CapForce Inc 10-Q for FY2023 Q3
CapForce Inc. (CFOR)
About this 10-Q
CapForce Inc filed this 10-Q on November 14, 2023, covering the quarter ended September 30, 2023 (FY2023 Q3).
Headline figures
Quarter ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $699.02K
- up 55.8% from $448.71K a year earlier
- Net loss
- $4.06M
- compared with a net loss of $14.1M a year earlier
- Diluted EPS
- -$0.46
- compared with -$5.92 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark one)
| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended
| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______ to _______.
Commission file number
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbols | Name of each exchange on which registered |
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. ☒ 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). ☒ 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 | ☐ | |
| ☒ | 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 registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ☐ NO
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” 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 ability to continue to operate in the ordinary course of business without disruption while the insolvency proceedings of our subsidiaries Curetis GmbH and Ares Genetics GmbH are pending; |
| ● | 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 Unyvero A30 RQ platform and ARESdb, and the timing of regulatory submissions; |
| ● | our ability to meet our obligations and extend our relationships under our collaboration and distribution agreements; |
| ● | our ability to obtain regulatory clearance for and commercialize our product and services offerings; |
| ● | our ability to sustain and grow our customer base for our Unyvero IVD products as well as our current research use only (RUO) products; |
| ● | 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, Russia’s war against Ukraine, and Hamas’ war against Israel; |
| ● | 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, 2023 | December 31, 2022 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventory, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Finance lease right-of-use assets, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Intangible assets, net | ||||||||
| Strategic inventory | ||||||||
| Other noncurrent assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities | ||||||||
| Current maturities of long-term debt | $ | $ | ||||||
| Accounts payable | ||||||||
| Accrued compensation and benefits | ||||||||
| Accrued liabilities | ||||||||
| Deferred revenue | ||||||||
| Short-term finance lease liabilities | ||||||||
| Short-term operating lease liabilities | ||||||||
| Total current liabilities | ||||||||
| Long-term debt, net | ||||||||
| Derivative liabilities | ||||||||
| Long-term finance lease liabilities | ||||||||
| Long-term operating lease liabilities | ||||||||
| Other long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 8) | ||||||||
| Stockholders’ equity | ||||||||
| Preferred stock, $ outstanding at September 30, 2023 and December 31, 2022 | ||||||||
| Common stock, $ December 31, 2022, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
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, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenue | ||||||||||||||||
| Product sales | $ | $ | $ | $ | ||||||||||||
| Laboratory services | ||||||||||||||||
| Collaboration revenue | ||||||||||||||||
| Total revenue | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Cost of products sold | ||||||||||||||||
| Cost of services | ||||||||||||||||
| Research and development | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| Goodwill impairment charge | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (expense) income | ||||||||||||||||
| Interest and other income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Foreign currency transaction (losses) gains | ( | ) | ( | ) | ( | ) | ||||||||||
| Change in fair value of derivative financial instruments | ||||||||||||||||
| Total other expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income taxes | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss available to common stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive income (loss) – foreign currency translation | ( | ) | ( | ) | ||||||||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 6 |
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, 2021 | $ | — | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||
| Issuance of RSUs | — | ( | ) | |||||||||||||||||||||||||||||
| Stock compensation expense | — | — | ||||||||||||||||||||||||||||||
| Foreign currency translation | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balances at March 31, 2022 | — | ( | ) | |||||||||||||||||||||||||||||
| Issuance of RSUs | — | ( | ) | |||||||||||||||||||||||||||||
| Stock compensation expense | — | — | ||||||||||||||||||||||||||||||
| Foreign currency translation | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balances at June 30, 2022 | — | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Stock compensation expense | — | — | ||||||||||||||||||||||||||||||
| At the market offering, net of offering costs | — | |||||||||||||||||||||||||||||||
| Foreign currency translation | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balances at September 30, 2022 | $ | — | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||
| Balances at December 31, 2022 | $ | — | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||
| Issuance of RSUs | — | ( | ) | |||||||||||||||||||||||||||||
| Stock compensation expense | — | — | ||||||||||||||||||||||||||||||
| Offering of common stock and warrants, net of issuance costs | — | |||||||||||||||||||||||||||||||
| Share cancellation | ( | ) | ( | ) | — | |||||||||||||||||||||||||||
