NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 30, 2020
(UNAUDITED)
1.
|
Basis of Presentation and New Accounting Standards
|
The accompanying consolidated condensed financial statements as of September 30, 2020 and for the three and nine months ended September 30, 2020 and 2019 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. The consolidated condensed balance sheet at December 31, 2019 has been derived from the audited financial statements at December 31, 2019 but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the financial position and results of operations of Plus Therapeutics, Inc., and its subsidiaries (collectively, the “Company”) have been included. Operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. These financial statements should be read in conjunction with the consolidated financial statements and notes therein included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission on March 30, 2020.
On March 30, 2019, the Company entered into an Asset and Share Sale and Purchase Agreement (the “Lorem Purchase Agreement”) with Lorem Vascular Pte. Ltd. (“Lorem”), pursuant to which, among other things, Lorem agreed to purchase the Company’s UK subsidiary, Cytori Ltd. (the “UK Subsidiary”), and the Company’s cell therapy assets, excluding such assets used in Japan or relating to the Company’s contract with the U.S. Department of Health and Human Service’s Biomedical Advanced Research and Development Authority (“BARDA”). Both the Company and Lorem made customary representations, warranties and covenants in the Lorem Purchase Agreement. The transaction was completed on April 24, 2019 and the Company received $4.0 million of cash proceeds, of which $1.7 million was used to pay down principal, interest and fees under the Loan and Security Agreement, dated May 29, 2015 (the “Loan and Security Agreement”) (Note 5), with Oxford Finance, LLC (“Oxford”).
On April 19, 2019, the Company entered into an Asset and Share Sale and Purchase Agreement (the “Shirahama Purchase Agreement”) with Seijirō Shirahama, pursuant to which, among other things, Mr. Shirahama agreed to purchase the Company’s Japanese subsidiary, Cytori Therapeutics, K.K. (the “Japanese Subsidiary”), and substantially all of the Company’s cell therapy assets used in Japan. Both the Company and Mr. Shirahama made customary representations, warranties and covenants in the Shirahama Purchase Agreement. The transaction was completed on April 25, 2019 and the Company received $3.0 million of cash proceeds, of which $1.4 million was used to pay down principal, interest and fees under the Loan and Security Agreement.
Amendments to Certificate of Incorporation
On July 29, 2019, the Company amended its Certificate of Incorporation with the State of Delaware to change its corporate name from Cytori Therapeutics, Inc. to Plus Therapeutics, Inc. The Company also changed its trading symbol for its common stock on the Nasdaq Capital Market to “PSTV”.
Recently Issued Accounting Pronouncements
In September 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The standard amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses for most financial assets and certain other instruments that aren’t measured at fair value through net income. For available-for-sale debt securities, entities will be required to recognize an allowance for credit losses rather than a reduction in carrying value of the asset. Entities will no longer be permitted to consider the length of time that fair value has been less than amortized cost when evaluating when credit losses should be recognized. This new guidance is effective in the first quarter of 2023 for calendar-year SEC filers that are smaller reporting companies as of the one-time determination date. Early adoption is permitted beginning in 2019. The Company plans to adopt the new guidance on January 1, 2023, and it does not expect that adoption of this standard will have a material impact on its consolidated financial statements and related disclosures.
In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”). ASU 2020-06 eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, ASU 2020-06 modifies how particular convertible instruments and certain contracts that may be settled
8
in cash or shares impact the diluted EPS computation. The amendments in ASU 2020-06 are effective for smaller reporting companies as defined by the SEC for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact of ASU 2020-06 on its financial statements.
Recently Adopted Accounting Pronouncements
In August 2018, the FASB issued ASU No. 2018-13 (ASU 2018-13), Changes to the Disclosure Requirements for Fair Value Measurement. This ASU eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. The standard is effective for all entities for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company adopted ASU 2018-13 as of January 1, 2020, which did not have a material impact on the Company's financial statements.
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. The Company’s most significant estimates and critical accounting policies involve recognizing revenue, reviewing assets for impairment, determining the assumptions used in measuring share-based compensation expense, valuing warrants, and valuing allowances for doubtful accounts.
Actual results could differ from these estimates. Management’s estimates and assumptions are reviewed regularly, and the effects of revisions are reflected in the consolidated financial statements in the periods they are determined to be necessary.
