UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30,
2015
OR
¨ TRANSITION REPORT
UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______to
_______
Commission File Number: 001-35737
NORTHWEST BIOTHERAPEUTICS, INC.
(Exact name of registrant as specified in
its charter)
Delaware
(State or Other Jurisdiction of
Incorporation or
Organization) |
|
94-3306718
(I.R.S. Employer Identification No.) |
4800 Montgomery Lane, Suite 800, Bethesda,
MD 20814
(Address of principal executive offices)
(Zip Code)
(240) 497-9024
(Registrant's telephone number)
Indicate by check
mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes x
No ¨
Indicate by check
mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T(§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
x No ¨
Indicate by check
mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ |
Accelerated filer x |
Non-accelerated filer ¨ |
Smaller reporting company ¨ |
(do not check if a smaller reporting company) |
Indicate by check
mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes
¨ No x
As of August 7, 2015,
the total number of shares of common stock, par value $0.001 per share, outstanding was 78,169,566.
NORTHWEST BIOTHERAPEUTICS, INC.
FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
NORTHWEST BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share
amounts)
| |
June 30, | | |
December 31, | |
| |
2015 | | |
2014 | |
| |
(Unaudited) | | |
| |
ASSETS | |
| | | |
| | |
Current assets: | |
| | | |
| | |
Cash and cash equivalents | |
$ | 19,202 | | |
$ | 13,390 | |
Restricted cash - interest payments held in escrow | |
| 1,021 | | |
| 865 | |
Prepaid expenses and other current assets | |
| 978 | | |
| 387 | |
Total current assets | |
| 21,201 | | |
| 14,642 | |
| |
| | | |
| | |
Non-current assets: | |
| | | |
| | |
Property, plant and equipment, net | |
| 41,999 | | |
| 39,999 | |
Restricted cash - interest payments held in escrow, net of current portion | |
| 739 | | |
| 1,760 | |
Other assets | |
| 309 | | |
| 55 | |
Total non-current assets | |
| 43,047 | | |
| 41,814 | |
| |
| | | |
| | |
Total assets | |
$ | 64,248 | | |
$ | 56,456 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS' DEFICIT | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable | |
$ | 11,072 | | |
$ | 9,826 | |
Accounts payable to related party | |
| 4,198 | | |
| 5,729 | |
Accrued expenses (includes related party of $10 and $8 as of June 30, 2015 and December 31, 2014, respectively) | |
| 1,188 | | |
| 1,211 | |
Convertible notes, net (includes related party note of $50 and $50 as of June 30, 2015 and December 31, 2014, respectively) | |
| 238 | | |
| 238 | |
Note payable - in dispute | |
| 934 | | |
| 934 | |
Environmental remediation liability | |
| 6,200 | | |
| 6,200 | |
Derivative liability | |
| 92,716 | | |
| 44,742 | |
Total current liabilities | |
| 116,546 | | |
| 68,880 | |
| |
| | | |
| | |
Non-current liabilities: | |
| | | |
| | |
Convertible note (net of deferred financing cost of $677 and $1,123 as of June 30, 2015 and December 31, 2014, respectively) | |
| 12,323 | | |
| 16,377 | |
Mortgage loan (net of deferred financing cost of $780 and $862 as of June 30, 2015 and December 31, 2014, respectively) | |
| 11,401 | | |
| 6,128 | |
Other accrued expenses | |
| 149 | | |
| 98 | |
Total non-current liabilities | |
| 23,873 | | |
| 22,603 | |
| |
| | | |
| | |
Total liabilities | |
| 140,419 | | |
| 91,483 | |
| |
| | | |
| | |
Stockholders' deficit: | |
| | | |
| | |
Preferred stock ($0.001 par value); 40,000,000 shares authorized; 0 shares issued and outstanding as of June 30, 2015 and December 31, 2014, respectively | |
| - | | |
| - | |
Common stock ($0.001 par value); 450,000,000 shares authorized; 77,727,823 and 68,957,469 shares issued and outstanding as of June 30, 2015 and December 31, 2014, respectively | |
| 78 | | |
| 69 | |
Additional paid-in capital | |
| 557,136 | | |
| 485,615 | |
Accumulated deficit | |
| (633,799 | ) | |
| (520,521 | ) |
Cumulative translation adjustment | |
| 414 | | |
| (190 | ) |
Total stockholders' deficit | |
| (76,171 | ) | |
| (35,027 | ) |
Total liabilities and stockholders' deficit | |
$ | 64,248 | | |
$ | 56,456 | |
The accompanying notes are an integral part
of these condensed consolidated financial statements.
NORTHWEST BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
(in thousands, except share amounts)
| |
For the three months ended | | |
For the six months ended | |
| |
June 30, | | |
June 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
Revenues: | |
| | | |
| | | |
| | | |
| | |
Research grant and other | |
$ | 391 | | |
$ | - | | |
$ | 585 | | |
$ | - | |
Total revenues | |
| 391 | | |
| - | | |
| 585 | | |
| - | |
Operating costs and expenses: | |
| | | |
| | | |
| | | |
| | |
Research and development | |
| 29,434 | | |
| 21,549 | | |
| 49,137 | | |
| 41,535 | |
General and administrative | |
| 9,811 | | |
| 3,878 | | |
| 13,133 | | |
| 7,576 | |
Total operating costs and expenses | |
| 39,245 | | |
| 25,427 | | |
| 62,270 | | |
| 49,111 | |
Loss from operations | |
| (38,854 | ) | |
| (25,427 | ) | |
| (61,685 | ) | |
| (49,111 | ) |
Other income (expense): | |
| | | |
| | | |
| | | |
| | |
Inducement expense | |
| - | | |
| (5,089 | ) | |
| - | | |
| (10,340 | ) |
Change in fair value of derivative liability | |
| (25,694 | ) | |
| 4,684 | | |
| (48,852 | ) | |
| (12,300 | ) |
Interest expense | |
| (1,636 | ) | |
| (33 | ) | |
| (2,429 | ) | |
| (155 | ) |
Foreign currency transaction loss | |
| (661 | ) | |
| - | | |
| (312 | ) | |
| - | |
Net loss | |
$ | (66,845 | ) | |
$ | (25,865 | ) | |
$ | (113,278 | ) | |
$ | (71,906 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net loss per share applicable to common stockholders - basic and diluted | |
$ | (0.88 | ) | |
$ | (0.45 | ) | |
$ | (1.56 | ) | |
$ | (1.31 | ) |
Weighted average shares used in computing basic and diluted loss per share | |
| 75,619 | | |
| 57,442 | | |
| 72,530 | | |
| 54,923 | |
The accompanying notes are an integral part
of these condensed consolidated financial statements.
NORTHWEST BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE LOSS
(Unaudited)
(in thousands)
| |
For the three months ended | | |
For the six months ended | |
| |
June 30, | | |
June 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
Net loss | |
$ | (66,845 | ) | |
$ | (25,865 | ) | |
$ | (113,278 | ) | |
$ | (71,906 | ) |
Other comprehensive loss | |
| | | |
| | | |
| | | |
| | |
Foreign currency translation adjustment | |
| 672 | | |
| - | | |
| 604 | | |
| - | |
Total comprehensive loss | |
$ | (66,173 | ) | |
$ | (25,865 | ) | |
$ | (112,674 | ) | |
$ | (71,906 | ) |
The accompanying notes are an integral part
of these condensed consolidated financial statements.
NORTHWEST BIOTHERAPEUTICS, INC.
CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT
(Unaudited)
(in thousands)
| |
Common
Stock | | |
Additional
Paid-in | | |
Accumulated | | |
Cumulative
Translation Adjustment | | |
Total
Stockholders' | |
| |
Shares | | |
Par
value | | |
Capital | | |
Deficit | | |
Adjustment | | |
Deficit | |
Balance as of January
1, 2015 | |
| 68,957 | | |
$ | 69 | | |
$ | 485,615 | | |
$ | (520,521 | ) | |
$ | (190 | ) | |
$ | (35,027 | ) |
Proceeds from issuance of
common stock | |
| 5,405 | | |
| 5 | | |
| 39,995 | | |
| - | | |
| - | | |
| 40,000 | |
Redeemable securities settlement | |
| 80 | | |
| - | | |
| 299 | | |
| - | | |
| - | | |
| 299 | |
Issuance of common stock
for debt conversion | |
| 682 | | |
| 1 | | |
| 4,499 | | |
| - | | |
| - | | |
| 4,500 | |
Issuance of common stock
for conversion of accrued interest | |
| 20 | | |
| - | | |
| 187 | | |
| - | | |
| - | | |
| 187 | |
Proceeds from warrants exercises | |
| 1,612 | | |
| 2 | | |
| 6,790 | | |
| - | | |
| - | | |
| 6,792 | |
Reclassification of warrant
liabilities related to warrants exercised for cash | |
| - | | |
| - | | |
| 58 | | |
| - | | |
| - | | |
| 58 | |
Cashless warrants exercise | |
| 569 | | |
| 1 | | |
| 520 | | |
| - | | |
| - | | |
| 521 | |
Issuance of common stock
as compensation | |
| 403 | | |
| - | | |
| 3,389 | | |
| - | | |
| - | | |
| 3,389 | |
Stock compensation expense
- Cognate BioServices | |
| - | | |
| - | | |
| 15,784 | | |
| - | | |
| - | | |
| 15,784 | |
Net loss | |
| - | | |
| - | | |
| - | | |
| (113,278 | ) | |
| - | | |
| (113,278 | ) |
Cumulative
translation adjustment | |
| - | | |
| - | | |
| - | | |
| - | | |
| 604 | | |
| 604 | |
Balance
as of June 30, 2015 | |
| 77,728 | | |
$ | 78 | | |
$ | 557,136 | | |
$ | (633,799 | ) | |
$ | 414 | | |
$ | (76,171 | ) |
The accompanying notes are an integral part
of these condensed consolidated financial statements.