| Foreign currency translation | — | — | ||||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balances at March 31, 2023 | — | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Issuance of RSUs | — | ( | ) | |||||||||||||||||||||||||||||
| Stock compensation expense | — | — | ||||||||||||||||||||||||||||||
| Cash bonus taken in the form of stock compensation | — | — | ||||||||||||||||||||||||||||||
| Offering of common stock and warrants, net of issuance costs | — | |||||||||||||||||||||||||||||||
| Foreign currency translation | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balances at June 30, 2023 | — | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Stock compensation expense | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Offering of common stock and warrants, net of issuance costs | — | |||||||||||||||||||||||||||||||
| Foreign currency translation | — | — | ||||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balances at September 30, 2023 | $ | — | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||
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 | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Depreciation and amortization | ||||||||
| Noncash interest expense | ||||||||
| Loss on disposal of equipment | ||||||||
| Stock compensation expense | ||||||||
| Change in inventory reserve | ||||||||
| Cash bonus taken in the form of stock compensation | ||||||||
| Change in fair value of derivative liabilities | ( | ) | ( | ) | ||||
| Goodwill impairment charge | ||||||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable | ||||||||
| Inventory | ( | ) | ||||||
| Other assets | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accrued compensation and other liabilities | ( | ) | ( | ) | ||||
| Deferred revenue | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from issuance of common stock and pre-funded warrants, net of issuance costs | ||||||||
| Proceeds from at the market offering, net of issuance costs | ||||||||
| Payments on debt | ( | ) | ( | ) | ||||
| Payments on finance lease obligations | ( | ) | ( | ) | ||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Effects of exchange rates on cash | ( | ) | ||||||
| Net decrease in cash and cash equivalents and restricted cash | ( | ) | ( | ) | ||||
| Cash and cash equivalents and restricted cash at beginning of period | ||||||||
| Cash and cash equivalents and restricted cash at end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Supplemental disclosures of noncash investing and financing activities | ||||||||
| Right-of-use assets acquired through operating leases | $ | $ | ||||||
| Property and equipment transferred to inventory | $ | $ | ||||||
| Purchased equipment not yet paid for | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 8 |
OpGen, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 2023
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 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 Holzgerlingen and Bodelshausen, 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’s current product portfolio includes Unyvero 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.
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 product. OpGen offers the FDA-cleared Unyvero LRT and LRT BAL Panels as well as the Unyvero UTI Panel as a 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-marked Unyvero Panels in Europe and other global markets via 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 through 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 € |
| ● | 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) |
| ● | 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) |
| 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) |
| ● | On June 24, 2022, the Company entered into an At-the-Market, or ATM, Offering Agreement (the “2022
ATM Agreement”) with H.C. Wainwright & Co., LLC (“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 $ |
On 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
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 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 assert claims against OpGen, OpGen’s cash available to fund its business operations 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. To meet its capital needs and improve its liquidity position, the Company 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.
The accompanying unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a 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, 2022 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.
| 11 |
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, 2023; all intercompany transactions and balances have been eliminated.
Foreign currency
The Company has subsidiaries located in Holzgerlingen, 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. 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, 2023 and December 31, 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
$
At September 30, 2023 and December 31, 2022, the Company
had funds totaling $
| 12 |
| September 30, 2023 | December 31, 2022 | September 30, 2022 | December 31, 2021 | |||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | ||||||||||||
| Restricted cash | ||||||||||||||||
| Total cash and cash equivalents and restricted cash in the condensed consolidated statements of cash flows | $ | $ | $ | $ | ||||||||||||
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
At September 30, 2023, the Company had accounts receivable
from
Inventory
| September 30, 2023 | December 31, 2022 | |||||||
| Raw materials and supplies | $ | $ | ||||||
| Work-in-process | ||||||||
| Finished goods | ||||||||
| Total | $ | $ | ||||||
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
$
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.
| 13 |
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, 2023 and 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. The Company did not identify any impaired ROU assets for the nine months ended September 30, 2023 and 2022.
