NORTHWEST BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share
amounts)
(Unaudited)
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,970
|
|
|
$
|
22,224
|
|
Prepaid expenses and other current assets
|
|
|
2,602
|
|
|
|
1,574
|
|
Total current assets
|
|
|
4,572
|
|
|
|
23,798
|
|
|
|
|
|
|
|
|
|
|
Non-current assets:
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
365
|
|
|
|
108
|
|
Right-of-use asset, net
|
|
|
4,455
|
|
|
|
-
|
|
Other assets
|
|
|
753
|
|
|
|
761
|
|
Total non-current assets
|
|
|
5,573
|
|
|
|
869
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
10,145
|
|
|
$
|
24,667
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
6,609
|
|
|
$
|
15,506
|
|
Accounts payable and accrued expenses to related parties and affiliates
|
|
|
788
|
|
|
|
4,588
|
|
Convertible notes, net
|
|
|
632
|
|
|
|
1,863
|
|
Convertible notes to related party
|
|
|
-
|
|
|
|
5,400
|
|
Notes payable, net
|
|
|
6,310
|
|
|
|
7,155
|
|
Notes payable to related party
|
|
|
61
|
|
|
|
393
|
|
Shares payable
|
|
|
138
|
|
|
|
138
|
|
Contingent payable derivative liability
|
|
|
7,015
|
|
|
|
-
|
|
Warrant liability
|
|
|
31,579
|
|
|
|
29,995
|
|
Lease liabilities
|
|
|
291
|
|
|
|
-
|
|
Deferred profit on sale-leaseback transaction
|
|
|
-
|
|
|
|
4,802
|
|
Total current liabilities
|
|
|
53,423
|
|
|
|
69,840
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities:
|
|
|
|
|
|
|
|
|
Note payable, net of current portion, net
|
|
|
6,652
|
|
|
|
1,986
|
|
Lease liabilities, net of current portion
|
|
|
4,605
|
|
|
|
-
|
|
Total non-current liabilities
|
|
|
11,257
|
|
|
|
1,986
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
64,680
|
|
|
|
71,826
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES (Note 12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' deficit:
|
|
|
|
|
|
|
|
|
Preferred stock ($0.001 par value); 100,000,000 shares authorized as of September 30, 2019 and December 31, 2018, respectively
|
|
|
-
|
|
|
|
-
|
|
Common stock ($0.001 par value); 1,200,000,000 shares authorized; 582.8 million and 523.2 million shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively
|
|
|
583
|
|
|
|
523
|
|
Additional paid-in capital
|
|
|
789,449
|
|
|
|
775,741
|
|
Stock subscription receivable
|
|
|
(10
|
)
|
|
|
(10
|
)
|
Accumulated deficit
|
|
|
(846,580
|
)
|
|
|
(824,413
|
)
|
Accumulated other comprehensive income
|
|
|
2,023
|
|
|
|
1,000
|
|
Total stockholders' deficit
|
|
|
(54,535
|
)
|
|
|
(47,159
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
$
|
10,145
|
|
|
$
|
24,667
|
|
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements
NORTHWEST BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except per share amounts)
(Unaudited)
|
|
For the three months ended
|
|
|
For the nine months ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and other
|
|
$
|
593
|
|
|
$
|
453
|
|
|
$
|
1,513
|
|
|
$
|
863
|
|
Total revenues
|
|
|
593
|
|
|
|
453
|
|
|
|
1,513
|
|
|
|
863
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
3,409
|
|
|
|
4,296
|
|
|
|
9,704
|
|
|
|
14,311
|
|
General and administrative
|
|
|
2,838
|
|
|
|
3,531
|
|
|
|
9,413
|
|
|
|
20,985
|
|
Legal expenses
|
|
|
802
|
|
|
|
1,945
|
|
|
|
3,255
|
|
|
|
4,056
|
|
Total operating costs and expenses
|
|
|
7,049
|
|
|
|
9,772
|
|
|
|
22,372
|
|
|
|
39,352
|
|
Loss from operations
|
|
|
(6,456
|
)
|
|
|
(9,319
|
)
|
|
|
(20,859
|
)
|
|
|
(38,489
|
)
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of derivative liabilities
|
|
|
2,460
|
|
|
|
24,358
|
|
|
|
(2,360
|
)
|
|
|
19,220
|
|
Loss from extinguishment of debt
|
|
|
(504
|
)
|
|
|
(229
|
)
|
|
|
(508
|
)
|
|
|
(830
|
)
|
Interest expense
|
|
|
(724
|
)
|
|
|
(1,596
|
)
|
|
|
(2,267
|
)
|
|
|
(8,222
|
)
|
Foreign currency transaction loss
|
|
|
(1,018
|
)
|
|
|
(636
|
)
|
|
|
(975
|
)
|
|
|
(1,823
|
)
|
Total other income (loss)
|
|
|
214
|
|
|
|
21,897
|
|
|
|
(6,110
|
)
|
|
|
8,345
|
|
Net income (loss)
|
|
$
|
(6,242
|
)
|
|
$
|
12,578
|
|
|
$
|
(26,969
|
)
|
|
$
|
(30,144
|
)
|
Deemed dividend on convertible preferred stock
|
|
|
-
|
|
|
|
(4,175
|
)
|
|
|
-
|
|
|
|
(17,765
|
)
|
Net income (loss) applicable to common stockholders
|
|
$
|
(6,242
|
)
|
|
$
|
8,403
|
|
|
$
|
(26,969
|
)
|
|
$
|
(47,909
|
)
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
892
|
|
|
|
301
|
|
|
|
1,023
|
|
|
|
982
|
|
Total comprehensive income (loss)
|
|
$
|
(5,350
|
)
|
|
$
|
12,879
|
|
|
$
|
(25,946
|
)
|
|
$
|
(29,162
|
)
|
Net earnings (loss) per share applicable to common stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.01
|
)
|
|
$
|
0.02
|
|
|
$
|
(0.05
|
)
|
|
$
|
(0.12
|
)
|
Diluted
|
|
$
|
(0.01
|
)
|
|
$
|
0.02
|
|
|
$
|
(0.05
|
)
|
|
$
|
(0.12
|
)
|
Weighted average shares used in computing basic earnings (loss) per share
|
|
|
577,130
|
|
|
|
461,040
|
|
|
|
552,335
|
|
|
|
414,426
|
|
Weighted average shares used in computing diluted earnings (loss) per share
|
|
|
577,130
|
|
|
|
516,300
|
|
|
|
552,335
|
|
|
|
414,426
|
|
The accompanying notes are an integral
part of these unaudited condensed consolidated financial statements.
NORTHWEST BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
STOCKHOLDERS’ EQUITY (DEFICIT)
(in thousands)
(Unaudited)
|
|
For
the Three Months Ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Accumulated
Other
|
|
|
Total
|
|
|
|
Common
Stock
|
|
|
Paid-in
|
|
|
Subscription
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Stockholders'
|
|
|
|
Shares
|
|
|
Par
value
|
|
|
Capital
|
|
|
Receivable
|
|
|
Deficit
|
|
|
Income
|
|
|
Deficit
|
|
Balance at July 1, 2019
|
|
|
562,462
|
|
|
$
|
562
|
|
|
$
|
785,648
|
|
|
$
|
(10
|
)
|
|
$
|
(840,338
|
)
|
|
$
|
1,131
|
|
|
$
|
(53,007
|
)
|
Issuance of common stock
and warrants for cash in a registered direct offering (net of $1.0 million warrant liability and $0.2 million cash offering
cost)
|
|
|
10,450
|
|
|
|
11
|
|
|
|
1,199
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,210
|
|
Issuance of common stock
and warrants for conversion of debt and accrued interest
|
|
|
8,736
|
|
|
|
9
|
|
|
|
2,034
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,043
|
|
Stock-based compensation
|
|
|
1,140
|
|
|
|
1
|
|
|
|
568
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
569
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,242
|
)
|
|
|
-
|
|
|
|
(6,242
|
)
|
Cumulative
translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
892
|
|
|
|
892
|
|
Balance at September
30, 2019
|
|
|
582,788
|
|
|
$
|
583
|
|
|
$
|
789,449
|
|
|
$
|
(10
|
)
|
|
$
|
(846,580
|
)
|
|
$
|
2,023
|
|
|
$
|
(54,535
|
)
|
|
|
For the Nine Months Ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Accumulated
Other
|
|
|
Total
|
|
|
|
Common
Stock
|
|
|
Paid-in
|
|
|
Subscription
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Stockholders'
|
|
|
|
Shares
|
|
|
Par
value
|
|
|
Capital
|
|
|
Receivable
|
|
|
Deficit
|
|
|
Income
|
|
|
Deficit
|
|
Balance at January 1, 2019
|
|
|
523,232
|
|
|
$
|
523
|
|
|
$
|
775,741
|
|
|
$
|
(10
|
)
|
|
$
|
(824,413
|
)
|
|
$
|
1,000
|
|
|
$
|
(47,159
|
)
|
Issuance of common stock
and warrants for cash in a registered direct offering (net of $1.0 million warrant liability and $0.2 million cash offering
cost)
|
|
|
10,450
|
|
|
|
11
|
|
|
|
1,199
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,210
|
|
Warrants exercised for
cash
|
|
|
9,532
|
|
|
|
9
|
|
|
|
2,210
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,219
|
|
Reclassification of warrant
liabilities related to warrants exercised for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
1,759
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,759
|
|
Issuance of common stock
and warrants for conversion of debt and accrued interest
|
|
|
26,234
|
|
|
|
27
|
|
|
|
6,993
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,020
|
|
Stock-based compensation
|
|
|
1,340
|
|
|
|
1
|
|
|
|
1,559
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,560
|
|
Cumulative effect of adopting
new accounting standard
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,802
|
|
|
|
-
|
|
|
|
4,802
|
|
Issuance of common shares
in connection with a settlement agreement
|
|
|
12,000
|
|
|
|
12
|
|
|
|
(12
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(26,969
|
)
|
|
|
-
|
|
|
|
(26,969
|
)
|
Cumulative
translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,023
|
|
|
|
1,023
|
|
Balance at September
30, 2019
|
|
|
582,788
|
|
|
$
|
583
|
|
|
$
|
789,449
|
|
|
$
|
(10
|
)
|
|
$
|
(846,580
|
)
|
|
$
|
2,023
|
|
|
$
|
(54,535
|
)
|
|
|
For
the Three Months Ended September 30, 2018
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Accumulated
Other
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Subscription
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Stockholders'
|
|
|
|
Shares
|
|
|
Par
value
|
|
|
Capital
|
|
|
Receivable
|
|
|
Deficit
|
|
|
Income
|
|
|
Equity (Deficit)
|
|
Balance at July 1, 2018
|
|
|
444,583
|
|
|
$
|
444
|
|
|
$
|
746,509
|
|
|
$
|
-
|
|
|
$
|
(831,341
|
)
|
|
$
|
84
|
|
|
$
|
(84,304
|
)
|
Issuance of common stock
for conversion of Series A convertible preferred stock
|
|
|
32,187
|
|
|
|
32
|
|
|
|
7,131
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,163
|
|
Deemed dividend on conversion
of Series A convertible preferred stock to common stock
|
|
|
-
|
|
|
|
-
|
|
|
|
(982
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(982
|
)
|
Issuance of common stock
for conversion of Series B convertible preferred stock
|
|
|
23,050
|
|
|
|
23
|
|
|
|
17,513
|
|
|
|
(10
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
17,526
|
|
Deemed dividend on conversion
of Series B convertible preferred stock to common stock
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,193
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,193
|
)
|
Conversion of share settled
debt into common stock
|
|
|
2,500
|
|
|
|
3
|
|
|
|
705
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
708
|
|
Issuance of common stock
and warrants for conversion of debt and accrued interest
