the Settlement Agreement, the Company is obligated to make payments to the DOJ for the calendar years ended December 31, 2014 through 2017, up to a cumulative maximum amount of $3.0 million.

Payments are due on March 31st following the calendar year in which the revenue milestones are achieved. In May 2017, the Company renegotiated payment terms with the DOJ related to a $0.5 million payment due associated with performance in fiscal 2016. The negotiations resulted in an agreement that the Company pay $83,335 on July 3, 2017, and $83,333 for the five remaining months of 2017. The Company made payments of approximately $0.3 million in the three months ended September 30, 2017. For the nine months ended September 30, 2017, the Company has accrued $0.5 million for the remainder of these payments and its estimate of the potential liability for 2017, based upon the terms of the Settlement Agreement.

~~Prolias Technologies, Inc. v. PDI, Inc.~~

On April 8, 2015, Prolias Technologies, Inc. (“Prolias”) filed a complaint (the “Complaint”) against the Company with the Superior Court of New Jersey (Morris County) (the “Court”) in a matter entitled Prolias Technologies, Inc. v. PDI, Inc. (Docket No. MRS-L-899-15). In the Complaint, Prolias alleged that it and the Company entered into an August 19, 2013 Collaboration Agreement and a First Amendment thereto (collectively, the “Agreement”) whereby Prolias and the Company agreed to work in good faith to commercialize a diagnostic testINTERPACE BIOSICENCES, INC (formerly known as “Thymira.” After various motions on October 13, 2016, the Company filed an application to enter final judgment and taxing of costs against Prolias. The Company requested that the Court enter final judgment against Prolias and for the Company.

INTERPACE DIAGNOSTICS GROUP, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(continued)~~

(Tabular information in thousands, except per share amounts)

~~(unaudited)~~

On March 9, 2017, the Court entered a final judgment in the Company’s favor against Prolias for the sum of $636,053 plus ten percent interest continuing to accrue on the principal balance of $500,000 (per diem $136.99) unless and until paid. Final judgment was also entered in the Company’s favor, and against Prolias, declaring Prolias is deemed to have executed and delivered to the Company a promissory note in the amount of $1,000,000 and Prolias is obligated to repay the Company the principal amount and all interest in accordance with the terms of the promissory note and Article 10.2(a) of the Collaboration Agreement by and between Prolias and the Company. On April 3, 2017, the final judgment against Prolias was recorded as a statewide lien. No assurance, however, can be given that the Company will ever be able to recover on the judgment against Prolias.

~~Severance~~

During the first quarter ended March 31, 2016 the Company recorded additional severance obligations as it continued to right-size the organization and wind down its CSO business. The Company recorded obligations of $1.1 million, $0.5 million of which was recorded in continuing operations.

The severance liability as of December 31, 2016 was approximately $3.1 million, of which $2.2 million is classified in continuing operations and $0.9 million is in discontinued operations. In January 2017, five former executives agreed to a settlement of their severance obligations agreeing to 35% of the total amount due them. These remaining obligations were paid out in February 2017 in payments totaling approximately $1.0 million. As a result of the settlement, the Company recorded a reversal of expense of approximately $2.0 million in the first quarter of 2017. Within continuing operations, $1.5 million of expense was reversed and was recorded in general and administrative expenses in the Condensed Consolidated Statements of Comprehensive Loss and $0.5 million was recorded in discontinued operations. The Company has no severance obligations as of September 30, 2017.

~~Parsippany Lease~~

Our corporate headquarters are located in Parsippany, New Jersey where we had been leasing approximately 23,000 square feet on an operating lease scheduled to run through June 2017. On May 24, 2017 the Company entered into a new lease with its Parsippany landlord. The lease is for a space of approximately 5,900 square feet and is for a period of sixty-three months commencing July 1, 2017 at an initial monthly obligation of approximately $13,000 per month subject to annual increases of fifty cents per square foot. The initial year of the lease has a two-month rent abatement period. The lease has an early termination date of June 30, 2020 at the option of the Company, provided at least 12 months’ notice is given in advance.

~~Pittsburgh Lease~~

On September 26, 2017 the Company renewed its lease for its Pittsburgh laboratory for an additional three months. The lease is for 20,000 square feet of laboratory and office space and now ends on June 30, 2018. The lease obligation remains at $32,500 per month for the full term of the lease.

~~INTERPACE DIAGNOSTICS GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(Tabular information in thousands, except per share amounts)~~

~~(unaudited)~~

7.9.	ACCRUED EXPENSES AND LONG-TERM LIABILITIES

Other accrued expenses consisted of the following as of September 30, ~~2017~~2019 and December 31, ~~2016:~~2018:

					September 30, 2019		December 31, 2018
	September 30, 2017		December 31, 2016		(unaudited)
Accrued royalties	$	931	$	711	$	2,000	$	1,399
Indemnification liability		875		875		875		875
Contingent consideration		250		260		559		434
Rent payable		18		110
DOJ settlement		542		80
Accrued professional fees		687		1,746		1,318		701
Operating lease liability						1,367		-
Deferred revenue						480		-
Taxes payable		389		526		287		285
Unclaimed property		565		565		565		565
Directors' Fees		41		40
Research related liabilities		388		496
All others		1,074		1,363		1,972		832
	$	5,331	$	6,236
Total other accrued expenses					$	9,423	$	5,091

~~Other long-term~~Long-term liabilities consisted of the following as of September 30, ~~2017~~2019 and December 31, ~~2016:~~2018:

	September 30, 2017		December 31, 2016		September 30, 2019		December 31, 2018
					(unaudited)
Warrant liability					$	326	$	361
Uncertain tax positions	$	3,733	$	3,594		4,011		3,838
DOJ settlement (indemnified by RedPath)		-		250
Warrant liability		733		-
Deferred revenue						294		-
Other		88		-		160		120
	$	4,554	$	3,844
Total other long-term liabilities					$	4,791	$	4,319

8.10.

STOCK-BASED COMPENSATION

Stock Incentive Plan

~~In 2015,~~The Company’s stock-incentive program is a long-term retention program that is intended to attract, retain and provide incentives for talented employees, officers and directors, and to align stockholder and employee interests. Currently, the ~~board of directors (the “Board”~~Company is able to grant options, stock appreciation rights (“SARs”) and ~~stockholders approved~~restricted shares from the Interpace Biosciences, Inc. 2019 Equity Incentive Plan, (the “Stock Incentive Plan”). No new grants may be made under the Company’s prior stock incentive plan, the Interpace Diagnostics Group, Inc. Amended and Restated 2004 Stock Award and Incentive Plan ~~(or the “Amended and Restated~~(the “2004 Plan”). The Amended and Restated Plan authorized an additional 245,000 shares for new awards and also included the remaining shares available under the prior Amended and Restated Plan. On September 14, 2017, the Company stockholders approved an amendment to the Amended and Restated Plan to increase the maximum number of shares available for sale thereunder by 3,700,000 shares, of which 184,647 shares represented stockholders’ approval of contingent awards. Eligible participants under the Amended and Restated Plan include officers and other employees of the Company, members of the Board and outside consultants, as specified under the Amended and Restated Plan and designated by the Compensation and Management Development Committee of the Board (the “Compensation Committee”). Unless earlier terminated by action of the ~~Board,~~Company’s board of directors, the ~~Amended and Restated~~2004 Plan will remain in effect until such time as no stock remains available for delivery ~~under the Amended and Restated Plan~~ and the Company has no further rights or obligations under the ~~Amended and Restated~~2004 Plan with respect to outstanding awards thereunder.

Historically, stock options have been granted with an exercise price equal to the market value of the Common Stock on the date of grant, expire 10 years from the date they are granted, and generally vested over a one to three-year period for employees and members of the Board. Upon exercise, new shares will be issued by the Company. The Company granted stock options in 2017 which vest monthly over a one-year period. SARs are generally granted with a grant price equal to the market value of the Common Stock on the date of grant, vest one-third each year on the anniversary of the date of grant and expire five years from the date of grant. The restricted shares and restricted stock units (“RSUs”) granted to employees generally have a three-year graded vesting period and are subject to accelerated vesting and forfeiture under certain circumstances. Restricted shares and RSUs granted to Board members generally have a three-year graded vesting period and are subject to accelerated vesting and forfeiture under certain circumstances.

During the first quarter of 2019, members of the Company’s management team were granted stock options to purchase an aggregate of 1,105,440 shares of Common Stock with an exercise price of $0.98 per share and 276,360 RSUs, subject generally to such member’s continued service with the Company, which vest one-third each year over a period of three years.

INTERPACE BIOSICENCES, INC (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(continued)~~

(Tabular information in thousands, except per share amounts)

~~(unaudited)~~

In March of 2017, the Company’s Chief Executive Officer, Chief Financial Officer and members of the Board were granted incentive stock options to purchase an aggregate of 172,077 shares of common stock with a weighted average exercise price of $2.13 per share (subject generally to the executive’s or board member’s, as applicable, continued service with the Company) which vest in equal monthly installments over a period of one year.

The following table provides the weighted average assumptions used in determining the fair value of the stock option awards granted during the nine month ~~period~~periods ended September 30, ~~2017. There were no options granted during the nine month period ended September 30, 2016.~~2019 and 2018.

	~~Nine Months Ended~~
	~~September 30, 2017~~
~~Risk-free interest rate~~		~~1.85~~	%
~~Expected life~~		~~4.93~~
~~Expected volatility~~		~~141.73~~	%
~~Dividend yield~~		-

	Nine Months Ended
	September 30, 2019			September 30, 2018
	(unaudited)
Risk-free interest rate		2.51	%		2.65	%
Expected life		6.0 years			6.0 years
Expected volatility		127.81	%		126.93	%
Dividend yield		-			-

The Company recognized approximately $0.3 million and ~~$0.02~~$0.4 million of stock-based compensation expense during the ~~three month~~three-month periods ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, and approximately ~~$0.5~~$1.2 million and ~~$0.1~~$1.6 million ~~during~~for the ~~nine month~~nine-month periods ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively.

In 2017, the Company inadvertently granted 184,647 share options to six employees in excess of the number available for grant under the Amended and Restated Plan. These grants were cancelled and replaced with the new awards that were contingent upon stockholder approval which was received in September 2017. The replacement option grants were made on May 10, 2017, with a strike price of $2.46 and will vest in equal monthly installments over one year subject generally to the continued service of the grantees.

In September 2017, subsequent to approval by shareholders, the Company granted 945,000 stock options to members of senior management. These options have an exercise price of a $1.45 and vest in equal monthly installments over one year. Also in September 2017, the Company granted 43,000 stock options to members of the Board of Directors with an exercise price of $1.48.

9.11.

INCOME TAXES

Generally, accounting standards require companies to provide for income taxes each quarter based on their estimate of the effective tax rate for the full year. The authoritative guidance for accounting for income taxes allows use of the discrete method when it provides a better estimate of income tax expense. Due to the Company’s valuation allowance position, it is the Company’s position that the discrete method provides a more accurate estimate of income tax expense and therefore income tax expense for the current quarter has been presented using the discrete method. As the year progresses, the Company refines its estimate based on the facts and circumstances by each tax jurisdiction. The following table summarizes ~~the~~ income tax ~~(benefit) provision~~expense on ~~the loss~~(loss) income from continuing operations and the effective tax rate for the three- and nine-month periods ended September 30, ~~2017~~2019 and ~~2016:~~2018:

~~INTERPACE DIAGNOSTICS GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(Tabular information in thousands, except per share amounts)~~

~~(unaudited)~~

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
(Benefit) provision for income tax $ (42 ) $ 173 $ (340 ) $ (54 )
Effective income tax rate 1.2 % 2.5 % 4.2 % 0.4 %

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
	(unaudited)						(unaudited)
Provision for income tax	$	9		$	7		$	19		$	21
Effective income tax rate		0.1	%		0.2	%		0.1	%		0.3	%

Income tax ~~(benefit) provision~~expense for the three- and nine-month periods ended September 30, ~~2017~~2019 and ~~2016~~2018 was primarily due to ~~an allocation of tax expense between continuing~~minimum state and ~~discontinued operations.~~local taxes.

~~10.~~12.

SEGMENT INFORMATION

~~Since December 22, 2015,~~We view our operations and manage our business in one operating segment, which is the ~~Company reports its operations as one segment, molecular diagnostics.~~business of developing and selling diagnostic tests and biopharma services. The Company’s reporting segment structure is currently reflective of the way both the Company’s management ~~views~~and chief operating decision maker view the business, ~~makes~~make operating decisions and ~~assesses~~assess performance. This structure allows investors to better understand Company performance, better assess prospects for future cash flows, and make more informed decisions about the Company.

The Company’s molecular diagnostics business focuses on developing and commercializing molecular diagnostic tests, leveraging the latest technology and personalized medicine for better patient diagnosis and management. Through the Company’s molecular diagnostics business, the Company aims to provide physicians and patients with diagnostic options for detecting genetic and other molecular alterations that are associated with gastrointestinal, endocrine and lung cancers, which are principally focused on early detection of patients at high risk of cancer. Customers in the Company’s molecular diagnostics segment consist primarily of physicians, hospitals and clinics. The service offerings throughout the segment have similar long-term average gross margins, contract terms, types of customers and regulatory environments. They are promoted through one centrally managed marketing group and the chief operating decision maker views their results on a combined basis.

~~11.~~

~~DISCONTINUED OPERATIONS~~

The table below presents the significant components of CSO, Group DCA's, Pharmakon's and TVG’s results included within Income (Loss) from Discontinued Operations, Net of Tax in the condensed consolidated statements of comprehensive loss for the three- and nine-months ended September 30, 2017 and 2016.

INTERPACE BIOSICENCES, INC (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(continued)~~

(Tabular information in thousands, except per share amounts)

~~(unaudited)~~

Three Months Ending September 30, Nine Months Ending September 30,
2017 2016 2017 2016
Revenue, net $ - $ - $ - $ 1,644

Income (loss) from discontinued operations 167 (414 ) 1,081 (1,006 )
Gain on sale of assets - - - 1,326
Income (loss) from discontinued operations, before tax 167 (414 ) 1,081 320
Income tax expense (benefit) 96 (117 ) 509 219
Income (loss) from discontinued operations, net of tax $ 71 $ (297 ) $ 572 $ 101

13.	DISCONTINUED OPERATIONS

The ~~assets and~~components of liabilities classified as discontinued operations relate to Commercial Services and consist of the ~~CSO, Group DCA,~~following as of September 30, 2019 and ~~TVG businesses and their composition are in the accompanying balance sheets as follows:~~December 31, 2018:

	September 30, 2017						December 31, 2016						September 30, 2019		December 31, 2018
	CSO		DCA/TVG		Total		CSO		DCA/TVG		Total		(unaudited)
Other	$	-	$	-	$	-	$	-	$	14	$	14
Current assets from discontinued operations		-		-		-		-		14		14
Total assets	$	-	$	-	$	-	$	-	$	14	$	14

Accounts payable	$	304	$	-	$	304	$	890	$	-	$	890	$	69	$	192
Accrued salary and bonus		-		-		-		1,272		-		1,272
Other		979		-		979		1,966		-		1,966		697		726
Current liabilities from discontinued operations		1,283		-		1,283		4,128		-		4,128		766		918
Total liabilities	$	1,283	$	-	$	1,283	$	4,128	$	-	$	4,128	$	766	$	918

~~12.~~14.

