Accelerate Diagnostics(AXDX) - 2022 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION This section details the company's unaudited Q1 2022 financial statements and management's analysis Item 1. Financial Statements This section presents Accelerate Diagnostics, Inc.'s unaudited condensed consolidated financial statements and related notes for Q1 2022 Condensed Consolidated Balance Sheets The balance sheet as of March 31, 2022, shows total assets of $70.4 million, a decrease from $83.0 million at year-end 2021, primarily due to a reduction in cash and cash equivalents Condensed Consolidated Balance Sheet Data (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $13,654 | $39,898 | | Total current assets | $61,111 | $73,331 | | Total assets | $70,357 | $83,047 | | Liabilities & Stockholders' Deficit | | | | Total current liabilities | $8,214 | $6,945 | | Convertible notes | $115,758 | $107,984 | | Total liabilities | $127,133 | $118,118 | | Total stockholders' deficit | $(56,776) | $(35,071) | | Total liabilities and stockholders' deficit | $70,357 | $83,047 | Condensed Consolidated Statements of Operations and Comprehensive Loss For the three months ended March 31, 2022, the company reported net sales of $3.0 million, an increase from $2.5 million in the prior-year period Q1 2022 Statement of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net sales | $2,958 | $2,518 | | Gross profit | $802 | $897 | | Loss from operations | $(15,895) | $(20,027) | | Gain on extinguishment of debt | $2,646 | $— | | Net loss | $(14,185) | $(24,239) | | Basic and diluted net loss per share | $(0.21) | $(0.41) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities was $12.6 million for the first three months of 2022, a slight improvement from $13.4 million in the same period of 2021 Q1 2022 Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(12,606) | $(13,375) | | Net cash (used in) provided by investing activities | $(13,641) | $8,522 | | Net cash provided by financing activities | $77 | $11,855 | | (Decrease) increase in cash and cash equivalents | $(26,244) | $6,945 | | Cash and cash equivalents, end of period | $13,654 | $42,726 | Notes to the Condensed Consolidated Financial Statements These notes detail accounting policies, business risks, convertible debt accounting, and significant subsequent events - The company identifies its ability to successfully commercialize products, obtain regulatory clearance, and raise additional capital as critical to its future success The COVID-19 pandemic has significantly impacted business by diminishing access to customers and reducing the growth rate of consumable test kit sales[26][27] - On January 1, 2022, the company adopted ASU 2020-06, which simplifies the accounting for convertible instruments This resulted in the convertible notes being accounted for as a single liability at amortized cost, leading to a reclassification of $37.4 million from additional-paid-in-capital and a decrease of $25.9 million in accumulated deficit[77][78][80] - In March 2022, the company entered into an exchange agreement to convert $14.0 million of its Convertible Senior Notes into common stock in eight tranches The first tranche of ~$1.8 million was exchanged for 849,713 shares on March 29, 2022, resulting in a gain on extinguishment of debt of $2.6 million for the quarter[116][118][119] - In March 2022, the company entered into a securities purchase agreement with the Jack W. Schuler Living Trust (a related party) for the sale of 2.44 million shares of common stock at $1.64 per share, for an aggregate price of $4.0 million, expected to close on June 30, 2022[159][160] - Subsequent to the quarter end, in April 2022, the company entered into a non-cancellable purchase obligation with a supplier for raw materials totaling $11.9 million over 5 years to support its next-generation AST platform[163] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the company's financial performance for Q1 2022, highlighting a 17% increase in net sales driven by higher consumable kit sales Overview and COVID-19 Impact The company provides solutions for rapid diagnosis of serious infections with its Accelerate Pheno® system, which continues to be impacted by the COVID-19 pandemic - On March 28, 2022, the company announced the launch of the Accelerate Arc™ system and BC Kit, a complementary offering to automate front-end steps for existing MALDI systems[177] - The COVID-19 pandemic continues to negatively impact the business by limiting access to hospital customers, which has constrained sales and implementation of new systems[182] - The company is experiencing unprecedented cost increases from suppliers for raw materials and components due to the pandemic, labor disruptions, and inflation, which impacts the cost of producing Accelerate Pheno kits[185] Results of Operations Net sales for Q1 2022 increased 17% year-over-year to $3.0 million, while gross profit decreased by 11% to $0.8 million Q1 2022 vs Q1 2021 Performance (in thousands) | Metric | Q1 2022 | Q1 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net sales | $2,958 | $2,518 | $440 | 17% | | Gross profit | $802 | $897 | $(95) | (11)% | | Research and development | $6,024 | $6,895 | $(871) | (13)% | | Sales, general and administrative | $10,673 | $14,029 | $(3,356) | (24)% | | Loss from operations | $(15,895) | $(20,027) | $4,132 | (21)% | - The decrease in gross profit was primarily due to increased costs to manufacture consumables from pandemic-related inflation and a lower average unit sales price from securing long-term contracts with existing customers[194] Capital Resources and Liquidity As of March 31, 2022, the company had $50.4 million in cash, cash equivalents, and investments, believed sufficient for the next twelve months - As of March 31, 2022, the company had $50.4 million in cash and investments and believes this is sufficient to fund capital and liquidity needs for the next twelve months[203] Material Cash Requirements as of March 31, 2022 (in thousands) | Obligation | Total | Remainder of 2022 | 2023 | | :--- | :--- | :--- | :--- | | Operating lease obligations | $3,267 | $649 | $968 | | Finance leases | $240 | $60 | $80 | | Long term debt | $82 | $82 | $— | | Convertible notes | $118,750 | $— | $118,750 | | Convertible notes interest | $2,968 | $1,484 | $1,484 | | Total | $126,152 | $2,275 | $121,282 | - In March 2022, the company entered into a securities purchase agreement to sell $4.0 million of common stock to the Schuler Trust, with the closing expected on June 30, 2022[220][222] Item 3. Quantitative and Qualitative Disclosures About Market Risk This disclosure is not required as the company qualifies as a smaller reporting company - The company is a smaller reporting company and is therefore not required to provide this disclosure[226] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2022, with no material changes in internal control over financial reporting - The company's Principal Executive Officer and Principal Financial Officer concluded that disclosure controls and procedures were effective as of the end of the period[227] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[228] Part II - OTHER INFORMATION This section covers legal proceedings, risk factors, and exhibits filed with the quarterly report Item 1. Legal Proceedings The company reports that it is not currently subject to any legal actions that would be reasonably expected to have a material adverse effect on its financial condition or results of operations - The company states there are currently no claims or legal actions that would reasonably be expected to have a material adverse effect on its results of operations or financial condition[230] Item 1A. Risk Factors This section directs readers to the detailed discussion of risk factors in the company's Annual Report on Form 10-K for the year ended December 31, 2021 - The company refers to the "Risk Factors" section in its Annual Report on Form 10-K for the year ended December 31, 2021 for a discussion of risks[231] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including required certifications and XBRL data files - The report includes certifications from the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act of 2002[233]