pstv-10q_20220630.htm
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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 June 30, 2022

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 001-34375

 

PLUS THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

33-0827593

(State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

4200 MARATHON BLVD., SUITE 200, AUSTIN, TX

 

78756

(Address of principal executive offices)

 

(Zip Code)

 

(737) 255-7194

(Registrant’s telephone number, including area code)

 

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 $0.001

PSTV

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 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

 

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 financing 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 July 14, 2022, there were 22,532,005 shares of the registrant’s common stock outstanding.

 



 

PLUS THERAPEUTICS, INC.

INDEX

 

 

 

 

 

Page

PART I

 

FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

 

Item 1.

 

Financial Statements (Unaudited)

 

4

 

 

 

 

 

 

 

 

 

 

 

Condensed Balance Sheets

 

4

 

 

 

 

 

 

 

 

 

 

 

Condensed Statements of Operations

 

5

 

 

 

 

 

 

 

 

 

 

 

Condensed Statements of Stockholders’ Equity

 

6

 

 

 

 

 

 

 

 

 

 

 

Condensed Statements of Cash Flows

 

7

 

 

 

 

 

 

 

 

 

 

 

Notes to Condensed Financial Statements

 

8

 

 

 

 

 

 

 

 

 

Item 2.

 

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

 

16

 

 

 

 

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

23

 

 

 

 

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

23

 

 

 

 

 

 

 

PART II

 

OTHER INFORMATION

 

 

 

 

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

23

 

 

 

 

 

 

 

 

 

Item 1A.

 

Risk Factors

 

23

 

 

Item 6.

 

Exhibits

 

25

2


 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report and the exhibits incorporated herein by reference contain “forward-looking statements” which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Statements other than statements of historical fact--constitute “forward-looking statements.” These forward-looking statements do not constitute guarantees of future performance. These forward-looking statements may be identified by terms such as “intend,” “expect,” “project,” “believe,” “anticipate,” “initiate,” “will,” “should,” “would,” “could,” “may,” “designed,” “potential,” “evaluate,” “hypothesize,” “plan,” “progressing,” “proceeding,” “exploring,” “opportunity,” “hopes,” “suggest,” and similar expressions, or the negative of such expressions. Such statements are based upon certain assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate.

These statements include, without limitation, statements about our anticipated expenditures, including research and development, and general and administrative expenses; the Company’s strategic collaborations and license agreements, intellectual property, FDA approvals and interactions and government regulation; the potential size of the market for our product candidates; our research and development efforts; results from our pre-clinical and clinical studies and the implications of such results regarding the efficacy or safety of our product candidates; the safety profile, pathways, and efficacy of our product candidates and formulations; anticipated advantages of our product candidates over other products available in the market and being developed; the populations that will most benefit from our product candidates and indications that will be pursued with each product candidate; anticipated progress in our current and future clinical trials; plans and strategies to create novel technologies; our IP strategy; competition; future development and/or expansion of our product candidates and therapies in our markets; sources of competition for any of our product candidates; our pipeline; our ability to generate  product or development revenue and the sources of such revenue; our ability to effectively manage our gross profit margins; our ability to obtain and maintain regulatory approvals; expectations as to our future performance; portions of the “Liquidity and Capital Resources” section of this report, including our potential need for additional financing and the availability thereof; our ability to continue as a going concern; our ability to remain listed on the Nasdaq Capital Market; our ability to repay or refinance some or all of our outstanding indebtedness and our ability to raise capital in the future; our ability to transfer the drug product manufacture to a contract drug manufacturing organization; and the potential enhancement of our cash position through development, marketing, and licensing arrangements. The forward-looking statements included in this report are also subject to a number of additional material risks and uncertainties, including but not limited to the risks described under “Part I – Item 1A – Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, and under “Part II – Item 1A – Risk Factors” in this Quarterly report. These risks and uncertainties could cause actual results to differ materially from expectations or those expressed in these forward-looking statements.

Our actual results may differ, including materially, from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, the following: the early stage of our product candidates and therapies, the results of our research and development activities, including uncertainties relating to the clinical trials of our product candidates and therapies; our liquidity and capital resources and our ability to raise additional cash, the outcome of our partnering/licensing efforts, risks associated with laws or regulatory requirements applicable to us, market conditions, product performance, potential litigation, and competition within the regenerative medicine field, among others. The forward-looking statements included in this report are also subject to a number of additional material risks and uncertainties, including but not limited to the risks described under “Part I – Item 1A – Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, and under “Part II – Item 1A – Risk Factors” in this Quarterly report. These risks and uncertainties could cause actual results to differ materially from expectations or those expressed in these forward-looking statements.

