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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2021

OR

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

For the transition period from ______to _______

Commission File Number: 001-35737

NORTHWEST BIOTHERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware

94-3306718 

 (State or Other Jurisdiction of Incorporation or Organization)

 (I.R.S. Employer Identification No.)

4800 Montgomery Lane, Suite 800, Bethesda, MD 20814

(Address of principal executive offices) (Zip Code)

(240497-9024

(Registrant’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes       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, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

Accelerated filer

 

Non-accelerated filer

 

Smaller reporting company

 

 

 

 

Emerging growth company

 

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

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

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.001 per share

NWBO

OTCQB

As of May 14, 2021, the total number of shares of common stock, par value $0.001 per share, outstanding was 851,564,728.

NORTHWEST BIOTHERAPEUTICS, INC.

FORM 10-Q

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

3

Item 1.

Condensed Consolidated Interim Financial Statements (Unaudited)

3

 

Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020

3

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2021 and 2020

4

 

Condensed Consolidated Statements of Stockholders’ Deficit for the three months ended March 31, 2021 and 2020

5

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020

6

 

Notes to Condensed Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

23

 

 

Item 4.

Controls and Procedures

23

PART II - OTHER INFORMATION

24

Item 1.

Legal Proceedings

24

 

 

Item 1A.

Risk Factors

24

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

24

 

 

Item 3.

Defaults Upon Senior Securities

24

 

 

Item 4.

Mine Safety Disclosures

24

 

Item 5.

Other Information

24

 

 

Item 6.

Exhibits

25

SIGNATURES

26

2

PART I - FINANCIAL INFORMATION

NORTHWEST BIOTHERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

    

March 31, 

    

December 31, 

2021

2020

(Unaudited)

ASSETS

 

  

 

Current assets:

 

  

 

  

Cash and cash equivalents

$

7,468

$

9,983

Prepaid expenses and other current assets

 

5,749

 

5,528

Total current assets

 

13,217

 

15,511

Non-current assets:

 

 

  

Property, plant and equipment, net

 

1,234

 

1,040

Construction in progress

9,881

9,074

Right-of-use asset, net

5,140

4,489

Indefinite-lived intangible asset

1,292

1,292

Goodwill

626

626

Other assets

 

1,070

 

867

Total non-current assets

 

19,243

 

17,388

TOTAL ASSETS

$

32,460

$

32,899

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

  

Current liabilities:

 

 

  

Accounts payable and accrued expenses

$

7,471

$

7,380

Accounts payable and accrued expenses to related parties and affiliates

 

2,973

 

5,363

Convertible notes, net

 

135

 

3,830

Notes payable, net

 

2,239

 

2,437

Contingent payable derivative liability

8,554

8,275

Warrant liability

 

341,867

 

354,972

Lease liabilities

170

167

Total current liabilities

 

363,409

 

382,424

Non-current liabilities:

 

  

 

  

Notes payable, net of current portion, net

 

16,691

 

8,507

Lease liabilities, net of current portion

5,560

4,916

Total non-current liabilities

 

22,251

 

13,423

Total liabilities

 

385,660

 

395,847

COMMITMENTS AND CONTINGENCIES (Note 10)

 

  

 

  

Stockholders’ deficit:

 

  

 

  

Preferred stock ($0.001 par value); 100,000,000 shares authorized as of March 31, 2021 and December 31, 2020, respectively

Common stock ($0.001 par value); 1,200,000,000 shares authorized; 842.4 million and 829.6 million shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

 

842

 

830

Additional paid-in capital

 

1,021,900

 

1,008,665

Stock subscription receivable

 

(79)

 

(79)

Accumulated deficit

 

(1,375,339)

 

(1,371,216)

Accumulated other comprehensive loss

 

(524)

 

(1,148)

Total stockholders’ deficit

 

(353,200)

 

(362,948)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT

$

32,460

$

32,899

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

3

NORTHWEST BIOTHERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except per share amounts)

(Unaudited)

For the three months ended

March 31, 

    

2021

    

2020

(As revised)

Revenues:

 

  

 

  

Research and other

$

239

$

570

Total revenues

 

239

 

570

Operating costs and expenses:

 

 

Research and development

 

