UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON,
Washington, D.C. 20549
FORM 10-Q
(Mark one)
| ☒ | QUARTERLY REPORT |
For the quarterly periodfiscal year ended September 30, 20222023
or
| ☐ | TRANSITION REPORT |
For the transition period from _______ to _______.
Commission File Numberfile 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.
| |
| 9717 Key West Avenue, Suite 100 | ||
| Rockville, MD | 20850 | |
| (Address of principal executive offices) | (Zip | |
(240) 813-1260
(Registrant’s telephone number, including area code: (240) 813-1260code)
Securities registered or to be registered pursuant to Section 12(b) of the Act.Act:
| Title of each class | Trading Symbols | Name of each exchange on which registered |
| Common Stock | OPGN | Nasdaq Capital Market |
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 ☒YES No ☒ 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 ☒YES No ☒ 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 YES ☐ No NO ☒
53,698,500
10,013,524 shares of the Company’s common stock, par value $0.01 per share, were outstanding as of November 10, 2022.14, 2023.
OPGEN, INC.
TABLE OF CONTENTS FOR FORM 10-Q
| 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 I Item 1A “Risk Factors” of our most recent annual report on Form 10-K and any risk factors included in Part II Item 1A “Risk Factors.”Factors” of this quarterly report on Form 10-Q. 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; |
| ● | the impact, timing, outcome and risks of the independent insolvency proceedings of our subsidiaries Curetis GmbH and Ares Genetics GmbH; |
| ● | the result of our efforts to mitigate the Company’s cash position, including restructuring or refinancing of our debt, seeking additional debt or equity capital, reducing or delaying our business activities, selling assets, other strategic transactions or other measures, including obtaining relief under U.S. bankruptcy or foreign insolvency laws, and the terms, value and timing of any transaction resulting from such efforts; |
| ● | our |
| ● | our ability to satisfy our debt obligations, including following and in connection with our subsidiaries’ insolvency proceedings; |
| ● | our ability to maintain compliance with the ongoing listing requirements for the Nasdaq Capital Market; |
| ● | the finalization of the FDA De Novo request review and eventual clearance decision for Unyvero UTI; |
| ● | the completion of our development efforts for our |
| ● | our ability to meet our obligations and extend our relationships under our collaboration |
| ● | our ability to obtain regulatory clearance for and commercialize our product and services offerings; |
| ● | our ability to |
| ● | regulations and changes in laws or regulations applicable to our business, including regulation by the FDA, European Union, including new IVDR requirements, and China’s NMPA; |
| ● |
| adverse effects on our business condition and results of operations from general economic and market conditions and overall fluctuations in the United States and international markets, including deteriorating market conditions due to investor concerns regarding inflation, |
| ● | adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults or non-performance by financial institutions that could adversely affect our business, financial condition or results of operations; |
| ● | our use of proceeds from capital financing transactions; |
| ● | 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. |
| 3 |
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 I Item 1A “Risk Factors” of our most recent annual report on Form 10-K and any risk factors included 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 but not limited to OpGen®, Curetis®, Unyvero®, ARES® and ARES GENETICS®, and Acuitas®. 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.
| 4 |
Part I. FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements
OpGen, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(unaudited)
| September 30, 2022 | December 31, 2021 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 10,275,654 | $ | 36,080,392 | ||||
| Accounts receivable, net | 665,313 | 1,172,396 | ||||||
| Inventory | 771,864 | 1,239,456 | ||||||
| Prepaid expenses and other current assets | 1,678,729 | 1,250,331 | ||||||
| Total current assets | 13,391,560 | 39,742,575 | ||||||
| Property and equipment, net | 3,054,990 | 4,011,748 | ||||||
| Finance lease right-of-use assets, net | 4,347 | 90,467 | ||||||
| Operating lease right-of-use assets | 1,472,934 | 1,814,396 | ||||||
| Goodwill | — | 7,453,007 | ||||||
| Intangible assets, net | 12,001,036 | 14,530,209 | ||||||
| Strategic inventory, net | 2,614,805 | 3,472,337 | ||||||
| Other noncurrent assets | 419,495 | 551,794 | ||||||
| Total assets | $ | 32,959,167 | $ | 71,666,533 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 682,592 | $ | 1,307,081 | ||||
| Accrued compensation and benefits | 1,391,145 | 1,621,788 | ||||||
| Accrued liabilities | 1,046,865 | 1,965,845 | ||||||
| Deferred revenue | 194,960 | — | ||||||
| Current maturities of long-term debt | 8,342,715 | 14,519,113 | ||||||
| Short-term finance lease liabilities | 6,748 | 43,150 | ||||||
| Short-term operating lease liabilities | 346,629 | 459,792 | ||||||
| Total current liabilities | 12,011,654 | 19,916,769 | ||||||
| Long-term debt, net | 4,108,421 | 7,176,251 | ||||||
| Long-term finance lease liabilities | 1,121 | 3,644 | ||||||
| Long-term operating lease liabilities | 2,631,957 | 2,977,402 | ||||||
| Derivative liabilities | 146,207 | 228,589 | ||||||
| Other long-term liabilities | 121,496 | 146,798 | ||||||
| Total liabilities | 19,020,856 | 30,449,453 | ||||||
| Commitments and contingencies (Note 8) | ||||||||
| Stockholders’ equity | ||||||||
| Preferred stock, $0.01 par value; 10,000,000 shares authorized; none issued and outstanding at September 30, 2022 and December 31, 2021 | — | — | ||||||
| Common stock, $0.01 par value; 100,000,000 shares authorized; 48,338,500 and 46,450,250 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively | 483,386 | 464,503 | ||||||
| Additional paid-in capital | 277,406,700 | 275,708,490 | ||||||
| Accumulated deficit | (262,289,652 | ) | (235,541,539 | ) | ||||
| Accumulated other comprehensive (loss) income | (1,662,123 | ) | 585,626 | |||||
| Total stockholders’ equity | 13,938,311 | 41,217,080 | ||||||
| Total liabilities and stockholders’ equity | $ | 32,959,167 | $ | 71,666,533 | ||||
| September 30, 2023 | December 31, 2022 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 292,642 | $ | 7,440,030 | ||||
| Accounts receivable, net | 422,725 | 514,372 | ||||||
| Inventory, net | 1,198,259 | 1,345,137 | ||||||
| Prepaid expenses and other current assets | 1,541,074 | 1,355,949 | ||||||
| Total current assets | 3,454,700 | 10,655,488 | ||||||
| Property and equipment, net | 3,820,829 | 3,457,531 | ||||||
| Finance lease right-of-use assets, net | 986 | 3,500 | ||||||
| Operating lease right-of-use assets | 1,915,049 | 1,459,413 | ||||||
| Intangible assets, net | 6,842,406 | 7,440,974 | ||||||
| Strategic inventory | 1,608,890 | 2,300,614 | ||||||
| Other noncurrent assets | 492,022 | 495,629 | ||||||
| Total assets | $ | 18,134,882 | $ | 25,813,149 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities | ||||||||
| Current maturities of long-term debt | $ | 9,199,764 | $ | 7,023,901 | ||||
| Accounts payable | 904,559 | 420,821 | ||||||
| Accrued compensation and benefits | 381,807 | 1,097,654 | ||||||
| Accrued liabilities | 1,268,723 | 1,526,204 | ||||||
| Deferred revenue | 194,687 | 142,061 | ||||||
| Short-term finance lease liabilities | 1,121 | 3,364 | ||||||
| Short-term operating lease liabilities | 521,424 | 377,626 | ||||||
| Total current liabilities | 12,472,085 | 10,591,631 | ||||||
| Long-term debt, net | — | 4,850,686 | ||||||
| Derivative liabilities | 34,364 | 99,498 | ||||||
| Long-term finance lease liabilities | — | 280 | ||||||
| Long-term operating lease liabilities | 2,830,282 | 2,566,138 | ||||||
| Other long-term liabilities | 121,428 | 129,368 | ||||||
| Total liabilities | 15,458,159 | 18,237,601 | ||||||
| Commitments and contingencies (Note 8) | ||||||||
| Stockholders’ equity | ||||||||
| Preferred stock, $0.01 par value; 10,000,000 shares authorized; none issued and outstanding at September 30, 2023 and December 31, 2022 | — | — | ||||||
| Common stock, $0.01 par value; 100,000,000 shares authorized; 10,013,524 and 2,899,911 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively | 100,135 | 28,999 | ||||||
| Additional paid-in capital | 291,705,905 | 281,167,161 | ||||||
| Accumulated deficit | (288,451,655 | ) | (272,824,772 | ) | ||||
| Accumulated other comprehensive loss | (677,662 | ) | (795,840 | ) | ||||
| Total stockholders’ equity | 2,676,723 | 7,575,548 | ||||||
| Total liabilities and stockholders’ equity | $ | 18,134,882 | $ | 25,813,149 | ||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 5 |
OpGen, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Loss
(unaudited)
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenue | ||||||||||||||||
| Product sales | $ | 359,112 | $ | 643,887 | $ | 1,614,435 | $ | 1,479,270 | ||||||||
| Laboratory services | 31,016 | 192,753 | 94,515 | 643,602 | ||||||||||||
| Collaboration revenue | 58,585 | 402,492 | 176,713 | 757,591 | ||||||||||||
| Total revenue | 448,713 | 1,239,132 | 1,885,663 | 2,880,463 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Cost of products sold | 1,886,191 | 648,298 | 2,824,577 | 1,544,932 | ||||||||||||
| Cost of services | 17,239 | 203,314 | 63,450 | 446,232 | ||||||||||||
| Research and development | 2,031,113 | 2,382,303 | 6,621,310 | 8,055,384 | ||||||||||||
| General and administrative | 2,020,452 | 2,088,226 | 6,779,773 | 7,444,138 | ||||||||||||
| Sales and marketing | 1,031,496 | 1,003,577 | 3,252,277 | 2,705,378 | ||||||||||||
| Impairment of right-of-use asset | — | — | — | 170,714 | ||||||||||||
| Goodwill impairment charge | 6,975,520 | — | 6,975,520 | — | ||||||||||||
| Total operating expenses | 13,962,011 | 6,325,718 | 26,516,907 | 20,366,778 | ||||||||||||
| Operating loss | (13,513,298 | ) | (5,086,586 | ) | (24,631,244 | ) | (17,486,315 | ) | ||||||||
| Other (expense) income | ||||||||||||||||
| Gain on extinguishment of debt | — | — | — | 259,353 | ||||||||||||
| Warrant inducement expense | — | — | — | (7,755,541 | ) | |||||||||||
| Interest and other income | 11,174 | 31,844 | 28,147 | 41,471 | ||||||||||||
| Interest expense | (569,306 | ) | (1,222,867 | ) | (2,618,799 | ) | (3,586,018 | ) | ||||||||
| Foreign currency transaction (losses) gains | (51,547 | ) | 229,074 | 419,160 | 655,774 | |||||||||||
| Change in fair value of derivative financial instruments | 18,995 | (8,161 | ) | 54,623 | (122,572 | ) | ||||||||||
| Total other expense | (590,684 | ) | (970,110 | ) | (2,116,869 | ) | (10,507,533 | ) | ||||||||
| Loss before income taxes | (14,103,982 | ) | (6,056,696 | ) | (26,748,113 | ) | (27,993,848 | ) | ||||||||
| Provision for income taxes | — | — | — | — | ||||||||||||
| Net loss | $ | (14,103,982 | ) | $ | (6,056,696 | ) | $ | (26,748,113 | ) | $ | (27,993,848 | ) | ||||
| Net loss available to common stockholders | $ | (14,103,982 | ) | $ | (6,056,696 | ) | $ | (26,748,113 | ) | $ | (27,993,848 | ) | ||||
| Net loss per common share - basic and diluted | $ | (0.30 | ) | $ | (0.16 | ) | $ | (0.57 | ) | $ | (0.79 | ) | ||||
| Weighted average shares outstanding - basic and diluted | 47,656,972 | 38,270,250 | 46,915,880 | 35,373,397 | ||||||||||||
| Net loss | $ | (14,103,982 | ) | $ | (6,056,696 | ) | $ | (26,748,113 | ) | $ | (27,993,848 | ) | ||||
| Other comprehensive loss - foreign currency translation | (536,758 | ) | (597,527 | ) | (2,247,749 | ) | (1,146,355 | ) | ||||||||
| Comprehensive loss | $ | (14,640,740 | ) | $ | (6,654,223 | ) | $ | (28,995,862 | ) | $ | (29,140,203 | ) | ||||
See accompanying notes to unaudited condensed consolidated financial statements.
OpGen, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
(unaudited)
| Common Stock | Preferred Stock | |||||||||||||||||||||||||||||||
Number of Shares | Amount | Number of Shares | Amount | Additional Paid- in Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total | |||||||||||||||||||||||||
| Balances at December 31, 2020 | 25,085,534 | $ | 250,855 | — | $ | — | $ | 219,129,045 | $ | 2,547,182 | $ | (200,735,827 | ) | $ | 21,191,255 | |||||||||||||||||
| Offering of common stock and warrants, net of issuance costs | 8,333,333 | 83,334 | — | — | 23,390,628 | — | — | 23,473,962 | ||||||||||||||||||||||||
| Inducement expense related to warrant reprice | — | — | — | — | 7,755,541 | — | — | 7,755,541 | ||||||||||||||||||||||||
| Common stock warrant exercises, net of issuance costs | 4,847,615 | 48,476 | — | — | 9,045,696 | — | — | 9,094,172 | ||||||||||||||||||||||||
| Proceeds from issuance of common stock warrants | — | — | — | — | 255,751 | — | — | 255,751 | ||||||||||||||||||||||||
| Stock compensation expense | — | — | — | — | 189,670 | — | — | 189,670 | ||||||||||||||||||||||||
| Foreign currency translation | — | — | — | — | — | (1,078,479 | ) | — | (1,078,479 | ) | ||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | (14,850,591 | ) | (14,850,591 | ) | ||||||||||||||||||||||
| Balances at March 31, 2021 | 38,266,482 | 382,665 | — | — | 259,766,331 | 1,468,703 | (215,586,418 | ) | 46,031,281 | |||||||||||||||||||||||
| Issuance of RSUs | 3,768 | 38 | — | — | (38 | ) | — | — | — | |||||||||||||||||||||||
| Stock compensation expense | — | — | — | — | 261,548 | — | — | 261,548 | ||||||||||||||||||||||||
| Foreign currency translation | — | — | — | — | — | 529,651 | — | 529,651 | ||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | (7,086,561 | ) | (7,086,561 | ) | ||||||||||||||||||||||
| Balances at June 30, 2021 | 38,270,250 | 382,703 | — | — | 260,027,841 | 1,998,354 | (222,672,979 | ) | 39,735,919 | |||||||||||||||||||||||
| Stock compensation expense | — | — | — | — | 217,156 | — | — | 217,156 | ||||||||||||||||||||||||
| Foreign currency translation | — | — | — | — | — | (597,527 | ) | — | (597,527 | ) | ||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | (6,056,696 | ) | (6,056,696 | ) | ||||||||||||||||||||||
| Balances at September 30, 2021 | 38,270,250 | $ | 382,703 | — | $ | — | $ | 260,244,997 | $ | 1,400,827 | $ | (228,729,675 | ) | $ | 33,298,852 | |||||||||||||||||
| Balances at December 31, 2021 | 46,450,250 | $ | 464,503 | — | $ | — | $ | 275,708,490 | $ | 585,626 | $ | (235,541,539 | ) | $ | 41,217,080 | |||||||||||||||||
| Issuance of RSUs | 107,500 | 1,075 | — | — | (1,075 | ) | — | — | — | |||||||||||||||||||||||
| Stock compensation expense | — | — | — | — | 241,619 | — | — | 241,619 | ||||||||||||||||||||||||
| Foreign currency translation | — | — | — | — | — | (483,849 | ) | — | (483,849 | ) | ||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | (6,803,716 | ) | (6,803,716 | ) | ||||||||||||||||||||||
| Balances at March 31, 2022 | 46,557,750 | 465,578 | — | — | 275,949,034 | 101,777 | (242,345,255 | ) | 34,171,134 | |||||||||||||||||||||||
| Issuance of RSUs | 65,868 | 659 | — | — | (659 | ) | — | — | — | |||||||||||||||||||||||
| Stock compensation expense | — | — | — | — | 257,403 | — | — | 257,403 | ||||||||||||||||||||||||
| Foreign currency translation | — | — | — | — | — | (1,227,142 | ) | — | (1,227,142 | ) | ||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | (5,840,415 | ) | (5,840,415 | ) | ||||||||||||||||||||||
| Balances at June 30, 2022 | 46,623,618 | 466,237 | — | — | 276,205,778 | (1,125,365 | ) | (248,185,670 | ) | 27,360,980 | ||||||||||||||||||||||
| Stock compensation expense | — | — | — | — | 228,367 | — | — | 228,367 | ||||||||||||||||||||||||
| At the market offering, net of offering costs | 1,714,882 | 17,149 | — | — | 972,555 | — | — | 989,704 | ||||||||||||||||||||||||
| Foreign currency translation | — | — | — | — | — | (536,758 | ) | — | (536,758 | ) | ||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | (14,103,982 | ) | (14,103,982 | ) | ||||||||||||||||||||||
| Balances at September 30, 2022 | 48,338,500 | $ | 483,386 | — | $ | — | $ | 277,406,700 | $ | (1,662,123 | ) | $ | (262,289,652 | ) | $ | 13,938,311 | ||||||||||||||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenue | ||||||||||||||||
| Product sales | $ | 558,965 | $ | 359,112 | $ | 1,409,534 | $ | 1,614,435 | ||||||||
| Laboratory services | 47,135 | 31,016 | 112,810 | 94,515 | ||||||||||||
| Collaboration revenue | 92,922 | 58,585 | 826,257 | 176,713 | ||||||||||||
| Total revenue | 699,022 | 448,713 | 2,348,601 | 1,885,663 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Cost of products sold | 618,796 | 1,886,191 | 1,925,566 | 2,824,577 | ||||||||||||
| Cost of services | 73,174 | 17,239 | 405,582 | 63,450 | ||||||||||||
| Research and development | 1,201,865 | 2,031,113 | 4,403,488 | 6,621,310 | ||||||||||||
| General and administrative | 2,034,628 | 2,020,452 | 6,883,588 | 6,779,773 | ||||||||||||
| Sales and marketing | 336,184 | 1,031,496 | 2,522,471 | 3,252,277 | ||||||||||||
| Goodwill impairment charge | — | 6,975,520 | — | 6,975,520 | ||||||||||||
| Total operating expenses | 4,264,647 | 13,962,011 | 16,140,695 | 26,516,907 | ||||||||||||
| Operating loss | (3,565,625 | ) | (13,513,298 | ) | (13,792,094 | ) | (24,631,244 | ) | ||||||||
| Other (expense) income | ||||||||||||||||
| Interest and other income | 24,977 | 11,174 | 86,301 | 28,147 | ||||||||||||
| Interest expense | (396,768 | ) | (569,306 | ) | (1,698,564 | ) | (2,618,799 | ) | ||||||||
| Foreign currency transaction (losses) gains | (135,930 | ) | (51,547 | ) | (288,326 | ) | 419,160 | |||||||||
| Change in fair value of derivative financial instruments | 10,389 | 18,995 | 65,800 | 54,623 | ||||||||||||
| Total other expense | (497,332 | ) | (590,684 | ) | (1,834,789 | ) | (2,116,869 | ) | ||||||||
| Loss before income taxes | (4,062,957 | ) | (14,103,982 | ) | (15,626,883 | ) | (26,748,113 | ) | ||||||||
| Provision for income taxes | — | — | — | — | ||||||||||||
| Net loss | $ | (4,062,957 | ) | $ | (14,103,982 | ) | $ | (15,626,883 | ) | $ | (26,748,113 | ) | ||||
| Net loss available to common stockholders | $ | (4,062,957 | ) | $ | (14,103,982 | ) | $ | (15,626,883 | ) | $ | (26,748,113 | ) | ||||
| Net loss per common share – basic and diluted | $ | (0.46 | ) | $ | (5.92 | ) | $ | (2.38 | ) | $ | (11.40 | ) | ||||
| Weighted average shares outstanding – basic and diluted | 8,778,152 | 2,382,848 | 6,565,853 | 2,345,794 | ||||||||||||
| Net loss | $ | (4,062,957 | ) | $ | (14,103,982 | ) | $ | (15,626,883 | ) | $ | (26,748,113 | ) | ||||
| Other comprehensive income (loss) – foreign currency translation | 78,815 | (536,758 | ) | 118,178 | (2,247,749 | ) | ||||||||||
| Comprehensive loss | $ | (3,984,142 | ) | $ | (14,640,740 | ) | $ | (15,508,705 | ) | $ | (28,995,862 | ) | ||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 6 |
OpGen, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash FlowsStockholders’ Equity
(unaudited)
| Nine months ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | (26,748,113 | ) | $ | (27,993,848 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Depreciation and amortization | 1,307,590 | 2,107,323 | ||||||
| Non-cash interest expense | 1,973,437 | 2,967,775 | ||||||
| Loss on disposal of equipment | 15,988 | — | ||||||
| Change in inventory reserve | 1,447,626 | — | ||||||
| Stock compensation expense | 727,389 | 668,374 | ||||||
| Gain on extinguishment of debt | — | (259,353 | ) | |||||
| Inducement expense related to warrant reprice | — | 7,755,541 | ||||||
| Change in fair value of derivative liabilities | (54,623 | ) | 122,572 | |||||
| Impairment of right-of-use asset | — | 170,714 | ||||||
| Goodwill impairment charge | 6,975,520 | — | ||||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable | 386,704 | (118,755 | ) | |||||
| Inventory | (600,186 | ) | (1,891,760 | ) | ||||
| Other assets | (326,820 | ) | (353,371 | ) | ||||
| Accounts payable | (519,625 | ) | (667,480 | ) | ||||
| Accrued compensation and other liabilities | (1,250,476 | ) | (188,322 | ) | ||||
| Deferred revenue | 210,735 | (9,808 | ) | |||||
| Net cash used in operating activities | (16,454,854 | ) | (17,690,398 | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchases of property and equipment | (186,556 | ) | (1,824,765 | ) | ||||
| Net cash used in investing activities | (186,556 | ) | (1,824,765 | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from issuance of common stock warrants | — | 255,751 | ||||||
| Proceeds from issuance of common stock and pre-funded warrants in registered offering, net of selling costs | — | 23,473,962 | ||||||
| Proceeds from the exercise of common stock warrants, net of issuance costs | — | 9,094,172 | ||||||
| Payment of deferred offering costs | — | (108,794 | ) | |||||
| Proceeds from at the market offering, net of issuance costs | 989,704 | — | ||||||
| Payments on debt | (8,697,587 | ) | (441,076 | ) | ||||
| Payments on finance lease obligations | (38,925 | ) | (236,563 | ) | ||||
| Net cash (used in) provided by financing activities | (7,746,808 | ) | 32,037,452 | |||||
| Effects of exchange rates on cash | (1,548,819 | ) | (727,477 | ) | ||||
| Net (decrease) increase in cash and cash equivalents and restricted cash | (25,937,037 | ) | 11,794,812 | |||||
| Cash and cash equivalents and restricted cash at beginning of period | 36,632,186 | 14,107,255 | ||||||
| Cash and cash equivalents and restricted cash at end of period | $ | 10,695,149 | $ | 25,902,067 | ||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for interest | $ | 976,324 | $ | 886,796 | ||||
| Supplemental disclosures of non-cash investing and financing activities | ||||||||
| Right-of-use assets acquired through operating leases | $ | — | $ | 748,294 | ||||
| Inventory transferred to property and equipment | $ | — | $ | 559,230 | ||||
| Property and equipment transferred to inventory | $ | 152,243 | $ | — | ||||
| Common Stock | Preferred Stock | |||||||||||||||||||||||||||||||
Number of Shares | Amount | Number of Shares | Amount | Additional Paid- in Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total | |||||||||||||||||||||||||
| Balances at December 31, 2021 | 2,322,511 | $ | 23,225 | — | $ | — | $ | 276,149,768 | $ | 585,626 | $ | (235,541,539 | ) | $ | 41,217,080 | |||||||||||||||||
| Issuance of RSUs | 5,375 | 54 | — | — | (54 | ) | — | — | — | |||||||||||||||||||||||
| Stock compensation expense | — | — | — | — | 241,619 | — | — | 241,619 | ||||||||||||||||||||||||
| Foreign currency translation | — | — | — | — | — | (483,849 | ) | — | (483,849 | ) | ||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | (6,803,716 | ) | (6,803,716 | ) | ||||||||||||||||||||||
