| |
March 31, 2022 | | |
December 31, 2021 | | |
March 31, 2021 | | |
December 31, 2020 | |
Cash and cash equivalents | |
$ | 30,653,410 | | |
$ | 36,080,392 | | |
$ | 39,397,437 | | |
$ | 13,360,463 | |
Restricted cash | |
| 468,041 | | |
| 551,794 | | |
| 569,052 | | |
| 746,792 | |
Total cash and cash equivalents and restricted cash in the condensed consolidated statements of cash flows | |
$ | 31,121,451 | | |
$ | 36,632,186 | | |
$ | 39,966,489 | | |
$ | 14,107,255 | |
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 as of March
31, 2022 and December 31, 2021, respectively.
At March 31, 2022, the Company had accounts receivable
from four customers which individually represented 28%, 27%, 16% and 14% of total accounts receivable, respectively. At December 31, 2021,
the Company had accounts receivable from two customers which individually represented 52% and 14% of total accounts receivable, respectively.
For the three months ended March 31, 2022, revenue earned from three customers represented 27%, 27% and 12% of total revenues, respectively.
For the three months ended March 31, 2021, revenue earned from two customers represented 18% and 13% of total revenues, respectively.
Inventory
Inventories are valued using the first-in, first-out
cost method and stated at the lower of cost or net realizable value and consist of the following:
| |
March 31, 2022 | | |
December 31, 2021 | |
Raw materials and supplies | |
$ | 944,802 | | |
$ | 866,963 | |
Work-in-process | |
| 121,731 | | |
| 100,801 | |
Finished goods | |
| 3,743,496 | | |
| 3,744,029 | |
Total | |
$ | 4,810,029 | | |
$ | 4,711,793 | |
Inventory includes Unyvero instrument systems,
Unyvero cartridges, reagents and components for Unyvero, Acuitas, Curetis SARS CoV-2 test kits, and reagents and supplies used for the
Company’s laboratory services. Inventory reserves for obsolescence and expirations were $82,151 and $98,064 at March 31, 2022 and
December 31, 2021, 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 good inventory
it does not expect to sell or use in clinical studies within 12 months of the unaudited condensed consolidated balance sheets date as
strategic inventory, a non-current asset.
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 months ended March 31, 2022 and 2021, 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 months ended March 31, 2021, the
Company had determined that the ROU asset associated with its San Diego, California office lease may not be recoverable. As a result,
the Company had recorded an impairment charge of $55,496 during the three months ended March 31, 2021.
Intangible assets and goodwill
Intangible assets and goodwill as of March 31, 2022
consist of finite-lived and indefinite-lived intangible assets and goodwill.
Finite-lived and indefinite-lived intangible assets
Intangible assets include trademarks, developed technology,
In-Process Research & Development, software and customer relationships and consisted of the following as of March 31, 2022 and December
31, 2021:
| |
| | |
| | |
March 31, 2022 | | |
December 31, 2021
| |
| |
Subsidiary | | |
Cost | | |
Accumulated Amortization | | |
Effect of Foreign Exchange Rates | | |
Net Balance | | |
Accumulated Amortization | | |
Effect of Foreign Exchange Rates | | |
Net Balance | |
Trademarks and tradenames | |
| Curetis | | |
$ | 1,768,000 | | |
$ | (355,010 | ) | |
$ | 7,036 | | |
$ | 1,420,026 | | |
$ | (316,930 | ) | |
$ | 43,015 | | |
$ | 1,494,085 | |
Distributor relationships | |
| Curetis | | |
| 2,362,000 | | |
| (316,193 | ) | |
| 9,400 | | |
| 2,055,207 | | |
| (282,277 | ) | |
| 57,465 | | |
| 2,137,188 | |
A50 - Developed technology | |
| Curetis | | |
| 349,000 | | |
| (100,123 | ) | |
| 1,390 | | |
| 250,267 | | |
| (89,384 | ) | |
| 8,492 | | |
| 268,108 | |
Ares - Developed technology | |
| Curetis | | |
| 5,333,000 | | |
| (764,878 | ) | |
| 21,223 | | |
| 4,589,345 | | |
| (682,833 | ) | |
| 129,745 | | |
| 4,779,912 | |
A30 - In-Process Research & Development | |
| Curetis | | |
| 5,706,000 | | |
| — | | |
| 33,323 | | |
| 5,739,323 | | |
| — | | |
| 144,916 | | |
| 5,850,916 | |
| |
| | | |
$ | 15,518,000 | | |
$ | (1,536,204 | ) | |
$ | 72,372 | | |
$ | 14,054,168 | | |
$ | (1,371,424 | ) | |
$ | 383,633 | | |
$ | 14,530,209 | |
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 in-process research and development
(“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.
Total amortization expense of intangible assets was
$192,025 and $197,842 for the three months ended March 31, 2022 and 2021, respectively. Expected future amortization of intangible assets
is as follows:
Year Ending December 31, | | |
| |
| 2022 (Nine months) | | |
$ | 576,075 | |
| 2023 | | |
| 768,100 | |
| 2024 | | |
| 768,100 | |
| 2025 | | |
| 768,100 | |
| 2026 | | |
| 768,100 | |
| 2027 | | |
| 730,516 | |
| Thereafter | | |
| 3,935,854 | |
| Total | | |
$ | 8,314,845 | |
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 three months ended March 31, 2022 and 2021, the Company determined that its finite-lived intangible
assets were not impaired.
Goodwill
Goodwill represents the excess of the purchase
price paid when the Company acquired AdvanDx, Inc. in July 2015 and Curetis in April 2020, over the fair values of the acquired tangible
or intangible assets and assumed liabilities. Goodwill is not tax deductible in any relevant jurisdictions. The Company’s goodwill
balance as of March 31, 2022 and December 31, 2021, was $7,316,883 and $7,453,007,
respectively.
The changes in the carrying amount of goodwill as
of March 31, 2022, and since December 31, 2021, were as follows:
Balance as of December 31, 2021 | |
$ | 7,453,007 | |
Changes in currency translation | |
| (136,124 | ) |
Balance as of March 31, 2022 | |
$ | 7,316,883 | |
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 three months ended March 31, 2022 and 2021, the Company determined
that its goodwill was not impaired.
Revenue recognition
The Company derives revenues from (i) the sale of
Unyvero Application cartridges, Unyvero Systems, SARS CoV-2 tests, and Acuitas AMR Gene Panel test products, (ii) providing laboratory
services, (iii) providing collaboration services including funded software arrangements, and license arrangements, and (iv) granting access
to a subset of the proprietary ARESdb data asset.
The Company analyzes contracts to determine
the appropriate revenue recognition using the following steps: (i) identification of contracts with customers, (ii) identification of
distinct performance obligations in the contract, (iii) determination of contract transaction price, (iv) allocation of contract transaction
price to the performance obligations and (v) determination of revenue recognition based on timing of satisfaction of the performance obligation.
The Company recognizes revenues upon the satisfaction
of its performance obligation (upon transfer of control of promised goods or services to our customers) in an amount that reflects the
consideration to which it expects to be entitled in exchange for those goods or services.
The Company defers incremental costs of obtaining
a customer contract and amortizes the deferred costs over the period that the goods and services are transferred to the customer. The
Company had no material incremental costs to obtain customer contracts in any period presented.
Deferred revenue results from amounts billed in advance
to customers or cash received from customers in advance of services being provided.
