HTG MOLECULAR DIAGNOSTICS, INC. The following discussion and analysis should be read in conjunction with our consolidated financial statements and notes thereto for the year endedDecember 31, 2020 , and the related Management's Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K filed with theSecurities and Exchange Commission ("SEC") onMarch 25, 2021 . This discussion and analysis contains certain 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"). These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward looking statements include, but are not limited to, statements about:
• our ability to successfully commercialize our products, services and
technology, including our HTG EdgeSeq assays and corresponding automation
systems, our transcriptome product which has been designed to measure
approximately 20,000 mRNA targets using our HTG EdgeSeq technology ("HTG
• our ability to generate sufficient revenue or raise additional capital to
meet our working capital needs;
• our ability to generate revenue from our products and services and drive
revenue streams;
• the impact of the COVID-19 pandemic ("COVID-19") on our business;
• our ability to develop new technologies to expand our product offerings,
including direct-target sequencing for detection of mutations from expressed
RNA (such as single-point mutations and gene rearrangements, including gene
fusions and insertions) and our recently launched transcriptome panel;
• the activities anticipated to be performed by us and third parties underdesign and development projects and programs, and the expected benefits and
outcomes of such projects and programs;
• the implementation of our business model and strategic plans for our
business, including, without limitation, our new drug discovery business
unit, HTG Therapeutics;
• the expected capabilities and performance of our
our epitranscriptome profiling technology and HTG Therapeutics business
unit;
• the regulatory landscape for our products, domestically and internationally;
• our strategic relationships, including with holders of intellectual property
relevant to our technologies, manufacturers of next-generation sequencing
("NGS") instruments and consumables, critical component suppliers,
distributors of our products, and third parties who conduct our clinical
studies;
• our intellectual property position;
• our ability to comply with the restrictions of our debt facility and meet
our debt obligations;
• our expectations regarding the market size and growth potential for our life
sciences, diagnostic and drug discovery businesses;
• our expectations regarding trends in the demand for sample processing by our
biopharmaceutical company customers;
• our ability to secure regulatory clearance or approval, domestically and
internationally, for the clinical use of our products;
• any estimates regarding expenses, future revenue and capital requirements;
and
• our ability to sustain and manage growth, including our ability to develop
new products and enter new markets.
In some cases, you can identify these statements by terms such as "anticipate,"
"believe," "could," "estimate," "expect," "intend," "may," "plan," "potential,"
"predict," "continue," "seek," "project," "should," "will," "would" or the
negative of those terms, and similar expressions. These forward-looking
statements reflect our management's beliefs and views with respect to future
events and are based on estimates and assumptions as of the date of this filing
and are subject to risks and uncertainties. We discuss many of these risks in
greater detail in Part II, Item 1A - "Risk Factors" and elsewhere in this
filing. You should carefully read the "Risk Factors" section of this filing to
gain an understanding of the important factors that could cause actual results
to differ materially from our forward-looking statements. These statements, like
all statements in this report, speak only as of their date, and except as
required by law, we assume no obligation to update these forward-looking
statements publicly, or to update the reasons actual results
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could differ materially from those anticipated in these forward-looking
statements, even if new information becomes available in the future. Moreover,
we operate in a very competitive and rapidly changing environment. New risks
emerge from time to time. It is not possible for our management to predict all
risks, nor can we assess the impact of all factors on our business or the extent
to which any factor, or combination of factors, may cause actual results to
differ materially from those contained in any forward-looking statements we
make. Given these uncertainties, you should not place undue reliance on these
forward-looking statements. In addition, statements that "we believe" and
similar statements reflect our beliefs and opinions on the relevant subject.
These statements are based upon information available to us as of the date of
this report, and while we believe such information forms a reasonable basis for
such statements, such information may be limited or incomplete, and our
statements should not be read to indicate that we have conducted an exhaustive
inquiry into, or review of, all potentially available relevant information.
Overview
We are a life science company advancing precision medicine through our innovative transcriptome-wide profiling technology. Building on more than a decade of pioneering innovation and partnerships with biopharma leaders and major academic institutes, our proprietary next-generation HTG EdgeSeq technology is designed to make the development of life science tools and diagnostics more effective and efficient and to unlock a differentiated and disruptive approach to transformative drug discovery.
