NORTHWEST BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share and per share
amounts)
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,051
|
|
|
$
|
6,186
|
|
Restricted cash - interest payments held in escrow
|
|
|
-
|
|
|
|
685
|
|
Prepaid expenses and other current assets
|
|
|
1,077
|
|
|
|
1,013
|
|
Total current assets
|
|
|
2,128
|
|
|
|
7,884
|
|
|
|
|
|
|
|
|
|
|
Non-current assets:
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
188
|
|
|
|
315
|
|
Construction in progress (property in the United Kingdom)
|
|
|
47,322
|
|
|
|
44,559
|
|
Other assets
|
|
|
110
|
|
|
|
148
|
|
Total non-current assets
|
|
|
47,620
|
|
|
|
45,022
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
49,748
|
|
|
$
|
52,906
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
17,032
|
|
|
$
|
13,239
|
|
Accounts payable and accrued expenses to related parties
|
|
|
27,916
|
|
|
|
23,393
|
|
Convertible notes, net
|
|
|
135
|
|
|
|
10,960
|
|
Notes payable, net
|
|
|
5,294
|
|
|
|
2,450
|
|
Notes payable to related party
|
|
|
1,471
|
|
|
|
310
|
|
Share settled debt, at fair value (in default)
|
|
|
4,013
|
|
|
|
5,200
|
|
Shares payable
|
|
|
2,550
|
|
|
|
-
|
|
Environmental remediation liability
|
|
|
6,200
|
|
|
|
6,200
|
|
Warrant liability
|
|
|
11,883
|
|
|
|
4,862
|
|
Mortgage loan, net
|
|
|
4,640
|
|
|
|
9,791
|
|
Total current liabilities
|
|
|
81,134
|
|
|
|
76,405
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities:
|
|
|
|
|
|
|
|
|
Note payable, net of current portion, net
|
|
|
-
|
|
|
|
3,000
|
|
Convertible notes payable, net of current portion, net
|
|
|
5,072
|
|
|
|
-
|
|
Mortgage loan, net of current portion, net
|
|
|
6,375
|
|
|
|
-
|
|
Total non-current liabilities
|
|
|
11,447
|
|
|
|
3,000
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
92,581
|
|
|
|
79,405
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity (deficit):
|
|
|
|
|
|
|
|
|
Preferred stock ($0.001 par value); 40,000,000 shares authorized; 0 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively
|
|
|
-
|
|
|
|
-
|
|
Common stock ($0.001 par value); 450,000,000 shares authorized; 309,675,000 and 157,028,000 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively
|
|
|
309
|
|
|
|
157
|
|
Additional paid-in capital
|
|
|
718,831
|
|
|
|
686,972
|
|
Accumulated deficit
|
|
|
(761,620
|
)
|
|
|
(715,476
|
)
|
Accumulated other comprehensive (loss) gain
|
|
|
(353
|
)
|
|
|
1,848
|
|
Total stockholders' equity (deficit)
|
|
|
(42,833
|
)
|
|
|
(26,499
|
)
|
Total liabilities and stockholders' equity (deficit)
|
|
$
|
49,748
|
|
|
$
|
52,906
|
|
The accompanying notes are an integral
part of these unaudited condensed consolidated financial statements.
NORTHWEST BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
(in thousands, except per share amounts)
|
|
For the three months ended
|
|
|
For the nine months ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and other
|
|
$
|
148
|
|
|
$
|
159
|
|
|
$
|
304
|
|
|
$
|
552
|
|
Total revenues
|
|
|
148
|
|
|
|
159
|
|
|
|
304
|
|
|
|
552
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
9,721
|
|
|
|
21,094
|
|
|
|
20,222
|
|
|
|
43,247
|
|
General and administrative
|
|
|
2,965
|
|
|
|
2,668
|
|
|
|
9,254
|
|
|
|
7,929
|
|
Legal expenses
|
|
|
1,595
|
|
|
|
1,913
|
|
|
|
7,530
|
|
|
|
7,394
|
|
Total operating costs and expenses
|
|
|
14,281
|
|
|
|
25,675
|
|
|
|
37,006
|
|
|
|
58,570
|
|
Loss from operations
|
|
|
(14,133
|
)
|
|
|
(25,516
|
)
|
|
|
(36,702
|
)
|
|
|
(58,018
|
)
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inducement loss
|
|
|
(2,297
|
)
|
|
|
(1,457
|
)
|
|
|
(2,297
|
)
|
|
|
(1,457
|
)
|
Change in fair value of derivative liabilities
|
|
|
(4,933
|
)
|
|
|
(217
|
)
|
|
|
2,963
|
|
|
|
17,238
|
|
Net loss from extinguishment of debt
|
|
|
(1,975
|
)
|
|
|
(433
|
)
|
|
|
(10,517
|
)
|
|
|
(433
|
)
|
Interest expense
|
|
|
(1,193
|
)
|
|
|
(691
|
)
|
|
|
(3,695
|
)
|
|
|
(2,138
|
)
|
Foreign currency transaction gain (loss)
|
|
|
1,260
|
|
|
|
(913
|
)
|
|
|
4,104
|
|
|
|
(4,700
|
)
|
Net loss
|
|
$
|
(23,271
|
)
|
|
$
|
(29,227
|
)
|
|
$
|
(46,144
|
)
|
|
$
|
(49,508
|
)
|
Deemed dividend related to warrant modification
|
|
|
-
|
|
|
|
(3,007
|
)
|
|
|
-
|
|
|
|
(5,647
|
)
|
Net loss applicable to common stockholders
|
|
$
|
(23,271
|
)
|
|
$
|
(32,234
|
)
|
|
$
|
(46,144
|
)
|
|
$
|
(55,155
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share applicable to common stockholders - basic and diluted
|
|
$
|
(0.08
|
)
|
|
$
|
(0.28
|
)
|
|
$
|
(0.21
|
)
|
|
$
|
(0.52
|
)
|
Weighted average shares used in computing basic and diluted loss per share
|
|
|
281,486
|
|
|
|
114,836
|
|
|
|
217,587
|
|
|
|
105,501
|
|
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
NORTHWEST BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE LOSS
(Unaudited)
(in thousands)
|
|
For the three months ended
|
|
|
For the nine months ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Net loss
|
|
$
|
(23,271
|
)
|
|
$
|
(29,227
|
)
|
|
$
|
(46,144
|
)
|
|
$
|
(49,508
|
)
|
Other comprehensive gain (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
(561
|
)
|
|
|
626
|
|
|
|
(2,201
|
)
|
|
|
1,126
|
|
Total comprehensive loss
|
|
$
|
(23,832
|
)
|
|
$
|
(28,601
|
)
|
|
$
|
(48,345
|
)
|
|
$
|
(48,382
|
)
|
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
NORTHWEST BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’
EQUITY (DEFICIT)
(Unaudited)
(in thousands)
|
|
Common
Stock
|
|
|
Additional
Paid-in
|
|
|
Accumulated
|
|
|
Cumulative
Translation
|
|
|
Total
Stockholders'
|
|
|
|
Shares
|
|
|
Par
value
|
|
|
Capital
|
|
|
Deficit
|
|
|
Adjustment
|
|
|
Equity
(Deficit)
|
|
Balance at January 1, 2017
|
|
|
157,027
|
|
|
$
|
157
|
|
|
$
|
686,972
|
|
|
$
|
(715,476
|
)
|
|
$
|
1,848
|
|
|
$
|
(26,499
|
)
|
Issuance of common stock and warrants for cash
in a registered direct offering (net of $7.0 million warrant liability)
|
|
|
28,979
|
|
|
|
29
|
|
|
|
2,511
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,540
|
|
Offering cost related to registered direct offering
|
|
|
-
|
|
|
|
-
|
|
|
|
(856
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(856
|
)
|
Issuance of common stock and warrants for cash
in private offering (net of $1.0 million warrant liability)
|
|
|
9,010
|
|
|
|
9
|
|
|
|
605
|
|
|
|
-
|
|
|
|
-
|
|
|
|
614
|
|
Warrants exercised for cash
|
|
|
23,527
|
|
|
|
23
|
|
|
|
2,782
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,805
|
|
Reclassification of warrant liabilities related
to warrants exercised for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
2,117
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,117
|
|
Cashless warrants exercise
|
|
|
6,940
|
|
|
|
7
|
|
|
|
(7
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Reclassification of warrant liabilities related
to cashless warrants exercise
|
|
|
-
|
|
|
|
-
|
|
|
|
3,054
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,054
|
|
Conversion of share settled debt into common
stock
|
|
|
7,000
|
|
|
|
7
|
|
|
|
1,180
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,187
|
|
Issuance of common stock and warrants for conversion
of debt and accrued interest
|
|
|
68,789
|
|
|
|
69
|
|
|
|
13,948
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14,017
|
|
Common stock issued for extinguishment of 2014
senior convertible notes
|
|
|
7,090
|
|
|
|
7
|
|
|
|
2,047
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,054
|
|
Forgiveness of certain payables to Cognate BioServices,
Inc.