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 ended March 31, 2022 and 2021, the Company recognized $108,465 and $219,222 as a reduction
of research and development expense related to government grant arrangements, respectively. The Company had earned but not yet received
$496,461 and $396,365 related to these agreements and incentives included in prepaid expenses and other current assets, as of March 31,
2022 and December 31, 2021, 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.
Income taxes
Income taxes are accounted for under the asset and
liability method. Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to temporary
differences between financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred income
tax assets to the amount expected to be realized.
Tax benefits are initially recognized in the financial
statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions
are initially, and subsequently, measured as the largest amount of tax benefit that is greater than 50% 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 $202,015,062 and $196,511,928 at December 31, 2021 and 2020, 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
$170,607,782 at December 31, 2021 from their foreign subsidiaries. $147,313,786 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 NOLs within a consolidated group. There is no assurance that the 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 19.3 million
shares and 11.0 million shares as of March 31, 2022 and 2021, respectively.
Recently issued accounting standards
The Company has evaluated all other issued and unadopted
ASUs and believes the adoption of these standards will not have a material impact on its results of operations, financial position or
cash flows.
Note 4 – Revenue from contracts with customers
Disaggregated revenue
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 March 31, | |
| |
2022 | | |
2021 | |
Product sales | |
$ | 366,052 | | |
$ | 613,918 | |
Laboratory services | |
| 42,929 | | |
| 97,726 | |
Collaboration revenue | |
| 60,764 | | |
| 118,072 | |
Total revenue | |
$ | 469,745 | | |
$ | 829,716 | |
Revenues by geography are as follows:
| |
Three Months Ended March 31, | |
| |
2022 | | |
2021 | |
Domestic | |
$ | 156,410 | | |
$ | 344,008 | |
International | |
| 313,335 | | |
| 485,708 | |
Total revenue | |
$ | 469,745 | | |
$ | 829,716 | |
Deferred revenue
The Company had no deferred revenue at March 31, 2022
and December 31, 2021.
Contract assets
The Company had approximately
$55,505 of contract assets as of March 31, 2022, which are generated when contractual billing schedules differ from revenue recognition
timing. The Company had $0 of contract assets as of December 31, 2021. 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 March 31, 2022 and December 31, 2021.
Note 5 – Fair value measurements
The Company classifies its financial instruments using
a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:
| ● | Level 1 - defined as observable inputs such as quoted prices in active markets; |
| ● | Level 2 - defined as inputs other than quoted prices in active markets that are either directly or indirectly
observable; and |
| ● | Level 3 - defined as unobservable inputs in which little or no market data exists, therefore requiring
an entity to develop its own assumptions such as expected revenue growth and discount factors applied to cash flow projections. |
For the three months ended March 31, 2022, the Company
has not transferred any assets between fair value measurement levels.
Financial assets and liabilities measured at fair
value on a recurring basis
The Company evaluates financial assets and liabilities
subject to fair value measurements on a recurring basis to determine the appropriate level at which to classify them each reporting period.
This determination requires the Company to make subjective judgments as to the significance of inputs used in determining fair value and
where such inputs lie within the hierarchy.
In June 2019, Curetis drew down a third tranche of €5.0 million from the EIB (“European
Investment Bank”). In return for the EIB waiving the condition precedent of a minimum cumulative equity capital raised of €15
million to disburse this €5.0 million tranche, the parties agreed on a 2.1% participation percentage interest (“PPI”).
Upon maturity of the tranche, the 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. On July 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 of €5.0 million, which was funded in June
2019 from its original 2.1% PPI in Curetis N.V.’s equity value upon maturity to a new 0.3% PPI in OpGen’s equity value upon
maturity 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.
The fair value of level 3 liabilities measured at
fair value on a recurring basis for the three months ended March 31, 2022 was as follows:
Description | |
Balance at December 31, 2021 | | |
Change in Fair Value | | |
Effect of Foreign Exchange Rates | | |
Balance at March 31, 2022 | |
Participation percentage interest liability | |
$ | 228,589 | | |
$ | (109,744 | ) | |
$ | (4,041 | ) | |
$ | 114,804 | |
Total | |
$ | 228,589 | | |
$ | (109,744 | ) | |
$ | (4,041 | ) | |
$ | 114,804 | |
Financial assets and liabilities carried at fair
value on a non-recurring basis
The Company does not have any financial assets and
liabilities measured at fair value on a non-recurring basis.
Non-financial assets and liabilities carried at
fair value on a recurring basis
The Company does not have any non-financial assets
and liabilities measured at fair value on a recurring basis.
Non-financial assets and liabilities carried at
fair value on a non-recurring basis
The Company measures its long-lived assets, including
property and equipment and intangible assets (including goodwill), at fair value on a non-recurring basis when a triggering event requires
such evaluation. During the three months ended March 31, 2021, the Company recorded impairment expense of $55,496 related to its ROU assets.
Note 6 – Debt
The following table summarizes the Company’s
long-term debt and short-term borrowings as of March 31, 2022 and December 31, 2021:
| |
March 31, 2022 | | |
December 31, 2021 | |
EIB | |
$ | 24,957,409 | | |
$ | 25,161,855 | |
Total debt obligations | |
| 24,957,409 | | |
| 25,161,855 | |
Unamortized debt discount | |
| (2,607,102 | ) | |
| (3,466,491 | ) |
Carrying value of debt | |
| 22,350,307 | | |
| 21,695,364 | |
Less current portion | |
| (14,394,824 | ) | |
| (14,519,113 | ) |
Long-term debt | |
$ | 7,955,483 | | |
$ | 7,176,251 | |
EIB Loan Facility
In 2016, Curetis entered into a contract for an up
to €25 million senior, unsecured loan financing facility from the European Investment Bank (“EIB”). The financing is
in the first growth capital loan under the European Growth Finance Facility (“EGFF”), launched in November 2016. It is backed
by a guarantee from the European Fund for Strategic Investment (“EFSI”). EFSI is an essential pillar of the Investment Plan
for Europe (“IPE”), under which the EIB and the European Commission are working as strategic partners to support investments
and bring back jobs and growth to Europe.
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.
In April 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.
In June 2018, a second tranche of €3.0 million was drawn down. The terms and conditions are analogous to the first one.
In June 2019, Curetis drew down a third tranche of
€5.0 million from the EIB. In line with all prior tranches, the majority of interest is also deferred until repayment upon maturity.
In return for the EIB waiving the condition precedent of a minimum cumulative equity capital raised of €15 million to disburse this
€5.0 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), the 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 the EIB on July 9, 2020, the parties adjusted the PPI percentage applicable
to the previous EIB tranche of €5.0 million, which was funded in June 2019, from its original 2.1% PPI in Curetis N.V.’s equity
value upon maturity to a new 0.3% PPI in OpGen’s equity value upon maturity. This right constitutes an embedded derivative, which
is separated and measured at fair value with changes being accounted for through income or loss.
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.
On April 25, 2022, the Company announced that
Curetis and the EIB expect to restructure the payment of the first tranche of debt (see Note 11).
As of March
31, 2022, the outstanding borrowings under all tranches were €22,482,127 ($24,957,409), including deferred interest payable at
maturity of €4,482,127 ($4,975,609).
PPP
On April 22, 2020, the Company entered into a Term
Note (the “Company Note”) with Silicon 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 the U.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 were dated April 22, 2020. The principal amount of the Company Note was $879,630,
and the principal amount of the Subsidiary Note was $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 accrued on the Notes at the rate of 1.00% per annum. The Borrowers applied 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. The Company Note was forgiven in November 2020. In May 2021, the Subsidiary Note was forgiven.
Total interest expense (including amortization
of debt discounts and financing fees) on all debt instruments was $1,269,581 and $1,164,982 for the three months ended March 31, 2022
and 2021, respectively.
Note 7 – Stockholders’ equity
As of March 31, 2022, the Company had 100,000,000
shares of authorized common stock and 46,557,750 shares issued and outstanding, and 10,000,000 shares of authorized preferred stock,
of which none were issued or outstanding.
Following receipt of approval from stockholders
at a special meeting of stockholders held on December 8, 2021, the Company filed an amendment to its Amended and Restated Certificate
of Incorporation to increase the authorized shares of common stock from 50,000,000 to 100,000,000 shares.
Following receipt of approval from stockholders at
a special meeting of stockholders held on January 17, 2018, the Company filed an amendment to its Amended and Restated Certificate of
Incorporation to effect a reverse stock split of the issued and outstanding shares of common stock, at a ratio of one share for twenty-five
shares. Additionally, following receipt of approval from stockholders at a special meeting of stockholders held on August 22, 2019, the
Company filed an additional amendment to its Amended and Restated Certificate of Incorporation to effect a reverse stock split of the
issued and outstanding shares of common stock, at a ratio of one share for twenty shares. All share amounts and per share prices in this
Quarterly Report have been adjusted to reflect the reverse stock splits.
On February 11, 2020, the Company entered into an
ATM Agreement with Wainwright, which was amended and restated on November 13, 2020 to add BTIG, LLC as a sales agent, pursuant to which
the Company may offer and sell from time to time in an “at the market offering,” at its option, up to an aggregate of $22.1
million of shares of the Company's common stock through the sales agents. During the year ended December 31, 2021, the Company sold 680,000
shares of its common stock under the 2020 ATM Offering resulting in aggregate net proceeds to the Company of approximately $1.48 million,
and gross proceeds of $1.55 million. As of March 31, 2022, remaining availability under the ATM
Agreement is $3.9 million.
On April 1, 2020, the Company acquired all of the
shares of Curetis GmbH, and certain other assets and liabilities of Curetis N.V., as further described in Note 1, and paid, as the sole
consideration, 2,028,208 shares of the Company’s common stock to the Seller.
On February 11, 2021, the Company closed the February
2021 Offering with a single U.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. The February
2021 Offering raised aggregate net proceeds of $23.5 million, and gross proceeds of $25.0 million. As of December 31, 2021, all pre-funded
warrants issued in the February 2021 Offering have been exercised.
On March 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 Existing Warrants pursuant to the Exercise Agreement for 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 the remaining 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 year ended December 31, 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.
On October 18, 2021, the Company closed the October
2021 Offering with a single healthcare-focused institutional investor of 150,000 shares of convertible preferred stock and warrants to
purchase up to an aggregate of 7,500,000 shares of common stock. The shares of preferred stock had a stated value of $100 per share and
were converted into an aggregate of 7,500,000 shares of common stock at a conversion price of $2.00 per share after the Company received
stockholder approval for an increase to its number of authorized shares of common stock, which approval occurred at the Company’s
special meeting of stockholders held in December 2021. The warrants have an exercise price of $2.05 per share, will become exercisable
six months following the date of issuance, and will expire five years following the initial exercise date. The warrants are classified
as permanent equity at March 31, 2022. In connection with the issuance of convertible preferred stock, the Company recognized
a beneficial conversion feature of $7,166,752 as a deemed dividend to the preferred stockholders in the fourth quarter of 2021.
On December 8, 2021, the Company received stockholder
approval to increase the number of authorized shares of common stock of the Company. As of December 31, 2021, all 150,000 shares of convertible
preferred stock were converted into an aggregate of 7,500,000 shares of common stock. The October 2021 Offering raised aggregate net proceeds
of $13.9 million, and gross proceeds of $15.0 million.
Stock options
In 2008, the Company adopted the 2008 Stock Option
and Restricted Stock Plan (the “2008 Plan”), pursuant to which the Company’s Board of Directors could grant either incentive
or non-qualified stock options or shares of restricted stock to directors, key employees, consultants and advisors.
In April 2015, the Company adopted, and the Company’s
stockholders approved, the 2015 Equity Incentive Plan (the “2015 Plan”); the 2015 Plan became effective upon the execution
and delivery of the underwriting agreement for the Company’s initial public offering in May 2015. Following the effectiveness of
the 2015 Plan, no further grants will be made under the 2008 Plan. The 2015 Plan provides for the granting of incentive stock options
within the meaning of Section 422 of the Code to employees and the granting of non-qualified stock options to employees, non-employee
directors and consultants. The 2015 Plan also provides for the grants of restricted stock, restricted stock units, stock appreciation
rights, dividend equivalents and stock payments to employees, non-employee directors and consultants.
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 on January 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. Following Board of Director approval, 1,858,010 shares were automatically added to the 2015 Plan in 2022. 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 of March 31, 2022, 1,327,136 shares remain
available for issuance under the 2015 Plan.
On September 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 on August 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 on September 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. As of March 31, 2022,
no shares remain available for issuance under the 2020 Stock Options Plan.
In connection with the appointment of Albert Weber as Chief Financial Officer,
OpGen granted Mr. Weber an inducement grant of stock options to purchase an aggregate of 210,000 shares of OpGen’s common stock
with a grant date of January 3, 2022. The equity award was granted as a component of Mr. Weber’s employment compensation and was
granted as an inducement material to his acceptance of employment with OpGen. The options have an exercise price of $1.08, a ten-year
term and a vesting schedule of 25% vesting of the award on the first annual anniversary of the date of grant and then 6.25% vesting each
quarter thereafter over three additional years. The award is subject to Mr. Weber’s continued service with OpGen through the applicable
vesting dates.
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 through April 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 months ended March 31, 2022
and 2021, the Company recognized share-based compensation expense as follows:
| |
Three months ended March 31, | |
| |
2022 | | |
2021 | |
Cost of services | |
$ | 2,835 | | |
$ | 1,402 | |
Research and development | |
| 66,998 | | |
| 34,973 | |
General and administrative | |
| 140,882 | | |
| 141,992 | |
Sales and marketing | |
| 30,904 | | |
| 11,303 | |
| |
$ | 241,619 | | |
$ | 189,670 | |
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 542,500 options during the
three months ended March 31, 2022. During the three months ended March 31, 2022, 2,500 options were forfeited and 1,536 options expired.
The Company had total stock options to acquire
2,251,813 shares of common stock outstanding at March 31, 2022 under all of its equity compensation plans.
Restricted stock units
The Company granted 670,572 restricted stock
units during the three months ended March 31, 2022, 107,500 restricted stock units vested and 2,577 were forfeited. The Company had 846,760
total restricted stock units outstanding at March 31, 2022.
