Quarterly Report (10-q)

Date : 05/10/2019 @ 10:24PM
Source : Edgar (US Regulatory)
Stock : Northwest Biotherapeutics, Inc. (QB) (NWBO)
Quote : 0.2499  0.0 (0.00%) @ 12:55PM

Quarterly Report (10-q)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2019

 

OR

 

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______to _______

 

Commission File Number: 001-35737

 

NORTHWEST BIOTHERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware 94-3306718  
 (State or Other Jurisdiction of Incorporation or Organization)  (I.R.S. Employer Identification No.)

 

4800 Montgomery Lane, Suite 800, Bethesda, MD 20814

(Address of principal executive offices) (Zip Code)

 

(240) 497-9024

(Registrant's telephone number)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x      No  ¨

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  x      No  ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   ¨ Accelerated filer   x
Non-accelerated filer   ¨ Smaller reporting company   x
      Emerging growth company   ¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ¨  No  x

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.         ¨

 

Title of each class Trading Symbol Name of each exchange on which registered
Common Stock, par value $0.001 per share NWBO OTCQB

 

As of May 9, 2019, the total number of shares of common stock, par value $0.001 per share, outstanding was 544,469,782.

 

 

 

 

 

NORTHWEST BIOTHERAPEUTICS, INC.

 

FORM 10-Q

 

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION 3
     
Item 1. Condensed Consolidated Interim Financial Statements (Unaudited)  
     
  Condensed Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018 3
     
  Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2019 and 2018 4
     
  Condensed Consolidated Statements of Stockholders’ Deficit for the three months ended March 31, 2019 and 2018 5
     
  Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018 6
     
  Notes to Condensed Consolidated Financial Statements 8
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 21
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 25
     
Item 4. Controls and Procedures 26
     
PART II - OTHER INFORMATION 26
     
Item 1. Legal Proceedings 26
     
Item 1A. Risk Factors 26
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 27
     
Item 3. Defaults Upon Senior Securities 27
     
Item 4. Mine Safety Disclosures 27
     
Item 5. Other Information 27
     
Item 6. Exhibits 27
   
SIGNATURES 28

 

 

 

 

PART I - FINANCIAL INFORMATION

 

NORTHWEST BIOTHERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(Unaudited)

 

  March 31,
2019
      December 31,
2018
 
ASSETS                
Current assets:                
Cash and cash equivalents   $ 16,288     $ 22,224  
Prepaid expenses and other current assets     2,293       1,574  
Total current assets     18,581       23,798  
                 
Non-current assets:                
Property, plant and equipment, net     277       108  
Right-of-use asset, net     4,864       -  
Other assets     748       761  
Total non-current assets     5,889       869  
                 
TOTAL ASSETS   $ 24,470     $ 24,667  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT                
Current liabilities:                
Accounts payable and accrued expenses   $ 15,316     $ 15,506  
Accounts payable and accrued expenses to related parties and affiliates     2,729       4,588  
Convertible notes, net     852       1,863  
Convertible notes to related party     5,400       5,400  
Notes payable, net     7,729       7,155  
Notes payable to related party     65       393  
Shares payable     138       138  
Warrant liability     41,717       29,995  
Lease liabilities     270       -  
Deferred profit on sale-leaseback transaction     -       4,802  
Total current liabilities     74,216       69,840  
                 
Non-current liabilities:                
Note payable, net of current portion, net     4,001       1,986  
Lease liabilities, net of current portion     4,749       -  
Total non-current liabilities     8,750       1,986  
                 
Total liabilities     82,966       71,826  
                 
COMMITMENTS AND CONTINGENCIES                
                 
Stockholders' deficit:                
Preferred stock ($0.001 par value); 100,000,000 shares authorized as of March 31, 2019 and December 31, 2018, respectively     -       -  
Common stock ($0.001 par value); 1,200,000,000 shares authorized; 537.1 million and 523.2 million shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively     537       523  
Additional paid-in capital     780,478       775,741  
Stock subscription receivable     (10 )     (10 )
Accumulated deficit     (840,557 )     (824,413 )
Accumulated other comprehensive loss     1,056       1,000  
Total stockholders' deficit     (58,496 )     (47,159 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT   $ 24,470     $ 24,667  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

3

 

 

NORTHWEST BIOTHERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except per share amounts)

(Unaudited)

 

    For the three months ended  
    March 31,  
    2019     2018  
Revenues:                
Research and other   $ 339     $ 132  
Total revenues     339       132  
Operating costs and expenses:                
Research and development     3,004       4,733  
General and administrative     3,562       3,005  
Legal expenses     1,539       1,210  
Total operating costs and expenses     8,105       8,948  
Loss from operations     (7,766 )     (8,816 )
Other income (expense):                
Change in fair value of derivative liabilities     (12,021 )     (11,451 )
Net (loss) gain from extinguishment of debt     (788 )     215  
Interest expense     (756 )     (3,324 )
Foreign currency transaction gain     385       1,831  
Total other expenses     (13,180 )     (12,729 )
Net loss   $ (20,946 )   $ (21,545 )
Other comprehensive income (loss)                
Foreign currency translation adjustment     56       (870 )
Total comprehensive loss   $ (20,890 )   $ (22,415 )
Deemed dividend on convertible preferred stock     -       (10,056 )
Net loss applicable to common stockholders   $ (20,946 )   $ (31,601 )
                 
Net loss per share applicable to common stockholders - basic and diluted   $ (0.04 )   $ (0.09 )
Weighted average shares used in computing basic and diluted loss per share     529,133       356,162  

 

 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

4

 

 

NORTHWEST BIOTHERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands)

(Unaudited)

 

    Common Stock     Additional
Paid-in
    Subscription     Accumulated     Cumulative
Translation
    Total
Stockholders'
 