| Balances at March 31, 2022 | 2,327,886 | 23,279 | — | — | 276,391,333 | 101,777 | (242,345,255 | ) | 34,171,134 | |||||||||||||||||||||||
| Issuance of RSUs | 3,293 | 33 | — | — | (33 | ) | — | — | — | |||||||||||||||||||||||
| Stock compensation expense | — | — | — | — | 257,403 | — | — | 257,403 | ||||||||||||||||||||||||
| Foreign currency translation | — | — | — | — | — | (1,227,142 | ) | — | (1,227,142 | ) | ||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | (5,840,415 | ) | (5,840,415 | ) | ||||||||||||||||||||||
| Balances at June 30, 2022 | 2,331,179 | 23,312 | — | — | 276,648,703 | (1,125,365 | ) | (248,185,670 | ) | 27,360,980 | ||||||||||||||||||||||
| Stock compensation expense | — | — | — | — | 228,367 | — | — | 228,367 | ||||||||||||||||||||||||
| At the market offering, net of offering costs | 85,732 | 857 | — | — | 988,847 | — | — | 989,704 | ||||||||||||||||||||||||
| Foreign currency translation | — | — | — | — | — | (536,758 | ) | — | (536,758 | ) | ||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | (14,103,982 | ) | (14,103,982 | ) | ||||||||||||||||||||||
| Balances at September 30, 2022 | 2,416,911 | $ | 24,169 | — | $ | — | $ | 277,865,917 | $ | (1,662,123 | ) | $ | (262,289,652 | ) | $ | 13,938,311 | ||||||||||||||||
| Balances at December 31, 2022 | 2,899,911 | $ | 28,999 | — | $ | — | $ | 281,167,161 | $ | (795,840 | ) | $ | (272,824,772 | ) | $ | 7,575,548 | ||||||||||||||||
| Issuance of RSUs | 11,627 | 116 | — | — | (116 | ) | — | — | — | |||||||||||||||||||||||
| Stock compensation expense | — | — | — | — | 211,122 | — | — | 211,122 | ||||||||||||||||||||||||
| Offering of common stock and warrants, net of issuance costs | 2,586,207 | 25,862 | — | — | 6,948,188 | — | — | 6,974,050 | ||||||||||||||||||||||||
| Share cancellation | (2,199 | ) | (22 | ) | — | — | 22 | — | — | — | ||||||||||||||||||||||
| Foreign currency translation | — | — | — | — | — | 153,067 | — | 153,067 | ||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | (5,736,603 | ) | (5,736,603 | ) | ||||||||||||||||||||||
| Balances at March 31, 2023 | 5,495,546 | 54,955 | — | — | 288,326,377 | (642,773 | ) | (278,561,375 | ) | 9,177,184 | ||||||||||||||||||||||
| Issuance of RSUs | 22,153 | 222 | — | — | (222 | ) | — | — | — | |||||||||||||||||||||||
| Stock compensation expense | — | — | — | — | 156,529 | — | — | 156,529 | ||||||||||||||||||||||||
| Cash bonus taken in the form of stock compensation | — | — | — | — | 283,554 | — | — | 283,554 | ||||||||||||||||||||||||
| Offering of common stock and warrants, net of issuance costs | 1,450,000 | 14,500 | — | — | 3,169,150 | — | — | 3,183,650 | ||||||||||||||||||||||||
| Foreign currency translation | — | — | — | — | — | (113,704 | ) | — | (113,704 | ) | ||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | (5,827,323 | ) | (5,827,323 | ) | ||||||||||||||||||||||
| Balances at June 30, 2023 | 6,967,699 | 69,677 | — | — | 291,935,388 | (756,477 | ) | (284,388,698 | ) | 6,859,890 | ||||||||||||||||||||||
| Stock compensation expense | — | — | — | — | (229,483 | ) | — | — | (229,483 | ) | ||||||||||||||||||||||
| Offering of common stock and warrants, net of issuance costs | 3,045,825 | 30,458 | — | — | — | — | — | 30,458 | ||||||||||||||||||||||||
| Foreign currency translation | — | — | — | — | — | 78,815 | — | 78,815 | ||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | (4,062,957 | ) | (4,062,957 | ) | ||||||||||||||||||||||
| Balances at September 30, 2023 | 10,013,524 | $ | 100,135 | — | $ | — | $ | 291,705,905 | $ | (677,662 | ) | $ | (288,451,655 | ) | $ | 2,676,723 | ||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 7 |
OpGen, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(unaudited)
| Nine months ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | (15,626,883 | ) | $ | (26,748,113 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Depreciation and amortization | 1,070,581 | 1,307,590 | ||||||
| Noncash interest expense | 1,261,495 | 1,973,437 | ||||||
| Loss on disposal of equipment | — | 15,988 | ||||||
| Stock compensation expense | 138,168 | 727,389 | ||||||
| Change in inventory reserve | 535,755 | 1,447,626 | ||||||
| Cash bonus taken in the form of stock compensation | 283,554 | — | ||||||
| Change in fair value of derivative liabilities | (65,800 | ) | (54,623 | ) | ||||
| Goodwill impairment charge | — | 6,975,520 | ||||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable | 91,522 | 386,704 | ||||||
| Inventory | 290,366 | (600,186 | ) | |||||
| Other assets | 86,516 | (326,820 | ) | |||||
| Accounts payable | 399,197 | (519,625 | ) | |||||
| Accrued compensation and other liabilities | (1,161,958 | ) | (1,250,476 | ) | ||||
| Deferred revenue | 54,388 | 210,735 | ||||||
| Net cash used in operating activities | (12,643,099 | ) | (16,454,854 | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchases of property and equipment | (799,498 | ) | (186,556 | ) | ||||
| Net cash used in investing activities | (799,498 | ) | (186,556 | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from issuance of common stock and pre-funded warrants, net of issuance costs | 10,188,158 | — | ||||||
| Proceeds from at the market offering, net of issuance costs | — | 989,704 | ||||||
| Payments on debt | (3,910,010 | ) | (8,697,587 | ) | ||||
| Payments on finance lease obligations | (2,523 | ) | (38,925 | ) | ||||
| Net cash provided by (used in) financing activities | 6,275,625 | (7,746,808 | ) | |||||
| Effects of exchange rates on cash | 15,977 | (1,548,819 | ) | |||||
| Net decrease in cash and cash equivalents and restricted cash | (7,150,995 | ) | (25,937,037 | ) | ||||
| Cash and cash equivalents and restricted cash at beginning of period | 7,935,659 | 36,632,186 | ||||||
| Cash and cash equivalents and restricted cash at end of period | $ | 784,664 | $ | 10,695,149 | ||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for interest | $ | 1,422,343 | $ | 976,324 | ||||
| Supplemental disclosures of noncash investing and financing activities | ||||||||
| Right-of-use assets acquired through operating leases | $ | 801,321 | $ | — | ||||
| Property and equipment transferred to inventory | $ | — | $ | 152,243 | ||||
| Purchased equipment not yet paid for | $ | 94,784 | $ | — | ||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 8 |
OpGen, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 20222023
Note 1 – Organization
OpGen, Inc. (“OpGen” or the “Company”) was incorporated in Delaware in 2001. On April 1, 2020, OpGen completed its business combination transaction (the “Transaction”) with Curetis N.V., a public company with limited liability under the laws of the Netherlands (the “Seller” or “Curetis N.V.”), as contemplated by the Implementation Agreement, dated as of September 4, 2019 (the “Implementation Agreement”), by and among the Company, the Seller, and Crystal GmbH, a private limited liability company organized under the laws of the Federal Republic of Germany and wholly-owned subsidiary of the Company (the “Purchaser”). Pursuant to the Implementation Agreement, the Purchaser acquired all of the shares of Curetis GmbH, a private limited liability company organized under the laws of the Federal Republic of Germany (“Curetis GmbH”), and certain other assets and liabilities of the Seller (together, “Curetis”). As of December 31, 2022, Crystal GmbH was dissolved and merged into Curetis GmbH. References to the “Company” include OpGen and its wholly-owned subsidiaries. The Company’s headquarters are in Rockville, Maryland, and the Company’s principal operations are in Rockville, Maryland; Holzgerlingen and Bodelshausen, Germany;Germany, and Vienna, Austria. The Company operates in one business segment.
OpGen Overview
OpGen is a precision medicine company harnessing the power of molecular diagnostics and informatics to help combat infectious disease. Along with its subsidiaries, Curetis GmbH and Ares Genetics GmbH, the Company is developing and commercializing molecular microbiology solutions helping to guide clinicians with more rapid and actionable information about life threatening infections to improve patient outcomes and decrease the spread of infections caused by multidrug-resistant microorganisms, or MDROs. OpGen'sOpGen’s current product portfolio includes Unyvero Acuitas AMR Gene Panel, and the ARES Technology Platform including ARESdb, NGS technology and AI-powered bioinformatics solutions for AMR surveillance, outbreak analysis, and antibiotic response prediction including ARESiss, ARESid, ARESasp, and AREScloud, as well as the Curetis CE-IVD-marked PCR-based SARS-CoV-2 test kit.AREScloud.
Following its initial announcement in October 2020, the Company discontinued its QuickFISH and PNA FISH product portfolio in its entirety during the first quarter of 2021 (see Note 10). The Company's FISH customers and distribution partners had been informed accordingly and last orders were received and processed in the first quarter of 2021. The discontinuance of these product lines did not qualify for discontinued operations reporting.
The focus of OpGen is on its combined broad portfolio of products, which include high impact rapid diagnostics and bioinformatics to interpret antimicrobial resistance (“AMR”) genetic data. OpGen will continue to develop and seek FDA and other regulatory clearances or approvals, as applicable, for the Unyvero UTI and IJI products.product. OpGen offers the FDA-cleared Unyvero LRT and LRT BAL Panels the FDA-cleared Acuitas AMR Gene Panel diagnostic test, as well as the Unyvero UTI Panel as ana research use only, or RUO, product to hospitals, public health departments, clinical laboratories, pharmaceutical companies, and contract research organizations, or CROs. In addition, following successful completion of a prospective multi-center clinical trial, the UTI product was submitted to the FDA in the second quarter of 2023. The FDA provided an additional information request letter on June 30, 2023. The Company responded to all of the FDA’s additional requests on October 20, 2023 in order to continue the FDA review. OpGen is also commercializing its CE MarkedCE-marked Unyvero Panels in Europe and other global markets via distributors.distributors, and, following the signing of a distribution deal with Fisher Healthcare in April 2023, the Company is using a mix of direct and distributor sales in the United States.
In October 2023, the Company discontinued its Acuitas AMR Gene Panel diagnostic test (see Note 11). The Company informed customers of the discontinuation and final orders were processed earlier this year. The discontinuance of this product line did not qualify for discontinued operations reporting.
Note 2 – Going Concern 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 and negative operating cash flows and has a significant amount of debt coming due in 2022, 2023, andthrough June 2024. The Company has funded its operations primarily through external investor financing arrangements and significant actions taken by the Company, including the following:
| ● | During the three months ended September 30, 2023, the Company implemented certain cash management initiatives, including restructuring its U.S. operations by reducing headcount from 23 to 6 and scaling down operations at OpGen’s U.S. headquarters to the core functions of a U.S. Nasdaq listed company with only minimal marketing and sales support, allowing the Company to conserve cash and focus on the functions needed to pursue potential strategic alternatives. |
| 9 |
| ● | On June 26, 2023, the Company announced that its subsidiary Curetis and the European Investment Bank (“EIB”) agreed in principle to certain terms relating to the repayment of the second tranche of Curetis’ loan from the EIB pursuant to that certain Finance Contract, dated December 12, 2016, as amended, by and between Curetis and the EIB (the “Finance Contract”). The second tranche had a principal balance of €3 million plus accumulated and deferred interest. The second tranche was drawn down in June 2018 and matured on June 22, 2023. On July 4, 2023, the EIB and Curetis entered into a Standstill Agreement (the “Standstill Agreement”) pursuant to which the EIB agreed that, with respect to each default or event of default relating to such second tranche, the EIB would not take any action or exercise any right under the Finance Contract until the earlier of a restructuring of the second tranche and November 30, 2023. As a condition to entering into the Standstill Agreement, Curetis paid the EIB a partial payment of interest on the second tranche of €1 million on June 22, 2023. In addition, Curetis agreed to certain undertakings during the standstill period, including the delivery of a rolling cash flow forecast and to cause a third-party restructuring expert to prepare and deliver a restructuring opinion to the EIB. EIB may terminate the Standstill Agreement upon notice to Curetis if, among other customary termination rights, Curetis or the guarantors fail to comply with any undertakings in the Standstill Agreement, the third party expert determines that there are no prospects for a successful restructuring of the second tranche and that it therefore will be unable to issue a restructuring opinion, or the cash flow forecast shows a negative liquidity shortfall during the specified period. |
| ● | On May 4, 2023, the Company closed a best-efforts public offering pursuant to a securities purchase agreement with a certain institutional investor, pursuant to which the Company issued and sold to the Investor (i) 605,000 shares of the Company’s common stock, par value $0.01 per share, (ii) pre-funded warrants to purchase up to an aggregate of 3,890,825 shares of common stock, and (iii) common warrants to purchase up to an aggregate of 4,495,825 shares of common stock. Each share of common stock and accompanying common warrant was sold at a price of $0.7785 per share and accompanying common warrant, and each pre-funded warrant and accompanying common warrant was sold at an offering price of $0.7685 per share underlying such pre-funded warrant and accompanying common warrant, for aggregate gross proceeds of approximately $3.5 million and net proceeds of approximately $3.0 million. The common warrants have an exercise price of $0.7785 per share and will be exercisable beginning on the date of stockholder approval of the exercisability of the warrants under Nasdaq rules or may be exercised pursuant to the Warrant Inducement Agreement entered into on October 12, 2023, as amended on October 26, 2023 (the “Inducement Agreement”), upon the payment of additional consideration of $0.25 per share of common stock issued upon exercise of any existing warrants. The common warrants not exercised as part of the Inducement Agreement will expire on the five-year anniversary of the date of such stockholder approval (see Note 11). Each pre-funded warrant has an exercise price per share of common stock equal to $0.01 per share and may be exercised at any time until the pre-funded warrants are exercised in full. In connection with the offering, the Company also entered into a warrant amendment agreement with the investor pursuant to which the Company amended certain existing warrants to purchase up to 6,396,903 shares of common stock that were previously issued in 2018, 2021, 2022 and 2023 to the investor, with exercise prices ranging from $2.65 to $7.54 per share, in consideration for their purchase of the securities in the offering, as follows: (i) lower the exercise price of the existing warrants to $0.7785 per share, (ii) provide that the existing warrants, as amended, will not be exercisable until the receipt of stockholder approval for the exercisability of the common warrants in the offering, and (iii) extend the original expiration date of the existing warrants by five years following the receipt of such stockholder approval. The increase in fair value resulting from the warrant modifications is accounted for as an equity issuance cost, resulting in a debit and credit to additional paid in capital of approximately $0.3 million. As of September 30, 2023, stockholder approval for the exercisability of the common warrants in the offering has not yet been obtained; however, pursuant to the Inducement Agreement, the existing common warrants are exercisable until December 31, 2023 upon payment of the exercise price plus additional consideration of $0.25 per share of common stock issued upon exercise of any existing warrants. In addition, the Company’s requirement to hold a stockholders’ meeting to obtain approval for the exercisability of the existing common warrants is not applicable during the offer period under the Inducement Agreement. |
| ● | On January 11, 2023, the Company closed a best-efforts public offering pursuant to a securities purchase agreement with a certain institutional investor for the purchase of (i) 321,207 shares of the Company’s common stock, par value $0.01 per share, (ii) pre-funded warrants to purchase up to an aggregate of 2,265,000 shares of common stock (the “Pre-funded Warrants”), (iii) Series A-1 common warrants to purchase an aggregate of 2,586,207 shares of common stock (the “Series A-1 Warrants”), and (iv) Series A-2 common warrants to purchase an aggregate of 2,586,207 shares of common stock (the “Series A-2 Warrants,” and together with the Series A-1 Warrants, the “Common Warrants”). Each share of common stock and accompanying Common Warrants were sold at a price of $2.90 per share and accompanying Common Warrants, and each Pre-funded Warrant and accompanying Common Warrants were sold at an offering price of $2.89 per share underlying such Pre-funded Warrants and accompanying Common Warrants, for aggregate gross proceeds of approximately $7.5 million before deducting the placement agent’s fees and the offering expenses, and net proceeds of approximately $6.9 million. The Common Warrants have an exercise price of $2.65 per share. The Series A-1 Warrants were immediately exercisable upon issuance, and will expire five years following the issuance date. The Series A-2 Warrants were immediately exercisable upon issuance, and will expire eighteen months following the issuance date. Subject to certain ownership limitations described in the Pre-funded Warrants, the Pre-funded Warrants were immediately exercisable and could be exercised at a nominal consideration of $0.01 per share of common stock any time until all the Pre-funded Warrants are exercised in full. All Pre-funded Warrants were exercised by February 15, 2023. In connection with the Company’s best-efforts public offering consummated in May 2023, the Company amended the exercise price of the Common Warrants to $0.7785 per share. |
| 10 |
| ● | On October 3, 2022, the Company closed a registered direct offering of shares of common stock and Series C Mirroring Preferred Stock pursuant to a securities purchase agreement entered into with a certain institutional investor. In the offering, the Company agreed to issue and sell to the investor (i) 268,000 shares of the Company’s common stock, par value $0.01 per share, (ii) 33,810 shares of the Company’s Series C Mirroring Preferred Stock, par value $0.01 per share and stated value of $0.01 per share, and (iii) pre-funded warrants to purchase an aggregate of 215,000 shares of common stock. Each share of common stock was sold at a price of $7.00 per share, each share of preferred stock was sold at a price of $0.01 per share, and each pre-funded warrant was sold at an offering price of $6.80 per share underlying such pre-funded warrants, for aggregate gross proceeds of $3.34 million before deducting the placement agent’s fees and the offering expenses, and net proceeds of $3.04 million. Under the purchase agreement, the Company also agreed to issue and sell to the investor in a concurrent private placement warrants to purchase an aggregate of 483,000 shares of common stock. In connection with the offering, the Company also entered into a warrant amendment agreement with the investor pursuant to which the Company agreed to amend certain existing warrants to purchase up to 741,489 shares of common stock that were previously issued in 2018 and 2021 to the investor, with exercise prices ranging from $41.00 to $1,300.00 per share as a condition to their purchase of the securities in the offering, as follows: (i) lower the exercise price of the investor’s existing warrants to $7.54 per share, (ii) provide that the existing warrants, as amended, will not be exercisable until six months following the closing date of the offering, and (iii) extend the original expiration date of the existing warrants by five and one-half years following the close of the offering. The increase in fair value resulting from the warrant modifications is accounted for as an equity issuance cost, resulting in a debit and credit to additional paid in capital for approximately $1.8 million. As of December 31, 2022, all 215,000 pre-funded warrants were exercised and all 33,810 shares of the Company’s Series C Mirroring Preferred Stock were automatically cancelled and ceased to be outstanding following receipt of stockholder approval for the Company’s reverse stock split on November 30, 2022. In connection with the Company’s best-efforts public offering consummated in May 2023, the Company amended the exercise price of the existing warrants to $0.7785 per share. |
| ● | On June 24, 2022, the Company entered into an |
On February 28, 2022,June 5, 2023, the Listing Qualifications Staff of The Nasdaq Stock Market LLC notified the Company that the closing bid price of the Company’s common stock had, for 30 consecutive business days preceding the date of such notice, been below the $1.00 per share minimum required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Marketplace Rule 5550(a)(2). In accordance with Nasdaq Marketplace Rule 5810(c)(3)(A), the Company was provided 180 calendar days, or until August 29, 2022,December 4, 2023, to regain compliance. The Company requested an extension on August 8, 2022 and was granted the additional 180-day grace period through February 27, 2023. If at any time before February 27,December 4, 2023, the closing bid price of the Common Stockcommon stock is at least $1.00$1 for a minimum of ten (10) consecutive trading days, the Company can regain compliance. If the Company is not in compliance with the minimum bid price requirement by February 27,December 4, 2023, the Company may be entitled to an additional 180-day grace period if the Company meets the continued listing requirements for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market LLC will send the Company a delisting determination after which the Company can request a hearing to review the delisting determination.at such time.