|
|
|
7,794
|
|
|
|
8
|
|
|
|
1,600
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,608
|
|
Stock-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
1,456
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,456
|
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,578
|
|
|
|
-
|
|
|
|
12,578
|
|
Cumulative
translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
301
|
|
|
|
301
|
|
Balance at September
30, 2018
|
|
|
510,114
|
|
|
$
|
510
|
|
|
$
|
770,739
|
|
|
$
|
(10
|
)
|
|
$
|
(818,763
|
)
|
|
$
|
385
|
|
|
$
|
(47,139
|
)
|
NORTHWEST BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
STOCKHOLDERS’ EQUITY (DEFICIT) - CONTINUED
(in thousands)
(Unaudited)
|
|
For
the Nine Months Ended September 30, 2018
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Accumulated
Other
|
|
|
|
|
|
|
Common
Stock
|
|
|
Paid-in
|
|
|
Subscription
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Stockholders'
|
|
|
|
Shares
|
|
|
Par
value
|
|
|
Capital
|
|
|
Receivable
|
|
|
Deficit
|
|
|
Income
(loss)
|
|
|
Equity
(Deficit)
|
|
Balance at January 1, 2018
|
|
|
328,857
|
|
|
$
|
329
|
|
|
$
|
721,554
|
|
|
$
|
-
|
|
|
$
|
(788,619
|
)
|
|
$
|
(597
|
)
|
|
$
|
(67,333
|
)
|
Issuance of common
stock and warrants for cash in a registered direct offering
|
|
|
4,000
|
|
|
|
4
|
|
|
|
696
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
700
|
|
Issuance of common
stock for conversion of Series A convertible preferred stock
|
|
|
100,141
|
|
|
|
100
|
|
|
|
18,938
|
|
|
|
(109
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
18,929
|
|
Deemed dividend
on conversion of Series A convertible preferred stock to common stock
|
|
|
-
|
|
|
|
-
|
|
|
|
(10,892
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(10,892
|
)
|
Beneficial conversion
feature of Series B convertible preferred stock
|
|
|
-
|
|
|
|
-
|
|
|
|
2,086
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,086
|
|
Deemed dividend
related to immediate accretion of beneficial conversion feature of Series B convertible preferred stock
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,086
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,086
|
)
|
Issuance of common
stock for conversion of Series B convertible preferred stock
|
|
|
32,491
|
|
|
|
33
|
|
|
|
19,674
|
|
|
|
(10
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
19,697
|
|
Deemed dividend on conversion
of Series B convertible preferred stock to common stock
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,787
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,787
|
)
|
Warrants exercised
for cash
|
|
|
8,957
|
|
|
|
9
|
|
|
|
2,110
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,119
|
|
Reclassification
of warrant liabilities related to warrants exercised for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
2,177
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,177
|
|
Conversion of share
settled debt into common stock
|
|
|
13,300
|
|
|
|
13
|
|
|
|
2,440
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,453
|
|
Issuance of common stock
and warrants for conversion of debt and accrued interest
|
|
|
22,268
|
|
|
|
22
|
|
|
|
5,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,522
|
|
Reclass between accrued
interest and subscription receivable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9
|
|
Proceeds from investor
to offset subscription receivable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
100
|
|
|
|
-
|
|
|
|
-
|
|
|
|
100
|
|
Stock-based compensation
|
|
|
100
|
|
|
|
-
|
|
|
|
13,329
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13,329
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(30,144
|
)
|
|
|
-
|
|
|
|
(30,144
|
)
|
Cumulative
translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
982
|
|
|
|
982
|
|
Balance at September
30, 2018
|
|
|
510,114
|
|
|
$
|
510
|
|
|
$
|
770,739
|
|
|
$
|
(10
|
)
|
|
$
|
(818,763
|
)
|
|
$
|
385
|
|
|
$
|
(47,139
|
)
|
The accompanying notes are an
integral part of these unaudited condensed consolidated financial statements.
NORTHWEST BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(in thousands)
(Unaudited)
|
|
For the nine months ended
|
|
|
|
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(26,969
|
)
|
|
$
|
(30,144
|
)
|
Reconciliation of net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
16
|
|
|
|
1,063
|
|
Amortization of debt discount
|
|
|
1,020
|
|
|
|
5,882
|
|
Amortization of debt premium
|
|
|
-
|
|
|
|
(319
|
)
|
Change in fair value of derivatives
|
|
|
2,360
|
|
|
|
(19,220
|
)
|
Loss from extinguishment of debt
|
|
|
508
|
|
|
|
830
|
|
Amortization of operating lease right-of-use asset
|
|
|
435
|
|
|
|
-
|
|
Stock-based compensation related to warrants modification
|
|
|
3
|
|
|
|
141
|
|
Stock-based compensation for services
|
|
|
1,560
|
|
|
|
13,329
|
|
Subtotal of non-cash charges
|
|
|
5,902
|
|
|
|
1,706
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
(1,059
|
)
|
|
|
428
|
|
Other non-current assets
|
|
|
(23
|
)
|
|
|
(55
|
)
|
Accounts payable and accrued expenses
|
|
|
62
|
|
|
|
4,493
|
|
Related party accounts payable and accrued expenses
|
|
|
(3,800
|
)
|
|
|
3,164
|
|
Lease liabilities
|
|
|
6
|
|
|
|
-
|
|
Net cash used in operating activities
|
|
|
(25,881
|
)
|
|
|
(20,408
|
)
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
Purchase of equipment
|
|
|
(246
|
)
|
|
|
-
|
|
Net cash used in investing activities
|
|
|
(246
|
)
|
|
|
-
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
Proceeds from issuance of Series A convertible preferred stock and warrants
|
|
|
-
|
|
|
|
527
|
|
Proceeds from issuance of Series B convertible preferred stock and warrants, net
|
|
|
-
|
|
|
|
6,594
|
|
Proceeds from issuance of common stock and warrants in a registered direct offering, net
|
|
|
2,241
|
|
|
|
1,000
|
|
Proceeds from private offering (shares payable)
|
|
|
-
|
|
|
|
138
|
|
Proceeds from investor to offset subscription receivable
|
|
|
-
|
|
|
|
100
|
|
Proceeds from exercise of warrants
|
|
|
2,219
|
|
|
|
2,119
|
|
Proceeds from warrants modification
|
|
|
7
|
|
|
|
-
|
|
Proceeds from issuance of notes payable, net
|
|
|
6,500
|
|
|
|
5,701
|
|
Proceeds from issuance of notes payable to related party
|
|
|
-
|
|
|
|
95
|
|
Proceeds from issuance of convertible notes payable to related party
|
|
|
-
|
|
|
|
5,400
|
|
Repayment of notes payable
|
|
|
(420
|
)
|
|
|
(2,200
|
)
|
Repayment of notes payable to related parties
|
|
|
(329
|
)
|
|
|
(782
|
)
|
Repayment of convertible notes payable to related parties
|
|
|
(5,400
|
)
|
|
|
-
|
|
Net cash provided by financing activities
|
|
|
4,818
|
|
|
|
18,692
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
1,055
|
|
|
|
1,847
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(20,254
|
)
|
|
|
131
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of the period
|
|
|
22,224
|
|
|
|
117
|
|
Cash and cash equivalents, end of the period
|
|
$
|
1,970
|
|
|
$
|
248
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information
|
|
|
|
|
|
|
|
|
Interest payments on mortgage loan
|
|
$
|
-
|
|
|
$
|
(935
|
)
|
Interest payments on notes payable
|
|
$
|
(43
|
)
|
|
$
|
-
|
|
Interest payments on notes payable to related party
|
|
$
|
(177
|
)
|
|
$
|
(27
|
)
|
Interest payments on convertible notes payable to related party
|
|
$
|
(795
|
)
|
|
$
|
-
|
|
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
NORTHWEST BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(in thousands)
(Unaudited)
|
|
For the nine months ended
|
|
|
|
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
Supplemental schedule of non-cash investing and financing activities:
|
|
|
|
|
|
|
Issuance of common stock for conversion of Series A convertible preferred stock
|
|
$
|
-
|
|
|
$
|
18,929
|
|
Deemed dividend on conversion of Series A convertible preferred stock to common stock
|
|
$
|
-
|
|
|
$
|
10,892
|
|
Beneficial conversion feature of Series B convertible preferred stock
|
|
$
|
-
|
|
|
$
|
2,086
|
|
Deemed dividend related to immediate accretion of beneficial conversion feature of Series B convertible preferred stock
|
|
$
|
-
|
|
|
$
|
2,086
|
|
Issuance of common stock for conversion of Series B convertible preferred stock
|
|
$
|
-
|
|
|
$
|
19,697
|
|
Deemed dividend on conversion of Series B convertible preferred stock to common stock
|
|
$
|
-
|
|
|
$
|
4,787
|
|
Reclassification of warrant liabilities related to warrants exercised for cash
|
|
$
|
1,759
|
|
|
$
|
2,177
|
|
Conversion of share settled debt into common stock
|
|
$
|
-
|
|
|
$
|
2,453
|
|
Issuance of common stock and warrants for conversion of debt and accrued interest
|
|
$
|
5,533
|
|
|
$
|
4,692
|
|
Conversion of outstanding accounts payables to note payable and contingent payable
|
|
$
|
8,560
|
|
|
$
|
-
|
|
Issuance of common shares in connection with a settlement agreement
|
|
$
|
12
|
|
|
$
|
-
|
|
Offering cost related to warrant liability
|
|
$
|
1,031
|
|
|
$
|
-
|
|
Warrants and contingently issuable warrants associated with convertible notes payable to related party
|
|
$
|
-
|
|
|
$
|
4,217
|
|
Issuance of warrants in conjunction with note payable
|
|
|
|
|
|
$
|
67
|
|
Conversion of note payable to offset Series A convertible preferred stock subscription receivable
|
|
$
|
-
|
|
|
$
|
500
|
|
Conversion of interest payable to offset Series A convertible preferred stock subscription receivable
|
|
$
|
-
|
|
|
$
|
71
|
|
Accrued renewal fee incurred from mortgage loan
|
|
|
|
|
|
$
|
212
|
|
Reclass between accrued interest and subscription receivable
|
|
$
|
-
|
|
|
$
|
9
|
|
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, Aracaris Ltd, Aracaris Capital, Ltd, and Northwest Biotherapeutics B.V. (collectively, the
“Company”, “we”, “us” and “our”) were organized to discover and develop innovative
immunotherapies for cancer. On April 25, 2019, the Company established a new wholly owned subsidiary Northwest Biotherapeutics
B.V. in the Netherlands, where the European Medicines Agency is relocating.