We encourage you to read the risks described under “Risk Factor Summary” and “Part II – Item 1A – Risk Factors” in this report carefully. We caution you not to place undue reliance on the forward-looking statements contained in this report.  These statements, like all statements in this report, speak only as of the date of this report (unless an earlier date is indicated) and we undertake no obligation to update or revise the statements except as required by law.  Such forward-looking statements are not guarantees of future performance.  

 

3


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PLUS THERAPEUTICS, INC.

CONDENSED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and par value data)

 

 

 

 

 

 

June 30, 2022

 

 

December 31, 2021

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

18,090

 

 

$

18,400

 

Other current assets

 

 

799

 

 

 

1,324

 

Total current assets

 

 

18,889

 

 

 

19,724

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

1,560

 

 

 

1,477

 

Operating lease right-use-of assets

 

 

303

 

 

 

341

 

Goodwill

 

 

372

 

 

 

372

 

Intangible assets, net

 

 

131

 

 

 

51

 

Other assets

 

 

16

 

 

 

16

 

Total assets

 

$

21,271

 

 

$

21,981

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

5,259

 

 

$

4,151

 

Operating lease liability

 

 

104

 

 

 

111

 

Term loan obligation, current

 

 

1,608

 

 

 

1,608

 

Total current liabilities

 

 

6,971

 

 

 

5,870

 

 

 

 

 

 

 

 

 

 

Noncurrent operating lease liability

 

 

202

 

 

 

269

 

Term loan obligation

 

 

4,419

 

 

 

5,005

 

Warrant liability

 

 

 

 

 

1

 

Total liabilities

 

 

11,592

 

 

 

11,145

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value; 5,000,000 shares authorized; 1,952

   shares issued and outstanding at June 30, 2022 and December 31, 2021

 

 

 

 

 

 

Common stock, $0.001 par value; 100,000,000 shares authorized; 22,468,682 and 15,510,025 issued and outstanding at June 30, 2022 and December 31, 2021, respectively

 

 

22

 

 

 

16

 

Additional paid-in capital

 

 

465,965

 

 

 

457,730

 

Accumulated deficit

 

 

(456,308

)

 

 

(446,910

)

Total stockholders’ equity

 

 

9,679

 

 

 

10,836

 

Total liabilities and stockholders’ equity

 

$

21,271

 

 

$

21,981

 

 

See Accompanying Notes to these Condensed Financial Statements

 

 

4


 

PLUS THERAPEUTICS, INC.

CONDENSED STATEMENTS OF OPERATIONS  

(UNAUDITED)

(in thousands, except share and per share data)

 

 

 

 

 

 

For the Three Months Ended

June 30,

 

 

For the Six Months Ended

June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

2,831

 

 

$

1,106

 

 

$

4,615

 

 

$

2,233

 

General and administrative

 

 

2,289

 

 

 

1,469

 

 

 

4,431

 

 

 

2,821

 

Total operating expenses

 

 

5,120

 

 

 

2,575

 

 

 

9,046

 

 

 

5,054

 

Operating loss

 

 

(5,120

)

 

 

(2,575

)

 

 

(9,046

)

 

 

(5,054

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

19

 

 

 

4

 

 

 

26

 

 

 

8

 

Interest expense

 

 

(181

)

 

 

(229

)

 

 

(379

)

 

 

(476

)

Change in fair value of liability instruments

 

 

 

 

 

 

 

 

1

 

 

 

2

 

Total other expense

 

 

(162

)

 

 

(225

)

 

 

(352

)

 

 

(466

)

Net loss

 

$

(5,282

)

 

$

(2,800

)

 

$

(9,398

)

 

$

(5,520

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share, basic and diluted

 

$

(0.24

)

 

$

(0.25

)

 

$

(0.43

)

 

$

(0.56

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted weighted average shares used in calculating net loss per share attributable to common stockholders

 

 

22,254,823

 

 

 

11,296,816

 

 

 

21,919,956

 

 

 