To meetOpGen is a guarantor of Curetis’ debt to the EIB and OpGen would likely remain responsible for Curetis’ debt unless it is fully satisfied in connection with the resolution of Curetis’ and Ares Genetics’ insolvency proceedings. If Curetis’ debt is not fully satisfied in connection with the insolvency proceedings, and if the EIB asserts its capital needs,claims against OpGen, OpGen’s cash reach would be dependent on the Companyremaining amount due, and it is considering multiple alternatives, including, butpossible that OpGen would need to seek bankruptcy protection in the United States. Even if Curetis’ debt is satisfied in connection with the insolvency proceedings and the EIB does not limitedassert claims against OpGen, OpGen’s cash available to strategic financings or other transactions, additional equity financings, debt financings and other funding transactions, licensing and/or partnering arrangements. 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 repay or refinance the current portion of the Company’s debt and fund its business operations into the first quarter of 2023.is significantly limited. This has led management to conclude that there is substantial doubt about the Company’s ability to continue as a going concern. In the eventTo meet its capital needs and improve its liquidity position, the Company is unablehas been and continues to successfully raiseactively consider multiple alternatives, including, but not limited to, restructuring or refinancing its debt, seeking additional debt or equity capital, duringreducing or before the end of the first quarter of 2023,delaying business activities, selling assets, other strategic financings or transactions and other measures, including obtaining relief under applicable bankruptcy laws. There can be no assurance that the Company will be able to identify or execute on any of these alternatives on acceptable terms or that any of these alternatives will be successful.
The accompanying unaudited condensed consolidated financial statements do not have sufficient cash flowsinclude any adjustments related to the recoverability and liquidity to finance its business operations beyondclassification of assets or the first quarteramounts and classification of 2023 as currently contemplated. Accordingly, in such circumstances,liabilities that may result from the possible inability of the Company would be compelled to immediately reduce general and administrative expenses and delay research and development projects, pause or abort clinical trials including the purchase of scientific equipment and supplies, until it is able to obtain sufficient financing. If such sufficient financing is not received oncontinue as 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.going concern.
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 latest 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, 20212022 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.
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The accompanying unaudited condensed consolidated financial statements include the accounts of OpGen and its wholly-owned subsidiaries as of and for the three and nine months ended September 30, 2022;2023; all intercompany transactions and balances have been eliminated.
Foreign currency
The Company has subsidiaries located in Holzgerlingen, Germany;Germany and Vienna, Austria, each of which use currencies other than the U.S. dollar as their functional currency. As a result, all assets and liabilities of the subsidiaries are translated into U.S. dollars based on exchange rates at the end of the reporting period for these unaudited condensed consolidated financial statements.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 income (loss), a component of stockholders’ equity. Foreign currency translation adjustments are the sole component of accumulated other comprehensive income (loss) at September 30, 20222023 and December 31, 2021.2022.
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 United States 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, inducement expense related to warrant repricing, 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, determining the fair value of assets acquired and liabilities assumed in business combinations, 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 equivalents, 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 and 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 Deposit Insurance Corporation (“FDIC”) insured limit of $250,000. On March 10, 2023, the Company learned that Silicon Valley Bank (“SVB”), the Company’s primary bank at the time (now a division of First Citizens Bank), was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation as receiver. The Company hasdid not experiencedexperience any losses in such accounts, and management believes it is notbut since the Company was exposed to any significant credit risk. risk with the failure of SVB, management diversified the Company’s holdings to minimize credit risk in the future.
At September 30, 20222023 and December 31, 2021,2022, the Company had funds totaling $419,495$492,022 and $551,794,$495,629, respectively, 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.
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The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows:sheets:
| September 30, 2022 | December 31, 2021 | September 30, 2021 | December 31, 2020 | September 30, 2023 | December 31, 2022 | September 30, 2022 | December 31, 2021 | |||||||||||||||||||||||||
| Cash and cash equivalents | $ | 10,275,654 | $ | 36,080,392 | $ | 25,352,337 | $ | 13,360,463 | $ | 292,642 | $ | 7,440,030 | $ | 10,275,654 | $ | 36,080,392 | ||||||||||||||||
| Restricted cash | 419,495 | 551,794 | 549,730 | 746,792 | 492,022 | 495,629 | 419,495 | 551,794 | ||||||||||||||||||||||||
| Total cash and cash equivalents and restricted cash in the condensed consolidated statements of cash flows | $ | 10,695,149 | $ | 36,632,186 | $ | 25,902,067 | $ | 14,107,255 | $ | 784,664 | $ | 7,935,659 | $ | 10,695,149 | $ | 36,632,186 | ||||||||||||||||
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 90 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 ability to pay its obligation.obligation, and reasonable and supportable forecasts from the customer. If amounts become uncollectible, they are charged to operations when that determination is made. The allowance for doubtful accountscredit losses was $0 as of September 30, 20222023 and December 31, 2021, respectively.2022.
At September 30, 2022,2023, the Company had accounts receivable from one customerthree customers which individually represented 77%24%, 24%, and 11% of total accounts receivable. At December 31, 2021,2022, the Company had accounts receivable from two customers which individually represented 52%41% and 14%21% of total accounts receivable, respectively.receivable. For the three months ended September 30, 2023, revenue earned from four customers represented 21%, 15%, 12%, and 11% of total revenues. For the three months ended September 30, 2022, revenue earned from three customers represented 29%, 18%, and 11% of total revenues, respectively.revenues. For the threenine months ended September 30, 2021,2023, revenue earned from twothree customers represented 20%28%, 17%, and 17%10% of total revenues, respectively.revenues. For the nine months ended September 30, 2022, revenue earned from two customers represented 43% and 16% of total revenues, respectively. For the nine months ended September 30, 2021, revenue earned from three customers represented 19%, 15%, and 10% of total revenues, respectively.revenues.
Inventory
Inventories are valued using the first-in, first-out cost method and stated at the lower of cost or net realizable value and consist of the following:
| September 30, 2022 | December 31, 2021 | September 30, 2023 | December 31, 2022 | |||||||||||||
| Raw materials and supplies | $ | 841,859 | $ | 866,963 | $ | 993,093 | $ | 1,011,476 | ||||||||
| Work-in-process | 47,999 | 100,801 | 34,638 | 37,445 | ||||||||||||
| Finished goods | 2,496,811 | 3,744,029 | 1,779,418 | 2,596,830 | ||||||||||||
| Total | $ | 3,386,669 | $ | 4,711,793 | $ | 2,807,149 | $ | 3,645,751 | ||||||||
Inventory includes Unyvero instrument systems,system instruments, Unyvero cartridges, reagents and components for Unyvero and Acuitas Curetis SARS CoV-2 test kits, and reagents and supplies used for the Company’s laboratory services.
The Company periodically reviews inventory quantities on hand and analyzes the provision for excess and obsolete inventory based primarily on product expiration dating and its estimated sales forecast, which is based on sales history and anticipated future demand. The Company’s estimates of future product demand may not be accurate, and it may understate or overstate the provision required for excess and obsolete inventory. Accordingly, any significant unanticipated changes in demand could have a significant impact on the value of the Company’s inventory and results of operations. Based on the Company’s assumptions and estimates, inventory reserves for obsolescence, expirations, and slow-moving inventory were $1,470,649$2,214,185 and $98,064$1,694,843 at September 30, 20222023 and December 31, 2021,2022, respectively.
The Company classifies finished good inventory it does not expect to sell or use in clinical studies within 12 months of the unaudited condensed consolidated balance sheets date as strategic inventory, a non-current asset.
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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 nine months ended September 30, 20222023 and 2021,2022, the Company determined that its property and equipment were 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 effective 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. DuringThe Company did not identify any impaired ROU assets for the nine months ended September 30, 2021, the Company had determined that the ROU asset associated with its San Diego, California office lease may not be recoverable. As a result, the Company had recorded an impairment charge of $02023 and $170,714 during the three and nine months ended September 30, 2021, respectively. During the three and nine months ended September 30, 2022, the Company did not record any such impairment charge.2022.
Intangible assets and goodwill
Intangible assets and goodwill asAs of September 30, 2022 consist of finite-lived and indefinite-lived2023, the Company’s intangible assets and goodwill.with net balances are all finite-lived.
Finite-lived and indefinite-lived intangible assets
Intangible assets include trademarks and tradenames, developed technology and software, in-process research & development software(“IPR&D”), and customerdistributor relationships and consisted of the following as of September 30, 20222023 and December 31, 2021:2022:
September 30, 2023 | December 31, 2022 | |||||||||||||||||||||||||||||
| Subsidiary | Cost | Accumulated Amortization and Impairment | Effect of Foreign Exchange Rates | Net Balance | Accumulated Amortization and Impairment | Effect of Foreign Exchange Rates | Net Balance | |||||||||||||||||||||||
| Trademarks and tradenames | Curetis | $ | 1,768,000 | $ | (592,893 | ) | $ | (74,033 | ) | $ | 1,101,074 | $ | (469,011 | ) | $ | (62,520 | ) | $ | 1,236,469 | |||||||||||
| Distributor relationships | Curetis | 2,362,000 | (528,064 | ) | (98,907 | ) | 1,735,029 | (417,728 | ) | (83,525 | ) | 1,860,747 | ||||||||||||||||||
| A50 – Developed technology | Curetis | 349,000 | (167,211 | ) | (14,614 | ) | 167,175 | (132,273 | ) | (12,342 | ) | 204,385 | ||||||||||||||||||
| Ares – Developed technology | Ares Genetics | 5,333,000 | (1,277,401 | ) | (216,471 | ) | 3,839,128 | (1,010,495 | ) | (183,132 | ) | 4,139,373 | ||||||||||||||||||
| A30 – In-Process Research & Development | Curetis | 5,706,000 | (5,467,067 | ) | (238,933 | ) | — | (5,407,699 | ) | (298,301 | ) | — | ||||||||||||||||||
| $ | 15,518,000 | $ | (8,032,636 | ) | $ | (642,958 | ) | $ | 6,842,406 | $ | (7,437,206 | ) | $ | (639,820 | ) | $ | 7,440,974 | |||||||||||||
September 30, 2022 | December 31, 2021 | |||||||||||||||||||||||||||||
| Subsidiary | Cost | Accumulated Amortization | Effect of Foreign Exchange Rates | Net Balance | Accumulated Amortization | Effect of Foreign Exchange Rates | Net Balance | |||||||||||||||||||||||
| Trademarks and tradenames | Curetis | $ | 1,768,000 | $ | (389,676 | ) | $ | (209,308 | ) | $ | 1,169,016 | $ | (316,930 | ) | $ | 43,015 | $ | 1,494,085 | ||||||||||||
| Distributor relationships | Curetis | 2,362,000 | (347,069 | ) | (279,628 | ) | 1,735,303 | (282,277 | ) | 57,465 | 2,137,188 | |||||||||||||||||||
| A50 - Developed technology | Curetis | 349,000 | (109,899 | ) | (41,317 | ) | 197,784 | (89,384 | ) | 8,492 | 268,108 | |||||||||||||||||||
| Ares - Developed technology | Ares Genetics | 5,333,000 | (839,567 | ) | (631,354 | ) | 3,862,079 | (682,833 | ) | 129,745 | 4,779,912 | |||||||||||||||||||
A30 – Acquired in-process research & development | Curetis | 5,706,000 | — | (669,146 | ) | 5,036,854 | — | 144,916 | 5,850,916 | |||||||||||||||||||||
| $ | 15,518,000 | $ | (1,686,211 | ) | $ | (1,830,755 | ) | $ | 12,001,036 | $ | (1,371,424 | ) | $ | 383,633 | $ | 14,530,209 | ||||||||||||||
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Identifiable intangible assets will beare amortized on a straight-line basis over their estimated useful lives. The estimated useful lives of the intangibles are:
| Estimated Useful Life | |||
| Trademarks and tradenames | 10 years | ||
| Customer/distributor relationships | 15 years | ||
| A50 – Developed technology | 7 years | ||
| Ares – Developed technology | 14 years | ||
| A30 – Acquired in-process research & development | Indefinite |
Acquired in-process research and development (“IPR&D”)&D represents the fair value assigned to those research and development projects that were acquired in a business combination for which the related products have not received regulatory approval and have no alternative future use. IPR&D is capitalized at its fair value as an indefinite-lived intangible asset, and any development costs incurred after the acquisition are expensed as incurred. Upon achieving regulatory approval or commercial viability for the related product, the indefinite-lived intangible asset is accounted for as a finite-lived asset and is amortized on a straight-line basis over itsthe estimated useful life. If the project is not completed or is terminated or abandoned, the Company may have an impairment related to the IPR&D which is charged to expense. Indefinite-lived intangible assets are tested for impairment annually and whenever events or changes in circumstances indicate that the carrying amount may be impaired. Impairment is calculated as the excess of the asset’s carrying value over its fair value. During the Company’s annual impairment test for its IPR&D intangible asset at December 31, 2022, it was determined that the infinite-lived intangible asset was impaired because although the Company has an ongoing collaboration utilizing the intangible asset, at the time, the contracted cash flow associated with this collaboration and projected future cash flows did not support the carrying amount. As a result, the Company recorded an impairment charge in the amount of $5,407,699 for the year ended December 31, 2022.
The Company reviews the useful lives of intangible assets when events or changes in circumstances occur which may potentially impact the estimated useful life of the intangible assets.
Total amortization expense of intangible assets was $182,265$187,255 and $212,829$182,265 for the three months ended September 30, 20222023 and 2021,2022, respectively. Total amortization expense of intangible assets was $546,795$561,172 and $615,471$546,795 for the nine months ended September 30, 20222023 and 2021,2022, respectively. Expected future amortization of intangible assets is as follows:
| Year Ending December 31, | ||||||||
| 2022 (Three months) | $ | 168,621 | ||||||
| 2023 | 674,484 | |||||||
| 2023 (October to December) | $ | 183,255 | ||||||
| 2024 | 674,484 | 733,020 | ||||||
| 2025 | 674,484 | 733,020 | ||||||
| 2026 | 674,484 | 733,020 | ||||||
| 2027 | 641,480 | 697,152 | ||||||
| Thereafter | 3,456,145 | 3,762,939 | ||||||
| Total | $ | 6,964,182 | $ | 6,842,406 | ||||
IntangibleIn accordance with ASC 360-10, Property, Plant and Equipment, intangible assets, other than IPR&D as discussed above, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If any indicators were present, the Company would test for recoverability by comparing the carrying amount of the asset to the net undiscounted cash flows expected to be generated from the asset. If those net undiscounted cash flows do not exceed the carrying amount (i.e., the asset is not recoverable), the Company would perform the next step, which is to determine the fair value of the asset and record an impairment loss, if any.
In accordance with ASC 360-10, Property, Plant and Equipment, the Company records impairment losses on long-lived assets used in operations when events and circumstances indicate that long-lived assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. During the three and nine months ended September 30, 20222023, the Company identified triggering events that may indicate that the carrying amount of the intangible assets are not recoverable. The triggering events identified include the decline in the Company’s stock price and 2021,the Company’s shortening cash reach. As a result of identifying these potential indicators of impairment, the Company performed a long-lived asset impairment analysis for the three months ended September 30, 2023, and this analysis determined that the fair value of the Company’s assets exceeded their carrying values, so no impairment loss was recorded. During the three and nine months ended September 30, 2022, the Company determined that its finite-lived intangible assets were not impaired.
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Goodwill
Goodwill represents the excess of the purchase price paid when the Company acquired AdvanDx, Inc. in July 2015 and Curetis in April 2020, over the fair values of the acquired tangible or intangible assets and assumed liabilities. Goodwill is not tax deductible in any relevant jurisdictions. The Company’s goodwill balance as of September 30, 2022 and December 31, 2021 was $0 and $7,453,007, respectively.
The changes in the carrying amount of goodwill as of September 30, 2022, and since December 31, 2021, were as follows:
| Balance as of December 31, 2021 | $ | 7,453,007 | ||
| Changes in currency translation | (477,487 | ) | ||
| Goodwill impairment | (6,975,520 | ) | ||
| Balance as of September 30, 2022 | $ | — |
The Company conducts an impairment test of goodwill on an annual basis and will also conduct tests if events occur or circumstances change that would, more likely than not, reduce the Company’s fair value below its net equity value. During the three and nine monthsyear ended September 30, 2021, the Company had determined that its goodwill had not been impaired. As circumstances changed during the three and nine months ended September 30,December 31, 2022, that would, more likely than not, reduce the Company’s fair value below its net equity value, the Company performed qualitative and quantitative analyses, assessing trends in market capitalization, current and future cash flows, revenue growth rates, and the impact of global unrest and the COVID-19 pandemic on the Company and its performance. Based on the analysis performed, and primarily due to changes in the Company’s stock price and market capitalization in the third quarter of 2022, it was determined that goodwill was impaired. As a result, the Company recorded a goodwill impairment charge in the full amount of $6,975,520$6,940,549 for the three and nine monthsyear ended September 30,December 31, 2022.
Revenue recognition
The Company derives revenues from (i) the sale of Unyvero Application cartridges and Unyvero Systems, Acuitas AMR Gene Panel test products, and SARS CoV-2 tests,instruments, (ii) providing laboratory services, (iii) providing collaboration services (e.g., with the Foundation for Innovative New Diagnostics (FIND) on the Unyvero A30 RQ platform) including funded software arrangements, and license arrangements, and (iv) granting access to a subsetsubsets of the proprietary ARESdb data asset.
The Company analyzes contracts to determine the appropriate revenue recognition using the following steps: (i) identification of contracts with customers, (ii) identification of distinct performance obligations in the contract, (iii) determination of contract transaction price, (iv) allocation of contract transaction price to the performance obligations and (v) determination of revenue recognition based on timing of satisfaction of the performance obligation.
The Company recognizes revenues upon the satisfaction of its performance obligation (upon transfer of control of promised goods or services to our customers) in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services.
The Company defers incremental costs of obtaining a customer contract and amortizes the deferred costs over the period that the goods and services are transferred to the customer. The Company had no material incremental costs to obtain customer contracts in any period presented.
Deferred revenue results from amounts billed in advance to customers or cash received from customers in advance of services being provided.
Research and development costs
Research and development costs are expensed as incurred. Research and development costs primarily consist of salaries and related expenses for personnel, other resources, laboratory, engineering workshop, and instrument supplies, and fees paid to consultants and outside service partners.
Government grant agreements and research incentives
From time to time, the Company may enter into arrangements with governmental entities for the purposes of obtaining funding for research and development activities. The Company recognizes funding from grants and from research incentives received from Austrian government agencies in the condensed consolidated statements of operations and comprehensive loss in the period during which the related qualifying expenses are incurred, provided that the conditions under which the grants or incentives were provided have been met. For grants under funding agreements and for proceeds under research incentive programs, the Company recognizes grant and incentive income in an amount equal to the estimated qualifying expenses incurred in each period multiplied by the applicable reimbursement percentage. The Company classifies government grants received under these arrangements as a reduction to the related research and development expense incurred. The Company analyzes each arrangement on a case-by-case basis. For the three months ended September 30, 20222023 and 2021,2022, the Company recognized $110,439$78,752 and $190,911$110,439 as a reduction of research and development expense related to government grant arrangements, respectively. For the nine months ended September 30, 20222023 and 2021,2022, the Company recognized $324,168$301,229 and $564,983$324,168 as a reduction of research and development expense related to government grant arrangements, respectively. The Company had earned but not yet received $639,095$680,302 and $396,365$401,436 related to these agreements and incentives included in prepaid expenses and other current assets, as of September 30, 20222023 and December 31, 2021,2022, respectively.
Research and development costs
Research and development costs are expensed as incurred. Research and development costs primarily consist of salaries and related expenses for personnel, other resources, laboratory supplies, and fees paid to consultants and outside service partners.
Stock-based compensation
Stock-based compensation expense is recognized at grant date fair value. The fair value of stock-based compensation to employees and directors is estimated, on the date of grant, using the Black-Scholes model. For restricted stock awards with a time-based vesting condition, the fair value, which is fixed at the grant date for purposes of recognizing compensation costs, is determined by reference to the Company’s stock price on the grant date. The resulting fair value is recognized ratably over the requisite service period, which is generally the vesting period of the option. For all time-vesting awards granted, expense is amortized using the straight-line attribution method. The Company accounts for forfeitures as they occur.
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Option valuation models, including the Black-Scholes model, require the input of highly subjective assumptions, and changes in the assumptions used can materially affect the grant-date fair value of an award. These assumptions include the risk-free rate of interest, expected dividend yield, expected volatility and the expected life of the award.
Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments’ specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”), and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the instruments are free standing financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company’s own ordinary shares and whether the instrument holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent period end date while the instruments are outstanding.
Income taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to temporary differences between financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred income tax assets to the amount expected to be realized.
Tax benefits are initially recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions are initially, and subsequently, measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with the tax authority, assuming full knowledge of the position and all relevant facts.
