| Summary of Significant Accounting Policies | Note 3 - Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The consolidated financial statements consolidate the operations of all controlled subsidiaries; all intercompany activity is eliminated. Foreign Currency Curetis and Ares Genetics are located in Holzgerlingen, Germany and Vienna, Austria, respectively, each of which use currencies other than the U.S. dollar as their functional currency. As a result, all assets and liabilities of these entities 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 income (loss), a component of stockholders’ equity. Foreign currency translation adjustments are the sole component of accumulated other comprehensive income (loss) at December 31, 2023 and 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 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, 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. For additional fair value disclosures, see Note 5. 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 At December 31, 2023 and 2022, the Company had funds totaling $ 302,262 495,629 The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the consolidated statements of cash flows:
Schedule of reconciliation of cash, cash equivalents and restricted cash
December 31, December 31,
Cash and cash equivalents $ 1,151,823 $ 7,440,030
Restricted cash 302,262 495,629
Total cash and cash equivalents and restricted cash in the consolidated statements of cash flows $ 1,454,085 $ 7,935,659 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 90 0 At December 31, 2023, the Company had accounts receivable from three customers which individually represented 39% 26% 10% 41% 21% 24% 19% 13% 32% 14% 11% 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:
Schedule of inventories
December 31,
2023 2022
Raw materials and supplies $ - $ 1,011,476
Work-in-process - 37,445
Finished goods - 2,596,830
Total $ - $ 3,645,751 Inventory includes Unyvero system instruments, Unyvero cartridges, reagents and components for Unyvero and Acuitas 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 $ 1,280,805 1,694,843 The Company classifies finished goods inventory it does not expect to sell or use in clinical studies within 12 months of the consolidated balance sheets date as strategic inventory, a non-current asset. Long-lived assets Property and equipment Property and equipment is stated at cost and depreciated on a straight-line basis over the estimated useful lives of the related assets. The estimated service lives range from three to ten years. 584,230 830,757
Schedule of property and equipment
December 31,
2023 2022
Laboratory and manufacturing equipment $ 614,036 $ 4,712,668
Office furniture and equipment 207,164 707,054
Computers and network equipment 245,983 431,787
Leasehold improvements 397,666 1,667,302
1,464,849 7,518,811
Less accumulated depreciation (1,464,849 ) (4,061,280 )
Property and equipment, net $ - $ 3,457,531 Property and equipment is 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 year ended December 31, 2023, the Company determined that its property and equipment, including leasehold improvements and computer and networking equipment, at its Rockville, MD office was impaired due to the Company’s financial condition and the impairment of the Company’s ROU lease asset. As a result, the Company recorded an impairment charge in the amount of $ 1,231,874 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. Given the deconsolidation of Curetis and Ares Genetics following their insolvency filings, the ROU assets associated with these entities are removed from the consolidated balance sheet for the year ended December 31, 2023. During the year ended December 31, 2023, the Company determined that its operating right-of-use lease asset for its Rockville, MD office was impaired due to the Company’s inability to support the lease given its financial position. As a result, the Company recorded an impairment charge in the amount of $ 849,243 Intangible assets and goodwill Intangible assets and goodwill consist of finite-lived and indefinite-lived intangible assets and goodwill. Finite-lived and indefinite-lived intangible assets Intangible assets include trademarks and tradenames, developed technology and software, in-process research & development (“IPR&D”), and distributor relationships and consisted of the following as of December 31, 2023 and 2022:
Schedule of finite-lived and indefinite-lived intangible assets
December 31, 2023 December 31, 2022
Subsidiary Cost
Accumulated Amortization, Deconsolidation, and Impairment Effect of Foreign Exchange Rates Net Balance Accumulated Effect of Foreign Exchange Rates Net Balance
Trademarks and tradenames Curetis $ 1,768,000 $ (1,766,880 ) $ (1,120 ) $ - $ (469,011 ) $ (62,520 ) $ 1,236,469
Distributor relationships Curetis 2,362,000 (2,360,505 ) (1,495 ) - (417,728 ) (83,525 ) 1,860,747
