10-Q 1 pstv-10q_20200331.htm Q1 2020 10-Q pstv-10q_20200331.htm

 

 

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 March 31, 2020

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)

 

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 May 8, 2020, there were 4,111,357 shares of the registrant’s common stock outstanding.

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

 


 


 

PLUS THERAPEUTICS, INC.

INDEX

 

 

 

 

 

Page

PART I

 

FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

 

Item 1.

 

Financial Statements (Unaudited)

 

4

 

 

 

 

 

 

 

 

 

 

 

Consolidated Condensed Balance Sheets

 

4

 

 

 

 

 

 

 

 

 

 

 

Consolidated Condensed Statements of Operations and Comprehensive Loss

 

5

 

 

 

 

 

 

 

 

 

 

 

Consolidated Condensed Statements of Stockholders’ Equity

 

6

 

 

 

 

 

 

 

 

 

 

 

Consolidated Condensed Statements of Cash Flows

 

7

 

 

 

 

 

 

 

 

 

 

 

Notes to Consolidated Condensed 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

 

24

 

 

 

 

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

24

 

 

 

 

 

 

 

PART II

 

OTHER INFORMATION

 

 

 

 

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

25

 

 

 

 

 

 

 

 

 

Item 1A.

 

Risk Factors

 

25

 

 

 

 

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

30

 

 

 

 

 

 

 

 

 

Item 5.

 

Other Information

 

30

 

 

 

 

 

 

 

 

 

Item 6.

 

Exhibits

 

31

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2


 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report contains statements that may be deemed “forward-looking statements” within the meaning of U.S. securities laws.  All statements in this report, other than statements of historical fact, are forward-looking statements. These forward-looking statements may be identified by terms such as “intend,” “expect,” “believe,” “anticipate,” “will,” “should,” “would,” “could,” “may,” “designed,”, “potential,” 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 regarding: our anticipated expenditures, including research and development, sales and marketing, and general and administrative expenses; the potential size of the market for our products; future development and/or expansion of our products and therapies in our markets; our ability to generate product or development revenues and the sources of such revenues; 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; and the potential enhancement of our cash position through development, marketing, and licensing arrangements. Our actual results will likely differ, perhaps materially, from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to: 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 need and 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,  competition within the regenerative medicine field, and the ong COVID-19 pandemic. 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, 2019, and under “Part II, Item 1A - Risk Factors” in this Quarterly Report on Form 10-Q.  These risks and uncertainties that could cause actual results to differ materially from expectations or those expressed in these forward-looking statements.  We encourage you to read these risks 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.  

 

3


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PLUS THERAPEUTICS, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and par value data)

 

 

 

As of March 31,

2020

 

 

As of December 31,

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

16,061

 

 

$

17,552

 

Accounts receivable

 

 

978

 

 

 

1,169

 

Restricted cash

 

 

 

 

 

40

 

Inventories, net

 

 

107

 

 

 

107

 

Other current assets

 

 

551

 

 

 

957

 

Total current assets

 

 

17,697

 

 

 

19,825

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

2,096

 

 

 

2,179

 

Operating lease right-of-use assets

 

 

744

 

 

 

781

 

Other assets

 

 

58

 

 

 

72

 

Goodwill

 

 

372

 

 

 

372

 

Total assets

 

$

20,967

 

 

$

23,229

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

3,670

 

 

$

3,279

 

Operating lease liability

 

 

136

 

 

 

147

 

Term loan obligations, net of discount

 

 

11,182

 

 

 

11,060

 

Total current liabilities

 

 

14,988

 

 

 

14,486

 

 

 

 

 

 

 

 

 

 

Other noncurrent liabilities

 

 

8

 

 

 

8

 

Noncurrent operating lease liability

 

 

624

 

 

 

646

 

Warrant liability

 

 

5,262

 

 

 

6,929

 

Total liabilities

 

 

20,882

 

 

 

22,069

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Notes 9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value; 5,000,000 shares authorized; 1,959  shares issued and outstanding at March 31, 2020 and December 31, 2019

 

 

 

 

 

 

Common stock, $0.001 par value; 100,000,000 shares authorized; 3,880,588 shares issued and outstanding at March 31, 2020 and December 31, 2019