NORTHWEST BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
(in thousands)
| |
For the six months ended | |
| |
June 30, | |
| |
2015 | | |
2014 | |
Cash Flows from Operating Activities: | |
| | | |
| | |
Net Loss | |
$ | (113,278 | ) | |
$ | (71,906 | ) |
Reconciliation of net loss to net cash used in operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| 15 | | |
| 6 | |
Amortization of deferred financing cost | |
| 717 | | |
| - | |
Change in fair value of derivatives | |
| 48,852 | | |
| 12,300 | |
Accrued interest converted to common stock | |
| - | | |
| 76 | |
Stock and warrants issued to Cognate BioServices as compensation under Cognate Agreements | |
| 15,784 | | |
| 10,623 | |
Stock and warrants issued for services | |
| 3,389 | | |
| 1,722 | |
Inducement expense | |
| - | | |
| 10,340 | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Prepaid expenses and other current assets | |
| (591 | ) | |
| (30 | ) |
Accounts payable and accrued expenses | |
| 2,211 | | |
| 1,385 | |
Related party accounts payable and accrued expenses | |
| (1,529 | ) | |
| 7,986 | |
Deposits and other non-current assets | |
| (254 | ) | |
| - | |
Net cash used in operating activities | |
| (44,684 | ) | |
| (27,498 | ) |
Cash Flows from Investing Activities: | |
| | | |
| | |
Purchase of property and equipment/cost of construction in progress | |
| (2,015 | ) | |
| - | |
Cash deposited in custody account | |
| - | | |
| (3,414 | ) |
Net cash used in investing activities | |
| (2,015 | ) | |
| (3,414 | ) |
Cash Flows from Financing Activities: | |
| | | |
| | |
Proceeds from mortgage loan | |
| 4,997 | | |
| - | |
Deferred offering cost related to mortgage loan | |
| (138 | ) | |
| - | |
Proceeds transferred from escrow account | |
| 62 | | |
| - | |
Repayment of convertible promissory notes | |
| - | | |
| (25 | ) |
Proceeds from exercise of warrants | |
| 6,792 | | |
| 3,087 | |
Proceeds from the issuance of common stock and warrants - Cognate | |
| - | | |
| 2,250 | |
Proceeds from issuance common stock and warrants | |
| - | | |
| 2,059 | |
Proceeds from issuance common stock | |
| 40,000 | | |
| - | |
Gross proceeds from issuance common stock and overallotment rights | |
| - | | |
| 15,000 | |
Offering costs | |
| - | | |
| (1,105 | ) |
Net cash provided by financing activities | |
| 51,713 | | |
| 21,266 | |
Effect of exchange rate changes on cash and cash equivalents | |
| 798 | | |
| - | |
Net increase (decrease) in cash and cash equivalents | |
| 5,812 | | |
| (9,646 | ) |
| |
| | | |
| | |
Cash and cash equivalents at beginning of period | |
| 13,390 | | |
| 18,499 | |
Cash and cash equivalents at end of period | |
$ | 19,202 | | |
$ | 8,853 | |
| |
| | | |
| | |
Supplemental disclosure of cash flow information | |
| | | |
| | |
Interest payments on mortgage loan | |
$ | (673 | ) | |
$ | - | |
The accompanying notes are an integral part
of these condensed consolidated financial statements.
NORTHWEST BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS - CONTINUED
(Unaudited)
(in thousands)
| |
For the six months ended | |
| |
June 30, | |
| |
2015 | | |
2014 | |
Supplemental schedule of non-cash investing and financing activities: | |
| | | |
| | |
Issuance of common stock in connection with conversion of notes payable and accrued expenses | |
$ | - | | |
$ | 140 | |
Issuance of common stock and warrants in connection with conversion of accounts payable - Cognate BioServices | |
$ | - | | |
$ | 8,835 | |
Reclass of redeemable security to equity | |
$ | - | | |
$ | 8,913 | |
Deferred offering cost related to mortgage loan | |
$ | 51 | | |
$ | - | |
Reclassification of warrant liabilities related to cashless warrants exercise | |
$ | 521 | | |
$ | - | |
Reclassification of warrant liabilities related to warrants exercised for cash | |
$ | 58 | | |
$ | - | |
Interest payment on convertible note from escrow | |
$ | 803 | | |
$ | - | |
Issuance of common stock for debt conversion | |
$ | 4,500 | | |
$ | - | |
Issuance of common stock for conversion of accrued interest | |
$ | 187 | | |
$ | - | |
Redeemable security settlement | |
$ | 299 | | |
$ | - | |
The accompanying notes are an integral part
of these condensed consolidated financial statements.
NORTHWEST BIOTHERAPEUTICS, INC.
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
1. Organization and Description of Business and Recent
Developments
Northwest Biotherapeutics, Inc. and its
subsidiaries NW Bio Europe S.A.R.L, NW Bio Gmbh and Aracaris Capital, Ltd. (collectively, the “Company”, “we”,
“us” and “our”) were organized to discover and develop innovative immunotherapies for cancer.
The Company’s platform technology,
DCVax®, is currently being tested for the treatment of certain types of cancers through clinical trials in the United States
and Europe that are in various phases.
Recent Developments
During the quarter ended June 30, 2015,
the Company expanded its patient recruitment in the Phase III trial of DCVax-L for Glioblastoma multiforme (GBM) brain cancer.
The Company conducted further product development activities and intellectual property filings. The Company undertook legal, regulatory,
scientific and operational preparatory work for multiple Phase II trials which the Company anticipates launching during the second
half of the year. The Company expanded and accelerated the engineering, systems design and development, infrastructure arrangements,
land use and zoning, legal and contractual, regulatory analyses and other work related to development of new manufacturing capacity
in Europe.
On February 13, 2015, the Company entered
into a mortgage loan agreement (“the Mortgage”) with Lancashire Mortgage Corporation Limited in UK for approximately
$5.0 million. The Mortgage has an 18 month term with a 12% annual interest rate.
On April 2, 2015, the Company entered into
a stock purchase agreement (the “Agreement”) with Woodford Investment Management LLP as agent for the CF Woodford Equity
Income Fund and other clients (collectively, “Woodford”). Pursuant to the Agreement, the Company sold 5,405,405 shares
of the Company’s unregistered common stock, par value $0.001 per share (the “Shares”), at a purchase price of
$7.40 per Share for an aggregate purchase price of $40,000,000. The sale of the Shares took place in two separate closings as follows:
(i) 1,554,054 shares for a purchase price of $11,500,000 which closed on April 8, 2015; and (ii) an additional 3,851,351 shares
for a purchase price of $28,500,000 which closed on May 1, 2015. There are no warrants, pre-emptive rights or other rights or preferences.
In April and June of 2015, an unrelated
institutional investor elected to exchange $4.50 million of its existing 5.00% Convertible Senior Notes due in August 2017 (the
“Notes”) for common stock of the Company on the terms set forth in the Notes. The convertible debt was entered into
in August 2014. Pursuant to the exchange, the investor received 701,033 shares of the Company’s common stock. The shares
are being issued pursuant to the exemption from the registration requirements afforded by Section 3(a)(9) of the Securities Act
of 1933, as amended.
2. Liquidity and Financial Condition
During the six months ended June 30, 2015,
the Company used approximately $44.7 million of cash for its operations and for certain one-time payments (e.g., development work
and related patent costs, engineering, legal, regulatory, and other development costs related to the U.K. facility). The Company
incurred a net loss of $113.3 million for the six months ended June 30, 2015, including $68.8 million of non-cash charges associated
with a mark to market charge for the change in the fair value of its derivative liability and other non-cash charges.
