opgn-10q_20190630.htm

 

f

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark one)

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

For the quarterly period ended June 30, 2019

or

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 001-37367

 

OPGEN, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

06-1614015

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. employer

identification no.)

 

 

 

708 Quince Orchard Road, Suite 205, Gaithersburg, MD

 

20878

(Address of principal executive offices)

 

(Zip code)

Registrant’s telephone number, including area code: (240) 813-1260

 

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      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes      No  

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

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

 

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  

Securities registered or to be registered pursuant to Section 12(b) of the Act.

 

Title of each class

Trading Symbols

Name of each exchange on which registered

Common Stock

OPGN

Nasdaq Capital Market

Common Warrants

OPGNW

Nasdaq Capital Market

17,645,720 shares of the Company’s common stock, par value $0.01 per share, were outstanding as of August 10, 2019.

 

 

 

 


 

OPGEN, INC.

TABLE OF CONTENTS FOR FORM 10-Q

 

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

 

3

 

 

 

 

 

PART I.

 

FINANCIAL INFORMATION

 

4

 

 

 

 

Item 1.

 

Unaudited Condensed Consolidated Financial Statements

 

4

 

 

Condensed Consolidated Balance Sheets at June 30, 2019 and December 31, 2018

 

4

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2019 and 2018

 

5

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2019 and 2018

 

6

 

 

Condensed Consolidated Statements of Cash Flow for the six months ended June 30, 2019 and 2018

 

7

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

8

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

22

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

27

Item 4.

 

Controls and Procedures

 

28

 

 

 

 

PART II.

 

OTHER INFORMATION

 

28

 

 

 

 

Item 1.

 

Legal Proceedings

 

28

Item 1A.

 

Risk Factors

 

28

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

29

Item 3.

 

Defaults Upon Senior Securities

 

29

Item 4.

 

Mine Safety Disclosures

 

29

Item 5

 

Other Information

 

29

Item 6.

 

Exhibits

 

29

 

 

 

 

SIGNATURES

 

30

 

2


 

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q of OpGen, Inc. 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, as amended (the “Exchange Act”). In this quarterly report, we refer to OpGen, Inc. as the “Company,” “we,” “our” or “us.” All statements other than statements of historical facts contained herein, including statements regarding our future results of operations and financial position, strategy and plans, and our expectations for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “design,” “intend,” “expect” or the negative version of these words and similar expressions are intended to identify forward-looking statements.

We have based these forward-looking statements on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, strategy, short- and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in Part II Item 1A “Risk Factors.” In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances included herein may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

 

our liquidity and working capital requirements, including our cash requirements over the next 12 months;

 

our ability to maintain compliance with the ongoing listing requirements for the Nasdaq Capital Market;

 

receipt of regulatory clearance of our submitted 510(k) application for our Acuitas AMR Gene Panel (Isolates) test;

 

the completion of our development efforts for the Acuitas AMR Gene Panel tests and Acuitas Lighthouse Software, and the timing of regulatory submissions;

 

our ability to sustain or grow our customer base for our current research use only and rapid pathogen ID testing products;

 

regulations and changes in laws or regulations applicable to our business, including regulation by the FDA;

 

anticipated trends and challenges in our business and the competition that we face;

 

the execution of our business plan and our growth strategy;

 

our expectations regarding the size of and growth in potential markets;

 

our opportunity to successfully enter into new collaborative or strategic agreements;

 

compliance with the U.S. and international regulations applicable to our business; and

 

our expectations regarding future revenue and expenses.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. In addition, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. These risks should not be construed as exhaustive and should be read in conjunction with our other disclosures, including but not limited to the risk factors described in Part II, Item 1A of this quarterly report. Other risks may be described from time to time in our filings made under the securities laws. New risks emerge from time to time. It is not possible for our management to predict all risks. All forward-looking statements in this quarterly report speak only as of the date made and are based on our current beliefs and expectations. We undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

NOTE REGARDING TRADEMARKS

We own various U.S. federal trademark registrations and applications and unregistered trademarks and servicemarks, including OpGen®, Acuitas®, Acuitas Lighthouse®, AdvanDx®, QuickFISH®, and PNA FISH®. All other trademarks, servicemarks or trade names referred to in this quarterly report are the property of their respective owners. Solely for convenience, the trademarks and trade names in this quarterly report are sometimes referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend the use or display of other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies, products or services.