    Shares     Par value     Capital     Receivable     Deficit     Adjustment     Deficit  
Balance at January 1, 2019     523,232       523       775,741       (10 )     (824,413 )     1,000       (47,159 )
 Warrants exercised for cash     2,986       3       685       -       -       -       688  
 Reclassification of warrant liabilities related to warrants exercised for cash     -       -       509       -       -       -       509  
 Issuance of common stock and warrants for conversion of debt and accrued interest     10,873       11       2,990       -       -       -       3,001  
 Stock-based compensation     -       -       553       -       -       -       553  
 Cumulative effect of adopting new accounting standard     -       -       -       -       4,802       -       4,802  
 Net loss     -       -       -       -       (20,946 )     -       (20,946 )
 Cumulative translation adjustment     -       -       -       -       -       56       56  
Balance at March 31, 2019     537,091     $ 537     $ 780,478     $ (10 )   $ (840,557 )   $ 1,056     $ (58,496 )

 

    Common Stock     Additional
Paid-in
    Subscription     Accumulated     Cumulative Translation     Total Stockholders'  
    Shares     Par value     Capital     Receivable     Deficit     Adjustment     Deficit  
Balance at January 1, 2018     328,857     $ 329     $ 721,554     $ -     $ (788,619 )   $ (597 )   $ (67,333 )
 Issuance of common stock for conversion of Series A convertible preferred stock     65,278       65       11,355       (109 )     -       -       11,311  
 Deemed dividend on conversion of Series A convertible preferred stock to common stock     -       -       (9,491 )     -       -       -       (9,491 )
 Beneficial conversion feature of Series B convertible preferred stock     -       -       388       -       -       -       388  
 Deemed dividend related to immediate accretion of beneficial conversion feature of Series B convertible preferred stock     -       -       (388 )     -       -       -       (388 )
 Issuance of common stock for conversion of Series B convertible preferred stock     4,323       4       990       -       -       -       994  
 Deemed dividend on conversion of Series B convertible preferred stock to common stock     -       -       (177 )     -       -       -       (177 )
 Warrants exercised for cash     6,796       7       1,604       -       -       -       1,611  
 Reclassification of warrant liabilities related to warrants exercised for cash     -       -       1,747       -       -       -       1,747  
 Conversion of share settled debt into common stock     4,300       5       1,069       -       -       -       1,074  
 Issuance of common stock and warrants for conversion of debt and accrued interest     5,011       5       1,547       -       -       -       1,552  
 Stock-based compensation     100       -       304       -       -       -       304  
 Net loss     -       -       -       -       (21,545 )     -       (21,545 )
 Cumulative translation adjustment     -       -       -       -       -       (870 )     (870 )
Balance at March 31, 2018     414,665     $ 415     $ 730,502     $ (109 )   $ (810,164 )   $ (1,467 )   $ (80,823 )

 

 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

5

 

 

NORTHWEST BIOTHERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

 

`   For the three months ended  
    March 31,  
    2019     2018  
Cash Flows from Operating Activities:                
Net Loss   $ (20,946 )   $ (21,545 )
Reconciliation of net loss to net cash used in operating activities:                
Depreciation and amortization     2       365  
Amortization of debt discount     296       2,627  
Amortization of debt premium     -       (151 )
Change in fair value of derivatives     12,021       11,451  
Loss (gain) from extinguishment of debt     788       (215 )
Amortization of operating lease right-of-use asset     26       -  
Stock-based compensation related to warrants modification     -       141  
Stock-based compensation for services     553       304  
Subtotal of non-cash charges     13,686       14,522  
Changes in operating assets and liabilities:                
Prepaid expenses and other current assets     (705 )     362  
Other non-current assets     9       (62 )
Accounts payable and accrued expenses     (65 )     (628 )
Related party accounts payable and accrued expenses     (1,859 )     2,564  
Lease liabilities     129       -  
Net cash used in operating activities     (9,751 )     (4,787 )
Cash Flows from Investing Activities:                
Purchase of equipment     (164 )     -  
Net cash used in investing activities     (164 )     -  
Cash Flows from Financing Activities:                
Proceeds from issuance of Series A convertible preferred stock and warrants     -       500  
Proceeds from issuance of Series B convertible preferred stock and warrants, net     -       2,671  
Proceeds from exercise of warrants     688       1,611  
Proceeds from issuance of notes payable, net     4,000       -  
Proceeds from issuance of notes payable to related party     -       30  
Proceeds from issuance of convertible notes payable to related party     -       4,400  
Repayment of notes payable     (420 )     (2,200 )
Repayment of notes payable to related parties     (329 )     (250 )
Net cash provided by financing activities     3,939       6,762  
Effect of exchange rate changes on cash and cash equivalents     40       (1,894 )
Net (decrease) increase in cash and cash equivalents     (5,936 )     81  
                 
Cash and cash equivalents, beginning of the period     22,224       117  
Cash and cash equivalents, end of the period   $ 16,288     $ 198  
                 
Supplemental disclosure of cash flow information                
Interest payments on mortgage loan   $ -     $ (326 )
Interest payments on notes payable   $ (43 )   $ -  
Interest payments on notes payable to related party   $ (131 )   $ (9 )

 

 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

6

 

 

NORTHWEST BIOTHERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

 

    For the three months ended  
    March 31,  
    2019     2018  
Supplemental schedule of non-cash investing and financing activities:                
Issuance of common stock for conversion of Series A convertible preferred stock   $ -     $ 11,311  
Deemed dividend on conversion of Series A convertible preferred stock to common stock   $ -     $ 9,491  
Beneficial conversion feature of Series B convertible preferred stock   $ -     $ 388  
Deemed dividend related to immediate accretion of beneficial conversion feature of Series B convertible preferred stock   $ -     $ 388  
Issuance of common stock for conversion of Series B convertible preferred stock   $ -     $ 994  
Deemed dividend on conversion of Series B convertible preferred stock to common stock   $ -     $ 177  
Reclassification of warrant liabilities related to warrants exercised for cash   $ 509     $ 1,747  
Conversion of share settled debt into common stock   $ -     $ 1,074  
Issuance of common stock and warrants for conversion of debt and accrued interest   $ 2,213     $ 1,767  
Warrants issued associated with convertible notes payable to related party   $ -     $ 2,217  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

7

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 and Aracaris Capital, Ltd (collectively, the “Company”, “we”, “us” and “our”) were organized to discover and develop innovative immunotherapies for cancer.