Our product and service solutions enable targeted RNA profiling using a small
amount of biological sample, in liquid or solid forms. Our menu of HTG EdgeSeq
assays is automated on our HTG EdgeSeq system, which applies genomic sequencing
tools that generate gene expression data in a timely manner utilizing a
simplified workflow for customers. We seek to leverage key business drivers in
molecular profiling for biomarker analysis and diagnostics, including the
acceleration of precision medicine, the migration of molecular testing to
NGS-based applications, the movement to smaller and less invasive biopsies, the
need for greater diagnostic sensitivity, the need to conform to challenging
healthcare economics and the need for automation and an easily deployable
workflow, including simplified bioinformatics. These capabilities enable
customers to extend the use of limited biological samples for retrospective
analysis, gaining further understanding of the molecular drivers of disease with
the goal of developing biomarker-driven targeted therapies. We also believe our
HTG EdgeSeq technology can be used as a platform technology in clinical
applications that will simplify, consolidate and reduce the cost of NGS-based
diagnostic workflows and in commercialized companion diagnostic ("CDx") tests.
Our products include instruments, consumables, including assay kits, and
software that, as an integrated platform, automate sample processing and can
quickly, robustly and simultaneously profile tens, hundreds or thousands of
molecular targets from samples a fraction of the size required by many
prevailing technologies. Our objective is to establish our solutions as the
standard in molecular profiling, CDx development and molecular diagnostics, and
to make their benefits accessible to all molecular labs from research to the
clinic. We believe that our target customers and collaborators desire high
quality molecular profiling data in a multiplexed panel format from increasingly
smaller and less invasive samples, providing our customers and collaborators
with the option to analyze such data locally to minimize turnaround time and
cost.
Our development efforts over the past 18 months have been primarily focused on
completing feasibility and development of the HTG Transcriptome Panel , including
supporting our Early Adopter Program (EAP), where approximately 30 scientific
collaborators throughout the U.S. and EU have partnered with us to explore
potential applications of the HTG Transcriptome Panel in their research and
clinical programs. In the near future we expect our EAP collaborators to assist
us with customer testimonials, white papers, technical notes and peer-reviewed
publications highlighting their use of the HTG Transcriptome Panel and overall
experience relative to alternative technologies. The release of the HTG
Transcriptome Panel , coupled with our existing whole transcriptome miRNA panel,
is expected to allow us to not only continue to expand our position within
oncology, but to diversify the use of our panels in other critical markets such
as immunology, infectious disease, diabetes, cardiology and neurology. We also
expect to focus our future development efforts on the expansion of the sample
types available for use with both of these assays, with an initial focus on
liquid biopsies.
In addition, we are working to leverage our existing capabilities and expand the
utility of our HTG EdgeSeq platform technology through our new drug discovery
business unit, HTG Therapeutics. This business unit is expected to use our HTG
Transcriptome Panel and an epitranscriptome profiling technology evolved from
our original HTG EdgeSeq technology ("HTG EpiEdgeSeq") to profile RNA
modifications. By leveraging these profiling technologies earlier in the drug
discovery process, HTG Therapeutics is expected to generate lead compounds
faster, and with potentially more favorable efficacy and toxicity profiles. In
addition to the platform technology for molecular profiling, we are building a
full machine learning-based chemical library design platform, which is expected
to better predict the binding properties of a drug candidate to its target.
Since June 2021 , we have expanded HTG Therapeutics with the addition of several
highly experienced professionals in leadership positions. Working with our
Tucson -based research and development teams, these individuals have engaged
several external collaborators who are expected to contribute meaningful cohorts
for our initial planned studies to identify development candidates targeting RNA
or RNA modifying proteins, which could be relevant in areas such as oncology,
immunology, transplant, diabetes and rare disease. These efforts are
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aimed at the generation of high-quality primary data from our proprietary
profiling platform from known and well annotated cohorts that we believe could
lead to new pharma partnerships in early-stage drug discovery by the second half
of 2022 and beyond. Costs related to this program were approximately 29% and 18%
our overall research and development expense for the three and nine months ended
September 30, 2021 , respectively, but are not expected to have a material impact
on our projected operating expense for the remainder of the year.