3.
|
Liquidity and Going Concern
|
The Company incurred net losses of $1.7 million and $4.7 million for the three and nine months ended September 30, 2020, respectively. The Company had an accumulated deficit of $429.9 million as of September 30, 2020. Additionally, it used net cash of $5.2 million to fund its operating activities for the nine months ended September 30, 2020. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
To date, these operating losses have been funded primarily from outside sources of invested capital, proceeds raised from the Loan and Security Agreement, and gross profits. The Company has had, and will continue to have, an ongoing need to raise additional cash from outside sources to fund its future clinical development programs and other operations. The Company anticipates using its new equity line facility entered into on September 30, 2020 with Lincoln Park Capital Fund, LLC (“Lincoln Park”) (Note 11) to raise additional cash. The Company’s inability to raise additional cash would have a material and adverse impact on its business and operations and would cause it to default on its loan.
The Company continues to seek additional capital through strategic transactions and from other financing alternatives. Without additional capital, the Company’s current working capital will not provide adequate funding to make debt repayments or support its research, sales and marketing efforts and product development activities at their current levels. If sufficient additional capital is not raised, the Company will at a minimum need to significantly reduce or curtail its research and development and other operations, and this would negatively affect its ability to achieve corporate growth goals.
The accompanying consolidated condensed financial statements have been prepared assuming the Company will continue to operate as a going concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from uncertainty related to its ability to continue as a going concern.
4.
|
Fair Value Measurements
|
Fair value measurements are market-based measurements, not entity-specific measurements. Therefore, fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability. The Company follows a three-level hierarchy to prioritize the inputs used in the valuation techniques to derive fair values. The basis for fair value measurements for each level within the hierarchy is described below:
|
•
|
Level 1: Quoted prices in active markets for identical assets or liabilities.
|
|
•
|
Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets.
|
|
•
|
Level 3: Valuations derived from valuation techniques in which one or more significant inputs are unobservable in active markets.
|
9
Warrants issued by the Company in connection with a rights offering originally filed under a Form S-1 registration statement in April 2018 (“Series T Warrants”) and in an underwritten public offering in September 2019 (“Series U Warrants”) are classified as liability instruments initially upon issuance. Because some of the inputs to the Company’s valuation model are either not observable or are not derived principally from or corroborated by observable market data by correlation or other means, the warrant liability is classified as Level 3 in the fair value hierarchy.
The estimated fair value of the Series T Warrants as of September 30, 2020 and December 31, 2019 was determined by using an option pricing model with the following assumptions. The Series T Warrants will be marked to market as of each balance sheet date until they are exercised or upon expiration, with the changes in fair value recorded as non-operating income or loss in the statements of operations and comprehensive loss.
|
|
As of September 30, 2020
|
|
|
As of
December 31,
2019
|
|
Expected term
|
|
0.55 years
|
|
|
1.1 years
|
|
Common stock market price
|
|
$
|
2.56
|
|
|
$
|
2.40
|
|
Risk-free interest rate
|
|
|
0.11
|
%
|
|
|
1.59
|
%
|
Expected volatility
|
|
|
128
|
%
|
|
|
168
|
%
|
Resulting fair value (per warrant)
|
|
$
|
1.04
|
|
|
$
|
1.47
|
|
The Company estimated the fair value of the Series U Warrants with the Black Scholes model with the following assumptions. The Series U Warrants that have not been amended (Note 11) will be marked to market as of each balance sheet date until they are exercised or upon expiration, with the changes in fair value recorded as non-operating income or loss in the statements of operations and comprehensive loss.
|
|
As of September 30, 2020
|
|
|
As of
December 31,
2019
|
|
Expected term
|
|
4 years
|
|
|
4.75 years
|
|
Common stock market price
|
|
$
|
2.56
|
|
|
$
|
2.40
|
|
Risk-free interest rate
|
|
|
0.22
|
%
|
|
|
1.68
|
%
|
Expected volatility
|
|
|
146
|
%
|
|
|
135
|
%
|
Resulting fair value (per warrant)
|
|
$
|
2.21
|
|
|
$
|
1.94
|
|
The following table summarizes the change in Level 3 warrant liability value (in thousands):
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
Warrant liability
|
September 30, 2020
|
|
September 30, 2019
|
|
|
September 30, 2020
|
|
September 30, 2019
|
|
Beginning balance
|
$
|
242
|
|
$
|
424
|
|
|
$
|
6,929
|
|
$
|
916
|
|
Issuance
|
|
—
|
|
|
10,215
|
|
|
|
—
|
|
|
10,215
|
|
Exercise/settlement
|
|
—
|
|
|
(794
|
)
|
|
|
—
|
|
|
(794
|
)
|
Change in fair value
|
|
81
|
|
|
561
|
|
|
|
(2,342
|
)
|
|
69
|
|
Reclassification to equity
|
|
(240
|
)
|
|
—
|
|
|
|
(4,504
|
)
|
|
—
|
|
Ending balance
|
$
|
83
|
|
$
|
10,406
|
|
|
$
|
83
|
|
$
|
10,406
|
|
10
On May 29, 2015, the Company entered into the Loan and Security Agreement, pursuant to which it funded an aggregate principal amount of $17.7 million (the “Term Loan”), subject to the terms and conditions set forth in the Loan and Security Agreement. The Term Loan accrues interest at a floating rate of at least 8.95% per annum, comprised of three-month LIBOR rate with a floor of 1.00% plus 7.95%. Pursuant to the Loan and Security Agreement, as amended, the Company is required to make interest only payments through May 1, 2021 and thereafter it is required to make payments of principal and accrued interest in equal monthly installments sufficient to amortize the Term Loan through September 1, 2024, the maturity date. At maturity of the Term Loan, or earlier repayment in full following voluntary prepayment or upon acceleration, the Company is required to make a final payment in an aggregate amount equal to approximately $3.2 million. In connection with the Term Loan, on May 29, 2015, the Company issued to Oxford warrants to purchase an aggregate of 188 shares of the Company’s common stock at an exercise price of $5,175 per share. These warrants became exercisable as of November 30, 2015 and will expire on May 29, 2025 and, following the authoritative accounting guidance, are equity classified and its respective fair value was recorded as a discount to the debt.