The Company had cash and cash equivalents
of $19.2 million and a working capital deficiency (cash and non-cash liabilities combined) of approximately $95.3 million at June
30, 2015 (with $92.7 million of the $95.3 million deficit comprised of non-cash derivative liabilities). The Company owes an aggregate
of $4.2 million of trade liabilities and convertible notes to related parties.
Because of recurring operating losses,
net operating cash flow deficits, and an accumulated deficit there is substantial doubt about the Company’s ability to continue
as a going concern. The financial statements have been prepared assuming the Company will continue as a going concern and do not
include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that might become necessary should the Company be able to continue as a going concern.
3. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated
interim financial statements include the accounts of the Company and its subsidiaries. All material intercompany balances and transactions
have been eliminated.
The accompanying unaudited condensed consolidated
financial statements of the Company have been prepared in accordance with the accounting principles generally accepted in the United
States of America (“U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and
Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”) and on the same basis as the Company
prepares its annual audited consolidated financial statements. The condensed consolidated balance sheet as of June 30, 2015, condensed
consolidated statements of operations for the three months and six months ended June 30, 2015 and 2014, condensed consolidated
statements of comprehensive loss for the three months and six months ended June 30, 2015 and 2014, condensed consolidated statement
of stockholders’ equity (deficit) for the six months ended June 30, 2015, and the condensed consolidated statements of cash
flows for the six months ended June 30, 2015 and 2014 are unaudited, but include all adjustments, consisting only of normal recurring
adjustments, which the Company considers necessary for a fair presentation of the financial position, operating results and cash
flows for the periods presented. The results for the three months and six months ended June 30, 2015 are not necessarily indicative
of results to be expected for the year ending December 31, 2015 or for any future interim period. The condensed balance sheet at
December 31, 2014 has been derived from audited financial statements; however, it does not include all of the information and notes
required by U.S. GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements for the year ended December 31, 2014, and notes thereto
included in the Company’s annual report on Form 10-K, which was filed with the SEC on March 17, 2015.
Reclassifications
The Company reclassified
debt issuance costs from other long-term assets to long-term debt, net on the condensed consolidated balance sheets for all periods
presented pursuant to early adoption of Accounting Standards Update ("ASU") No. 2015-03 - Simplifying the Presentation
of Debt Issuance Costs.
Use of Estimates
In preparing financial statements in conformity
with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of
expenses during the reporting period. Due to inherent uncertainty involved in making estimates, actual results reported in future
periods may be affected by changes in these estimates. On an ongoing basis, the Company evaluates its estimates and assumptions.
These estimates and assumptions include valuing equity securities in share-based payment arrangements, valuing environmental liabilities,
estimating the fair value of equity instruments recorded as derivative liabilities, and estimating the useful lives of depreciable
assets and whether impairment charges may apply.
Environmental Remediation Liabilities
The Company records environmental remediation
liabilities for properties acquired. The environmental remediation liabilities are initially recorded at fair value. The liability
is reduced for actual costs incurred in connection with the clean-up activities for each property. Upon completion of the clean-up,
the environmental remediation liability is adjusted to equal the fair value of the remaining operation, maintenance and monitoring
activities to be performed for the property. The amount of the liability resulting from the completion of the clean-up, if any,
would be included in other income(expense). As of June 30, 2015, we estimate that the total environmental remediation costs associated
with the purchase of the UK Facility will be approximately $6.2 million. Contamination clean-up costs that improve the property
from its original acquisition state are capitalized as part of the property’s overall development costs. The Company engaged
a third party specialist to conduct certain surveys of the condition of the property which included, among other things, a preliminary
analysis of potential environmental remediation exposures. The Company determined, based on information contained in the specialist’s
report, that it would be required to estimate the fair value of an unconditional obligation to remediate specific ground contamination
at an estimated fair value of approximately $6.2 million. The Company computed the fair value of this obligation using a probability
weighted approach that measures the likelihood of the following two potential outcomes: (i) a higher probability requirement of
erecting a protective barrier around the affected area at an estimated cost of approximately $4.5 million, and (ii) a lower probability
requirement of having to excavate the affected area at an estimated cost of approximately $32.0 million. The Company’s estimate
is preliminary and therefore subject to change as further studies are conducted, and as additional facts come to the Company’s
attention. Environmental remediation efforts are complex, technical and subject to various uncertainties. Accordingly, it is at
least reasonably possible that any changes in the Company’s estimate could materially differ from the management’s
preliminary discussed herein.
Research and Development Costs
Research and development costs are charged
to operations as incurred and consist primarily of clinical trial costs for the Company’s Phase III and Phase I/II clinical
trials, related party manufacturing costs, consulting costs, contract research and development costs, and compensation costs.
For the six months ended June 30,
2015 and 2014, the Company recognized research and development costs (cash and non-cash combined) of $49.1 million and $41.5
million, respectively. Clinical trial site fees and contract research organization (“CRO”) costs are included in
research and development expenses. CRO cost amounted to $6.6 million and $3.3 million for the six months ended June 30, 2015
and 2014, respectively. Clinical trial site fees amounted to $1.5 million and $2 million for the six months ended June 30,
2015 and 2014, respectively.
For the six months ended June 30, 2015
and 2014, the Company made cash payments of approximately $21.3 million (with invoices generally being paid all in cash) and $12.4
million (with invoices generally being paid half in cash and half in stock), respectively, to Cognate BioServices, Inc. (“Cognate”).
At June 30, 2015 and 2014, the Company owed Cognate $4.2 million and $2.7 million, respectively, for unpaid invoices for services
performed by Cognate (including manufacturing for both the Phase III and Phase I/II clinical trials, ongoing product and process
development, expansion of several company programs and services related to expansion of manufacturing capacity).
For the six months ended June 30, 2015
and 2014, the Company incurred non-cash equity based compensation (restricted common stock and warrants) for the ongoing vesting
(in equal monthly installments over 3 years) of the one-time initiation payments of shares and warrants under the four agreements
the Company entered into with Cognate in January 2014. The vesting amounts during the six months ended June 30, 2015 and 2014 were
$15.8 million (comprising 0.9 million shares per six months) and $10.6 million (comprising 0.9 million shares per six months),
respectively. The value of the monthly vesting amounts was higher in the six months ended June 2015 than the period ended June
2014 because the price per share of the Company’s stock has risen to $9.93 as of June 30, 2015 . The fair value calculation
of these shares was determined using the market price for tradable shares; however the shares issued to Cognate were unregistered
restricted shares. The ongoing installments also included lock-up warrants (for a 3-year lock-up of Cognate shares) and most
favored nation shares and warrants.
Foreign Currency Translation and Transactions
The
Company maintains operations in Germany, the United Kingdom and Canada. Assets and liabilities are translated into U.S. dollars
using end of period exchange rates and revenues and expense are translated into U.S. dollars using weighted average rates. Foreign
currency translation adjustments are reported as a separate component of Accumulated Other Comprehensive Loss within Shareholders’
Equity.
During
the six months ended June 30, 2015, the Company recorded $0.6 million of foreign currency translation gain primarily due to the
strengthening of the U.S. dollar relative to the euro and British pound sterling.
Foreign
currency transaction losses are recognized in the Consolidated Statements of Operations as incurred.
Significant Accounting Policies
There have been no material changes in
the Company’s significant accounting policies to those previously disclosed in the 2014 Annual Report.
Recent Accounting Pronouncements
In April 2015,
the Financial Accounting Standards Board (“FASB”) issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance
Costs (ASU 2015-03), which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the
carrying value of the associated debt liability, consistent with the presentation of a debt discount. ASU 2015-03 is effective
for the interim and annual periods ending after December 15, 2015, but early adoption is permitted. As of June 30, 2015, the Company
adopted ASU 2015-03 and such adoption resulted in debt issuance costs for all periods presented to be reclassified to long-term
debt, net.
In May 2014, the
FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers: Topic 606 (ASU
2014-09), to supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to
recognize revenues, when promised goods or services are transferred to customers, in an amount that reflects the consideration
that is expected to be received for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle
and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required
under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration
to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU 2014-09 is
effective the first quarter of 2018 using either of two methods: (i) retrospective to each prior reporting period
presented with the option to elect certain practical expedients as defined within ASU 2014-09; or (ii) retrospective with
the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional
disclosures as defined per ASU 2014-09. The Company is currently evaluating the impact of ASU 2014-09 on its consolidated
financial statements.
4. Fair Value Measurements
Fair value is the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
In determining fair value, the Company uses various methods including market, income and cost approaches. Based on these approaches,
the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including
assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable,
market corroborated, or generally unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable
inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques the
Company is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks
the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair
value will be classified and disclosed in one of the following three categories:
Level 1 - Quoted prices for identical assets
and liabilities traded in active exchange markets, such as the New York Stock Exchange.
Level 2 - Observable inputs other than
Level 1 including quoted prices for similar assets or liabilities, quoted prices in less active markets, or other observable inputs
that can be corroborated by observable market data. Level 2 also includes derivative contracts whose value is determined using
a pricing model with observable market inputs or can be derived principally from or corroborated by observable market data.