Intangible assets
As of September 30, 2023, the Company’s intangible assets with net balances are all finite-lived.
Finite-lived and indefinite-lived intangible assets
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 | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||
| Distributor relationships | Curetis | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| A50 – Developed technology | Curetis | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Ares – Developed technology | Ares Genetics | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| A30 – In-Process Research & Development | Curetis | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||
| 14 |
| Estimated Useful Life | |||
| Trademarks and tradenames | |||
| Customer/distributor relationships | |||
| A50 – Developed technology | |||
| Ares – Developed technology | |||
| A30 – Acquired in-process research & development |
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 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 $
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
$
| Year Ending December 31, | ||||
| 2023 (October to December) | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Thereafter | ||||
| Total | $ |
In 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. During the three and nine months ended September 30, 2023, 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 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.
| 15 |
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 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, 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 $
Revenue recognition
The Company derives revenues from (i) the sale of Unyvero Application cartridges and Unyvero 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 and license arrangements, and (iv) granting access to subsets 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.
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, 2023 and 2022, the Company recognized $
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.
| 16 |
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
The Company had federal net operating loss (“NOL”)
carryforwards of $
The Company also has foreign NOL carryforwards of
$
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
| 17 |
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
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Product sales | $ | $ | $ | $ | ||||||||||||
| Laboratory services | ||||||||||||||||
| Collaboration revenue | ||||||||||||||||
| Total revenue | $ | $ | $ | $ | ||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Domestic | $ | $ | $ | $ | ||||||||||||
| International | ||||||||||||||||
| Total revenue | $ | $ | $ | $ | ||||||||||||
Deferred revenue
| Balance at December 31, 2022 | $ | |||
| Contracts with customers | ||||
| Recognized in the current period | ( | ) | ||
| Currency translation adjustment | ( | ) | ||
| Balance at September 30, 2023 | $ |
Contract assets
The Company had no contract assets as of September 30, 2023 and December 31, 2022, which are generated when contractual billing schedules differ from revenue recognition timing. Contract assets represent a conditional right to consideration for satisfied performance obligations that becomes a billed receivable when the conditions are satisfied.
| 18 |
Unsatisfied performance obligations
The Company had no unsatisfied performance obligations related to its contracts with customers at September 30, 2023 and December 31, 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, 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 €
| Description | Balance at December 31, 2022 | Change in Fair Value | Effect of Foreign Exchange Rates | Balance at September 30, 2023 | ||||||||||||
| Participation percentage interest liability | $ | $ | ( | ) | $ | $ | ||||||||||
| Total | $ | $ | ( | ) | $ | $ | ||||||||||
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 months ended September 30, 2023, the Company did not record any such impairment expenses. During the
year ended December 31, 2022, the Company recorded impairment expense of $
| 19 |
Note 6 – Debt
| September 30, 2023 | December 31, 2022 | |||||||
| EIB | $ | $ | ||||||
| Total debt obligations | ||||||||
| Unamortized debt discount | ( | ) | ( | ) | ||||
| Carrying value of debt | ||||||||
| Less current portion | ( | ) | ( | ) | ||||
| Non-current portion of long-term debt | $ | $ | ||||||
EIB Loan Facility
In 2016, Curetis entered into a contract for an up
to €
In April 2017, Curetis drew down a first tranche
of €
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 €
| 20 |
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 €
As of September 30, 2023, the outstanding borrowings
under all tranches were €
Total interest
expense (including amortization of debt discounts and financing fees) on all debt instruments was $
Note 7 – Stockholders’ equity
As of September 30, 2023, the Company had
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. Following receipt of approval from stockholders at a special meeting of stockholders held on 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, 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 an 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 $
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)
| 21 |
On January 11, 2023, the Company closed a best-efforts
public offering pursuant to a securities purchase agreement entered into with a certain institutional investor for the purchase of (i)
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)
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.