From September 2017 to March 2019, the Company entered into a total of seven amendments to the Term Loan which, amongst other things, extended the interest only period, required repayment of $3.1 million using the proceeds received from sale of the Company’s former UK and Japan subsidiaries as described in Note 1, increased the final payment, increased the final payment fee upon maturity or early repayment of the Term Loan, and increased the minimum liquidity covenant level to $2.0 million.
On March 29, 2020, the Company entered into the Ninth Amendment of the Loan and Security Agreement (“Ninth Amendment”), pursuant to which Oxford agreed to defer the start date of principal repayment from May 1, 2020 to May 1, 2021 and extended the term of the Term loan from September 1, 2021 to September 1, 2024. In addition, pursuant to the Ninth Amendment, on April 1, 2020, the Company made a $5.0 million paydown of principal upon execution of the Ninth Amendment and $0.3 million of related final payment. After giving effect to this payment, there is $4.3 million of principal outstanding under the Loan Agreement. In addition, an amendment fee of $1.0 million will be payable in connection with the Amendment at the earlier of the maturity date, acceleration of the loans and the making of certain prepayments. All other major terms remained consistent.
Under authoritative guidance, the Ninth Amendment does not meet the criteria to be accounted for as a troubled debt restructuring. In addition, the Company performed a quantitative analysis and determined that the terms of the new debt and original debt instrument are not substantially different. Accordingly, the Ninth Amendment is accounted for as debt modification. A new effective interest rate that equates the revised cash flows to the carrying amount of the original debt is computed and applied prospectively.
The Term Loan, as amended, is collateralized by a security interest in substantially all of the Company’s existing and subsequently acquired assets, including its intellectual property assets, subject to certain exceptions set forth in the Loan and Security Agreement, as amended. The intellectual property asset collateral will be released upon the Company achieving a certain liquidity level when the total principal outstanding under the Loan and Security Agreement is less than $3 million. As of September 30, 2020, there was $4.3 million principal amount outstanding under the Term Loan, and the Company was in compliance with all of the debt covenants under the Loan and Security Agreement.
The Company’s interest expense for the three months ended September 30, 2020 and 2019 was $0.3 million and $0.4 million, respectively. The Company’s interest expense for the nine months ended September 30, 2020 and 2019 was $0.9 million and $1.5 million, respectively. Interest expense is calculated using the effective interest method, therefore it is inclusive of non-cash amortization in the amount of $0.1 million and $0.1 million for the three months ended September 30, 2020 and 2019, and $0.4 million and $0.4 million for the nine months ended September 30, 2020 and 2019, respectively, related to the amortization of the debt discount, capitalized loan costs, and accretion of final payment.
The Loan and Security Agreement, as amended, contains customary indemnification obligations and customary events of default, including, among other things, the Company’s failure to fulfill certain obligations under the Term Loan, as amended, and the occurrence of a material adverse change, which is defined as a material adverse change in the Company’s business, operations, or condition (financial or otherwise), a material impairment of the prospect of repayment of any portion of the loan. In the event of default by the Company or a declaration of material adverse change by its lender, under the Term Loan, the lender would be entitled to exercise its remedies thereunder, including the right to accelerate the debt, upon which the Company may be required to repay all amounts then outstanding under the Term Loan, which could materially harm the Company’s financial condition. As of September 30, 2020, the Company has not received any notification or indication from Oxford to invoke the material adverse change clause. However, due to the Company’s current cash flow position and the substantial doubt about its ability to continue as a going concern, the entire principal amount of the Term Loan is presented as short-term. The Company will continue to evaluate the debt classification on a quarterly basis and evaluate for reclassification in the future should its financial condition improve.
