NORTHWEST BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share and per share
amounts)
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,597
|
|
|
$
|
117
|
|
Prepaid expenses and other current assets
|
|
|
838
|
|
|
|
1,285
|
|
Total current assets
|
|
|
2,435
|
|
|
|
1,402
|
|
|
|
|
|
|
|
|
|
|
Non-current assets:
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
45,980
|
|
|
|
47,488
|
|
Other assets
|
|
|
61
|
|
|
|
17
|
|
Total non-current assets
|
|
|
46,041
|
|
|
|
47,505
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
48,476
|
|
|
$
|
48,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
18,379
|
|
|
$
|
13,015
|
|
Accounts payable and accrued expenses to related parties and affiliates
|
|
|
2,368
|
|
|
|
5,385
|
|
Convertible notes, net
|
|
|
135
|
|
|
|
135
|
|
Convertible notes to related party
|
|
|
5,400
|
|
|
|
-
|
|
Notes payable, net
|
|
|
5,102
|
|
|
|
7,122
|
|
Notes payable to related party
|
|
|
369
|
|
|
|
1,121
|
|
Share settled debt, at fair value (in default)
|
|
|
1,562
|
|
|
|
3,308
|
|
Environmental remediation liability
|
|
|
6,200
|
|
|
|
6,200
|
|
Shares payable
|
|
|
138
|
|
|
|
-
|
|
Warrant liability
|
|
|
52,389
|
|
|
|
40,171
|
|
Mortgage loan, net
|
|
|
6,504
|
|
|
|
11,226
|
|
Total current liabilities
|
|
|
98,546
|
|
|
|
87,683
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities:
|
|
|
|
|
|
|
|
|
Convertible notes payable, net of current portion, net
|
|
|
6,474
|
|
|
|
6,010
|
|
Note payable, net of current portion, net
|
|
|
2,511
|
|
|
|
2,507
|
|
Mortgage loan, net of current portion, net
|
|
|
4,735
|
|
|
|
-
|
|
Total non-current liabilities
|
|
|
13,720
|
|
|
|
8,517
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
112,266
|
|
|
|
96,200
|
|
|
|
|
|
|
|
|
|
|
Preferred stock ($0.001 par value); 100,000,000 shares authorized as of June 30, 2018 and December 31, 2017, respectively
|
|
|
|
|
|
|
|
|
Convertible Series A, 15,000,000 shares designated - 3.2 million and 9.7 million shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively; aggregate liquidation preference of $7,137
|
|
|
6,181
|
|
|
|
7,439
|
|
Convertible Series B, 15,000,000 shares designated - 7.5 million and 5.6 million shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively; aggregate liquidation preference of $17,527
|
|
|
14,333
|
|
|
|
12,601
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity (deficit):
|
|
|
|
|
|
|
|
|
Common stock ($0.001 par value); 1,200,000,000 shares authorized; 444.6 million and 328.9 million shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively
|
|
|
444
|
|
|
|
329
|
|
Additional paid-in capital
|
|
|
746,509
|
|
|
|
721,554
|
|
Accumulated deficit
|
|
|
(831,341
|
)
|
|
|
(788,619
|
)
|
Accumulated other comprehensive loss
|
|
|
84
|
|
|
|
(597
|
)
|
Total stockholders' equity (deficit)
|
|
|
(84,304
|
)
|
|
|
(67,333
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) AND TEMPORARY EQUITY
|
|
$
|
48,476
|
|
|
$
|
48,907
|
|
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
NORTHWEST BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
(in thousands, except per share amounts)
|
|
For the three months ended
|
|
|
For the six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and other
|
|
$
|
278
|
|
|
$
|
88
|
|
|
$
|
410
|
|
|
$
|
156
|
|
Total revenues
|
|
|
278
|
|
|
|
88
|
|
|
|
410
|
|
|
|
156
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
5,282
|
|
|
|
5,466
|
|
|
|
10,015
|
|
|
|
10,501
|
|
General and administrative
|
|
|
14,449
|
|
|
|
3,284
|
|
|
|
17,454
|
|
|
|
6,289
|
|
Legal expenses
|
|
|
901
|
|
|
|
2,003
|
|
|
|
2,111
|
|
|
|
5,935
|
|
Total operating costs and expenses
|
|
|
20,632
|
|
|
|
10,753
|
|
|
|
29,580
|
|
|
|
22,725
|
|
Loss from operations
|
|
|
(20,354
|
)
|
|
|
(10,665
|
)
|
|
|
(29,170
|
)
|
|
|
(22,569
|
)
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of derivative liabilities
|
|
|
6,313
|
|
|
|
6,457
|
|
|
|
(5,138
|
)
|
|
|
7,896
|
|
Net loss from extinguishment of debt
|
|
|
(816
|
)
|
|
|
(7,007
|
)
|
|
|
(601
|
)
|
|
|
(8,542
|
)
|
Interest expense
|
|
|
(3,302
|
)
|
|
|
(1,308
|
)
|
|
|
(6,626
|
)
|
|
|
(2,502
|
)
|
Foreign currency transaction gain
|
|
|
(3,018
|
)
|
|
|
2,270
|
|
|
|
(1,187
|
)
|
|
|
2,844
|
|
Net loss
|
|
$
|
(21,177
|
)
|
|
$
|
(10,253
|
)
|
|
$
|
(42,722
|
)
|
|
$
|
(22,873
|
)
|
Deemed dividend on convertible preferred stock
|
|
|
(3,535
|
)
|
|
|
-
|
|
|
|
(13,589
|
)
|
|
|
-
|
|
Net loss applicable to common stockholders
|
|
$
|
(24,712
|
)
|
|
$
|
(10,253
|
)
|
|
$
|
(56,311
|
)
|
|
$
|
(22,873
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share applicable to common stockholders - basic and diluted
|
|
$
|
(0.06
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.14
|
)
|
|
$
|
(0.12
|
)
|
Weighted average shares used in computing basic and diluted loss per share
|
|
|
424,922
|
|
|
|
208,458
|
|
|
|
390,732
|
|
|
|
185,108
|
|
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
NORTHWEST BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE LOSS
(Unaudited)
(in thousands)
|
|
For the three months ended
|
|
|
For the six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Net loss
|
|
$
|
(21,177
|
)
|
|
$
|
(10,253
|
)
|
|
$
|
(42,722
|
)
|
|
$
|
(22,873
|
)
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
835
|
|
|
|
(1,326
|
)
|
|
|
681
|
|
|
|
(1,640
|
)
|
Total comprehensive loss
|
|
$
|
(20,342
|
)
|
|
$
|
(11,579
|
)
|
|
$
|
(42,041
|
)
|
|
$
|
(24,513
|
)
|
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
NORTHWEST BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’
EQUITY (DEFICIT)
(Unaudited)
(in thousands)
|
|
Common
Stock
|
|
|
Additional
Paid-in
|
|
|
Subscription
|
|
|
Accumulated
|
|
|
Cumulative
Translation
|
|
|
Total
Stockholders'
|
|
|
|
Shares
|
|
|
Par
value
|
|
|
Capital
|
|
|
Receivable
|
|
|
Deficit
|
|
|
Adjustment
|
|
|
Equity
(Deficit)
|
|
Balance at January 1, 2018
|
|
|
328,857
|
|
|
$
|
329
|
|
|
$
|
721,554
|
|
|
$
|
-
|
|
|
$
|
(788,619
|
)
|
|
$
|
(597
|
)
|
|
$
|
(67,333
|
)
|
Issuance of common stock and warrants for cash in a registered direct offering
|
|
|
4,000
|
|
|
|
4
|
|
|
|
696
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
700
|
|
Issuance of common stock for conversion of Series A convertible preferred stock
|
|
|
67,955
|
|
|
|
68
|
|
|
|
11,807
|
|
|
|
(109
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
11,766
|
|
Deemed dividend on conversion of Series A convertible preferred stock to common stock
|
|
|
-
|
|
|
|
-
|
|
|
|
(9,910
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(9,910
|
)
|
Beneficial conversion feature of Series B convertible preferred stock
|
|
|
-
|
|
|
|
-
|
|
|
|
2,086
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,086
|
|
Deemed dividend related to immediate accretion of beneficial conversion feature of Series
B convertible preferred stock
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,086
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,086
|
)
|
Issuance of common stock for conversion of Series B convertible preferred stock
|
|
|
9,441
|
|
|
|
9
|
|
|
|
2,162
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,171
|
|
Deemed dividend on conversion of Series B convertible preferred stock to common stock
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,594
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,594
|
)
|
Warrants exercised for cash
|
|
|
8,957
|
|
|
|
9
|
|
|
|
2,110
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,119
|
|
Reclassification of warrant liabilities related to warrants exercised for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
2,177
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,177
|
|
Conversion of share settled debt into common stock
|
|
|
10,800
|
|
|
|
11
|
|
|
|
1,735
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,746
|
|
Issuance of common stock and warrants for conversion of debt and accrued interest
|
|
|
14,473
|
|
|
|
14
|
|
|
|
3,899
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,913
|
|
Reclass between accrued interest and subscription receivable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9
|
|
Proceeds from investor to offset subscription receivable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
100
|
|
|
|
-
|
|
|
|
-
|
|
|
|
100
|
|
Stock-based compensation
|
|
|
100
|
|
|
|
-
|
|
|
|
11,873
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,873