 

3


 

Part I. FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements

OpGen, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

 

 

 

June 30, 2019

 

 

December 31, 2018

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

3,055,894

 

 

$

4,572,487

 

Accounts receivable, net

 

 

772,914

 

 

 

373,858

 

Inventory, net

 

 

567,422

 

 

 

543,747

 

Prepaid expenses and other current assets

 

 

178,356

 

 

 

292,918

 

Total current assets

 

 

4,574,586

 

 

 

5,783,010

 

Property and equipment, net

 

 

197,502

 

 

 

1,221,827

 

Finance lease right-of-use assets, net

 

 

984,742

 

 

 

 

Operating lease right-of-use assets

 

 

1,381,830

 

 

 

 

Goodwill

 

 

600,814

 

 

 

600,814

 

Intangible assets, net

 

 

951,458

 

 

 

1,085,366

 

Other noncurrent assets

 

 

241,182

 

 

 

259,346

 

Total assets

 

$

8,932,114

 

 

$

8,950,363

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,258,908

 

 

$

1,623,751

 

Accrued compensation and benefits

 

 

1,190,500

 

 

 

1,041,573

 

Accrued liabilities

 

 

820,667

 

 

 

902,019

 

Deferred revenue

 

 

9,993

 

 

 

15,824

 

Short-term notes payable

 

 

343,330

 

 

 

398,595

 

Short-term finance lease liabilities

 

 

576,322

 

 

 

399,345

 

Short-term operating lease liabilities

 

 

958,992

 

 

 

 

Total current liabilities

 

 

5,158,712

 

 

 

4,381,107

 

Deferred rent

 

 

 

 

 

162,919

 

Note payable

 

 

494,897

 

 

 

660,340

 

Warrant liability

 

 

 

 

 

67

 

Long-term finance lease liabilities

 

 

379,825

 

 

 

437,189

 

Long-term operating lease liabilities

 

 

1,071,677

 

 

 

 

Total liabilities

 

 

7,105,111

 

 

 

5,641,622

 

Commitments (Note 9)

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value; 10,000,000 shares authorized; none issued and

   outstanding at June 30, 2019 and December 31, 2018, respectively

 

 

 

 

 

 

Common stock, $0.01 par value; 50,000,000 shares authorized; 17,645,720 and

   8,645,720 shares issued and outstanding at June 30, 2019 and

   December 31, 2018, respectively

 

 

176,457

 

 

 

86,457

 

Additional paid-in capital

 

 

170,190,415

 

 

 

165,313,902

 

Accumulated deficit

 

 

(168,524,652

)

 

 

(162,078,525

)

Accumulated other comprehensive loss

 

 

(15,217

)

 

 

(13,093

)

Total stockholders’ equity

 

 

1,827,003

 

 

 

3,308,741

 

Total liabilities and stockholders’ equity

 

$

8,932,114

 

 

$

8,950,363

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

4


 

OpGen, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product sales

 

$

504,293

 

 

$

632,525

 

 

$

1,024,470

 

 

$

1,266,021

 

 

Laboratory services

 

 

5,250

 

 

 

1,100

 

 

 

5,250

 

 

 

9,790

 

 

Collaboration revenue

 

 

500,000

 

 

 

155,276

 

 

 

1,000,000

 

 

 

359,316

 

 

Total revenue

 

 

1,009,543

 

 

 

788,901

 

 

 

2,029,720

 

 

 

1,635,127

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of products sold

 

 

198,493

 

 

 

303,663

 

 

 

419,195

 

 

 

646,495

 

 

Cost of services

 

 

251,981

 

 

 