11
Development Revenue
The Company received revenue for tasks performed under research and development agreements with governmental agencies, like BARDA, which is outside of the scope of the new revenue recognition guidance. Revenues derived from reimbursement of direct out-of-pocket expenses for research costs associated with government contracts are recorded as government contracts and other within development revenues. Government contract revenue is recorded at the gross amount of the reimbursement. The costs associated with these reimbursements are reflected as a component of research and development expense in the Company’s consolidated condensed statements of operations and comprehensive loss.
The BARDA contract was terminated by the U.S. Department of Health and Human Services effective in December 2019 and the contract close out process was completed during the three months ended September 30, 2020. During the three and nine months ended September 30, 2020, the Company recognized $0 and $0.3 million in development revenue and related costs related to unreimbursed costs prior to termination of the contract, respectively.
7.
|
Discontinued Operations
|
As explained in Note 1, on April 24, 2019 and April 25, 2019, the Company completed the sale of its cell therapy business to Lorem and Mr. Shirahama, respectively. The following table summarizes the calculation of the loss on the sale of the cell therapy business, which was finalized during the fourth quarter of 2019 (in thousands):
|
|
|
|
|
Consideration received
|
|
$
|
7,000
|
|
Transaction costs
|
|
|
(1,363
|
)
|
Net cash proceeds
|
|
|
5,637
|
|
Less:
|
|
|
|
|
Carrying value of business and assets sold
|
|
|
12,145
|
|
Net loss on sale of business
|
|
$
|
(6,508
|
)
|
There were no assets or liabilities related to discontinued operations as of September 30, 2020 or December 31, 2019.
The following table summarizes the results of discontinued operations for the nine months ended September 30, 2019 (in thousands). Discontinued operations did not have an impact on the Company’s results of operations during the three months ended September 30, 2019, or the three and nine months ended September 30, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2019
|
|
|
|
|
|
|
|
|
Product revenue
|
|
|
|
|
|
$
|
901
|
|
Cost of revenue
|
|
|
|
|
|
|
857
|
|
Gross profit
|
|
|
|
|
|
|
44
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
|
|
|
|
656
|
|
Sales and marketing
|
|
|
|
|
|
|
411
|
|
General and administrative
|
|
|
|
|
|
|
185
|
|
Total operating expenses
|
|
|
|
|
|
|
1,252
|
|
Operating loss
|
|
|
|
|
|
|
(1,208
|
)
|
Other income (expense)
|
|
|
|
|
|
|
140
|
|
Loss from discontinued operations
|
|
|
|
|
|
$
|
(1,068
|
)
|
During the nine months ended September 30, 2019, revenues from discontinued operations were related to the cell therapy business. Because of the sale of the cell therapy business to Lorem and Mr. Shirahama, all product revenue and costs of product revenues for these periods have been recorded in loss from discontinued operations in the consolidated condensed statements of operations and comprehensive loss.
Included in the statements of cash flows are the following non-cash adjustments related to the discontinued operations (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
Depreciation and amortization
|
|
$
|
—
|
|
|
$
|
467
|
|
12
Basic per share data is computed by dividing net income or loss applicable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted per share data is computed by dividing net income or loss applicable to common stockholders by the weighted average number of common shares outstanding during the period increased to include, if dilutive, the number of additional common shares that would have been outstanding as calculated using the treasury stock method. Potential common shares were related to outstanding but unexercised options, multiple series of preferred stock, and warrants for all periods presented.
The following were excluded from the diluted loss per share calculation for the periods presented because their effect would be anti-dilutive:
|
|
Nine Months Ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding stock options
|
|
|
531,336
|
|
|
|
254,000
|
|
Outstanding warrants
|
|
|
3,121,125
|
|
|
|
3,637,000
|
|
Preferred stocks
|
|
|
422,985
|
|
|
|
298,000
|
|
Total
|
|
|
4,075,446
|
|
|
|
4,189,000
|
|
9.
|
Commitments and Contingencies
|
Leases
At the inception of a contractual arrangement, the Company determines whether the contract contains a lease by assessing whether there is an identified asset and whether the contract conveys the right to control the use of the identified asset in exchange for consideration over a period of time. If both criteria are met, the Company calculates the associated lease liability and corresponding right-of-use asset upon lease commencement using a discount rate based on the rate implicit in the lease or an incremental borrowing rate commensurate with the term of the lease.
The Company records lease liabilities within current liabilities or long-term liabilities based upon the length of time associated with the lease payments. The Company records its operating lease right-of-use assets as long-term assets. Right-of-use assets for financing leases are recorded within property and equipment, net in the balance sheet. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Instead, the Company recognizes lease expense for these leases on a straight-line basis over the lease term.