6,923

 

3,857

General and administrative

 

12,886

 

4,546

Total operating costs and expenses

 

19,809

 

8,403

Loss from operations

 

(19,570)

 

(7,833)

Other income (expense):

 

  

 

  

Change in fair value of derivative liabilities

 

17,563

 

12,927

Loss from extinguishment of debt

 

(8)

 

(715)

Interest expense

 

(1,447)

 

(625)

Foreign currency transaction loss

 

(661)

 

(1,128)

Total other income

 

15,447

 

10,459

Net (loss) income

$

(4,123)

$

2,626

Other comprehensive income

Foreign currency translation adjustment

624

1,041

Total comprehensive (loss) income

$

(3,499)

$

3,667

Net earnings (loss) per share applicable to common stockholders

Basic

$

(0.00)

$

0.00

Diluted

$

(0.00)

$

0.00

Weighted average shares used in computing basic earnings (loss) per share

834,605

640,390

Weighted average shares used in computing diluted earnings (loss) per share

834,605

648,858

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

4

NORTHWEST BIOTHERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(in thousands)

(Unaudited)

For the Three Months Ended March 31, 2021

Additional

Accumulated

Total

Common Stock

Paid-in

Subscription

Accumulated

Other Comprehensive

Stockholders’

    

Shares

    

Par value

    

Capital

    

Receivable

    

Deficit

    

Income (Loss)

    

Deficit

Balance at January 1, 2021

 

829,631

$

830

 

$

1,008,665

 

$

(79)

$

(1,371,216)

 

$

(1,148)

$

(362,948)

Issuance of common stock for cash

69

16

16

Issuance of common stock and warrants for conversion of debt and accrued interest

 

4,533

4

 

6,615

 

 

6,619

Warrants and stock options exercised for cash

 

2,872

3

742

745

Reclassification of warrant liabilities related to warrants exercised for cash

 

2,935

2,935

Cashless warrants and stock options exercise

5,205

5

(5)

Reclassification of warrant liabilities related to cashless warrants exercise

146

146

Stock-based compensation

48

9,891

9,891

Reclassification of warrant liabilities related to sequencing policy

(7,105)

(7,105)

Net loss

 

 

 

(4,123)

 

(4,123)

Cumulative translation adjustment

 

 

 

 

624

624

Balance at March 31, 2021

 

842,358

$

842

$

1,021,900

$

(79)

$

(1,375,339)

$

(524)

$

(353,200)

For the Three Months Ended March 31, 2020

Additional

Accumulated

Total

Common Stock

Paid-in

Subscription

Accumulated

Other Comprehensive

Stockholders’

    

Shares

    

Par value

    

Capital

    

Receivable

    

Deficit

    

Income

    

Deficit

Balance at January 1, 2020

614,292

$

614

$

794,900

$

(10)

$

(841,395)

$

836

$

(45,055)

Issuance of common stock and warrants for cash in a registered direct offering (net of $3.6 million warrant liability and $0.4 million cash offering cost)

 

34,466

 

34

 

2,011

 

 

 

 

2,045

Issuance of common stock and warrants for conversion of debt and accrued interest

 

12,417

 

13

 

2,386

 

 

 

 

2,399

Stock-based compensation

 

973

 

1

 

363

 

 

 

 

364

Net income (as revised)

 

 

 

 

 

2,626

 

 

2,626

Cumulative translation adjustment

 

 

 

 

 

 

1,041

 

1,041

Balance at March 31, 2020

 

662,148

$

662

$

799,660

$

(10)

$

(838,769)

$

1,877

$

(36,580)

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

5

NORTHWEST BIOTHERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

For the three months ended

March 31, 

    

2021

    

2020

(As revised)

Cash Flows from Operating Activities:

 

  

 

Net (loss) income

$

(4,123)

$

2,626

Reconciliation of net loss to net cash used in operating activities:

 

 

Depreciation and amortization

 

68

 

14

Amortization of debt discount

 

1,126

 

343

Change in fair value of derivatives

 

(17,563)

 

(12,927)

Loss from extinguishment of debt

 

8

 

715

Amortization of operating lease right-of-use asset

93

80

Stock-based compensation for services

 

9,818

 