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(42,722
|
)
|
|
|
-
|
|
|
|
(42,722
|
)
|
Cumulative translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
681
|
|
|
|
681
|
|
Balance at June 30, 2018
|
|
|
444,583
|
|
|
$
|
444
|
|
|
|
746,509
|
|
|
$
|
-
|
|
|
$
|
(831,341
|
)
|
|
$
|
84
|
|
|
$
|
(84,304
|
)
|
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
NORTHWEST BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
(in thousands)
`
|
|
For the six months ended
|
|
|
|
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(42,722
|
)
|
|
$
|
(22,873
|
)
|
Reconciliation of net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
722
|
|
|
|
100
|
|
Amortization of debt discount
|
|
|
5,082
|
|
|
|
687
|
|
Amortization of debt premium
|
|
|
(240
|
)
|
|
|
-
|
|
Non-cash interest expense
|
|
|
-
|
|
|
|
348
|
|
Change in fair value of derivatives
|
|
|
5,138
|
|
|
|
(7,896
|
)
|
Loss from extinguishment of debt
|
|
|
601
|
|
|
|
8,092
|
|
Stock-based compensation related to warrants modification
|
|
|
141
|
|
|
|
-
|
|
Stock-based compensation for services
|
|
|
11,873
|
|
|
|
373
|
|
Subtotal of non-cash charges
|
|
|
23,317
|
|
|
|
1,704
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
453
|
|
|
|
212
|
|
Accounts payable and accrued expenses
|
|
|
857
|
|
|
|
3,222
|
|
Related party accounts payable and accrued expenses
|
|
|
1,782
|
|
|
|
1,730
|
|
Other non-current assets
|
|
|
(42
|
)
|
|
|
29
|
|
Net cash used in operating activities
|
|
|
(16,355
|
)
|
|
|
(15,976
|
)
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
Refund of leasehold improvement related to UK construction
|
|
|
-
|
|
|
|
220
|
|
Purchase of property, plant and equipment
|
|
|
-
|
|
|
|
(9
|
)
|
Net cash provided by investing activities
|
|
|
-
|
|
|
|
211
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
Proceeds from issuance of Series A convertible preferred stock and warrants
|
|
|
527
|
|
|
|
-
|
|
Proceeds from issuance of Series B convertible preferred stock and warrants, net
|
|
|
6,594
|
|
|
|
-
|
|
Proceeds from issuance of common stock and warrants in a registered direct offering, net
|
|
|
1,000
|
|
|
|
7,067
|
|
Proceeds from issuance of common stock and warrants in a private offering
|
|
|
-
|
|
|
|
553
|
|
Proceeds from private offering (shares payable)
|
|
|
138
|
|
|
|
-
|
|
Proceeds from investor to offset subscription receivable
|
|
|
100
|
|
|
|
-
|
|
Proceeds from exercise of warrants
|
|
|
2,119
|
|
|
|
100
|
|
Proceeds from issuance of notes payable, net
|
|
|
3,701
|
|
|
|
3,973
|
|
Proceeds from issuance of notes payable to related party
|
|
|
30
|
|
|
|
2,740
|
|
Proceeds from issuance of convertible notes payable, net
|
|
|
-
|
|
|
|
1,604
|
|
Proceeds from issuance of convertible notes payable to related party
|
|
|
5,400
|
|
|
|
-
|
|
Repayment of notes payable
|
|
|
(2,200
|
)
|
|
|
-
|
|
Repayment of notes payable to related parties
|
|
|
(782
|
)
|
|
|
(880
|
)
|
Repayment of convertible notes payable
|
|
|
-
|
|
|
|
(3,258
|
)
|
Net cash provided by financing activities
|
|
|
16,627
|
|
|
|
11,899
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
1,208
|
|
|
|
(2,983
|
)
|
Net increase (decrease) in cash and cash equivalents
|
|
|
1,480
|
|
|
|
(6,849
|
)
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of the year
|
|
|
117
|
|
|
|
6,871
|
|
Cash and cash equivalents, end of the year
|
|
$
|
1,597
|
|
|
$
|
22
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information
|
|
|
|
|
|
|
|
|
Interest payments on mortgage loan
|
|
$
|
(633
|
)
|
|
$
|
(658
|
)
|
Interest payments on senior convertible note
|
|
$
|
-
|
|
|
$
|
(485
|
)
|
Interest payments on notes payable to related party
|
|
$
|
(27
|
)
|
|
$
|
(47
|
)
|
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
NORTHWEST BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
(in thousands)
|
|
For the six months ended
|
|
|
|
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
Supplemental schedule of non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Issuance of common stock for conversion of Series A convertible preferred stock
|
|
$
|
11,766
|
|
|
$
|
-
|
|
Deemed dividend on conversion of Series A convertible preferred stock to common stock
|
|
$
|
9,910
|
|
|
$
|
-
|
|
Beneficial conversion feature of Series B convertible preferred stock
|
|
$
|
2,086
|
|
|
$
|
-
|
|
Deemed dividend related to immediate accretion of beneficial conversion feature of Series B convertible preferred stock
|
|
$
|
2,086
|
|
|
$
|
-
|
|
Issuance of common stock for conversion of Series B convertible preferred stock
|
|
$
|
2,171
|
|
|
$
|
-
|
|
Deemed dividend on conversion of Series B convertible preferred stock to common stock
|
|
$
|
1,594
|
|
|
$
|
-
|
|
Reclassification of warrant liabilities related to warrants exercised for cash
|
|
$
|
2,177
|
|
|
$
|
1,847
|
|
Conversion of share settled debt into common stock
|
|
$
|
1,746
|
|
|
$
|
451
|
|
Issuance of common stock and warrants for conversion of debt and accrued interest
|
|
$
|
3,312
|
|
|
$
|
5,462
|
|
Exchange 2014 Senior Convertible Notes and accrued interest for secured convertible note
|
|
$
|
-
|
|
|
$
|
5,175
|
|
Forgiveness of certain payables to Cognate BioServices, Inc.
|
|
$
|
-
|
|
|
$
|
3,750
|
|
Embedded conversion features with issuance of secured convertible notes
|
|
$
|
-
|
|
|
$
|
1,826
|
|
Beneficial conversion feature associated with convertible note issued to related party
|
|
$
|
-
|
|
|
$
|
-
|
|
Warrants and contingently issuable warrants associated with convertible notes payable to related party
|
|
$
|
4,217
|
|
|
$
|
-
|
|
Warrants issued associated with notes payable
|
|
$
|
-
|
|
|
$
|
83
|
|
Conversion of note payable to offset Series A convertible preferred stock subscription receivable
|
|
$
|
500
|
|
|
$
|
-
|
|
Conversion of interest payable to offset Series A convertible preferred stock subscription receivable
|
|
$
|
71
|
|
|
$
|
-
|
|
Reclass between accrued interest and subscription receivable
|
|
$
|
9
|
|
|
$
|
-
|
|
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
1. Organization and Description of Business
Northwest Biotherapeutics, Inc. and its
wholly owned subsidiaries NW Bio Gmbh, Aracaris Ltd 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.
Cognate BioServices, Inc. (“Cognate
BioServices”), a company which was related by common ownership until a management buyout of Cognate occurred on February
6, 2018, provides the Company with mission critical contract manufacturing services, research and development services, distribution
and logistics, and related services, in compliance with the Company’s specifications and the applicable regulatory requirements
for clinical grade cellular products. The Company and Cognate BioServices are currently parties to a series of contracts providing
for these services as more fully described below. The Company is currently dependent on Cognate BioServices to provide the manufacturing
services, and any interruption of such services could potentially have a material adverse effect on the Company’s ability
to proceed with its clinical trials. In addition, a former Cognate affiliate in the UK (which was formerly part of Cognate BioServices,
and is now known as Advent BioServices, in a related party relationship to the Company) is preparing for production of DCVax-L
products there. The Company and Advent BioServices entered into contract arrangements for manufacturing and related services for
the U.K. and Europe on May 14, 2018.
2. Liquidity, Financial Condition and Management Plans
During the six months ended June 30, 2018
the Company used approximately $16.4 million of cash in its operating activities. Management believes that the Company will be
able to continue accessing capital resources through the sale of equity and debt financing arrangements. However, the Company has
no assurance that such capital will be available at the times needed and/or on the terms desired.
During the six months ended June 30, 2018,
the Company raised approximately $19.6 million in equity and debt securities to fund its operations. The Company had current assets
of $2.4 million and a working capital deficit of approximately $96.1 million at June 30, 2018. The Company owed an aggregate of
$2.4 million of trade liabilities and accrued expenses to certain related parties as of June 30, 2018, of which $2.0 million was
payable to Advent BioServices and Cognate Israel.
