GENMARK DIAGNOSTICS, INC. Forward Looking Statements The following discussion of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements for the nine months endedSeptember 30, 2020 and the notes thereto included in Part I, Item 1 of this Quarterly Report, as well as the audited financial statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year endedDecember 31, 2019 . This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These forward-looking statements regarding future events and our future results are based on current expectations, estimates, forecasts, and projections and the beliefs and assumptions of our management, including, without limitation, our expectations regarding our results of operations, sales and marketing expenses, general and administrative expenses, research and development expenses, and the sufficiency of our cash for future operations. Words such as "expect," "anticipate," "target," "project," "believe," "goals," "estimate," "potential," "predict," "plan," "may," "will," "might," "could," "intend," variations of these terms or the negative of those terms and similar expressions are intended to identify these forward-looking statements. Readers are cautioned that these forward-looking statements are subject to risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in or implied by any forward-looking statements. Among the important factors that could cause actual results to differ materially from those indicated by our forward-looking statements are those discussed under the heading "Risk Factors" in Part II, Item 1A of this Quarterly Report. We assume no obligation to update these forward looking statements to reflect future events or circumstances. Trademarks andTrade Names GenMark®, eSensor®, XT-8®, and ePlex® and our other logos and trademarks are the property ofGenMark Diagnostics, Inc. or its subsidiaries. All other brand names or trademarks appearing in this Quarterly Report are the property of their respective holders. Our use or display of other parties' trademarks, trade dress or products in this Quarterly Report does not imply that we have a relationship with, or the endorsement or sponsorship of, the trademark or trade dress owners.
Overview
GenMark was formed byOsmetech plc , orOsmetech , as aDelaware corporation inFebruary 2010 , and had no operations prior to its initial public offering, which was completed inJune 2010 . Immediately prior to the closing of the initial public offering, GenMark acquired all of the outstanding ordinary shares ofOsmetech in a reorganization under the applicable laws of theUnited Kingdom . Following the reorganization,Osmetech became a wholly-owned subsidiary controlled by GenMark, and the former shareholders ofOsmetech received shares of GenMark. Any historical discussion of GenMark relates toOsmetech and its consolidated subsidiaries prior to the reorganization. InSeptember 2012 , GenMark placedOsmetech into liquidation to simplify its corporate structure. The liquidation ofOsmetech was competed in the fourth quarter of 2013.
We are a molecular diagnostics company focused on developing and commercializing multiplex solutions designed to enhance patient care, improve key quality metrics, and reduce the total cost-of-care. We currently develop and commercialize high-value, simple to perform, clinically relevant multiplex molecular tests based on our proprietary eSensor electrochemical detection technology.
Since inception, we have incurred net losses from operations each year, and we expect to continue to incur losses for the foreseeable future. Our net losses for the nine months endedSeptember 30, 2020 and 2019 were approximately$14.9 million and$37.1 million , respectively. As ofSeptember 30, 2020 , we had an accumulated deficit of$529.2 million . Our operations to date have been funded principally through sales of capital stock, borrowings, and cash from operations. Our Products and Technology We offer our ePlex sample-to-answer instrument andRespiratory Pathogen (RP) Panel ,Respiratory Pathogen Panel 2 (RP2 ),Blood Culture Identification Gram-Positive (BCID-GP) Panel ,Blood Culture Identification Gram-Negative (BCID-GN) Panel , andBlood Culture Identification Fungal Pathogen (BCID-FP) Panel for sale inthe United States and internationally. In addition, in response to the COVID-19 outbreak, we received Emergency Use Authorization (EUA) from theU.S. Food and Drug Administration , or the FDA, inMarch 2020 for our ePlex SARS-CoV-2 Test. We also received CE Mark and FDA EUA forRP2 , which is designed to provide results for SARS-CoV-2 in addition to the other respiratory viruses contained on our ePlexRP Panel . We are also developing our ePlexGastrointestinal Pathogen Panel for the detection of pathogens associated with gastrointestinal infections. We continue to 23 -------------------------------------------------------------------------------- Table of Contents actively evaluate the development of additional assay panels that we believe will meet important, unmet clinical needs, which our ePlex system is uniquely positioned to address. We offer four FDA-cleared diagnostic tests which run on our