~~LONG-TERM DEBT~~LINE OF CREDIT

On ~~October 31, 2014,~~November 13, 2018 the Company, Interpace Diagnostics Corporation, and ~~its subsidiary,~~ Interpace Diagnostics, LLC entered into a Loan and Security Agreement (the “SVB Loan Agreement”) with Silicon Valley Bank (“SVB”), which provides for up to $4.0 million of debt financing consisting of a term loan of up to $850,000 and a revolving line of credit based on its outstanding accounts receivable (the “Revolving Line”) of up to $4.0 million.

The amount that may be borrowed under the Revolving Line is the lower of (i) $4.0 million or (ii) 80% of the Company’s eligible accounts receivable (as adjusted by SVB). Revolving Line outstanding amounts incur interest at a rate per annum equal to the Wall Street Journal Prime Rate plus 0.5%. The Company is also required to pay an ~~agreement~~unused Revolving Line facility fee monthly in arrears in an amount equal to ~~acquire RedPath (the “Transaction”). In connection~~0.35% per annum of the average unused but available portion of the Revolving Line. The term loan portion of the SVB Loan Agreement has a maturity date of May 2, 2022, and the Revolving Line has a maturity date three years from the effective date, or November 13, 2021.

As of September 30, 2019, the Company has drawn $3.75 million of the available funds with the ~~Transaction,~~Revolving Line which is the ~~Company entered into a note payable (the “RedPath Note”) requiring eight equal consecutive quarterly installments beginning October 1, 2016.~~

~~The obligations~~maximum allowed and has no remaining availability as $250,000 of the ~~Company under the RedPath Note were guaranteed by the Company and its subsidiaries pursuant~~Line of Credit is used to a Guarantee and Collateral Agreement (the “Subordinated Guarantee”) in favor of the RedPath Equityholder Representative. Pursuant to the Subordinated Guarantee, the Company and its subsidiaries also granted a security interest in substantially all of their assets, including intellectual property, to secure their obligations to the RedPath Equityholder Representative. Based on the Company’s incremental borrowing rate under its Credit Agreement, the fair value of the RedPath Note at the date of issuance was $7.5 million. During the three months ended September 30, 2017 and 2016, the Company accreted zero and approximately $0.2 million in interest expense, respectively. During the nine months ended September 30, 2017 and 2016, the Company accreted approximately $0.2 million and $0.6 million into interest expense, respectively. At December 31, 2016, the fair value balance of the $9.3 million RedPath Note was approximately $7.9 million and the unamortized discount was $1.4 million. As of June 30, 2017, the Note was fully converted into the Company’s common stock (see below).

~~INTERPACE DIAGNOSTICS GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~(Tabular information in thousands, except per share amounts)~~

~~(unaudited)~~

~~Debt Exchange for RedPath Note~~

On December 23, 2016 we repaid $1.33 million in principal of the RedPath Note resulting in an outstanding balance of $9.34 million. The balance of the RedPath Note was subsequently acquired by the Investor, for $8.87 million on March 22, 2017. Also on that date we and the Investor exchanged the RedPath Note for a senior secured convertible note (the “Exchanged Convertible Note”) in the aggregate principal amount of $5.32 million and a senior secured non-convertible note in the aggregate principal amount of $3.55 million. On April 18, 2017, we and the Investor exchanged the senior secured non-convertible note for $3.55 million of our senior secured convertible note (the “Senior Secured Convertible Note”). Between March 23, 2017 and April 18, 2017, the senior secured convertible notes were converted in full for 3,795,429 shares of our common stock. We no longer have any outstanding secured debt, and any security interests and liens related to our former secured debt have been fully released.

In connection with the conversion of the Exchanged Convertible Note, the Company recorded a loss of $4.3 million. Maxim Group LLC (“Maxim”) acted as agent in connection with the exchanges into the Exchanged Convertible Note and the Senior Secured Convertible Note. Maxim was paid a cash fee of $0.6 million representing 6.5% of the balance of the $8.85 million exchanged RedPath Note. These costs are directly related to the issuance of ~~the Company’s shares, and as~~ a ~~result are recorded against equity.~~standby letter of credit by SVB. See also Note 19, Subsequent Events – Revolving line of credit.

In connection with the Exchanged Convertible Note and the Senior Secured Convertible Note, the Company determined there to be an embedded conversion option feature. Accordingly, the embedded conversion option contained in the Exchange Convertible Note was accounted for as a derivative liability at the date of issuance, and shall be adjusted to fair value through earnings at each reporting date.The fair value of the embedded conversion option derivative was determined using the Black-Scholes Option Pricing Model. On the initial measurement date, the fair value of the embedded conversion option derivative of $208,427 was recorded as a derivative liability and was allocated as a debt discount to the Exchanged Convertible Note. At each conversion date, subsequent to the issuance of the Exchanged Convertible Note, the embedded conversion option derivative liability would be revalued, with any changes to its fair value being recorded to earnings. At March 31, 2017, the Company also revalued the embedded conversion option derivative liability resulting in a loss from the change in fair value, and accordingly. In connection with these revaluations, the Company recorded derivative losses of zero and approximately $0.1 million for the three and nine-month periods ended September 30, 2017. The value of the derivative liability as of September 30, 2017 was zero. The Company incurred $0.5 million of debt issuance costs, for investment banking, legal and placement fee services in connection with the Exchange Agreement. These costs were treated as a debt discount and amortized to interest expense over the term of the Exchanged Notes. In connection with the conversion of the Senior Secured Convertible Note on April 18, 2017, the Company recorded a loss of $2.3 million.

~~INTERPACE DIAGNOSTICS GROUP, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~
~~(Tabular information in thousands, except per share amounts)~~
~~(unaudited)~~

~~13.~~15.

SUPPLEMENTAL CASH FLOW INFORMATION

The following table represents cash flows used in the Company’s discontinued operations for the nine months ended September 30, ~~2017~~2019 and ~~2016:~~2018:

Nine Months Ended
September 30,
2017 2016
Net cash used in operating activities of discontinued operations $ (2,259 ) $ (1,486 )

Net cash used in investing activities of discontinued operations $ - $ -

	Nine Months Ended
	September 30,
	2019			2018
	(unaudited)
Net cash used in operating activities of discontinued operations	$	(30	)	$	(376	)

~~Supplemental Disclosures of Non Cash Financing Activities~~
~~(in thousands)~~

Nine Months Ended
September 30,
2017 2016

Write-off of the RedPath Note $ (8,098 ) $ -
Issuance of the Exchange Notes $ 11,375 $ -
Non-cash equity conversion costs $ (173 ) $ -
Debt issuance costs $ (511 ) $ -
Warrants issued through Termination Agreement (See Note 14,Equity) $ 193 $ -
Shares issued in debt exchange $ 11,643 $ -
Professional fees paid by a third party $ 685 $ -

~~14.~~

~~EQUITY~~

~~Public Equity Offerings~~

~~During the nine months ended September 30, 2017, the Company closed on four separate equity offerings raising gross proceeds of $27.9 million. The details are~~INTERPACE BIOSICENCES, INC (formerly known as ~~follows:~~

	●	On January 6, 2017, the Company completed the Second Registered Direct Offering to sell 630,000 shares of its common stock at a price of $6.81 per share to certain institutional investors, which resulted in gross proceeds to the Company of approximately $4.2 million.

	●	On January 25, 2017, the Company completed the Third Registered Direct Offering to sell 855,000 shares of its common stock and a concurrent private placement of warrants to purchase 855,000 shares of its common stock, or the Warrants, to the same investors participating in the Third Registered Direct Offering. The Warrants and the shares of the Company’s common stock issuable upon the exercise of the Warrants were not registered under the Securities Act and were sold pursuant to the exemption provided in Section 4(a)(2) under the Securities Act and Rule 506(b) of Regulation D promulgated thereunder. The shares of common stock sold in the Third Registered Direct Offering and the Warrants issued in the concurrent Private Placement were issued separately but sold together at a combined purchase price of $4.69 per share of common stock and accompanying Warrant. The Third Registered Direct Offering and the Private Placement together resulted in gross proceeds to the Company of approximately $4 million. The Company also used approximately $1.0 million to satisfy the obligations due to five former senior executives. See Note 6,~~Commitments and Contingencies~~. The fair value of these warrants issued was determined using the Black-Scholes Option Pricing Model and amounted to $1.67 million. The warrants do not include any cash settlement provisions and accordingly are not liability classified. As a result, the Company is not required to revalue the warrants at each reporting date. The following table sets forth the assumptions used in the Black-Scholes Option Pricing Model to estimate the fair value of the warrants upon issuance:

INTERPACE DIAGNOSTICS GROUP, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(continued)~~

(Tabular information in thousands, except per share amounts)

~~(unaudited)~~Supplemental Disclosures of Non Cash Activities

(in thousands)

Market Price $ 4.33
Exercise Price $ 4.69
Risk-free interest rate 1.95 %
Expected volatility 124.02 %
Expected life in years 5.0
Expected dividend yield 0.00 %

	Nine Months Ended
	September 30,
	2019		2018
	(unaudited)
Operating
Adoption of ASC 606	$	-	$	2,500
Prepaid stock grants issued to vendors	$	72	$	257
Adoption of ASC 842 - right of use asset	$	2,449	$	-
Adoption of ASC 842 - operating lease liability	$	2,536	$	-
Investing
Acquisition of property and equipment	$	-	$	12
Excess consideration note	$	6,822	$	-

16.

●

On February 8, 2017, the Company completed a CMPO to sell 1,200,000 shares of our common stock at a price of $3.00 per share. In addition, we granted the underwriters an option to purchase up to an additional 9% of the total number of shares of common stock sold by us in the CMPO, solely for the purpose of covering over-allotments, if any. The underwriters exercised the over-allotment option in full. The CMPO resulted in gross proceeds to us of approximately $3.9 million.EQUITY

On March 22, 2017, the Company entered into a Termination Agreement with the RedPath Equityholder Representative. Under the terms of the Termination Agreement, RedPath Equityholder Representative agreed to terminate all royalty and milestone rights under the contingent consideration agreement. In exchange for terminating the royalty and milestone right of RedPath, the Company agreed to issue to the RedPath Equityholder Representative 5 year warrants to acquire an aggregate of 100,000 shares of the Company’s common stock at a fixed price of $4.69 per share. The fair value of the warrants issued was determined using the Black-Scholes Option Pricing Model and amounted to $0.19 million. The warrants do not include any cash settlement provisions and accordingly are not liability classified. As a result, the Company is not required to revalue the warrants at each reporting date. The following table sets forth the assumptions used in the Black-Scholes Option Pricing Model to estimate the fair value of the warrants upon issuance:

Market Price $ 2.37
Exercise Price $ 4.69
Risk-free interest rate 1.95 %
Expected volatility 125.58 %
Expected life in years 5.5
Expected dividend yield 0.00 %

~~INTERPACE DIAGNOSTICS GROUP, INC.~~Public Offering
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~
~~(Tabular information in thousands, except per share amounts)~~
~~(unaudited)~~

As part of our acquisition of RedPath Integrated Pathology, Inc., we issued the RedPath Note. In December 2016 we repaid $1.33 million in principal of the RedPath Note resulting in an outstanding balance of $9.34 million. The RedPath Note was subsequently acquired by the Investor for $8.87 million on March 22, 2017. Also on that date we and the investor exchanged the RedPath Note for a senior secured convertible note in the aggregate principal amount of $5.32 million and a senior secured non-convertible note in the aggregate principal amount of $3.55 million. On April 18, 2017, we and the Investor exchanged the senior secured non-convertible note for $3.55 million of our senior secured convertible note. Between March 23, 2017 and April 18, 2017, the senior secured convertible notes were converted in full for 3,795,429 shares of our common stock. We no longer have any outstanding secured debt, and any security interests and liens related to our former secured debt have been or will be released and/or terminated upon the completion of applicable filings.

On ~~June 16, 2017,~~January 25, 2019, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with ~~Maxim as the representative of several underwriters (the “Underwriters”~~H.C. Wainwright & Co., LLC (“Wainwright”) ~~named therein~~ with respect to the issuance and sale of an aggregate of ~~(i) 9,900,000~~9,333,334 shares ~~(“Firm~~(the “Firm Shares”) of the Company’s ~~common stock, (ii) Base Warrants~~Common Stock in an underwritten public offering. Pursuant to the Underwriting Agreement, the Company also granted Wainwright an option, exercisable for 30 days, to purchase ~~12,500,000~~an additional 1,400,000 shares of ~~common stock~~Common Stock. The option expired unexercised. The Firm Shares were offered to the public at a price of $0.75 per Share. Wainwright purchased the Firm Shares from the Company pursuant to the Underwriting Agreement at an ~~exercise~~effective price ~~equal~~of $0.6975 per share.

The Company received net proceeds, after deducting underwriter discounts and commissions and other expenses related to ~~$1.25~~the offering, in the amount of approximately $6.0 million. The Company used the net proceeds from the offering for working capital, capital expenditures, business development and research and development expenditures, and the acquisition (in part) of the BioPharma business.

Preferred Stock Issuance

The Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) on July 15, 2019 with Ampersand 2018 Limited Partnership (the “Investor”), a fund managed by Ampersand Capital Partners, providing for the issuance and sale to the Investor of up to an aggregate of $27,000,000 in convertible preferred stock, par value $0.01 per share, of the Company consisting of two series, Series A (“Series A”) and ~~(iii) Pre-Funded Warrants~~Series A-1 (“Series A-1” and together with the Series A, the “Preferred Stock”), both at an issuance price per share of $100,000 (the “Stated Value”), to be funded at up to two different closings (the “Investment”).

The initial closing, which was consummated promptly after the execution of the Securities Purchase Agreement, involved the issuance of 60 newly created shares of Series A at an aggregate purchase ~~2,600,000~~price of $6,000,000, and 80 newly created shares of Series A-1 at an aggregate purchase price of $8,000,000, for net proceeds of approximately $13.1 million.