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.
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
The accompanying unaudited condensed consolidated
financial statements of the Company have been prepared in accordance with the accounting principles generally accepted in the United
States of America (“U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and
Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”) and on the same basis as the Company
prepares its annual audited consolidated financial statements. The condensed consolidated balance sheet as of June 30, 2018, condensed
consolidated statements of operations for the three and six months ended June 30, 2018 and 2017, condensed consolidated statements
of comprehensive loss for the three and six months ended June 30, 2018 and 2017, condensed consolidated statement of stockholders’
equity (deficit) for the six months ended June 30, 2018, and the condensed consolidated statements of cash flows for the six months
ended June 30, 2018 and 2017 are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which
the Company considers necessary for a fair presentation of the financial position, operating results and cash flows for the periods
presented. The results for the three and six months ended June 30, 2018 are not necessarily indicative of results to be expected
for the year ending December 31, 2018 or for any future interim period. The condensed consolidated balance sheet at December 31,
2017 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, 2017 and notes thereto included
in the Company’s annual report on Form 10-K, which was filed with the SEC on April 17, 2018.
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
There have been no material changes in
the Company’s significant accounting policies to those previously disclosed in the 2017 Annual Report.
Adoption of Recent Accounting Standards
Revenue from Contracts with Customer
In April 2016, the Financial Accounting
Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-10 to clarify the implementation
guidance on licensing and the identification of performance obligations consideration included in ASU 2014-09, Revenue from Contracts
with Customers (“ASU 2014-09”), which is also known as ASC 606, was issued in May 2014 and outlines
a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes
most current revenue recognition guidance, including industry-specific guidance. In March 2016, the FASB issued ASU 2016-08
to provide amendments to clarify the implementation guidance on principal versus agent considerations. The Company implemented
the standard on the effective date of January 1, 2018 on a modified retrospective basis to contracts which were not completed
as of this date. Adoption of this standard did not have a material impact on the Company’s condensed consolidated financial
statements as we did not have any unrecognized transaction price, or any remaining performance obligations under the Company’s
patient service contracts. Payments from patients are non-refundable, and are not dependent on the Company’s ongoing future
performance. Due to potential collectability issues with patients, the Company has adopted a policy of recognizing these payments
as revenue when received.
Recognition and Measurement of Financial
Assets and Financial Liabilities
In January 2016, the FASB issued ASU No.
2016-01,
Recognition and Measurement of Financial Assets and Financial Liabilities
. ASU 2016-01 requires equity investments
to be measured at fair value with changes in fair value recognized in net income; simplifies the impairment assessment of equity
investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; eliminates the
requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value
that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; requires public business
entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; requires
an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability
resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value
in accordance with the fair value option for financial instruments; requires separate presentation of financial assets and financial
liabilities by measurement category and form of financial assets on the balance sheet or the accompanying notes to the financial
statements; and clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to
available-for-sale securities in combination with the entity’s other deferred tax assets. ASU 2016-01 will be effective for
financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.
The Company has adopted this guidance during the quarter ended March 31, 2018. The adoption of this update did not impact
the Company’s condensed consolidated financial statements and related disclosures.
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
Statement of Cash Flows
In August 2016, the FASB issued ASU No.
2016-15 Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments, which addresses specific
cash flow classification issues where there is currently diversity in practice including debt prepayment and proceeds from the
settlement of insurance claims. ASU 2016-15 is effective for annual periods beginning after December 15, 2017, with early adoption
permitted. The Company adopted ASU No. 2016-15 as of January 1, 2018. The adoption of this update did not impact the Company’s
condensed consolidated financial statements and related disclosures.
Recent Issued Accounting Pronouncements
Leases
In February 2016, the FASB issued ASU No.
2016-02,
Leases (Topic 842)
which supersedes FASB ASC Topic 840,
Leases (Topic 840)
and provides principles for the
recognition, measurement, presentation and disclosure of leases for both lessees and lessors. The new standard requires lessees
to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the
lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized
based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required
to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of classification.
Leases with a term of twelve months or less will be accounted for similar to existing guidance for operating leases. The standard
will be effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted upon issuance.
The Company is currently evaluating the impact that ASU 2016-02 will have on its condensed consolidated financial statements and
related disclosures.
Compensation-Stock Compensation
In May 2017, the FASB issued ASU No. 2017-09,
Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting
, which clarifies when to account for a change
to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is
required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as
a result of the change in terms or conditions. It is effective prospectively for the annual period ending December 31, 2018 and
interim periods within that annual period. Early adoption is permitted. The Company is currently evaluating the impact of adopting
this standard on the condensed consolidated financial statements and disclosures, but does not expect it to have a significant
impact.
Accounting for Certain Financial Instruments with Down
Round Features
In July 2017, the FASB has issued a two-part
ASU No. 2017-11, (i).
Accounting for Certain Financial Instruments with Down Round Features
and (ii)
Replacement of the
Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable
Noncontrolling Interests with a Scope Exception
which simplifies the accounting for certain financial instruments with down
round features, a provision in an equity-linked financial instrument (or embedded feature) that provides a downward adjustment
of the current exercise price based on the price of future equity offerings. It is effective for public business entities for fiscal
years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The Company
will be evaluating the impact of adopting this standard on its condensed consolidated financial statements and disclosures.
Improvements to Nonemployee Share-Based Payment Accounting
In June 2018, the FASB issued ASU 2018-07
“Improvements to Nonemployee Share-Based Payment Accounting”, which simplifies the accounting for share-based payments
granted to nonemployees for goods and services. Under the ASU, most of the guidance on such payments to nonemployees would be aligned
with the requirements for share-based payments granted to employees. The amendments are effective for fiscal years beginning after
December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but
no earlier than an entity’s adoption date of Topic 606.
The Company is currently evaluating
the impact of the new standard on its condensed consolidated financial statements.
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
4. Fair Value Measurements
Derivative Warrants Granted in 2018
During the six months ended June 30, 2018,
the Company granted approximately 68.3 million warrants (the “Warrants”) to multiple investors (the “Holders”),
including 11.7 million contingently issuable warrants to Linda F. Powers, the Company’s Chief Executive Officer. Since the
Company’s adoption of a sequencing policy, the warrants were classified as liabilities and measured at fair value on the
grant date, with changes in fair value recognized as other income on the statements of operations and disclosed in the financial
statements.
A summary of weighted average (in aggregate)
significant unobservable inputs (Level 3 inputs) used in measuring warrants granted during the six months ended June 30, 2018 is
as follows:
|
|
2018 Warrants Granted
Associated with
|
|
|
|
Series A Convertible
|
|
|
Series B Convertible
|
|
|
|
|
|
Issuance of
|
|
|
Modification of
|
|
|
|
Preferred Stock
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Debt
|
|
|
Warrant Liabilities
|
|
Strike price
|
|
$
|
0.22
|
|
|
$
|
0.30
|
|
|
$
|
0.30
|
|
|
$
|
0.30
|
|
|
$
|
0.26
|
|
Contractual term (years)
|
|
|
2.0
|
|
|
|
2.0
|
|
|
|
2.0
|
|
|
|
5.0
|
|
|
|
3.8
|
|
Volatility (annual)
|
|
|
116
|
%
|
|
|
115
|
%
|
|
|
114
|
%
|
|
|
94
|
%
|
|
|
99
|
%
|
Risk-free rate
|
|
|
2
|
%
|
|
|
2
|
%
|
|
|
3
|
%
|
|
|
3
|
%
|
|
|
3
|
%
|
Dividend yield (per share)
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
The following table classifies the Company’s
liabilities measured at fair value on a recurring basis into the fair value hierarchy as of June 30, 2018 and December 31, 2017
(in thousands):
|
|
Fair value measured
at June 30, 2018
|
|
|
|
|
|
|
Quoted prices in active
|
|
|
Significant other
|
|
|
Significant
|
|
|
|
Fair value at
|
|
|
markets
|
|
|
observable inputs
|
|
|
unobservable inputs
|
|
|
|
June 30, 2018
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Warrant liability
|
|
$
|
52,389
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
52,389
|
|
Embedded conversion feature
|
|
|
2,794
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,794
|
|
Share-settled debt (in default)
|
|
|
1,562
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,562
|
|
Total fair value
|
|
$
|
56,745
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
56,745
|
|
|
|
Fair value measured
at December 31, 2017
|
|
|
|
|
|
|
Quoted prices in active
|
|
|
Significant other
|
|
|
Significant
|
|
|
|
Fair value at
|
|
|
markets
|
|
|
observable inputs
|
|
|
unobservable inputs
|
|
|
|
December 31, 2017
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Warrant liability
|
|
$
|
40,171
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
40,171
|
|
Embedded conversion feature
|
|
|
2,608
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,608
|
|
Share-settled debt (in default)
|
|
|
3,308
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,200
|
|
Total fair value
|
|
$
|
46,087
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
47,979
|
|
There were no transfers between Level 1,
2 or 3 during the six-month period ended June 30, 2018.