 

 

4

 

 

 

4

 

Additional paid-in capital

 

 

426,438

 

 

 

426,426

 

Accumulated deficit

 

 

(426,357

)

 

 

(425,270

)

Total stockholders’ equity

 

 

85

 

 

 

1,160

 

Total liabilities and stockholders’ equity

 

$

20,967

 

 

$

23,229

 

 

See Accompanying Notes to these Consolidated Condensed Financial Statements

 

 

4


 

PLUS THERAPEUTICS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

(in thousands, except share and per share data)

 

 

 

 

 

For the Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Development revenues:

 

 

 

 

 

 

 

 

Government contracts and other

 

$

118

 

 

$

737

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

941

 

 

 

1,426

 

Sales and marketing

 

 

110

 

 

 

114

 

General and administrative

 

 

1,508

 

 

 

1,363

 

Total operating expenses

 

 

2,559

 

 

 

2,903

 

Operating loss

 

 

(2,441

)

 

 

(2,166

)

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

Interest income

 

 

36

 

 

 

7

 

Interest expense

 

 

(349

)

 

 

(515

)

Change in fair value of warrants

 

 

1,667

 

 

 

210

 

Total other income (expense)

 

 

1,354

 

 

 

(298

)

Loss from continuing operations

 

 

(1,087

)

 

 

(2,464

)

Loss from discontinued operations

 

 

 

 

 

(686

)

Net loss

 

$

(1,087

)

 

$

(3,150

)

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per share attributable to common stockholders - continuing operations

 

$

(0.28

)

 

$

(6.98

)

Basic and diluted net loss per share attributable to common stockholders - discontinued operations

 

$

 

 

$

(1.94

)

Net loss per share, basis and diluted

 

$

(0.28

)

 

$

(8.92

)

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

 

 

3,880,588

 

 

 

353,142

 

 

 

 

 

 

 

 

 

 

Comprehensive loss:

 

 

 

 

 

 

 

 

Net loss

 

$

(1,087

)

 

$

(3,150

)

Other comprehensive loss – foreign currency translation adjustments

 

 

-

 

 

 

(140

)

Comprehensive loss

 

$

(1,087

)

 

$

(3,290

)

 

See Accompanying Notes to these Consolidated Condensed Financial Statements

 

 

5


 

PLUS THERAPEUTICS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

other

 

 

 

 

 

 

 

 

Total

 

 

 

preferred stock

 

 

Common stock

 

 

 

paid-in

 

 

 

comprehensive

 

 

 

Accumulated

 

 

 

stockholders’

 

 

 

Shares

 

 

 

Amount

 

 

Shares

 

 

 

Amount

 

 

 

capital

 

 

 

income

 

 

 

deficit

 

 

 

equity

 

Balance at December 31, 2018

 

 

4,606

 

 

$

 

 

 

 

296,609

 

 

$

 

 

 

$

 

418,390

 

 

$

 

1,218

 

 

$

 

(414,383

)

 

$

 

5,225

 

Share-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

49

 

 

 

 

 

 

 

 

 

 

 

 

49

 

Sale of common stock, net

 

 

 

 

 

 

 

 

 

139,855

 

 

 

 

 

 

 

 

1,873

 

 

 

 

 

 

 

 

 

 

 

 

1,873

 

Conversion of Series B Convertible Preferred

     Stock into common stock

 

 

(66

)

 

 

 

 

 

 

1,652

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment and

     accumulated other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(140

)

 

 

 

 

 

 

 

(140

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,150

)

 

 

 

(3,150

)

Balance at March 31, 2019

 

 

4,540

 

 

$

 

 

 

 

438,116

 

 

$

 

 

 

$

 

420,312

 

 

$

 

1,078

 

 

$

 

(417,533

)

 

$

 

3,857

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2019

 

 

1,959

 

 

$

 

 

 

 

3,880,588

 

 

$

 

4

 

 

$

 

426,426

 

 

$

 

 

 

$

 

(425,270

)

 

$

 

1,160

 

Share-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12

 

 

 

 

 

 

 

 

 

 

 

 

12

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,087

)

 

 

 

(1,087

)

Balance at March 31, 2020

 

 

1,959

 

 

$

 

 