179,402

 

 

 

396,463

 

 

 

347,955

 

 

Research and development

 

 

1,153,584

 

 

 

1,304,388

 

 

 

2,929,966

 

 

 

2,534,817

 

 

General and administrative

 

 

1,592,845

 

 

 

1,831,063

 

 

 

3,340,430

 

 

 

3,621,585

 

 

Sales and marketing

 

 

393,567

 

 

 

426,297

 

 

 

765,800

 

 

 

756,070

 

 

Impairment of right-of-use asset

 

 

 

 

 

 

 

 

520,759

 

 

 

 

 

Total operating expenses

 

 

3,590,470

 

 

 

4,044,813

 

 

 

8,372,613

 

 

 

7,906,922

 

 

Operating loss

 

 

(2,580,927

)

 

 

(3,255,912

)

 

 

(6,342,893

)

 

 

(6,271,795

)

 

Other (expense) income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

15,166

 

 

 

5

 

 

 

(9,256

)

 

 

5,303

 

 

Interest expense

 

 

(37,129

)

 

 

(54,533

)

 

 

(93,573

)

 

 

(112,379

)

 

Foreign currency transaction gains (losses)

 

 

9,879

 

 

 

(21,762

)

 

 

(472

)

 

 

(9,581

)

 

Change in fair value of derivative financial instruments

 

 

 

 

 

(11

)

 

 

67

 

 

 

8,155

 

 

Total other expense

 

 

(12,084

)

 

 

(76,301

)

 

 

(103,234

)

 

 

(108,502

)

 

Loss before income taxes

 

 

(2,593,011

)

 

 

(3,332,213

)

 

 

(6,446,127

)

 

 

(6,380,297

)

 

Provision for income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

(2,593,011

)

 

 

(3,332,213

)

 

 

(6,446,127

)

 

 

(6,380,297

)

 

Net loss available to common stockholders

 

$

(2,593,011

)

 

$

(3,332,213

)

 

$

(6,446,127

)

 

$

(6,380,297

)

 

Net loss per common share - basic and diluted

 

$

(0.15

)

 

$

(0.57

)

 

$

(0.48

)

 

$

(1.29

)

 

Weighted average shares outstanding - basic and diluted

 

 

17,645,720

 

 

 

5,826,947

 

 

 

13,518,648

 

 

 

4,950,517

 

 

Net loss

 

$

(2,593,011

)

 

$

(3,332,213

)

 

$

(6,446,127

)

 

$

(6,380,297

)

 

Other comprehensive (loss) gain  - foreign currency translations

 

 

(4,950

)

 

 

18,113

 

 

 

(2,124

)

 

 

5,534

 

 

Comprehensive loss

 

$

(2,597,961

)

 

$

(3,314,100

)

 

$

(6,448,251

)

 

$

(6,374,763

)

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5


 

OpGen, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)

 

 

 

Common Stock

 

 

Preferred Stock

 

 

Additional

 

 

Accumulated

Other

 

 

 

 

 

 

 

 

 

 

 

Number of

Shares

 

 

Amount

 

 

Number of

Shares

 

 

Amount

 

 

Paid-

in Capital

 

 

Comprehensive

Loss

 

 

Accumulated

Deficit

 

 

Total

 

Balances at December 31, 2017

 

 

2,265,320

 

 

$

22,653

 

 

 

 

 

 

 

 

$

150,114,671

 

 

$

(25,900

)

 

$

(148,710,427

)

 

$

1,400,997

 

Public offering of common stock and warrants, net of issuance costs

 

 

3,019,230

 

 

 

30,192

 

 

 

 

 

 

 

 

 

10,691,208

 

 

 

 

 

 

 

 

 

10,721,400

 

Issuance of RSUs

 

 

5,400

 

 

 

54

 

 

 

 

 

 

 

 

 

(54

)

 

 

 

 

 

 

 

 

 

Stock compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

238,190

 

 

 

 

 

 

 

 

 

238,190

 

Stock cancellation

 

 