The Company is developing experimental
dendritic cell vaccines using its platform technology known as DCVax®. DCVax is being tested in clinical trials for use in
the treatment of certain types of cancers.
The Company currently relies upon contract
manufacturers for production of its DCVax products, research and development services, distribution and logistics, and related
services, in compliance with the Company’s specifications and the applicable regulatory requirements. The companies are Cognate
BioServices in the U.S. and Advent BioServices (a related party) in the U.K. Both of these companies specialize in the production
of living cell products.
2. Financial Condition, Going Concern
and Management Plans
The Company has incurred annual net operating
losses since its inception. The Company had a net loss of $27.0 million for the nine months ended September 30,
2019. The Company used approximately $25.9 million of cash in its operating activities for the nine months ended September 30,
2019.
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 within one year from the date of this filing. The condensed consolidated financial statements have
been prepared assuming that the Company will continue as a going concern, and do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets, or the amounts and classification of liabilities that
may result from the outcome of this uncertainty.
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, 2019, condensed consolidated statements of operations and comprehensive loss for the three
and nine months ended September 30, 2019 and 2018, condensed consolidated statement of stockholders’ deficit for the
three and nine months ended September 30, 2019 and 2018, and the condensed consolidated statements of cash flows for the nine
months ended September 30, 2019 and 2018 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, 2019 are not necessarily
indicative of results to be expected for the year ending December 31, 2019 or for any future interim period. The condensed
consolidated balance sheet at December 31, 2018 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, 2018 and notes thereto included in the Company’s annual report on Form 10-K, which was filed
with the SEC on April 2, 2019.
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,
estimating the fair value of financial instruments recorded as derivative liabilities, useful lives of depreciable assets and whether
impairment charges may apply, and the fair value of environmental remediation liabilities.
Significant Accounting Policies
Leases
Effective January 1, 2019, the Company
accounts for its leases under ASC 842, Leases. Under this guidance, arrangements meeting the definition of a lease are classified
as operating or financing leases and are recorded on the condensed consolidated balance sheet as both a right of use asset and
lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s
incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right of use
asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the right
of use asset result in straight-line rent expense over the lease term. For finance leases, interest on the lease liability and
the amortization of the right of use asset results in front-loaded expense over the lease term. Variable lease expenses are recorded
when incurred.
In calculating the right of use asset and
lease liability, the Company elects to combine lease and non-lease components. The Company excludes short-term leases having initial
terms of 12 months or less from the new guidance as an accounting policy election and instead recognizes rent expense on a straight-line
basis over the lease term.
The Company continues to account for leases
in the prior period financial statements under ASC Topic 840.
Other than above, there have been no material
changes in the Company’s significant accounting policies to those previously disclosed in the 2018 Annual Report.
Adoption
of Recent Accounting Standards
Leases
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842) in order to increase transparency and comparability among organizations by, among other provisions, recognizing
lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous GAAP. For
public companies, ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 (including interim periods within
those periods) using a modified retrospective approach and early adoption is permitted. In transition, entities may also elect
a package of practical expedients that must be applied in its entirety to all leases commencing before the adoption date, unless
the lease is modified, and permits entities to not reassess (a) the existence of a lease, (b) lease classification or (c) determination
of initial direct costs, as of the adoption date, which effectively allows entities to carryforward accounting conclusions under
previous U.S. GAAP. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which provides entities
an optional transition method to apply the guidance under Topic 842 as of the adoption date, rather than as of the earliest period
presented. The Company adopted Topic 842 on January 1, 2019, using the optional transition method to apply the new guidance as
of January 1, 2019, rather than as of the earliest period presented, and elected the package of practical expedients described
above. Based on the analysis, on January 1, 2019, the Company recorded right of use assets and lease liabilities of approximately
$4.3 million, which represented operating lease entered prior to January 1, 2019. Additionally, the Company recorded an adjustment
to opening accumulated deficit of $4.8 million related to the derecognition of deferred profit related to the U.K facility sales
leaseback transaction.
4. Fair Value Measurements
In accordance with ASC 820 (Fair Value
Measurements and Disclosures), the Company uses various inputs to measure the outstanding warrants and certain embedded conversion
feature associated with convertible debt on a recurring basis to determine the fair value of the liability. ASC 820 also establishes
a hierarchy categorizing inputs into three levels used to measure and disclose fair value. The hierarchy gives the highest priority
to quoted prices available in active markets and the lowest priority to unobservable inputs. An explanation of each level in the
hierarchy is described below:
Level 1 - Unadjusted quoted prices in active markets for identical
instruments that are accessible by the Company on the measurement date
Level 2 - Quoted prices in markets that are not active or inputs
which are either directly or indirectly observable
Level 3 - Unobservable inputs for the instrument requiring the
development of assumptions by the Company
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, 2019 and December 31,
2018 (in thousands):
|
|
Fair
value measured at September 30, 2019
|
|
|
|
|
|
|
Quoted prices in active
|
|
|
Significant other
|
|
|
Significant
|
|
|
|
Fair value at
|
|
|
markets
|
|
|
observable inputs
|
|
|
unobservable inputs
|
|
|
|
September
30, 2019
|
|
|
(Level
1)
|
|
|
(Level
2)
|
|
|
(Level
3)
|
|
Warrant liability
|
|
$
|
31,579
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
31,579
|
|
Contingent payable derivative
liability
|
|
|
7,015
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,015
|
|
Total fair value
|
|
$
|
38,594
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
38,594
|
|
|
|
Fair
value measured at December 31, 2018
|
|
|
|
|
|
|
Quoted prices in active
|
|
|
Significant other
|
|
|
Significant
|
|
|
|
Fair value at
|
|
|
markets
|
|
|
observable inputs
|
|
|
unobservable inputs
|
|
|
|
December
31, 2018
|
|
|
(Level
1)
|
|
|
(Level
2)
|
|
|
(Level
3)
|
|
Warrant liability
|
|
$
|
29,995
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
29,995
|
|
Embedded conversion feature
|
|
|
357
|
|
|
|
-
|
|
|
|
-
|
|
|
|
357
|
|
Total fair value
|
|
$
|
30,352
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
30,352
|
|
There were no transfers between Level 1,
2 or 3 during the nine-month period ended September 30, 2019.
The following table presents changes in
Level 3 liabilities measured at fair value for the nine-month period ended September 30, 2019. 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
|
|
|
|
|
|
|
Warrant
|
|
|
Contingent Payable
|
|
|
Conversion
|
|
|
|
|
|
|
Liability
|
|
|
Derivative Liability
|
|
|
Feature
|
|
|
Total
|
|
Balance – January 1, 2019
|
|
$
|
29,995
|
|
|
$
|
-
|
|
|
$
|
357
|
|
|
$
|
30,352
|
|
Additional contingent liability in connection with a settlement agreement
|
|
|
-
|
|
|
|
6,602
|
|
|
|
-
|
|
|
|
6,602
|
|
Additional warrant liability
|
|
|
1,042
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,042
|
|
Extinguishment of derivative liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
(3
|
)
|
|
|
(3
|
)
|
Extinguishment of warrant liabilities related to warrants exercised for cash
|
|
|
(1,759
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,759
|
)
|
Change in fair value
|
|
|
2,301
|
|
|
|
413
|
|
|
|
(354
|
)
|
|
|
2,360
|
|
Balance – September 30, 2019
|
|
$
|
31,579
|
|
|
$
|
7,015
|
|
|
$
|
-
|
|
|
$
|
38,594
|
|
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, 2019 and December 31, 2018 is as follows:
|
|
As
of September 30, 2019
|
|
|
As
of December 31, 2018
|
|
|
|
Warrant
|
|
|
Contingent Payable
|
|
|
Warrant
|
|
|
Embedded
|
|
|
|
Liability
|
|
|
Derivative
Liability
|
|
|
Liability
|
|
|
Conversion
Feature
|
|
Strike price
|
|
$
|
0.28
|
|
|
$
|
0.25
|
*
|
|
$
|
0.29
|
|
|
$
|
0.44
|
|
Contractual term (years)
|
|
|
1.5
|
|
|
|
0.6
|
|
|
|
2.2
|
|
|
|
1.5
|
|
Volatility (annual)
|
|
|
82
|
%
|
|
|
71
|
%
|
|
|
85
|
%
|
|
|
85
|
%
|
Risk-free rate
|
|
|
2
|
%
|
|
|
2
|
%
|
|
|
3
|
%
|
|
|
3
|
%
|
Dividend yield (per share)
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
* The strike price related to the derivative
liability associated with the contingent payable as of September 30, 2019 is contingent based on the market price.
5. Stock-based Compensation
During the nine months ended September
30, 2019, the Company issued approximately 1.3 million shares of its common stock for service providers. The Company recorded approximately
$0.3 million of stock-based compensation expense based on the fair value on the grant date.
The
following table summarizes stock option activity for the Company’s option plans during the nine months ended September
30, 2019 (amount in thousands, except per share number):
|
|
Number of Shares
|
|
|
Weighted Average
Exercise Price
|
|
|
Weighted Average
Remaining
Contractual Life (in
years)
|
|
|
Total Intrinsic Value
|
|
Outstanding as of January 1, 2019
|
|
|
100,159
|
|
|
$
|
0.24
|
|
|
|
9.3
|
|
|
$
|
-
|
|
Granted
|
|
|
1,500
|
|
|
$
|
0.21
|
|
|
|
9.9
|
|
|
$
|
-
|
|
Outstanding as of September 30, 2019
|
|
|
101,659
|
|
|
$
|
0.24
|
|
|
|
8.6
|
|
|
$
|
2,851
|
|
Options vested and exercisable as of September 30, 2019
|
|
|
92,378
|
|
|
$
|
0.24
|
|
|
|
8.5
|
|
|
$
|
2,543
|
|
During the nine months ended September
30, 2019, the Company issued 1.5 million stock options with grant date fair value of approximately $327,000. The Options will vest
on a pro rata monthly basis over the first 36 months. The exercise price of the options is $0.21, and the exercise period will
be 10 years.
