htgm-10q_20150630.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015

OR

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 000-37369

 

HTG Molecular Diagnostics, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

86-0912294

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

3430 E. Global Loop

Tucson, AZ

85706

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (877) 289-2615

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

o

  

Accelerated filer

 o

 

 

 

 

Non-accelerated filer

 

o  (Do not check if a small reporting company)

  

Small reporting company

 x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  x

As of August 3, 2015, the registrant had 6,827,414 shares of common stock, $0.001 par value per share, outstanding.

 

 

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

1

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Balance Sheets

1

 

Condensed Statements of Operations

3

 

Condensed Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

4

 

Condensed Statements of Cash Flows

6

 

Notes to Unaudited Condensed Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

27

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

34

Item 4.

Controls and Procedures

34

PART II.

OTHER INFORMATION

36

Item 1.

Legal Proceedings

36

Item 1A.

Risk Factors

36

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

62

Item 5.

Other Information

63

Item 6.

Exhibits

63

Signatures

64

Exhibit Index

65

 

 

 

i


 

PART I—FINANCIAL INFORMATION

 

 

Item 1. Financial Statements.

HTG Molecular Diagnostics, Inc.

Condensed Balance Sheets

(Unaudited)

 

 

 

June 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

11,171,021

 

 

$

3,613,392

 

Short-term investments available-for-sale, at fair value

 

 

18,456,590

 

 

 

 

Accounts receivable, net

 

 

554,181

 

 

 

801,125

 

Inventory, net allowance of $265,150 at June 30, 2015 and

   $54,269 at December 31, 2014

 

 

2,412,093

 

 

 

1,685,814

 

Prepaid insurance

 

 

531,735

 

 

 

20,905

 

Prepaid expenses and other

 

 

236,000

 

 

 

91,130

 

Total current assets

 

 

33,361,620

 

 

 

6,212,366

 

 

 

 

 

 

 

 

 

 

Long-term investments available-for-sale, at fair value

 

 

14,412,979

 

 

 

 

Deferred financing and offering costs

 

 

64,105

 

 

 

1,369,281

 

 

 

 

 

 

 

 

 

 

Property and equipment:

 

 

 

 

 

 

 

 

Office equipment

 

 

434,729

 

 

 

414,424

 

Leasehold improvements

 

 

242,436

 

 

 

234,602

 

Laboratory and manufacturing equipment

 

 

2,682,093

 

 

 

2,009,818

 

Field equipment

 

 

164,755

 

 

 

286,044

 

Software

 

 

140,248

 

 

 

140,248

 

 

 

 

3,664,261

 

 

 

3,085,136

 

Less accumulated depreciation and amortization

 

 

(2,190,778

)

 

 

(1,938,537

)

Property and equipment, net

 

 

1,473,483

 

 

 

1,146,599

 

Total assets

 

$

49,312,187

 

 

$

8,728,246

 

 

1


 

HTG Molecular Diagnostics, Inc.

Condensed Balance Sheets (Continued)

(Unaudited)

 

 

 

June 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

Liabilities and stockholders' equity (deficit)

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,192,786

 

 

$

948,429

 

Accrued liabilities

 

 

1,036,974

 

 

 

1,499,750

 

Deferred revenue

 

 

28,753

 

 

 

41,248

 

NuvoGen obligation

 

 

181,250

 

 

 

 

Term loan

 

 

998,175

 

 

 

813,715

 

Total current liabilities

 

 

3,437,938

 

 

 

3,303,142

 

Redeemable convertible preferred stock warrant liability

 

 

 

 

 

730,543

 

Term loan payable - non-current, net of discount

 

 

9,669,319

 

 

 

9,705,655

 

NuvoGen obligation - non-current, net of discount

 

 

8,674,360

 

 

 

8,677,859

 

Other

 

 

43,757

 

 

 

58,380

 

Total liabilities

 

 

21,825,374

 

 

 

22,475,579

 

Redeemable convertible preferred stock:

 

 

 

 

 

 

 

 

Series A, $0.001 par value; $0 and $1,406,369 liquidation value at June 30, 2015 and

   December 31, 2014, respectively; 0 and 1,292,084 shares authorized at

   June 30, 2015 and December 31, 2014, respectively; no shares issued and outstanding at

   June 30, 2015 and 1,292,084 shares both issued and outstanding at December 31, 2014

 

 

 

 

 

1,402,687

 

Series B, $0.001 par value; $0 and $2,104,811 liquidation value at June 30, 2015 and

   December 31, 2014, respectively;  0 and 11,919,624 shares authorized at

   June 30, 2015 and December 31, 2014, respectively; no shares issued and outstanding at

   June 30, 2015 and 6,789,712 shares both issued and outstanding at December 31, 2014