|
|
|
-
|
|
|
|
-
|
|
|
|
3,750
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,750
|
|
Stock-based compensation
|
|
|
1,313
|
|
|
|
1
|
|
|
|
728
|
|
|
|
-
|
|
|
|
-
|
|
|
|
729
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(46,144
|
)
|
|
|
-
|
|
|
|
(46,144
|
)
|
Cumulative translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,201
|
)
|
|
|
(2,201
|
)
|
Balance at September 30, 2017
|
|
|
309,675
|
|
|
$
|
309
|
|
|
$
|
718,831
|
|
|
$
|
(761,620
|
)
|
|
$
|
(353
|
)
|
|
$
|
(42,833
|
)
|
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
NORTHWEST BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
(in thousands)
|
|
For the nine months ended
|
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(46,144
|
)
|
|
$
|
(49,508
|
)
|
Reconciliation of net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
141
|
|
|
|
135
|
|
Amortization of debt discount
|
|
|
1,158
|
|
|
|
639
|
|
Debt premium
|
|
|
407
|
|
|
|
-
|
|
Change in fair value of derivatives
|
|
|
(2,963
|
)
|
|
|
(17,238
|
)
|
Inducement loss
|
|
|
2,297
|
|
|
|
1,457
|
|
Loss from extinguishment of debt
|
|
|
10,067
|
|
|
|
433
|
|
Stock-based compensation
|
|
|
729
|
|
|
|
98
|
|
Stock issued to Cognate BioServices under Cognate Agreements
|
|
|
-
|
|
|
|
13,654
|
|
Subtotal of non-cash charges
|
|
|
11,836
|
|
|
|
(822
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
(72
|
)
|
|
|
617
|
|
Other non-current assets
|
|
|
38
|
|
|
|
70
|
|
Accounts payable and accrued expenses
|
|
|
4,368
|
|
|
|
1,697
|
|
Related party accounts payable and accrued expenses
|
|
|
8,273
|
|
|
|
6,391
|
|
Net cash used in operating activities
|
|
|
(21,701
|
)
|
|
|
(41,555
|
)
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment
|
|
|
(14
|
)
|
|
|
(4,770
|
)
|
Refund of VAT related to UK construction
|
|
|
220
|
|
|
|
-
|
|
Net cash used in investing activities
|
|
|
206
|
|
|
|
(4,770
|
)
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock and warrants in a registered direct offering
|
|
|
9,509
|
|
|
|
13,700
|
|
Offering cost related to registered direct offering
|
|
|
(856
|
)
|
|
|
(1,077
|
)
|
Proceeds from issuance of common stock and warrants in private offering
|
|
|
1,616
|
|
|
|
926
|
|
Proceeds from private offering (shares payable)
|
|
|
2,550
|
|
|
|
-
|
|
Proceeds from exercise of warrants
|
|
|
2,805
|
|
|
|
8,066
|
|
Offering cost related to warrants exercise
|
|
|
-
|
|
|
|
(795
|
)
|
Proceeds from issuance of notes payable, net
|
|
|
4,864
|
|
|
|
-
|
|
Proceeds from issuance of notes payable to related party
|
|
|
2,805
|
|
|
|
-
|
|
Repayment of notes payable to related parties
|
|
|
(1,644
|
)
|
|
|
-
|
|
Proceeds from issuance of convertible notes payable, net
|
|
|
1,604
|
|
|
|
-
|
|
Repayment of convertible notes payable
|
|
|
(3,258
|
)
|
|
|
-
|
|
Net cash provided by financing activities
|
|
|
19,995
|
|
|
|
20,820
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(4,320
|
)
|
|
|
3,944
|
|
Net decrease in cash, cash equivalents and restricted cash
|
|
|
(5,820
|
)
|
|
|
(21,561
|
)
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash, beginning of the period
|
|
|
6,871
|
|
|
|
23,048
|
|
Cash, cash equivalents and restricted cash, end of the period
|
|
$
|
1,051
|
|
|
$
|
1,487
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information
|
|
|
|
|
|
|
|
|
Interest payments on mortgage loan
|
|
$
|
(969
|
)
|
|
$
|
(1,497
|
)
|
Interest payments on senior convertible note
|
|
$
|
(485
|
)
|
|
$
|
(275
|
)
|
Interest payments on notes payable to related party
|
|
$
|
(47
|
)
|
|
$
|
-
|
|
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
NORTHWEST BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
(Continued)
(in thousands)
|
|
For the nine months ended
|
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
Supplemental schedule of non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Conversion of share settled debt into common stock
|
|
$
|
1,187
|
|
|
$
|
-
|
|
Issuance of common stock and warrants for conversion of debt and accrued interest
|
|
$
|
10,975
|
|
|
$
|
-
|
|
Exchange 2014 Senior Convertible Notes and accrued interest for secured convertible note
|
|
$
|
5,175
|
|
|
$
|
-
|
|
Reclassification of warrant liabilities related to warrants exercised for cash
|
|
$
|
2,117
|
|
|
$
|
825
|
|
Reclassification of warrant liabilities related to cashless warrants
|
|
$
|
3,054
|
|
|
$
|
-
|
|
Cashless warrants exercise
|
|
$
|
7
|
|
|
$
|
-
|
|
Issuance of warrants in conjunction with note payable
|
|
$
|
139
|
|
|
$
|
-
|
|
Forgiveness of certain payables from Cognate BioServices, Inc.
|
|
$
|
3,750
|
|
|
$
|
-
|
|
Embedded conversion features with issuance of secured convertible notes
|
|
$
|
1,826
|
|
|
$
|
-
|
|
Accrued renewal fee incurred from mortgage loan
|
|
$
|
218
|
|
|
$
|
211
|
|
Deemed dividend related to modification of warrant
|
|
$
|
-
|
|
|
$
|
5,647
|
|
Return of common stock and warrants from Cognate
|
|
$
|
-
|
|
|
$
|
8
|
|
Extinguishment of shares payable related to Cognate
|
|
$
|
-
|
|
|
$
|
22,539
|
|
Extinguishment of derivative liabilities related to Cognate
|
|
$
|
-
|
|
|
$
|
10,131
|
|
Issuance of common stock for accounts payable conversion
|
|
$
|
-
|
|
|
$
|
28
|
|
Issuance of common stock for debt conversion
|
|
$
|
-
|
|
|
$
|
934
|
|
Issuance of common stock for conversion of accrued interest
|
|
$
|
-
|
|
|
$
|
66
|
|
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
1. Organization and Description of Business
Northwest Biotherapeutics, Inc. and its
wholly owned subsidiaries 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 is developing an experimental
dendritic cell vaccine using its platform technology known as DCVax. DCVax is currently being tested for use in the treatment of
certain types of cancers.
Cognate BioServices, Inc. (“Cognate
BioServices”), which is a company related by common ownership (Note 9), provides the Company with mission critical contract
manufacturing services, research and development services, distribution and logistics, and related services, in compliance with
the Company’s specifications and the applicable regulatory requirements for clinical grade cellular products. The Company
and Cognate BioServices are currently parties to a series of contracts providing for these services as more fully described below.
The Company is dependent on Cognate BioServices to provide the manufacturing services, and any interruption of such services could
potentially have a material adverse effect on the Company’s ability to proceed with its clinical trials. Cognate BioServices’
manufacturing facility for clinical-grade cellular products is located in Memphis, Tennessee. In addition, a Cognate affiliate
in the UK (which was formerly part of Cognate BioServices, and is now known as Advent BioServices) is preparing for production
of DCVax-L products there. The Company and Advent are in the process of developing contract arrangements for manufacturing and
related services for the U.K. and Europe.
Although there are many contract manufacturers
for small molecule drugs and for biologics, there are only a few contract manufacturers in the U.S., and even fewer in Europe,
that specialize in producing living cell products and that have a track record of success with regulatory authorities. The manufacturing
of living cell products is highly specialized and entirely different than production of biologics: the physical facilities and
equipment are different, the types of personnel and skill sets are different, and the processes are different. The regulatory requirements
relating to manufacturing and cellular products are especially challenging and are one of the most frequent reasons for the development
of a company’s cellular products to be put on clinical hold (i.e., stopped by regulatory authorities).
In addition, the Company’s programs
require a large amount of capacity in these specialized manufacturing facilities. The Company’s products are fully personalized
and not made in standardized batches: the Company’s products are made on demand, patient by patient, on an as needed basis.
2. Liquidity, Financial Condition and Management Plans
During the nine months ended September
30, 2017 and 2016, the Company used approximately $21.7 million and $41.6 million of cash in its operating activities, respectively.
The expenditures in 2017 have included substantial payments for expenses previously incurred in connection with the Phase III clinical
trial of DCVax-L.
During the nine months ended September
30, 2017, the Company raised approximately $24.9 million in equity and debt securities to fund its operations, and raised an additional
$5 million from a third party who retired the 2014 Notes on the Company’s behalf (see Note 7 for further details). As expected
for a company that is pre-revenue, the Company incurred a net loss of $23.3 million and $46.1 million for the three and nine months
ended September 30, 2017, respectively. The Company had current assets of $2.1 million and a working capital deficit of approximately
$79 million at September 30, 2017. The Company owed an aggregate of $27.8 million of trade liabilities to certain related parties
as of September 30, 2017 (after waiver by such related parties of $3.75 million related to certain payables, which was owed to
them by the Company), based on invoicing to date while the Company and Cognate were negotiating an overall settlement of amounts
owed for 2016 and 2017. Subsequent to September 30, 2017, the parties reached an agreement in principle for settlement of the overall
amounts due, which the reduced the amounts that would otherwise have been owed under the contracts between the parties. The parties
are now in the process of drafting and executing the agreement.
The Company has not yet generated any material
revenue from the sale of its products and is subject to all of the risks and uncertainties that are typically faced by biotechnology
companies that devote substantially all of their efforts to R&D and clinical trials and do not yet have commercial products.
The Company expects to continue incurring losses for the foreseeable future. The Company’s existing liquidity is not sufficient
to fund its operations, anticipated capital expenditures, working capital and other financing requirements until the Company reaches
significant revenues. Until that time, the Company will need to obtain additional equity and/or debt financing, especially
if the Company experiences downturns in its business that are more severe or longer than anticipated, or if the Company experiences
significant increases in expense levels resulting from being a publicly-traded company or from expansion of operations. If
the Company attempts to obtain additional equity or debt financing, the Company cannot assume that such financing will be available
to the Company on favorable terms, or at all.
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 Company has operated with going concern determinations throughout more than a decade, and so
the condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
The Company did 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 may result from the outcome of this uncertainty.
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
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. Certain immaterial reclassifications have been made to prior period amounts to conform to the current period
presentation.
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 September 30, 2017,
condensed consolidated statements of operations for the three and nine months ended September 30, 2017 and 2016, condensed consolidated
statements of comprehensive loss for the three and nine months ended September 30, 2017 and 2016, condensed consolidated statement
of stockholders’ equity (deficit) for the nine months ended September 30, 2017, and the condensed consolidated statements
of cash flows for the nine months ended September 30, 2017 and 2016 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 and nine months ended September 30, 2017 are not necessarily
indicative of results to be expected for the year ending December 31, 2017 or for any future interim period. The condensed consolidated
balance sheet at December 31, 2016 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, 2016,
and notes thereto included in the Company’s annual report on Form 10-K, which was filed with the SEC on April 17, 2017.