The Company had federal net operating loss (“NOL”) carryforwards of $202,015,062$232,682,072 and $196,511,928$202,015,062 at December 31, 20212022 and 2020,2021, respectively. Despite the NOL carryforwards, which begin to expirebegan expiring in 2022, the Company may have state tax requirements. Also, use of the NOL carryforwards may be subject to an annual limitation as provided by Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). To date, the Company has not performed a formal study to determine if any of its remaining NOL and credit attributes might be further limited due to the ownership change rules of Section 382 or Section 383 of the Code. The Company will continue to monitor this matter going forward. There can be no assurance that the NOL carryforwards will ever be fully utilized.
The Company also has foreign NOL carryforwards of $170,607,782$170,661,923 at December 31, 20212022 from their foreign subsidiaries. $147,313,786$162,712,615 of those foreign NOL carryforwards are from the operations of the Company’s operations in Germany.German subsidiary. Despite the NOL carryforwards, the Company may have a current and future tax liability due to the nuances of German tax law around the use of NOLs within a consolidated group. There is no assurance that the NOL carryforwards will ever be fully utilized.
Loss per share
Basic loss per share is computed by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period.
For periods of net income, and when the effects are not anti-dilutive, diluted earnings per share is computed by dividing net income available to common stockholders by the weighted average number of shares outstanding plus the impact of all potential dilutive common shares, consisting primarily of common stock options and stock purchase warrants using the treasury stock method, and convertible preferred stock and convertible debt using the if-converted method.
For periods of net loss, diluted loss per share is calculated similarly to basic loss per share because the impact of all dilutive potential common shares is anti-dilutive. The number of anti-dilutive shares consisting of (i) common stock options, (ii) stock purchase warrants, and (iii) unvested restricted stock units representing the right to acquire shares of common stock, which have been excluded from the computation of diluted loss per share, was 19.111.1 million shares and 10.71.0 million shares as of September 30, 20222023 and 2021,2022, respectively.
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Adopted accounting pronouncements
In June 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Codification (ASC) Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The purpose of Update No. 2016-13 is to replace the incurred loss impairment methodology for financial assets measured at amortized cost with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information, including forecasted information, to develop credit loss estimates. Update No. 2016-13 did not have a material impact on the Company's financial position or results of operations.
In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50), Compensation — Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2021-04”). ASU 2021-04 clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options, including warrants, that remain equity-classified after modification or exchange. ASU 2021-04 requires an entity to treat a modification or an exchange of a freestanding equity-classified written call option that remains equity-classified after the modification or exchange as an exchange of the original instrument for a new instrument and provides guidance on measuring and recognizing the effect of a modification or an exchange. The Company adopted ASU 2021-04 on January 1, 2022. The adoption did not have a material impact on the Company’s consolidated financial statements and related disclosures.
Recently issued accounting standards
The Company has evaluated all other issued and unadopted ASUs and believes the adoption of these standards will not have a material impact on its results of operations, financial position or cash flows.
Note 4 – Revenue from contracts with customers
Disaggregated revenue
The Company provides diagnostic test products and laboratory services to hospitals, clinical laboratories and other healthcare providers,providing customers, and enters into collaboration agreements with government agencies, non-profitnon-governmental organizations, and healthcare providers. The revenues by type of service consist of the following:
| Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||
| Product sales | $ | 359,112 | $ | 643,887 | $ | 1,614,435 | $ | 1,479,270 | $ | 558,965 | $ | 359,112 | $ | 1,409,534 | $ | 1,614,435 | ||||||||||||||||
| Laboratory services | 31,016 | 192,753 | 94,515 | 643,602 | 47,135 | 31,016 | 112,810 | 94,515 | ||||||||||||||||||||||||
| Collaboration revenue | 58,585 | 402,492 | 176,713 | 757,591 | 92,922 | 58,585 | 826,257 | 176,713 | ||||||||||||||||||||||||
| Total revenue | $ | 448,713 | $ | 1,239,132 | $ | 1,885,663 | $ | 2,880,463 | $ | 699,022 | $ | 448,713 | $ | 2,348,601 | $ | 1,885,663 | ||||||||||||||||
Revenues by geography are as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||
| Domestic | $ | 135,857 | $ | 372,902 | $ | 415,926 | $ | 1,036,662 | $ | 142,716 | $ | 135,857 | $ | 523,978 | $ | 415,926 | ||||||||||||||||
| International | 312,856 | 866,230 | 1,469,737 | 1,843,801 | 556,306 | 312,856 | 1,824,623 | 1,469,737 | ||||||||||||||||||||||||
| Total revenue | $ | 448,713 | $ | 1,239,132 | $ | 1,885,663 | $ | 2,880,463 | $ | 699,022 | $ | 448,713 | $ | 2,348,601 | $ | 1,885,663 | ||||||||||||||||
Deferred revenue
Changes into deferred revenue for the period were as follows:
| Balance at December 31, 2022 | $ | 142,061 | ||
| Contracts with customers | 198,419 | |||
| Recognized in the current period | (144,031 | ) | ||
| Currency translation adjustment | (1,762 | ) | ||
| Balance at September 30, 2023 | $ | 194,687 |
Contract assets
The Company had no contract assets as of September 30, 20222023 and December 31, 2021. Contract assets2022, which are generated when contractual billing schedules differ from revenue recognition timing and theytiming. Contract assets represent a conditional right to consideration for satisfied performance obligations that becomes a billed receivable when the conditions are satisfied.
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Unsatisfied performance obligations
The Company had no unsatisfied performance obligations related to its contracts with customers at September 30, 20222023 and December 31, 2021.2022.
Note 5 – Fair value measurements
The Company classifies its financial instruments using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:
| ● | Level 1 - defined as observable inputs such as quoted prices in active markets; |
| ● | Level 2 - defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and |
| ● | Level 3 - defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions such as expected revenue growth and discount factors applied to cash flow projections. |
For the three and nine months ended September 30, 2022,2023, the Company has not transferred any assets between fair value measurement levels.
Financial assets and liabilities measured at fair value on a recurring basis
The Company evaluates financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level at which to classify them each reporting period. This determination requires the Company to make subjective judgments as to the significance of inputs used in determining fair value and where such inputs lie within the hierarchy.
In 2016, Curetis entered into a contract for an up to €25.0 million senior, unsecured loan financing facility from the EIB (see Note 6). In June 2019, Curetis drew down a third tranche of €5.0 million from the EIB. In return for the EIB waiving the condition precedent of a minimum cumulative equity capital raised of €15.0 million to disburse this €5.0 million tranche, the parties agreed on a 2.1% PPI.participation percentage interest (“PPI”). Upon maturity of the tranche, the EIB would be entitled to an additional payment that is equity-linked and equivalent to 2.1% of the then total valuation of Curetis N.V. On July 9, 2020, the Company negotiated an amendment to the EIB debt financing facility. As part of the amendment, the parties adjusted the PPI percentage applicable to the previous EIB tranche of €5.0 million which was funded in June 2019 from its original 2.1% PPI in Curetis N.V.’s equity value upon maturity to a new 0.3% PPI in OpGen’s equity value.equity. On May 23, 2022, the Company entered into a Waiver and Amendment Letter which increased the PPI to 0.75% upon maturity between mid-2024 and mid-2025. This right constitutes an embedded derivative, which is separated and measured at fair value with changes being accounted for through profit or loss. The Company determines the fair value of the derivative using a Monte Carlo simulation model. Using this model, Levellevel 3 unobservable inputs include estimated discount rates and estimated risk-free interest rates.
The fair value of Levellevel 3 liabilities measured at fair value on a recurring basis for the nine months ended September 30, 20222023 was as follows:
| Description | Balance at December 31, 2021 | Change in Fair Value | Effect of Foreign Exchange Rates | Balance at September 30, 2022 | Balance at December 31, 2022 | Change in Fair Value | Effect of Foreign Exchange Rates | Balance at September 30, 2023 | ||||||||||||||||||||||||
| Participation percentage interest liability | $ | 228,589 | $ | (54,623 | ) | $ | (27,759 | ) | $ | 146,207 | $ | 99,498 | $ | (65,800 | ) | $ | 666 | $ | 34,364 | |||||||||||||
| Total | $ | 228,589 | $ | (54,623 | ) | $ | (27,759 | ) | $ | 146,207 | $ | 99,498 | $ | (65,800 | ) | $ | 666 | $ | 34,364 | |||||||||||||
Financial assets and liabilities carried at fair value on a non-recurring basis
The Company does not have any financial assets and liabilities measured at fair value on a non-recurring basis.
Non-financial assets and liabilities carried at fair value on a recurring basis
The Company does not have any non-financial assets and liabilities measured at fair value on a recurring basis.
Non-financial assets and liabilities carried at fair value on a non-recurring basis
The Company measures its long-lived assets, including property and equipment and intangible assets (including goodwill), at fair value on a non-recurring basis when a triggering event requires such evaluation. During the three and nine months ended September 30, 2021,2023, the Company did not record any such impairment expenses. During the year ended December 31, 2022, the Company recorded impairment expense of $0 and $170,714, respectively,$6,940,549 related to its ROU assets. During the threegoodwill (see Note 3) and nine months ended September 30, 2022, the company did not record any such impairment expenses.$5,407,699 related to its indefinite-lived intangible asset (see Note 3).
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Note 6 – Debt
The following table summarizes the Company’s long-term debt and short-term borrowings as of September 30, 20222023 and December 31, 2021:2022:
| September 30, 2022 | December 31, 2021 | |||||||
| EIB | $ | 14,177,909 | $ | 25,161,855 | ||||
| Total debt obligations | 14,177,909 | 25,161,855 | ||||||
| Unamortized debt discount | (1,726,773 | ) | (3,466,491 | ) | ||||
| Carrying value of debt | 12,451,136 | 21,695,364 | ||||||
| Less current portion | (8,342,715 | ) | (14,519,113 | ) | ||||
| Long-term debt | $ | 4,108,421 | $ | 7,176,251 | ||||
| September 30, 2023 | December 31, 2022 | |||||||
| EIB | $ | 9,947,611 | $ | 13,489,178 | ||||
| Total debt obligations | 9,947,611 | 13,489,178 | ||||||
| Unamortized debt discount | (747,847 | ) | (1,614,591 | ) | ||||
| Carrying value of debt | 9,199,764 | 11,874,587 | ||||||
| Less current portion | (9,199,764 | ) | (7,023,901 | ) | ||||
| Non-current portion of long-term debt | $ | — | $ | 4,850,686 | ||||
EIB Loan Facility
In 2016, Curetis entered into a contract for an up to €25.0 million senior, unsecured loan financing facility from the EIB. The financing is in the first growth capital loan under the European Growth Finance Facility (“EGFF”), launched in November 2016. It is backed by a guarantee from the European Fund for Strategic Investment (“EFSI”). EFSI is an essential pillar of the Investment Plan for Europe (“IPE”), under which the EIB and the European Commission are working as strategic partners to support investments and bring back jobs and growth to Europe.
The funding cancould be drawn in up to five tranches within 36 months of entry into the contract, under the EIB amendment, and each tranche is to be repaid upon maturity five years after draw-down.
In April 2017, Curetis drew down a first tranche of €10.0 million from this facility. This tranche hashad a floating interest rate of EURIBOR plus 4% payable after each 12-month-period from the draw-down-date and another additional 6% interest per annum that is deferred and payable at maturity together with the principal. In June 2018, a second tranche of €3.0 million was drawn down. The terms and conditions are analogous to the first one.
In June 2019, Curetis drew down a third tranche of €5.0 million from the EIB. In line with all prior tranches, the majority of interest is also deferred until repayment upon maturity. In return for the EIB waiving the condition precedent of a minimum cumulative equity capital raised of €15.0 million to disburse this €5.0 million third tranche, the parties agreed on a 2.1% PPI. Upon maturity of the tranche, not before approximately mid-2024, (andand no later than mid-2025),mid-2025, the EIB would be entitled to an additional payment that is equity-linked and equivalent to 2.1% of the then total valuation of Curetis N.V. As part of anthe amendment between the Company and the EIB on July 9, 2020, the parties adjusted the PPI percentage applicable to the third EIB tranche of €5.0 million, which was funded in June 2019, from its original 2.1% PPI in Curetis N.V.’s equity value upon maturity to a new 0.3% PPI in OpGen’s equity value upon maturity. This right constitutes an embedded derivative, which is separated and measured at fair value with changes being accounted for through income or loss.
The EIB debt was measured and recognized at fair value as of the acquisition date. The fair value of the EIB debt was approximately €14.4 million (approximately $15.8 millionmillion) as of the acquisition date. The resulting debt discount is beingwill be amortized over the life of the EIB debt as an increase to interest expense.
On May 23, 2022, the Company and the EIB entered into a Waiver and Amendment Letter (the “2022 EIB Amendment”) relating to the amendment of the EIB loan facility, between the EIB and Curetis, pursuant to which Curetis borrowed an aggregate amount of €18.0 million in three tranches. The 2022 EIB Amendment restructured the first tranche of approximately €13.35€13.4 million (including accumulated and deferred interest) of the Company’s outstanding indebtedness with the EIB. Pursuant to the 2022 EIB Amendment, the Company repaid €5.0 million to the EIB in April 2022. The Company also agreed, among other things, to amortize the remainder of the debt tranche over the twelve-month period beginning in May 2022. Accordingly, the Company agreed to pay a monthly amount of approximately €0.7 million through April 2023. The Amendment also provides for an increase of the PPI applicable to the third tranche under the loan facility from 0.3% to 0.75% beginning in June 2024. The terms of the second and third tranches of the Company’s indebtedness of €3.0 million and €5.0 million, respectively, plus accumulated deferred interest, remain unchanged pursuant to the 2022 EIB Amendment. The second tranche became due and payable by the Company to the EIB in June 2023, and the third tranche will become due and payable in June 2024. As the effective borrowing rate under the amended agreement is less than the effective borrowing rate under the previous agreement, a concession is deemed to have been granted under ASC 470-60. As a concession has been granted, the agreement was accounted for as a troubled debt restructuring under ASC 470-60. The amendment did not result in a gain on restructuring as the future undiscounted cash outflows required under the amended agreement exceed the carrying value of the debt immediately prior to the amendment.
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On June 26, 2023, the Company announced that its subsidiary Curetis and the European Investment Bank (“EIB”) agreed in principle to certain terms relating to the repayment of the second tranche of Curetis’ loan from the EIB pursuant to that certain Finance Contract, dated December 12, 2016, as amended, by and between Curetis and the EIB (the “Finance Contract”). The second tranche had a principal balance of €3 million plus accumulated and deferred interest. The second tranche was drawn down in June 2018 and matured on June 22, 2023. On July 4, 2023, the EIB and Curetis entered into a Standstill Agreement pursuant to which the EIB agreed that, with respect to each default or event of default relating to such second tranche, the EIB would not take any action or exercise any right under the Finance Contract until the earlier of a restructuring of the second tranche and November 30, 2023. As a condition to entering into the Standstill Agreement, Curetis paid the EIB a partial payment of interest on the second tranche of €1 million on June 22, 2023. In addition, Curetis agreed to certain undertakings during the standstill period, including the delivery of a rolling cash flow forecast and to cause a third-party restructuring expert to prepare and deliver a restructuring opinion to the EIB. EIB may terminate the Standstill Agreement upon notice to Curetis if, among other customary termination rights, Curetis or the guarantors fail to comply with any undertakings in the Standstill Agreement, the third party expert determines that there are no prospects for a successful restructuring of the second tranche and that it therefore will be unable to issue a restructuring opinion, or the cash flow forecast shows a negative liquidity shortfall during the specified period.
As of September 30, 2022,2023, the outstanding borrowings under all tranches were €14,544,429 ($14,177,909)€9.4 million (approximately $9.9 million), including deferred interest payable at maturity of €1,755,429 ($1,711,193)€1.4 million (approximately $1.5 million).
PPP
On April 22, 2020, the Company entered into a Term Note (the “Company Note”) with Silicon Valley Bank (the “Bank”) pursuant to the Paycheck Protection Program (the “PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) administered by the U.S. Small Business Administration. The Company’s wholly-owned subsidiary, Curetis USA Inc. (“Curetis USA” and collectively with the Company, the “Borrowers”), also entered into a Term Note with the Bank (the “Subsidiary Note,” and collectively with the Company Note, the “Notes”). The Notes were dated April 22, 2020. The principal amount of the Company Note was $879,630, and the principal amount of the Subsidiary Note was $259,353.
In accordance with the requirements of the CARES Act, the Borrowers used the proceeds from the Notes in accordance with the requirements of the PPP to cover certain qualified expenses, including payroll costs, rent and utility costs. Interest accrued on the Notes at the rate of 1.00% per annum. The Borrowers applied for forgiveness of amounts due under the Notes, in an amount equal to the sum of qualified expenses under the PPP, which include payroll costs, rent obligations, and covered utility payments incurred during the twenty-four weeks following disbursement under the Notes. The entire proceeds were used under the Notes for such qualifying expenses. The Company Note was forgiven in November 2020. In May 2021, the Subsidiary Note was forgiven.
Total interest expense (including amortization of debt discounts and financing fees) on all debt instruments was $569,306$396,768 and $1,222,867$569,306 for the three months ended September 30, 20222023 and 2021,2022, respectively. Total interest expense (including accretion of fair value to book value and amortization of debt discounts and financing fees) on all debt instruments was $2,618,799$1,698,564 and $3,586,018$2,618,799 for the nine months ended September 30, 2023 and 2022, and 2021, respectively.
Note 7 – Stockholders’ equity
As of September 30, 2022,2023, the Company had 100,000,000 shares of authorized common stock and 48,338,50010,013,524 shares issued and outstanding, and 10,000,000 shares of authorized preferred stock, of which none were issued or outstanding.
Following receipt of approval from stockholders at a special meeting of stockholders held on December 8, 2021, the Company filed an amendment to its Amended and Restated Certificate of Incorporation to increase the authorized shares of common stock from 50,000,000 to 100,000,000 shares.
Following receipt of approval from stockholders at a special meeting of stockholders held on January 17, 2018, the Company filed an amendment to its Amended and Restated Certificate of Incorporation to effect a reverse stock split of the issued and outstanding shares of common stock, at a ratio of one share for twenty-five shares. Additionally, following receipt of approval from stockholders at a special meeting of stockholders held on August 22, 2019, the Company filed an additional amendment to its Amended and Restated Certificate of Incorporation to effect a reverse stock split of the issued and outstanding shares of common stock, at a ratio of one share for twenty shares. All share amounts and per share prices in this Quarterly Report have been adjusted to reflect the reverse stock splits.
Following receipt of approval from stockholders at a special meeting of stockholders held on January 17, 2018, the Company filed an amendment to its Amended and Restated Certificate of Incorporation to effect a reverse stock split of the issued and outstanding shares of common stock, at a ratio of one share for twenty-five shares. Additionally, following receipt of approval from stockholders at a special meeting of stockholders held on August 22, 2019,November 30, 2022, the Company filed an additional amendment to its Amended and Restated Certificate of Incorporation to effect a reverse stock split of the issued and outstanding shares of common stock, at a ratio of one share for twenty shares.shares, which reverse stock split was effective January 5, 2023. All share amounts and per share prices in this Quarterly Report have been adjusted to reflect the reverse stock splits.
On June 24, 2022, the Company entered into the 2022 ATM Agreementan At-the-Market Offering with H.C. Wainwright & Co., LLC, as a sales agent, pursuant to which the Company may offer and sell from time to time in an “at the market offering”, at its option, up to an aggregate of $10.65 million of shares of the Company'sCompany’s common stock through the sales agent.Wainwright. As of September 30,December 31, 2022, the Company sold 1,714,88285,732 shares under the 2022 ATM Offering totaling $1.03 million in gross proceeds and $0.99 million in net proceeds. On September 30, 2022, theThe Company reduced the amount of common stock that may behas not sold any shares under the 2022 ATM Agreement to up to an aggregatein 2023.
On October 3, 2022, the Company closed a registered direct offering of $3.5 million, not including the shares of common stock and Series C Mirroring Preferred Stock pursuant to a securities purchase agreement entered into with a certain institutional investor. In the offering, the Company agreed to issue and sell to the investor (i) 268,000 shares of the Company’s common stock, par value $0.01 per share, (ii) 33,810 shares of the Company’s Series C Mirroring Preferred Stock, par value $0.01 per share and stated value of $0.01 per share, and (iii) pre-funded warrants to purchase an aggregate of 215,000 shares of common stock. Each share of common stock was sold at a price of $7.00 per share, each share of preferred stock was sold at a price of $0.01 per share, and each pre-funded warrant was sold at an offering price of $6.80 per share underlying such pre-funded warrants, for aggregate gross proceeds of $3.34 million before deducting the placement agent’s fees and the offering expenses, and net proceeds of $3.04 million. Under the purchase agreement, the Company also agreed to issue and sell to the investor in a concurrent private placement warrants to purchase an aggregate of 483,000 shares of common stock. In connection with the offering, the Company also entered into a warrant amendment agreement with the investor pursuant to which the Company agreed to amend certain existing warrants to purchase up to 741,489 shares of common stock that were previously sold underissued in 2018 and 2021 to the investor, with exercise prices ranging from $41.00 to $1,300.00 per share as a condition to their purchase of the securities in the offering, as follows: (i) lower the exercise price of the investor’s existing warrants to $7.54 per share, (ii) provide that the existing warrants, as amended, will not be exercisable until six months following the closing date of the offering, and (iii) extend the original expiration date of the existing warrants by five and one-half years following the closing of the offering. The increase in fair value resulting from the warrant modifications is accounted for as an equity issuance cost, resulting in a debit and credit to additional paid in capital for approximately $1.8 million. As of December 31, 2022, ATM Offering.all 215,000 pre-funded warrants were exercised and all 33,810 shares of the Company’s Series C Mirroring Preferred Stock were automatically cancelled and ceased to be outstanding following receipt of stockholder approval for the Company’s reverse stock split on November 30, 2022. In connection with the Company’s best-efforts public offering consummated in May 2023, the Company amended the exercise price of the existing warrants to $0.7785 per share.