The Company leases laboratory, office and storage facilities in San Antonio, Texas, under operating lease agreements that expire in 2028. The Company also leases certain office space in Austin, Texas under a month-to-month operating lease agreement. In addition, the Company leases certain equipment under various operating and finance leases. The lease agreements generally provide for periodic rent increases, and renewal and termination options. The Company’s lease agreements do not contain any material variable lease payments, residual value guarantees or material restrictive covenants.
Certain leases require the Company to pay taxes, insurance, and maintenance. Payments for the transfer of goods or services such as common area maintenance and utilities represent non-lease components. The Company elected the package of practical expedients and therefore does not separate non-lease components from lease components.
13
The table below summarizes the Company’s lease liabilities and corresponding right-of-use assets (in thousands, except year and rates):
|
As of September 30, 2020
|
|
Assets
|
|
|
|
Operating
|
$
|
671
|
|
Financing
|
39
|
|
Total leased assets
|
$
|
710
|
|
|
|
|
|
Liabilities
|
|
|
|
Current:
|
|
|
|
Operating
|
$
|
140
|
|
Financing
|
39
|
|
Noncurrent:
|
|
|
|
Operating
|
545
|
|
Financing
|
|
—
|
|
Total lease liabilities
|
$
|
724
|
|
|
|
|
|
Weighted-average remaining lease term (years) - operating leases
|
6.53
|
|
Weighted-average remaining lease term (years) - finance leases
|
0.37
|
|
Weighted-average discount rate - operating leases
|
|
7.9
|
%
|
Weighted-average discount rate - finance leases
|
|
5.0
|
%
|
The table below summarizes the Company’s lease costs from its consolidated condensed statement of operations and comprehensive loss, and cash payments from its consolidated condensed statement of cash flows during the three and nine months ended September 30, 2020 (in thousands):
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
September 30, 2020
|
|
September 30, 2019
|
|
|
September 30, 2020
|
|
September 30, 2019
|
|
Lease expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease expense
|
$
|
52
|
|
$
|
56
|
|
|
$
|
160
|
|
$
|
169
|
|
Finance lease expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation of right-of-use assets
|
|
32
|
|
32
|
|
|
95
|
|
85
|
|
Interest expense on lease liabilities
|
1
|
|
2
|
|
|
4
|
|
7
|
|
Total lease expense
|
$
|
85
|
|
$
|
90
|
|
|
$
|
259
|
|
$
|
261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash payment information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating cash used for operating leases
|
$
|
56
|
|
$
|
38
|
|
|
$
|
155
|
|
$
|
147
|
|
Financing cash used for financing leases
|
42
|
|
1
|
|
|
93
|
|
75
|
|
Total cash paid for amounts included in the measurement of lease liabilities
|
$
|
98
|
|
$
|
39
|
|
|
$
|
248
|
|
$
|
222
|
|
Total rent expense for the three and nine months ended September 30, 2020 was $48,000 and $177,000, respectively, which includes leases in the table above, month-to-month operating leases, and common area maintenance charges.
14
The Company’s future minimum annual lease payments under operating and financing leases at September 30, 2020 are as follows in (thousands):
|
|
|
|
|
|
|
|
|
|
|
Financing Leases
|
|
|
Operating Leases
|
|
|
|
|
|
|
|
|
|
|
Remaining 2020
|
|
$
|
32
|
|
|
$
|
49
|
|
2021
|
|
7
|
|
|
183
|
|
2022
|
|
—
|
|
|
123
|
|
2023
|
|
—
|
|
|
100
|
|
Thereafter
|
|
—
|
|
|
447
|
|
Total minimum lease payments
|
|
$
|
39
|
|
|
$
|
902
|
|
Less: amount representing interest
|
|
|
—
|
|
|
|
(217
|
)
|
Present value of obligations under leases
|
|
|
39
|
|
|
|
685
|
|
Less: current portion
|
|
|
39
|
|
|
|
(140
|
)
|
Noncurrent lease obligations
|
|
$
|
—
|
|
|
$
|
545
|
|
Other commitments
The Company has entered into agreements with various research organizations for pre-clinical and clinical development studies, which have provisions for cancellation. Under the terms of these agreements, the vendors provide a variety of services including conducting research, recruiting and enrolling patients, monitoring studies and data analysis. Payments under these agreements typically include fees for services and reimbursement of expenses. The timing of payments due under these agreements is estimated based on current study progress. As of September 30, 2020, the Company did not have obligations related to its clinical research agreements.
