OPGEN INC - Quarter Report: 2023 September (Form 10-Q)

 

 

 

 

 

 

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. In addition, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. These risks should not be construed as exhaustive and should be read in conjunction with our other disclosures, including but not limited to the risk factors described in Part I Item 1A “Risk Factors” of our most recent annual report on Form 10-K and any risk factors included in Part II, Item 1A of this quarterly report. Other risks may be described from time to time in our filings made under the securities laws. New risks emerge from time to time. It is not possible for our management to predict all risks. All forward-looking statements in this quarterly report speak only as of the date made and are based on our current beliefs and expectations. We undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

 

NOTE REGARDING TRADEMARKS

 

We own various U.S. federal trademark registrations and applications and unregistered trademarks and servicemarks, including but not limited to OpGen®, Curetis®, Unyvero®, ARES® and ARES GENETICS®, and Acuitas®. All other trademarks, servicemarks or trade names referred to in this quarterly report are the property of their respective owners. Solely for convenience, the trademarks and trade names in this quarterly report are sometimes referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend the use or display of other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies, products or services.

 

Part I. FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements

OpGen, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(unaudited)

 

		September 30, 2023				December 31, 2022
Assets
Current assets
Cash and cash equivalents		$	292,642			$	7,440,030
Accounts receivable, net			422,725				514,372
Inventory, net			1,198,259				1,345,137
Prepaid expenses and other current assets			1,541,074				1,355,949
Total current assets			3,454,700				10,655,488
Property and equipment, net			3,820,829				3,457,531
Finance lease right-of-use assets, net			986				3,500
Operating lease right-of-use assets			1,915,049				1,459,413
Intangible assets, net			6,842,406				7,440,974
Strategic inventory			1,608,890				2,300,614
Other noncurrent assets			492,022				495,629
Total assets		$	18,134,882			$	25,813,149
Liabilities and Stockholders’ Equity
Current liabilities
Current maturities of long-term debt		$	9,199,764			$	7,023,901
Accounts payable			904,559				420,821
Accrued compensation and benefits			381,807				1,097,654
Accrued liabilities			1,268,723				1,526,204
Deferred revenue			194,687				142,061
Short-term finance lease liabilities			1,121				3,364
Short-term operating lease liabilities			521,424				377,626
Total current liabilities			12,472,085				10,591,631
Long-term debt, net			—				4,850,686
Derivative liabilities			34,364				99,498
Long-term finance lease liabilities			—				280
Long-term operating lease liabilities			2,830,282				2,566,138
Other long-term liabilities			121,428				129,368
Total liabilities			15,458,159				18,237,601
Commitments and contingencies (Note 8)
Stockholders’ equity
Preferred stock, $0.01 par value; 10,000,000 shares authorized; none issued and outstanding at September 30, 2023 and December 31, 2022			—				—
Common stock, $0.01 par value; 100,000,000 shares authorized; 10,013,524 and 2,899,911 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively			100,135				28,999
Additional paid-in capital			291,705,905				281,167,161
Accumulated deficit			(288,451,655	)			(272,824,772	)
Accumulated other comprehensive loss			(677,662	)			(795,840	)
Total stockholders’ equity			2,676,723				7,575,548
Total liabilities and stockholders’ equity		$	18,134,882			$	25,813,149

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

OpGen, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Loss

(unaudited)

 

 

		Three months ended September 30,								Nine months ended September 30,
		2023				2022				2023				2022
Revenue
Product sales		$	558,965			$	359,112			$	1,409,534			$	1,614,435
Laboratory services			47,135				31,016				112,810				94,515
Collaboration revenue			92,922				58,585				826,257				176,713
Total revenue			699,022				448,713				2,348,601				1,885,663
Operating expenses
Cost of products sold			618,796				1,886,191				1,925,566				2,824,577
Cost of services			73,174				17,239				405,582				63,450
Research and development			1,201,865				2,031,113				4,403,488				6,621,310
General and administrative			2,034,628				2,020,452				6,883,588				6,779,773
Sales and marketing			336,184				1,031,496				2,522,471				3,252,277
Goodwill impairment charge			—				6,975,520				—				6,975,520
Total operating expenses			4,264,647				13,962,011				16,140,695				26,516,907
Operating loss			(3,565,625	)			(13,513,298	)			(13,792,094	)			(24,631,244	)
Other (expense) income
Interest and other income			24,977				11,174				86,301				28,147
Interest expense			(396,768	)			(569,306	)			(1,698,564	)			(2,618,799	)
Foreign currency transaction (losses) gains			(135,930	)			(51,547	)			(288,326	)			419,160
Change in fair value of derivative financial instruments			10,389				18,995				65,800				54,623
Total other expense			(497,332	)			(590,684	)			(1,834,789	)			(2,116,869	)
Loss before income taxes			(4,062,957	)			(14,103,982	)			(15,626,883	)			(26,748,113	)
Provision for income taxes			—				—				—				—
Net loss		$	(4,062,957	)		$	(14,103,982	)		$	(15,626,883	)		$	(26,748,113	)
Net loss available to common stockholders		$	(4,062,957	)		$	(14,103,982	)		$	(15,626,883	)		$	(26,748,113	)
Net loss per common share – basic and diluted		$	(0.46	)		$	(5.92	)		$	(2.38	)		$	(11.40	)
Weighted average shares outstanding – basic and diluted			8,778,152				2,382,848				6,565,853				2,345,794
Net loss		$	(4,062,957	)		$	(14,103,982	)		$	(15,626,883	)		$	(26,748,113	)
Other comprehensive income (loss) – foreign currency translation			78,815				(536,758	)			118,178				(2,247,749	)
Comprehensive loss		$	(3,984,142	)		$	(14,640,740	)		$	(15,508,705	)		$	(28,995,862	)

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

OpGen, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)

 

			Common Stock								Preferred Stock
			Number of Shares				Amount				Number of Shares				Amount				Additional Paid- in Capital				Accumulated Other Comprehensive Income (Loss)				Accumulated Deficit				Total
Balances at December 31, 2021			2,322,511			$	23,225				—			$	—			$	276,149,768			$	585,626			$	(235,541,539	)		$	41,217,080
Issuance of RSUs			5,375				54				—				—				(54	)			—				—				—
Stock compensation expense			—				—				—				—				241,619				—				—				241,619
Foreign currency translation			—				—				—				—				—				(483,849	)			—				(483,849	)
Net loss			—				—				—				—				—				—				(6,803,716	)			(6,803,716	)
Balances at March 31, 2022			2,327,886				23,279				—				—				276,391,333				101,777				(242,345,255	)			34,171,134
Issuance of RSUs			3,293				33				—				—				(33	)			—				—				—
Stock compensation expense			—				—				—				—				257,403				—				—				257,403
Foreign currency translation			—				—				—				—				—				(1,227,142	)			—				(1,227,142	)
Net loss			—				—				—				—				—				—				(5,840,415	)			(5,840,415	)
Balances at June 30, 2022			2,331,179				23,312				—				—				276,648,703				(1,125,365	)			(248,185,670	)			27,360,980
Stock compensation expense			—				—				—				—				228,367				—				—				228,367
At the market offering, net of offering costs			85,732				857				—				—				988,847				—				—				989,704
Foreign currency translation			—				—				—				—				—				(536,758	)			—				(536,758	)
Net loss			—				—				—				—				—				—				(14,103,982	)			(14,103,982	)
Balances at September 30, 2022			2,416,911			$	24,169				—			$	—			$	277,865,917			$	(1,662,123	)		$	(262,289,652	)		$	13,938,311
Balances at December 31, 2022			2,899,911			$	28,999				—			$	—			$	281,167,161			$	(795,840	)		$	(272,824,772	)		$	7,575,548
Issuance of RSUs			11,627				116				—				—				(116	)			—				—				—
Stock compensation expense			—				—				—				—				211,122				—				—				211,122
Offering of common stock and warrants, net of issuance costs			2,586,207				25,862				—				—				6,948,188				—				—				6,974,050
Share cancellation			(2,199	)			(22	)			—				—				22				—				—				—
Foreign currency translation			—				—				—				—				—				153,067				—				153,067
Net loss			—				—				—				—				—				—				(5,736,603	)			(5,736,603	)
Balances at March 31, 2023			5,495,546				54,955				—				—				288,326,377				(642,773	)			(278,561,375	)			9,177,184
Issuance of RSUs			22,153				222				—				—				(222	)			—				—				—
Stock compensation expense			—				—				—				—				156,529				—				—				156,529
Cash bonus taken in the form of stock compensation			—				—				—				—				283,554				—				—				283,554
Offering of common stock and warrants, net of issuance costs			1,450,000				14,500				—				—				3,169,150				—				—				3,183,650
Foreign currency translation			—				—				—				—				—				(113,704	)			—				(113,704	)
Net loss			—				—				—				—				—				—				(5,827,323	)			(5,827,323	)
Balances at June 30, 2023			6,967,699				69,677				—				—				291,935,388				(756,477	)			(284,388,698	)			6,859,890
Stock compensation expense			—				—				—				—				(229,483	)			—				—				(229,483	)
Offering of common stock and warrants, net of issuance costs			3,045,825				30,458				—				—				—				—				—				30,458
Foreign currency translation			—				—				—				—				—				78,815				—				78,815
Net loss			—				—				—				—				—				—				(4,062,957	)			(4,062,957	)
Balances at September 30, 2023			10,013,524			$	100,135				—			$	—			$	291,705,905			$	(677,662	)		$	(288,451,655	)		$	2,676,723

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

 

 

 

 