The Securities Purchase Agreement contemplated a second closing (the “Second Closing”), which would only be effected following the fulfillment to the Investor’s satisfaction of customary conditions, including, among others, the approval by the stockholders of the Company, as required under the rules of the Nasdaq Stock Market LLC (the “Nasdaq Listing Rules”), of the issuance of shares of Common Stock at an exercise price equal to $0.01 per share in the Offering pursuant to the Underwriting Agreement. Each Firm Share and accompanying Base Warrant was sold for a combined effective price of $1.10, and each Pre-Funded Warrant and accompanying Base Warrant was sold for a combined effective price of $1.09. The Underwriters were entitled to receive an underwriting discount equal to 7.5%upon conversion of the ~~offer price~~Preferred Stock (the “Conversion Issuances”) in excess of the aggregate number of Firm Shares and Pre-Funded Warrants sold in the Offering and Over-Allotment and reasonable out-of-pocket expenses of $0.1 million. The Company also granted the Underwriters a 45-day option to purchase up to an additional 1,875,000 Firm Shares and/or 1,875,000 Base Warrants to cover over-allotments, if any (the “Over-Allotment”). Additionally, the Company agreed to issue to the Underwriters warrants (the “Underwriter Warrant”) to purchase a number of Firm Shares of common stock equal to an aggregate of 4% of the total number of shares of Common Stock ~~and Pre-Funded Warrants sold in~~that the ~~Offering.~~

~~The~~ Company offered to each purchaser whose purchase of shares of common stock in this Offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% of our outstanding common stock immediately following the consummation of this Offering, the opportunity to purchase, if the purchaser so chooses, pre-funded warrants, in lieu of shares of common stock that would otherwise result in the purchaser’s beneficial ownership exceeding 4.99% of our outstanding common stock. Subject to limited exceptions, a holder of pre-funded warrants could not have the right to exercise any portion of its pre-funded warrants if the holder, together with its affiliates, would beneficially own in excess of 4.99% (or, at the electionmay issue upon conversion of the ~~holder, 9.99%~~Preferred Stock without breaching its obligations under the Nasdaq Listing Rules (the “Stockholder Approval”). The terms of the ~~number~~Series A-1 provided that each share of ~~shares of common stock outstanding immediately after giving effect to such exercise. Each pre-funded warrant was exercisable for~~Series A-1 would automatically convert into one share of ~~our common stock. The Offering also related~~Series A upon the Company obtaining the Stockholder Approval. SeeNote 19, Subsequent Events, for additional information.

ATM program

On September 20, 2019, the Company entered into an Equity Distribution Agreement (the “Agreement”) with Oppenheimer & Co. Inc., as sales agent (the “Agent”), pursuant to which the Company may, from time to time, issue and sell shares of its Common Stock, at an aggregate offering price of up to $4.8 million (the “Shares”) through the Agent. Under the terms of the Agreement, the Agent may sell the Shares at market prices by any method that is deemed to be an “at the market offering” as defined in Rule 415 under the Securities Act, as amended.

Subject to the terms and conditions of the Agreement, the Agent will use its commercially reasonable efforts to sell the Shares from time to time, based upon the Company’s instructions. The Company has no obligation to sell any of the Shares, and may at any time suspend sales under the Agreement or terminate the Agreement in accordance with its terms. The Company has provided the Agent with customary indemnification rights, and the Agent will be entitled to a fixed commission of 3.0% of the aggregate gross proceeds from the Shares sold. The Agreement contains customary representations and warranties, and the Company is required to deliver customary closing documents and certificates in connection with sales of the Shares. To date, no shares ~~of common stock issuable upon exercise of any pre-funded warrants~~have been sold in the Offering. Each pre-funded warrant was sold together with a common warrant with the same terms as the common warrant described above. The common warrants were exercisable immediately and will expire five years after the date of issuance, or June 22, 2022. The shares of common stock and pre-funded warrants could only be purchased with the accompanying common warrants, but were issued separately, and were immediately separable upon issuance.

under this agreement.

INTERPACE BIOSICENCES, INC (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(continued)~~

(Tabular information in thousands, except per share amounts)
~~(unaudited)~~

~~On June 21, 2017, the Company successfully closed its Offering, See Note 2,~~~~Liquidity~~. A public trading market for the Base Warrants was established on July 5, 2017 on the OTC market under the trading symbol IDGGW. As part of the offering the Underwriters purchased the full over-allotment of 1,875,000 Base Warrants available to them for the specified $.01 per warrant, which are not exercisable for six months after the Offering. The full 2,600,000 of Pre-Funded Warrants were also sold on at the price of $1.09 per warrant. The combined gross proceeds of the Offering totaled $13.7 million with approximately $12.3 million of net funds available to the Company after deducting underwriting discounts and other stock issuance expenses.

In summary, the Company issued 9,900,000 shares of Common Stock as well as Base Warrants, Overallotment Warrants, Pre-Funded Warrants and Underwriters Warrants to purchase 12,500,000, 1,875,000, 2,600,000 and 575,000 shares of the Company’s Common Stock, respectively. The Pre-Funded and Underwriters Warrants are classified as liabilities because in certain circumstances they could require cash settlement. The Base and Overallotment Warrants do not contain such provisions. As a result, the Company is not required to revalue the Base and Overallotment warrants at each reporting date. The Base Warrants are traded on the OTC market, however, trading volume has been insufficient to determine fair value. The fair value of the Base and Overallotment Warrants was determined using the Black-Scholes Option Pricing Model and amounted to $5.3 million and $0.8 million, respectively.

~~The following table sets forth the assumptions used in the Black-Scholes Option Pricing Model to estimate the fair value of the Base Warrants and Overallotment Warrants upon issuance:~~

Market Price $ 0.87
Exercise Price $ 1.25
Risk-free interest rate 1.75 %
Expected volatility 134.21 %
Expected life in years 5.0
Expected dividend yield 0.00 %

As of July 7, 2017, all of the 2,600,000 Pre-Funded Warrants were exercised for $.01 per warrant exercise price and all 2,600,000 common shares related to the warrants have been issued. On July 31, the Underwriters exercised their right to purchase 875,000 Firm Shares for $0.960 million net of $0.072 million in underwriter discounts, or $0.882 million.

On July 5, 2017, the Company entered into an agreement for investor relations services. In consideration for these services, the Company paid $0.2 million in cash and agreed to issue a warrant expiring in August 2020, exercisable into 150,000 shares of Common Stock with an exercise price of $1.25.

~~INTERPACE DIAGNOSTICS GROUP, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~
~~(Tabular information in thousands, except per share amounts)~~
~~(unaudited)~~

The warrant issuance is considered a share-based payment award issued to a nonemployee in exchange for services and falls within the scope of ASC 505-50. The fair value of the warrant was determined to be $0.2 million and was fully expensed during the quarter ended September 30, 2017.

~~The following table sets forth the assumptions used in the Black-Scholes Option Pricing Model to estimate the fair value of the share- based warrant upon issuance:~~

Market Price $ 1.62
Exercise Price $ 1.25
Risk-free interest rate 1.66 %
Expected volatility 172.29 %
Expected life in years 3.1
Expected dividend yield 0.00 %

~~15.~~17.

WARRANTS

In connection with the Wainwright underwritten public offering, the Company issued to Wainwright’s designees warrants (the “Underwriter Warrants”) to purchase up to 654,334 shares of Common Stock (representing 7% of the aggregate number of Firm Shares), at an exercise price of $0.9375 per share (representing 125% of the public offering price). The Underwriter Warrants are exercisable immediately and expire three years from the date of issuance.

~~Warrants outstanding and~~There was no warrant exercise activity for the nine months ended September 30, ~~2017~~2019. Warrants outstanding for the period ended September 30, 2019 are as follows:

Description Classification Exercise Price Expiration Date
Balance
December 31, 2016
Warrants Issued Warrants Exercised Warrants Cancelled/ Expired
Balance
September 30, 2017

Pre-Funded Warrants, issued June 21, 2017 Liability $ 0.01 None - 2,600,000 (2,600,000 ) - -
Underwriters Warrants, issued June 21, 2017 Liability $ 1.32 December 2022 - 575,000 - (40,000 ) 535,000
Private Placement Warrants, issued January 25, 2017 Equity $ 4.69 June 2022 - 855,000 - - 855,000
RedPath Warrants, issued March 22, 2017 Equity $ 4.69 September 2022 - 100,000 - - 100,000
Base & Overallotment Warrants, issued June 21, 2017 Equity $ 1.25 June 2022 - 14,375,000 (747,800 ) - 13,627,200
Vendor Warrants, issued August 6, 2017 Equity $ 1.25 August 2020 - 150,000 - - 150,000

- 18,655,000 (3,347,800 ) (40,000 ) 15,267,200

Description	Classification	Exercise Price		Expiration Date	Warrants Issued		Warrants Exercised			Warrants Cancelled/ Expired			Balance December 31, 2018		Balance September 30, 2019

Private Placement Warrants, issued January 25, 2017	Equity	$	4.69	June 2022		855,000		-			-			855,000		855,000
RedPath Warrants,issued March 22, 2017	Equity	$	4.69	September 2022		100,000		-			-			100,000		100,000
Underwriters Warrants,issued June 21, 2017	Liability	$	1.32	December 2022		575,000		-			(40,000	)		535,000		535,000
Base & Overallotment Warrants,issued June 21, 2017	Equity	$	1.25	June 2022		14,375,000		(5,672,852	)		-			8,702,148		8,702,148
Vendor Warrants,issued August 6, 2017	Equity	$	1.25	August 2020		150,000		-			-			150,000		150,000
Warrants issued October 12, 2017	Equity	$	1.80	April 2022		3,200,000		-			-			3,200,000		3,200,000
Underwriters Warrants,issued January 25, 2019	Equity	$	0.9375	January 2022		654,334		-			-			-		654,334

						19,909,334		(5,672,852	)		(40,000	)		13,542,148		14,196,482

~~16.~~18.

RECENT ACCOUNTING PRONOUNCEMENTS

In March 2016, the Financial Accounting Standards Board (”FASB”) issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which is intended to simplify the accounting and reporting for employee share-based payment transactions. The pronouncement is effective for interim and annual periods beginning after December 31, 2016 with early adoption permitted. The adoption of the guidance in ASU No. 2016-09 in the first quarter of 2017 did not have a material impact on the Company’s consolidated financial statements.

~~INTERPACE DIAGNOSTICS GROUP, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~
~~(Tabular information in thousands, except per share amounts)~~
~~(unaudited)~~Recently adopted standards

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which ~~when~~is effective ~~will require organizations~~for public companies for annual reporting periods beginning after December 15, 2018, including interim periods within those fiscal years. Topic 842 establishes a right-of-use model that requires a lessee to record a right-of-use asset and a lease ~~assets to recognize assets and liabilities for the rights and obligations created by the leases~~liability, measured on a discounted basis, on the balance ~~sheet. A lessee will be required to recognize assets and liabilities~~sheet for all leases with terms ~~that exceed twelve~~longer than 12 months. ~~The~~Leases are to be classified as either finance or operating leases, with such classification affecting the pattern or expense recognition in the statement of operations. We adopted this new standard as of January 1, 2019, by using the alternative modified transition method. See Note 3,Significant Accounting Policies, for more details.

INTERPACE BIOSICENCES, INC (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular information in thousands, except per share amounts)

Standards not yet effective

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350):Simplifying the Accounting for Goodwill Impairment, which removes the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment. A goodwill impairment will ~~also require disclosures to help investors and financial statement users better understand~~now be the amount ~~timing and uncertainty~~by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of ~~cash flows arising from leases. The disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. The guidance~~goodwill. ASU 2017-04 is effective for annual periods beginning after December 15, ~~2018,~~2019, and interim periods within those annual periods. Early adoption is ~~permitted. The Company~~permitted and applied prospectively. Management is ~~currently~~ evaluating ~~the impact of this standard on its consolidated financial position and results of operations.~~

~~In May 2014, the FASB issued~~ ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” The standard, including subsequently issued amendments, will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The key focus of the new standard is that an entity should recognize revenue2017-04 to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this key focus, there is a five-step approach outlined in the standard. Entities are permitted to apply the new standard under the full retrospective method, subject to certain practical expedients, or the modified retrospective method that requires the application of the guidance only to contracts that are uncompleted on the date of initial application. The Company will adopt the new revenue standard and subsequently issued amendments as of January 1, 2018 using the modified retrospective method.

The Company has formed an implementation team, which includes internal accounting resources and a third party consulting firm, to oversee the adoption of the new standard. The implementation team is performing a detailed review of the Company’s contracts and revenue streams to identify potential differences in accounting as a result of the new standard. The Company continues to assessdetermine the impact on ~~its existing revenue accounting policies, newly required~~the consolidated financial statement disclosures, and is executing on the project plan. The Company has not yet determined the impact from the adoption of the new standard on either its financial position or results of operations.statements.

~~17.~~19.

~~OTHER~~ SUBSEQUENT EVENTS

Additional financing received

Stockholder Approval was obtained on October 10, 2019 for the Securities Purchase Agreement (discussed in~~Warrant Exercise Agreement~~Note 16, Equity) and each share of Series A-1 issued to the Investor at the initial closing automatically converted into one share of Series A on that day (the “Conversion”).

On October 16, 2019, the Company and the Investor consummated the Second Closing. At the Second Closing, the Company issued to the Investor 130 newly created shares of Series A at an aggregate gross purchase price of $13,000,000. The Company used the proceeds from the Second Closing to make the maturity date payment, subject to certain holdbacks, with respect to the promissory note issued by a subsidiary of the Company to Cancer Genetics, Inc., and expects to use the remaining proceeds for general corporate purposes, including the integration of the Biopharma services business. The Company issued the aforementioned note in connection with the acquisition of its BioPharma services business.

The Series A was offered and sold pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Rule 506 of Regulation D promulgated thereunder. The shares to be issued upon conversion of the Series A have not been registered under the Securities Act and may not be offered or sold in the United States in the absence of an effective registration statement or exemption from the registration requirements.

INTERPACE BIOSICENCES, INC (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular information in thousands, except per share amounts)

Revolving line of credit

Using the proceeds received from the Second Closing described above, the Company paid off the line of credit balance of $3.75 million that was outstanding as of September 30, 2019 in October 2019.

Excess consideration note

As part of the purchase of the BioPharma business from CGI and the consideration given for the purchased assets, $7,692,300 was in the form of a subordinated seller note (the “Excess Consideration Note”), issued by a subsidiary of the Company to CGI. The payment of the note due in October 2019 was subject to certain adjustments to the purchase price as described inNote 2, Acquisition.

In October 2019, the excess consideration note balance was paid to CGI amounting to $6,024,489 million which included the following adjustments: an indemnification holdback of $735,000 (less paid indemnity claims) due to be released to CGI in January 2020, less the remaining accounts receivable holdback of $152,858 also due to be released by January 2020, less the final post-closing net-worth adjustment of $775,000, less repayment of certain advances made by the Company on behalf of the BioPharma business to CGI regarding certain pre-closing liabilities totaling $317,628, plus $289,000 of unbilled accounts receivable as of July 15, 2019 that were not included in the original financial schedules, plus unpaid and accrued interest under the excess consideration note of $23,674.

The indemnification and accounts receivable holdbacks were deposited into separate escrow accounts until released or settled which is due by December 31, 2019.