Stock purchase warrants
At March 31, 2022 and December 31, 2021, the following
warrants to purchase shares of common stock were outstanding:
| | | |
| | | |
| | | |
| Outstanding at | |
| Issuance | | |
| Exercise Price | | |
| Expiration | | |
| March, 31, 2022 (1) | | |
| December 31,
2021 (1) | |
| February 2015 | | |
$ | 3,300.00 | | |
| February 2025 | | |
| 451 | | |
| 451 | |
| 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 | | |
$ | 212.60 | | |
| 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 | | |
| 354,000 | |
| October 2019 | | |
$ | 2.60 | | |
| October 2024 | | |
| 235,000 | | |
| 235,000 | |
| November 2020 | | |
$ | 2.52 | | |
| May 2026 | | |
| 242,130 | | |
| 242,130 | |
| February 2021 | | |
$ | 3.55 | | |
| August 2026 | | |
| 4,166,666 | | |
| 4,166,666 | |
| February 2021 | | |
$ | 3.90 | | |
| August 2026 | | |
| 416,666 | | |
| 416,666 | |
| March 2021 | | |
$ | 3.56 | | |
| March 2026 | | |
| 3,147,700 | | |
| 3,147,700 | |
| October 2021 | | |
$ | 2.05 | | |
| April 2027 | | |
| 7,500,000 | | |
| 7,500,000 | |
| | | |
| | | |
| | | |
| 16,217,946 | | |
| 16,217,946 | |
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 August
22, 2019 were rounded up to the next whole share of common stock on a holder by holder basis. |
Note 8 – Commitments and Contingencies
Registration and other stockholder rights
In connection with the various investment transactions,
the Company entered into registration rights agreements with stockholders, pursuant to which the investors were granted certain demand
registration rights and/or piggyback and/or resale registration rights in connection with subsequent registered offerings of the Company’s
common stock.
Supply agreements
In June 2017, the Company entered into an agreement
with Life Technologies Corporation, a subsidiary of Thermo Fisher Scientific (“LTC”), to supply the Company with Thermo Fisher
Scientific’s QuantStudio 5 Real-Time PCR Systems (“QuantStudio 5”) to be used to run OpGen’s Acuitas AMR Gene
Panel tests. Under the terms of the agreement, the Company must notify LTC of the number of QuantStudio 5s that it commits to purchase
in the following quarter. As of March 31, 2022, the Company had acquired twenty-four QuantStudio 5s including none during the three months
ended March 31, 2022. As of March 31, 2022, 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 $0.8 million.
COVID-19 Impact
In December 2019 and early 2020, the coronavirus known
as COVID-19 was reported to have surfaced in China. The spread of this virus including its variants and mutations globally in 2020, 2021
as well as into 2022 has caused significant business disruption domestically in the United States and in Europe, as well as China, the
areas in which the Company primarily operates or has significant business interest. While the disruption is currently expected to be temporary,
such disruption is still 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 9 – Leases
The following table presents the Company’s ROU
assets and lease liabilities as of March 31, 2022 and December 31, 2021:
Lease Classification | |
March 31, 2022 | | |
December 31, 2021 | |
ROU Assets: | |
| | | |
| | |
Operating | |
$ | 1,706,346 | | |
$ | 1,814,396 | |
Financing | |
| 50,756 | | |
| 90,467 | |
Total ROU assets | |
$ | 1,757,102 | | |
$ | 1,904,863 | |
Liabilities | |
| | | |
| | |
Current: | |
| | | |
| | |
Operating | |
$ | 447,710 | | |
$ | 459,792 | |
Finance | |
| 26,462 | | |
| 43,150 | |
Noncurrent: | |
| | | |
| | |
Operating | |
| 2,860,703 | | |
| 2,977,402 | |
Finance | |
| 2,803 | | |
| 3,644 | |
Total lease liabilities | |
$ | 3,337,678 | | |
$ | 3,483,988 | |
Maturities of lease liabilities as of March
31, 2022 by fiscal year are as follows:
Maturity
of Lease Liabilities | | |
Operating | | |
Finance | | |
Total | |
| 2022 (Nine months) | | |
$ | 540,660 | | |
$ | 26,417 | | |
$ | 567,077 | |
| 2023 | | |
| 639,022 | | |
| 3,364 | | |
| 642,386 | |
| 2024 | | |
| 648,617 | | |
| 280 | | |
| 648,897 | |
| 2025 | | |
| 543,989 | | |
| — | | |
| 543,989 | |
| 2026 | | |
| 378,279 | | |
| — | | |
| 378,279 | |
| Thereafter | | |
| 2,126,369 | | |
| — | | |
| 2,126,369 | |
| Total lease payments | | |
| 4,876,936 | | |
| 30,061 | | |
| 4,906,997 | |
| Less: Interest | | |
| (1,568,523 | ) | |
| (796 | ) | |
| (1,569,319 | ) |
| Present value of lease liabilities | | |
$ | 3,308,413 | | |
$ | 29,265 | | |
$ | 3,337,678 | |
Condensed consolidated statements of operations
classification of lease costs as of the three months ended March 31, 2022 and 2021 are as follows:
| |
| |
Three months ended March 31, | |
Lease Cost | |
Classification | |
2022 | | |
2021 | |
Operating | |
Operating expenses | |
$ | 174,914 | | |
$ | 348,038 | |
Finance: | |
| |
| | | |
| | |
Amortization | |
Operating expenses | |
| 39,711 | | |
| 110,955 | |
Interest expense | |
Other expenses | |
| 905 | | |
| 6,860 | |
Total lease costs | |
| |
$ | 215,530 | | |
$ | 465,853 | |
| |
| |
| | | |
| | |
Other lease information as of March 31, 2022 is
as follows:
| |
Total | |
Weighted average remaining lease term (in years) | |
| | |
Operating leases | |
| 7.7 | |
Finance leases | |
| 0.8 | |
Weighted average discount rate: | |
| | |
Operating leases | |
| 9.1 | % |
Finance leases | |
| 8.1 | % |
Supplemental cash flow information as of
the three months ended March 31, 2022 and 2021 is as follows:
Supplemental Cash Flow Information | |
2022 | | |
2021 | |
Cash paid for amounts included in the measurement of lease liabilities | |
| | | |
| | |
Cash used in operating activities | |
| | | |
| | |
Operating leases | |
$ | 174,914 | | |
$ | 348,038 | |
Finance leases | |
$ | 905 | | |
$ | 6,860 | |
Cash used in financing activities | |
| | | |
| | |
Finance leases | |
$ | 17,529 | | |
$ | 100,466 | |
ROU assets obtained in exchange for lease obligations: | |
| | | |
| | |
Operating leases | |
$ | — | | |
$ | 748,294 | |
Note 10 – License agreements, research
collaborations and development agreements
NYSDOH
In 2018, the Company announced a collaboration with
the New York State Department of Health (“DOH”) and ILÚM Health Solutions, LLC (“ILÚM”), a wholly-owned
subsidiary of Merck’s Healthcare Services and Solutions division, to develop a state-of-the-art research program to detect, track,
and manage antimicrobial-resistant infections at healthcare institutions statewide. ILÚM has since been acquired by Infectious
Disease Connect, Inc. (“IDC”), a University of Pittsburgh Medical Center (“UPMC”) Enterprise company. The Company
is working together with DOH’s Wadsworth Center and IDC to continue development of an infectious disease digital health and precision
medicine platform that connects healthcare institutions to DOH and uses genomic microbiology for statewide surveillance and control of
antimicrobial resistance. As part of the collaboration, the Company received approximately $1.6 million over the 15-month demonstration
portion of the project. The demonstration project began in early 2019 and was completed in the first quarter of 2020. In April 2020, the
Company began a second-year expansion phase to build on the successes and experience of the first-year pilot phase while focusing on accomplishing
the goal of the effort to improve patient outcomes and save healthcare dollars by integrating real-time epidemiologic surveillance with
rapid delivery of antibiotic resistance results to care-givers via web-based and mobile platforms. The second-year contract included a
quarterly retainer-based project fee as well as volume-dependent per test fees for a total contract value of up to $450,000 to OpGen.