 

 

3,880,588

 

 

$

 

4

 

 

$

 

426,438

 

 

$

 

 

 

$

 

(426,357

)

 

$

 

85

 

 

See Accompanying Notes to these Consolidated Condensed Financial Statements

 

6


 

PLUS THERAPEUTICS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

 

 

 

For the Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Cash flows used in operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(1,087

)

 

$

(3,150

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

94

 

 

 

443

 

Amortization of deferred financing costs and debt discount

 

 

122

 

 

 

168

 

Noncash lease expenses

 

 

4

 

 

 

 

Change in fair value of warrants

 

 

(1,667

)

 

 

(210

)

Share-based compensation expense

 

 

12

 

 

 

49

 

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

 

 

 

 

 

 

 

 

Accounts receivable

 

 

191

 

 

 

(212

)

Inventories

 

 

 

 

 

16

 

Other current assets

 

 

405

 

 

 

16

 

Other assets

 

 

14

 

 

 

1

 

Accounts payable and accrued expenses

 

 

410

 

 

 

(405

)

Deferred revenues

 

 

 

 

 

(25

)

Other long-term liabilities

 

 

 

 

 

39

 

Net cash used in operating activities

 

 

(1,502

)

 

 

(3,270

)

Cash flows used in investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(11

)

 

 

(6

)

Net cash used in investing activities

 

 

(11

)

 

 

(6

)

Cash flows (used in) provided by financing activities:

 

 

 

 

 

 

 

 

Payment of financing lease liability

 

 

(18

)

 

 

(28

)

Proceeds from sale of common stock, net

 

 

 

 

 

1,919

 

Net cash (used in) provided by financing activities

 

 

(18

)

 

 

1,891

 

Effect of exchange rate changes on cash and cash equivalents

 

 

 

 

 

(4

)

Net decrease in cash and cash equivalents

 

 

(1,531

)

 

 

(1,389

)

Cash, cash equivalents, and restricted cash at beginning of period

 

 

17,592

 

 

 

5,301

 

Cash, cash equivalents, and restricted cash at end of period

 

$

16,061

 

 

$

3,912

 

Supplemental disclosure of cash flows information:

 

 

 

 

 

 

 

 

Cash paid during period for:

 

 

 

 

 

 

 

 

Interest

 

$

227

 

 

$

347

 

 

See Accompanying Notes to these Consolidated Condensed Financial Statements

 

 

7


 

PLUS THERAPEUTICS, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

March 31, 2020

(UNAUDITED)

 

 

1.

Basis of Presentation and New Accounting Standards

Our accompanying unaudited consolidated condensed financial statements as of March 31, 2020 and for the three months ended March 31, 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.  Our 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 our subsidiaries (collectively, the “Company”) have been included.  Operating results for the three months ended March 31, 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 our 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 and Reverse Stock Split

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”.

On August 5, 2019, following stockholder and Board approval, the Company filed a Certificate of Amendment (the “August 2019 Amendment”) to its Amended and Restated Certificate of Incorporation (the Amendment), as amended, with the Secretary of State of the State of Delaware to effectuate a one-for-fifty (1:50) reverse stock split (the “August 2019 Reverse Stock Split”)) of its common stock, par value $0.001 per share, without any change to its par value. The August 2019 Amendment became effective on the filing date. The August 2019 Reverse Stock Split became effective for trading purposes as of the commencement of trading on the Nasdaq Capital Market on August 6, 2019. There was no change in the Company’s Nasdaq ticker symbol, “PSTV,” as a result of the August 2019 Reverse Stock Split. Upon effectiveness, each 50 shares of issued and outstanding common stock were converted into one newly issued and outstanding share of common stock. The Company’s 5,000,000 shares of authorized Preferred Stock were not affected by the August 2019 Reverse Stock Split. No fractional shares were issued in connection with the August 2019 Reverse Stock Split. Any fractional shares of common Stock that would have otherwise resulted from the August 2019 Reverse Stock Split were rounded up to the nearest whole share. Outstanding equity awards and the shares available for future grant under the Company’s Amended and Restated 2004 Equity Incentive Plan, 2011 Employee Stock Purchase Plan, 2014 Amended and Restated Equity Incentive Plan and 2015 New Employee Incentive Plan were proportionately reduced (rounded down to the nearest whole share), and the exercise prices of outstanding equity awards were proportionately increased (rounded up to the nearest whole cent) to give effect to the August 2019 Reverse Stock Split.