Nasdaq notification

On October ~~12, 2017,~~15, 2019, the Company ~~entered into warrant exercise agreements (each~~received notice from Nasdaq indicating that, while the Company has not regained compliance with the minimum bid price requirement, the staff of Nasdaq (the “Staff”) has determined that the Company is eligible for an additional 180-day period, or until April 13, 2020, to regain compliance. The Staff’s determination was based on (i) the Company meeting the continued listing requirement for market value of its publicly held shares and all other applicable initial listing standards for the Nasdaq Capital Market, with the exception of the bid price requirement, and (ii) the Company providing written notice to Nasdaq of its intent to cure the deficiency during this second compliance period by effecting a ~~“Warrant Exercise Agreement”) with certain holders (collectively,~~reverse stock split, if necessary. If at any time during this second, 180-day period the ~~“Warrant Holders” and each, a “Warrant Holder”)~~closing bid price of the Company’s ~~warrants (the “Warrants”) issued in June 2017. Pursuant~~Common Stock is at least $1.00 per share for at least a minimum of 10 consecutive business days, the Staff will provide written confirmation of compliance. If compliance cannot be demonstrated by April 13, 2020, Nasdaq will provide written notification to the ~~Warrant Exercise Agreement,~~Company that its Common Stock will be subject to delisting. At that time, the ~~Warrant Holders agreed~~Company may appeal the delisting determination to ~~exercise Warrants~~a Nasdaq hearings panel. There can be no assurance that the Company will regain compliance with the Rule or maintain compliance with other Nasdaq continued listing requirements.

Reverse Stock Split

On November 14, 2019, the Company filed a definitive proxy statement on Schedule 14A for a special meeting of stockholders to be held on December 13, 2019 to approve an ~~aggregate~~amendment to the Company’s certificate of ~~4,000,000 shares~~incorporation to effect a reverse stock split of common stock, at a ratio in the ~~Warrant exercise price~~range from one-for-five to one-for-fifteen, with such specific ratio to be determined by the Company’s board of ~~$1.25 per share.~~directors following the special meeting. The ~~Warrants were issued pursuant~~Company is not obligated to ~~that certain warrant agency agreement, dated as of June 21, 2017 (the “Warrant Agency Agreement”), by and between~~effect the Company and American Stock Transfer & Trust Company, as warrant agent (the “Warrant Agent”). In connection with the exercises, the Company agreed to issue additional warrants to the Warrant Holders for the number of shares of Common Stock that is equal to eighty percent (or 3,200,000 warrants) of the number of shares exercised by such Warrant Holder (the “Additional Warrant Shares”), at an exercise price of $1.80 per share.reverse stock split.

INTERPACE BIOSCIENCES, INC. (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q ~~(“Form 10-Q”)~~(Form 10-Q) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of ~~1934.~~1934, as amended (the “Exchange Act”). Statements that are not historical facts, including statements about our plans, objectives, beliefs and expectations, are forward-looking statements. Forward-looking statements include statements preceded by, followed by or that include the words “believes,” “expects,” “anticipates,” “plans,” “estimates,” “intends,” “projects,” “should,” “could,” “may,” “will” or similar words and expressions. These forward-looking statements are contained throughout this Form 10-Q.

Forward-looking statements are only predictions and are not guarantees of future performance. These statements are based on current expectations and assumptions involving judgments about, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. These predictions are also affected by known and unknown risks, uncertainties and other factors that may cause our actual results to be materially different from those expressed or implied by any forward-looking statement. Many of these factors are beyond our ability to control or predict. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors. Such factors include, but are not limited to, the following:

	●	our ~~ability to profitably grow~~stock price is volatile and could be further affected by events not within our ~~business, including~~control, and an investment in our ~~ability to finance our business on acceptable terms and successfully compete~~common stock could suffer a decline in ~~the market;~~value;

	●	~~our ability to obtain broad adoption~~dilution as a result of ~~and reimbursement for our molecular diagnostic tests in a changing reimbursement environment;~~future equity issuances;

	●	stockholders must rely on appreciation of the value of our common stock for any return on their investment because we do not intend to declare cash dividends on our shares of common stock in the foreseeable future;

	●	the limited revenue generated from our business thus far and our ability to commercially leverage our bioinformatics data and develop our pipeline products;

	●	whether we are able to successfully utilize our commercial and operating experience to sell our molecular diagnostic tests;

	●	our ~~limited operating history~~dependence on a concentrated selection of third-party payers including the lack of timeliness of their payments, payer volatility and subjective decision making as well as the impact of reporting subsequent accounts receivable adjustments related to our diagnostics business as a ~~molecular diagnostics company;~~reduction in current periods revenues;

	●	our ~~dependence on~~ability to obtain broad adoption of and ability to grow or continue to secure sufficient levels of reimbursement in a ~~concentrated selection~~changing reimbursement environment, including obtaining clinical data to support sufficient levels of ~~payers for our molecular diagnostic tests;~~reimbursement;

	●	the demand for our molecular diagnostic tests from physicians and patients;

	●	our products continuing to perform as expected;

	●	our obligations to make royalty and milestone payments to our licensors;

	●	our inability to finance our business on acceptable terms in the future may limit our ability to develop and commercialize new molecular diagnostic solutions and technologies and grow our business;

INTERPACE BIOSCIENCES, INC. (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

	●	our ability to comply with financial covenants under our current line of credit facility and comply with our debt obligations;

	●	our limited operating history;

	●	our ability to attract and retain qualified commercial representatives and other key employees and management personnel;

	●	our relationships with leading thought leaders and biopharmaceutical companies;

	●	our ability to continue to meet the high compliance standards necessary to do business with biopharmaceutical companies

	●	our ability to expand our international footprint with consistency of service to be able to meet our biopharmaceutical customers’ demands

	●	demonstration of clinical relevance and value in utility studies;

	●	our ability to continue to expand our sales and marketing forces;

	●	our reliance on our ~~internal~~commercial sales forces for continued business expansion;

	●	fluctuating quarterly operating results;

	●	our dependence on third parties for the supply of some of the materials used in our ~~molecular diagnostic~~ tests;

	●	our ability to scale our operations, testing capacity and processing technology;

	●	our ability to ~~continue to secure sufficient levels~~support demand for our molecular diagnostic tests and any of ~~reimbursement to continue to progress~~ our ~~business;~~future tests or solutions;

	●	our ability to compete successfully with physicians and members of the medical community who use traditional methods to diagnose gastrointestinal and endocrine cancers, competitors offering broader product lines outside of the molecular diagnostic testing market and having greater brand recognition than we do, and companies with greater financial resources;

	●	our ability to obtain sufficient data and samples to cost effectively and timely perform sufficient clinical trials in order to support our current and future products;

~~INTERPACE DIAGNOSTICS GROUP, INC.~~

	●	~~product liability claims against us;~~

	●	~~patent infringement claims against us;~~our ability to license rights to use technologies in order to commercialize new products;

	●	our involvement in current and future litigation against ~~us;~~us or our ability to collect on judgements found in our favor;

	●	our ability to continuously develop our technology and to work to develop new solutions to keep pace with evolving standards of care;

	●	our ability to enter into additional clinical study collaborations with highly regarded institutions;

INTERPACE BIOSCIENCES, INC. (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

	●	the effect of seasonal results and adverse weather conditions, such as hurricanes and floods, on our business;

	●	our ability to increase or maintain sales of the tests and services in our Biopharma business or to successfully develop and commercialize other proprietary tests and services in our Biopharma business;

	●	whether pharmaceutical, biotech companies and clinical research organizations decide to use our Biopharma business tests and services;

	●	our ability to perform our Biopharma business services in accordance with contractual and regulatory requirements, and ethical considerations;

	●	the effect current and future laws, licensing requirements and regulation have on our business including the changing U.S. Food and Drug Administration ~~or the FDA,~~ environment as it relates to molecular ~~diagnostics;~~diagnostics and biopharma services;

	●	our ability to obtain and maintain sufficient laboratory space to meet our processing needs as well as our ability to pass regulatory inspections and continue to be Clinical Laboratory Improvement Amendments (“CLIA”) and the College of American Pathologists (“CAP”) certified or accredited;

	●	legislative reform of the U.S. healthcare system, including the effect of pricing provisions of the Protecting Access to Medicare Act of 2014 on our Advanced Diagnostic Laboratory Tests, adjustments or reductions in reimbursement rates of our molecular diagnostic tests by the Centers for Medicare and Medicaid Services and changes or reductions in reimbursement rates or coverage of our tests by third party payers;

	●	compliance with numerous statutes and regulations pertaining to our business;

	●	the effect of The Eliminating Kickbacks in Recovery Act of 2018 as it potentially impacts our ability to incentivize our sales personnel appropriately;

	●	the effect of potential adverse findings resulting from regulatory audits of our billing and payment practices and the impact such results could have on our business;

	●	business, regulatory, political, operational, financial, and economic risks associated with doing business outside of the United States, including our ability to comply with international laws and regulations;

	●	compliance with the U.S. Foreign Corrupt Practices Act and anti-bribery laws;

	●	our ~~exposure~~ability to ~~environmental liabilities as a result~~use our net operating loss carryforwards;

	●	tax reform legislation;

	●	changes in financial accounting standards or practices;

	●	our use of ~~our business;~~hazardous materials;

	●	the susceptibility of our information systems to security breaches, loss of data and other disruptions;

	●	~~our ability to enter into effective electronic data interchange arrangements with our customers;~~product liability claims against us;

	●	our billing practices and our ability to collect on claims for the sale of our ~~molecular diagnostic~~ tests;

	●	our ~~ability~~dependence on third-party medical billing providers to ~~attract and retain qualified sales representatives and~~operate effectively without delays, data loss, or other ~~key employees and management personnel;~~disruptions;

	●	~~competition in the segment of the molecular diagnostics industry in which we operate or expect to operate;~~cost increases resulting from enacted healthcare reform legislation;

	●	changes in governmental regulations mandating price controls and limitations on patient access to our products;

INTERPACE BIOSCIENCES, INC. (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

	●	our ability to ~~obtain additional funds in order to implement~~increase revenue and manage the size of our ~~business models and strategies;~~operations;

	●	~~the results of any future impairment testing for other intangible assets;~~

	●	our ability to successfully identify, complete and integrate recent and any future acquisitions of companies, assets and/or products that we believe meet our strategic goals and needs, and the effects of any such ~~items~~acquisitions on our revenues, profitability and ongoing business;

	●	the impact of contingent liabilities on our financial condition;

	●	our ability, and the ability of our third-party billing providers, to effectively maintain, upgrade and integrate the information systems on which we depend, including our partially customized Laboratory Information Management System;

	●	the results of any future impairment testing for intangible assets as required under U.S. generally accepted accounting principles (“GAAP”);

	●	our compliance with our license agreements and our ability to protect and defend our intellectual property rights;

	●	~~our ability to maintain our listing with The Nasdaq Capital Market;~~changes in U.S. patent law;

	●	~~the effect of material weaknesses in our disclosure controls and procedures and internal controls;~~patent infringement claims against us;

	●	our ability to maintain our listing with Nasdaq;

	●	compliance with public company reporting requirements;

	●	our ability to maintain and implement effective internal controls over financial reporting;

	●	the ~~effect~~impact of future issuances of debt, common and preferred shares on stockholders’ interest and stock price;

	●	we have issued convertible preferred stock and may issue additional convertible preferred stock in the future, and the terms of our preferred stock may dilute our common stock;

	●	our ability to report financial results on a timely and accurate basis;

	●	the impact of anti-takeover defenses on an acquisition or stock price;

	●	fluctuations in our quarterly and annual revenues and earnings;

	●	securities class action litigation;

	●	cost of settlement or damage awards against our directors and officers;

	●	preferential rights of the holders of our Preferred Stock that may be adverse ~~weather conditions such as hurricanes on~~to holders of our common stock;

	●	our ability to successfully execute under the transition services agreement with Cancer Genetics, Inc. (“CGI”);

INTERPACE BIOSCIENCES, INC. (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

	●	our ability to realize all of the anticipated benefits of the acquisition of the Biopharma business or those benefits taking longer to realize than expected;

	●	our ability to retain customers and critical vendors to our Biopharma business;

	●	~~failure~~our ability to integrate the Biopharma business acquired;

	●	our ability to integrate accounting systems and disclosure controls and procedures of ~~third-party service providers~~the Biopharma business;

	●	our ability to ~~perform their obligations~~expand and grow our newly acquired Biopharma business;

	●	our ability to ~~us;~~effectively separate the Biopharma business from CGI’s former clinical business;

	●	our ability to continue to engage necessary personnel to operate the Biopharma business;

	●	our ability to manage costs of our combined diagnostic business and the Biopharma business and provide sufficient capital to continue to grow and expand the base of business;

	●	the limited financial information on which to evaluate the financial prospects for the combined company; and

	●	~~the volatility of~~ our ~~stock price and fluctuations in~~ability to expand our ~~quarterly and annual revenues and earnings.~~working capital borrowing base to provide sufficient working capital financing during growth periods.

Please see Part I – Item 1A – “Risk Factors” in our ~~Annual Report on~~ Form 10-K, ~~for the year ended December 31, 2016, as amended,~~ as well as other documents we file with the SEC from time-to-time, including our Current Report on Form 8-K/A filed on September 20, 2019, for other important factors that could cause our actual results to differ materially from our current expectations as expressed in the forward-looking statements discussed in this Form 10-Q. Because of these and other risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. In addition, these statements speak only as of the date of the report in which they are set forth and, except as may be required by law, we undertake no obligation to revise or update publicly any forward-looking statements for any reason.

~~INTERPACE DIAGNOSTICS GROUP, INC.~~

OVERVIEW

The Company is a leader in enabling personalized medicine, offering specialized services along the therapeutic value chain from early diagnosis and prognostic planning to targeted therapeutic applications. The Company’s primary source of revenue is generated from the performance of its proprietary molecular diagnostic tests for its clinical customers (Interpace Diagnostics) and its DNA-based pharma testing services in support of clinical trials for its BioPharma customers (Interpace Pharma Solutions). We are leveraging our licensed and accredited laboratories in Pittsburgh, PA, Rutherford, NJ, Raleigh, North Carolina and New Haven, CT all CLIA and CAP Certified to develop and commercialize our assays and products. and lung cancers. Our customers consist primarily of physicians, hospitals, clinics, biotechnology and pharmaceutical companies as well as major Contract Research Organizations and specialty contractors.

Diagnostics (Interpace Diagnostics)

Our Diagnostics business is a fully integrated commercial ~~company~~and bioinformatics business unit that provides clinically useful molecular diagnostic tests, bioinformatics and pathology ~~services. We develop and commercialize molecular diagnostic tests and related first line assays principally focused on early detection of patients at high~~services for evaluating risk of cancer ~~and leverage~~by leveraging the latest technology ~~and~~in personalized medicine for improved patient diagnosis and management. The genomic tests that we develop and commercialize as well as related first line assays are principally focused on early detection of patients with indeterminate biopsies and at high risk of cancer. Our tests and services provide mutational analysis of genomic material contained in these “suspicious” cysts, nodules and lesions with the goal of better informing treatment decisions in patients at risk of thyroid, pancreatic, and other cancers and in many cases avoiding unnecessary surgical treatment in patients at low risk.

INTERPACE BIOSCIENCES, INC. (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

We ~~currently~~ have ~~three~~four commercialized molecular diagnostic ~~assays~~tests in the marketplace for which we are ~~reimbursed by Medicare and multiple private payers:~~receiving reimbursement: PancraGEN®, which is a pancreatic cyst and pancreaticobiliary solid lesion ~~molecular~~genomic test that ~~can aid in pancreatic cyst diagnosis and pancreatic cancer~~helps physicians better assess risk ~~assessment utilizing~~of pancreaticobiliary cancers using our proprietary ~~PathFinder~~PathFinderTG^® platform; ~~ThyGenX®~~ThyGeNEXT^®, which ~~assesses~~is an expanded oncogenic mutation panel that helps identify potentially malignant thyroid nodules, ~~for risk of malignancy; and ThyraMIR®~~ThyraMIR^®, which assesses thyroid nodules for risk of malignancy utilizing a proprietary microRNA gene expression assay. We ThyGeNEXT^®and ThyraMIR^®are typically used in conjunction; and RespriDx^®, which is a genomic test that helps physicians differentiate metastatic or recurrent lung cancer from the presence of newly formed primary lung cancer and which also inutilizes our PathFinderTG^®platform to compare the ~~process~~genomic fingerprint of ~~“soft launching” while we gather additional market data, BarreGEN®~~two or more sites of lung cancer.

BarreGEN^®, anis our esophageal cancer risk classifier for Barrett’s Esophagus that also utilizes our PathFinder TG^®platform and ~~RespriDX™~~is currently in a Clinical Evaluation Program or (“CEP”) whereby we gather information from physicians using BarreGEN^®to assist us in positioning our product for assessing metastatic versus primary lung cancer which was launched in September 2017. RespriDX™ differentiates the local recurrence of cancer versus new primary cancer formation. It compares the mutational fingerprint of two or more sites of lung cancer to determine whether the neoplastic deposits are representative of a recurrence of cancer or a new primary (independent) cancer.full launch, partnering and potentially supporting improved reimbursement with payers.

We currently process diagnostic samples in our laboratory facilities in Pittsburgh, Pennsylvania and New Haven, Connecticut. The New Haven facility is also a center for new product development.Our ~~mission is~~laboratories are licensed pursuant to ~~provide personalized medicine through~~federal law under CLIA and are accredited by CAP and New York State. In August 2018, we acquired a majority of the Philadelphia laboratory equipment of Rosetta Genomics Ltd., a molecular diagnostics company, in order to further support our CLIA and ~~innovation to advance patient care based on rigorous science. We are leveraging~~CAP certified lab expansion in our ~~Clinical Laboratory Improvement Amendments (“CLIA”)~~New Haven, Connecticut and College of American Pathologists (“CAP”), accredited laboratories to develop and commercialize our assays and products. We aim to provide physicians and patients with diagnostic options for detecting genetic and other molecular mutations that are associated with gastrointestinal and endocrine cancer.Pittsburgh, Pennsylvania laboratories. Our customers consist primarily of physicians, hospitals, and clinics.

~~The global molecular diagnostics~~BioPharma (Interpace Pharma Solutions)

Our recently acquired BioPharma business (now called Interpace Pharma Solutions, Inc.) provides pharmacogenomics testing, genotyping, biorepository and other customized services to the pharmaceutical and biotechnology industries and advances personalized medicine by partnering with pharmaceutical, academic, and technology leaders to effectively integrate pharmacogenomics into their drug development and clinical trial programs with the goals of delivering safer, more effective drugs to market ~~is estimated~~more quickly, and improving patient care. Our laboratories in Raleigh, NC and Rutherford, NJ are licensed pursuant to ~~be $6.45 billion~~federal law under CLIA and ~~is a segment within the approximately $60 billion in vitro diagnostics market. We believe that the molecular diagnostics market offers significant growth~~are accredited by CAP. Our customers consist mostly of biotechnology and strong patient value given the substantial opportunity it affords to lower healthcare costs by helping to reduce unnecessary surgeries and ensuring the appropriate frequency of monitoring. We are keenly focused on growing our test volumes, securing additional coverage and reimbursement, maintaining our current reimbursement and supporting revenue growth for our three commercialized innovative tests, introducing related first line product and service extensions,pharmaceutical companies as well as ~~expanding our business by developing~~major Contract Research Organizations and ~~promoting synergistic products, like BarreGEN®, and RespriDX® in our market.~~specialty contractors.

Additional Reimbursement Coverage During ~~2017~~2019

Reimbursement progress is key for any molecular diagnostic company. We ~~were~~have been successful to date in expanding the reimbursement of our products in ~~2016 and that has continued into 2017.~~2019. Specifically, the most significant progress we have made regarding payers ~~so far~~to date in ~~2017~~2019 is as follows:

~~INTERPACE DIAGNOSTICS GROUP, INC.~~

	●	In ~~April 2017,~~January 2019, we announced that ~~UnitedHealthcare,~~we had entered into an Agreement with the ~~largest health plan~~University of Maryland Medical System (“UMMS”) to provide physicians’ access to ThyGeNEXT^®, ThyraMIR^®, and PancraGEN^®across the UMMS network, which includes 4,000 affiliated physicians who provide primary and specialty care in ~~the United States, has agreed to cover our ThyraMIR® test used in assessing indeterminate thyroid nodule fine needle aspirate (“FNA”) biopsies. The coverage is now in effect~~more than 150 locations and ~~is subject to members’ specific benefit plan design.~~
		at 14 hospitals.
	●	In ~~June 2017,~~April 2019, we announced that Medica, one of the largest health plans in the Midwest, extended coverage of both ThyGeNEXT^®and ThyraMIR^® to its 1.3 million covered lives. Physicians across Medica’s entire network will now be able to utilize Interpace’s thyroid products.
	●	In April 2019, we announced that we signed a new national contract with Aetna for our ThyGenX ® and ThyraMIR® molecular tests for indeterminate thyroid nodules. The agreement covers many of Aetna’s products, including commercial and Medicare Advantage plans. The agreement is our first national provider contract with a national health plan and means that we will now be part of Aetna’s laboratory network for these services. The agreement went into effect August 15, 2017.

	●	~~In July 2017, we announced that Cigna, one of the largest national health plans in the United States, has agreed~~had received approval to ~~cover Interpace’s ThyGenX~~launch ThyraMIR^® test for Cigna’s 15 million members nationwide, with coverage effective immediately. Cigna’s coverage when combined with Aetna, UnitedHealthcare, Medicare and other payers brings the total number of covered lives for ThyGenX^® ~~to approximately 275 million patients nationwide.~~

	●	~~In October 2017, we announced that Medicare reimbursement for our ThyGenX~~^® ~~molecular test for indeterminate~~diagnostic testing on formalin-fixed, paraffin-embedded (“FFPE”) tissue samples from thyroid nodules ~~will increase by 40% starting January 1, 2018. Medicare represents approximately 40%~~from the State of ~~the Company’s volume for the ThyGenX test.~~New York.

~~Recent Equity Financings~~

From January 6, 2017 through September 30, 2017, we completed four public offerings of common stock and a private placement of warrants, which resulted in aggregate gross proceeds to us of approximately $27.9 million. A description of the financings isINTERPACE BIOSCIENCES, INC. (formerly known as ~~follows:~~

	●	On January 6, 2017, we completed a registered direct public offering, or the Second Registered Direct Offering, to sell 630,000 shares of our common stock at a price of $6.81 per share to certain institutional investors. The Second Registered Direct Offering resulted in gross proceeds to us of approximately $4.2 million. We are using the net proceeds from the Second Registered Direct Offering for working capital, repayment of indebtedness and general corporate purposes. In addition, we granted each institutional investor who participated in the Second Registered Direct Offering the right, for a period of 15 months following January 6, 2017, or until April 6, 2018, to participate in any public or private offering by us of equity securities, subject to certain exceptions, up to such investor’s pro rata portion of 50% of the securities being offered.

	●	On January 25, 2017, we completed a registered direct public offering, or the Third Registered Direct Offering, to sell 855,000 shares of our common stock and a concurrent private placement of warrants to purchase 855,000 shares of our common stock, or the Warrants, to the same investors participating in the Third Registered Direct Offering, (the “Private Placement”). The Warrants and the shares of our common stock issuable upon the exercise of the Warrants were not registered under the Securities Act and were sold pursuant to the exemption provided in Section 4(a)(2) under the Securities Act and Rule 506(b) of Regulation D promulgated thereunder. The shares of common stock sold in the Third Registered Direct Offering and the Warrants issued in the concurrent Private Placement were issued separately but sold together at a combined purchase price of $4.69 per share of common stock and accompanying Warrant. The Third Registered Direct Offering and the Private Placement together resulted in gross proceeds to us of approximately $4 million. We are using the net proceeds from the Third Registered Direct Offering for working capital, repayment of indebtedness and general corporate purposes and also used approximately $1.0 million to satisfy the severance obligations due to five former senior executives.

	●	On February 8, 2017, we completed an underwritten, confidentially marketed public offering, or the CMPO, to sell 1,200,000 shares of our common stock at a price of $3.00 per share. In addition, we granted the underwriters an option to purchase up to an additional 9% of the total number of shares of common stock sold by us in the CMPO, solely for the purpose of covering over-allotments, if any. The underwriters exercised the over-allotment option in full. The CMPO resulted in gross proceeds to us of approximately $3.9 million. We are using the proceeds from the CMPO for working capital, repayment of indebtedness and liabilities and for general corporate purposes.

INTERPACE DIAGNOSTICS GROUP, INC.)

●

OnIn June ~~21, 2017, pursuant to~~2019, we announced that our ThyGeNEXT^® and ThyraMIR^® tests are now covered by Independence Blue Cross (“Independence”), providing plan benefits coverage for its S-1 filing of its preliminary prospectus to register shares on May 22, 2017, as amended thereafter, the Company completed a public offering for 9,900,000 shares of common stock together with an equal number of common warrants (the “Base Warrants”), to purchase shares of its common stock (and the shares of common stock that are issuable from time to time upon exercise of the common warrants) for $1.10 per share. Each Base Warrant upon exercise at a price of $1.25 will result in the issuance of one share of common stock to the holder. A public trading marketmembers who meet established medical criteria for the Base Warrants was established on July 5, 2017 on the OTC market under the trading symbol IDGGW. As part of the offering (the “Offering”), which closed on June 21, 2017, the related underwriters purchased the full over-allotment of 1,875,000 Base Warrants available to them for the specified $.01 per warrant. 2,600,000 of Pre-Funded Warrants were also sold at the specified $1.09 per warrant. The combined gross proceeds of the Offering totaled $13.7tests. Independence covers nearly 2.5 million ~~with approximately $12.3 million of net funds available to the Company after deducting underwriting discounts~~members in Philadelphia and other stock issuance expenses. As of July 7, 2017 all of the 2,600,000 Pre-Funded Warrants were exercised for the $.01 per warrant exercise price and all 2,600,000 common shares related to the warrants have been issued. On July 31, the Company and the underwriters closed on the exercise of the underwriters’ over-allotment option to purchase an additional 875,000 shares of common stock at a price of $1.09 per share for gross proceeds of $0.960 million.

~~As of July 7, 2017 all of the 2,600,000 Pre-funded Warrants were exercised for the $.01 per warrant exercise price and all 2,600,000 common shares related to the warrants have been issued.~~

	●	~~During September 2017 the Company received approximately $0.9 million from the exercise of 747,800 Base Warrants.~~Southeastern Pennsylvania.
	●	In July 2019, we announced that we reached an agreement with SelectHealth (a plan associated with Intermountain Healthcare) (“SelectHealth”) to provide our proprietary thyroid cancer assays, ThyGeNEXT^® and ThyraMIR^®, to SelectHealth’s more than 850,000 members in Utah and Idaho.
	●	~~Additionally, On October 12, 2017, the Company”),~~In July 2019, we announced we had entered into ~~warrant exercise agreements (each~~ a ~~“Warrant Exercise Agreement”)~~contract with ~~certain holders (collectively,~~Blue Shield of California, a not-for-profit independent member of the ~~“Warrant Holders”~~Blue Cross Blue Shield Association making ThyGeNEXT^® and ThyraMIR^® tests in-network services for their 4 million lives.
	●	In July 2019, we announced that we contracted with Blue Cross Blue Shield of Michigan, a not-for-profit independent member of the Blue Cross Blue Shield Association, for coverage of our thyroid tests. The contract makes the ThyGeNEXT^®and ThyraMIR^®tests both covered services as well as in-network services for their total of 6 million members.
	●	In September 2019, we announced that we contracted with 3 independent Blue Cross Blue Shield (BCBS) plans totaling nearly 5 million covered lives across Alabama, Arkansas, and Arizona. These members of the BCBS Association are the largest payers in their respective states and each ~~a “Warrant Holder”) of~~affiliate’s customers now have access to both the Company’s warrants (the “Warrants”) issued in June 2017. The Warrants were issued pursuant to that certain warrant agency agreement, dated as of June 21, 2017 (the “Warrant Agency Agreement”), byThyGeNEXT® and ~~between the Company and American Stock Transfer & Trust Company, as warrant agent (the “Warrant Agent”). Pursuant to the Warrant Exercise Agreement, the Warrant Holders agreed to exercise Warrants~~ThyraMIR® tests for assessing indeterminate thyroid biopsies on an aggregate of 4,000,000 shares of common stock, par value $0.01 per share in exchange for additional warrants to the Warrant Holders for the number of shares of Common Stock that is equal to eighty percent of the number of shares exercised by such Warrant Holder (the “Additional Warrant Shares”), at an exercise price of $1.80 per share. The Company received aggregate gross proceeds of $5,000,000 from the exercise of the Warrants, which will be used for general working capital purposes. The Warrants and Exercised Shares were registered pursuant to the Company’s Registration Statement on Form S-1 (File No. 333-218140).

~~Recent Notices of NASDAQ Listing Compliance~~

●

On July 31, 2017, NASDAQ notified the Company that its common stock failed to maintain a minimum bid price of $1.00 over the previous 30 consecutive business days as required by the Listing Rules of The Nasdaq Stock Market. On August 30, 2017 NASDAQ determined that the closing bid price of the Company’s common stock had been at $1.00 per share or greater for the 10 consecutive business days from August 15 to 28, 2017. Accordingly, NASDAQ has notified the Company that it had regained compliance with Listing Rule 5550(a)(2) and this matter is now closed.

~~INTERPACE DIAGNOSTICS GROUP, INC.~~

●

On October 6, 2016, NASDAQ notified the Company that it did not comply with the audit committee requirements for continued listing on The Nasdaq Capital Market set forth in Listing Rule 5605(c)(2) (the “Rule”). The Company was granted time to regain compliance until no later than its next annual meeting, which occurred on September 14, 2017. Based on the information regarding the appointment of Dr. Felice Schnoll-Sussman to the Company’s Board of Directors and audit committee, as detailed in our Form 8-K dated September 13, 2017, NASDAQ has notified the Company that it now complies with the Rule and this matter is now closed.in-network basis.

DESCRIPTION OF REPORTING SEGMENTS

~~We currently operate~~Since December 22, 2015, the Company has reported its operations as one segment, molecular diagnostics and bioinformatics. On July 15, 2019 the Company acquired the BioPharma business of Cancer Genetics, Inc. and still operates under one ~~operating~~ segment which is ~~our molecular~~the business of developing and selling diagnostic ~~business. Until December 22, 2015 prior to the sale~~tests and biopharma services. The Company’s reporting segment structure is currently reflective of the ~~CSO~~way both the Company’s management and chief operating decision maker view the business, ~~we operated under two reporting segments: Commercial Services~~make operating decisions and ~~Interpace Diagnostics. The CSO business is reported as discontinued operations in all periods presented.~~assess performance. Further, this structure allows investors to understand Company performance, assess prospects for the future, evaluate cash flows, and make informed decisions about the Company.