(31

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,579

)

 

 

 

 

 

(12,579

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,048,084

)

 

 

(3,048,084

)

Balances at March 31, 2018

 

 

5,289,919

 

 

$

52,899

 

 

 

 

 

 

 

 

$

161,044,015

 

 

$

(38,479

)

 

$

(151,758,511

)

 

$

9,299,924

 

Public offering of common stock and warrants, net of issuance costs

 

 

673,077

 

 

 

6,731

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,731

 

At the market offering, net of offering costs

 

 

104,043

 

 

 

1,040

 

 

 

 

 

 

 

 

 

191,280

 

 

 

 

 

 

 

 

 

192,320

 

Stock compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

213,890

 

 

 

 

 

 

 

 

 

213,890

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18,113

 

 

 

 

 

 

18,113

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,332,213

)

 

 

(3,332,213

)

Balances at June 30, 2018

 

 

6,067,039

 

 

$

60,670

 

 

 

 

 

 

 

 

$

161,449,185

 

 

$

(20,366

)

 

$

(155,090,724

)

 

$

6,398,765

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2018

 

 

8,645,720

 

 

$

86,457

 

 

 

 

 

 

 

 

$

165,313,902

 

 

$

(13,093

)

 

$

(162,078,525

)

 

$

3,308,741

 

Public offering of common stock and warrants, net of issuance costs

 

 

9,000,000

 

 

 

90,000

 

 

 

 

 

 

 

 

 

4,692,509

 

 

 

 

 

 

 

 

 

4,782,509

 

Stock compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

98,033

 

 

 

 

 

 

 

 

 

98,033

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,826

 

 

 

 

 

 

2,826

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,853,116

)

 

 

(3,853,116

)

Balances at March 31, 2019

 

 

17,645,720

 

 

$

176,457

 

 

 

 

 

 

 

 

$

170,104,444

 

 

$

(10,267

)

 

$

(165,931,641

)

 

$

4,338,993

 

Stock compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

85,971

 

 

 

 

 

 

 

 

 

85,971

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,950

)

 

 

 

 

 

(4,950

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,593,011

)

 

 

(2,593,011

)

Balances at June 30, 2019

 

 

17,645,720

 

 

$

176,457

 

 

 

 

 

 

 

 

$

170,190,415

 

 

$

(15,217

)

 

$

(168,524,652

)

 

$

1,827,003

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

 

 

6


 

 

 

OpGen, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(6,446,127

)

 

$

(6,380,297

)

Adjustments to reconcile net loss to net cash used in operating activities

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

450,952

 

 

 

317,652

 

Noncash interest expense

 

 

43,371

 

 

 

94,594

 

Stock compensation expense

 

 

184,004

 

 

 

452,080

 

Loss (gain) on sale of equipment

 

 

9,904

 

 

 

(5,253

)

Change in fair value of warrant liability

 

 

(67

)

 

 

(8,155

)

Impairment of right-of-use asset

 

 

520,759

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(399,528

)

 

 

291,273

 

Inventory

 

 

(23,824

)

 

 

(81,321

)

Other assets

 

 

429,558

 

 

 

(235,835

)

Accounts payable

 

 

(301,376

)

 

 

(219,565

)

Accrued compensation and other liabilities

 

 

(285,953

)

 

 

226,611

 

Deferred revenue

 

 

(5,831

)

 

 

(10,320

)

Net cash used in operating activities

 

 

(5,824,158

)

 

 

(5,558,536

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(24,680

)

 

 

(4,457

)

Proceeds from sale of equipment

 

 

29,250

 

 

 

10,440

 

Net cash provided by investing activities

 

 

4,570

 

 

 

5,983

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock, net of issuance costs

 

 

4,782,509

 

 

 

192,320

 

Proceeds from issuance of units, net of selling costs

 

 

 

 

 

10,728,131

 

Proceeds from debt, net of issuance costs

 

 

15,481

 

 

 

309,900

 

Payments on debt

 

 

(237,414

)