 

 

 

 

 

2,099,310

 

Series C-1, $0.001 par value; $0 and $4,581,944 liquidation value at June 30, 2015 and

   December 31, 2014, respectively; 0 and 17,530,800 shares authorized at

   June 30, 2015 and December 31, 2014, respectively; no shares issued and outstanding at

   June 30, 2015 and 13,342,612 shares both issued and outstanding at December 31, 2014

 

 

 

 

 

4,567,525

 

Series C-2, $0.001 par value; $0 and $2,244,343 liquidation value at June 30, 2015 and

   December 31, 2014, respectively; 0 and 19,262,522 shares authorized at

   June 30, 2015 and December 31, 2014, respectively; no shares issued and outstanding at

   June 30, 2015 and 9,948,331 shares both issued and outstanding at December 31, 2014

 

 

 

 

 

2,223,506

 

Series D, $0.001 par value; $0n and $68,001,923 liquidation value at June 30, 2015 and

   December 31, 2014, respectively; 0 and 237,031,908 shares authorized at

   June 30, 2015 and December 31, 2014, respectively; no shares issued and outstanding at

   June 30, 2015 and 139,529,173 shares both issued and outstanding at December 31, 2014

 

 

 

 

 

37,174,666

 

Series E, $0.001 par value; $0 and $20,839,001 liquidation value at June 30, 2015 and

   December 31, 2014, respectively; 0 and 185,046,445 shares authorized at

   June 30, 2015 and December 31, 2014, respectively; no shares issued and outstanding at

   June 30, 2015, 45,938,041 shares both issued and outstanding at December 31, 2014

 

 

 

 

 

8,454,899

 

Total redeemable convertible preferred stock

 

 

 

 

 

55,922,593

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

Stockholders’ equity (deficit):

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value; 10,000,000 and 0 authorized at June 30, 2015 and

   December 31, 2014, respectively; no shares issued and outstanding at either date.

 

 

 

 

 

 

 

 

Common stock, $0.001 par value; 200,000,000 and 600,000,000 shares authorized at

   June 30, 2015 and December 31, 2014, respectively; 6,828,810 and 6,827,414 shares issued

   and outstanding, respectively, at June 30, 2015, 334,003 and 332,607 shares issued and

   outstanding, respectively, at December 31, 2014

 

 

6,827

 

 

 

333

 

Additional paid-in-capital (distributions in excess of capital)

 

 

106,264,166

 

 

 

(1,426,556

)

Treasury stock – 1,396 shares, at cost

 

 

(75,000

)

 

 

(75,000

)

Accumulated deficit

 

 

(78,709,180

)

 

 

(68,168,703

)

Total stockholders' equity (deficit)

 

 

27,486,813

 

 

 

(69,669,926

)

Total liabilities and stockholders' equity (deficit)

 

$

49,312,187

 

 

$

8,728,246

 

 

See notes to the condensed financial statements (unaudited)

2


 

HTG Molecular Diagnostics, Inc.

Condensed Statements of Operations

(Unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

$

648,347

 

 

$

75,139

 

 

$

1,375,785

 

 

$

445,146

 

Service

 

 

51,000

 

 

 

74,807

 

 

 

113,292

 

 

 

289,657

 

Other

 

 

91,204

 

 

 

184,429

 

 

 

325,789

 

 

 

426,095

 

Total revenue

 

 

790,551

 

 

 

334,375

 

 

 

1,814,866

 

 

 

1,160,898

 

Cost of revenue

 

 

834,949

 

 

 

615,523

 

 

 

1,729,575

 

 

 

1,257,934

 

Gross margin

 

 

(44,398

)

 

 

(281,148

)

 

 

85,291

 

 

 

(97,036

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

3,726,490

 

 

 

2,429,388

 

 

 

7,165,759

 

 

 

4,506,190

 

Research and development

 

 

953,222

 

 

 

865,540

 

 

 

1,641,437

 

 

 

1,723,023

 

Total operating expenses

 

 

4,679,712

 

 

 

3,294,928

 

 

 

8,807,196

 

 

 

6,229,213

 

Operating loss

 

 

(4,724,110

)

 

 

(3,576,076

)

 

 

(8,721,905

)

 

 

(6,326,249

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from change in stock warrant valuation

 

 

(628,643

)

 

 

(56,322

)

 

 

(239,683

)

 

 

(56,322

)

Interest expense

 

 

(476,071

)

 

 

(56,436

)

 

 

(955,448

)

 

 

(130,949

)

Interest income

 

 

11,065

 

 

 

 

 

 

11,142

 

 

 

 

Loss on settlement of convertible debt

 

 

(705,217

)

 

 

 

 

 

(705,217

)

 

 

 

Other

 

 

70,634

 

 

 

4,008

 

 

 

70,634

 

 

 

1,104

 

Net loss before income taxes

 

 

(6,452,342

)

 

 

(3,684,826

)

 

 

(10,540,477

)

 

 

(6,512,416

)

Income taxes

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

(6,452,342

)

 

 

(3,684,826

)

 

 

(10,540,477

)

 

 

(6,512,416

)

Accretion of stock issuance costs

 

 

(10,969

)

 

 

(186,206

)

 

 

(35,046

)

 

 

(208,687

)

Accretion of Series E warrant discount

 

 

(40,146

)

 

 

(85,717

)

 

 

(127,616

)

 

 

(137,094

)

Accretion of Series D and E redeemable convertible

   preferred stock dividends

 

 

(367,350

)

 

 

(828,125

)

 

 

(1,165,932

)

 

 

(1,568,762

)

Net loss attributable to common stockholders

 

$

(6,870,807

)

 

$

(4,784,874

)

 

$

(11,869,071

)

 

$

(8,426,959

)

Net loss per share attributable to common stockholders,

   basic and diluted

 

$

(1.73

)

 

$

(49.62

)

 

$

(5.49

)

 

$

(87.39

)

Shares used in computing net loss per share attributable

   to common stockholders, basic and diluted

 

 

3,973,055

 

 

 

96,440

 

 

 

2,163,295

 

 

 

96,426

 

See notes to the condensed financial statements (unaudited)

 

 

3


 

HTG Molecular Diagnostics, Inc.

Condensed Statements of Redeemable Convertible Preferred Stock and Stockholders’ Deficit

(Unaudited)

 

 

 

Redeemable Convertible Preferred Stock

 

 

 

Series A

 

 

Series B

 

 

Series C-1

 

 

Series C-2

 

 

Series D

 

 

Series E

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

Balance at January 1, 2015

 

 

1,292,084

 

 

$

1,402,687

 

 

 

6,789,712

 

 

$

2,099,310

 

 

 

13,242,612

 

 

$

4,567,525

 

 

 

9,948,331

 

 

$

2,223,506

 

 

 

139,529,173

 

 

$

37,174,666

 

 

 

45,938,041

 

 

$

8,454,899

 

Exercise of Series D and Series

   E warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

723,505

 

 

 

93,550

 

 

 

51,681

 

 

 

11,312

 

Exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accretion of redeemable

   convertible preferred

   stock issuance costs

 

 

 

 

 

320

 

 

 

 

 

 

839

 

 

 

 

 

 

1,538

 

 

 

 

 

 

2,113

 

 

 

 

 

 

18,109

 

 

 

 

 

 

12,127

 

Accretion of Series E

   warrant discount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

127,616

 

Accretion of Series D and E

   redeemable convertible

   preferred stock dividend

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

876,955

 

 

 

 

 

 

288,977

 

Conversion of outstanding

   principal and accrued interest

   on convertible notes to

   common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of warrants from

   warrants for preferred stock to

   warrants for common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of preferred stock

   into common stock at initial

   public offering

 

 

(1,292,084

)

 

 

(1,403,007

)

 

 

(6,789,712

)

 

 

(2,100,149

)

 

 

(13,242,612

)

 

 

(4,569,063

)

 

 

(9,948,331

)

 

 

(2,225,619

)

 

 

(140,252,678

)

 

 

(38,163,280

)

 

 

(45,989,722

)

 

 

(8,894,931

)

Issuance of common stock from

   initial public offering net of

   issuance costs of $5.9 million

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2015

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

 

 

 

See notes to the condensed financial statements (unaudited)

 

 

4


 

 

 

 

Stockholders’ Equity (Deficit)

 

 

 

 

 

 

Additional

Paid-In-Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

(Distributions in

 

 

Treasury

 

 

Accumulated

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Excess of Capital)

 

 

Stock

 

 

Deficit

 

 

Total

 

Balance at January 1, 2015

 

 

332,607

 

 

$

333

 

 

$

(1,426,556

)

 

$

(75,000

)

 

$

(68,168,703

)

 

$

(69,669,926

)

Exercise of Series D and Series E warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

 

1,316

 

 

 

1

 

 

 

5,577

 

 

 

 

 

 

 

 

 

5,578

 

Share-based compensation expense

 

 

 

 

 

 

 

 

146,548

 

 

 

 

 

 

 

 

 

146,548

 

Accretion of redeemable convertible

   preferred stock issuance costs

 

 

 

 

 

 

 

 

(35,046

)

 

 

 

 

 

 

 

 

(35,046

)

Accretion of Series E warrant discount

 

 

 

 

 

 

 

 

(127,616

)