~~Interpace Diagnostics~~Revenue

~~Under current GAAP, we recognize revenue from services rendered when the following four revenue recognition criteria are met: persuasive evidence~~The Company’s primary source of ~~an arrangement exists; services have been rendered; the selling price is fixed or determinable; and collectability is reasonably assured.~~

~~Our~~ revenue is generated ~~using our~~from the performance of its proprietary molecular diagnostic tests for its clinical customers and ~~related services. Our~~its DNA-based testing services in support of clinical trials for its BioPharma customers. The Company’s performance obligation is fulfilled upon ~~the~~ completion, review and release of test ~~results. In conjunction with fulfilling these services, we bill~~results and subsequent billing to the third-party payer, hospital or ~~hospital. We recognize our~~contracting customer.

Clinical (Interpace Diagnostics) Performance Obligations and Revenue Recognition

Under ASC 606, the Company recognizes revenue ~~related to~~for billings less contractual allowances and estimated uncollectable amounts for ~~Medicare, Medicare Advantage, and hospitals~~all third party payer groups on anthe accrual basis based upon a thorough analysis of historical receipts. The net ~~of contractual adjustment, when a contract~~amount derived and used for revenue recognition is ~~in place, a reliable pattern of collectability exists~~referred to as the NRV for the particular test and ~~collectability~~payer group from which reimbursement is ~~reasonably assured. Contractual adjustments represent the difference between the list prices~~received. This derived NRV is evaluated quarterly or as needed and ~~the reimbursement rate set by Medicare and Medicare Advantage, the contractual rate or the amounts agreed~~then applied to ~~with hospitals.~~future periods until recalculated.

~~Until a contract has been negotiated with a commercial insurance carrier or governmental program,~~BioPharma (Interpace Pharma Solutions) Performance Obligations and Revenue Recognitions

With the acquisition of our BioPharma business, which consists of customized solutions for patient stratification and treatment selection through an extensive suite of DNA-based testing services. The services ~~may or may not be covered by these entities existing reimbursement policies. In the absence of an agreement with the patient or other clearly enforceable legal right~~are billed to demand payment, the related revenue is only recognized upon the earlier of payment notification or cash receipt. Accordingly, we recognize revenue from commercial insurance carriers, government programs,pharmaceutical and ~~direct-bill healthcare providers without contracts, when payment is received.~~biotechnology companies.

~~Persuasive evidence~~Performance obligations are satisfied at a point in time as the Company processes samples delivered by the customer. Project level activities, including study setup and project management, are satisfied over the life of ~~an arrangement exists and delivery is deemed to have occurred upon completion, review, and release of~~the contract. Revenues are recognized at a point in time when the test results ~~at which time we will bill~~or other deliverables are reported to the ~~third-party payer or hospital. The assessment~~customer. Project level fee revenue is recognized ratably over the life of the fixed or determinable nature of the fees charged for diagnostic testing performed, and the collectability of those fees, requires significant judgment by our management. Our management believes that these two criteria have been met when there is contracted reimbursement coverage or a predictable pattern of collectability with individual third-party payers or hospitals and accordingly, recognizes revenue upon delivery of the test results. In the absence of contracted reimbursement coverage or a predictable pattern of collectability, we believe that the fee is fixed or determinable and collectability is reasonably assured only upon request of third-party payer notification of payment or when cash is received, and we recognize revenue at that time.

~~INTERPACE DIAGNOSTICS GROUP, INC.~~

contract.

Deferred revenue from BioPharma contracts is recorded at fair value and represents payments received in advance of services rendered.

Cost of Revenue

Cost of Revenue for services consists primarily of the costs associated with operating our laboratories and other costs directly related to our tests. Personnel costs, which constitute the largest portion of cost of services, include all labor related costs, such as salaries, bonuses, fringe benefits and payroll taxes for laboratory personnel. Other direct costs include, but are not limited to, laboratory supplies, certain consulting expenses, and facility expenses.

Other Matters

The acquisition of the net assets of the BioPharma business and the acquisition funding provided by Ampersand Capital Partners were important milestones for the Company during the quarter. Subsequent to September 30^th, we closed on the $13 million second tranche acquisition financing, settled the Net Worth Adjustment obligations with Cancer Genetics, and provided additional working capital. Our primary diagnostic assays volume grew to 16% for the quarter and 22% year to date over the prior year. We did have an adjustment of approximately $1.8 million to reduce our estimate of amounts to be collected related principally to the transition to a new billing contractor and we have taken corrective action steps to resolve. It should be further noted that, in accordance with ASC 606 implemented in 2018 this adjustment did directly reduce revenues for the quarter and year to date.

INTERPACE BIOSCIENCES, INC. (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

CONDENSED CONSOLIDATED RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain statements of operations data. The trends illustrated in this table may not be indicative of future results.

Condensed Consolidated Results of Continuing Operations for the Quarter Ended September 30, ~~2017~~2019 Compared to the Quarter Ended September 30, ~~2016~~2018 (in thousands)

Three Months Ended
September 30,
�� 2017 2017 2016 2016

Revenue, net $ 4,202 100.0 % $ 3,316 100.0 %
Cost of revenue 2,069 49.2 % 1,846 55.7 %
Gross profit 2,133 50.8 % 1,470 44.3 %
Operating expenses:
Sales and marketing 1,816 43.2 % 1,282 38.7 %
Research and development 483 11.5 % 659 19.9 %
General and administrative 2,116 50.4 % 2,858 86.2 %
Acquisition related amortization expense 813 19.3 % 970 29.3 %
Asset impairment - 0.0 % 3,363 101.4 %
Change in fair value of contingent consideration - 0.0 % (1,174 )
Total operating expenses 5,228 124.4 % 8,803 265.5 %

Operating loss (3,095 ) -73.7 % (6,488 ) -195.7 %
Interest expense (40 ) -1.0 % (539 ) -16.3 %
Other income (loss), net (294 ) -7.0 % 4 0.1 %
Loss from continuing operations before tax (3,429 ) -81.6 % (7,023 ) -211.8 %
Benefit for income tax (42 ) -1.0 % 173 5.2 %
Loss from continuing operations (3,387 ) -80.6 % (7,196 ) -217.0 %
Income (loss) from discontinued operations, net of tax 71 1.7 % (297 ) -9.0 %
Net loss $ (3,316 ) -78.9 % $ (7,493 ) -226.0 %

	Three Months Ended September 30,
	2019			2019			2018			2018

Revenue, net	$	7,725			100.0	%	$	5,753			100.0	%
Cost of revenue		4,835			62.6	%		2,763			48.0	%
Gross profit		2,890			37.4	%		2,990			52.0	%
Operating expenses:
Sales and marketing		2,757			35.7	%		2,048			35.6	%
Research and development		857			11.1	%		510			8.9	%
General and administrative		4,492			58.1	%		2,084			36.2	%
Acquisition related expense		838			10.8	%		-			0.0	%
Acquisition related amortization expense		995			12.9	%		813			14.1	%
Total operating expenses		9,939			128.7	%		5,455			94.8	%

Operating loss		(7,049	)		-91.2	%		(2,465	)		-42.8	%
Accretion expense		(111	)		-1.4	%		(248	)		-4.3	%
Other expense, net		(135	)		-1.7	%		(288	)		-5.0	%
Loss from continuing operations before tax		(7,295	)		-94.4	%		(3,001	)		-52.2	%
Provision for income taxes		9			0.1	%		7			0.1	%
Loss from continuing operations		(7,304	)		-94.6	%		(3,008	)		-52.3	%

Loss from discontinued operations, net of tax		(58	)		-0.8	%		(34	)		-0.6	%

Net loss	$	(7,362	)		-95.3	%	$	(3,042	)		-52.9	%

Revenue, net

~~Net~~Consolidated revenue, net for the three months ended September 30, ~~2017~~2019 increased by ~~$0.9~~$2.0 million, or ~~26.7%~~34%, to ~~$4.2~~$7.7 million, compared to ~~$3.3~~$5.8 million for the three months ended September 30, ~~2016.~~2018. This increase was principally attributable to ~~increased test and collection volume for~~ our ~~thyroid tests and~~acquisition of the ~~change from cash basis to accrual for ThyraMIR.~~

~~INTERPACE DIAGNOSTICS GROUP, INC.~~BioPharma business in the third quarter.

Cost of revenue

~~Cost~~Consolidated cost of revenue for the three months ended September 30, ~~2017 increased by $0.2~~2019 was $4.8 million, ~~or 12.1%. This increase was primarily due~~as compared to $2.8 million for the ~~increase in revenue discussed above.~~three months ended September 30, 2018. As a percentage of revenue, cost of revenue ~~decreased~~increased to ~~49.2%~~63% for the three months ended September 30, 2019 as compared to ~~55.7%~~48% in the comparable ~~prior year~~same period in 2018. This increase as a percentage of revenue can be attributed to the ~~Company became more efficient in its manufacturing process and average reimbursement increased.~~lower margins associated with the BioPharma business.

Gross profit

Consolidated gross profit ~~for the three months ended September 30, 2017 increased $0.7 million, or 45.1%, to $2.1 million, compared to gross profit of $1.5~~was approximately $2.9 million for the three months ended September 30, ~~2016.~~2019 and $3.0 million for the three months ended September 30, 2018. The gross profit percentage decreased from 52% in the third quarter of 2018 to 37% for the third quarter of 2019. This ~~increase was primarily related~~decrease can be attributed to the ~~increase~~lower margins associated with BioPharma business mentioned above and the reduction in ~~revenue~~the estimate of amounts to be collected resulting from our transition to a new billing and ~~improved efficiencies in manufacturing processes as discussed above.~~collections contractor.

Sales and marketing expense

Sales and marketing expense was ~~$1.8~~$2.8 million for the three months ended September 30, ~~2017 and~~2019, or 36% as a percentage of ~~revenue was 43.2%.~~net revenue. For the three months ended September 30, ~~2016,~~2018, sales and marketing expense was ~~$1.3~~$2.0 million, or ~~38.7%~~36% as a percentage of net revenue. The increase in sales and marketing expense ~~principally~~primarily reflects ~~a modest rebuilding~~an increase in employee and consulting costs of $0.3 million, as we have expanded the size of our salesforce and increased our contracting and marketing activities which are supporting our growth, and ~~certain other~~the addition of sales, and marketing costs ~~that had been minimized in 2016 during cost reduction initiatives.~~associated with the BioPharma business.

INTERPACE BIOSCIENCES, INC. (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

Research and development

Research and development expense reflects clinical and research costs for supplies, laboratory tests and evaluations, scientific and administrative staff involved in clinical research, statistical research and product development related to new tests, products and programs. These costs were approximately $0.5 million and $0.7was $0.9 million for the three months ended September 30, ~~2017~~2019 and ~~September 30, 2016, respectively. As a percentage of revenue they were 11.5%~~$0.5 million for the three months ended September 30, ~~2017~~2018. The increase was primarily attributable to costs associated with the acquired BioPharma business. As a percentage of revenue, research and ~~19.9 % for~~development expense increased to 11%, up from 9% in the ~~three months ended September 30, 2016.~~comparable prior year quarter.

General and administrative

General and administrative expense for the three months ended September 30, ~~2017~~2019 was ~~$2.1~~$4.5 million as compared to ~~$2.9~~$2.1 million for the three months ended September 30, ~~2016. This decrease~~2018. The increase was primarily attributable to ~~a decrease in bad debt~~costs associated with the acquired BioPharma business.

Acquisition related expense ~~of approximately $0.3 million and a non-recurring charge of approximately $0.3 million recorded in~~

During the three months ended September 30, ~~2016.~~2019 we incurred approximately $0.8 million in expenses related to our acquisition of the BioPharma Business on July 15, 2019.

Acquisition related amortization expense

During the three months ended September 30, ~~2017~~2019 and September 30, ~~2016,~~2018, we recorded amortization expense of ~~approximately~~$1.0 million and $0.8 million, ~~and $1.0 million, respectively. This relates~~respectively in both periods which is related to ~~the amortization for RedPath and Asuragen acquired~~ intangible ~~assets. The decrease relates to the impact of certain intangibles being fully written off in 2016. See Asset impairment, below. As a result the amortization expense is reduced going forward.~~

~~INTERPACE DIAGNOSTICS GROUP, INC.~~

~~Asset impairment~~

~~During the three months ended September 30, 2016, we incurred an asset impairment charge of approximately $3.4 million for the write-off of a pancreas test and biobank-specimen~~ assets associated with ~~the~~prior acquisitions. The increase is related to our acquisition of ~~certain assets from Asuragen that were determined to have no future value .~~

~~Change in fair value of contingent consideration~~

~~During~~ the ~~three months ended September 30, 2016, there was a $1.2 million reduction in contingent consideration liability related to amounts~~BioPharma Business mentioned above and the associated ~~with future royalty payments for the pancreas asset acquired from Asuragen.~~intangible assets.

Operating loss

~~There~~Operating loss from continuing operations was ~~an operating loss of $3.1~~$(7.0) million for the three months ended September 30, ~~2017 and an operating loss during the three months ended September 30, 2016 of $6.5 million. The decrease in the operating loss for the three months ended September 30, 2017 was primarily attributable~~2019 as compared to ~~the asset impairment charge of $3.4 million recorded in the three months ended September 30, 2016, as well as the increase in revenue and gross profit discussed above.~~

~~Benefit for income taxes~~

~~We had an income tax benefit of approximately $0.04~~$(2.5) million for the three months ended September 30, ~~2017.~~ 2018. The increase can be attributed to the increase in general and administrative and sales and marketing expense discussed above as well as the $0.8 million in acquisition related expenses incurred in the quarter.

Provision for income taxes

Income tax expense was approximately $9,000 for the three months ended September 30, 2019 and $7,000 for the three months ended September 30, 2018. Income tax expense for both periods was primarily driven by minimum state and local taxes.

Loss from discontinued operations, net of tax

We had ~~income tax expense~~a loss from discontinued operations of ~~approximately $0.2~~$(0.06) million for the three months ended September 30, ~~2016. Both the income tax benefit for the three months ended September 30, 2017~~2019 and ~~the income tax expense for the three months ended September 30, 2016 was primarily due to allocation of tax expense between continuing and discontinued operations.~~

~~Income (loss)~~ ~~from discontinued operations, net of tax~~

~~We had income~~a loss from discontinued operations of ~~$0.1~~$(0.03) million for the three months ended September 30, 2017 and a loss from discontinued operations of $0.3 million for the three months ended September 30, 2016. The income from discontinued operations for the quarter ended September 30, 2017 was primarily related to the favorable settlement of outstanding obligations. The loss from discontinued operations for the quarter ended September 30, 2016 was primarily related to legacy costs associated with the CSO business.2018.