XT-8 instrument: ourRespiratory Viral Panel ; our Cystic Fibrosis Genotyping Test; our Warfarin Sensitivity Test; and our Thrombophilia Risk Test. We also offer a Hepatitis C (HCV) Genotyping Test and associated custom manufactured reagents, as well as a 2C19 Genotyping Test, each of which is available for use with our XT-8 instrument for research use only (RUO). In addition, inAugust 2020 we submitted an EUA to the FDA for our eSensor SARS-CoV-2 Test. COVID-19 Impact Our priorities following the COVID-19 outbreak have been, among others, protecting the health and safety of our employees; and increasing our manufacturing capacity for our ePlex tests includingRP2 , which includes the SARS-CoV-2 pathogen target, and the SARS-CoV-2 single target test in order to assist our customers with the current pandemic. For the three months endedSeptember 30, 2020 , we continued to expand our manufacturing capacity to address demand for our tests. During the quarter endedSeptember 30, 2020 , portions of our workforce continued to work remotely as their positions allowed. Our ability to continue to operate without any significant negative operational impact from the COVID-19 pandemic will, in part, depend on our ability to protect our employees and maintain our supply chain. The Company continues to endeavor to follow the recommended actions of government and health authorities to protect our employees, with particular measures in place for employees who manufacture our products. However, the complications resulting from the pandemic could result in unforeseen disruptions to our workforce and supply chain (for example, the inability of a key supplier or transportation supplier to source, transport and supply materials to the Company that are necessary for continued operations) that could negatively impact our operations. We believe the extent of the COVID-19 pandemic's impact on our operating results and financial condition will be driven by many factors, most of which are beyond our control and ability to forecast. Such factors include, but are not limited to, the severity and duration of the pandemic, our ability to timely develop, commercialize and manufacture solutions related to the pandemic, the extent and the effectiveness of responsive actions taken by authorities of impacted countries, the impact of these and other factors on our employees, customers and suppliers, as well as any resulting impact of the economic uncertainty and volatility that could affect demand for our products. Because of these and other uncertainties, we cannot estimate the length or extent of the impact of the pandemic on our business. For additional information on risk factors related to the pandemic or other risks that could impact our results, please refer to "Risk Factors" included in Part I, Item 1A of our Annual Report on Form 10-K for the year endedDecember 31, 2019 , and as updated by Part II, Item 1A of this Quarterly Report on Form 10-Q.
Revenue
Revenue from operations includes revenue from the sale of our products and other
services. Product revenue comprises the sale of diagnostic tests and
instruments. In addition to selling our instruments, we also place our
instruments with customers through a reagent rental agreement, under which we
retain title to the instrument and customers generally commit to purchasing
minimum quantities of reagents and test cartridges over a period of one to five
years. Under our reagent rental agreements, a portion of the price charged to
customers from the sale of test cartridges is attributable to the usage fee for
the instrument. Other revenue primarily consists of freight revenue and revenue
from extended service agreements.
Cost of Revenues
Cost of revenues includes the cost of materials, direct labor, and manufacturing
overhead costs used in the manufacture of our consumable tests. Cost of revenues
also includes depreciation on revenue generating instruments that have been
placed with our customers under a reagent rental agreement, cost of instruments
sold to customers, amortization of licenses related to our products, and other
costs such as warranty, royalty, and customer and product technical support. Any
potential underutilized capacity may result in a high cost of revenues relative
to revenue, if manufacturing volumes are not able to fully absorb operating
costs. Our instruments are procured from contract manufacturers. We expect our
cost of revenues to increase as we place additional instruments and manufacture
and sell additional diagnostic panels; however, over time, we expect our cost
per unit to decrease as production volume increases, manufacturing efficiencies
are realized, improvements to procurement practices are made, product
reliability increases, and other improvements decrease costs.
Sales and Marketing Expenses
Sales and marketing expenses include costs associated with our direct sales
force, sales management, marketing, technical support, and business development
activities. These expenses primarily consist of salaries, commissions, benefits,
stock-based compensation, travel, advertising, promotions, product samples, and
trade show expenses.