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On October 18, 2021,January 11, 2023, the Company closed the October 2021 Offeringa best-efforts public offering pursuant to a securities purchase agreement entered into with a single healthcare-focusedcertain institutional investor for the purchase of 150,000(i) 321,207 shares of convertible preferredthe Company’s common stock, andpar value $0.01 per share, (ii) pre-funded warrants to purchase up to an aggregate of 7,500,0002,265,000 shares of common stock, (iii) Series A-1 common warrants to purchase an aggregate of 2,586,207 shares of common stock, and (iv) Series A-2 common warrants to purchase an aggregate of 2,586,207 shares of common stock. The sharesEach share of preferredcommon stock hadand accompanying Series A-1 Warrant and Series A-2 Warrant (collectively, the “Common Warrants”) was sold at a stated valueprice of $100$2.90 per share and were converted intoaccompanying Common Warrants, and each Pre-funded Warrant and accompanying Series A-1 Warrant and Series A-2 Warrant was sold at an aggregate of 7,500,000 shares of common stock at a conversionoffering price of $2.00$2.89 per share afterunderlying such Pre-funded Warrants and accompanying Common Warrants, for aggregate gross proceeds of approximately $7.5 million before deducting the Company received stockholder approval for an increase to its number of authorized shares of common stock, which approval occurred atplacement agent’s fees and the Company’s special meeting of stockholders held in December 2021. As of December 8, 2021, following receipt of approval from the stockholders, all 150,000 shares of convertible preferred stock were converted into an aggregate of 7,500,000 shares of common stock. The October 2021 Offering raised aggregateoffering expenses, and net proceeds of $13.9 million, and gross proceeds of $15.0approximately $6.9 million. The warrants issued in the October 2021 Offering initially hadCommon Warrants have an exercise price of $2.05$2.65 per share,share. The Series A-1 Warrants were immediately exercisable six months following the date ofupon issuance, and will expire five years following the initial exerciseissuance date. The warrants are classified as permanent equity at September 30, 2022. In connection withSeries A-2 Warrants were immediately exercisable upon issuance, and will expire eighteen months following the issuance of convertible preferred stock, the Company recognized a beneficial conversion feature of $7,166,752 as a deemed dividenddate. Subject to the preferred stockholderscertain ownership limitations described in the fourth quarterPre-funded Warrants, the Pre-funded Warrants were immediately exercisable and could be exercised at a nominal consideration of 2021.$0.01 per share of common stock any time until all the Pre-funded Warrants are exercised in full. All Pre-funded Warrants were exercised by February 15, 2023. In connection with the Company’s October 2022 Offering,best-efforts public offering consummated in May 2023, the Company amended the exercise price of the Common Warrants to $0.7785 per share.
On May 4, 2023, the Company closed a best-efforts public offering pursuant to a securities purchase agreement with a certain institutional investor’s 7,500,000 warrants was repricedinvestor, pursuant to $0.377which the Company issued and sold to the Investor (i) 605,000 shares of the Company’s common stock, par value $0.01 per share, (see Note 11).
On March 9, 2021, the Company entered into an Exercise Agreement with the Holder from our 2020 PIPE financing. Pursuant to the Exercise Agreement, in order to induce the Holder to exercise all of the remaining 4,842,615 Existing Warrants for cash, pursuant to the terms of and subject to beneficial ownership limitations contained in the Existing Warrants, the Company agreed to issue to the Holder, New Warrants(ii) pre-funded warrants to purchase 0.65 shares of common stock for each share of common stock issued upon such exercise of the remaining Existing Warrants pursuantup to the Exercise Agreement for an aggregate of 3,147,700 New Warrants. The terms of the New Warrants are substantially similar to those of the Existing Warrants, except that the New Warrants had an exercise price of $3.56. The New Warrants were immediately exercisable and will expire five years from the date of the Exercise Agreement. The Holder paid an aggregate of $255,751 to the Company for the purchase of the New Warrants. The Company received aggregate gross proceeds before expenses of approximately $9.65 million from the exercise of the remaining Existing Warrants held by the Holder and the payment of the purchase price for the New Warrants. The Company recognized approximately $7.8 million of non-cash warrant inducement expense during year ended December 31, 2021 related to this transaction representing the fair value of the New Warrants issued to induce the exercise. The fair values were calculated using the Black-Scholes option pricing model. In connection with the Company’s October 2022 Offering, the exercise price of the institutional investor’s 3,147,700 warrants was repriced to $0.377 per share (see Note 11).
On February 11, 2021, the Company closed the February 2021 Offering with a single U.S.-based, healthcare-focused institutional investor for the purchase of (i) 2,784,1843,890,825 shares of common stock, and (ii) 5,549,149 pre-funded warrants, with each pre-funded warrant exercisable for one share of common stock. The Company also issued to the investor, in a concurrent private placement, unregistered(iii) common warrants to purchase 4,166,666up to an aggregate of 4,495,825 shares of the Company’s common stock. Each share of common stock and accompanying common warrant werewas sold together at a combined offering price of $3.00,$0.7785 per share and accompanying common warrant, and each pre-funded warrant and accompanying common warrant werewas sold together at a combinedan offering price of $2.99.$0.7685 per share underlying such pre-funded warrant and accompanying common warrant, for aggregate gross proceeds of approximately $3.5 million and net proceeds of approximately $3.0 million. The pre-fundedcommon warrants were immediately exercisable, athave an exercise price of $0.7785 per share and will be exercisable beginning on the date of stockholder approval of the exercisability of the warrants under Nasdaq rules or may be exercised pursuant to the Warrant Inducement Agreement entered into on October 12, 2023, as amended on October 26, 2023 (the “Inducement Agreement”), upon the payment of additional consideration of $0.25 per share of common stock issued upon exercise of any existing warrants. The common warrants not exercised as part of the Inducement Agreement will expire on the five-year anniversary of the date of such stockholder approval (see Note 11). Each pre-funded warrant has an exercise price per share of common stock equal to $0.01 per share and could have beenmay be exercised at any time until all of the pre-funded warrants are exercised in full. The common warrants had an exercise price of $3.55 per share, were exercisable commencing on the six-month anniversary of the date of issuance, and will expire five and one-half (5.5) years from the date of issuance. The February 2021 Offering raised aggregate net proceeds of $23.5 million, and gross proceeds of $25.0 million. As of December 31, 2021, all pre-funded warrants issued in the February 2021 Offering have been exercised. In connection with the Company’s Octoberoffering, the Company also entered into a warrant amendment agreement with the investor pursuant to which the Company amended certain existing warrants to purchase up to 6,396,903 shares of common stock that were previously issued in 2018, 2021, 2022 Offering,and 2023 to the investor, with exercise prices ranging from $2.65 to $7.54 per share, in consideration for their purchase of the securities in the offering, as follows: (i) lower the exercise price of the institutional investor’s 4,166,666existing warrants was repriced to $0.377$0.7785 per share, (see Note 11).
On February 11, 2020,(ii) provide that the Company entered intoexisting warrants, as amended, will not be exercisable until the receipt of stockholder approval for the exercisability of the common warrants in the offering, and (iii) extend the original expiration date of the existing warrants by five years following the receipt of such stockholder approval. The increase in fair value resulting from the warrant modifications is accounted for as an ATM Agreement with Wainwright, which was amendedequity issuance cost, resulting in a debit and restated on November 13, 2020credit to add BTIG, LLC as a sales agent,additional paid in capital of approximately $0.3 million. As of September 30, 2023, stockholder approval for the exercisability of the common warrants in the offering has not yet been obtained; however, pursuant to which the Company could offer and sell from time to time in an “atInducement Agreement, the market offering,” at its option, up to an aggregate of $22.1 million of sharesexisting common warrants are exercisable until December 31, 2023 upon payment of the Company'sexercise price plus additional consideration of $0.25 per share of common stock throughissued upon exercise of any existing warrants. In addition, the sales agents. DuringCompany’s requirement to hold a stockholders’ meeting to obtain approval for the year ended December 31, 2021,exercisability of the Company sold 680,000 shares of itsexisting common stockwarrants is not applicable during the offer period under the 2020 ATM Offering resulting in aggregate net proceeds to the Company of approximately $1.48 million, and gross proceeds of $1.55 million. The Company terminated the ATM Agreement in June 2022 in conjunction with the execution of the 2022 ATMInducement Agreement.
Stock options
In 2008, the Company adopted the 2008 Stock Option and Restricted Stock Plan (the “2008 Plan”), pursuant to which the Company’s Board of Directors could grant either incentive or non-qualified stock options or shares of restricted stock to directors, key employees, consultants and advisors.
In April 2015, the Company adopted, and the Company’s stockholders approved, the 2015 Equity Incentive Plan (the “2015 Plan”); the 2015 Plan became effective upon the execution and delivery of the underwriting agreement for the Company’s initial public offering in May 2015. Following the effectiveness of the 2015 Plan, no further grants will be made under the 2008 Plan. The 2015 Plan provides for the granting of incentive stock options within the meaning of Section 422 of the Code to employees and the granting of non-qualified stock options to employees, non-employee directors and consultants. The 2015 Plan also provides for the grants of restricted stock, restricted stock units, stock appreciation rights, dividend equivalents and stock payments to employees, non-employee directors and consultants.
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Under the 2015 Plan, the aggregate number of shares of the common stock authorized for issuance may not exceed (1)(i) 2,710 plus (2)(ii) the sum of the number of shares subject to outstanding awards under the 2008 Plan as of the 2015 Plan’s effective date, that are subsequently forfeited or terminated for any reason before being exercised or settled, plus (3)(iii) the number of shares subject to vesting restrictions under the 2008 Plan as of the 2015 Plan’s effective date that are subsequently forfeited. In addition, the number of shares that have been authorized for issuance under the 2015 Plan will be automatically increased on the first day of each fiscal year beginning on January 1, 2016 and ending on (and including) January 1, 2025, in an amount equal to the lesser of (1)(i) 4% of the outstanding shares of common stock on the last day of the immediately preceding fiscal year, or (2)(ii) another lesser amount determined by the Company’s Board of Directors. Following Board of Director approval, 1,858,010115,996 shares were automatically added to the 2015 Plan in 2022.2023. Shares subject to awards granted under the 2015 Plan that are forfeited or terminated before being exercised or settled, or are not delivered to the participant because such award is settled in cash, will again become available for issuance under the 2015 Plan. However, shares that have actually been issued shall not again become available unless forfeited. As of September 30, 2022, 1,365,0242023, 107,481 shares remain available for issuance under the 2015 Plan.
On September 30, 2020, the Company held its 2020 Annual Meeting of Stockholders (the “Annual Meeting”). At the Annual Meeting, stockholders of the Company voted to approve, among other things, a plan under which stock options to purchase an aggregate of 1,300,000 shares of the Company’s common stock would be made by the Board of Directors of the Company outside of the stockholder-approved equity incentive plan to its executive officers and non-employee directors (the “2020 Stock Options Plan”). The 2020 Stock Options Plan and the grants made thereunder were approved by the Board of Directors on August 6, 2020, subject to receipt of stockholder approval at the Annual Meeting. The aggregate number of shares of the Company’s common stock authorized for issuance is 1,300,000 shares of common stock and all 1,300,000 stock options were issued on September 30, 2020. Shares subject to awards granted under the 2020 Stock Options Plan that are forfeited or terminated before being exercised will not be available for re-issuance under the 2020 Stock Options Plan. As of September 30, 2022, no shares remain available for issuance under the 2020 Stock Options Plan.
In connection with the appointment of Albert Weber as Chief Financial Officer, OpGen granted Mr. Weber an inducement grant of stock options to purchase an aggregate of 210,00010,500 shares of OpGen’s common stock with a grant date of January 3, 2022. The equity award was granted as a component of Mr. Weber’s employment compensation and was granted as an inducement material to his acceptance of employment with OpGen. The options have an exercise price of $1.08,$21.60, a ten-year term and a vesting schedule of 25% vesting of the award on the first annual anniversary of the date of grant and then 6.25% vesting each quarter thereafter over three additional years. The award is subject to Mr. Weber’s continued service with OpGen through the applicable vesting dates.
Replacement awards
In connection with the acquisition of Curetis, the Company issued equity awards to Curetis employees consisting of stock options (“replacement awards”) in exchange for their Curetis equity awards. The replacement awards consisted of 134,371 stock options with a weighted average grant date fair value of $1.68. The terms of these replacement awards are substantially similar to the original Curetis equity awards. The fair value of the replacement awards for services rendered through April 1, 2020, the acquisition date, was recognized as a component of the purchase consideration, with the remaining fair value of the replacement awards related to the post-combination services recorded as stock-based compensation over the remaining vesting period.
For the three and nine months ended September 30, 20222023 and 2021,2022, the Company recognized share-based compensation expense as follows:
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Cost of services | $ | — | $ | 2,977 | $ | 11,101 | $ | 7,323 | ||||||||
| Research and development | 82,659 | 65,836 | 223,638 | 168,592 | ||||||||||||
| General and administrative | 108,672 | 112,706 | 387,992 | 427,487 | ||||||||||||
| Sales and marketing | 37,036 | 35,637 | 104,658 | 64,972 | ||||||||||||
| $ | 228,367 | $ | 217,156 | $ | 727,389 | $ | 668,374 | |||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Cost of services | $ | (442 | ) | $ | — | $ | (442 | ) | $ | 11,101 | ||||||
| Research and development | (159,742 | ) | 82,659 | (41,914 | ) | 223,638 | ||||||||||
| General and administrative | 74,411 | 108,672 | 259,452 | 387,992 | ||||||||||||
| Sales and marketing | (143,710 | ) | 37,036 | (78,928 | ) | 104,658 | ||||||||||
| $ | (229,483 | ) | $ | 228,367 | $ | 138,168 | $ | 727,389 | ||||||||
No income tax benefit for share-based compensation arrangements was recognized in the condensed consolidated statements of operations and comprehensive loss due to the Company’s net loss position.
The Company granted no options during Share-based compensation expense decreased significantly in the three monthsquarter ended September 30, 2022. 2023 primarily due to reversals resulting from forfeited options and restricted stock units upon the reduction in force in connection with the Company’s cash management efforts (see Note 2).
During the three months ended September 30, 2022, 53,125 options were forfeited, and 2,603 options expired. The Company granted 542,500 options during the nine months ended September 30, 2022. During2023, the nine months ended September 30, 2022, 63,316Company did not grant any options, 3,663 options were forfeited, and 32,5061,734 options expired.
The Company had total stock options to acquire 2,160,027102,200 shares of common stock outstanding at September 30, 20222023 under all of its equity compensation plans.
Restricted stock units
The Company granted no restricted stock units duringDuring the three months ended September 30, 2022,2023, the Company did not grant any restricted stock units, no restricted stock units vested, and 25,00020,438 were forfeited. The Company granted 730,572 restricted stock units duringDuring the nine months ended September 30, 2022, and 173,3682023, the Company granted 100,500 restricted stock units, 33,780 restricted stock units vested, and 35,40220,438 were forfeited. The Company had 808,06689,189 total restricted stock units outstanding at September 30, 2022.2023.
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Stock purchase warrants
At September 30, 20222023 and December 31, 2021,2022, the following warrants to purchase shares of common stock were outstanding:
| Outstanding at | ||||||||||||||||||
| Issuance | Exercise Price | Expiration | September 30, 2023 (1) | December 31, 2022 (1) | ||||||||||||||
| February 2015 | $ | 66,000.00 | February 2025 | 23 | 23 | |||||||||||||
| February 2018 | $ | 1,625.00 | February 2023 | — | 462 | |||||||||||||
| February 2018 | $ | 1,300.00 | February 2023 | — | 3,848 | |||||||||||||
| October 2019 | $ | 40.00 | October 2024 | 17,700 | 17,700 | |||||||||||||
| October 2019 | $ | 52.00 | October 2024 | 11,750 | 11,750 | |||||||||||||
| November 2020 | $ | 50.44 | May 2026 | 12,107 | 12,107 | |||||||||||||
| February 2021 | $ | 78.00 | August 2026 | 20,834 | 20,834 | |||||||||||||
| October 2022 | $ | 7.54 | April 2028 | — | 1,224,489 | |||||||||||||
| May 2023 | $ | 0.7785 | (2) | 10,892,728 | — | |||||||||||||
| 10,955,142 | 1,291,213 | |||||||||||||||||
| Outstanding at | ||||||||||||||||||
| Issuance | Exercise Price | Expiration | September 30, 2022 (1) | December 31, 2021 (1) | ||||||||||||||
| February 2015 | $ | 3,300.00 | February 2025 | 451 | 451 | |||||||||||||
| June 2017 | $ | 390.00 | June 2022 | — | 938 | |||||||||||||
| July 2017 | $ | 345.00 | July 2022 | — | 318 | |||||||||||||
| July 2017 | $ | 250.00 | July 2022 | — | 2,501 | |||||||||||||
| July 2017 | $ | 212.60 | July 2022 | — | 50,006 | |||||||||||||
| February 2018 | $ | 81.25 | February 2023 | 9,232 | 9,232 | |||||||||||||
| February 2018 | $ | 65.00 | February 2023 | 92,338 | 92,338 | |||||||||||||
| October 2019 | $ | 2.00 | October 2024 | 354,000 | 354,000 | |||||||||||||
| October 2019 | $ | 2.60 | October 2024 | 235,000 | 235,000 | |||||||||||||
| November 2020 | $ | 2.52 | May 2026 | 242,130 | 242,130 | |||||||||||||
| February 2021 | $ | 3.55 | August 2026 | 4,166,666 | 4,166,666 | |||||||||||||
| February 2021 | $ | 3.90 | August 2026 | 416,666 | 416,666 | |||||||||||||
| March 2021 | $ | 3.56 | March 2026 | 3,147,700 | 3,147,700 | |||||||||||||
| October 2021 | $ | 2.05 | April 2027 | 7,500,000 | 7,500,000 | |||||||||||||
| 16,164,183 | 16,217,946 | |||||||||||||||||
The warrants listed above were issued in connection with various debt, equity, or development contract agreements.
| (1) | Warrants to purchase fractional shares of common stock resulting from the reverse stock |
| (2) | Warrants will be exercisable beginning on the date of stockholder approval of the exercisability of the warrants under Nasdaq rules or, pursuant to the Warrant Inducement Agreement entered into on October 12, 2023, as amended on October 26, 2023 (the “Inducement Agreement”), upon the payment of additional consideration of $0.25 per share of common stock issued upon exercise of any existing warrants. The warrants not exercised as part of the Inducement Agreement will expire on the five-year anniversary of the date of such stockholder approval (see Note 11). |
Note 8 – Commitments and Contingencies
Registration and other stockholder rights
In connection with the various investment transactions, the Company entered into certain registration rights agreements with stockholders, pursuant to which the investors were granted certain demand registration rights and/or piggyback and/or resale registration rights in connection with subsequent registered offerings of the Company’s common stock.
Supply agreements
In June 2017, the Company entered into an agreement with Life Technologies Corporation, a subsidiary of Thermo Fisher Scientific (“LTC”), to supply the Company with Thermo Fisher Scientific’s QuantStudio 5 Real-Time PCR Systems (“QuantStudio 5”) to be used to run OpGen’s Acuitas AMR Gene Panel tests. Under the terms of the agreement, the Company must notify LTC of the number of QuantStudio 5s5 systems that it commits to purchase in the following quarter. AsSince the inception of September 30, 2022,the agreement, the Company had acquired twenty-four24 QuantStudio 5s including5 systems, none of which were acquired during the three and nine months ended September 30, 2022.2023. As of September 30, 2022,2023, the Company has not committed to acquiring additional QuantStudio 5 systems in the next three months. Since the Company decided to discontinue its Acuitas AMR Gene Panel diagnostic test in October 2023, the Company plans to sell or dispose of any surplus of such 24 QuantStudio 5 systems.
Curetis places frame-work orders for Unyvero Systemsinstruments and for raw materials for its cartridge manufacturing to ensure availability during commercial ramp-up-phase and also to gain volume-scale-effects with regards to purchase prices. Some of the electronic parts used for the production of Unyvero Systemsinstruments have lead times of several months, hence it is necessary to order such systems with long-term framework-orders to ensure the demands from the market are covered. The aggregateCuretis does not have any purchase commitments over the next twelve months are approximately $0.1 million.months.
COVID-19 Impact
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In December 2019 and early 2020, the coronavirus known as COVID-19 was reported to have surfaced in China. The spread of this virus including its variants and mutations globally in 2020, 2021 as well as into 2022 has caused significant business disruption domestically in the United States and in Europe, as well as China, the areas in which the Company primarily operates or has significant business interest. While the disruption is currently expected to be temporary, such disruption is still ongoing and there remains considerable uncertainty around the duration of this disruption. Therefore, while the Company expects that this matter will continue to impact the Company’s financial condition, results of operations, or cash flows, the extent of the financial impact and duration cannot be reasonably estimated at this time.
