htgm-10q_20150930.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 September 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 November 6, 2015, the registrant had 6,839,864 shares of common stock, $0.001 par value per share, outstanding.

 

 

 

 

 


 

Table of Contents

 

 

 

 

 

Page

PART I.

 

FINANCIAL INFORMATION

 

 

Item 1.

 

Financial Statements (Unaudited)

 

 

 

 

Condensed Balance Sheets

 

1

 

 

Condensed Statements of Operations

 

3

 

 

Condensed Statements of Comprehensive Income

 

4

 

 

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

 

5

 

 

Condensed Statements of Cash Flows

 

7

 

 

Notes to Unaudited Condensed Financial Statements

 

8

Item 2.

 

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

 

30

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

36

Item 4.

 

Controls and Procedures

 

36

PART II.

 

OTHER INFORMATION

 

38

Item 1.

 

Legal Proceedings

 

38

Item 1A.

 

Risk Factors

 

38

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

64

Item 5.

 

Other Information

 

64

Item 6.

 

Exhibits

 

64

Signatures

 

65

Exhibit Index

 

66

 

 

 

i


 

PART I—FINANCIAL INFORMATION

 

 

Item 1. Financial Statements (Unaudited).

HTG Molecular Diagnostics, Inc.

Condensed Balance Sheets

 

 

 

September 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

Assets

 

(Unaudited)

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

2,598,143

 

 

$

3,613,392

 

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

 

 

28,711,759

 

 

 

 

Accounts receivable, net

 

 

696,827

 

 

 

801,125

 

Inventory, net of allowance of $328,022 at September 30, 2015 and

   $54,269 at December 31, 2014

 

 

2,266,182

 

 

 

1,685,814

 

Prepaid insurance

 

 

393,127

 

 

 

20,905

 

Prepaid expenses and other

 

 

223,472

 

 

 

91,130

 

Total current assets

 

 

34,889,510

 

 

 

6,212,366

 

 

 

 

 

 

 

 

 

 

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

 

 

7,766,952

 

 

 

 

Deferred financing and offering costs

 

 

59,582

 

 

 

1,369,281

 

 

 

 

 

 

 

 

 

 

Property and equipment:

 

 

 

 

 

 

 

 

Office equipment

 

 

442,490

 

 

 

414,424

 

Leasehold improvements

 

 

252,750

 

 

 

234,602

 

Laboratory and manufacturing equipment

 

 

3,127,484

 

 

 

2,003,693

 

Field equipment

 

 

180,355

 

 

 

286,044

 

Software

 

 

140,248

 

 

 

140,248

 

Construction in progress

 

 

49,953

 

 

 

6,125

 

Total property and equipment

 

 

4,193,280

 

 

 

3,085,136

 

Less: accumulated depreciation and amortization

 

 

(2,365,135

)

 

 

(1,938,537

)

Property and equipment, net

 

 

1,828,145

 

 

 

1,146,599

 

Total assets

 

$

44,544,189

 

 

$

8,728,246

 

 

1


 

HTG Molecular Diagnostics, Inc.

Condensed Balance Sheets (Continued)

 

 

September 30,

 

 

December 31,

 

 

2015

 

 

2014

 

Liabilities and stockholders' equity (deficit)

(Unaudited)

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

966,853

 

 

$

948,429

 

Accrued liabilities

 

1,407,998

 

 

 

1,499,750

 

Deferred revenue

 

32,716

 

 

 

41,248

 

NuvoGen obligation

 

362,500

 

 

 

 

Term loan

 

2,017,712

 

 

 

813,715

 

Total current liabilities

 

4,787,779

 

 

 

3,303,142

 

Redeemable convertible preferred stock warrant liability

 

 

 

 

730,543

 

Term loan payable - non-current, net of discount

 

8,738,683

 

 

 

9,705,655

 

NuvoGen obligation - non-current, net of discount

 

8,544,591

 

 

 

8,677,859

 

Other

 

36,447

 

