htgm-10q_20190630.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended June 30, 2019

OR

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

Commission File Number: 001-37369

 

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

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value per share

HTGM

The Nasdaq Stock Market LLC

 

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      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes      No  

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

Large accelerated filer

 

 

  

Accelerated filer

 

Non-accelerated filer

 

   

  

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if he registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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

As of August 2, 2019, the registrant had 28,720,193 shares of common stock, $0.001 par value per share, outstanding.

 

 


 

Table of Contents

 

 

 

 

 

Page

PART I.

 

FINANCIAL INFORMATION

 

 

Item 1.

 

Condensed Consolidated Financial Statements (Unaudited)

 

1

 

 

Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018

 

1

 

 

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2019 and 2018

 

2

 

 

Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2019 and 2018

 

3

 

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three and six months ended June 30, 2019 and 2018

 

4

 

 

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018

 

6

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

8

Item 2.

 

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

 

26

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

 

65

Item 5.

 

Other Information

 

66

Item 6.

 

Exhibits

 

66

Signatures

 

69

 

 

 

i


 

PART I—FINANCIAL INFORMATION

 

Item 1. Condensed Consolidated Financial Statements (Unaudited).

HTG Molecular Diagnostics, Inc.

Condensed Consolidated Balance Sheets 

 

 

June 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

Assets

 

(Unaudited)

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

11,813,589

 

 

$

8,432,600

 

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

 

 

9,753,727

 

 

 

22,681,049

 

Accounts receivable

 

 

3,981,103

 

 

 

5,012,678

 

Inventory, net of allowance of $39,403 at both June 30, 2019 and December 31, 2018

 

 

1,160,682

 

 

 

1,306,609

 

Prepaid expenses and other

 

 

1,069,180

 

 

 

568,209

 

Total current assets

 

 

27,778,281

 

 

 

38,001,145

 

 

 

 

 

 

 

 

 

 

Restricted cash

 

 

3,270,247

 

 

 

3,270,247

 

Deferred offering costs

 

 

198,088

 

 

 

59,030

 

Deferred MidCap revolving loan costs

 

 

59,086

 

 

 

67,068

 

Operating lease right-of-use assets

 

 

1,394,664

 

 

 

 

Property and equipment, net

 

 

2,424,625

 

 

 

2,373,790

 

Total assets

 

$

35,124,991

 

 

$

43,771,280

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

3,357,343

 

 

$

1,849,921

 

Accrued liabilities

 

 

1,499,510

 

 

 

3,358,465

 

Contract liabilities - current

 

 

486,994

 

 

 

332,711

 

NuvoGen obligation - current

 

 

1,286,152

 

 

 

1,290,234

 

MidCap Term Loan payable - current

 

 

583,333

 

 

 

 

Operating lease liabilities - current

 

 

682,863

 

 

 

 

Other current liabilities

 

 

63,344

 

 

 

186,043

 

Total current liabilities

 

 

7,959,539

 

 

 

7,017,374

 

NuvoGen obligation - non-current, net of discount

 

 

5,044,263

 

 

 

5,702,519

 

Convertible note, related party - net of debt issuance costs

 

 

2,980,940

 

 

 

2,974,213

 

MidCap Term Loan payable – non-current, net of discount and debt issuance costs

 

 

6,194,422

 

 

 

6,704,641

 

Operating lease liabilities - non-current

 

 

976,786

 

 

 

 

Other non-current liabilities

 

 

299,049

 

 

 

280,471

 

Total liabilities

 

 

23,454,999

 

 

 

22,679,218

 

Commitments and Contingencies (Note 16)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, $0.001 par value; 200,000,000 shares authorized at June 30,

   2019 and December 31, 2018, 28,707,047 shares issued and outstanding at

   June 30, 2019 and 28,585,449 shares issued and outstanding at December 31, 2018

 

 

28,707

 

 

 

28,585

 

Additional paid-in-capital

 

 

172,831,416

 

 

 

172,086,909

 

Accumulated other comprehensive loss

 

 

(2,036

)

 

 

(3,453

)

Accumulated deficit

 

 

(161,188,095

)

 

 

(151,019,979

)

Total stockholders’ equity

 

 

11,669,992

 

 

 

21,092,062

 

Total liabilities and stockholders’ equity

 

$

35,124,991

 

 

$

43,771,280

 

See notes to the unaudited condensed consolidated financial statements.

 

 

1


 

HTG Molecular Diagnostics, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product and product-related services

 

$

4,424,368

 

 

$

2,023,312

 

 

$

7,086,873

 

 

$

3,756,858

 

Collaborative development services

 

 

1,371,952

 

 

 

2,887,454

 

 

 

1,912,272

 

 

 

5,312,560

 

Total revenue

 

 

5,796,320

 

 

 

4,910,766

 

 

 

8,999,145

 

 

 

9,069,418

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product and product-related services revenue

 

 

2,508,371

 

 

 

1,450,682

 

 

 

4,553,898

 

 

 

2,587,745

 

Selling, general and administrative

 

 

4,740,710

 

 

 

4,764,751

 

 

 

9,141,576

 

 

 

10,422,583

 

Research and development

 

 

3,253,639

 

 

 

2,758,984

 

 

 

5,328,387

 

 

 

5,348,270

 

Total operating expenses

 

 

10,502,720

 

 

 

8,974,417

 

 

 

19,023,861

 

 

 

18,358,598

 

Operating loss

 

 

(4,706,400

)

 

 

(4,063,651

)

 

 

(10,024,716

)

 

 

(9,289,180

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(238,796

)

 

 

(233,306

)

 

 

(472,763

)

 

 

(415,823

)

Interest income

 

 

154,774

 

 

 

197,773

 

 

 

336,211

 

 

 

330,936

 

Loss on extinguishment of Growth Term Loan

 

 

 

 

 

 

 

 

 

 

 

(105,064

)

Total other income (expense)

 

 

(84,022

)

 

 

(35,533

)

 

 

(136,552

)

 

 

(189,951

)

Net loss before income taxes

 

 

(4,790,422

)

 

 

(4,099,184

)

 

 

(10,161,268

)

 

 

(9,479,131

)

Provision for income taxes

 

 

6,848

 

 

 

3,545

 

 

 

6,848

 

 

 

3,545

 

Net loss

 

$

(4,797,270

)

 

$

(4,102,729

)

 

$

(10,168,116

)

 

$

(9,482,676

)

Net loss per share, basic and diluted

 

$

(0.17

)

 

$

(0.14

)

 

$

(0.36

)

 

$

(0.36

)

Shares used in computing net loss per share, basic and diluted

 

 

28,657,384

 

 

 

28,375,379

 

 

 

28,629,189

 

 

 

26,549,895

 

 

See notes to the unaudited condensed consolidated financial statements.

 

2


 

HTG Molecular Diagnostics, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net loss

 

$

(4,797,270

)

 

$

(4,102,729

)

 

$

(10,168,116

)

 

$

(9,482,676

)

Other comprehensive income (loss), net of tax effect:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on short-term investments

 

 

819

 

 

 

(188

)

 

 

4,172

 

 

 

(11,339

)

Foreign currency translation adjustment

 

 

(9,194

)

 

 

 

 

 

(2,755

)

 

 

 

Total other comprehensive income (loss)

 

 

(8,375

)

 

 

(188

)

 

 

1,417

 

 

 

(11,339

)

Comprehensive loss

 

$

(4,805,645

)

 

$

(4,102,917

)

 

$

(10,166,699

)

 

$

(9,494,015

)

 

See notes to the unaudited condensed consolidated financial statements.

 

 

 

3


HTG Molecular Diagnostics, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

(Unaudited)

 

 

 

Three and Six Months Ended June 30, 2019

 

 

 

Common Stock

 

 

 

 

Additional

Paid-In

 

 

 

 

Accumulated

Other

Comprehensive

 

 

 

 

Accumulated

 

 

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

 

Capital

 

 

 

 

Income (Loss)

 

 

 

 

Deficit

 

 

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2019

 

 

28,585,449

 

 

$

28,585

 

 

 

 

$

172,086,909

 

 

 

 

$

(3,453

)

 

 

 

$

(151,019,979

)

 

 

 

$

21,092,062

 

Exercise of stock options

 

 

21,871

 

 

 

22

 

 

 

 

 

51,548

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

51,570

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

241,233

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

241,233

 

Release of restricted stock awards

 

 

13,126

 

 

 

13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13

 

Net share settlement of restricted stock award

 

 

(3,813

)

 

 

(4

)

 

 

 

 

(9,681

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,685

)

Employee stock purchase plan expense

 

 

 

 

 

 

 

 

 

 

16,794

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16,794

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,370,846

)

 

 

 

 

(5,370,846

)

Unrealized gain on short-term investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,353

 

 

 

 

 

 

 

 

 

 

3,353

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,439

 

 

 

 

 

 

 

 

 

 

6,439

 

Balance at March 31, 2019

 

 

28,616,633

 

 

$

28,616

 

 

 

 

$

172,386,803

 

 

 

 

$

6,339

 

 

 

 

$

(156,390,825

)

 

 

 

$

16,030,933

 

Exercise of stock options

 

 

32,385

 

 

 

32

 

 

 

 

 

69,352

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

69,384

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

287,317

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

287,317

 

Release of restricted stock awards

 

 

15,001

 

 

 

15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15

 

Net share settlement of restricted stock award

 

 

(4,461

)

 

 

(4

)

 

 

 

 

(11,148

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,152

)

Stock issued under stock purchase plans

 

 

47,489

 

 

 

48

 

 

 

 

 

99,092

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

99,140

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,797,270

)

 

 

 

 

(4,797,270

)

Unrealized gain on short-term investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

819

 

 

 

 

 

 

 

 

 

 

819

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,194

)

 

 

 

 

 

 

 

 

 

(9,194

)

Balance at June 30, 2019

 

 

28,707,047

 

 

$

28,707

 

 

 

 

$

172,831,416

 

 

 

 

$

(2,036

)

 

 

 

$

(161,188,095

)

 

 

 

$

11,669,992

 

4


 

HTG Molecular Diagnostics, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (cont’d)

(Unaudited)

 

 

 

Three and Six Months Ended June 30, 2018

 

 

 

Common Stock

 

 

 

 

Additional

Paid-In

 

 

 

 

Accumulated

Other

Comprehensive

 

 

 

 

Accumulated

 

 

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

 

Capital

 

 

 

 

Loss

 

 

 

 

Deficit

 

 

 

 

Equity (Deficit)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2018

 

 

13,929,763

 

 

$

13,929

 

 

 

 

$

131,492,595

 

 

 

 

$

-

 

 

 

 

$

(134,566,061

)

 

 

 

$

(3,059,537

)

Exercise of stock options

 

 

18,028

 

 

 

18

 

 

 

 

 

40,486

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

40,504

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

1,143,188

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,143,188

 

Release of restricted stock awards

 

 

269,551

 

 

 

270

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

270

 

Net share settlement of restricted stock award

 

 

(34,769

)

 

 

(35

)

 

 

 

 

(133,478

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(133,513

)

Employee stock purchase plan expense

 

 

 

 

 

 

 

 

 

 

14,453

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,453

 

Issuance of common stock from ATM Offering, net of issuance costs of $17,000

 

 

261,352

 

 

 

261

 

 

 

 

 

556,445

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

556,706

 

Issuance of common stock from underwritten public offering, net of issuance costs of $2.6 million

 

 

13,915,000

 

 

 

13,915

 

 

 

 

 

37,710,401

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

37,724,316

 

Issuance of common stock warrants in connection with MidCap Term Loan

 

 

 

 

 

 

 

 

 

 

74,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

74,000

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,379,947

)

 

 

 

 

(5,379,947

)

Unrealized loss on short-term investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,151

)

 

 

 

 

 

 

 

 

 

(11,151

)

Balance at March 31, 2018

 

 

28,358,925

 

 

$

28,358

 

 

 

 

$

170,898,090

 

 

 

 

$

(11,151

)

 

 

 

$

(139,946,008

)

 

 

 

$

30,969,289

 

Exercise of stock options

 

 

15,623

 

 

 

16

 

 

 

 

 

28,993

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,009

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

241,920

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

241,920

 

Stock issued under stock purchase plan

 

 

39,976

 

 

 

40

 

 

 

 

 

77,275

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

77,315

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,102,729

)

 

 

 

 

(4,102,729

)

Unrealized loss on short-term investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(188

)

 

 

 

 

 

 

 

 

 

(188

)

Balance at June 30, 2018

 

 

28,414,524

 

 

$

28,414

 

 

 

 

$

171,246,278

 

 

 

 

$

(11,339

)

 

 

 

$

(144,048,737

)

 

 

 

$

27,214,616

 

 

See notes to the unaudited condensed consolidated financial statements.

 

 

5


HTG Molecular Diagnostics, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited) 

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

2018

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(10,168,116

)

 

$

(9,482,676

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

603,480

 

 

 

778,344

 

Accretion of discount on NuvoGen obligation

 

 

(6,483

)

 

 

(6,006

)

Provision for excess inventory

 

 

45,000

 

 

 

23,533

 

Amortization of Growth Term Loan discount and issuance costs

 

 

 

 

 

62,951

 

Loss on extinguishment of Growth Term Loan

 

 

 

 

 

105,064

 

Amortization of QNAH Convertible Note issuance costs

 

 

6,727

 

 

 

6,727

 

Amortization of MidCap Credit Facility discount and issuance costs

 

 

81,096

 

 

 

48,092

 

Stock-based compensation expense

 

 

528,578

 

 

 

1,385,378

 

Employee stock purchase plan expense

 

 

33,589

 

 

 

28,906

 

Amortization of operating lease right-of-use assets

 

 

194,232

 

 

 

 

Amortization of incentive from landlord

 

 

 

 

 

(71,000

)

Accrued interest on available-for-sale securities investments

 

 

(178,165

)

 

 

(187,946

)

Changes in operating assets and liabilities: