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utr:sqft

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended September 30, 2021

 

OR

 

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

 

For the transition period from ____________ to ____________

 

Commission file number: 001-15911

 

CELSION CORPORATION

(Exact name of Registrant as specified in its charter)

 

Delaware   52-1256615

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

997 Lenox Drive, Suite 100,

Lawrenceville, NJ 08648

(Address of principal executive offices)

 

(609) 896-9100

(Registrant’s telephone number, including area code)

 

NA

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act

 

Title of each class   Trading symbol(s)   Name of each exchange on which registered
Common stock, par value $0.01 per share   CLSN   Nasdaq Capital Market

 

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 ☒ 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 ☒ No ☐

 

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

 

  Large accelerated filer ☐ Accelerated filer ☐
  Non-accelerated filer Smaller reporting company
  Emerging growth company  

 

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. ☐

 

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

 

As of November 12, 2021, the Registrant had 86,557,736 shares of common stock, $0.01 par value per share, outstanding.

 

 

 

 

 

 

CELSION CORPORATION

QUARTERLY REPORT ON

FORM 10-Q

 

TABLE OF CONTENTS

 

  Page(s)
PART I: FINANCIAL INFORMATION  
     
Item 1. Financial Statements 1
  Condensed Consolidated Balance Sheets 2
  Condensed Consolidated Statements of Operations 3
  Condensed Consolidated Statements of Comprehensive Loss 4
  Condensed Consolidated Statements of Cash Flows 5
  Condensed Consolidated Statements of Changes in Stockholders’ Equity 7
  Notes to the Condensed Consolidated Financial Statements 9
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 27
     
Item 3. Quantitative and Qualitative Disclosures about Market Risk 43
     
Item 4. Controls and Procedures 44
     
PART II: OTHER INFORMATION  
     
Item 1. Legal Proceedings 45
     
Item 1A. Risk Factors 45
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 46
     
Item 3. Defaults Upon Senior Securities 46
     
Item 4. Mine Safety Disclosures 46
     
Item 5. Other Information 46
     
Item 6. Exhibits 46
     
SIGNATURES 47

 

i

 

 

Cautionary Note Regarding Forward-Looking Statements

 

This report includes “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”). All statements other than statements of historical fact are “forward-looking statements” for purposes of this Quarterly Report on Form 10-Q, including, without limitation, any projections of earnings, revenue or other financial items, any statements of the plans and objectives of management for future operations (including, but not limited to, pre-clinical development, clinical trials, manufacturing and commercialization), uncertainties and assumptions regarding the impact of the COVID-19 pandemic on our business, operations, clinical trials, supply chain, strategy, goals and anticipated timelines, any statements concerning proposed drug candidates, potential therapeutic benefits, or other new products or services, any statements regarding future economic conditions or performance, any changes in the course of research and development activities and in clinical trials, any possible changes in cost and timing of development and testing, capital structure, financial condition, working capital needs and other financial items, and any statements of assumptions underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “estimates,” “potential” or “continue,” or the negative thereof or other comparable terminology. Although we believe that our expectations are based on reasonable assumptions within the bounds of our knowledge of our industry, business, and operations, we cannot guarantee that actual results will not differ materially from our expectations.

 

Our future financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risks and uncertainties, including, but not limited to, the inherent uncertainty in the drug development process, our ability to raise additional capital to fund our planned future operations, our ability to obtain or maintain FDA and foreign regulatory approvals for our drug candidates, potential impact of the outbreak, duration and severity of the COVID-19 pandemic on our business, our ability to enroll patients in our clinical trials, risks relating to third parties conduct of our clinical trials, risks relating to government, private health insurers and other third-party payers coverage or reimbursement, risks relating to commercial potential of a drug candidate in development, changes in technologies for the treatment of cancer, impact of development of competitive drug candidates by others, risks relating to intellectual property, volatility in the market price of our common stock, potential inability to maintain compliance with The Nasdaq Marketplace Rules and the impact of adverse capital and credit market conditions. These and other risks, assumptions are described in Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and in other documents that we file or furnish with the SEC. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. All forward-looking statements speak only as of the date they are made and we do not intend to update any forward-looking statements, except as required by law or applicable regulations. We operate in a highly competitive, highly regulated, and rapidly changing environment and our business is in a state of evolution. Therefore, it is likely that new risks will emerge, and that the nature and elements of existing risks will change, over time. It is not possible for management to predict all such risk factors or changes therein, or to assess either the impact of all such risk factors on our business or the extent to which any individual risk factor, combination of factors, or new or altered factors, may cause results to differ materially from those contained in any forward-looking statement.

 

Except where the context otherwise requires, in this Quarterly Report on Form 10-Q, the “Company,” “Celsion,” “we,” “us,” and “our” refer to Celsion Corporation, a Delaware corporation and its wholly owned subsidiary CLSN Laboratories, Inc., also a Delaware corporation.

 

Trademarks

 

The Celsion brand and product names, including but not limited to Celsion® and ThermoDox® contained in this document are trademarks, registered trademarks or service marks of Celsion Corporation or its subsidiary in the United States (“U.S.”) and certain other countries. This document also contains references to trademarks and service marks of other companies that are the property of their respective owners.

 

ii

 

 

PART I: FINANCIAL INFORMATION

 

Item 1. FINANCIAL STATEMENTS

 

CELSION CORPORATION

 

CONDENSED CONSOLIDATED

BALANCE SHEETS

 

    September 30, 2021     December 31, 2020  
      (Unaudited)          
ASSETS                
Current assets:                
Cash and cash equivalents   $ 25,648,849     $ 17,164,177  
Investment in debt securities - available for sale, at fair value     28,864,364        
Accrued interest on investment in debt securities     38,404        
Advances and deposits on clinical programs and other current assets     2,213,262       1,660,695  
                 
Total current assets     56,764,879       18,824,872  
                 
Property and equipment (at cost, less accumulated depreciation and amortization)     486,022       294,551  
                 
Other assets:                
Money market investments, restricted cash     6,000,000        
Deferred income tax asset           1,845,823  
In-process research and development, net     13,366,234       13,366,234  
Goodwill     1,976,101       1,976,101  
Operating lease right-of-use assets, net     816,520       1,047,336  
Other intangible assets, net           113,660  
Deposits and other assets     58,761       58,761  
                 
Total other assets     22,217,616       18,407,915  
                 
Total assets   $ 79,468,517     $ 37,527,338  

 

See accompanying notes to the condensed consolidated financial statements.

 

  1  

 

 

CELSION CORPORATION

 

CONDENSED CONSOLIDATED

BALANCE SHEETS

(Continued)

 

    September 30, 2021     December 31, 2020  
      (Unaudited)          
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities:                
Accounts payable – trade   $ 2,615,992     $ 2,244,847  
Other accrued liabilities     2,824,788       2,458,532  
Notes payable – current portion, net of deferred financing costs           1,116,663  
Operating lease liability - current portion     534,256       433,413  
Deferred revenue - current portion     500,000       500,000  
Total current liabilities     6,475,036       6,753,455  
                 
Earn-out milestone liability     7,345,000       7,018,000  
Notes payable – non-current portion, net of deferred financing costs     5,808,774       3,934,497  
Operating lease liability - non-current portion     373,526       710,305  
Deferred revenue - non-current portion     125,000       500,000  
Total liabilities     20,127,336       18,916,257  
                 
Commitments and contingencies            
                 
Stockholders’ equity:                
                 
Preferred Stock - $0.01 par value (100,000 shares authorized, and no shares issued or outstanding at September 30, 2021 and December 31, 2020)            
Common stock - $0.01 par value (112,500,000 shares authorized; 86,558,070 and 40,701,356 shares issued at September 30, 2021 and December 31, 2020, respectively, and 86,557,736 and 40,701,022 shares outstanding at September 30, 2021 and December 31, 2020, respectively)     865,581       407,014  
Additional paid-in capital     387,106,934       330,289,596  
Accumulated other comprehensive loss     2,139        
Accumulated deficit     (328,548,285 )     (312,000,341 )
Total stockholders’ equity before treasury stock     59,426,369       18,696,269  
                 
Treasury stock, at cost (334 shares at September 30, 2021 and December 31, 2020)     (85,188 )     (85,188 )
Total stockholders’ equity     59,341,181       18,611,081  
                 
Total liabilities and stockholders’ equity   $ 79,468,517     $ 37,527,338  

 

See accompanying notes to the condensed consolidated financial statements.

 

  2  

 

 

CELSION CORPORATION

 

CONDENSED CONSOLIDATED

STATEMENTS OF OPERATIONS

(Unaudited)

 

                         
   

Three Months Ended

September 30,

   

Nine Months Ended

September 30,

 
    2021     2020     2021     2020  
                         
Licensing revenue   $ 125,000     $ 125,000     $ 375,000     $ 375,000  
                                 
Operating expenses:                                
Research and development     2,468,066       2,491,696       7,633,051       8,534,606  
General and administrative     2,718,510       1,792,904       8,258,271       5,532,946  
Total operating expenses     5,186,576       4,284,600       15,891,322       14,067,552  
                                 
Loss from operations     (5,061,576 )     (4,159,600 )     (15,516,322 )     (13,692,552 )
                                 
Other (expense) income:                                
Loss from change in fair-value of earn-out milestone liability     (257,000 )     (1,099,721 )     (327,000 )     (1,397,291 )
Impairment of in-process research and development           (2,370,257 )           (2,370,257 )
Investment income     3,552       10,114       5,614       119,383  
Interest expense     (95,520 )     (450,732 )     (474,361 )     (1,130,699 )
Recognized loss on extinguishment of debt                 (234,419 )      
Other (expense) income           (1,400 )     (1,456 )     7  
Total other (expense) income, net     (348,968 )     (3,911,996 )     (1,031,622 )     (4,778,857 )
                                 
Net loss   $ (5,410,544 )   $ (8,071,596 )   $ (16,547,944 )   $ (18,471,409 )
                                 
Net loss per common share                                
Basic and diluted   $ (0.06 )   $ (0.24 )   $ (0.21 )   $ (0.62 )
                                 
Weighted average shares outstanding                                
Basic and diluted     86,557,736       34,112,254       79,667,613       29,934,764  

 

See accompanying notes to the condensed consolidated financial statements.