Use of Estimates
In preparing condensed consolidated 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 financial instruments recorded as derivative liabilities, and estimating
the useful lives of depreciable assets and whether impairment charges may apply.
Warrant Liability
The Company accounts for certain common
stock warrants outstanding as a liability at fair value and adjusts the instruments to fair value at each reporting period. This
liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in
the Company's statements of operations. The fair value of the warrants issued by the Company has been estimated using Monte Carlo
simulation and or a Black Scholes model.
Sequencing
As of October 13, 2016, the Company adopted
a sequencing policy whereby all future instruments may be classified as a derivative liability with the exception of instruments
related to share-based compensation issued to employees or directors.
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 additional liability resulting from the completion of the clean-up,
if any, would be included in other income (expense). As of September 30, 2017, the Company estimated that the total environmental
remediation costs associated with the purchase of the UK Facility will be approximately $6.2 million. This is a projected potential
future cost. No such environmental costs have been incurred to date and none are in the upcoming twelve months or on a long-term
basis. Contamination clean-up costs that improve the property from its original acquisition state will be 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 assessment discussed herein.
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
Comprehensive Loss
The Company reports comprehensive loss
and its components in its condensed consolidated financial statements. Comprehensive loss consists of net loss and foreign currency
translation adjustments, affecting stockholders’ equity (deficit) that, under U.S, GAAP, are excluded from net loss.
Research and Development Costs
Research and development costs are charged
to operations as incurred and consist primarily of clinical trial costs, related party manufacturing costs, consulting costs, contract
research and development costs, clinical site costs and compensation costs.
Significant Accounting Policies
There have been no material changes in
the Company’s significant accounting policies to those previously disclosed in the 2016 Annual Report.
Adoption of Recent Accounting Pronouncements
Compensation-Stock Compensation
In March 2016, the Financial Accounting
Standards Board (the “FASB”) issued ASU No. 2016-09,
Compensation-Stock Compensation (Topic 718), Improvements
to Employee Share-Based Payment Accounting
. Under ASU No. 2016-09, companies will no longer record excess tax benefits and
certain tax deficiencies in additional paid-in capital (“APIC”). Instead, they will record all excess tax benefits
and tax deficiencies as income tax expense or benefit in the income statement and the APIC pools will be eliminated. In addition,
ASU No. 2016-09 eliminates the requirement that excess tax benefits be realized before companies can recognize them. ASU No. 2016-09
also requires companies to present excess tax benefits as an operating activity on the statement of cash flows rather than as
a financing activity. Furthermore, ASU No. 2016-09 will increase the amount an employer can withhold to cover income taxes on
awards and still qualify for the exception to liability classification for shares used to satisfy the employer’s statutory
income tax withholding obligation. An employer with a statutory income tax withholding obligation will now be allowed to withhold
shares with a fair value up to the amount of taxes owed using the maximum statutory tax rate in the employee’s applicable
jurisdiction(s). ASU No. 2016-09 requires a company to classify the cash paid to a tax authority when shares are withheld to satisfy
its statutory income tax withholding obligation as a financing activity on the statement of cash flows. Under current U.S. GAAP,
it was not specified how these cash flows should be classified. In addition, companies will now have to elect whether to account
for forfeitures on share-based payments by (1) recognizing forfeitures of awards as they occur or (2) estimating the number of
awards expected to be forfeited and adjusting the estimate when it is likely to change, as is currently required. These aspects
of ASU 2016-09 are effective for reporting periods beginning after December 15, 2016, with early adoption permitted provided that
all of the guidance is adopted in the same period. The Company’s adoption of ASU No. 2016-09 on January 1, 2017 did not
have a material impact on its condensed consolidated financial statements and related disclosures. In accordance with the adoption
of ASU No. 2016-09, the Company will record forfeitures, if any, when such forfeitures occur.
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
Recent Issued Accounting Pronouncements
Compensation-Stock Compensation
In May 2017, the FASB issued ASU 2017-09,
Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting
, which clarifies when to account for a change
to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is
required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as
a result of the change in terms or conditions. It is effective prospectively for the annual period ending December 31, 2018 and
interim periods within that annual period. Early adoption is permitted. The Company is currently evaluating the impact of adopting
this standard on the condensed consolidated financial statements and disclosures, but does not expect it to have a significant
impact.
Accounting for Certain Financial Instruments with Down
Round Features
On July 13, 2017, the FASB has issued a two-part ASU No. 2017-11,
(i).
Accounting for Certain Financial Instruments with Down Round Features
and (ii)
Replacement of the Indefinite Deferral
for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling
Interests with a Scope Exception
. It is effective for public business entities for fiscal years, and interim periods within
those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The Company will be evaluating the impact of
adopting this standard on the condensed consolidated financial statements and disclosures.
4. Fair Value Measurements
Derivative Warrants Granted in 2017
During the nine months ended September
30, 2017, the Company issued approximately 192 million warrants (the “Warrants”) to multiple investors (the “Holders”).
Since the Company’s adoption of a sequencing policy (see Note 3), the warrants were classified as liabilities and measured
at fair value on the grant date, with changes in fair value recognized as other income on the statements of operations and disclosed
in the financial statements.
A summary of weighted average (in aggregate)
significant unobservable inputs (Level 3 inputs) used in measuring warrants granted during the nine months ended September 30,
2017 is as follows:
|
|
2017 Warrants Granted Associated with
|
|
|
|
Public and Private
|
|
|
Debt
|
|
|
|
|
|
Modification of
|
|
|
|
Offering
|
|
|
Conversion
|
|
|
Issuance of Debt
|
|
|
Warrant Liabilities
|
|
Strike price
|
|
$
|
0.47
|
|
|
$
|
0.44
|
|
|
$
|
0.19
|
|
|
$
|
0.27
|
|
Contractual term (years)
|
|
|
2.4
|
|
|
|
2.6
|
|
|
|
2.0
|
|
|
|
5.0
|
|
Volatility (annual)
|
|
|
107
|
%
|
|
|
107
|
%
|
|
|
113
|
%
|
|
|
99
|
%
|
Risk-free rate
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
2
|
%
|
Dividend yield (per share)
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
Embedded Conversion Features
A summary of weighted average (in aggregate)
significant unobservable inputs (Level 3 inputs) used in measuring embedded conversion features at inception for convertible notes
issued during the nine months ended September 30, 2017 is as follows:
Conversion price
|
|
$
|
0.41
|
|
Contractual term (years)
|
|
|
1.92
|
|
Volatility (annual)
|
|
|
97
|
%
|
Risk-free rate
|
|
|
1
|
%
|
Dividend yield (per share)
|
|
|
0
|
%
|
The following table classifies the Company’s
liabilities measured at fair value on a recurring basis into the fair value hierarchy as of September 30, 2017 and December 31,
2016 (in thousands):
|
|
Fair value measured at September 30, 2017
|
|
|
|
|
|
|
Quoted prices in active
|
|
|
Significant other
|
|
|
Significant
|
|
|
|
Fair value at
|
|
|
markets
|
|
|
observable inputs
|
|
|
unobservable inputs
|
|
|
|
September 30, 2017
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Warrant liability
|
|
$
|
11,883
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
11,883
|
|
Embedded conversion feature
|
|
|
1,794
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,794
|
|
Share-settled debt (in default)
|
|
|
4,013
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,013
|
|
Total fair value
|
|
$
|
17,690
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
17,690
|
|
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
|
|
Fair value measured at December 31, 2016
|
|
|
|
|
|
|
Quoted prices in active
|
|
|
Significant other
|
|
|
Significant
|
|
|
|
Fair value at
|
|
|
markets
|
|
|
observable inputs
|
|
|
unobservable inputs
|
|
|
|
December 31, 2016
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Warrant liability
|
|
$
|
4,862
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
4,862
|
|
Share-settled debt (in default)
|
|
|
5,200
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,200
|
|
Total fair value
|
|
$
|
10,062
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
10,062
|
|
There were no transfers between Level 1, 2 or 3 during the nine-month
period ended September 30, 2017.
The following table presents changes in
Level 3 liabilities measured at fair value for the nine-month period ended September 30, 2017. 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).
|
|
|
|
|
Embedded
|
|
|
Share-settled
|
|
|
|
|
|
|
Warrant
|
|
|
Conversion
|
|
|
Debt
|
|
|
|
|
|
|
Liability
|
|
|
Feature
|
|
|
(in Default)
|
|
|
Total
|
|
Balance – January 1, 2017
|
|
$
|
4,862
|
|
|
$
|
-
|
|
|
$
|
5,200
|
|
|
$
|
10,062
|
|
Warrants granted related to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Public and privated offering
|
|
|
7,971
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,971
|
|
Debt conversion
|
|
|
7,544
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,544
|
|
Issuance of debt
|
|
|
139
|
|
|
|
-
|
|
|
|
-
|
|
|
|
139
|
|
Modification of warrant liabilities
|
|
|
2,297
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,297
|
|
|
|
|
17,951
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,951
|
|
Issuance of convertible notes
|
|
|
-
|
|
|
|
4,262
|
|
|
|
-
|
|
|
|
4,262
|
|
Extinguishment of embedded derivative liabilities related to debt conversion
|
|
|
-
|
|
|
|
(5,264
|
)
|
|
|
-
|
|
|
|
(5,264
|
)
|
Extinguishment of warrant liabilities related to warrants exercised for cash
|
|
|
(2,117
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,117
|
)
|
Extinguishment of warrant liabilities related to cashless warrants exercise
|
|
|
(3,054
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,054
|
)
|
Conversion of share-settled debt
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,187
|
)
|
|
|
(1,187
|
)
|
Change in fair value
|
|
|
(5,759
|
)
|
|
|
2,796
|
|
|
|
-
|
|
|
|
(2,963
|
)
|
Balance – September 30, 2017
|
|
$
|
11,883
|
|
|
$
|
1,794
|
|
|
$
|
4,013
|
|
|
$
|
17,690
|
|
A summary of the weighted average (in aggregate)
significant unobservable inputs (Level 3 inputs) used in measuring the Company’s warrant liabilities and embedded conversion
feature that are categorized within Level 3 of the fair value hierarchy as of September 30, 2017 and December 31, 2016 is as follows:
|
|
As of September 30, 2017
|
|
|
As of December 31, 2016
|
|
|
|
Warrant
|
|
|
Embedded
|
|
|
Warrant
|
|
|
|
Liability
|
|
|
Conversion Feature
|
|
|
Liability
|
|
Strike price
|
|
$
|
0.40
|
|
|
$
|
0.50
|
|
|
$
|
0.60
|
|
Contractual term (years)
|
|
|
3.6
|
|
|
|
2.73
|
|
|
|
4.7
|
|
Volatility (annual)
|
|
|
99
|
%
|
|
|
99
|
%
|
|
|
98
|
%
|
Risk-free rate
|
|
|
2
|
%
|
|
|
2
|
%
|
|
|
2
|
%
|
Dividend yield (per share)
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
5. Property & Equipment and Construction in Progress
Property and equipment consist of the following at September
30, 2017 and December 31, 2016 (in thousands):
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Leasehold improvements
|
|
$
|
69
|
|
|
$
|
69
|
|
Office furniture and equipment
|
|
|
25
|
|
|
|
25
|
|
Computer equipment and software
|
|
|
640
|
|
|
|
626
|
|
|
|
|
734
|
|
|
|
720
|
|
Less: accumulated depreciation
|
|
|
(546
|
)
|
|
|
(405
|
)
|
Total property, plant and equipment, net
|
|
|
188
|
|
|
|
315
|
|
Construction in progress (property in the United Kingdom)*
|
|
|
47,322
|
|
|
|
44,559
|
|
|
|
$
|
47,510
|
|
|
$
|
44,874
|
|
* Construction in progress includes both
the land acquisition costs and the building costs.