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Research and Development Expenses
Research and development expenses primarily include costs associated with the
development and expansion of our ePlex instrument's diagnostic test menu. These
expenses also include certain clinical study expenses incurred in preparation
for FDA clearance for these products, intellectual property prosecution and
maintenance costs, and quality assurance expenses. The expenses primarily
consist of salaries, benefits, stock-based compensation, outside design and
consulting services, laboratory supplies, costs of consumables and materials
used in product development, and clinical studies and facility costs. We expense
all research and development expenses in the periods in which they are incurred.
General and Administrative Expenses
Our general and administrative expenses include costs associated with our
executive, accounting and finance, compliance, information technology, legal,
facilities, human resources, administrative, and investor relations activities.
These expenses consist primarily of salaries, benefits, stock-based
compensation, independent auditor costs, legal fees, consultant costs, insurance
premiums, and public company expenses, such as stock transfer agent fees and
listing fees for NASDAQ.
Foreign Exchange Gains and Losses
Transactions in currencies other than our functional currency, the U.S. Dollar,
are translated at the prevailing rates on the dates of the applicable
transaction. Foreign exchange gains and losses arise from differences in
exchange rates during the period between the date a transaction denominated in a
foreign currency is consummated and the date on which it is settled or
translated.
Interest Income and Interest Expense
Interest income includes interest earned on our cash and cash equivalents and
investments. Interest expense represents interest incurred on our loan payable
and on other liabilities.
Provision for Income Taxes
We make certain estimates and judgments in determining income tax expense for
financial statement purposes. These estimates and judgments occur in the
calculation of certain tax assets and liabilities, which arise from differences
in the timing of recognition of revenue and expense for tax and financial
statement purposes.
We assess the likelihood that we will be able to recover our deferred tax
assets. We consider all available evidence, both positive and negative,
including historical levels of income, expectations and risks associated with
estimates of future taxable income, and ongoing prudent and feasible tax
planning strategies in assessing the need for the valuation allowance. If it is
more likely than not that we will not recover our deferred tax assets, we will
increase our provision for income taxes by recording a valuation allowance
against the deferred tax assets that we estimate will not ultimately be
recoverable.
Our income tax returns are based on calculations and assumptions that are
subject to examination by the Internal Revenue Service and other tax
authorities. In addition, the calculation of our tax liabilities involves
dealing with uncertainties in the application of complex tax regulations. We
recognize liabilities for uncertain tax positions based on a two-step process.
The first step is to evaluate the tax position for recognition by determining if
the weight of available evidence indicates that it is more likely than not that
the position will be sustained on audit, including resolution of related appeals
or litigation processes, if any. The second step is to measure the tax benefit
as the largest amount that is more than 50% likely of being realized upon
settlement. While we believe we have appropriate support for the positions taken
on our tax returns, we regularly assess the potential outcomes of examinations
by tax authorities in determining the adequacy of our provision for income
taxes. We continually assess the likelihood and amount of potential adjustments
and adjust the income tax provision, income taxes payable, and deferred taxes in
the period in which the facts that give rise to a revision become known.
Results of Operations - Three and nine months ended
Three Months Ended September 30, Nine Months Ended September 30,
(dollars in thousands) 2020 2019 $ Change % Change 2020 2019
$ Change % Change
Revenue $ 42,646 $ 20,918 $ 21,728 104 % $ 121,474 $ 60,825 $ 60,649 100 %
Our revenue consists primarily of revenue from the sale of test cartridges (which we refer to as consumables), instruments, and other revenues.
Revenue increased by
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revenue increased by $24.8 million , or 187%, to $38.0 million primarily due to
increases in the sale of SARS-CoV-2 and RP2 test consumables and instrument
sales to both new and existing customers. XT-8 product revenue decreased by $3.4
million over the prior year period, or 46%, to $4.0 million during the three
months ended September 30, 2020 , primarily due to decreased sales volumes.
Revenue increased by $60.6 million , or 100% during the nine months ended
September 30, 2020 when compared to the same period of the prior year, primarily
driven by growth in ePlex product revenue. For the nine months ended
September 30, 2020 , ePlex product revenue increased by $66.5 million , or 163%,
to $107.2 million primarily due to increases in the sale of our SARS-CoV-2 and
RP2 test consumables and instrument sales to both new and existing customers.
XT-8 product revenue decreased by $6.6 million over the prior year period, or
34%, to $12.6 million during the nine months ended September 30, 2020 , primarily
due to decreased sales volumes.
