UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 20222023
OR
☐ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ______to _______
Commission File Number: 001-35737
NORTHWEST BIOTHERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
Delaware | 94-3306718 |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
4800 Montgomery Lane, Suite��Suite 800, Bethesda, MD 20814
(Address of principal executive offices) (Zip Code)
(240) 497-9024
(Registrant’s telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
| ☒ | Accelerated filer |
| ☐ |
Non-accelerated filer |
| ☐ | Smaller reporting company |
| ☐ |
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| Emerging growth company |
| ☐ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Title of each class | Trading Symbol | Name of each exchange on which registered |
Common Stock, par value $0.001 per share | NWBO | OTCQB |
As of August 4, 2022,7, 2023, the total number of shares of common stock, par value $0.001 per share, outstanding was 1,037,230,618.1,121,070,972.
NORTHWEST BIOTHERAPEUTICS, INC.
FORM 10-Q
TABLE OF CONTENTS
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Item 1. | Condensed Consolidated Interim Financial Statements (Unaudited) | |
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| Condensed Consolidated Balance Sheets as of June 30, | 3 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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2
PART I - FINANCIAL INFORMATION
NORTHWEST BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
| | | | | | |
|
| June 30, |
| December 31, | ||
| | 2022 | | 2021 | ||
| | (Unaudited) | | | ||
ASSETS |
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|
| | |
Current assets: |
| |
|
| |
|
Cash and cash equivalents | | $ | 4,831 | | $ | 15,169 |
Prepaid expenses and other current assets | |
| 2,347 | |
| 2,121 |
Total current assets | |
| 7,178 | |
| 17,290 |
| | | | | | |
Non-current assets: | |
| | |
| |
Property, plant and equipment, net | |
| 13,748 | |
| 15,027 |
Right-of-use asset, net | | | 4,335 | | | 4,889 |
Indefinite-lived intangible asset | | | 1,292 | | | 1,292 |
Goodwill | | | 626 | | | 626 |
Other assets | |
| 342 | |
| 1,036 |
Total non-current assets | |
| 20,343 | |
| 22,870 |
| | | | | | |
TOTAL ASSETS | | $ | 27,521 | | $ | 40,160 |
| | | | | | |
LIABILITIES AND STOCKHOLDERS’ DEFICIT | |
| | |
| |
Current liabilities: | |
| | |
| |
Accounts payable and accrued expenses | | $ | 8,370 | | $ | 6,976 |
Accounts payable and accrued expenses to related parties and affiliates | |
| 5,657 | |
| 3,971 |
Convertible notes, net | |
| 135 | |
| 135 |
Notes payable, net | |
| 9,858 | |
| 7,104 |
Contingent payable derivative liability | | | 8,123 | | | 8,232 |
Warrant liability | |
| 65,686 | |
| 106,784 |
Lease liabilities | | | 329 | | | 317 |
Shares payable | | | — | | | 250 |
Total current liabilities | |
| 98,158 | |
| 133,769 |
| | | | | | |
Non-current liabilities: | |
| | |
| |
Notes payable, net of current portion, net | |
| 16,455 | |
| 25,156 |
Lease liabilities, net of current portion | | | 4,574 | | | 5,226 |
Total non-current liabilities | |
| 21,029 | |
| 30,382 |
| | | | | | |
Total liabilities | |
| 119,187 | |
| 164,151 |
| | | | | | |
COMMITMENTS AND CONTINGENCIES (Note 10) | |
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| | | | | | |
Stockholders’ deficit: | |
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| |
Preferred stock ($0.001 par value); 100,000,000 shares authorized as of June 30, 2022 and December 31, 2021, respectively | | | — | | | — |
Common stock ($0.001 par value); 1,200,000,000 shares authorized; 1,034.5 million and 948.4 million shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | |
| 1,034 | |
| 948 |
Additional paid-in capital | |
| 1,139,811 | |
| 1,066,873 |
Stock subscription receivable | |
| (79) | |
| (79) |
Accumulated deficit | |
| (1,235,972) | |
| (1,192,090) |
Accumulated other comprehensive income | |
| 3,540 | |
| 357 |
Total stockholders’ deficit | |
| (91,666) | |
| (123,991) |
| | | | | | |
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | | $ | 27,521 | | $ | 40,160 |
| | | | | | |
|
| June 30, |
| December 31, | ||
| | 2023 | | 2022 | ||
| | (Unaudited) | | | ||
ASSETS |
| |
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| | |
Current assets: |
| |
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| |
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Cash and cash equivalents | | $ | 1,424 | | $ | 6,965 |
Prepaid expenses and other current assets | |
| 3,218 | |
| 2,460 |
Total current assets | |
| 4,642 | |
| 9,425 |
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Non-current assets: | |
| | |
| |
Property, plant and equipment, net | |
| 17,286 | |
| 13,418 |
Construction in progress | | | — | | | 2,028 |
Right-of-use asset, net | | | 4,231 | | | 4,189 |
Indefinite-lived intangible asset | | | 1,292 | | | 1,292 |
Goodwill | | | 626 | | | 626 |
Other assets | |
| 361 | |
| 345 |
Total non-current assets | |
| 23,796 | |
| 21,898 |
| | | | | | |
TOTAL ASSETS | | $ | 28,438 | | $ | 31,323 |
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LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ DEFICIT | |
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Current liabilities: | |
| | |
| |
Accounts payable and accrued expenses | | $ | 12,107 | | $ | 10,687 |
Accounts payable and accrued expenses to related parties and affiliates | |
| 6,551 | |
| 6,955 |
Convertible notes, net | |
| 1,858 | |
| 135 |
Notes payable, net | |
| 8,403 | |
| 15,403 |
Contingent payable derivative liability | | | 8,706 | | | 8,668 |
Warrant liability | |
| 1,083 | |
| 80,559 |
Investor advances | | | 609 | | | 2,566 |
Share liability | | | 223 | | | 678 |
Lease liabilities | | | 385 | | | 354 |
Total current liabilities | |
| 39,925 | |
| 126,005 |
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Non-current liabilities: | |
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| |
Notes payable, net of current portion, net | |
| 15,743 | |
| 5,991 |
Lease liabilities, net of current portion | | | 4,369 | | | 4,370 |
Contingent payment obligation | | | 4,050 | | | — |
Total non-current liabilities | |
| 24,162 | |
| 10,361 |
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Total liabilities | |
| 64,087 | |
| 136,366 |
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COMMITMENTS AND CONTINGENCIES (Note 12) | |
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Mezzanine equity: | | | | | | |
Series C Convertible Preferred Stock, 10,000,000 shares designated; 1.5 million and 1.4 million shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively; aggregate liquidation preference of $23.7 million | | | 25,385 | | | 23,060 |
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Stockholders’ deficit: | |
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Preferred stock ($0.001 par value); 100,000,000 shares authorized as of June 30, 2023 and December 31, 2022, respectively | | | — | | | — |
Common stock ($0.001 par value); 1,700,000,000 shares authorized; 1,115.2 million and 1,068.4 million shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively | |
| 1,115 | |
| 1,068 |
Additional paid-in capital | |
| 1,258,259 | |
| 1,164,885 |
Stock subscription receivable | |
| (79) | |
| (79) |
Accumulated deficit | |
| (1,322,222) | |
| (1,297,122) |
Accumulated other comprehensive income | |
| 1,893 | |
| 3,145 |
Total stockholders’ deficit | |
| (61,034) | |
| (128,103) |
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TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ DEFICIT | | $ | 28,438 | | $ | 31,323 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statementsstatements.