OpGen, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

		Nine months ended September 30,
		2023				2022
Cash flows from operating activities
Net loss		$	(15,626,883	)		$	(26,748,113	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization			1,070,581				1,307,590
Noncash interest expense			1,261,495				1,973,437
Loss on disposal of equipment			—				15,988
Stock compensation expense			138,168				727,389
Change in inventory reserve			535,755				1,447,626
Cash bonus taken in the form of stock compensation			283,554				—
Change in fair value of derivative liabilities			(65,800	)			(54,623	)
Goodwill impairment charge			—				6,975,520
Changes in operating assets and liabilities
Accounts receivable			91,522				386,704
Inventory			290,366				(600,186	)
Other assets			86,516				(326,820	)
Accounts payable			399,197				(519,625	)
Accrued compensation and other liabilities			(1,161,958	)			(1,250,476	)
Deferred revenue			54,388				210,735
Net cash used in operating activities			(12,643,099	)			(16,454,854	)
Cash flows from investing activities
Purchases of property and equipment			(799,498	)			(186,556	)
Net cash used in investing activities			(799,498	)			(186,556	)
Cash flows from financing activities
Proceeds from issuance of common stock and pre-funded warrants, net of issuance costs			10,188,158				—
Proceeds from at the market offering, net of issuance costs			—				989,704
Payments on debt			(3,910,010	)			(8,697,587	)
Payments on finance lease obligations			(2,523	)			(38,925	)
Net cash provided by (used in) financing activities			6,275,625				(7,746,808	)
Effects of exchange rates on cash			15,977				(1,548,819	)
Net decrease in cash and cash equivalents and restricted cash			(7,150,995	)			(25,937,037	)
Cash and cash equivalents and restricted cash at beginning of period			7,935,659				36,632,186
Cash and cash equivalents and restricted cash at end of period		$	784,664			$	10,695,149
Supplemental disclosure of cash flow information
Cash paid for interest		$	1,422,343			$	976,324
Supplemental disclosures of noncash investing and financing activities
Right-of-use assets acquired through operating leases		$	801,321			$	—
Property and equipment transferred to inventory		$	—			$	152,243
Purchased equipment not yet paid for		$	94,784			$	—

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

OpGen, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2023

 

Note 1 – Organization

 

OpGen, Inc. (“OpGen” or the “Company”) was incorporated in Delaware in 2001. On April 1, 2020, OpGen completed its business combination transaction (the “Transaction”) with Curetis N.V., a public company with limited liability under the laws of the Netherlands (the “Seller” or “Curetis N.V.”), as contemplated by the Implementation Agreement, dated as of September 4, 2019 (the “Implementation Agreement”), by and among the Company, the Seller, and Crystal GmbH, a private limited liability company organized under the laws of the Federal Republic of Germany and wholly-owned subsidiary of the Company (the “Purchaser”). Pursuant to the Implementation Agreement, the Purchaser acquired all the shares of Curetis GmbH, a private limited liability company organized under the laws of the Federal Republic of Germany (“Curetis GmbH”), and certain other assets and liabilities of the Seller (together, “Curetis”). As of December 31, 2022, Crystal GmbH was dissolved and merged into Curetis GmbH. References to the “Company” include OpGen and its wholly-owned subsidiaries. The Company’s headquarters are in Rockville, Maryland, and the Company’s principal operations are in Holzgerlingen and Bodelshausen, Germany, and Vienna, Austria. The Company operates in one business segment.

 

OpGen Overview

 

OpGen is a precision medicine company harnessing the power of molecular diagnostics and informatics to help combat infectious disease. Along with its subsidiaries, Curetis GmbH and Ares Genetics GmbH, the Company is 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. OpGen’s current product portfolio includes Unyvero and the ARES Technology Platform including ARESdb, NGS technology and AI-powered bioinformatics solutions for AMR surveillance, outbreak analysis, and antibiotic response prediction including ARESiss, ARESid, ARESasp, and AREScloud.

 

The focus of OpGen is on its combined broad portfolio of products, which include high impact rapid diagnostics and bioinformatics to interpret antimicrobial resistance (“AMR”) genetic data. OpGen will continue to develop and seek FDA and other regulatory clearances or approvals, as applicable, for the Unyvero UTI product. OpGen offers the FDA-cleared Unyvero LRT and LRT BAL Panels as well as the Unyvero UTI Panel as a research use only, or RUO, product to hospitals, public health departments, clinical laboratories, pharmaceutical companies, and contract research organizations, or CROs. In addition, following successful completion of a prospective multi-center clinical trial, the UTI product was submitted to the FDA in the second quarter of 2023. The FDA provided an additional information request letter on June 30, 2023. The Company responded to all of the FDA’s additional requests on October 20, 2023 in order to continue the FDA review. OpGen is also commercializing its CE-marked Unyvero Panels in Europe and other global markets via distributors, and, following the signing of a distribution deal with Fisher Healthcare in April 2023, the Company is using a mix of direct and distributor sales in the United States.

 

In October 2023, the Company discontinued its Acuitas AMR Gene Panel diagnostic test (see Note 11). The Company informed customers of the discontinuation and final orders were processed earlier this year. The discontinuance of this product line did not qualify for discontinued operations reporting.

 

Note 2 – Going Concern and Management’s Plans

 

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Since inception, the Company has incurred, and continues to incur, significant losses from operations and negative operating cash flows and has a significant amount of debt coming due through June 2024. The Company has funded its operations primarily through external investor financing arrangements and significant actions taken by the Company, including the following:

 

●

During the three months ended September 30, 2023, the Company implemented certain cash management initiatives, including restructuring its U.S. operations by reducing headcount from 23 to 6 and scaling down operations at OpGen’s U.S. headquarters to the core functions of a U.S. Nasdaq listed company with only minimal marketing and sales support, allowing the Company to conserve cash and focus on the functions needed to pursue potential strategic alternatives.

 

 

 

 

●

On June 26, 2023, the Company announced that its subsidiary Curetis and the European Investment Bank (“EIB”) agreed in principle to certain terms relating to the repayment of the second tranche of Curetis’ loan from the EIB pursuant to that certain Finance Contract, dated December 12, 2016, as amended, by and between Curetis and the EIB (the “Finance Contract”). The second tranche had a principal balance of €3 million plus accumulated and deferred interest. The second tranche was drawn down in June 2018 and matured on June 22, 2023. On July 4, 2023, the EIB and Curetis entered into a Standstill Agreement (the “Standstill Agreement”) pursuant to which the EIB agreed that, with respect to each default or event of default relating to such second tranche, the EIB would not take any action or exercise any right under the Finance Contract until the earlier of a restructuring of the second tranche and November 30, 2023. As a condition to entering into the Standstill Agreement, Curetis paid the EIB a partial payment of interest on the second tranche of €1 million on June 22, 2023. In addition, Curetis agreed to certain undertakings during the standstill period, including the delivery of a rolling cash flow forecast and to cause a third-party restructuring expert to prepare and deliver a restructuring opinion to the EIB. EIB may terminate the Standstill Agreement upon notice to Curetis if, among other customary termination rights, Curetis or the guarantors fail to comply with any undertakings in the Standstill Agreement, the third party expert determines that there are no prospects for a successful restructuring of the second tranche and that it therefore will be unable to issue a restructuring opinion, or the cash flow forecast shows a negative liquidity shortfall during the specified period.

 

●

On May 4, 2023, the Company closed a best-efforts public offering pursuant to a securities purchase agreement with a certain institutional investor, pursuant to which the Company issued and sold to the Investor (i) 605,000 shares of the Company’s common stock, par value $0.01 per share, (ii) pre-funded warrants to purchase up to an aggregate of 3,890,825 shares of common stock, and (iii) common warrants to purchase up to an aggregate of 4,495,825 shares of common stock. Each share of common stock and accompanying common warrant was sold at a price of $0.7785 per share and accompanying common warrant, and each pre-funded warrant and accompanying common warrant was sold at an offering price of $0.7685 per share underlying such pre-funded warrant and accompanying common warrant, for aggregate gross proceeds of approximately $3.5 million and net proceeds of approximately $3.0 million. The common warrants have an exercise price of $0.7785 per share and will be exercisable beginning on the date of stockholder approval of the exercisability of the warrants under Nasdaq rules or may be exercised pursuant to the Warrant Inducement Agreement entered into on October 12, 2023, as amended on October 26, 2023 (the “Inducement Agreement”), upon the payment of additional consideration of $0.25 per share of common stock issued upon exercise of any existing warrants. The common warrants not exercised as part of the Inducement Agreement will expire on the five-year anniversary of the date of such stockholder approval (see Note 11). Each pre-funded warrant has an exercise price per share of common stock equal to $0.01 per share and may be exercised at any time until the pre-funded warrants are exercised in full. In connection with the offering, the Company also entered into a warrant amendment agreement with the investor pursuant to which the Company amended certain existing warrants to purchase up to 6,396,903 shares of common stock that were previously issued in 2018, 2021, 2022 and 2023 to the investor, with exercise prices ranging from $2.65 to $7.54 per share, in consideration for their purchase of the securities in the offering, as follows: (i) lower the exercise price of the existing warrants to $0.7785 per share, (ii) provide that the existing warrants, as amended, will not be exercisable until the receipt of stockholder approval for the exercisability of the common warrants in the offering, and (iii) extend the original expiration date of the existing warrants by five years following the receipt of such stockholder approval. The increase in fair value resulting from the warrant modifications is accounted for as an equity issuance cost, resulting in a debit and credit to additional paid in capital of approximately $0.3 million. As of September 30, 2023, stockholder approval for the exercisability of the common warrants in the offering has not yet been obtained; however, pursuant to the Inducement Agreement, the existing common warrants are exercisable until December 31, 2023 upon payment of the exercise price plus additional consideration of $0.25 per share of common stock issued upon exercise of any existing warrants. In addition, the Company’s requirement to hold a stockholders’ meeting to obtain approval for the exercisability of the existing common warrants is not applicable during the offer period under the Inducement Agreement.