Depreciation expense was approximately
$41,000 and $55,000 for the three months ended September 30, 2017 and 2016. Depreciation expenses were approximately $141,000 and
$135,000 for the nine months ended September 30, 2017 and 2016.
6. Stock-based Compensation
On June 13, 2017, the Company granted options
(the “Options”) to acquire shares of the Company’s common stock (the “Shares”) to Dr. Marnix Bosch,
the Chief Technical Officer of the Company, and Dr. Alton Boynton, the Chief Scientific Officer of the Company. The Options were
granted pursuant to the Second Amended and Restated Northwest Biotherapeutics, Inc. 2007 Stock Plan (the “Equity Plan”).
The Equity Plan provided for awards of various types of equity securities (including common stock, restricted stock units, options
and/or other derivative securities) to employees and directors of the Company.
Dr. Bosch received Options exercisable
for approximately 7.9 million Shares and Dr. Boynton received Options exercisable for approximately 3.4 million Shares. The
Options are exercisable at a price of $0.25 per share, and have a 5-year exercise period. The Options granted to Dr. Bosch and
Dr. Boynton are subject to vesting requirements. 50% of the Options vested on the grant date, and 50% will vest over a 24-month
period in equal monthly installments, provided that the recipient continues to be employed by the Company. The unvested portions
of the Options are subject to accelerated vesting upon (i) a change of effective control of the Company, (ii) the filing of the
first Biologics License Application or other application for product approval in any jurisdiction, (iii) completion of any randomized
clinical trial that meets its endpoint(s) (Phase II or Phase III), (iv) decision by the Board, in its discretion or (v) the death
of the recipient.
The following table summarizes stock option activities for the
Company’s option plans for the nine months ended September 30, 2017 (amount in thousands, except per share number):
|
|
Number of Shares
|
|
|
Weighted Average Exercise Price
|
|
|
Total Intrinsic Value
|
|
|
Weighted Average Remaining Contractual Life (in years)
|
|
Outstanding as of December 31, 2016
|
|
|
1,551
|
|
|
$
|
10.56
|
|
|
$
|
-
|
|
|
|
1.9
|
|
Granted
|
|
|
11,343
|
|
|
|
0.25
|
|
|
|
-
|
|
|
|
4.7
|
|
Forfeited/expired
|
|
|
(238
|
)
|
|
|
9.90
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding as of September 30, 2017
|
|
|
12,656
|
|
|
$
|
1.32
|
|
|
|
-
|
|
|
|
4.3
|
|
Options vested and exercisable
|
|
|
7,255
|
|
|
$
|
1.49
|
|
|
$
|
-
|
|
|
|
4.2
|
|
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
The following assumptions were used to
compute the fair value of stock options granted during the nine months ended September 30, 2017:
|
|
For the Nine Months
|
|
|
|
Ended
|
|
|
|
September 30, 2017
|
|
Exercise price
|
|
$
|
0.25
|
|
Expected term (years)
|
|
|
2.8
|
|
Expected stock price volatility
|
|
|
96
|
%
|
Risk-free rate of interest
|
|
|
2
|
%
|
Dividend yield (per share)
|
|
|
0
|
%
|
The weighted average grant date fair value
was approximately $0.7 million and the unrecognized compensation cost was approximately $0.2 million as of September 30, 2017,
and will be recognized over the next 1.8 years.
The Company recorded stock based compensation expense of approximately $0.4 million and $0.5 million,
which was included as part of research and development expenses for the three and nine months ended September 30, 2017, respectively.
7. Outstanding Debt
The following table summarizes outstanding
debt as of September 30, 2017 and December 31, 2016, respectively (amount in thousands, except per share data):
|
|
|
|
Stated
|
|
|
|
|
|
|
|
Remaining
|
|
|
Fair Value of
|
|
|
|
|
|
|
|
|
Interest
|
|
Conversion
|
|
|
|
|
|
Debt
|
|
|
Embedded
|
|
|
Carrying
|
|
|
|
Maturity Date
|
|
Rate
|
|
Price
|
|
|
Face Value
|
|
|
Discount
|
|
|
Conversion Option
|
|
|
Value
|
|
Short term convertible notes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6% unsecured (1)
|
|
Due
|
|
6%
|
|
$
|
3.09
|
|
|
$
|
135
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
135
|
|
10% unsecured (2)
|
|
In Default
|
|
10%
|
|
$
|
0.16
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
135
|
|
|
|
-
|
|
|
|
-
|
|
|
|
135
|
|
Short term notes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8% unsecured (3)
|
|
12/5/17 and In Default
|
|
8% and 15%
|
|
|
N/A
|
|
|
|
2,310
|
|
|
|
(55
|
)
|
|
|
-
|
|
|
|
2,255
|
|
8% unsecured (4)
|
|
6/30/2018
|
|
8%
|
|
|
N/A
|
|
|
|
2,206
|
|
|
|
(144
|
)
|
|
|
-
|
|
|
|
2,062
|
|
10% unsecured (5)
|
|
On Demand
|
|
Various
|
|
|
N/A
|
|
|
|
650
|
|
|
|
-
|
|
|
|
-
|
|
|
|
650
|
|
12% unsecured (6)
|
|
On Demand
|
|
12%
|
|
|
N/A
|
|
|
|
440
|
|
|
|
(113
|
)
|
|
|
-
|
|
|
|
327
|
|
|
|
|
|
|
|
|
|
|
|
|
5,606
|
|
|
|
(312
|
)
|
|
|
-
|
|
|
|
5,294
|
|
Short term notes payable - related parties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10% unsecured - Related Parties (7)
|
|
On Demand
|
|
10%
|
|
|
N/A
|
|
|
|
1,421
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,421
|
|
12% unsecured - Related Parties (7)
|
|
On Demand
|
|
12%
|
|
|
N/A
|
|
|
|
50
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
1,471
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-settled debt, at fair value (8)
|
|
In Default
|
|
18%
|
|
$
|
0.16
|
|
|
|
4,013
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short term mortgage loan (9)
|
|
8/13/2018
|
|
12%
|
|
|
N/A
|
|
|
|
4,831
|
|
|
|
(191
|
)
|
|
|
-
|
|
|
|
4,640
|
|
Long term mortgage loan
|
|
11/16/2018
|
|
12%
|
|
|
N/A
|
|
|
|
6,412
|
|
|
|
(37
|
)
|
|
|
-
|
|
|
|
6,375
|
|
|
|
|
|
|
|
|
|
|
|
|
11,243
|
|
|
|
(228
|
)
|
|
|
-
|
|
|
|
11,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long term convertible notes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12% secured convertible notes (10)
|
|
6/21/2020
|
|
12%
|
|
$
|
0.50
|
|
|
|
5,350
|
|
|
|
(2,072
|
)
|
|
|
1,794
|
|
|
|
5,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance as of September 30, 2017
|
|
|
|
|
|
|
|
|
|
$
|
27,818
|
|
|
$
|
(2,612
|
)
|
|
$
|
1,794
|
|
|
$
|
27,000
|
|
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
|
|
|
|
Stated
|
|
|
|
|
|
|
|
Remaining
|
|
|
|
|
|
|
|
|
Interest
|
|
Conversion
|
|
|
|
|
|
Debt
|
|
|
Carrying
|
|
|
|
Maturity Date
|
|
Rate
|
|
Price
|
|
|
Face Value
|
|
|
Discount
|
|
|
Value
|
|
Short term convertible notes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6% unsecured (1)
|
|
Due
|
|
6%
|
|
$
|
3.09
|
|
|
$
|
135
|
|
|
$
|
-
|
|
|
$
|
135
|
|
5% 2014 Senior convertible notes (11)
|
|
8/15/2017
|
|
5%
|
|
$
|
6.60
|
|
|
|
11,000
|
|
|
|
(175
|
)
|
|
|
10,825
|
|
|
|
|
|
|
|
|
|
|
|
|
11,135
|
|
|
|
(175
|
)
|
|
|
10,960
|
|
Short term notes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10% unsecured (2)
|
|
11/4/2017
|
|
10%
|
|
|
N/A
|
|
|
|
2,450
|
|
|
|
-
|
|
|
|
2,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short term notes payable - related parties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10% unsecured - Related Parties
|
|
On Demand
|
|
10%
|
|
|
N/A
|
|
|
|
50
|
|
|
|
-
|
|
|
|
50
|
|
12% unsecured - Related Parties
|
|
On Demand
|
|
12%
|
|
|
N/A
|
|
|
|
260
|
|
|
|
-
|
|
|
|
260
|
|
|
|
|
|
|
|
|
|
|
|
|
310
|
|
|
|
-
|
|
|
|
310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-settled debt, at fair value (9)
|
|
In Default
|
|
18%
|
|
$
|
0.35
|
|
|
|
5,200
|
|
|
|
-
|
|
|
|
5,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loan (10)
|
|
11/16/17 & 8/13/17
|
|
12%
|
|
|
N/A
|
|
|
|
10,156
|
|
|
|
(365
|
)
|
|
|
9,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long term note payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8% unsecured note (5)
|
|
6/30/2018
|
|
8%
|
|
|
N/A
|
|
|
|
3,310
|
|
|
|
(310
|
)
|
|
|
3,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance as of December 31, 2016
|
|
|
|
|
|
|
|
|
|
$
|
32,561
|
|
|
$
|
(850
|
)
|
|
$
|
31,711
|
|
|
(1)
|
This $135,000 note as of September 30, 2017 and December
31, 2016 consists of two separate 6% notes in the amounts of $110,000 and $25,000. In regard to the $110,000 note due in 2011,
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 $25,000 note due in 2011, during the year ended December 31, 2013, 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.
