OPGEN, INC. 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. The Company has funded its operations primarily through external investor financing arrangements and significant actions taken by the Company, including the following:
•
OnMarch 9, 2021 , the Company entered into a Warrant Exercise Agreement (the "Exercise Agreement") with the institutional investor (the "Holder") from our 2020 PIPE financing (see discussion below for a description of the 2020 PIPE). Pursuant to the Exercise Agreement, in order to induce the Holder to exercise all of the remaining 4,842,615 outstanding warrants (the "Existing Warrants") for cash, pursuant to the terms of and subject to beneficial ownership limitations contained in the Existing Warrants, the Company agreed to issue to the Holder new warrants (the "New Warrants") to purchase 0.65 shares of common stock for each share of common stock issued upon such exercise of the remaining 4,842,615 outstanding Existing Warrants pursuant to the Exercise Agreement or an aggregate of 3,147,700 New Warrants. The terms of the New Warrants are substantially similar to those of the Existing Warrants, except that the New Warrants have an exercise price of$3.56 . The New Warrants are immediately exercisable and will expire five years from the date of the Exercise Agreement. The Holder paid an aggregate of$255,751 to the Company for the purchase of the New Warrants. The Company received aggregate gross proceeds before expenses of approximately$9.65 million from the exercise of all of the remaining 4,842,615 outstanding Existing Warrants held by the Holder and the payment of the purchase price for the New Warrants (together, the "2021 Warrant Exercise"). As additional compensation, A.G.P./Alliance Global Partners will receive a cash fee equal to$200,000 upon the cash exercise in full of the New Warrants. 8
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•
OnFebruary 11, 2021 , the Company closed a registered direct offering (the "February 2021 Offering") with a singleU.S. -based, healthcare-focused institutional investor for the purchase of (i) 2,784,184 shares of common stock and (ii) 5,549,149 pre-funded warrants, with each pre-funded warrant exercisable for one share of common stock. The Company also issued to the investor, in a concurrent private placement, unregistered common share purchase warrants to purchase 4,166,666 shares of the Company's common stock. Each share of common stock and accompanying common warrant were sold together at a combined offering price of$3.00 , and each pre-funded warrant and accompanying common warrant were sold together at a combined offering price of$2.99 . The pre-funded warrants are immediately exercisable, at an exercise price of$0.01 , and may be exercised at any time until all of the pre-funded warrants are exercised in full. The common warrants will have an exercise price of$3.55 per share, will be exercisable commencing on the six-month anniversary of the date of issuance, and will expire five and one-half (5.5) years from the date of issuance. TheFebruary 2021 Offering raised aggregate net proceeds of$23.5 million , and gross proceeds of$25.0 million . As ofJune 30, 2021 , all 5,549,149 pre-funded warrants issued in theFebruary 2021 Offering have been exercised.
•
OnNovember 25, 2020 , the Company closed a private placement (the "2020 PIPE") with one healthcare-focusedU.S. institutional investor for the purchase of (i) 2,245,400 shares of common stock, (ii) 4,842,615 warrants to purchase shares of common stock and (iii) 2,597,215 pre-funded warrants, with each pre-funded warrant exercisable for one share of common stock. Each share of common stock and accompanying common warrant were sold together at a combined offering price of$2.065 , and each pre-funded warrant and accompanying common warrant were sold together at a combined offering price of$2.055 . The common warrants have an exercise price of$1.94 per share, and are exercisable commencing on the six-month anniversary of the date of issuance, and will expire five and one-half (5.5) years from the date of issuance. The 2020 PIPE raised aggregate net proceeds of$9.3 million , and gross proceeds of$10.0 million . As ofDecember 31, 2020 , all 2,597,215 pre-funded warrants issued in the 2020 PIPE have been exercised. • OnFebruary 11, 2020 , the Company entered into an At the Market Common Offering (the "ATM Agreement") withH.C. Wainwright & Co., LLC ("Wainwright"), which was amended and restated onNovember 13, 2020 to addBTIG, LLC ("BTIG"), 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$22.1 million of shares of the Company's common stock through the sales agents (the "2020 ATM Offering"). During the year endedDecember 31, 2020 , the Company sold 7,521,610 shares of its common stock under the 2020 ATM Offering resulting in aggregate net proceeds to the Company of approximately$15.8 million , and gross proceeds of$16.7 million . To meet its capital needs, the Company is considering multiple alternatives, including, but not limited to, strategic financings or other transactions, additional equity financings, debt financings and other funding transactions, licensing and/or partnering arrangements. There can be no assurance that the Company will be able to complete any such transaction on acceptable terms or otherwise. The Company believes that current cash will be sufficient to fund operations into the second quarter of 2022. This has led management to conclude that substantial doubt about the Company's ability to continue as a going concern exists. In the event the Company is unable to successfully raise additional capital during or before the end of the second quarter of 2022, the Company will not have sufficient cash flows and liquidity to finance its business operations as currently contemplated. Accordingly, in such circumstances, the Company would be compelled to immediately reduce general and administrative expenses and delay research and development projects, pause or abort clinical trials including the purchase of scientific equipment and supplies, until it is able to obtain sufficient financing. If such sufficient financing is not received on a timely basis, the Company would then need to pursue a plan to license or sell its assets, seek to be acquired by another entity, cease operations and/or seek bankruptcy protection.
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 theSecurities and Exchange Commission (the "SEC") and the standards of accounting measurement set forth in the Interim Reporting Topic of theFinancial 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 inthe 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. TheDecember 31, 2020 consolidated balance sheet included herein was derived from the audited consolidated financial statements, but does not include all disclosures including notes required by GAAP for complete financial statements.