 

●

On January 11, 2023, the Company closed a best-efforts public offering pursuant to a securities purchase agreement with a certain institutional investor for the purchase of (i) 321,207 shares of the Company’s common stock, par value $0.01 per share, (ii) pre-funded warrants to purchase up to an aggregate of 2,265,000 shares of common stock (the “Pre-funded Warrants”), (iii) Series A-1 common warrants to purchase an aggregate of 2,586,207 shares of common stock (the “Series A-1 Warrants”), and (iv) Series A-2 common warrants to purchase an aggregate of 2,586,207 shares of common stock (the “Series A-2 Warrants,” and together with the Series A-1 Warrants, the “Common Warrants”). Each share of common stock and accompanying Common Warrants were sold at a price of $2.90 per share and accompanying Common Warrants, and each Pre-funded Warrant and accompanying Common Warrants were sold at an offering price of $2.89 per share underlying such Pre-funded Warrants and accompanying Common Warrants, for aggregate gross proceeds of approximately $7.5 million before deducting the placement agent’s fees and the offering expenses, and net proceeds of approximately $6.9 million. The Common Warrants have an exercise price of $2.65 per share. The Series A-1 Warrants were immediately exercisable upon issuance, and will expire five years following the issuance date. The Series A-2 Warrants were immediately exercisable upon issuance, and will expire eighteen months following the issuance date. Subject to certain ownership limitations described in the Pre-funded Warrants, the Pre-funded Warrants were immediately exercisable and could be exercised at a nominal consideration of $0.01 per share of common stock any time until all the Pre-funded Warrants are exercised in full. All Pre-funded Warrants were exercised by February 15, 2023. In connection with the Company’s best-efforts public offering consummated in May 2023, the Company amended the exercise price of the Common Warrants to $0.7785 per share.

 

 

 

●

On October 3, 2022, the Company closed a registered direct offering of shares of common stock and Series C Mirroring Preferred Stock pursuant to a securities purchase agreement entered into with a certain institutional investor. In the offering, the Company agreed to issue and sell to the investor (i) 268,000 shares of the Company’s common stock, par value $0.01 per share, (ii) 33,810 shares of the Company’s Series C Mirroring Preferred Stock, par value $0.01 per share and stated value of $0.01 per share, and (iii) pre-funded warrants to purchase an aggregate of 215,000 shares of common stock. Each share of common stock was sold at a price of $7.00 per share, each share of preferred stock was sold at a price of $0.01 per share, and each pre-funded warrant was sold at an offering price of $6.80 per share underlying such pre-funded warrants, for aggregate gross proceeds of $3.34 million before deducting the placement agent’s fees and the offering expenses, and net proceeds of $3.04 million. Under the purchase agreement, the Company also agreed to issue and sell to the investor in a concurrent private placement warrants to purchase an aggregate of 483,000 shares of common stock. In connection with the offering, the Company also entered into a warrant amendment agreement with the investor pursuant to which the Company agreed to amend certain existing warrants to purchase up to 741,489 shares of common stock that were previously issued in 2018 and 2021 to the investor, with exercise prices ranging from $41.00 to $1,300.00 per share as a condition to their purchase of the securities in the offering, as follows: (i) lower the exercise price of the investor’s existing warrants to $7.54 per share, (ii) provide that the existing warrants, as amended, will not be exercisable until six months following the closing date of the offering, and (iii) extend the original expiration date of the existing warrants by five and one-half years following the close of the offering. The increase in fair value resulting from the warrant modifications is accounted for as an equity issuance cost, resulting in a debit and credit to additional paid in capital for approximately $1.8 million. As of December 31, 2022, all 215,000 pre-funded warrants were exercised and all 33,810 shares of the Company’s Series C Mirroring Preferred Stock were automatically cancelled and ceased to be outstanding following receipt of stockholder approval for the Company’s reverse stock split on November 30, 2022. In connection with the Company’s best-efforts public offering consummated in May 2023, the Company amended the exercise price of the existing warrants to $0.7785 per share.

 

●

On June 24, 2022, the Company entered into an At-the-Market, or ATM, Offering Agreement (the “2022 ATM Agreement”) with H.C. Wainwright & Co., LLC (“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 Wainwright. As of December 31, 2022, the Company sold 85,732 shares under the 2022 ATM Agreement totaling $1.03 million in gross proceeds and $0.99 million in net proceeds. The Company has not sold any shares under the 2022 ATM Agreement in 2023.

 

On June 5, 2023, the Listing Qualifications Staff of The Nasdaq Stock Market LLC notified the Company that the closing bid price of the Company’s common stock had, for 30 consecutive business days preceding the date of such notice, been below the $1.00 per share minimum required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Marketplace Rule 5550(a)(2). In accordance with Nasdaq Marketplace Rule 5810(c)(3)(A), the Company was provided 180 calendar days, or until December 4, 2023, to regain compliance.  If at any time before December 4, 2023, the closing bid price of the common stock is at least $1 for a minimum of ten (10) consecutive trading days, the Company can regain compliance. If the Company is not in compliance with the minimum bid price requirement by December 4, 2023, the Company may be entitled to an additional 180-day grace period if the Company meets the continued listing requirements for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market at such time.

 

OpGen is a guarantor of Curetis’ debt to the EIB and OpGen would likely remain responsible for Curetis’ debt unless it is fully satisfied in connection with the resolution of Curetis’ and Ares Genetics’ insolvency proceedings. If Curetis’ debt is not fully satisfied in connection with the insolvency proceedings, and if the EIB asserts its claims against OpGen, OpGen’s cash reach would be dependent on the remaining amount due, and it is possible that OpGen would need to seek bankruptcy protection in the United States. Even if Curetis’ debt is satisfied in connection with the insolvency proceedings and the EIB does not assert claims against OpGen, OpGen’s cash available to fund its business operations is significantly limited. This has led management to conclude that there is substantial doubt about the Company’s ability to continue as a going concern. To meet its capital needs and improve its liquidity position, the Company has been and continues to actively consider multiple alternatives, including, but not limited to, restructuring or refinancing its debt, seeking additional debt or equity capital, reducing or delaying business activities, selling assets, other strategic financings or transactions and other measures, including obtaining relief under applicable bankruptcy laws. There can be no assurance that the Company will be able to identify or execute on any of these alternatives on acceptable terms or that any of these alternatives will be successful.

 

The accompanying unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

 

Note 3 – Summary of Significant Accounting Policies

 

Basis of presentation and consolidation

 

The Company has prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and the standards of accounting measurement set forth in the Interim Reporting Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted, although the Company believes that the disclosures made are adequate to make the information not misleading. The Company recommends that the unaudited condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s latest Annual Report on Form 10-K. In the opinion of management, all adjustments that are necessary for a fair presentation of the Company’s financial position for the periods presented have been reflected. All adjustments are of a normal, recurring nature, unless otherwise stated. The interim condensed consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year. The December 31, 2022 consolidated balance sheet included herein was derived from the audited consolidated financial statements, but does not include all disclosures including notes required by GAAP for complete financial statements.

 

 

The accompanying unaudited condensed consolidated financial statements include the accounts of OpGen and its wholly-owned subsidiaries as of and for the three and nine months ended September 30, 2023; all intercompany transactions and balances have been eliminated.

 

Foreign currency

 

The Company has subsidiaries located in Holzgerlingen, Germany and Vienna, Austria, each of which use currencies other than the U.S. dollar as their functional currency. As a result, all assets and liabilities of the subsidiaries are translated into U.S. dollars based on exchange rates at the end of the reporting period. Income and expense items are translated at the average exchange rates prevailing during the reporting period. Translation adjustments are reported in accumulated other comprehensive income (loss), a component of stockholders’ equity. Foreign currency translation adjustments are the sole component of accumulated other comprehensive income (loss) at September 30, 2023 and December 31, 2022.

 

Foreign currency transaction gains and losses, excluding gains and losses on intercompany balances where there is no current intent to settle such amounts in the foreseeable future, are included in the determination of net loss. Unless otherwise noted, all references to “$” or “dollar” refer to the United States dollar.

 

Use of estimates

 

In preparing financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In the accompanying unaudited condensed consolidated financial statements, estimates are used for, but not limited to, liquidity assumptions, revenue recognition, inducement expense related to warrant repricing, stock-based compensation, allowances for doubtful accounts and inventory obsolescence, discount rates used to discount unpaid lease payments to present values, valuation of derivative financial instruments measured at fair value on a recurring basis, deferred tax assets and liabilities and related valuation allowance, determining the fair value of assets acquired and liabilities assumed in business combinations, the estimated useful lives of long-lived assets, and the recoverability of long-lived assets. Actual results could differ from those estimates.

 

Fair value of financial instruments

 

Financial instruments classified as current assets and liabilities (including cash and cash equivalents, receivables, accounts payable, deferred revenue and short-term notes) are carried at cost, which approximates fair value, because of the short-term maturities of those instruments.

 

Cash and cash equivalents and restricted cash

 

The Company considers all highly liquid instruments with original maturities of three months or less to be cash equivalents. The Company has cash and cash equivalents deposited in financial institutions in which the balances occasionally exceed the Federal Deposit Insurance Corporation (“FDIC”) insured limit of $250,000. On March 10, 2023, the Company learned that Silicon Valley Bank (“SVB”), the Company’s primary bank at the time (now a division of First Citizens Bank), was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation as receiver. The Company did not experience any losses in such accounts, but since the Company was exposed to credit risk with the failure of SVB, management diversified the Company’s holdings to minimize credit risk in the future.