COVID-19 and international efforts to control its spread have significantly
curtailed the movement of people, goods and services worldwide, including in
regions where we sell our products and services and conduct our business over
the past year. We experienced a significant slowing in our product and
product-related services revenue beginning in March 2020 and throughout the
first half of 2021 due to continued disruptions to our customers' businesses
from the pandemic and, in many instances, their prioritization of projects in
areas related to COVID-19. In addition, we have experienced extended shipment
times and increases in cost of product as ongoing supply chain disruptions have
impacted the ability of certain suppliers to produce the materials necessary to
build our product and perform our testing services. Despite the impacts of
COVID-19 on our revenue and operations, we met all key development milestones
throughout 2020 and 2021 to date and have not experienced any substantive
manufacturing delays from raw material shortages. While most of our customers
have now reopened their facilities, it remains unknown whether COVID-19 will
continue to materially impact our financial condition, liquidity and future
results of operations in future periods due to further shutdowns, social
distancing measures or illness.
Results of Operations
Comparison of the three and nine months ended
Three Months Ended Nine Months Ended
September 30, Change September 30, Change
2021 2020 $ % 2021 2020 $ %
Revenue:
Product and product-related services
819,342 48 %
11 % Collaborative development services - 76,030 (76,030 ) (100 %) - 548,135 (548,135 ) (100 %) Total revenue 2,520,410 1,777,098 743,312 42 % 6,029,760 5,965,866 63,894 1 % Operating expenses: Cost of product and product-related services revenue 983,761 940,892
42,869 5 % 2,740,004 2,931,026 (191,022 )
(7 %)
Selling, general and administrative 4,232,313 4,752,321 (520,008 ) (11 %) 11,995,747 13,683,069 (1,687,322 ) (12 %)
Research and development 1,534,818 1,255,416 279,402 22 % 4,188,219 4,914,467 (726,248 ) (15 %)
Total operating expenses 6,750,892 6,948,629 (197,737 ) (3 %) 18,923,970 21,528,562 (2,604,592 ) (12 %)
Operating loss (4,230,482 ) (5,171,531 ) 941,049 (18 %) (12,894,210 ) (15,562,696 ) 2,668,486 (17 %)
Gain on forgiveness of PPP Loan - - - 0 % 1,735,792 - 1,735,792 100 %
Loss on extinguishment of MidCap
Credit Facility - - - 0 % - (522,394 ) 522,394 (100 %)
Other income (expense) (258,206 ) (238,676 ) (19,530 ) 8 % (774,820 ) (482,599 ) (292,221 ) 61 %
Net loss before income taxes $ (4,488,688 ) $ (5,410,207 ) $921,519 (17 %)$ (11,933,238 ) $ (16,567,689 ) $ 4,634,451 (28 %) Revenue Our product and product-related services revenue is generated through the sale of our profiling instruments and consumables, sample processing services and custom assay design services to biopharmaceutical companies, academic research centers and molecular testing laboratories. RUO profiling is currently made available to our customers through product sales and service offerings. Customers can purchase our HTG EdgeSeq instrument and related consumables, which consist primarily of our proprietary molecular profiling panels and other assay components. Customers can also access our technology through contracted services. We perform these services using our HTG EdgeSeq instruments and RUO consumables to process samples in our VERI/O laboratory. Our proprietary technology is also used to develop custom RUO panels which are expected to generate future sample processing or RUO consumables revenue.
We have also previously generated collaborative development services revenue
through three statements of work entered into under our
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QIAGEN Manchester Limited ("QML"). Under these agreements, we and QML combined
our technological and commercial strengths to offer biopharmaceutical companies
a complete NGS-based solution for the development, manufacture and
commercialization of companion diagnostic assays in support of and in
conjunction with, biopharmaceutical companies' drug development programs.
Remaining agreed upon procedures associated with these statements of work were
completed in the prior year and no additional collaborative development services
programs have been entered into as of September 30, 2021 . Although we continue
to seek potential, new customer collaborations, we currently do not anticipate
additional revenue from existing or new collaborative development services
programs in 2021.