The Company also agreed to issue another
1.5 million stock options which will vest on certain performance criteria, which remain to be determined by the parties. The Company
does not consider such performance options to be granted until such performance criteria is determined in accordance with ASC 718.
The
following assumptions were used to compute the fair value of stock options granted during the nine months ended September
30, 2019:
|
|
For the Nine
|
|
|
|
Months Ended
|
|
|
|
September 30, 2019
|
|
Exercise price
|
|
$
|
0.23
|
|
Expected price volatility
|
|
|
93
|
%
|
Risk free interest rate
|
|
|
2.9
|
%
|
Expected term
|
|
|
5.0-6.5
|
|
The following table summarizes stock-based
compensation expense for the three and nine months ended September 30, 2019 and 2018 (in thousands):
|
|
For the three months ended
|
|
|
For the nine months ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Research and development
|
|
$
|
221
|
|
|
$
|
451
|
|
|
$
|
394
|
|
|
$
|
1,575
|
|
General and administrative (1)
|
|
|
351
|
|
|
|
1,006
|
|
|
|
1,169
|
|
|
|
11,895
|
|
Total stock-based compensation expense
|
|
$
|
572
|
|
|
$
|
1,457
|
|
|
$
|
1,563
|
|
|
$
|
13,470
|
|
(1)
|
The general and administrative expense during the three months and nine months ended September 30, 2019 is related to applicable vesting portion of stock options awards made in the past to directors and employees.
|
The
total unrecognized compensation cost was approximately $0.6 million as of September 30, 2019, and will be recognized over
the next 3 years.
6. Property & Equipment
Property and equipment consist of the following
at September 30, 2019 and December 31, 2018 (in thousands):
|
|
September 30,
|
|
|
December 31,
|
|
|
Estimated
|
|
|
2019
|
|
|
2018
|
|
|
Useful Life
|
Leasehold improvements
|
|
$
|
102
|
|
|
$
|
81
|
|
|
Lesser of lease term or estimated useful life
|
Office furniture and equipment
|
|
|
58
|
|
|
|
25
|
|
|
3 years
|
Computer equipment and software
|
|
|
787
|
|
|
|
599
|
|
|
3 years
|
Land in the United Kingdom
|
|
|
84
|
|
|
|
86
|
|
|
NA
|
|
|
|
1,031
|
|
|
|
791
|
|
|
|
Less: accumulated depreciation
|
|
|
(666
|
)
|
|
|
(683
|
)
|
|
|
Total property, plant and equipment, net
|
|
$
|
365
|
|
|
$
|
108
|
|
|
|
Depreciation expenses were approximately
$8,000 and $341,000 for the three months ended September 30, 2019 and 2018 and were approximately $16,000 and $1.1 million for
the nine months ended September 30, 2019 and 2018.
7. Leases
The Company adopted ASC Topic 842 - Leases
as of January 1, 2019, using the transition method per ASU No. 2018-11 issued on July 2018 wherein entities were allowed to initially
apply the new leases standard at adoption date and recognize a cumulative-effect adjustment to the opening balance of retained
earnings in the period of adoption. Accordingly, all periods prior to January 1, 2019 were presented in accordance with the previous
ASC Topic 840, Leases, and no retrospective adjustments were made to the comparative periods presented. Adoption of ASC 842
resulted in an increase to total assets and liabilities due to the recording of operating lease right-of-use assets ("ROU")
and operating lease liabilities of approximately $4.3 million, as of January 1, 2019. On March 4, 2019, the
Company recognized additional $0.6 million ROU and lease liabilities to its amended office lease in the U.S. The adoption did not
materially impact the Company’s condensed consolidated statements of operations or cash flows.
The Company has operating leases for corporate
offices in the U.S., U.K., Germany and the Netherlands, and for manufacturing facilities in the U.K. Leases with an initial term
of 12 months or less are not recorded in the balance sheet. The Company has elected the practical expedient to account for each
separate lease component of a contract and its associated non-lease components as a single lease component,
thus causing all fixed payments to be capitalized. The Company also elected the package of practical expedients permitted within
the new standard, which among other things, allows the Company to carry forward historical lease classification. The
renewal options have not been included in the calculation of the lease liabilities and ROU as the Company is not reasonably certain
to exercise the options. Variable lease payment amounts that cannot be determined at the commencement of the lease such
as increases in lease payments based on changes in index rates or usage, are not included in the ROU assets or liabilities. These
are expensed as incurred and recorded as variable lease expense.
At September 30, 2019, the Company had
operating lease liabilities of approximately $4.9 million for both the 20-year lease of the building for the manufacturing facility
in Sawston, U.K., and the current office lease in the U.S. and ROU of approximately $4.5 million for the Sawston lease and US office
lease, which were included in the condensed consolidated balance sheet.
The following summarizes quantitative information about the
Company’s operating leases:
|
|
For the Nine Months Ended
|
|
|
|
September 30, 2019
|
|
|
|
U.K
|
|
|
U.S
|
|
|
Total
|
|
Lease cost
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease cost
|
|
$
|
454
|
|
|
$
|
165
|
|
|
$
|
619
|
|
Short-term lease cost
|
|
|
38
|
|
|
|
81
|
|
|
|
119
|
|
Variable lease cost
|
|
|
-
|
|
|
|
11
|
|
|
|
11
|
|
Total
|
|
$
|
492
|
|
|
$
|
257
|
|
|
$
|
749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other information as of adoption date
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating cash flows from operating leases
|
|
$
|
-
|
|
|
$
|
(162
|
)
|
|
$
|
(162
|
)
|
Weighted-average remaining lease term – operating leases
|
|
|
10.2
|
|
|
|
1.1
|
|
|
|
|
|
Weighted-average discount rate – operating leases
|
|
|
12
|
%
|
|
|
12
|
%
|
|
|
|
|
The Company recorded lease costs as a component of general
and administrative expense during the nine months ended September 30, 2019.
Maturities of our operating leases, excluding short-term leases,
are as follows:
|
|
U.K
|
|
|
U.S
|
|
|
Total
|
|
Three months ended December 31, 2019
|
|
$
|
-
|
|
|
$
|
81
|
|
|
$
|
81
|
|
Year ended December 31, 2020
|
|
|
615
|
|
|
|
332
|
|
|
|
947
|
|
Year ended December 31, 2021
|
|
|
651
|
|
|
|
84
|
|
|
|
735
|
|
Year ended December 31, 2022
|
|
|
651
|
|
|
|
-
|
|
|
|
651
|
|
Year ended December 31, 2023
|
|
|
651
|
|
|
|
-
|
|
|
|
651
|
|
Year ended December 31, 2024
|
|
|
651
|
|
|
|
-
|
|
|
|
651
|
|
Thereafter
|
|
|
9,116
|
|
|
|
-
|
|
|
|
9,116
|
|
Total
|
|
|
12,335
|
|
|
|
497
|
|
|
|
12,832
|
|
Less present value discount
|
|
|
(7,892
|
)
|
|
|
(44
|
)
|
|
|
(7,936
|
)
|
Operating lease liabilities included in the Consolidated Balance Sheet at September 30, 2019
|
|
$
|
4,443
|
|
|
$
|
453
|
|
|
$
|
4,896
|
|
8. Outstanding Debt
The following two tables summarize outstanding
debt as of September 30, 2019 and December 31, 2018, respectively (amount in thousands):
|
|
|
|
Stated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
Conversion
|
|
|
|
|
|
Remaining
|
|
|
Carrying
|
|
|
|
Maturity Date
|
|
Rate
|
|
|
Price
|
|
|
Face Value
|
|
|
Debt Discount
|
|
|
Value
|
|
Short term convertible notes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6% unsecured (1)
|
|
Due
|
|
|
6
|
%
|
|
$
|
3.09
|
|
|
$
|
135
|
|
|
$
|
-
|
|
|
$
|
135
|
|
10% unsecured (2)
|
|
4/18/2020
|
|
|
10
|
%
|
|
$
|
0.22
|
|
|
|
500
|
|
|
|
(3
|
)
|
|
|
497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
635
|
|
|
|
(3
|
)
|
|
|
632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short term notes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8% unsecured (5)
|
|
Various
|
|
|
8
|
%
|
|
|
N/A
|
|
|
|
1,009
|
|
|
|
(98
|
)
|
|
|
911
|
|
10% unsecured (6)
|
|
Various
|
|
|
10
|
%
|
|
|
N/A
|
|
|
|
3,975
|
|
|
|
(50
|
)
|
|
|
3,925
|
|
12% unsecured (7)
|
|
On Demand
|
|
|
12
|
%
|
|
|
N/A
|
|
|
|
440
|
|
|
|
-
|
|
|
|
440
|
|
0% unsecured (8)
|
|
8/1/2020
|
|
|
0
|
%
|
|
|
N/A
|
|
|
|
1,156
|
|
|
|
(122
|
)
|
|
|
1,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,580
|
|
|
|
(270
|
)
|
|
|
6,310
|
|
Short term notes payable - related parties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10% unsecured - Related Parties (9)
|
|
On Demand
|
|
|
10
|
%
|
|
|
N/A
|
|
|
|
61
|
|
|
|
-
|
|
|
|
61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61
|
|
|
|
-
|
|
|
|
61
|
|
Long term notes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8% unsecured (10)
|
|
Various
|
|
|
8
|
%
|
|
|
N/A
|
|
|
|
7,165
|
|
|
|
(513
|
)
|
|
|
6,652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,165
|
|
|
|
(513
|
)
|
|
|
6,652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance as of September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
$
|
14,441
|
|
|
$
|
(786
|
)
|
|
$
|
13,655
|
|
|
|
|
|
Stated
|
|
|
|
|
|
|
|
|
|
|
|
Fair
Value of
|
|
|
|
|
|
|
|
|
Interest
|
|
|
Conversion
|
|
|
|
|
|
Remaining
|
|
|
Embedded
|
|
|
Carrying
|
|
|
|
Maturity
Date
|
|
Rate
|
|
|
Price
|
|
|
Face
Value
|
|
|
Debt
Discount
|
|
|
Conversion
Option
|
|
|
Value
|
|
Short term convertible
notes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6% unsecured (1)
|
|
Due
|
|
|
6
|
%
|
|
$
|
3.09
|
|
|
$
|
135
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
135
|
|
10% unsecured (2)
|
|
10/18/2019
|
|
|
10
|
%
|
|
$
|
0.22
|
|
|
|
500
|
|
|
|
(43
|
)
|
|
|
-
|
|
|
|
457
|
|
18% unsecured (3)
|
|
In
Default
|
|
|
18
|
%
|
|
$
|
0.21
|
|
|
|
914
|
|
|
|
-
|
|
|
|
357
|
|
|
|
1,271
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,549
|
|
|
|
(43
|
)
|
|
|
357
|
|
|
|
1,863
|
|
Short term convertible
notes payable - related party
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10% unsecured (4)
|
|
On Demand
|
|
|
10
|
%
|
|
$
|
0.23
|
|
|
|
5,400
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short term notes
payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8% unsecured (5)
|
|
6/20/2019 and 12/12/2019
|
|
|
8
|
%
|
|
|
N/A
|
|
|
|
3,840
|
|
|
|
(383
|
)
|
|
|
-
|
|
|
|
3,457
|
|
10% unsecured (6)
|
|
Various
|
|
|
10
|
%
|
|
|
N/A
|
|
|
|
3,658
|
|
|
|
(400
|
)
|
|
|
|
|
|
|
3,258
|
|
12% unsecured (7)
|
|
On
Demand
|
|
|
12
|
%
|
|
|
N/A
|
|
|
|
440
|
|
|
|
-
|
|
|
|
-
|
|
|
|
440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,938
|
|
|
|
(783
|
)
|
|
|
-
|
|
|
|
7,155
|
|
Short term notes
payable - related parties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10% unsecured - Related
Parties (9)
|
|
On Demand
|
|
|
10
|
%
|
|
|
N/A
|
|
|
|
324
|
|
|
|
-
|
|
|
|
-
|
|
|
|
324
|
|
12%
unsecured - Related Parties (9)
|
|
On
Demand
|
|
|
12
|
%
|
|
|
N/A
|
|
|
|
69
|
|
|
|
-
|
|
|
|
-
|
|
|
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
393
|
|
|
|
-
|
|
|
|
-
|
|
|
|
393
|
|
Long term notes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8% unsecured (5)
|
|
2/13/2020
|
|
|
8
|
%
|
|
|
N/A
|
|
|
|
1,155
|
|
|
|
(119
|
)
|
|
|
-
|
|
|
|
1,036
|
|
5% unsecured (6)
|
|
1/13/2020
|
|
|
10
|
%
|
|
|
N/A
|
|
|
|
1,000
|
|
|
|
(50
|
)
|
|
|
-
|
|
|
|
950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,155
|
|
|
|
(169
|
)
|
|
|
-
|
|
|
|
1,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
as of December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
$
|
17,435
|
|
|
$
|
(995
|
)
|
|
$
|
357
|
|
|
$
|
16,797
|
|
(1)
|
This $135,000 note as of September 30, 2019 and December 31, 2018 consists of two separate 6% notes in the amounts of $110,000 and $25,000. In regard to the $110,000 note, the Company has made ongoing attempts to locate the creditor to repay or convert this note, but has been unable to locate the creditor to date. In regard to the $25,000 note, the holder has elected to convert these notes into equity, the Company has delivered the applicable conversion documents to the holder, and the Company is waiting for the holder to execute and return the documents.