INTERPACE BIOSICENCES, INC (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

Condensed Consolidated Results of Continuing Operations for the Nine Months Ended September 30, ~~2017~~2019 Compared to the Nine Months Ended September 30, ~~2016~~2018 (in thousands)

	Nine Months Ended September 30,
	2019			2019			2018			2018

Revenue, net	$	20,005			100.0	%	$	16,062			100.0	%
Cost of revenue		10,489			52.4	%		7,590			47.3	%
Gross profit		9,516			47.6	%		8,472			52.7	%
Operating expenses:
Sales and marketing		8,127			40.6	%		6,135			38.2	%
Research and development		2,032			10.2	%		1,528			9.5	%
General and administrative		9,790			48.9	%		5,981			37.2	%
Acquisition related expense		2,534			12.7	%		-			0.0	%
Acquisition related amortization expense		2,621			13.1	%		2,439			15.2	%
Total operating expenses		25,104			125.5	%		16,083			100.1	%

Operating loss		(15,588	)		-77.9	%		(7,611	)		-47.4	%
Accretion expense		(331	)		-1.7	%		(248	)		-1.5	%
Other expense, net		(12	)		-0.1	%		(143	)		-0.9	%
Loss from continuing operations before tax		(15,931	)		-79.6	%		(8,002	)		-49.8	%
Provision for income taxes		19			0.1	%		21			0.1	%
Loss from continuing operations		(15,950	)		-79.7	%		(8,023	)		-50.0	%

Loss from discontinued operations, net of tax		(51	)		-0.3	%		(129	)		-0.8	%

Net loss	$	(16,001	)		-80.0	%	$	(8,152	)		-50.8	%

~~INTERPACE DIAGNOSTICS GROUP, INC.~~

Nine Months Ended
September 30,
2017 2017 2016 2016

Revenue, net $ 11,527 100.0 % $ 9,963 100.0 %
Cost of revenue 5,719 49.6 % 4,866 48.8 %
Gross profit 5,808 50.4 % 5,097 51.2 %
Operating expenses:
Sales and marketing 4,507 39.1 % 4,186 42.0 %
Research and development 1,202 10.4 % 1,339 13.4 %
General and administrative 6,431 55.8 % 7,655 76.8 %
Acquisition related amortization expense 2,439 21.2 % 2,909 29.2 %
Asset impairment - 0.0 % 3,363 33.8 %
Change in fair value of contingent consideration (5,776 ) -50.1 % (1,174 ) -11.8 %
Total operating expenses 8,803 76.4 % 18,278 183.5 %

Operating loss (2,995 ) -26.0 % (13,181 ) -132.3 %
Interest expense (433 ) -3.8 % (1,601 ) -16.1 %
Loss on extinguishment of debt (4,278 ) -37.1 % - 0.0 %
Other (loss) income, net (414 ) -3.6 % 14 0.1 %
Loss from continuing operations before tax (8,120 ) -70.4 % (14,768 ) -148.2 %
Benefit for income tax (340 ) -2.9 % (54 ) -0.5 %
Loss from continuing operations (7,780 ) -67.5 % (14,714 ) -147.7 %
Income from discontinued operations, net of tax 572 5.0 % 101 1.0 %
Net loss $ (7,208 ) -62.5 % $ (14,613 ) -146.7 %

Revenue, net

~~Net~~Consolidated revenue, net for the nine months ended September 30, ~~2017~~2019 increased by ~~$1.5~~$3.9 million, or ~~15.7%~~25%, to ~~$11.5~~$20.0 million, compared to ~~net revenue of $10.0~~$16.1 million for the nine months ended September 30, ~~2016.~~2018. This increase was principally attributable to increased test volume in our diagnostic business and ~~collection volume for~~revenue from our ~~thyroid tests and the change from cash basis to accrual for ThyraMIR.~~newly acquired BioPharma business.

Cost of revenue

~~Cost~~Consolidated cost of revenue for the nine months ended September 30, ~~2017~~2019 increased ~~by $0.9~~$2.9 million or ~~17.5% as compared to the same period~~38%. This increase was in ~~2016. The primary reason for the change was~~line with the increase in revenue discussed above related to increased test volume and the ~~corresponding increase in expenses. As a percentage of revenue, cost of revenue increased to 49.6% as compared to 48.8% in the comparable prior year period.~~BioPharma business.

Gross profit

~~Gross~~Consolidated gross profit ~~as a percentage of revenue decreased slightly to 50.4%~~ for the nine months ended September 30, ~~2017~~2019 increased $1.0 million, or 12%, to $9.5 million, as compared to ~~51.2% for the nine months ended September 30, 2016 due to an increase in lab supplies expense.~~

~~INTERPACE DIAGNOSTICS GROUP, INC.~~

~~Sales and marketing expense~~

~~Sales and marketing expense was $4.5~~$8.5 million for the nine months ended September 30, ~~2017~~2018. The gross profit percentage was approximately 48% for the nine months ended September 30, 2019 as compared to 53% in the comparable prior year period. The decrease in gross profit percentage can be attributed to the lower margins associated with the BioPharma business and the reduction in the estimate of amounts to be collected resulting from our transition to a new billing and collections contractor.

Sales and marketing expense

Sales and marketing expense was $8.1 million for the nine months ended September 30, 2019, or 41% as a percentage of net ~~revenue was 39.1%.~~revenue. For the nine months ended September 30, ~~2016,~~2018, sales and marketing expense was ~~$4.2~~$6.1 million, or ~~42.0%~~38% as a percentage of net revenue. The increase in sales and marketing expense ~~principally~~primarily reflects an increase in employee and consulting costs of $1.3 million, as we expanded the size of our salesforce and ~~the decline~~have increased our contracting and marketing activities which are supporting our growth.

INTERPACE BIOSCIENCES, INC. (formerly known as ~~a percentage of net revenue is a function of the growth in revenues.~~INTERPACE DIAGNOSTICS GROUP, INC.)

Research and development

Research and development ~~costs~~expense totaled ~~$1.2~~approximately $2.0 million for the nine months ended September 30, ~~2017~~2019 and ~~as a percentage of net revenue they were 10.4%. For~~$1.5 million for the nine months ended September 30, ~~2016 the expense was $1.3 million and as a percentage of net revenue was 13.4%. The decrease as a percentage of net revenue was primarily due to increased revenues.~~2018.

General and administrative

General and administrative expense for the nine months ended September 30, ~~2017~~2019 was ~~$6.4~~$9.8 million as compared to ~~$7.7~~$6.0 million for the nine months ended September 30, ~~2016.~~2018. This ~~decrease~~increase was primarily ~~attributable~~related to certain non-cash charges including bad debt expense from the ASC 606 conversion and the reversal of a ~~reduction in severance expense of $2.0 million due to the settlement of severance obligations with former executives~~contingent claim in the ~~first quarter of 2017. This decrease was partially offset by the expense~~prior year as well as general and administrative costs associated with ~~our DOJ settlement of $0.9 million, $0.5 million pertains to 2016 and $0.4 million pertains to a potential 2017 liability.~~the BioPharma business discussed previously.

Acquisition related expense

During the nine months ended September 30, 2019 we incurred approximately $2.5 million in expenses related to our acquisition of the BioPharma business on July 15, 2019.

Acquisition related amortization expense

During the nine months ended September 30, ~~2017~~2019 and September 30, ~~2016,~~2018, we recorded amortization expense of approximately $2.6 million and $2.4 million, ~~and $2.9 million,~~ respectively, which is related to ~~the amortization for RedPath and Asuragen acquired~~ intangible ~~assets. The decrease relates to the impact of certain intangibles being fully written off in 2016. See Asset impairment, below. As a result the amortization expense is reduced going forward.~~

~~Asset impairment~~

~~During the nine months ended September 30, 2016, we incurred an asset impairment charge of approximately $3.4 million for the write-off of a pancreas test and biobank-specimen~~ assets associated with ~~the acquisition of certain assets from Asuragen that were determined to have no future value .~~

~~Change in fair value of contingent consideration~~

During the nine months ended September 30, 2017, there was a $5.8 million reduction in contingent consideration liability related to amounts associated with future royalty payments for the assets acquired from Redpath. See Note 5 to the Consolidated Financial Statements for more details. During the nine months ended September 30, 2016, there was a $1.2 million reduction in contingent consideration liability related to amounts associated with future royalty payments for the pancreas asset acquired from Asuragen.prior acquisitions.

Operating loss

~~There was an operating~~Operating loss from continuing operations ~~of $3.0~~was $(15.6) million for the nine months ended September 30, ~~2017 and an operating loss during the nine months ended September 30, 2016 of $13.2 million. The increase in operating income for the nine months ended September 30, 2017 was primarily attributable~~2019 as compared to the reversal of our Redpath contingent consideration liability of $5.8 million in the nine months ended September 30, 2017 and the asset impairment charge of $3.3 million in the nine months ended September 30, 2016.

~~INTERPACE DIAGNOSTICS GROUP, INC.~~

~~Benefit for income taxes~~

~~We had an income tax benefit of approximately $0.3~~$(7.6) million for the nine months ended September 30, ~~2017.~~ 2018. The increase can be attributed to the increase in general and administrative expense and sales and marketing expense discussed above as well as the $2.5 million in acquisition related expenses incurred during the nine months ended September 30, 2019.

Provision for income taxes

Income tax expense was approximately $19,000 for the nine months ended September 30, 2019 and $21,000 for the nine months ended September 30, 2018. Income tax expense for both periods was primarily driven by minimum state and local taxes.

Lossfrom discontinued operations, net of tax

We had ~~an income tax benefit~~a loss from discontinued operations of ~~approximately $0.1~~$(0.1) million for the nine months ended September 30, ~~2016. The income tax benefit for both periods was primarily due to allocation of tax expense between continuing~~2019 and ~~discontinued operations.~~

~~Income from discontinued operations, net of tax~~

~~We had income~~a loss from discontinued operations of ~~$0.6~~$(0.1) million for the nine months ended September 30, 2017 and income from discontinued operations of $0.1 million for the nine months ended September 30, 2016. The income from discontinued operations for the nine months ended September 30, 2017 was primarily related to reversals of severance accruals and for 2016 it was primarily related to the gain on sale of $1.3 million related to the final working capital adjustment regarding the sale of the CSO business in December of 2015 partially offset by expenses relating to the winding down of CSO.2018.

LIQUIDITY AND CAPITAL RESOURCES

For the nine months ended September 30, ~~2017,~~2019, we had an operating loss of ~~$3.0~~$(15.6) million. As of September 30, ~~2017,~~2019, we had cash and cash equivalents of ~~$11.7~~$2.4 million, net accounts receivable of $14.7 million, total current assets of $20.6 million and current liabilities of ~~$8.3~~$17.3 million.

It is anticipated that we may require additional capital to fund our operations in the future. There is no guarantee that additional capital can be raised to fund our future operations. We intend to meet our capital needs by driving revenue growth, containing costs as well as exploring other options.

We completed four public offerings and a private placement of warrants from January 6, 2017 through September 2017, which resulted in aggregate gross proceeds to us of approximately $27.9 million. See “Recent Equity Financings”.

~~See Note 2~~~~, Liquidity~~~~in the unaudited condensed consolidated financial statements for a discussion of the RedPath Note.~~

On September 28, 2016, the Company and its wholly owned direct and indirect subsidiaries, Interpace LLC and Interpace Diagnostics Corporation, entered into the Credit Agreement with SCM Specialty Finance Opportunities Fund, L.P., or the Lender. Pursuant to and subject to the terms of the Credit Agreement, the Lender agreed to provide a revolving loan, or the Loan, to us in the maximum principal amount of $1.2 million. The maturity date of the Loan is September 28, 2018. The Loan bears interest at an annual rate equal to the Prime Rate (as defined in the Credit Agreement) plus 2.75%, payable in cash monthly in arrears. The interest rate will be increased by 5.0% in the event of a default under the Credit Agreement. We have not yet drawn down on the credit facility. As of September30, 2017, the Company is seeking to renegotiate the terms of the Credit Agreement and had not borrowed any funds under the Credit Agreement.

During the nine months ended September 30, ~~2017,~~2019, net cash used in operating activities was ~~$12.9~~$12.6 million, all but $0.03 million of which ~~$10.6~~was used in continuing operations. The main component of cash used in operating activities during the nine months ended September 30, 2019 was the net loss of $(16.0) million. During the nine months ended September 30, 2018, net cash used in operating activities was $6.8 million, of which $6.4 million was used in continuing operations and ~~$2.3~~$0.4 million was used in discontinued operations. The main component of cash used in operating activities during the nine months ended September 30, ~~2017~~2018 was athe net loss of ~~$7.2 million, a decrease in accrued payroll of $1.8 million and accounts payable of $2.2 million related to past due obligations from the prior year. During~~$8.2 million.

INTERPACE BIOSCIENCES, INC. (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

For the nine months ended September 30, ~~2016, net cash used in operating activities~~2019, there was $6.6 million, of which $5.1 million was used in continuing operations and $1.5 million was used in discontinued operations. The main component of cash used in operating activities during the nine months ended September 30, 2016 was our loss from continuing operations of $14.7 million.

~~There was net~~ cash used in investing activities ~~for~~of $13.9 million, $13.8 million of which was used in our acquisition of the ~~nine-months ended September 30, 2017 of $29,000. There was no net cash from investing activities in 2016.~~BioPharma business.

For the nine months ended September 30, ~~2017,~~2019, there was ~~net~~ cash provided from financing activities of ~~$24.0~~$22.8 million, $6.0 million which resulted from the issuance of Common Stock in our underwritten public offering completed in January 2019, $13.1 million which resulted from the issuance of Preferred Stock in July 2019, and $3.7 million from the drawing down of funds under our revolving line of credit.

Additionally, on September 20, 2019, the Company entered into the Equity Distribution Agreement (the “Agreement”) with Oppenheimer & Co. Inc., as sales agent (the “Agent”), pursuant to which the Company may, from time to time, issue and sell shares of its common stock in an aggregate offering price of up to $4.8 million through the Agent. Under the terms of the Agreement, the Agent may sell the Shares at market prices by any method that is deemed to be an “at the market offering”, i.e., ATM, as defined in Rule 415 under the Securities Act, as amended.

Further, under the terms of the Financing Agreement with Ampersand, and as a result of the stockholder approval required by the Nasdaq Listing Rules and the satisfaction of customary conditions, the second tranche of funding of approximately $13.0 million of Preferred Stock was received in October 2019.

As of September 30, 2019, the Company had drawn $3.75 million of the $4.0 million of available funds under its Revolving Line with SVB. The funds drawn were used principally in conjunction with the acquisition of the BioPharma business of CGI and have been paid off as of the report date.

We do not expect to generate positive cash flows from operations for the year ending December 31, 2019. We intend to meet our ~~four direct offerings completed~~ongoing capital needs by using proceeds under the Securities Purchase Agreement, additional borrowings under the line of credit resulting from the additional accounts receivable acquired in the ~~first nine months of 2017~~BioPharma acquisition, selling shares under the Agreement, revenue growth and margin improvement, collecting accounts receivable, containing costs as well as exploring other financing options. Management believes that the ~~subsequent exercise of warrants related~~Company has sufficient cash on hand and available to ~~those offerings. For the nine months ended September~~sustain operations through at least November 30, ~~2016,~~2020. However, there ~~was~~is no ~~cash provided from financing activities.~~guarantee that additional capital can be raised to fund our future operations.