3
NORTHWEST BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except per share amounts)
(Unaudited)
| | | | | | | | | | | | |
| | For the three months ended | | For the six months ended | ||||||||
| | June 30, | | June 30, | ||||||||
| | 2022 | | 2021 |
| 2022 |
| 2021 | ||||
Revenues: | | | | | | | | | | | | |
Research and other | | $ | 477 | | $ | 416 | | $ | 880 | | $ | 655 |
Total revenues | | | 477 | | | 416 | | | 880 | | | 655 |
Operating costs and expenses: | | | | | | | | | | | | |
Research and development | | | 13,645 | | | 5,451 | | | 18,465 | | | 12,374 |
General and administrative | | | 7,931 | | | 7,372 | | | 15,800 | | | 20,258 |
Total operating costs and expenses | | | 21,576 | | | 12,823 | | | 34,265 | | | 32,632 |
Loss from operations | | | (21,099) | | | (12,407) | | | (33,385) | | | (31,977) |
Other income (expense): | | | | | | | | | | | | |
Change in fair value of derivative liabilities | | | (4,254) | | | 17,500 | | | (3,714) | | | 35,063 |
Gain (loss) from extinguishment of debt | | | (110) | | | (136) | | | 300 | | | (144) |
Interest expense | | | (1,432) | | | (807) | | | (3,335) | | | (2,254) |
Foreign currency transaction loss | | | (2,773) | | | 260 | | | (3,748) | | | (401) |
Total other income (loss) | | | (8,569) | | | 16,817 | | | (10,497) | | | 32,264 |
Net income (loss) | | $ | (29,668) | | $ | 4,410 | | $ | (43,882) | | $ | 287 |
| | | | | | | | | | | | |
Other comprehensive income (loss) | | | | | | | | | | | | |
Foreign currency translation adjustment | | | 2,375 | | | (274) | | | 3,183 | | | 350 |
Total comprehensive income (loss) | | $ | (27,293) | | $ | 4,136 | | $ | (40,699) | | $ | 637 |
| | | | | | | | | | | | |
Net earnings (loss) per share applicable to common stockholders | | | | | | | | | | | | |
Basic | | $ | (0.03) | | $ | 0.01 | | $ | (0.04) | | $ | 0.00 |
Diluted | | $ | (0.03) | | $ | (0.01) | | $ | (0.04) | | $ | (0.03) |
| | | | | | | | | | | | |
Weighted average shares used in computing basic earnings (loss) per share | | | 1,003,976 | | | 851,805 | | | 981,737 | | | 843,252 |
Weighted average shares used in computing diluted earnings (loss) per share | | | 1,003,976 | | | 1,159,076 | | | 981,737 | | | 1,147,423 |
| | | | | | | | | | | | |
| | For the three months ended | | For the six months ended | ||||||||
| | June 30, | | June 30, | ||||||||
|
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||
Revenues: | | | | | | | | | | | | |
Research and other | | $ | 201 | | $ | 477 | | $ | 1,081 | | $ | 880 |
Total revenues | | | 201 | | | 477 | | | 1,081 | | | 880 |
Operating costs and expenses: | | | | | | | | | | | | |
Research and development | | | 6,214 | | | 13,645 | | | 13,075 | | | 18,465 |
General and administrative | | | 7,564 | | | 7,931 | | | 14,547 | | | 15,800 |
Total operating costs and expenses | | | 13,778 | | | 21,576 | | | 27,622 | | | 34,265 |
Loss from operations | | | (13,577) | | | (21,099) | | | (26,541) | | | (33,385) |
Other income (expense): | | | | | | | | | | | | |
Change in fair value of derivative liabilities | | | 107 | | | (4,254) | | | 3,987 | | | (3,714) |
Change in fair value of share liabilities | | | 99 | | | — | | | 47 | | | — |
(Loss) gain from extinguishment of debt | | | (472) | | | (110) | | | (1,880) | | | 300 |
Interest expense | | | (1,302) | | | (1,432) | | | (2,329) | | | (3,335) |
Foreign currency transaction gain (loss) | | | 697 | | | (2,773) | | | 1,616 | | | (3,748) |
Total other income (loss) | | | (871) | | | (8,569) | | | 1,441 | | | (10,497) |
Net loss | | | (14,448) | | | (29,668) | | | (25,100) | | | (43,882) |
Deemed dividend related to warrant modification | | | (519) | | | — | | | (914) | | | — |
Net loss attributable to common stockholders | | $ | (14,967) | | $ | (29,668) | | $ | (26,014) | | $ | (43,882) |
| | | | | | | | | | | | |
Other comprehensive income (loss) | | | | | | | | | | | | |
Foreign currency translation adjustment | | | (502) | | | 2,375 | | | (1,252) | | | 3,183 |
Total comprehensive loss | | $ | (15,469) | | $ | (27,293) | | $ | (27,266) | | $ | (40,699) |
| | | | | | | | | | | | |
Net loss per share applicable to common stockholders | | | | | | | | | | | | |
Basic | | $ | (0.01) | | $ | (0.01) | | $ | (0.02) | | $ | 0.21 |
Diluted | | $ | (0.01) | | $ | (0.01) | | $ | (0.02) | | $ | (0.06) |
| | | | | | | | | | | | |
Weighted average shares used in computing basic loss per share | | | 1,108,420 | | | 1,003,976 | | | 1,091,754 | | | 981,737 |
Weighted average shares used in computing diluted loss per share | | | 1,108,420 | | | 1,003,976 | | | 1,091,754 | | | 981,737 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
NORTHWEST BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(in thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | |
| | For the Three Months Ended June 30, 2022 | ||||||||||||||||||
| | | | | | | | | | | | | | | | Accumulated | | | | |
| | | | | | | Additional | | | | | | | | Other | | Total | |||
| | Common Stock | | Paid-in | | Subscription | | Accumulated | | Comprehensive | | Stockholders’ | ||||||||
|
| Shares |
| Par value |
| Capital |
| Receivable |
| Deficit |
| Income |
| Deficit | ||||||
Balances at April 1, 2022 |
| 969,697 | | $ | 970 |
| $ | 1,083,723 |
| $ | (79) | | $ | (1,206,304) |
| $ | 1,165 | | $ | (120,525) |
Issuance of common stock for cash | | 8,584 | | | 8 | | | 6,317 | | | — | | | — | | | — | | | 6,325 |
Warrants exercised for cash |
| 23,747 | | | 24 | | | 5,347 | | | — | | | — | | | — | | | 5,371 |
Reclassification of warrant liabilities related to warrants exercised for cash |
| — | | | — | | | 11,973 | | | — | | | — | | | — | | | 11,973 |
Cashless warrants and stock options exercise | | 28,877 | | | 29 | | | (29) | | | — | | | — | | | — | | | — |
Reclassification of warrant liabilities related to cashless warrants exercise | | — | | | — | | | 25,375 | | | — | | | — | | | — | | | 25,375 |
Issuance of common stock conversion of debt and accrued interest | | 2,070 | | | 2 | | | 1,343 | | | — | | | — | | | — | | | 1,345 |
Stock-based compensation | | 1,500 | | | 1 | | | 5,762 | | | — | | | — | | | — | | | 5,763 |
Net loss | | — | | | — | | | — | | | — | | | (29,668) | | | — | | | (29,668) |
Cumulative translation adjustment |
| — | | | — |
| | — |
| | — | | | — |
| | 2,375 | | | 2,375 |
Balances at June 30, 2022 |
| 1,034,475 | | $ | 1,034 | | $ | 1,139,811 | | $ | (79) | | $ | (1,235,972) | | $ | 3,540 | | $ | (91,666) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
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| For the Three Months Ended June 30, 2023 | ||||||||||||||||||||||||
| | Mezzanine equity | | | | | | | | | | | | | | | | | Accumulated | | | | ||||
| | Series C Convertible | | | | | | | | Additional | | | | | | | | Other | | Total | ||||||
| | Preferred Stock | | | Common Stock | | Paid-in | | Subscription | | Accumulated | | Comprehensive | | Stockholders' | |||||||||||
| | Shares | | Amount |
|
| Shares |
| Par value |
| Capital |
| Receivable |
| Deficit |
| Income |
| Deficit | |||||||
Balances at April 1, 2023 |
| 1,416 |
| $ | 23,752 | |
| 1,083,084 | | $ | 1,083 | | $ | 1,248,397 | | $ | (79) | | $ | (1,307,774) | | $ | 2,395 | | $ | (55,978) |
Issuance of Series C convertible preferred stock for cash |
| 176 | |
| 2,371 | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — |
Issuance of Series C convertible preferred stock in lieu of debt redemption |
| 13 | |
| 207 | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — |
Series C convertible preferred stock conversion |
| (59) | |
| (945) | |
| 1,484 | |
| 2 | |
| 943 | |
| — | |
| — | |
| — | |
| 945 |
Warrants exercised for cash |
| — | |
| — | |
| 11,553 | |
| 11 | |
| 2,510 | |
| — | |
| — | |
| — | |
| 2,521 |
Cashless warrants and stock options exercise |
| — | |
| — | |
| 9,169 | |
| 9 | |
| (9) | |
| — | |
| — | |
| — | |
| — |
Issuance of common stock for conversion of debt and accrued interest |
| — | |
| — | |
| 6,893 | |
| 7 | |
| 3,941 | |
| — | |
| — | |
| — | |
| 3,948 |
Stock-based compensation |
| — | |
| — | |
| 3,000 | |
| 3 | |
| 187 | |
| — | |
| — | |
| — | |
| 190 |
Reclass issued milestone shares from liability to equity |
| — | |
| — | |
| — | |
| — | |
| 2,130 | |
| — | |
| — | |
| — | |
| 2,130 |
Net loss |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| (14,448) | |
| — | |
| (14,448) |
Warrants modification |
| — | |
| — | |
| — | |
| — | |
| 679 | |
| — | |
| — | |
| — | |
| 679 |
Deemed dividend related to warrants modification |
| — | |
| — | |
| — | |
| — | |
| (519) | |
| — | |
| — | |
| — | |
| (519) |
Cumulative translation adjustment |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| (502) | |
| (502) |
Balances at June 30, 2023 |
| 1,546 | | $ | 25,385 | |
| 1,115,183 | | $ | 1,115 | | $ | 1,258,259 | | $ | (79) | | $ | (1,322,222) | | $ | 1,893 | | $ | (61,034) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the Three Months Ended June 30, 2021 |
| For the Three Months Ended June 30, 2022 | ||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | Accumulated | | | | | | | | | | | | | | | | | | | Accumulated | | | | ||
| | | | | | | Additional | | | | | | | | Other | | Total | | | | | | | Additional | | | | | | | | Other | | Total | ||||||
| | Common Stock | | Paid-in | | Subscription | | Accumulated | | Comprehensive | | Stockholders’ | | Common Stock | | Paid-in | | Subscription | | Accumulated | | Comprehensive | | Stockholders' | ||||||||||||||||
|
| Shares |
| Par value |
| Capital |
| Receivable |
| Deficit |
| Income (Loss) |
| Deficit |
| Shares |
| Par value |
| Capital |
| Receivable |
| Deficit |
| Income |
| Deficit | ||||||||||||
Balance at April 1, 2021 | | 842,358 | | $ | 842 | | $ | 1,021,900 | | $ | (79) | | $ | (1,375,339) | | $ | (524) | | $ | (353,200) | ||||||||||||||||||||
Issuance of common stock and warrants for conversion of debt and accrued interest | | 612 | | | 1 | | | 880 | | | — | | | — | | | — | | | 881 | ||||||||||||||||||||
Warrants and stock options exercised for cash |
| 13,326 |
| | 13 |
| | 3,315 |
| | — |
| | — |
| | — |
| | 3,328 | ||||||||||||||||||||
Balances at April 1, 2022 |
| 969,697 | | $ | 970 | | $ | 1,083,723 | | $ | (79) | | $ | (1,206,304) | | $ | 1,165 | | $ | (120,525) | ||||||||||||||||||||
Issuance of common stock for cash |
| 8,584 | |
| 8 | |
| 6,317 | |
| — | |
| — | |
| — | |
| 6,325 | ||||||||||||||||||||
Warrants exercised for cash |
| 23,747 | |
| 24 | |
| 5,347 | |
| — | |
| — | |
| — | |
| 5,371 | ||||||||||||||||||||
Reclassification of warrant liabilities related to warrants exercised for cash | | — | | | — | | | 8,459 | | | — | | | — | | | — | | | 8,459 |
| — | |
| — | |
| 11,973 | |
| — | |
| — | |
| — | |
| 11,973 |
Cashless warrants and stock options exercise | | 934 | | | 1 | | | (1) | | | — | | | — | | | — | | | — |
| 28,877 | |
| 29 | |
| (29) | |
| — | |
| — | |
| — | |
| — |
Reclassification of warrant liabilities related to cashless warrants exercise | | — | | | — | | | 1,446 | | | — | | | — | | | — | | | 1,446 |
| — | |
| — | |
| 25,375 | |
| — | |
| — | |
| — | |
| 25,375 |
Issuance of common stock conversion of debt and accrued interest |
| 2,070 | |
| 2 | |
| 1,343 | |
| — | |
| — | |
| — | |
| 1,345 | ||||||||||||||||||||
Stock-based compensation | | — | | | — | | | 3,551 | | | — | | | — | | | — | | | 3,551 |
| 1,500 | |
| 1 | |
| 5,762 | |
| — | |
| — | |
| — | |
| 5,763 |
Reclassification of warrant liabilities based on authorized shares |
| — |
| | — |
| | (18,443) |
| | — |
| | — |
| | — |
| | (18,443) | ||||||||||||||||||||
Net income | | — | | | — | | | — | | | — | | | 4,410 | | | — | | | 4,410 | ||||||||||||||||||||
Net loss |
| — | |
| — | |
| — | |
| — | |
| (29,668) | |
| — | |
| (29,668) | ||||||||||||||||||||
Cumulative translation adjustment |
| — |
| | — |
| | — |
| | — |
| | — |
| | (274) |
| | (274) |
| — | |
| — | |
| — | |
| — | |
| — | |
| 2,375 | |
| 2,375 |
Balance at June 30, 2021 |
| 857,230 | | $ | 857 | | $ | 1,021,107 | | $ | (79) | | $ | (1,370,929) | | $ | (798) | | $ | (349,842) | ||||||||||||||||||||
Balances at June 30, 2022 |
| 1,034,475 | | $ | 1,034 | | $ | 1,139,811 | | $ | (79) | | $ | (1,235,972) | | $ | 3,540 | | $ | (91,666) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statementsstatements.