 

  3  

 

 

CELSION CORPORATION

 

CONDENSED CONSOLIDATED

STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

 

                         
   

Three Months Ended

September 30,

   

Nine Months Ended

September 30,

 
    2021     2020     2021     2020  
Other comprehensive (loss) gain                                
                                 
Changes in:                                
Realized (gains) losses on debt securities recognized in investment income, net   $ 2,736     $ (7,257 )   $ 4,521     $ (53,354 )
Unrealized (losses) gains on debt securities, net     3,173       (609 )     (2,382 )     10,576  
                                 
Change in unrealized (losses) gains on available for sale securities, net     5,909       (7,866 )     2,139       (42,778 )
                                 
Net loss     (5,410,544 )     (8,071,596 )     (16,547,944 )     (18,471,409 )
                                 
Comprehensive loss   $ (5,404,635 )   $ (8,079,462 )   $ (16,545,805 )   $ (18,514,187 )

 

See accompanying notes to the condensed consolidated financial statements.

 

  4  

 

 

CELSION CORPORATION

 

CONDENSED CONSOLIDATED

STATEMENTS OF CASH FLOWS

(Unaudited)

 

             
   

Nine Months Ended

September 30,

 
    2021     2020  
Cash flows from operating activities:                
                 
Net loss   $ (16,547,944 )   $ (18,471,409 )
                 
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation and amortization     542,740       572,065  
Change in fair value of earn-out milestone liability     327,000       1,397,291  
Recognition of deferred revenue     (375,000 )     (375,000 )
Stock-based compensation costs     3,073,569       1,448,202  
Deferred income tax asset     1,845,823       1,819,324  
Impairment of in-process research and development           2,370,257  
Amortization of deferred finance charges and debt discount associated with notes payable     191,571       439,786  
Fair value of warrants issued in exchange for services           44,798  
Net changes in:                
Accrued interest on investment securities     (38,404 )     21,369  
Advances, deposits, and other current assets     (552,567 )     (286,991 )
Accounts payable and accrued liabilities     397,701       (866,748 )
Net cash used in operating activities     (11,135,511 )     (11,887,056 )
                 
Cash flows from investing activities:                
Purchases of investment securities     (40,862,225 )     (9,956,892 )
Proceeds from sale and maturity of investment securities     12,000,000       17,900,000  
Purchases of property and equipment     (285,971 )     (13,918 )
Net cash (used in) provided by investing activities     (29,148,196 )     7,929,190  
                 
Cash flows from financing activities:                
Proceeds from sale of common stock equity, net of issuance costs     52,688,945       20,250,426  
Proceeds from issuance of common stock upon conversion of stock warrants     1,508,666        
Proceeds from issuance of common stock upon conversion of stock options     4,725       371,895  
Proceeds from the SVB Loan Facility, net of issuance costs     5,756,630        
Payoff of the Horizon Credit Agreement and accrued end of term fees     (5,190,587 )     (5,200,000 )
Proceeds from Payroll Protection Program (PPP) loans           1,324,750  
Repayments on Payroll Protection Program (PPP) loans           (1,324,750 )
Net cash provided by financing activities     54,768,379       15,422,321  
                 
Change in cash, cash equivalents and restricted cash     14,484,672       11,464,455  
Cash, cash equivalents and restricted cash at beginning of period     17,164,177       6,875,273  
Cash, cash equivalents and restricted cash at end of period   $ 31,648,849     $ 18,339,728  

 

See accompanying notes to the condensed consolidated financial statements.

 

  5  

 

 

CELSION CORPORATION

 

CONDENSED CONSOLIDATED

STATEMENTS OF CASH FLOWS (continued)

(Unaudited)

 

   

Nine Months Ended

September 30,

 
    2021     2020  
             
Supplemental disclosures of cash flow information:                
Interest paid   $ (307,985 )   $ (685,913 )
                 
Cash paid for amounts included in measurement of lease liabilities:                
Operating cash flows from lease payments   $ 418,696     $ 393,947  
                 
Common stock issued to settle accrued bonuses   $     $ 498,632  
                 
Fair value of warrants issued in connection with debt facility, net of cancelled warrants   $     $ 81,102  
                 
Realized and unrealized gains (losses), net, on investment securities   $ 2,139     $ (42,778 )

 

See accompanying notes to the condensed consolidated financial statements.

 

  6  

 

 

CELSION CORPORATION

 

CONDENSED CONSOLIDATED

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

 

THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

 

                                                 
Three Months Ended  

Common Stock

Outstanding

   

Additional

Paid in

    Treasury Stock     Accumulated Other Comprehensive     Accumulated        
September 30, 2021   Shares     Amount     Capital     Shares     Amount     Income     Deficit     Total  
                                                 
Balance at July 1, 2021     86,557,736     $ 865,581     $ 386,414,630       334     $ (85,188 )   $ (3,770 )   $ (323,137,741 )   $ 64,053,512  
Net loss     -       -       -       -       -       -       (5,410,544 )     (5,410,544 )
Sale of equity through equity financing facilities     -       -       (8,320 )     -       -       -       -       (8,320 )
Realized and unrealized gains and losses, net, on investments securities     -       -       -       -       -       5,909       -       5,909  
Stock-based compensation expense     -       -       700,624       -       -       -       -       700,624  
Balance at September 30, 2021     86,557,736     $ 865,581     $ 387,106,934       334     $ (85,188 )   $ 2,139     $ (328,548,285 )   $ 59,341,181  

 

Three Months Ended  

Common Stock

Outstanding

   

Additional

Paid in

    Treasury Stock     Accumulated Other Comprehensive     Accumulated        
September 30, 2020   Shares     Amount     Capital     Shares     Amount     Income     Deficit     Total  
                                                 
Balance at July 1, 2020     33,229,380     $ 332,297     $ 324,869,780       334     $ (85,188 )   $ 7,866     $ (300,916,593 )   $ 24,208,162  
Net loss     -       -       -       -       -       -       (8,071,596 )     (8,071,596 )
Sale of equity through equity financing facilities     2,927,400       29,274       2,038,553       -       -       -       -       2,067,827  
Common stock warrants issued in exchange for services     -       -       44,798       -       -       -       -       44,798  
Issuance of restricted stock     3,000       30       (30 )     -       -       -       -       -  
Realized and unrealized gains and losses, net, on investments securities     -       -       -       -       -       (7,866 )     -       (7,866 )
Stock-based compensation expense     -       -       417,476       -       -       -       -       417,476  
Balance at September 30, 2020     36,159,780     $ 361,601     $ 327,370,577       334     $ (85,188 )   $ -     $ (308,988,189 )   $ 18,658,801  

 

See accompanying notes to the condensed consolidated financial statements.

 

  7  

 

 

CELSION CORPORATION

 

CONDENSED CONSOLIDATED

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (continued)

(Unaudited)

 

NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

 

Nine Months Ended  

Common Stock

Outstanding

   

Additional

Paid in

    Treasury Stock     Accumulated Other Comprehensive     Accumulated        
September 30, 2021   Shares     Amount     Capital     Shares     Amount     Income     Deficit     Total  
                                                 
Balance at January 1, 2021     40,701,022     $ 407,014     $ 330,289,596       334     $ (85,188 )   $ -     $ (312,000,341 )   $ 18,611,081  
Net loss     -       -       -       -       -       -       (16,547,944 )     (16,547,944 )
Sale of equity through equity financing facilities     44,632,547       446,326       52,242,619       -       -       -       -       52,688,945  
Shares issued upon exercise of common stock warrants, net of fees     1,216,667       12,166       1,496,500       -       -       -       -       1,508,666  
Shares issued upon exercise of options to purchase common stock     7,500       75       4,650       -       -       -       -       4,725  
Realized and unrealized gains and losses, net, on investments securities     -       -       -       -       -       2,139       -       2,139  
Stock-based compensation expense     -       -       3,073,569       -       -       -       -       3,073,569  
Balance at September 30, 2021     86,557,736     $ 865,581     $ 387,106,934       334     $ (85,188 )   $ 2,139     $ (328,548,285 )   $ 59,341,181  

 

Nine Months Ended  

Common Stock

Outstanding

   

Additional

Paid in

    Treasury Stock     Accumulated Other Comprehensive     Accumulated        
September 30, 2020   Shares     Amount     Capital     Shares     Amount     Income     Deficit     Total  
                                                 
Balance at January 1, 2020     23,255,818     $ 232,562     $ 304,885,663       334     $ (85,188 )   $ 42,778     $ (290,516,780 )   $ 14,559,035  
Net loss     -       -       -       -       -       -       (18,471,409 )     (18,471,409 )
Sale of equity through equity financing facilities     12,330,243       123,301       20,127,125       -       -       -       -       20,250,426  
Issuance of common stock upon exercise of options     140,864       1,409       370,486       -       -       -       -       371,895  
Common stock warrants issued in exchange for services     -       -       44,798       -       -       -       -       44,798  
Issuance of restricted stock     3,000       30       (30 )     -       -       -       -       -  
Realized and unrealized gains and losses, net, on investments securities     -       -       -       -       -       (42,778 )     -       (42,778 )
Stock-based compensation expense     -       -       1,448,202       -       -       -       -       1,448,202  
Common stock issued to settle accrued bonuses     429,855       4,299       494,333       -       -       -       -       498,632  
Balance at September 30, 2020     36,159,780     $ 361,601     $ 327,370,577       334     $ (85,188 )   $ -     $ (308,988,189 )   $ 18,658,801  

 

See accompanying notes to the condensed consolidated financial statements.

