Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2025

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

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, 2024 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 as of and for the three months ended March 31, 2025; all intercompany transactions and balances have been eliminated. The accompanying unaudited condensed consolidated financial statements for the three months ended March 31, 2025 include the balance sheet and income statement activity for CapForce, the Company’s wholly-owned subsidiary.

Immaterial Out of Period Adjustments

During the three months ended March 31, 2024, the Company identified an immaterial error related to the calculation of preferred stock par value and additional paid-in capital for the Company’s Series D convertible preferred stock that impacted the Company’s previously issued 2023 consolidated financial statements. Management evaluated the effect of the error on the 2023 and 2024 consolidated financial statements and concluded the error was not material. As a result, in the three months ended March 31, 2024, the Company recorded an out of period adjustment to decrease preferred stock par value and increase additional paid-in capital, each by approximately $2.5 thousand.

During the three months ended March 31, 2024, the Company identified an immaterial error related to the inclusion of balances of accumulated other comprehensive loss representing historic translation adjustments of previously dissolved subsidiaries that impacted the Company’s previously issued 2023 and 2022 consolidated financial statements. Management evaluated the effect of the error on the 2022, 2023, and 2024 consolidated financial statements and concluded the error was not material. As a result, in the three months ended March 31, 2024, the Company recorded an out of period adjustment to increase the loss on deconsolidation of subsidiaries and decrease accumulated other comprehensive loss, each by approximately $75.1 thousand.

Restatement of Previously Issued Financial Statements

Subsequent to the filing of the Company’s quarterly report on Form 10-Q for the three months ended March 31, 2024, the Company identified an error relating to the accounting treatment of an indemnification asset in the Company’s previously issued unaudited condensed consolidated financial statements included in the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2024 (the “Affected Period”). As a result, the Company filed an amended and restated quarterly report on Form 10-Q for the quarter ended March 31, 2024 to correct the error in the Affected Period by adjusting the following information for the three months ended March 31, 2024: (i) removing the previously recorded indemnification asset and gain on lease indemnification; and (ii) changing the accounting estimates related to the Company’s operating lease right-of-use asset and leasehold improvement property and equipment and recording a gain on impairment adjustment associated with the Rockville, Maryland office due to the identification of a subtenant in the three months ended March 31, 2024. In total, the restatement and associated change in accounting estimates resulted in an incremental loss of approximately $0.1 million.

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 credit losses and inventory obsolescence, discount rates used to discount unpaid lease payments to present values, deferred tax assets and liabilities and related valuation allowance, the estimated useful lives of long-lived assets, and the recoverability of long-lived assets. Actual results could differ from those estimates.

Segment Reporting

The Company’s chief operating decision maker (“CODM”) is the Company’s Chief Executive Officer. The CODM is assisted in his responsibilities of making decisions regarding resource allocation and performance assessment by the leadership team.

The Company views its operations and manages its business as one operating segment, focused on repositioning itself by offering listing sponsorship and consultancy services to international companies seeking to list their securities on securities exchanges and entering the financial technology industry with a focus on developing and supporting advanced digital investment banking activities, cross-border securities trading, advanced computational model-enabled investment banking advisory, asset management services, and FinTech-enabled capital table management. Segment profit or loss is measured as the Company’s net income (loss) as reported on the Company’s Statement of Operations. The Company monitors its cash and cash equivalents, as reported on the Company’s Balance Sheets, to determine funding for its activities.

The CODM assesses Company performance through revenue goals and the achievement of integration objectives and cost optimization initiatives. In addition to the Company’s Statement of Operations, the CODM is regularly provided with budgeted and forecasted expense information which is used to determine the Company’s liquidity needs and cash allocation.

Foreign currency

The Company previously had foreign subsidiaries that used currencies other than the U.S. dollar as their functional currencies. As a result, all assets and liabilities of the subsidiaries were translated into U.S. dollars based on exchange rates at the end of the reporting period. Income and expense items were translated at the average exchange rates prevailing during the reporting period. Translation adjustments were reported in accumulated other comprehensive income (loss), a component of stockholders’ equity.

