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 €15.0 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 an amendment between the Company and the EIB on July 9, 2020, the parties adjusted the PPI percentage applicable to the third EIB tranche
of €5.0 million, which was funded in June 2019, from its original 2.1% PPI in Curetis N.V.’s equity value upon maturity to
a new 0.3% PPI in OpGen’s equity value upon maturity. This right constitutes an embedded derivative, which is separated and measured
at fair value with changes being accounted for through income or loss.
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 May 23, 2022, the Company and
the EIB entered into a Waiver and Amendment Letter (the “2022 EIB Amendment”) relating to the amendment of the EIB loan facility,
between the EIB and Curetis pursuant to which Curetis borrowed an aggregate amount of €18.0
million in three tranches. The 2022 EIB Amendment restructured the first tranche of approximately €13.35
million (including accumulated and deferred interest) of the Company’s outstanding indebtedness with the EIB. Pursuant to the 2022
EIB Amendment, the Company repaid €5.0 million to the EIB in April 2022. The Company also agreed,
among other things, to amortize the remainder of the debt tranche over the twelve-month period beginning in May 2022. The Amendment also
provides for an increase of the PPI applicable to the third tranche under the loan facility from 0.3% to 0.75% beginning in June 2024.
The terms of the second and third tranches of the Company’s indebtedness of €3.0 million
and €5.0 million, respectively, plus accumulated deferred interest remain unchanged pursuant
to the 2022 EIB Amendment. As the effective borrowing rate under the amended agreement is less than the effective borrowing rate under
the previous agreement, a concession is deemed to have been granted under ASC 470-60. As a concession has been granted, the agreement
was accounted for as a troubled debt restructuring under ASC 470-60. The amendment did not result in a gain on restructuring as the future
undiscounted cash outflows required under the amended agreement exceed the carrying value of the debt immediately prior to the amendment.
As of June 30,
2022, the outstanding borrowings under all tranches were €16,392,331 ($17,026,715), including deferred interest payable at
maturity of €1,634,551 ($1,697,808).
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 $779,912 and $1,198,169 for the three
months ended June 30, 2022 and 2021, 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 $2,049,493 and $2,363,151 for the six months ended June
30, 2022 and 2021, respectively.
Note 7 – Stockholders’ equity
As of June 30, 2022, the Company had 100,000,000
shares of authorized common stock and 46,623,618 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 June 24, 2022, the Company entered into the 2022 ATM Agreement with Wainwright, as a sales agent, pursuant to which the Company may offer and sell from time to time in an “at the market offering”, at its option, up to an aggregate of $10.65 million of shares of the Company's common stock through the sales agent. As of June 30, 2022, the Company had not sold any shares under the 2022 ATM Offering (see Note 11).
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.
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 June 30, 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 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 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 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, 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 could 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. The Company terminated the ATM Agreement in June 2022 in conjunction with the execution of the 2022
ATM Agreement.
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 June 30, 2022, 1,284,296 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 June 30, 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 and six months ended June 30,
2022 and 2021, the Company recognized share-based compensation expense as follows:
| |
Three months ended June 30, | | |
Six months ended June 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Cost of services | |
$ | 8,266 | | |
$ | 2,944 | | |
$ | 11,101 | | |
$ | 4,346 | |
Research and development | |
| 73,981 | | |
| 67,783 | | |
| 140,979 | | |
| 102,756 | |
General and administrative | |
| 138,438 | | |
| 172,790 | | |
| 279,320 | | |
| 314,781 | |
Sales and marketing | |
| 36,718 | | |
| 18,031 | | |
| 67,622 | | |
| 29,335 | |
| |
$ | 257,403 | | |
$ | 261,548 | | |
$ | 499,022 | | |
$ | 451,218 | |
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 no options during the three
months ended June 30, 2022. During the three months ended June 30, 2022, 7,691 options were forfeited, and 28,367 options expired. The
Company granted 542,500 options during the six months ended June 30, 2022. During the six months ended June 30, 2022, 10,191 options were
forfeited, and 29,903 options expired.