364

Subtotal of non-cash charges

 

(6,450)

 

(11,411)

Changes in operating assets and liabilities:

 

  

 

  

Prepaid expenses and other current assets

 

(286)

 

(78)

Other non-current assets

 

(198)

 

Accounts payable and accrued expenses

 

876

 

1,208

Related party accounts payable and accrued expenses

 

(3,128)

 

81

Lease liabilities

61

35

Net cash used in operating activities

 

(13,248)

 

(7,539)

Cash Flows from Investing Activities:

 

  

 

  

Purchase of equipment and construction in progress

 

(264)

 

(62)

Net cash used in investing activities

 

(264)

 

(62)

Cash Flows from Financing Activities:

 

  

 

  

Proceeds from issuance of common stock and warrants in a registered direct offering, net

 

16

 

5,671

Proceeds from exercise of warrants and stock options

 

745

 

Proceeds from issuance of notes payable, net

 

10,000

 

Proceeds from issuance of convertible notes payable, net

 

 

1,000

Proceeds from issuance of convertible notes payable to related party

 

 

240

Proceeds from investor advance

 

 

178

Repayment of notes payable to related parties

 

 

(64)

Net cash provided by financing activities

 

10,761

 

7,025

Effect of exchange rate changes on cash and cash equivalents

 

236

 

968

Net (decrease) increase in cash and cash equivalents

 

(2,515)

 

392

Cash and cash equivalents, beginning of the year

 

9,983

 

372

Cash and cash equivalents, end of the year

$

7,468

$

764

Supplemental disclosure of cash flow information

 

  

 

  

Interest payments on notes payable to related party

$

$

(9)

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

6

NORTHWEST BIOTHERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

For the three months ended

March 31, 

    

2021

    

2020

(As revised)

Supplemental schedule of non-cash investing and financing activities:

 

  

 

Cashless warrants and stock options exercise

$

5

$

Reclassification of warrant liabilities related to warrants exercised for cash

$

2,935

$

Reclassification of warrant liabilities related to cashless warrants exercise

$

146

$

Reclassification of warrant liabilities related to sequencing policy

$

7,105

$

Issuance of common stock and warrants for conversion of debt and accrued interest

$

6,742

$

1,789

Offering cost related to warrant liability

$

$

2,606

Capital expenditures included in accounts payable

$

753

$

405

Issuance of warrants in conjunction with convertible note payable

$

$

79

Issuance of warrants in connection with debt modification

$

$

315

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

7

Table of Contents

NORTHWEST BIOTHERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

1. Organization and Description of Business

Northwest Biotherapeutics, Inc. and its wholly owned subsidiaries Flaskworks L.L.C., NW Bio GmbH, Aracaris Ltd, Aracaris Capital, Ltd, and Northwest Biotherapeutics B.V. (collectively, the “Company”, “we”, “us” and “our”) were organized to discover and develop innovative immunotherapies for cancer. The Company has developed DCVax® platform technologies for both operable and inoperable solid tumor cancers. The Company has wholly owned subsidiaries in the U.K., in the Netherlands, where the European Medicines Agency is relocating, and in Boston, Massachusetts.

The Company relies upon contract manufacturers for production of its DCVax products, research and development services, distribution and logistics, and related services, in compliance with the Company’s specifications and the applicable regulatory requirements.

2. Financial Condition, Going Concern and Management Plans

The Company has incurred annual net operating losses since its inception. The Company had a net loss of $4.1 million for the three months ended March 31, 2021. The Company used approximately $13.2 million of cash in its operating activities for the three months ended March 31, 2021.Management believes that the Company has access to capital resources through the sale of equity and debt financing arrangements. However, the Company has not secured any commitments for new financing for this specific purpose at this time.

The Company does not expect to generate material revenue in the near future from the sale of products and is subject to all of the risks and uncertainties that are typically faced by biotechnology companies that devote substantially all of their efforts to R&D and clinical trials and do not yet have commercial products. The Company expects to continue incurring annual losses for the foreseeable future. The Company’s existing liquidity is not sufficient to fund its operations, anticipated capital expenditures, working capital and other financing requirements until the Company reaches significant revenues.  Until that time, the Company will need to obtain additional equity and/or debt financing, especially if the Company experiences downturns in its business that are more severe or longer than anticipated, or if the Company experiences significant increases in expense levels resulting from being a publicly-traded company or from expansion of operations.  If the Company attempts to obtain additional equity or debt financing, the Company cannot assume that such financing will be available to the Company on favorable terms, or at all.