Three Months Ended September 30, Nine Months Ended September 30,
(dollars in thousands) 2020 2019 $ Change % Change 2020 2019 $ Change % Change
Cost of revenue $ 26,103 $ 13,868 $ 12,235 88 % $ 72,928 $ 41,339 $ 31,589 76 %
Gross profit $ 16,543 $ 7,050 $ 9,493 135 % $ 48,546 $ 19,486 $ 29,060 149 %
Gross margin 39 % 34 % 40 % 32 %
The increase in cost of revenue for the three months ended September 30, 2020 ,
compared to the same period of the prior year was a result of the growth in
ePlex product revenue, which increased by 187% versus the same period of the
prior year and represented 89% of total revenue for the current period. Standard
product costs in the current quarter increased by $10.6 million as compared to
the same period of the prior year due to increases in ePlex product revenue.
Cost of revenue in the current period also increased by $1.0 million in
royalties expense, $0.5 million in overhead absorption, $0.3 million in freight
expense, and $0.2 million in customer and product and technical support expense,
all as a result of the increases in ePlex product revenue. These increases were
offset by a decrease of $0.4 million in inventory reserve expense in the current
period as compared to the same period of the prior year.
Gross profit in the three months ended September 30, 2020 increased by $9.5
million , or a gross margin increase of five percentage points when compared to
the same period of the prior year. These increases were due to changes in the
composition of ePlex product revenue and continued gains in the manufacture of
ePlex consumables. The increase in gross margin to 39% in the current period was
also attributable to sales mix as ePlex instrument sales comprised a higher
percentage of total product revenue during the three months ended September 30,
2020 when compared to the same period of the prior year.
The increase in cost of revenue for the nine months ended September 30, 2020 ,
compared to the same period of the prior year was a result of the growth in
ePlex product revenue, which increased by 163% versus the same period of the
prior year and represented 88% of total revenue for the current period. Standard
product costs increased by $29.5 million in the current period when compared to
the same period of the prior year due to increases in ePlex product revenue.
Cost of revenue in the current period also increased by $2.4 million in
royalties expense, $0.6 million in freight expense, $0.5 million in customer and
product technical support expense, and $0.4 million in instrument repair
expense, all as a result of the increases in ePlex product revenue. These
increases were offset by decreases of $1.3 million attributable to the
realization of manufacturing efficiencies and improvements to overhead
absorption and $0.4 million in inventory reserve expense in the current period
as compared to the same period of the prior year.
Gross profit in the nine months ended September 30, 2020 increased by $29.1
million , or a gross margin increase of eight percentage points when compared to
the same period of the prior year. These increases were due to changes in the
composition of ePlex product revenue and continued gains in the manufacture of
ePlex consumables. The increase in gross margin to 40% in the current period was
attributable to the realization of manufacturing efficiencies and improvements
to overhead absorption, which resulted in a decrease of $1.3 million in cost of
revenue. ePlex instrument sales also comprised a higher percentage of total
product revenue and contributed to increased gross profit during the nine months
ended September 30, 2020 when compared to the same period of the prior year.
Three Months Ended September 30, Nine Months Ended September 30,
(dollars in thousands) 2020 2019 $ Change % Change 2020 2019 $ Change % Change
Sales and marketing $ 4,979 $ 6,279 $ (1,300) (21) % $ 17,404 $ 17,991 $ (587) (3) %
The decrease in sales and marketing expense for the three months ended
September 30, 2020 , when compared to the same period of the prior year, was
primarily driven by decreases of $0.7 million in evaluation kit expense
resulting from the commercial launch of our ePlex BCID Panels during the prior
year, a $0.7 million reduction of bad debt expense related to recoveries during
the current period, and a decrease of $0.4 million in travel expense. These
decreases were partially offset by increases of $0.5 million in personnel
expense.
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The decrease in sales and marketing expense for the nine months ended
September 30, 2020 , when compared to the same period of the prior year, was
primarily driven by decreases of $1.0 million in evaluation kit expense
resulting from the commercial launch of our ePlex BCID Panels during the prior
year, $0.9 million in travel expense, and $0.2 million in marketing expense.
These decreases were partially offset by increases of $1.3 million in personnel
expense, and $0.2 million in supplies expense.