The Company is subject to various claims and contingencies related to legal proceedings. Due to their nature, such legal proceedings involve inherent uncertainties including, but not limited to, court rulings, negotiations between affected parties and governmental actions. Management assesses the probability of loss for such contingencies and accrues a liability and/or discloses the relevant circumstances, as appropriate. Management believes that any liability to the Company that may arise as a result of currently pending legal proceedings will not have a material adverse effect on the Company’s financial condition, liquidity, or results of operations as a whole.
10.
|
NanoTx License Agreement
|
On March 29, 2020, the Company and NanoTx, Corp. (“NanoTx”) entered into a Patent and Know-How License Agreement (the “NanoTx License Agreement”), pursuant to which NanoTx granted the Company an irrevocable, perpetual, exclusive, fully paid-up license, with the right to sublicense and to make, develop, commercialize and otherwise exploit certain patents, know-how and technology related to the development of radiolabeled nanoliposomes.
On May 7, 2020, all closing conditions under the NanoTx License Agreement were satisfied and the Company paid an upfront payment of $400,000 in cash and issued 230,769 shares of its common stock to NanoTx. Cash and the fair value of common stock issued totaled $781,000 and is recorded as in-process research and development expenses in the consolidated condensed statement of operations and comprehensive loss for the three and nine months ended September 30, 2020. Pursuant to the terms of the NanoTx License Agreement, the Company may be required to pay up to $136.5 million in development and sales milestone payments and a tiered single-digit royalty on U.S. and European sales.
Preferred Stock
The Company has authorized 5,000,000 shares of preferred stock, par value $0.001 per share. The Company’s Board of Directors is authorized to designate the terms and conditions of any preferred stock the Company issues without further action by the common stockholders. There were no shares of Series A 3.6% Convertible Preferred Stock outstanding as of September 30, 2020 or December 31, 2019. There were 1,016 and 1,021 shares of Series B Convertible Preferred Stock outstanding as of each of September 30, 2020 and December 31, 2019, respectively. There were 938 shares of Series C Preferred Stock outstanding as of September 30, 2020 and December 31, 2019.
15
As of September 30, 2020, there were 938 outstanding shares of Series C Preferred Stock that can be converted into an aggregate of 416,889 shares of common stock, and 1,016 shares of Series B Convertible Preferred Stock that can be converted into an aggregate of 6,096 shares of common stock. In April 2020, in connection with the Warrant Amendments (defined below), the conversion price of the Series C Preferred Stock was reduced from $3.2132 per share to $2.25 per share.
Warrants
Pursuant to a registration statement on Form S-1 originally filed on April 27, 2018, as amended, which became effective on July 17, 2018, and related prospectus (as supplemented), the Company registered and distributed to holders of its common stock and Series B Convertible Preferred Stock, at no charge, non-transferable subscription rights to purchase up to an aggregate of 20,000 units for $1,000 a unit. Each such unit consisted of one share of Series C Preferred Stock and 1,050 warrants (“Series T Warrants”). Pursuant to the 2018 Rights Offering, which closed on July 25, 2018, the Company sold an aggregate of 6,723 units, resulting in total net proceeds to the Company of approximately $5.7 million. In April 2020, in connection with Warrant Amendments (defined below), the exercise price of the Series T Warrants was further adjusted such that every 50 warrants can be exercised into one share of common stock for $2.25.
As of September 30, 2020, there were 3,787,350 outstanding Series T Warrants that can be exercised into an aggregate of 75,747 shares of common stock.
On September 25, 2019, the Company completed an underwritten public offering. The Company issued 289,000 shares of its common stock, along with pre-funded warrants to purchase 2,711,000 shares of its common stock and Series U Warrants to purchase 3,450,000 shares of its common stock at $5.00 per share. The Series U Warrants have a term of five years from the issuance date. In addition, the Company issued warrants to H.C. Wainwright & Co., LLC, as representatives of the underwriters, to purchase 75,000 shares of its common stock at $6.25 per share with a term of 5 years from the issuance date, in the form of Series U Warrants (the “Representative Warrants”).
In accordance with authoritative guidance, the pre-funded warrants are classified as equity. The Series U Warrants and the Representative Warrants are classified at issuance as liabilities due to a contingent obligation for the Company to settle the Series U Warrants with cash upon certain change in control events.