 

 

 

 

 

 

 

 

(127,616

)

Accretion of Series D and E

   redeemable convertible preferred

   stock dividends

 

 

 

 

 

 

 

 

(1,165,932

)

 

 

 

 

 

 

 

 

(1,165,932

)

Settlement of outstanding principal and

   accrued interest on convertible notes by

   issuance of common stock

 

 

324,591

 

 

 

324

 

 

 

4,544,060

 

 

 

 

 

 

 

 

 

4,544,384

 

Conversion of warrants from warrants for

   preferred stock to warrants for

   common stock

 

 

 

 

 

 

 

 

1,616,140

 

 

 

 

 

 

 

 

 

1,616,140

 

Conversion of preferred stock into

   common stock at initial public offering

 

 

2,508,824

 

 

 

2,509

 

 

 

57,353,540

 

 

 

 

 

 

 

 

 

57,356,049

 

Issuance of common stock from initial

   public offering net of issuance

   costs of $5.9 million

 

 

3,660,076

 

 

 

3,660

 

 

 

45,353,451

 

 

 

 

 

 

 

 

 

45,357,111

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,540,477

)

 

 

(10,540,477

)

Balance at June 30, 2015

 

 

6,827,414

 

 

$

6,827

 

 

$

106,264,166

 

 

$

(75,000

)

 

$

(78,709,180

)

 

$

27,486,813

 

 

See notes to the condensed financial statements (unaudited)

 

 

5


 

HTG Molecular Diagnostics, Inc.

Condensed Statements of Cash Flows

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2015

 

 

2014

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(10,540,477

)

 

$

(6,512,416

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

299,409

 

 

 

240,698

 

Accretion of discount on NuvoGen obligation

 

 

177,751

 

 

 

94,684

 

Bad debt expense (recovery), net

 

 

33,854

 

 

 

102,467

 

Provision for excess inventory

 

 

210,881

 

 

 

 

Amortization of deferred financing costs

 

 

32,938

 

 

 

 

Amortization of discount on term loan

 

 

89,032

 

 

 

 

Amortization of final payment premium on term loan

 

 

59,091

 

 

 

 

Loss on settlement of convertible notes

 

 

705,217

 

 

 

 

Amortization of discount on convertible notes

 

 

90,222

 

 

 

 

Share-based compensation

 

 

146,548

 

 

 

81,162

 

Change in redeemable convertible preferred stock warrant liability

 

 

239,683

 

 

 

56,322

 

Loss on disposal of assets

 

 

70,626

 

 

 

35,960

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

213,090

 

 

 

199,646

 

Inventory

 

 

(937,160

)

 

 

(190,090

)

Prepaid expenses and other

 

 

(657,054

)

 

 

(47,284

)

Accounts payable

 

 

7

 

 

 

(336,799

)

Accrued liabilities

 

 

(418,392

)

 

 

(300,316

)

Deferred revenue

 

 

(12,495

)

 

 

(64,548

)

Net cash used in operating activities

 

 

(10,197,229

)

 

 

(6,640,514

)

Investing activities

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(444,329

)

 

 

(372,640

)

Purchases of available-for-sale securities

 

 

(32,877,808

)

 

 

 

Net cash used in investing activities

 

 

(33,322,137

)

 

 

(372,640

)

Financing activities

 

 

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

5,578

 

 

 

327

 

Draws on line of credit

 

 

 

 

 

750,000

 

Payments on NuvoGen obligation

 

 

 

 

 

(225,000

)

Proceeds from exercise of E warrants

 

 

8,948

 

 

 

 

Deferred offering costs

 

 

(1,002,930

)

 

 

 

Deferred financing costs

 

 

(75,523

)

 

 

 

Payments on equipment lease

 

 

(14,622

)

 

 

 

Proceeds from sale of Series E preferred stock, net of issuance costs

 

 

 

 

 

7,384,923

 

Proceeds from issuance of convertible note warrants

 

 

1,354

 

 

 

 

Proceeds from convertible notes

 

 

4,500,000

 

 

 

 

Proceeds from initial public offering

 

 

47,654,190

 

 

 

 

Net cash provided by financing activities

 

 

51,076,995

 

 

 

7,910,250

 

Increase in cash and cash equivalents

 

 

7,557,629

 

 

 

897,096

 

Cash and cash equivalents at beginning of year

 

 

3,613,392

 

 

 

1,815,289

 

Cash and cash equivalents at end of period

 

$

11,171,021

 

 

$

2,712,385

 

Noncash investing and financing activities

 

 

 

 

 

 

 

 

Accretion of preferred stock issuance costs

 

$

35,046

 

 

$

208,687

 

Net exercise of Series D and Series E warrants

 

 

95,914