Three Months Ended September 30, Nine Months Ended September 30,
(dollars in thousands) 2020 2019 $ Change % Change 2020 2019 $ Change % Change
General and administrative
602 13 %$ 18,927 $ 14,217 $ 4,710 33 % The increase in general and administrative expense for the three months endedSeptember 30, 2020 , compared to the same period of the prior year, was primarily driven by increases of$0.2 million in personnel expense,$0.2 million in professional services expense, and$0.1 million in supplies expense. The increase in general and administrative expense for the nine months endedSeptember 30, 2020 , compared to the same period of the prior year, was primarily driven by an increase of$3.9 million in personnel expense, including$3.0 million in non-cash stock-based compensation expense resulting from the acceleration of the vesting of equity awards to our former CEO in connection with his departure,$0.5 million in professional services expense, and$0.2 million in supplies expense. Three Months Ended September 30, Nine Months Ended September 30, (dollars in thousands) 2020 2019 $ Change % Change 2020 2019 $ Change % Change Research and development$ 7,463 $ 6,294 $ 1,169 19 %$ 21,179 $ 20,386 $ 793 4 % The increase in research and development expense for the three months endedSeptember 30, 2020 , compared to the same period of the prior year, was primarily driven by an increases of$1.0 million in personnel expense and$0.9 million in prototype materials used by our assay development teams. These increases were partially offset by a reduction in expense of$0.7 million related to a grant from theBiomedical Advanced Research and Development Authority , or BARDA, received in the current period. The increase in research and development expense for the nine months endedSeptember 30, 2020 , compared to the same period of the prior year, was primarily driven by an increase of$1.5 million in personnel expense, partially offset by a reduction in expense of$0.7 million related to a grant from BARDA received in the current period. Three Months Ended September 30, Nine Months Ended September 30, (dollars in thousands) 2020 2019 $ Change % Change 2020 2019
$ Change % Change
Other expense $ (1,979) $ (1,420) $ (559) 39 % $ (5,895) $ (3,927) $ (1,968) 50 %
Other expense represents non-operating income and expense, including, but not
limited to, earnings on cash, cash equivalents, restricted cash, marketable
securities, exchange gains and losses of foreign currency denominated balances,
and interest expense related to debt.
The change in other expense for the three and nine months ended September 30,
2020 , compared to the same periods of the prior year, were primarily due to
higher interest expense from borrowings from our loan and security agreement.
Three Months Ended September 30, Nine Months Ended September 30,
(dollars in thousands) 2020 2019 $ Change % Change 2020 2019 $ Change % Change
Income tax expense
(benefit) $ (17) $ (33) $ 16 (48) % $ 61 $ 28 $ 33 118 %
Due to net losses incurred, we have only recorded tax provisions related to
minimum tax payments in
Liquidity and Capital Resources
To date, we have funded our operations primarily from the sale of our common stock, borrowings, and cash from operations. We have incurred net losses from continuing operations each year and have not yet achieved profitability. As ofSeptember 30, 2020 , we had$135.2 million of working capital, including$137.3 million in cash, cash equivalents, and marketable securities. We believe our 27 --------------------------------------------------------------------------------
existing cash, cash equivalents, and marketable securities as of
The following table summarizes, for the periods indicated, selected items in our unaudited condensed consolidated statements of cash flows:
Nine Months Ended September 30,
(dollars in thousands) 2020 2019
Net cash provided by (used in) operating activities $ 6,671
(78,351) (1,048)
Net cash provided by financing activities 86,039 14,611
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
(22) 30
Net increase (decrease) in cash, cash equivalents, and
restricted cash $ 14,337 $ (11,978)
Cash provided by (used in) operating activities
Net cash provided by operating activities increased by $32.2 million for the
nine months ended September 30, 2020 compared to the same period of the prior
year. The increase in cash provided by operating activities was primarily due to
a decrease of $22.1 million in net loss, favorable changes in operating assets
and liabilities of $8.2 million , and an increase of $1.9 million in non-cash
adjustments. The changes in operating assets and liabilities was primarily a
result of increases in accounts payable, accrued compensation, operating lease
liabilities, and other liabilities, partially offset by increases in accounts
receivable and inventory.