Level 3 - Unobservable inputs supported
by little or no market activity for financial instruments whose value is determined using pricing models, discounted cash flow
methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management
judgment or estimation; also includes observable inputs for nonbinding single dealer quotes not corroborated by observable market
data.
The Company has various processes and controls
in place to ensure that fair value is reasonably estimated. A model validation policy governs the use and control of valuation
models used to estimate fair value. The Company performs due diligence procedures over third-party pricing service providers in
order to support their use in the valuation process. Where market information is not available to support internal valuations,
independent reviews of the valuations are performed and any material exposures are escalated through a management review process.
While the Company believes its valuation
methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine
the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
The following table classifies the Company’s
liabilities measured at fair value on a recurring basis into the fair value hierarchy as of June 30, 2015 and December 31, 2014
(in thousands):
| |
Fair value measured at June 30, 2015 | |
| |
| | |
Quoted prices in active | | |
Significant other | |
Significant | |
| |
Fair value at | | |
markets | | |
observable inputs | |
unobservable inputs | |
| |
June 30, 2015 | | |
(Level 1) | | |
(Level 2) | |
(Level 3) | |
Warrant liability | |
$ | 92,716 | | |
$ | - | | |
$ |
- | |
$ | 92,716 | |
| |
Fair value measured at December 31, 2014 | |
| |
| | |
Quoted prices in active | | |
Significant other | |
Significant | |
| |
Fair value at | | |
markets | | |
observable inputs | |
unobservable inputs | |
| |
December 31, 2014 | | |
(Level 1) | | |
(Level 2) | |
(Level 3) | |
Warrant liability | |
$ | 44,742 | | |
$ | - | | |
$ |
- | |
$ | 44,742 | |
There were no transfers between Level 1,
2 or 3 during the six month period ended June 30, 2015.
The following table presents changes in
Level 3 liabilities measured at fair value for the six month period ended June 30, 2015. Both observable and unobservable
inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category.
Unrealized gains and losses associated with liabilities within the Level 3 category include changes in fair
value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable
long-
dated volatilities) inputs (in thousands).
| |
Warrant | |
| |
Liability | |
Balance – January 1, 2015 | |
$ | 44,742 | |
Change in fair value | |
| 48,852 | |
Cashless warrants exercise | |
| (521 | ) |
Warrants exercised for cash | |
| (58 | ) |
Redeemable security settlement | |
| (299 | ) |
Balance – June 30, 2015 | |
$ | 92,716 | |
The Company’s warrant liabilities
are measured at fair value using the Monte Carlo simulation valuation methodology. A summary of quantitative information about
significant unobservable inputs (Level 3 inputs) used in measuring the Company’s warrant liabilities that are categorized
within Level 3 of the fair value hierarchy for the six months ended June 30, 2015 is as follows:
Date of valuation | |
June 8, 2015* | | |
June 9, 2015* | | |
June 12, 2015* | | |
June 23, 2015* | | |
June 30, 2015 | |
Strike price | |
$ | 5.97 | | |
$ | 5.97 | | |
$ | 5.97 | | |
$ | 5.97 | | |
| $2.40-$5.97 | |
Volatility (annual) | |
| 66.4 | % | |
| 66.4 | % | |
| 66.4 | % | |
| 66.4 | % | |
| 66.4%-65.9 | % |
Risk-free rate | |
| 1.2 | % | |
| 1.3 | % | |
| 1.3 | % | |
| 1.2 | % | |
| 1.0%-1.4 | % |
Contractual term (years) | |
| 3.5 | | |
| 3.5 | | |
| 3.5 | | |
| 3.4 | | |
| 3.0-4.2 | |
Dividend yield (per share) | |
| 0 | % | |
| 0 | % | |
| 0 | % | |
| 0 | % | |
| 0 | % |
* Inputs for derivative warrants exercise for cash that were
marked to fair value through the time of exercise.
The development and determination of the
unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s
management.
5. Stock-based Compensation- Non-Employees
Stock based payment
expense (restricted common stock and warrants) to Cognate for the ongoing vesting over 3 years of one-time initiation
payments under the four agreements that were entered into in January 2014 for Cognate services
was $15.8 million (comprising 0.9 million shares per six months) and $10.6
million (comprising 0.9 million shares per six months) for the six months
ended June 30, 2015 and 2014, respectively. Approximately $4.4 million in compensation costs per calendar quarter may be
recognized over the next 1.5 years based on the fair market value of stock of $9.93 as of June 30, 2015.
6. Property and Equipment
Property and equipment consist of the following at June 30,
2015 and December 31, 2014 (in thousands):
| |
June 30, | | |
December 31, | |
| |
2015 | | |
2014 | |
Leasehold improvements | |
$ | 69 | | |
$ | 69 | |
Office furniture and equipment | |
| 25 | | |
| 25 | |
Computer equipment and software | |
| 191 | | |
| 137 | |
Construction in progress (property in the United Kingdom) | |
| 41,889 | | |
| 39,928 | |
| |
| 42,174 | | |
| 40,159 | |
Less: accumulated depreciation | |
| (175 | ) | |
| (160 | ) |
| |
$ | 41,999 | | |
$ | 39,999 | |
Depreciation expense was approximately
$15,000 and $6,000 for the six months ended June 30, 2015 and 2104, respectively.
7. Notes Payable
2014 Convertible Senior Notes
The 2014 Convertible Senior Notes are due
on August 15, 2017 and have a conversion price of $6.60.
The Company has remaining $1.8 million
in escrowed interest payments, which is sufficient to fund, when due, the total aggregate amount of the six scheduled semi-annual
interest payments during the term of the notes, excluding additional interest, if any.
During the six months ended June 30, 2015,
$4.5 million of the 2014 Convertible Senior Notes were converted into common stock of the Company on the terms set forth in the
agreement. Pursuant to the exchange, on the terms set forth in the Notes, the investors received 701,033 shares of the Company’s
common stock, which includes accelerated interest. The Company also accelerated the remaining portion of deferred offering cost
upon the conversion of the Senior Notes and recorded as additional interest expense.
The following table shows the details
of interest expenses related to 2014 Convertible Senior Notes for the three and six months ended June 30, 2015 (in
thousands):
| |
Three months ended | | |
Six months ended | |
| |
June 30, 2015 | | |
June 30, 2015 | |
Contractual interest | |
$ | 135 | | |
$ | 351 | |
Accelerated interest associated with the converted portion of convertible senior notes into common stock | |
| 563 | | |
| 563 | |
Amortization of debt issuance costs | |
| 107 | | |
| 212 | |
Accelerated amortization of debt issuance cost due to the converted portion of convertible senior notes into common stock | |
| 234 | | |
| 234 | |
Total interest expense on the convertible senior notes | |
$ | 1,039 | | |
$ | 1,360 | |
Mortgage Loan
On February 13, 2015, the Company entered
into a mortgage loan agreement (the “Mortgage”) with Lancashire Mortgage Corporation Limited in the UK to expand the
facility to $12 million (£7.75 million). The Mortgage has a 1.5 year term with a 12% annual interest rate. The Company received
gross proceeds of approximately $5 million (£3.25 million), and this amount was netted by approximately $0.1 million of a
related financing charge, which was capitalized as deferred financing cost that is being amortized over the term of the Mortgage.
Interest expense related to the February
13, 2015 and November 17, 2014 mortgage loans amounted to $0.6 million and $0.9 million for the three and six months ended June
30, 2015, respectively, which included $0.3 million and $0.6 million related to the 12% coupon and $0.1 million and $0.3 million
related to the amortization of deferred offering financing costs on the mortgage loan.
Other Notes Payable
Notes payable consist of the following at June 30, 2015 and
December 31, 2014 (in thousands):
| |
March 31, | | |
December 31, | |
| |
2015 | | |
2014 | |
Notes payable - current | |
| | | |
| | |
12% unsecured originally due July 2011 - in dispute (1) | |
$ | 934 | | |
$ | 934 | |
| |
| 934 | | |
| 934 | |
Convertible notes payable, net - current | |
| | | |
| | |
6% unsecured (2) | |
| 135 | | |
| 135 | |
8% unsecured note due 2014 (3) | |
| 53 | | |
| 53 | |
| |
| 188 | | |
| 188 | |
Note payable | |
| | | |
| | |
6% due on demand (4) | |
| 50 | | |
| 50 | |
| |
| 50 | | |
| 50 | |
| |
| | | |
| | |
Total notes payable, net | |
$ | 1,172 | | |
$ | 1,172 | |
(1) This $0.934 million note, which was
originally due in July 2011 is currently under dispute with the creditor as to the validity of the note payable balance, which
the Company believes has already been paid in full and is not outstanding.