The following table presents changes in
Level 3 liabilities measured at fair value for the six-month period ended June 30, 2018. 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).
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
|
|
|
|
|
Embedded
|
|
|
Share-settled
|
|
|
|
|
|
|
Warrant
|
|
|
Conversion
|
|
|
Debt
|
|
|
|
|
|
|
Liability
|
|
|
Feature
|
|
|
(in Default)
|
|
|
Total
|
|
Balance – January 1, 2018
|
|
$
|
40,171
|
|
|
$
|
2,608
|
|
|
$
|
3,308
|
|
|
$
|
46,087
|
|
Warrants granted
|
|
|
9,443
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,443
|
|
Extinguishment of warrant liabilities related to warrants exercised for cash
|
|
|
(2,177
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,177
|
)
|
Conversion of share-settled debt
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,746
|
)
|
|
|
(1,746
|
)
|
Change in fair value
|
|
|
4,952
|
|
|
|
186
|
|
|
|
-
|
|
|
|
5,138
|
|
Balance – June 30, 2018
|
|
$
|
52,389
|
|
|
$
|
2,794
|
|
|
$
|
1,562
|
|
|
$
|
56,745
|
|
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 June 30, 2018 is as follows:
|
|
As of June 30, 2018
|
|
|
As of December 31, 2017
|
|
|
|
Warrant
|
|
|
Embedded
|
|
|
Warrant
|
|
|
Embedded
|
|
|
|
Liability
|
|
|
Conversion Feature
|
|
|
Liability
|
|
|
Conversion Feature
|
|
Strike price
|
|
$
|
0.29
|
|
|
$
|
0.50
|
|
|
$
|
0.31
|
|
|
$
|
0.50
|
|
Contractual term (years)
|
|
|
2.4
|
|
|
|
2.2
|
|
|
|
2.5
|
|
|
|
2.5
|
|
Volatility (annual)
|
|
|
99
|
%
|
|
|
106
|
%
|
|
|
110
|
%
|
|
|
102
|
%
|
Risk-free rate
|
|
|
2
|
%
|
|
|
2
|
%
|
|
|
2
|
%
|
|
|
2
|
%
|
Dividend yield (per share)
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
5. Property & Equipment
Property and equipment consist of the following
at June 30, 2018 and December 31, 2017 (in thousands):
|
|
June 30,
|
|
|
December 31,
|
|
|
Estimated
|
|
|
2018
|
|
|
2017
|
|
|
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
|
|
|
611
|
|
|
|
622
|
|
|
3 years
|
|
|
|
717
|
|
|
|
728
|
|
|
|
Less: accumulated depreciation
|
|
|
(626
|
)
|
|
|
(559
|
)
|
|
|
Total property, plant and equipment, net
|
|
$
|
91
|
|
|
$
|
169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land in the United Kingdom
|
|
$
|
29,003
|
|
|
$
|
29,003
|
|
|
NA
|
Buildings in the United Kingdom
|
|
|
17,786
|
|
|
|
18,601
|
|
|
15 years
|
Less: accumulated depreciation
|
|
|
(900
|
)
|
|
|
(285
|
)
|
|
|
Total facilities in the United Kingdom, net
|
|
$
|
45,889
|
|
|
$
|
47,319
|
|
|
|
Depreciation expenses were approximately
$357,000 and $44,000 for the three months ended June 30, 2018 and 2017 and were approximately $722,000 and $100,000 for the six
months ended June 30, 2017 and 2016.
6. Stock-based Compensation
On May 28, 2018, the Company entered into
Option Grant Agreements and issued options thereunder to certain directors, officers and consultants, most of which options were
approved by the Board in prior months (collectively, the “Options”).
The Options included 68,600,000 options
for officers, 15,680,000 options to independent directors, and 1,500,000 to an individual consultant. The Options are subject
to vesting requirements. 50% of the Options are vested on the grant date, and the remaining 50% of the Options will vest monthly
over a period of 24 months following the Board approvals of the Options, subject to acceleration upon the occurrence of certain
achievement milestones as reported in an 8-K filed on June 1, 2018. A performance milestone was achieved and the Company accelerated
vesting on 25% of these outstanding Options. As a result, the Company recorded an additional charge to stock-based compensation
of $2.6 million during the three months ended June 30, 2018.
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
Modification of Stock Options
In January 2018, the Board also approved
extension of the term of options that were granted to Dr. Alton Boyton and Dr. Marnix Bosch on June 13, 2017, from 5 years to 10
years to conform to the term of other employee options. The Company accounted for the modification as a Type I (probable-to-probable)
modification and the incremental cost was approximately $0.4 million.
The following table summarizes stock option
activities for the Company’s option plans for the six months ended June 30, 2018 (amount in thousands, except per share number):
|
|
Number of Shares
|
|
|
Weighted Average
Exercise Price
|
|
|
Weighted Average
Remaining
Contractual Life (in
years)
|
|
|
Total Intrinsic Value
|
|
Outstanding as of December 31, 2017
|
|
|
12,656
|
|
|
$
|
10.56
|
|
|
|
1.9
|
|
|
$
|
-
|
|
Granted
|
|
|
97,123
|
|
|
|
0.23
|
|
|
|
9.8
|
|
|
|
2,687
|
|
Forfeited/expired
|
|
|
(12,587
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding as of June 30, 2018
|
|
|
97,192
|
|
|
$
|
0.24
|
|
|
|
9.8
|
|
|
$
|
2,687
|
|
Options vested and exercisable
|
|
|
73,202
|
|
|
$
|
0.24
|
|
|
|
9.8
|
|
|
$
|
2,204
|
|
The following weighted average assumptions
were used to compute the fair value of stock options granted during the six months ended June 30, 2018:
|
|
For the Six Months
|
|
|
|
Ended
|
|
|
|
June 30, 2018
|
|
Exercise price
|
|
$
|
0.23
|
|
Expected term (years)
|
|
|
5.2
|
|
Expected stock price volatility
|
|
|
95
|
%
|
Risk-free rate of interest
|
|
|
3
|
%
|
The following table summarizes stock-based
compensation expense related to stock options for the three and six months ended June 30, 2018 and 2017 (in thousands):
|
|
For the three months ended
|
|
|
For the six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Research and development
|
|
$
|
854
|
|
|
$
|
373
|
|
|
$
|
1,124
|
|
|
$
|
424
|
|
General and administrative
|
|
|
10,715
|
|
|
|
-
|
|
|
|
10,715
|
|
|
|
-
|
|
Total stock-based compensation expense
|
|
$
|
11,569
|
|
|
$
|
373
|
|
|
$
|
11,839
|
|
|
$
|
424
|
|
The weighted average grant date fair value
was approximately $15.5 million, including the incremental fair value of $0.4 million resulting from the modification of Dr. Alton
Boyton’s and Dr. Marnix Bosch’s options, which is being recognized over the new vesting period of 2.5 years. The total
unrecognized compensation cost was approximately $3.2 million as of June 30, 2018 and will be recognized over the next 2.0 years.