 

At September 30, 2023 and December 31, 2022, the Company had funds totaling $492,022 and $495,629, respectively, which are required as collateral for letters of credit benefiting its landlords and for credit card processors. These funds are reflected in other noncurrent assets on the accompanying unaudited condensed consolidated balance sheets.

 

 

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets:

 

		September 30, 2023				December 31, 2022				September 30, 2022				December 31, 2021
Cash and cash equivalents		$	292,642			$	7,440,030			$	10,275,654			$	36,080,392
Restricted cash			492,022				495,629				419,495				551,794
Total cash and cash equivalents and restricted cash in the condensed consolidated statements of cash flows		$	784,664			$	7,935,659			$	10,695,149			$	36,632,186

 

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, the customer’s current ability to pay its obligation, and reasonable and supportable forecasts from the customer. If amounts become uncollectible, they are charged to operations when that determination is made. The allowance for credit losses was $0 as of September 30, 2023 and December 31, 2022.

 

At September 30, 2023, the Company had accounts receivable from three customers which individually represented 24%, 24%, and 11% of total accounts receivable. At December 31, 2022, the Company had accounts receivable from two customers which individually represented 41% and 21% of total accounts receivable. For the three months ended September 30, 2023, revenue earned from four customers represented 21%, 15%, 12%, and 11% of total revenues. For the three months ended September 30, 2022, revenue earned from three customers represented 29%, 18%, and 11% of total revenues. For the nine months ended September 30, 2023, revenue earned from three customers represented 28%, 17%, and 10% of total revenues. For the nine months ended September 30, 2022, revenue earned from two customers represented 43% and 16% of total revenues.

 

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: 

 

		September 30, 2023				December 31, 2022
Raw materials and supplies		$	993,093			$	1,011,476
Work-in-process			34,638				37,445
Finished goods			1,779,418				2,596,830
Total		$	2,807,149			$	3,645,751

 

Inventory includes Unyvero system instruments, Unyvero cartridges, reagents and components for Unyvero and Acuitas kits, and reagents and supplies used for the Company’s laboratory services.

 

The Company periodically 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. Based on the Company’s assumptions and estimates, inventory reserves for obsolescence, expirations, and slow-moving inventory were $2,214,185 and $1,694,843 at September 30, 2023 and December 31, 2022, respectively.

 

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 and nine months ended September 30, 2023 and 2022, 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. The Company did not identify any impaired ROU assets for the nine months ended September 30, 2023 and 2022.

 

Intangible assets

 

As of September 30, 2023, the Company’s intangible assets with net balances are all finite-lived.

 

Finite-lived and indefinite-lived intangible assets

 

Intangible assets include trademarks and tradenames, developed technology and software, in-process research & development (“IPR&D”), and distributor relationships and consisted of the following as of September 30, 2023 and December 31, 2022:

 

								September 30, 2023												December 31, 2022
		Subsidiary		Cost				Accumulated Amortization and Impairment				Effect of Foreign Exchange Rates				Net Balance				Accumulated Amortization and Impairment				Effect of Foreign Exchange Rates				Net Balance
Trademarks and tradenames		Curetis		$	1,768,000			$	(592,893	)		$	(74,033	)		$	1,101,074			$	(469,011	)		$	(62,520	)		$	1,236,469
Distributor relationships		Curetis			2,362,000				(528,064	)			(98,907	)			1,735,029				(417,728	)			(83,525	)			1,860,747
A50 – Developed technology		Curetis			349,000				(167,211	)			(14,614	)			167,175				(132,273	)			(12,342	)			204,385
Ares – Developed technology		Ares Genetics			5,333,000				(1,277,401	)			(216,471	)			3,839,128				(1,010,495	)			(183,132	)			4,139,373
A30 – In-Process Research & Development		Curetis			5,706,000				(5,467,067	)			(238,933	)			—				(5,407,699	)			(298,301	)			—
				$	15,518,000			$	(8,032,636	)		$	(642,958	)		$	6,842,406			$	(7,437,206	)		$	(639,820	)		$	7,440,974

 

 

Identifiable intangible assets are amortized on a straight-line basis over their estimated useful lives. The estimated useful lives of the intangibles are:

 

		Estimated Useful Life
Trademarks and tradenames		10 years
Customer/distributor relationships		15 years
A50 – Developed technology		7 years
Ares – Developed technology		14 years
A30 – Acquired in-process research & development		Indefinite

 

Acquired IPR&D represents the fair value assigned to those research and development projects that were acquired in a business combination for which the related products have not received regulatory approval and have no alternative future use. IPR&D is capitalized at its fair value as an indefinite-lived intangible asset, and any development costs incurred after the acquisition are expensed as incurred. Upon achieving regulatory approval or commercial viability for the related product, the indefinite-lived intangible asset is accounted for as a finite-lived asset and is amortized on a straight-line basis over the 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. During the Company’s annual impairment test for its IPR&D intangible asset at December 31, 2022, it was determined that the infinite-lived intangible asset was impaired because although the Company has an ongoing collaboration utilizing the intangible asset, at the time, the contracted cash flow associated with this collaboration and projected future cash flows did not support the carrying amount. As a result, the Company recorded an impairment charge in the amount of $5,407,699 for the year ended December 31, 2022.

 

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 $187,255 and $182,265 for the three months ended September 30, 2023 and 2022, respectively. Total amortization expense of intangible assets was $561,172 and $546,795 for the nine months ended September 30, 2023 and 2022, respectively. Expected future amortization of intangible assets is as follows:

 

Year Ending December 31,
2023 (October to December)		$	183,255
2024			733,020
2025			733,020
2026			733,020
2027			697,152
Thereafter			3,762,939
Total		$	6,842,406

 

In accordance with ASC 360-10, Property, Plant and Equipment, intangible assets, other than IPR&D as discussed above, 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. During the three and nine months ended September 30, 2023, the Company identified triggering events that may indicate that the carrying amount of the intangible assets are not recoverable. The triggering events identified include the decline in the Company’s stock price and the Company’s shortening cash reach. As a result of identifying these potential indicators of impairment, the Company performed a long-lived asset impairment analysis for the three months ended September 30, 2023, and this analysis determined that the fair value of the Company’s assets exceeded their carrying values, so no impairment loss was recorded. During the three and nine months ended September 30, 2022, 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 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 year ended December 31, 2022, the Company performed qualitative and quantitative analyses, assessing trends in market capitalization, current and future cash flows, revenue growth rates, and the impact of global unrest and the COVID-19 pandemic on the Company and its performance. Based on the analysis performed, and primarily due to changes in the Company’s stock price and market capitalization in the third quarter of 2022, it was determined that goodwill was impaired. As a result, the Company recorded a goodwill impairment charge in the full amount of $6,940,549 for the year ended December 31, 2022.

 

Revenue recognition

 

The Company derives revenues from (i) the sale of Unyvero Application cartridges and Unyvero instruments, (ii) providing laboratory services, (iii) providing collaboration services (e.g., with the Foundation for Innovative New Diagnostics (FIND) on the Unyvero A30 RQ platform) including funded software and license arrangements, and (iv) granting access to subsets 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.

 

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 from 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 September 30, 2023 and 2022, the Company recognized $78,752 and $110,439 as a reduction of research and development expense related to government grant arrangements, respectively. For the nine months ended September 30, 2023 and 2022, the Company recognized $301,229 and $324,168 as a reduction of research and development expense related to government grant arrangements, respectively. The Company had earned but not yet received $680,302 and $401,436 related to these agreements and incentives included in prepaid expenses and other current assets, as of September 30, 2023 and December 31, 2022, respectively.

 

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.

 

Stock-based compensation

 

Stock-based compensation expense is recognized at grant date 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. For restricted stock awards with a time-based vesting condition, the fair value, which is fixed at the grant date for purposes of recognizing compensation costs, is determined by reference to the Company’s stock price on the grant date. 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.

 

Warrants

 

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments’ specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”), and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the instruments are free standing financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company’s own ordinary shares and whether the instrument holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent period end date while the instruments are outstanding.

 

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 $232,682,072 and $202,015,062 at December 31, 2022 and 2021, respectively. Despite the NOL carryforwards, which began expiring 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 $170,661,923 at December 31, 2022 from their foreign subsidiaries. $162,712,615 of those foreign NOL carryforwards are from the operations of the Company’s German subsidiary. 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) unvested restricted stock units representing the right to acquire shares of common stock, which have been excluded from the computation of diluted loss per share, was 11.1 million shares and 1.0 million shares as of September 30, 2023 and 2022, respectively.

 

 

Adopted accounting pronouncements

 

In June 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Codification (ASC) Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The purpose of Update No. 2016-13 is to replace the incurred loss impairment methodology for financial assets measured at amortized cost with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information, including forecasted information, to develop credit loss estimates. Update No. 2016-13 did not have a material impact on the Company's financial position or results of operations.

 

In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50), Compensation — Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2021-04”). ASU 2021-04 clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options, including warrants, that remain equity-classified after modification or exchange. ASU 2021-04 requires an entity to treat a modification or an exchange of a freestanding equity-classified written call option that remains equity-classified after the modification or exchange as an exchange of the original instrument for a new instrument and provides guidance on measuring and recognizing the effect of a modification or an exchange. The Company adopted ASU 2021-04 on January 1, 2022. The adoption did not have a material impact on the Company’s consolidated financial statements and related disclosures.