(2) This $0.135 million note as of June
30, 2015 consists of two separate 6% notes in the amounts of $0.110 million and $0.025 million. In regard to the $0.110 million
note, the Company has made ongoing attempts to locate the creditor to repay or convert this note, but has been unable to locate
the creditor to date. In regard to the $0.025 million note, the holder has elected to convert these notes into equity, the Company
has delivered the applicable conversion documents to the holder, and the Company is waiting for the holder to execute and return
the documents.
(3) This $0.053 million note was due May
25, 2014, and is currently past due.
(4) This $0.050 million demand note as
of June 30, 2015 is held by an officer of the Company. The holder has made no demand for payment, but reserves the right to make
a demand at any time.
8. Potentially Dilutive Securities
Options, warrants, and convertible debt
outstanding were all considered anti-dilutive for the three month and six month periods ended June 30, 2015 and 2014, due to net
losses. The following securities were not included in the diluted net loss per share calculation because their effect was anti-dilutive
for the periods presented (in thousands):
| |
For the six months ended | |
| |
June 30, | |
| |
2015 | | |
2014 | |
Common stock options | |
| 1,551 | | |
| 1,551 | |
Over-allotment rights | |
| - | | |
| 2,273 | |
Common stock warrants - equity treatment | |
| 13,166 | | |
| 14,200 | |
Common stock warrants - liability treatment | |
| 12,491 | | |
| 9,108 | |
Convertible notes | |
| 2,135 | | |
| 81 | |
Potentially dilutive securities | |
| 29,343 | | |
| 27,213 | |
9. Related Party Transactions
Cognate BioServices, Inc.
Under the January 17, 2014 DCVax®-L
Manufacturing Services Agreement and the DCVax-Direct Agreement, if the Company, in breach of the Agreements, shuts down or suspends
its DCVax-L program or DCVax-Direct program with Cognate, the Company will be liable for certain fees in addition to any other
remedies. The fees are based on the stage at which the shut down or suspension occurs:
• |
Prior to the last dose of the last patient enrolled in the Phase III trial for DCVax®-L or after the last dose of the last patient enrolled in the Phase III clinical trial for DCVax®-L but before any submission for product approval in any jurisdiction or after the submission of any application for market authorization but prior to receiving a marketing authorization approval: in any of these cases, the fee shall be $3 million. |
• |
At any time after receiving the equivalent of a marketing authorization for DCVax®-L in any jurisdiction, the fee shall be $5 million. |
For the six months ended June 30, 2015,
the Company made net disbursements to Cognate of approximately $21.3 million (with invoices generally paid all in cash rather than
half in cash and half in stock), including charges relating to manufacturing for both the Phase III and Phase I/II clinical trials,
ongoing product and process development, and expansion of several Company programs under these service agreements. With the substantial
expansion of recruitment in the Phase III DCVax-L trial during this period, patient volume has exceeded the maximum amount contracted
for, and as a result the disbursements have included excess production costs. In addition, the disbursements have included preparatory
work for multiple different Phase II clinical trials, which the Company anticipates launching during the second half of this year,
as well as development work connected with new intellectual property and certain regulatory requirements. The disbursements have
also included substantial one-time services related to manufacturing expansion in Europe.
As of June 30, 2015 and December 31, 2014,
the Company owed Cognate (including third party sub-contract amounts) approximately $4.2 million and $5.7 million, respectively.
These amounts are included in accounts payable related party.
The
Company issued 318,116 common shares to Cognate’s designee in partial satisfaction of the 8.1 million shares that were
approved by the Company’s Board in November 2014 to satisfy certain anti-dilution obligations to Cognate under the
most favored nation provisions in the Company’s agreements with Cognate that had not yet been issued. The Company
recorded a $2.7 million charge to stock based compensation based upon the fair value of the common shares on the date of
issuance.
Of note, in accordance with ASC 718, Stock Based Compensation,
certain key terms related to 8.1 million shares have not been finalized (e.g., vesting conditions), therefore the Company has not
recorded this transaction in its condensed consolidated financial statements as of June 30, 2015.
10. Stockholders’ Equity (Deficit)
Common Stock Issuances
First Quarter 2015
During the quarter ended March 31, 2015,
the Company issued an aggregate of 888,187 shares of common stock from the exercise of warrants receiving approximately $3.7 million
of proceeds.
During the quarter ended March 31, 2015,
the Company issued 80,068 shares of common stock to an individual investor as settlement of redemption of redeemable securities.
The fair value of the settlement was $0.3 million and was recorded to offset derivative liabilities.
During the quarter ended March 31, 2015,
the Company issued an aggregate of 385,000 shares of common stock to an individual investor from the cashless exercise of warrants
previously issued. The warrants were classified as warrant liability. The fair value of the warrants on the date of exercise was
$0.5 million.
Second Quarter 2015
On April 2, 2015, the Company entered into
a stock purchase agreement (the “Agreement”) with Woodford Investment Management LLP as agent for the CF Woodford Equity
Income Fund and other clients (collectively, “Woodford”). Pursuant to the Agreement, the Company agreed to sell, and
Woodford agreed to purchase, 5,405,405 shares of the Company’s unregistered common stock, par value $0.001 per share (the
“Shares”), at a purchase price of $7.40 per Share for an aggregate purchase price of $40 million. The sale of the Shares
took place in two separate closings as follows: (i) 1,554,054 shares for a purchase price of $11.5 million which closed on April
8, 2015; and (ii) an additional 3,851,351 shares for a purchase price of $28.5 million which closed on May 1, 2015. There are no
warrants, pre-emptive rights or other rights or preferences.
During the quarter ended June 30, 2015,
the Company converted $4.5 million of the 2014 Convertible Senior Notes into common stock on the terms set forth in the agreement.
Pursuant to the exchange, on the terms set forth in the Notes, the investors received 701,033 shares of the Company’s common
stock.
During the quarter ended June 30, 2015,
the Company issued an aggregate of 723,422 shares of common stock from the exercise of warrants for total proceeds of $3.1 million.
Of which 9,200 shares of common stock was related to extinguishment of warrant liabilities. The fair value of the warrant liabilities
was $0.06 million on the date of exercise, which was recorded as a component of additional paid-in-capital.
During the quarter ended June 30, 2015,
the Company issued an aggregate of 183,895 shares of common stock to multiple investors from the cashless exercise of warrants
previously issued.
During the quarter ended June 30, 2015,
the Company issued an aggregate of 85,228 shares of common stock to an individual investor as stock based compensation. The fair
value of the stock on the issuance date was $0.7 million.
During the quarter ended June 30, 2015, the Company issued an
aggregate of 318,116 shares of common stock to Cognate’s designee in partial satisfaction of the 8.1 million shares that
were approved by the Company’s Board last November to satisfy certain anti-dilution obligations to Cognate under the most
favored nation provisions in the Company’s agreements with Cognate, and were reported by the Company last November, but had
not yet been issued.
Stock Purchase Warrants
The following is a summary of warrant activity
for the six months ended June 30, 2015 (in thousands):
| |
Number of | | |
Weighted Average | |
| |
Warrants | | |
Exercise Price | |
Outstanding as of December 31, 2014 | |
| 29,385 | | |
$ | 4.72 | |
Warrants exercised for cash | |
| (1,611 | ) | |
| 4.18 | |
Warrants exercised on a cashless basis* | |
| (302 | ) | |
| 3.94 | |
Warrant adjustment due to Cognate price reset | |
| 62 | | |
| 3.35 | |
Warrants expired and cancellation | |
| (2,134 | ) | |
| 4.63 | |
Adjustment related to prior issued warrants | |
| 257 | | |
| 4.31 | |
Outstanding as of June 30, 2015 ** | |
| 25,657 | | |
$ | 4.76 | |
*The warrants contain “down round
protection” and the Company classifies these warrant instruments as liabilities measured at fair value and re-measures these
instruments at fair value each reporting period.
** Approximately 14,323,003 warrants
issued to Cognate, during the 8-year period from 2008 through 2015, with a weighted average exercise price and remaining contractual
term of $3.3 and 4.2 years, respectively. The weighted average exercise price gives effect to adjustments related to the most favored
nation clause in these warrants.
11. Subsequent Events
The Company reviewed its activities and
concluded that no subsequent events have occurred that would require recognition in our condensed consolidated financial statements
or in the notes to our condensed consolidated financial statements.
Item 2. Management’s Discussion
and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of
our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial
statements and the notes to those statements included with this report. In addition to historical information, this report contains
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”),
and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements
are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. The words
“believe,” “expect,” “intend,” “anticipate,” and similar expressions are used to
identify forward-looking statements, but some forward-looking statements are expressed differently. Many factors could affect our
actual results, including those factors described under “Risk Factors” in our Form 10-K for the year ended December
31, 2014 and in Part II Item 1A of this report. These factors, among others, could cause results to differ materially from those
presently anticipated by us. You should not place undue reliance on these forward-looking statements.