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
7. Outstanding Debt
The following table summarizes outstanding
debt as of June 30, 2018 and December 31, 2017, respectively (amount in thousands, except per share data):
|
|
|
|
Stated
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
Fair Value of
|
|
|
|
|
|
|
|
|
Interest
|
|
|
Conversion
|
|
|
|
|
|
Debt (Discount)/
|
|
|
Embedded
|
|
|
Carrying
|
|
|
|
Maturity
Date
|
|
Rate
|
|
|
Price
|
|
|
Face
Value
|
|
|
Premium
|
|
|
Conversion
Option
|
|
|
Value
|
|
Short term convertible notes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6% unsecured (1)
|
|
Due
|
|
|
6
|
%
|
|
$
|
3.09
|
|
|
$
|
135
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short term convertible notes payable - related
party
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10% unsecured (2)
|
|
On Demand
|
|
|
10
|
%
|
|
$
|
0.23
|
|
|
|
5,400
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short term notes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6% unsecured (3)
|
|
8/25/2018
|
|
|
6
|
%
|
|
|
N/A
|
|
|
|
1,389
|
|
|
|
(171
|
)
|
|
|
-
|
|
|
|
1,218
|
|
8% unsecured (4)
|
|
Various
|
|
|
8
|
%
|
|
|
N/A
|
|
|
|
3,442
|
|
|
|
(144
|
)
|
|
|
-
|
|
|
|
3,298
|
|
10% unsecured (6)
|
|
On Demand
|
|
|
10
|
%
|
|
|
N/A
|
|
|
|
150
|
|
|
|
-
|
|
|
|
-
|
|
|
|
150
|
|
12% unsecured (7)
|
|
On Demand
|
|
|
12
|
%
|
|
|
N/A
|
|
|
|
440
|
|
|
|
(4
|
)
|
|
|
-
|
|
|
|
436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,421
|
|
|
|
(319
|
)
|
|
|
-
|
|
|
|
5,102
|
|
Short term notes payable - related parties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10% unsecured - Related Parties (9)
|
|
On Demand
|
|
|
10
|
%
|
|
|
N/A
|
|
|
|
300
|
|
|
|
-
|
|
|
|
-
|
|
|
|
300
|
|
12% unsecured - Related Parties (9)
|
|
On Demand
|
|
|
12
|
%
|
|
|
N/A
|
|
|
|
69
|
|
|
|
-
|
|
|
|
-
|
|
|
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
369
|
|
|
|
-
|
|
|
|
-
|
|
|
|
369
|
|
Share-settled debt, at fair value (10)
|
|
In Default
|
|
|
18
|
%
|
|
$
|
0.24
|
|
|
|
1,562
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short term mortgage loan (11)
|
|
11/16/2018
|
|
|
12
|
%
|
|
|
N/A
|
|
|
|
6,618
|
|
|
|
(114
|
)
|
|
|
-
|
|
|
|
6,504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long term convertible notes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12% secured convertible notes (12)
|
|
06/21/20
|
|
|
12
|
%
|
|
$
|
0.50
|
|
|
|
5,350
|
|
|
|
(1,670
|
)
|
|
|
2,794
|
|
|
|
6,474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long term notes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8% unsecured (13)
|
|
12/12/19
|
|
|
8
|
%
|
|
|
N/A
|
|
|
|
2,880
|
|
|
|
(369
|
)
|
|
|
-
|
|
|
|
2,511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long term mortgage loan (11)
|
|
08/17/19
|
|
|
12
|
%
|
|
|
N/A
|
|
|
|
4,763
|
|
|
|
(28
|
)
|
|
|
-
|
|
|
|
4,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance as of June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
$
|
32,498
|
|
|
$
|
(2,500
|
)
|
|
$
|
2,794
|
|
|
$
|
32,792
|
|
|
|
|
|
Stated
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
Fair Value of
|
|
|
|
|
|
|
|
|
Interest
|
|
|
Conversion
|
|
|
|
|
|
Debt (Discount)/
|
|
|
Embedded
|
|
|
Carrying
|
|
|
|
Maturity
Date
|
|
Rate
|
|
|
Price
|
|
|
Face
Value
|
|
|
Premium
|
|
|
Conversion
Option
|
|
|
Value
|
|
Short term convertible notes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6% unsecured (1)
|
|
Due
|
|
|
6
|
%
|
|
$
|
3.09
|
|
|
$
|
135
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short term notes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8% unsecured (4)
|
|
9/3/2018 and 12/5/2018
|
|
|
8
|
%
|
|
|
N/A
|
|
|
|
2,007
|
|
|
|
355
|
|
|
|
-
|
|
|
|
2,362
|
|
8% unsecured (5)
|
|
6/30/2018
|
|
|
8
|
%
|
|
|
N/A
|
|
|
|
1,655
|
|
|
|
(103
|
)
|
|
|
-
|
|
|
|
1,552
|
|
10% unsecured (6)
|
|
On Demand
|
|
|
10
|
%
|
|
|
N/A
|
|
|
|
650
|
|
|
|
-
|
|
|
|
-
|
|
|
|
650
|
|
12% unsecured (7)
|
|
On Demand
|
|
|
12
|
%
|
|
|
N/A
|
|
|
|
440
|
|
|
|
(82
|
)
|
|
|
-
|
|
|
|
358
|
|
8% unsecured (8)
|
|
On Demand
|
|
|
8
|
%
|
|
|
N/A
|
|
|
|
2,200
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,952
|
|
|
|
170
|
|
|
|
-
|
|
|
|
7,122
|
|
Short term notes payable - related parties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10% unsecured - Related Parties (9)
|
|
On Demand
|
|
|
10
|
%
|
|
|
N/A
|
|
|
|
1,071
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,071
|
|
12% unsecured - Related Parties (9)
|
|
On Demand
|
|
|
12
|
%
|
|
|
N/A
|
|
|
|
50
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,121
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,121
|
|
Share-settled debt, at fair value (10)
|
|
In Default
|
|
|
18
|
%
|
|
$
|
0.24
|
|
|
|
3,308
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short term mortgage loan (11)
|
|
8/16/2018 & 11/16/18
|
|
|
12
|
%
|
|
|
N/A
|
|
|
|
11,629
|
|
|
|
(403
|
)
|
|
|
-
|
|
|
|
11,226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long term convertible notes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12% secured convertible notes (12)
|
|
06/21/20
|
|
|
12
|
%
|
|
$
|
0.50
|
|
|
|
5,350
|
|
|
|
(1,948
|
)
|
|
|
2,608
|
|
|
|
6,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long term notes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8% unsecured (4)
|
|
06/20/19
|
|
|
8
|
%
|
|
|
N/A
|
|
|
|
2,880
|
|
|
|
(373
|
)
|
|
|
-
|
|
|
|
2,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance as of December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
$
|
31,375
|
|
|
$
|
(2,554
|
)
|
|
$
|
2,608
|
|
|
$
|
31,429
|
|
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
|
(1)
|
This $135,000 note as of June 30, 2018 and December 31,
2017 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)
|
Between February 2018 and April 2018, the Company’s
Chief Executive Officer, Linda Powers, loaned the Company an aggregate principal amount of $5.4 million, and the Company entered
into convertible note agreements for this amount (the “Convertible Notes”). The Convertible Notes bear interest rate
at 10% per annum, and are repayable upon 15 days' notice from the holder (and no later than five years from the date of the Convertible
Notes).
|
The principal and interest of the Convertible
Notes are convertible into Series B Preferred Stock at conversion price of $2.30 per share, and each share of Series B Preferred
Stock is convertible into 10 shares of common stock. Additionally, the Convertible Notes carry Class D-2 Warrants, with half of
the Class D-2 Warrants due and issuable when the loan was provided, and half of the Class D-2 Warrants due on a proportional basis
in the event of conversion of some or all of the Note. The Class D-2 Warrants have five-year term.
The Company issued 23.5 million Class D-2
Warrants with an exercise price of $0.30, including 11.7 million contingently issuable warrants. The fair value of the warrants
were approximately $4.2 million, which were recorded as debt discount at the issuance date.
The Company recorded $4.2 million interest
expenses as amortization on the debt discount immediately due to the term of the Convertible Notes, which are on demand.
The accrued interest associated with the
Convertible Notes were approximately $178,000 as of June 30, 2018.
|
(3)
|
On May 1, 2018, the Company entered into a Convertible Secured Full Recourse Redeemable Note Agreement (the “Secured Note”) of $1.4 million with an existing investor, who is currently holding certain share-settled debt of the Company. The Secured Note included an original issue discount of $0.1 million and $50,000 legal cost that was reimbursable to the investor. The Secured Note bears interest at a rate of 6% per annum, and will be due on August 25, 2018.
|
|
(4)
|
This $3.4 million note as of June 30, 2018 consists of
three separate 8% notes in the amounts of $0.3 million, $0.5 million and $2.6 million.
|
During the six months ended
June 30, 2018, the Company converted approximately $1.4 million principal and $0.2 million accrued interest into approximately
7.7 million shares of common stock at fair value of $2.1 million. The Company recorded an approximate $0.5 million debt extinguishment
loss from this conversion.
|
(5)
|
On December 30, 2016, the Company entered into a note purchase
agreement (the “Note”) with an individual investor for an aggregate principal amount of $3.3 million. The Note bore
interest at 8% per annum with 18 months term. The Note carries an original issue discount of $0.3 million and $10,000 legal cost
that was reimbursable to the investor.
|
During the six months ended
June 30, 2018, the Company entered into multiple exchange agreement with the Note holder to convert approximately $1.7 million
principal and $33,000 accrued interest into approximately 6.8 million shares of common stock at fair value of $1.8 million. The
Company recorded an approximate $0.1 million debt extinguishment loss from this conversion.
|
(6)
|
In 2017, the Company entered two promissory note agreements
(the “Notes”) with certain investors for an aggregate principal amount of $650,000. The Notes bore interest at 10%
per annum, and were payable upon demand.
|
During the six months ended
June 30, 2018, the Company agreed to take the proceeds from the $500,000 note and $12,000 accrued interest to offset certain Series
A convertible preferred stock subscription receivable.
|
(7)
|
In 2017, the Company entered
two promissory note agreements (the “Notes”) with the same investor for an aggregate principal amount of $0.4 million.
The Notes bore interest at 12% per annum, and is payable upon demand. The Company also issued approximately 1.2 million warrants
with a weighted average strike price of $0.19 in conjunction the Note. The Company recorded $0.1 million debt discount at the
issuance date, which is the fair value of the warrants.
|
The remaining debt discount
associated with the Notes was $4,000 as of June 30, 2018.
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
|
(8)
|
On December 29, 2017, the Company entered a promissory
note agreement (the “Note”) with a third party for principal amount of $2.2 million. The Note bore interest at 8%
per annum, and is payable upon demand.
|
During the six months ended
June 30, 2018, the Company made full repayment to the Note holder in the amount of $2.2 million, including $9,000 related to accrued
interest.