In April 2021, the Company extended its second-year expansion phase by another six months through September 30, 2021 at which point the
project was completed and has ended. The six-month extension and expansion contract included a quarterly retainer-based project fee as
well as volume-dependent per test fees for a total contract value of up to an additional $540,000. During the three months ended March
31, 2022 and 2021, the Company recognized $0 and $108,000 of revenue related to the contract, respectively.
Sandoz
In December 2018, Ares Genetics entered into a service
frame agreement with Sandoz International GmbH (“Sandoz”), to leverage Ares Genetics’ database on the genetics of antibiotic
resistance, ARESdb, and the ARES Technology Platform for Sandoz’ anti-infective portfolio.
Under the terms of the framework agreement, which had an initial term of 36 months
that was subsequently extended to January 31, 2025, Ares Genetics and Sandoz intend to develop a digital anti-infectives platform, combining
established microbiology laboratory methods with advanced bioinformatics and artificial intelligence methods to support drug development
and life-cycle management. The collaboration, in the short- to mid-term, aims to both rapidly and cost-effectively re-purpose existing
antibiotics and design value-added medicines with the objective of expanding indication areas and to overcome antibiotic resistance, in
particular with regards to infections with bacteria that has already developed resistance against multiple treatment options. In the longer-term,
the platform is expected to enable surveillance for antimicrobial resistant pathogens to inform antimicrobial stewardship and the development
of novel anti-infectives that are less prone to encounter resistance and thereby preserve antibiotics as an effective treatment option.
Qiagen
On February 18, 2019, Ares Genetics and Qiagen GmbH,
or Qiagen, entered into a strategic licensing agreement for ARESdb and AREStools, in the area of antimicrobial resistance (“AMR”)
research. The agreement has a term of 20 years and may be terminated by Qiagen for convenience with 180 days written notice.
Ares Genetics has retained the rights to use ARESdb
and AREStools for AMR research, customized bioinformatics services, and for the development of specific AMR assays and applications for
the Curetis Group (including Ares Genetics), as well as third parties (e.g., other diagnostics companies or partners in the pharmaceutical
industry). As the Qiagen research offering is expected to also enable advanced molecular diagnostic services and products, Qiagen’s
customers may obtain a diagnostic use license from Ares Genetics.
Under the terms of the original agreement, Qiagen,
in exchange for a moderate six figure up-front licensing payment, has received an exclusive RUO license to develop and commercialize general
bioinformatics offerings and services for AMR research use only, based on Ares Genetics’ database on the genetics of antimicrobial
resistance, ARESdb, as well as on the ARES bioinformatics AMR toolbox, AREStools. Under the agreement, the parties had agreed to a mid-single
digit percentage royalty rate on Qiagen net sales, which is subject to a minimum royalty rate that steps up upon certain achieved milestones,
which is payable to Ares Genetics. The parties also agreed to further modest six figure milestone payments upon certain product launches.
The contract was subsequently amended in May 2021 to a non-exclusive license and a flat annual license fee as well as a royalty percentage
on potential future panel-based products that are developed by Qiagen.
FISH License
The Company was
party to one license agreement with Life Technologies to acquire certain patent rights and technologies related
to its FISH product line. Royalties were incurred upon the sale of a product or service which utilizes the licensed technology. The Company
terminated this license agreement in October 2020 effective as of June 30, 2021 in conjunction with its announced exit of the FISH business
in June 2021. The Company paid a one-time settlement fee of $350,000 and paid a 10% royalty on the sale of eligible products through June
2021 but is no longer subject to any minimum royalty obligations. The Company recognized net royalty expense of $0 and $8,996 for the
three months ended March 31, 2022 and 2021, respectively.
Siemens
In 2016, Ares Genetics acquired the GEAR assets from
Siemens Technology Accelerator GmbH (“STA”), providing the original foundation to ARESdb. Under the agreement with STA, Ares Genetics incurs
royalties on revenues from licensed product sales or sublicensing proceeds. Royalty rates under the Siemens agreement range from 1.3%
to 40% depending on the specifics of the licenses and rights provided by Ares Genetics to third parties and whether such third parties
may have been originally introduced by Siemens to Ares Genetics. The total net royalty expense related to this agreement was $2,779 and
$616 the three months ended March 31, 2022 and 2021, respectively.
Note 11 - Subsequent Events
On April 25, 2022, the Company announced that its
subsidiary, Curetis, and the EIB expect to restructure the repayment of the first tranche of debt, which matured on April 22, 2022. Under
the currently contemplated terms of the restructured repayment plan, OpGen’s subsidiary Curetis repaid €5.0 million in cash
in April 2022 and the remainder of the debt tranche of approximately €8.35 million (approximately $9 million at current foreign
exchange rates) would be amortized over a 12 month-period commencing at the end of May 2022, which would be paid in equal monthly installments
of approximately €0.7 million in cash. Interest rates on the remaining debt would remain unchanged at 10% per annum. The parties
also anticipate increasing the PPI from its current 0.3% on then prevailing OpGen market cap in June 2024 to 0.75% at that time. No other
payments or consideration (including any equity) is contemplated as part of the currently proposed restructuring plan. The second and
third tranches of €3.0 million and €5.0 million principal plus respective accumulated deferred interest which mature and become
due for repayment in June 2023 and June 2024, respectively, remain unchanged at this time. The Company expects to enter into an amendment
or side letter memorializing the foregoing restructuring as soon as practicable. The proposed restructuring is subject to approval by
the EIB, and there can be no assurance that the Company will succeed in securing such approval.
Item 2. Management’s Discussion
and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion
and Analysis of Financial Condition and Results of Operations should be read in conjunction with the unaudited condensed consolidated
financial statements and the accompanying notes thereto included in Part I, Item 1 of this quarterly report on Form 10-Q. This discussion
contains forward-looking statements, based on current expectations and related to future events and our future financial performance,
that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements
as a result of many important factors, including those set forth under Part II. Item 1A. “Risk Factors” of this quarterly
report on Form 10-Q and Part 1. Item 1A of our annual report on Form 10-K for the year ended December 31, 2021.
Overview
OpGen, Inc. (the “Company”) is a
precision medicine company harnessing the power of molecular diagnostics and informatics to help combat infectious disease. Along with
our subsidiaries, Curetis GmbH and Ares Genetics GmbH, we are developing and commercializing molecular microbiology solutions helping
to guide clinicians with more rapid and actionable information about life threatening infections to improve patient outcomes and decrease
the spread of infections caused by multidrug-resistant microorganisms, or MDROs. Our current product portfolio includes Unyvero, Acuitas
AMR Gene Panel, and the ARES Technology Platform including ARESdb, NGS technology and AI-powered bioinformatics solutions for antibiotic
response prediction including ARESiss and AREScloud, as well as the Curetis CE-IVD-marked PCR-based SARS-CoV-2 test kit. The Company exited
its FISH business in early 2021, and the Company's license agreement with Life Technologies, a subsidiary of Thermo Fisher, was terminated
as of June 30, 2021.