9,790,726

 

 

See Accompanying Notes to these Condensed Financial Statements

 

5


 

PLUS THERAPEUTICS, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(In thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

Total

 

 

 

preferred stock

 

 

Common stock

 

 

 

paid-in

 

 

 

Accumulated

 

 

 

stockholders’

 

 

 

Shares

 

 

 

Amount

 

 

Shares

 

 

 

Amount

 

 

 

capital

 

 

 

deficit

 

 

 

equity

 

Balance at December 31, 2020

 

 

1,954

 

 

$

 

 

 

 

6,749,028

 

 

$

 

7

 

 

$

 

436,535

 

 

$

 

(433,511

)

 

$

 

3,031

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

107

 

 

 

 

 

 

 

 

107

 

Sale of common stock, net

 

 

 

 

 

 

 

 

 

2,534,879

 

 

 

 

2

 

 

 

 

7,076

 

 

 

 

 

 

 

 

7,078

 

Conversion of Series B Convertible Preferred

     Stock into common stock

 

 

(2

)

 

 

 

 

 

 

118

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for exercise of warrants

 

 

 

 

 

 

 

 

 

896,500

 

 

 

 

1

 

 

 

 

2,016

 

 

 

 

 

 

 

 

2,017

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,720

)

 

 

 

(2,720

)

Balance at March 31, 2021

 

 

1,952

 

 

$

 

 

 

 

10,180,525

 

 

$

 

10

 

 

$

 

445,734

 

 

$

 

(436,231

)

 

$

 

9,513

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

138

 

 

 

 

 

 

 

 

138

 

Sale of common stock, net

 

 

 

 

 

 

 

 

 

1,907,000

 

 

 

 

2

 

 

 

 

5,092

 

 

 

 

 

 

 

 

5,094

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,800

)

 

 

 

(2,800

)

Balance at June 30, 2021

 

 

1,952

 

 

$

 

 

 

 

12,087,525

 

 

$

 

12

 

 

$

 

450,964

 

 

$

 

(439,031

)

 

$

 

11,945

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2021

 

 

1,952

 

 

$

 

 

 

 

15,510,025

 

 

$

 

16

 

 

$

 

457,730

 

 

$

 

(446,910

)

 

$

 

10,836

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

180

 

 

 

 

 

 

 

 

180

 

Sale of common stock, net

 

 

 

 

 

 

 

 

 

6,687,610

 

 

 

 

6

 

 

 

 

7,736

 

 

 

 

 

 

 

 

7,742

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,116

)

 

 

 

(4,116

)

Balance at March 31, 2022

 

 

1,952

 

 

$

 

 

 

 

22,197,635

 

 

$

 

22

 

 

$

 

465,646

 

 

$

 

(451,026

)

 

$

 

14,642

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

167

 

 

 

 

 

 

 

 

167

 

Sale of common stock, net

 

 

 

 

 

 

 

 

 

271,047

 

 

 

 

 

 

 

 

152

 

 

 

 

 

 

 

 

152

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,282

)

 

 

 

(5,282

)

Balance at June 30, 2022

 

 

1,952

 

 

$

 

 

 

 

22,468,682

 

 

$

 

22

 

 

$

 

465,965

 

 

$

 

(456,308

)

 

$

 

9,679

 

 

 

 

See Accompanying Notes to these Condensed Financial Statements

 

6


 

PLUS THERAPEUTICS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)

 

 

For the Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

Cash flows used in operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(9,398

)

 

$

(5,520

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

302

 

 

 

179

 

Amortization of deferred financing costs and debt discount

 

 

218

 

 

 

283

 

Change in fair value of liability instruments

 

 

(1

)

 

 

(2

)

Stock-based compensation expense

 

 

347

 

 

 

245

 

Change of operating lease assets and liabilities

 

 

(36

)

 

 

 

Non-cash lease expense

 

 

 

 

 

4

 

Increases (decreases) in cash caused by changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Other current assets

 

 

525

 

 

 

(11

)

Accounts payable and accrued expenses

 

 

1,527

 

 

 

(583

)

Net cash used in operating activities

 

 

(6,516

)

 

 

(5,405

)

 

 

 

 

 

 

 

 

 

Cash flows (used in) investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(348

)

 

 

(80

)

Purchases of intangible assets

 

 

(117

)