5
NORTHWEST BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(in thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | |
| | For the Six Months Ended June 30, 2022 | ||||||||||||||||||
| | | | | | | | | | | | | | | | Accumulated | | | | |
| | | | ��� | | | Additional | | | | | | | | Other | | Total | |||
| | Common Stock | | Paid-in | | Subscription | | Accumulated | | Comprehensive | | Stockholders’ | ||||||||
|
| Shares |
| Par value |
| Capital |
| Receivable |
| Deficit |
| Income |
| Deficit | ||||||
Balances at January 1, 2022 | | 948,445 | | $ | 948 | | $ | 1,066,873 | | $ | (79) | | $ | (1,192,090) | | $ | 357 | | $ | (123,991) |
Issuance of common stock for cash | | 13,137 | | | 13 | | | 9,676 | | | — | | | — | | | — | | | 9,689 |
Warrants exercised for cash |
| 39,003 |
| | 39 |
| | 9,517 |
| | — |
| | — |
| | — |
| | 9,556 |
Reclassification of warrant liabilities related to warrants exercised for cash |
| — |
| | — |
| | 19,688 |
| | — |
| | — |
| | — |
| | 19,688 |
Cashless warrants and stock options exercise | | 28,903 | | | 29 | | | (29) | | | — | | | — | | | — | | | — |
Reclassification of warrant liabilities related to cashless warrants exercise | | — | | | — | | | 25,379 | | | — | | | — | | | — | | | 25,379 |
Issuance of common stock conversion of debt and accrued interest |
| 3,482 |
| | 4 |
| | 2,328 |
| | — |
| | — |
| | — |
| | 2,332 |
Stock-based compensation |
| 1,505 |
| | 1 |
| | 6,379 |
| | — |
| | — |
| | — |
| | 6,380 |
Net loss |
| — |
| | — |
| | — |
| | — |
| | (43,882) |
| | — |
| | (43,882) |
Cumulative translation adjustment |
| — |
| | — |
| | — |
| | — |
| | — |
| | 3,183 |
| | 3,183 |
Balances at June 30, 2022 |
| 1,034,475 | | $ | 1,034 | | $ | 1,139,811 | | $ | (79) | | $ | (1,235,972) | | $ | 3,540 | | $ | (91,666) |
| | | | | | | | | | | | | | | | | | | | |
| | For the Six Months Ended June 30, 2021 | ||||||||||||||||||
| | | | | | | | | | | | | | | | Accumulated | | | | |
| | | | | | | Additional | | | | | | | | Other | | Total | |||
| | Common Stock | | Paid-in | | Subscription | | Accumulated | | Comprehensive | | Stockholders’ | ||||||||
|
| Shares |
| Par value |
| Capital |
| Receivable |
| Deficit |
| Income (Loss) |
| Deficit | ||||||
Balance at January 1, 2021 | | 829,631 | | $ | 830 | | $ | 1,008,665 | | $ | (79) | | $ | (1,371,216) | | $ | (1,148) | | $ | (362,948) |
Issuance of common stock for cash | | 69 | | | — | | | 16 | | | — | | | — | | | — | | | 16 |
Issuance of common stock and warrants for conversion of debt and accrued interest |
| 5,145 |
| | 5 |
| | 7,495 |
| | — |
| | — |
| | — |
| | 7,500 |
Warrants and stock options exercised for cash |
| 16,198 | | | 16 | | | 4,057 | | | — | | | — | | | — | | | 4,073 |
Reclassification of warrant liabilities related to warrants exercised for cash |
| — |
| | — |
| | 11,394 |
| | — |
| | — |
| | — |
| | 11,394 |
Cashless warrants and stock options exercise | | 6,139 | | | 6 | | | (6) | | | — | | | — | | | — | | | — |
Reclassification of warrant liabilities related to cashless warrants exercise |
| — |
| | — |
| | 1,592 |
| | — |
| | — |
| | — |
| | 1,592 |
Stock-based compensation | | 48 | | | — | | | 13,442 | | | — | | | — | | | — | | | 13,442 |
Reclassification of warrant liabilities based on authorized shares | | — | | | — | | | (25,548) | | | — | | | — | | | — | | | (25,548) |
Net income |
| — |
| | — |
| | — |
| | — |
| | 287 |
| | — |
| | 287 |
Cumulative translation adjustment |
| — |
| | — |
| | — |
| | — |
| | — |
| | 350 |
| | 350 |
Balance at June 30, 2021 |
| 857,230 | | $ | 857 | | $ | 1,021,107 | | $ | (79) | | $ | (1,370,929) | | $ | (798) | | $ | (349,842) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the Six Months Ended June 30, 2023 | ||||||||||||||||||||||||
| | Mezzanine equity | | | | | | | | | | | | | | | | | Accumulated | | | | ||||
| | Series C Convertible | | | | | | | | Additional | | | | | | | | Other | | Total | ||||||
| | Preferred Stock | | | Common Stock | | Paid-in | | Subscription | | Accumulated | | Comprehensive | | Stockholders’ | |||||||||||
|
| Shares |
| Amount |
|
| Shares |
| Par value |
| Capital |
| Receivable |
| Deficit |
| Income |
| Deficit | |||||||
Balances at January 1, 2023 |
| 1,415 | | $ | 23,060 | | | 1,068,394 | | $ | 1,068 |
| $ | 1,164,885 |
| $ | (79) | | $ | (1,297,122) |
| $ | 3,145 | | $ | (128,103) |
Issuance of Series C convertible preferred stock for cash | | 324 | | | 4,756 | | | — | | | — | | | — | | | — | | | — | | | — | | | — |
Issuance of Series C convertible preferred stock in lieu of debt redemption |
| 56 | | | 1,013 | | | — | | | — | | | — | | | — | | | — | | | — | | | — |
Series C convertible preferred stock conversion |
| (257) | | | (3,562) | | | 6,430 | | | 7 | | | 3,555 | | | — | | | — | | | — | | | 3,562 |
Warrants exercised for cash | | — | | | — | | | 12,320 | | | 12 | | | 2,757 | | | — | | | — | | | — | | | 2,769 |
Cashless warrants and stock options exercise | | — | | | — | | | 9,879 | | | 10 | | | (10) | | | — | | | — | | | — | | | — |
Reclassification of warrant liabilities to stockholders’ deficit | | — | | | — | | | — | | | — | | | 76,258 | | | — | | | — | | | — | | | 76,258 |
Issuance of common stock for conversion of debt and accrued interest | | — | | | — | | | 15,160 | | | 15 | | | 9,549 | | | — | | | — | | | — | | | 9,564 |
Stock-based compensation | | 8 | | | 118 | | | 3,000 | | | 3 | | | 1,105 | | | — | | | — | | | — | | | 1,108 |
Net loss |
| — | | | — | | | — | | | — |
| | — |
| | — | | | (25,100) |
| | — | | | (25,100) |
Warrants modification |
| — | | | — | | | — | | | — | | | 1,074 | | | — | | | — | | | — | | | 1,074 |
Deemed dividend related to warrants modification |
| — | | | — | | | — | | | — | | | (914) | | | — | | | — | | | — | | | (914) |
Cumulative translation adjustment |
| — | | | — | | | — | | | — |
| | — |
| | — | | | — |
| | (1,252) | | | (1,252) |
Balances at June 30, 2023 |
| 1,546 | | $ | 25,385 | | | 1,115,183 | | $ | 1,115 | | $ | 1,258,259 | | $ | (79) | | $ | (1,322,222) | | $ | 1,893 | | $ | (61,034) |
| | | | | | | | | | | | | | | | | | | | |
| | For the Six Months Ended June 30, 2022 | ||||||||||||||||||
| | | | | | | | | | | | | | | | Accumulated | | | | |
| | | | | | | Additional | | | | | | | | Other | | Total | |||
| | Common Stock | | Paid-in | | Subscription | | Accumulated | | Comprehensive | | Stockholders’ | ||||||||
|
| Shares |
| Par value |
| Capital |
| Receivable |
| Deficit |
| Income |
| Deficit | ||||||
Balances at January 1, 2022 | | 948,445 | | $ | 948 | | $ | 1,066,873 | | $ | (79) | | $ | (1,192,090) | | $ | 357 | | $ | (123,991) |
Issuance of common stock for cash |
| 13,137 | | | 13 | | | 9,676 |
| | — |
| | — |
| | — |
| | 9,689 |
Warrants exercised for cash | | 39,003 | | | 39 | | | 9,517 | | | — | | | — | | | — | | | 9,556 |
Reclassification of warrant liabilities related to warrants exercised for cash | | — | | | — | | | 19,688 | | | — | | | — | | | — | | | 19,688 |
Cashless warrants and stock options exercise | | 28,903 | | | 29 | | | (29) | | | — | | | — | | | — | | | — |
Reclassification of warrant liabilities related to cashless warrants exercise | | — | | | — | | | 25,379 | | | — | | | — | | | — | | | 25,379 |
Issuance of common stock conversion of debt and accrued interest | | 3,482 | | | 4 | | | 2,328 | | | — | | | — | | | — | | | 2,332 |
Stock-based compensation |
| 1,505 | | | 1 | | | 6,379 |
| | — |
| | — |
| | — |
| | 6,380 |
Net loss | | — | | | — | | | — | | | — | | | (43,882) | | | — | | | (43,882) |
Cumulative translation adjustment |
| — | | | — | | | — |
| | — |
| | — |
| | 3,183 |
| | 3,183 |
Balances at June 30, 2022 |
| 1,034,475 | | $ | 1,034 | | $ | 1,139,811 | | $ | (79) | | $ | (1,235,972) | | $ | 3,540 | | $ | (91,666) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
NORTHWEST BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
| | | | | | |
| | For the six months ended | ||||
| | June 30, | ||||
|
| 2022 |
| 2021 | ||
Cash Flows from Operating Activities: | | | | | | |
Net income (loss) | | $ | (43,882) | | $ | 287 |
Reconciliation of net loss to net cash used in operating activities: | | | | | | |
Depreciation and amortization | | | 624 | | | 145 |
Amortization of debt discount | | | 1,509 | | | 1,357 |
Change in fair value of derivatives | | | 3,714 | | | (35,063) |
(Gain) loss from extinguishment of debt | | | (300) | | | 144 |
Amortization of operating lease right-of-use asset | | | 121 | | | 149 |
Stock-based compensation for services | | | 6,380 | | | 13,369 |
Subtotal of non-cash charges | | | 12,048 | | | (19,899) |
Changes in operating assets and liabilities: | | | | | | |
Prepaid expenses and other current assets | | | (286) | | | 992 |
Other non-current assets | | | 660 | | | (218) |
Accounts payable and accrued expenses | | | 1,533 | | | 1,424 |
Related party accounts payable and accrued expenses | | | 2,056 | | | (2,645) |
Lease liabilities | | | 63 | | | 19 |
Net cash used in operating activities | | | (27,808) | | | (20,040) |
Cash Flows from Investing Activities: | | | | | | |