| 22 |
Under the 2015 Plan, the aggregate number of shares
of the common stock authorized for issuance may not exceed (i)
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
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Cost of services | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Research and development | ( | ) | ( | ) | ||||||||||||
| General and administrative | ||||||||||||||||
| Sales and marketing | ( | ) | ( | ) | ||||||||||||
| $ | ( | ) | $ | $ | $ | |||||||||||
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. Share-based compensation expense decreased significantly in the quarter ended September 30, 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 and nine months ended September
30, 2023, the Company did not grant any options,
The Company had total stock options to acquire
Restricted stock units
During the three months ended September 30, 2023,
the Company did not grant any restricted stock units, no restricted stock units vested, and
| 23 |
Stock purchase warrants
| Outstanding at | ||||||||||||||||||
| Issuance | Exercise Price | Expiration | September 30, 2023 (1) | December 31, 2022 (1) | ||||||||||||||
| February 2015 | $ | |||||||||||||||||
| February 2018 | $ | |||||||||||||||||
| February 2018 | $ | |||||||||||||||||
| October 2019 | $ | |||||||||||||||||
| October 2019 | $ | |||||||||||||||||
| November 2020 | $ | |||||||||||||||||
| February 2021 | $ | |||||||||||||||||
| October 2022 | $ | |||||||||||||||||
| May 2023 | $ | |||||||||||||||||
The warrants listed above were issued in connection with various debt, equity, or development contract agreements.
| (1) |
| (2) |
Note 8 – Commitments and Contingencies
Registration and other stockholder rights
In connection with the various investment transactions, the Company entered into 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 5 systems that it commits to purchase in the following quarter. Since the inception of the agreement, the Company had acquired 24 QuantStudio 5 systems, none of which were acquired during the nine months ended September 30, 2023. As of September 30, 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 instruments 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 instruments 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. Curetis does not have any purchase commitments over the next twelve months.
| 24 |
Note 9 – Leases
| Lease classification | September 30, 2023 | December 31, 2022 | ||||||
| ROU Assets: | ||||||||
| Operating | $ | $ | ||||||
| Financing | ||||||||
| Total ROU assets | $ | $ | ||||||
| Liabilities | ||||||||
| Current: | ||||||||
| Operating | $ | $ | ||||||
| Finance | ||||||||
| Noncurrent: | ||||||||
| Operating | ||||||||
| Finance | ||||||||
| Total lease liabilities | $ | $ | ||||||
| Maturity of lease liabilities | Operating | Finance | Total | |||||||||||
| 2023 (October to December) | $ | $ | $ | |||||||||||
| 2024 | ||||||||||||||
| 2025 | ||||||||||||||
| 2026 | ||||||||||||||
| 2027 | ||||||||||||||
| Thereafter | ||||||||||||||
| Total lease payments | ||||||||||||||
| Less: Interest | ( | ) | ( | ) | ||||||||||
| Present value of lease liabilities | $ | $ | $ | |||||||||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||
| Lease cost | Classification | 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Operating | Operating expenses | $ | $ | $ | $ | |||||||||||||
| Finance: | ||||||||||||||||||
| Amortization | Operating expenses | |||||||||||||||||
| Interest expense | Other expenses | |||||||||||||||||
| Total lease costs | $ | $ | $ | $ | ||||||||||||||
| Other information | Total | |||
| Weighted average remaining lease term (in years) | ||||
| Operating leases | ||||
| Finance leases | ||||
| Weighted average discount rate: | ||||
| Operating leases | % | |||
| Finance leases | % | |||
| Supplemental cash flow information | 2023 | 2022 | ||||||
| Cash paid for amounts included in the measurement of lease liabilities | ||||||||
| Cash used in operating activities | ||||||||
| Operating leases | $ | $ | ||||||
| Finance leases | $ | $ | ||||||
| Cash used in financing activities | ||||||||
| Finance leases | $ | $ | ||||||
| ROU assets obtained in exchange for lease obligations: | ||||||||
| Operating leases | $ | $ | ||||||
| 25 |
Note 10 – License agreements, research collaborations and development agreements
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’s anti-infective portfolio.
Under the terms of the framework agreement, which
had an initial term of
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.