Note 9 – Leases
The following table presents the Company’s ROU assets and lease liabilities as of September 30, 20222023 and December 31, 2021:2022:
| Lease Classification | September 30, 2022 | December 31, 2021 | ||||||||||||||
| Lease classification | September 30, 2023 | December 31, 2022 | ||||||||||||||
| ROU Assets: | ||||||||||||||||
| Operating | $ | 1,472,934 | $ | 1,814,396 | $ | 1,915,049 | $ | 1,459,413 | ||||||||
| Financing | 4,347 | 90,467 | 986 | 3,500 | ||||||||||||
| Total ROU assets | $ | 1,477,281 | $ | 1,904,863 | $ | 1,916,035 | $ | 1,462,913 | ||||||||
| Liabilities | ||||||||||||||||
| Current: | ||||||||||||||||
| Operating | $ | 346,629 | $ | 459,792 | $ | 521,424 | $ | 377,626 | ||||||||
| Finance | 6,748 | 43,150 | 1,121 | 3,364 | ||||||||||||
| Noncurrent: | ||||||||||||||||
| Operating | 2,631,957 | 2,977,402 | 2,830,282 | 2,566,138 | ||||||||||||
| Finance | 1,121 | 3,644 | — | 280 | ||||||||||||
| Total lease liabilities | $ | 2,986,455 | $ | 3,483,988 | $ | 3,352,827 | $ | 2,947,408 | ||||||||
Maturities of lease liabilities as of September 30, 20222023 by fiscal year are as follows:
| Maturity of Lease Liabilities | Operating | Finance | Total | |||||||||||
| 2022 (Three months) | $ | 159,760 | $ | 4,254 | $ | 164,014 | ||||||||
| 2023 | 598,672 | 3,364 | 602,036 | |||||||||||
| 2024 | 608,267 | 280 | 608,547 | |||||||||||
| 2025 | 519,550 | — | 519,550 | |||||||||||
| 2026 | 378,279 | — | 378,279 | |||||||||||
| Thereafter | 2,126,369 | — | 2,126,369 | |||||||||||
| Total lease payments | 4,390,897 | 7,898 | 4,398,795 | |||||||||||
| Less: Interest | (1,412,311 | ) | (29 | ) | (1,412,340 | ) | ||||||||
| Present value of lease liabilities | $ | 2,978,586 | $ | 7,869 | $ | 2,986,455 | ||||||||
| Maturity of lease liabilities | Operating | Finance | Total | |||||||||||
| 2023 (October to December) | $ | 202,289 | $ | 841 | $ | 203,130 | ||||||||
| 2024 | 815,622 | 280 | 815,902 | |||||||||||
| 2025 | 725,505 | — | 725,505 | |||||||||||
| 2026 | 577,456 | — | 577,456 | |||||||||||
| 2027 | 587,859 | — | 587,859 | |||||||||||
| Thereafter | 1,737,689 | — | 1,737,689 | |||||||||||
| Total lease payments | 4,646,420 | 1,121 | 4,647,541 | |||||||||||
| Less: Interest | (1,294,714 | ) | — | (1,294,714 | ) | |||||||||
| Present value of lease liabilities | $ | 3,351,706 | $ | 1,121 | $ | 3,352,827 | ||||||||
Condensed consolidated statements of operations classification of lease costs as of the three and nine months ended September 30, 20222023 and 20212022 are as follows:
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||
| Lease Cost | Classification | 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Operating | Operating expenses | $ | 139,206 | $ | 188,945 | $ | 466,904 | $ | 835,314 | |||||||||
| Finance: | ||||||||||||||||||
| Amortization | Operating expenses | 15,312 | 85,822 | 86,119 | 308,242 | |||||||||||||
| Interest expense | Other expenses | 258 | 2,640 | 1,672 | 13,991 | |||||||||||||
| Total lease costs | $ | 154,776 | $ | 277,407 | $ | 554,695 | $ | 1,157,547 | ||||||||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||
| Lease cost | Classification | 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Operating | Operating expenses | $ | 175,243 | $ | 139,206 | $ | 484,546 | $ | 466,904 | |||||||||
| Finance: | ||||||||||||||||||
| Amortization | Operating expenses | 847 | 15,312 | 2,514 | 86,119 | |||||||||||||
| Interest expense | Other expenses | — | 258 | — | 1,672 | |||||||||||||
| Total lease costs | $ | 176,090 | $ | 154,776 | $ | 487,060 | $ | 554,695 | ||||||||||
Other lease information as of September 30, 20222023 is as follows:
| Other | Total | |||
| Weighted average remaining lease term (in years) | ||||
| Operating leases | ||||
| Finance leases | ||||
| Weighted average discount rate: | ||||
| Operating leases | % | |||
| Finance leases | % | |||
Supplemental cash flow information as of the nine months ended September 30, 20222023 and 20212022 is as follows:
| Supplemental cash flow information | 2023 | 2022 | ||||||
| Cash paid for amounts included in the measurement of lease liabilities | ||||||||
| Cash used in operating activities | ||||||||
| Operating leases | $ | 484,546 | $ | 466,904 | ||||
| Finance leases | $ | — | $ | 1,672 | ||||
| Cash used in financing activities | ||||||||
| Finance leases | $ | 2,523 | $ | 38,925 | ||||
| ROU assets obtained in exchange for lease obligations: | ||||||||
| Operating leases | $ | 801,321 | $ | — | ||||
| Supplemental Cash Flow Information | 2022 | 2021 | ||||||
| Cash paid for amounts included in the measurement of lease liabilities | ||||||||
| Cash used in operating activities | ||||||||
| Operating leases | $ | 466,904 | $ | 835,314 | ||||
| Finance leases | $ | 1,672 | $ | 13,991 | ||||
| Cash used in financing activities | ||||||||
| Finance leases | $ | 38,925 | $ | 236,563 | ||||
| ROU assets obtained in exchange for lease obligations: | ||||||||
| Operating leases | $ | — | $ | 748,294 | ||||
| 25 |
Note 10 – License agreements, research collaborations and development agreements
NYSDOH
In 2018, the Company announced a collaboration with the New York State Department of Health (“DOH”) and ILÚM Health Solutions, LLC (“ILÚM”), a wholly-owned subsidiary of Merck’s Healthcare Services and Solutions division, to develop a state-of-the-art research program to detect, track, and manage antimicrobial-resistant infections at healthcare institutions statewide. ILÚM has since been acquired by Infectious Disease Connect, Inc. (“IDC”), a University of Pittsburgh Medical Center (“UPMC”) Enterprise company. The Company was working together with DOH’s Wadsworth Center and IDC to continue development of an infectious disease digital health and precision medicine platform that connects healthcare institutions to DOH and uses genomic microbiology for statewide surveillance and control of antimicrobial resistance. As part of the collaboration, the Company received approximately $1.6 million over the 15-month demonstration portion of the project. The demonstration project began in early 2019 and was completed in the first quarter of 2020. In April 2020, the Company began a second-year expansion phase to build on the successes and experience of the first-year pilot phase while focusing on accomplishing the goal of the effort to improve patient outcomes and save healthcare dollars by integrating real-time epidemiologic surveillance with rapid delivery of antibiotic resistance results to care-givers via web-based and mobile platforms. The second-year contract included a quarterly retainer-based project fee as well as volume-dependent per test fees for a total contract value of up to $450,000 to OpGen. In April 2021, the Company extended its second-year expansion phase by another six months through September 30, 2021 at which point the project was completed and has ended. The six-month extension and expansion contract included a quarterly retainer-based project fee as well as volume-dependent per test fees for a total contract value of up to an additional $540,000. During the three months ended September 30, 2022 and 2021, the Company recognized $0 and $213,000 of revenue related to the contract, respectively. During the nine months ended September 30, 2022 and 2021, the Company recognized $0 and $558,000 of revenue related to the contract, respectively.
Sandoz
In December 2018, Ares Genetics entered into a service frame agreement with Sandoz International GmbH (“Sandoz”), to leverage Ares Genetics’ database on the genetics of antibiotic resistance, ARESdb, and the ARES Technology Platform for Sandoz’Sandoz’s anti-infective portfolio.
Under the terms of the framework agreement, which had an initial term of 36 months thatand was subsequently extended to January 31, 2025, Ares Genetics and Sandoz intend to develop a digital anti-infectives platform, combining established microbiology laboratory methods with advanced bioinformatics and artificial intelligence methods to support drug development and life-cycle management. The collaboration, in the short- to mid-term, aims to both rapidly and cost-effectively re-purpose existing antibiotics and design value-added medicines with the objective of expanding indication areas and to overcome antibiotic resistance, in particular with regards to infections with bacteria that have already developed resistance against multiple treatment options. In the longer-term, the platform is expected to enable surveillance for antimicrobial resistant pathogens to inform antimicrobial stewardship and the development of novel anti-infectives that are less prone to encounter resistance and thereby preserve antibiotics as an effective treatment option.
Qiagen
On February 18, 2019, Ares Genetics and Qiagen GmbH, or Qiagen, entered into a strategic licensing agreement for ARESdb and AREStools, in the area of AMR research. The agreement has a term of 20 years and may be terminated by Qiagen for convenience with 180 days written notice.
Ares Genetics has retained the rights to use ARESdb and AREStools for AMR research, customized bioinformatics services, and for the development of specific AMR assays and applications for the Curetis Group (including Ares Genetics), as well as third parties (e.g., other diagnostics companies or partners in the pharmaceutical industry). As the Qiagen research offering is expected to also enable advanced molecular diagnostic services and products, Qiagen’s customers may obtain a diagnostic use license from Ares Genetics.
Under the terms of the original agreement, Qiagen, in exchange for a moderate six figure up-front licensing payment, has received an exclusive RUO license to develop and commercialize general bioinformatics offerings and services for AMR research use only, based on Ares Genetics’ database on the genetics of antimicrobial resistance, ARESdb, as well as on the ARES bioinformatics AMR toolbox, AREStools. Under the agreement, the parties had agreed to a mid-single digit percentage royalty rate on Qiagen net sales, which is subject to a minimum royalty rate that steps up upon certain achieved milestones, which is payable to Ares Genetics. The parties also agreed to further modest six figure milestone payments upon certain product launches. The contract was subsequently amended in May 2021 to a non-exclusive license and a flat annual license fee as well as a royalty percentage on potential future panel-based products that are developed by Qiagen.
FISH License
The Company was party to one license agreement with Life Technologies to acquire certain patent rights and technologies related to its FISH product line. Royalties were incurred upon the sale of a product or service which utilizes the licensed technology. The Company terminated this license agreement in October 2020 effective as of June 30, 2021 in conjunction with its announced exit of the FISH business in June 2021. The Company paid a one-time settlement fee of $350,000 and paid a 10% royalty on the sale of eligible products through June 2021 but is no longer subject to any minimum royalty obligations. The Company recognized net royalty expense of $0 and $2,725 for the three months ended September 30, 2022 and 2021, respectively. The Company recognized net royalty expense of $0 and $11,721 for the nine months ended September 30, 2022 and 2021, respectively.
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Siemens
In 2016, Ares Genetics acquired the GEAR assets from Siemens Technology Accelerator GmbH (“STA”), providing the original foundation to ARESdb. Under the agreement with STA, Ares Genetics incurs royalties on revenues from licensed product sales or sublicensing proceeds. Royalty rates under the Siemens agreement range from 1.3% to 40% depending on the specifics of the licenses and rights provided by Ares Genetics to third parties and whether such third parties may have been originally introduced by Siemens to Ares Genetics. The total net royalty expense related to this agreement was $1,552$3,102 and $681$1,552 for the three months ended September 30, 20222023 and 2021,2022, respectively. The total net royalty expense related to this agreement was $5,034$7,309 and $1,475$5,034 for the nine months ended September 30, 20222023 and 2021,2022, respectively.
Foundation for Innovative New Diagnostics (FIND)
On September 20, 2022, Curetis GmbH and FIND entered into a research and development collaboration agreement for a total amount due to Curetis of €0.7 million to develop a simple to use molecular diagnostic test for identification of pathogens and antibiotic resistances in positive blood cultures for deployment in low- and middle-income countries (“LMICs”). If successful, after demonstrating feasibility and completingOn April 4, 2023, the initialCompany entered into an amendment to its research and development projectcollaboration agreement with FIND to expand the deliverables in exchange for an additional €0.13 million in milestone payments (“Amendment 1”). The additional deliverables were completed by June 30, 2023. Following successful completion of the feasibility phase both parties have agreed to discussof the option of a potential future collaboration, including the additional deliverables, FIND and commercialization agreement. As of September 30, 2022,Curetis, on August 1, 2023, extended the research and development activities had already commenced,collaboration agreement through May 31, 2024, to include AMR assay and cartridge development, analytical testing, and software development for an additional €0.5 million (“Amendment 2”). During the three and nine months ended September 30, 2023, the Company recognized revenues of €42 thousand and €0.6 million, respectively, related to the collaboration, is expectedincreasing the total project revenue to conclude with a series of work packages and deliverables in the first half of 2023.€0.87 million.
Note 11 - Subsequent Events
SubsequentThe Company evaluates subsequent events and transactions that occur after the balance sheet date up to September 30, 2022,the date that the unaudited condensed consolidated financial statements are issued.
Other than as disclosed in this Note 11 and as was disclosed in Notes 1, 2, and 7 to the accompanying unaudited condensed consolidated financial statements, there have been no subsequent events that require adjustment or disclosure in the accompanying unaudited condensed consolidated financial statements.
On October 6, 2023, the Company’s subsidiary, Curetis, received a payment of €0.75 million related to the sale of certain Unyvero A50 systems by Curetis to a strategic partner. Such purchase of systems and payment was made in connection with the negotiation of a potential strategic transaction involving Curetis and the Company’s subsidiary, Ares Genetics, with such strategic partner. The Company used the payment to fund Curetis’ and Ares Genetics’ operations. Following the insolvency filings by Curetis and Ares Genetics, the negotiation of such potential strategic transaction has ceased.
On October 11, 2023, the Company consummatedentered into a registered direct offering of shares of common stock and Series C Mirroring Preferred Stock Purchase Agreement (the “Purchase Agreement”) with a single investor (the “Investor”), pursuant to a Securities Purchase Agreement entered into with a certain institutional investor. Pursuant to the Securities Purchase Agreement,which the Company agreed to issue and sell to the investor (i) 5,360,000 shares of the Company’s common stock, par value $0.01 per share, (ii) 33,810Investor in a private placement (the “Private Placement”) 1,000 shares of the Company’s Series C MirroringD Preferred Stock, par value $0.01 per share and stated value of $0.01 per share, and (iii) pre-funded warrants to purchase an aggregate of 4,300,000 shares of common stock.(the “Preferred Stock”). Each share of common stock was sold at a price of $0.35 per share, each share of preferred stock was sold at a price of $0.01$1,000 per share and each pre-funded warrant was sold at an offering price of $0.34 per share underlying such pre-funded warrants, for aggregate gross proceeds of $3.34$1.0 million before deducting offering expenses. The Private Placement was conducted in connection with the placement agent’s feesnegotiation of a potential strategic transaction involving the Company and the offering expenses, and netInvestor. The Company intends to use the proceeds of $3.04 million. Underthe Private Placement to fund the Company’s operations while it pursues a potential strategic transaction with the Investor. Any such strategic transaction will be pursuant to a definitive agreement entered into by the Company and the Investor. In connection with the ongoing discussions for a potential strategic transaction, the parties anticipate closing the Private Placement as soon as practical. Pursuant to the Purchase Agreement, the Company also agreed to issuefiled a certificate of designation (the “Certificate of Designation”) with the Secretary of State of the State of Delaware designating the rights, preferences and sell tolimitations of the investor inshares of preferred stock on October 11, 2023. The Certificate of Designation provides that the shares of preferred stock have a concurrent private placement warrants to purchase an aggregatestated value of 9,660,000$1,000 per share and are convertible into shares of common stock. In connection with the offering,stock, par value $0.01 per share of the Company alsoat a price of $0.409 per share, subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications, or similar events affecting the common stock. The preferred stock may be converted at any time at the option of the holder. Notwithstanding the foregoing, the Certificate of Designation provides that in no event will the preferred stock be convertible into common stock in a manner that would result in the holder, its permitted transferees and affiliates holding more than 19.99% (together with any shares of common stock otherwise held by the Investor, its permitted transferees and their affiliates) of the then issued and outstanding common stock (the “Ownership Limitation”), prior to the date that the Company’s stockholders approve the issuance of shares of common stock to the holder upon conversion of the preferred stock (the “stockholder approval”). Upon receipt of stockholder approval, the shares of preferred stock will automatically be converted into shares of common stock without further action of the holder thereof.
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On October 12, 2023, the Company entered into a warrant inducement agreement (the “Inducement Agreement”) with a holder (the “Holder”) of certain existing warrants (the “Existing Warrants”) to purchase shares of common stock, par value $0.01 per share, of the Company. Pursuant to the Inducement Agreement, the Holder agreed to exercise for cash their Existing Warrants to purchase up to 10,892,728 shares of the Company’s common stock at an exercise price of $0.7785 per share, the exercise price per share of the Existing Warrants, during the period from the date of the Inducement Agreement until 7:30 a.m., Eastern Time, on October 26, 2023. Pursuant to an amendment agreement withentered into by the investor pursuant to whichCompany and Holder on October 26, 2023, the Company agreed to amend certain existing warrantsextend the offer period until December 31, 2023. In order to purchasepermit the exercise of the Existing Warrants pursuant to the rules of the Nasdaq Capital Market, the Holder agreed to pay as additional consideration $0.25 per share of common stock issued upon exercise of the Existing Warrants. The aggregate gross proceeds to be received by the Company will depend on the number of Existing Warrants actually exercised by the Holder. If all the Existing Warrants are exercised in connection with the Inducement Agreement, the Company would anticipate receiving aggregate gross proceeds of up to 14,829,751approximately $11.2 million from the exercise of the Existing Warrants before deducting financial advisory fees and other expenses payable by us. There is, however, no guarantee that all the Existing Warrants will be exercised by the Holder in accordance with the Inducement Agreement. In consideration of the Holder’s agreement to exercise the Existing Warrants in accordance with the Inducement Agreement, the Company agreed to issue new warrants (the “Inducement Warrants”) to purchase shares of common stock that were previously issued in 2018 and 2021equal to the investor, with exercise prices ranging from $2.05 to $65.00 per share as a condition for their purchase100% of the securities innumber of shares of common stock issued upon exercise of the offering, as follows: (i) lower theExisting Warrants (the “Inducement Warrant Shares”). The Inducement Warrants will have an exercise price of the investor’s existing warrants to $0.377$0.336 per share (ii) provide that the existing warrants, as amended,and will not be exercisable until six monthson the six-month anniversary of the date of issuance and expire on the five-year anniversary of the Inducement Warrant’s first becoming exercisable. As of October 25, 2023, the Holder had exercised 2,000,000 shares of common stock under the Existing Warrants pursuant to the Inducement Agreement for aggregate gross proceeds to the Company of $2.057 million before deducting financial advisory fees and other expenses payable by the Company.
On October 18, 2023, the Company discontinued its Acuitas AMR Gene Panel diagnostic test. The Company informed customers of the discontinuation and final orders were processed earlier this year. The Company plans to sell or dispose of its surplus QuantStudio 5 and EZ1 systems and has written off the remaining Acuitas products from its inventory. The discontinuance of this product line did not qualify for discontinued operations reporting.
On November 6, 2023, following the closing dateCompany’s unsuccessful efforts to sell the businesses or assets of its wholly owned subsidiaries Curetis and Ares Genetics or to access additional capital to continue their operations, Curetis filed a petition for insolvency with the district court of Stuttgart, Germany, and Ares Genetics filed a petition for insolvency with the commercial court in Vienna, Austria, Reference Number 38 S 175/23x. The insolvency proceedings of Curetis and Ares Genetics will be adjudicated under the insolvency laws of Germany and Austria, respectively. Dr. Katharina Widhalm-Budak has been appointed insolvency administrator by the Vienna court in Ares Genetics’ insolvency proceeding. The district court of Stuttgart will appoint an insolvency administrator for Curetis’ insolvency proceeding. The insolvency administrators will assume control over the assets and liabilities of Curetis and Ares Genetics, respectively, which effectively eliminates the authority and power of the offering,Company and (iii) extend the original expiration dateits officers to act on behalf of the existing warrants by fivesubsidiaries. In the event the preservation and one-half years following the closesale of the offering.business in connection with the insolvency proceedings is unsuccessful, the assets of Curetis and Ares Genetics would be liquidated and claims paid in accordance with the insolvency laws of the applicable jurisdiction.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the unaudited condensed consolidated financial statements and the accompanying notes thereto included in Part I, Item 1 of this quarterly report on Form 10-Q. This discussion contains forward-looking statements, based on current expectations and related to future events and our future financial performance, that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many important factors, including those set forth under Part II. Item 1A. “Risk Factors” of this quarterly report on Form 10-Q and Part 1. Item 1A of our annual report on Form 10-K for the year ended December 31, 2021.2022.
Overview
OpGen, Inc. (the “Company”) is aisa precision medicine company harnessing the power of molecular diagnostics and informatics to help combat infectious disease. Along with ourits subsidiaries, Curetis GmbH and Ares Genetics GmbH, we arethe Company is developing and commercializing molecular microbiology solutions helping to guide clinicians with more rapid and actionable information about life threatening infections to improve patient outcomes and decrease the spread of infections caused by multidrug-resistant microorganisms, or MDROs. OurThe Company’s current product portfolio includes Unyvero Acuitas AMR Gene Panel, and the ARES Technology Platform including ARESdb, NGS technology and AI-powered bioinformatics solutions for AMR surveillance, outbreak analysis, and antibiotic response prediction including ARESiss, ARESid, ARESasp, and AREScloud, as well as the Curetis CE-IVD-marked PCR-based SARS-CoV-2 test kit. The Company exited its FISH business in early 2021, and the Company's corresponding license agreement with Life Technologies, a subsidiary of Thermo Fisher, was terminated as of June 30, 2021.AREScloud.
On April 1, 2020, the Company completed a business combination transaction whereby the Company acquired Curetis GmbH, a private limited liability company organized under the laws of the Federal Republic of Germany (“Curetis GmbH”). Curetis is an early commercial-stage molecular diagnostics (MDx) company focused on rapid infectious disease testing for hospitalized patients with the aim to improve the treatment of hospitalized, critically ill patients with suspected microbial infection and has developed the innovative Unyvero molecular diagnostic solution for comprehensive infectious disease testing. The business combination transaction was designed principally to leverage each company’s existing research and development and relationships with hospitals and clinical laboratories to accelerate the sales of both companies’ products and services.
On October 18, 2023, the Company discontinued its Acuitas AMR Gene Panel diagnostic test. The Company informed customers of the discontinuation and final orders were processed earlier this year. The discontinuance of this product line did not qualify for discontinued operations reporting.