The accompanying unaudited condensed consolidated financial statements include
the accounts of
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Foreign currency
The Company has subsidiaries located in Holzgerlingen,Germany ;Vienna, Austria ; andCopenhagen, Denmark , each of which use currencies other than theU.S. dollar as their functional currency. As a result, all assets and liabilities are translated intoU.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, a component of stockholders' equity. Foreign currency translation adjustments are the sole component of accumulated other comprehensive income atJune 30, 2021 andDecember 31, 2020 . 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 tothe 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 reprice, 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 exceed theFederal Deposit Insurance Corporation ("FDIC") insured limit of$250,000 . The Company has not experienced any losses in such accounts and management believes it is not exposed to any significant credit risk. AtJune 30, 2021 andDecember 31, 2020 , the Company had funds totaling$551,260 and$746,792 , respectively, which are required as collateral for letters of credit benefiting its landlords and for credit card processors. These funds are reflected in other noncurrent assets on the accompanying unaudited condensed consolidated balance sheets. 10 -------------------------------------------------------------------------------- The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows: December 31, June 30, 2021 2020 June 30, 2020 December 31, 2019 Cash and cash equivalents$ 31,182,385 $ 13,360,463 $ 12,886,547 $ 2,708,223 Restricted cash 551,260 746,792 291,420 185,380 Total cash and cash equivalents and restricted cash in the condensed consolidated statements of cash flows$ 31,733,645 $ 14,107,255 $ 13,177,967 $ 2,893,603 Accounts receivable The Company's accounts receivable result from revenues earned but not yet collected from customers. Credit is extended based on an evaluation of a customer's financial condition and, generally, collateral is not required. Accounts receivable are due within 30 to 90 days and are stated at amounts due from customers. The Company evaluates if an allowance is necessary by considering a number of factors, including the length of time accounts receivable are past due, the Company's previous loss history and the customer's current ability to pay its obligation. If amounts become uncollectible, they are charged to operations when that determination is made. The allowance for doubtful accounts was$0 and$20,753 as ofJune 30, 2021 andDecember 31, 2020 , respectively. AtJune 30, 2021 , the Company had accounts receivable from three customers which individually represented 50%, 16% and 13% of total accounts receivable, respectively. AtDecember 31, 2020 , the Company had accounts receivable from one customer which individually represented 20% of total accounts receivable. For the three months endedJune 30, 2021 , revenue earned from two customers represented 29% and 13% of total revenues, respectively. For the three months endedJune 30, 2020 , revenue earned from one customer represented 38% of total revenues. For the six months endedJune 30, 2021 , revenue earned from three customers represented 21%, 13%, and 11% of total revenues, respectively. For the six months endedJune 30, 2020 , revenue earned from two customers represented 22% and 14% of total revenues, respectively.
Inventory
Inventories are valued using the first-in, first-out method and stated at the lower of cost or net realizable value and consist of the following:
June 30, 2021 December 31, 2020
Raw materials and supplies $ 810,800 $ 773,021
Work-in-process 67,058 87,159
Finished goods 3,451,458 2,312,148
Total $ 4,329,316 $ 3,172,328
Inventory includes Unyvero instrument systems, Unyvero cartridges, reagents and
components for Unyvero, Acuitas, QuickFISH and PNA FISH products, Curetis
SARS-CoV-2 test kits, and reagents and supplies used for the Company's
laboratory services. Inventory reserves for obsolescence and expirations were
$91,066 and $288,378 at June 30, 2021 and December 31, 2020 , respectively.
The Company 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.
The Company classifies finished goods 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.
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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 six months endedJune 30, 2021 and 2020, 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. During the three and six months endedJune 30, 2021 , the Company determined that the ROU asset associated with itsSan Diego, California office lease may not be recoverable. As a result, the Company recorded an impairment charge of$115,218 and$ 170,714 during the three and six months endedJune 30, 2021 , respectively.
Intangible assets and goodwill
Intangible assets and goodwill as of
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Finite-lived and indefinite-lived intangible assets
Intangible assets include trademarks, developed technology,
June 30, 2021 December 31, 2020
Effect of Effect of
Foreign Foreign
Accumulated Exchange Accumulated Exchange
Subsidiary Cost Amortization Rates Net Balance Amortization Impairment Rates Net Balance
Trademarks
and
tradenames AdvanDx $ 461,000 $ - $ - $ - $ (217,413 ) $ (243,587 ) $ - $ -
Developed
technology AdvanDx 458,000 - - - (308,526 ) (149,474 ) - -
Customer
relationships AdvanDx 1,094,000 - - - (736,465 ) (357,535 ) - -
Trademarks
and
tradenames Curetis 1,768,000 (237,532 ) 132,238 1,662,706 (147,161 ) - 194,119 1,814,958
Distributor
relationships Curetis 2,362,000 (211,560 ) 176,665 2,327,105 (131,070 ) - 259,336 2,490,266
A50 -
Developed
technology Curetis 349,000 (66,991 ) 26,104 308,113 (41,504 ) - 38,319 345,815
Ares -
Developed
technology Curetis 5,333,000 (511,768 ) 398,879 5,220,111 (317,060 ) - 585,536 5,601,476
A30 -
In-Process
Research &
Development Curetis 5,706,000 - 438,289 6,144,289 - - 622,448 6,328,448
$ 17,531,000 $ (1,027,851 ) $ 1,172,175 $ 15,662,324 $ (1,899,199 ) $ (750,596 ) $ 1,699,758 $ 16,580,963 Identifiable intangible assets will be amortized on a straight-line basis over their estimated useful lives. The estimated useful lives of the intangibles are:
Estimated Useful Life
Trademarks and tradenames 10 years
Customer/distributor relationships 15 years
A50 - Developed technology 7 years
Ares - Developed technology 14 years
A30 - Acquired in-process research & development Indefinite
Acquired IPR&D represents the fair value assigned to those research and
development projects that were acquired in a business combination for which the
related products have not received regulatory approval and have no alternative
future use. IPR&D is capitalized at its fair value as an indefinite-lived
intangible asset, and any development costs incurred after the acquisition are
expensed as incurred. Upon achieving regulatory approval or commercial viability
for the related product, the indefinite-lived intangible asset is accounted for
as a finite-lived asset and is amortized on a straight-line basis over its
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.
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.