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.
| 26 |
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
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 €
Note 11 - Subsequent Events
The Company evaluates subsequent events and transactions that occur after the balance sheet date up to 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 €
On October 11, 2023, the Company entered into
a Preferred Stock Purchase Agreement (the “Purchase Agreement”) with a single investor (the “Investor”), pursuant
to which the Company agreed to issue and sell to the Investor in a private placement (the “Private Placement”)
| 27 |
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 $
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 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.
| 28 |
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, 2022.
Overview
OpGen, Inc. (the “Company”) isa 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. The Company’s current product portfolio includes Unyvero 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.
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 AMR genetic data. The Company currently expects to focus on the following products for lower respiratory infection and urinary tract 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 Company has commercialized the Unyvero LRT BAL test for testing bronchoalveolar lavage, or BAL, specimens from patients with lower respiratory tract infections following FDA clearance received by Curetis in December 2019. The Unyvero LRT BAL automated test simultaneously detects 20 pathogens and 10 antibiotic resistance markers, and it is the first and only FDA-cleared panel that also includes Pneumocystis jirovecii, a key fungal pathogen often found in immunocompromised patients (such as AIDS and transplant patients) that can be difficult to diagnose, as the 20th pathogen on the panel. The Company believes the Unyvero LRT and LRT BAL tests have the ability to help address a significant, previously unmet medical need that causes over $10 billion in annual costs for the U.S. healthcare system, according to the U.S. Centers for Disease Control and Prevention, or CDC. |
| ● | The Unyvero Urinary Tract Infection, or UTI, test, which is CE-IVD-marked in Europe, is currently being made available to laboratories in the United States as a research use only, or RUO, kit. The test detects a broad range of pathogens as well as antimicrobial resistance markers directly from native urine specimens. The Company had initiated a prospective multi-center clinical trial for the Unyvero UTI in the United States in the third quarter of 2021 and completed enrollment of more than 1,800 patient samples by the end of the third quarter of 2022. Following the announcement of preliminary top line data in December 2022, the Company concluded reference testing in early 2023 and submitted a De Novo classification request to the U.S. Food and Drug Administration (FDA) seeking marketing authorization for its Unyvero UTI panel in April 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. If cleared, the Unyvero UTI would become the first rapid sample-to-answer semi-quantitative test for urinary tract infections available as an FDA-cleared IVD test in the United States. |
| 29 |
| ● | In September 2022, the Company entered into a research and development, or R&D, collaboration agreement with the Foundation for Innovative New Diagnostics (FIND), the global alliance for diagnostics, to assist in funding the development of the Unyvero A30 RQ platform for use in low- and middle-income countries (LMICs). The initial project focused on a feasibility study for the rapid detection of AMR markers from blood culture. The feasibility phase of this initial R&D project concluded in the first quarter of 2023 and was funded by FIND for €0.7 million (approximately $0.7 million). In April 2023, the Company entered into an amendment to its research and development collaboration 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 of the collaboration, including the additional deliverables, FIND and Curetis, on August 1, 2023, extended the research and development 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, increasing the total project revenue to €0.87 million. |
| ● | In October 2022, the Company announced that its subsidiary Curetis and BioVersys AG, a Swiss biotech company developing novel antibiotics against drug resistant infections, entered into a collaboration agreement. Under that collaboration agreement, BioVersys is using the Unyvero systems and HPN tests at all its sites during its BV100 phase II clinical trial which is targeted to treat carbapenem-resistant Acinetobacter baumannii. |
| ● | The Company is also developing novel bioinformatics tools and solutions to accompany or augment its current and potential future IVD products and may seek regulatory clearance for such bioinformatics tools and solutions to the extent they would be required either as part of its portfolio of IVD products or even as a standalone bioinformatics product. |
| ● | The Company offers validated high-quality sequencing and analysis services with rapid turnaround times for key applications in microbiology from our Ares Genetics laboratory in Vienna, Austria. The unique and differentiated offering for rapid and comprehensive genetic characterization of bacterial isolates and interpretive services include whole genome sequencing, taxonomic identification and typing, detection of plasmids and other mobile elements, AMR, and virulence markers. The RUO services offered provide prediction of genomic antibiotic susceptibility based on our ARESdb database as well as specialized software for bacterial outbreak analysis via our AREScloud web application. These technologies are particularly applicable to programs of Infection Prevention and Control (IPC), antibiotic stewardship and surveillance, all of which are part of the U.S. national strategy to protect against rising antimicrobial resistance. Furthermore, in August 2023, Ares Genetics released new features to its AREScloud offering including a single nucleotide polymorphism (SNP) analysis module and a module for the interpretation of plasmids to enhance genomic surveillance. |
OpGen has extensive offerings of additional IVD tests including CE-IVD-marked Unyvero tests for intra-abdominal and blood stream infections. The Company’s portfolio included a CE-IVD-marked polymerase chain reaction, or PCR, based rapid test kit for SARS-CoV-2 detection in combination with its 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 130,000 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 late 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, certified laboratory, a contract research organization, or CRO, a major University Medical Center, 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 been extended until January 2025.