Inflation

We do not believe that inflation had a significant impact on our results of operations for the periods presented. On an ongoing basis, we attempt to minimize any effects of inflation on our operating results by controlling operating costs and whenever possible, seeking to insure that billing rates reflect increases in costs due to inflation.

Off-Balance Sheet Arrangements

None.

Item 3. — Quantitative and Qualitative Disclosures About Market Risk.

As a smaller reporting company, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item.

INTERPACE BIOSCIENCES, INC. (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act as of the end of the period covered by this Form 10-Q. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives including that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In addition, management is required to apply its judgment in evaluating the benefits of possible disclosure controls and procedures relative to their costs to implement and maintain.

Based on ~~their~~the evaluation ~~our Chief Executive Officer and Chief Financial Officer concluded that our~~of the Company’s disclosure controls and procedures, ~~were not effective at~~as that term is defined in Rule 13a-15(e) under the ~~reasonable assurance level in 2016 during which time~~Securities Exchange Act of 1934, as amended, the ~~following material weaknesses existed:~~

	●	~~We lack a sufficient complement of personnel to appropriately account for, review, and disclose the completeness and accuracy of transactions entered into by the Company.~~

	●	We lack sufficient qualified resources to ensure the appropriate design and operating effectiveness of our internal control over financial reporting. Specifically, ineffective monitoring controls related to our accounting and reporting functions around management review were not adequately designed and/or operating effectively and can result in adjustments to our financial statements and disclosures.

Management believes that the material weaknesses noted were due in part to the small size of the staff resulting from staff downsizing and cost containment. As part of our remediation plan in 2017, we have taken steps to improve our financial reporting and have implemented new policies, procedures and controls in addition to hiring competent accounting professionals to review transactions recorded and classifications in the financial statements. Through the hiring of independent consultants we have also received external technical accounting assistance to review the accounting and related disclosures for complex accounting matters when necessary. Accordingly, our Chief Executive Officer of the Company and the Chief Financial Officer of the Company have concluded that ~~our~~the Company’s disclosure controls and procedures ~~were greatly improved in 2017 and were~~are effective ~~at the reasonable assurance level~~ as of September 30, ~~2017.~~2019.

Reference should be made to our Form 10-K for additional information regarding discussion of the effectiveness of the Company’s controls and procedures.

Changes in internal controls

During the third quarter ended September 30, 2017 management believes that it has completed its remediation plan to address the material weaknesses that existed at the end of 2016 and through the first and second quarters of 2017. Other than the completion of this remediation plan, thereThere has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

~~INTERPACE DIAGNOSTICS GROUP, INC.~~

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

“Item 3- Legal Proceedings” and Note 10,Commitments and Contingencies, to the Consolidated Financial Statements of our ~~most recent Annual Report on~~ Form 10-K, ~~filed on March 31, 2017 includes~~include a discussion of our legal proceedings, as does Note 68,Commitments and Contingencies, to the ~~accompanying~~ condensed consolidated financial ~~statements.~~statements furnished herewith. During the fiscal quarter ended September 30, ~~2017,~~2019, there have been no material changes tofrom the ~~legal~~ proceedings disclosed ~~within~~in our ~~2016~~ Form ~~10-K, as supplemented and amended within our quarterly reports on Form 10-Q for the quarters ended March 31, 2017 and June 30, 2017.~~10-K.

Item 1A. Risk Factors.

Not applicable as we are a smaller reporting company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On July 5, 2017, the Company agreed to issue a warrant to purchase 150,000 shares of Common Stock, $.01 par value, to a consultant of the Company, who is an accredited investor, at an exercise price of $1.25 in consideration of services to the Company in a private placement exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety ~~Disclosures.~~Disclosures

None.

INTERPACE BIOSCIENCES, INC. (formerly known as INTERPACE DIAGNOSTICS GROUP, INC.)

Item 5. Other Information.

None.

Item 6. Exhibits

~~Item 6. Exhibits~~

Exhibit No.		Description

~~1.1~~ 3.1**		~~Underwriting Agreement, dated~~Conformed version of Certificate of Incorporation of Interpace Biosciences, Inc., as amended by the Certificate of ~~June 16, 2017, by~~Amendment filed on November 14, 2019.

3.2		Amended and ~~between~~Restated Bylaws of Interpace ~~Diagnostics Group,~~Biosciences, Inc. ~~and Maxim Group LLC,~~, incorporated by reference to the designated exhibit of the Company’s Current Report on Form 8-K, dated November 12, 2019, filed with the ~~SEC~~Commission on ~~June 21, 2017.~~November 14, 2019.

4.1**		Interpace Biosciences, Inc. 2019 Equity Incentive Plan..

4.2**		Interpace Biosciences, Inc. Employee Stock Purchase Plan.

4.3**		Form of ~~Additional Warrant,~~Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement under the Interpace Biosciences, Inc. 2019 Equity Incentive Plan.

4.4**		Form of Stock Option Grant Notice and Stock Option Agreement under the Interpace Biosciences, Inc. 2019 Equity Incentive Plan.

10.2		Equity Distribution Agreement, dated September 20, 2019, by and between Interpace Diagnostics Group, Inc. (now known as Interpace Biosciences, Inc.)and Oppenheimer & Co. Inc., incorporated by reference to the designated exhibit of the Company’s Current Report on Form 8-K, dated September 20, 2019 filed with the ~~SEC~~Commission on ~~October 12, 2017.~~September 20, 2019.

4.2*		Warrant Agency Agreement, dated as of June 21, 2017, by and between Interpace Diagnostics Group, Inc. and American Stock Transfer & Trust Company, incorporated by reference to the designated exhibit of the Company’s Current Report on Form 8-K, filed with the SEC on June 21, 2017.

4.3*		~~Form of Underwriting Warrant, incorporated by reference to the designated exhibit of the Company’s Current Report on Form 8-K, filed with the SEC on June 21, 2017.~~

~~4.4~~ 31.1**		~~Form of Pre-Funded Warrant, incorporated by reference to the designated exhibit of the Company’s Current Report on Form 8-K, filed with the SEC on June 21, 2017.~~

4.5 *		~~Form of Base Warrant, incorporated by reference to the designated exhibit of the Company’s Current Report on Form 8-K, filed with the SEC on June 21, 2017.~~

10.1*		Warrant Exercise Agreement, dated October 12, 2017, by and between Interpace Diagnostics Group, Inc. and certain Warrant Holders, incorporated by reference to the designated exhibit of the Company's Current Report on Form 8-K, filed with the SEC on October 12, 2017.

10.2 *		~~Form of Amendment and Exchange Agreement, dated April 18, 2017, incorporated by reference to the designated exhibit of the Company’s Current Report on Form 8-K, filed with the SEC on April 18, 2017.~~

10.4*		Lease Agreement, dated March 31, 2017, by and between Saddle Lane Realty, LLC and Interpace Diagnostics Group, Inc., incorporated by reference to the designated exhibit of the Company’s S-1/A, filed with the SEC on June 13, 2017.

~~31.1~~		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

~~31.2~~31.2**		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

32.1+		Certification of Chief Executive Officer ~~Pursuant~~pursuant to 18 U.S.C. Section 1350, as adopted ~~Pursuant~~pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished herewith.

32.2+		Certification of Chief Financial Officer ~~Pursuant~~pursuant to 18 U.S.C. Section 1350, as adopted ~~Pursuant~~pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished herewith.

101		The following financial information from this Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, ~~2017~~2019 formatted in XBRL (Extensible Business Reporting Language) and furnished electronically herewith: (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Operations; (iii) the Condensed Consolidated Statements of Stockholders’ Equity; (iv) the Condensed Consolidated Statements of Cash Flows; and ~~(iv)~~(v) the Notes to Condensed Consolidated Financial Statements.

* This exhibit is being filed pursuant to Item 601(b)(3)(i) of Regulation S-K which requires a conformed version of our charter reflecting all amendments in one document. The exhibit reflects our Certificate of Incorporation, as amended, as filed with the Delaware Secretary of State on November 14, 2018, revised for the Certificate of Amendment filed on November 13, 2019.

** Filed herewith.


	+	Exhibits 32.1 and 32.2 are being furnished herewith and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall such exhibits be deemed to be incorporated by reference to any registration statement or other document filed under the Securities Act or the Exchange Act, except as otherwise stated in any such filing.

	*	~~previously filed~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: November ~~13, 2017~~14, 2019	Interpace ~~Diagnostics Group,~~Biosciences, Inc.
	(Registrant)

	/s/ Jack E. Stover
	Jack E. Stover
	President and Chief Executive Officer
	(Principal Executive Officer)

Date: November 14, 2019	/s/ James Early
	James Early
	Chief Financial Officer
	(Principal Financial Officer)

Date: November 14, 2019	/s/ Thomas Freeburg
	Thomas Freeburg
	Chief Accounting Officer ~~and~~
	(Principal Accounting Officer)

	Nine Months Ended
	September 30,
	2017			2016

Cash Flows Used in Operating Activities
Net loss	$	(7,208	)	$	(14,613	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,813			3,490
Realignment accrual accretion		-			29
Interest accretion		312			1,601
Provision for bad debt		(6	)		482
Mark to market on warrants		401			-
Amortization of debt issuance costs		117			-
Mark to market on derivatives		61			-
Loss on extinguishment of debt		4,278			-
Reversal of severance accrual		(2,034	)		-
Non-employee share-based payment		216			-
Stock-based compensation		477			109
Asset impairment		-			3,363
Change in fair value of contingent consideration		(5,776	)		(1,174	)
Other gains and expenses, net		-			(4	)
Other changes in assets and liabilities:
(Increase) decrease in accounts receivable		(588	)		4,639
Decrease in unbilled receivable		-			16
Decrease in other current assets		162			1,272
Decrease in other long-term assets		220			754
Decrease in accounts payable		(2,208	)		(761	)
Decrease in unearned contract revenue		-			(11	)
Decrease in accrued salaries and bonus		(1,805	)		(685	)
Decrease in accrued liabilities		(2,210	)		(4,561	)
Decrease in long-term liabilities		(106	)		(563	)
Net cash used in operating activities		(12,884	)		(6,617	)

Cash Flows Used in Investing Activities
Purchase of property and equipment		(29	)		-
Net cash used in investing activities		(29	)		-

Cash Flows From Financing Activities
Issuance of common stock, net of expenses		24,042			-
Cash paid for repurchase of restricted shares		(28	)		-
Net cash provided by financing activities		24,014			-

Net increase (decrease) in cash and cash equivalents		11,101			(6,617	)
Cash and cash equivalents – beginning		602			8,310
Cash and cash equivalents – ending	$	11,703		$	1,693
Cash paid for interest	$	-		$	-

			As of September 30, 2017			As of December 31, 2016
	Life		Carrying			Carrying
	(Years)		Value			Value
Diagnostic assets:
Asuragen acquisition:
Thyroid		9	$	8,519		$	8,519
RedPath acquisition:
Pancreas test		7		16,141			16,141
Barrett’s test		9		18,351			18,351
Total			$	43,011		$	43,011
Diagnostic lab:
CLIA Lab		2.3	$	609		$	609

Accumulated Amortization			$	(9,701	)	$	(7,262	)

Net Carrying Value			$	33,919		$	36,358

	December 31, 2016		Initial Liability		Payments			Accretion		Cancellation of Obligation/ Conversions Exercises			Mark to Market		September 30, 2017
Contingent consideration:
Asuragen	$	1,545			$	(260	)	$	122	$	-		$	-	$	1,407
Redpath		5,969				-			-		(5,969	)		-		-
Embedded conversion option		-		208		-			-		(269	)		61		-
Pre-Funded Warrants		-		2,247		-			-		(2,337	)		90		-
Underwriters Warrants		-		422		-			-		-			311		733
	$	7,514	$	2,877	$	(260	)	$	122	$	(8,575	)	$	462	$	2,140

	Three Months Ending September 30,					Nine Months Ending September 30,
	2017		2016			2017		2016
Revenue, net	$	-	$	-		$	-	$	1,644

Income (loss) from discontinued operations		167		(414	)		1,081		(1,006	)
Gain on sale of assets		-		-			-		1,326
Income (loss) from discontinued operations, before tax		167		(414	)		1,081		320
Income tax expense (benefit)		96		(117	)		509		219
Income (loss) from discontinued operations, net of tax	$	71	$	(297	)	$	572	$	101

Market Price	$	4.33
Exercise Price	$	4.69
Risk-free interest rate		1.95	%
Expected volatility		124.02	%
Expected life in years		5.0
Expected dividend yield		0.00	%

Market Price	$	2.37
Exercise Price	$	4.69
Risk-free interest rate		1.95	%
Expected volatility		125.58	%
Expected life in years		5.5
Expected dividend yield		0.00	%

Market Price	$	0.87
Exercise Price	$	1.25
Risk-free interest rate		1.75	%
Expected volatility		134.21	%
Expected life in years		5.0
Expected dividend yield		0.00	%

Market Price	$	1.62
Exercise Price	$	1.25
Risk-free interest rate		1.66	%
Expected volatility		172.29	%
Expected life in years		3.1
Expected dividend yield		0.00	%

	Three Months Ended
	September 30,
��	2017			2017			2016			2016

Revenue, net	$	4,202			100.0	%	$	3,316			100.0	%
Cost of revenue		2,069			49.2	%		1,846			55.7	%
Gross profit		2,133			50.8	%		1,470			44.3	%
Operating expenses:
Sales and marketing		1,816			43.2	%		1,282			38.7	%
Research and development		483			11.5	%		659			19.9	%
General and administrative		2,116			50.4	%		2,858			86.2	%
Acquisition related amortization expense		813			19.3	%		970			29.3	%
Asset impairment		-			0.0	%		3,363			101.4	%
Change in fair value of contingent consideration		-			0.0	%		(1,174	)
Total operating expenses		5,228			124.4	%		8,803			265.5	%

Operating loss		(3,095	)		-73.7	%		(6,488	)		-195.7	%
Interest expense		(40	)		-1.0	%		(539	)		-16.3	%
Other income (loss), net		(294	)		-7.0	%		4			0.1	%
Loss from continuing operations before tax		(3,429	)		-81.6	%		(7,023	)		-211.8	%
Benefit for income tax		(42	)		-1.0	%		173			5.2	%
Loss from continuing operations		(3,387	)		-80.6	%		(7,196	)		-217.0	%
Income (loss) from discontinued operations, net of tax		71			1.7	%		(297	)		-9.0	%
Net loss	$	(3,316	)		-78.9	%	$	(7,493	)		-226.0	%

Large accelerated filer [ ]

Accelerated filer [ ]

Non-accelerated filer ~~[ ]~~[X]

Smaller reporting company [X]

~~(Do not check if a smaller~~
~~reporting company)~~

Emerging Growth Company [ ]