Between April and September 2020, the Company entered into revised warrant agreements with the holders of 3,447,500 Series U Warrants (“Warrant Amendments”). In return for reducing the strike price of the warrants to $2.25 per share, the warrant holders agreed to amend the settlement provisions upon a fundamental transaction such that the warrants would meet the requirements to be classified within stockholders’ equity. In September 2020, the Company entered into revised warrant agreements for the Representative Warrants that reduced the strike price of the warrants to $2.81 per share, and the warrant holders agreed to amend the settlement provisions upon a fundamental transaction such that the Representative Warrants would meet the requirements to be classified within stockholders’ equity. Accordingly, approximately $4.5 million of warrant liability was reclassified to the stockholders’ equity section of the balance sheet on the respective effective date of the Warrant Amendment. In addition, approximately $0.7 million of other income representing change in the fair value of amended warrants from April 1, 2020 to the respective effective date of the Warrant Amendments is recorded in the consolidated condensed statement of operations and comprehensive loss for the nine months ended September 30, 2020.
As of September 30, 2020, there were 3,045,000 outstanding Series U Warrants which can be exercised into an aggregate of 3,045,000 shares of common stock.
Common Stock
On September 21, 2018, the Company entered into a purchase agreement (the “2018 Purchase Agreement”) with Lincoln Park pursuant to which the Company had the right to sell to Lincoln Park and Lincoln Park was obligated to purchase up to $5.0 million of shares of the Company’s common stock over the 24-month period following October 15, 2018. Through December 31, 2018, the Company sold a total of 12,802 shares for proceeds of approximately $0.3 million through the 2018 Purchase Agreement. During the year ended December 31, 2019, the Company sold a total of 32,170 shares for proceeds of approximately $0.3 million. The Company believes there is no amount remaining available under this financing facility as of September 30, 2020.
On September 30, 2020, the Company entered into a new purchase agreement (the “2020 Purchase Agreement”) and registration rights agreement pursuant to which Lincoln Park has committed to purchase up to $25.0 million of the Company’s common stock. Under the terms and subject to the conditions of the 2020 Purchase Agreement, the Company has the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase up to $25.0 million of the Company’s common stock. Such sales of common stock by the Company, if any, will be subject to certain limitations, and may occur from time to time, at the Company’s sole discretion, over the 36-month period commencing on the date that the registration statement covering the resale of shares of common stock that have been and may be issued under the 2020 Purchase Agreement, is declared effective by the SEC and a final prospectus in connection therewith is filed. As of September 30, 2020, the Company has not sold any shares of common stock under the 2020 Purchase Agreement.
16
The 2020 Purchase Agreement provides that the number of shares the Company may sell to Lincoln Park on any single business day in a regular purchase is 50,000, but that amount may be increased up to 100,000 shares, depending upon the market price of the Company’s common stock at the time of sale and subject to a maximum limit of $500,000 per regular purchase. The purchase price per share for each such regular purchase will be based on prevailing market prices of the Company’s common stock immediately preceding the time of sale as computed under the 2020 Purchase Agreement. In addition to regular purchases, the Company may also direct Lincoln Park to purchase other amounts as accelerated purchases or as additional accelerated purchases if the closing sale price of the common stock exceeds certain threshold prices as set forth in the 2020 Purchase Agreement. There are no trading volume requirements or restrictions under the Lincoln Park Purchase Agreement. There is no upper limit on the price per share that Lincoln Park must pay for common stock under a regular purchase or an accelerated purchase and in no event will shares be sold to Lincoln Park on a day when the Company’s common stock closing sale price is less than $0.25 per share.
On June 16, 2020, the Company received stockholder approval pursuant to Nasdaq Listing Rules 5635(a), 5635(b) and 5635(d) to permit issuances of the Company’s common stock (including the issuance of more than 19.99% of the Company’s common stock) to Lincoln Park pursuant to the 2020 Purchase Agreement. Based on the closing price of the Company’s common stock of $1.05 per share on March 16, 2020 (the Company’s lowest closing sale price since January 1, 2020 as reported on Nasdaq.com) the maximum number of shares the Company could issue and sell under the 2020 Purchase Agreement is approximately 23.8 million shares. Accordingly, the Company requested and received stockholder approval for the issuance of up to 23.8 million shares of the Company’s common stock under the 2020 Purchase Agreement. The Company would seek additional stockholder approval before issuing more than 23.8 million shares.
Lincoln Park has no right to require the Company to sell any shares of common stock to Lincoln Park, but Lincoln Park is obligated to make purchases as the Company directs, subject to certain conditions.
Actual sales of shares of common stock to Lincoln Park under the 2020 Purchase Agreement will depend on a variety of factors to be determined by the Company from time to time, including, among others, market conditions, the trading price of the common stock and determinations by the Company as to the appropriate sources of funding for the Company and its operations.
The net proceeds under the 2020 Purchase Agreement to the Company will depend on the frequency and prices at which the Company sells shares of its stock to Lincoln Park. On October 2, 2020, the Company issued 180,701 shares of common stock to Lincoln Park as a commitment fee in connection with entering into the 2020 Purchase Agreement. The $0.5 million fair value of the commitment fee shares was recorded as other current assets as of September 30, 2020, and the Company expects to sell its common stock pursuant to the 2020 Purchase Agreement during the three months ending December 31, 2020.