Purchase of equipment and construction in progress | | | (466) | | | (1,771) |
Net cash used in investing activities | | | (466) | | | (1,771) |
Cash Flows from Financing Activities: | | | | | | |
Proceeds from issuance of common stock, net | | | 9,465 | | | 16 |
Proceeds from exercise of warrants and stock options | | | 9,556 | | | 4,073 |
Proceeds from issuance of notes payable, net | | | 600 | | | 12,288 |
Repayment of notes payable | | | (5,290) | | | (835) |
Net cash provided by financing activities | | | 14,331 | | | 15,542 |
Effect of exchange rate changes on cash and cash equivalents | | | 3,605 | | | 44 |
Net decrease in cash and cash equivalents | | | (10,338) | | | (6,225) |
| | | | | | |
Cash and cash equivalents, beginning of the period | | | 15,169 | | | 9,983 |
Cash and cash equivalents, end of the period | | $ | 4,831 | | $ | 3,758 |
| | | | | | |
Supplemental disclosure of cash flow information | | | | | | |
Interest payments on notes payable | | $ | (876) | | $ | (174) |
| | | | | | |
| | For the six months ended | ||||
| | June 30, | ||||
|
| 2023 |
| 2022 | ||
Cash Flows from Operating Activities: |
| | | | | |
Net loss | | $ | (25,100) | | $ | (43,882) |
Reconciliation of net loss to net cash used in operating activities: | | | | | | |
Depreciation and amortization | | | 685 | | | 624 |
Amortization of debt discount | | | 1,276 | | | 1,509 |
Change in fair value of derivatives | | | (3,987) | | | 3,714 |
Change in fair value of share liability | | | (47) | | | — |
Loss (gain) from extinguishment of debt | | | 1,880 | | | (300) |
Amortization of operating lease right-of-use asset | | | 138 | | | 121 |
Stock-based compensation for services | | | 1,211 | | | 6,380 |
Subtotal of non-cash charges | | | 1,156 | | | 12,048 |
Changes in operating assets and liabilities: | | | | | | |
Prepaid expenses and other current assets | | | (681) | | | (286) |
Other non-current assets | | | (14) | | | 660 |
Accounts payable and accrued expenses | | | 2,206 | | | 1,533 |
Related party accounts payable and accrued expenses | | | (404) | | | 2,056 |
Lease liabilities | | | 77 | | | 63 |
Net cash used in operating activities | | | (22,760) | | | (27,808) |
Cash Flows from Investing Activities: | | | | | | |
Purchase of equipment and construction in progress | | | (2,582) | | | (466) |
Net cash used in investing activities | | | (2,582) | | | (466) |
Cash Flows from Financing Activities: | | | | | | |
Proceeds from issuance of Series C convertible preferred stock | | | 4,756 | | | — |
Proceeds from issuance of common stock | | | — | | | 9,465 |
Proceeds from exercise of warrants | | | 1,566 | | | 9,556 |
Proceeds from investor advance | | | 7 | | | — |
Proceeds from issuance of notes payable, net | | | 10,000 | | | 600 |
Proceeds from issuance of convertible notes payable, net | | | 1,149 | | | — |
Proceeds from contingent payment obligation | | | 4,050 | | | — |
Repayment of notes payable | | | (208) | | | (5,290) |
Repayment of investor advances | | | (100) | | | — |
Net cash provided by financing activities | | | 21,220 | | | 14,331 |
Effect of exchange rate changes on cash and cash equivalents | | | (1,419) | | | 3,605 |
Net decrease in cash and cash equivalents | | | (5,541) | | | (10,338) |
| | | | | | |
Cash and cash equivalents, beginning of the period | | | 6,965 | | | 15,169 |
Cash and cash equivalents, end of the period | | $ | 1,424 | | $ | 4,831 |
| | | | | | |
Supplemental disclosure of cash flow information | | | | | | |
Interest payments on notes payable | | $ | (30) | | $ | (876) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.statements
7
NORTHWEST BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
| | | | | | | |
| | For the six months ended | | ||||
| | June 30, | | ||||
|
| 2022 |
| 2021 |
| ||
Supplemental schedule of non-cash investing and financing activities: |
| |
|
| | | |
Cashless warrants and stock options exercise | | $ | 29 | | $ | 6 | |
Reclassification of warrant liabilities related to warrants exercised for cash | | $ | 19,688 | | $ | 11,394 | |
Reclassification of warrant liabilities related to cashless warrants exercise | | $ | 25,379 | | $ | 1,592 | |
Reclassification of warrant liabilities based on authorized shares | | $ | — | | $ | 25,548 | |
Issuance of common stock and warrants for conversion of debt and accrued interest | | $ | 2,229 | | $ | 7,487 | |
Reclassification between shares payable and equity | | $ | 250 | | $ | — | |
Capital expenditures included in accounts payable | | $ | 49 | | $ | 592 | |
| | | | | | |
| | For the six months ended | ||||
| | June 30, | ||||
|
| 2023 |
| 2022 | ||
Supplemental schedule of non-cash investing and financing activities: |
| |
|
| | |
Cashless warrants and stock options exercise | | $ | 10 | | $ | 29 |
Reclassification of warrant liabilities related to warrants exercised for cash | | $ | — | | $ | 19,688 |
Reclassification of warrant liabilities to stockholders’ deficit | | $ | 76,258 | | $ | — |
Reclassification of warrant liabilities related to cashless warrants exercise | | $ | — | | $ | 25,379 |
Reclassification of investor advances to convertible notes payable | | $ | 661 | | $ | — |
Reclassification of investor advances to stockholders' deficit | | $ | 1,203 | | $ | — |
Issuance of common stock for conversion of debt and accrued interest | | $ | 9,564 | | $ | 2,229 |
Issuance of Series C convertible preferred stock in lieu of debt redemption | | $ | 1,013 | | $ | — |
Series C convertible preferred stock conversion | | $ | 3,562 | | $ | — |
Capital expenditures included in accounts payable | | $ | 266 | | $ | 49 |
Reclassification between shares payable and equity | | $ | — | | $ | 250 |
Deemed dividend related to warrant modification | | $ | 914 | | $ | — |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8
1. Organization and Description of Business
Northwest Biotherapeutics, Inc. and its wholly owned subsidiaries Flaskworks, L.L.C.Northwest Biotherapeutics Limited (formerly known as Aracaris Ltd), Aracaris Capital, Ltd, Northwest Biotherapeutics B.V., and NW Bio GmbH Aracaris Ltd, Aracaris Capital, Ltd, and Northwest Biotherapeutics B.V. (collectively, the “Company”, “we”, “us” and “our”) were organized to discover and develop innovative immunotherapies for cancer. The Company has developed DCVax® platform technologies for both operable and inoperable solid tumor cancers. The Company is headquartered in Bethesda, Maryland and has wholly owned subsidiaries in Boston, the U.K., in the Netherlands and in Boston, Massachusetts.Germany. On August 28, 2020, the Company acquired Flaskworks, LLC (“Flaskworks”), a company that has developed a system designed to close and automate the manufacturing of cell therapy products such as DCVax®. On July 24, 2023, the Company’s wholly-owned subsidiary changed its name from Aracaris Ltd to Northwest Biotherapeutics Limited.
The Company relies upon contract manufacturers for production of its DCVax products, research and development services, distribution and logistics, and related services, in compliance with the Company’s specifications and the applicable regulatory requirements.
The Company has completed a Phase 3 clinical trial of its DCVax®-L product for glioblastoma brain cancer, has publicly reported the results in a peer reviewed publication in a medical journal as well as at a medical conference, and is working on prerequisites and preparations for filing an application for regulatory approval of the product.
2. Financial Condition, Going Concern and Management Plans
The Company has incurred annual net operating losses since its inception. The Company had a net loss of $43.9$25.1 million for the six months ended June 30, 2022.2023. The Company used approximately $27.8$22.8 million of cash in its operating activities during the six months ended June 30, 2022.2023.
The Company does not expect to generate material revenue in the near future from the sale of products and is subject to all of the risks and uncertainties that are typically faced by biotechnology companies that devote substantially all of their efforts to research and development (“R&D”) and clinical trials and do not yet have commercial products. The Company expects to continue incurring annual losses for the foreseeable future. The Company’s existing liquidity is not sufficient to fund its operations, anticipated capital expenditures, working capital and other financing requirements until the Company reaches significant revenues. Until that time, the Company will need to obtain additional equity and/or debt financing, especially if the Company experiences downturns in its business that are more severe or longer than anticipated, or if the Company experiences significant increases in expense levels resulting from being a publicly-traded company or from expansion of operations. If the Company attempts to obtain additional equity or debt financing, the Company cannot assume that such financing will be available to the Company on favorable terms, or at all.
