NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Organization and Basis of Presentation
Description of Business
Bionano Genomics, Inc. (collectively, with its consolidated subsidiary, the “Company”) is a life sciences instrumentation company in the genome analysis space. The Company currently develops and markets the Saphyr system, a platform for ultra-sensitive and ultra-specific structural variation detection that enables researchers and clinicians to accelerate the search for new diagnostics and therapeutic targets and to streamline the study of changes in chromosomes, which is known as cytogenetics.
Basis of Presentation
The accompanying financial information has been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission for interim reporting purposes. The condensed consolidated financial statements are unaudited. The unaudited condensed consolidated financial statements reflect, in the opinion of the Company's management, all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of financial position, results of operations, changes in equity, and comprehensive loss and cash flows for each period presented in accordance with United States generally accepted accounting principles (“U.S. GAAP”). All intercompany transactions and balances have been eliminated. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019. Certain prior year numbers were reclassified to conform with current year presentation. Such reclassification had no impact on the previously reported results of operations.
Going Concern
The Company is required to perform an analysis regarding its ability to continue as a going concern. The Company must evaluate whether there are conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern and to meet its obligations as they become due within one year after the date that the financial statements are issued. If the Company concludes that substantial doubt is raised, the Company is also required to consider whether its plans alleviate that doubt.
The Company has experienced recurring net losses from operations, negative cash flows from operating activities, financial covenant breaches, and significant accumulated deficit since its inception and expects to continue to incur net losses into the foreseeable future. The Company had an accumulated deficit of $113.1 million as of March 31, 2020. The Company had cash and cash equivalents of $8.1 million as of March 31, 2020. Management expects operating losses and negative cash flows to continue for at least the next year as the Company continues to incur costs related to research and commercialization efforts. Management has prepared cash flow forecasts which indicate that based on the Company’s expected operating losses, negative cash flows and debt obligations, there is substantial doubt about the Company’s ability to continue as a going concern within twelve months after the date that the financial statements for the three months ended March 31, 2020 are issued.
In March 2020, the World Health Organization announced the novel coronavirus COVID-19 as a global pandemic. COVID-19 continues to spread in the United States and globally and as a result the Company is subject to additional risks and uncertainties. The degree to which our business will be affected by the COVID-19 pandemic is highly uncertain. The Company expects the disruption to be temporary, however, the Company cannot reasonably estimate the duration of the disruption at this time. The negative effects of COVID-19 could have a material impact on the Company’s financial results. To comply with Governmental authorities in the jurisdictions in which the Company operates, the Company has temporarily reduced its business operations to comply with social distancing restrictions. The Company’s manufacturing partners, suppliers, and customers, have implemented similar operational reductions. This overall reduction in activity has resulted in a decrease in sales which has negatively impacted the Company’s first quarter 2020 financial results. Future effects of COVID-19 are unknown and the Company’s financial results may continue to be negatively affected in the future.
There may be long-term negative effects of the COVID-19 pandemic, even after the outbreak has subsided. Specifically, product demand may be reduced due to an economic recession, a decrease in corporate capital expenditures, prolonged unemployment, reduction in consumer confidence, or any similar negative economic condition. These negative effects could have a material impact on the Company’s operations, business, earnings, and liquidity.
The Company’s ability to continue as a going concern is dependent upon its ability to raise additional funding. The Company has plans to raise additional capital through equity offerings or debt financings to fulfill its operating and capital requirements for at least 12 months and to maintain compliance with certain financial covenants in the Innovatus LSA (as defined
below). The Company’s plans include continuing to fund its operating losses and capital funding needs through equity or debt financings, strategic collaborations, licensing arrangements, asset sales, or other arrangements. However, the Company may not be able to secure such financing in a timely manner or on favorable terms, if at all.
As a publicly-traded company on The Nasdaq Stock Market LLC ("Nasdaq"), the Company is required to comply with rules and regulations issued by Nasdaq. If the Company is not able to comply with such rules and regulations, which it has not met from time-to-time since the Company's initial public offering in August 2018, the Company may not be able to maintain its Nasdaq listing.