 

8


 

 

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 an impact on its consolidated financial statements and related disclosures.

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 has not had a material impact on the Company's financial statements.

 

2.

Use of Estimates

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.  Our 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

We incurred net losses of $1.1 million for the three months ended March 31, 2020.  We have an accumulated deficit of $426.4 million as of March 31, 2020.  Additionally, we used net cash of  $1.5 million to fund our operating activities for the three months ended March 31, 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 in the Company’s common stock, proceeds raised from the Loan and Security Agreement, and gross profits.  We have had, and we will continue to have, an ongoing need to raise additional cash from outside sources to fund our future clinical development programs and other operations. Our inability to raise additional cash would have a material and adverse impact on operations and would cause us to default on our loan.

On August 19, 2019, the Company received written notice from Nasdaq indicating that, based on the Company’s stockholders’ deficit of $6.3 million as of June 30, 2019, as reported in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, it is no longer in compliance with the minimum stockholders’ equity requirement for continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(b)(1), which requires listed companies to maintain stockholders’ equity of at least $2.5 million.

Based on the Company’s stockholders’ equity of $85,000 as of March 31, 2020, the Company does not meet the minimum stockholders’ equity requirement for continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(b)(1). In April 2020, the Company entered into agreements (the “Warrant Amendments”) with certain holders of the Series U Warrants (the “Amending Warrant Holders”) to amend the terms of the Amending Warrant Holders’ Series U Warrants to, among other things, (i) limit the Company’s obligation to make cash payments to the Amending Warrant Holders upon certain fundamental transactions and (ii) establish an exercise price of $2.25. Subsequent to the Warrant Amendments, the amended Series U warrants are expected to meet the criteria under authoritative guidance to be classified within stockholders’ equity. The Company expects that in April 2020, approximately $4.2 million of warrant liability will be reclassed to the stockholders’ equity section of the balance sheet. In addition, approximately $0.7 million of other income representing change in the fair value of

9


 

amended warrants from April 1, 2020 to the amendment date will be recorded in the statement of operations and other comprehensive income (loss) for the three months ending June 30, 2020.

 

The Company continues to seek additional capital through strategic transactions and from other financing alternatives. Without additional capital, current working capital will not provide adequate funding to make debt repayments, for research, sales and marketing efforts and product development activities at their current levels. 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.

Should the Company fail to raise additional cash from outside sources, this would have a material adverse impact on its operations.

The accompanying consolidated 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.  We follow 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.

 

 

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. Because some of the inputs to our 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 March 31, 2020 and December 31, 2019 was determined by using an option pricing model with the following assumptions:

 

 

 

As of

March 31, 2020

 

 

As of

December 31,

2019

 

Expected term

 

1 year

 

 

1.1 years

 

Common stock market price

 

$

1.88

 

 

$

2.40

 

Risk-free interest rate

 

 

0.17

%

 

 

1.59

%

Expected volatility

 

 

204

%

 

 

168

%

Resulting fair value (per warrant)

 

$

1.17

 

 

$

1.47

 

 

10


 

The Company estimated the fair value of the Series U Warrants with the Black Scholes model. The Series U 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

March 31, 2020

 

 

As of

December 31,

2019

 

Expected term

 

4.5 years

 

 

4.75 years

 

Common stock market price

 

$

1.88

 

 

$

2.40

 

Risk-free interest rate

 

 

0.35

%

 

 

1.68

%

Expected volatility

 

 

140

%

 

 

135

%

Resulting fair value (per warrant)

 

$

1.47

 

 

$

1.94

 

 

The following tables summarizes the change in Level 3 warrant liability value (in thousands):

 

 

Three Months Ended March 31, 2020

 

Warrant liability

 

 

 

 

Beginning balance

 

$

6,929

 

Change in fair value

 

 

(1,667

)

Ending balance

 

$

5,262

 

 

Warrant liability

 

Three Months Ended

March 31, 2019

 

 

Beginning balance

 

$

916

 

Change in fair value

 

 

(210

)

Ending balance

 

$

706

 

 

5.

