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TWO BIOTECH FIRMS, CO-FOUNDER TO RESOLVE FEDERAL GRANT AUDIT ALLEGATIONS

iSense and its co-founder Dr. Paul Andrew Rhodes have settled an investigation arising from a U.S. Defense Contract Audit Agency (DCAA) draft audit of iSense’s 2016-2017 contracting activities.

The work done under these and related contracts was successful and repeatedly assessed as responsive and effective by the government granting agencies, Rhodes added.

The DCAA draft audit raised objections related to payments for services and personnel time that iSense made to another company also founded by Dr. Rhodes, Specific Diagnostics.

The two companies initially shared a building that contained the laboratories and personnel of both companies. In the early years, manufacturing and other services related to the sensors that both companies used were provided by shared personnel rather than duplicate teams for each of what were then small companies. Both the companies indeed contributed to rent in this shared space, as well as to the salary of the controller they shared.

Regarding the two agreements between iSense and Specific referenced in the government’s news release, which the government considered misleadingly dated, in the first DCAA auditors requested that iSense provide a service contract that reflected the services exchanged between the two companies.

The requested contract, which indeed accurately summarized the service relationship between iSense and Specific, was dated as of the start of the relationship rather than when it was prepared. There has never been any suggestion that the summary of the relationship between the companies that was memorialized in that contract was inaccurate or, indeed, that there was anything amiss about that relationship.

In the second, in early 2018, CARB-X grant administrators requested a document confirming the availability of funds from iSense to Specific, and the companies accordingly provided a document that accurately confirmed the funding relationship that existed between them, correctly summarizing the funds that were supplied by iSense to Specific in 2017 and providing the assurance that funds would be provided in 2018, funding that was indeed fulfilled by iSense. “There was no ill intent in dating the agreement confirming the funding agreement as of January 2017, when the funding arrangement was in effect,” Dr. Rhodes stated.

“I and the co-founders of our companies are proud of the work we did,” Dr. Rhodes added. “Specific’s development of a life-saving rapid susceptibility test for blood infections, supported so crucially by NIAID and CARB-X, was recently designated a Breakthrough Device by the FDA.

“In 2016-17 we had two small companies, a total of little more than 20 persons between them, which did their best to fairly apportion costs and provide the associated documentation. All the monies we received were used to hire and pay real employees, buy equipment and supplies, and do the work that we promised,” Dr. Rhodes added.

“I remain deeply grateful for the indispensable support that the government provided us, including military contracts to develop chemical weapon detection and characterization technology in the early years, and then the vital support of first NIAID and later CARB-X which enabled the development of Specific’s antibiotic susceptibility testing system. Without this support, we would not have made it, and while this investigation and settlement was the last thing we expected, we remain very grateful to the agencies that supported what we have done along the way.”

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