13
-------------------------------------------------------------------------------- Total amortization expense of intangible assets was$204,800 and$192,709 for the three months endedJune 30, 2021 and 2020, respectively. Total amortization expense of intangible assets was$402,642 and$259,663 for the six months endedJune 30, 2021 and 2020, respectively. Expected future amortization of intangible assets is as follows: Year Ending December 31, 2021 (Six months)$ 411,139 2022 822,278 2023 822,278 2024 822,278 2025 822,278 2026 822,278 Thereafter 4,995,506 Total$ 9,518,035 Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If any indicators were present, the Company would test for recoverability by comparing the carrying amount of the asset to the net undiscounted cash flows expected to be generated from the asset. If those net undiscounted cash flows do not exceed the carrying amount (i.e., the asset is not recoverable), the Company would perform the next step, which is to determine the fair value of the asset and record an impairment loss, if any. In accordance with ASC 360-10, Property, Plant and Equipment, the Company records impairment losses on long-lived assets used in operations when events and circumstances indicate that long-lived assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. During the six months endedJune 30, 2021 , the Company determined that its finite-lived intangible assets were not impaired. During the six months endedJune 30, 2020 , events and circumstances indicated the Company's FISH intangible assets might be impaired. These circumstances included decreased product sales related to the COVID-19 pandemic and the loss of significant customers. Management's updated estimate of undiscounted cash flows indicated that such carrying amounts were no longer expected to be recovered and that the FISH intangible assets were impaired. The Company's analysis determined that the fair value of the assets was$0 and the Company recorded an impairment loss of$750,596 .
Goodwill represents the excess of the purchase price paid when the Company acquiredAdvanDx, Inc. inJuly 2015 and Curetis inApril 2020 , over the fair values of the acquired tangible or intangible assets and assumed liabilities.Goodwill is not tax deductible in any relevant jurisdictions. The Company's goodwill balance as ofJune 30, 2021 andDecember 31, 2020 was$7,790,595 and$8,024,729 , respectively.
The changes in the carrying amount of goodwill as of
Balance as ofDecember 31, 2020 $ 8,024,729 Changes in currency translation (234,134 ) Balance as ofJune 30, 2021 $ 7,790,595 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 six months endedJune 30, 2021 and 2020, the Company determined that its goodwill was not impaired.
Revenue recognition
The Company derives revenues from (i) the sale of
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.
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The Company recognizes revenues upon the satisfaction of its performance obligation (upon transfer of control of promised goods or services to our customers) in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services.
The Company defers incremental costs of obtaining a customer contract and amortizes the deferred costs over the period that the goods and services are transferred to the customer. The Company had no material incremental costs to obtain customer contracts in any period presented.
Deferred revenue results from amounts billed in advance to customers or cash received from customers in advance of services being provided.
Research and development costs
Research and development costs are expensed as incurred. Research and development costs primarily consist of salaries and related expenses for personnel, other resources, laboratory supplies, and fees paid to consultants and outside service partners.
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 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 endedJune 30, 2021 , the Company recognized$154,850 as a reduction of research and development expense related to government grant arrangements. For the six months endedJune 30, 2021 , the Company recognized$374,072 as a reduction of research and development expense related to government grant arrangements. There were no grant proceeds recognized for the three and six months endedJune 30, 2020 . The Company had earned but not yet received$727,659 and$413,530 related to these agreements and incentives included in prepaid expenses and other current assets, as ofJune 30, 2021 andDecember 31, 2020 , respectively.
Stock-based compensation
Stock-based compensation expense is recognized at fair value. The fair value of stock-based compensation to employees and directors is estimated, on the date of grant, using the Black-Scholes model. The resulting fair value is recognized ratably over the requisite service period, which is generally the vesting period of the option. For all time-vesting awards granted, expense is amortized using the straight-line attribution method. The Company accounts for forfeitures as they occur.
Option valuation models, including the Black-Scholes model, require the input of highly subjective assumptions, and changes in the assumptions used can materially affect the grant-date fair value of an award. These assumptions include the risk-free rate of interest, expected dividend yield, expected volatility and the expected life of the award.
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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 condensed consolidated financial
statements when it is more likely than not that the position will be sustained
upon examination by the tax authorities. Such tax positions are initially, and
subsequently, measured as the largest amount of tax benefit that is greater than
50% likely of being realized upon ultimate settlement with the tax authority,
assuming full knowledge of the position and all relevant facts.
The Company had federal net operating loss ("NOL") carryforwards of $196,511,928
and $188,282,298 at December 31, 2020 and 2019, respectively. Despite the NOL
carryforwards, which begin to expire in 2022, the Company may have state tax
requirements. Also, use of the NOL carryforwards may be subject to an annual
limitation as provided by Section 382 of the Internal Revenue Code of 1986, as
amended (the "Code"). To date, the Company has not performed a formal study to
determine if any of its remaining NOL and credit attributes might be further
limited due to the ownership change rules of Section 382 or Section 383 of the
Code. The Company will continue to monitor this matter going forward. There can
be no assurance that the NOL carryforwards will ever be fully utilized.
The Company also has foreign NOL carryforwards of $160,540,528 at December 31,
2020 from its foreign subsidiaries. $138,576,755 of those foreign NOL
carryforwards are from the Company's operations in Germany . Despite the NOL
carryforwards, the Company may have a current and future tax liability due to
the nuances of German tax law around the use of NOL's within a consolidated
group. There is no assurance that these foreign NOL carryforwards will ever be
fully utilized.
Loss per share
Basic loss per share is computed by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period.
For periods of net income, and when the effects are not anti-dilutive, diluted earnings per share is computed by dividing net income available to common stockholders by the weighted average number of shares outstanding plus the impact of all potential dilutive common shares, consisting primarily of common stock options and stock purchase warrants using the treasury stock method, and convertible preferred stock and convertible debt using the if-converted method. For periods of net loss, diluted loss per share is calculated similarly to basic loss per share because the impact of all dilutive potential common shares is anti-dilutive. The number of anti-dilutive shares, consisting of (i) common stock options, (ii) stock purchase warrants, and (iii) restricted stock units representing the right to acquire shares of common stock which have been excluded from the computation of diluted loss per share, was 11.0 million shares and 1.1 million shares as ofJune 30, 2021 and 2020, respectively.