Total revenue increased by 42% to $2.5 million for the three months ended
September 30, 2021 , compared with $1.8 million for the three months ended
September 30, 2020 , reflecting increases in both product and product-related
services revenue when compared with the third quarter of 2020. Total revenue
increased by approximately 1% to $6.0 million for the nine months ended
September 30, 2021 , compared with $6.0 million for the nine months ended
September 30, 2020 . The increase in total revenue for the nine-month period
primarily reflects an increase in product and product-related services revenue.
Product and product-related services revenue
Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Product revenue:
Instruments $ 407,130 $ 71,742 $ 1,028,348 $ 563,396
Consumables 793,542 764,605 2,265,894 2,091,848
Total product revenue 1,200,672 836,347 3,294,242 2,655,244Product-related services revenue:
Custom RUO assay design - 238,502 48,350 1,210,968 RUO sample processing 1,319,738 626,219 2,687,168 1,551,519 Total product-related services revenue 1,319,738 864,721 2,735,518 2,762,487 Total product and product-related services revenue$ 2,520,410 $ 1,701,068 $ 6,029,760 $ 5,417,731 Product and product-related services revenue increased by 48% to$2.5 million for the three months endedSeptember 30, 2021 , compared with$1.7 million for the three months endedSeptember 30, 2020 . Product and product-related services revenue increased by 11% to$6.0 million for the nine months endedSeptember 30, 2021 , compared with$5.4 million for the nine months endedSeptember 30, 2020 . Product revenue, which includes gene expression profiling revenue generated through the sale of our HTG EdgeSeq instruments and consumables, increased by 44% to$1.2 million for the three months endedSeptember 30, 2021 , compared with$0.8 million for the three months endedSeptember 30, 2020 . Product revenue increased by 24% to$3.3 million for the nine months endedSeptember 30, 2021 , compared with$2.7 million for the nine months endedSeptember 30, 2020 . This increase primarily reflects additional instrument placements made during the period with biopharmaceutical companies and academic medical centers when compared to the same period in the prior year, when most of our customers had closed their laboratories due to COVID-19. In addition, consumables product revenue for the three months endedSeptember 30, 2021 included revenue recognized from the sale ofHTG Transcriptome Panel consumables. Revenue from the sale of theHTG Transcriptome Panel represented 27% and 18% of our consumables revenue for the three and nine months endedSeptember 30, 2021 , respectively. Product-related services revenue, consisting of RUO sample processing using our HTG EdgeSeq instruments and consumables in our VERI/O laboratory and custom RUO assay design, increased by 53% to$1.3 million for the three months endedSeptember 30, 2021 , compared with$0.9 million for the three months endedSeptember 30, 2020 , and decreased by approximately 1% to$2.7 million for the nine months endedSeptember 30, 2021 , compared with$2.8 million for the nine months endedSeptember 30, 2020 . Specifically, RUO sample processing revenue generated in our VERI/O laboratory increased by 111% to$1.3 million for the three months endedSeptember 30, 2021 , compared with$0.6 million for the three months endedSeptember 30, 2020 , and increased by 73% to$2.7 million for the nine months endedSeptember 30, 2021 , compared with$1.6 million for the same period in 2020. This increase in RUO sample processing services for the three and nine months endedSeptember 30, 2021 was partially offset by the decrease in custom RUO assay design services in both periods. With the release of theHTG Transcriptome Panel , which is designed to measure approximately 20,000 mRNA targets using our HTG EdgeSeq technology, revenue from RUO assay development services is expected to be a smaller portion of our business moving forward, as it is replaced by consumables purchases and sample processing laboratory services using theHTG Transcriptome Panel . 28 --------------------------------------------------------------------------------
Cost of product and product-related services revenue
Cost of product and product-related services revenue includes costs incurred to generate product and product-related services revenue. Product-related costs include the aggregate costs incurred in manufacturing, delivering, installing and servicing instruments and consumables. The components of our product-related costs of revenue include consumables and lab supplies, subcomponent and servicing costs, manufacturing costs incurred internally (which include direct labor costs), and equipment and infrastructure expenses associated with the manufacturing and distribution of our products. Due to the fixed nature of certain of these expenses, such as overhead, equipment and infrastructure, those associated with a regulated industry and our expectations for further growth in customer demand, we expect our cost of product and product-related services revenue as a percentage to decrease over time as we increase product and product-related services revenue, further absorbing these fixed costs. Cost of product and product-related services revenue increased by 5% to$1.0 million for the three months endedSeptember 30, 2021 , compared with$0.9 million for the three months endedSeptember 30, 2020 . Cost of product and product-related services revenue decreased by 7% to$2.7 million for the nine months endedSeptember 30, 2021 , compared with$2.9 million for the nine months endedSeptember 30, 2020 . This decrease in cost of product and product-related services revenue for the nine months endedSeptember 30, 2021 compared with the same periods in 2020 primarily reflects a reduction of compensation expense in our cost of product and product-related services from Employee Retention Credits ("ERC") secured in the first three quarters of 2021 in accordance with the Federal Consolidated Appropriations Act.