|
(2)
|
On November 4, 2016, the Company entered
into three promissory notes agreements (“the November 2016 Notes”) with an individual investor (“the Holder”)
for an aggregate amount of $2.45 million. The Notes bore interest at the rate of 10% with 1 year term.
On March 3, 2017, the Company entered into
a series of promissory notes (the “March 2017 Notes”) with unrelated third parties in the original principal amount
of $1,450,000 with an original issuance discount of 3% for aggregate net proceeds of $1.4 million with no stated interest rate.
On April 12, 2017, the Company made a repayment
of $258,000 to one of the March 2017 Notes holders.
During the nine months period ended September
30, 2017, the Company entered into multiple amendments (the “Amendment”) to the November 2016 Notes and March 2017
Notes. The Company recorded an approximate $2.4 million debt extinguishment loss from the Amendment. The Company also recorded
approximately $407,000 additional debt premium pursuant to the Amendment.
During the nine months period ended September
30, 2017, the Company induced the holders of the November 2016 Notes and March 2017 Notes to convert approximately $4.2 million
of principal, debt premium and accrued interest into approximately 24.7 million shares of common stock at a fair value of approximately
$5.8 million, and approximately 43.8 million warrants with weighted average exercise price of $0.53, at fair value of approximately
$4.6 million using Black-Scholes model. The Company also reversed approximately $5.2 million of embedded conversion features as
of the conversion date, which was recorded as gain from debt extinguishment.
Overall, the Company recorded approximately
$1.0 million net debt extinguishment loss from this conversion.
|
|
(3)
|
On March 3, 2017 and June 5, 2017, the Company entered
into two promissory notes agreement (the “Notes”) with the same investor for an aggregate principal amount of $2,310,000.
The Notes bore interest at 8% per annum with a 6 month term. One of the Notes became in default as of September 3, 2017. The Notes
carry an original issue discount of $300,000 and $10,000 legal cost that was reimbursable to the investor. The remaining unamortized
debt discount related the Notes was approximately $55,000 as of September 30, 2017.
|
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
(4)
|
On December 30, 2016, the Company entered
into a note purchase agreement (the “Note”) with an individual investor for an aggregate principal amount of $3.3 million.
The Note bore interest at 8% per annum with 18 months term. The Note carries an original issue discount of $300,000 and $10,000
legal cost that was reimbursable to the investor.
During the nine months ended September 30, 2017, the Company entered into multiple exchange agreement
with the Note holder to convert approximately $1.1 million principal and $0.2 million accrued interest into approximately 8.8 million
shares of common stock at fair value of $1.7 million. The Company recorded approximately $408,000 debt extinguishment loss from
this conversion.
|
(5)
|
During the nine months ended September
30, 2017, the Company entered multiple promissory note agreement (the “Notes”) with certain investors for an aggregate
principal amount of $2.4 million. The Notes bore interest at either 0%, 10% or 12% per annum, and were payable upon demand.
During the nine months ended September
30, 2017, the Company induced the holders to convert approximately $1.8 million principal and accrued interest of the Notes into
approximately 10.6 million shares of common stock at fair value of approximately $1.9 million.
In addition, the Company issued approximately
12.5 million warrants with an exercise price of $0.49 and a fair value of approximately $0.9 million.
The Company recorded debt extinguishment of approximately $1.1
million for the nine month period ended September 30, 2017.
|
|
(6)
|
During the nine months ended September 30, 2017, the
Company entered two promissory note agreements (the “Notes”) with the same investor for an aggregate principal amount
of $440,000. The Notes bore interest at 12% per annum, and is payable upon demand. The Company also issued approximately 1.2 million
warrants with a weighted average strike price of $0.19 in conjunction the Note. The Company recorded $139,000 debt discount at
the issuance date, which is the fair value of the warrants.
|
Goldman Notes
During the nine months ended
September 30, 2017, Leslie J. Goldman, an officer of the Company, loaned the Company an aggregate amount of $1,334,000 pursuant
to certain Demand Promissory Note Agreements (the “Goldman Notes”). $470,000 of the Goldman Notes bore interest at
the rate of 12% per annum, and $864,000 of the Goldman Notes bore interest at the rate of 10% per annum.
During the nine months ended
September 30, 2017, the Company made an aggregate principal payment of $955,000 to settle some of Mr. Goldman’s outstanding
demand notes, and an aggregate of $47,000 interest payment associated with these demand notes. Such payment included repayment
of $350,000 outstanding debt incurred during the year ended December 31, 2016.
The outstanding principal amount
for Goldman Notes was $689,000 as of September 30, 2017.
Toucan Notes
During the nine months ended
September 30, 2017, Toucan Capital Fund III loaned the Company an aggregate amount of $1,170,000 pursuant to multiple Demand Promissory
Notes (the “Toucan Notes”). The Toucan Notes bear interest at 10% per annum, and are payable upon demand, with 7 days’
prior written notice to the Company.
During the nine months ended
September 30, 2017, the Company repaid approximately $688,000 of the Toucan Notes.
The outstanding principal amount
for Toucan Notes was $482,000 as of September 30, 2017.
Board of Directors Notes
During the nine months ended
September 30, 2017, Jerry Jasinowski, Robert Farmer and Cofer Black, members of the Company’s Board of Directors, loaned
the Company an aggregate amount of $300,000 pursuant to multiple Demand Promissory Notes (the “Notes”). The Notes bear
interest at 10% per annum, and are payable upon demand, with 7 days’ prior written notice to the Company.
(8)
|
During the nine months ended September
30, 2017, the holder of the Company’s share-settled debt converted approximately $1.2 million of outstanding share-settled
debt.
|
(9)
|
The mortgage loan was originally
due in August 2017 and has been renewed for additional one year until August 17, 2018. The Company recorded a $218,000 renewal
fee.
|
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
The mortgage loan was originally due in
November 2017 and has been renewed for an additional one year until November 16, 2018.
|
(10)
|
2014 Senior Convertible Notes
|
Due to the Nasdaq delisting
on December 19, 2016, the term of the 2014 Convertible Senior Notes (the “2014 Notes”) Indenture required the Company
to offer to repurchase the entire principal and all remaining interest through the Notes’ original maturity date. The
debt holders (the “Holders”) accepted the offer, and the Company was required to repurchase the entire 2014 Notes on
March 10, 2017.
The full repurchase of $11 million
of 2014 Notes, as well as $660,000 of interest payments and cash and stock forbearance payments were completed during the nine
months ended September 30, 2017, through a series of transactions.
During the nine months ended
September 30, 2017, the Company entered into multiple agreements to extend the date for payment of the 2014 Notes to June 20, 2017.
As an additional consideration to the Holders to delay the 2014 Notes repayment, the Company issued the Holders an aggregate 7.1
million common stock. The total forbearance charge of $2.6 million was recorded as a debt extinguishment loss and was based upon
the fair value of the common stock of $2.1 million on the grant date and cash payments of $0.5 million.
During the nine months ended
September 30, 2017, the Company repaid in cash $3.0 million of principal of the 2014 Notes, and repaid an additional $3.0 million
of principal in common stock and warrants, and $5 million of principal of the 2014 Notes was repurchased by the investor pursuant
to an Exchange Agreement and Note Agreement, as described below.
2017 Secured Convertible
Notes
On June 21, 2017, an unaffiliated
investor (the “Investor”) agreed to purchase $5.0 million of the 2014 Notes from the Holders, pursuant to a Purchase
Agreement (the “Purchase Agreement”).
Also on June 21, 2017, the Company
and the Investor entered into an Exchange Agreement (the “Exchange Agreement”) pursuant to which the Investor agreed
to exchange its $5.0 million of the 2014 Note for new convertible notes (the “2017 Notes”) with an aggregate principal
amount of approximately $5.6 million, inclusive of original issue discount of approximately 9%. The Company and the Investor also
entered another secured convertible note with an aggregate principal amount of approximately $355,000, inclusive of original issue
discount of approximately 9%, for $204,000 in cash. Total debt outstanding as of September 30, 2017 was $5.4 million under the
2017 Secured Convertible Notes.
The 2017 Notes have a 3-year
maturity and bear interest at 12% per annum. No interest will be payable during the term, but interest will accrue and be payable
at maturity. The 2017 Notes are secured by the property owned by the Company in the U.K., and not by any other assets of the Company.
The 2017 Notes and accrued interest will be convertible at any time during the term at fixed conversion prices: 50% of the principal
and accrued interest will be convertible at $0.25 per share, 25% of the principal and accrued interest will be convertible at $0.50
per share and 25% of the principal and accrued interest will be convertible at $1.00 per share. The transaction was accounted for
as a debt extinguishment. The Company recorded an approximate $1.8 million embedded conversion feature on the 2017 Notes as part
of debt discount on the issuance date.