Adopted accounting pronouncements
InDecember 2019 , the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes, which removes certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, the recognition of deferred tax liabilities for outside basis differences and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The Company adopted ASU 2019-12 onJanuary 1, 2021 . The impact of adopting ASU 2019-12 did not have a material impact on the Company's condensed consolidated financial statements. InMarch 2020 , the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The new guidance under ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or beforeDecember 31, 2022 . The impact of adopting ASU 2020-04 did not have a material impact on the Company's condensed consolidated financial statements. 16
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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 - Business Combination
OnApril 1, 2020 , the Company completed its business combination transaction with Curetis N.V., a public company with limited liability under the laws ofthe Netherlands , as contemplated by the Implementation Agreement, dated as ofSeptember 4, 2019 , by and among the Company, the Seller, andCrystal GmbH , a private limited liability company organized under the laws of the FederalRepublic of Germany and wholly-owned subsidiary of the Company. Pursuant to the Implementation Agreement, the Purchaser acquired all of the shares of Curetis GmbH, a private limited liability company organized under the laws of theFederal Republic of Germany, and certain other assets and liabilities of the Seller, as further described below, and paid, as the sole consideration, 2,028,208 shares of the Company's common stock to the Seller, and reserved for future issuance (a) 134,356 shares of Common Stock, in connection with its assumption of the Seller's 2016 Stock Option Plan, as amended (the "Seller Stock Option Plan"), and the outstanding awards thereunder, and (b) 500,000 shares of common stock to be issued upon the conversion, if any, of certain convertible notes issued by the Seller. At the closing, the Company assumed all of the liabilities of the Seller solely and exclusively related to the acquired business, which is providing innovative solutions, through development of proprietary platforms, diagnostic content, applied bioinformatics, lab services, research services and commercial collaborations and agreements, for molecular microbiology, diagnostics designed to address the global challenge of detecting severe infectious diseases and identifying antibiotic resistances in hospitalized patients. Pursuant to the Implementation Agreement, the Company also assumed and adopted the Seller Stock Option Plan as an Amended and Restated Stock Option Plan of the Company. In connection with the foregoing, the Company assumed all awards thereunder that were outstanding as of the Closing Date and converted such awards into options to purchase shares of the Company's Common Stock pursuant to the terms of the applicable award. In addition, the Company assumed, at the closing, all of the outstanding convertible notes issued by Seller in favor of YA II PN, LTD, pursuant to the previously disclosed Assignment of the Agreement for the Issuance of and Subscription to Notes Convertible into Shares, datedFebruary 24, 2020 , and entered into pursuant to the Implementation Agreement. Curetis' assets and liabilities were measured and recognized at their fair values as of the transaction date and combined with the assets, liabilities, and results of operations ofOpGen after the consummation of the business combination. The allocation of the purchase price to acquired assets and assumed liabilities based on their underlying fair values requires the extensive use of significant estimates and management's judgment. The allocation of the purchase price is final at this time. 17
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The components of the purchase price and net assets acquired are as follows:
Purchase Price
Number of shares issued to Curetis N.V 2,028,208 Multiplied by the market value per share ofOpGen's common stock (i)$ 2.39 Total fair value of common stock issued to Curetis N.V shareholders 4,847,417 Fair value of replacement stock awards related to precombination service (ii) 136,912 Fair value of convertible notes assumed (iii) 1,323,750 Fair value of EIB debt assumed (iv) 15,784,892 Funds advanced toCuretis GmbH under Interim Facility 4,808,712 Cash and cash equivalents and restricted cash acquired (1,266,849 )$ 25,634,834
(i) The price per share of
as reported on the Nasdaq Capital Market on
(ii) The fair value of the stock options assumed was determined using the
Black-Scholes option pricing model.
(iii) To derive the fair value of the convertible notes, the Company estimated the
fair value of the convertible notes with and without the derivative
liability using a scenario analysis and Monte Carlo simulation.
(iv) The fair value of the EIB debt is determined using a discounted cash flow
analysis with current applicable rates for similar instruments.
Net Assets Acquired Assets acquired Receivables$ 482,876 Inventory 2,022,577 Property and equipment 3,802,431 Right of use assets 1,090,812 Other current assets 925,364 Finite-lived intangible assets Trade names/trademarks 1,768,000 Customer/distributor relationships 2,362,000 A50 - Developed technology 349,000 Ares - Developed technology 5,333,000 Indefinite-lived intangible assets A30 - In-process research & development 5,706,000 Goodwill 6,688,652 Liabilities assumed Accounts payable (1,168,839 ) Accrued expenses and other current liabilities (1,953,927 ) Derivative liabilities (615,831 ) Lease liabilities (1,108,193 ) Other long-term liabilities (49,088 ) Net assets acquired$ 25,634,834 18
-------------------------------------------------------------------------------- The fair value of identifiable intangible assets has been determined using the income approach, which involves significant unobservable inputs (Level 3 inputs). These inputs include projected sales, margin, required rate of return and tax rate, as well as an estimated royalty rate in the case of the trade names/trademarks intangibles. The trade names/trademarks intangibles are valued using a relief-from-royalty method. The customer/distributor relationships are valued using the with and without method. The developed technology intangibles are valued using a multi-period earnings method. The Company determined the fair value of an IPR&D asset resulting from the acquisition of Curetis using the multi-period earnings method under the income approach. This method reflects the present value of the projected cash flows that are expected to be generated by the IPR&D, less charges representing the required return on other assets to sustain those cash flows.
The weighted-average amortization periods for finite-lived intangible assets acquired are 15 years for customer/distributor relationships, 10 years for developed technology and 10 years for trade names/trademarks.