Selling, general and administrative expenses
Selling, general and administrative expenses consist primarily of personnel costs for our sales and marketing, regulatory, legal, executive management and finance and accounting functions. The expenses also include third-party professional and consulting fees incurred by these functions, promotional expenses and facility and overhead costs for our administrative offices. Selling, general and administrative expenses decreased by 11% to$4.2 million for the three months endedSeptember 30, 2021 , compared with$4.8 million for the three months endedSeptember 30, 2020 . Selling, general and administrative expenses decreased by 12% to$12.0 million for the nine months endedSeptember 30, 2021 , compared with$13.7 million for the nine months endedSeptember 30, 2020 . This decrease in selling, general and administrative expense for the three and nine months endedSeptember 30, 2021 compared with the same periods in 2020 reflects a decrease in stock-based and other compensation-related expense items, as well as ERC benefits secured in the first three quarters of 2021.
Research and development expenses
Research and development expenses represent amounts incurred to perform collaborative development services, costs to develop new proprietary panels and technologies, and costs to continue improving and expanding the utility of our HTG EdgeSeq technology. These expenses include payroll and related expenses, consulting expenses, laboratory supplies, facilities and equipment. Research and development costs are expensed as incurred. Research and development expenses increased by 22% to$1.5 million for the three months endedSeptember 30, 2021 , compared with$1.3 million for the three months endedSeptember 30, 2020 . This increase primarily reflects hiring, payroll-related costs and the initiation of feasibility studies associated with HTG Therapeutics in the third quarter of 2021. Research and development expenses decreased by 15% to$4.2 million for the nine months endedSeptember 30, 2021 , compared with$4.9 million for the nine months endedSeptember 30, 2020 . This decrease is primarily due to a reduction in research and development headcount since the first quarter 2020 as a result of the completion of our existing collaborative development services programs in 2020 and the transitioning of our transcriptome concept project from ourCalifornia research facility to ourTucson development laboratory for completion of the development of theHTG Transcriptome Panel in the second half of 2020. In addition, research and development expense for the three and nine months endedSeptember 30, 2021 compared with the same period in 2020 reflects ERC credits recognized as an offset to compensation expense in the first three quarters of 2021.