Furthermore, if the Company issues equity securities to raise additional funds, its existing stockholders may experience dilution, and the new equity securities may have rights, preferences and privileges senior to those of the Company’s existing stockholders. If the Company raises additional funds through collaboration, licensing or other similar arrangements, it may be necessary to relinquish valuable rights to its products or proprietary technologies or grant licenses on terms that are not favorable to the Company. If the Company does not have or is not able to obtain sufficient funds, it may have to reduce commercialization efforts or delay its development of new products. The Company also may have to reduce marketing, customer support or other resources devoted to its products or cease operations. As a result, the aforementioned conditions, among others, raise substantial doubt about the Company's ability to continue as a going concern within one year after the date the financial statements for the three months ended March 31, 2020 are issued. Such financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities in the normal course of business, and do not include any adjustments to reflect the outcome of this uncertainty.
In April 2020, the Company received a letter (the “Notice”) from The Nasdaq Stock Market LLC (“Nasdaq”) advising the Company that for 30 consecutive trading days preceding the date of the Notice, the bid price of the Company’s common stock had closed below the $1.00 per share minimum required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”).
The Notice has no effect on the listing of the Company’s common stock at this time, and the Company’s common stock continues to trade on The Nasdaq Capital Market under the symbol “BNGO.”
Under Nasdaq Listing Rule 5810(c)(3)(A), the Company has 180 calendar days following the date of the Notice to regain compliance with the Minimum Bid Price Requirement. However, due to recent extraordinary market conditions, Nasdaq has determined to toll the compliance period for the Minimum Bid Price Requirement through June 30, 2020 (the “Tolling Period”). As a result, the compliance Period will end on December 28, 2020 (the “Compliance Period”) instead of October 20, 2020. If at any time during the Tolling Period or the Compliance Period the closing bid price of the Company’s common stock is at least $1.00 for a minimum of 10 consecutive business days, the Company will regain compliance with the Minimum Bid Price Requirement and its common stock will continue to be eligible for listing on The Nasdaq Capital Market absent noncompliance with any other requirement for continued listing.
If the Company does not regain compliance with the Minimum Bid Price Requirement by the end of the Compliance Period, the Company may be afforded an additional 180 calendar days to regain compliance with the Minimum Bid Price Requirement (the “Additional Compliance Period”) if on the last day of the Compliance Period the Company is in compliance with the market value of publicly held shares requirement for continued listing as well as all other standards for initial listing of its common stock on The Nasdaq Capital Market (other than the Minimum Bid Price Requirement), unless the Company does not indicate its intent to cure the deficiency, or if it appears to Nasdaq that it is not possible for the Company to cure the deficiency.
If the Company does not regain compliance with the Minimum Bid Price Requirement by the end of the Compliance Period, or the Additional Compliance Period, if applicable, the Company’s common stock will be subject to delisting.
The Company intends to monitor the closing bid price of its common stock and may, if appropriate, consider implementing available options to regain compliance with the Minimum Bid Price Requirement. For example, the Company is seeking stockholder approval at its 2020 Annual Meeting of Stockholders of a series of alternate amendments to the Company’s Amended and Restated Certificate of Incorporation (each, a “Reverse Split Amendment”), to among other things, effect, at the discretion of the Company’s Board of Directors, a reverse stock split of the Company’s common stock, which may, absent other factors, proportionately increase the market price of the Company’s common stock above $1.00 per share.
Significant Accounting Policies
During the three months ended March 31, 2020, there were no changes to the Company's significant accounting policies as described in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.
Recent Issued But Not Yet Adopted Accounting Pronouncements
In April 2012, the Jump-Start Our Business Startups Act (the “JOBS Act”) was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for an emerging growth company. As an emerging growth company, the Company may elect to adopt new or revised accounting standards when they become effective for non-public companies, which typically is later than when public companies must adopt the standards. The Company has elected to take advantage of the extended transition period afforded by the JOBS Act and, as a result, will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for emerging growth companies, which are the dates included below.