 

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 and laboratory services to hospitals, clinical laboratories and other healthcare providing customers, and enters into collaboration agreements with government agencies, non-governmental organizations, and healthcare providers. The revenues by type of service consist of the following:

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2023				2022				2023				2022
Product sales		$	558,965			$	359,112			$	1,409,534			$	1,614,435
Laboratory services			47,135				31,016				112,810				94,515
Collaboration revenue			92,922				58,585				826,257				176,713
Total revenue		$	699,022			$	448,713			$	2,348,601			$	1,885,663

 

Revenues by geography are as follows:

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2023				2022				2023				2022
Domestic		$	142,716			$	135,857			$	523,978			$	415,926
International			556,306				312,856				1,824,623				1,469,737
Total revenue		$	699,022			$	448,713			$	2,348,601			$	1,885,663

 

Deferred revenue

 

Changes to deferred revenue for the period were as follows:

 

Balance at December 31, 2022		$	142,061
Contracts with customers			198,419
Recognized in the current period			(144,031	)
Currency translation adjustment			(1,762	)
Balance at September 30, 2023		$	194,687

 

Contract assets

 

The Company had no contract assets as of September 30, 2023 and December 31, 2022, which are generated when contractual billing schedules differ from revenue recognition timing. 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 September 30, 2023 and December 31, 2022.

 

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 and nine months ended September 30, 2023, 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 2016, Curetis entered into a contract for an up to €25.0 million senior, unsecured loan financing facility from the EIB (see Note 6). In June 2019, Curetis drew down a third tranche of €5.0 million from the EIB. 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% 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. On May 23, 2022, the Company entered into a Waiver and Amendment Letter which increased the PPI to 0.75% 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 nine months ended September 30, 2023 was as follows:

 

Description		Balance at December 31, 2022				Change in Fair Value				Effect of Foreign Exchange Rates				Balance at September 30, 2023
Participation percentage interest liability		$	99,498			$	(65,800	)		$	666			$	34,364
Total		$	99,498			$	(65,800	)		$	666			$	34,364

 

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 September 30, 2023, the Company did not record any such impairment expenses. During the year ended December 31, 2022, the Company recorded impairment expense of $6,940,549 related to its goodwill (see Note 3) and $5,407,699 related to its indefinite-lived intangible asset (see Note 3).

 

 

Note 6 – Debt

 

The following table summarizes the Company’s long-term debt and short-term borrowings as of September 30, 2023 and December 31, 2022:

 

		September 30, 2023				December 31, 2022
EIB		$	9,947,611			$	13,489,178
Total debt obligations			9,947,611				13,489,178
Unamortized debt discount			(747,847	)			(1,614,591	)
Carrying value of debt			9,199,764				11,874,587
Less current portion			(9,199,764	)			(7,023,901	)
Non-current portion of long-term debt		$	—			$	4,850,686

 

EIB Loan Facility

 

In 2016, Curetis entered into a contract for an up to €25.0 million senior, unsecured loan financing facility from the EIB. The funding could be drawn in up to five tranches within 36 months of entry into the contract, 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 €10.0 million from this facility. This tranche had 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 €15.0 million to disburse this €5.0 million third 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 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 EIB debt was measured and recognized at fair value as of the acquisition date. The fair value of the EIB debt was approximately €14.4 million (approximately $15.8 million) as of the acquisition date. The resulting debt discount will be 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 €13.4 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. Accordingly, the Company agreed to pay a monthly amount of approximately €0.7 million through April 2023. 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. The second tranche became due and payable by the Company to the EIB in June 2023, and the third tranche will become due and payable in June 2024. 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.

 

 

On June 26, 2023, the Company announced that its subsidiary Curetis and the European Investment Bank (“EIB”) agreed in principle to certain terms relating to the repayment of the second tranche of Curetis’ loan from the EIB pursuant to that certain Finance Contract, dated December 12, 2016, as amended, by and between Curetis and the EIB (the “Finance Contract”). The second tranche had a principal balance of €3 million plus accumulated and deferred interest. The second tranche was drawn down in June 2018 and matured on June 22, 2023. On July 4, 2023, the EIB and Curetis entered into a Standstill Agreement pursuant to which the EIB agreed that, with respect to each default or event of default relating to such second tranche, the EIB would not take any action or exercise any right under the Finance Contract until the earlier of a restructuring of the second tranche and November 30, 2023. As a condition to entering into the Standstill Agreement, Curetis paid the EIB a partial payment of interest on the second tranche of €1 million on June 22, 2023. In addition, Curetis agreed to certain undertakings during the standstill period, including the delivery of a rolling cash flow forecast and to cause a third-party restructuring expert to prepare and deliver a restructuring opinion to the EIB. EIB may terminate the Standstill Agreement upon notice to Curetis if, among other customary termination rights, Curetis or the guarantors fail to comply with any undertakings in the Standstill Agreement, the third party expert determines that there are no prospects for a successful restructuring of the second tranche and that it therefore will be unable to issue a restructuring opinion, or the cash flow forecast shows a negative liquidity shortfall during the specified period.

 

As of September 30, 2023, the outstanding borrowings under all tranches were €9.4 million (approximately $9.9 million), including deferred interest payable at maturity of €1.4 million (approximately $1.5 million).

 

Total interest expense (including amortization of debt discounts and financing fees) on all debt instruments was $396,768 and $569,306 for the three months ended September 30, 2023 and 2022, 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 $1,698,564 and $2,618,799 for the nine months ended September 30, 2023 and 2022, respectively.

 

Note 7 – Stockholders’ equity

 

As of September 30, 2023, the Company had 100,000,000 shares of authorized common stock and 10,013,524 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 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. Following receipt of approval from stockholders at a special meeting of stockholders held on November 30, 2022, 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, which reverse stock split was effective January 5, 2023. 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 an At-the-Market Offering with H.C. Wainwright & Co., 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 $10.65 million of shares of the Company’s common stock through Wainwright. As of December 31, 2022, the Company sold 85,732 shares under the 2022 ATM Offering totaling $1.03 million in gross proceeds and $0.99 million in net proceeds. The Company has not sold any shares under the 2022 ATM Agreement in 2023.

 

On October 3, 2022, the Company closed a registered direct offering of shares of common stock and Series C Mirroring Preferred Stock pursuant to a securities purchase agreement entered into with a certain institutional investor. In the offering, the Company agreed to issue and sell to the investor (i) 268,000 shares of the Company’s common stock, par value $0.01 per share, (ii) 33,810 shares of the Company’s Series C Mirroring Preferred Stock, par value $0.01 per share and stated value of $0.01 per share, and (iii) pre-funded warrants to purchase an aggregate of 215,000 shares of common stock. Each share of common stock was sold at a price of $7.00 per share, each share of preferred stock was sold at a price of $0.01 per share, and each pre-funded warrant was sold at an offering price of $6.80 per share underlying such pre-funded warrants, for aggregate gross proceeds of $3.34 million before deducting the placement agent’s fees and the offering expenses, and net proceeds of $3.04 million. Under the purchase agreement, the Company also agreed to issue and sell to the investor in a concurrent private placement warrants to purchase an aggregate of 483,000 shares of common stock. In connection with the offering, the Company also entered into a warrant amendment agreement with the investor pursuant to which the Company agreed to amend certain existing warrants to purchase up to 741,489 shares of common stock that were previously issued in 2018 and 2021 to the investor, with exercise prices ranging from $41.00 to $1,300.00 per share as a condition to their purchase of the securities in the offering, as follows: (i) lower the exercise price of the investor’s existing warrants to $7.54 per share, (ii) provide that the existing warrants, as amended, will not be exercisable until six months following the closing date of the offering, and (iii) extend the original expiration date of the existing warrants by five and one-half years following the closing of the offering. The increase in fair value resulting from the warrant modifications is accounted for as an equity issuance cost, resulting in a debit and credit to additional paid in capital for approximately $1.8 million. As of December 31, 2022, all 215,000 pre-funded warrants were exercised and all 33,810 shares of the Company’s Series C Mirroring Preferred Stock were automatically cancelled and ceased to be outstanding following receipt of stockholder approval for the Company’s reverse stock split on November 30, 2022. In connection with the Company’s best-efforts public offering consummated in May 2023, the Company amended the exercise price of the existing warrants to $0.7785 per share.

 

 

On January 11, 2023, the Company closed a best-efforts public offering pursuant to a securities purchase agreement entered into with a certain institutional investor for the purchase of (i) 321,207 shares of the Company’s common stock, par value $0.01 per share, (ii) pre-funded warrants to purchase up to an aggregate of 2,265,000 shares of common stock, (iii) Series A-1 common warrants to purchase an aggregate of 2,586,207 shares of common stock, and (iv) Series A-2 common warrants to purchase an aggregate of 2,586,207 shares of common stock. Each share of common stock and accompanying Series A-1 Warrant and Series A-2 Warrant (collectively, the “Common Warrants”) was sold at a price of $2.90 per share and accompanying Common Warrants, and each Pre-funded Warrant and accompanying Series A-1 Warrant and Series A-2 Warrant was sold at an offering price of $2.89 per share underlying such Pre-funded Warrants and accompanying Common Warrants, for aggregate gross proceeds of approximately $7.5 million before deducting the placement agent’s fees and the offering expenses, and net proceeds of approximately $6.9 million. The Common Warrants have an exercise price of $2.65 per share. The Series A-1 Warrants were immediately exercisable upon issuance, and will expire five years following the issuance date. The Series A-2 Warrants were immediately exercisable upon issuance, and will expire eighteen months following the issuance date. Subject to certain ownership limitations described in the Pre-funded Warrants, the Pre-funded Warrants were immediately exercisable and could be exercised at a nominal consideration of $0.01 per share of common stock any time until all the Pre-funded Warrants are exercised in full. All Pre-funded Warrants were exercised by February 15, 2023. In connection with the Company’s best-efforts public offering consummated in May 2023, the Company amended the exercise price of the Common Warrants to $0.7785 per share.