Because of recurring operating losses and operating cash flow deficits, there is substantial doubt about the Company’s ability to continue as a going concern within one year from the date of this filing. The condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets, or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

As also previously reported, coronavirus-related difficulties have impacted most aspects of the database lock and process of analyzing the Phase III trial results, especially with the successive waves of COVID cases in many areas. The independent service firms have had limited capacity, and restrictions on operations. Key experts at certain specialized service providers have been unavailable for periods of time due to illness in their family. Other experts have gone on extended leave due to restrictions on operations. Clinical trial site personnel have been unavailable due to being reassigned for COVID, and the limited site personnel have had to work under restrictions. Committee processes and regulatory processes have been similarly focused on COVID matters and delayed on other matters. Firms such as the ones storing the Phase III trial tissue samples that are needed for certain analyses, and the firms conducting the analyses, continue to have had only limited operations. Even logistical matters such as the shipping of materials have been subjected to substantial restrictions and delays.

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3. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated interim financial statements include the accounts of the Company and its subsidiaries. All material intercompany balances and transactions have been eliminated. Certain immaterial reclassifications have been made to prior period amounts to conform to the current period presentation.

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”) and on the same basis as the Company prepares its annual audited consolidated financial statements. The condensed consolidated balance sheet as of March 31, 2021, condensed consolidated statements of operations and comprehensive loss, condensed consolidated statement of stockholders’ deficit for the three months ended March 31, 2021 and 2020, and the condensed consolidated statements of cash flows for the three months ended March 31, 2021 and 2020 are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which the Company considers necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The results for the three months ended March 31, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021 or for any future interim period. The condensed consolidated balance sheet at December 31, 2020 has been derived from audited financial statements; however, it does not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2020 and notes thereto included in the Company’s annual report on Form 10-K (the “2020 Annual Report”), which was filed with the SEC on March 31, 2021.

Use of Estimates

In preparing condensed consolidated financial statements in conformity with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of expenses during the reporting period. Due to inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in these estimates. On an ongoing basis, the Company evaluates its estimates and assumptions. These estimates and assumptions include recoverability and useful lives (indefinite) of intangible asset, assessment of impairment of goodwill, valuing equity securities in share-based payment arrangements, estimating the fair value of financial instruments recorded as derivative liabilities, useful lives of depreciable assets and whether impairment charges may apply.

Significant Accounting Policies

There have been no material changes in the Company’s significant accounting policies to those previously disclosed in the 2020 Annual Report.

Recently Adopted Accounting Standards

Income Taxes

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. On January 1, 2021, the Company adopted this standard without any material impact on its condensed consolidated financial statements and related disclosures.

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Debt

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): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. This ASU is effective for annual reporting periods beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. This update permits the use of either the modified retrospective or fully retrospective method of transition. The Company has adopted the new standard as of January 1, 2021 and determined the impact of the adoption to the condensed consolidated financial statements and related disclosures is immaterial as of March 31, 2021.

4. Fair Value Measurements

In accordance with ASC 820 (Fair Value Measurements and Disclosures), the Company uses various inputs to measure the outstanding warrants and certain embedded conversion feature associated with convertible debt on a recurring basis to determine the fair value of the liability. ASC 820 also establishes a hierarchy categorizing inputs into three levels used to measure and disclose fair value. The hierarchy gives the highest priority to quoted prices available in active markets and the lowest priority to unobservable inputs. An explanation of each level in the hierarchy is described below:

Level 1 - Unadjusted quoted prices in active markets for identical instruments that are accessible by the Company on the measurement date

Level 2 - Quoted prices in markets that are not active or inputs which are either directly or indirectly observable

Level 3 - Unobservable inputs for the instrument requiring the development of assumptions by the Company

The following table classifies the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy as of March 31, 2021 and December 31, 2020 (in thousands):

Fair value measured at March 31, 2021

    