Overview
We are a biotechnology company focused
on developing immunotherapy products to treat cancers more effectively than current treatments, without toxicities of the kind
associated with chemotherapies, and, through a proprietary batch manufacturing process, on a cost-effective basis, initially in
the United States, Canada and Europe.
We have developed a platform technology,
DCVax®, which uses activated dendritic cells to mobilize a patient's own immune system to attack their cancer. The DCVax technology
is expected to be applicable to all solid tumor cancers, and is embodied in several distinct product lines. One of the product
lines (DCVax®-L) is designed to cover all solid tumor cancers in which the tumors can be surgically removed. Another product
line (DCVax®-Direct) is designed for all solid tumor cancers which are considered inoperable and cannot be surgically removed.
We believe the broad applicability of DCVax to many cancers provides multiple opportunities for commercialization and partnering.
Our DCVax platform technology involves
dendritic cells, the master cells of the immune system, and is designed to reinvigorate and educate the immune system to attack
cancers. The dendritic cells are able to mobilize the overall immune system, including T cells, B cells and antibodies, natural
killer cells and many others. Such mobilization of the overall immune system provides a broader attack on the cancer than mobilizing
just a particular component, such as T cells alone, or a particular antibody alone. Likewise, our DCVax technology is designed
to attack the full set of biomarkers, or antigens, on a patient’s cancer, rather than just a particular selected target or
several targets. Clinical experience indicates that when just one or a few biomarkers on a cancer are targeted by a drug or other
treatment, sooner or later the cancer usually develops a way around that drug, and the drug stops working. We believe that mobilizing
the overall immune system, and targeting the full set of biomarkers on the patient’s cancer, contributes to the effectiveness
of DCVax.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial
condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. GAAP.
The preparation of these financial statements requires us to make estimates and judgments that affect our reported amounts of assets,
liabilities, revenues and expenses.
On an ongoing basis, we evaluate our estimates
and judgments, including those related to accrued expenses and stock-based compensation. We based our estimates on historical experience
and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities and the reported amounts of revenues and expenses that
are not readily apparent from other sources. Actual results may differ from these estimates.
Our critical accounting policies and significant
estimates are detailed in our Annual Report on Form 10-K for the year ended December 31, 2014. Our critical accounting policies
and significant estimates have not changed substantially from those previously disclosed in our Annual Report on Form 10-K for
the year ended December 31, 2014.
Results of Operations
Operating costs:
Operating costs and expenses consist primarily
of research and development expenses, including clinical trial expenses which increase when we are actively participating in clinical
trials and are especially high when we are in a large ongoing international Phase III trial (as we now are), as well as preparing
for multiple parallel Phase II trials. Such costs have increased and will continue to increase as we expand and accelerate these
programs, and bring on additional clinical trial programs and additional intellectual property development, and general and administrative
expenses. Such expenses will also increase as we undertake preparations for eventual commercialization, which involves extensive
work for process optimization, validation and scale-up. The associated administrative expenses also increase as such operating
activities grow.
Research
and development expense was $29.4 million for the three months ended June 30, 2015 versus $21.5 million for the three months ended
June 30, 2014.
Our operating costs include ongoing development
work relating to the DCVax-Direct product and its manufacturing, such as the development, testing and optimization of different
product preparations and methods, the design, engineering, sourcing, production, testing, modification and validation of the manufacturing
automation systems, disposable sets to be used with the manufacturing automation systems, and manufacturing processes, product
ingredients, product release assays, and other matters, as well as development of standard operating procedures (SOPs), batch production
records, and other necessary materials.
Our operating costs also include the costs
of preparations for the expansion of our clinical trial programs including the Phase III trial in the US, UK, Germany and Canada
(with DCVax-L for brain cancer), early access programs in Europe, and multiple Phase II trials (with DCVax-Direct for inoperable
solid tumor cancers). The preparation costs include process development, upfront payments to the clinical trial sites and the CROs
managing the trials and other service providers, and legal, regulatory and expert expenses related to regulatory approvals, institutional
approvals and clinical trial agreements with each site, database development, training of medical and other site personnel, trial
supplies and other. Additional substantial costs relate to the expansion of manufacturing facilities and capacity, in both the
US and Europe.
Research and development:
Discovery and preclinical research and
development expenses include costs for substantial external scientific personnel, technical and regulatory advisers, and others,
costs of laboratory supplies used in our internal research and development projects, travel, regulatory compliance, and expenditures
for preclinical and clinical trial operation and management when we are actively engaged in clinical trials.
Because we are a pre-revenue company, we
do not allocate research and development costs on a project basis. We adopted this policy, in part, due to the unreasonable cost
burden associated with accounting at such a level of detail and our limited number of financial and personnel resources.
General and administrative:
General and administrative expenses include
both cash and non-cash measures. The non-cash expenses include stock-based compensation and depreciation. The cash expenses include
administrative personnel related salary and benefit expenses, cost of facilities, insurance, travel, legal support, property and
equipment and amortization of stock options and warrants.
Three Months Ended June 30, 2015 and
2014
For the three months ended June
30, 2015 and 2014, we recognized a net loss of $66.8 million and $25.9 million, respectively. For the three months ended June 30, 2014,
the net loss was $25.7 million. The increase in net loss is mainly due to a non-cash change in fair value of derivative
liability of $25.7 million recorded during the 2nd quarter of 2015.
Research and Development Expense
Research and development expense was $29.4
million for the three months ended June 30, 2015 versus $21.5 million for the three months ended June 30, 2014. The increase was
primarily attributable to costs associated with manufacturing for, conducting (including CRO and site costs) and expanding the
Phase III DCVax-L trial in Europe and the preparations for multiple Phase II trials, which we are expanding as compared to this
period last year, as well as establishment and expansion of our German and UK subsidiaries and operations.
For the three months ended June 30, 2015
and 2014, we made cash payments for the two periods, respectively, of approximately $13.1 million (with the invoices generally
being paid all in cash), and $7.1 million (with the invoices generally being paid half in cash and half in stock ) to Cognate.
At June 30, 2015 and 2014, we owed Cognate $4.2 million and $2.7 million, respectively, for unpaid invoices for services performed
by Cognate (including manufacturing for both the Phase III and Phase I/II clinical trials, ongoing product and process development,
expansion of several company programs and services related to expansion of manufacturing capacity).
For the three months ended June 30, 2015
and 2014, we incurred non-cash equity based expense (restricted common stock and warrants) for the ongoing vesting (in equal monthly
installments over 3 years) of the one-time initiation payments of shares and warrants under the four agreements the Company entered
into with Cognate in January 2014. The vesting amounts during the three months ended June 30, 2015 and 2014 were $9.4 million (comprising
0.9 million shares per six months) and $2.7 million (comprising 0.9 million shares per six months) , respectively. The value of
the monthly vesting amounts was higher in the three months ended June 2015 than the period ended June 2014 because the price per
share of the Company’s stock has risen. The fair value calculation of these shares was determined using the market price
for tradable shares; however the shares issued to Cognate were unregistered restricted shares. The ongoing installments also included
lock-up warrants (for a 3-year lock-up of Cognate shares) and most favored nation warrants.
General and Administrative Expense
General and administrative expense was $9.8 million (cash and
non-cash expenses combined) for the three months ended June 30, 2015 versus $3.9 million for the three months ended June 30, 2014.
The increase in general and administrative expenses can be mainly attributed to non-cash stock based payment to Cognate’s
designee in partial satisfaction of the 8.1 million shares that were approved by the Company’s Board last November to satisfy
certain anti-dilution obligations to Cognate, and were reported by the Company last November, but had not yet been issued.
Of note, in accordance with ASC 718, Stock Based Compensation,
certain key terms related to 8.1 million shares have not been finalized ( e.g., vesting conditions), therefore the Company has
not recorded this transaction in its condensed consolidated financial statements as of June 30, 2015.
Change in fair value of derivatives
During the three months ended June 30,
2015 and 2014 we recognized a non-cash loss and gain on derivative liabilities of $25.7 million and $4.7 million, respectively,
due primarily to the change in value of the warrants, due to an increase in our stock price, issued to Cognate in connection with
the extinguishment of accounts payable.
Inducement expense
During the three months ended June 30,
2015 there was no inducement expense versus inducement expense of $5.1 million for the three months ended June 30, 2014. The inducement
expense for the three months ended June 30, 2014 was related to the conversion of accounts payable to common stock and warrants
to Cognate in connection with the extinguishment of accounts payable, and the fair value of the common stock and warrants were
higher than the conversion price.
Interest Expense
Interest expense (including non-cash elements
such as amortization of debt discount and debt issuance cost) increased to $1.6 million for the three months ended June 30, 2015
from $0.03 million for the three months ended June 30, 2014. The increase in interest expense is primarily related to the issuance
of senior convertible notes and mortgage loans during the 2nd half of 2014 and 1st quarter of 2015.