Term Loan Obligations

On May 29, 2015, the Company entered into the Loan and Security Agreement, dated May 29, 2015, with Oxford (the “Loan and Security Agreement”), pursuant to which it funded an aggregate principal amount of $17.7 million (“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, we were previously required to make interest only payments through June 1, 2016 and thereafter we were required to make payments of principal and accrued interest in equal monthly installments sufficient to amortize the Term Loan through June 1, 2019, the maturity date. On February 23, 2016, we received an acknowledgement and agreement from Oxford related to the positive data on our U.S. ACT-OA clinical trial. As a result, pursuant to the Loan and Security Agreement, the period for which we are required to make interest-only payments was extended from July 1, 2016 to January 1, 2017. All unpaid principal and interest with respect to the Term Loan is due and payable in full on June 1, 2019. At maturity of the Term Loan, or earlier repayment in full following voluntary prepayment or upon acceleration, we are required to make a final payment in an aggregate amount equal to approximately $1.1 million. In connection with the Term Loan, on May 29, 2015, we issued to Oxford warrants to purchase an aggregate of 188 shares of our 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.

In September 2017 and June 2018, the Company entered into two amendments to the Term Loan which extended the interest-only period, and the Company agreed to pay Oxford an amendment fee of $250,000 at the earlier of maturity or acceleration of the loan.

On August 31, 2018, the Company entered into a third amendment (the “Third Amendment”) to the Term Loan with Oxford. The Third Amendment extends requires that the Company pay to Oxford, in accordance with its pro rata share of the loans, 75% of all proceeds received (i) from the issuance and sale of unsecured subordinated convertible debt, (ii) in connection with a joint venture, collaboration or other partnering transaction, (iii) in connection with any licenses, (iv) from dividends (other than non-cash dividends from wholly owned subsidiaries) and (v) from the sale of any assets (such requirement, the “Prepayment Requirement”).  The Prepayment Requirement does not apply to proceeds from the sale and issuance of the Company’s equity securities, other than convertible debt.  The Prepayment Requirement shall apply until an aggregate principle amount of $7.0 million has been paid pursuant to the Prepayment Requirement.  However, if less than $7.0 million has been paid pursuant to the

11


 

Prepayment Requirement on December 31, 2018 then the Company is required to promptly make additional payments until an aggregate principal amount of $7.0 million has been paid.

On December 31, 2018, the Company entered into a fourth amendment (the “Fourth Amendment”) to the Term Loan with Oxford, which increased the minimum liquidity covenant level from $1.5 million to $2.0 million.

On February and March 2019, the Company entered into a fifth amendment and a sixth amendment to the Term Loan which primarily extended the interest only period to March 29, 2019. On April 29, 2019, the Company entered into a seventh amendment (the “Seventh Amendment”) to the Term Loan, pursuant to which, among other things, Oxford agreed to interest only payments starting May 1, 2019, with amortization payments resuming on May 1, 2020. In April 2019, the Company repaid $3.1 million of total principal using the proceeds received from sale of the Company’s former UK and Japan subsidiaries as described in Note 1.

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.  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. After giving effect to this payment, there is $4.3 million of principal outstanding under the Loan Agreement. As a result of this Ninth Amendment, the term of the Term Loan has been extended from June 1, 2021 to June 1, 2024. In addition, an amendment fee of $1.3 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 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 certain liquidity level when the total principal outstanding under the Loan and Security Agreement is less than $3 million. As of March 31, 2020, we were in compliance with all of the debt covenants under the Loan and Security Agreement.

The Company’s interest expense for the three months ended March 31, 2020 and 2019 was $0.3 million 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 the three months ended March 31, 2020 and $0.2 million for the three months ended March 31, 2019, 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, our 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 our 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 we may be required to repay all amounts then outstanding under the Term Loan, which could materially harm the Company’s financial condition. As of March 31, 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.

 

6.

Revenue Recognition

Development Revenue

The Company earns revenue for performing tasks 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 our statements of operations.

The BARDA contract was terminated by the U.S. Department of Health and Human Services effectively in December 2019. During the three months ended March 31, 2020, the Company recognized $0.1 million in development revenue and related costs related to unreimbursed costs prior to termination of the contract.