|
(2)
|
On October 18, 2018, the Company entered into an Unsecured
Convertible Promissory Note Agreement Plus Warrant (the “Note”) with an individual investor (the “Holder”)
for an aggregate principal amount of $500,000. No payment was made during the nine months ended September 30, 2019.
|
(3)
|
On
May 1, 2018, the Company entered into a Convertible Redeemable Note Agreement (the “Redeemable Note”) of $1.4 million
with an existing investor. The Redeemable Note was in default on August 25, 2018.
|
Due to the events of default,
the holder is entitled to convert all or any amount of the outstanding principal amount and interest into shares of the common
stock of the Company without restrictive legend of any nature. The conversion price is equal to 90% of the average of the 5 lowest
daily volume weighted average prices of the Company’s common stock during the 15 consecutive trading days immediately preceding
the conversion date.
During the nine months ended
September 30, 2019, the Company converted approximately $0.9 million of principal and $0.1 million of accrued interest into approximately
4.9 million shares of the Company’s common stock at a fair value of $1.4 million. The Company recorded approximately $0.4
million of debt extinguishment loss from this conversion.
The Redeemable Note was fully
converted as of September 30, 2019.
(4)
|
Between February 2018 and April 2018, the Company’s Chief Executive Officer, Linda Powers, loaned the Company aggregate funding of $5.4 million, and the Company entered into Convertible Note agreements for this amount (the “Convertible Notes”). The Convertible Notes were 15-day demand notes, and intended as temporary bridge loans. However, they remained unpaid and outstanding throughout the year.
|
On November 11, 2018, the Company
and Ms. Powers agreed to further extend the forbearance on the notes to a maturity of one year following the respective funding
dates. In consideration of the continuing forbearance, the Company agreed to issue warrants representing 50% of the repayment amounts
of the Convertible Notes. The Company has not yet finalized the terms of the warrant agreement.
During the nine months ended
September 30, 2019, the Company paid $6.2 million related to these Convertible Notes, including $0.8 million of interest.
(5)
|
This $1.0 million note as of September 30, 2019 consists of two separate 8% notes in the amounts of $0.7 million and $0.3 million.
|
During the nine months ended
September 30, 2019, the Company converted approximately $4.0 million of principal and $0.2 million of accrued interest into approximately
20.0 million shares of the Company’s common stock at a fair value of $5.3 million. The Company recorded approximately $1.1
million of debt extinguishment loss from this conversion.
(6)
|
Between October 1, 2018 and November 7, 2018, the Company entered into multiple one-year promissory notes (the “Notes”) with multiple holders (the “Holders”) for an aggregate principal amount of $3.7 million. The notes included approximately $0.2 million original issue discount. The Notes accrued interest at 10% per annum.
|
During the nine months ended
September 30, 2019, the Company made a principal payment of approximately $420,000, and an interest payment of approximately $43,000,
which included a $27,000 premium pursuant to the prepayment option.
During the nine months ended
September 30, 2019, the Company converted approximately $0.3 million of principal and $44,000 of accrued interest into approximately
1.3 million shares of the Company’s common stock at a fair value of $0.3 million. The Company recorded approximately $20,000
of debt extinguishment loss from this conversion.
During the nine months ended
September 30, 2019, the Company wrote off $29,000 of unamortized debt discount related to the debt extinguishment, which was recognized
as a debt extinguishment loss.
During the nine months ended
September 30, 2019, the Company recognized interest expense of approximately $371,000 resulting from the amortization of the debt
discount related to the Notes. The remaining debt discount as of September 30, 2019 was approximately $50,000.
The accrued interest associated
with the Notes was approximately $374,000 as of September 30, 2019.
(7)
|
This $440,000 note as of September 30, 2019 consists of two separate 12% demand notes (the “Notes”) in the amounts of $300,000 and $140,000.
|
The accrued interest associated with the Notes
was approximately $118,000 as of September 30, 2019.
(8)
|
On
May 28, 2019, the Company entered into a settlement agreement (the “Settlement”) with Cognate BioServices, resolving
past matters and providing for the restart of DCVax®-Direct Production.
|
Cognate agreed to reduce outstanding accounts
payable by approximately $10 million, with some amounts related to periods of inactivity being cancelled and with $1.1 million
being deferred until 2020 (the “Deferred Note”). As part of this overall settlement, the Company also provided a contingent
note payable (the “Contingent Payable Derivative”) of $10 million, which is only payable upon the Company’s first
financing after DCVax product approval in or outside the U.S. If such product approval has not been obtained by the seventh anniversary
of the Contingent Payable Derivative, such Contingent Payable Derivative will expire without becoming payable. The Contingent Payable
Derivative may be satisfied in whole or in part through conversion to equity if Cognate so elects on a Determination Date during
the period from the date of the first application for product approval until 120 days after such application date. The Contingent
Payable Derivative may also become payable in the event of an uncured event of default. The Contingent Payable Derivative bears
interest rate at 6% per annum.
The following table summarizes the Settlement transaction at
inception date which resulted in a $1.0 million gain from debt extinguishment (amount in thousands):
Accounts payable (in dispute)
|
|
$
|
9,894
|
|
Upfront cash payment
|
|
|
(1,334
|
)
|
Deferred installment note (net of $175 discount)
|
|
|
(981
|
)
|
Contingent payable derivative *
|
|
|
(6,602
|
)
|
Gain from debt extinguishment
|
|
$
|
977
|
|
*see Note 4 for valuation details
As of September 30, 2019, the Deferred Note had $1.1 million
principal outstanding.
Goldman Notes
In 2017, Leslie J. Goldman,
an officer of the Company, loaned the Company an aggregate amount of $1.3 million pursuant to certain Demand Promissory Note Agreements.
On January 3, 2018, Mr. Goldman loaned the Company an additional $30,000 (collectively the “Goldman Notes”). Approximately
$0.5 million of the Goldman Notes bear interest at the rate of 12% per annum, and $0.8 million of the Goldman Notes bear interest
at the rate of 10% per annum.
During the nine months ended
September 30, 2019, the Company paid $148,000 related to the Goldman Notes, including $79,000 of interest.
Toucan Notes
In 2017, Toucan Capital Fund
III loaned the Company an aggregate amount of $1.2 million 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, 2019, the Company paid interest totaling $46,000.
Advent BioServices Note
Advent
BioServices (“Advent”), a related party which was formerly part of Cognate BioServices and was spun off separately
as part of an institutional financing of Cognate, provided a short-term loan to the Company in the amount of $65,000 on
September 26, 2018. The loan bears interest at 10% per annum, and is payable upon demand, with 7 days’ prior written notice
to the Company.
As of September 30, 2019, the
Note remains outstanding and unpaid. The principal and interest owed to Advent under this Note at September 30, 2019 was $61,000
and $6,000 based on the current exchange rate, respectively.
(10)
|
On March 29, 2019, the Company entered into two 22-month
notes (the “Notes”), with two different institutional investors. The Notes have a principal balance of $4.4 million,
accrue interest at a rate of 8% per annum and have a maturity date of January 29, 2021. The Notes contain an OID of 10%. Net funding
to the Company totaled $4.0 million. The Notes allow for an optional prepayment at the Company’s discretion. Should
the Company elect to prepay the Notes, the Company will incur a prepayment premium of 15%. Monthly amortization payments
of 1/14th of the total due on the Notes will be payable beginning in month 9 through month 22, with a 10% premium.
|
In June 2019, the Company entered into two 21-month notes (the “Notes”), with two different institutional investors. The Notes have a principal balance of $2.8 million, accrue interest at a rate of 8% per annum and mature in March 2021. The Notes contain an OID of 10%. Net funding to the Company totaled $2.5 million. The Notes allow for an optional prepayment at the Company’s discretion. Should the Company elect to prepay the Notes, the Company will incur a prepayment premium of 15%. Monthly amortization payments of 1/14th of the total due related to the Notes will be payable beginning in month 7 through month 21, with a 10% premium.
The
outstanding interest for the above long-term notes was approximately $241,000 as of September 30, 2019.