12.
|
Stock-based Compensation
|
On February 6, 2020, the Company amended the Company’s 2015 New Employee Incentive Plan (the “2015 Plan”) to increase the total number of shares of common stock reserved for issuance under the plan by 250,000 shares. Awards may only be granted under the 2015 Plan to employees who were not previously an employee or director of the Company, or following a bona fide period of non-employment, as a material inducement to entering into employment with the Company. As of September 30, 2020 there were 210,389 shares of common stock remaining and available for future issuances under the 2015 Plan.
On June 16, 2020, the stockholders of the Company approved the Company’s 2020 Stock Incentive Plan (“2020 Plan”), which replaced the Company’s 2014 Equity Incentive Plan. The 2020 Plan provides for the award or sale of shares of common stock (including restricted stock), the award of stock units and stock appreciation rights, and the grant of both incentive stock options to purchase common stock. The 2020 Plan provides for the issuance of up to 550,000 shares of common stock, and the number of shares available for issuance will be increased to the extent that awards granted under the 2020 Plan and the Company’s 2014 Equity Incentive Plan are forfeited or expire (except as otherwise provided in the 2020 Plan). As of September 30, 2020, there were 159,939 shares of common stock remaining and available for future issuances under the 2020 Plan.
17
A summary of activity for the nine months ended September 30, 2020 is as follows:
|
|
Options
|
|
|
Weighted
Average
Exercise Price
|
|
Aggregate
Intrinsic Value
|
|
Outstanding as of December 31, 2019
|
|
|
1,865
|
|
|
$
|
2,968.22
|
|
|
|
|
Granted
|
|
|
530,000
|
|
|
$
|
2.12
|
|
|
|
|
Cancelled/forfeited
|
|
|
(529
|
)
|
|
$
|
2,486.82
|
|
|
|
|
Outstanding as of September 30, 2020
|
|
|
531,336
|
|
|
$
|
10.01
|
|
$
|
233,000
|
|
Vested as of September 30, 2020
|
|
|
39,114
|
|
|
$
|
106.86
|
|
$
|
17,500
|
|
Vested and expected to be vested as of September 30, 2020
|
|
|
482,121
|
|
|
$
|
10.66
|
|
$
|
211,500
|
|
As of September 30, 2020, the total compensation cost related to non-vested stock options not yet recognized for the Company’s plans is approximately $786,000, which is expected to be recognized as a result of vesting under service conditions over a weighted average period of 2.99 years.
13.
|
COVID-19 Pandemic and CARES Act
|
A novel strain of coronavirus (COVID-19) was declared a global pandemic by the World Health Organization in March 2020. COVID-19 has presented substantial public health and economic challenges and is affecting economies, financial markets and business operations around the world. International and U.S. governmental authorities in impacted regions have taken action in an effort to slow the spread of COVID-19, including issuing varying forms of “stay-at-home” orders, and restricting business functions outside of one’s home. In response, the Company put restrictions on employee travel and working from its executive offices with many employees continuing their work remotely. While the Company has implemented additional health and safety precautions and protocols in response to the pandemic and government guidelines, the Company has not yet experienced a significant impact on its business and operations. However, the Company may experience disruptions that could adversely impact its business operations as well as its preclinical studies and clinical trials. The Company is currently continuing the clinical trials it has underway in sites across the U.S., and, although there has been no significant impact to date, the Company expects that COVID-19 precautions may directly or indirectly impact the timeline for some of its clinical trials. Some of the Company’s clinical trial sites, including those located in areas severely impacted by the pandemic, have placed new patient enrollment into clinical trials on hold or, for patients traveling from out-of-state, have implemented a 14-day self-quarantine before appointments. In addition, some clinical trial sites have imposed limited accessibility to conduct clinical monitoring and training on-site. The Company considered the impacts of COVID-19 on the assumptions and estimates used to prepare its consolidated condensed financial statements and determined that there were no material adverse impacts on the Company’s results of operations and financial position at September 30, 2020. The full extent to which the COVID-19 pandemic will directly or indirectly impact its business, results of operations and financial condition, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat it, as well as the economic impact on local, regional, national and international markets.
In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020. The CARES Act, among other things, includes tax provisions relating to refundable payroll tax credits, deferment of employer’s social security payments, net operating loss utilization and carryback periods, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property (QIP). The CARES Act had no material impact on the Company’s income tax provision for the three and nine months ended September 30, 2020. The Company continues to evaluate the impact of the CARES Act on its financial position, results of operations and cash flows.
18