On April 1, 2020, the Company completed a business
combination transaction whereby the Company acquired Curetis GmbH, a private limited liability company organized under the laws of the
Federal Republic of Germany (“Curetis GmbH”). Curetis is an early commercial-stage molecular diagnostics (MDx) company focused
on rapid infectious disease testing for hospitalized patients with the aim to improve the treatment of hospitalized, critically ill patients
with suspected microbial infection and has developed the innovative Unyvero molecular diagnostic solution for comprehensive infectious
disease testing. The business combination transaction was designed principally to leverage each company’s existing research and
development and relationships with hospitals and clinical laboratories to accelerate the sales of both companies’ products and services.
The focus of OpGen is on its combined broad portfolio
of products, which includes high impact rapid diagnostics and bioinformatics to interpret AMR genetic data. The Company currently expects
to focus on the following products for lower respiratory infection, urinary tract infection and invasive joint infection:
| ● | The Unyvero Lower Respiratory Tract, or LRT, test (e.g. for bacterial pneumonias) is the first U.S. Food
and Drug Administration, or FDA, cleared test that can be used for the detection of more than 90% of common causative agents of hospitalized
pneumonia. According to the National Center for Health Statistics (2018), pneumonia is a leading cause of admissions to the hospital and
is associated with substantial morbidity and mortality. The Unyvero LRT automated test detects 19 pathogens within less than five hours,
with approximately two minutes of hands-on time and provides clinicians with a comprehensive overview of 10 genetic antibiotic resistance
markers. We have commercialized the Unyvero LRT BAL test for testing bronchoalveolar lavage, or BAL, specimens from patients with lower
respiratory tract infections following FDA clearance received by Curetis in December 2019. The Unyvero LRT BAL automated test simultaneously
detects 20 pathogens and 10 antibiotic resistance markers, and it is the first and only FDA-cleared panel that also includes Pneumocystis
jirovecii, a key fungal pathogen often found in immunocompromised patients (such as AIDS and transplant patients) that can be difficult
to diagnose, as the 20th pathogen on the panel. We believe the Unyvero LRT and LRT BAL tests have the ability to help address
a significant, previously unmet medical need that causes over $10 billion in annual costs for the U.S. healthcare system, according to
the Centers for Disease Control, or CDC. |
| ● | Following registration of the Unyvero instrument system as an IVD for the Chinese market in early 2021,
we are supporting our strategic partner Beijing Clear Biotech (BCB) in pursuing execution of a supplemental clinical trial with the Unyvero
HPN test. As requested by the Chinese regulatory authority NMPA, this study is geared towards generating additional data in China that
will complement a larger data set with data from abroad compiled from other clinical and analytical studies performed in the past. |
| ● | The Unyvero Urinary Tract Infection, or UTI, test, which is CE-IVD marked in Europe, is currently being
made available to laboratories in the United States as a research use only or RUO kit. The test detects a broad range of pathogens as
well as antimicrobial resistance markers directly from native urine specimens. We initiated a prospective multi-center clinical trial
for the Unyvero UTI in the United States in the third quarter of 2021. |
| ● | The Unyvero Invasive Joint Infection, or IJI, test, which is a variant being developed for the U.S. market,
has also been selected for analytical and clinical performance evaluation including clinical trials towards a future U.S. FDA submission.
Microbial diagnosis of IJI is difficult because of challenges in sample collection, usually at surgery, and patients being on prior antibiotic
therapy which minimizes the chances of recovering viable bacteria. We believe that Unyvero IJI could be useful in identifying pathogens
as well as their AMR markers to help guide optimal antibiotic treatment for these patients. |
| ● | On September 30, 2021, we received clearance from the FDA for our Acuitas AMR Gene Panel for bacterial
isolates. The Acuitas AMR Gene Panel detects 28 genetic antimicrobial resistance, or AMR, markers in isolated bacterial colonies from
26 different pathogens. We believe the panel provides clinicians with a valuable diagnostic tool that informs about potential antimicrobial
resistance patterns early and supports appropriate antibiotic treatment decisions in this indication. We expect to commercialize the Acuitas
AMR Gene Panel for isolates to customers in the United States. |
| ● | We are also developing novel bioinformatics tools and solutions to accompany or augment our current and
potential future IVD products and may seek regulatory clearance for such bioinformatics tools and solutions to the extent they would be
required either as part of our portfolio of IVD products or even as a standalone bioinformatics product. |
OpGen has extensive offerings of additional IVD tests
including CE-IVD-marked Unyvero tests for hospitalized pneumonia patients, implant and tissue infections, intra-abdominal infections,
complicated urinary tract infections, and blood stream infections. Our portfolio furthermore includes a CE-IVD-marked PCR based rapid
test kit for SARS-CoV-2 detection in combination with our PCR compatible universal lysis buffer (PULB).
OpGen’s combined AMR bioinformatics
offerings, when and if such products are cleared for marketing, will offer important new tools to clinicians treating patients with
AMR infections. OpGen’s subsidiary Ares Genetics’ ARESdb is a comprehensive database of genetic and phenotypic
information. ARESdb was originally designed based on the Siemens microbiology strain collection covering resistant pathogens and its
development has significantly expanded, as a result of transferring data from the discontinued Acuitas Lighthouse into ARESdb to now
cover more than 78,000 bacterial isolates that have been sequenced using NGS technology and tested for susceptibility with
applicable antibiotics from a range of over 100 antimicrobial drugs. In the fourth quarter of 2021, Ares Genetics entered into a
strategic database access deal with one of the world’s leading microbiology and IVD corporations for their non-exclusive
access to approximately 1.1% of Ares Genetics’ total database asset at the time of signing. Ares Genetics continues to explore
various discussions with several interested parties in potential future collaboration or licensing opportunities. Additional
partnerships with a U.S. CLIA lab, a contract research organization (“CRO”) and a major University Medical Center have
been initiated and are ongoing and the collaboration master service agreement with Sandoz has recently been extended until January
2025.
In addition to potential future licensing and partnering,
Ares Genetics intends to independently utilize the proprietary biomarker content in this database, as well as to build an independent
business in NGS and AI based offerings for AMR research and diagnostics in collaboration with its current and potential future partners
in the life science, pharmaceutical and diagnostics industries. Ares Genetics signed up Siemens Technology Accelerator and AGES (Austrian
Agency for Health and Food Safety), as well as several other national institutions from various European countries as new customers.
OpGen’s subsidiary Curetis’ Unyvero A50
tests for up to 130 diagnostic targets (pathogens and resistance genes) in under five hours with approximately two minutes of hands-on
time. The system was first CE-IVD-marked in 2012 and was FDA cleared in 2018 along with the LRT test through a De Novo request.
The Unyvero A30 RQ is a new device designed to address the low-to mid-plex testing market for 5-30 DNA targets and to provide results
in approximately 30 to 90 minutes with 2-5 minutes of hands-on time. The Unyvero A30 RQ has a small benchtop footprint and has
an attractive cost of goods profile. Curetis has been following a partnering strategy for the Unyvero A30 RQ and, following the
successful completion of a key development milestone, Curetis has completed final verification and validation testing of the A30 instruments
and is actively engaged in several ongoing partnering discussions and due diligence under respective material transfer agreements.
The Company has extensive partner and distribution
relationships to help accelerate the establishment of a global infectious disease diagnostic testing and informatics business. The Company’s
partners include A. Menarini Diagnostics S.r.l. for pan-European distribution to currently 12 countries and Beijing Clear Biotech Co.
Ltd. for Unyvero A50 product distribution in China. We have a network of distributors covering countries in Europe, the Middle East and
Africa, Asia Pacific and Latin America. With the discontinuation of our FISH products business in Europe, we have reduced our network
of distributors to only those distributors actively commercializing our Unyvero line of products or CE-IVD-marked SARS-CoV-2 test kits.