The following table summarizes total interest
expenses related to outstanding notes and the mortgage loan for the three and nine months ended September 30, 2019 and 2018, respectively
(in thousands):
|
|
For the three months ended
|
|
|
For the nine months ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Interest expenses related to outstanding notes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual interest
|
|
$
|
330
|
|
|
$
|
427
|
|
|
$
|
881
|
|
|
$
|
1,170
|
|
Amortization on debt premium
|
|
|
-
|
|
|
|
(79
|
)
|
|
|
-
|
|
|
|
(319
|
)
|
Amortization of debt discount
|
|
|
357
|
|
|
|
673
|
|
|
|
1,020
|
|
|
|
1,257
|
|
Total interest expenses
related to outstanding notes
|
|
|
687
|
|
|
|
1,021
|
|
|
|
1,901
|
|
|
|
2,108
|
|
Interest expenses related to outstanding notes to related parties:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual interest
|
|
|
36
|
|
|
|
143
|
|
|
|
364
|
|
|
|
474
|
|
Amortization of debt discount
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,235
|
|
Total interest expenses
related to outstanding notes to related parties
|
|
|
36
|
|
|
|
143
|
|
|
|
364
|
|
|
|
4,709
|
|
Interest expenses related to mortgage loan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual interest
|
|
|
-
|
|
|
|
303
|
|
|
|
-
|
|
|
|
942
|
|
Amortization of debt issuance costs
|
|
|
-
|
|
|
|
127
|
|
|
|
-
|
|
|
|
390
|
|
Total interest expenses
on the mortgage loan
|
|
|
-
|
|
|
|
430
|
|
|
|
-
|
|
|
|
1,332
|
|
Interest expenses related to Series A convertible preferred stock
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
68
|
|
Other interest expenses
|
|
|
1
|
|
|
|
2
|
|
|
|
2
|
|
|
|
5
|
|
Total interest expense
|
|
$
|
724
|
|
|
$
|
1,596
|
|
|
$
|
2,267
|
|
|
$
|
8,222
|
|
The following table summarizes the
Company’s contractual obligations on debt principal as of September 30, 2019 (amount in thousands):
|
|
Payment Due by Period
|
|
|
|
|
|
|
Less than
|
|
|
1 to 2
|
|
|
|
Total
|
|
|
1 Year
|
|
|
Years
|
|
Short term convertible notes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
6% unsecured
|
|
|
135
|
|
|
|
135
|
|
|
|
-
|
|
10% unsecured
|
|
|
500
|
|
|
|
500
|
|
|
|
-
|
|
Short term notes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
8% unsecured
|
|
|
1,009
|
|
|
|
1,009
|
|
|
|
-
|
|
10% unsecured
|
|
|
3,975
|
|
|
|
3,975
|
|
|
|
|
|
12% unsecured
|
|
|
440
|
|
|
|
440
|
|
|
|
-
|
|
0% unsecured
|
|
|
1,156
|
|
|
|
1,156
|
|
|
|
-
|
|
Short term notes payable - related parties
|
|
|
|
|
|
|
|
|
|
|
|
|
10% unsecured - (on demand)
|
|
|
61
|
|
|
|
61
|
|
|
|
-
|
|
Long term notes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
8% unsecured
|
|
|
7,165
|
|
|
|
-
|
|
|
|
7,165
|
|
Total
|
|
$
|
14,441
|
|
|
$
|
7,276
|
|
|
$
|
7,165
|
|
9. Net Earnings (Loss) per Share Applicable
to Common Stockholders
Basic earnings (loss) per common share
is computed by dividing net loss by the weighted average number of common shares outstanding during the reporting period. Diluted
earnings (loss) per common share is computed similar to basic earnings (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. Diluted weighted average common shares include common stock potentially issuable under the Company’s convertible notes,
warrants and vested and unvested stock options.
The following table sets forth the computation
of earnings (loss) per share (amounts in thousands except per share data):
|
|
For the three months ended
|
|
|
For the nine months ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Net earnings (loss) - basic
|
|
$
|
(6,242
|
)
|
|
$
|
8,403
|
|
|
$
|
(26,969
|
)
|
|
$
|
(47,909
|
)
|
Interest on convertible senior notes
|
|
|
-
|
|
|
|
2,617
|
|
|
|
-
|
|
|
|
-
|
|
Net earnings (loss) - diluted
|
|
$
|
(6,242
|
)
|
|
$
|
11,020
|
|
|
$
|
(26,969
|
)
|
|
$
|
(47,909
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic
|
|
|
577,130
|
|
|
|
461,040
|
|
|
|
552,335
|
|
|
|
414,426
|
|
Warrants
|
|
|
-
|
|
|
|
1,533
|
|
|
|
-
|
|
|
|
-
|
|
Stock options
|
|
|
-
|
|
|
|
41,960
|
|
|
|
-
|
|
|
|
-
|
|
Convertible notes and accrued interest
|
|
|
-
|
|
|
|
11,767
|
|
|
|
-
|
|
|
|
-
|
|
Weighted average shares outstanding - diluted
|
|
|
577,130
|
|
|
|
516,300
|
|
|
|
552,335
|
|
|
|
414,426
|
|
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,
|
|
|
|
2019
|
|
|
2018
|
|
Common stock options
|
|
|
101,659
|
|
|
|
100,159
|
|
Common stock warrants
|
|
|
340,769
|
|
|
|
357,192
|
|
Contingently issuable warrants
|
|
|
11,739
|
|
|
|
11,739
|
|
Share-settled debt and accrued interest, at fair value
|
|
|
-
|
|
|
|
11,767
|
|
Convertible notes and accrued interest
|
|
|
2,559
|
|
|
|
41,960
|
|
Potentially dilutive
securities
|
|
|
456,726
|
|
|
|
522,817
|
|
10. Related Party Transactions
Advent BioServices Agreement
On May 14, 2018, the Company entered into
a DCVax®-L Manufacturing and Services Agreement with Advent BioServices, a related party which was formerly part of Cognate
BioServices and was spun off separately as part of an institutional financing of Cognate. The Advent Agreement provides for manufacturing
of DCVax-L products for the European region. The Advent Agreement provided for a program initiation payment of approximately $1.0
million (£0.7 million), in connection with technology transfer and operations transfer from Germany to the U.K., to an existing
facility in London, development of new Standard Operating Procedures (SOPs), training of new personnel, selection of new suppliers
and auditing for GMP compliance, and other preparatory activities. Such initiation payment was fully paid by the Company as of
December 31, 2018. The Advent Agreement provides for certain payments for achievement of milestones and, as is the case under the
existing agreements with Cognate BioServices, the Company is required to pay certain fees for dedicated production capacity reserved
exclusively for DCVax production, and pay for a certain minimum number of patients, whether or not the Company fully utilizes the
dedicated capacity and number of patients. Either party may terminate the Advent Agreement at any time for any reason on twelve
months’ notice. The notice period is designed to enable an effective transition and minimize or avoid interruption of product
supply. During the twelve-month period, the Company will continue to pay the minimum fees and the applicable fees for any DCVax
products beyond the minimums, and Advent will continue to produce the DCVax products.
On November 8, 2019, the Company and Advent
entered into an Ancillary Services Agreement with an 8-month Term for the U.K. Facility Development Activities and the Compassionate
Use Program Activities. The Ancillary Services Agreement establishes a structure under which Advent will develop Statements of
Work (“SOWs”) for each portion of the U.K. Facility Development Activities and Compassionate Use Program Activities,
and will deliver those SOWs to the Company for review and approval. After an SOW is approved by the Company, Advent will proceed
with or continue the applicable services and will invoice the Company pursuant to the SOW. Since both the U.K. Facility Development
and the Compassionate Use Program involve pioneering and uncertainties in most aspects, the invoicing under the Ancillary Services
Agreement will be on the basis of costs incurred plus fifteen percent.
Advent Expenses and Accounts Payable
The following table summarizes expenses
incurred to related parties (i.e., amounts invoiced) during the three and nine months ended September 30, 2019 and 2018 (amount
in thousands) (some of which remain unpaid as noted in the second table below):
|
|
For the three months ended
|
|
|
For the nine months ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Cognate BioServices, Inc. (related party until February 2018)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
873
|
|
Cognate BioServices GmbH
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
66
|
|
Cognate Israel
|
|
|
N/A
|
|
|
|
35
|
|
|
|
N/A
|
|
|
|
133
|
|
Advent BioServices
|
|
|
1,218
|
|
|
|
1,373
|
|
|
|
3,931
|
|
|
|
5,039
|
|
Total
|
|
$
|
1,218
|
|
|
$
|
1,408
|
|
|
$
|
3,931
|
|
|
$
|
6,111
|
|
The following table summarizes outstanding
unpaid accounts payable held by related parties as of September 30, 2019 and December 31, 2018 (amount in thousands). These
unpaid amounts are part of the expenses reported in the table above and also part of certain expenses incurred in prior periods.
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Advent BioServices
|
|
$
|
782
|
|
|
$
|
3,967
|
|
Other Related Parties
Linda F. Powers - Demand Loans
Between February 2018 and April 2018, the
Company’s Chief Executive Officer, Linda Powers, loaned the Company aggregate funding of $5.4 million pursuant to convertible
Notes.
During the three months ended September
30, 2019, the Company made a partial repayment of $1.4 million of Ms. Powers’ outstanding demand loan, including $46,000
interest payment.
Advent BioServices Note
Advent BioServices, a related party which
was formerly part of Cognate BioServices and was spun off separately as part of an institutional financing of Cognate, provided
a short-term loan to the Company in the amount of $65,000 on September 26, 2018. The loan bears interest at 10% per annum, and
is payable upon demand, with 7 days’ prior written notice to the Company.
As
of September 30, 2019, the Advent Note remains outstanding and unpaid. The principal amount and accrued interest owed to Advent
under this Note at September 30, 2019 was $61,000 and $6,000, respectively, based on the current exchange rate.
Interest
expense for the nine-month period ended September 30, 2019 and 2018 associated with related party loans was approximately $0.3
million and $4.7 million, respectively.
11. Stockholders’ Deficit
Registered Direct Offering
On July 15, 2019, the Company issued an
aggregate of 11.8 million shares of its common stock at a purchase price of $0.23 per share to certain institutional investors
in a registered direct offering (the “Offering”). Included with the Offering were 1.3 million shares
of common stock which were issued from the conversion of an existing loan and the related accrued interest totaling $306,000. The
net proceeds from the Offering were approximately $2.2 million, after deducting offering costs of $0.2 million paid by the
Company.
In connection with the Offering, the Company
did not issue any additional warrants for the new investment by the investors, but the Company, in effect, agreed to extend by
twelve months the maturity date of certain existing warrants already held by some of those investors. The new maturity date varies
between July 2020 and October 2021. The Company recorded an incremental change of $0.9 million on the fair value of warrants due
to the modification and recorded it as part of offering cost during the nine months ended September 30, 2019.