 

On May 4, 2023, the Company closed a best-efforts public offering pursuant to a securities purchase agreement with a certain institutional investor, pursuant to which the Company issued and sold to the Investor (i) 605,000 shares of the Company’s common stock, par value $0.01 per share, (ii) pre-funded warrants to purchase up to an aggregate of 3,890,825 shares of common stock, and (iii) common warrants to purchase up to an aggregate of 4,495,825 shares of common stock. Each share of common stock and accompanying common warrant was sold at a price of $0.7785 per share and accompanying common warrant, and each pre-funded warrant and accompanying common warrant was sold at an offering price of $0.7685 per share underlying such pre-funded warrant and accompanying common warrant, for aggregate gross proceeds of approximately $3.5 million and net proceeds of approximately $3.0 million. The common warrants have an exercise price of $0.7785 per share and will be exercisable beginning on the date of stockholder approval of the exercisability of the warrants under Nasdaq rules or may be exercised pursuant to the Warrant Inducement Agreement entered into on October 12, 2023, as amended on October 26, 2023 (the “Inducement Agreement”), upon the payment of additional consideration of $0.25 per share of common stock issued upon exercise of any existing warrants. The common warrants not exercised as part of the Inducement Agreement will expire on the five-year anniversary of the date of such stockholder approval (see Note 11). Each pre-funded warrant has an exercise price per share of common stock equal to $0.01 per share and may be exercised at any time until the pre-funded warrants are exercised in full. In connection with the offering, the Company also entered into a warrant amendment agreement with the investor pursuant to which the Company amended certain existing warrants to purchase up to 6,396,903 shares of common stock that were previously issued in 2018, 2021, 2022 and 2023 to the investor, with exercise prices ranging from $2.65 to $7.54 per share, in consideration for their purchase of the securities in the offering, as follows: (i) lower the exercise price of the existing warrants to $0.7785 per share, (ii) provide that the existing warrants, as amended, will not be exercisable until the receipt of stockholder approval for the exercisability of the common warrants in the offering, and (iii) extend the original expiration date of the existing warrants by five years following the receipt of such stockholder approval. The increase in fair value resulting from the warrant modifications is accounted for as an equity issuance cost, resulting in a debit and credit to additional paid in capital of approximately $0.3 million. As of September 30, 2023, stockholder approval for the exercisability of the common warrants in the offering has not yet been obtained; however, pursuant to the Inducement Agreement, the existing common warrants are exercisable until December 31, 2023 upon payment of the exercise price plus additional consideration of $0.25 per share of common stock issued upon exercise of any existing warrants. In addition, the Company’s requirement to hold a stockholders’ meeting to obtain approval for the exercisability of the existing common warrants is not applicable during the offer period under the Inducement 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 (i) 2,710 plus (ii) 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 (iii) 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 (i) 4% of the outstanding shares of common stock on the last day of the immediately preceding fiscal year, or (ii) another lesser amount determined by the Company’s Board of Directors. Following Board of Director approval, 115,996 shares were automatically added to the 2015 Plan in 2023. 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 September 30, 2023, 107,481 shares remain available for issuance under the 2015 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 10,500 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 $21.60, 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.

 

For the three and nine months ended September 30, 2023 and 2022, the Company recognized share-based compensation expense as follows: 

 

		Three months ended September 30,								Nine months ended September 30,
		2023				2022				2023				2022
Cost of services		$	(442	)		$	—			$	(442	)		$	11,101
Research and development			(159,742	)			82,659				(41,914	)			223,638
General and administrative			74,411				108,672				259,452				387,992
Sales and marketing			(143,710	)			37,036				(78,928	)			104,658
		$	(229,483	)		$	228,367			$	138,168			$	727,389

 

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. Share-based compensation expense decreased significantly in the quarter ended September 30, 2023 primarily due to reversals resulting from forfeited options and restricted stock units upon the reduction in force in connection with the Company’s cash management efforts (see Note 2).

 

During the three and nine months ended September 30, 2023, the Company did not grant any options, 3,663 options were forfeited, and 1,734 options expired.

 

The Company had total stock options to acquire 102,200 shares of common stock outstanding at September 30, 2023 under all of its equity compensation plans.

 

Restricted stock units

 

During the three months ended September 30, 2023, the Company did not grant any restricted stock units, no restricted stock units vested, and 20,438 were forfeited. During the nine months ended September 30, 2023, the Company granted 100,500 restricted stock units, 33,780 restricted stock units vested, and 20,438 were forfeited. The Company had 89,189 total restricted stock units outstanding at September 30, 2023.

 

 

Stock purchase warrants

 

At September 30, 2023 and December 31, 2022, the following warrants to purchase shares of common stock were outstanding:

 

													Outstanding at
	Issuance				Exercise Price				Expiration				September 30, 2023 (1)				December 31, 2022 (1)
	February 2015			$	66,000.00				February 2025				23				23
	February 2018			$	1,625.00				February 2023				—				462
	February 2018			$	1,300.00				February 2023				—				3,848
	October 2019			$	40.00				October 2024				17,700				17,700
	October 2019			$	52.00				October 2024				11,750				11,750
	November 2020			$	50.44				May 2026				12,107				12,107
	February 2021			$	78.00				August 2026				20,834				20,834
	October 2022			$	7.54				April 2028				—				1,224,489
	May 2023			$	0.7785				(2)				10,892,728				—
													10,955,142				1,291,213

 

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 splits effected on August 22, 2019 and January 5, 2023 were rounded up to the next whole share of common stock on a holder by holder basis.

(2)

Warrants will be exercisable beginning on the date of stockholder approval of the exercisability of the warrants under Nasdaq rules or, pursuant to the Warrant Inducement Agreement entered into on October 12, 2023, as amended on October 26, 2023 (the “Inducement Agreement”), upon the payment of additional consideration of $0.25 per share of common stock issued upon exercise of any existing warrants. The warrants not exercised as part of the Inducement Agreement will expire on the five-year anniversary of the date of such stockholder approval (see Note 11).

 

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 5 systems that it commits to purchase in the following quarter. Since the inception of the agreement, the Company had acquired 24 QuantStudio 5 systems, none of which were acquired during the nine months ended September 30, 2023. As of September 30, 2023, the Company has not committed to acquiring additional QuantStudio 5 systems in the next three months. Since the Company decided to discontinue its Acuitas AMR Gene Panel diagnostic test in October 2023, the Company plans to sell or dispose of any surplus of such 24 QuantStudio 5 systems.

 

Curetis places frame-work orders for Unyvero instruments 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 instruments 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. Curetis does not have any purchase commitments over the next twelve months.

 

 

Note 9 – Leases

 

The following table presents the Company’s ROU assets and lease liabilities as of September 30, 2023 and December 31, 2022:

 

Lease classification		September 30, 2023				December 31, 2022
ROU Assets:
Operating		$	1,915,049			$	1,459,413
Financing			986				3,500
Total ROU assets		$	1,916,035			$	1,462,913
Liabilities
Current:
Operating		$	521,424			$	377,626
Finance			1,121				3,364
Noncurrent:
Operating			2,830,282				2,566,138
Finance			—				280
Total lease liabilities		$	3,352,827			$	2,947,408

 

Maturities of lease liabilities as of September 30, 2023 by fiscal year are as follows:

 

Maturity of lease liabilities				Operating				Finance				Total
	2023 (October to December)			$	202,289			$	841			$	203,130
	2024				815,622				280				815,902
	2025				725,505				—				725,505
	2026				577,456				—				577,456
	2027				587,859				—				587,859
	Thereafter				1,737,689				—				1,737,689
	Total lease payments				4,646,420				1,121				4,647,541
	Less: Interest				(1,294,714	)			—				(1,294,714	)
	Present value of lease liabilities			$	3,351,706			$	1,121			$	3,352,827

 

Condensed consolidated statements of operations classification of lease costs as of the three and nine months ended September 30, 2023 and 2022 are as follows:

 

				Three months ended September 30,								Nine months ended September 30,
Lease cost		Classification		2023				2022				2023				2022
Operating		Operating expenses		$	175,243			$	139,206			$	484,546			$	466,904
Finance:
Amortization		Operating expenses			847				15,312				2,514				86,119
Interest expense		Other expenses			—				258				—				1,672
Total lease costs				$	176,090			$	154,776			$	487,060			$	554,695

 

Other lease information as of September 30, 2023 is as follows:

 

Other information		Total
Weighted average remaining lease term (in years)
Operating leases			6.7
Finance leases			0.3
Weighted average discount rate:
Operating leases			9.7	%
Finance leases			1.0	%

 

Supplemental cash flow information as of the nine months ended September 30, 2023 and 2022 is as follows:

 

Supplemental cash flow information		2023				2022
Cash paid for amounts included in the measurement of lease liabilities
Cash used in operating activities
Operating leases		$	484,546			$	466,904
Finance leases		$	—			$	1,672
Cash used in financing activities
Finance leases		$	2,523			$	38,925
ROU assets obtained in exchange for lease obligations:
Operating leases		$	801,321			$	—

 

 

Note 10 – License agreements, research collaborations and development agreements

 

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’s anti-infective portfolio.

 

Under the terms of the framework agreement, which had an initial term of 36 months and 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 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.

 

 

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 $3,102 and $1,552 for the three months ended September 30, 2023 and 2022, respectively. The total net royalty expense related to this agreement was $7,309 and $5,034 for the nine months ended September 30, 2023 and 2022, respectively.