Because of recurring operating losses and operating cash flow deficits, there is substantial doubt about the Company’s ability to continue as a going concern withinfor at least one year from the date of this filing. The condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, andhowever, they do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets, or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
As previously reported, coronavirus-related difficulties have impacted most aspects of the database lock and the process of analyzing the Phase III trial results, especially with the successive waves of COVID-19 cases in many areas. The independent service firms have had limited capacity, and restrictions on operations. Key experts at certain specialized service providers have been unavailable for periods of time due to illness in their family. Other experts have gone on extended leave due to restrictions on operations. Clinical trial sites have not allowed personnel from the contract research organization managing the trial, or other service providers, to visit the sites for trial matters such as data monitoring and collection activities. Clinical trial site personnel have been unavailable due to being reassigned for COVID-19, and the limited site personnel have had to work under restrictions. Committee processes and regulatory processes have been similarly focused on COVID-19 matters and delayed on other matters. Firms such as the ones storing the Phase III trial tissue samples that are needed for certain analyses, and the firms conducting the analyses have had only limited operations. Even logistical matters such as the shipping of materials have been subjected to substantial restrictions and delays.
3. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated interim financial statements include the accounts of the Company and its subsidiaries. All material intercompany balances and transactions have been eliminated. Certain immaterial reclassifications have been made to prior period amounts to conform to the current period presentation.
9
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”) and on the same basis as the Company preparesuses to prepare its annual audited consolidated financial statements. The condensed consolidated balance sheet as of June 30, 2022,2023, condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2023 and 2022, condensed consolidated statement of stockholders’ deficit for the three and six months ended June 30, 20222023 and 2021,2022, and the condensed consolidated statements of cash flows for the six months ended June 30, 20222023 and 20212022 are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which the Company considers necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The results for the three and six months ended June 30, 20222023 are not necessarily indicative of results to be expected for the year ending December 31, 20222023 or for any future interim period. The condensed consolidated balance sheet at December 31, 20212022 has been derived from audited financial statements; however, it does not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 20212022 and notes thereto included in the Company’s annual report on Form 10-K (the “2021“2022 Annual Report”), which was filed with the SEC on March 1, 2022.February 28, 2023.
Use of Estimates
In preparing condensed consolidated financial statements in conformity with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of expenses during the reporting period. Due to inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in these estimates.
On an ongoing basis, the Company evaluates its estimates and judgments, including valuing equity securities in share-based payment arrangements, estimating the fair value of financial instruments recorded as derivative liabilities, useful lives of depreciable assets, and whether impairment charges may apply. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the reported amounts of revenues and expenses that are not readily apparent from other sources. Actual results could differ from those estimates, particularly given the significant social and economic disruptions and uncertainties associated with the ongoing coronavirus pandemic (“COVID-19”) and the COVID-19 control responses.
Significant Accounting Policies
There have been no material changes in the Company’s significant accounting policies tofrom those previously disclosed in the 20212022 Annual Report.Report other than those discussed below.
Recently Adopted Accounting StandardsSequencing
Modifications or ExchangesThe Company adopted a sequencing policy under ASC 815-40-35 to determine if reclassification of Freestanding Equity-Classified Written Call Options
In May 2021,contracts from equity to liabilities is necessary pursuant to ASC 815 due to the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40). This ASU reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equityCompany’s inability to demonstrate it has sufficient authorized shares. Certain contracts were classified after modification or exchange. This ASU provides guidance for a modification or an exchange of a freestanding equity-classified written call option that is not withinas liabilities as the scope of another Topic. It specifically addresses: (1) how an entity should treat a modificationresult of the terms or conditions or an exchangeinstruments containing a potentially indeterminable number of a freestanding equity-classified written call option that remains equityshares and, most recently, due to the Company entering into agreements providing for the potential issuance of more shares than authorized. While temporary suspensions are in place to keep the potential exercises beneath the number authorized, certain instruments are classified as liabilities, after modification or exchange; (2) how an entity should measureallocating available authorized shares on the effectbasis of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange; and (3) how an entity should recognize the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange. This ASU will be effective for all entities for fiscal years beginning after December 15, 2021. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effectiveearliest grant date of potentially dilutive instruments. Pursuant to ASC 815, issuance of stock-based awards to the amendments. Early adoption is permitted, including adoption in an interim period. Company’s employees, nonemployees or directors are not subject to the sequencing policy.
On January 1, 2022,9, 2023, the Company adopted this standard without any material impact onfiled a Certificate of Amendment of its Seventh Amended and Restated Certificate of Incorporation (the “Certificate of Amendment”) with the Secretary of the State of Delaware, which effected an increase in the Company’s financial statements or disclosures.authorized shares of common stock, from 1.2 billion to 1.7 billion, par value $0.001 per share. As a result of this increase in authorized shares, the liability-classified warrants were reclassified to equity. Approximately 141 million warrants, with a value of approximately $76.3 million, to purchase shares of the Company’s common stock were reclassified from liabilities to equity on January 9, 2023. The remaining balance of $1.1 million in warrant liability as of June 30, 2023 was related to certain conditional rights to independently purchase shares from the Company in a future raise of capital (the “Piggy-back Rights”).
10
RecentModification of Equity Classified Warrants
A change in the terms or conditions of a warrant is accounted for as a modification. For a warrant modification accounted for under ASC 815, the effect of a modification shall be measured as the difference between the fair value of the modified warrant and the fair value of the original warrant immediately before its terms are modified, with each measured on the modification date. The accounting for incremental fair value of the modified warrants over the original warrants is based on the specific facts and circumstances related to the modification. When a modification is directly attributable to an equity offering, the incremental change in fair value of the warrants is accounted for as an equity issuance cost. When a modification is directly attributable to a debt offering, the incremental change in fair value of the warrants is accounted for as a debt discount or debt issuance cost. For all other modifications, the incremental change in fair value is recognized as a deemed dividend.
Recently Issued Accounting Standards Not Yet Adopted
Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions
In June 2022, the FASB issued ASU 2022-03, ASC Subtopic 820 “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”. The FASB is issuing this Update (1) to clarify the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, (2) to amend a related illustrative example, and (3) to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820.
For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance.
The Company is still evaluating the impact of this pronouncement on the consolidated financial statements.
4. Fair Value Measurements
In accordance with ASC 820 (Fair Value Measurements and Disclosures), the Company uses various inputs to measure the fair value of liabilities related to certain outstanding warrants, and certain embedded conversion featurefeatures associated with convertible debt and the contingent payable to Cognate BioServices on a recurring basis to determine the fair value of the liability.these liabilities. ASC 820 also establishes a hierarchy categorizing inputs into three levels used to measure and disclose fair value. The hierarchy gives the highest priority to quoted prices available in active markets and the lowest priority to unobservable inputs. An explanation of each level in the hierarchy is described below:
Level 1 - Unadjusted quoted prices in active markets for identical instruments that are accessible by the Company on the measurement datedate.
Level 2 - Quoted prices in markets that are not active or inputs which are either directly or indirectly observableobservable.
Level 3 - Unobservable inputs for the instrument requiring the development of assumptions by the Company
The following table classifies the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy as of June 30, 2022 and December 31, 2021 (in thousands):
| | | | | | | | | | | | |
| | Fair value measured at June 30, 2022 | ||||||||||
|
| | |
| Quoted prices in active |
| Significant other |
| Significant | |||
|
| Fair value at | | markets | | observable inputs | | unobservable inputs | ||||
| | June 30, 2022 |
| (Level 1) |
| (Level 2) |
| (Level 3) | ||||
Warrant liability | | $ | 65,686 | | $ | 0 | | $ | 0 | | $ | 65,686 |
Embedded redemption option | | | 1,033 | | | 0 | | | 0 | | | 1,033 |
Contingent payable derivative liability | |
| 8,123 | |
| 0 | |
| 0 | |
| 8,123 |
Total fair value | | $ | 74,842 | | $ | 0 | | $ | 0 | | $ | 74,842 |
| | | | | | | | | | | | |
| | Fair value measured at December 31, 2021 | ||||||||||
|
| | |
| Quoted prices in active |
| Significant other |
| Significant | |||
| | Fair value at | | markets | | observable inputs | | unobservable inputs | ||||
|
| December 31, 2021 |
| (Level 1) |
| (Level 2) |
| (Level 3) | ||||
Warrant liability | | $ | 106,784 | | $ | 0 | | $ | 0 | | $ | 106,784 |
Embedded redemption option | |
| 988 | |
| 0 | |
| 0 | |
| 988 |
Contingent payable derivative liability |
| | 8,232 | |
| 0 | |
| 0 | |
| 8,232 |
Total fair value | | $ | 116,004 | | $ | 0 | | $ | 0 | | $ | 116,004 |
There were no transfers between Level 1, 2 or 3 during the six-month period ended June 30, 2022.Company.
11
The following table presents changes in Level 3 liabilities measured at fair value for the six-month period ended June 30, 2022. Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category. Unrealized gains and losses associated with liabilities within the Level 3 category include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long- dated volatilities) inputs (in thousands).
| | | | | | | | | | | | |
| | Warrant | | Embedded | | Contingent Payable | | | | |||
|
| Liability |
| Redemption Option |
| Derivative Liability |
| Total | ||||
Balance - January 1, 2022 | | $ | 106,784 | | $ | 988 | | $ | 8,232 | | $ | 116,004 |
Additional warrant liability | | | 184 | | | 7 | | | 0 | | | 191 |
Reclassification of warrant liabilities | | | (45,067) | | | 0 | | | 0 | | | (45,067) |
Change in fair value | | | 3,785 | | | 38 | | | (109) | | | 3,714 |
Balance – June 30, 2022 | | $ | 65,686 | | $ | 1,033 | | $ | 8,123 | | $ | 74,842 |
A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the Company’s warrant liabilities and embedded conversion feature that are categorized within Level 3 of the fair value hierarchy as of June 30, 2022 and December 31, 2021 is as follows:
| | | | | | | |
| | As of June 30, 2022 | | ||||
| | Warrant | | Contingent Payable | | ||
|
| Liability |
| Derivative Liability |
| ||
Strike price | | $ | 0.31 | | $ | 0.63 | * |
Contractual term (years) |
| | 1.4 |
| | 1.5 |
|
Volatility (annual) |
| | 82 | % | | 84 | % |
Risk-free rate |
| | 2.2 | % | | 2.7 | % |
Dividend yield (per share) |
| | 0 | % | | 0 | % |
| | | | | | | |
| | As of December 31, 2021 |
| ||||
|
| Warrant |
| Contingent Payable |
| ||
|
| Liability |
| Derivative Liability |
| ||
Strike price | | $ | 0.30 | | $ | 0.70 | * |
Contractual term (years) | |
| 1.0 | |
| 1.6 | |
Volatility (annual) | |
| 90 | % |
| 72 | % |
Risk-free rate | |
| 0.1 | % |
| 0.6 | % |
Dividend yield (per share) | |
| 0 | % |
| 0 | % |
5. Stock-based Compensation
The following table summarizes total amounts of stock-based compensation that were expensed during the three and six months ended June 30, 2022 and 2021 (in thousands). The related party amounts were for milestone incentives that are deemed probable to be achieved in the future and become payable at that time; only $0.5 million was paid during the three months ended June 30, 2022.
| | | | | | | | | | | | |
| | For the three months ended | | For the six months ended | ||||||||
| | June 30, | | June 30, | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
Research and development | | $ | 641 | | $ | 2,553 | | $ | 1,151 | | $ | 6,242 |
Research and development - related party | | | 5,340 | | | — | | | 5,340 | | | — |
General and administrative | |
| (218) | |
| 998 | |
| (111) | |
| 7,127 |
Total stock-based compensation expense | | $ | 5,763 | | $ | 3,551 | | $ | 6,380 | | $ | 13,369 |
12
During the three months ended June 30, 2022, the Company reversed approximately $0.9 million and $0.3 million of stock-based compensation expense in research and development and general and administrative, respectively, which were related to the cancellation of certain unvested performance-based awards.
