XML 37 R26.htm IDEA: XBRL DOCUMENT v3.19.2
Description of Business, Basis of Presentation and Principles of Consolidation (Policies)
6 Months Ended
Jun. 30, 2019
Accounting Policies [Abstract]  
Basis of Presentation

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and reflect the accounts of the Company as of June 30, 2019 and for the three and six months ended June 30, 2019 and 2018. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (“US GAAP”) for complete financial statements. The accompanying condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments which, in the opinion of management, are necessary for a fair statement of the Company’s financial position and the results of its operations and cash flows, as of and for the periods presented. The accompanying condensed consolidated balance sheet at December 31, 2018 has been derived from the audited consolidated financial statements at that date but does not include all of the information and disclosures required by US GAAP for annual financial statements. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2018, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 7, 2019.

Going Concern and Liquidity

Going Concern and Liquidity

Management has assessed the Company’s ability to continue as a going concern within one year of the filing of this Quarterly Report on Form 10-Q with the SEC. The accompanying interim unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of the assets and satisfaction of liabilities in the normal course of business. However, the Company has had recurring operating losses and negative cash flows since its inception and has an accumulated deficit of approximately $161.2 million as of June 30, 2019. As of June 30, 2019, the Company had working capital of $19.8 million and long-term liabilities of $15.5 million. The Company’s liability balances consist of its asset-secured MidCap Term Loan (see Note 8), its convertible promissory note with QIAGEN North American Holdings (“QNAH Convertible Note”) (see Note 15) and an obligation to NuvoGen Research, LLC (“NuvoGen obligation”) (see Note 10). Management believes that the Company’s existing resources will be sufficient to fund the Company’s planned operations and expenditures through the midpoint of the second quarter of 2020. However, the Company cannot provide assurance that its plans will not change or that changed circumstances will not result in the depletion of its capital resources more rapidly than it currently anticipates. These circumstances raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying interim unaudited condensed consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.

The Company will need to raise additional capital to fund its operations and service its near and long-term debt obligations until its revenue reaches a level sufficient to provide for self-sustaining cash flows. There can be no assurance that additional capital will be available on acceptable terms, or at all, or that the Company’s revenue will reach a level sufficient to provide for self-sustaining cash flows. If sufficient additional capital is not available as and when needed, the Company may have to delay, scale back or discontinue one or more product development programs, curtail its commercialization activities, significantly reduce expenses, sell assets (potentially at a discount to their fair value or carrying value), enter into relationships with third parties to develop or commercialize products or technologies that the Company otherwise would have sought to develop or commercialize independently, cease operations altogether, pursue a sale of the Company at a price that may result in up to a total loss on investment for its stockholders, file for bankruptcy or seek other protection from creditors, or liquidate all assets. In addition, if the Company defaults under its term loan agreement, its lenders could foreclose on its assets, including substantially all of its cash and cash equivalents which are held in accounts with its lenders.  

Principles of Consolidation

Principles of Consolidation

The Company formed a French subsidiary, HTG Molecular Diagnostics France SARL (“HTG France”), in November 2018. The accompanying condensed consolidated financial statements include the accounts of the Company and this wholly owned subsidiary after elimination of all intercompany transactions.

Concentration Risks

Concentration Risks

Financial instruments that potentially subject the Company to credit risk consist principally of cash and cash equivalents, restricted cash, available-for-sale debt securities and uncollateralized accounts receivable. The Company maintains the majority of its cash and restricted cash balances in the form of cash deposits in bank checking and money market accounts in amounts in excess of federally insured limits. Management believes, based upon the quality of the financial institution, that the credit risk with regard to these deposits is not significant.

 

The Company sells its instrument, related consumables, sample processing services, custom RUO assay design and collaborative development services primarily to biopharmaceutical companies, academic institutions and molecular labs. The Company routinely assesses the financial strength of its customers and credit losses have been minimal to date.

 

The Company’s top three customers accounted for 24%, 18% and 16% of the Company’s total revenue for the three months ended June 30, 2019, compared with the Company’s top two customers accounting for 59% and 11% of the Company’s total revenue for the three months ended June 30, 2018. The top three customers accounted for 31%, 21% and 13% of the Company’s total revenue for the six months ended June 30, 2019 compared to the Company’s top two customers which accounted for 59% and 10% for the six months ended June 30, 2018.

 

The Company’s top three customers accounted for approximately 27%, 16% and 15% of the Company’s accounts receivable as of June 30, 2019. The Company’s top four customers accounted for approximately 44%, 27% and two customers accounting for 11% each as of December 31, 2018.

 

The Company currently relies on a single supplier to supply a subcomponent used in the HTG EdgeSeq processors. A loss of this supplier could significantly delay the delivery of processors, which in turn would materially affect the Company’s ability to generate revenue.