 

 

(55,582

)

Payments on finance leases

 

 

(235,600

)

 

 

(107,871

)

Net cash provided by financing activities

 

 

4,324,976

 

 

 

11,066,898

 

Effects of exchange rates on cash

 

 

(1,321

)

 

 

5,587

 

Net (decrease) increase in cash, cash equivalents and restricted cash

 

 

(1,495,933

)

 

 

5,519,932

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

4,737,207

 

 

 

2,090,551

 

Cash, cash equivalents and restricted cash at end of period

 

$

3,241,274

 

 

$

7,610,483

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

97,599

 

 

$

17,785

 

Supplemental disclosures of noncash investing and financing activities:

 

 

 

 

 

 

 

 

Right-of-use assets acquired through finance leases

 

$

291,936

 

 

$

281,153

 

Conversion of accounts payable to finance lease

 

$

63,600

 

 

$

174,968

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

 

 

 

 

 

 

 

 

7


 

OpGen, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2019

 

Note 1 – Organization

OpGen, Inc. (“OpGen” or the “Company”) was incorporated in Delaware in 2001. References in this report to the “Company” include OpGen and its wholly-owned subsidiaries. The Company’s headquarters and its principal operations are in Gaithersburg, Maryland. The Company also has operations in Copenhagen, Denmark, and Bogota, Colombia. The Company operates in one business segment.

 

OpGen is a precision medicine company harnessing the power of molecular diagnostics and informatics to help combat infectious disease. The Company is developing molecular information products and services for global healthcare settings, helping to guide clinicians with more rapid and actionable information about life threatening infections, improve patient outcomes, and decrease the spread of infections caused by multidrug-resistant microorganisms, or MDROs. Its proprietary DNA tests and informatics address the rising threat of antibiotic resistance by helping physicians and other healthcare providers optimize care decisions for patients with acute infections.  

 

The Company’s molecular diagnostics and informatics products, product candidates and services combine its Acuitas molecular diagnostics and Acuitas Lighthouse informatics platform for use with its proprietary, curated MDRO knowledgebase. The Company is working to deliver products and services, some in development, to a global network of customers and partners.

 

 

The Company’s Acuitas molecular diagnostic tests provide rapid microbial identification and antibiotic resistance gene information. These products include its Acuitas antimicrobial resistance, or AMR, Gene Panel (Urine) test in development for patients at risk for complicated urinary tract infection, or cUTI, and its Acuitas AMR Gene Panel (Isolates) test in development for testing bacterial isolates, and its QuickFISH and PNA FISH FDA-cleared and CE-marked diagnostics used to rapidly detect pathogens in positive blood cultures.  Each of the Acuitas AMR Gene Panel tests is available for sale for research use only, or RUO.

 

The Company’s Acuitas Lighthouse informatics systems are cloud-based HIPAA compliant informatics offerings that combine clinical lab test results with patient and hospital information to provide analytics and actionable insights to help manage MDROs in the hospital and patient care environment. Components of the informatics systems include the Acuitas Lighthouse Knowledgebase and the Acuitas Lighthouse Software. The Acuitas Lighthouse Knowledgebase is a relational database management system and a proprietary data warehouse of genomic data matched with antibiotic susceptibility information for bacterial pathogens.  The Acuitas Lighthouse Software system includes the Acuitas Lighthouse Portal, a suite of web applications and dashboards, the Acuitas Lighthouse Prediction Engine, which is a data analysis software, and other supporting software components.  The Acuitas Lighthouse Software can be customized and made specific to a healthcare facility or collaborator, such as a pharmaceutical company. The Acuitas Lighthouse Software is not distributed commercially for antibiotic resistance prediction and is not for use in diagnostic procedures.

The Company’s operations are subject to certain risks and uncertainties. The risks include the risk that the Company will not receive 510(k) clearance for its Acuitas AMR Gene Panel tests and Acuitas Lighthouse Software on a timely basis, or at all, rapid technology changes, the need to retain key personnel, the need to protect intellectual property and the need to raise additional capital financing on terms acceptable to the Company. The Company’s success depends, in part, on its ability to develop, obtain regulatory approval for and commercialize its proprietary technology as well as raise additional capital.

 

 

Note 2 – Liquidity and management’s plans

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Since inception, the Company has incurred, and continues to incur, significant losses from operations. The Company has funded its operations primarily through external investor financing transactions, including the following in 2018 and 2019 to date:

 

On March 29, 2019,  the Company closed a public offering (the “March 2019 Public Offering”) of 9,000,000 shares of its common stock at a public offering price of $0.60 per share. The offering raised gross proceeds of $5.4 million and net proceeds of approximately $4.8 million.

 

On October 22, 2018, the Company closed a public offering (the “October 2018 Public Offering”) of 2,220,000 shares of its common stock at a public offering price of $1.45 per share. The offering raised gross proceeds of approximately $3.2 million and net proceeds of approximately $2.8 million.

 

 

On June 11, 2018, the Company executed an Allonge (the “Allonge”) to its Second Amended and Restated Senior Secured Promissory Note, dated June 28, 2017, with a principal amount of $1,000,000 issued to Merck Global Health Innovation Fund, LLC (“MGHIF”).  The Allonge provided that accrued and unpaid interest of $285,512 due as of July 14, 2018, the

8


 

 

original maturity date, be paid through the issuance of shares of OpGen’s common stock in a private placement transaction. In addition, the Allonge revised and extended the maturity date for payment of the Promissory Note to six semi-annual payments of $166,667 plus accrued and unpaid interest beginning on January 2, 2019 and ending on July 1, 2021. On July 30, 2018, the Company issued 144,238 shares of common stock to MGHIF in a private placement transaction for $285,512 of accrued and unpaid interest due as of July 14, 2018 under the MGHIF Note.

 

On February 6, 2018, the Company closed a public offering (the “February 2018 Public Offering”) of 2,841,152 units at $3.25 per unit, and 851,155 pre-funded units at $3.24 per pre-funded unit, raising gross proceeds of approximately $12 million and net proceeds of approximately $10.7 million.  Each unit included one share of common stock and one common warrant to purchase 0.5 share of common stock at an exercise price of $3.25 per share.  Each pre-funded unit included one pre-funded warrant to purchase one share of common stock for an exercise price of $0.01 per share, and one common warrant to purchase 0.5 share of common stock at an exercise price of $3.25 per share. The common warrants are exercisable immediately and have a five-year term from the date of issuance. The 851,155 pre-funded warrants issued in the February 2018 Public Offering were exercised during the year ended December 31, 2018. 

 

On September 13, 2016, the Company entered into the Sales Agreement (the “Sales Agreement”) with Cowen and Company LLC (“Cowen”) pursuant to which the Company could offer and sell from time to time, up to an aggregate of $25 million of shares of its common stock through Cowen, as sales agent, with initial sales limited to an aggregate of $11.5 million. During the year ended December 31, 2018, the Company sold 318,236 shares of its common stock under this at the market offering resulting in aggregate net proceeds to the Company of approximately $0.6 million, and gross proceeds of $0.6 million. The at the market offering was terminated in connection with the October 2018 Public Offering.

To meet its capital needs, the Company is considering multiple alternatives, including, but not limited to, strategic financings or other transactions, additional equity financings, debt financings and other funding transactions, licensing and/or partnering arrangements and business combination transactions. There can be no assurance that the Company will be able to complete any such transaction on acceptable terms or otherwise. The Company believes that current cash will be sufficient to fund operations into the third quarter of 2019. This has led management to conclude that substantial doubt about the Company’s ability to continue as a going concern exists.  In the event the Company is unable to successfully raise additional capital during or before the end of the third quarter of 2019, the Company will not have sufficient cash flows and liquidity to finance its business operations as currently contemplated. Accordingly, in such circumstances the Company would be compelled to immediately reduce general and administrative expenses and delay research and development projects, including the purchase of scientific equipment and supplies, until it is able to obtain sufficient financing. If such sufficient financing is not received on a timely basis, the Company would then need to pursue a plan to license or sell its assets, seek to be acquired by another entity, cease operations and/or seek bankruptcy protection.

