Bionano Genomics, Inc. — Q1 2020 Form 10-Q
Business and period: Bionano develops and markets the Saphyr genome-analysis system, including instruments, consumables and related services. This unaudited report covers the three months ended March 31, 2020, compared with Q1 2019. The company said COVID-19 disrupted operations and customer activity and relied on SEC relief to delay filing; the report was signed June 18, 2020.
Key financial results
| Metric | Q1 2020 | Q1 2019 / comparison |
|---|---|---|
| Total revenue | $1.136 million | $1.853 million; down 38.7% |
| Gross profit and margin | $280,000; approximately 24.6% | $706,000; approximately 38.1% |
| Operating expenses | $10.042 million | $6.891 million; up 45.7% |
| Operating loss | $9.762 million | $6.185 million |
| Net loss | $10.510 million | $7.852 million |
| Net loss per share, basic and diluted | $0.30 | $0.77 |
| Cash used in operations | $8.032 million | $6.552 million |
| Cash and cash equivalents | $8.144 million at March 31 | $17.311 million at December 31, 2019 |
| Debt carrying value | $16.969 million, all classified current | $20.085 million at December 31, 2019 |
Gross profit and margins above are calculated from reported revenue and cost of revenue. No material cash investing outflow was reported. Q1 financing activities used $1.135 million net, including term-loan and revolving-credit repayments, partly offset by warrant exercises. Accumulated deficit was $113.1 million, and stockholders’ equity was negative $4.2 million at quarter-end.
Changes and notable items
- Product revenue fell 41.8% to $983,000; service and other revenue declined 7.3% to $153,000. Instrument sales fell from six units to three, while consumable units sold increased 46%.
- Management attributed the revenue decline primarily to COVID-related laboratory shutdowns. EMEIA revenue fell 57%, North America 13%, and Asia Pacific 78% year over year.
- Research and development expense rose 27.3% to $2.674 million, and selling, general and administrative expense rose 53.8% to $7.368 million, reflecting hiring, commercialization and public-company costs. SG&A included $958,000 of bad-debt expense; the allowance for doubtful accounts increased to $1.513 million.
- Interest expense increased to $761,000 from $273,000, reflecting the higher debt balance and financing terms. The prior-year period included a $1.333 million debt-extinguishment loss, absent in Q1 2020.
- Debt principal was $18.625 million before $1.656 million of unamortized issuance costs. The Innovatus loan bears 10.25% cash interest or a reduced cash rate plus interest added to principal; its effective rate, including issuance costs, was 13.7%. The loan is secured by substantially all assets, including intellectual property. After a covenant shortfall at December 2019, an amendment waived defaults, required repayments and revised covenant terms; the company reported compliance for Q1.
- Subsequent to quarter-end, the company raised approximately $18.0 million gross in an April public offering of common shares and warrants, and used $2.9 million for an additional term-loan principal repayment. It also received a $1.77 million PPP loan at 1% interest, potentially forgivable subject to eligibility and use requirements. These are post-quarter events, not Q1 cash or revenue.
Outlook, risks and contingencies
- The filing states that recurring losses, negative operating cash flow, debt obligations and covenant history raise substantial doubt about the company’s ability to continue as a going concern within one year after issuance. Management said existing cash plus April offering proceeds were expected to fund operations and obligations through Q4 2020, but further funding may be needed and is not assured.
- Management suspended its 2020 guidance and projections because COVID-19’s duration and effects were uncertain. Risks include reduced customer demand, delayed or defaulted orders, supply-chain disruption, limits on installations and customer support, and difficulty raising capital or meeting loan covenants.
- In April, Nasdaq notified the company that its share price had remained below the $1 minimum bid requirement. The stated compliance deadline was December 28, 2020, subject to applicable extensions; failure to regain compliance could result in delisting. A reverse stock split was among the options being considered.
- PPP forgiveness was uncertain; the company disclosed risks of repayment, regulatory review, penalties and reputational harm if it were found ineligible or unable to substantiate forgiveness.
- Disclosure controls were assessed as ineffective due to a material weakness involving insufficient financial-reporting resources and inadequate segregation of duties. Remediation was underway but not complete as of June 18, 2020.
- The company reported no accrued legal contingencies and no pending legal actions in the filing. COVID-related compensation measures implemented after quarter-end included 50% salary reductions for certain executives and reduced hours or pay for other employees.
Important facts for investors to verify
- Whether revenue, instrument placements and consumable demand recovered after COVID-related customer and operational disruptions.
- Cash burn, funding runway, and the net proceeds and dilution effects of the April offering and associated warrants.
- Debt repayment, minimum-liquidity and revenue covenant compliance, and any lender waivers or amendments.
- Eligibility for and eventual forgiveness of the PPP loan, including any repayment or regulatory consequences.
- Progress in regaining Nasdaq bid-price compliance and completing internal-control remediation.