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 income (loss). Unless otherwise noted, all references to “$” or “dollar” refer to the United States dollar.

Fair value of financial instruments

Financial instruments classified as current assets and liabilities (including cash and cash equivalents, receivables, investments, 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. The Company also holds a portion of its cash and cash equivalents in accounts with foreign financial institutions that are not federally insured. While the Company has not experienced any losses related to its cash concentrations, the Company may be subject to risks relating to its cash held in U.S. financial institutions in excess of the FDIC limit or in financial institutions that are not FDIC-insured.

At March 31, 2025 and December 31, 2024, the Company had funds totaling $302,262 which are required as collateral for letters of credit benefiting its landlords and for credit card processors. These funds are reflected in restricted cash 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 that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows:

	March 31, 2025		December 31, 2024		March 31, 2024		December 31, 2023
Cash and cash equivalents	$	1,112,781	$	1,310,653	$	267,493	$	1,151,823
Restricted cash		302,262		302,262		302,262		302,262
Total cash and cash equivalents and restricted cash in the condensed consolidated statements of cash flows	$	1,415,043	$	1,612,915	$	569,755	$	1,454,085

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 and the customer’s current ability to pay its obligation. If amounts become uncollectible, they are charged to operations when that determination is made. The Company concluded no allowance was necessary as of March 31, 2025 and December 31, 2024.

At March 31, 2025, the Company had accounts receivable from one customer that individually represented 94% of total accounts receivable. At December 31, 2024, the Company had accounts receivable from one customer that individually represented 93% of total accounts receivable. The Company did not earn revenues during the three months ended March 31, 2025. For the three months ended March 31, 2024, revenue earned from two customers represented 56% and 11% of total revenues.

Investments in equity securities

The Company currently has a single investment in equity securities issued by a privately held entity. In the fourth quarter of 2024, CapForce performed part of its listing sponsorship and consulting services and completed the first performance obligation within its agreement with a client, generating proceeds of $5.0 million in the client’s equity (see Note 5). The Company has elected to account for this investment using the measurement alternative as the investment does not have a readily determinable fair value. Pursuant to this alternative, the investment is carried at its estimated fair value calculated as its cost minus any impairment. The Company will adjust the investment to fair value only when it identifies observable price changes in orderly transactions for identical or similar investments of the same issuer. The Company will evaluate the investment at each reporting period to determine whether the investment is impaired.

Inventory

Inventory is entirely comprised of the remaining Unyvero system instruments and components and is valued using the first in, first out cost method and stated at the lower of cost or net realizable value. The inventory of approximately $1.2 million at March 31, 2025 and December 31, 2024 is fully reserved given the uncertainty surrounding the net realizable value and future demand for the Company’s products.

Long-lived assets

Property and equipment

Property and equipment is 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 estimation of undiscounted cash flows is performed 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. In the first quarter of 2024, the Company identified and subsequently entered into an agreement with a subtenant for its office space. As a result, the Company had a change in estimate related to the impairment of its leasehold improvements and recognized a gain of $1.2 million in the three months ended March 31, 2024. No impairment was identified during the three months ended March 31, 2025.

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 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 estimation of undiscounted cash flows is performed 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. As a result of the identification of a subtenant for its office space discussed above, the Company had a change in estimate related to the impairment of its right-of-use asset and recognized a gain of $0.8 million in the three months ended March 31, 2024. No impairment was identified during the three months ended March 31, 2025.

Intangible assets

Intangible assets represent costs incurred related to the Company’s proprietary platform during the application development stage that are capitalized as finite-lived intangible assets. These costs include external direct costs for infrastructure and services, as well as personnel and related costs for consultants directly involved in the development effort. Once the project is substantially complete and available for use, capitalized costs will be amortized on a straight-line basis over the asset’s estimated useful life.

Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

Revenue recognition

The Company derives revenues primarily from offering listing sponsorship and consultancy services to international companies seeking to list their securities on securities exchanges.

Prior to its repositioning, the Company derived revenues from (i) the sale of Unyvero Application cartridges, Unyvero Systems, Acuitas AMR Gene Panel systems and test products, and SARS CoV-2 tests, (ii) providing laboratory services, and (iii) providing collaboration services.

The Company analyzes its 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 obligations.

The Company recognizes revenues upon the satisfaction of its performance obligations (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.

Research and development costs, net

Research and development costs are expensed as incurred. Research and development costs primarily consist of fees to expand and innovate CapForce’s digital investment banking platform, salaries and related expenses for personnel, and fees paid to consultants and outside service providers. Prior to the Company’s repositioning, research and development costs also included laboratory supplies and development materials.

Stock-based compensation

Stock-based compensation expense is recognized at 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. The resulting fair value is recognized ratably over the requisite service period, which is generally the vesting period of the award. 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.

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 approximately $227.1 million at December 31, 2024. NOLs created prior to 2018 began expiring in 2022 while those created 2018 and after do not expire. Despite the existence of federal NOLs, 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.

Net (loss) income per share

In periods of net loss, 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. The Company’s Series D and E convertible preferred stock contain non-forfeitable rights to dividends and, therefore, are considered to be participating securities; in periods of net income, the calculation of basic earnings per share excludes from the numerator net income attributable to the preferred stock and excludes the impact of those shares from the denominator.

In periods of net loss, diluted loss per share is calculated similarly to basic loss per share because the impact of all potential dilutive common shares is anti-dilutive. In periods of net income, diluted earnings per share is computed using the more dilutive of the “two class method” or the “treasury method.” Dilutive earnings per share under the “two class method” is calculated by dividing net income available to common stockholders as adjusted for the participating impacts of the preferred stock, by the weighted-average number of shares outstanding plus the dilutive impact of all other potential dilutive common shares, consisting primarily of common shares underlying common stock options and stock purchase warrants using the treasury stock method. Dilutive earnings per share under the “treasury stock method” is calculated by dividing net income available to common stockholders by the weighted-average number of shares outstanding plus the dilutive impact of all potential dilutive common shares, consisting primarily of common shares underlying common stock options and stock purchase warrants using the treasury stock method, and preferred stock using the if-converted method.

The Company has calculated basic and diluted (loss) earnings per share for the three months ended March 31, 2025 and 2024 as follows:

	Basic						Diluted
	March 31, 2025			March 31, 2024			March 31, 2025			March 31, 2024
				(As Restated)						(As Restated)
Net (loss) income	$	(408,133	)	$	287,967		$	(408,133	)	$	287,967
Net income allocated to preferred stock		-			(84,462	)		-			(84,462	)
Net (loss) income available to common stockholders	$	(408,133	)	$	203,505		$	(408,133	)	$	203,505
Basic weighted average shares outstanding		10,071,079			1,284,305			10,071,079			1,284,305
Dilutive effect of stock purchase warrants								-			47,273
Dilutive weighted average shares outstanding								10,071,079			1,331,578
(Loss) earnings per share	$	(0.04	)	$	0.16		$	(0.04	)	$	0.15

None of the potential dilutive securities had a dilutive impact during the three months ended March 31, 2025 due to the Company’s net loss.

The number of anti-dilutive shares for the three months ended March 31, 2025 and 2024 consisting of common shares underlying (i) common stock options, (ii) restricted stock units, and (iii) stock purchase warrants which have been excluded from the computation of diluted income per share, was 1.3 million and 1.1 million shares, respectively.

Recently issued accounting standards

In July 2025, the FASB issued ASU No. 2025-05: Financial Instruments-Credit Losses which amends topic 326. Specifically, the ASU provides a practical expedient whereby an entity can assume that current conditions as of the balance sheet date will not change for the remaining life of the asset (e.g., the account receivable). This guidance is effective for the Company’s fiscal year ending December 31, 2026 and can be adopted early. The Company is in the process of evaluating the effects of this guidance on its unaudited condensed consolidated financial statements.

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.