 

  8  

 

 

CELSION CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(UNAUDITED)

 

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

 

Note 1. Business Description

 

Celsion Corporation (“Celsion” and the “Company”) is a fully integrated, clinical stage biotechnology company focused on advancing a portfolio of innovative treatments including DNA-based immunotherapies, next generation vaccines and directed chemotherapies through clinical trials and eventual commercialization. The Company’s product pipeline includes GEN-1, a DNA-based immunotherapy for the localized treatment of ovarian cancer and ThermoDox®, a proprietary heat-activated liposomal encapsulation of doxorubicin, currently under investigator-sponsored development for several cancer indications. Celsion has two feasibility stage platform technologies for the development of novel nucleic acid-based immunotherapies and next generation vaccines and other anti-cancer DNA or RNA therapies. Both are novel synthetic, non-viral vectors with demonstrated capability in nucleic acid cellular transfection.

 

Note 2. Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements, which include the accounts of the Company and its wholly owned subsidiaries, CLSN Laboratories, Inc. and Celsion, GmbH, have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. All significant intercompany balances and transactions have been eliminated in consolidation. Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.

 

In the opinion of management, all adjustments, consisting only of normal recurring accruals considered necessary for a fair presentation, have been included in the accompanying unaudited condensed consolidated financial statements. Operating results for the three-month and nine-month periods ended September 30, 2021 and 2020 are not necessarily indicative of the results that may be expected for any other interim period(s) or for any full year. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the Securities and Exchange Commission (SEC) on March 19, 2021.

 

The preparation of financial statements in conformity with GAAP requires management to make judgments, estimates, and assumptions that affect the amount reported in the Company’s financial statements and accompanying notes. Actual results could differ materially from those estimates. Events and conditions arising subsequent to the most recent balance sheet date have been evaluated for their possible impact on the financial statements and accompanying notes. The Company continues to monitor the impact of the COVID-19 pandemic on its financial condition and results of operations, along with the valuation of its long-term assets, intangible assets, and goodwill. The effect of this matter could potentially have an impact on the valuation of such assets in the future. The COVID-19 pandemic is discussed in more detail in Note 3 to the financial statements.

 

Note 3. Financial Condition and Business Plan

 

Since inception, the Company has incurred substantial operating losses, principally from expenses associated with the Company’s research and development programs, clinical trials conducted in connection with the Company’s product candidates, and applications and submissions to the U.S. Food and Drug Administration. The Company has not generated significant revenue and has incurred significant net losses in each year since our inception. As of September 30, 2021, the Company has incurred approximately $329 million of cumulative net losses and had approximately $60.6 million in cash and cash equivalents, restricted cash, short-term investments and interest receivable. We have substantial future capital requirements to continue our research and development activities and advance our product candidates through various development stages. The Company believes these expenditures are essential for the commercialization of its technologies.

 

The Company expects its operating losses to continue for the foreseeable future as it continues its product development efforts, and when it undertakes marketing and sales activities. The Company’s ability to achieve profitability is dependent upon its ability to obtain governmental approvals, manufacture, and market and sell its product candidates. There can be no assurance that the Company will be able to commercialize its technology successfully or that profitability will ever be achieved. The operating results of the Company have fluctuated significantly in the past.

 

  9  

 

 

In January 2020, the WHO declared an outbreak of coronavirus, COVID-19, to be a “Public Health Emergency of International Concern,” and the U.S. Department of Health and Human Services declared a public health emergency to aid the U.S. healthcare community in responding to COVID-19. This virus has spread to over 100 countries, including the U.S. Governments and businesses around the world have taken unprecedented actions to mitigate the spread of COVID-19, including, but not limited to, shelter-in-place orders, quarantines, significant restrictions on travel, as well as restrictions that prohibit many employees from going to work. Uncertainty with respect to the economic impacts of the pandemic has introduced significant volatility in the financial markets. The Company did not observe significant impacts on its business or results of operations during 2020 and into 2021 due to COVID-19. While the extent to which COVID-19 impacts the Company’s future results will depend on future developments, the pandemic and associated economic impacts could result in a material impact to the Company’s future financial condition, results of operations and cash flows. The Company’s ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, financial markets in the U.S. and worldwide resulting from the ongoing COVID-19 pandemic. The disruptions caused by COVID-19 may also disrupt the clinical trials process and enrolment of patients. This may delay commercialization efforts. The Company continues to monitor its operating activities in light of these events. The specific impact, if any, is not readily determinable as of the date of these financial statements.

 

The actual amount of funds the Company will need to operate is subject to many factors, some of which are beyond the Company’s control. These factors include the following:

 

the progress of research activities;
   
the number and scope of research programs;
   
the progress of preclinical and clinical development activities;
   
the progress of the development efforts of parties with whom the Company has entered into research and development agreements;
   
the costs associated with additional clinical trials of product candidates;
   
the ability to maintain current research and development licensing arrangements and to establish new research and development and licensing arrangements;
   
the ability to achieve milestones under licensing arrangements;
   
the costs involved in prosecuting and enforcing patent claims and other intellectual property rights; and
   
the costs and timing of regulatory approvals.

 

On July 13, 2020, the Company announced that it has received a recommendation from the independent Data Management Committee (“DMC”) to consider stopping the global Phase III OPTIMA Study of ThermoDox® in combination with RFA for the treatment of HCC, or primary liver cancer. The recommendation was made following the second pre-planned interim safety and efficacy analysis by the DMC on July 9, 2020. The DMC’s analysis found that the pre-specified boundary for stopping the trial for futility of 0.900 was crossed with an actual value of 0.903. The Company followed the advice of the DMC and considered its options to either stop the study or continue to follow patients after a thorough review of the data, and an evaluation of the probability of success. On February 11, 2021, the Company issued a letter to shareholders stating that the Company was notifying all clinical sites to discontinue following patients in the OPTIMA Study.

 

During 2020, 2019 and 2018, the Company submitted applications to sell a portion of the Company’s State of New Jersey net operating losses as part of the Technology Business Tax Certificate Program sponsored by The New Jersey Economic Development Authority. Under the program, emerging biotechnology companies with unused NOLs and unused research and development credits are allowed to sell these benefits to other New Jersey-based companies. In 2018 and 2019, the Company sold cumulative NOL’s from 2011 to 2018 NOLs totaling $13 million receiving net proceeds of $12.2 million. In June 2020 and as updated in September 2020, the Company filed an application with the New Jersey Economic Development Authority to sell substantially all of its remaining State of New Jersey net operating losses totaling $2.0 million available under the program. On February 12, 2021, the New Jersey Economic Development Authority approved the full amount of the Company’s application. In February of 2021, the Company entered into an agreement to sell the net operating losses from the 2020 application and the Company received net proceeds of approximately $1.85 million on May 10, 2021. During 2021, the New Jersey State Legislature increased the maximum lifetime benefit per company from $15 million to $20 million, which will allow the Company to participate in this program in future years. On June 16, 2021, the Company filed another application to sell approximately $1.6 million of net operating losses during 2021 and expects to receive up to approximately $1.4 million under the current year program.

 

  10  

 

 

In June 2018, the Company entered into a Credit Agreement with Horizon Technology Finance Corporation (“Horizon”) that provided $10 million in capital (the “Horizon Credit Agreement”). The obligations under the Horizon Credit Agreement are secured by a first-priority security interest in substantially all assets of Celsion other than intellectual property assets. Payments under the loan agreement are interest only (calculated based on one-month LIBOR plus 7.625%) for the first 24 months through July 2020, followed by a 21-month amortization period of principal and interest starting on August 1, 2020 and ending through the scheduled maturity date on April 1, 2023. On August 28, 2020, in connection with an Amendment to the Horizon Credit Agreement, Celsion repaid $5 million of the $10 million loan and $0.2 million in related end of term charges, and the remaining $5 million in obligations were restructured. As more fully discussed in Note 11 to these condensed consolidated financial statements, in June 2021, the Company entered into a $10 million loan facility with Silicon Valley Bank. The Company immediately used $6 million from this facility to retire all outstanding indebtedness with Horizon Technology Finance Corporation. The remaining $4 million will be available to be drawn down up to 12 months after closing and will be used for working capital and to fund the advancement of the Company’s product pipelines. The funding is in the form of money market secured indebtedness bearing interest at a calculated WSJ Prime-based variable rate of 3.25%. Payments under the loan agreement are interest only for the first 24 months after loan closing, followed by a 24-month amortization period of principal and interest through the scheduled maturity date.

 

As more fully discussed in Note 12, during 2021 through the date of the filing of this Quarterly Report on Form 10-Q, the Company has raised approximately $6.9 million in gross proceeds from the use of its JonesTrading Capital on DemandTM financing facility, $35 million from a registered direct financing completed in January 2021, $15 million from a registered direct financing completed on April 5, 2021, and $1.5 million from warrant exercises. With $60.6 million in cash and cash equivalents, restricted cash, short-term investments and interest receivable, the Company believes it has sufficient capital resources to fund its operations through the end of 2024.