 

The Company is developing 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. Although there are many contract manufacturers for small molecule drugs and for biologics, there are only a few contract manufacturers in the U.S. and in Europe that specialize in producing living cell products. The manufacturing of such products is highly specialized and entirely different than production of biologics: the physical facilities and equipment are different, the types of personnel and skill sets are different, and the processes are different. The regulatory requirements relating to manufacturing and cellular products are especially challenging and are one of the most frequent reasons for the development of a company’s cellular products to be put on clinical hold (i.e., stopped by regulatory authorities).

 

In addition, the Company’s programs require dedicated capacity in these specialized manufacturing facilities. The Company’s products are fully personalized and not made in standardized batches: the Company’s products are made on demand, patient by patient, on an as needed basis.  

 

2. 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 $20.9 million for the three months ended March 31, 2019. The Company used approximately $9.8 million of cash in its operating activities for the three months ended March 31, 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 March 31, 2019, condensed consolidated statements of operations for the three months ended March 31, 2019 and 2018, condensed consolidated statements of comprehensive loss for the three months ended March 31, 2019 and 2018, condensed consolidated statement of stockholders’ deficit for the three months ended March 31, 2019 and 2018, and the condensed consolidated statements of cash flows for the three months ended March 31, 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 months ended March 31, 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.

 

8

NORTHWEST BIOTHERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

 

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.

 

9

NORTHWEST BIOTHERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

 

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 March 31, 2019 and December 31, 2018 (in thousands):

 

    Fair value measured at March 31, 2019  
          Quoted prices
in active
    Significant
other
    Significant  
    Fair value at     markets     observable inputs     unobservable inputs  
    March 31, 2019     (Level 1)     (Level 2)     (Level 3)  
Warrant liability   $ 41,717     $           -     $          -     $ 41,717  
Embedded conversion feature     147       -       -       147  
Total fair value   $ 41,864     $ -     $ -     $ 41,864  

 

    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 three-month period ended March 31, 2019.

 

The following table presents changes in Level 3 liabilities measured at fair value for the three-month period ended March 31, 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     Conversion        
    Liability     Feature     Total  
Balance – January 1, 2019   $ 29,995     $ 357     $ 30,352  
Extinguishment of warrant liabilities related to warrants exercised for cash     (509 )     -       (509 )
Change in fair value     12,231       (210 )     12,021  
Balance – March 31, 2019   $ 41,717     $ 147     $ 41,864  

 

  10  

NORTHWEST BIOTHERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

 

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 March 31, 2019 and December 31, 2018 is as follows:

 

    As of March 31, 2019     As of December 31, 2018  
    Warrant     Embedded     Warrant     Embedded  
    Liability     Conversion Feature     Liability     Conversion Feature  
Strike price   $ 0.29     $ 0.27     $ 0.29     $ 0.44  
Contractual term (years)     1.7       0.3       2.2       1.5  
Volatility (annual)     85 %     62 %     85 %     85 %
Risk-free rate     2 %     2 %     3 %     3 %
Dividend yield (per share)     0 %     0 %     0 %     0 %

 

5. Stock-based Compensation

  

The Company didn’t incur any new stock option activities for the three months ended March 31, 2019.

 

The following table summarizes stock-based compensation expense related to stock options for the three months ended March 31, 2019 and 2018 (in thousands):

 

    For the three months ended  
    March 31,  
    2019     2018  
Research and development   $ 104     $ 270  
General and administrative (1)     449       -  
Total stock-based compensation expense   $ 553     $ 270  

 

(1) The general and administrative expense during the three months ended March 31, 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 $0.9 million as of March 31, 2019, and will be recognized over the next 1.5 years.

 

  11  

NORTHWEST BIOTHERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

 

6. Property & Equipment

 

Property and equipment consist of the following at March 31, 2019 and December 31, 2018 (in thousands):

 

    March 31,     December 31,     Estimated
    2019     2018     Useful Life
Leasehold improvements   $ 81     $ 81      Lesser of lease term or estimated useful life
Office furniture and equipment     25       25      3 years
Computer equipment and software     763       599      3 years
Land in the United Kingdom     89       86      NA
      958       791      
Less: accumulated depreciation     (681 )     (683 )    
Total property, plant and equipment, net   $ 277     $ 108      

 

Depreciation expense was approximately $2,000 and $365,000 for the three months ended March 31, 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 Earnings or Cash Flows.

 

The Company has operating leases for corporate offices in the U.S. and manufacturing facility 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 March 31, 2019, the Company had operating lease liabilities of approximately $5.0 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 $4.9 million for the Sawston lease and US office lease, which were included in the condensed consolidated balance sheet.

 

  12  

NORTHWEST BIOTHERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

 

The following summarizes quantitative information about the Company’s operating leases:

 

    For the Three Months Ended  
    March 31, 2019  
    U.K     U.S     Total  
Lease cost                        
Operating lease cost   $ 155     $ -     $ 155  
Short-term lease cost     14       81       95  
Variable lease cost     -       2       2  
Total   $ 169     $ 83     $ 252  
                         
Other information                        
Operating cash flows from operating leases   $ -     $ -     $ -  
Right of use assets exchanged for new operating lease liabilities   $ 4,306     $ 584     $ 4,890  
Weighted-average remaining lease term – operating leases     10.7       1.4          
Weighted-average discount rate – operating leases     12 %     12 %        

 

Maturities of our operating leases, excluding short-term leases, are as follows:

 

    U.K     U.S     Total  
Nine months ended December 31, 2019   $ -     $ 244     $ 244  
Year ended December 31, 2020     651       332       983  
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     12,371       660       13,031  
Less present value discount     (7,936 )     (76 )     (8,012 )
Operating lease liabilities included in the Condensed Consolidated Balance Sheet at March 31, 2019   $ 4,435     $ 584     $ 5,019  

  

 

  13  

NORTHWEST BIOTHERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

 

8. Outstanding Debt

 

The following two tables summarize outstanding debt as of March 31, 2019 and December 31, 2018, respectively (amount in thousands):

 

        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       (30 )     -       470  
18% unsecured (3)   In Default     18 %   $ 0.26       100       -       147       247  
                          735       (30 )     147       852  
Short term convertible notes payable - related party                                                    
10% unsecured (4)   On Demand     10 %   $ 0.23       1,000       -       -       1,000  
18% unsecured (4)   In Default     18 %   $ 0.23       4,400       -       -       4,400  
                          5,400       -       -       5,400  
                                                     
Short term notes payable                                                    
8% unsecured (5)   Various     8 %      N/A       3,699       (348 )     -       3,351  
10% unsecured (6)   Various     10 %      N/A       4,238       (300 )             3,938  
12% unsecured (7)   On Demand     12 %      N/A       440       -       -       440  
                          8,377       (648 )     -       7,729  
Short term notes payable - related parties                                                    
10% unsecured - Related Parties (8)   On Demand     10 %      N/A       65       -       -       65  
                          65       -       -       65  
Long term notes payable                                                    
10% unsecured (9)   1/29/2021     8 %      N/A       4,405       (404 )     -       4,001  
                          4,405       (404 )     -       4,001  
                                                     
Ending balance as of March 31, 2019                       $ 18,982     $ (1,082 )   $ 147     $ 18,047  

 

 

        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 (8)   On Demand     10 %      N/A       324       -       -       324  
12% unsecured - Related Parties (8)   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  

 

  14  

NORTHWEST BIOTHERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

 

(1) This $135,000 note as of March 31, 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 three months ended March 31, 2019.

 

The Company recognized interest expense of approximately $13,000 resulting from amortization of debt discount for the Note. The accrued interest associated with the Note was approximately $22,000 as of March 31, 2019.

 

(3) On May 1, 2018, the Company entered into a Convertible Secured Full Recourse Redeemable Note Agreement (the “Redeemable Note”) of $1.4 million with an existing investor. The Redeemable Note is currently in default with an 18% annual interest rate.

 

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 VWAP of the Company’s common stock during the 15 consecutive trading days immediately preceding the conversion date.

 

During the three months ended March 31, 2019, the Company converted approximately $0.8 million principal into approximately 4.0 million shares of common stock at fair value of $1.1 million. The Company recorded an approximate $0.3 million debt extinguishment loss from this conversion.

 

The accrued interest associated with the Redeemable Note was approximately $129,000 as of March 31, 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 Notes were 15-day demand notes, 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 Notes. The warrants were anticipated have exercise price at $0.35 per share, and have an exercise period of 2 years. However, the Company has not finalized the terms of the warrant agreement.

 

By February and March 2019, $4.4 million of the $5.4 million principal amount of the February through April 2018 Notes remained unpaid and were past the end of the further forbearance period agreed last November. As such, the Notes were again in default, and the Company started to accrue interest using 18% annual rate from the default dates. The accrued unpaid interest associated with the Convertible Notes was approximately $0.6 million as of March 31, 2019.

 

(5) This $3.7 million note as of March 31, 2019 consists of three separate 8% notes in the amounts of $0.5 million, $2.2 million and $1.0 million.

 

During the three months ended March 31, 2019, the Company converted approximately $1.3 million principal and $0.1 million accrued interest into approximately 6.9 million shares of common stock at fair value of $1.9 million. The Company recorded an approximate $0.5 million 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 OID. The Notes bore interest at 10% per annum.

 

During the three months ended March 31, 2019, the Company made principal payment of approximately $400,000, and interest payment of approximately $43,000 which included $27,000 premium pursuant to the prepayment option.  

 

During the three months ended March 31, 2019, the Company recognized interest expense of approximately $150,000 resulting from amortization of debt discount for the Notes. The remaining debt discount as of March 31, 2019 was approximately $300,000.  

 

The accrued interest associated with the Note was approximately $64,000 as of December 31, 2018.

 

(7) This $440,000 note as of March 31, 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 $92,000 as of March 31, 2019.

 

  15  

NORTHWEST BIOTHERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

 

(8) Related Party Notes

 

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. Leslie 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 three months ended March 31, 2019, the Company made an aggregate payment of $148,000 to the Goldman Notes, including $79,000 interest payment.

 

As of March 31, 2019, there were no outstanding notes or interest owed to Mr. Goldman.

  

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.

 

All principal was repaid as of March 31, 2019. There was approximately $46,000 remaining of unpaid interest as of March 31, 2019.

  

Board of Directors Notes

 

As of March 31, 2019, there were no outstanding notes or interest owed to the Company’s Board of Directors.

 

Advent BioServices Note

 

On September 26, 2018, 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. The loan bears interest at 10% per annum, and is payable upon demand, with 7 days’ prior written notice to the Company.

 

This Note remains outstanding and unpaid. The amount owed to Advent under this Note at March 31, 2019 was $65,000 based on the current exchange rate.

 

(9) On March 29, 2019, the Company entered into two 22-month notes (the “Notes”), with two different institutional investors, for a total of $4.4 million with an interest rate of 8% and a maturity date of November 29, 2020. The Notes carried an OID of 10%. Net funding to the Company is $4.0 million. The Note allows for optional prepayment by the Company, in the Company’s discretion.  If the Company elects to prepay the Notes, there will be a prepayment premium of 15%.  Monthly amortization payments of 1/14 th of the total are payable from month 9 through 22, with a 10% premium.

 

  16  

NORTHWEST BIOTHERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

 

The following table summarizes total interest expenses related to outstanding notes and mortgage loan for the three months ended March 31, 2019 and 2018, respectively (in thousands):

 

    For the three months ended  
    March 31,  
    2019     2018  
Interest expenses related to outstanding notes:                
Contractual interest   $ 268     $ 385  
Amortization on debt premium     -       (150 )
Amortization of debt discount     296       277  
Total interest expenses related to outstanding notes     564       512  
Interest expenses related to outstanding notes to related parties:                
Contractual interest     191       138  
Amortization of debt discount     -       2,217  
Total interest expenses related to outstanding notes to related parties     191       2,355  
Interest expenses related to mortgage loan:                
Contractual interest     -       323  
Amortization of debt issuance costs     -       133  
Total interest expenses on the mortgage loan     -       456  
Other interest expenses     1       1  
Total interest expense   $ 756     $ 3,324  

 

The following table summarizes the Company’s contractual obligations on debt principal as of March 31, 2019 (amount in thousands):

  

    Payment Due by Period  
          Less than     1 to 2  
    Total     1 Year     Years  
Short term convertible notes payable - related party                        
10% unsecured   $ 5,400     $ 5,400     $ -  
Short term convertible notes payable                        
6% unsecured     135       135       -  
10% unsecured     500       500       -  
18% unsecured     100       100       -  
Short term notes payable                        
8% unsecured     3,699       3,699       -  
10% unsecured     4,238       4,238          
12% unsecured     440       440       -  
Short term notes payable - related parties                        
10% unsecured - (on demand)     65       65       -  
Long term notes payable                        
8% unsecured     4,405       -       4,405  
Total   $ 18,982     $ 14,577     $ 4,405  

 

9. Net Loss per Share Applicable to Common Stockholders

 

Basic loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the reporting period. Diluted loss per common share is computed similar to basic loss per common share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock.

 

The following securities were not included in the diluted net loss per share calculation because their effect was anti-dilutive as of the periods presented (in thousands): 

 

    For the three months ended  
    March 31,  
    2019     2018  
Series A convertible preferred stock     -       34,863  
Series B convertible preferred stock     -       63,557  
Common stock options     100,159       12,656  
Common stock warrants     357,428       349,056  
Contingently issuable warrants     11,739          
Share-settled debt and accrued interest, at fair value     -       12,757  
Convertible notes and accrued interest     29,516       35,380  
Potentially dilutive securities     498,842       508,269  

 

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 provides for a program initiation payment of approximately $1.0 million (£0.7 million), in connection with technology transfer and operations transfer to the U.K. from Germany, 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.

 

  17  

NORTHWEST BIOTHERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

 

Cognate & Advent Expenses and Accounts Payable

 

The following table summarizes expenses incurred to related parties (i.e., amounts invoiced) during the three months ended March 31, 2019 and 2018 (amount in thousands) (some of which remain unpaid as noted in the second table below):

 

    For the three months ended  
    March 31,  
    2019     2018  
Cognate BioServices, Inc. (no longer related party since Q2 2018)   $ -     $ 1,302  
Cognate BioServices GmbH     -       66  
Cognate Israel     -       27  
Advent BioServices     1,450       1,919  
Total   $ 1,450     $ 3,314  

 

The following table summarizes outstanding unpaid accounts payable held by related parties as of March 31, 2019 and December 31, 2018 (amount in thousands).  These unpaid amounts include part of the expenses reported in the table above and also certain expenses incurred in prior periods.

 

    March 31,     December 31,  
    2019     2018  
Advent BioServices   $ 2,061     $ 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.

  

The Company issued 11,739,130 Class D-2 Warrants with an exercise price of $0.30 and a fair value of approximately $2.2 million. The fair value of the warrants was recorded as debt discount at the issuance date. The Company recorded $2.2 million interest expenses as amortization on the debt discount immediately due to the term of the Convertible Notes, which are on demand.

 

The Notes entered into in February through April 2018 were 15-day demand notes, and were intended as temporary bridge notes. However, the Notes remained unpaid outstanding throughout the year. On November 11, 2018, the Company and Ms. Powers agreed to further extend 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 Notes. The warrants were anticipated to have an exercise price of $0.35 per share, and have an exercise period of 2 years. However, the Company has not yet finalized the terms of the warrant agreement.

 

By February and March 2019, $4.4 million of the $5.4 million principal amount of the February and March 2018 Notes remained unpaid and were past the end of the further forbearance period agreed last November. As such, the Notes were again in default, and the Company started to accrue interest using 18% annual rate from the default dates. The accrued unpaid interest associated with the Convertible Notes was approximately $0.6 million as of March 31, 2019.

 

As of March 31, 2019, the entire principal and interest amounts (approximately $6 million) owed to Ms. Powers under the February through April 2018 bridge notes remained outstanding and owed.

 

  18  

NORTHWEST BIOTHERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

 

Leslie J. Goldman - Demand Loans

  

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 bore interest at the rate of 12% per annum, and $0.8 million of the Goldman Notes bore interest at the rate of 10% per annum.

 

During the three months ended March 31, 2019, the Company made an aggregate payment of $148,000 on the Goldman Notes, including $79,000 interest payment.

 

As of March 31, 2019, there were no outstanding notes or interest owed to Mr. Goldman.

  

Toucan Capital III Fund - Demand Loans

  

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.

 

All principal was repaid in 2018. There was approximately $46,000 remaining of unpaid interest as of March 31, 2019.

 

Board of Directors - Demand Loans

 

As of March 31, 2019, there was no outstanding notes or interest owed to the Company’s Board of Directors.

 

Advent BioServices Note

 

On September 26, 2018, 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. The loan bears interest at 10% per annum, and is payable upon demand, with 7 days’ prior written notice to the Company.

 

This Note remains outstanding and unpaid. The principal amount and accrued interest owed to Advent under this Note at March 31, 2019 was $65,000 and $3,000, respectively, based on the current exchange rate.

 

Interest expense for the three month period ended March 31, 2019 and 2018 associated with related party loans was approximately $0.2 million and $2.4 million, respectively.

 

11. Stockholders’ Deficit

   

Debt Conversion

 

During the three months ended March 31, 2019, the Company converted debt of approximately $2.1 million principal and $0.1 million accrued interest into approximately 10.9 million shares of common stock at fair value of $3.0 million. The Company recorded an approximate $0.8 million debt extinguishment loss from the conversion.

 

  19  

NORTHWEST BIOTHERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

 

 

Warrants Exercised for Cash

 

During the three months ended March 31, 2019, the Company issued 3.0 million shares of common stock from warrants exercised for cash. The Company received $688,000 cash.

 

Common Stock Purchase Warrants

  

The following is a summary of warrant activity for the three months ended March 31, 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 exercised for cash     (2,986 )     0.23          
Outstanding as of March 31, 2019     369,167     $ 0.29       1.72  

  

12. Commitments and Contingencies

 

U.S. Securities and Exchange Commission

 

As previously reported, the Company has received a number of formal information requests (subpoenas) from the SEC regarding several broad topics that have been previously disclosed, including the Company’s membership on Nasdaq and delisting, related party matters, the Company’s programs, internal controls, the Company’s Special Litigation Committee, disclosures and the publication of interim clinical trial data. Testimony of certain officers and third parties has been taken as well. The Company has been cooperating with the SEC investigation.  As hoped, the investigation is winding to a conclusion.  After investigation of a broad array of issues over the past two-plus years, the SEC Staff has informed us preliminarily that they have concerns in regard to two issues, relating to the Company’s internal controls over financial reporting and the adequacy of certain disclosures made in the past.  We have previously disclosed material weaknesses in our internal controls.  As for disclosures, we believe our disclosures complied with applicable law.  Despite our belief that the Staff should close the investigation, there can be no assurance that the Staff will not recommend some action involving the Company and/or individuals. Given the stage of the process, the Company is unable to provide a current assessment of the potential outcome or potential liability, if any.

 

13. Subsequent Events

 

Between April 2019 and May 2019, the Company converted debt of approximately $0.9 million principal and $28,000 accrued interest into approximately 3.9 million shares of common stock at fair value of $1.2 million. The Company recorded an approximate $0.2 million debt extinguishment loss from the conversion.

 

Between April 2019 and May 2019, the Company issued 3.5 million shares of common stock from warrants exercised for cash. The Company received $0.8 million cash.

 

On April 25, 2019, the Company established a new wholly owned subsidiary in the Netherlands, where the European Medicines Agency is relocating.

 

  20  

 

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 is now 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 then unblinding and analyzing the data. Each of these stages are multi-month processes, involving teams of outside experts as well as Company personnel. This work also involves various special circumstances such as a crossover trial design and the issue of pseudo-progression as previously reported. The Company’s projections, estimates and expectations are subject to material changes as the work proceeds.

 

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.

 

  21  

 

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.

 

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 March 31, 2019 and 2018

 

We recognized a net loss of $20.9 million and $21.5 million for the three months ended March 31, 2019 and 2018, respectively. Net cash used in operations was $9.8 million and $4.8 million for the three months ended March 31, 2019 and 2018, respectively, including payment of substantial amounts of accumulated payables in the three months ended March 31, 2019.  

 

Research and Development Expense

 

For the three months ended March 31, 2019 and 2018, research and development expense was $3.0 million and $4.7 million, respectively. The decrease was primarily due to less expenses incurred from Advent BioServices compared to last year.

 

The following table summarizes outstanding balance under accounts payable and outstanding principal amount of notes payable to related parties for services related to the Company’s research and development activities as of March 31, 2019 and December 31, 2018 (amount in thousands):

 

    March 31,     December 31,  
    2019     2018  
Accounts payable:                
Advent BioServices   $ 2,061     $ 3,967  
                 
Demand Loan:                
Linda Powers  (1)   $ 5,400     $ 5,400  
Advent BioServices (2)     65       65  
Total   $ 5,465     $ 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.

  

  22  

 

The following table summarizes expenses incurred (i.e., amounts invoiced, which have only been partly paid) to related parties during the three months ended March 31, 2019 and 2018 (amount in thousands):

 

    For the three months ended  
    March 31,  
    2019     2018  
Cognate BioServices, Inc. (no longer related party since Q2 2018)   $ -     $ 1,302  
Cognate BioServices GmbH     -       66  
Cognate Israel     -       27  
Advent BioServices     1,450       1,919  
Total   $ 1,450     $ 3,314  

   

General and Administrative Expense

 

General and administrative expenses were $3.6 million and $3.0 million for three months ended March 31, 2019 and 2018, respectively. The increase compared with 2018 was primarily due to non-cash expense for the applicable portion of ongoing vesting, during the three months ended March 31, 2019, of stock-based compensation awarded in the past to our officers and directors. We did not incur any stock-based compensation under general and administrative expense during the three months ended March 31, 2018. 

 

Legal Expenses

 

Legal costs were $1.5 million for the three months ended March 31, 2019 versus $1.2 million for the three months ended March 31, 2018.

   

Change in fair value of derivatives

 

During the three months ended March 31, 2019 and 2018, we recognized a non-cash loss of $12.0 million and $11.5 million, respectively, primarily due to the increase of stock price and the number of warrants outstanding as of March 31, 2019 (369 million) compared to March 31, 2018 (349 million).

 

Net (loss) gain from extinguishment of debt

 

During the three months ended March 31, 2019, we converted debt of approximately $2.1 million principal and $0.1 million accrued interest into approximately 10.9 million shares of common stock at fair value of $3.0 million. We recorded an approximate $0.8 million debt extinguishment loss from the conversion.

 

During the quarter ended March 31, 2018, we converted approximately $1.7 million principal and $61,000 accrued interest into approximately 5 million shares of common stock at fair value of $1.6 million. We recorded an approximate $0.2 million debt extinguishment gain from the conversion.

 

Interest Expense

 

During the three months ended March 31, 2019 and 2018, we recorded interest expense of $0.8 million and $3.3 million, respectively. We recorded approximately $2.2 million debt discount amortization cost on Ms. Powers’ Notes during the three months ended March 31, 2018.

 

Foreign currency transaction gain

 

During the three months ended March 31, 2019 and 2018, we recognized foreign currency transaction gain of $0.4 million and $1.8 million, respectively. The gain was due to the strengthening of the British pound sterling relative to the U.S. dollar. The fluctuation on the foreign currency during the three months ended March 31, 2019 was less than in the three months ended March 31, 2018.

 

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 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.

 

  23  

 

Contingent Contractual Payment

 

The following table summarizes our contractual obligations as of March 31, 2019 (amount in thousands):

  

    Payment Due by Period  
          Less than     1 to 2  
    Total     1 Year     Years  
Short term convertible notes payable - related party (1)                        
10% unsecured   $ 6,023     $ 6,023     $ -  
Short term convertible notes payable (2)                        
10% unsecured     550       550       -  
18% unsecured     230       230       -  
Short term notes payable (3)                        
8% unsecured     3,718       3,718       -  
10% unsecured     4,662       4,662          
12% unsecured     483       483       -  
Short term notes payable - related parties (4)                        
10% unsecured - (on demand)     115       115       -  
Long term notes payable (5)                        
8% unsecured     5,051       -       5,051  
Operating leases (6)     9,932       3,996       5,936  
Purchase obligation (7)                        
Total   $ 30,764     $ 19,777     $ 10,987  

  

(1) The obligations related to short term convertible notes to Linda Powers were approximately $6.0 million as of March 31, 2019, which included contractual unpaid interest of $0.6 million. The Notes were entered into in February through April 2018 as 15-day demand notes, and were intended to be short-term bridge notes. However, the Notes remained unpaid and outstanding throughout 2018. On November 11, 2018, the Company and Ms. Powers agreed to further extend 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 amounts repayment amounts of the Notes for the loans from Ms. Powers. The warrants were anticipated to have an exercise price of $0.35 per share, and have an exercise period of 2 years. However, the Company is still working on the key terms of this agreement.  Therefore, the Company has not recorded the impact of this modification as of March 31, 2019.

 

(2) The obligations related to short term convertible notes were approximately $0.8 million as of March 31, 2019, which included remaining contractual unpaid interest of $0.2 million.

  

(3) The obligations related to short term notes were approximately $8.9 million as of March 31, 2019, which included remaining contractual unpaid interest of $0.5 million.

 

(4) The obligations related to short term notes to related parties were approximately $0.1 million as of March 31, 2019, which included unpaid interest of $46,000 and $3,000 owed to Toucan Capital Fund III and Advent BioServieds, Ltd, respectively. the obligations included loans of $65,000 from Advent BioServices, Ltd.

 

(5) The obligations related to long term notes were approximately $5.1 million as of March 31, 2019, which included remaining contractual unpaid interest of $0.6 million.

  

(6) The operating lease obligations during the next 2 years included $576,000, $12,000 and $5,000 to our offices in Maryland, Germany and London, 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 $8.6 million of anticipated payments to Advent BioServices, which represents the next 2 years’ obligation. The remaining contract term as of March 31, 2019 was approximately 4 years for manufacturing facilities under the Manufacturing Services Agreement with Advent.

 

(7) 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-L program, 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 the equivalent of a marketing authorization for DCVax®-L in any jurisdiction, the fee shall be $5 million.

 

 

  24  

 

For a shut down or suspension of the DCVax-Direct program, the fees will be as follows:

 

· Prior to the last dose of the last patient enrolled in the Phase I trial for DCVax®-Direct, the fee shall be $1.5 million.

 

· After the last dose of the last patient enrolled in the Phase I clinical trial for DCVax®-Direct but before the initiation of a Phase III trial the fee shall be $2.0 million.

 

· After initiation of a phase III trial but before submission of an application for market authorization in any jurisdiction or after the submission of an application for market authorization but prior to receiving a market authorization approval: in each of these cases, the fee shall be $3.0 million.

 

· At any time after receiving the equivalent of a marketing authorization for DCVax®-Direct in any jurisdiction the fee shall be $5.0 million.

 

As of March 31, 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. We have disputed certain amounts invoiced to us by Cognate, and we are in the process of discussing the amounts with Cognate.

 

Operating Activities

 

During the three months ended March 31, 2019 and March 31, 2018, net cash outflows from operations were $9.8 million and $4.8 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 three months ended March 31, 2019, we did not issue any new preferred stock, common stock or warrants. During the three months ended March 31, 2018, we received approximately $3.2 million cash proceeds from issuance of preferred stock, common stock and warrants in a public offering during the three months ended March 31, 2018.

 

We received $0.7 million and $1.6 million from the exercise of warrants during the three months ended March 31, 2019 and 2018, respectively.

 

We received approximately $4.0 million and $4.4 million cash proceeds from issuances of debt to third parties (unrelated and related) during the three months ended March 31, 2019 and 2018, respectively.

 

We made an aggregate debt payment of $0.7 million and $2.4 million during the three months ended March 31, 2019 and 2018, respectively.

 

Our financial statements indicate there is substantial doubt about our ability to continue as a going concern as we are dependent on our ability to obtain ongoing financing and ultimately to generate sufficient cash flow to meet our obligations on a timely basis.  We can give no assurance that our plans and efforts to achieve the above steps will be successful.

 

Other factors affecting our ongoing funding requirements include the number of staff we employ, the number of sites, number of patients and amount of activity in our clinical trial programs, the costs of further product and process development work relating to our DCVax products, the costs of preparations for Phase II trials, the costs of expansion of manufacturing, and unanticipated developments. The extent of resources available to us will determine which programs can move forward and at what pace.

  

Off-Balance Sheet Arrangements

 

Since our inception, we have not engaged in any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Market risk represents the risk of loss that may result from the change in value of financial instruments due to fluctuations in its market price. Market risk is inherent in all financial instruments. Market risk may be exacerbated in times of trading illiquidity when market participants refrain from transacting in normal quantities and/or at normal bid-offer spreads. Our exposure to market risk is directly related to derivatives, debt and equity linked instruments related to our financing activities.

 

Our assets and liabilities are overwhelmingly denominated in U.S. dollars. We do not use foreign currency contracts or other derivative instruments to manage changes in currency rates. We do not now, nor do we plan to, use derivative financial instruments for speculative or trading purposes. However, these circumstances might change.

  

  25  

 

The primary quantifiable market risk associated with our financial instruments is sensitivity to changes in interest rates. Interest rate risk represents the potential loss from adverse changes in market interest rates. We use an interest rate sensitivity simulation to assess our interest rate risk exposure. For purposes of presenting the possible earnings effect of a hypothetical, adverse change in interest rates over the 12-month period from our reporting date, we assume that all interest rate sensitive financial instruments will be impacted by a hypothetical, immediate 100 basis point increase in interest rates as of the beginning of the period. The sensitivity is based upon the hypothetical assumption that all relevant types of interest rates that affect our results would increase instantaneously, simultaneously and to the same degree. We do not believe that our cash and equivalents have significant risk of default or illiquidity.

 

The sensitivity analyses of the interest rate sensitive financial instruments are hypothetical and should be used with caution. Changes in fair value based on a 1% or 2% variation in an estimate generally cannot be extrapolated because the relationship of the change in the estimate to the change in fair value may not be linear. Also, the effect of a variation in a particular estimate on the fair value of financial instruments is calculated independent of changes in any other estimate; in practice, changes in one factor may result in changes in another factor, which might magnify or counteract the sensitivities. In addition, the sensitivity analyses do not consider any action that we may take to mitigate the impact of any adverse changes in the key estimates.

 

Based on our analysis, as of March 31, 2019, the effect of a 100+/- basis point change in interest rates on the value of our financial instruments and the resultant effect on our net loss are considered immaterial.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Certain of our Company’s finance and accounting functions are performed by an external firm on a contract services basis. This firm specializes in providing finance and accounting functions for biotech companies, and the founders and senior managers are highly experienced former partners of national accounting firms. Further, the Company is engaged with a second external firm: one that specializes in Sarbanes-Oxley matters and helping public companies improve their controls and procedures. Together with these two external firms, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on the evaluation of our disclosure controls and procedures, our principal executive, financial and accounting officer concluded that during the period covered by this report, our Company’s processes for internally reporting material information in a systematic manner to allow for timely filing of material information were not effective, due to inherent limitations from being a small company, and the three material weaknesses described in our Form 10-K for 2018, filed on April 2, 2019, remain as of the filing of this Form 10-Q.  We continue to work to further strengthen our disclosure controls and procedures, and further mitigate the remaining weaknesses.

  

Changes in Internal Control over Financial Reporting

 

There has been a change in our internal control over financial reporting during the quarter ended March 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Effective January 1, 2019, we adopted Accounting Standards Update (“ASU”) No 2016-02, Leases (Topic 842). ASC Topic 842 requires management to make significant judgments and estimates. As a result, we implemented changes to our internal controls related to lease evaluation for the three months ended March 31, 2019. These changes include updated accounting policies affected by ASC Topic 842 as well as redesigned internal controls over financial reporting related to ASC Topic 842 implementation. Additionally, management has expanded data gathering procedures to comply with the additional disclosure requirements and ongoing contract review requirements.

 

Part II - Other Information

 

Item 1. Legal Proceedings

 

U.S. Securities and Exchange Commission

 

As previously reported, the Company has received a number of formal information requests (subpoenas) from the SEC regarding several broad topics that have been previously disclosed, including the Company’s membership on Nasdaq and delisting, related party matters, the Company’s programs, internal controls, the Company’s Special Litigation Committee, disclosures and the publication of interim clinical trial data. Testimony of certain officers and third parties has been taken as well. The Company has been cooperating with the SEC investigation.  As hoped, the investigation is winding to a conclusion.  After investigation of a broad array of issues over the past two-plus years, the SEC Staff has informed us preliminarily that they have concerns in regard to two issues, relating to the Company’s internal controls over financial reporting and the adequacy of certain disclosures made in the past.  We have previously disclosed material weaknesses in our internal controls.  As for disclosures, we believe our disclosures complied with applicable law.  Despite our belief that the Staff should close the investigation, there can be no assurance that the Staff will not recommend some action involving the Company and/or individuals. Given the stage of the process, the Company is unable to provide a current assessment of the potential outcome or potential liability, if any. 

 

Item 1A. Risk Factors

 

See risk factors described in our most recent Annual Report on Form 10-K.

 

  26  

  

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3. Defaults Upon Senior Securities

 

Not Applicable.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

   

Item 5. Other Information

 

None.

 

Item 6. Exhibits

 

31.1   Certification of President (Principal Executive Officer and Principal Financial and Accounting Officer), Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
     
32.1   Certification of President, Chief Executive Officer and Principal Financial and Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.** 
     
101.INS   XBRL Instance Document.
101.SCH   XBRL Schema Document.
101.CAL   XBRL Calculation Linkbase Document.
101.DEF   XBRL Definition Linkbase Document.
101.LAB   XBRL Label Linkbase Document.
101.PRE   XBRL Presentation Linkbase Document.

 

* Filed herewith

 

** Furnished herewith

   

  27  


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  NORTHWEST BIOTHERAPEUTICS, INC
     
Dated: May 10, 2019 By:   /s/ Linda F. Powers
    Name:   Linda F. Powers
       
    Title: President and Chief Executive Officer
      Principal Executive Officer
      Principal Financial and Accounting Officer

 

  28  

 

Northwest Biotherapeutics, Inc. (USOTC:NWBO)
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