| 30 |
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.
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-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 two 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 verification and validation testing of the A30 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. The Company has a network of other distributors covering countries in Europe, the Middle East and Africa, Asia Pacific, and Latin America. In October 2023, the Company amended its distribution agreement with Fisher Healthcare to allow Fisher Healthcare to sell to existing U.S. Unyvero customers of 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 product as well as for its Unyvero A30 RQ platform. OpGen will continue to offer the FDA-cleared Unyvero LRT and LRT BAL Panels as well as the Unyvero UTI Panel as RUO products to hospitals, public health departments, clinical laboratories, pharmaceutical companies and 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 limited number of designated EU Notified Bodies at this time, and with the EU commission IVDR amendment in early 2022 providing for 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.
The Company’s headquarters are in Rockville, Maryland, and its principal operations are in Holzgerlingen and Bodelshausen, Germany, and Vienna, Austria. The Company operates in one business segment. 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.
Financial Overview
Revenue
We recognize three types of revenues: product sales, laboratory services and collaboration revenue. We generate product revenues from sales of our products, including through our distribution partners, such as our Unyvero 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 services that we and our subsidiaries provide to customers. Lastly, our collaboration revenues consist of revenue received from research and development collaborations that we have entered into with third parties, such as our 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.
| 31 |
Results of operations for the three months ended September 30, 2023 and 2022
Revenues
| 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, 2023 increased approximately 56% when compared to the same period in 2022, with a change in the mix of revenue as follows:
| ● | Product Sales: the increase in revenue of approximately 56% in the 2023 period compared to the 2022 period is primarily attributable to an increase in international Unyvero system and cartridge sales; |
| ● | Laboratory Services: the increase in revenue of approximately 52% in the 2023 period compared to the 2022 period is primarily attributable to an increase in the validated high-quality sequencing and analysis services performed by Ares Genetics and an increase in the RUO laboratory services performed by OpGen’s laboratory in Rockville, Maryland; and |
| ● | Collaboration Revenue: the increase in revenue of approximately 59% in the 2023 period compared to the 2022 period is primarily the result of the Company’s collaboration agreement with FIND. |
Operating expenses
| 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, 2023 decreased approximately 69% when compared to the same period in 2022. Operating expenses changed as follows:
| ● | Cost of products sold: cost of products sold for the three months ended September 30, 2023 decreased approximately 67% when compared to the same period in 2022, primarily because the Company recorded a $1.4 million increase to its inventory reserves for obsolescence, expirations, and slow-moving inventory in 2022, due, in part, to review and approval delays of the Company’s pneumonia cartridge encountered in China; |
| ● | Cost of services: cost of services for the three months ended September 30, 2023 increased approximately 324% when compared to the same period in 2022, primarily due to additional expenses from the Company’s collaboration with FIND, as well as an increase in the laboratory services performed; |
| ● | Research and development: research and development expenses for the three months ended September 30, 2023 decreased approximately 41% when compared to the same period in 2022, primarily due to a reduction in payroll related costs as well as the conclusion of the prospective multi-center clinical trial for the Unyvero UTI in the third quarter of 2022; |
| ● | General and administrative: general and administrative expenses for the three months ended September 30, 2023 remained relatively consistent when compared to the same period in 2022; |
| 32 |
| ● | Sales and marketing: sales and marketing expenses for the three months ended September 30, 2023 decreased approximately 67% when compared to the same period in 2022, primarily due to the reduction in payroll related costs resulting from the Company’s restructuring; and |
