Description of Business, Basis of Presentation and Principles of Consolidation | Note 1. Description of Business, Basis of Presentation and Principles of Consolidation HTG Molecular Diagnostics, Inc. (the “Company”) is a life science company whose mission is to advance precision medicine through its innovative transcriptome-wide profiling technology. The Company derives revenue primarily from sales of its HTG EdgeSeq system and integrated next-generation sequencing-based (“NGS-based”) HTG EdgeSeq research use only (“RUO”) assays and from sample processing services performed in its VERI/O laboratory. The Company operates in one segment and its customers and distributors are located primarily in the United States and Europe. For sales to distributors, their locations may be different from the locations of the end customers. For the three months ended March 31, 2022, approximately 18% of the Company’s revenue was generated from sales originated by customers located outside of the United States, compared with 41% for the three months ended March 31, 2021. COVID-19 Pandemic The full impact of the COVID-19 pandemic continues to evolve as of the date of this report and management continues to actively monitor the potential impact of the global situation on its financial condition, liquidity, operations, suppliers, industry and workforce. Given the ongoing evolution of the COVID-19 pandemic, including resurgences in many areas of the world and the global responses to curb its spread, the Company is not able to fully estimate the effects of the COVID-19 pandemic on its results of operations, financial condition or liquidity. The Company experienced a significant slowing of product and product-related services revenue generation beginning in March 2020 and believes that while it has seen some recovery, this impact will continue to be seen at some level at least through the first half of 2022. The extent of this impact has varied from customer to customer depending upon how they have been directly or indirectly impacted by local stay-at-home orders and other social distancing measures, prioritization of studies by those customers as the immediate impacts of the pandemic have passed, and the workforce and supplier impacts that each customer has experienced during the pandemic. The Company has not experienced delays in its development efforts despite its efforts to prioritize the safety of its employees during this pandemic. In addition, the impact of the COVID-19 pandemic on the Company’s ability to source raw materials and other supplies has not been significant to date. However, a change in or loss of suppliers or other supply chain or distribution network partners due to the ongoing impacts of the pandemic on the global economy could adversely affect the Company’s business and the business of its vendors, partners and customers, and could result in future reductions in sales and operating results. While there remains uncertainty as to the ultimate impact of the COVID-19 pandemic, the Company has considered the known impacts on its business as of the date these condensed consolidated financial statements were issued and has reflected any known or expected impacts in its condensed consolidated financial statements, including consideration of potential impairment risks to its long-lived assets, potential accounts receivable collection risks and potential impacts to its overall liquidity position. As a result of various government programs enacted to address the ongoing impacts of COVID-19, the Company was able to qualify for and receive Employee Retention Credits (“ERC”) during the years ended December 31, 2020 and 2021. ERC benefits of approximately $0.1 million, $0.3 million, and $0.1 million were included in cost of product and product-related services revenue, selling, general and administrative and research and development, respectively, as an offset to the related compensation costs in the accompanying condensed consolidated statements of operations for the three months ended March 31, 2021. In November 2021, the Infrastructure Investment and Jobs Act was signed into law, making wages paid after September 30, 2021 ineligible for these credits. As such, no further ERC benefits were received for the three months ended March 31, 2022. ERC benefits receivable of $0.4 million was included in prepaid expenses and other in the accompanying condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021. Basis of Presentation The accompanying condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and reflect the accounts of the Company as of March 31, 2022 and for the three months ended March 31, 2022 and 2021. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. The accompanying condensed consolidated financial statements reflect all normal recurring adjustments which, in the opinion of management, are necessary for a fair statement of the Company’s financial position and the results of its operations and cash flows, as of and for the periods presented. The accompanying condensed consolidated balance sheet at December 31, 2021 has been derived from the audited consolidated financial statements at that date but does not include all of the information and disclosures required by GAAP for annual financial statements. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2021, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 29, 2022. Going Concern and Management has assessed the Company’s ability to continue as a going concern within one year of issuance of these financial statements. The accompanying interim unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. However, the Company has had recurring operating losses and negative operating cash flows since its inception and has an accumulated deficit of $214.8 million as of March 31, 2022. As of March 31, 2022, the Company had working capital of $16.9 million and long-term liabilities of $8.7 million. The Company’s liability balances consist primarily of its debt obligations, including an asset-secured loan with Silicon Valley Bank (the “SVB Term Loan”), as well as an obligation to NuvoGen Research, LLC (the “NuvoGen obligation”) (see Note 10). Potentially changing circumstances, including COVID-19 uncertainties, may result in the depletion of the Company’s capital resources more rapidly than it currently anticipates, resulting in the Company not having adequate resources to fund its planned operations and expenditures for at least the next 12 months and to comply with the financial covenant in the Loan and Security Agreement for the SVB Term Loan (the “Loan Agreement”). These circumstances raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties. The Company will need to raise additional capital to fund its operations and service its long-term debt obligations until its revenue reaches a level sufficient to provide for self-sustaining cash flows. There can be no assurance that additional capital will be available on acceptable terms, or at all, or that the Company’s revenue will reach a level sufficient to provide for self-sustaining cash flows. In addition, the Company must comply with a financial covenant in the SVB Term Loan requiring the Company to maintain unrestricted cash, including short term investments available-for-sale, of not less than the greater of (i) $12.5 million and (ii) an amount equal to six times the amount of the Company’s average monthly Cash Burn (as defined in the Loan Agreement) over the trailing three months. Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, HTG Molecular Diagnostics France, SARL, after elimination of all intercompany transactions and balances. Concentration Risks Financial instruments that potentially subject the Company to credit risk consist principally of cash and cash equivalents and accounts receivable. The Company maintains the majority of its cash balances in the form of cash deposits in bank checking and money market accounts in amounts in excess of federally insured limits. Management believes, based upon the quality of the financial institution, that the credit risk with regard to these deposits is not significant. The Company sells its instrument, related consumables, sample processing services and custom RUO assay design services primarily to biopharmaceutical companies, academic institutions and molecular labs. The Company routinely assesses the financial strength of its customers and credit losses have been minimal to date. The Company’s top three customers accounted for 24%, 20% and 12% of the Company’s revenue for the three months ended March 31, 2022, compared with the Company’s top two customers accounting for 19% and 15% of the Company’s revenue for the three months ended March 31, 2021. The largest three customers accounted for 50%, 11% and 10% of the Company’s accounts receivable as of March 31, 2022. The largest two customers accounted for approximately 18% and 17% of the Company’s accounts receivable as of December 31, 2021. The third and fourth largest customers accounted for approximately 10% each of the Company’s accounts receivable as of December 31, 2021. One vendor accounted for 28% of the Company’s accounts payable as of March 31, 2022, compared with two vendors who accounted for 28% and 16% of the Company’s accounts payable as of December 31, 2021. The Company is also subject to supply chain risks related to the reliance on a single supplier to manufacture a subcomponent used in its HTG EdgeSeq instruments. Although there are a limited number of manufacturers for components of this type, the Company believes that other suppliers could provide similar products on comparable terms. However, a change in or loss of this supplier could significantly delay the delivery of products, which in turn would materially affect the Company’s ability to generate revenue. |