In February 2015, the FASB issued Accounting Standards Update ("ASU") 2016-2, Leases (Topic 842), which amends the accounting guidance for leases and increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and requires disclosures of key information about leasing arrangements. ASU 2016-2 initially mandated a modified retrospective transition method, however, in July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which amends ASU 2016-2, permitting entities the option to adopt this standard prospectively with a cumulative-effect adjustment to opening equity in the year of adoption and include required disclosures for prior periods but will not restate prior periods. The Company anticipates implementing the accounting guidance for leases using the alternative method beginning with the annual reporting period ending December 31, 2022 and interim reporting periods in 2023. The Company is in the process of evaluating the impact of adoption of the lease accounting guidance on the consolidated financial statements.
2. Net Loss Per Share
Basic net loss per share is calculated by dividing the net loss by the weighted-average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing the net loss by the weighted average number of common shares and common share equivalents outstanding for the period. Common stock equivalents are only included when their effect is dilutive. The Company’s potentially dilutive securities which include outstanding stock options under the Company’s equity incentive plan have been excluded from the computation of diluted net loss per share as they would be anti-dilutive to the net loss per share. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company’s net loss position.
Potentially dilutive securities not included in the calculation of diluted net loss per share attributable to common stockholders because to do so would be anti-dilutive are as follows (in common stock equivalent shares):
|
|
|
|
|
|
|
|
March 31,
2020
|
|
March 31,
2019
|
Stock options
|
2,760,000
|
|
|
1,707,000
|
|
Warrants
|
24,128,000
|
|
|
4,225,000
|
|
Total
|
26,888,000
|
|
|
5,932,000
|
|
3. Revenue Recognition
Revenue by Source
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2020
|
|
2019
|
Instruments
|
$
|
534,000
|
|
|
$
|
1,302,000
|
|
Consumables
|
449,000
|
|
|
386,000
|
|
Total product revenue
|
983,000
|
|
|
1,688,000
|
|
Services and other
|
153,000
|
|
|
165,000
|
|
Total revenue
|
$
|
1,136,000
|
|
|
$
|
1,853,000
|
|
Revenue by Geographic Location
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2020
|
|
2019
|
|
$
|
|
%
|
|
$
|
|
%
|
North America
|
$
|
726,000
|
|
|
64
|
%
|
|
$
|
839,000
|
|
|
45
|
%
|
EMEIA
|
390,000
|
|
|
34
|
%
|
|
919,000
|
|
|
50
|
%
|
Asia Pacific
|
20,000
|
|
|
2
|
%
|
|
95,000
|
|
|
5
|
%
|
Total
|
$
|
1,136,000
|
|
|
100
|
%
|
|
$
|
1,853,000
|
|
|
100
|
%
|
The table above provides revenue from contracts with customers by business and geographic region on a disaggregated basis. North America consists of the United States and Canada. EMEIA consists of Europe, the Middle East, India and Africa. Asia Pacific includes China, Japan, South Korea, Singapore and Australia. For the three months ended March 31, 2020 and 2019, the United States represented 64% and 45%, and China represented 0% and 4%, respectively of total revenue.
Remaining Performance Obligations
As of March 31, 2020, the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied was $445,000. These remaining performance obligations primarily relate to extended warranty and support and maintenance obligations. The Company expects to recognize approximately 58% of this amount as revenue during the remainder of 2020, 39% in 2021 and 3% in 2022. Warranty revenue is included in Service and other revenue.
The Company recognized revenue of $127,000 and $89,000 during the three months ended March 31, 2020 and 2019, respectively, which was included in the contract liability balance at the end of the previous year.
Concentrations
Accounts receivable is subject to concentration risk whenever a customer has a balance that meets or exceeds 10% of the total balance. As of March 31, 2020 and December 31, 2019, one customer represented 17% and 10%, respectively, of the Company's accounts receivable balance.