 

Foundation for Innovative New Diagnostics (FIND)

 

On September 20, 2022, Curetis GmbH and FIND entered into a research and development collaboration agreement for a total amount due to Curetis of €0.7 million to develop a simple to use molecular diagnostic test for identification of pathogens and antibiotic resistances in positive blood cultures for deployment in low- and middle-income countries (“LMICs”). On April 4, 2023, the Company entered into an amendment to its research and development collaboration agreement with FIND to expand the deliverables in exchange for an additional €0.13 million in milestone payments (“Amendment 1”). The additional deliverables were completed by June 30, 2023. Following successful completion of the feasibility phase of the collaboration, including the additional deliverables, FIND and Curetis, on August 1, 2023, extended the research and development collaboration agreement through May 31, 2024, to include AMR assay and cartridge development, analytical testing, and software development for an additional €0.5 million (“Amendment 2”). During the three and nine months ended September 30, 2023, the Company recognized revenues of €42 thousand and €0.6 million, respectively, related to the collaboration, increasing the total project revenue to €0.87 million.

 

Note 11 - Subsequent Events

 

The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the unaudited condensed consolidated financial statements are issued.

 

Other than as disclosed in this Note 11 and as was disclosed in Notes 1, 2, and 7 to the accompanying unaudited condensed consolidated financial statements, there have been no subsequent events that require adjustment or disclosure in the accompanying unaudited condensed consolidated financial statements.

 

On October 6, 2023, the Company’s subsidiary, Curetis, received a payment of €0.75 million related to the sale of certain Unyvero A50 systems by Curetis to a strategic partner. Such purchase of systems and payment was made in connection with the negotiation of a potential strategic transaction involving Curetis and the Company’s subsidiary, Ares Genetics, with such strategic partner. The Company used the payment to fund Curetis’ and Ares Genetics’ operations. Following the insolvency filings by Curetis and Ares Genetics, the negotiation of such potential strategic transaction has ceased.

 

On October 11, 2023, the Company entered into a Preferred Stock Purchase Agreement (the “Purchase Agreement”) with a single investor (the “Investor”), pursuant to which the Company agreed to issue and sell to the Investor in a private placement (the “Private Placement”) 1,000 shares of the Company’s Series D Preferred Stock, par value $0.01 per share (the “Preferred Stock”). Each share of preferred stock was sold at a price of $1,000 per share for aggregate gross proceeds of $1.0 million before deducting offering expenses. The Private Placement was conducted in connection with the negotiation of a potential strategic transaction involving the Company and the Investor. The Company intends to use the proceeds of the Private Placement to fund the Company’s operations while it pursues a potential strategic transaction with the Investor. Any such strategic transaction will be pursuant to a definitive agreement entered into by the Company and the Investor. In connection with the ongoing discussions for a potential strategic transaction, the parties anticipate closing the Private Placement as soon as practical. Pursuant to the Purchase Agreement, the Company filed a certificate of designation (the “Certificate of Designation”) with the Secretary of State of the State of Delaware designating the rights, preferences and limitations of the shares of preferred stock on October 11, 2023. The Certificate of Designation provides that the shares of preferred stock have a stated value of $1,000 per share and are convertible into shares of common stock, par value $0.01 per share of the Company at a price of $0.409 per share, subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications, or similar events affecting the common stock. The preferred stock may be converted at any time at the option of the holder. Notwithstanding the foregoing, the Certificate of Designation provides that in no event will the preferred stock be convertible into common stock in a manner that would result in the holder, its permitted transferees and affiliates holding more than 19.99% (together with any shares of common stock otherwise held by the Investor, its permitted transferees and their affiliates) of the then issued and outstanding common stock (the “Ownership Limitation”), prior to the date that the Company’s stockholders approve the issuance of shares of common stock to the holder upon conversion of the preferred stock (the “stockholder approval”). Upon receipt of stockholder approval, the shares of preferred stock will automatically be converted into shares of common stock without further action of the holder thereof.

 

 

On October 12, 2023, the Company entered into a warrant inducement agreement (the “Inducement Agreement”) with a holder (the “Holder”) of certain existing warrants (the “Existing Warrants”) to purchase shares of common stock, par value $0.01 per share, of the Company. Pursuant to the Inducement Agreement, the Holder agreed to exercise for cash their Existing Warrants to purchase up to 10,892,728 shares of the Company’s common stock at an exercise price of $0.7785 per share, the exercise price per share of the Existing Warrants, during the period from the date of the Inducement Agreement until 7:30 a.m., Eastern Time, on October 26, 2023. Pursuant to an amendment agreement entered into by the Company and Holder on October 26, 2023, the Company agreed to extend the offer period until December 31, 2023. In order to permit the exercise of the Existing Warrants pursuant to the rules of the Nasdaq Capital Market, the Holder agreed to pay as additional consideration $0.25 per share of common stock issued upon exercise of the Existing Warrants. The aggregate gross proceeds to be received by the Company will depend on the number of Existing Warrants actually exercised by the Holder. If all the Existing Warrants are exercised in connection with the Inducement Agreement, the Company would anticipate receiving aggregate gross proceeds of up to approximately $11.2 million from the exercise of the Existing Warrants before deducting financial advisory fees and other expenses payable by us. There is, however, no guarantee that all the Existing Warrants will be exercised by the Holder in accordance with the Inducement Agreement. In consideration of the Holder’s agreement to exercise the Existing Warrants in accordance with the Inducement Agreement, the Company agreed to issue new warrants (the “Inducement Warrants”) to purchase shares of common stock equal to 100% of the number of shares of common stock issued upon exercise of the Existing Warrants (the “Inducement Warrant Shares”). The Inducement Warrants will have an exercise price of $0.336 per share and will be exercisable on the six-month anniversary of the date of issuance and expire on the five-year anniversary of the Inducement Warrant’s first becoming exercisable. As of October 25, 2023, the Holder had exercised 2,000,000 shares of common stock under the Existing Warrants pursuant to the Inducement Agreement for aggregate gross proceeds to the Company of $2.057 million before deducting financial advisory fees and other expenses payable by the Company.

 

On October 18, 2023, the Company discontinued its Acuitas AMR Gene Panel diagnostic test. The Company informed customers of the discontinuation and final orders were processed earlier this year. The Company plans to sell or dispose of its surplus QuantStudio 5 and EZ1 systems and has written off the remaining Acuitas products from its inventory. The discontinuance of this product line did not qualify for discontinued operations reporting.

 

On November 6, 2023, following the Company’s unsuccessful efforts to sell the businesses or assets of its wholly owned subsidiaries Curetis and Ares Genetics or to access additional capital to continue their operations, Curetis filed a petition for insolvency with the district court of Stuttgart, Germany, and Ares Genetics filed a petition for insolvency with the commercial court in Vienna, Austria, Reference Number 38 S 175/23x. The insolvency proceedings of Curetis and Ares Genetics will be adjudicated under the insolvency laws of Germany and Austria, respectively. Dr. Katharina Widhalm-Budak has been appointed insolvency administrator by the Vienna court in Ares Genetics’ insolvency proceeding. The district court of Stuttgart will appoint an insolvency administrator for Curetis’ insolvency proceeding. The insolvency administrators will assume control over the assets and liabilities of Curetis and Ares Genetics, respectively, which effectively eliminates the authority and power of the Company and its officers to act on behalf of the subsidiaries. In the event the preservation and sale of the business in connection with the insolvency proceedings is unsuccessful, the assets of Curetis and Ares Genetics would be liquidated and claims paid in accordance with the insolvency laws of the applicable jurisdiction.

 

 

 

 

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, 2022.

 

Overview

 

OpGen, Inc. (the “Company”) isa precision medicine company harnessing the power of molecular diagnostics and informatics to help combat infectious disease. Along with its subsidiaries, Curetis GmbH and Ares Genetics GmbH, the Company is 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. The Company’s current product portfolio includes Unyvero and the ARES Technology Platform including ARESdb, NGS technology and AI-powered bioinformatics solutions for AMR surveillance, outbreak analysis, and antibiotic response prediction including ARESiss, ARESid, ARESasp, and AREScloud.

 

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.

 

On October 18, 2023, the Company discontinued its Acuitas AMR Gene Panel diagnostic test. The Company informed customers of the discontinuation and final orders were processed earlier this year. The discontinuance of this product line did not qualify for discontinued operations reporting.

 

On November 6, 2023, following the Company’s unsuccessful efforts to sell the businesses or assets of its wholly owned subsidiaries Curetis and Ares Genetics or to access additional capital to continue their operations, Curetis filed a petition for insolvency with the district court of Stuttgart, Germany, and Ares Genetics filed a petition for insolvency with the commercial court in Vienna, Austria, Reference Number 38 S 175/23x. The insolvency proceedings of Curetis and Ares Genetics will be adjudicated under the insolvency laws of Germany and Austria, respectively. Dr. Katharina Widhalm-Budak has been appointed insolvency administrator by the Vienna court in Ares Genetics’ insolvency proceeding. The district court of Stuttgart will appoint an insolvency administrator for Curetis’ insolvency proceeding. The insolvency administrators will assume control over the assets and liabilities of Curetis and Ares Genetics, respectively, which effectively eliminates the authority and power of the Company and its officers to act on behalf of the subsidiaries. In the event the preservation and sale of the business in connection with the insolvency proceedings is unsuccessful, the assets of Curetis and Ares Genetics would be liquidated and claims paid in accordance with the insolvency laws of the applicable jurisdiction.

 

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 and urinary tract 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. The Company has 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. The Company believes 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 U.S. Centers for Disease Control and Prevention, or CDC.

 

●

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. The Company had initiated a prospective multi-center clinical trial for the Unyvero UTI in the United States in the third quarter of 2021 and completed enrollment of more than 1,800 patient samples by the end of the third quarter of 2022. Following the announcement of preliminary top line data in December 2022, the Company concluded reference testing in early 2023 and submitted a De Novo classification request to the U.S. Food and Drug Administration (FDA) seeking marketing authorization for its Unyvero UTI panel in April 2023. The FDA provided an additional information request letter on June 30, 2023. The Company responded to all of the FDA’s additional requests on October 20, 2023 in order to continue the FDA review. If cleared, the Unyvero UTI would become the first rapid sample-to-answer semi-quantitative test for urinary tract infections available as an FDA-cleared IVD test in the United States.