| ● | Goodwill impairment charge: goodwill impairment charge for the three months ended September 30, 2022 represents the impairment of the Company’s goodwill due to decreases in the Company’s stock price and market capitalization in the third quarter of 2022. |
Other (expense) income
| 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, 2023 decreased when compared to the same period in 2022 primarily due to a 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, 2023 and 2022
Revenues
| 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, 2023 increased approximately 25% when compared to the same period in 2022, with a change in the mix of revenue as follows:
| ● | Product Sales: the decrease in revenue of approximately 13% in the 2023 period compared to the 2022 period is primarily attributable to the one-time sale of a pool of Unyvero A50 instrument systems to our Pan-European distribution partner, Menarini, in the second quarter of 2022; |
| ● | Laboratory Services: the increase in revenue of approximately 19% in the 2023 period compared to the 2022 period is primarily attributable to an increase in the RUO laboratory services performed by OpGen’s laboratory in Rockville, Maryland; and |
| ● | Collaboration Revenue: the increase in revenue of approximately 368% in the 2023 period compared to the 2022 period is primarily the result of the Company’s collaboration agreement with FIND. |
| 33 |
Operating expenses
| 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, 2023 decreased approximately 39% when compared to the same period in 2022. Operating expenses changed as follows:
| ● | Costs of products sold: cost of products sold for the nine months ended September 30, 2023 decreased approximately 32% when compared to the same period in 2022, primarily because the Company recorded a $1.4 million increase to its inventory reserves for obsolescence, expirations, and slow-moving inventory in 2022, due, in part, to review and approval delays of the Company’s pneumonia cartridge encountered in China; |
| ● | Costs of services: cost of services for the nine months ended September 30, 2023 increased approximately 539% when compared to the same period in 2022, primarily due to additional expenses from the Company’s collaboration with FIND; |
| ● | Research and development: research and development expenses for the nine months ended September 30, 2023 decreased approximately 33% when compared to the same period in 2022, primarily due to a reduction in payroll related costs as well as the conclusion of the prospective multi-center clinical trial for the Unyvero UTI in the third quarter of 2022; |
| ● | General and administrative: general and administrative expenses for the nine months ended September 30, 2023 remained relatively consistent when compared to the same period in 2022; |
| ● | Sales and marketing: sales and marketing expenses for the nine months ended September 30, 2023 decreased approximately 22% when compared to the same period in 2022, primarily due to the reduction in payroll related costs resulting from the Company’s restructuring; and |
| ● | Goodwill impairment charge: goodwill impairment charge for the nine months ended September 30, 2022 represents the impairment of the Company’s goodwill due to decreases in the Company’s stock price and market capitalization in the third quarter of 2022. |
Other expense
| 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, 2023 decreased when compared to the same period in 2022 primarily due to a reduction in interest expense resulting from the Company’s debt repayments, partially offset by foreign currency transaction losses.
| 34 |
Liquidity and capital resources
As of September 30, 2023, we had cash and cash equivalents of $0.3 million compared to $7.4 million at December 31, 2022. We have funded our operations primarily through external investor financing arrangements and have raised funds in 2023 and 2022, including:
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’s common stock through the sales agent. As of December 31, 2022, the Company sold 85,732 shares under the 2022 ATM Offering totaling $1.03 million in gross proceeds and $0.99 million in net proceeds. The Company has not sold any shares under the 2022 ATM Agreement in 2023.
On October 3, 2022, we closed a registered direct offering for the purchase of 268,000 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 215,000 shares of common stock. The offering 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.
On January 11, 2023, we closed a best-efforts public offering for the purchase of (i) 321,207 shares of common stock, (ii) pre-funded warrants to purchase 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 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 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.