The Company had total stock options to acquire
2,215,755 shares of common stock outstanding at June 30, 2022 under all of its equity compensation plans.
Restricted stock units
The Company granted 60,000 restricted stock units
during the three months ended June 30, 2022, and 65,868 restricted stock units vested and 7,826 were forfeited. The Company granted 730,572
restricted stock units during the six months ended June 30, 2022, and 173,368 restricted stock units vested and 10,402 were forfeited.
The Company had 833,066 total restricted stock units outstanding at June 30, 2022.
Stock purchase warrants
At June 30, 2022 and December 31, 2021, the following
warrants to purchase shares of common stock were outstanding:
| | | |
| | | |
| | | |
| Outstanding at | |
| Issuance | | |
| Exercise Price | | |
| Expiration | | |
| June 30, 2022 (1) | | |
| December 31, 2021 (1) | |
| February 2015 | | |
$ | 3,300.00 | | |
| February 2025 | | |
| 451 | | |
| 451 | |
| June 2017 | | |
$ | 390.00 | | |
| June 2022 | | |
| — | | |
| 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 | |
| | | |
| | | |
| | | |
| 16,217,008 | | |
| 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 certain 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 June 30, 2022, the Company had acquired twenty-four QuantStudio 5s including none during the three and
six months ended June 30, 2022. As of June 30, 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 $0.5 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 June 30, 2022 and December 31, 2021:
Lease Classification | |
June 30, 2022 | | |
December 31, 2021 | |
ROU Assets: | |
| | | |
| | |
Operating | |
$ | 1,582,325 | | |
$ | 1,814,396 | |
Financing | |
| 19,660 | | |
| 90,467 | |
Total ROU assets | |
$ | 1,601,985 | | |
$ | 1,904,863 | |
Liabilities | |
| | | |
| | |
Current: | |
| | | |
| | |
Operating | |
$ | 394,027 | | |
$ | 459,792 | |
Finance | |
| 16,731 | | |
| 43,150 | |
Noncurrent: | |
| | | |
| | |
Operating | |
| 2,721,233 | | |
| 2,977,402 | |
Finance | |
| 1,962 | | |
| 3,644 | |
Total lease liabilities | |
$ | 3,133,953 | | |
$ | 3,483,988 | |
Maturities of lease liabilities as of June
30, 2022 by fiscal year are as follows:
Maturity of Lease Liabilities | | |
Operating | | |
Finance | | |
Total | |
| 2022 (Six months) | | |
$ | 329,771 | | |
$ | 15,336 | | |
$ | 345,107 | |
| 2023 | | |
| 615,068 | | |
| 3,364 | | |
| 618,432 | |
| 2024 | | |
| 624,663 | | |
| 280 | | |
| 624,943 | |
| 2025 | | |
| 529,481 | | |
| — | | |
| 529,481 | |
| 2026 | | |
| 378,279 | | |
| — | | |
| 378,279 | |
| Thereafter | | |
| 2,126,368 | | |
| — | | |
| 2,126,368 | |
| Total lease payments | | |
| 4,603,630 | | |
| 18,980 | | |
| 4,622,610 | |
| Less: Interest | | |
| (1,488,370 | ) | |
| (287 | ) | |
| (1,488,657 | ) |
| Present value of lease liabilities | | |
$ | 3,115,260 | | |
$ | 18,693 | | |
$ | 3,133,953 | |
Condensed consolidated statements of operations
classification of lease costs as of the three and six months ended June 30, 2022 and 2021 are as follows:
| |
| |
Three months ended June 30, | | |
Six months ended June 30, | |
Lease Cost | |
Classification | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Operating | |
Operating expenses | |
$ | 152,784 | | |
$ | 298,331 | | |
$ | 327,699 | | |
$ | 646,369 | |
Finance: | |
| |
| | | |
| | | |
| | | |
| | |
Amortization | |
Operating expenses | |
| 31,096 | | |
| 111,464 | | |
| 70,807 | | |
| 222,420 | |
Interest expense | |
Other expenses | |
| 509 | | |
| 4,491 | | |
| 1,414 | | |
| 11,350 | |
Total lease costs | |
| |
$ | 184,389 | | |
$ | 414,286 | | |
$ | 399,920 | | |
$ | 880,139 | |
Other lease information as of June 30, 2022 is
as follows:
Other Information | |
Total | |
Weighted average remaining lease term (in years) | |