Six Months Ended June 30, 2015 and 2014
We recognized a (combined cash and non-cash)
net loss of $113.3 million for the six months ended June 30, 2015 which was comparable to the net loss of $71.9 million for the
six months ended June 30, 2014.
Research and Development Expense
Research and development expense was $49.1
million for the six months ended June 30, 2015 versus $41.5 million for the six months ended June 30, 2014.
For the six months ended June 30, 2015
and 2014, we made cash payments for the two periods, respectively, of approximately $21.3 million (with invoices generally being
paid in all cash), and $12.4 million (with invoices generally being paid half in cash and half in stock) to Cognate. With the substantial
expansion of recruitment in the Phase III DCVax-L trial, patient volume exceeded the maximum amount contracted for, and as a result,
the payments have included excess production costs. In addition, the payments have included preparatory work for multiple different
Phase II clinical trials, which the Company anticipates launching during the second half of this year, as well as development work
connected with new intellectual property and certain regulatory requirements. The payments have also included substantial one-time
services related to manufacturing expansion in Europe.
As of June 30, 2015 and 2014, we owed Cognate
$4.2 million and $2.7 million, respectively, for unpaid invoices for services performed by Cognate.
For the six months ended June 30, 2015
and 2014, we incurred non-cash equity based payment (restricted common stock and warrants) expense for the ongoing vesting (in
equal monthly installments over 3 years) of the one-time initiation payments of shares and warrants under the four agreements the
Company entered into with Cognate in January 2014. The vesting amounts during the six months ended June 30, 2015 and 2014 were
$15.8 million (comprising 0.9 million shares per six months) and $10.6 million (comprising 0.9 million shares per six months),
respectively. The value of the monthly vesting amounts was higher in the three months ended June 2015 than the period ended June
2014 because the price per share of the Company’s stock has risen. The fair value calculation of these shares was determined
using the market price for tradable shares; however the shares issued to Cognate were unregistered restricted shares. The ongoing
installments also included lock-up warrants (for a 3-year lock-up of Cognate shares) and most favored nation warrants.
General and Administrative Expense
General and administrative expense was
$13.1 million (cash and non-cash expenses combined) for the six months ended June 30, 2015 versus $7.6 million for the six months
ended June 30, 2014. The increase in general and administrative expenses were mainly from an increase of approximately $2.3 million in
legal fees, and non-cash stock based compensation issued to Cognate’s designee in partial satisfaction of the 8.1 million
shares that were approved by the Company’s Board last November to satisfy certain anti-dilution obligations to Cognate, and
were reported by the Company last November, but had not yet been issued.
Of note, in accordance with ASC 718, Stock Based Compensation,
certain key terms related to 8.1 million shares have not been finalized (e.g., vesting conditions), therefore the Company has not
recorded this transaction in its condensed consolidated financial statements as of June 30, 2015.
Change in fair value of derivatives
During the six months ended June 30, 2015
and 2014 we recognized a non-cash loss on derivative liabilities of $48.9 million and $12.3 million, respectively, due primarily
to the change in value of the warrants, due to an increase in our stock price, previously issued to Cognate in connection with
the extinguishment of accounts payable.
Inducement expense
During the six months ended June 30, 2015
there was no inducement expense versus inducement expense of $10.3 million for the six months ended June 30, 2014. The inducement
expense for the six months ended June 30, 2014 was related to the conversion of accounts payable to common stock and warrants to
Cognate in connection with the extinguishment of accounts payable, and the fair value of the common stock and warrants of marketable,
tradable shares of the Company’s common stock were higher than the conversion price for the unregistered, restricted stock
issued to Cognate.
Interest Expense
Interest expense (including non-cash elements
such as amortization of debt discount and debt issuance cost) increased to $2.4 million for the six months ended June 30, 2015
from $0.2 million for the six months ended June 30, 2014. The increase in interest expense is primarily related to the issuance
of senior convertible notes and mortgage loans during the 2nd half of 2014 and 1st quarter of 2015.
Liquidity and Capital Resources
We have experienced recurring losses from
operations. During the six months ended June 30, 2015, net cash outflows for operations and for one-time expenses was $44.7 million.
At June 30, 2015, current assets totaled
$21.2 million, compared to $14.6 million at December 31, 2014. Current assets less current liabilities produces working capital
deficit (cash and non-cash liabilities combined) in the amount of $95.3 million at June 30, 2015 (with $92.7 million of the $95.3
million deficit comprised of non-cash derivative liabilities), compared to a deficit of $54.2 million at December 31, 2014, as
described above.
Operating Activities
During the six months ended June 30, 2015,
we used $44.7 million in cash for operating activities and certain one-time expenses.
Investing Activities
During the six months ended June 30, 2015,
we used $2.0 million in cash related to capitalized costs related to the UK facility. There were no investing activities during
the six months ended June 30, 2014.
Financing Activities
During the six months ended June 30, 2015,
our financing activities provided net proceeds after expenses of $51.7 million, consisting of $5 million in net mortgage loan
proceeds, proceeds of $6.8 million from the exercise of warrants, and proceeds of $40.0 million from issuance of common stock.
Our financial statements indicate there
is substantial doubt about our ability to continue as a going concern as we are dependent on our ability to obtain ongoing financing
and ultimately to generate sufficient cash flow to meet our obligations on a timely basis. We can give no assurance
that our plans and efforts to achieve the above steps will be successful.
Other factors affecting our ongoing funding
requirements include the number of staff we employ, the number of sites and pace of patient enrollment in our Phase III brain cancer
trial and our Phase II clinical trials with DCVax-Direct, the costs of further development work relating to DCVax-Direct, the costs
of expansion of manufacturing of both DCVax-L and DCVax-Direct, the cost of developing our Hospital Exemption program in Germany,
and unanticipated developments. The extent of resources available to us will determine the pace at which we can move forward with
both our DCVax-L program and our DCVax-Direct program.
Off-Balance Sheet Arrangements
Since our inception, we have not engaged
in any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk
Market risk represents the risk of loss
that may result from the change in value of financial instruments due to fluctuations in its market price. Market risk is inherent
in all financial instruments. Market risk may be exacerbated in times of trading illiquidity when market participants refrain from
transacting in normal quantities and/or at normal bid-offer spreads. Our exposure to market risk is directly related to derivatives,
debt and equity linked instruments related to our financing activities.
Our assets and liabilities are overwhelmingly
denominated in U.S. dollars. We do not use foreign currency contracts or other derivative instruments to manage changes in currency
rates. We do not now, nor do we plan to, use derivative financial instruments for speculative or trading purposes. However, these
circumstances might change.
The primary quantifiable market risk associated
with our financial instruments is sensitivity to changes in interest rates. Interest rate risk represents the potential loss from
adverse changes in market interest rates. We use an interest rate sensitivity simulation to assess our interest rate risk exposure.
For purposes of presenting the possible earnings effect of a hypothetical, adverse change in interest rates over the 12-month period
from our reporting date, we assume that all interest rate sensitive financial instruments will be impacted by a hypothetical, immediate
100 basis point increase in interest rates as of the beginning of the period. The sensitivity is based upon the hypothetical assumption
that all relevant types of interest rates that affect our results would increase instantaneously, simultaneously and to the same
degree. We do not believe that our cash and equivalents have significant risk of default or illiquidity.
The sensitivity analyses of the interest
rate sensitive financial instruments are hypothetical and should be used with caution. Changes in fair value based on a 1% or 2%
variation in an estimate generally cannot be extrapolated because the relationship of the change in the estimate to the change
in fair value may not be linear. Also, the effect of a variation in a particular estimate on the fair value of financial instruments
is calculated independent of changes in any other estimate; in practice, changes in one factor may result in changes in another
factor, which might magnify or counteract the sensitivities. In addition, the sensitivity analyses do not consider any action that
we may take to mitigate the impact of any adverse changes in the key estimates.
Based on our analysis, as of June 30, 2015,
the effect of a 100+/- basis point change in interest rates on the value of our financial instruments and the resultant effect
on our net loss are considered immaterial.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and
Procedures
Under the supervision and with the participation
of the external firm that performs the finance and accounting functions for our Company, together with our management (including
our principal executive, financial and accounting officer), we conducted an evaluation of our disclosure controls and procedures,
as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended.
Since 2012, our Company’s finance
and accounting functions have been performed by an external firm on a contract services basis. This firm specializes in providing
financing and accounting functions for biotech companies, and the founders and senior managers are highly experienced former partners
of national accounting firms.
Based on the evaluation of our controls
and procedures, our principal executive, financial and accounting officer concluded that during the period covered by this report,
our Company’s processes for internally reporting material information in a systematic manner to allow for timely filing of
material information were ineffective, due to inherent limitations from being a small company and insufficient personnel for segregation
of duties, and there existed material weaknesses in our oversight over the financial reporting that contribute to the weaknesses
in our disclosure controls and procedures. We have been working together with the external firm who performs the Company’s
finance and accounting functions to address the weaknesses.