 

 

 

In process research and development acquired

 

 

(250

)

 

 

 

Net cash used in investing activities

 

 

(715

)

 

 

(80

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Principal payments of long-term obligations

 

 

(804

)

 

 

 

Payment of financing lease liability

 

 

 

 

 

(8

)

Proceeds from exercise of warrants

 

 

 

 

 

2,017

 

Proceeds from sale of common stock, net

 

 

7,725

 

 

 

12,291

 

Net cash provided by financing activities

 

 

6,921

 

 

 

14,300

 

Net increase (decrease) in cash and cash equivalents

 

 

(310

)

 

 

8,815

 

Cash and cash equivalents at beginning of period

 

 

18,400

 

 

 

8,346

 

Cash and cash equivalents at end of period

 

$

18,090

 

 

$

17,161

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flows information:

 

 

 

 

 

 

 

 

Cash paid during period for:

 

 

 

 

 

 

 

 

Interest

 

$

168

 

 

$

290

 

Supplemental schedule of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Unpaid offering cost

 

$

50

 

 

$

119

 

Right-of-use asset obtained in exchange for lease liabilities

 

$

 

 

$

81

 

 

 

 

 

 

 

 

 

 

 

 

See Accompanying Notes to these Condensed Financial Statements

 

 

7


 

PLUS THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

June 30, 2022

(UNAUDITED)

 

 

1.

Basis of Presentation and New Accounting Standards

The accompanying unaudited condensed financial statements as of June 30, 2022 and for the three and six months ended June 30, 2022 and 2021 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 condensed balance sheet at December 31, 2021 has been derived from the audited financial statements at December 31, 2021, 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 six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. These financial statements should be read in conjunction with the financial statements and notes therein included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on February 24, 2022.

Recently Issued Accounting Pronouncements

In June 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 financial statements and related disclosures.

 

2.

Use of Estimates

The preparation of 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 reviewing assets for impairment, and determining the assumptions used in measuring stock-based compensation expense.  

Actual results could differ from these estimates. Management’s estimates and assumptions are reviewed regularly, and the effects of revisions are reflected in the financial statements in the periods they are determined to be necessary.

 

3.

Liquidity

The Company incurred net losses of $9.4 million for the six months ended June 30, 2022. The Company had an accumulated deficit of $456.3 million as of June 30, 2022. Additionally, the Company used net cash of $6.5 million to fund its operating activities for the six months ended June 30, 2022.

 

As disclosed in more detail in Note 9, the Company had entered into various financing agreements, and raised capital by issuing its common stock. The Company believes its current cash and cash equivalents will be sufficient to fund its operations for at least the next 12 months from the date these financial statements are issued.

 

The Company continues to seek additional capital through strategic transactions and from other financing alternatives. If sufficient 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.

 

On May 24, 2022, the Company received notice from The Nasdaq Stock Market LLC (“Nasdaq”) that, because the closing bid price for the Company’s common stock had fallen below $1.00 per share for 30 consecutive business days, the Company no longer complied with the minimum bid price requirement pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid

8


Requirement”).

 

Nasdaq’s notice has no immediate effect on the listing or trading of the Company’s common stock. Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the Company was provided an initial compliance period of 180 calendar days, or until November 21, 2022, to regain compliance with the Minimum Bid Requirement. To regain compliance, the closing bid price of the Company’s common stock must meet or exceed $1.00 per share for a minimum of 10 consecutive business days prior to November 21, 2022.

 

If the Company does not achieve compliance with the Minimum Bid Requirement by November 21, 2022, the Company may be eligible for an additional 180 calendar days to regain compliance. To qualify, the Company would be required to meet the continued listing requirement for market value of publicly held shares and all other Nasdaq initial listing standards, with the exception of the Minimum Bid Requirement, and provide written notice of its intention to cure the minimum bid price deficiency during the second compliance period by effecting a reverse stock split if necessary. If the Nasdaq staff determines that the Company will not be able to cure the deficiency, or if the Company is otherwise not eligible for such additional compliance period, Nasdaq will provide notice that the Company’s common stock will be subject to delisting. In the event the Company receives notice that its common stock is being delisted, Nasdaq rules permit the Company to appeal any delisting determination by the Nasdaq staff.

 

There can be no assurance that the Company will be able to regain compliance with the Minimum Bid Requirement or maintain compliance with the other listing requirements.