Cash used in investing activities
Net cash used in investing activities increased by $77.3 million for the nine
months ended September 30, 2020 , compared to the same period of the prior year,
primarily due to increases of $62.6 million in purchases of marketable
securities, a decrease of $8.0 million in the sale and maturities of marketable
securities, and $6.7 million in purchases of property and equipment.
Cash provided by financing activities
Net cash provided by financing activities increased by $71.4 million for the
nine months ended September 30, 2020 , compared to the same period of the prior
year, primarily due to increases of $75.2 million in net proceeds from the
issuance of common stock and $7.7 million from stock option exercises. The
increase in cash provided by financing activities was partially offset by a
decrease of $11.5 million from net borrowings under our loan and security
agreement.
We have prepared cash flow forecasts which indicate, based on our current cash
resources available, that we will have sufficient resources to fund our business
for at least the next 12 months. Factors that could affect our capital
requirements, in addition to those previously identified, include, but are not
limited to:
• the level of revenues and the rate of our revenue growth;
• changes in demand from our customers;
• the level of cost of revenues and their impact to our gross margin;
• the level of expenses required to expand our commercial (sales and marketing) activities; • the level of research and development investment required to develop our diagnostic systems and test menu; • our need to acquire or license complementary technologies;
• the costs of filing, prosecuting, defending, and enforcing patent claims and other intellectual property rights;
• competing technological and market developments; and
• changes in regulatory policies or laws that affect our operations.
Loan and Security Agreement OnFebruary 1, 2019 , or the Effective Date, we entered into a Loan and Security Agreement, or the LSA, with Solar Capital Ltd. and certain other financial institutions, or, collectively, the Lenders. Pursuant to the LSA and certain subsequent amendments, the Lenders have provided us with$70.0 million in a series of term loans, of which$50.0 million was funded on the Effective Date and an additional$20.0 million was funded inDecember 2019 upon our achievement of a designated amount of product revenues on a trailing six-month basis. The term loans under the LSA accrue interest at a floating per annum rate in effect from time-to-time equal to (a) the greater of 2.51% or the one-monthIntercontinental Exchange Benchmark Administration, Ltd. rate then in effect as of the applicable payment date, plus (b) 5.90% per annum. We are only required to make interest payments on amounts borrowed pursuant to the term loans from the applicable funding date untilFebruary 28, 2022 , or the Interest Only Period. Following the Interest Only Period, monthly installments 28 --------------------------------------------------------------------------------
of principal and interest under the term loans will be due until the original
principal amount and applicable interest is fully repaid by
Pursuant to the terms of the LSA, the Lenders are granted a security interest in (a) all of our personal property, other than intellectual property (which is subject to a negative pledge), but including our rights to payment in respect of intellectual property, and (b) the stock of all of our subsidiaries; provided that if the pledge of 100% of the voting shares of our non-U.S. subsidiaries would result in adverse tax consequences, such pledge shall be limited to 65% of the voting stock and 100% of the non-voting stock of each of our non-U.S. subsidiaries. The LSA contains customary affirmative and negative covenants, including, without limitation, delivering reports and notices relating to our financial condition and certain regulatory events and intellectual property matters, as well as limiting the creation of liens, the incurrence of indebtedness, and the making of certain investments, payments and acquisitions, other than as specifically permitted by the LSA. The LSA also contains customary events of default (subject, in certain instances, to specified cure periods), including, but not limited to, the failure to make payments of interest or premium when due, the failure to comply with certain covenants and agreements specified in the LSA, and the occurrence of a material adverse change, certain regulatory events, or certain insolvency events. Upon the occurrence of an event of default, the Lenders may declare all outstanding principal and accrued but unpaid interest under the LSA immediately due and payable and may exercise the other rights and remedies as set forth in the LSA. Equity Distribution Agreement OnAugust 5, 2019 , we entered into an Equity Distribution Agreement, or the Distribution Agreement, withCanaccord Genuity LLC , or Canaccord, pursuant to which we may offer and sell, from time to time, shares of our common stock having an aggregate offering price of up to$35.0 million . Under the Distribution Agreement, Canaccord may sell shares by any method deemed to be an "at-the-market" offering as defined in Rule 415 under theU.S. Securities Act of 1933, as amended, or any other method permitted by law, including in privately negotiated transactions. We are not obligated