 

 

Note 3 – Summary of significant accounting policies

Basis of presentation and consolidation

The Company has prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and the standards of accounting measurement set forth in the Interim Reporting Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted, although the Company believes that the disclosures made are adequate to make the information not misleading. The Company recommends that the unaudited condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s 2018 Annual Report on Form 10-K. In the opinion of management, all adjustments that are necessary for a fair presentation of the Company’s financial position for the periods presented have been reflected. All adjustments are of a normal, recurring nature, unless otherwise stated. The interim condensed consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year. The December 31, 2018 consolidated balance sheet included herein was derived from the audited consolidated financial statements, but does not include all disclosures including notes required by GAAP for complete financial statements.

The accompanying unaudited condensed consolidated financial statements include the accounts of OpGen and its wholly-owned subsidiaries; all intercompany transactions and balances have been eliminated.

9


 

Foreign currency

The Company has subsidiaries located in Copenhagen, Denmark, and Bogota, Colombia, both of which use currencies other than the U.S dollar as their functional currency. As a result, all assets and liabilities are translated into U.S. dollars based on exchange rates at the end of the reporting period. Income and expense items are translated at the average exchange rates prevailing during the reporting period. Translation adjustments are reported in accumulated other comprehensive loss, a component of stockholders’ equity. Foreign currency translation adjustments are the sole component of accumulated other comprehensive loss at June 30, 2019 and December 31, 2018.

Foreign currency transaction gains and losses, excluding gains and losses on intercompany balances where there is no current intent to settle such amounts in the foreseeable future, are included in the determination of net loss.  Unless otherwise noted, all references to “$” or “dollar” refer to the U.S. dollar.

Use of estimates

In preparing financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the 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. In the accompanying unaudited condensed consolidated financial statements, estimates are used for, but not limited to, liquidity assumptions, revenue recognition, stock-based compensation, allowances for doubtful accounts and inventory obsolescence, discount rates used to discount unpaid lease payments to present values, valuation of derivative financial instruments measured at fair value on a recurring basis, deferred tax assets and liabilities and related valuation allowance, the estimated useful lives of long-lived assets, and the recoverability of long-lived assets. Actual results could differ from those estimates.

Fair value of financial instruments

Financial instruments classified as current assets and liabilities (including cash and cash equivalent, receivables, accounts payable, deferred revenue and short-term notes) are carried at cost, which approximates fair value, because of the short-term maturities of those instruments.

Cash, cash equivalents and restricted cash

The Company considers all highly liquid instruments with original maturities of three months or less to be cash equivalents. The Company has cash and cash equivalents deposited in financial institutions in which the balances occasionally exceed the federal government agency (“FDIC”) insured limit of $250,000. The Company has not experienced any losses in such accounts and management believes it is not exposed to any significant credit risk. 

At June 30, 2019, the Company has funds totaling $185,380, which are required as collateral for letters of credit benefiting its landlords and for credit card processors. At December 31, 2018, the Company had funds totaling $164,720, which are required as collateral for letters of credit benefiting its landlords and for credit card processors. These funds are reflected in other noncurrent assets on the accompanying unaudited condensed consolidated balance sheets.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the statements of cash flows:

 

 

 

June 30, 2019

 

 

December 31, 2018

 

 

June 30, 2018

 

 

December 31, 2017

 

Cash and cash equivalents

 

$

3,055,894

 

 

$

4,572,487

 

 

$

7,428,993

 

 

$

1,847,171

 

Restricted cash

 

 

185,380

 

 

 

164,720

 

 

 

181,490

 

 

 

243,380

 

Total cash, cash equivalents and restricted cash in the condensed consolidated statement of cash flows

 

$

3,241,274

 

 

$

4,737,207

 

 

$

7,610,483

 