 

 

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.

 

 

Certain warrants issued in an underwritten public offering in September 2019 (“Series U Warrants”) are classified as liability instruments. The Company estimated the fair value of the Series U Warrants with the Black Scholes model. 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.

 

Liability-classified Series U Warrants are 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. As of June 30, 2022, the fair value of the Series U Warrants was immaterial, and the change in the fair value of liability classified Series U Warrants during the three and six months ended June 30, 2022 and 2021 was immaterial.

 

5.

Term Loan Obligations

 

On May 29, 2015, the Company entered into the Loan and Security Agreement (the “Loan and Security Agreement”), pursuant to which Oxford Finance, LLC (“Oxford”) 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 a three-month LIBOR rate with a floor of 1.00% plus 7.95%.  Pursuant to the Loan and Security Agreement, as amended, the Company made interest only payments through May 1, 2021 and thereafter is required to make payments of principal and accrued interest in equal monthly installments sufficient to amortize the Term Loan through June 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 authoritative accounting guidance, are equity classified and its respective fair value was recorded as a discount to the debt.

9


From September 2017 to July 2019, the Company entered into a total of eight 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 in April 2019, 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 (the “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 June 1, 2024.  

 

Under authoritative guidance, the Ninth Amendment did 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 $3.0 million. As of June 30, 2022, there was $3.1 million principal amount outstanding under the Term Loan, excluding the $3.2 million final payment fee, 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 June 30, 2022 and 2021 was $0.2 million. The Company’s interest expense for the six months ended June 30, 2022 and 2021 was $0.4 and $0.5 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 for each of the three months ended June 30, 2022 and 2021, and $0.2 million and $0.3 million for the six months ended June 30, 2022 and 2021, 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 June 30, 2022, the Company has not received any notification or indication from Oxford that it intends to invoke the material adverse change clause.

 

 

6.

Loss per Share

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 convertible 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:

 

As of June 30,

 

 

2022

 

 

2021

 

Outstanding stock options

 

 

1,183,873

 

 

 

1,090,890

 

Preferred stock

 

 

422,867

 

 

 

422,867

 

Outstanding warrants

 

 

2,141,189

 

 

 

2,141,378

 

Total

 

 

3,747,929

 

 

 

3,655,135

 

 

7.

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

10


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. Lease renewable options are included in the estimation of lease term when it is reasonably certain that the Company will exercise such options.  

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 finance leases are recorded within property and equipment, net in the condensed balance sheets. Leases with an initial term of 12 months or less are not recorded on the condensed balance sheets. Instead, the Company recognizes lease expense for these leases on a straight-line basis over the lease term in the condensed statements of operations.  

The Company leases laboratory, office and storage facilities in San Antonio, Texas, under operating lease agreements that expire in 2025. The Company also leases certain office space in Austin, Texas under a month-to-month operating lease agreement and certain office space in Charlottesville, Virginia (the “Charlottesville Lease”). The Charlottesville Lease has a term of 12 months and we have the ability to renew for three additional one-year periods. The  Charlottesville Lease is currently set to expire on March 31, 2023. The Company measured the operating lease right-of-use asset and related lease liability related to the Charlottesville Lease as of the lease commencement date of April 1, 2021. In addition, the Company has entered into leases for certain equipment under various operating and finance leases. During 2021, contractual terms of all finance leases had expired and the Company did not have any right-of-use assets or lease liabilities relating to finance leases as of June 30, 2022. The Company’s existing operating 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.

 

The Company’s operating lease liabilities and corresponding right-of-use assets are included in the condensed balance sheets. As of June 30, 2022, weighted average discount rate used to measure operating lease liabilities and the operating leases remaining term were 9.0% and 2.52 years, respectively.

 

The table below summarizes the Company’s lease costs from its unaudited condensed statement of operations, and cash payments from its unaudited condensed statement of cash flows during the three and six months ended June 30, 2022 and 2021 (in thousands):

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

 

2022

 

 

2021

 

Lease expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease expense

$

46

 

$

58

 

 

$

92

 

$

108

 

Finance lease expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation of right-of-use assets

 

-

 

3

 

 

 

-

 

7

 

Total lease expense

$

46

 

$

61

 

 

$

92

 

$

115

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash payment information: