Bionano Genomics, Inc. — Q3 2019 Form 10-Q
Business context and reporting period
Unaudited results for the quarter and nine months ended September 30, 2019. Bionano develops and markets the Saphyr genome-analysis system, including instruments, consumables, reagents and data-analysis tools. Its products were sold for research-use applications.
Financial performance and position
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Total revenue | $3.31m | $2.83m | $7.34m | $7.99m |
| Gross profit (margin) | $0.94m (28.3%) | ($0.24m) (-8.5%) | $2.26m (30.8%) | $2.26m (28.3%) |
| Operating loss | ($5.69m) | ($5.97m) | ($18.71m) | ($14.32m) |
| Net loss | ($6.40m) | ($4.93m) | ($21.91m) | ($12.08m) |
| Operating cash used | — | ($20.05m) | ($15.85m) |
Q3 product revenue rose 17.1% year over year; nine-month product revenue fell 9.8%. Other revenue increased in both periods. Cash and cash equivalents were $8.22m at September 30, down from $16.52m at December 31, 2018. Current assets were $17.84m and current liabilities $7.44m. Total liabilities were $26.59m, including $18.78m of long-term debt and $0.95m drawn on the line of credit. Stockholders’ equity was negative $7.38m; accumulated deficit was $94.68m.
Material changes versus comparable periods
- Q3 revenue increased $0.48m, driven by North America; EMEIA and Asia Pacific revenue declined. For the first nine months, revenue decreased $0.65m, principally because Asia Pacific sales fell $1.38m, partly offset by growth in North America and EMEIA.
- Q3 cost of revenue fell 22.6%, mainly because the prior-year period included a $1.3m write-down of Irys instruments. Nine-month gross profit was broadly unchanged.
- Q3 SG&A rose 38.0% to $4.45m; nine-month SG&A rose 48.6% to $14.30m, reflecting added sales, marketing and support personnel, public-company costs, and higher marketing spending. R&D declined modestly for both periods.
- Nine-month net loss increased $9.83m. The prior-year comparisons included $3.99m of warrant fair-value gains; 2019 included $0.92m of debt-extinguishment loss and higher interest expense.
- Operating cash use increased $4.19m year over year. Financing cash provided was $11.79m, versus $35.81m in 2018.
Outlook, risks and unusual items
- Management expects operating losses and negative operating cash flows to continue and disclosed substantial doubt about the company’s ability to continue as a going concern. At September 30, it said existing cash was not expected to meet anticipated needs for at least 12 months; additional financing is critical and may be unavailable or dilutive.
- The Innovatus loan is secured by substantially all assets, including intellectual property, and carries financial covenants. The company missed a revenue covenant for Q3; Innovatus subsequently waived the breach subject to conditions, including a qualifying public offering and repricing its warrant. The company amended that warrant on October 30, lowering its exercise price from $4.63 to $0.48, and agreed to issue Innovatus 572,917 shares in connection with a prospective liquidity-covenant waiver.
- On October 23, 2019, after quarter-end, the company completed an offering of common shares and pre-funded warrants with accompanying warrants, generating approximately $18.0m gross proceeds. The offering creates substantial potential dilution; the filing does not state net proceeds in the provided text.
- Nasdaq granted an extension through February 12, 2020 to demonstrate compliance with continued-listing requirements. The company warned that regaining compliance is not assured.
- Debt terms include covenants and potential acceleration; failure to comply could threaten liquidity and pledged assets. Management reported disclosure controls and procedures were effective at the reasonable-assurance level. No material litigation was disclosed.
Investor verification priorities
- Confirm net proceeds, resulting share count and fully diluted capitalization after the October offering, pre-funded warrants and common warrants.
- Review the Innovatus waiver conditions, warrant amendment, planned share issuance and current covenant compliance, including liquidity and revenue tests.
- Assess cash runway and financing needs in light of $20.05m nine-month operating cash use and the going-concern disclosure.
- Track Nasdaq compliance by the February 12, 2020 deadline and any subsequent listing notices.
- Investigate the geographic mix and sustainability of revenue, particularly the nine-month decline in Asia Pacific sales.