 

The Company has based its estimates on assumptions that may prove to be wrong. The Company may need to obtain additional funds sooner or in greater amounts than it currently anticipates. Potential sources of financing include strategic relationships, public or private sales of the Company’s shares or debt, the sale of the Company’s State of New Jersey net operating losses and other sources. If the Company raises funds by selling additional shares of common stock or other securities convertible into common stock, the ownership interest of existing stockholders may be diluted.

 

Note 4. New Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) and are adopted by us as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued accounting pronouncements will not have a material impact on the Company’s condensed consolidated financial position, results of operations, and cash flows, or do not apply to our operations.

 

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which modifies the measurement of expected credit losses on certain financial instruments. The Company adopted ASU 2016-13 in the first quarter of 2021 utilizing the modified retrospective transition method. Based on the composition of the Company’s investment portfolio and current market conditions, the adoption of ASU 2016-13 did not have a material impact on its consolidated financial statements.

 

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740). The standard simplifies the accounting for incomes taxes by removing certain exceptions to the general principles in Topic 740 related to the approach for intra-period tax allocation and the recognition of deferred tax liabilities for outside basis differences. The standard also clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard also improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company adopted this standard during the first quarter of 2021. The adoption of ASU 2019-12 did not have a material impact on its consolidated financial statements.

 

In connection with the upcoming elimination of the London Inter-bank Offered Rate, (“LIBOR”) and other reference interest rates, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Reform on Financial Reporting. ASU 2020-04, which is available for contract modifications and hedging relationship modifications entered into or evaluated before December 31, 2022, provides certain practical expedients related to simplifying the accounting for contract modifications resulting from the change in terms from LIBOR to a new required interest rate benchmark. The Company is currently evaluating the effects of adopting this accounting standards update.

 

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In May 2021, the FASB issued ASU No. 2021-04 “Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force)”. This ASU is intended to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The guidance clarifies whether an issuer should account for a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as (1) an adjustment to equity and, if so, the related earnings per share effects, if any, or (2) an expense and, if so, the manner and pattern of recognition. The amendments in this ASU affect all entities that issue freestanding written call options that are classified in equity. The amendments do not apply to modifications or exchanges of financial instruments that are within the scope of another Topic and do not affect a holder’s accounting for freestanding call options. The amendments in this ASU are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. Early adoption is permitted for all entities, including adoption in an interim period. The Company is currently evaluating the impact of adopting ASU 2021-04 on its consolidated financial statements.

 

Note 5. Restricted Cash

 

As a condition of the $10 million loan facility with Silicon Valley Bank (“SVB”) entered into on June 18, 2021 as further discussed in Note 11, the Company is required at all times to maintain on deposit with SVB as cash collateral in a segregated money market bank account in the name of the Company, unrestricted and unencumbered cash (other than a lien in favor of SVB) in an amount of at least 100% of the aggregate outstanding amount of the SVB loan facility. SVB may restrict withdrawals or transfers by or on behalf of the Company that would violate this requirement. The required reserve totaled $6.0 million as of September 30, 2021. This amount is presented in part as restricted cash in other non-current assets on the accompanying condensed consolidated balance sheets.

 

The following table reconciles cash and cash equivalents and restricted cash per the balance sheet to the condensed statements of cash flows:

 

    September 30, 2021     September 30, 2020  
Cash and cash equivalents   $ 25,648,849     $ 18,339,728  
Money market investments, restricted     6,000,000       -  
Total   $ 31,648,849     $ 18,339,728  

 

Note 6. Net Loss per Common Share

 

Basic loss per share is calculated based upon the net loss available to common shareholders divided by the weighted average number of common shares outstanding during the period. Diluted loss per share is calculated after adjusting the denominator of the basic earnings per share computation for the effects of all dilutive potential common shares outstanding during the period. The dilutive effects of preferred stock, options and warrants and their equivalents are computed using the treasury stock method.

 

The total number of shares of common stock issuable upon exercise of warrants, stock option grants and equity awards were 9,250,354 and 8,507,041 shares for the three-month and nine-month periods ended September 30, 2021 and 2020, respectively. Warrants with an exercise price of $0.01 exercisable for 200,000 shares of common stock were considered issued in calculating basic loss per share during the first nine-months of 2020. These warrants were exercised in October 2020. For the three-month and nine-month periods ended September 30, 2021 and 2020, diluted loss per common share was the same as basic loss per common share as the other warrants and equity awards that were convertible into shares of the Company’s common stock were excluded from the calculation of diluted loss per common share as their effect would have been anti-dilutive. The Company did not pay any dividends during the first nine months of 2021 or 2020.

 

Note 7. Investment in Debt Securities-Available for Sale

 

Investments in debt securities available for sale with a fair value of $28,864,364 as of September 30, 2021, consisted of government backed debt securities and commercial paper. These investments are valued at estimated fair value, with unrealized gains and losses reported as a separate component of stockholders’ equity in accumulated other comprehensive loss. The Company only had investments in cash and cash equivalents on December 31, 2020.

 

Investments in debt securities available for sale are evaluated periodically to determine whether a decline in their value is other than temporary. The term “other than temporary” is not intended to indicate a permanent decline in value. Rather, it means that the prospects for near term recovery of value are not necessarily favorable, or that there is a lack of evidence to support fair values equal to, or greater than, the carrying value of the security. Management reviews criteria such as the magnitude and duration of the decline, as well as the reasons for the decline, to predict whether the loss in value is other than temporary. Once a decline in value is determined to be other than temporary, the value of the security is reduced and a corresponding charge to earnings is recognized.

 

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A summary of the cost, fair value and maturities of the Company’s short-term investments is as follows:

 

    September 30, 2021     December 31, 2020  
    Cost     Fair Value     Cost     Fair Value  
Short-term investments                                
Commercial paper   $ 7,784,165     $ 7,784,894     $ -       -  
Government backed debt securities     21,078,059       21,079,470       -       -  
Total   $ 28,862,224     $ 28,864,364     $ -     $ -  

 

    September 30, 2021     December 31, 2020  
    Cost     Fair Value     Cost     Fair Value  
Short-term investment maturities                                
Within 3 months   $ 11,998,304     $ 11,999,400     $ -     $ -  
Between 3-12 months     16,863,920       16,864,964       -       -  
Total   $ 28,862,224     $ 28,864,364     $ -     $ -  

 

The following table shows the Company’s investment in debt securities available for sale gross unrealized gains (losses) and fair value by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2021 and December 31, 2020. The Company has reviewed individual securities to determine whether a decline in fair value below the amortizable cost basis is other than temporary.

 

    September 30, 2021     December 31, 2020  
Available for sale securities (all unrealized holding gains and losses are less than 12 months at date of measurement)   Fair Value    

Unrealized Holding

Gains (Losses)

    Fair Value    

Unrealized Holding

Gains (Losses)

 
                         
Investments with unrealized gains   $ 21,029,520     $ 3,055     $ -     $ -  
Investments with unrealized losses     7,834,844       (916 )     -       -  
Total   $ 28,864,364     $ 2,139     $ -     $ -  

 

Investment (loss) income, which includes net realized losses on sales of available for sale securities and investment income interest and dividends, is summarized as follows:

 

    2021     2020  
   

Three Months Ended

September 30,

 
    2021     2020  
Interest and dividends accrued and paid   $ 6,288     $ 2,857  
Realized (losses) gains     (2,736 )     7,257  
Investment income, net   $ 3,552     $ 10,114  

 

    2021     2020  
   

Nine Months Ended

September 30,

 
    2021     2020  
Interest and dividends accrued and paid   $ 10,135     $ 66,029  
Realized (losses) gains     (4,521 )     53,354  
Investment income, net   $ 5,614     $ 119,383  

 

Note 8. Fair Value Measurements

 

FASB ASC Section 820, Fair Value Measurements and Disclosures establishes a three-level hierarchy for fair value measurements which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are as follows:

 

Level 1: Quoted prices (unadjusted) or identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date;

 

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Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data; and

 

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions that market participants would use in pricing an asset or liability.

 

Cash and cash equivalents, other current assets, accounts payable and other accrued liabilities are reflected in the condensed consolidated balance sheet at their approximate estimated fair values primarily due to their short-term nature. The fair values of securities available for sale is determined by relying on the securities’ relationship to other benchmark quoted securities and classified its investments as Level 2 items in both 2021 and 2020. There were no transfers of assets or liabilities between Level 1 and Level 2 and no transfers in or out of Level 3 during the nine-months ended September 30, 2021 or during the year ended December 31, 2020. The changes in Level 3 liabilities were the result of changes in the fair value of the earn-out milestone liability included in earnings and in-process R&D. The earnout milestone liability is valued using a risk-adjusted assessment of the probability of payment of each milestone, discounted to present value using an estimated time to achieve the milestone (see Note 14).