Cash Flows for the nine months ended
The following table summarizes the primary sources and uses of cash for each of the periods presented:
Nine Months Ended September 30, Change
2021 2020 $ %
Net cash provided by (used in):
Operating activities $ (13,118,546 ) $ (12,742,237 ) (376,309 ) 3 %
Investing activities (9,461,939 ) 13,465,406 (22,927,345 ) (170 %)
Financing activities 10,425,167 7,262,021 3,163,146 44 %
Effect of exchange rates on cash (12,848 ) 9,283 (22,131 ) (238 %)
Increase (decrease) in cash, cash
equivalents and restricted cash $ (12,168,166 ) $ 7,994,473 (20,162,639 ) (252 %)
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Operating Activities Net cash used in operating activities for the nine months endedSeptember 30, 2021 was$13.1 million compared with net cash used in operating activities of$12.7 million for the nine months endedSeptember 30, 2020 . Net cash used in operating activities for the nine months endedSeptember 30, 2021 reflected (i) a net loss of$12.0 million ; (ii) net non-cash items consisting primarily of the gain on the forgiveness of our PPP loan of$1.7 million , stock-based compensation expense of$1.0 million , depreciation and amortization expense of$0.6 million , amortization of loan discount and issuance costs of$0.4 million , amortization of right-of-use assets of$0.4 million and loss on abandonment and disposal of assets of$0.2 million ; and (iii) a net cash outflow from changes in balances of operating assets and liabilities of$2.0 million . Net cash used in operating activities for the nine months endedSeptember 30, 2020 was$12.7 million and reflected (i) a net loss of$16.6 million ; (ii) net non-cash items of$3.6 million , consisting primarily of stock-based compensation of$1.2 million , depreciation and amortization of$1.0 million , loss on extinguishment of MidCap Credit Facility of$0.5 million , and amortization of right-of-use assets of$0.5 million ; and (iii) a net cash inflow from changes in balances of operating assets and liabilities of$0.2 million .
Investing Activities
Net cash used in investing activities for the nine months endedSeptember 30, 2021 was$9.5 million compared with net cash provided by investing activities of$13.5 million for the nine months endedSeptember 30, 2020 . Net cash used in investing activities for the nine months endedSeptember 30, 2021 was comprised primarily of purchases of$17.9 million of available-for-sale securities, partially offset by$9.0 million of our available-for-sale securities maturing during the period. Net cash provided by investing activities for the nine months endedSeptember 30, 2020 was$13.5 million and was comprised primarily of maturities of available-for-sale securities of$25.5 million , partially offset by purchases of available-for-sale securities of$11.6 million .
Financing Activities
Net cash provided by financing activities for the nine months endedSeptember 30, 2021 was$10.4 million compared with net cash provided by financing activities for the nine months endedSeptember 30, 2020 of$7.3 million . This activity for the nine months endedSeptember 30, 2021 consisted primarily of$10.7 million in net proceeds from our ATM Offering and$0.6 million in proceeds from our stock purchase agreement (the "LP Purchase Agreement") withLincoln Park Capital Fund, LLC ("Lincoln Park"), partially offset by$0.4 million of payments made on our outstanding NuvoGen obligation, and$0.5 million of payments made on our 2020 and 2021 Insurance Notes. Net cash provided by financing activities for the nine months endedSeptember 30, 2020 was$7.3 million . This activity for the nine months endedSeptember 30, 2020 consisted primarily of$6.4 million in net proceeds from our ATM Offering,$1.7 million in proceeds from our PPP Loan, and$0.6 million in net proceeds from our Series A convertible preferred stock private placement, partially offset by$0.6 million of net payments to extinguish our QNAH Convertible Note and MidCap Credit Facility obligations with cash on hand and proceeds from our SVB Term Loan,$0.5 million of payments made on our outstanding NuvoGen obligation, and$0.3 million of payments made on our Insurance Note.