On August 4, 2017, the Company
induced the holder to convert $650,000 principal of the 2017 Notes into approximately 3.3 million shares of common stock at fair
value of $0.24. In addition, the Company also issued approximately 1.6 million warrants with an exercise price of $0.23 and 1.6
million warrants with an exercise price of $0.30. The aggregate fair value of these 3.2 million warrants was approximately $0.4
million using a Black-Scholes model. The Company also reversed approximately $108,000 of embedded derivative liabilities and a
$256,000 unamortized debt discount associated with the 2017 Notes. The Company recorded approximately $668,000 debt extinguishment
loss from this conversion.
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
The following table summarizes total interest
expenses related to senior convertible notes, other notes and mortgage loan for the three and nine months ended September 30, 2017
and 2016, respectively (in thousands):
|
|
For the three months ended
|
|
|
For the nine months ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Interest expenses related to 2014 Senior convertible notes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual interest
|
|
$
|
-
|
|
|
$
|
139
|
|
|
$
|
424
|
|
|
$
|
413
|
|
Amortization of debt issuance costs
|
|
|
-
|
|
|
|
71
|
|
|
|
175
|
|
|
|
211
|
|
Total interest expenses related to senior convertible notes
|
|
|
-
|
|
|
|
210
|
|
|
|
599
|
|
|
|
624
|
|
Interest expenses related to other notes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual interest
|
|
|
354
|
|
|
|
38
|
|
|
|
743
|
|
|
|
114
|
|
Additional debt premium
|
|
|
59
|
|
|
|
-
|
|
|
|
407
|
|
|
|
-
|
|
Amortization of debt discount
|
|
|
345
|
|
|
|
-
|
|
|
|
615
|
|
|
|
-
|
|
Total interest expenses related to other notes
|
|
|
758
|
|
|
|
38
|
|
|
|
1,765
|
|
|
|
114
|
|
Interest expenses related to mortgage loan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual interest
|
|
|
304
|
|
|
|
305
|
|
|
|
953
|
|
|
|
970
|
|
Amortization of debt issuance costs
|
|
|
126
|
|
|
|
136
|
|
|
|
368
|
|
|
|
428
|
|
Total interest expenses on the mortgage loan
|
|
|
430
|
|
|
|
441
|
|
|
|
1,321
|
|
|
|
1,398
|
|
Other interest expenses
|
|
|
5
|
|
|
|
2
|
|
|
|
10
|
|
|
|
2
|
|
Total interest expense
|
|
$
|
1,193
|
|
|
$
|
691
|
|
|
$
|
3,695
|
|
|
$
|
2,138
|
|
8. Net Loss per Share Applicable to
Common Stockholders
Basic loss per common share is computed
by dividing net loss by the weighted average number of common shares outstanding during the reporting period. Diluted loss per
common share is computed similar to basic loss per common share except that it reflects the potential dilution that could occur
if dilutive securities or other obligations to issue common stock were exercised or converted into common stock.
The following securities were not included
in the diluted net loss per share calculation because their effect was anti-dilutive as of the periods presented (in thousands):
|
|
For the nine months ended
|
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
Common stock options
|
|
|
12,656
|
|
|
|
1,551
|
|
Common stock warrants - equity treatment
|
|
|
37,499
|
|
|
|
38,990
|
|
Common stock warrants - liability treatment
|
|
|
141,468
|
|
|
|
1,316
|
|
Share-settled debt and accrued interest, at fair value
|
|
|
23,406
|
|
|
|
-
|
|
Convertible notes and accrued interest
|
|
|
15,293
|
|
|
|
1,744
|
|
Potentially dilutive securities
|
|
|
230,322
|
|
|
|
43,601
|
|
9. Related Party Transactions
Cognate BioServices, Inc.
Cognate Expenses and Accounts Payable
At September 30, 2017 and December 31,
2016, the Company owed Cognate $27.8 million (after waiver of $3.75 million by Cognate as described below) and $23.4 million, respectively,
for unpaid invoices for manufacturing and related services, based on Cognate invoicing to date. The Company and Cognate have been
negotiating an overall settlement for amounts owed to Cognate for 2016 and 2017, to reduce the amounts otherwise due under the
contracts, and subsequent to September 30, 2017 reached an agreement in principle. The parties are now in the process of drafting
and executing the agreement.
During the nine months ended September
30, 2017, Cognate waived its right to receive payment of $3.75 million in connection with certain payables, which was owed to Cognate
by the Company as of December 31, 2016 and March 31, 2017. Following this waiver, the Company owed Cognate $27.8 million for unpaid
invoices as of September 30, 2017.
Overall, for the three months ended September
30, 2017 and 2016, the Company incurred research and development costs related to Cognate BioServices of $7.8 million and $18.2
million, respectively, relating to the DCVax-L and DCVax-Direct programs, product and process development work and preparations
for upcoming Phase II trials.
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
Overall, for the nine months ended September 30, 2017 and 2016,
the Company incurred research and development costs related to Cognate BioServices of approximately $13.0 million and $34.8 million,
respectively, relating to the DCVax-L and DCVax-Direct programs, product and process development work and preparations for upcoming
Phase II trials, based on Cognate invoicing to date. The substantial reduction in costs related to Cognate BioServices relates
in part to reduction in clinical trial related activity, in part to an arrangement being tested under which the Company would no
longer have capacity dedicated to its programs and instead would have to arrange for advance scheduling in regard to each patient
individually, and in part to negotiations that were under way between the Company and Cognate for an overall settlement for amounts
owed to Cognate for 2016 and 2017. While the negotiations were under way and pending a final determination of amounts, for the
first two quarters of this year only, Cognate invoiced a reduced portion of the contract amounts. Subsequent to September 30, 2017,
the parties reached an agreement in principle for settlement of the overall amounts due from the Company to Cognate for 2017. The
parties are now in the process of drafting and executing the agreement.
Cognate Organization
Pursuant to an institutional financing of Cognate in October
2016, Cognate’s operations outside the US were separated from its operations in the US. The operations outside the US include
Cognate BioServices GmbH in Germany, Advent BioServices, Ltd (formerly called Cognate BioServices Ltd.) in the UK, and Cognate
Israel in Israel. As a result of the separation, the Cognate affiliates outside the US are now owned by Toucan Capital Fund III,
as is Cognate US. The Cognate affiliates in Germany and Israel are in the process of being wound down, and manufacturing and related
activities are being expanded and consolidated in the U.K. The Company is in the process of establishing contract arrangements
for the U.K. operations. Approximately $1.3 and $3.7 million of the total research and development cost related to Cognate entities
outside the US are included in the overall amounts reported with respect to Cognate for the three and nine months ended September
30, 2017, respectively.
Other Related Parties
Leslie J. Goldman - Demand Loans
During the nine months ended September
30, 2017, Leslie J. Goldman, an officer of the Company, loaned the Company an aggregate amount of $1,334,000 pursuant to certain
Demand Promissory Note Agreements (the “Goldman Notes”). $470,000 of the Goldman Notes bore interest at the rate of
12% per annum, and $864,000 of the Goldman Notes bore interest at the rate of 10% per annum.
During the nine months ended September
30, 2017, the Company made an aggregate principal payment of $955,000 to settle some of Mr. Goldman’s outstanding demand
notes, and an aggregate of $47,000 interest payment associated with these demand notes. Such payment included repayment of $350,000
outstanding debt incurred from the year ending December 31, 2016.
The outstanding principal amount for Goldman
Notes was $689,000 as of September 30, 2017.
Toucan Capital III Fund - Demand Loans
During the nine months ended September
30, 2017, Toucan Capital Fund III loaned the Company an aggregate amount of $1,170,000 pursuant to multiple Demand Promissory Notes
(the “Toucan Notes”). The Toucan Notes bear interest at 10% per annum, and are payable upon demand, with 7 days’
prior written notice to the Company.
During the nine months ended September
30, 2017, the Company repaid approximately $688,000 of the Toucan Notes.
The outstanding principal amount for Toucan
Notes was $482,000 as of September 30, 2017.
Various Related Parties - Demand Loans
During the nine months ended September
30, 2017, Jerry Jasinowski, Robert Farmer and Cofer Black, members of the Company’s Board of Directors, loaned the Company
an aggregate amount of $300,000 pursuant to multiple Demand Promissory Notes (the “Notes”). The Notes bear interest
at 10% per annum, and are payable upon demand, with 7 days’ prior written notice to the Company.
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
10. Stockholders’ Equity (Deficit)
Common Stock Issuances
First Quarter of 2017
Public Offering
On March 17, 2017, the Company entered
into agreements with institutional investors for a registered direct offering with gross proceeds of $7.5 million. The Company
issued 18.8 million shares of common stock at a purchase price of $0.26 per share, or pre-funded warrants in lieu of shares.
Additionally, the investors received 5 year Class A warrants to purchase up to approximately 21.6 million shares of common stock
with an exercise price of $0.26 per share, 3 month Class B warrants to purchase up to approximately 21.6 million shares of common
stock with an exercise price of $1.00 per share, and a pre-paid 3 month Class C warrant to purchase up to approximately 10.0 million
shares of common stock with an exercise price of $0.26 per share, of which $0.25 per share was pre-paid at the time of closing
and another $0.01 per share is payable upon exercise of each Class C Warrant. Total warrants issued in March 2017 have value of
approximately $6.2 million.
Warrants Exercised for Cash
During the quarter ended March 31, 2017,
the Company issued an aggregate of 3.1 million shares of common stock from the exercise of warrants that were issued in March 2017
for total proceeds of $31,000. All of these 3.1 million shares of common stock were related to extinguishment of warrant liabilities.
The fair value of the warrant liabilities was $713,000 on the date of exercise, which were recorded as a component of additional
paid-in-capital.
Stock Compensation - 2014 Senior Convertible
Notes
On March 10, 2017, the Company issued approximately
4 million shares of common stock to the holders of the Company’s $11 million senior convertible notes as additional consideration
to enter into a payment plan and extend the debt payment. The fair value of the common stock on the grant date was approximately
$1.5 million. The Company recorded such cost as a debt extinguishment loss.