The Black-Scholes option pricing model is used to estimate the fair value of stock options granted. The weighted average assumptions used in calculating the fair values of stock options that were granted during the six months ended June 30, 2022 was as follows:
| | | | |
| | For the six months |
| |
| | ended |
| |
|
| June 30, 2022 |
| |
Exercise price | | $ | 0.65 | |
Expected term (years) | |
| 3.9 | |
Expected stock price volatility | |
| 99 | % |
Risk-free rate | |
| 3.3 | % |
Dividend yield (per share) | |
| 0 | % |
The total unrecognized compensation cost was approximately $9.6 million as of June 30, 2022 and will be recognized over the next 1.5 years.
Stock Options
The following table summarizes stock option activity for the Company’s option plans during the six months ended June 30, 2022 (amount in thousands, except per share number):
| | | | | | | | | | |
| | | | | | | Weighted Average | | | |
| | | | Weighted | | Remaining | | | | |
| | Number of | | Average | | Contractual Life | | Total Intrinsic | ||
| | Shares | | Exercise Price | | (in years) | | Value | ||
Outstanding as of January 1, 2022 |
| 304,847 | | $ | 0.33 | | 8.0 | | $ | 114,803 |
Granted(1) | | 8,005 | | | 0.65 | | 7.2 | | | |
Cashless exercised | | (3,286) | | | 0.49 | | | | | |
Forfeited/expired |
| (54) | |
| 11.20 | | | |
| |
Outstanding as of June 30, 2022 |
| 309,512 | | $ | 0.34 | | 7.5 | | $ | 92,895 |
Options vested (2) |
| 286,047 | | $ | 0.33 | | 7.5 | | $ | 87,730 |
Ms. Linda Powers, the Company’s Chief Executive Officer, and Mr. Leslie Goldman, the Company’s Senior Vice President, are subject to an agreement under which they cannot exercise any options or warrants except upon at least 61 days’ prior notice.
Restricted Stock Awards
During April 2022, the Company’s Board approved and the Company entered into a Statement of Work #6 (the “SOW 6”) with Advent BioServices for 5 workstreams that are prerequisites for an application for regulatory approval of DCVax-L, for drafting of key portions of the application and for 3 required licenses for the Sawston facility. The SOW provides for baseline costs and for milestone incentives for successful completion of each of the workstreams, the completion of the application and regulatory acceptance of the submission, and regulatory approval of each of the three licenses. The milestone incentives will be a combination of cash and stock, and will not be paid until they are achieved. If all of the milestones are achieved for the 5 workstreams that are prerequisites for an application for product approval, for the application itself and regulatory acceptance of the submission, and for all 3 licenses required for the Sawston facility, the aggregate stock based compensation under SOW 6 will be 12.5 million shares (including the 1.5 millions shares already earned by obtaining the first 2 of the 3 required licenses for the Sawston facility). Such 12.5 million shares had an aggregate fair value on the grant date (effective date) of SOW 6 of $11.8 million. During the three months ended June 30, 2022, the Company recognized and expensed an aggregate of $3.8 million related to the cash component of certain milestones and $5.3 million related to the stock
13
component of such milestones, in anticipation that it is probable the milestones will be achieved and earned in the future. The amounts recognized and expensed during the three months ended June 30, 2022, included $1.5 million cash payable (of which $0.5 million was paid) and 1.5 million shares for milestones met and hence vested, and the pro rata portion of other milestones that are expected to be achieved and become payable in the future. These amounts are only payable if and when the relevant milestones are met. The 1.5 million shares that were issued were for the milestones that had been met by the regulatory approvals of 2 of the licenses required for the Sawston facility.
6. Notes Payable
The following two tables summarize outstanding debttable classifies the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy as of June 30, 20222023 and December 31, 2021, respectively (amount in2022 (in thousands):
| | | | | | | | | | | | | | | | | | | | |
|
| |
| Stated |
| | |
| | |
| | |
| Embedded |
| | | ||
| | | | Interest | | Conversion | | | | | Remaining | | Redemption | | Carrying | |||||
| | Maturity Date | | Rate | | Price | | Face Value | | Debt Discount | | Option | | Value | ||||||
Short term convertible notes payable |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
6% unsecured |
| Due |
| | 6 | % | $ | 3.09 | | $ | 135 | | $ | — | | $ | — | | $ | 135 |
| | | | | | | | | | | 135 | | | — | | | — | | | 135 |
Short term notes payable |
|
|
| |
| |
|
| |
| | |
|
| |
| | |
|
|
8% unsecured |
| Various |
| | 8 | % |
| N/A | |
| 5,503 | |
| (277) | |
| — | |
| 5,226 |
9% unsecured |
| Various |
| | 9 | % |
| N/A | |
| 3,932 | |
| (10) | |
| 7 | |
| 3,929 |
12% unsecured |
| On Demand |
| | 12 | % |
| N/A | |
| 703 | |
| — | |
| — | |
| 703 |
|
| | | | | | | | | | 10,138 |
| | (287) |
|
| 7 | | | 9,858 |
Long term notes payable | | | | | | | | | | | | | | | | | | | | |
8% unsecured |
| 9/22/2023 |
| | 8 | % |
| N/A | |
| 16,505 | |
| (2,202) | |
| 1,026 | |
| 15,329 |
6% secured |
| 3/25/2025 | | | 6 | % | | N/A | | | 1,126 |
| | — |
|
| — | | | 1,126 |
| | | | | | | | | | | 17,631 | | | (2,202) | | | 1,026 | | | 16,455 |
| | | | | | | | | | | | | | | | | | | | |
Ending balance as of June 30, 2022 | | | | | | | | | | $ | 27,904 | | $ | (2,489) | | $ | 1,033 | | $ | 26,448 |
| | | | | | | | | | | | |
| | Fair value measured at June 30, 2023 | ||||||||||
|
| | |
| Quoted prices in active |
| Significant other |
| Significant | |||
|
| Fair value at | | markets | | observable inputs | | unobservable inputs | ||||
| | June 30, 2023 |
| (Level 1) |
| (Level 2) |
| (Level 3) | ||||
Warrant liability | | $ | 1,083 | | $ | — | | $ | — | | $ | 1,083 |
Contingent payable derivative liability | | | 8,706 | | | — | | | — | | | 8,706 |
Share liability | |
| 223 | |
| — | |
| — | |
| 223 |
Total fair value | | $ | 10,012 | | $ | — | | $ | — | | $ | 10,012 |
| | | | | | | | | | | | | | | | | | | | |
| | | | Stated | | | | | | | | | | | Embedded | |
| | ||
| | | | Interest | | Conversion | | | | | Remaining | | Redemption | | Carrying | |||||
|
| Maturity Date |
| Rate |
| Price |
| Face Value |
| Debt Discount |
| Option |
| Value | ||||||
Short term convertible notes payable | | | | | | | | | | | | | | | | | | | | |
6% unsecured |
| Due |
| | 6 | % | $ | 3.09 | | $ | 135 | | $ | — | | $ | — | | $ | 135 |
|
| | | | | | | | | | 135 |
| | — | |
| — | | | 135 |
Short term notes payable |
|
|
| |
| |
|
| |
|
| |
|
| |
|
| | |
|
8% unsecured | | Various | | | 8 | % | | N/A | | | 2,320 | | | (118) | | | — | | | 2,202 |
9% unsecured | | Various | | | 9 | % | | N/A | | | 4,232 | | | (80) | | | 47 | | | 4,199 |
12% unsecured | | On Demand | | | 12 | % | | N/A | | | 703 | | | — | | | — | | | 703 |
|
| | | | | | | | | | 7,255 |
| | (198) | |
| 47 | | | 7,104 |
Long term notes payable | | | | | | | | | | | | | | | | | | | | |
1% unsecured(10) | | Various | | | 1 | % | | N/A | | | 433 | | | — | | | — | | | 433 |
8% unsecured | | 9/22/2023 | | | 8 | % | | N/A | | | 25,938 | | | (3,638) | | | 941 | | | 23,241 |
6% secured | | 3/25/2025 | | | 6 | % | | N/A | | | 1,482 | | | — | | | — | | | 1,482 |
| | | | | | | | | | | 27,853 | | | (3,638) | | | 941 | | | 25,156 |
| | | | | | | | | | | | | | | | | | | | |
Ending balance as of June 30, 2022 | | | | | | | | | | $ | 35,243 | | $ | (3,836) | | $ | 988 | | $ | 32,395 |
| | | | | | | | | | | | |
| | Fair value measured at December 31, 2022 | ||||||||||
|
| | |
| Quoted prices in active |
| Significant other |
| Significant | |||
| | Fair value at | | markets | | observable inputs | | unobservable inputs | ||||
|
| December 31, 2022 |
| (Level 1) |
| (Level 2) |
| (Level 3) | ||||
Warrant liability | | $ | 80,559 | | $ | — | | $ | — | | $ | 80,559 |
Embedded redemption option | |
| 807 | |
| — | |
| — | |
| 807 |
Contingent payable derivative liability | | | 8,668 | | | — | | | — | | | 8,668 |
Share liability |
| | 678 | |
| — | |
| — | |
| 678 |
Total fair value | | $ | 90,712 | | $ | — | | $ | — | | $ | 90,712 |
DuringThere were no transfers between Level 1, 2 or 3 during the six-month period ended June 30, 2023.
