| Summary of significant accounting policies | 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 following 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, 2019 consolidated balance sheet included herein
was derived from the audited consolidated financial statements, but does not include all disclosures including notes required by
GAAP for complete financial statements. The accompanying unaudited condensed
consolidated financial statements include the accounts of OpGen and its wholly-owned subsidiaries as of March 31, 2020 and excludes
the Curetis Business which was acquired on April 1, 2020; all intercompany transactions and balances have been eliminated. Foreign currency The Company has subsidiaries located
in Copenhagen, Denmark, and Bogota, Colombia, both of which use currencies other than the U.S dollar as their functional currency.
As a result, all assets and liabilities are translated into U.S. dollars based on exchange rates at the end of the reporting period.
Income and expense items are translated at the average exchange rates prevailing during the reporting period. Translation adjustments
are reported in accumulated other comprehensive (loss)/income, a component of stockholders’ equity. Foreign currency translation
adjustments are the sole component of accumulated other comprehensive (loss)/income at March 31, 2020 and 2019. 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, stock-based compensation, allowances for doubtful
accounts and inventory obsolescence, discount rates used to discount unpaid lease payments to present values, valuation of derivative
financial instruments measured at fair value on a recurring basis, deferred tax assets and liabilities and related valuation allowance,
the estimated useful lives of long-lived assets, and the recoverability of long-lived assets. Actual results could differ from
those estimates. Fair value of financial instruments Financial instruments classified as current
assets and liabilities (including cash and cash equivalent, receivables, accounts payable, deferred revenue and short-term notes)
are carried at cost, which approximates fair value, because of the short-term maturities of those instruments. Cash, cash equivalents and restricted
cash The Company considers all highly liquid
instruments with original maturities of three months or less to be cash equivalents. The Company has cash and cash equivalents
deposited in financial institutions in which the balances occasionally exceed the federal government agency (“FDIC”)
insured limit of $250,000. The Company has not experienced any losses in such accounts and management believes it is not exposed
to any significant credit risk. At March 31, 2020 and December 31, 2019,
the Company has funds totaling $185,380, which are required as collateral for letters of credit benefiting its landlords and for
credit card processors. These funds are reflected in other noncurrent assets on the accompanying unaudited condensed consolidated
balance sheets. The following table provides a reconciliation
of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same
amounts shown in the statements of cash flows:
March 31, 2020 December 31, 2019 March 31, 2019 December 31, 2018
Cash and cash equivalents $ 11,469,455 $ 2,708,223 $ 6,011,508 $ 4,572,487
Restricted cash 185,380 185,380 185,380 164,720
Total cash, cash equivalents and restricted cash in the condensed consolidated statement of cash flows $ 11,654,835 $ 2,893,603 $ 6,196,888 $ 4,737,207 Accounts receivable The Company’s accounts receivable
result from revenues earned but not yet collected from customers. Credit is extended based on an evaluation of a customer’s
financial condition and, generally, collateral is not required. Accounts receivable are due within 30 to 60 days and are stated
at amounts due from customers. The Company evaluates if an allowance is necessary by considering a number of factors, including
the length of time accounts receivable are past due, the Company’s previous loss history and the customer’s current
ability to pay its obligation. If amounts become uncollectible, they are charged to operations when that determination is made.
The allowance for doubtful accounts was $20,753 as of March 31, 2020 and December 31, 2019. At March 31, 2020, the Company
had accounts receivable from one customer which individually represented 31% of total accounts receivable. At March 31, 2019,
one individual customer represented 61% of total accounts receivable. For the three months ended March 31, 2020, revenue earned
from one customer represented 41% of total revenues. For the three months ended March 31, 2019, revenue earned from one customer
represented 49% of total revenues. Inventory Inventories are valued using the first-in,
first-out method and stated at the lower of cost or net realizable value and consist of the following:
March 31, 2020 December 31, 2019
Raw materials and supplies $ 266,444 $ 315,542
Work-in-process 22,291 35,080
Finished goods 147,948 122,408
Total $ 436,683 $ 473,030 Inventory includes reagents and components
for QuickFISH and PNA FISH kit products, and reagents and supplies used for the Company’s laboratory services. Inventory
reserves for obsolescence and expirations were $132,260 and $92,454 at March 31, 2020 and December 31, 2019, respectively. Long-lived assets Property and equipment Property and equipment are reviewed
for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted
net cash flows expected to be generated by the asset. Recoverability measurement and estimating of undiscounted cash flows is done
at the lowest possible level for which we can identify assets. If such assets are considered to be impaired, impairment is recognized
as the amount by which the carrying amount of assets exceeds the fair value of the assets. During the three months ended March
31, 2020 and 2019, the Company determined that its property and equipment was not impaired. Leases The Company determines if an arrangement
is a lease at inception. For leases where the Company is the lessee, right-of-use (“ROU”) assets represent the Company’s
right to use the underlying asset for the term of the lease and the lease liabilities represent an obligation to make lease payments
arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value
of the future lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available
at the commencement date of the underlying lease arrangement to determine the present value of lease payments. The ROU asset also
includes any prepaid lease payments and any lease incentives received. The lease term to calculate the ROU asset and related lease
liability includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise the option.