| | |
Operating leases | |
| 7.7 | |
Finance leases | |
| 0.6 | |
Weighted average discount rate: | |
| | |
Operating leases | |
| 9.2 | % |
Finance leases | |
| 7.3 | % |
Supplemental cash flow information as of
the six months ended June 30, 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 | |
$ | 327,699 | | |
$ | 646,369 | |
Finance leases | |
$ | 1,414 | | |
$ | 11,350 | |
Cash used in financing activities | |
| | | |
| | |
Finance leases | |
$ | 28,101 | | |
$ | 177,742 | |
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
was 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 June
30, 2022 and 2021, the Company recognized $0 and $237,000 of revenue related to the contract, respectively. During the six months
ended June 30, 2022 and 2021, the Company recognized $0 and $345,000 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 have 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 for the three months ended June 30, 2022 and 2021, respectively. The Company recognized net royalty expense of $0 and $8,996 for the six months ended June 30, 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 $703 and $178 for the three months
ended June 30, 2022 and 2021, respectively. The total net royalty expense related to this agreement was $3,482 and $794 for the six months
ended June 30, 2022 and 2021, respectively.
Note 11 - Subsequent Events
Subsequent to June 30, 2022, the Company sold 1,703,324
shares of its common stock under the 2022 ATM Offering resulting in aggregate gross proceeds to the Company of approximately $1.0 million.
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, ARESid, 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 pneumonia
in hospitalized patients. According to the National Center for Health Statistics (2018), pneumonia is a leading cause of admissions to
the hospital and is associated with substantial morbidity and mortality. It also increases in elderly patients, transplant, cancer or
other immunocompromised patients. The Unyvero LRT automated test detects 19 pathogens within less than five hours, with approximately
two minutes of hands-on time and provides clinicians with a comprehensive overview of 10 genetic antibiotic resistance markers. 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. Due
to continued impact of COVID restrictions in China, this supplementary study has not yet been initiated and OpGen currently does not have
visibility on the timelines for such a clinical study to start, given China’s “zero COVID” policies. |
| ● | 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 and have recently announced enrollment of more than 1,000 patient
samples. We currently expect enrollment to be completed in the coming months and expect final data read-out from the UTI clinical trial
in H2-2022 for a subsequent FDA submission. |
| ● | 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 have signed the first two commercial
customer contracts for the Acuitas AMR Gene Panel for isolates and have a funnel of several additional commercial contract proposals that
we expect to enter into during the coming months. |
| ● | 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 who are hospitalized, 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 as well as the Belgian national reference laboratory at UZ Leuven 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’ customers for such offerings include 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 efforts in ensuring compliance with the new European Union’s In-Vitro-Diagnostic Device Regulation
(IVDR), which officially went 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 and results of operations for the three and six months ended June 30, 2022 as well as significant business disruptions.