to sell any shares under the Distribution Agreement. Canaccord is entitled to a commission of 3% of the aggregate gross proceeds from each sale of shares occurring pursuant to the Distribution Agreement. During the nine months endedSeptember 30, 2020 , we sold 363,120 shares of common stock under the Distribution Agreement at a weighted average price per share of$6.13 resulting in aggregate gross proceeds of$2.2 million . We incurred$67,000 in commissions paid to Canaccord in connection with such sales. As ofSeptember 30, 2020 , the Company may issue up to an additional$19.7 million of its common stock under the Distribution Agreement.Biomedical Advanced Research and Development Authority (BARDA) Funding InMarch 2020 , we were awarded$0.7 million from theBiomedical Advanced Research and Development Authority (BARDA), part of theDepartment of Health andHuman Services Office of the Assistant Secretary for Preparedness and Response, to develop and pursue FDA Emergency Use Authorization (EUA) of a diagnostic panel that incorporates the new SARS-CoV-2 viral target into our existing ePlexRP Panel . The full$0.7 million was received inSeptember 2020 . InJune 2020 , we submittedRP2 to the FDA for EUA. InOctober 2020 ,RP2 received EUA from the FDA. Underwriting Agreement OnMay 6, 2020 , the Company entered into an Underwriting Agreement, or the Underwriting Agreement, withCowen and Company, LLC andWilliam Blair & Company, LLC acting as joint book-running managers and as representatives of the underwriters named therein, or collectively, the Underwriters, relating to the issuance and sale of 7,253,886 shares of common stock and an option, exercisable by the Underwriters for 30 days, to purchase up to an additional 1,088,082 shares of common stock, or the Offering. The Offering closed onMay 11, 2020 and the Company sold 8,341,968 shares of common stock, including the full exercise of the Underwriters' option, at a public offering price of$9.65 per share before underwriting discounts and commissions. The Company raised$75.4 million in net proceeds from the Offering, after deducting underwriters discounts and commissions and offering expenses. Letter of Credit The Company has provided an aggregate of$1.6 million in letters of credit to the landlords of certain of its leased facilities and maintains$42,000 in required minimum account balances with the financial institutions issuing such letters of credit. As a result, the Company maintains$1.6 million of restricted cash in connection with these lease agreements as ofSeptember 30, 2020 . If we require additional capital, we cannot be certain that it will be available when needed or that our actual cash requirements will not be greater than anticipated. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could be significantly diluted, and these newly issued securities may have rights, preferences, or privileges senior to those of existing stockholders. If we raise additional funds through collaborations and licensing arrangements, we may be required to relinquish significant rights to our technologies or products, or grant licenses on terms that are not favorable to us.
Contractual Obligations
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As of September 30, 2020 , we had the following contractual obligations:
Payments due by period
Less than 1 More than 5
year 1-3 years 4-5 years years Total
Operating lease obligations(1)
10,168 1,119 - 16,633
Debt obligations(3) 5,969 80,087 - - 86,056
Other contractual obligations 63 117 103 - 283
Total obligations $ 14,308 $ 97,444 $ 6,708 $ 9,883 $ 128,343 (1) We enter into leases in the ordinary course of business with respect to our facilities.
Our lease agreements have fixed payment terms based on the passage of time. Certain
facility leases require payment of maintenance expenses and real estate taxes. Our future
operating lease obligations could change if we terminate certain contracts or if we enter
into additional leases.
(2) We enter into supplier contracts in the ordinary course of our business. Certain supplier
agreements require us to purchase minimum quantities of goods or services on an annual
basis.
(3) Our contractual obligations under the LSA consist of principal payments, interest, and
fees due to the Lenders.
Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance withU.S. GAAP. The preparation of these financial statements requires us to make certain estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We evaluate our estimates on an ongoing basis, including those related to doubtful accounts, inventories, valuation of intangible assets and other long-term assets, income taxes, and stock-based compensation. We base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities not readily apparent from other sources. Actual results may differ from these estimates. Our critical accounting policies and estimates are discussed in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2019 . There have been no material changes to our critical accounting policies and estimates during the nine months endedSeptember 30, 2020 . Off-Balance Sheet Arrangements We have no off-balance sheet arrangements. The Company has provided$1.6 million in letters of credit to the landlords of certain of its leased facilities, which is recorded as restricted cash on our unaudited condensed consolidated balance sheets. 30
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