Share-settled Debt
On March 30, 2017, the Company issued 2.5
million shares of common stock to the holder of the Company’s share-settled debt (the “Holder”) as advance payment
for future debt conversion. The fair value of the remaining share-settled debt will be reduced when the Company is notified by
the Holder of the value at which the shares have been sold.
Second Quarter of 2017
Public and Private Offering
On April 14, 2017, the Company entered
into Stock Purchase Agreement with multiple investors. The Company issued approximately 1.4 million shares of common stock at a
price of $0.26 per share. The investors received Class A Common Stock Purchase Warrants to purchase up to approximately 1 million
shares of Common Stock at an exercise price of $0.26 per share (the “Class A Warrants”) and Class B Common Stock Purchase
Warrants to purchase up to approximately 1 million shares of Common Stock at an exercise price of $1.00 per share (the “Class
B Warrants”). Both the Class A Warrants and the Class B Warrants are exercisable immediately. The Class A Warrants are exercisable
for five years and the Class B Warrants are exercisable for three months. The Company received gross proceeds of $360,000 from
this offering.
During the three months ended June 30,
2017, the Company entered into Subscription Agreements with multiple investors. The Company issued approximately 3.6 million shares
of common stock at a weighted average price of $0.15 per share. The investors also received approximately an aggregate 3.3 million
warrants at a weighted average exercise price of $0.33 per share. The Company received gross proceeds of $552,000 from this offering.
Debt Conversion
On May 22, 2017, the holders of certain
existing notes converted approximately $2.0 million principal amount and accrued interest for approximately 11 million shares of
its common stock at a price of $0.18 per share and issued to such investors approximately 8 million Class A warrants with exercise
price of $0.26 per share for a period of 5 years and approximately 8 million Class B warrants with exercise price of $1.00 per
share for a period of 90 days. The fair value of common stock and warrant liability as of the conversion date was approximately
$1.8 million and $0.9 million, respectively. The difference of $0.7 million was recorded as a debt extinguishment loss.
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
On May 31, 2017, the Company and certain
unaffiliated institutional investors (the “Investor”) entered into an Exchange Agreement (the “Exchange Agreement”)
pursuant to which the Investor agreed to exchange $3.0 million of the Company’s 2014 Senior Convertible Notes for 20,628,571
shares of common stock, warrants to acquire up to approximately 16 million shares of common stock at an exercise price of $0.175
per share and exercisable for 2 years from the date of issuance of such warrants, and 800,000 shares of Common Stock. The
fair value of common stock and warrant liability as of the conversion date was approximately $3.9 million and $1.6 million, respectively.
On June 5, 2017, the Company exchanged
approximately $0.5 million principal amount and accrued interest of certain notes held by an unaffiliated investor for approximately
3.3 million shares of its common stock at a price of $0.14 per share and issued to such investors approximately 2.5 million Class
D warrants with exercise price of $0.175 per share for a period of 2 years. The fair value of common stock and warrant liability
as of the conversion date was approximately $0.6 million and $0.3 million, respectively. The difference of $0.4 million was recorded
as a debt extinguishment loss.
Warrants Exercised for Cash
During the three months ended June 30,
2017, the Company issued approximately 6.9 million shares of common stock from the exercise of pre-paid warrants that were issued
in March 2017 with an exercise price of $0.26, of which $0.25 was paid in March and $0.01 was paid at the time of exercise, for
proceeds of $69,000 at the time of exercise during the three months ended June 30, 2017. All of these 6.9 million shares
of common stock were related to extinguishment of warrant liabilities. The fair value of the warrant liabilities was approximately
$1.1 million on the date of exercise, which were recorded as a component of additional paid-in-capital.
Stock Compensation - 2014 Senior Convertible
Notes
During the three months ended June 30,
2017, the Company issued approximately 3 million shares of common stock to the holders of the Company’s $11 million senior
convertible note as additional consideration to extend the debt payment and to enter into a forbearance agreement. The fair value
of the common stock on the grant date was approximately $0.5 million. The Company recorded such cost as a debt extinguishment loss.
Share-settled Debt
On June 14, 2017, the Company issued 1
million shares of common stock to the holder of the Company’s share-settled debt (the “Holder”) as advance payment
for future debt conversion. The fair value of the remaining share-settled debt will be reduced when the Company is notified by
the Holder of the value at which the shares have been sold.
Third Quarter of 2017
Public and Private Offering
On September 22, 2017, the Company entered
into a Stock Purchase Agreement with multiple investors. The Company issued approximately 8.7 million shares of common stock at
a price of $0.20 per share. The investors received Class A Common Stock Purchase Warrants to purchase up to approximately 4.4 million
shares of Common Stock at an exercise price of $0.22 per share (the “Class A Warrants”). The Class A Warrants are exercisable
immediately and are exercisable for five years. The Company received gross proceeds of $1.8 million (net proceeds of $1.6 million)
from this offering.
During the three months ended September
30, 2017, the Company entered into Subscription Agreements with multiple investors. The Company issued 5.4 million shares of common
stock at a weighted average price of $0.20 per share. The investors also received an aggregate of 5.3 million warrants at a weighted
average exercise price of $0.26 per share. The Company received gross proceeds of $1.1 million from this offering.
During the three months ended September
30, 2017, the Company received an aggregate of $2.6 million from multiple investors as an advance of certain Subscription Agreements
that were entered in November 2017. The Company recorded a $2.6 million shares payable as of September 30, 2017.
Warrants Exercised for Cash and Warrants
Modification
On August 7, 2017, the Company entered
into a $2.7 million financing with an institutional health care investor holding Class B Warrants exercisable for approximately
13.5 million shares of Common Stock of the Company, in which the investor exercised its Class B Warrants in full in return for
amendment of the investor’s Class B Warrants to reduce the exercise from $1.00 to $0.20 per share, as set forth in a Warrant
Repricing Letter Agreement. The Class B Warrants were originally issued on March 17, 2017 with an exercise period of 90 days, and
the exercise period was previously extended to August 24, 2017. The fair value of the amended Class B Warrants on the amendment
date was approximately $0.3 million using a Black-Scholes model. There was no residual value for the original Class B warrants
as of the amendment date, so the Company recorded $0.3 million as inducement loss.
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
As consideration for the investor’s
exercise in full of the Class B Warrants, the Company agreed to issue to the investor new Series A Warrants exercisable for the
purchase of 13.5 million shares of the Company’s Common Stock at an exercise price of $0.27 per share, with an exercise period
of 5 years. The Company also issued an aggregate amount of 0.9 million Class A warrants at an exercise price of $0.27 per share,
with an exercise period of 5 years to certain placement agent. The fair value of these 14.5 million warrants were approximately
$2.0 million using a Black-Scholes model, and the Company recorded such cost as inducement loss.
Cashless Warrants Exercise
On July 17, 2017, holders of approximately
16 million Class A warrants of the Company exercised such warrants on a cashless basis in exchange for the delivery of approximately
6.9 million shares of the Company’s common stock. The fair value of these Class A warrants were approximately $3.1 million
as of July 17, 2017.
Debt Conversions
During the quarter ended September 30,
2017, the Company induced certain debt holders to convert approximately $5.5 million of principal and interest into approximately
32.9 million shares of common stock at a fair value of approximately $7.8 million. In addition the Company issued approximately
40.4 million warrants with a weighted average exercise price of $0.48 and a fair value of $4.7 million.
Share-settled Debt
During the quarter ended September 30,
2017, the Company issued 3.5 million shares of common stock to the holder of the Company’s share-settled debt as advance
payment for future debt conversion. The fair value of the remaining share-settled debt will be reduced when the Company is notified
by the Holder of the value at which the shares have been sold.
As of September 30, 2017, the outstanding
share-settled debt was approximately $4.0 million.
Shares for Services
On July 6, 2017, as compensation for services
as a Director, the Company issued 1.3 million shares of its common stock at fair value of $0.18 to a designee of Robert Farmer.
Stock Purchase Warrants
The following is a summary of warrant activity
for the nine months ended September 30, 2017 (in thousands, except per share data):
|
|
Number of
|
|
|
Weighted Average
|
|
|
Remaining
|
|
|
|
Warrants
|
|
|
Exercise Price
|
|
|
Contractual Term
|
|
Outstanding as of January 1, 2017
|
|
|
58,278
|
|
|
$
|
1.78
|
|
|
|
3.86
|
|
Warrants granted
|
|
|
191,965
|
|
|
|
0.47
|
|
|
|
|
|
Warrants exercised for cash
|
|
|
(24,327
|
)
|
|
|
0.11
|
|
|
|
|
|
Cashless warrants exercise
|
|
|
(16,071
|
)
|
|
|
0.20
|
|
|
|
|
|
Warrants expired and cancellation
|
|
|
(30,878
|
)
|
|
|
1.18
|
|
|
|
|
|
Outstanding as of September 30, 2017
|
|
|
178,967
|
|
|
$
|
0.84
|
|
|
|
3.52
|
|
11. Variable Interest
Entities
Variable Interest Entities (“VIEs”)
are entities in which equity investors lack the characteristics of a controlling financial interest. VIEs are consolidated
by the primary beneficiary. The primary beneficiary is the party who has both the power to direct the activities of a VIE
that most significantly impact the entity’s economic performance and an obligation to absorb losses of the entity or a right
to receive benefits from the entity that could potentially be significant to the entity.
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
After the assumption of $5.7 million in
debt originally incurred by Cognate in October 2016 the Company had an implicit variable interest in Cognate to potentially fund
Cognate’s losses (if Cognate incurs losses). The Company determines whether it is the primary beneficiary of Cognate
upon its initial involvement and the Company reassess whether it is the primary beneficiary of Cognate on an ongoing basis.
The determination of whether the Company is the primary beneficiary of Cognate is based upon the facts and circumstances and requires
significant judgment. The Company’s considerations in determining Cognate’s most significant activities and whether
the Company has power to direct those activities include, but are not limited to, Cognate’s purpose and design and the risks
passed through to investors, the equity ownership and voting interests of Cognate, management, service and/or other agreements
of Cognate, involvement in Cognate’s initial design and the existence of explicit or implicit financial guarantees.