For example, some of our employees are currently still working remotely from home 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
June 30, 2022 and 2021
Revenues
| |
Three months ended June 30, | |
| |
2022 | | |
2021 | |
Product sales | |
$ | 889,271 | | |
$ | 307,804 | |
Laboratory services | |
| 20,570 | | |
| 266,784 | |
Collaboration revenue | |
| 57,364 | | |
| 237,027 | |
Total revenue | |
$ | 967,205 | | |
$ | 811,615 | |
Total revenue for the three months ended June
30, 2022 increased approximately 19% when compared to the same period in 2021, with a change in the mix of revenue, as follows:
| ● | Product Sales: an increase in revenue of approximately 189% in the 2022 period compared to the 2021 period
is primarily attributable to the one-time sale of a pool of Unyvero A50 instrument systems to our Pan-European
distribution partner Menarini and an increase in domestic Unyvero sales; |
| ● | Laboratory Services: a decrease in revenue of approximately 92% 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 76% 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 June 30, | |
| |
2022 | | |
2021 | |
Cost of products sold | |
$ | 646,389 | | |
$ | 342,580 | |
Cost of services | |
| 15,650 | | |
| 137,934 | |
Research and development | |
| 2,273,756 | | |
| 2,859,590 | |
General and administrative | |
| 2,134,266 | | |
| 2,692,255 | |
Sales and marketing | |
| 1,169,349 | | |
| 802,549 | |
Impairment of right-of-use asset | |
| — | | |
| 115,218 | |
Total operating expenses | |
$ | 6,239,410 | | |
$ | 6,950,126 | |
Our total operating expenses for the three months
ended June 30, 2022 decreased approximately 10% 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 June 30, 2022 increased
approximately 89% when compared to the same period in 2021. The increase is primarily attributable to the one-time sale of a
pool of Unyvero A50 instrument systems to our Pan-European distribution partner Menarini, which also contributed to the
Company’s improved gross margin. Additionally, the Company saw a significant increase in domestic Unyvero sales over the same
period; |
| ● | Cost of services: cost of services for the three months ended June 30, 2022 decreased approximately 89%
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 and a decrease in COVID testing services by
Curetis; |
| ● | Research and development: research and development expenses for the three months ended June 30, 2022 decreased
approximately 20% when compared to the same period in 2021. The decrease in research and development is primarily attributable to
a reduction in payroll related costs resulting primarily from streamlining operations and reducing headcount in R&D and operations
at our Rockville headquarters; |
| ● | General and administrative: general and administrative expenses for the three months ended June 30, 2022
decreased approximately 21% when compared to the same period in 2021, primarily due to a reduction in payroll related costs; |
| ● | Sales and marketing: sales and marketing expenses for the three
months ended June 30, 2022 increased approximately 46% when compared to the same period in 2021,
primarily due to the expansion of the Company’s sales force as well as the return of various international and domestic trade
shows and exhibitions post COVID; and |
| ● | Impairment of right-of-use asset: impairment of right-of-use asset for the three months ended June 30,
2021 represents the impairment of our San Diego, California ROU asset. |
Other (expense) income
| |
Three months ended June 30, | |
| |
2022 | | |
2021 | |
Gain on extinguishment of debt | |
$ | — | | |
$ | 259,353 | |
Interest expense | |
| (779,912 | ) | |
| (1,198,169 | ) |
Foreign currency transaction gains (losses) | |
| 271,967 | | |
| (915 | ) |
Other income | |
| 13,851 | | |
| 4,702 | |
Change in fair value of derivative financial instruments | |
| (74,116 | ) | |
| (13,021 | ) |
Total other expense | |
$ | (568,210 | ) | |
$ | (948,050 | ) |
Our total other expense for the three months
ended June 30, 2022 decreased when compared to the same period in 2021 primarily due to lower interest expense and foreign currency transaction
gains.