 

 

58,380

 

Total liabilities

 

22,107,500

 

 

 

22,475,579

 

Redeemable convertible preferred stock:

 

 

 

 

 

 

 

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

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

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

   September 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 September 30, 2015 and

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

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

   September 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 September 30, 2015 and

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

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

   September 30, 2015 and 13,242,612 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 September 30, 2015 and

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

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

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

 

 

 

 

2,223,506

 

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

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

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

   September 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 September 30, 2015 and

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

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

   September 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 September 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

   September 30, 2015 and December 31, 2014, respectively; 6,841,260 and 6,839,864 shares

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

   issued and outstanding, respectively, at December 31, 2014

 

6,840

 

 

 

333

 

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

 

106,366,937

 

 

 

(1,426,556

)

Treasury stock – 1,396 shares, at cost

 

(75,000

)

 

 

(75,000

)

Accumulated other comprehensive income

 

4,754

 

 

 

 

Accumulated deficit

 

(83,866,842

)

 

 

(68,168,703

)

Total stockholders' equity (deficit)

 

22,436,689

 

 

 

(69,669,926

)

Total liabilities and stockholders' equity (deficit)

$

44,544,189

 

 

$

8,728,246

 

 

See notes to the unaudited condensed financial statements.

2


 

HTG Molecular Diagnostics, Inc.

Condensed Statements of Operations

(Unaudited)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

$

973,956

 

 

$

532,240

 

 

$

2,349,740

 

 

$

977,386

 

Service

 

 

37,000

 

 

 

107,183

 

 

 

150,292

 

 

 

396,840

 

Other

 

 

 

 

 

230,822

 

 

 

325,789

 

 

 

656,917

 

Total revenue

 

 

1,010,956

 

 

 

870,245

 

 

 

2,825,821

 

 

 

2,031,143

 

Cost of revenue

 

 

809,015

 

 

 

747,342

 

 

 

2,538,590

 

 

 

2,005,276

 

Gross margin

 

 

201,941

 

 

 

122,903

 

 

 

287,231

 

 

 

25,867

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

3,717,402

 

 

 

2,610,354

 

 

 

10,883,161

 

 

 

7,116,544

 

Research and development

 

 

1,309,573

 

 

 

649,949

 

 

 

2,951,009

 

 

 

2,372,972

 

Total operating expenses

 

 

5,026,975

 

 

 

3,260,303

 

 

 

13,834,170

 

 

 

9,489,516

 

Operating loss

 

 

(4,825,034

)

 

 

(3,137,400

)

 

 

(13,546,939

)

 

 

(9,463,649

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from change in stock warrant valuation

 

 

 

 

 

 

 

 

(239,683

)

 

 

(56,323

)

Interest expense

 

 

(378,656

)

 

 

(161,069

)

 

 

(1,334,103

)

 

 

(292,018

)

Interest income

 

 

37,788

 

 

 

 

 

 

48,930

 

 

 

 

Loss on settlement of convertible debt

 

 

 

 

 

 

 

 

(705,217

)

 

 

 

Other

 

 

8,239

 

 

 

(8,860

)

 

 

78,873

 

 

 

(7,756

)

Total other income (expense)

 

 

(332,629

)

 

 

(169,929

)

 

 

(2,151,200

)

 

 

(356,097

)

Net loss before income taxes

 

 

(5,157,663

)

 

 

(3,307,329

)

 

 

(15,698,139

)

 

 

(9,819,746

)

Income taxes

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

(5,157,663

)

 

 

(3,307,329

)

 

 

(15,698,139

)

 

 

(9,819,746

)

Accretion of stock issuance costs

 

 

 

 

 

(19,488

)

 

 

(35,046

)

 

 

(71,175

)

Accretion of Series E warrant discount

 

 

 

 

 

(94,893

)

 

 

(127,616

)

 

 

(251,893

)

Accretion of Series D and E redeemable convertible

   preferred stock dividends

 

 

 

 

 