Changes in Internal Control over Financial
Reporting
We have been taking steps to remediate
the weaknesses identified above, which continue to exist as of the end of the period covered by this report. Specifically,
we have expanded the personnel resources and activities performed by the external firm. We plan to continue taking steps
to improve our internal control system and to address these deficiencies, but the timing of such steps is uncertain and our ability
to retain or attract qualified individuals to undertake these functions is also uncertain. Aside from these changes, there
has been no change in our internal controls over financial reporting that occurred during the fiscal quarter ended June 30, 2015,
that has materially affected, or is reasonable expected to materially affect, our internal controls over financial reporting.
Part II - Other Information
Item 1. Legal Proceedings
In 2014, as previously reported, the Company
received demand letters from three purported individual shareholders seeking to inspect our corporate books and records pursuant
to Section 220 of the Delaware General Corporation Law. The demand letters were all substantially similar, and claimed that their
purpose is to investigate possible mismanagement and breaches of fiduciary duty by the Company’s directors and officers.
They requested a range of documents. The Company reached negotiated agreements and provided limited records, under confidentiality
agreements.
On June 19, 2015, two of the purported
shareholders filed a complaint purportedly suing on behalf of a class of similarly situated shareholders and derivatively on behalf
of the Company. The lawsuit names Cognate BioServices, Inc. Toucan Partners, Toucan Capital Fund III, Linda Powers and the
Company’s Board of Directors as defendants, and names NW Bio as a “nominal defendant” with respect to the derivative
claims. The complaint generally claims that the Company overpaid the Cognate and Toucan defendants with respect to financings
provided by those parties or conversions of debts owed to those parties. The complaint seeks various forms of relief. The
Company strongly disputes the allegations of the complaint and intends to vigorously defend the case.
As previously reported, the Company previously
received demand letters from two purported individual shareholders alleging “short swing” profits under Section 16(b)
of the Exchange Act arising from Cognate awarding to some of its own employees some of the NW Bio shares that Cognate owned, and
arising from a convertible debt financing transaction in which the unrelated investor chose to convert the debt into shares of
NW Bio stock owned by Cognate rather than being repaid in cash. However, prior to either of these demand letters, NW Bio
had already filed a Form 8-K on December 19, 2014, in which it already disclosed this same information (which had been found in
the course of a joint review by Cognate and NW Bio), already agreed with Cognate on the disgorgement of those deemed profits ($448,681)
by Cognate and resolved the matter. The Company believes that the payment by Cognate fully resolved the matters, and so informed
the purported shareholders who sent the demand letters.
In April, 2015, one of those purported individual shareholders
filed a complaint against the Company and Cognate. The same plaintiff had previously filed such a complaint and then withdrew
it to amend it. The complaint seeks to force disgorgement of a larger amount, which the plaintiff alleges is unknown but
is estimated to be approximately $1.4 million, reduced by the payment already made. The Company and Cognate dispute the plaintiff’s
claim for further disgorgement, have filed an Answer denying such liability, and are defending against these claims.
Item 1A. Risk Factors
The risk factors described in our most
recent Annual Report on Form 10-K and other filings continue to apply as described therein.
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds
During the quarter ended June 30, 2015,
the Company converted $4.5 million of the 2014 Convertible Senior Notes and accrued interest into common stock on the terms set
forth in the agreement. Pursuant to the exchange, on the terms set forth in the Notes, the investors received 701,033 shares of
the Company’s common stock. The shares are being issued pursuant to the exemption from the registration requirements afforded
by Section 3(a)(9) of the Securities Act of 1933, as amended.
During the quarter ended June 30, 2015,
the Company issued an aggregate of 723,422 shares of common stock from the exercise of warrants for total proceeds of $3.1 million.
Of which 9,200 shares of common stock was related to extinguishment of warrant liabilities. The fair value of the warrant liabilities
was $0.06 million on the date of exercise, which was recorded as a component of additional paid-in-capital.
During the quarter ended June 30, 2015,
the Company issued an aggregate of 183,895 shares of common stock to multiple investors from the cashless exercise of warrants
previously issued.
During the quarter ended June 30, 2015,
the Company issued an aggregate of 85,228 shares of common stock to an individual investor as stock compensation. The fair value
of the stock on the issuance date was $0.7 million.
During the quarter ended June 30, 2015, the Company issued an
aggregate of 318,116 shares of common stock to Cognate’s designee in partial satisfaction of the 8.1 million shares that
were approved by the Company’s Board last November to satisfy certain anti-dilution obligations to Cognate under the most
favored nation provisions in the Company’s agreements with Cognate, and were reported by the Company last November, but had
not yet been issued.
On April 2, 2015, the Company entered into
a stock purchase agreement (the “Agreement”) with Woodford Investment Management LLP as agent for the CF Woodford Equity
Income Fund and other clients (collectively, “Woodford”). Pursuant to the Agreement, the Company agreed to sell,
and Woodford has agreed to purchase, 5,405,405 shares of the Company’s unregistered common stock, par value $0.001 per share
(the “Shares”), at a purchase price of $7.40 per Share for an aggregate purchase price of $40,000,000. The sale of
the Shares took place in two separate closings as follows: (i) 1,554,054 shares for a purchase price of $11,500,000 which closed
on April 8, 2015; and (ii) an additional 3,851,351 shares for a purchase price of $28,500,000 which closed on April 30, 2015. There
are no warrants, pre-emptive rights or other rights or preferences.
On April 13, 2015, an unrelated institutional
investor elected to exchange all $2.5 million of its existing 5.00% Convertible Senior Notes due in August 2017 (the “Notes”)
for common stock of the Company on the terms set forth in the Notes. The convertible debt was entered into in August 2014. Pursuant
to the exchange, on the terms set forth in the Notes, the investor received 378,535 shares of the Company’s common stock.
The shares are being issued pursuant to the exemption from the registration requirements afforded by Section 3(a)(9) of the Securities
Act of 1933, as amended.
Except as noted above, all of the securities
sold in these transactions were exempt from registration under the Securities Act of 1933, as amended, in reliance on Section 4(a)
(2) thereof.
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Mine Safety Disclosures
None
Item 5. Other Information
None
Item 6. Exhibits
31.1 |
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Certification of President (Principal Executive Officer and Principal Financial and Accounting Officer), Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
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32.1 |
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Certification of President, Chief Executive Officer and Principal Financial and Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.** |
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101 |
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The following financial information from our Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014, (ii) the Condensed Consolidated Statements of Operations for the three-month and six-month periods ended June 30, 2015 and 2014, (iii) the Condensed Consolidated Statements of Comprehensive Loss for the three-month and six-month periods ended June 30, 2015 and 2014, (iv) the Condensed Consolidated Statement of Stockholders’ Equity (Deficit), (v) the Condensed Consolidated Statements of Cash Flows for the six-month periods ended June 30, 2015 and 2014, and (vi) the Notes to Condensed Consolidated Financial Statements.* |
* Filed herewith
** Furnished herewith
SIGNATURES
Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
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NORTHWEST BIOTHERAPEUTICS, INC |
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Dated: August 10, 2015 |
By: |
/s/ Linda F. Powers |
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Name: |
Linda F. Powers |
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Title: |
President and Chief Executive Officer |
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Principal Executive Officer |
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Principal Financial and Accounting Officer |
Exhibit 31.1
CERTIFICATION PURSUANT
TO
SECTION 302 OF THE SARBANES-OXLEY ACT
OF 2002
I, Linda F. Powers, certify that:
(1) I have
reviewed this quarterly report on Form 10-Q of Northwest Biotherapeutics, Inc.;
(2) Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
the period covered by this report;
(3) Based
on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
in this report;
(4) I am
responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15 (f)), for the
registrant and have:
(a) Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision,
to ensure that material information relating to the registrant, including its condensed consolidated subsidiaries, is made known
to me by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated
the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
and
(d) Disclosed
in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
(5) I have
disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors
and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
(a) All
significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
(b) Any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: August 10, 2015 |
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By: |
/s/ Linda F. Powers |
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Name: |
Linda F. Powers |
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Title: |
President and Chief Executive Officer |
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Principal Executive Officer |
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Principal Financial and Accounting Officer |
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Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
In connection with the quarterly report
of Northwest Biotherapeutics, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2015, as filed with
the Securities and Exchange Commission (the “Report”), I, Linda F. Powers, certify, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies
with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information
contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 10, 2015 |
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By: |
/s/ Linda F. Powers |
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Name: |
Linda F. Powers |
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Title: |
President and Chief Executive Officer |
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Principal Executive Officer |
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Principal Financial and Accounting Officer |
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