The total consideration paid in the acquisition exceeded the estimated fair value of the tangible and identifiable intangible assets acquired and liabilities assumed, resulting in approximately$6.7 million of goodwill.Goodwill , primarily related to expected synergies gained from combining operations, sales growth from future product offerings and customers, together with certain intangible assets that do not qualify for separate recognition, including assembled workforce, is not tax deductible in all relevant taxing jurisdictions. The following unaudited pro forma financial information summarizes the results of operations for the periods indicated as if the Transaction had been completed as ofJanuary 1, 2020 . Pro forma information primarily reflects adjustments relating to the amortization of intangibles acquired and elimination of interest expense due under the interim facility. The pro forma amounts do not purport to be indicative of the results that would have actually been obtained if the acquisition had occurred as ofJanuary 1, 2020 or that may be obtained in the future. Six months ended Unaudited pro forma results June 30, 2020 Revenues$ 2,835,532 Net loss (14,734,370 ) Net loss per share (1.29 )
Note 5 - Revenue from contracts with customers
Disaggregated revenue
The Company provides diagnostic test products, laboratory services to hospitals,
clinical laboratories and other healthcare provider customers, and enters into
collaboration agreements with government agencies and healthcare providers. The
revenues by type of service consist of the following:
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Product sales $ 307,804 $ 601,304 $ 835,383 $ 968,237
Laboratory services 266,784 25,992 450,849 25,992
Collaboration revenue 237,027 561,089 355,099 811,089
Total revenue $ 811,615 $ 1,188,385 $ 1,641,331 $ 1,805,318 Revenues by geography are as follows:
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Domestic $ 305,617 $ 302,676 $ 649,624 $ 893,125
International 505,998 885,709 991,707 912,193
Total revenue $ 811,615 $ 1,188,385 $ 1,641,331 $ 1,805,318
19
--------------------------------------------------------------------------------
Deferred revenue
Changes in deferred revenue for the period were as follows:
Balance atDecember 31, 2020 $ 9,808
New deferrals, net of amounts recognized in the current period - Amounts returned to customers
(9,808 )
Effect of foreign exchange rates -
Balance at June 30, 2021 $ -
Contract assets
The Company did not have any contract assets as of June 30, 2021 , which are
generated when contractual billing schedules differ from revenue recognition
timing. The Company had approximately $18,000 of contract assets as of December
31, 2020 . Contract assets represent a conditional right to consideration for
satisfied performance obligations that becomes a billed receivable when the
conditions are satisfied.
Unsatisfied performance obligations
The Company had no unsatisfied performance obligations related to its contracts
with customers at
Note 6 - 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 six months ended
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. InJune 2019 , Curetis drew down a third tranche ofEUR 5.0 million from the EIB ("European Investment Bank "). In return for EIB waiving the condition precedent of a minimum cumulative equity capital raised ofEUR 15 million to disburse thisEUR 5.0 million tranche, the parties agreed on a 2.1% participation percentage interest ("PPI"). Upon maturity of the tranche, EIB would be entitled to an additional payment that is equity-linked and equivalent to 2.1% of the then total valuation of Curetis N.V. OnJuly 9, 2020 , the Company negotiated an amendment to the EIB debt financing facility. As part of the amendment, the parties adjusted the PPI percentage applicable to the previous EIB tranche ofEUR 5.0 million , which was funded inJune 2019 from its original 2.1% PPI in Curetis N.V.'s equity value upon maturity to a new 0.3% PPI inOpGen's equity value upon maturity between mid-2024 and mid-2025. This right constitutes an embedded derivative, which is separated and measured at fair value with changes being accounted for through profit or loss. The Company determines the fair value of the derivative using a Monte Carlo simulation model. Using this model, level 3 unobservable inputs include estimated discount rates and estimated risk-free interest rates. 20
--------------------------------------------------------------------------------
The fair value of level 3 liabilities measured at fair value on a recurring
basis for the three months ended
Effect of
Balance at Foreign Balance at
December 31, Change in Exchange June 30,
Description 2020 Fair Value Rates 2021
Participation
percentage
interest
liability $ 112,852 $ 114,411 $ (4,876 ) $ 222,387
Total $ 112,852 $ 114,411 $ (4,876 ) $ 222,387 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 endedJune 30, 2021 , the Company recorded impairment expense of$115,218 related to its ROU assets. During the six months endedJune 30, 2021 , the Company recorded impairment expense of$170,714 related to its ROU assets. During the three and six months endedJune 30, 2020 , the Company recorded impairment expense of$0 and$750,596 related to its intangible assets, respectively (see Note 3).
Note 7 - Debt
The following table summarizes the Company's long-term debt and short-term
borrowings as of
June 30, 2021 December 31, 2020
EIB $ 25,754,951 $ 25,936,928
PPP - 259,353
MGHIF - 331,904
Insurance financings - 107,742
Total debt obligations 25,754,951 26,635,927
Unamortized debt discount (5,084,010 ) (6,557,992 )
Carrying value of debt 20,670,941 20,077,935
Less current portion - (699,000 )
Long-term debt $ 20,670,941 $ 19,378,935
MGHIF financing
In July 2015 , the Company entered into a Purchase Agreement with MGHIF, pursuant
to which MGHIF purchased 2,273 shares of common stock of the Company at $2,200
per share for gross proceeds of $5.0 million . Pursuant to the Purchase
Agreement, the Company also issued to MGHIF an 8% Senior Secured Promissory Note
(the "MGHIF Note") in the principal amount of $1.0 million with a two-year
maturity date from the date of issuance. The Company's obligations under the
MGHIF Note were secured by a lien on all of OpGen's assets excluding the assets
of Curetis GmbH , Curetis USA , and Ares Genetics.
On June 28, 2017 , the MGHIF Note was amended and restated, and the maturity date
of the MGHIF Note was extended by one year to July 14, 2018 . As consideration
for the agreement to extend the maturity date, the Company issued an amended and
restated secured promissory note to MGHIF that (1) increased the interest rate
to ten percent (10%) per annum and (2) provided for the issuance of common stock
warrants to purchase 656 shares of its common stock to MGHIF.
On June 11, 2018 , the Company executed an Allonge to the MGHIF Note. The Allonge
provided that accrued and unpaid interest of $285,512 due as of July 14, 2018 ,
the original maturity date, be paid through the issuance of shares of OpGen's
common stock in a private placement transaction. In addition, the Allonge
revised and extended the maturity date for payment of the MGHIF Note to six
semi-annual payments of $166,667 plus accrued and unpaid interest beginning on
January 2, 2019 . During the six months ended June 30, 2021 , the Company made the
final payment under the MGHIF Note and the lien on the Company's assets was
released.
21--------------------------------------------------------------------------------
Yorkville Convertible Notes
The Company agreed to assume, as a condition to closing the business combination
with Curetis, all of the outstanding convertible notes (the "Convertible Notes")
issued by Curetis N.V. in favor of YA II PN, LTD ("Yorkville"), pursuant to that
certain Agreement for the Issuance of and Subscription to Notes Convertible into
Shares and Share Subscription Warrants, dated October 2, 2018 , by and between
Curetis N.V. and Yorkville .