Liquidity and Capital Resources
Since our inception, our operations have primarily been financed through the issuance of our common stock, redeemable convertible preferred stock, the incurrence of debt and cash received from product sales, services revenue and other income. As ofSeptember 30, 2021 , we had$25.4 million in cash, cash equivalents and investments in short-term available-for-sale securities, and current liabilities of approximately$8.1 million . As ofSeptember 30, 2021 , we also had approximately$11.5 million of long-term liabilities outstanding, relating to our SVB Term Loan (see below), our NuvoGen and 2021 Insurance Note obligations, and our financing and operating leases. InNovember 2019 , we entered into a Controlled Equity Offering Sales Agreement (the "Cantor Sales Agreement") with Cantor as sales agent, pursuant to which we were able to offer and sell, from time to time, through Cantor, shares of our common stock by any method deemed to be an "at the market offering" as defined by rule 415(a)(4) under the Securities Act (the "ATM Offering"). We have sold an aggregate of 3,961,335 shares of our common stock in the ATM Offering between its inception andSeptember 30, 2021 for net proceeds of$18.2 million pursuant to our shelf registration statement on Form S-3 (File No. 333-229045). InFebruary 2020 , we issued 41,100 shares of our Series A convertible preferred stock ("Series A Preferred") to accredited investors, in exchange for the investors surrendering to us for cancellation an aggregate of 274,000 shares of our common stock. In addition, we sold an aggregate of 10,170 additional shares of our Series A Preferred to the accredited investors for aggregate gross 30 -------------------------------------------------------------------------------- proceeds of approximately$0.6 million , and transaction costs of approximately$37,000 . Each share of Series A Preferred is convertible into 6.67 shares of the Company's common stock, subject to proportional adjustment and beneficial ownership limitations. InJune 2020 , the investors elected to convert 27,500 shares of Series A Preferred to common stock, resulting in the issuance of 183,333 shares of the Company's common stock. The remaining 23,770 Series A Preferred shares remain outstanding as ofSeptember 30, 2021 . In the event of the Company's liquidation, dissolution or winding up, holders of Series A Preferred will participate pari passu with any distribution of proceeds to holders of the Company's common stock. Holders of Series A Preferred are entitled to receive dividends on shares of Series A Preferred equal (on an as converted to common stock basis) to and in the same form as dividends actually paid on the Company's common stock. Shares of Series A Preferred generally have no voting rights, except as required by law. InMarch 2020 , we entered into the LP Purchase Agreement, pursuant to which, upon the terms and subject to the conditions and limitations set forth therein, we have the right to sell to Lincoln Park up to$20.0 million of shares of our common stock ("Purchase Shares") from time to time over the 36-month term of the LP Purchase Agreement. The purchase price of the Purchase Shares will be based on recent closing prices of our common stock at the time of sale. We issued Lincoln Park an aggregate of 41,026 shares of our common stock as consideration for their purchase commitment pursuant to the LP Purchase Agreement. During the nine months endedSeptember 30, 2021 , we sold 298,850 shares of our common stock to Lincoln Park under the LP Purchase Agreement for aggregate proceeds of$1.6 million . InApril 2020 , we received the proceeds from the PPP Loan in the amount of$1.7 million from SVB, as lender, pursuant to the Paycheck Protection Program of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"). InMay 2021 , we received notification from SVB that the PPP Loan and related accrued interest, totaling$1,735,792 , was forgiven in full by theU.S. Small Business Administration , and the PPP Loan note was canceled. InJune 2020 , we entered into a Loan and Security Agreement (the "Loan Agreement") for an asset-secured loan in the principal amount of$10.0 million withSilicon Valley Bank ("SVB"), as lender (the "SVB Term Loan"). The proceeds from the SVB Term Loan were fully funded on theJune 25, 2020 . The proceeds from the SVB Term Loan, together with cash on hand, were used to repay in full all outstanding amounts and fees due under our MidCap Credit Facility and the QNAH Convertible Note. Our SVB Term Loan bears interest at a floating rate equal to the greater of 2.50% above the Prime Rate (as defined in the Loan and Security Agreement) and 5.75% and originally required interest-only payments payable monthly in arrears throughJune 30, 2021 . This interest-only period has been extended for an additional six months as a result of the Company's achievement of the equity milestone defined in the Loan Agreement. The extended interest-only period will be followed by equal monthly payments of principal and interest through the maturity date ofDecember 1, 2023 . In addition, we must comply with a financial covenant requiring that we maintain a certain amount of unrestricted cash under the Loan Agreement (see Note 8 to our condensed consolidated financial statements included elsewhere in this report). If sufficient additional capital is not available as and when needed, we may have to delay, scale back or discontinue one or more product development programs, curtail our commercial activities, significantly reduce expenses, sell assets (potentially at a discount to their fair value or carrying value), enter into relationships with third parties to develop or commercialize products or technologies that we otherwise would have sought to develop or commercialize independently, cease operational altogether, pursue a sale of the Company at a price that may result in a significant loss on investment for our stockholders, file for bankruptcy or seek other protection from creditors, or liquidate all assets. In addition, if we default under the Loan Agreement, SVB could accelerate the payment of the SVB Term Loan and ultimately foreclose on our assets. Funding Requirements We have had recurring operating losses and negative cash flows from operations since our inception and have an accumulated deficit of$203.1 million as ofSeptember 30, 2021 . As ofSeptember 30, 2021 , we had cash, cash equivalents and investments in short-term available-for-sale securities of approximately$25.4 million and current liabilities of approximately$8.1 million . As ofSeptember 30, 2021 , we also had$11.5 million in long-term liabilities primarily attributable to the SVB Term Loan and our NuvoGen obligation. We cannot be certain that our existing resources will be sufficient to fund our planned operations and expenditures for at least the next 12 months from issuance of these condensed consolidated financial statements. Potentially changing circumstances, especially those related to COVID-19, may also result in the depletion of our capital resources more rapidly than we currently anticipate. These circumstances raise substantial doubt about our ability to continue as a going concern.