 

Assets and liabilities measured at fair value are summarized below:

 

    Total Fair Value     Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)    

Significant Other Observable Inputs

(Level 2)

   

Significant Unobservable Inputs

(Level 3)

 
Assets:                                
                                 
Recurring items as of September 30, 2021                                
Investment in debt securities - available for sale, at fair value   $ 28,864,364     $     $ 28,864,364     $  
                                 
Non-recurring items as of September 30, 2021                                
In-process R&D (Note 9)   $ 13,366,234     $     $     $ 13,366,234  
                                 
Non-recurring items as of December 31, 2020                                
In-process R&D (Note 9)   $ 13,366,234     $     $     $ 13,366,234  
                                 
Liabilities:                                
                                 
Recurring items as of September 30, 2021                                
Earn-out milestone liability (Note 14)   $ 7,345,000     $     $     $ 7,345,000  
                                 
Recurring items as of December 31, 2020                                
Earn-out milestone liability (Note 14)   $ 7,018,000     $     $     $ 7,018,000  

 

Note 9. Intangible Assets

 

In June 2014, we completed the acquisition of substantially all of the assets of EGEN, Inc., an Alabama corporation, which has changed its company name to EGWU, Inc. after the closing of the acquisition (“EGEN”). We acquired all of EGEN’s right, title and interest in and to substantially all of the assets of EGEN, including cash and cash equivalents, patents, trademarks and other intellectual property rights, clinical data, certain contracts, licenses and permits, equipment, furniture, office equipment, furnishings, supplies and other tangible personal property. In addition, CLSN Laboratories assumed certain specified liabilities of EGEN, including the liabilities arising out of the acquired contracts and other assets relating to periods after the closing date.

 

Acquired In-process Research and Development

 

Acquired in-process research and development (IPR&D) consists of EGEN’s drug technology platforms: TheraPlas and TheraSilence. The fair value of the IPR&D drug technology platforms was estimated to be $24.2 million as of the acquisition date. As of the closing of the acquisition, the IPR&D was considered indefinite lived intangible assets and will not be amortized. IPR&D is reviewed for impairment at least annually as of our third quarter ended September 30, and whenever events or changes in circumstances indicate that the carrying value of the assets might not be recoverable. The Company’s IPR&D consisted of three core elements, its RNA delivery system, its glioblastoma multiforme cancer (GBM) product candidate and its ovarian cancer indication.

 

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The Company’s ovarian cancer indication, with original value of $13.3 million, has not been impaired since its acquisition. At September 30, 2021, the Company evaluated its IPR&D of the ovarian cancer indication and concluded that it is not more likely than not that the asset is impaired. As no other indicators of impairment existed during the fourth quarter of 2020 or first nine months of 2021, no impairment charges were recorded during the three or nine-months ended September 30, 2021 and 2020.

 

The Company’s GBM candidate, with original value of $9.4 million, had cumulative impairments through 2018 of $7 million, with remaining carrying value of $2.4 million at December 31, 2019. On September 30, 2020, the Company evaluated its IPR&D for the (GBM) product candidate and concluded that it is more likely than not that the asset is further impaired. After this assessment on September 30, 2020, the Company wrote off the remaining $2.4 million of this asset, thereby recognizing a non-cash charge of $2.4 million in the third quarter of 2020.

 

Covenants Not to Compete

 

Pursuant to the EGEN Purchase Agreement, EGEN provided certain covenants (“Covenant Not To Compete”) to the Company whereby EGEN agreed, during the period ending on the seventh anniversary of the closing date of the acquisition on June 20, 2014, not to enter into any business, directly or indirectly, which competes with the business of the Company, nor will it contact, solicit or approach any of the employees of the Company for purposes of offering employment. The Covenant Not to Compete which was valued at approximately $1.6 million at the date of the EGEN acquisition has a definitive life and is amortized on a straight-line basis over its life of 7 years. The Company recognized the remaining carrying value of $113,660 as amortization expense in the first half of 2021. The carrying value of the Covenant Not to Compete was fully amortized as of June 30, 2021 and had a carrying value of $113,660, net of $1,477,554 accumulated amortization, as of December 31, 2020. The Company recognized amortization expense of $56,830 and 170,487 in the three-month and nine-month periods ended September 30, 2020.

 

Goodwill

 

The purchase price exceeded the estimated fair value of the net assets acquired by approximately $2.0 million which was recorded as Goodwill. Goodwill represents the difference between the total purchase price for the net assets purchased from EGEN and the aggregate fair values of tangible and intangible assets acquired, less liabilities assumed. Goodwill is reviewed for impairment at least annually as of our third quarter ended September 30 or sooner if we believe indicators of impairment exist. As of September 30, 2021, we concluded that the Company’s fair value exceeded its carrying value therefore “it is not more likely than not” that the Goodwill was impaired.

 

Following is a summary of the net fair value of the assets acquired in the EGEN asset acquisition for the nine-month period ended September 30, 2021:

 

    IPR&D     Goodwill     Covenant Not To Compete  
For the nine-months ended September 30, 2021                        
Balance at January 1, 2021, net   $ 13,366,234     $ 1,976,101     $ 113,660  
Amortization     -       -       (113,660 )
Balance at September 30, 2021, net   $ 13,366,234     $ 1,976,101     $ -  

 

Note 10. Accrued Liabilities

 

Other accrued liabilities at September 30, 2021 and December 31, 2020 include the following:

 

    September 30, 2021     December 31, 2020  
Amounts due to contract research organizations and other contractual agreements   $ 1,276,317     $ 636,000  
Accrued payroll and related benefits     1,247,460       1,736,271  
Accrued professional fees     265,350       66,850  
Accrued interest     16,250       -  
Other     19,411       19,411  
Total   $ 2,824,788     $ 2,458,532  

 

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Note 11. Notes Payable

 

The SVB Loan Facility

 

On June 18, 2021, the Company entered into a $10 million loan facility (the “SVB Loan Facility”) with Silicon Valley Bank (“SVB”). Celsion immediately used $6 million from the SVB Loan Facility to retire all outstanding indebtedness with Horizon Technology Finance Corporation as further discussed below. Concurrently with this transaction, the Company used $6.0 million of other available funds to establish a restricted cash account which serves as security for the SVB Loan Facility. The remaining $4 million will be available to be drawn down up to 12 months after closing and will be used for working capital and to fund the advancement of the Company’s product pipeline, including GEN-1 for the treatment of newly diagnosed advanced ovarian cancer, as well as other strategic initiatives intended to broaden its product pipeline.

 

The SVB Loan Facility is in the form of money market secured indebtedness bearing interest at a calculated WSJ Prime-based variable rate (currently 3.25%). A final payment equal to 3% of the total $10 million commitment amount is due upon maturity or prepayment of the SVB Loan Facility. There was no facility commitment fee and no stock or warrants were issued to SVB. Payments under the loan agreement are interest only for the first 24 months after loan closing, followed by a 24-month amortization period of principal and interest through the scheduled maturity date.

 

In connection with the SVB Loan Facility, the Company incurred financing fees and expenses totaling $243,370 which is recorded and classified as debt discount and are being amortized as interest expense using the effective interest method over the life of the loan. Also, in connection with the SVB Loan Facility, the Company is required to pay an end-of-term fee equal to 3.0% of the original loan amount at time of maturity. Therefore, these amounts totaling $300,000 are being amortized as interest expense using the effective interest method over the life of the loan. During the three-month and nine-month periods ended September 30, 2021, the Company incurred interest expense of $49,883 and $56,875, respectively, and amortized $45,687 and $52,144, respectively, as interest expense for debt discounts and end-of-term fee in connection with the SVB Financing Facility.

 

Following is a schedule of future principal payments, net of unamortized debt discounts and amortized end-of-term fee, due on the SVB Loan Facility:

 

   

As of

September 30,

 
2022   $  
2023     750,000  
2024     3,000,000  
2025 and thereafter     2,250,000  
Subtotal of future principal payments     6,000,000  
Unamortized debt premium, net     (191,226 )
Total   $ 5,808,774  

 

Horizon Credit Agreement

 

On June 27, 2018, the Company entered into a loan agreement with Horizon Technology Finance Corporation (“Horizon”) that provided $10 million in new capital (the “Horizon Credit Agreement”). The Company drew down $10 million upon closing of the Horizon Credit Agreement on June 27, 2018. On August 28, 2020, Horizon and the Company amended the Horizon Credit Agreement (the “Amendment”) whereby Celsion repaid $5 million of the $10 million loan and $0.2 million in related end of term charges, and the remaining $5 million in obligations were restructured as set forth below.

 

Pursuant to the Amendment, the remaining $5 million in obligations of Celsion under the Horizon Credit Agreement was secured by a first-priority security interest in substantially all assets of Celsion other than intellectual property assets. The obligations bore interest at a rate calculated based an amount by which the one-month LIBOR exceeds 2% plus 7.625%. In no event shall the interest rate be less than 9.625%. Payments pursuant to the Amendment were interest only for the first twelve (12) months after August 1, 2020, followed by a 21-month amortization period of principal and interest through the scheduled maturity date on April 1, 2023. In addition, the remaining $5 million in obligations was subject to an end of term fee equal, in the aggregate, to $275,000, which amount was payable upon the maturity of the obligations or upon the date of final payment or default, as applicable. In connection with the Amendment, Celsion agreed to a liquidity covenant which provides that, at all times, Celsion shall maintain unrestricted cash and/or cash equivalents on deposit in accounts over which the applicable Lenders maintain an account control agreement in an amount not less than $2.5 million. In addition, pursuant to the Amendment, Celsion agreed to provide evidence to Horizon on or before March 31, 2021, that it received aggregate cash proceeds of not less than $5 million from the sale of equity, debt, its New Jersey net operating losses, or a combination thereof, subsequent to the date of the Amendment. The Company met this requirement during the fourth quarter of 2020.

 

  16  

 

 

In connection with the Horizon Credit Agreement, the Company incurred financing fees and expenses totaling $175,000 which were recorded and classified as debt discount. In addition, the Company paid loan origination fees of $100,000 which were recorded and classified as debt discount. These debt discount amounts totaling $782,116 were being amortized as interest expense using the effective interest method over the life of the loan. Also, in connection with each of the Horizon Credit Agreement, the Company was required to pay an end of term charge equal to 4.0% of the original loan amount at time of maturity. Therefore, those amounts totaling $400,000 were being amortized as interest expense using the effective interest method over the life of the loan.

 

As a fee in connection with the Horizon Credit Agreement, Celsion issued Horizon warrants exercisable for a total of 190,114 shares of Celsion’s common stock (the “Existing Warrants”) at a per share exercise price of $2.63. The Horizon Warrants were immediately exercisable for cash or by net exercise from the date of grant and will expire after ten years from the date of grant. The Company valued the Horizon Warrants issued using the Black-Scholes option pricing model and recorded a total of $507,116 as a direct deduction from the debt liability, consistent with the presentation of debt discounts, and are being amortized as interest expense using the effective interest method over the life of the loan. Pursuant to the Amendment, one-half of the aggregate Existing Warrants, exercisable for a total of 95,057 shares of Celsion’s common stock, have been canceled, and, in connection with the Amendment, Celsion issued Horizon new warrants exercisable at a per share exercise price equal to $1.01 for a total of 247,525 shares of Celsion’s common stock (the “New Warrants” and, together with the Existing Warrants, the “Warrants”). The remaining 95,057 Existing Warrants issued in connection with the Horizon Credit Agreement remain outstanding at a per share exercise price of $2.63.

 

The New Warrants were immediately exercisable for cash or by net exercise from the date of grant and will expire after ten years from the date of grant. The Horizon Credit Agreement contains customary representations, warranties and affirmative and negative covenants including, among other things, covenants that limit or restrict Celsion’s ability to grant liens, incur indebtedness, make certain restricted payments, merge, or consolidate and make dispositions of assets.

 

The Amendment was evaluated in accordance with FASB ASC 470-50, Debt-Modifications and Extinguishments, for debt modification and extinguishment accounting. We accounted for the $5 million we repaid as a debt extinguishment thereby reducing the principal obligations accordingly. Also, in connection with the $5 million repayment, we recognized as interest expense, approximately $0.2 million of unamortized debt discount, deferred financing and end of term fees related to the repaid obligation in August 2020.

 

We accounted for the remaining $5 million of obligation under the Amendment as a debt modification to the initial agreement with respect to the minor changes in cash flows. Also, in connection with the $5 million remaining obligations, we recorded $5,000 of financing fees and the New Warrant fair value of $247,548 as additional debt discount on the $5 million remaining obligation. Therefore, approximately $109,706 of unamortized debt discount will be amortized over the remaining life of the new obligations. The $275,000 of end of term fees, net of previously amortized end of term fees totaling $142,605 previously accrued on the original note associated with the $5 million remaining obligation, will be amortized as interest expense over the remaining life of the new obligations.

 

No interest expense was recognized during the three months ended September 31, 2021 as the amounts owed under the Horizon Credit agreement were paid off in June 2021. During the nine-month period ended September 30, 2021, the Company incurred $225,920 in interest expense and amortized $139,428 as interest expense for debt discounts and end of term charges in connection with the Horizon Credit Agreement. During the three-month period ended September 30, 2020, the Company incurred $198,738 in interest expense and amortized $251,993 as interest expense for debt discounts and end of term charges in connection with the Initial Horizon Credit Agreement and Amendment. During the nine-month period ended September 30, 2020, the Company incurred $685,913 in interest expense and amortized $444,786 as interest expense for debt discounts and end of term charges in connection with the Initial Horizon Credit Agreement and Amendment.

 

On June 18, 2021, as a condition of entering into the SVB Loan Facility, the Company paid the outstanding principal balance, an early termination fee and the end of term charges in full satisfaction of the Horizon Credit Agreement, as amended. Following is a schedule of the amounts paid to Horizon on June 18, 2021.

 

         
Principal balance at June 18, 2021   $ 5,000,000  
Early termination fees     150,000  
End of term charges     275,000  
Total   $ 5,425,000  

 

  17  

 

 

During the nine months ended September 30, 2021, the Company recorded a loss of $234,419 on the termination of the Horizon Credit Agreement, as amended, which represented the early termination fee and the end of term fees, net of previously amortized interest expense totaling $190,581 on the date of its payoff.

 

Note 12. Stockholders’ Equity

 

In September 2018, the Company filed with the SEC a $75 million shelf registration statement on Form S-3 (the 2018 Shelf Registration Statement) that allows the Company to issue any combination of common stock, preferred stock or warrants to purchase common stock or preferred stock. This shelf registration was declared effective on October 12, 2018 and was fully utilized by the end of January 2021.

 

On March 19, 2021, the Company filed with the SEC a new $100 million shelf registration statement on Form S-3 (the “2021 Registration Statement”) that allows the Company to issue any combination of common stock, preferred stock or warrants to purchase common stock or preferred stock. This shelf registration was declared effective on March 30, 2021.

 

Capital on DemandTM Sales Agreement

 

On December 4, 2018, the Company entered into the Capital on Demand Agreement with JonesTrading, pursuant to which the Company may offer and sell, from time to time, through JonesTrading shares of Common Stock having an aggregate offering price of up to $16.0 million.

 

During 2020 through September 30, 2020, the Company sold and issued an aggregate of 2.1 million shares under the Capital on Demand Agreement, receiving approximately $4.3 million in gross proceeds. During the first nine months of 2021, the Company sold 7.2 million shares under the Capital on Demand Agreement, receiving approximately $6.9 million in gross proceeds under the Capital on Demand Agreement.

 

Registered Direct Offering

 

On February 27, 2020, we entered into a Securities Purchase Agreement (the “February 2020 Purchase Agreement”) with several institutional investors, pursuant to which we agreed to issue and sell, in a registered direct offering (the “February 2020 Offering”), an aggregate of 4,571,428 shares of our common stock at an offering price of $1.05 per Share for gross proceeds of approximately $4.8 million before the deduction of the Placement Agent fees and offering expenses. In a concurrent private placement (the “Private Placement”), the Company issued to the investors that participated in the February 2020 Offering, for no additional consideration, warrants to purchase up to 2,971,428 shares of common stock (the “Original Warrants”). The Original Warrants were initially exercisable six months following their date of issue and were set to expire on the five-year anniversary of such initial exercise date. The Original Warrants had an exercise price of $1.15 per share subject to adjustment as provided therein. On March 12, 2020, the Company entered into private exchange agreements (the “Exchange Agreements”) with holders of the Original Warrants. Pursuant to the Exchange Agreements, in return for a higher exercise price of $1.24 per share of common stock, the Company issued new warrants to the Investors to purchase up to 3,200,000 shares of common stock (the “Exchange Warrants”) in exchange for the Original Warrants. The Exchange Warrants, like the Original Warrants, are initially exercisable six months following their issuance (the “Initial Exercise Date”) and expire on the five-year anniversary of their Initial Exercise Date. Other than having a higher exercise price, different issue date, Initial Exercise Date and expiration date, the terms of the Exchange Warrants are identical to those of the Original Warrants. On July 31, 2020, the Company filed a Form S-3 Registration Statement to register the shares of common stock issuable under the Exchange Warrants; the Registration Statement was declared effective by the SEC on August 13, 2020. No Exchange Warrants were exercised during 2020. During 2021 through the date of this Quarterly Report on Form 10-Q, the Company issued 1.2 million shares pursuant to investors exercising Exchange Warrants, receiving approximately $1.5 million in net proceeds.

 

Underwritten Offering

 

On June 22, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Oppenheimer & Co. Inc. (the “Underwriter”), relating to the issuance and sale (the “Underwritten Offering”) of 2,666,667 shares of the Company’s common stock. Pursuant to the terms of the Underwriting Agreement, the Underwriter agreed to purchase the shares at a price of $3.4875 per share. The Underwriter offered the shares at a public offering price of $3.75 per share, reflecting an underwriting discount equal to $0.2625, or 7.0% of the public offering price. The net proceeds to the Company from the Underwritten Offering, after deducting the underwriting discount and estimated offering expenses payable by the Company, were approximately $9.1 million.

 

  18  

 

 

Pursuant to the Underwriting Agreement, until December 31, 2020, the Underwriter had a right of first refusal to act as sole underwriter, initial purchaser, placement/selling agent, or arranger, as the case may be, on any new financing for the Company (excluding equipment lease financings, loans or grants from governmental authorities or in connection with government programs and financings relating to or sales of tax attributes) during such period. The Underwriter had the sole right to determine whether or not any other broker dealer could participate in any such offering and the economic terms of any such participation.

 

January 2021 Registered Direct Offering

 

On January 22, 2021, the Company entered into a Securities Purchase Agreement (the “January 2021 Purchase Agreement”) with several institutional investors, pursuant to which the Company agreed to issue and sell, in a registered direct offering (the “January 2021 Offering”), an aggregate of 25,925,925 shares of the Company’s common stock at an offering price of $1.35 per share for gross proceeds of approximately $35 million before the deduction of the January 2021 Placement Agents (as defined below) fee and offering expenses. The January 2021 Purchase Agreement contains customary representations, warranties and agreements by the Company and customary conditions to closing. The closing of the January 2021 Offering occurred on January 26, 2021.

 

In connection with the January 2021 Offering, the Company entered into a placement agent agreement (the “January 2021 Placement Agent Agreement”) with A.G.P./Alliance Global Partners (together with Brookline Capital Markets, the “January 2021 Placement Agents”) pursuant to which the Company agreed to pay the January 2021 Placement Agents a cash fee equal to 7% of the aggregate gross proceeds raised from the sale of the securities sold in the January 2021 Offering and reimburse the January 2021 Placement Agents for certain of their expenses in an amount not to exceed $82,500.

 

March 2021 Registered Direct Offering

 

On March 31, 2021, the Company entered into a Securities Purchase Agreement (the “March 2021 Purchase Agreement”) with several institutional investors, pursuant to which the Company agreed to issue and sell, in a registered direct offering (the “March 2021 Offering”), an aggregate of 11,538,462 shares of the Company’s common stock, at an offering price of $1.30 per share for gross proceeds of approximately $15 million before the deduction of the placement agents fee and offering expenses. The shares were offered by the Company pursuant to the 2021 Registration Statement. The closing of the Offering occurred on April 5, 2021.

 

In connection with the March 2021 Offering, the Company entered into a placement agent agreement (the “March 2021 Placement Agent Agreement”) with A.G.P./Alliance Global Partners, as lead placement agent (“AGP,” and together with JonesTrading Institutional Services LLC and Brookline Capital Markets, a division of Arcadia Securities, LLC, serving as co-placement agents, the “March 2021 Placement Agents”), pursuant to which the Company agreed to pay the March 2021 Placement Agents an aggregate cash fee equal to 7% of the aggregate gross proceeds raised from the sale of the securities sold in the Offering and reimburse the Placement Agents for certain of their expenses in an amount not to exceed $82,500.

 

Under the March 2021 Purchase Agreement and March 2021 Placement Agent Agreement, the Company and its subsidiaries were prohibited, for a period of 90 days after the closing, from entering into any agreement to issue or announcing any issuance or proposed issuance of common stock or any other securities that are at any time convertible into, or exercisable or exchangeable for, or otherwise entitle the holder thereof to receive common stock without the prior written consent of AGP or the investors participating in the offering. For purposes of this offering, AGP and the investors from the Company’s January 2021 Offering waived a similar 90-day restriction in the placement agent agreement and purchase agreement for that transaction.

 

LPC Purchase Agreement

 

On September 8, 2020, the Company entered into a purchase agreement (the “LPC Purchase Agreement”) and a Registration Rights Agreement (the “Registration Rights Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which, upon the terms and subject to the conditions and limitations set forth therein, the Company has the right to sell to Lincoln Park up to $26.0 million of shares of the Company’s common stock at the Company’s discretion as described below (the “LPC Offering”). During 2020, the Company sold and issued an aggregate of 3.3 million shares, including the 437,828 commitment shares, under the LPC Purchase Agreement, receiving approximately $2.2 million in gross proceeds. On January 21, 2021, the Company terminated the LPC Purchase Agreement. The Company did not sell any shares under the LPC Purchase Agreement in 2021.

 

  19  

 

 

Note 13. Stock-Based Compensation

 

The Company has long-term compensation plans that permit the granting of equity-based awards in the form of stock options, restricted stock, restricted stock units, stock appreciation rights, other stock awards, and performance awards.

 

At the 2018 Annual Stockholders Meeting of the Company held on May 15, 2018, stockholders approved the Celsion Corporation 2018 Stock Incentive Plan (the “2018 Plan”). The 2018 Plan, as adopted, permits the granting of 2,700,000 shares of Celsion common stock as equity awards in the form of incentive stock options, nonqualified stock options, restricted stock, restricted stock units, stock appreciation rights, other stock awards, performance awards, or in any combination of the foregoing. At the 2019 Annual Stockholders Meeting of the Company held on May 14, 2019, stockholders approved an amendment to the 2018 Plan whereby the Company increased the number of common stock shares available by 1,200,000 to a total of 3,900,000 under the 2018 Plan, as amended. Prior to the adoption of the 2018 Plan, the Company had maintained the Celsion Corporation 2007 Stock Incentive Plan (the “2007 Plan”). At the 2020 Annual Stockholders Meeting of the Company held on June 15, 2020, stockholders approved an amendment to the 2018 Plan, as previously amended, whereby the Company increased the number of shares of common stock available by 2,500,000 to a total of 6,400,000 under the 2018 Plan, as amended. At the 2021 Annual Stockholders Meeting of the Company held on June 10, 2020, stockholders approved an amendment to the 2018 Plan, as previously amended, whereby the Company increased the number of shares of common stock available by 7,700,000 to a total of 14,100,000 under the 2018 Plan, as amended.

 

The Company has issued stock awards to employees and directors in the form of stock options and restricted stock. Options are generally granted with strike prices equal to the fair market value of a share of Celsion common stock on the date of grant. Incentive stock options may be granted to purchase shares of common stock at a price not less than 100% of the fair market value of the underlying shares on the date of grant, provided that the exercise price of any incentive stock option granted to an eligible employee owning more than 10% of the outstanding stock of Celsion must be at least 110% of such fair market value on the date of grant. Only officers and key employees may receive incentive stock options.

 

Option and restricted stock awards vest upon terms determined by the Compensation Committee of the Board of Directors and are subject to accelerated vesting in the event of a change of control or certain terminations of employment. The Company issues new shares to satisfy its obligations from the exercise of options or the grant of restricted stock awards.

 

On September 28, 2018, and again on February 19, 2019, the Compensation Committee of the Board of Directors approved the grant of (i) inducement stock options (the “Inducement Option Grants”) to purchase a total of 164,004 and 140,004 shares of Celsion common stock, respectively, and (ii) inducement restricted stock awards (the “Inducement Stock Grants”) totaling 19,000 and 13,000 shares of Celsion common stock to five new employees collectively. Each award has a grant date of the date of grant. Each Inducement Option Grant has an exercise price per share equal to $2.77 and $2.18 which represents the closing price of Celsion’s common stock as reported by Nasdaq on September 28, 2018 and February 19, 2019, respectively. Each Inducement Option Grant will vest over three years, with one-third vesting on the one-year anniversary of the employee’s first day of employment with the Company and one-third vesting on the second and third anniversaries thereafter, subject to the new employee’s continued service relationship with the Company on each such date. Each Inducement Option Grant has a ten-year term and is subject to the terms and conditions of the applicable stock option agreement. Each of Inducement Stock Grant vested on the one-year anniversary of the employee’s first day of employment with the Company is subject to the new employee’s continued service relationship with the Company through such date and is subject to the terms and conditions of the applicable restricted stock agreement.

 

As of September 30, 2021, there were a total of 14,198,424 shares of Celsion common stock reserved for issuance under the 2018 Plan, which were comprised of 6,473,451 shares of Celsion common stock subject to equity awards previously granted under the 2018 Plan and 2007 Plan and 7,724,973 shares of Celsion common stock available for future issuance under the 2018 Plan. As of September 30, 2021, there were a total of 140,004 shares of Celsion common stock subject to outstanding inducement awards.

 

  20  

 

 

A summary of stock option awards and restricted stock grants for the nine-months ended September 30, 2021 is presented below:

 

    Stock Options     Restricted Stock Awards    

Weighted

Average

 
   

Options

Outstanding

   

Weighted

Average

Exercise

Price

   

Non-vested

Restricted

Stock

Outstanding

   

Weighted

Average

Grant

Date

Fair Value

   

Contractual

Terms of

Equity

Awards

(in years)

 
Equity awards outstanding at January 1, 2021     4,624,725     $ 2.77       2,750     $ 0.89          
                                         
Equity awards granted     2,171,250     $ 2.17       9,000     $ 1.29          
                                         
Equity awards exercised or vested and issued     (7,500 )   $ 0.63       -     $ -          
                                         
Equity awards forfeited, cancelled or expired     (185,770 )   $ 2.59       (1,000 )   $ 2.22          
                                         
Equity awards outstanding at September 30, 2021     6,602,705     $ 2.58       10,750     $ 1.33       7.8  
                                         
Aggregate intrinsic value of outstanding equity awards at September 30, 2021   $ 2,538             $ 12,383                  
                                         
Equity awards exercisable at September 30, 2021     4,291,685     $ 2.73                       7.2  
                                         
Aggregate intrinsic value of equity awards exercisable at September 30, 2021   $ -                                  

 

Total compensation cost related to stock options and restricted stock awards amounted to $700,624 and $417,476 for the three-month periods ended September 30, 2021 and 2020, respectively. Of these amounts, $241,288 and $164,035 was charged to research and development during the three-month periods ended September 30, 2021 and 2020, respectively, and $459,336 and $253,441 was charged to general and administrative expenses during the three-month periods ended September 30, 2021 and 2020, respectively.

 

Total compensation cost related to stock options and restricted stock awards amounted to $3,073,569 and $1,448,202 for the nine-month periods ended September 30, 2021 and 2020, respectively. Of these amounts, $1,123,376 and $542,157 was charged to research and development during the nine-month periods ended September 30, 2021 and 2020, respectively, and $1,950,193 and $906,045 was charged to general and administrative expenses during the nine-month periods ended September 30, 2021 and 2020, respectively.

 

As of September 30, 2021, there was $2.4 million of total unrecognized compensation cost related to non-vested stock-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of 1.0 years. The weighted average grant date fair values of the stock options granted was $1.97 and $3.07 during the nine-month periods ended September 30, 2021 and 2020, respectively.