Debt Conversion
During the nine months ended September
30, 2019, the Company converted debt of approximately $5.2 million of principal and $0.4 million of accrued interest into approximately
26.2 million shares of the Company’s common stock at a fair value of $7.0 million. The Company recorded approximately $1.5
million of debt extinguishment loss from the conversion.
Warrants Exercised for Cash
During the nine months ended September
30, 2019, the Company issued 9.5 million shares of its common stock from warrants exercised for cash. The Company received $2.2
million in cash.
Shares Settlement
On May 28, 2019, the Company entered into a settlement agreement
with Cognate BioServices, resolving past matters and providing for the restart of DCVax®-Direct Production (see Note 8).
As part of the settlement agreement, the
number of shares of the Company’s common stock which the Company was to issue to Cognate was substantially reduced: 52 million
shares of the Company’s common stock which the Company had previously agreed to issue to Cognate were reduced to 12 million
shares. The Company considers the reduction in shares owed to Cognate a modification. Because the 52 million shares were never
issued and the modification, which resulted in a decrease in fair value, is not a forfeiture, previously recognized expense related
to services performed by Cognate is not reversed in connection with this modification. During the nine months ended September 30,
2019, the Company recorded $12,000 in its common stock par and reduced same amount in additional paid-in capital.
Common Stock Purchase Warrants
The following is a summary of warrant activity
for the nine months ended September 30, 2019 (in thousands, except per share data):
|
|
Number of
|
|
|
Weighted Average
|
|
|
Remaining
|
|
|
|
Warrants
|
|
|
Exercise Price
|
|
|
Contractual Term
|
|
Outstanding as of January 1, 2019
|
|
|
372,153
|
|
|
$
|
0.29
|
|
|
|
1.97
|
|
Warrants granted
|
|
|
765
|
|
|
$
|
0.23
|
|
|
|
2.85
|
|
Warrants exercised for cash
|
|
|
(9,532
|
)
|
|
$
|
0.23
|
|
|
|
|
|
Warrants expired and cancellation
|
|
|
(10,878
|
)
|
|
$
|
0.61
|
|
|
|
|
|
Outstanding as of September 30, 2019
|
|
|
352,508
|
|
|
$
|
0.28
|
|
|
|
1.53
|
|
12. Commitments and Contingencies
U.S. Securities and Exchange Commission
As previously reported, the SEC has been
investigating the Company regarding various topics that have been previously disclosed. The Company has been cooperating with the
SEC investigation. On October 10, 2019, the Company entered into a settlement agreement with the SEC. Under the settlement,
in which the Company neither admits nor denies any violations, the Company paid a fine of $250,000 in connection with past weaknesses
in its internal controls, and the Company will retain an additional independent consultant to help the Company remediate its remaining
weaknesses.
13. Subsequent Events
During the period from October 1 through
November 11, 2019, the Company entered into equity and debt financings of $3.4 million and converted $1.3 million of debt into
equity. The Company also entered into extensions of certain existing notes totaling approximately $3.1 million.
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion and analysis of
our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial
statements and the notes to those statements included with this report. In addition to historical information, this report contains
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”),
and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements
are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. The words
“believe,” “expect,” “intend,” “anticipate,” and similar expressions are used to
identify forward-looking statements, but some forward-looking statements are expressed differently. Many factors could affect our
actual results, including those factors described under “Risk Factors” in our Form 10-K for the year ended December
31, 2018 and in Part II Item 1A of this report. These factors, among others, could cause results to differ materially from those
presently anticipated by us. You should not place undue reliance on these forward-looking statements.
Overview
The Company is focused on developing personalized
immune therapies for cancer. We have developed a platform technology, DCVax®, which uses activated dendritic cells to mobilize
a patient's own immune system to attack their cancer.
Our lead product, DCVax®-L, is designed
to treat solid tumor cancers in which the tumor can be surgically removed. This product is in an ongoing Phase III trial for newly
diagnosed Glioblastome multiforme (GBM). 331 patients were enrolled in the trial, and the Company is working to reach completion.
The Company, the physicians and the patients remain blinded. On May 29, 2018, interim blinded data from the Phase III trial collected
in 2017 were published in a peer reviewed scientific journal. On November 17, 2018, updated interim blinded data from the Phase
III trial were presented at the Society for Neuro-Oncology annual meeting. As the Company noted in its announcement of the May
publication and in subsequent reports, the data could get either better or worse as it continues to mature. The Company has been
consulting with its Scientific Advisory Board, the Steering Committee of the trial and other independent experts about the ongoing
handling of the trial and preparations for completion.
As previously reported, the Company has
been moving forward with the several stages of work that are needed to reach completion of this trial. These include finalizing
the Statistical Analysis Plan, conducting the final data collection, data validation and data lock, and unblinding and analyzing
the data. Each of these stages involves teams of outside experts as well as Company personnel.
The independent statisticians and the Company
have completed the draft of the Statistical Analysis Plan (SAP). The Company is proceeding with the regulatory processes
relating to the SAP. The Company is continuing to consult with its Scientific Advisory Board and Board of Directors to move
forward as prudently and expeditiously as possible to data lock, unblinding and top line data.
The independent contract research organization
managing the trial has been moving forward on resolving queries to confirm the trial data, in parallel while the Company and the
statisticians have been developing the SAP. The Company’s understanding is that most of the queries have been resolved
and only a small number remain outstanding.
Our second product, DCVax®-Direct,
is designed to treat inoperable solid tumors. A 40-patient Phase I trial has been completed, and included treatment of a diverse
range of cancers. As resources permit, the Company is working on preparations for Phase II trials of DCVax-Direct.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial
condition and results of operations are based on our condensed financial statements, which have been prepared in accordance with
U.S. GAAP. The preparation of these condensed financial statements requires us to make estimates and judgments that affect our
reported amounts of assets, liabilities, revenues and expenses.
On an ongoing basis, we evaluate our estimates
and judgments, including those related to accrued expenses and stock-based compensation. We based our estimates on historical experience
and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities and the reported amounts of revenues and expenses that
are not readily apparent from other sources. Actual results may differ from these estimates.
Our critical accounting policies and significant
estimates are detailed in our Annual Report on Form 10-K for the year ended December 31, 2018 and Note 7 Leases to the condensed
consolidated financial statements in this accompanying Form 10-Q. Other than the changes related to adoption of ASC 842, our critical
accounting policies and significant estimates have not changed substantially from those previously disclosed in our Annual Report
on Form 10-K for the year ended December 31, 2018.
Results of Operations
Operating costs:
Operating costs and expenses consist primarily
of research and development expenses, including clinical trial expenses, which increase when we are actively participating in clinical
trials and especially when we are in a large ongoing international phase III trial. The associated administrative expenses also
increase as such operating activities grow.
In addition to clinical trial related costs,
our operating costs may include ongoing work relating to our DCVax products, including R&D, product characterization, and related
matters. Going forward, we are also incurring large amounts of costs to carry out and complete statistical analyses, process validation
work, final data collection and validation, and other work associated with moving towards completing the statistical analysis plan
for the trial and obtaining approval of the plan by regulators in all of the countries where the clinical trial has been conducted,
data lock for the clinical trial data, unblinding and analysis of the data, manufacturing validation, and other requirements.
Our operating costs also include the costs
of preparations for the launch of new or expanded clinical trial programs, such as our planned Phase II clinical trials. The preparation
costs include payments to regulatory consultants, lawyers, statisticians, sites and others, evaluation of potential investigators,
the clinical trial sites and the CROs managing the trials and other service providers, and expenses related to institutional approvals,
clinical trial agreements (business contracts with sites), training of medical and other site personnel, trial supplies and other.
Additional substantial costs relate to the maintenance of manufacturing capacity, in both the US and Europe.
Our operating costs also include significant
legal and accounting costs in operating the Company.
Research and development:
Discovery and preclinical research and
development expenses include costs for substantial external scientific personnel, technical and regulatory advisers, and others,
costs of laboratory supplies used in our internal research and development projects, travel, regulatory compliance, and expenditures
for preclinical and clinical trial operation and management when we are actively engaged in clinical trials.
Because we are pre-revenue company, we
do not allocate research and development costs on a project basis. We adopted this policy, in part, due to the unreasonable cost
burden associated with accounting at such a level of detail and our limited number of financial and personnel resources.
The Board approved a 5.5 million option
pool to various external manufacturing parties (Advent BioServices, the Royal Free Hospital, Fraunhofer and other consultants)
in December 2018. We have not allocated the options to the individual manufacturing parties but anticipate doing so during the
latter half of 2019.
General and administrative:
General and administrative expenses include
administrative personnel related salary and benefit expenses, cost of facilities, insurance, travel, legal support, property and
equipment and amortization of stock options and warrants.
Three Months Ended September 30, 2019
and 2018
We recognized net loss of $6.2 million
(including both cash and non-cash amounts) for the three months ended September 30, 2019 versus net income of $12.6 million for
the three months ended September 30, 2018.
Research and Development Expense
For the three months ended September 30,
2019 and 2018, research and development expense was $3.4 million and $4.3 million, respectively. The decrease of $0.9 million
for the three months ended September 30, 2019, was due to lower expenses incurred from Advent BioServices and other major third-party
vendors compared to the same period last year.
The following table summarizes the outstanding
balance under accounts payable and the outstanding principal amount of notes payable to related parties for services related to
the Company’s research and development activities as of September 30, 2019 and December 31, 2018 (amount in thousands):
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Accounts payable:
|
|
|
|
|
|
|
|
|
Advent BioServices
|
|
$
|
782
|
|
|
$
|
3,967
|
|
|
|
|
|
|
|
|
|
|
Demand Loan:
|
|
|
|
|
|
|
|
|
Linda Powers (1)
|
|
$
|
-
|
|
|
$
|
5,400
|
|
Advent BioServices (2)
|
|
|
61
|
|
|
|
65
|
|
Total
|
|
$
|
61
|
|
|
$
|
5,465
|
|
(1)
|
Cash loaned by our CEO was used for operations, including research and development expenses. The amount represents principal only.
|
(2)
|
The amount represents principal only.
|
The following table summarizes expenses
incurred (i.e., amounts invoiced, which have only been partly paid) to related parties during the three months ended September
30, 2019 and 2018 (amount in thousands):
|
|
For the three months ended
|
|
|
|
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
Cognate Israel
|
|
|
N/A
|
|
|
$
|
35
|
|
Advent BioServices
|
|
|
1,218
|
|
|
|
1,373
|
|
Total
|
|
$
|
1,218
|
|
|
$
|
1,408
|
|
General and Administrative Expense
General
and administrative expenses were $2.8 million and $3.5 million for three months ended September 30, 2019 and 2018, respectively.