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 year ended December
31, 2017, the Company made an aggregate principal payment of $1.2 million to settle some of Mr. Goldman’s outstanding demand
notes, and an aggregate of $47,000 interest payment associated with these demand notes. Such payment included repayment of $0.3
million outstanding debt incurred during the year ended December 31, 2016.
During the six months ended
June 30, 2018, the Company made an aggregate principal payment of $0.4 million to the Goldman Notes.
The outstanding principal amount
for the Goldman Notes was approximately $69,000 and $0.4 million as of June 30, 2018 and December 31, 2017, respectively.
There was approximately $69,000
accrued interest associated with the Goldman Notes which remained due as of June 30, 2018.
Toucan Notes
In 2017, Toucan Capital Fund
III loaned the Company an aggregate amount of $1.2 million pursuant to multiple Demand Promissory Notes (the “Toucan Notes”).
The Toucan Notes bear interest at 10% per annum, and are payable upon demand, with 7 days’ prior written notice to the Company.
During the year ended December
31, 2017, the Company made an aggregate principal payment of approximately $0.8 million on the Toucan Notes.
During the six months ended
June 30, 2018, the Company made an aggregate principal payment of approximately $0.4 million to the Toucan Notes. In addition,
the Company also made a partial interest payment of $18,000.
All principal was repaid as
of June 30, 2018. There was approximately $50,000 remaining of unpaid interest as of June 30, 2018.
Board of Directors Notes
In 2017, Jerry Jasinowski, Robert
Farmer and Cofer Black, members of the Company’s Board of Directors, loaned the Company an aggregate amount of $300,000 pursuant
to multiple Demand Promissory Notes (the “Notes”). The Notes bear interest at 10% per annum, and are payable upon demand,
with 7 days’ prior written notice to the Company.
No repayments have been made
on any of these notes. The full principal amounts remained outstanding as of June 30, 2018.
|
(
10
)
|
During the six months ended June 30, 2018, the holder of
the Company’s share-settled debt converted approximately $1.7 million of outstanding share-settled debt.
|
|
(11)
|
The two mortgage loans will be due on August 16, 2019 and
November 16, 2018. During the six months ended June 30, 2018, the Company made $633,000 of interest payments.
|
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
|
(12)
|
These long-term secured convertible notes (the “Notes”)
have a 3-year maturity and bear interest at 12% per annum. No interest will be payable during the term, but interest will accrue
and be payable at maturity. The Notes are secured by the property owned by the Company in the U.K., and not by any other assets
of the Company. The Notes and accrued interest will be convertible at any time during the term at fixed conversion prices: 50%
of the principal and accrued interest will be convertible at $0.25 per share, 25% of the principal and accrued interest will be
convertible at $0.50 per share and 25% of the principal and accrued interest will be convertible at $1.00 per share.
|
The Notes contained an embedded conversion feature which had
been revalued as of June 30, 2018 to approximately $2.8 million (see note 4).
|
(13)
|
On June 12, 2018, the Company entered into a note purchase
agreement (the “Note”) with an individual investor for an aggregate principal amount of $2,880,000. The Note bears
interest at 8% per annum with a 2-year term. The Note carries an original issue discount of $375,000 and $5,000 for legal cost
that was reimbursable to the investor.
|
No repayments have been made
on the Note. The remaining debt discount and accrued interest associated with the Note as of June 30, 2018 was $369,000 and $12,000,
respectively.
The following table summarizes total interest
expenses related to senior convertible notes, other notes and mortgage loan for the three and six months ended June 30, 2018 and
2017, respectively (in thousands):
|
|
For the three months ended
|
|
|
For the six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Interest expenses related to 2014 Senior convertible notes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual interest
|
|
$
|
-
|
|
|
$
|
39
|
|
|
$
|
-
|
|
|
$
|
424
|
|
Amortization of debt issuance costs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
175
|
|
Total interest expenses related to senior convertible notes
|
|
|
-
|
|
|
|
39
|
|
|
|
-
|
|
|
|
599
|
|
Interest expenses related to other notes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual interest
|
|
|
551
|
|
|
|
245
|
|
|
|
1,074
|
|
|
|
389
|
|
Amortization on debt premium
|
|
|
(90
|
)
|
|
|
348
|
|
|
|
(240
|
)
|
|
|
348
|
|
Amortization of debt discount
|
|
|
2,325
|
|
|
|
190
|
|
|
|
4,819
|
|
|
|
270
|
|
Total interest expenses related to other notes
|
|
|
2,786
|
|
|
|
783
|
|
|
|
5,653
|
|
|
|
1,007
|
|
Interest expenses related to mortgage loan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual interest
|
|
|
316
|
|
|
|
360
|
|
|
|
639
|
|
|
|
649
|
|
Amortization of debt issuance costs
|
|
|
130
|
|
|
|
123
|
|
|
|
263
|
|
|
|
242
|
|
Total interest expenses on the mortgage loan
|
|
|
446
|
|
|
|
483
|
|
|
|
902
|
|
|
|
891
|
|
Interest expenses related to Series A convertible preferred stock
|
|
|
68
|
|
|
|
-
|
|
|
|
68
|
|
|
|
-
|
|
Other interest expenses
|
|
|
2
|
|
|
|
3
|
|
|
|
3
|
|
|
|
5
|
|
Total interest expense
|
|
$
|
3,302
|
|
|
$
|
1,308
|
|
|
$
|
6,626
|
|
|
$
|
2,502
|
|
8. Net Loss per Share Applicable to
Common Stockholders
Basic loss per common share is computed
by dividing net loss by the weighted average number of common shares outstanding during the reporting period. Diluted loss per
common share is computed similar to basic loss per common share except that it reflects the potential dilution that could occur
if dilutive securities or other obligations to issue common stock were exercised or converted into common stock.
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
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 six months ended
|
|
|
|
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
Series A convertible preferred stock
|
|
|
32,187
|
|
|
|
-
|
|
Series B convertible preferred stock
|
|
|
75,059
|
|
|
|
-
|
|
Common stock options
|
|
|
97,192
|
|
|
|
12,656
|
|
Common stock warrants - equity treatment
|
|
|
-
|
|
|
|
37,554
|
|
Common stock warrants - liability treatment
|
|
|
356,844
|
|
|
|
84,135
|
|
Contingently issuable warrants
|
|
|
11,739
|
|
|
|
-
|
|
Share-settled debt and accrued interest, at fair value
|
|
|
11,046
|
|
|
|
30,932
|
|
Convertible notes and accrued interest
|
|
|
40,923
|
|
|
|
27,501
|
|
Potentially dilutive securities
|
|
|
624,990
|
|
|
|
192,778
|
|
9. Related Party Transactions
Cognate & Advent Expenses and Accounts
Payable
The following table summarizes expenses
incurred to related parties during the three and six months ended June 30, 2018 and 2017 (amount in thousands) (some of which remain
unpaid as noted below):
|
|
For the three months ended
|
|
|
For the six months ended
|
|
|
|
June 30,
|
|
|
June
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Cognate BioServices, Inc. (no longer related party in Q2 2018)
|
|
$
|
-
|
|
|
$
|
1,100
|
|
|
$
|
873
|
|
|
$
|
2,878
|
|
Cognate BioServices GmbH
|
|
|
-
|
|
|
|
348
|
|
|
|
66
|
|
|
|
765
|
|
Cognate Israel
|
|
|
70
|
|
|
|
318
|
|
|
|
98
|
|
|
|
689
|
|
Advent BioServices
|
|
|
1,747
|
|
|
|
853
|
|
|
|
3,666
|
|
|
|
856
|
|
Total
|
|
$
|
1,817
|
|
|
$
|
2,619
|
|
|
$
|
4,703
|
|
|
$
|
5,188
|
|
The following table summarizes outstanding
accounts payable held by related parties as of June 30, 2018 and December 31, 2017 (amount in thousands). These unpaid amounts
include part of the expenses reported in the table above and also certain expenses incurred in prior periods. The unpaid amounts
to Cognate BioServices, Inc. also include certain amounts that the Company disputes and that are under discussion with Cognate.
|
|
June 30, 2018
|
|
|
December 31, 2017
|
|
Cognate BioServices, Inc. (no longer related party in Q2 2018)*
|
|
$
|
6,913
|
|
|
$
|
4,520
|
|
Cognate BioServices GmbH
|
|
|
325
|
|
|
|
279
|
|
Cognate Israel
|
|
|
35
|
|
|
|
239
|
|
Advent BioServices
|
|
|
2,000
|
|
|
|
165
|
|
Total
|
|
$
|
9,273
|
|
|
$
|
5,203
|
|
*
Including
certain disputed amounts that the Company are in the process of discussing with Cognate.