 

$

2,090,551

 

 

Accounts receivable

The Company’s accounts receivable result from revenues earned but not yet collected from customers. Credit is extended based on an evaluation of a customer’s financial condition and, generally, collateral is not required. Accounts receivable are due within 30 to 60 days and are stated at amounts due from customers. The Company evaluates if an allowance is necessary by considering a number of factors, including the length of time accounts receivable are past due, the Company’s previous loss history and the customer’s current

10


 

ability to pay its obligation. If amounts become uncollectible, they are charged to operations when that determination is made. The allowance for doubtful accounts was $22,309 and $18,332 as of June 30, 2019 and December 31, 2018, respectively.

One individual customer represented 50% and 19% of revenues for the three months ended June 30, 2019 and 2018, respectively. One individual customer represented   49% and 21% of revenues for the six months ended June 30, 2019 and 2018, respectively. At June 30, 2019, one individual customer represented 65% of total accounts receivable.  At December 31, 2018, one individual customer represented 12% of total accounts receivable.

Inventory

Inventories are valued using the first-in, first-out method and stated at the lower of cost or net realizable value and consist of the following: 

 

 

 

June 30, 2019

 

 

December 31, 2018

 

Raw materials and supplies

 

$

237,500

 

 

$

368,438

 

Work-in-process

 

 

135,916

 

 

 

58,402

 

Finished goods

 

 

194,006

 

 

 

116,907

 

Total

 

$

567,422

 

 

$

543,747

 

 

Inventory includes reagents and components for QuickFISH and PNA FISH kit products, and reagents and supplies used for the Company’s laboratory services. Inventory reserves for obsolescence and expirations were $114,327 and $71,270 at June 30, 2019 and December 31, 2018, respectively.

Long-lived assets

Property and equipment

Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. Recoverability measurement and estimating of undiscounted cash flows is done at the lowest possible level for which we can identify assets. If such assets are considered to be impaired, impairment is recognized as the amount by which the carrying amount of assets exceeds the fair value of the assets. During the three and six months ended June 30, 2019 and 2018, the Company determined that its property and equipment was not impaired.

 

Leases

 

The Company determines if an arrangement is a lease at inception. For leases where the Company is the lessee, right-of-use (“ROU”) assets represent the Company’s right to use the underlying asset for the term of the lease and the lease liabilities represent an obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of the future lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at the commencement date of the underlying lease arrangement to determine the present value of lease payments. The ROU asset also includes any prepaid lease payments and any lease incentives received. The lease term to calculate the ROU asset and related lease liability includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise the option. The Company’s lease agreements generally do not contain any material variable lease payments, residual value guarantees or restrictive covenants.

 

Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense while expense for financing leases is recognized as depreciation expense and interest expense using the accelerated interest method of recognition. The Company has made certain accounting policy elections whereby the Company (i) does not recognize ROU assets or lease liabilities for short-term leases (those with original terms of 12 months or less) and (ii) combines lease and non-lease elements of our operating leases.  

 

ROU assets

ROU assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. Recoverability measurement and estimating of undiscounted cash flows is done at the lowest possible level for which the Company can identify assets. If such assets are considered to be impaired, impairment is recognized as the amount by which the carrying amount of assets exceeds the fair value of the assets. In

11


 

conjunction with adoption of Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) (“ASC 842”), the Company determined that the ROU asset associated with its Woburn, Massachusetts office lease may not be recoverable. As a result, the Company recorded an impairment charge of $520,759 during the six months ended June 30, 2019.

Intangible assets and goodwill

Intangible assets and goodwill as of June 30, 2019 consist of finite-lived intangible assets and goodwill.

Finite-lived intangible assets

Finite-lived intangible assets include trademarks, developed technology and customer relationships and consisted of the following as of June 30, 2019 and December 31, 2018:

 

 

 

 

 

 

 

June 30, 2019

 

 

December 31, 2018

 

 

 

Cost

 

 

Accumulated

Amortization

 

 

Net Balance