Results of operations for the six months ended
June 30, 2022 and 2021
Revenues
| |
Six months ended June 30, | |
| |
2022 | | |
2021 | |
Product sales | |
$ | 1,255,323 | | |
$ | 835,383 | |
Laboratory services | |
| 63,499 | | |
| 450,849 | |
Collaboration revenue | |
| 118,128 | | |
| 355,099 | |
Total revenue | |
$ | 1,436,950 | | |
$ | 1,641,331 | |
Total revenue for the six months ended June
30, 2022 decreased approximately 12% when compared to the same period in 2021, with a change in the mix of revenue, as follows:
| ● | Product Sales: an increase in revenue of approximately 50% in the 2022 period compared to the 2021 period
is primarily attributable to the one-time sale of a pool of Unyvero A50 instrument systems to our Pan-European
distribution partner Menarini and an increase in domestic Unyvero sales; |
| ● | Laboratory Services: a decrease in revenue of approximately 86% 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 67% in the 2022 period compared to the
2021 period is primarily attributable to revenue from our contract with the New York State DOH, which ended in the third quarter of
2021. |
Operating expenses
| |
Six months ended June 30, | |
| |
2022 | | |
2021 | |
Cost of products sold | |
$ | 938,386 | | |
$ | 896,634 | |
Cost of services | |
| 46,212 | | |
| 242,918 | |
Research and development | |
| 4,590,197 | | |
| 5,673,081 | |
General and administrative | |
| 4,759,319 | | |
| 5,355,912 | |
Sales and marketing | |
| 2,220,781 | | |
| 1,701,801 | |
Impairment of right-of-use asset | |
| — | | |
| 170,714 | |
Total operating expenses | |
$ | 12,554,895 | | |
$ | 14,041,060 | |
Our total operating expenses for the six months
ended June 30, 2022 decreased approximately 11% when compared to the same period in 2021. Operating expenses changed as follows:
| ● | Costs of products sold: cost of products sold for the six months ended June 30, 2022 increased
approximately 5% when compared to the same period in 2021. The increase is primarily attributable to the one-time sale of a
pool of Unyvero A50 instrument systems to our Pan-European distribution partner Menarini, which also contributed to the
Company’s improved gross margin. Additionally, the Company saw a significant increase in domestic Unyvero sales over the same
period; |
| ● | Costs of services: cost of services for the six months ended June 30, 2022 decreased approximately 81%
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 and a decrease in COVID testing services by
Curetis; |
| ● | Research and development: research and development expenses for the six months ended June 30, 2022 decreased
approximately 19% when compared to the same period in 2021. The decrease in research and development is primarily attributable to
a reduction in payroll related costs resulting primarily from streamlining operations and reducing headcount in R&D and operations
at our Rockville headquarters; |
| ● | General and administrative: general and administrative expenses for the six months ended June 30, 2022
decreased approximately 11% when compared to the same period in 2021, which is primarily due to a
reduction in payroll related costs; |
| ● | Sales and marketing: sales and marketing expenses for the six
months ended June 30, 2022 increased approximately 30% when compared to the same period in
2021, which is primarily due to the expansion of the Company’s sales force as well as the return of various
international and domestic trade shows and exhibitions post COVID; and |
| ● | Impairment of right-of-use asset: impairment of right-of-use asset for the six months ended June 30, 2021
represents the impairment of our San Diego, California ROU asset. |
Other expense
| |
Six months ended June 30, | |
| |
2022 | | |
2021 | |
Warrant inducement expense | |
$ | — | | |
$ | (7,755,541 | ) |
Gain on extinguishment of debt | |
| — | | |
| 259,353 | |
Interest expense | |
| (2,049,493 | ) | |
| (2,363,151 | ) |
Foreign currency transaction gains (losses) | |
| 470,707 | | |
| 426,700 | |
Other income | |
| 16,972 | | |
| 9,627 | |
Change in fair value of derivative financial instruments | |
| 35,628 | | |
| (114,411 | ) |
Total other expense | |
$ | (1,526,186 | ) | |
$ | (9,537,423 | ) |
Our total other expense for the six months ended
June 30, 2022 decreased when compared to the same period in 2021 primarily due to warrant inducement expense related to our 2021 Warrant
Exercise.
Liquidity and capital resources
As of June 30, 2022, we had cash and cash equivalents
of $16.6 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.
On June 24, 2022, the Company entered into the 2022
ATM Agreement with Wainwright, as a sales agent, pursuant to which the Company may offer and sell from time to time in an at the market
offering, at its option, up to an aggregate of $10.65 million of shares of the Company's common stock through the sales agent. As of June
30, 2022, the Company had not sold any shares under the 2022 ATM Offering (see Note 11).