On November 6, 2023, following the Company’s unsuccessful efforts to sell the businesses or assets of its wholly owned subsidiaries Curetis and Ares Genetics or to access additional capital to continue their operations, Curetis filed a petition for insolvency with the district court of Stuttgart, Germany, and Ares Genetics filed a petition for insolvency with the commercial court in Vienna, Austria, Reference Number 38 S 175/23x. The insolvency proceedings of Curetis and Ares Genetics will be adjudicated under the insolvency laws of Germany and Austria, respectively. Dr. Katharina Widhalm-Budak has been appointed insolvency administrator by the Vienna court in Ares Genetics’ insolvency proceeding. The district court of Stuttgart will appoint an insolvency administrator for Curetis’ insolvency proceeding. The insolvency administrators will assume control over the assets and liabilities of Curetis and Ares Genetics, respectively, which effectively eliminates the authority and power of the Company and its officers to act on behalf of the subsidiaries. In the event the preservation and sale of the business in connection with the insolvency proceedings is unsuccessful, the assets of Curetis and Ares Genetics would be liquidated and claims paid in accordance with the insolvency laws of the applicable jurisdiction.
The focus of OpGen is on its combined broad portfolio of products, which includes high impact rapid diagnostics and bioinformatics to interpret antimicrobial resistance (or AMR)AMR genetic data. The Company currently expects to focus on the following products for lower respiratory infection and urinary tract infection and invasive joint infection:
| ● | The Unyvero Lower Respiratory Tract, or LRT, test (e.g., for bacterial pneumonias) is the first U.S. Food and Drug Administration, or FDA, cleared test that can be used for the detection of more than 90% of common causative agents of pneumonia in hospitalized patients. According to the National Center for Health Statistics (2018), pneumonia is a leading cause of admissions to the hospital and is associated with substantial morbidity and mortality. It also increases in elderly patients, transplant, cancer or other immunocompromised patients. The Unyvero LRT automated test detects 19 pathogens within less than five hours, with approximately two minutes of hands-on time and provides clinicians with a comprehensive overview of 10 genetic antibiotic resistance markers. |
| ● | The Unyvero Urinary Tract Infection, or UTI, test, which is |
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OpGen has extensive offerings of additional IVD tests including CE-IVD-marked Unyvero tests for hospitalized pneumonia patients who are hospitalized, implant and tissue infections, intra-abdominal infections, complicated urinary tract infections, and blood stream infections. OurThe Company’s portfolio furthermore includesincluded a CE-IVD-marked polymerase chain reaction, or PCR, based rapid test kit for SARS-CoV-2 detection in combination with ourits PCR compatible universal lysis buffer (PULB). in 2022, but the Company has ceased all commercial operations on the SARS-CoV-2 test kit in 2023.
OpGen’s combined AMR bioinformatics offerings, when and if such products are cleared for marketing, will offer important new tools to clinicians treating patients with AMR infections. OpGen’s subsidiary Ares Genetics’ ARESdb is a comprehensive database of genetic and phenotypic information. ARESdb was originally designed based on the Siemens microbiology strain collection covering resistant pathogens and its development has significantly expanded, as a result of transferring data from the discontinued Acuitas Lighthouse into ARESdb to now cover more than 90,000130,000 bacterial isolates that have been sequenced using Next Generation Sequencing, or NGS, technology and tested for susceptibility with applicable antibiotics from a range of over 100 antimicrobial drugs. In the fourth quarter oflate 2021, Ares Genetics entered into a strategic database access deal with one of the world’s leading microbiology and IVD corporations for their non-exclusive access to approximately 1.1% of Ares Genetics’ total database asset at the time of signing. Ares Genetics continues to explore various discussions with several interested parties in potential future collaboration or licensing opportunities. Additional partnerships with a U.S. Clinical Laboratory Improvement Amendments, or CLIA, lab,certified laboratory, a contract research organization, (“CRO”) andor CRO, a major University Medical Center, as well as the Belgian national reference laboratory at the University Hospital Leuven as well as several U.S. state public health labs have been initiated and are ongoing and the collaboration master service agreement with Sandoz has recently been extended until January 2025.
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In addition to potential future licensing and partnering, Ares Genetics intends to independently utilize the proprietary biomarker content in this database, as well as to build an independent business in NGS and Artificial Intelligence, or AI, based offerings for AMR research and diagnostics in collaboration with its current and potential future partners in the life science, pharmaceutical and diagnostics industries. Ares Genetics’ customers for such offerings include Siemens Technology Accelerator and academic, public health, healthcare and biotechnology institutions from the United States and various European countries as new customers.countries.
Curetis’Our Unyvero A50 system tests for up to 130 diagnostic targets (pathogens and resistance genes) in under five hours with approximately two minutes of hands-on time. The system was first CE-IVD-marked in 2012 and was FDA clearedFDA-cleared in 2018 along with the LRT test through a De Novo request. The Unyvero A30 RQ is a new device designed to address the low-to mid-plex testing market for 5-30 DNA targets and to provide results in approximately 30 to 90 minutes with 2-5two to five minutes of hands-on time. The Unyvero A30 RQ has a small benchtop footprint and has an attractive cost of goods profile. Curetis has been following a partnering strategy for the Unyvero A30 RQ and, following the successful completion of a key development milestone, Curetis has completed final verification and validation testing of the A30 instruments and, in addition to the new collaboration with FIND, is actively engaged in ongoing partnering discussions and due diligence.RQ instruments.
The Company has extensive partner and distribution relationships to help accelerate the establishment of a global infectious disease diagnostic testing and informatics business. The Company’s distribution partners include Fisher Healthcare in the United States, A. Menarini Diagnostics S.r.l. for Pan-European distribution of the Unyvero A50 product line to currently 12 countries, and Beijing Clear Biotech Co. Ltd. for Unyvero A50 product distribution in China. We haveThe Company has a network of other distributors covering countries in Europe, the Middle East and Africa, Asia Pacific, and Latin America. WithIn October 2023, the discontinuationCompany amended its distribution agreement with Fisher Healthcare to allow Fisher Healthcare to sell to existing U.S. Unyvero customers of our FISH products business in Europe, we have reduced our network of distributors to only those distributors actively commercializing our Unyvero line of products or CE-IVD-marked SARS-CoV-2 test kits.the Company, which had previously been maintained by the Company’s sales force.
OpGen will continue to develop and seek FDA and other regulatory clearances or approvals, as applicable, for its Unyvero UTI and IJI productsproduct as well as for its Unyvero A30 RQ platform. OpGen will continue to offer the FDA-cleared Unyvero LRT and LRT BAL Panels and FDA-cleared Acuitas AMR Gene Panel tests, as well as the Unyvero UTI Panel as RUO products to hospitals, public health departments, clinical laboratories, pharmaceutical companies and CROs.CROs in the United States. Curetis continues its efforts in ensuring compliance with the new In-Vitro-Diagnostic Device Regulation (IVDR) in the European Union (EU), which officially went into effect in May 2022. Given the lacklimited number of designated EU Notified Bodies at this time, and with the recently approved EU commission proposal to provideIVDR amendment in early 2022 providing for generous multi-year grace periods for certain IVD products with former In-Vitro-Diagnostic Device Directive (IVDD) CE marking, it is now possible for Curetis to continue commercializing its portfolio of existing CE-IVD-marked products until at least May 2025 and May 2026, respectively, as long as no material changes are being made to any of its products. Following May 2022, however, any new or changed CE-marked products will be required to be IVDR compliant from the outset.
OurThe Company’s headquarters are in Rockville, Maryland, and ourits principal operations are in Rockville, Maryland and Holzgerlingen and Bodelshausen, both in Germany. We also have operations inGermany, and Vienna, Austria. We operateThe Company operates in one business segment.
Recent developments
COVID-19
On March 11, 2020, During the World Health Organization declared the novel coronavirus (“COVID-19”) a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19. COVID-19 has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption in the financial markets.
As a result of the outbreak, we have experienced a material impact on our business, financial condition and results of operations for the three and nine months ended September 30, 2022 as well as significant business disruptions. For example,2023, the recurringCompany implemented certain cash management initiatives, including restructuring its U.S. operations by reducing headcount from 23 to 6 and ongoing COVID-19 related lockdowns and restrictions resulted in delaysscaling down operations at OpGen’s U.S. headquarters to the startcore functions of a U.S. Nasdaq listed company with only minimal marketing and sales support, allowing the clinical study required in China.
We continueCompany to monitor the impacts of COVID-19conserve cash and focus on the global economyfunctions needed to pursue potential strategic alternatives.
Financial Overview
Revenue
We recognize three types of revenues: product sales, laboratory services and oncollaboration revenue. We generate product revenues from sales of our business operations. However, at this time, it is difficult to predict how long the potential operational impacts of COVID-19 will remain in effect or to what degree they will impactproducts, including through our operations and financial results. An extended period of global supply chain and economic disruption could materially affect our business, results of operations, access to sources of liquidity and financial condition, as welldistribution partners, such as our abilityUnyvero instruments and consumables. We also generate revenue from sales by OpGen’s subsidiary Ares Genetics of its AI-powered prediction models and solutions. Revenues generated from our laboratory services relate to executeservices that we and our business strategiessubsidiaries provide to customers. Lastly, our collaboration revenues consist of revenue received from research and initiatives in their respective expected time frames.
Financings
Since inception,development collaborations that we have incurred, and continue to incur, significant losses from operations. We have fundedentered into with third parties, such as our operations primarily through external investor financing arrangements. During 2021, we raised net proceeds of approximately $48 million. During 2022, we raised net proceeds of approximately $1 million through September 30, 2022.collaboration agreement with FIND.
Cost of Products, Cost of Services, and Operating Expenses
Our cost of products consists of product and inventory costs, including materials costs and overhead, and other costs related to the recognition of revenue. Cost of services relate to the material and labor costs associated with providing our services. Research and development expenses currently consist primarily of expenses incurred in connection with our clinical and pre-clinical research activities, such as our prior clinical trials for our clinical trial for the Unyvero UTI in the United States. Selling, general and administrative expenses consist of public company costs and salaries and related costs for administrative and sales and business development personnel.
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Results of operations for the three months ended September 30, 20222023 and 20212022
Revenues
| Three months ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Product sales | $ | 359,112 | $ | 643,887 | ||||
| Laboratory services | 31,016 | 192,753 | ||||||
| Collaboration revenue | 58,585 | 402,492 | ||||||
| Total revenue | $ | 448,713 | $ | 1,239,132 | ||||
| Three months ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Product sales | $ | 558,965 | $ | 359,112 | ||||
| Laboratory services | 47,135 | 31,016 | ||||||
| Collaboration revenue | 92,922 | 58,585 | ||||||
| Total revenue | $ | 699,022 | $ | 448,713 | ||||
Total revenue for the three months ended September 30, 2022 decreased2023 increased approximately 64%56% when compared to the same period in 2021,2022, with a change in the mix of revenue as follows:
| ● | Product |
| ● | Laboratory |
| ● | Collaboration |
Operating expenses
| Three months ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Cost of products sold | $ | 1,886,191 | $ | 648,298 | ||||
| Cost of services | 17,239 | 203,314 | ||||||
| Research and development | 2,031,113 | 2,382,303 | ||||||
| General and administrative | 2,020,452 | 2,088,226 | ||||||
| Sales and marketing | 1,031,496 | 1,003,577 | ||||||
| Goodwill impairment charge | 6,975,520 | — | ||||||
| Total operating expenses | $ | 13,962,011 | $ | 6,325,718 | ||||
| Three months ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cost of products sold | $ | 618,796 | $ | 1,886,191 | ||||
| Cost of services | 73,174 | 17,239 | ||||||
| Research and development | 1,201,865 | 2,031,113 | ||||||
| General and administrative | 2,034,628 | 2,020,452 | ||||||
| Sales and marketing | 336,184 | 1,031,496 | ||||||
| Goodwill impairment charge | — | 6,975,520 | ||||||
| Total operating expenses | $ | 4,264,647 | $ | 13,962,011 | ||||
Our total operating expenses for the three months ended September 30, 2022 increased2023 decreased approximately 121%69% when compared to the same period in 2021.2022. Operating expenses changed as follows:
| ● | Cost of products sold: cost of products sold for the three months ended September 30, |
| ● | Cost of services: cost of services for the three months ended September 30, |
| ● | Research and development: research and development expenses for the three months ended September 30, |
| ● | General and administrative: general and administrative expenses for the three months ended September 30, |
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| ● | Sales and marketing: sales and marketing expenses for the three months ended September 30, |
| ● | Goodwill impairment charge: goodwill impairment charge for the three months ended September 30, 2022 represents the impairment of the Company’s goodwill |
Disregarding the impact of the goodwill impairment charge, total operating expenses for the three months ended September 30, 2022 increased approximately 10% when compared to the same period in 2021.
Other (expense) income
| Three months ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Interest expense | $ | (569,306 | ) | $ | (1,222,867 | ) | ||
| Foreign currency transaction (losses) gains | (51,547 | ) | 229,074 | |||||
| Other income | 11,174 | 31,844 | ||||||
| Change in fair value of derivative financial instruments | 18,995 | (8,161 | ) | |||||
| Total other expense | $ | (590,684 | ) | $ | (970,110 | ) | ||
| Three months ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Interest expense | $ | (396,768 | ) | $ | (569,306 | ) | ||
| Foreign currency transaction losses | (135,930 | ) | (51,547 | ) | ||||
| Other income | 24,977 | 11,174 | ||||||
| Change in fair value of derivative financial instruments | 10,389 | 18,995 | ||||||
| Total other expense | $ | (497,332 | ) | $ | (590,684 | ) | ||
Our total other expense for the three months ended September 30, 20222023 decreased when compared to the same period in 20212022 primarily due to lowera reduction in interest expense resulting from the Company’s debt repayments, partially offset by larger foreign currency transaction losses.
Results of operations for the nine months ended September 30, 20222023 and 20212022
Revenues
| Nine months ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Product sales | $ | 1,614,435 | $ | 1,479,270 | ||||
| Laboratory services | 94,515 | 643,602 | ||||||
| Collaboration revenue | 176,713 | 757,591 | ||||||
| Total revenue | $ | 1,885,663 | $ | 2,880,463 | ||||
| Nine months ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Product sales | $ | 1,409,534 | $ | 1,614,435 | ||||
| Laboratory services | 112,810 | 94,515 | ||||||
| Collaboration revenue | 826,257 | 176,713 | ||||||
| Total revenue | $ | 2,348,601 | $ | 1,885,663 | ||||
Total revenue for the nine months ended September 30, 2022 decreased2023 increased approximately 35%25% when compared to the same period in 2021,2022, with a change in the mix of revenue as follows:
| ● | Product |
| ● | Laboratory |
| ● | Collaboration |
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Operating expenses
| Nine months ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Cost of products sold | $ | 2,824,577 | $ | 1,544,932 | ||||
| Cost of services | 63,450 | 446,232 | ||||||
| Research and development | 6,621,310 | 8,055,384 | ||||||
| General and administrative | 6,779,773 | 7,444,138 | ||||||
| Sales and marketing | 3,252,277 | 2,705,378 | ||||||
| Impairment of right-of-use asset | — | 170,714 | ||||||
| Goodwill impairment charge | 6,975,520 | — | ||||||
| Total operating expenses | $ | 26,516,907 | $ | 20,366,778 | ||||
| Nine months ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cost of products sold | $ | 1,925,566 | $ | 2,824,577 | ||||
| Cost of services | 405,582 | 63,450 | ||||||
| Research and development | 4,403,488 | 6,621,310 | ||||||
| General and administrative | 6,883,588 | 6,779,773 | ||||||
| Sales and marketing | 2,522,471 | 3,252,277 | ||||||
| Goodwill impairment charge | — | 6,975,520 | ||||||
| Total operating expenses | $ | 16,140,695 | $ | 26,516,907 | ||||
Our total operating expenses for the nine months ended September 30, 2022 increased2023 decreased approximately 30%39% when compared to the same period in 2021.2022. Operating expenses changed as follows:
| ● | Costs of products sold: cost of products sold for the nine months ended September 30, |
| ● | Costs of services: cost of services for the nine months ended September 30, |
| ● | Research and development: research and development expenses for the nine months ended September 30, |
| ● | General and administrative: general and administrative expenses for the nine months ended September 30, |
| ● | Sales and marketing: sales and marketing expenses for the nine months ended September 30, |
| ● | Goodwill impairment charge: goodwill impairment charge for the nine months ended September 30, 2022 represents the impairment of the Company’s goodwill |
Disregarding the impact of the goodwill impairment charge, total operating expenses for the nine months ended September 30, 2022 decreased approximately 4% when compared to the same period in 2021.
Other expense
| Nine months ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Warrant inducement expense | $ | — | $ | (7,755,541 | ) | |||
| Gain on extinguishment of debt | — | 259,353 | ||||||
| Interest expense | (2,618,799 | ) | (3,586,018 | ) | ||||
| Foreign currency transaction gains | 419,160 | 655,774 | ||||||
| Other income | 28,147 | 41,471 | ||||||
| Change in fair value of derivative financial instruments | 54,623 | (122,572 | ) | |||||
| Total other expense | $ | (2,116,869 | ) | $ | (10,507,533 | ) | ||
| Nine months ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Interest expense | $ | (1,698,564 | ) | $ | (2,618,799 | ) | ||
| Foreign currency transaction (losses) gains | (288,326 | ) | 419,160 | |||||
| Other income | 86,301 | 28,147 | ||||||
| Change in fair value of derivative financial instruments | 65,800 | 54,623 | ||||||
| Total other expense | $ | (1,834,789 | ) | $ | (2,116,869 | ) | ||
Our total other expense for the nine months ended September 30, 20222023 decreased when compared to the same period in 20212022 primarily due to warrant inducementa reduction in interest expense related to our 2021 Warrant Exercise.resulting from the Company’s debt repayments, partially offset by foreign currency transaction losses.
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Liquidity and capital resources
As of September 30, 2022,2023, we had cash and cash equivalents of $10.3$0.3 million compared to $36.1$7.4 million at December 31, 2021.2022. We have funded our operations primarily through external investor financing arrangements and have raised funds in 2023 and 2022, and 2021, including:
During the year ended December 31, 2021, we sold 680,000 shares of common stock under the ATM Agreement resulting in aggregate net proceeds to us of approximately $1.48 million, and gross proceeds of $1.55 million.
On February 11, 2021, we closed the February 2021 Offering for the purchase of (i) 2,784,184 shares of common stock, (ii) 5,549,149 pre-funded warrants, and (iii) unregistered common share purchase warrants to purchase 4,166,666 shares. The February 2021 Offering raised aggregate net proceeds of $23.5 million, and gross proceeds of $25.0 million.
On March 9, 2021, we closed the 2021 Warrant Exercise resulting in the issuance of 4,842,615 shares of common stock and raising gross proceeds of approximately $9.65 million and net proceeds of $9.3 million.
On October 18, 2021, we closed the October 2021 Offering of 150,000 shares of convertible preferred stock and warrants to purchase up to an aggregate of 7,500,000 shares of common stock. The October 2021 Offering raised aggregate net proceeds of $13.9 million, and gross proceeds of $15.0 million.
On June 24, 2022, we entered into the 2022 ATM Agreement with H.C. Wainwright, as a sales agent, pursuant to which the Company may offer and sell from time to time in an at the market offering, at its option, up to an aggregate of $10.65 million of shares of the Company'sCompany’s common stock through the sales agent. As of September 30,December 31, 2022, the Company sold 1,714,88285,732 shares under the 2022 ATM Offering totaling $1.03 million in gross proceeds and $0.99 million in net proceeds. On September 30, 2022, theThe Company reduced the amount of common stock that may behas not sold any shares under the 2022 ATM Offering to up to an aggregate of $3.5 million, not including the shares of common stock previously sold under the 2022 ATM Offering.Agreement in 2023.
On October 3, 2022, we closed the October 2022 Offeringa registered direct offering for the purchase of 5,360,000268,000 shares of the Company’s common stock, 33,810 shares of the Company’s Series C Mirroring Preferred Stock, and pre-funded warrants to purchase an aggregate of 4,300,000215,000 shares of common stock. The October 2022 Offeringoffering raised aggregate gross proceeds of $3.34 million before deducting the placement agent’s fees and the offering expenses, and net proceeds of $3.04 million.
To meet our capital needs,On January 11, 2023, we are considering multiple alternatives, including, but not limitedclosed a best-efforts public offering for the purchase of (i) 321,207 shares of common stock, (ii) pre-funded warrants to additional equity financings, debt financingspurchase up to an aggregate of 2,265,000 shares of common stock, (iii) Series A-1 common warrants to purchase an aggregate of 2,586,207 shares of common stock, and (iv) Series A-2 common warrants to purchase an aggregate of 2,586,207 shares of common stock. The offering raised aggregate gross proceeds of approximately $7.5 million before deducting the placement agent’s fees and the offering expenses, and net proceeds of approximately $6.9 million.
On May 4, 2023, we closed a best-efforts public offering for the purchase of (i) 605,000 shares of the Company’s common stock, par value $0.01 per share, (ii) pre-funded warrants to purchase up to an aggregate of 3,890,825 shares of common stock, and (iii) common warrants to purchase up to an aggregate of 4,495,825 shares of common stock. The offering raised aggregate gross proceeds of approximately $3.5 million and net proceeds of approximately $3.0 million.
On October 6, 2023, Curetis received a payment of €0.75 million related to the sale of certain Unyvero A50 systems by Curetis to a strategic partner. Such purchase of systems and payment was made in connection with the negotiation of a potential strategic transaction involving Curetis and the Company’s subsidiary, Ares Genetics, with such strategic partner. Following the insolvency filings by Curetis and Ares Genetics, the negotiation of such potential strategic transaction has ceased.
On October 11, 2023, we entered into a Preferred Stock Purchase Agreement with a single investor for 1,000 shares of the Company’s Series D Preferred Stock, par value $0.01 per share, where each share of preferred stock was sold at a price of $1,000 per share for aggregate gross proceeds of $1.0 million before deducting offering expenses. The private placement was conducted in connection with the negotiation of a potential strategic transaction involving the Company and the Investor. Any such strategic transaction will be pursuant to a definitive agreement entered into by the Company and the Investor. In connection with the ongoing discussions for a potential strategic transaction, the parties anticipate closing the Private Placement as soon as practical.