OpGen will continue to develop and seek FDA and other
regulatory clearances or approvals, as applicable, for our Unyvero UTI and IJI products. OpGen will continue to offer the FDA-cleared
Unyvero LRT and LRT BAL Panels, and FDA-cleared Acuitas AMR Gene Panel tests, as well as the Unyvero UTI Panel as a RUO product to hospitals,
public health departments, clinical laboratories, pharmaceutical companies and CROs. OpGen’s subsidiary, Curetis, continues its
preparations for achieving compliance with the upcoming European Union’s In-Vitro-Diagnostic Device Regulation (IVDR), which officially
will go into effect in May 2022. Given the lack of designated Notified Bodies at this time, and with the recently approved EU commission
proposal to provide for generous multi-year grace periods for IVD products with current In-Vitro-Diagnostic Device Directive (IVDD) CE
marking, it is now possible for Curetis to continue its portfolio of existing CE-IVD marked products until at least May 2025 and May 2026,
respectively, as long as no material changes are being made to any of its products. Following May 2022, however, any new or changed CE
marked products will be required to be IVDR compliant from the outset.
Our headquarters are in Rockville, Maryland,
and our principal operations are in Rockville, Maryland and Holzgerlingen and Bodelshausen, both in Germany. We also have operations in
Vienna, Austria. We operate in one business segment.
Recent developments
COVID-19
On March 11, 2020, the World Health Organization declared
the novel coronavirus (“COVID-19”) a pandemic, and on March 13, 2020, the United States declared a national emergency with
respect to COVID-19. COVID-19 has negatively impacted the global economy, disrupted global supply chains and created significant volatility
and disruption in the financial markets.
As a result of the outbreak, we have experienced a
material impact on our business, financial condition or results of operations for the three months ended March 31, 2022 as well as significant
business disruptions. For example, some of our employees are currently still working remotely from
home, we have continued to suspend most business travel, and we are still not always able to physically meet with future and current customers
to sell and market our products.
We continue
to monitor the impacts of COVID-19 on the global economy and on our business operations. However, at this time, it is difficult to predict
how long the potential operational impacts of COVID-19 will remain in effect or to what degree they will impact our operations and financial
results. An extended period of global supply chain and economic disruption could materially affect our business, results of operations,
access to sources of liquidity and financial condition, as well as our ability to execute our business strategies and initiatives in their
respective expected time frames.
Financings
Since inception, we have incurred, and continue to
incur, significant losses from operations. We have funded our operations primarily through external investor financing arrangements. During
2021, we raised net proceeds of approximately $48 million.
Results of operations for the three months ended
March 31, 2022 and 2021
Revenues
| |
Three months ended March 31, | |
| |
2022 | | |
2021 | |
Product sales | |
$ | 366,052 | | |
$ | 613,918 | |
Laboratory services | |
| 42,929 | | |
| 97,726 | |
Collaboration revenue | |
| 60,764 | | |
| 118,072 | |
Total revenue | |
$ | 469,745 | | |
$ | 829,716 | |
Total revenue for the three months ended March
31, 2022 decreased approximately 43% when compared to the same period in 2021, with a change in the mix of revenue, as follows:
| ● | Product Sales: a decrease in revenue of approximately 40% in the 2022 period compared to the 2021 period
is primarily attributable to the discontinuation of the Company’s FISH line of products in
2021; |
| ● | Laboratory Services: a decrease in revenue of approximately 56% in the 2022 period compared to the 2021
period is primarily attributable to a decrease in COVID testing services performed by Curetis GmbH;
and |
| ● | Collaboration Revenue: a decrease in revenue of approximately 49% in the 2022 period compared to the
2021 period is primarily the result of revenue from our contract with the New York State DOH, which ended in the third quarter of
2021. |
Operating expenses
| |
Three months ended March 31, | |
| |
2022 | | |
2021 | |
Cost of products sold | |
$ | 291,997 | | |
$ | 554,054 | |
Cost of services | |
| 30,562 | | |
| 104,984 | |
Research and development | |
| 2,316,441 | | |
| 2,813,491 | |
General and administrative | |
| 2,625,053 | | |
| 2,663,657 | |
Sales and marketing | |
| 1,051,432 | | |
| 899,252 | |
Impairment of right-of-use asset | |
| — | | |
| 55,496 | |
Total operating expenses | |
$ | 6,315,485 | | |
$ | 7,090,934 | |
Our total operating expenses for the three months
ended March 31, 2022 decreased approximately 11% when compared to the same period in 2021. Operating expenses changed as follows:
| ● | Cost of products sold: cost of products sold for the three months ended March 31, 2022 decreased
approximately 47% when compared to the same period in 2021. The decrease in cost of products sold is primarily attributable to
the discontinuation of the Company’s FISH line of products in 2021 partially
offset by significantly higher direct sales in the U.S. which increased by 76% over the same period in 2021; |
| ● | Cost of services: cost of services for the three months ended March 31, 2022 decreased approximately
71% when compared to the same period in 2021. The decrease in cost of services is primarily attributable to lower cost of services related
to the conclusion of our contract with the New York State DOH in the third quarter of 2021; |
| ● | Research and development: research and development expenses for the three months ended March 31, 2022
decreased approximately 18% when compared to the same period in 2021. The decrease in research and development is primarily attributable
to a reduction in payroll related costs; |
| ● | General and administrative: general and administrative expenses for the three months ended March 31, 2022
decreased approximately 1% when compared to the same period in 2021, primarily due to a reduction in consulting and legal costs; |
| ● | Sales and marketing: sales and marketing expenses for the three
months ended March 31, 2022 increased approximately 17% when compared to the same period in 2021,
primarily due to the expansion of the Company’s sales force; and |
| ● | Impairment of right-of-use asset: impairment of right-of-use asset for the three months ended March 31,
2021 represents the impairment of our San Diego, California ROU asset. |
Other (expense) income
| |
Three months ended March 31, | |
| |
2022 | | |
2021 | |
Warrant inducement expense | |
$ | — | | |
$ | (7,755,541 | ) |
Interest expense | |
| (1,269,581 | ) | |
| (1,164,982 | ) |
Foreign currency transaction gains | |
| 198,740 | | |
| 427,615 | |
Other income | |
| 3,121 | | |
| 4,925 | |
Change in fair value of derivative financial instruments | |
| 109,744 | | |
| (101,390 | ) |
Total other expense | |
$ | (957,976 | ) | |
$ | (8,589,373 | ) |
Our total other expense for the three
months ended March 31, 2022 decreased when compared to the same period in 2021 primarily due to the warrant inducement expense
related to our 2021 Warrant Exercise.
Liquidity and capital resources
As of March 31, 2022, we had cash and cash equivalents
of $30.6 million compared to $36.1 million at December 31, 2021. We have funded our operations primarily through external investor financing
arrangements and have raised funds in 2022 and 2021, including:
During the year ended December 31, 2021, we sold 680,000
shares of common stock under the ATM Agreement resulting in aggregate net proceeds to us of approximately $1.48 million, and gross proceeds
of $1.55 million.
On February 11, 2021, we closed the February 2021
Offering for the purchase of (i) 2,784,184 shares of common stock, (ii) 5,549,149 pre-funded warrants, and (iii) unregistered common share
purchase warrants to purchase 4,166,666 shares. The February 2021 Offering raised aggregate net proceeds of $23.5 million, and gross proceeds
of $25.0 million.