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:
| |
Six months ended June 30, | |
| |
2022 | | |
2021 | |
Net cash used in operating activities | |
$ | (11,700,904 | ) | |
$ | (12,559,210 | ) |
Net cash used in investing activities | |
| (83,563 | ) | |
| (1,723,064 | ) |
Net cash (used in) provided by financing activities | |
| (6,847,506 | ) | |
| 32,205,067 | |
Net cash used in operating activities
Net cash used in operating activities for the six
months ended June 30, 2022 consisted primarily of our net loss of $12.6 million, reduced by certain noncash items, including depreciation
and amortization expense of $1.0 million, noncash interest expense of $1.6 million, and share-based compensation expense of $0.5 million.
Net cash used in operating activities for the six months ended June 30, 2021 consisted primarily of our net loss of $21.9 million, reduced
by certain noncash items, including inducement expense related to warrant repricing of $7.8 million, depreciation and amortization expense
of $1.3 million, noncash interest expense of $1.9 million, and share-based compensation expense of $0.5 million.
Net cash used in investing activities
Net cash used in investing activities for the six
months ended June 30, 2022 and 2021 consisted of purchases of property and equipment. The majority of the purchases of property and
equipment in 2021 were related to the Company’s new corporate headquarters in Rockville, Maryland.
Net cash (used in) provided by financing activities
Net cash used in financing activities for the six
months ended June 30, 2022 consisted of payments on the Company’s EIB debt and finance leases. Net cash provided by financing activities
for the six months ended June 30, 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 €25.0 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% PPI. Upon maturity of the third tranche, which is not before approximately mid-2024 (and no later than mid-2025), the EIB would
have been entitled to an additional payment that is equity-linked and equivalent to 2.1% of the then total valuation of Curetis N.V. As
part of an amendment between the Company and the EIB on July 9, 2020, the parties adjusted the PPI percentage applicable to the third
EIB tranche of €5.0 million, which was funded in June 2019 from its original 2.1% PPI in Curetis N.V.’s equity value upon maturity
to a new 0.3% PPI in OpGen’s equity value upon maturity. This right constitutes an embedded derivative, which is separated and measured
at fair value with changes being accounted for through income or loss.
As of June 30, 2022, the outstanding borrowings under all tranches were €16,392,331 ($17,026,715),
including deferred interest payable at maturity of €1,634,551 ($1,697,808). On May 23, 2022, the Company and the EIB entered into
a Waiver and Amendment Letter (the “2022 EIB Amendment”), which amended the EIB loan facility. The 2022 EIB Amendment restructured
the first tranche of approximately €13.35 million (including accumulated and deferred interest) of the Company’s indebtedness
with the EIB. Pursuant to the 2022 EIB Amendment, the Company repaid €5.0 million to the EIB in April 2022. The Company also agreed,
among other things, to amortize the remainder of the debt tranche over the twelve-month period beginning in May 2022. The 2022 EIB Amendment
also provides for the increase of the PPI of the third tranche under the loan facility from 0.3% to 0.75% beginning in June 2024. The
terms of the second and third tranches of the Company’s indebtedness of €3.0 million and €5.0 million, respectively, plus
accumulated deferred interest remain unchanged.
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 June 30, 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.
Item 3. Quantitative and Qualitative Disclosures
About Market Risk
As a smaller reporting company, we are not required
to provide the information required by this Item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and
other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange
Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls
and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our
reports filed under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal
financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Our management has carried out an evaluation,
under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness
of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange
Act), as of June 30, 2022. Based upon that evaluation, our principal executive officer and principal financial officer concluded that,
as of the end of the period covered by this report, our disclosure controls and procedures were effective. In designing and evaluating
our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide
only reasonable assurance of achieving the desired control objectives.