On February 24, 2020 , the Company entered into an Assignment of the Agreement
for the Issuance of and Subscription to Notes Convertible into Shares (the
"Assignment Agreement") with Curetis N.V. and Yorkville . Pursuant to the
Assignment Agreement, upon assumption of the Convertible Notes by the Company,
the Convertible Notes ceased to be convertible into shares of Curetis N.V. and
are instead convertible into shares of the Company's common stock, par value
$0.01 . The Assignment Agreement provided that an amount of 500,000 shares of the
Company's common stock that comprise a portion of the consideration payable by
the Company under the Implementation Agreement be reserved for issuance under
the Convertible Notes. On June 17, 2020 , the Company registered for resale an
additional 450,000 shares of Company common stock issuable upon conversion of
the Convertible Notes.
At closing of the Transaction, an aggregate amount of €1.3 million of
unconverted Convertible Notes was assumed by the Company. The Convertible Notes
were measured and recognized at fair value at the acquisition date. The fair
value of the Convertible Notes as of the closing of the Transaction was
approximately $1.3 million . The resulting debt discount was amortized over the
life of the Convertible Notes as an increase in interest expense. During year
ended December 31, 2020 , the Company issued 763,905 shares of common stock in
satisfaction of approximately $1,451,000 of Convertible Notes. As of December
31, 2020 , all notes have been converted.
EIB Loan Facility
In 2016, Curetis entered into a contract for an up to €25 million senior, unsecured loan financing facility from theEuropean Investment Bank ("EIB"). The financing is in the first growth capital loan under the European Growth Finance Facility ("EGFF"), launched inNovember 2016 . It is backed by a guarantee from theEuropean Fund for Strategic Investment ("EFSI"). EFSI is an essential pillar of the Investment Plan forEurope ("IPE"), under which the EIB and theEuropean Commission are working as strategic partners to support investments and bring back jobs and growth toEurope .
The funding can be drawn in up to five tranches within 36 months, under the EIB amendment, and each tranche is to be repaid upon maturity five years after draw-down.
InApril 2017 , Curetis drew down a first tranche of €10 million from this facility. This tranche has a floating interest rate of EURIBOR plus 4% payable after each 12-month-period from the draw-down-date and another additional 6% interest per annum that is deferred and payable at maturity together with the principal. InJune 2018 , another tranche of €3 million was drawn down. The terms and conditions are analogous to the first one. InJune 2019 , Curetis drew down a third tranche of €5 million from the EIB. In line with all prior tranches, the majority of interest is also deferred into the bullet repayment structure upon maturity. In return for EIB waiving the condition precedent of a minimum cumulative equity capital raised of €15 million to disburse this €5 million tranche, the parties agreed on a 2.1% PPI. Upon maturity of the tranche, not before approximately mid-2024 (and no later than mid-2025) EIB would be 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 the amendment between the Company and EIB onJuly 9, 2020 , the parties adjusted the PPI percentage applicable to the previous EIB tranche of €5 million, which was funded inJune 2019 from its original 2.1% PPI in Curetis N.V.'s equity value upon maturity to a new 0.3% PPI inOpGen'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. OnJuly 10, 2020 , EIB agreed to defer total interest payments of €720k due in April andJune 2020 under the first three tranches of the debt financing facility untilDecember 31, 2020 . The Company made these interest payments inDecember 2020 . The debt was measured and recognized at fair value as of the acquisition date. The fair value of the EIB debt was approximately$15.8 million as of the acquisition date. The resulting debt discount is being amortized over the life of the EIB debt as an increase to interest expense.
As of
22--------------------------------------------------------------------------------
PPP
OnApril 22, 2020 , the Company entered into a Term Note (the "Company Note") withSilicon Valley Bank (the "Bank") pursuant to the Paycheck Protection Program (the "PPP") of the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") administered by theU.S. Small Business Administration . The Company's wholly-owned subsidiary,Curetis USA Inc. ("Curetis USA " and collectively with the Company, the "Borrowers"), also entered into a Term Note with the Bank (the "Subsidiary Note," and collectively with the Company Note, the "Notes"). The Notes are datedApril 22, 2020 . The principal amount of the Company Note was$879,630 , and the principal amount of the Subsidiary Note is$259,353 . In accordance with the requirements of the CARES Act, the Borrowers used the proceeds from the Notes in accordance with the requirements of the PPP to cover certain qualified expenses, including payroll costs, rent and utility costs. Interest accrues on the Notes at the rate of 1.00% per annum. The Borrowers may apply for forgiveness of amounts due under the Notes, in an amount equal to the sum of qualified expenses under the PPP, which include payroll costs, rent obligations, and covered utility payments incurred during the twenty-four weeks following disbursement under the Notes. The entire proceeds were used under the Notes for such qualifying expenses.OpGen filed for forgiveness of the Subsidiary note duringNovember 2020 . The Company Note was forgiven inNovember 2020 . InMay 2021 , the Subsidiary Note was forgiven. Total interest expense (including amortization of debt discounts and financing fees) on all debt instruments was$1,198,169 and$1,044,891 for the three months endedJune 30, 2021 and 2020, respectively. Total interest expense (including accretion of fair value to book value and amortization of debt discounts and financing fees) on all debt instruments was$2,363,151 and$1,083,158 for the six months endedJune 30, 2021 and 2020, respectively.