 

12


 

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.  The following table summarizes the calculation of the loss on 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 March 31, 2020 or December 31, 2019. 

 

The following table summarizes the results of discontinued operations for the periods presented (in thousands.):

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Product revenue

 

$

 

 

$

703

 

Cost of revenue

 

 

 

 

 

659

 

Gross profit

 

 

 

 

 

44

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

 

 

 

420

 

Sales and marketing

 

 

 

 

 

314

 

General and administrative

 

 

 

 

 

145

 

Total operating expenses

 

 

 

 

 

879

 

Operating loss

 

 

 

 

 

(835

)

Other income (expense)

 

 

 

 

 

 

149

 

Loss from discontinued operations

 

$

 

 

$

(686

)

 

 

During the three months ended March 31, 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 revenues and costs of product revenues for these periods have been recorded in loss from discontinued operations in the consolidated statements of operations.

 

Included in the statement of cash flows are the following non-cash adjustments related to the discontinued operations (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Depreciation and amortization

 

$

 

 

$

344

 

Provision for excess inventory

 

$

 

 

$

 

Loss on asset disposal

 

$

 

 

$

 

 

8.

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 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:

 

13


 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Outstanding stock options

 

 

87,741

 

 

 

2,000

 

Outstanding warrants

 

 

3,637,000

 

 

 

178,000

 

Preferred stocks

 

 

298,000

 

 

 

92,000

 

Total

 

 

4,022,741

 

 

 

272,000

 

 

9.

Commitments

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.

The table below summarizes the Company’s lease liabilities and corresponding right-of-use assets (in thousands):

 

As of March 31, 2020

 

Assets

 

 

 

Operating

$

744

 

Financing

102

 

Total leased assets

$

846

 

 

 

 

 

Liabilities

 

 

 

Current:

 

 

 

Operating

$

136

 

Financing

108

 

Noncurrent:

 

 

 

Operating

624

 

Financing

4

 

Total lease liabilities

$

872

 

 

 

 

 

Weighted-average remaining lease term (years) - operating leases

6.74

 

Weighted-average remaining lease term (years) - finance leases

0.82

 

Weighted-average discount rate - operating leases

 

7.91

%

Weighted-average discount rate - finance leases

 

5

%

 

The table below summarizes the Company’s lease costs from its unaudited consolidated condensed statement of operations, and cash payments from its unaudited consolidated condensed statement of cash flows during the three months ended March 31, 2020 (in thousands, except years and rates):

14


 

 

Three Months Ended March 31, 2020

 

Lease expense:

 

 

 

Operating lease expense

$

55

 

Finance lease expense:

 

 

 

Depreciation of right-of-use assets

32

 

Interest expense on lease liabilities

2

 

Total lease expense

$

89

 

 

 

 

 

Cash payment information:

 

 

 

Operating cash used for operating leases

$

51

 

Financing cash used for financing leases

18

 

Total cash paid for amounts included in the measurement of lease liabilities

$

69

 

 

Total rent expenses for the three months ended March 31, 2020 was $95,000, which includes leases in the table above, month-to-month operating leases, and common area maintenance charges.

The Company’s future minimum annual lease payments under operating and financing leases at March 31, 2020 are as follows in (thousands):

 

 

Financing

 

 

Operating

 

 

 

Leases

 

 

Leases

 

 

 

 

 

 

 

 

 

 

Remaining 2020

 

$

105

 

 

$

159

 

2021

 

7

 

 

183

 

2022

 

 

 

123

 

2023

 

 

 

100

 

Thereafter

 

 

 

447

 

Total minimum lease payments

 

$

112

 

 

$

1,012

 

Less: amount representing interest

 

0

 

 

 

(252

)

Present value of obligations under leases

 

112

 

 

 

760

 

Less: current portion

 

 

(108

)

 

 

(136

)

Noncurrent lease obligations

 

$

4

 

 

$

624

 

 

 

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 March 31, 2020, the Company had clinical research study obligations of $0.9 million, all of which is expected to be paid within a year.  Should the timing of the clinical trials change, the timing of the payment of these obligations would also change.

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.