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 Agreement is structured in the same manner as the Company’s existing Agreements
with Cognate BioServices. The Advent Agreement provides for a program initiation payment of approximately $1.0 million (£0.7
million), in connection with technology transfer to the UK, development of new Standard Operating Procedures (SOPs), training of
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 June 30, 2018. The Advent Agreement provides for certain payments for achievement of milestones
and, as is the case under the existing agreement 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.
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
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 principal amounts of $5.4 million, and the
Company entered into convertible note agreements for these amounts (the “Convertible Notes”). The Convertible Notes
bear interest rate at 10% per annum, and are repayable upon 15 days' notice from the holder (and no later than five years from
the date of the Convertible Notes).
The Convertible Notes are convertible into
Series B Preferred Stock at conversion price of $2.30 per share, and each share of Series B Preferred Stock is convertible into
10 shares of common stock. Additionally, the Convertible Notes carry Class D-2 Warrants, with half of the Class D-2 Warrants due
and issuable when the loan was provided, and half of the Class D-2 Warrants due on a proportional basis in the event of conversion
of some or all of the Note. The Class D-2 Warrants have five-year term.
The Company issued 23.5 million Class D-2
Warrants with an exercise price of $0.30, including 11.7 million contingently issuable warrants. The fair value of the warrants
was approximately $4.2 million, which were recorded as debt discount at the issuance date.
The Company recorded $4.2 million of interest
expenses as amortization on the debt discount immediately due to the term of the Convertible Notes, which are on demand.
The accrued interest associated with the
Convertible Notes was approximately $178,000 as of June 30, 2018.
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 multiple Demand Promissory Note Agreements.
On January 3, 2018, Mr. Goldman loaned the Company an additional $30,000 (collectively the “Goldman Notes”). Approximately
$0.5 million of the Goldman Notes bear interest at the rate of 12% per annum, and $0.8 million of the Goldman Notes bear interest
at the rate of 10% per annum.
During the year ended December 31, 2017,
the Company made an aggregate principal payment of $1.2 million to settle some of Mr. Goldman’s outstanding demand notes,
and an aggregate of $47,000 interest payment associated with these demand notes. Such payment included repayment of $0.3 million
outstanding debt incurred during the year ended December 31, 2016.
During the six months ended June 30, 2018,
the Company made an aggregate principal payment of $0.4 million to the Goldman Notes.
The outstanding principal amount for the
Goldman Notes was approximately $69,000 and $0.4 million as of June 30, 2018 and December 31, 2017, respectively.
There was approximately $69,000 accrued
interest associated with the Goldman Notes as of June 30, 2018.
Toucan Capital III Fund - Demand Loans
In April, 2017, Toucan Capital Fund III
loaned the Company an aggregate amount of $1.2 million pursuant to multiple Demand Promissory Notes (the “Toucan Notes”).
The Toucan Notes bear interest at 10% per annum, and are payable upon demand, with 7 days’ prior written notice to the Company.
During the year ended December 31, 2017,
the Company made an aggregate principal payment of approximately $0.8 million to the Toucan Notes.
During the six months ended June 30, 2018,
the Company made an aggregate principal payment of approximately $0.4 million to the Toucan Notes. In addition, the Company also
made a partial interest payment of $18,000.
All principal was repaid as of June 30,
2018. There was approximately $50,000 of remaining unpaid interest as of June 30, 2018.
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
Board of Directors - Demand Loans
In April, 2017, Jerry Jasinowski, Robert
Farmer and Cofer Black, members of the Company’s Board of Directors, loaned the Company an aggregate amount of $0.3 million
pursuant to multiple Demand Promissory Notes (the “Notes”). The Notes bear interest at 10% per annum, and are payable
upon demand, with 7 days’ prior written notice to the Company.
No repayments have been made on any of
these notes. The full principal amounts remained outstanding as of June 30, 2018.
10. Temporary Equity
Series A Convertible Preferred Stock
The following table summarizes the Company’s
Series A Convertible Preferred Stock activities for the six months ended June 30, 2018 (amount in thousands):
|
|
Series A Convertible Preferred Stock
|
|
|
|
Shares
|
|
|
Amount
|
|
Balance as of January 1, 2018
|
|
|
9,720
|
|
|
$
|
7,439
|
|
Issuance of Series A convertible preferred stock and warrants for cash (net of $0.5 million warrant liability)
|
|
|
294
|
|
|
|
27
|
|
Conversion of note payable to offset Series A convertible preferred stock subscription receivable
|
|
|
-
|
|
|
|
500
|
|
Conversion of interest payable to offset Series A convertible preferred stock subscription receivable
|
|
|
-
|
|
|
|
71
|
|
Issuance of common stock for conversion of Series A convertible preferred stock
|
|
|
(6,795
|
)
|
|
|
(11,766
|
)
|
Deemed dividends on conversion of Series A convertible preferred stock to common stock
|
|
|
-
|
|
|
|
9,910
|
|
Balance as of June 30, 2018
|
|
|
3,219
|
|
|
$
|
6,181
|
|
During the six months ended June 30, 2018,
the Company issued 294,118 shares of the Series A Convertible Preferred Stock, par value $0.001 per share (the “Series A
Shares”), at a purchase price of $1.70 per share, and 2-year Class D-1 Common Stock Purchase Warrants (the “Class D-1
Warrants”) to purchase up to 2.9 million shares of common stock at an exercise price of $0.22 per share. The Company received
$0.5 million cash.
During the six months ended June 30, 2018,
one of the Series A Shareholders converted his $500,000 note and $71,000 accrued interest with the Company to offset his current
subscription due amount to the Company.
The Series A Preferred Stock are convertible
into common stock after May 2, 2018. All Series A Shares are convertible at the option of the holder, at any time, into 10 shares
of common stock, par value $0.001 per share, for a total of 2.9 million shares of common stock (the equivalent of a conversion
price of $0.17 per share of common stock).
Due to the Sequencing Policy, the Class
D-1 Warrants were classified as warrant liabilities. On the issuance date, the Company estimated the fair value of the Class D-1
Warrants at approximately $500,000 under the Black-Scholes option pricing model using the following primary assumptions:
Exercise price
|
|
$
|
0.22
|
|
Expected term (years)
|
|
|
2.0
|
|
Expected stock price volatility
|
|
|
116
|
%
|
Risk-free rate of interest
|
|
|
2
|
%
|
Dividend yield (per share)
|
|
|
0
|
%
|
The fair value of the Class D-1 Warrants
was allocated to the $500,000 proceeds, creating a corresponding preferred stock discount in the same amount.
The Company determined that the Series
A Shares contain liquidation preference provisions allowing liquidation by the holder upon certain defined events (“deemed
liquidation events”). As the event that may trigger the liquidation of the Series A Shares is not solely within the Company’s
control, the Series A Shares are classified as mezzanine equity (temporary equity) in the Company’s consolidated balance
sheets.
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
If a liquidation or deemed liquidation
event occurs, and the Series A preferred stock has not yet been converted by election of the holder or by mandatory conversion
at the election of the Company, the holder will be entitled to a liquidation preference of either (a) an amount equal to the amount
the holder paid for their preferred stock, or (b) the proportionate proceeds applicable to their shares on an as converted basis.
During the six months ended June 30, 2018,
certain Series A Investors converted 6.8 million shares of Series A Shares into 68.0 million shares of common stock in accordance
with their terms. The Company recognized approximately $9.9 million of deemed dividends upon such conversion.
Series B Convertible Preferred Stock
The following table summarizes the Company’s
Series B Convertible Preferred Stock activities for the six months ended June 30, 2018 (amount in thousands):
|
|
Series B Convertible Preferred Stock
|
|
|
|
Shares
|
|
|
Amount
|
|
Balance as of January 1, 2018
|
|
|
5,582
|
|
|
$
|
12,601
|
|
Issuance of Series B convertible preferred stock and warrants for cash (net of $4.3 million warrant liability and $10,000 subscription receivable)
|
|
|
2,868
|
|
|
|
2,309
|
|
Beneficial conversion feature of Series B convertible preferred stock
|
|
|
-
|
|
|
|
(2,086
|
)
|
Deemed dividends related to immediate accretion of beneficial conversion feature of Series B convertible preferred stock
|
|
|
-
|
|
|
|
2,086
|
|
Issuance of common stock for conversion of Series B convertible preferred stock
|
|
|
(944
|
)
|
|
|
(2,171
|
)
|
Deemed dividends on conversion of Series B convertible preferred stock to common stock
|
|
|
-
|
|
|
|
1,594
|
|
Balance as of June 30, 2018
|
|
|
7,506
|
|
|
$
|
14,333
|
|
During the six months ended June 30, 2018,
the Company issued 2.9 million shares of the Series B Convertible Preferred Stock, par value $0.001 per share (the “Series
B Shares”), at a purchase price of $2.30 per share, and 2-year Class D-2 Common Stock Purchase Warrants (the “Class
D-2 Warrants”) to purchase up to 28.7 million shares of common stock at an exercise price of $0.30 per share. The Company
received $6.6 million cash.