Note 8 - Stockholders' equity
As of
Following receipt of approval from stockholders at a special meeting of stockholders held onJanuary 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, and to reduce the authorized shares of common stock from 200,000,000 to 50,000,000 shares. Additionally, following receipt of approval from stockholders at a special meeting of stockholders held onAugust 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. All share amounts and per share prices in this Quarterly Report have been adjusted to reflect the reverse stock splits. OnOctober 28, 2019 , the Company closed theOctober 2019 Public Offering of 2,590,170 units at$2.00 per unit and 2,109,830 pre-funded units at$1.99 per pre-funded unit. The offering raised gross proceeds of approximately$9.4 million and net proceeds of approximately$8.3 million . During the six months endedJune 30, 2021 , 5,000 common warrants were exercised raising net proceeds of$10,000 . During the year endedDecember 31, 2020 , 4,341,000 common warrants were exercised raising net proceeds of approximately$8.7 million . 23 -------------------------------------------------------------------------------- OnFebruary 11, 2020 , the Company entered into an ATM Agreement with Wainwright, which we amended and restated onNovember 13, 2020 to addBTIG, LLC 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$22.1 million of shares of the Company's common stock through the sales agents. The Company did not sell any shares under the 2020 ATM Offering during the three or six months endedJune 30, 2021 . During the year endedDecember 31, 2020 , the Company sold 7,521,610 shares of its common stock under the 2020 ATM Offering resulting in aggregate net proceeds to the Company of approximately$15.8 million , and gross proceeds of$16.7 million . As ofJune 30, 2021 , remaining availability under the ATM Agreement is$5.4 million . OnApril 1, 2020 , the Company acquired all of the shares ofCuretis GmbH , and certain other assets and liabilities of Curetis N.V., as further described in Notes 1 and 4, and paid, as the sole consideration, 2,028,208 shares of the Company's common stock to the Seller. OnNovember 25, 2020 , the Company closed a private placement with one healthcare-focusedU.S. institutional investor of (i) 2,245,400 shares of common stock together with 2,245,400 common warrants to purchase up to 2,245,400 shares of common stock and (ii) 2,597,215 pre-funded warrants, with each pre-funded warrant exercisable for one share of common stock, together with 2,597,215 common warrants to purchase up to 2,597,215 shares of common stock (the "2020 PIPE"). Each share of common stock and accompanying common warrant were sold together at a combined offering price of$2.065 , and each pre-funded warrant and accompanying common warrant were sold together at a combined offering price of$2.055 . The common warrants have an exercise price of$1.94 per share, and are exercisable commencing on the six month anniversary of the date of issuance, and will expire five and one half (5.5) years from the date of issuance. The 2020 PIPE raised aggregate net proceeds of$9.3 million , and gross proceeds of$10.0 million . As ofDecember 31, 2020 , all 2,597,215 pre-funded warrants issued in the 2020 PIPE have been exercised. OnFebruary 11, 2021 , the Company closed theFebruary 2021 Offering with a singleU.S. -based, healthcare-focused institutional investor for the purchase of (i) 2,784,184 shares of common stock and (ii) 5,549,149 pre-funded warrants, with each pre-funded warrant exercisable for one share of common stock. The Company also issued to the investor, in a concurrent private placement, unregistered common warrants to purchase 4,166,666 shares of the Company's common stock. Each share of common stock and accompanying common warrant were sold together at a combined offering price of$3.00 , and each pre-funded warrant and accompanying common warrant were sold together at a combined offering price of$2.99 . The pre-funded warrants are immediately exercisable, at an exercise price of$0.01 , and may be exercised at any time until all of the pre-funded warrants are exercised in full. The common warrants will have an exercise price of$3.55 per share, will be exercisable commencing on the six-month anniversary of the date of issuance, and will expire five and one-half (5.5) years from the date of issuance. TheFebruary 2021 Offering raised aggregate net proceeds of$23.5 million , and gross proceeds of$25.0 million . As ofJune 30, 2021 , all pre-funded warrants issued in theFebruary 2021 Offering have been exercised. OnMarch 9, 2021 , the Company entered into an Exercise Agreement with the Holder from our 2020 PIPE financing. Pursuant to the Exercise Agreement, in order to induce the Holder to exercise all of the remaining 4,842,615 Existing Warrants for cash, pursuant to the terms of and subject to beneficial ownership limitations contained in the Existing Warrants, the Company agreed to issue to the Holder, New Warrants to purchase 0.65 shares of common stock for each share of common stock issued upon such exercise of the remaining 4,842,615 outstanding Existing Warrants pursuant to the Exercise Agreement or an aggregate of 3,147,700 New Warrants. The terms of the New Warrants are substantially similar to those of the Existing Warrants, except that the New Warrants have an exercise price of$3.56 . The New Warrants are immediately exercisable and will expire five years from the date of the Exercise Agreement. The Holder paid an aggregate of$255,751 to the Company for the purchase of the New Warrants. The Company received aggregate gross proceeds before expenses of approximately$9.65 million from the exercise of all of the remaining 4,842,615 outstanding Existing Warrants held by the Holder and the payment of the purchase price for the New Warrants. The Company recognized approximately$7.8 million of non-cash warrant inducement expense during the six months endedJune 30, 2021 related to this transaction representing the fair value of the New Warrants issued to induce the exercise. The fair values were calculated using the Black-Scholes option pricing model. 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. InApril 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 inMay 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. Under the 2015 Plan, the aggregate number of shares of the common stock authorized for issuance may not exceed (1) 2,710 plus (2) the sum of the number of shares subject to outstanding awards under the 2008 Plan as of the 2015 Plan's effective date, that are subsequently forfeited or terminated for any reason before being exercised or settled, plus (3) the number of shares subject to vesting restrictions under the 2008 Plan as of the 2015 Plan's effective date that are subsequently forfeited. In addition, the number of shares that have been authorized for issuance under the 2015 Plan will be automatically increased on the first day of each fiscal year beginning onJanuary 1, 2016 and ending on (and including)January 1, 2025 , in an amount equal to the lesser of (1) 4% of the outstanding shares of common stock on the last day of the immediately preceding fiscal year, or (2) another lesser amount determined by the Company's Board of Directors. FollowingBoard of Director approval, 1,003,421 shares were automatically added to the 2015 Plan. Shares subject to awards granted under the 2015 Plan that are forfeited or terminated before being exercised or settled, or are not delivered to the participant because such award is settled in cash, will again become available for issuance under the 2015 Plan. However, shares that have actually been issued shall not again become available unless forfeited. As ofJune 30, 2021 , 411,644 shares remain available for issuance under the 2015 Plan. 24
-------------------------------------------------------------------------------- OnSeptember 30, 2020 , the Company held its 2020 Annual Meeting of Stockholders (the "Annual Meeting"). At the Annual Meeting, stockholders of the Company voted to approve, among other things, a plan under which stock options to purchase an aggregate of 1,300,000 shares of the Company's common stock would be made by the Board of Directors of the Company outside of the stockholder-approved equity incentive plan to its executive officers and non-employee directors (the "2020 Stock Options Plan"). The 2020 Stock Options Plan and the grant made thereunder were approved by the Board of Directors onAugust 6, 2020 , subject to receipt of stockholder approval at the Annual Meeting. The aggregate number of shares of the Company's common stock authorized for issuance is 1,300,000 shares of common stock and all 1,300,000 stock options were issued onSeptember 30, 2020 . Shares subject to awards granted under the 2020 Stock Options Plan that are forfeited or terminated before being exercised will not be available for re-issuance under the 2020 Stock Options Plan. Replacement awards In connection with the acquisition of Curetis, the Company issued equity awards to Curetis employees consisting of stock options ("replacement awards") in exchange for their Curetis equity awards. The replacement awards consisted of 134,371 stock options with a weighted average grant date fair value of$1.68 . The terms of these replacement awards are substantially similar to the original Curetis equity awards. The fair value of the replacement awards for services rendered throughApril 1, 2020 , the acquisition date, was recognized as a component of the purchase consideration, with the remaining fair value of the replacement awards related to the post-combination services recorded as stock-based compensation over the remaining vesting period.