Changes in Internal Control over Financial Reporting
For the quarter ended June 30, 2022, there have
been no changes in the Company's internal controls over financial reporting that have materially affected, or are reasonably likely to
materially affect, the Company's internal controls over financial reporting.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
Our business and financial results are subject
to numerous risks and uncertainties. As a result, the risks and uncertainties discussed in Part I, Item 1A. Risk Factors in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2021 should be carefully considered. There have been no material changes in
the assessment of the risk factors set forth in such Form 10-K, except for the additional risk factors noted below, which update the risk
factors included in Part II, Item 1A of our Quarterly Reports on Form 10-Q for the quarter ended March 31, 2022:
If our goodwill,
acquired in-process research and development costs or finite-lived tangible and intangible assets become impaired in the future, we may
be required to record non-cash charges to earnings, which could be material and could reduce stockholders’ equity or otherwise adversely
affect the Company’s financial condition.
We review long-lived assets,
including property and equipment and identifiable amortizing intangible assets, for impairment whenever changes in circumstances or events
may indicate that the carrying amounts are not recoverable. If the fair value is less than the carrying amount of the asset, an impairment
is recognized for the difference. Factors which may cause an impairment of long-lived assets include significant changes in the manner
of use of these assets, negative industry or market trends, a significant underperformance relative to historical or projected future
operating results, extended period of idleness or a likely sale or disposal of the asset before the end of its estimated useful life.
In 2021, the Company had determined that the right-of-use asset associated with the Company’s San Diego, California office lease
may not be recoverable, and, as a result, the Company recorded an impairment charge of $170,714 during the six months ended June 30, 2021.
There can be no assurance that our other long-lived assets and intangible assets will not be further impaired. If our property and equipment
and identifiable amortizing intangible assets are determined to be impaired in the future, we may be required to record non-cash charges
to earnings during the period in which the impairment is determined, which could be material and have an adverse effect on our financial
position and results of operations.
In addition, we review and test goodwill for
impairment at least annually and whenever changes in circumstances indicate that the carrying value of the goodwill may not be recoverable.
The impairment test for goodwill consists of comparing the fair value of the reporting unit and acquired IPR&D, which is estimated
using both the income and market approach, to its carrying value. The process of impairment testing for our goodwill involves a number
of judgments and estimates made by management including future cash flows, revenue growth rates, profitability assumptions, terminal
growth rates and discount rates with regards to our reporting unit. Our internally generated long-range plan includes assumptions regarding
pricing and operating forecasts for our products and technologies. If the judgments and estimates used in our analysis are not realized
or are affected by external factors, then actual results may not be consistent with these judgments and estimates, and we may be required
to record a goodwill impairment charge in the future, which could be material, could reduce stockholders’ equity and have an adverse
effect on our financial position and results of operations.
Item 2. Unregistered Sales of Equity Securities
and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
Exhibit
Number |
|
|
Description |
|
|
|
|
10.1 |
|
|
Waiver and Amendment Letter, dated May 23, 2022 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 24, 2022). |
|
|
|
|
10.2 |
|
|
At the
Market Offering Agreement, dated June 24, 2022, by and between OpGen, Inc. and H.C. Wainwright & Co., LLC (incorporated by
reference to Exhibit 1.1 to the Registrant’s Current Report on Form 8-K filed on June 24, 2022). |
|
|
|
|
31.1* |
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a). |
|
|
|
|
31.2* |
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a). |
|
|
|
|
32.1* |
|
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
101* |
|
|
Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Unaudited Condensed Consolidated Balance Sheets, (ii) the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss, (iii) the Unaudited Condensed Consolidated Statements of Cash Flows and (iv) the Notes to Unaudited Condensed Consolidated Financial Statements. |
| * | Filed or furnished herewith |
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
OPGEN, INC. |
|
|
|
|
|
By: |
|
/s/ Albert Weber |
|
|
|
Albert Weber |
|
|
|
Chief Financial Officer (principal financial officer and principal accounting officer) |
|
|
|
|
|
Date: |
|
August 12, 2022 |