The following table presents changes in Level 3 liabilities measured at fair value for the six-month period ended June 30, 2023. Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category. Unrealized gains and losses associated with liabilities within the Level 3 category include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long- dated volatilities) inputs (in thousands).
| | | | | | | | | | | | | | | |
| | Warrant | | Embedded | | Contingent Payable | | Share | | | | ||||
|
| Liability |
| Redemption Option |
| Derivative Liability |
| Liability |
| Total | |||||
Balance - January 1, 2023 | | $ | 80,559 | | $ | 807 | | $ | 8,668 | | $ | 678 | | $ | 90,712 |
Additional share liability | | | — | | | — | | | — | | | 663 | | | 663 |
Redemption of share liability | | | — | | | — | | | — | | | (1,071) | | | (1,071) |
Reclassification of warrant liabilities | | | (76,258) | | | — | | | — | | | — | | | (76,258) |
Change in fair value | | | (3,218) | | | (807) | | | 38 | | | (47) | | | (4,034) |
Balance - June 30, 2023 | | $ | 1,083 | (1) | $ | — | | $ | 8,706 | | $ | 223 | | $ | 10,012 |
(1) | The remaining balance of $1.1 million in warrant liability as of June 30, 2023 was related to certain conditional rights to independently purchase shares from the Company in a future raise of capital (the “Piggy-back Rights”). The Company accounted for the Piggy-back Rights as a freestanding financial instrument, which was classified as a liability at fair value on the Condensed Consolidated Balance Sheet |
On January 9, 2023, the Company reclassified the fair value of the warrant liability of $76.3 million into the additional paid-in capital. The change in fair value of the common stock warrant liability of $2.3 million between December 31, 2022 and January 9, 2023 is reflected in “Change in fair value of derivative liabilities” in the accompanying condensed consolidated statements of comprehensive loss for the six months ended June 30, 2022, the Company entered into multiple four-month note agreements (the “Notes”) with various individual lenders (the “Holders”) with an aggregate principal amount of $0.6 million for net proceeds of $0.6 million. The Notes have a 9% interest rate, a 5% original issue discount (“OID”), and contain a conditional right to independently purchase shares from the Company in a future raise of Capital (the “Piggy-back Right”), under which the Company agrees that if it (i) publicly releases top line data from the Phase III trial of its DCVax®-L vaccine (such eventuality, the “Release”) and (ii) consummates the first offering of its common stock following such Release (the “Next Offering”), then Holder shall have the conditional right, at its sole option, typically exercisable within seven (7) days following the Next Offering, to independently purchase from the Company up to a number of shares2023.
1412
equal in value to (a) 50%A summary of the principal amountweighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the Company’s warrant liabilities and embedded conversion feature that are categorized within Level 3 of the loan, (b) 50% of the value of the exercised warrant shares, and (c) exchange some or all of the outstanding loan amount for a variable number of shares (the “Contingent Rights”). The Contingent Right (a) and (b) above shall be priced at a 12% discount from the Next Offering, resulting in either an elimination of, or a reduced cash amount repayable under the loan agreement. The Company accounted for the Contingent Right (a) and (b) as a freestanding financial instrument, which was classified as a liability at fair value on the Condensed Consolidated Balance Sheet with changes in fair value recognized in the Condensed Consolidated Statementhierarchy as of Operations. The Company accounted for the Contingent Right (c) as an embedded derivative liability at fair value, which requires it to be bifurcated, with changes in fair value recognized in the Condensed Consolidated Statement of Operations.
During the six months ended June 30, 2023, January 9, 2023 (the reclassification date) and December 31, 2022 the Company issued approximately 3.5 million shares of common stock at fair value of $2.3 million to certain lenders in lieu of cash payments. The Company recognized approximately $0.1 million debt extinguishment loss.
During the six months ended June 30, 2022, the Company made aggregate cash payments of $6.2 million on notes payable, including $0.9 million of interest payment.
During the six months ended June 30, 2022, the Company entered into multiple note extension agreements whereby the maturity date of the notes was extended for additional 2-4 months.
The Company received 2 loans under the Coronavirus Aid, Relief and Economic Security (“CARES”) Act’s Paycheck Protection Program (“PPP”) in 2021 for the amount of $0.4 million. On February 22, 2022, the PPP loans were approved for forgiveness. The Company recorded approximately $0.4 million debt extinguishment gain from the forgiveness of these PPP loans.
For the three months ended June 30, 2022 and 2021, interest expense related to notes payable totaled approximately $1.4 million and $0.7 million including amortization of debt discounts totaling $0.7 million and $0.2 million, respectively.is as follows:
| | | | | | | | | | |
|
| As of June 30, 2023 |
| As of January 9, 2023 |
| |||||
| | Share | | Contingent Payable | | Warrant | | |||
| | Liability | | Derivative Liability | | Liability | | |||
Strike price | | $ | 0.60 | | $ | 0.57 | * | $ | 0.31 | |
Contractual term (years) | |
| 0.07 | |
| 1.24 |
| | 1.46 | |
Volatility (annual) | |
| 60 | % |
| 61 | % | | 87 | % |
Risk-free rate | |
| 4.3 | % |
| 5.5 | % | | 4.3 | % |
Dividend yield (per share) | |
| 0 | % |
| 0 | % | | 0 | % |
For
| | | | | | | | | | |
| | As of December 31, 2022 |
| |||||||
|
| Warrant |
| Share |
| Contingent Payable |
| |||
|
| Liability |
| Liability | | Derivative Liability |
| |||
Strike price | | $ | 0.31 | | $ | 0.78 | * | $ | 0.78 | * |
Contractual term (years) | |
| 1.5 | | | 0.1 | |
| 0.6 | |
Volatility (annual) | |
| 86 | % | | 76 | % |
| 77 | % |
Risk-free rate | |
| 4.3 | % | | 2.0 | % |
| 4.8 | % |
Dividend yield (per share) | |
| 0 | % | | 0 | % |
| 0 | % |
* | The strike price assumes the current stock price as of June 30, 2023 and December 31, 2022 |
The key unobservable inputs for Piggy-back rights that was included in the six months endedwarrant liability as of June 30, 2023 and December 31, 2022 and 2021, interest expense related to notes payable totaled approximately $3.3 million and $2.1 million including amortizationwas the assumption of debt discounts totaling $1.5 million and $1.4 million, respectively.the estimated remaining life which was based on the estimate of the next qualified financing.
7. Net Earnings (Loss) per Share Applicable to Common Stockholders5. Stock-based Compensation
Basic earnings (loss) per common share is computed by dividing net earnings (loss) by the weighted average number of common shares outstanding during the reporting period. Diluted earnings (loss) per common share is computed similar to basic earnings (loss) per common share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock. Diluted weighted average common shares include common stock potentially issuable under the Company’s convertible notes, warrants and vested and unvested stock options.
ForThe following table summarizes total stock-based compensation expense for the three and six months ended June 30, 2021, net income is adjusted2023 and 2022 (in thousands).
| | | | | | | | | | | | |
| | For the three months ended | | For the six months ended | ||||||||
| | June 30, | | June 30, | ||||||||
|
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||
Research and development | | $ | 147 | | $ | 641 | | $ | 444 | | $ | 1,151 |
Research and development - related party | | | | | | | | | | | | |
Milestones achieved (1) | | | — | | | 1,410 | | | 520 | | | 1,410 |
Future milestones (2) | | | 40 | | | 3,930 | | | 140 | | | 3,930 |
General and administrative | |
| 90 | |
| (218) | |
| 107 | |
| (111) |
Total stock-based compensation expense | | $ | 277 | | $ | 5,763 | | $ | 1,211 | | $ | 6,380 |
The related party amounts were for gainmilestone incentives that either were earned or are deemed probable to be achieved in the future and become issuable at that time (as detailed below in Restricted Stock Awards).
(1) | During the six months ended June 30, 2023, the Company recognized the remaining $0.5 million stock-based compensation related to the achieved milestone (obtaining a commercial manufacturing license from the MHRA). The Company had previously recognized $1.6 million stock-based compensation as of December 31, 2022. |
The $1.4 million expense recognized in 2022 covers 2 one-time milestones: 2 required licenses for the Sawston facility (licenses from change in fair valuethe Human Tissue Authority and from the MHRA for manufacturing for clinical trials and compassionate use cases).
13
Table of warrant liabilities.Contents
NORTHWEST BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
(2) | During the three and six months ended June 30, 2023, the Company recognized and expensed (but did not issue shares for) the pro-rata portion of the remaining one-time milestone stock awards for drafting key portions of the application for product approval of $40,000 and $140,000, respectively. |
During the three and six months ended June 30, 2022, the Company recognized and expensed (but did not issue shares for) the pro-rata portion of 6 one-time milestones: 5 workstreams (Comparability, Stability, Potency, Product Profile and Fill/Finish) and one-time milestone for drafting key portions of the application for product approval of $3.9 million and $3.9 million, respectively.
The total unrecognized stock compensation cost was approximately $0.5 million as of June 30, 2023 and will be recognized over the next 1.5 years.