    

Quoted prices in active

    

Significant other

    

Significant

Fair value at

markets

observable inputs

unobservable inputs

March 31, 2021

(Level 1)

(Level 2)

(Level 3)

Warrant liability

$

341,867

$

$

$

341,867

Contingent payable derivative liability

 

8,554

 

 

 

8,554

Total fair value

$

350,421

$

$

$

350,421

Fair value measured at December 31, 2020

    

    

Quoted prices in active

    

Significant other

    

Significant

Fair value at

markets

observable inputs

unobservable inputs

December 31, 2020

(Level 1)

(Level 2)

(Level 3)

Warrant liability

$

354,972

$

$

$

354,972

Embedded conversion option

 

2,507

 

 

 

2,507

Contingent payable derivative liability

 

8,275

 

 

 

8,275

Total fair value

$

365,754

$

$

$

365,754

There were no transfers between Level 1, 2 or 3 during the three-month period ended March 31, 2021.

The following table presents changes in Level 3 liabilities measured at fair value for the three-month period ended March 31, 2021. Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category. Unrealized gains and losses associated with liabilities within the Level 3

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category include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long- dated volatilities) inputs (in thousands).

Contingent

Embedded

Payable

Warrant

Conversion

Derivative

    

Liability

    

Option

    

Liability

    

Total

Balance - January 1, 2021

$

354,972

$

2,507

$

8,275

$

365,754

Additional warrant liability

131

131

Reclassification of warrant liabilities

4,024

4,024

Debt conversion

(1,925)

(1,925)

Change in fair value

(17,260)

(582)

279

(17,563)

Balance - March 31, 2021

$

341,867

$

$

8,554

$

350,421

A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the Company’s warrant liabilities and embedded conversion feature that are categorized within Level 3 of the fair value hierarchy as of March 31, 2021 and December 31, 2020 is as follows:

As of March 31, 2021

 

    

Warrant

    

Contingent Payable

 

Liability

Derivative Liability

 

Strike price

$

0.25

$

1.49

Contractual term (years)

 

1.2

 

1.4

Volatility (annual)

 

95

%  

 

119

%

Risk-free rate

 

0.1

%  

 

0.1

%

Dividend yield (per share)

 

0

%  

 

0

%

*Contingent based on stock price as of March 31, 2021

As of December 31, 2020

Warrant

Embedded

Contingent Payable

    

Liability

    

Conversion Option

Derivative Liability

    

Strike price

$

0.28

$

0.59

$

1.53

*

Contractual term (years)

 

1.6

 

0.9

1.4

 

Volatility (annual)

 

116

%  

106

%

126

%  

Risk-free rate

 

0.2

%  

0.1

%

0.1

%  

Dividend yield (per share)

 

0

%  

0

%

0

%  

* Contingent based on stock price as of December 31, 2020

5. Stock-based Compensation

The following table summarizes total stock-based compensation expense for the three months ended March 31, 2021 and 2020 (in thousands). The general and administrative expense during the three months ended March 31, 2021 and 2020

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relate to the applicable portion vesting during this period of stock option awards made in the past to directors and employees.

For the three months ended

March 31, 2021

2021

    

2020

Research and development

$

3,689

$

(23)

General and administrative

 

6,129

 

387

Total stock-based compensation expense

$

9,818

$

364

The total unrecognized compensation cost was approximately $7.4 million as of March 31, 2021, and will be recognized over the next 1.6 years.

Stock Options

The following table summarizes stock option activity for the Company’s option plans during the three months ended March 31, 2021 (amount in thousands, except per share number):

    

    

    

Weighted

    

Average

Weighted

Remaining

Number of

Average Exercise

Contractual Life

Total Intrinsic

Shares

Price

(in years)

Value

Outstanding as of January 1, 2021

 

308,840

$

0.33

8.9

$

372,219

Cash exercised

 

(183)

 

0.25

 

Cashless exercise

(3,695)

0.25

Forfeited/expired

 

 

 

Outstanding as of March 31, 2021

 

304,962

$

0.33

8.7

$

354,723

Options vested (1)

 

254,385

$

0.30

8.7

$

276,262

(1) Approximately 244 million options are not exercisable until May 31, 2021.