A50 – Developed technology Curetis 349,000 (348,779 ) (221 ) - (132,273 ) (12,342 ) 204,385
Ares – Developed technology Ares Genetics 5,333,000 (5,329,624 ) (3,376 ) - (1,010,495 ) (183,132 ) 4,139,373
A30 – Acquired in-process research & development Curetis 5,706,000 (5,702,388 ) (3,612 ) - (5,407,699 ) (298,301 ) -
$ 15,518,000 $ (15,508,176 ) $ (9,824 ) $ - $ (7,437,206 ) $ (639,820 ) $ 7,440,974 Identifiable intangible assets will be amortized on a straight-line basis over their estimated useful lives. The estimated useful lives of the intangibles are:
Schedule of estimated useful lives of identifiable intangible assets
Estimated Useful Life
Trademarks and tradenames 10
Customer/distributor relationships 15
A50 – Developed technology 7
Ares – Developed technology 14
A30 – Acquired in-process research & development Indefinite Acquired IPR&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 the 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 in 2022, it was determined that the infinite-lived intangible asset was impaired because although the Company had an ongoing collaboration utilizing the intangible asset, 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 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. All the Company’s finite-lived intangible assets with net balances were held by Curetis and Ares Genetics. As a result of the insolvency filings for Curetis and Ares Genetics and the associated deconsolidation of all balance sheet balances related to these entities, the Company does not have any finite-lived intangible asset balances as of December 31, 2023. Total amortization expense of intangible assets was $ 624,240 725,060 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 December 31, 2022 was $ 0 The changes in the carrying amount of goodwill as of December 31, 2022, and since December 31, 2021, were as follows:
Schedule of changes in carrying amount of goodwill
Balance as of December 31, 2021 $ 7,453,007
Changes in currency translation (512,458 )
Goodwill impairment charge (6,940,549 )
Balance as of December 31, 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 year ended December 31, 2022, since the Company identified circumstances 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 $ 6,940,549 Revenue recognition During the years ended December 31, 2022 and 2023, the Company derived revenues from (i) the sale of Unyvero Application cartridges, Unyvero Systems, Acuitas AMR Gene Panel test products, and SARS CoV-2 tests, (ii) providing laboratory services, and (iii) providing collaboration services including funded software arrangements, license arrangements, and the FIND NGO collaboration on our Unyvero A30 platform. 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. 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 recognized funding from grants and research incentives received through its subsidiary, Ares Genetics, from Austrian government agencies in the 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 year ended December 31, 2023, the Company recognized $ 301,575 424,304 0 401,436 Research and development costs, net 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, development materials, 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. A discussion of management’s methodology for developing each of the assumptions used in the Black-Scholes model is as follows: Fair value of common stock The Company uses the quoted market price of its common stock as its fair value. Expected volatility Through 2020, since OpGen did not have sufficient history to estimate the expected volatility of its common stock price, expected volatility was based on the volatility of peer public entities that were similar in size and industry. Beginning in 2021, for stock options with an expected term where there is sufficient history available, expected volatility is based on the volatility of OpGen’s common stock. Expected dividend yield The Company has never declared or paid dividends on its common stock and has no plans to do so in the foreseeable future. Risk-free interest rate The risk-free interest rate is the U.S. Treasury rate for the day of each option grant during the year, having a term that most closely resembles the expected term of the option. Expected term The expected term of a stock option grant is the period of time that the options granted are expected to remain unexercised. Options granted have a maximum term of 10 5.75 6.25 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% The Company had federal net operating loss (“NOL”) carryforwards of $ 241,110,447 232,682,072 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, (iii) restricted stock units representing the right to acquire shares of common stock, and (iv) convertible preferred stock which have been excluded from the computation of diluted loss per share, was 1.2 0.1 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) 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. |