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 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 assert claims against OpGen, OpGen’s cash available to fund its business operations 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. To meet its capital needs and improve its liquidity position, the Company 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.
| 35 |
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 access our cash and cash equivalents as needed, our financial position and ability to operate our business will be 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, | ||||||||
| 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 noncash items, including depreciation and amortization expense of $1.3 million, noncash interest expense of $2.0 million, change in inventory reserve of $1.4 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, 2023 and 2022 consisted of purchases of property and equipment.
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 and finance leases, partially offset by proceeds from the at the market offering, net of 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 tranche has a floating interest rate of EURIBOR plus 4% payable after each 12-month-period from the draw-down-date and an 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, 2023, the outstanding borrowings under all tranches were €9.4 million (approximately $9.9 million), including deferred interest payable at maturity of €1.4 million (approximately $1.5 million).
| 36 |
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 €13.4 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 a 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 third tranche of the Company’s indebtedness of €5.0 million 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, 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, 2023, and December 31, 2022, we did not have any off-balance sheet arrangements.
| 37 |
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, the 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, 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, 2023, there have been no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
Reference is made to the Risk Factors included in our Annual Report on Form 10-K for the year ended December 31, 2022 and our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2023 and June 30, 2023. There have been no material changes from the Risk Factors disclosed in our Annual Report on Form 10-K for the year 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 our common stock to decrease in value.
As previously reported in the Company’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 such insolvency proceedings may be highly speculative and pose substantial risks to investors of our common stock, as the price of our common stock may decrease in value or experience substantial volatility. There is substantial uncertainty that the Company would recover any amounts in connection with such insolvency proceedings, including, in particular, as a result of Curetis’ indebtedness. In addition, the Company 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.
| 38 |
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 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 liabilities 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 plans to focus on the functions needed to pursue potential strategic alternatives. There is no guarantee that any such strategic alternatives will be available to the Company on reasonable terms or that any 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 discharged in the 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 discharged 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 condition, and results of operations on a post-reorganization basis. In addition, because we are 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 Ares Genetics’ insolvency proceedings.
If we operate under the insolvency court’s control for a long period of time, or for a longer period of time than expected, our business may be harmed.
Our future results may be dependent on our ability to successfully complete a strategic transaction or successful execution of our business plan. Our being subject to a long period of operations under the insolvency court’s control could have a material adverse effect on our business, financial condition, 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.
| 39 |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
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.
| 41 |
Item 6. Exhibits
|
Exhibit Number |
Description | ||
| 10.1 | Standstill Agreement, dated July 4, 2023, by and between OpGen, Inc. and the Investor (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on July 4, 2023. | ||
| 10.2 | Finance Contract, as amended and restated pursuant to the First Amendment and Restatement Agreement dated May 20, 2019 and the Second Amendment and Restatement Agreement dated as of July 9, 2020, by and between the European Investment Bank and Curetis GmbH (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on July 13, 2020). | ||
| 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 |
| 42 |
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, 2023 | ||
| 43 |
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13A-14(A)/15D-14(A)
I, Oliver Schacht, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of OpGen, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 14, 2023 |
| /s/ Oliver Schacht |
| Oliver Schacht, Ph.D. |
|
Chief Executive Officer (principal executive officer) |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13A-14(A)/15D-14(A)
I, Albert Weber, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of OpGen, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 14, 2023 |
| /s/ Albert Weber |
| Albert Weber |
|
Chief Financial Officer (principal financial officer and principal accounting officer) |
Exhibit 32.1
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report on Form 10-Q of OpGen, Inc. (the “Company”) for the quarterly period ended September 30, 2023 (the “Report”) as filed with the Securities and Exchange Commission on the date hereof, the undersigned Chief Executive Officer and Chief Financial Officer of the Company hereby certify that, to such officer’s knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
This certification is provided solely pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
| Date: November 14, 2023 | By: | /s/ Oliver Schacht | ||
| Oliver Schacht, Ph.D. | ||||
| Chief Executive Officer | ||||
| (principal executive officer) | ||||
| Date: November 14, 2023 | By: | /s/ Albert Weber | ||
| Albert Weber | ||||
| Chief Financial Officer | ||||
| (principal financial officer and principal accounting officer) |
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.