(837,225

)

 

 

(1,165,932

)

 

 

(2,405,987

)

Net loss attributable to common stockholders

 

$

(5,157,663

)

 

$

(4,258,935

)

 

$

(17,026,733

)

 

$

(12,548,801

)

Net loss per share attributable to common stockholders,

   basic and diluted

 

$

(0.76

)

 

$

(44.14

)

 

$

(4.56

)

 

$

(130.11

)

Shares used in computing net loss per share attributable

   to common stockholders, basic and diluted

 

 

6,829,687

 

 

 

96,486

 

 

 

3,735,852

 

 

 

96,446

 

 

See notes to the unaudited condensed financial statements.

 

 

3


 

HTG Molecular Diagnostics, Inc.

Condensed Statements of Comprehensive Income

(Unaudited)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Net loss

 

$

(5,157,663

)

 

$

(3,307,329

)

 

$

(15,698,139

)

 

$

(9,819,746

)

Other comprehensive income, net of tax effect:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on short and long-term investments

 

 

12,993

 

 

 

 

 

 

4,754

 

 

 

 

Comprehensive loss

 

$

(5,144,670

)

 

$

(3,307,329

)

 

$

(15,693,385

)

 

$

(9,819,746

)

Less:  Accretion of stock issuance costs

 

 

 

 

 

(19,488

)

 

 

(35,046

)

 

 

(71,175

)

Less:  Accretion of Series E warrant discount

 

 

 

 

 

(94,893

)

 

 

(127,616

)

 

 

(251,893

)

Less:  Accretion of Series D and E redeemable convertible

   preferred stock dividends

 

 

 

 

 

(837,225

)

 

 

(1,165,932

)

 

 

(2,405,987

)

Comprehensive loss attributable to common stockholders

 

$

(5,144,670

)

 

$

(4,258,935

)

 

$

(17,021,979

)

 

$

(12,548,801

)

 

See notes to the unaudited condensed financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4


 

HTG Molecular Diagnostics, Inc.

Condensed Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (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 September 30, 2015

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

See notes to the unaudited condensed financial statements.

 

 

 

5


 

 

 

 

Stockholders’ Equity (Deficit)

 

 

 

 

 

 

Additional

Paid-In-Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

(Distributions in

 

 

Treasury

 

 

Accumulated Other

 

 

Accumulated

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Excess of Capital)

 

 

Stock

 

 

Comprehensive Income

 

 

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

 

 

13,766

 

 

 

14

 

 

 

34,034

 

 

 

 

 

 

 

 

 

 

 

 

34,048

 

Share-based compensation expense

 

 

 

 

 

 

 

 

223,787

 

 

 

 

 

 

 

 

 

 

 

 

223,787

 

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

 

 

 

45,350,526

 

 

 

 

 

 

 

 

 

 

 

 

45,354,186

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,698,139

)

 

 

(15,698,139

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,754

 

 

 

 

 

 

4,754

 

Balance at September 30, 2015

 

 

6,839,864

 

 

$

6,840

 

 

$

106,366,937

 

 

$

(75,000

)

 

$

4,754

 

 

$

(83,866,842

)

 

$

22,436,689

 

 

See notes to the unaudited condensed financial statements.

 

 

 

6


HTG Molecular Diagnostics, Inc.

Condensed Statements of Cash Flows

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2015

 

 

2014

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(15,698,139

)

 

$

(9,819,746

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

473,799

 

 

 

365,100

 

Accretion of discount on NuvoGen obligation

 

 

229,232

 

 

 

141,551

 

Bad debt expense (recovery), net

 

 

44,854

 

 

 

117,467

 

Provision for excess inventory

 

 

273,752

 

 

 

 

Amortization of deferred financing costs

 

 

37,461

 

 

 

2,700

 

Amortization of discount on term loan

 

 

120,627

 

 

 

16,125

 

Amortization of final payment premium on term loan

 

 

116,398

 

 

 

 

Loss on settlement of convertible notes