 

 

 

 

●

In September 2022, the Company entered into a research and development, or R&D, collaboration agreement with the Foundation for Innovative New Diagnostics (FIND), the global alliance for diagnostics, to assist in funding the development of the Unyvero A30 RQ platform for use in low- and middle-income countries (LMICs). The initial project focused on a feasibility study for the rapid detection of AMR markers from blood culture. The feasibility phase of this initial R&D project concluded in the first quarter of 2023 and was funded by FIND for €0.7 million (approximately $0.7 million). In April 2023, the Company entered into an amendment to its research and development collaboration agreement with FIND to expand the deliverables in exchange for an additional €0.13 million in milestone payments (“Amendment 1”). The additional deliverables were completed by June 30, 2023. Following successful completion of the feasibility phase of the collaboration, including the additional deliverables, FIND and Curetis, on August 1, 2023, extended the research and development collaboration agreement through May 31, 2024, to include AMR assay and cartridge development, analytical testing, and software development for an additional €0.5 million (“Amendment 2”). During the three and nine months ended September 30, 2023, the Company recognized revenues of €42 thousand and €0.6 million, respectively, related to the collaboration, increasing the total project revenue to €0.87 million.

 

●

In October 2022, the Company announced that its subsidiary Curetis and BioVersys AG, a Swiss biotech company developing novel antibiotics against drug resistant infections, entered into a collaboration agreement. Under that collaboration agreement, BioVersys is using the Unyvero systems and HPN tests at all its sites during its BV100 phase II clinical trial which is targeted to treat carbapenem-resistant Acinetobacter baumannii.

 

●

The Company is also developing novel bioinformatics tools and solutions to accompany or augment its 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 its portfolio of IVD products or even as a standalone bioinformatics product.

 

●

The Company offers validated high-quality sequencing and analysis services with rapid turnaround times for key applications in microbiology from our Ares Genetics laboratory in Vienna, Austria. The unique and differentiated offering for rapid and comprehensive genetic characterization of bacterial isolates and interpretive services include whole genome sequencing, taxonomic identification and typing, detection of plasmids and other mobile elements, AMR, and virulence markers. The RUO services offered provide prediction of genomic antibiotic susceptibility based on our ARESdb database as well as specialized software for bacterial outbreak analysis via our AREScloud web application. These technologies are particularly applicable to programs of Infection Prevention and Control (IPC), antibiotic stewardship and surveillance, all of which are part of the U.S. national strategy to protect against rising antimicrobial resistance. Furthermore, in August 2023, Ares Genetics released new features to its AREScloud offering including a single nucleotide polymorphism (SNP) analysis module and a module for the interpretation of plasmids to enhance genomic surveillance.

 

OpGen has extensive offerings of additional IVD tests including CE-IVD-marked Unyvero tests for intra-abdominal and blood stream infections. The Company’s portfolio included a CE-IVD-marked polymerase chain reaction, or PCR, based rapid test kit for SARS-CoV-2 detection in combination with its PCR compatible universal lysis buffer (PULB) in 2022, but the Company has ceased all commercial operations on the SARS-CoV-2 test kit in 2023.

 

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 130,000 bacterial isolates that have been sequenced using Next Generation Sequencing, or NGS, technology and tested for susceptibility with applicable antibiotics from a range of over 100 antimicrobial drugs. In late 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. Clinical Laboratory Improvement Amendments, or CLIA, certified laboratory, a contract research organization, or CRO, a major University Medical Center, the Belgian national reference laboratory at the University Hospital Leuven as well as several U.S. state public health labs have been initiated and are ongoing and the collaboration master service agreement with Sandoz has 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 Artificial Intelligence, or 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 academic, public health, healthcare and biotechnology institutions from the United States and various European countries.

 

Our Unyvero A50 system 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 two to five 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 verification and validation testing of the A30 RQ instruments.

 

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 distribution partners include Fisher Healthcare in the United States, A. Menarini Diagnostics S.r.l. for Pan-European distribution of the Unyvero A50 product line to currently 12 countries, and Beijing Clear Biotech Co. Ltd. for Unyvero A50 product distribution in China. The Company has a network of other distributors covering countries in Europe, the Middle East and Africa, Asia Pacific, and Latin America. In October 2023, the Company amended its distribution agreement with Fisher Healthcare to allow Fisher Healthcare to sell to existing U.S. Unyvero customers of the Company, which had previously been maintained by the Company’s sales force.

 

OpGen will continue to develop and seek FDA and other regulatory clearances or approvals, as applicable, for its Unyvero UTI product as well as for its Unyvero A30 RQ platform. OpGen will continue to offer the FDA-cleared Unyvero LRT and LRT BAL Panels as well as the Unyvero UTI Panel as RUO products to hospitals, public health departments, clinical laboratories, pharmaceutical companies and CROs in the United States. Curetis continues its efforts in ensuring compliance with the new In-Vitro-Diagnostic Device Regulation (IVDR) in the European Union (EU), which officially went into effect in May 2022. Given the limited number of designated EU Notified Bodies at this time, and with the EU commission IVDR amendment in early 2022 providing for multi-year grace periods for certain IVD products with former In-Vitro-Diagnostic Device Directive (IVDD) CE marking, it is now possible for Curetis to continue commercializing 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.

 

The Company’s headquarters are in Rockville, Maryland, and its principal operations are in Holzgerlingen and Bodelshausen, Germany, and Vienna, Austria. The Company operates in one business segment. During the three months ended September 30, 2023, the Company implemented certain cash management initiatives, including restructuring its U.S. operations by reducing headcount from 23 to 6 and scaling down operations at OpGen’s U.S. headquarters to the core functions of a U.S. Nasdaq listed company with only minimal marketing and sales support, allowing the Company to conserve cash and focus on the functions needed to pursue potential strategic alternatives.

 

Financial Overview

 

Revenue

 

We recognize three types of revenues: product sales, laboratory services and collaboration revenue. We generate product revenues from sales of our products, including through our distribution partners, such as our Unyvero instruments and consumables. We also generate revenue from sales by OpGen’s subsidiary Ares Genetics of its AI-powered prediction models and solutions. Revenues generated from our laboratory services relate to services that we and our subsidiaries provide to customers. Lastly, our collaboration revenues consist of revenue received from research and development collaborations that we have entered into with third parties, such as our collaboration agreement with FIND.

 

Cost of Products, Cost of Services, and Operating Expenses

 

Our cost of products consists of product and inventory costs, including materials costs and overhead, and other costs related to the recognition of revenue. Cost of services relate to the material and labor costs associated with providing our services. Research and development expenses currently consist primarily of expenses incurred in connection with our clinical and pre-clinical research activities, such as our prior clinical trials for our clinical trial for the Unyvero UTI in the United States. Selling, general and administrative expenses consist of public company costs and salaries and related costs for administrative and sales and business development personnel.

 

 

Results of operations for the three months ended September 30, 2023 and 2022

 

Revenues 

 

		Three months ended September 30,
		2023				2022
Product sales		$	558,965			$	359,112
Laboratory services			47,135				31,016
Collaboration revenue			92,922				58,585
Total revenue		$	699,022			$	448,713

 

Total revenue for the three months ended September 30, 2023 increased approximately 56% when compared to the same period in 2022, with a change in the mix of revenue as follows:

 

●

Product Sales: the increase in revenue of approximately 56% in the 2023 period compared to the 2022 period is primarily attributable to an increase in international Unyvero system and cartridge sales;

 

●

Laboratory Services: the increase in revenue of approximately 52% in the 2023 period compared to the 2022 period is primarily attributable to an increase in the validated high-quality sequencing and analysis services performed by Ares Genetics and an increase in the RUO laboratory services performed by OpGen’s laboratory in Rockville, Maryland; and

 

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Collaboration Revenue: the increase in revenue of approximately 59% in the 2023 period compared to the 2022 period is primarily the result of the Company’s collaboration agreement with FIND.

 

Operating expenses 

 

		Three months ended September 30,
		2023				2022
Cost of products sold		$	618,796			$	1,886,191
Cost of services			73,174				17,239
Research and development			1,201,865				2,031,113
General and administrative			2,034,628				2,020,452
Sales and marketing			336,184				1,031,496
Goodwill impairment charge			—				6,975,520
Total operating expenses		$	4,264,647			$	13,962,011

 

Our total operating expenses for the three months ended September 30, 2023 decreased approximately 69% when compared to the same period in 2022. Operating expenses changed as follows:

 

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Cost of products sold: cost of products sold for the three months ended September 30, 2023 decreased approximately 67% when compared to the same period in 2022, primarily because the Company recorded a $1.4 million increase to its inventory reserves for obsolescence, expirations, and slow-moving inventory in 2022, due, in part, to review and approval delays of the Company’s pneumonia cartridge encountered in China;

 

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Cost of services: cost of services for the three months ended September 30, 2023 increased approximately 324% when compared to the same period in 2022, primarily due to additional expenses from the Company’s collaboration with FIND, as well as an increase in the laboratory services performed;

 

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Research and development: research and development expenses for the three months ended September 30, 2023 decreased approximately 41% when compared to the same period in 2022, primarily due to a reduction in payroll related costs as well as the conclusion of the prospective multi-center clinical trial for the Unyvero UTI in the third quarter of 2022;

 

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General and administrative: general and administrative expenses for the three months ended September 30, 2023 remained relatively consistent when compared to the same period in 2022;