Our primary short-term needs for capital, which are subject to change, include:
• planned costs to operating our business, including amounts required to
fund working capital and capital expenditures;
• repayment of debt obligations;
• support of commercialization efforts related to our current and future
products; and
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• continued advancement of research and development efforts, including those
related to our planned transcriptome panel.
Until our revenue reaches a level sufficient to support self-sustaining cash
flows, if ever, we will need to raise additional capital to fund our continued
operations, including our product development and commercialization activities
related to our current and future products. Future funding requirements will
depend on a number of factors, including our ability to generate significant
revenue, our ability to repay our debt obligations as they become due, the cost
and timing of establishing additional sales, marketing and distribution
capabilities, the ongoing cost of research and development activities, the cost
and timing of regulatory clearances and approvals, the effect of competing
technology and market developments, the nature and timing of companion
diagnostic development collaborations we may establish and the extent to which
we acquire or invest in businesses, products and technologies.
Additional capital may not be available at such times or in amounts needed by
us. Even if sufficient capital is available to us, it might be available only on
unfavorable terms. If we are unable to raise additional capital in the future
when required and insufficient amounts or on terms acceptable to us, we may have
to delay, scale back or discontinue one or more product development programs,
curtail our commercialization activities, significantly reduce expenses, sell
assets (potentially at a discount to their fair value or carrying value), enter
into relationships with third parties to develop or commercialize products or
technologies that we otherwise would have sought to develop or commercialize
independently, cease operations altogether, pursue an acquisition of our company
at a price that may result in a significant loss on investment to our
stockholders, file for bankruptcy, seek other protection from creditors, or
liquidate all of our assets. In addition, if we default under our SVB Term Loan
agreement, our lender could foreclose on our assets.
Recent Accounting Pronouncements
See Note 2. Summary of Significant Accounting Policies - Recently Adopted and Recently Issued Accounting Pronouncements in the notes to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
Critical Accounting Policies and Significant Judgments and Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted inthe United States of America ("GAAP"). The preparation of financial statements in conformity with GAAP requires management 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 amounts of revenue and expenses during the reporting period. Although these estimates are based on management's best knowledge of current events and actions that may impact us in the future, the estimation process is, by its nature, uncertain given that estimates depend on events over which we may not have control. Though the impact of COVID-19 on our business and operating results presents additional uncertainty, we continue to use the best information available to inform our critical accounting estimates. If market and other conditions change from those that we anticipate, our condensed consolidated financial statements may be materially affected. In addition, if our assumptions change, we may need to revise our estimates, or take other corrective actions, either of which may also have a material effect on our condensed consolidated financial statements. We believe that our critical accounting policies and estimates have a higher degree of inherent uncertainty and require our most significant judgments. In addition, had we used estimates different from any of these, our condensed consolidated financial statements could have been materially different from those presented. Members of our senior management have discussed the development and selection of our critical accounting policies and estimates, and our disclosures regarding them, with the Audit Committee of our Board of Directors. There were no changes in our critical accounting policies and estimates during the nine months endedSeptember 30, 2021 from those set forth in "Critical Accounting Policies and Significant Judgments and Estimates" in ourDecember 31, 2020 Annual Report on Form 10-K filed with theSEC onMarch 25, 2021 .
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