4. Balance Sheet Account Details
|
|
|
|
|
|
|
|
|
|
March 31,
2020
|
|
December 31,
2019
|
Accounts receivable, net:
|
|
|
|
Accounts receivable, trade
|
$
|
5,628,000
|
|
|
$
|
6,889,000
|
|
Less allowance for doubtful accounts
|
(1,513,000
|
)
|
|
(555,000
|
)
|
|
$
|
4,115,000
|
|
|
$
|
6,334,000
|
|
The Company extends credit to its customers in the normal course of business based upon an evaluation of each customer’s credit history, financial condition, and other factors. Estimates of allowances for doubtful accounts are determined by evaluating individual customer circumstances, historical payment patterns, length of time past due, and economic and other factors. Bad debt expense is recorded as necessary to maintain an appropriate level of allowance for doubtful accounts in selling, general and administrative expense.
During the three months ended March 31, 2020, for a portion of the Company's accounts, the Company determined that its collection efforts had been exhausted and deemed the accounts receivables balance as uncollectible. The Company recorded bad debt expense of $958,000 charged against selling, general, and administrative expense and increased its allowance for doubtful accounts from $555,000 as of December 31, 2019 to $1,513,000.
|
|
|
|
|
|
|
|
|
|
March 31,
2020
|
|
December 31,
2019
|
Inventory:
|
|
|
|
Materials and supplies
|
$
|
2,138,000
|
|
|
$
|
951,000
|
|
Finished goods
|
1,473,000
|
|
|
2,493,000
|
|
|
$
|
3,611,000
|
|
|
$
|
3,444,000
|
|
5. Debt
Paycheck Protection Program
On April 17, 2020, the Company received loan proceeds of approximately $1.77 million (the “PPP Loan”) pursuant to the Paycheck Protection Program (“the PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) administered by the U.S. Small Business Administration (the “SBA”).
The PPP Loan is scheduled to mature on April 17, 2022 (the “Maturity Date”), bears interest at a rate of 1.00% per annum, and is subject to the standard terms and conditions applicable to loans administered by the SBA under the CARES Act. Commencing November 17, 2020, the Company is required to pay regular monthly payments in an amount equal to one month’s accrued interest. All interest which accrues during the initial six months of the loan period will be deferred and payable on the Maturity Date. The amounts outstanding under the PPP Loan may be prepaid by the Company at any time prior to maturity without penalty.
The PPP Loan is evidenced by a promissory note, dated as of April 17, 2020, issued by East West Bank (the “PPP Lender”), which contains customary events of default relating to, among other things, payment defaults and breaches of representations and warranties. Upon an event of default under the PPP Note, the PPP Lender may, among other things, require immediate payment of all amounts owing under the PPP Note or file suit and obtain judgment. Under the terms of the CARES Act, recipients of loans under the PPP can apply for and be granted forgiveness for all or a portion of such loan granted under the PPP. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for payment of payroll costs and certain other eligible costs. The Company is continuing to evaluate guidance released by the SBA regarding qualification for forgiveness of the PPP Loan, however, no assurance is provided that forgiveness for any portion of the Company’s PPP Loan will be obtained.
In order to apply for the PPP Loan, the Company was required to certify, among other things, that the current economic uncertainty made the PPP Loan request necessary to support the Company’s ongoing operations. This certification further required the Company to take into account the maintenance of its workforce, the Company’s need for additional funding to continue operations, and the Company’s ability to access alternative forms of capital in the current market environment to offset the effects of the COVID-19 pandemic.
Loan Agreements
The carrying value of the Company's debt for the periods presented was as follows:
|
|
|
|
|
|
|
|
|
|
March 31,
2020
|
|
December 31,
2019
|
Term Loans
|
$
|
18,522,000
|
|
|
$
|
20,473,000
|
|
Revolver
|
103,000
|
|
|
1,498,000
|
|
Total principal
|
18,625,000
|
|
|
21,971,000
|
|
Less unamortized debt issuance costs
|
(1,656,000
|
)
|
|
(1,886,000
|
)
|
Total carrying value of debt
|
$
|
16,969,000
|
|
|
$
|
20,085,000
|
|
In March 2019, the Company entered into a Loan and Security Agreement (the “Innovatus LSA”) by and among Innovatus Life Sciences Lending Fund I, LP, a Delaware limited partnership (“Innovatus”), as collateral agent and the lenders listed on Schedule 1.1 thereto, including East West Bank. The Innovatus LSA provided a first term loan of $17.5 million, a second term loan of $2.5 million and a third term loan of $5.0 million (collectively, “Term Loans”) if the Company satisfied certain funding conditions. Interest on the Term Loans is due on the first of each month at a rate of 10.25% per annum in cash or a discounted rate of 7.25% in cash with 3.0% of the 10.25% per annum rate added to the principal of the loan and subject to accruing interest through the end of the interest only payment period, which ends March 1, 2022. At inception, the Company elected to pay interest in cash
at a rate of 7.25% per annum and have 3.0% per annum of the interest added back to the outstanding principal. As of March 31, 2020, the effective interest rate, including debt issuance costs, for Term Loans was 13.7%. Beginning in April 2022, the Company must make 24 equal monthly payments of principal and interest with a final maturity date in March 2024, which may be earlier due to an event of default if not cured within time specified.
The Innovatus LSA also provides for a revolving line of credit in an amount not to exceed $5.0 million (the “Revolver”). The Company may repay and reborrow amounts under the Revolver at any time prior to the March 1, 2024 maturity date without penalty or premium. The outstanding balance of amounts borrowed under the Revolver bears interest at a rate equal to 2.0% above the variable rate of interest, per annum, as specified in the terms of the Revolver.
The Innovatus LSA is collateralized by substantially all of the Company’s assets, including its intellectual property. The Innovatus LSA requires the Company to comply with various affirmative and negative covenants, including: (1) a liquidity covenant requiring the Company to maintain a minimum cash balance at all times in a collateral account; (2) a revenue covenant requiring the Company to meet certain minimum revenue targets measured at the end of each calendar quarter. The Innovatus LSA also includes standard events of default, including a provision that Innovatus could declare an event of default upon the occurrence of any event that it interprets as having a material adverse change in the Company's business, operations, or condition, a material impairment on the Company's ability to pay the secured obligations under the Innovatus LSA, or upon a material adverse effect on the collateral under the agreement, thereby requiring us to repay the loan immediately, together with a prepayment fee and other applicable fees. As of March 31, 2020, the Company has not received any notification or indication from Innovatus to invoke the material adverse change clause. However, due to the Company’s current cash flow position and the substantial doubt about its ability to continue as a going concern, the entire principal amount of the Term Loans are presented as short-term. The Company will continue to evaluate the debt classification on a quarterly basis and evaluate for reclassification in the future should its financial condition improve.
As of December 31, 2019, the Company did not achieve certain financial covenants under the Innovatus LSA. As a result, in March 2020, the Company and Innovatus entered into an amendment to the Innovatus LSA (the “Second Amendment”) to, among other things: (i) waive the events of default from not achieving the specific financial covenants for the December 31, 2019 measurement date, (ii) require an immediate partial repayment of $2.1million, (iii) require an additional partial repayment of $2.9 million on the earlier of completion of an Equity Event (as defined in the Second Amendment), or April 30, 2020, (iv) modify the liquidity covenant, such that the Company’s minimum cash balance shall vary based on outstanding borrowing capacity under the Revolver (provided, however, that the Company shall maintain a minimum cash balance of $2 million at any given time), (v) reduce the dollar amount of certain minimum revenue covenants and (vi) modify the terms of certain events of default. For example, the Second Amendment provides for a cure period in connection with the breach of certain minimum revenue financial covenants, as long as the Company submits an updated management plan and financial projections, which are subject to Innovatus approval, and completes a Qualified Financing Event (as defined in the Second Amendment) within 45 days of such breach.
In connection with the Second Amendment, the Company was obligated to pay Innovatus a waiver fee in the amount of $200,000 and a prepayment fee of $100,000, payable in cash or in shares of the Company’s common stock at the Company's election, no later than following completion of the Equity Event. As described in Note 6, the Company completed the follow-on offering in April 2020 that constituted an Equity Event under the Second Amendment. A portion of the proceeds from the follow-on offering were used to pay-down $2.9 million of principal balance outstanding under the Innovatus term loan in accordance with the Second Amendment. In addition, the Company issued 872,601 shares of its common stock to Innovatus to satisfy the $200,000 waiver fee and $100,000 prepayment fee due under the Second Amendment.
The Company was in compliance with all financial covenants under the Innovatus LSA for the three months ended March 31, 2020.
6. Stockholders’ Equity and Stock-Based Compensation
Follow-on Public Offering
In April 2020, the Company completed an underwritten public offering of 16,896,000 shares of its common stock and, to certain investors, pre-funded warrants to purchase 37,650,000 shares of its common stock, and accompanying common warrants to purchase up to an aggregate of 54,546,000 shares of its common stock. Each share of common stock and pre-funded warrant to purchase one share of common stock was sold together with a common warrant to purchase one share of common stock. The
public offering price of each share of common stock and accompanying common warrant was $0.33 and $0.329 for each pre-funded warrant. The pre-funded warrants are immediately exercisable at a price of $0.001 per share of common stock. The common warrants are immediately exercisable at a price of $0.33 per share of common stock and will expire five years from the date of issuance. The shares of common stock and pre-funded warrants, and the accompanying common warrants, were issued separately and were immediately separable upon issuance. The gross proceeds to the Company were approximately $18.0 million before deducting underwriting discounts and commissions and other offering expenses.
Stock-Based Compensation
Stock Options
A summary of the Company’s stock option activity for the three months ended March 31, 2020 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of Stock under Stock Options
|
|
Weighted-
Average
Exercise
Price
|
|
Weighted-
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
Outstanding at January 1, 2020
|
1,743,000
|
|
|
$
|
5.73
|
|
|
8.2
|
|
$
|
4,356
|
|
Granted
|
1,148,000
|
|
|
1.04
|
|
|
|
|
|
Exercised
|
—
|
|
|
—
|
|
|
|
|
$
|
—
|
|
Canceled
|
(131,000
|
)
|
|
5.57
|
|
|
|
|
|
Outstanding at March 31, 2020
|
2,760,000
|
|
|
$
|
3.78
|
|
|
8.9
|
|
$
|
33
|
|
Vested and exercisable at March 31, 2020
|
883,000
|
|
|
$
|
6.03
|
|
|
7.8
|
|
$
|
—
|
|
For the three months ended March 31, 2020 and 2019, the weighted-average grant date fair value of stock options granted was $1.04 and $2.42 per share, respectively.
The Company recognized stock-based compensation expense for the periods presented were as follows:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
2020
|
|
2019
|
Research and development
|
$
|
67,000
|
|
|
$
|
53,000
|
|
General and administrative
|
261,000
|
|
|
236,000
|
|
Total stock-based compensation expense
|
$
|
328,000
|
|
|
$
|
289,000
|
|
The weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of the employee stock option grants during the periods presented were as follows:
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
2020
|
|
2019
|
Risk-free interest rate
|
1.4
|
%
|
|
2.5
|
%
|
Expected volatility
|
70.0
|
%
|
|
67.0
|
%
|
Expected term (in years)
|
6.0
|
|
|
4.9
|
|
Expected dividend yield
|
0.0
|
%
|
|
0.0
|
%
|
Stock Warrants
A summary of the Company’s warrant activity for the three months ended March 31, 2020 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of Stock under Warrants
|
|
Weighted-
Average
Exercise
Price
|
|
Weighted-
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
Outstanding at January 1, 2020
|
24,406,000
|
|
|
$
|
1.76
|
|
|
4.82
|
|
$
|
7,932,689
|
|
Granted
|
3,200,000
|
|
|
1.06
|
|
|
5.43
|
|
|
Exercised
|
(3,478,000
|
)
|
|
0.71
|
|
|
|
|
1,305,172
|
|
Canceled
|
—
|
|
|
|
|
|
|
|
Outstanding at March 31, 2020
|
24,128,000
|
|
|
$
|
1.81
|
|
|
4.52
|
|
$
|
—
|
|
Vested and exercisable at March 31, 2020
|
24,128,000
|
|
|
$
|
1.81
|
|
|
4.52
|
|
$
|
—
|
|
Warrant Inducement
As previously reported, the Company issued warrants (the “Original Warrants”) to purchase shares of the Company’s Common Stock to certain investors in the Company’s underwritten public offering completed on October 23, 2019. The Original Warrants were immediately exercisable upon issuance at an exercise price per share of $0.86 and are set to expire on October 23, 2024.