On October 12, 2023, we entered into a warrant inducement agreement with a holder of certain existing warrants to purchase shares of common stock, par value $0.01 per share, of the Company. Pursuant to the Inducement Agreement, the holder agreed to exercise for cash their existing warrants to purchase up to 10,892,728 shares of the Company’s common stock at an exercise price of $0.7785 per share, the exercise price per share of the existing warrants, during the period from the date of the Inducement Agreement until 7:30 a.m., Eastern Time, on October 26, 2023; however, on October 26, 2023, the Company and the holder agreed to extend the offer period until December 31, 2023. As of October 25, 2023, the holder had exercised 2,000,000 shares of common stock under the existing warrants pursuant to the Inducement Agreement for aggregate gross proceeds to the Company of $2.057 million before deducting financial advisory fees and other funding transactions,expenses payable by the Company.
On November 6, 2023, following the Company’s unsuccessful efforts to sell the businesses or assets of its wholly owned subsidiaries Curetis and licensing and/Ares Genetics or partnering arrangements. There can be no assurance that weto access additional capital to continue their operations, Curetis filed a petition for insolvency with the district court of Stuttgart, Germany, and Ares Genetics filed a petition for insolvency with the commercial court in Vienna, Austria, Reference Number 38 S 175/23x. The insolvency proceedings of Curetis and Ares Genetics will be ableadjudicated under the insolvency laws of Germany and Austria, respectively. Dr. Katharina Widhalm-Budak has been appointed insolvency administrator by the Vienna court in Ares Genetics’ insolvency proceeding. The district court of Stuttgart will appoint an insolvency administrator for Curetis’ insolvency proceeding. The insolvency administrators will assume control over the assets and liabilities of Curetis and Ares Genetics, respectively, which effectively eliminates the authority and power of the Company and its officers to complete any such transactionact on acceptable terms or otherwise. We believebehalf of the subsidiaries. In the event the preservation and sale of the business in connection with the insolvency proceedings is unsuccessful, the assets of Curetis and Ares Genetics would be liquidated and claims paid in accordance with the insolvency laws of the applicable jurisdiction.
OpGen is a guarantor of Curetis’ debt to the EIB and OpGen would likely remain responsible for Curetis’ debt unless it is fully satisfied in connection with the resolution of Curetis’ and Ares Genetics’ insolvency proceedings. If Curetis’ debt is not fully satisfied in connection with the insolvency proceedings, and if the EIB asserts its claims against OpGen, OpGen’s cash reach would be dependent on the remaining amount due, and it is possible that currentOpGen would need to seek bankruptcy protection in the United States. Even if Curetis’ debt is satisfied in connection with the insolvency proceedings and the EIB does not assert claims against OpGen, OpGen’s cash on hand will be sufficientavailable to fund its business operations into the first quarter of 2023.is significantly limited. This has led management to conclude that there is substantial doubt about ourthe Company’s ability to continue as a going concern. InTo meet its capital needs and improve its liquidity position, the eventCompany has been and continues to actively consider multiple alternatives, including, but not limited to, restructuring or refinancing its debt, seeking additional debt or equity capital, reducing or delaying business activities, selling assets, other strategic financings or transactions and other measures, including obtaining relief under applicable bankruptcy laws. There can be no assurance that the Company will be able to identify or execute on any of these alternatives on acceptable terms or that any of these alternatives will be successful.
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On March 10, 2023, the Company learned that Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver, due to the sudden and massive financial collapse of the bank. On March 12, 2023, the Secretary of the Treasury, the chair of the Federal Reserve Board and the chairman of the FDIC released a joint statement related to the FDIC’s resolution of the SVB receivership (the “Statement”). The Statement provided that “[d]epositors will have access to all of their money starting Monday, March 13.” At the time, the Company had most of its cash and cash equivalents held in deposit accounts at SVB, which the Statement said the Company would have access to starting on March 13, 2023. While we regained access to our accounts at Silicon Valley Bank (now a division of First Citizens Bank) and created additional banking relationships to diversify our holdings, future disruptions of financial institutions where we bank or have credit arrangements, or disruptions of the financial services industry in general, could adversely affect our ability to access our cash and cash equivalents. If we are unable to successfully raise additional capital during or before the end of the first quarter of 2023, we will not have sufficientaccess our cash flows and liquiditycash equivalents as needed, our financial position and ability to financeoperate our business operations beyond the first quarter of 2023 as currently contemplated. Accordingly, in such circumstances we wouldwill be compelled to immediately reduce general and administrative expenses and delay research and development projects, including the purchase of scientific equipment and supplies, until we are able to obtain sufficient financing. If such sufficient financing is not received on a timely basis, we 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.adversely affected.
Sources and uses of cash
Our principal source of liquidity is from financing activities, including issuances of equity and debt securities. The following table summarizes the net cash and cash equivalents provided by (used in) operating activities, investing activities and financing activities for the periods indicated:
| Nine months ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Net cash used in operating activities | $ | (16,454,854 | ) | $ | (17,690,398 | ) | ||
| Net cash used in investing activities | (186,556 | ) | (1,824,765 | ) | ||||
| Net cash (used in) provided by financing activities | (7,746,808 | ) | 32,037,452 | |||||
| Nine months ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Net cash used in operating activities | $ | (12,643,099 | ) | $ | (16,454,854 | ) | ||
| Net cash used in investing activities | (799,498 | ) | (186,556 | ) | ||||
| Net cash provided by (used in) financing activities | 6,275,625 | (7,746,808 | ) | |||||
Net cash used in operating activities
Net cash used in operating activities for the nine months ended September 30, 2023 consisted primarily of our net loss of $15.6 million, reduced by certain noncash items, including depreciation and amortization expense of $1.1 million, noncash interest expense of $1.3 million, change in inventory reserve of $0.5 million, and share-based compensation expense of $0.1 million. Net cash used in operating activities for the nine months ended September 30, 2022 consisted primarily of our net loss of $26.7 million, reduced by certain non-cashnoncash items, including depreciation and amortization expense of $1.3 million, non-cashnoncash interest expense of $2.0 million, a change in inventory reserve of $1.4 million, a goodwill impairment charge of $7.0 million, and share-based compensation expense of $0.7 million. Net cash used in operating activities for the nine months ended September 30, 2021 consisted primarily of our net loss of $28.0 million, reduced by certain non-cash items, including inducement expense related to warrant repricing of $7.8 million, depreciation and amortization expense of $2.1 million, non-cash interest expense of $3.0 million, and share-based compensation expense of $0.7 million.
Net cash used in investing activities
Net cash used in investing activities for the nine months ended September 30, 20222023 and 20212022 consisted of purchases of property and equipment. The majority of the purchases of property and equipment in 2021 were related to the Company’s new corporate headquarters in Rockville, Maryland.
Net cash provided by (used in) financing activities
Net cash provided by financing activities
for the nine months ended September 30, 2023 consisted of proceeds from the issuance of common stock and warrants, net of issuance costs, in connection with the Company’s financings in January and May 2023, partially offset by payments on the Company’s debt with the EIB. Net cash used in financing activities for the nine months ended September 30, 2022 consisted of payments on the Company’s debt with the EIB debt and finance leases. Net cash providedleases, partially offset by financing activities for the nine months ended September 30, 2021 consisted primarily of the net proceeds from the February 2021 Offering, 2021 Warrant Exercise, October 2021 Offering, and exercises of common stock warrants,at the market offering, net of payments on debt and insurance financings.issuance costs.
Contractual Commitments
OpGen’s subsidiary, Curetis, has contractual commitments under its 2016 senior, unsecured loan financing facility of up to €25.0 million with the European Investment Bank (“EIB”). Following the consummation of our business combination with Curetis in April 2020, the Company guaranteed Curetis’ obligations under the loan financing facility. Curetis drew down three tranches under the facility: €10.0 million in April 2017, €3.0 million in June 2018, and €5.0 million in June 2019. The first tranche had and second tranches havetranche has a floating interest rate of EURIBOR plus 4% payable after each 12-month-period from the draw-down-date and anotheran additional 6% interest per annum that is deferred and payable at maturity together with the principal. The third tranche originally had a 2.1% PPI. Upon maturity of the third tranche, which is not before approximately mid-2024 (and no later than mid-2025), the EIB would have been entitled to an additional payment that is equity-linked and equivalent to 2.1% of the then total valuation of Curetis N.V. As part of an amendment between the Company and the EIB on July 9, 2020, the parties adjusted the PPI percentage applicable to the third EIB tranche of €5.0 million, which was funded in June 2019 from its original 2.1% PPI in Curetis N.V.’s equity value upon maturity to a new 0.3% PPI in OpGen’s equity value upon maturity. This right constitutes an embedded derivative, which is separated and measured at fair value with changes being accounted for through income or loss.
As of September 30, 2022,2023, the outstanding borrowings under all tranches were €14,544,429 ($14,177,909)€9.4 million (approximately $9.9 million), including deferred interest payable at maturity of €1,755,429 ($1,711,193)€1.4 million (approximately $1.5 million).
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On May 23, 2022, the Company and the EIB entered into a Waiver and Amendment Letter (the “2022 EIB Amendment”), which amended the EIB loan facility. The 2022 EIB Amendment restructured the first tranche of approximately €13.35€13.4 million (including accumulated and deferred interest) of the Company’s indebtedness with the EIB. Pursuant to the 2022 EIB Amendment, the Company repaid €5.0 million to the EIB in April 2022. The Company also agreed, among other things, to amortize the remainder of the debt tranche over thea twelve-month period beginning in May 2022. As a result, the Company paid twelve monthly installments totaling approximately €8.4 million through April 2023, at which point the first tranche was repaid in full. The 2022 EIB Amendment also provides for the increase of the PPI of the third tranche under the loan facility from 0.3% to 0.75% beginning in June 2024.
On July 4, 2023, the Company entered into a Standstill Agreement, by and among Curetis, as borrower, the Company and Ares Genetics, as guarantors, and the EIB, as lender, relating to that certain Finance Contract, originally dated December 12, 2016, as amended, by and between Curetis and EIB. Pursuant to the Standstill Agreement, the EIB agreed that, with respect to each default or event of default relating to €3 million in principal plus accumulated interest that (i) was due and payable on June 22, 2023 under the Finance Contract and (ii) continues to exist as of the date of the Standstill Agreement, the EIB would not take any action or exercise any right under the Finance Contract, including, but not limited to, any right of acceleration or termination, until the earlier of the entry into a definitive agreement for the restructuring of the second tranche and November 30, 2023. As a condition of entering into such standstill agreement, Curetis paid the EIB a partial payment of interest on the second tranche of €1 million on June 22, 2023. In addition, Curetis agreed to certain undertakings during the standstill period, including the delivery of a rolling cash flow forecast and to cause a third-party restructuring expert to prepare and deliver a restructuring opinion to the EIB. EIB may terminate the Standstill Agreement upon notice to Curetis if, among other customary termination rights, Curetis or the guarantors fail to comply with any undertakings in the Standstill Agreement, the third party expert determines that there are no prospects for a successful restructuring of the second tranche and that it therefore will be unable to issue a restructuring opinion, or the cash flow forecast shows a negative liquidity shortfall during the specified period.
The terms of the second and third tranchestranche of the Company’s indebtedness of €3.0 million and €5.0 million respectively, plus accumulated deferred interest remain unchanged. Accordingly, unless the EIB restructures the third tranche of indebtedness along with the second tranche, approximately €6.7 million for the third tranche will become due and payable by the Company in June 2024.
Critical accounting policies and use of estimates
This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. In our audited consolidated financial statements, estimates are used for, but not limited to, liquidity assumptions, revenue recognition, share-based compensation, allowances for doubtful accounts and inventory obsolescence, valuation of derivative financial instruments measured at fair value on a recurring basis, deferred tax assets and liabilities and related valuation allowance, estimated useful lives of long-lived assets, and the recoverability of long-lived assets. Actual results could differ from those estimates.
A summary of our significant accounting policies is included in Note 3 “Summary of significant accounting policies” to the accompanying unaudited condensed consolidated financial statements. Certain of our accounting policies are considered critical, as these policies require significant, difficult or complex judgments by management, often requiring the use of estimates about the effects of matters that are inherently uncertain. Our critical policies are summarized in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2021.2022.
Recently issued accounting pronouncements
See Note 3 “Summary of significant accounting policies” in this Form 10-Q for a full description of recent accounting pronouncements, including the respective expected dates of adoption and effects on our unaudited condensed consolidated financial statements.
Off-balance sheet arrangements
As of September 30, 20222023, and December 31, 2021,2022, we did not have any off-balance sheet arrangements.
JOBS Act
Prior to December 31, 2020, the Company was an “emerging growth company” (“EGC”) as defined in the Jumpstart Our Business Startups Act, (JOBS Act), and elected to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies until the Company is no longer an EGC, including using the extended transition period for complying with new or revised accounting standards. As of December 31, 2020, the Company has become a non-accelerated filer under the rules of the SEC and is no longer classified as an EGC.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we arethe Company is not required to provide the information required by this Item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Our management has carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of September 30, 2022.2023. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective. In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Changes in Internal Control over Financial Reporting
For the quarter ended September 30, 2022,2023, there have been no changes in the Company'sCompany’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company'sCompany’s internal controls over financial reporting.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
Our business and financial results are subject
Reference is made to numerous risks and uncertainties. As a result, the risks and uncertainties discussed in Part I, Item 1A. Risk Factors included in the Company’sour Annual Report on Form 10-K for the year ended December 31, 2021 should be carefully considered. There have been no material changes in the assessment of the risk factors set forth in such Form 10-K, except for the additional risk factors noted below, which update the risk factors included in Part II, Item 1A of2022 and our Quarterly Reports on Form 10-Q for the quarterquarterly periods ended March 31, 2023 and June 30, 2022:
If2023. There have been no material changes from the Risk Factors disclosed in our goodwill, acquired in-process research and development costs or finite-lived tangible and intangible assets become impaired in the future, we may be required to record non-cash charges to earnings, which could be material and could reduce stockholders’ equity or otherwise adversely affect the Company’s financial condition.
We review long-lived assets, including property and equipment and identifiable amortizing intangible assets, for impairment whenever changes in circumstances or events may indicate that the carrying amounts are not recoverable. If the fair value is less than the carrying amount of the asset, an impairment is recognizedAnnual Report on Form 10-K for the difference. Factorsyear ended December 31, 2022 and Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2023 and June 30, 2023, except as set forth below.
Risks Related to the Insolvency of Our Subsidiaries
Our subsidiaries Curetis GmbH and Ares Genetics GmbH filed for insolvency under German and Austrian laws, respectively, which may cause an impairment of long-lived assets include significant changesour common stock to decrease in value.
As previously reported in the mannerCompany’s Current Reports Form 8-K filed with the SEC on November 7, 2023, the Company’s subsidiaries Curetis and Ares Genetics filed for insolvency under German and Austrian laws, respectively. Any trading in our common stock during the pendency of usesuch insolvency proceedings may be highly speculative and pose substantial risks to investors of these assets, negative industryour common stock, as the price of our common stock may decrease in value or market trends, a significant underperformance relative to historical or projected future operating results, extended period of idleness or a likely sale or disposal of the asset before the end of its estimated useful life. In 2021,experience substantial volatility. There is substantial uncertainty that the Company had determined thatwould recover any amounts in connection with such insolvency proceedings, including, in particular, as a result of Curetis’ indebtedness. In addition, the right-of-use assetCompany is a guarantor of Curetis’ debt with the EIB and will remain liable under such guaranty for the debt if not fully satisfied by recoveries received by the EIB in connection with the insolvency proceedings.
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We are subject to other risks and uncertainties associated with our subsidiaries’ insolvency proceedings.
Our operations and ability to develop and execute our business plan, our financial condition, our liquidity, and our continuation as a going concern are subject to the risks and uncertainties associated with the Company’s San Diego, California office lease may not be recoverable,insolvency proceedings of our subsidiaries. As a result of the insolvency proceedings, the insolvency administrators appointed for the companies will assume control over the assets and asliabilities of Curetis and Ares Genetics, which eliminates our authority over the subsidiaries and will materially affect our ability to operate in the ordinary course of business. As a result, the Company recorded an impairment charge of $170,714 duringplans to focus on the six months ended June 30, 2021.functions needed to pursue potential strategic alternatives. There canis no guarantee that any such strategic alternatives will be no assuranceavailable to the Company on reasonable terms or that our other long-lived assets and intangible assetsany such alternatives will be successful.
In addition, we are subject to the following additional risks relating to such insolvencies:
| ● | the preservation and sale of the businesses of the subsidiaries as part of the insolvency proceedings may not be successful; |
| ● | we may incur higher costs in connection with such insolvency proceedings and related matters; |
| ● | our ability to obtain sufficient financing to allow us to continue to operate while we seek an alternative transaction or to allow us to emerge from insolvency and execute our business plan post-emergence; |
| ● | our ability to maintain our relationships with our suppliers, service providers, customers, employees and other third parties; |
| ● | our ability to maintain contracts that are critical to our operations; |
| ● | our ability to attract, motivate and retain key employees, including our current management; |
| ● | the ability of third parties to seek and obtain court approval to terminate contracts and other agreements with us; and |
| ● | the actions and decisions of our stockholders, creditors and other third parties who have interests in such insolvency proceedings may be inconsistent with our plans. |
Our subsidiaries may be subject to claims that will not be further impaired. If our property and equipment and identifiable amortizing intangible assets are determined to be impaireddischarged in the future, we may be required to record non-cash charges to earnings during the period in which the impairment is determined,insolvency proceedings, which could have a material adverse effect on our business, cash flows, liquidity, financial condition, and results of operations.
The insolvency proceedings may result in discharging a debtor from, among other things, substantially all debts arising prior to the insolvency proceedings. Thus, while generally all claims against us that arose prior to the filing by our subsidiaries for insolvency would be materialdischarged in connection with such insolvency proceedings, certain exceptions may arise. Any claims not ultimately discharged could be asserted against us and may have an adverse effect on our business, cash flows, liquidity, financial positioncondition, and results of operations.
operations on a post-reorganization basis. In addition, because we revieware a guarantor of Curetis’ debt to EIB, we would likely remain responsible for Curetis’ debt unless it is fully satisfied in connection with the resolution of Curetis’ and test goodwillAres Genetics’ insolvency proceedings.
If we operate under the insolvency court’s control for impairment at least annually and whenever changes in circumstances indicate that the carrying valuea long period of the goodwilltime, or for a longer period of time than expected, our business may not be recoverable. The impairment test for goodwill consists of comparing the fair value of the reporting unit and acquired IPR&D, which is estimated using both the income and market approach, to its carrying value. The process of impairment testing for our goodwill involves a number of judgments and estimates made by management includingharmed.
Our future cash flows, revenue growth rates, profitability assumptions, terminal growth rates and discount rates with regards to our reporting unit. Our internally generated long-range plan includes assumptions regarding pricing and operating forecasts for our products and technologies. For instance, based on the goodwill impairment assessment performed during the quarter ended September 30, 2022, and primarily due to changes in the Company’s stock price and market capitalization, it was determined that goodwill was impaired. As a result, the Company recorded a goodwill impairment charge in the full amount of $6,975,520 for the three and nine months ended September 30, 2022. Accordingly, if the judgments and estimates used in such analyses are not realized or are affected by external factors, our actual results may not be consistent with such judgments and estimates, and we may be requireddependent on our ability to record further impairmentsuccessfully complete a strategic transaction or successful execution of our business plan. Our being subject to a long period of operations under the Company’s assets in the future, whichinsolvency court’s control could behave a material could reduce stockholders’ equity and have an adverse effect on our business, financial position andcondition, results of operations, and liquidity. So long as the insolvency proceedings continue, our management will be required to spend a significant amount of time and effort dealing with the insolvency proceedings instead of focusing exclusively on a strategic transaction or our business operations. A prolonged period of operating under the insolvency court’s control may also make it more difficult to retain management and other key personnel necessary for the success and growth of our business. In addition, the longer the insolvency proceedings continue, the more likely it is that our clients, investors, strategic partners, and service providers will lose confidence in our ability to reorganize our businesses successfully and seek to establish alternative commercial relationships, as applicable. Furthermore, so long as the insolvency proceedings continue, we will be required to incur substantial costs for professional fees and other expenses associated with the administration of the proceedings. These fees and expenses will take priority over many other claims and expenses. We cannot predict the ultimate amount of all settlement terms for the liabilities that will be subject to any resolution of our subsidiaries’ insolvency proceedings.
As a result of Curetis’ and Ares Genetics’ insolvency proceedings, our historical financial information may not be indicative of our future financial performance, which may be volatile.
During Curetis’ and Ares Genetics’ insolvency proceedings, we expect our financial results to be volatile as we will be unable to operate in the ordinary course of business if we cannot preserve the operations of Curetis and Ares Genetics as part of the proceedings. In addition, restructuring activities and expenses, contract terminations and rejections, and claims assessments may impact our consolidated financial statements. As a result, our historical financial performance is likely not indicative of our financial performance after the date of the filing of the insolvency proceedings.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
During the period covered by this Quarterly Report on Form 10-Q, the Company has not sold any equity securities that were not registered under the Securities Act of 1933, other than as previously reported in a Current Report on Form 8-K.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
Exhibit Number | Description | ||
| 10.1 | |||
| 10.2 | |||
| 10.3 | Guarantee and Indemnity Agreement, dated as of July 9, 2020, by and between European Investment Bank and the Company (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on July 13, 2020). | ||
| 10.4 | Guarantee and Indemnity Agreement, dated as of July 9, 2020, by and between European Investment Bank and Ares Genetics (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on July 13, 2020). | ||
| 31.1* | Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a). | ||
| 31.2* | Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a). | ||
| 32.1* | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
| 101* | Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Unaudited Condensed Consolidated Balance Sheets, (ii) the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss, (iii) the Unaudited Condensed Consolidated Statements of Cash Flows and (iv) the Notes to Unaudited Condensed Consolidated Financial Statements. |
| * | Filed or furnished herewith |
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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.
| OPGEN, INC. | |||
| By: | /s/ Albert Weber | ||
| Albert Weber | |||
| Chief Financial Officer (principal financial officer and principal accounting officer) | |||
| Date: | November 14, | ||