The Company’s lease agreements generally do not contain any material variable lease payments, residual value guarantees
or restrictive covenants. Lease expense for operating leases
is recognized on a straight-line basis over the lease term as an operating expense while expense for financing leases is recognized
as depreciation expense and interest expense using the accelerated interest method of recognition. The Company has made certain
accounting policy elections whereby the Company (i) does not recognize ROU assets or lease liabilities for short-term leases (those
with original terms of 12 months or less) and (ii) combines lease and non-lease elements of our operating leases. ROU Assets ROU assets are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows
expected to be generated by the asset. Recoverability measurement and estimating of undiscounted cash flows is done at the lowest
possible level for which the Company can identify assets. If such assets are considered to be impaired, impairment is recognized
as the amount by which the carrying amount of assets exceeds the fair value of the assets. In conjunction with adoption of Accounting
Standards Update (“ASU”) 2016-02, Leases Intangible assets and goodwill Intangible assets and goodwill as of
March 31, 2020 consist of finite-lived intangible assets and goodwill. Finite-lived intangible assets Finite-lived intangible assets include
trademarks, developed technology and customer relationships and consisted of the following as of March 31, 2020 and December 31,
2019:
March 31, 2020 December 31, 2019
Cost Accumulated Amortization Impairment Net Balance Accumulated Amortization Net Balance
Trademarks and tradenames $ 461,000 (217,413 ) $ (243,587 ) $ — $ (205,887 ) $ 255,113
Developed technology 458,000 (308,526 ) (149,474 ) — (292,170 ) 165,830
Customer relationships 1,094,000 (736,465 ) (357,535 ) — (697,393 ) 396,607
$ 2,013,000 (1,262,404 ) $ (750,596 ) $ — $ (1,195,450 ) $ 817,550 Finite-lived intangible assets are
amortized over their estimated useful lives. The estimated useful life of trademarks is 10 years, developed technology is 7 years,
and customer relationships is 7 years. 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 $66,954 for each of the three months ended March 31, 2020 and 2019. Finite-lived intangible assets 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 Goodwill Goodwill represents the excess of
the purchase price paid in a July 2015 merger transaction in which the Company acquired AdvanDx, Inc. and its subsidiary (the “Merger”)
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 March 31, 2020 and December 31, 2019 was $600,814. 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 months ended March 31, 2020 and 2019, the
Company determined that its goodwill was not impaired. Revenue recognition The Company derives revenues from (i) the sale
of QuickFISH and PNA FISH diagnostic test products and Acuitas AMR Gene Panel RUO test products, (ii) providing laboratory services,
and (iii) providing collaboration services including funded software arrangements, and license arrangements. 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 supplies, and fees paid to consultants and outside service partners. Stock-based compensation Stock-based compensation expense is recognized
at 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. 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. 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. 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 $ 188,282,298 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) 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 1.1 million shares and 0.2 million shares as of March 31, 2020 and 2019, respectively. Adopted accounting pronouncements In February 2016, the FASB issued ASU 2016-02, Leases (Topic
842) The Company
adopted this guidance effective January 1, 2019 using the modified retrospective transition method and the following practical
expedients:
· The Company did not reassess if any expired or existing contracts are or contain leases.
· The Company did not reassess the classification of any expired or existing leases. Additionally,
the Company made ongoing 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. Upon adoption
of the new guidance on January 1, 2019, the Company recorded an operating lease right of use asset of approximately $2.2 million
(net of existing deferred rent) and recognized a lease liability of approximately $2.5 million. Prior to the adoption of ASC 842, deferred
rent was recorded and amortized to the extent the total minimum rental payments allocated to the period on a straight-line basis
exceeded or were less than the cash payments required. The Company adopted Accounting Standards
Update 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments 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. |
