Bionano Genomics, Inc. quarterly report, Q2 FY2020

Bionano Genomics, Inc. — Q2 2020 Form 10-Q

Reporting period: Three and six months ended June 30, 2020. Bionano develops and markets the Saphyr genome-analysis system, including instruments, consumables and related services. Amounts below are in U.S. dollars.

Financial performance and position

• Q2 revenue fell 45.7% year over year; first-half revenue fell 42.4%. Product revenue declined, partly offset by higher service revenue.
• Cash and cash equivalents were $17.194 million at June 30, down from $17.311 million at December 31, 2019. Total current assets were $24.654 million and current liabilities were $19.508 million.
• Debt carrying value was $15.713 million ($17.516 million principal before unamortized issuance costs). The term loans bear 10.25% stated interest, with a reported 16.7% effective rate including debt costs. The company classified all term-loan principal as current due to its going-concern uncertainty.
• Accumulated deficit was $121.161 million. Common shares issued and outstanding rose to 91.975 million from 34.274 million at year-end 2019. Separately, 79.914 million warrants were outstanding at June 30.

Material changes and notable items

• Management attributed the revenue decline largely to COVID-19 restrictions and customer laboratory closures. Instrument units sold fell to 1 from 8 in Q2 and to 4 from 14 in the first half; consumable units sold increased 189% in Q2 and 120% in the first half.
• First-half selling, general and administrative expense rose 31.8% to $12.981 million, including $1.290 million of bad-debt expense. Research and development expense increased 12.6% to $5.075 million. Higher operating costs contributed to the wider operating and net losses.
• In April, the company raised approximately $18.0 million gross in a public offering of common shares and warrants. Net proceeds reported for the first half were $16.366 million. It also received a $1.775 million PPP loan and generated $3.469 million from warrant and option exercises. The offering and warrant exercises materially increased potential share dilution.
• After quarter-end through August 12, the company received approximately $13.9 million gross from exercises of warrants covering 46.505 million shares. The filing reports 138,480,045 common shares outstanding as of August 12.
• The company repaid $5.0 million of term-loan principal under a March amendment that also waived prior covenant defaults and changed covenant terms. It reported compliance with Innovatus financial covenants for Q2; the agreement includes a minimum cash balance covenant of at least $2 million and is secured by substantially all assets, including intellectual property.

Outlook, risks and controls

• The company suspended its 2020 guidance and outlook. Management cited ongoing uncertainty about COVID-19’s effects on demand, operations, supply chain, customer support and financial markets.
• The filing states there is substantial doubt about the company’s ability to continue as a going concern within one year after issuance, citing recurring losses, negative operating cash flows and debt obligations. Management said cash at June 30 plus subsequent warrant proceeds was expected to fund operations and obligations into Q1 2021; it also said further financing would be needed and might not be available on acceptable terms.
• PPP loan forgiveness was uncertain. The company warned that an adverse eligibility review could require repayment and cause penalties or reputational harm.
• Nasdaq had notified the company that its share price was below the $1 minimum bid requirement. The disclosed compliance period ended December 28, 2020; failure to regain compliance could put its listing at risk.
• Disclosure controls were deemed ineffective because a previously identified material weakness in financial reporting had not been fully remediated. Management cited insufficient financial-reporting resources and inadequate segregation of duties; no material misstatement was identified.
• The filing reports no pending legal proceedings and no accrued legal loss contingencies. No off-balance-sheet arrangements were reported.

Important facts for investors to verify

• Whether post-quarter warrant exercises and other financing provide adequate liquidity, and whether additional capital is required sooner than anticipated.
• Progress toward sustained revenue growth, particularly instrument placements, consumable demand and recovery from COVID-related customer disruptions.
• Debt covenant compliance, current classification of term debt, and the lender’s rights if a default occurs.
• Actual PPP loan forgiveness outcome and any related repayment obligation.
• Nasdaq bid-price compliance and completion of remediation of the material weakness in internal controls.
• Potential dilution from outstanding warrants and options; the filing’s warrant counts and subsequent exercise proceeds should be reviewed alongside later share-count disclosures.