For the three and six months ended
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Cost of services $ 2,944 $ 727 $ 4,346 $ 1,455
Research and development 67,783 12,077 102,756 26,063
General and administrative 172,790 17,222 314,781 78,710
Sales and marketing 18,031 3,561 29,335 7,099
$ 261,548 $ 33,587 $ 451,218 $ 113,327
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.
The Company granted 20,000 options during the three months ended June 30, 2021 .
During the three months ended June 30, 2021 , 98,356 options were forfeited, and
473 options expired. The Company granted 355,000 options during the six months
ended June 30, 2021 . During the six months ended June 30, 2021 , 98,376 options
were forfeited, and 473 options expired.
The Company had total stock options to acquire 1,920,673 shares of common stock
outstanding at
Restricted stock units
The Company granted 80,000 restricted stock units during the three months endedJune 30, 2021 , and 3,768 restricted stock units vested and 21,467 were forfeited. The Company granted 360,000 restricted stock units during the six months endedJune 30, 2021 , and 3,768 restricted stock units vested and 21,467 were forfeited. The Company had 342,884 total restricted stock units outstanding atJune 30, 2021 . 25
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Stock purchase warrants
At
Outstanding at
December
June 30, 31, 2020
Issuance Exercise Price Expiration 2021 (1) (1)
November 2011 $ 3,955.00 November 2021 15 15
December 2011 $ 3,955.00 December 2021 2 2
February 2015 $ 3,300.00 February 2025 451 451
May 2016 $ 656.20 May 2021 - 9,483
June 2016 $ 656.20 May 2021 - 4,102
June 2017 $ 390.00 June 2022 938 938
July 2017 $ 345.00 July 2022 318 318
July 2017 $ 250.00 July 2022 2,501 2,501
July 2017 $ 212.50 July 2022 50,006 50,006
February 2018 $ 81.25 February 2023 9,232 9,232
February 2018 $ 65.00 February 2023 92,338 92,338
October 2019 $ 2.00 October 2024 354,000 359,000
October 2019 $ 2.60 October 2024 235,000 235,000
November 2020 $ 1.94 May 2026 - 4,842,615
November 2020 $ 2.68 May 2026 242,130 242,130
February 2021 $ 3.55 August 2026 4,166,666 -
February 2021 $ 3.90 August 2026 416,666 -
March 2021 $ 3.56 March 2026 3,147,700 -
8,717,963 5,848,131
The warrants listed above were issued in connection with various debt, equity or development contract agreements.
(1) Warrants to purchase fractional shares of common stock resulting from the
reverse stock split on
share of common stock on a holder by holder basis.
Note 9 - 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
InJune 2017 , the Company entered into an agreement withLife 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 runOpGen's Acuitas AMR Gene Panel tests. Under the terms of the agreement, the Company must notify LTC of the number of QuantStudio 5s that it commits to purchase in the following quarter. As ofJune 30, 2021 , the Company had acquired twenty-four QuantStudio 5s including none during the three and six months endedJune 30, 2021 . As ofJune 30, 2021 , the Company has not committed to acquiring additional QuantStudio 5s in the next three months. Curetis places frame-work orders for Unyvero Systems 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 Systems 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. The aggregate purchase commitments over the next twelve months are approximately$2.1 million . 26
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COVID-19 Impact
InDecember 2019 and early 2020, the coronavirus known as COVID-19 was reported to have surfaced inChina . The spread of this virus globally in early 2020 has caused business disruption domestically inthe United States and inEurope , the areas in which the Company primarily operates. While the disruption is currently expected to be temporary, such disruption is ongoing and there remains considerable uncertainty around the duration of this disruption. Therefore, while the Company expects that this matter will continue to impact the Company's financial condition, results of operations, or cash flows, the extent of the financial impact and duration cannot be reasonably estimated at this time.
Note 10 - Leases
The following table presents the Company's ROU assets and lease liabilities as
of
Lease Classification June 30, 2021 December 31, 2020 ROU Assets: Operating$ 2,038,073 $ 2,082,300 Financing 227,209 449,628 Total ROU assets$ 2,265,282 $ 2,531,928 Liabilities Current: Operating$ 854,233 $ 964,434 Finance 116,829 266,470 Noncurrent: Operating 2,910,810 1,492,544 Finance 18,693 46,794 Total lease liabilities$ 3,900,565 $ 2,770,242 Maturities of lease liabilities as ofJune 30, 2021 by fiscal year are as follows: Maturity of Lease Liabilities Operating Finance Total 2021$ 513,049 $ 92,858 $ 605,907 2022 740,316 44,850 785,166 2023 624,916 3,364 628,280 2024 634,511 280 634,791 2025 545,576 - 545,576 Thereafter 2,504,650 - 2,504,650 Total lease payments 5,563,018 141,352 5,704,370 Less: Interest (1,797,975 ) (5,830 )
(1,803,805 )
Present value of lease liabilities
Condensed consolidated statements of operations classification of lease costs as
of the three and six months ended
Three months ended June 30, Six months ended June 30,
Lease Cost Classification 2021 2020 2021 2020
Operating Operating expenses $ 298,331 $ 335,920 $ 646,369 $ 550,256
Finance:
Amortization Operating expenses 111,464 129,909 222,420 262,257
Interest expense Other expenses 4,491 15,050 11,350 33,519
Total lease costs $ 414,286 $ 480,879 $ 880,139 $ 846,032
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Other lease information as of
Other Information Total Weighted average remaining lease term (in years) Operating leases 7.2 Finance leases 0.8 Weighted average discount rate: Operating leases 8.7 % Finance leases 9.4 %
Supplemental cash flow information as of the six months ended
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