The transaction terms will require the Company to make an upfront payment of $400,000 in cash and $300,000 in the Company’s voting common stock (the “Equity Compensation”), subject to certain substantive closing conditions. Furthermore,

15


 

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.

 

11.

Stockholders’ Equity

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 we issue without further action by the common stockholders.  There were no shares of Series A 3.6% Convertible Preferred Stock outstanding as of March 31, 2020 or December 31, 2019. There were 1,021 shares of Series B Convertible Preferred Stock outstanding as of each of March 31, 2020 and December 31, 2019. There were 938 shares of Series C Preferred Stock outstanding as of each of March 31, 2020 and December 31, 2019.

As of March 31, 2020, there were 938 outstanding shares of Series C Preferred Stock that can be converted into an aggregate of 291,920 shares of common stock, and 1,021 shares of Series B Convertible Preferred Stock that can be converted into an aggregate of 6,133 shares of common stock.  

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 each consisting of one share of Series C Preferred Stock and 1,050 warrants for $1,000 per unit (“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. 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 $3.2132, and the conversion price of the Series C Preferred Stock was reduced from $7.50 to $3.2132.

As of March 31, 2020, there were 3,788,400 outstanding Series T Warrants that can be exercised into an aggregate of 75,768 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 the Representatives to purchase 75,000 shares of its common stock at $6.25 per share with a term of 5.0 years from the issuance date, in the form of Series U Warrants.

In accordance with authoritative guidance, the pre-funded warrants are classified as equity. The Series U Warrants and the Representative Warrants are classified as liabilities due to a contingent obligation for the Company to settle the Series U Warrants with cash upon certain change in control events.

As of March 31, 2020, there were 3,525,000 outstanding Series U Warrants which can be exercised into an aggregate of 3,525,000 shares of common stock.

 

Common Stock

  

 

On September 21, 2018, the Company entered into the Lincoln Park Purchase Agreement with Lincoln Park pursuant to which the Company has the right to sell to Lincoln Park and Lincoln Park is 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 Lincoln Park 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 March 31, 2020.

16


 

 

12.

Stock-based Compensation

 

In February 2020, the Company amended the 2015 Plan to increase the total number of shares of common stock reserved for issuance under the plan by 250,000 shares. As of March 31, 2020, there are 53,799 and 210,030 shares common stock remaining and available for future issuances under the 2015 and 2014 Plans, respectively.

 

A summary of activity for the three months ended March 31, 2020 is as follows:

 

 

 

Options

 

 

Weighted

Average

Exercise Price

 

Aggregate

Intrinsic Value

 

Outstanding as of December 31, 2019

 

 

1,865

 

 

$

2,968.22

 

 

 

 

Granted

 

 

86,000

 

 

$

2.18

 

 

 

 

Cancelled/forfeited

 

 

(124

)

 

$

49,903.00

 

 

 

 

Outstanding as of March 31, 2020

 

 

87,741

 

 

$

51.44

 

$

 

Vested as of March 31, 2020

 

 

1,080

 

 

$

3,862.00

 

$

 

Vested and expected to be vested as of March 31, 2020

 

 

87,741

 

 

$

51.44

 

$

 

 

As of March 31, 2020, the total compensation cost related to non-vested stock options not yet recognized for all our plans is approximately $227,000, which is expected to be recognized as a result of vesting under service conditions over a weighted average period of 2.77 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 are taking 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 has 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 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.  The Company considered the impacts of COVID-19 on the assumptions and estimates used to prepare its financial statements and determined that there were no material adverse impacts on the Company’s results of operations and financial position at March 31, 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 months ended March 31, 2020.  The Company continues to evaluate the impact of the CARES Act on its financial position, results of operations and cash flows.

 

14.     Subsequent Events

 

Between April 17 and April 21, 2020 and as disclosed in the Company’s 8-K filing on April 23, 2020, the Company entered in revised warrant agreements with the holders of 3,372,000 series U warrants. 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 fundamental transactions such that the warrants would meet the requirements to be classified within stockholders’ equity. The Company expects that in April 2020, approximately $4.2 million of warrant liability will be reclassed to the stockholders’ equity section of the balance sheet. In

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addition, approximately $0.7 million of other income representing change in the fair value of amended warrants from April 1, 2020 to the amendment date will be recorded in the statement of operations and other comprehensive income (loss) for the three months ending June 30, 2020.