Ms. Linda Powers, the Company's Chief Executive Officer, and Mr. Leslie Goldman, the Company's Senior Vice President, are subject to an agreement under which they cannot exercise any options or warrants except upon at least 61 days' prior notice.

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6. Outstanding Debt

The following two tables summarize outstanding debt as of March 31, 2021 and December 31, 2020, respectively (amount in thousands):

Stated

Interest

Conversion

Remaining

Carrying

    

Maturity Date

    

Rate

    

Price

    

Face Value

    

Debt Discount

    

Value

Short term convertible notes payable

6% unsecured

 

Due

 

6

%  

$

3.09

$

135

$

$

135

 

135

 

 

135

Short term notes payable

8% unsecured

 

Various

 

8

%  

 

N/A

 

1,615

 

(79)

 

1,536

10% unsecured

 

On Demand

 

10

%  

 

N/A

 

263

 

263

12% unsecured

 

On Demand

 

12

%  

 

N/A

 

440

 

 

440

 

2,318

 

(79)

 

2,239

Long term notes payable

8% unsecured

Various

8

%  

N/A

16,117

(1,284)

14,833

6% secured

 

3/25/2025

 

6

%  

 

N/A

 

1,858

 

 

1,858

 

17,975

 

(1,284)

 

16,691

Ending balance as of March 31, 2021

$

20,428

$

(1,363)

$

19,065

Stated

Embedded

 

Interest

Conversion

Remaining

Conversion

Carrying

    

Maturity Date

    

Rate

    

Price

    

Face Value

    

Debt Discount

    

Option

    

Value

Short term convertible notes payable

6% unsecured

 

Due

 

6

%  

$

3.09

$

135

$

$

$

135

8% unsecured

 

4/30/2021

 

8

%  

$

0.85

 

2,125

 

(937)

 

2,507

3,695

 

2,260

 

(937)

 

2,507

3,830

Short term notes payable

 

  

 

  

 

  

 

  

 

  

 

  

  

8% unsecured

Various

8

N/A

1,785

(51)

1,734

10% unsecured

Various

10

N/A

263

263

12% unsecured

On Demand

12

N/A

440

440

 

2,488

 

(51)

 

2,437

Long term notes payable

8% unsecured

Various

8

N/A

7,160

(496)

6,664

6% secured

3/25/2025

6

N/A

1,843

1,843

9,003

(496)

8,507

Ending balance as of December 31, 2020

$

13,751

$

(1,484)

$

2,507

$

14,774

On March 1, 2021, the Company entered into a Commercial Loan Agreement (the “Note”) with a commercial lender for an aggregate principal amount of $10 million. The Note bears interest at 8% per annum with a 22-month term. There are no principal repayments during the first 8 months of the term. The note is amortized in 14 installments starting on November 1, 2021. The Note carries an original issue discount of $1 million.

During the three months ended March 31, 2021, $4.8 million of debt and interest was converted into 4.5 million shares of common stock and 0.8 million warrants. The fair value of common stock and warrants for these conversions were

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approximately $6.7 million. The Company also extinguished approximately $1.9 embedded derivative liability from the note conversion.

For the three months ended March 31, 2021 and 2020, interest expense related to notes payable totaled approximately $1.4 million and $0.6 million including amortization of debt discounts totaling $1.1 million and $0.3 million, respectively.

7. Net Loss per Share Applicable to Common Stockholders

Basic earnings (loss) per common share is computed by dividing net earnings (loss) by the weighted average number of common shares outstanding during the reporting period. Diluted earnings (loss) per common share is computed similar to basic earnings (loss) per common share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock. Diluted weighted average common shares include common stock potentially issuable under the Company's convertible notes, warrants and vested and unvested stock options.

The following table sets forth the computation of earnings ( loss) per share (amounts in thousands):

For the three months ended

March 31, 

    

2021

    

2020

(As revised)

Net earnings (loss) - basic

 

$

(4,123)

 

$

2,626

Interest on convertible notes

 

 

173

Net earnings (loss) - diluted

 

(4,123)

 

2,799

Weighted average shares outstanding - basic

834,605

640,390

Convertible notes and accrued interest

 

 

8,468

Weighted average shares outstanding - diluted

 

834,605

 

648,858

For the three months ended March 31, 2021 and 2020, approximately 0.6 million and 0.5 million securities were not included, respectively, because effect was anti-dilutive.