On March 9, 2021, we closed the 2021 Warrant Exercise
resulting in the issuance of 4,842,615 shares of common stock and raising gross proceeds of approximately $9.65 million and net proceeds
of $9.3 million.
On October 18, 2021, we closed the October 2021 Offering
of 150,000 shares of convertible preferred stock and warrants to purchase up to an aggregate of 7,500,000 shares of common stock. The
October 2021 Offering raised aggregate net proceeds of $13.9 million, and gross proceeds of $15.0 million.
To meet our capital needs, we are considering multiple
alternatives, including, but not limited to, additional equity financings, debt financings and other funding transactions, and licensing
and/or partnering arrangements. There can be no assurance that we will be able to complete any such transaction on acceptable terms or
otherwise. We believe that current cash on hand will be sufficient to fund operations into the first quarter of 2023. This has led management
to conclude that there is substantial doubt about our ability to continue as a going concern. In the event we are unable to successfully
raise additional capital during or before the end of the first quarter of 2023, we will not have sufficient cash flows and liquidity to
finance our business operations as currently contemplated. Accordingly, in such circumstances we would be compelled to immediately reduce
general and administrative expenses and delay research and development projects, including the purchase of scientific equipment and supplies,
until we are able to obtain sufficient financing. If such sufficient financing is not received on a timely basis, we 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.
Sources and uses of cash
Our principal source of liquidity is from financing
activities, including issuances of equity and debt securities. The following table summarizes the net cash and cash equivalents provided
by (used in) operating activities, investing activities and financing activities for the periods indicated:
| |
Three months ended March 31, | |
| |
2022 | | |
2021 | |
Net cash used in operating activities | |
$ | (5,041,400 | ) | |
$ | (4,965,928 | ) |
Net cash used in investing activities | |
| (38,713 | ) | |
| (850,885 | ) |
Net cash (used in) provided by financing activities | |
| (17,529 | ) | |
| 32,305,045 | |
Net cash used in operating activities
Net cash used in operating activities for the three
months ended March 31, 2022 consists primarily of our net loss of $6.8 million, reduced by certain noncash items, including depreciation
and amortization expense of $0.5 million, noncash interest expense of $1.1 million, and share-based compensation expense of $0.2 million.
Net cash used in operating activities for the three months ended March 31, 2021 consists primarily of our net loss of $14.9 million, reduced
by certain noncash items, including inducement expense related to warrant repricing of $7.8 million, depreciation and amortization expense
of $0.5 million, noncash interest expense of $0.9 million, and share-based compensation expense of $0.2 million.
Net cash used in investing activities
Net cash used in investing activities for the three
months ended March 31, 2022 and 2021 consisted of the purchases of property and equipment.
Net cash (used in) provided by financing activities
Net cash used in financing activities for the three
months ended March 31, 2022 consisted of payments on finance leases. Net cash provided by financing activities for the three months ended
March 31, 2021 consisted primarily of the net proceeds from the February 2021 Offering, 2021 Warrant Exercise, October 2021 Offering,
and exercises of common stock warrants, net of payments on debt and insurance financings.
Contractual Commitments
OpGen’s subsidiary, Curetis, has
contractual commitments under its 2016 senior, unsecured loan financing facility of up to €25 million with the European
Investment Bank (“EIB”). Curetis drew down three tranches under the facility: €10.0 million in April 2017,
€3.0 million in June 2018, and €5.0 million in June 2019. The first and second tranches have 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. The third tranche originally had a 2.1% participation percentage
interest (“PPI”). Upon maturity of the third tranche, which is not before approximately mid-2024 (and no later than
mid-2025), the EIB would have been entitled to an additional payment that is equity-linked and equivalent to 2.1% of the then
total valuation of Curetis N.V. As part of the amendment between the Company and the EIB on July 9, 2020, the parties adjusted the
PPI percentage applicable to the previous EIB tranche of €5.0 million, which was funded in June 2019 from its original 2.1% PPI
in Curetis N.V.’s equity value upon maturity to a new 0.3% PPI in OpGen’s equity value upon maturity. This right
constitutes an embedded derivative, which is separated and measured at fair value with changes being accounted for through income or
loss.
As of March 31, 2022, the outstanding borrowings under
all tranches were €22,482,127 ($24,957,409), including deferred interest payable at maturity of €4,482,127 ($4,975,609). The
first tranche under the facility matured in April 2022, the second tranche matures in June 2023, and the third tranche matures in June
2024. With respect to the first tranche, in April 2022, the Company announced that Curetis and the EIB expect to restructure the repayment
of such tranche. Under the currently contemplated terms of the restructured repayment plan, Curetis repaid €5.0 million in cash in
April 2022 and the remainder of the debt tranche of approximately €8.35 million (approximately $9 million at current foreign exchange
rates) would be amortized over a 12 month-period commencing at the end of May 2022, which would be paid in equal monthly installments
of approximately €0.7 million in cash. Interest rates on the remaining debt would remain unchanged at 10% per annum. The parties
also anticipate increasing the percent participation interest or PPI from its current 0.3% on then prevailing OpGen market cap by June
2024 to 0.75% at that time. No other payments or consideration (including any equity) is contemplated as part of the currently proposed
restructuring plan. The second and third tranches of €3.0 million and €5.0 million principal plus respective accumulated deferred
interest remain unchanged at this time. The Company expects to enter into an amendment or side letter memorializing the foregoing restructuring
as soon as practicable. The proposed restructuring is subject to approval by the EIB, and there can be no assurance that the Company will
succeed in securing such approval.
Critical accounting policies and use of estimates
This Management’s Discussion and Analysis of
Financial Condition and Results of Operations is based on our unaudited condensed consolidated financial statements, which have been prepared
in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the reporting period. In our audited consolidated financial statements,
estimates are used for, but not limited to, liquidity assumptions, revenue recognition, share-based compensation, allowances for doubtful
accounts and inventory obsolescence, valuation of derivative financial instruments measured at fair value on a recurring basis, deferred
tax assets and liabilities and related valuation allowance, estimated useful lives of long-lived assets, and the recoverability of long-lived
assets. Actual results could differ from those estimates.
A summary of our significant accounting policies is
included in Note 3 “Summary of significant accounting policies” to the accompanying unaudited condensed consolidated financial
statements. Certain of our accounting policies are considered critical, as these policies require significant, difficult or complex judgments
by management, often requiring the use of estimates about the effects of matters that are inherently uncertain. Our critical policies
are summarized in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of
our Annual Report on Form 10-K for the year ended December 31, 2021.
Recently issued accounting pronouncements
See Note 3 “Summary of significant accounting
policies” in this Form 10-Q for a full description of recent accounting pronouncements, including the respective expected dates
of adoption and effects on our unaudited condensed consolidated financial statements.
Off-balance sheet arrangements
As of March 31, 2022 and December 31, 2021, we did
not have any off-balance sheet arrangements.
JOBS Act
Prior to December 31, 2020, the Company was an “emerging
growth company” (“EGC”) as defined in the Jumpstart Our Business Startups Act, (JOBS Act), and elected to take advantage
of certain exemptions from various reporting requirements that are applicable to other public companies until the Company is no longer
an EGC, including using the extended transition period for complying with new or revised accounting standards. As of December 31, 2020,
the Company has become a non-accelerated filer under the rules of the SEC and is no longer classified as an EGC.