 

The fair values of stock options granted were estimated at the date of grant using the Black-Scholes option pricing model. The Black-Scholes model was originally developed for use in estimating the fair value of traded options, which have different characteristics from Celsion’s stock options. The model is also sensitive to changes in assumptions, which can materially affect the fair value estimate. The Company used the following assumptions for determining the fair value of options granted under the Black-Scholes option pricing model:

 

    Nine Months Ended
September 30,
 
    2021     2020  
Risk-free interest rate     1.54 to 1.74 %     0.66 to 1.33 %
Expected volatility     106.8 to 113.2 %     100.4 to 104.8 %
Expected life (in years)     7.5 to 10.0        8.0 to 10.0  
Expected dividend yield     - %     - %

 

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Expected volatilities utilized in the model are based on historical volatility of the Company’s stock price. The risk-free interest rate is derived from values assigned to U.S. Treasury bonds with terms that approximate the expected option lives in effect at the time of grant.

 

Note 14. Earn-Out Milestone Liability

 

On March 28, 2019, the Company and EGWU, Inc. entered into an amendment to its purchase agreement (“Amended Asset Purchase Agreement”), whereby payment of the earnout milestone liability related to the Ovarian Cancer Indication of $12.4 million had been modified. The Company has the option to make the payment as follows:

 

a) $7.0 million in cash within 10 business days of achieving the milestone; or
b) $12.4 million in cash, common stock of the Company, or a combination of either, within one year of achieving the milestone.

 

As of September 30, 2021, June 30, 2021, and December 31, 2020, the Company calculated the fair value of the earn-out milestone liability at $7.3 million, $7.1 million and $7.0 million, respectively, and recognized a non-cash charge of $0.3 million and for each of the three-months and nine months ended September 30, 2021. In assessing the earnout milestone liability at September 30, 2021 and June 30, 2021, the Company determined the fair value of each of the two payment options per the Amended Asset Purchase Agreement and weighted them at 50% and 50% probability for the $7.0 million and the $12.4 million payments, respectively.

 

As of September 30, 2020, June 30, 2020 and December 31, 2019, the Company calculated the fair value of the earn-out milestone liability at $7.1 million, $6.0 million, and $5.7 million, respectively, and recognized a non-cash charge of $1.1 and $1.4 million for the three-month and nine-month periods ended September 30, 2020, respectively. In assessing the earnout milestone liability at September 30, 2020, the Company fair valued each of the two payment options per the Amended Asset Purchase Agreement and weighted them at 50% and 50% probability for the $7.0 million and the $12.4 million payments, respectively, and at June 30, 2020, the Company determined the fair value of each of the two payment options per the Amended Asset Purchase Agreement and weighted them at 80% and 20% probability for the $7.0 million and the $12.4 million payments, respectively.

 

The following is a summary of the changes in the earn-out milestone liability for the nine-month period ended September 30, 2021:

 

Balance at January 1, 2021   $ (7,018,000 )
Non-cash loss from the change in fair value     (327,000 )
Balance at September 30, 2021   $ (7,345,000 )

 

The following is a schedule of the Company’s risk-adjustment assessment of each milestone:

 

Date  

Risk-adjustment Assessment

of Achieving Each Milestone

    Discount Rate    

Estimated Time

to Achieve

                 
September 30, 2021     80 %     6.54% to 6.60 %   0.29 to 1.29 years
June 30, 2021     80 %     9 %   0.42 to 1.42 years
December 31, 2020     80 %     9 %   0.54 to 1.54 years
                     
September 30, 2020     80 %     9 %   0.38 to 1.38 years
June 30, 2020     80 %     9 %   0.54 to 1.54 years
December 31, 2019     80 %     9 %   1.12 to 2.12 years

  

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Note 15. Warrants

 

Following is a summary of all warrant activity for the nine-months ended September 30, 2021:

 

Warrants  

Number of
Warrants

Issued

   

Weighted

Average

Exercise Price

 
             
Warrants outstanding at December 31, 2020     3,853,566     $ 1.35  
                 
Warrants exercised during the nine months ended September 30, 2021 (see Note 12)     (1,216,667 )   $ 1.24  
                 
Warrants outstanding at September 30, 2021     2,636,899     $ 1.40  
                 
Aggregate intrinsic value of outstanding warrants at September 30, 2021   $ 159,857          
                 
Weighted average remaining contractual terms at September 30, 2021     4.1 years          

 

Note 16. Leases

 

In 2011, the Company executed a lease (the “Lease”) with Brandywine Operating Partnership, L.P. (Brandywine), a Delaware limited partnership, for a 10,870 square foot premises located in Lawrenceville, New Jersey and relocated its offices to Lawrenceville, New Jersey from Columbia, Maryland. The Lease had an initial term of 66 months. In late 2015, Lenox Drive Office Park LLC purchased the real estate and office building and assumed the Lease. This Lease was set to expire on April 30, 2017. In April 2017, the Company and the landlord amended the Lease effective May 1, 2017. The 1st Lease Amendment extended the term of the agreement for an additional 64 months, reduced the premises to 7,565 square feet, reduced the monthly rent and provided four months free rent. The monthly rent ranged from approximately $18,900 in the first year to approximately $20,500 in the final year of the 1st Lease Amendment. Effective January 9, 2019, the Company amended the current terms of the 1st Lease Amendment to increase the size of the premises by 2,285 square feet to 9,850 square feet and also extended the lease term by one year to September 1, 2023. The monthly rent ranges from approximately $25,035 in the first year to approximately $27,088 in the final year of the 2nd Lease Amendment.

 

In connection with the EGEN Asset Purchase Agreement in June 2014, the Company assumed the existing lease with another landlord for an 11,500 square foot premises located in Huntsville Alabama. In January 2018, the Company and the Huntsville landlord entered into a new 60-month lease which reduced the premises to 9,049 square feet with rent payments of approximately $18,100 per month. On June 9, 2021 and, as amended on July 7, 2021, the Company and the Huntsville landlord entered into a 22-month lease for an additional 2,197 square foot premises with rent payments of approximately $5,500 per month.

 

We adopted ASC Topic 842 on January 1, 2019 using the modified retrospective transition method for all lease arrangements at the beginning of the period of adoption. Results for reporting periods beginning January 1, 2019 are presented under ASC 842, while prior period amounts were not adjusted and continue to be reported in accordance with our historic accounting under Topic 840, Leases. The standard had a material impact on our Condensed Consolidated Balance Sheet but had no impact on our condensed consolidated net earnings and cash flows. The most significant impact of adopting ASC Topic 842 was the recognition of the right-of-use (ROU) asset and lease liabilities for operating leases, which are presented in the following three-line items on the Consolidated Condensed Balance Sheet: (i) operating lease right-of-use asset; (ii) current operating lease liabilities; and (iii) operating lease liabilities. Therefore, on date of adoption of ASC Topic 842, the Company recognized a ROU asset of $1.4 million, operating lease liabilities, current and non-current collectively, of $1.5 million and reduced other liabilities by approximately $0.1 million. We elected the package of practical expedients for leases that commenced before the effective date of ASC Topic 842 whereby we elected to not reassess the following: (i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. In addition, we have lease agreements with lease and non-lease components, and we have elected the practical expedient for all underlying asset classes and account for them as a single lease component. We have no finance leases. We determine if an arrangement is a lease at inception. We have operating leases for office space and research and development facilities. Neither of our leases include options to renew, however, one contains an option for early termination. We considered the option of early termination in measurement of right-of-use assets and lease liabilities and we determined it is not reasonably certain to be terminated. In connection with the 2nd Lease Amendment for the New Jersey office lease in January 2019, the Company considered this as one modified lease and not as two separate leases. Therefore, in January 2019, the Company determined this lease was an operating lease and remeasured the ROU asset and lease liability. Therefore, the Company increased the ROU asset and operating lease liabilities by $0.4 million to $1.8 million and $1.9 million, respectively. In connection with the 2021 lease, as amended, the Company determined this lease should be treated as a separate contract. Therefore, during the third quarter of 2021, the Company increased the ROU assets and operating lease liabilities by $0.1 million.

 

  23  

 

 

Following is a table of the lease payments and maturity of our operating lease liabilities as of September 30, 2021:

 

   

For the

year ending
September 30,

 
Remainder of 2021   $ 149,573  
2022     601,495  
2023     238,609  
2024 and thereafter     -  
Subtotal future lease payments     989,677  
Less imputed interest     (81,895 )
Total lease liabilities   $ 907,782  
         
Weighted average remaining life     1.7 years  
         
Weighted average discount rate     8.28 %

 

For the three-month and nine-month periods ended September 30, 2021, operating lease expense was $146,936 and $413,577, respectively and cash paid for operating leases included in operating cash flows was $149,115 and $418,696, respectively. For the three-month and nine-month periods ended September 30, 2020, operating lease expense was $130,595 and $391,785, respectively and cash paid for operating leases included in operating cash flows was $131,863 and $393,947, respectively.

 

Note 17. Technology Development and Licensing Agreements

 

On May 7, 2012, the Company entered into a long-term commercial supply agreement with Zhejiang Hisun Pharmaceutical Co. Ltd. (Hisun) for the production of ThermoDox® in the China territory. In accordance with the terms of the agreement, Hisun will be responsible for providing all of the technical and regulatory support services, including the costs of all technical transfer, registration and bioequivalence studies, technical transfer costs, Celsion consultative support costs and the purchase of any necessary equipment and additional facility costs necessary to support capacity requirements for the manufacture of ThermoDox®. Celsion will repay Hisun for the aggregate amount of these development costs and fees commencing on the successful completion of three registration batches of ThermoDox®. Hisun is