As of September 30, 2017, the Company does not have the power over the most significant activities (control of operating decisions)
and therefore does not meet the "power" criteria of the primary beneficiary.
The maximum exposure to loss is limited
to the notional amounts of the implicit variable interest in Cognate. The Company has no current plans to provide any support
additional to that which is noted above. Therefore, the maximum exposure to loss from its implicit interest is limited to
$4.5 million as of September 30, 2017; which is the shutdown fee the Company must pay to terminate their relationship with Cognate.
12. Commitments and Contingencies
Contingent Payment to Cognate BioServices
Under the January 17, 2014 DCVax®-L
Manufacturing Services Agreement and the DCVax-Direct Agreement, a new set of provisions apply going forward to any shut down or
suspension. Under these provisions, the Company will be contingently obligated to pay certain fees to Cognate BioServices
(in addition to any other remedies) if the Company shuts down or suspends its DCVax-L program or DCVax-Direct program. For
a shutdown or suspension of the DCVax-L program, the fees will be as fol
l
ows:
·
|
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 a shutdown or suspension of the DCVax-Direct
program, the fees will be as follows:
·
|
Prior to the last dose of the last patient
enrolled in the Phase I/II trial for DCVax®-Direct, the fee shall be $1.5 million.
|
·
|
After the last dose of the last patient
enrolled in the Phase I/II clinical trial for DCVax®-Direct but before the initiation of a Phase III trial the fee shall be
$2.0 million.
|
·
|
After initiation of a phase III trial but
before submission of an application for market authorization in any jurisdiction or After the submission of an application for
market authorization but prior to receiving a market authorization approval: in each of these cases, the fee shall be $3.0 million.
|
·
|
At any time after receiving the equivalent of a marketing authorization for DCVax®-Direct in any jurisdiction the fee shall be $5.0 million.
|
As of September 30, 2017, none of the above
fees were triggered; however, the Company and Cognate discussed these fee provisions as part of an ongoing negotiation to determine
the overall amounts to be paid for 2016 and 2017. Subsequent to September 30, 2017, the parties reached an agreement in principle
for settlement of the overall amounts due from the Company to Cognate for 2017 which involves a reduction of the amounts that would
otherwise be due under the contracts and includes suspension fees for the DCVax-L and DCVax-Direct programs.
While our DCVax programs are ongoing, the
Company is required to pay certain fees for dedicated production suites or capacity reserved exclusively for DCVax production,
and pay for a certain minimum number of patients, whether or not we fully utilize the dedicated capacity and number of patients.
The Company and Cognate are testing an arrangement under which the Company would no longer have capacity dedicated to its programs
and instead would have to arrange for advance scheduling in regard to each patient individually. In addition, the Company and Cognate
are in the process of negotiating an overall settlement of amounts owed to Cognate for 2016 and 2017.
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
Derivative and Class Action Litigation
On June 19, 2015, two purported shareholders
filed a lawsuit in the Delaware Court of Chancery, captioned
Tharp, et al. v. Cognate, et al.
, C.A. 11179-VCG (Del. Ch.
filed June 19, 2015), purportedly suing on behalf of a class of similarly situated shareholders and derivatively on behalf of the
Company. The lawsuit named Cognate BioServices, Inc., Toucan Partners, Toucan Capital Fund III, our CEO Linda Powers and the individuals
who then served on the Company’s Board of Directors as defendants, and named the Company as a “nominal defendant”
with respect to the derivative claims. The complaint generally challenged certain transactions between the Company and Cognate
and the Toucan entities, in which Cognate and the Toucan entities provided services and financing to the Company, or agreed to
the conversion of debts owed to them by the Company into equity. The complaint sought unspecified monetary relief for the Company
and the plaintiffs, and various forms of equitable relief, including disgorgement of allegedly improper benefits, rescission of
the challenged transactions, and an order forbidding similar transactions in the future. After considerable litigation and negotiations,
the parties reached an agreement to settle the case, along with the
Yonemura
case, discussed below. On October 17, 2017,
the court entered a final order and judgment approving the settlement.
On November 19, 2015, a third purported
shareholder filed a lawsuit in the U.S. District Court for the District of Maryland, captioned
Yonemura v. Powers, et al.
,
No. 15-03526 (D. Md. filed Nov. 19, 2015), claiming to sue derivatively on behalf of the Company. The complaint names the individuals
who then served on the Company’s Board of Directors, Toucan Capital Fund III, L.P., Toucan General II, LLC, Toucan Partners,
LLC, and Cognate as defendants, and names the Company as a nominal defendant. The complaint generally challenges the same transactions
disputed in the Delaware case, claiming that the Company purportedly overcompensated Cognate and Toucan for certain services and
loans in payments of stock, and that the Company’s CEO, Ms. Powers, benefited from these transactions with Cognate and Toucan,
which she allegedly owns or controls. The complaint asserts that the alleged overpayments unjustly enriched Ms. Powers, Toucan,
and Cognate; that the Company’s directors breached their fiduciary duties of loyalty and good faith to the Company by authorizing
the payments to Cognate; and that Ms. Powers, Cognate, and Toucan aided and abetted the directors’ breaches of fiduciary
duties. The plaintiff sought an award of unspecified damages to the Company and equitable remedies, including disgorgement by Ms.
Powers, Toucan, and Cognate of the allegedly improper benefits received as a result of the disputed transactions. The plaintiff
also sought costs and disbursements associated with bringing suit, including attorneys’ fees and expert fees. As discussed
above, the parties have agreed to settle the
Yonemura
case along with the
Tharp
case; the Stipulation and Agreement
of Compromise and Settlement thus addresses the claims in both lawsuits. The proceedings in the
Yonemura
case are currently
stayed, and the plaintiff in
Yonemura
has agreed to dismiss that case on or before November 23, 2017.
On November 28, 2016, a purported shareholder
filed a lawsuit in the Circuit Court for Montgomery County, Maryland, captioned
Wells v. Powers, et al.
, Case No. 427353-V
(Md. Cir. Ct., Mont. Cnty. filed Nov. 28, 2016), claiming to sue derivatively on behalf of the Company. The complaint names six
current and former members of the Company’s Board of Directors, Toucan Partners, LLC, Toucan Capital Fund III, L.P., Toucan
Partners, LP (a non-existent entity), Toucan General II, LLC, and Cognate as defendants, and names the Company as a nominal defendant.
The complaint largely challenges the same transactions disputed in the two cases discussed above, claiming that the Company overcompensated
Cognate and Toucan for certain services and loans. It asserts that, by authorizing those transactions, the individual defendants
breached their fiduciary duties to the Company, abused their ability to control and influence the Company, and engaged in gross
mismanagement of the Company’s business and assets. In addition, the complaint claims that the individual defendants are
liable to the Company for misleading its investors and financiers. The complaint claims that the individual defendants were unjustly
enriched by receiving compensation while the Company’s stock price was allegedly artificially inflated; that Ms. Powers,
Toucan, and Cognate are “controlling” stockholders of the Company who breached their fiduciary duties to minority stockholders;
that Ms. Powers, Toucan, and Cognate, benefited from these transactions due to their alleged “control”; that the alleged
overpayments unjustly enriched Ms. Powers, Toucan, and Cognate; and that Toucan and Cognate aided and abetted the individual defendants
in breaching their fiduciary duties. The plaintiff sought the award of unspecified damages to the Company; an order from the court
directing the Company to reform its corporate governance and internal procedures; and equitable remedies, including restitution
and disgorgement from defendants. The plaintiff also seeks the costs and disbursements associated with bringing suit, including
attorneys’ fees, costs, and expenses. After considerable litigation and negotiations, the parties reached an agreement to
settle the case. On October 6, 2017, the parties submitted a Stipulation and Agreement of Settlement, which the court preliminarily
approved on November 6, 2017. A hearing is currently scheduled for January 3, 2018, at which the court is expected to consider,
among other things, whether to grant final approval of the proposed settlement.
U.S. Securities and Exchange Commission
As previously reported, the Company has
received a number of formal information requests (subpoenas) from the SEC regarding several broad topics that have been previously
disclosed, including the Company’s membership on Nasdaq and delisting, related party matters, the Company’s programs,
internal controls and the Company’s Special Litigation Committee. Testimony of certain officers and third parties has been
taken as well. The Company is cooperating with the SEC investigation and is hopeful that it is reaching its final stages.
Special Litigation Committee
As previously reported, the Company appointed
a Special Litigation Committee, and Committee has undertaken an inquiry into the allegations of various lawsuits filed against
the Company, and an anonymous internet report raising a number of criticisms of the Company and its Board and management, including
with respect to the reasonableness of the transactions with Cognate. The Committee has retained experts to analyze some of these
issues.
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
13. Subsequent Events
Public and Private Offering
On October 20, 2017, the Company sold
2.9 million shares of common stock at a price of $0.17 per share and issued approximately 1.5 million Class D Warrants exercisable
at $0.22 per share for a period of 2 years for an aggregate of $0.5 million.
Debt Modification
In October and November, 2017, the Company
entered into multiple Exchange Agreements with an existing debt holder (the “Holder”). The Holder agreed to exchange
his existing promissory notes with an aggregate original principal amount of $2.2 million for a new promissory note (the “Exchange
Note”) in the principal amount of $2.4 million. The Exchange Note bore interest at 8% per annum and will be due in September
2018 and December 2018.
U.K. Lease
On October 10, 2017, the Company entered
into an agreement to lease to Commodities Centre, a commodity storage and distribution firm domiciled in the U.K., an existing
approximately 275,000 square foot warehouse building on the Company’s property in Sawston, U.K. The term of the lease will
be five years, with the potential for the tenant to discontinue at three years and five months. The tenant will undertake at least
$1.1 million of repairs and improvements to the building in return for five and a half months of free rent (which began upon execution
of the lease and ends on March 24, 2018). Thereafter, the tenant will pay rent at an annualized rate of approximately $1.0 million
for the first year, and thereafter rent at an annualized rate of approximately $1.4 million for each year or partial year for the
rest of the lease term, plus VAT. The tenant will also pay a proportional share of the common costs and the insurance costs for
the overall site. The tenant will pay for its own utilities and other costs for use of the warehouse.