8. Related Party Transactions

Advent BioServices Agreement

The Company has a Manufacturing Services Agreement with Advent BioServices for manufacture of DCVax-L products at an existing facility in London, as previously reported. The Company also has an Ancillary Services Agreement with Advent, which establishes a structure under which Advent submits Statements of Work (“SOWs”) for activities related to the development of the Sawston facility and the compassionate use activities in the UK, as previously reported. The Ancillary Services Agreement had an original term of 8 months, which ended in July 2020. The Company extended the term by 12 months, and did not make any other changes.

Related Party Expenses and Accounts Payable

During the three months ended March 31, 2021 and 2020, the Company recognized approximately $1.7 million and $1.4 million, respectively, in research and development costs from a related party.  Additionally, during the three months ended March 31, 2021 and 2020, the Company capitalized $0.7 million and $0.4 million costs related to Sawston buildout. Some of these amounts have been paid and some have not been paid.

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The following table summarizes outstanding unpaid accounts payable held by related parties as of March 31, 2021 and December 31, 2020 (amount in thousands). These unpaid amounts include part of the expenses reported in the table above and also certain expenses incurred in prior periods.

    

March 31, 2021

    

December 31, 2020

Advent BioServices – amount invoiced

$

339

$

3,734

Advent BioServices – amount accrued

2,634

1,629

Accounts payable and accrued expenses to Advent BioServices

$

2,973

$

5,363

9. Stockholders’ Deficit

Common Stock

Warrants and Stock Options Exercised for Cash

During the three months ended March 31, 2021, the Company received $0.7 million from the exercise of warrants and stock options issued in the past with an exercise price between $0.175 and $0.34. The Company issued approximately 2.9 million shares of common stock upon these warrant and stock option exercises.

Warrants and Stock Options Cashless Exercise

During the three months ended March 31, 2021, certain warrant and stock option holders elected to cashless exercise their warrants and stock options, with exercise prices between $0.22 and $0.52. The Company issued approximately 5.2 million shares of common stock upon 5.8 million warrants and stock options exercises.

Stock Purchase Warrants

The following is a summary of warrant activity for the three months ended March 31, 2021 (dollars in thousands, except per share data):

    

Number of

    

Weighted Average

    

Remaining

Warrants

Exercise Price

Contractual Term

Outstanding as of January 1, 2021

 

331,753

$

0.28

 

1.61

Warrants granted

 

774

 

2.00

 

  

Warrants exercised for cash

 

(2,688)

 

0.26

 

  

Cashless warrants exercise

(2,552)

0.23

Warrants expired and cancellation

 

(885)

 

3.37

 

  

Outstanding as of March 31, 2021

 

326,402

$

0.28

 

1.38

Warrants and Options Suspension

On January 15, 2021, the Company extended the suspension of approximately 256 million warrants and options held by certain officers and directors of the Company until February 28, 2021.

On February 28, 2021, the Company further extended the suspension of approximately 262 million warrants and options held by certain officers and directors of the Company until April 30, 2021.

On March 25, 2021, the options and warrants held by Ms. Powers and Mr. Goldman were subjected to an ongoing suspension on a rolling basis pursuant to the Blocker Letter. In addition, other executive officers and directors extended their suspensions from April 30, 2021 until May 31, 2021, accounting for approximately another 81 million in underlying warrants and options.

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10. Commitments and Contingencies

Operating Lease

The Company has operating leases for corporate offices in the U.S., U.K., Germany and the Netherlands, and for manufacturing facilities in the U.K. Leases with an initial term of 12 months or less are not recorded in the balance sheet. The Company has elected the practical expedient to account for each separate lease component of a contract and its associated non-lease components as a single lease component, thus causing all fixed payments to be capitalized. The Company also elected the package of practical expedients permitted within the new standard, which among other things, allows the Company to carry forward historical lease classification. The lease renewal options have not been included in the calculation of the lease liabilities and right-of-use (“ROU”) assets as the Company has not yet determined whether to exerc