 

In connection with the amendment of the Company’s Series U warrants, and in accordance with the terms of the Series T warrants, the exercise price of the Company’s Series T warrants was adjusted such that every 50 Series T warrants can be exercised into one share of common stock for $2.25. 

On April 1, 2020, the Company made a principal repayment of $5.0 million and associated final payment fee of $308,000, in accordance with the Ninth Amendment.  

On May 7, 2020, in accordance with the terms of the NanoTx License Agreement, the Company paid an upfront payment of $400,000 in cash and issued 230,769 shares of its common stock to NanoTx.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the unaudited financial information and the notes thereto included herein, as well as the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31,2019, as filed on March 30, 2020. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under the caption “Cautionary Note Regarding Forward-Looking Statements” in this report, as well as under "Part I – Item 1A - Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2019, in other subsequent filings with the SEC, and elsewhere in this Quarterly Report on Form 10-Q. These statements, like all statements in this report, speak only as of the date of this Quarterly Report on Form 10-Q (unless another date is indicated), and we undertake no obligation to update or revise these statements in light of future developments.

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, includes the following sections:

 

Overview that discusses our operating results and some of the trends that affect our business.

 

Results of Operations that includes a more detailed discussion of our revenue and expenses.

 

Liquidity and Capital Resources which discusses key aspects of our statements of cash flows, changes in our financial position and our financial commitments.

 

Significant changes since our most recent Annual Report on Form 10-K in the Critical Accounting Policies and Significant Estimates that we believe are important to understanding the assumptions and judgments underlying our financial statements.

Overview

Plus Therapeutics, Inc. is a clinical-stage pharmaceutical company focused on the discovery, development, and manufacturing scale up of complex and innovative treatments for patients battling cancer and other life-threatening diseases.  

Our proprietary nanotechnology platform is currently centered around the enhanced delivery of a variety of drugs using novel liposomal encapsulation technology. Liposomal encapsulation has been extensively explored and undergone significant technical and commercial advances since it was first developed.  Our platform is designed to facilitate new delivery approaches and/or formulations of safe and effective, injectable drugs, potentially enhancing the safety, efficacy and convenience for patients and healthcare providers.

We plan to leverage our nanotechnology platform and expertise using a simple multi-step model that enables us to address unmet needs or underserved conditions while managing risks and minimizing development costs through: (1) mapping of the current and anticipated market landscape to clearly understand the clinical and commercial opportunities and defining nanotechnology options, (2) redesign of known, safe and effective active pharmaceutical ingredients with new nanotechnology, (3) manufacture-to-scale of the reformulated drug along with critical non-clinical (i.e. bench, animal) analyses, (4) evaluation of early-stage clinical utility with a focus on proving safety and defining efficacy over the current standard of care, and (5) partnering the innovative treatment for late-stage clinical trials, regulatory approval, and commercial launch.

Recent Developments

In April 2020, we entered into agreements (the “Warrant Amendments”) with certain holders of the Series U Warrants (the “Amending Warrant Holders”) to amend the terms of the Amending Warrant Holders’ Series U Warrants to, among other things, (i) limit the Company’s obligation to make cash payments to the Amending Warrant Holders upon certain fundamental transactions and (ii) establish an exercise price of $2.25. Subsequent to the Warrant Amendments, the amended Series U warrants meet the criteria under authoritative guidance to be classified within stockholders’ equity. As a result of the Warrant Amendments, and in accordance with the terms of the Series T Warrants, the exercise price of our Series T warrants was adjusted such that every 50 Series T warrants can be exercised into one share of common stock for $2.25.

 

On March 29, 2020, we entered into a ninth amendment (the “Ninth Amendment”) to the Loan and Security Agreement, pursuant to which, among other things, Oxford agreed to defer the start date of principal repayment from May 1, 2020 to May 1, 2021. On April 1, 2020, we made a $5.0 million paydown of principal upon execution of the Ninth Amendment.  As a result of this Ninth Amendment, the term of the Term Loan has been extended from June 1, 2021 to June 1, 2024, with all other major terms remained consistent.