On March 2, 2020, the Company entered into a Warrants Amendment and Agreement (the “Inducement Agreement”) with certain holders (“Holders”) of the Original Warrants that are exercisable for an aggregate of up to 3,200,000 shares of Common Stock. The Inducement Agreement provided that, commencing immediately following the delivery to the Holders of a prospectus supplement (the “Prospectus Supplement”) relating to the impact of the Inducement Agreement on the Original Warrants and ending at 9:15 a.m. Eastern Time on the business day following the date of such delivery (the “Modified Exercise Price Term”), the exercise price per share for the Original Warrants will be equal to $0.75 but only with respect to a cash exercise under Section 1(a) of the Original Warrants. In addition, the Company and each Holder agreed that if and only if the Holders exercise for cash all of their Original Warrants as amended pursuant to the Inducement Agreement during the Modified Exercise Price Term, the Company will issue to each Holder a new warrant (collectively, the “New Warrants”) to purchase up to the same number of shares of Common Stock issued to such Holder pursuant to the exercise of its Original Warrant during the Modified Exercise Price Term.
The Company delivered the Prospectus Supplement on March 2, 2020 and each Holder exercised all of their Original Warrants for cash. As a result, on March 3, 2020, the Company issued the New Warrants to the Holders. The New Warrants are exercisable at an exercise price per share of $1.06 commencing on the six-month anniversary of the issuance date, and will terminate on the date that is five years and six months following the issuance date. The Original Warrants and the underlying shares of Common Stock were registered pursuant to the Company’s Registration Statement on Form S-1 (File No. 333-233828), as amended, filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended (“Securities Act”), which became effective on October 21, 2019, and the related prospectus dated October 21, 2019. The New Warrants and the shares of Common Stock issuable upon exercise of the New Warrants were not registered under the Securities Act, and were offered pursuant to the exemption provided in Section 4(a)(2) under the Securities Act.
7. Legal Proceedings
The Company is subject to potential liabilities under various claims and legal actions that are pending or may be asserted. These matters arise in the ordinary course and conduct of the business. The Company intends to continue to defend itself vigorously in such matters. The Company regularly assesses contingencies to determine the degree of probability and range of possible loss for potential accrual in the financial statements. An estimated loss contingency is accrued in the financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Based on the Company’s assessment, it currently does not have any amount accrued as it is not a defendant in any claims or legal actions.
8. Income Taxes
The Company is subject to taxation in the United States, United Kingdom and various state jurisdictions. The Company computes its quarterly income tax provision by using a forecasted annual effective tax rate and adjusts for any discrete items arising during the quarter. The primary difference between the effective tax rate and the federal statutory tax rate relates to the full valuation allowance on the Company's U.S. net operating losses.
In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020. The CARES Act, among other things, includes tax provisions relating to refundable payroll tax credits, deferment of employer’s social security payments, net operating loss utilization and carryback periods, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property (QIP). The CARES Act had no material impact on the Company’s income tax provision for the three months ended March 31, 2020. The Company continues to evaluate the impact of the CARES Act on its financial position, results of operations and cash flows.