The Series B Preferred Stock are convertible
into common stock after May 2, 2018. Each share of Series B Preferred Stock will be convertible at the option of the holder, at
any time, into a total of 10 shares of common stock, par value $0.001 per share, for a total of 28.7 million shares of common stock
(the equivalent of a conversion price of $0.23 per share of common stock).
Due to the Sequencing Policy, the Class
D-2 Warrants were classified as warrant liabilities. On the issuance date, the Company estimated the fair value of the Class D-2
Warrants at approximately $4.3 million under the Black-Scholes option pricing model using the following primary assumptions:
Exercise price
|
|
$
|
0.30
|
|
Expected term (years)
|
|
|
2.0
|
|
Expected stock price volatility
|
|
|
115
|
%
|
Risk-free rate of interest
|
|
|
2
|
%
|
Dividend yield (per share)
|
|
|
0
|
%
|
The entire fair value of the Class D-2
Warrants was allocated to the $6.6 million net proceeds, creating a corresponding preferred stock discount in the same amount.
The Company determined that the
Series B Shares contain contingent liquidation provisions allowing liquidation by the holder upon certain defined events
(“deemed liquidation events”). As the event that may trigger the liquidation of the Series B Shares is not solely
within the Company’s control, the Series B Shares are classified as mezzanine equity (temporary equity) in the
Company’s consolidated balance sheets, net of a subscription receivable of $10,000.
If a liquidation or deemed liquidation
event occurs, and the Series B preferred stock has not yet been converted by election of the holder or by mandatory conversion
at the election of the Company, the holder will be entitled to a liquidation preference of either (a) an amount equal to the amount
the holder paid for their preferred stock, or (b) the proportionate proceeds applicable to their shares on an as converted basis.
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
The initial fair value of the warrants
of approximately $4.3 million was deducted from the gross proceeds from the Series B Investors to arrive at the initial discounted
carrying value of the Series B Shares. The initial discounted carrying value resulted in recognition of a beneficial conversion
feature of $2.1 million, further reducing the initial carrying value of the Series B Shares. The resulting discount to the aggregate
stated value of the Series B Shares, resulting from recognition of the beneficial conversion feature, was immediately accreted
as a reduction of additional paid-in capital and an increase in the carrying value of the Series B Shares. The accretion is presented
in the Consolidated Statement of Operations as a deemed dividend, increasing net loss to arrive at net loss attributable to common
stockholders.
During the six months ended June 30, 2018,
certain Series B Investors converted 0.9 million shares of Series B Shares into 9.4 million shares of common stock based on original
term. The Company recognized approximately $2.2 million of deemed dividends upon such conversion.
11. Stockholders’ Equity (Deficit)
Increase of Authorized Shares
On April 27, 2018, the Company held a Special
Meeting of Shareholders to vote on several matters, including increasing the number of authorized shares of common stock from 450,000,000
to 1,200,000,000, par value $0.001 per share, and increasing the number of authorized shares of preferred stock from 40,000,000
to 100,000,000, par value $0.001 per share. The shareholders approved both increases, with 87% of the votes cast in favor of the
increase in common stock and 86% of the votes cast in favor of the increase in preferred stock. On May 2, 2018, the Company filed
a Certificate of Amendment of its Seventh Amended and Restated Certificate of Incorporation with the Secretary of the State of
Delaware, which effected the increase in authorized shares of common stock and the increase in authorized shares of preferred stock.
Equity Financing
On June 22, 2018, the Company entered into
agreements with institutional investors for a registered direct offering with proceeds of $1.0 million. The Company issued 4,000,000
shares of common stock at a purchase price of $0.25 per share. Additionally, the investors received 2-year Class D-3 warrants to
purchase up to 2,000,000 million shares of common stock with an exercise price of $0.30 per share.
Debt Conversion
During the six months ended June 30, 2018,
the Company converted approximately $3.1 million principal and $0.2 million accrued interest into approximately 14.5 million shares
of common stock at fair value of $3.9 million. The Company recorded an approximate $0.6 million debt extinguishment loss from the
conversion.
Warrants Exercised for Cash
During the six months ended June 30, 2018,
the Company issued approximately 9.0 million shares of common stock from the exercise of warrants with an exercise price from $0.22
to $0.26 for aggregate proceeds of $2.1 million.
Share-settled Debt
During the six months ended June 30, 2018,
the Company issued 10.8 million shares of common stock to the holder of the Company’s share-settled debt as advance payment
for future debt conversion. The fair value of the remaining share-settled debt will be reduced when the Company is notified by
the Holder of the value at which the shares have been sold.
As of June 30, 2018 and December 31, 2017,
the outstanding share-settled debt was approximately $1.6 million and $3.3 million, respectively.
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
Common Stock Purchase Warrants
During the six months ended June 30, 2018,
the Company modified approximately 124 million warrants, with new expiration dates ranging between 2018 and 2023, and new exercise
prices ranging between $0.24 and $2.50. These warrants, pursuant to the sequencing policy, were reclassified as liabilities.
The following is a summary of warrant activity for the six months
ended June 30, 2018 (in thousands, except per share data):
|
|
Number of
|
|
|
Weighted Average
|
|
|
Remaining
|
|
|
|
Warrants
|
|
|
Exercise Price
|
|
|
Contractual Term
|
|
Outstanding as of January 1, 2018
|
|
|
320,406
|
|
|
$
|
0.50
|
|
|
|
2.62
|
|
Warrants granted
|
|
|
68,301
|
|
|
|
0.50
|
|
|
|
|
|
Warrants exercised for cash
|
|
|
(8,957
|
)
|
|
|
0.06
|
|
|
|
|
|
Warrants expired and cancellation
|
|
|
(11,167
|
)
|
|
|
1.27
|
|
|
|
|
|
Outstanding as of June 30, 2018
|
|
|
368,583
|
|
|
$
|
0.29
|
|
|
|
2.46
|
|
12. Variable Interest Entities
Variable Interest Entities (“VIEs”)
are entities in which equity investors lack the characteristics of a controlling financial interest. VIEs are consolidated
by the primary beneficiary. The primary beneficiary is the party who has both the power to direct the activities of a VIE
that most significantly impact the entity’s economic performance and an obligation to absorb losses of the entity or a right
to receive benefits from the entity that could potentially be significant to the entity.
Advent
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 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. See Note 14 for more detail. Similar to Cognate, the Company has an implicit variable
interest in Advent to potentially fund Advent’s losses (if Advent incurs losses). As of June 30, 2018, the Company
did not have the power over the most significant activities (control of operating decisions) and therefore did not meet the "power"
criteria of the primary beneficiary.
The maximum exposure to loss is limited
to the notional amounts of the implicit variable interest in Advent. Under the Advent Agreement, either party may terminate
at any time upon twelve months’ notice, providing a transition period for technology transfer. Accordingly, the maximum
exposure to loss from the Company’s implicit variable interest in Advent is $5 million as of June 30, 2018, which is the
minimum twelve-monthly payments the Company must pay to terminate their relationship with Advent.
13. 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.
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
Chardan Capital
Markets v. Northwest Biotherapeutics, Inc.
On June 22, 2017, Chardan Capital Markets,
LLC filed a lawsuit against the Company in the United District Court for the Southern District of New York, captioned Chardan
Capital Markets v. Northwest Biotherapeutics, Inc., 1:17-cv-04727-PKC. Chardan alleges that it provided capital placement agent
services to the Company in December 2016 under a contract and that it has not been fully compensated for those services. Chardan
further alleges that it provided additional services to the Company in March 2017 in anticipation of entering into a contract and
that it received no compensation. The operative complaint asserts claims sounding in unjust enrichment, quantum meruit, and breach
of contract, and seeks recovery in the amount of $496,000, plus interest and attorneys’ fees and costs. The Company filed
a motion to dismiss the complaint on December 1, 2017; Chardan filed its opposition brief on January 19, 2018; and the Company
filed its reply brief on February 26, 2018. On August 6, 2018, the Court granted the Company’s motion to dismiss the case
in its entirety and entered a Judgment dismissing Chardan’s Amended Complaint in its entirety.
14. Subsequent Events
Between July 2, 2018 and August 1, 2018,
approximately $642,000 principal and $25,000 of accrued interest on certain notes were converted into approximately 3.1 million
shares of common stock.
On August 13, 2018, the Company entered
into an 18 month Note with an institutional investor at a 5% annual interest rate for $1.0 million with principal and interest
payable on the maturity date of January 13, 2020. Upon issuance of the Note, the investor received a 2 year, 50% warrant containing
833,333 exercise shares at an exercise price of $0.60 per share. The Note also includes a prepayment provision.
On August 13, 2018 the Company entered
into another 18 month Note with a different institutional investor at an 8% annual interest rate for $1,155,000 with a maturity
date of January 13, 2020. The note carried an OID of 15%. Net funding to the Company is $1.0 million. No interest or principal
payments are due during the first 6 months. Equal amortization payments of principal and interest are payable from month 7 through
18. The Note also includes a prepayment provision.