The decrease compared with 2018 was primarily due to lower stock-based compensation expense. We recorded approximately $1.0 million
of stock-based compensation under general and administrative expenses during the three months ended September 30, 2018 compared
to $0.4 million during the three months ended September 30, 2019.
Legal Expenses
Legal costs were $0.8 million and $1.9
million for the three months ended September 30, 2019 and 2018, respectively. The reduction in legal costs reflects a reduction
in legal processes.
Change in fair value of derivatives
During the three months ended September
30, 2019 and 2018, we recognized a non-cash gain of $2.5 million and $24.4 million, respectively. The non-cash gain in 2019 was
primarily due to the decrease in our stock price as of September 30, 2019 compared to June 30, 2019.
Loss from Extinguishment of Debt
During the three months ended September
30, 2019 and 2018, we recorded a loss from extinguishment of debt of $0.5 million and $0.2 million, respectively. The debt extinguishment
loss was related to debt conversions, where the fair value of common stock exceeded the book value of the debt on the date of conversion.
Interest Expense
During the three months ended September
30, 2019 and 2018, we recorded interest expense of $0.7 million and $1.6 million, respectively. We incurred approximately $0.4
million interest expense related to mortgage loan during the three months ended September 30, 2018. The mortgage loan was fully
paid off in December 2018.
Foreign currency transaction gain
During the three months ended September
30, 2019 and 2018, we recognized foreign currency transaction loss of $1.0 million and $0.6 million, respectively. The loss was
due to the strengthening of the U.S. dollar relative to the British pound sterling during the three months ended September 30,
2019.
Nine Months Ended September 30, 2019
and 2018
We recognized a net loss of $27.0 million
and $30.1 million for the nine months ended September 30, 2019 and 2018, respectively. Net cash used in operations was $25.9 million
and $20.4 million for the nine months ended September 30, 2019 and 2018, respectively, including payment of substantial amounts
of accumulated current and past payables during the nine months ended September 30, 2019.
Research and Development Expense
For the nine months ended September 30,
2019 and 2018, research and development expense was $9.7 million and $14.3 million, respectively. The decrease of $4.6 million
for the nine months ended September 30, 2019 was primarily due to lower expenses incurred from Advent BioServices and other major
third-party vendors compared to the same period last year. We also incurred lower stock-based compensation arrangements compared
to the same period last year. We recorded approximately $1.6 million of stock-based compensation expense related to research and
development expenses during the nine months ended September 30, 2018 as compared to $0.4 million for the nine months ended September
30, 2019.
The following table summarizes expenses
incurred (i.e., amounts invoiced, which have only been partly paid) to related parties during the nine months ended September 30,
2019 and 2018 (amount in thousands):
|
|
For the nine months ended
|
|
|
|
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
Cognate BioServices, Inc. (related party until February 2018) *
|
|
|
N/A
|
|
|
$
|
873
|
|
Cognate BioServices GmbH
|
|
|
N/A
|
|
|
|
66
|
|
Cognate Israel
|
|
|
N/A
|
|
|
|
133
|
|
Advent BioServices
|
|
|
3,931
|
|
|
|
5,039
|
|
Total
|
|
$
|
3,931
|
|
|
$
|
6,111
|
|
*
We made a $2 million cash payment to Cognate BioServices, Inc. pursuant to the settlement agreement entered into on
May 21, 2019.
General and Administrative Expense
General and administrative expenses were
$9.4 million and $21.0 million for the nine months ended September 30, 2019 and 2018, respectively. The decrease of $11.6 million
during the nine months ended September 30, 2019 compared with 2018, was primarily due to lower stock option grants in 2019, compared
with the grants of stock options to our officers and directors (covering multiple years of performance) in 2018. We recorded approximately
$11.9 million of stock-based compensation expense related to general and administrative expenses during the nine months ended September
30, 2018, including $141,000 related to warrants modification as compared to $1.2 million for the nine months ended September 30,
2019.
Legal Expenses
Legal costs were $3.3 million for the
nine months ended September 30, 2019 versus $4.1 million for the nine months ended September 30, 2018. The reduction in legal
costs reflects a reduction in legal processes.
Change in fair value of derivatives
During the nine months ended September
30, 2019 and 2018, we recognized a non-cash loss of $2.4 million and a non-cash gain of $19.2 million, respectively. The non-cash
loss in 2019 was primarily due to the increase in our stock price as of September 30, 2019 compared to December 31, 2018.
Loss from Extinguishment of Debt
During the nine months ended September
30, 2019 and 2018, we recorded loss from extinguishment of debt of $0.5 million and $0.8 million, respectively. The debt extinguishment
loss was resulted from debt conversion, when the fair value of common stock exceeded the book value of the debt as of the conversion
date.
Interest Expense
During the nine months ended September
30, 2019 and 2018, we recorded interest expense of $2.3 million and $8.2 million, respectively. We recorded approximately $4.2
million of debt discount amortization related to Ms. Powers’ Notes during the nine months ended September 30, 2018.
Foreign currency transaction loss
During the nine months ended September
30, 2019 and 2018, we recognized foreign currency transaction loss of $1.0 million and $1.8 million, respectively. The loss was
due to the strengthening of the U.S. dollar relative to the British pound sterling during the nine months ended September 30, 2019.
Liquidity and Capital Resources
We have experienced recurring losses from
operations since inception. We have not yet established an ongoing source of revenues and must cover our operating expenses through
debt and equity financings to allow us to continue as a going concern. Our ability to continue as a going concern depends on the
ability to obtain adequate capital to fund operating losses until we generate adequate cash flows from operations to fund our operating
costs and obligations. If we are unable to obtain adequate capital, we could be forced to cease operations.
We depend upon our ability, and will continue
to attempt, to secure equity and/or debt financing. We cannot be certain that additional funding will be available on acceptable
terms, or at all. Our management determined that there was substantial doubt about our ability to continue as a going concern
within one year after the condensed consolidated financial statements were issued, and management’s concerns about our ability
to continue as a going concern within the year following this report persist.
Contingent Contractual Payment
The following table summarizes our contractual
obligations as of September 30, 2019 (amount in thousands):
|
|
Payment Due by Period
|
|
|
|
|
|
|
Less than
|
|
|
1 to 2
|
|
|
|
Total
|
|
|
1 Year
|
|
|
Years
|
|
Short term convertible notes payable (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
6% unsecured
|
|
|
216
|
|
|
|
216
|
|
|
|
-
|
|
10% unsecured
|
|
|
550
|
|
|
|
550
|
|
|
|
-
|
|
Short term notes payable (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
8% unsecured
|
|
|
1,014
|
|
|
|
1,014
|
|
|
|
-
|
|
10% unsecured
|
|
|
4,373
|
|
|
|
4,373
|
|
|
|
|
|
12% unsecured
|
|
|
558
|
|
|
|
558
|
|
|
|
-
|
|
0% unsecured
|
|
|
1,156
|
|
|
|
-
|
|
|
|
1,156
|
|
Short term notes payable - related parties (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
10% unsecured - (on demand)
|
|
|
67
|
|
|
|
67
|
|
|
|
-
|
|
Long term notes payable (4)
|
|
|
|
|
|
|
|
|
|
|
|
|
8% unsecured
|
|
|
8,216
|
|
|
|
-
|
|
|
|
8,216
|
|
Operating leases (5)
|
|
|
11,032
|
|
|
|
5,559
|
|
|
|
5,473
|
|
Purchase obligation (6)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
27,182
|
|
|
$
|
12,337
|
|
|
$
|
14,845
|
|
(1) The obligations related to short term
convertible notes were approximately $0.7 million as of September 30, 2019, which included remaining contractual unpaid interest
of $0.1 million.
(2) The obligations related to short term
notes were approximately $7.1 million as of September 30, 2019, which included remaining contractual unpaid interest of $0.5 million.
(3) The obligations related to short term
notes to related parties were approximately $67,000 as of September 30, 2019, which included unpaid interest of $6,000 owed to
Advent BioServices, Ltd. The obligations included loans of $61,000 from Advent BioServices, Ltd.
(4) The obligations related to long term
notes were approximately $8.2 million as of September 30, 2019, which included remaining contractual unpaid interest of $1.1 million.
(5) The operating lease obligations during
the next 2 years included $497,000, $8,000 (3 months remaining term), $32,000 and $4,000 to our offices in Maryland, Germany, London
and Netherlands, respectively. Approximately $0.7 million lease obligations during the next 2 years (the first year is rent-free)
related to the Vision Centre in the U.K. that we leased back in December 2018. We also included approximately $9.3 million of anticipated
payments to Advent BioServices, which represents the next 2 years’ obligation. The remaining contract term as of September
30, 2019 was approximately 4 years under the Manufacturing Services Agreement with Advent.
(6) We have possible contingent obligations
to pay certain fees to Cognate BioServices (in addition to any other remedies) if we shut down or suspend its DCVax-L program or
DCVax-Direct program. These obligations are not reflected in the accompanying balance sheets.
For a shut down or suspension of the DCVax-Direct
program,at Cognate the Company must give 3 months’ advance notice.
For a shut down or suspension of the DCVax-L
program at Cognate, the fees will be as follows:
·
|
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 product approval for DCVax®-L
in any jurisdiction, the fee shall be $5 million.
|
For a shut down or suspension of the DCVax-L program at Advent, the Company must give 12 months’ advance notice.
As of September 30, 2019, no shut-down
or suspension fees were triggered.
While our DCVax programs are ongoing, under
our agreements with Cognate we are 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 same is the case under our agreement with Advent. As previously reported, we recently settled certain
disputed amounts that had been invoiced to us by Cognate.
Operating Activities
During the nine months ended September
30, 2019 and 2018, net cash outflows from operations were $25.9 million and $20.4 million, respectively. The increase in cash used
in operating activities was primarily attributable to the increase in the levels of activity in our ongoing clinical programs,
as well as payment of substantial accumulated payables.
Financing Activities
During the nine months ended September
30, 2019, we received $2.2 million of cash proceeds from the issuance of our common stock and warrants in a registered direct offering.
During the nine months ended September
30, 2018, we received approximately $8.1 million of cash proceeds from the issuance of our preferred stock, common stock and warrants
in a public offering.
We received $2.2 million and $2.1 million
from the exercise of warrants during the nine months ended September 30, 2019 and 2018, respectively.
We received approximately $6.5 million
from third parties during the nine months ended September 30, 2019, and $11.2 million of cash proceeds from issuances of debt to
third parties and related parties during the nine months ended September 30, 2018.
We made aggregate debt payments of $0.4
million and $3.0 million to third parties during the nine months ended September 30, 2019 and 2018, respectively.
We made aggregate debt payments of $5.7
million and $0.8 million to related parties during the nine months ended September 30, 2019 and 2018, respectively.
Off-Balance Sheet Arrangements
Since our inception, we have not engaged
in any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.