Stock Options
The following table sets forthsummarizes stock option activity for the computation of earnings (loss)Company’s option plans during the six months ended June 30, 2023 (amount in thousands, except per share (amounts in thousands)number):
| | | | | | | | | | | | |
|
| For the three months ended |
| For the six months ended | ||||||||
| | June 30, | | June 30, | ||||||||
| | 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
Net earnings (loss) - basic | | $ | (29,668) | | $ | 4,410 | | $ | (43,882) | | $ | 287 |
Reversal of gain due to change in fair value of warrant liability | |
| — | |
| (17,500) | |
| — | |
| (35,063) |
Net loss - diluted | |
| (29,668) | |
| (13,090) | |
| (43,882) | |
| (34,776) |
| | | | | | | | | | | | |
Weighted average shares outstanding - basic | |
| 1,003,976 | |
| 851,805 | |
| 981,737 | |
| 843,252 |
Diluted shares- Options | |
| — | |
| 51,547 | |
| — | |
| 48,774 |
Diluted shares- Warrants | |
| — | |
| 255,650 | |
| — | |
| 255,323 |
Convertible notes and interest | |
| — | |
| 74 | |
| — | |
| 74 |
Weighted average shares outstanding - diluted | |
| 1,003,976 | |
| 1,159,076 | |
| 981,737 | |
| 1,147,423 |
| | | | | | | | | | |
| | | | | | | Weighted Average | | | |
| | | | Weighted | | Remaining | | | | |
| | Number of | | Average | | Contractual Life | | Total Intrinsic | ||
|
| Shares |
| Exercise Price |
| (in years) |
| Value | ||
Outstanding as of January 1, 2023 |
| 301,263 | | $ | 0.34 | | 7.0 | | $ | 135,225 |
Cashless exercised | | (1,827) | | | 0.41 | | — | | | — |
Outstanding as of June 30, 2023 |
| 299,436 | | $ | 0.33 | | 6.5 | | $ | 73,083 |
Options vested (1) |
| 281,278 | | $ | 0.33 | | 6.5 | | $ | 69,223 |
(1) | An aggregate 153 million stock options held by Ms. Linda Powers, the Company’s Chief Executive Officer, and Mr. Leslie Goldman, the Company’s Senior Vice President, are subject to an agreement (the “Blocker Letter Agreement”) under which they cannot exercise any options or warrants except upon at least 61 days’ prior notice. |
Restricted Stock Awards
During April 2022, the Company’s Board approved, and the Company entered into a Statement of Work #6 (the “SOW 6”) with Advent BioServices, a related party of the Company, for five workstreams that are prerequisites for an application for regulatory approval of DCVax-L, for three required licenses for the Sawston facility , and for drafting of key portions of the application for approval. The SOW provides for baseline costs and for milestone incentives for successful completion of each of the workstreams, for the completion and submission of each application for product approval, and for obtaining regulatory approval of each of the three Sawston licenses. The milestone incentives will be a combination of cash and stock and are not paid until they are achieved. On September 26, 2022, the Company amended the SOW6 (the “Amended SOW6”) to (1) extend the service period through September 30, 2023, and (2) clarify the assessment and application of the milestones, and (3) add a sixth workstream. (The potential cost for all unearned stock awards for milestones not yet achieved was re-measured on the modification date and will be further re-measured until the date the milestone award is achieved and the stock awards are earned.) If all of the 10 one-time milestones are achieved (i.e., for all six workstreams that are prerequisites for an application for product approval, for obtaining all three licenses required for the Sawston facility, and for the completion of key portions of the application for product approval), the aggregate stock-based compensation under the Amended SOW 6 will be 13.5 million shares (including the shares already earned and issued for the milestones already achieved) for an aggregate fair value of $10.1 million.
As of December 31, 2022, seven milestones were completed, including five of the workstreams, and the regulatory approvals of two licenses required for the Sawston facility. An eighth milestone was partly completed and the stock component of that milestone was earned, but the cash portion of that eighth milestone was not yet earned.
During the six months ended June 30, 2023, the eighth milestone workstream for Mechanism of Action and the milestone for obtaining the commercial manufacturing license from the MHRA were completed. For this manufacturing license milestone, the Company
14
recognized the remaining $0.5 million in expense in the condensed consolidated statements of operations and comprehensive loss and issued 3.0 million common shares.
For the remaining one-time milestone that is anticipated to be achieved and earned in the future, the Company recognized and expensed (but did not issue) the pro-rata portion of the remaining potential milestone stock awards during the three and six months ended June 30, 2023, of $40,000 and $0.1 million, respectively.
Other Service Agreement
On March 16, 2023, the Company issued 8,000 shares of Series C convertible preferred stock to an unrelated vendor who provided professional services for the Company. The fair value of the Series C convertible preferred stock on the issuance date was approximately $0.1 million, which will be expensed over a four-month service period. During the three and six months ended June 30, 2023, the Company recognized approximately $89,000 and $0.1 million, respectively as part of general and administrative expenses.
6. Property, Plant and Equipment
Property, plant and equipment consist of the following at June 30, 2023 and December 31, 2022 (in thousands):
| | | | | | | | |
|
| June 30, |
| December 31, |
| Estimated | ||
| | 2023 | | 2022 | | Useful Life | ||
Leasehold improvements | | $ | 17,250 | | $ | 13,070 |
| Lesser of lease term or estimated useful life |
Office furniture and equipment | |
| 455 | |
| 300 |
| 3-5 years |
Computer and manufacturing equipment and software | |
| 2,495 | |
| 2,238 |
| 3-5 years |
Land in the United Kingdom | |
| 86 | |
| 82 |
| NA |
| |
| 20,286 | |
| 15,690 |
| NA |
Less: accumulated depreciation | |
| (3,000) | |
| (2,272) |
|
|
Total property, plant and equipment, net | | $ | 17,286 | | $ | 13,418 |
|
|
| | | | | | | | |
Construction in progress | | $ | — | | $ | 2,028 |
|
|
The construction works related to expanding the operational portion of its UK facility (Phase 1B) were completed and placed in service as of June 30, 2023. All costs associated with the Phase 1B build out were reclassified from construction in progress to leasehold improvements effective June 2023 and are being amortized over the estimated useful life of the facility.
Depreciation expense was approximately $0.7 million and $0.6 million for the six months ended June 30, 2023, and 2022, respectively.
15
7. Outstanding Debt
The following two tables summarize outstanding debt as of June 30, 2023 and December 31, 2022, respectively (amount in thousands):
| | | | | | | | | | | | | | | | | |
|
| |
| Stated |
| | |
| | |
| | |
| | ||
| | | | Interest | | Conversion | | | | | Remaining | | Carrying | ||||
| | Maturity Date | | Rate | | Price | | Face Value | | Debt Discount | | Value | |||||
Short term convertible notes payable |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
6% unsecured |
| Due |
| | 6 | % | $ | 3.09 | | $ | 135 | | $ | — | | $ | 135 |
8% unsecured | | 1/31/2024 | | | 8 | % | | 0.55 | * | | 900 | | | (177) | | | 723 |
8% unsecured | | 6/30/2024 | | | 8 | % | | 0.50 | * | | 1,000 | | | — | | | 1,000 |
| | | | | | | | | | | 2,035 | | | (177) | | | 1,858 |
Short term notes payable |
|
|
| |
| |
|
| |
| | |
|
| |
| |
8% unsecured |
| Various |
| | 8 | % |
| N/A | |
| 8,253 | |
| (413) | |
| 7,840 |
12% unsecured |
| On Demand |
| | 12 | % |
| N/A | |
| 562 | |
| — | |
| 562 |
|
| | | | | | | | | | 8,815 |
| | (413) |
|
| 8,402 |
Long term notes payable | | | | | | | | | | | | | | | | | |
8% unsecured |
| 7/26/2024 |
| | 8 | % |
| N/A | |
| 16,117 | |
| (1,121) | |
| 14,996 |
6% secured |
| 3/25/2025 | | | 6 | % | | N/A | | | 748 |
| | — |
|
| 748 |
| | | | | | | | | | | 16,865 | | | (1,121) | | | 15,744 |
| | | | | | | | | | | | | | | | | |
Ending balance as of June 30, 2023 | | | | | | | | | | $ | 27,715 | | $ | (1,711) | | $ | 26,004 |
*The 8% convertible notes are convertible into Series C preferred shares at $12.50 - $13.75 per share. Each Series C preferred share is convertible into common shares with 30 days’ restriction period. The conversion price in common share equivalent is at $0.50 and $0.55 per share.
| | | | | | | | | | | | | | | | | | | | |
| | | | Stated | | | | | | | | | | | Embedded | |
| | ||
| | | | Interest | | Conversion | | | | | Remaining | | Redemption | | Carrying | |||||
|
| Maturity Date |
| Rate |
| Price |
| Face Value |
| Debt Discount |
| Option |
| Value | ||||||
Short term convertible notes payable | | | | | | | | | | | | | | | | | | | | |
6% unsecured |
| Due |
| | 6 | % | $ | 3.09 | | $ | 135 | | $ | — | | $ | — | | $ | 135 |
|
| | | | | | | | | | 135 |
| | — | |
| — | | | 135 |
Short term notes payable |
|
|
| |
| |
|
| |
|
| |
|
| |
|
| | |
|
8% unsecured | | Various | | | 8 | % | | N/A | | | 14,540 | | | (1,300) | | | 807 | | | 14,047 |
9% unsecured | | Various | | | 9 | % | | N/A | | | 793 | | | — | | | — | | | 793 |
12% unsecured | | On Demand | | | 12 | % | | N/A | | | 563 | | | — | | | — | | | 563 |
|
| | | | | | | | | | 15,896 |
| | (1,300) | |
| 807 | | | 15,403 |
Long term notes payable | | | | | | | | | | | | | | | | | | | | |
8% unsecured | | 7/26/2024 | | | 8 | % | | N/A | | | 5,505 | | | (432) | | | — | | | 5,073 |
6% secured | | 3/25/2025 | | | 6 | % | | N/A | | | 918 | | | — | | | — | | | 918 |
| | | | | | | | | | | 6,423 | | | (432) | | | — | | | 5,991 |
| | | | | | | | | | | | | | | | | | | | |
Ending balance as of December 31, 2022 | | | | | | | | | | $ | 22,454 | | $ | (1,732) | | $ | 807 | | $ | 21,529 |
On March 2, 2023, the Company entered into a Commercial Loan Agreement (the “Commercial Loan”) with a commercial lender for an aggregate principal amount of $11.0 million. The Commercial Loan bears interest at 8% per annum with a 22-month term. There are no principal repayments during the first eight months of the term. The Commercial Loan is amortized in 14 installments starting on November 2, 2023. The Commercial Loan carries an original issue discount of $1.0 million.
In April 2023, the Company entered into several ten-month convertible notes (the “April Convertible Notes”) with multiple investors (the “Holders”) with an aggregate principal amount of $0.9 million for a purchase price of $0.8 million. The April Convertible Notes bear interest at 8% per annum, and are convertible into Series C preferred shares at $13.75 per share at the Holders’ sole option. The Series C preferred shares are convertible into common stock 30 days after the debt conversion date. Each Series C preferred share is convertible into 25 shares of common stock. The Company reclassed $0.7 million Investor advances that was received from the Holders in December 2022 to Convertible notes payable on the condensed consolidated balance sheet as of June 30, 2023. As a result, the Company received net cash proceeds of $0.1 million.
16
As consideration for entering into the convertible note agreements, the Company also agreed to amend the investors’ existing outstanding warrants. The exercise price of certain warrants was amended from $2.00 per share to $0.55 per share, and the maturity date was extended for additional 9 months. The incremental change in fair value resulting from the amendment was approximately $0.2 million, which was recognized as an additional debt discount to the April Convertible Notes.
On June 30, 2023, the Company entered into a one-year convertible note (the “June Convertible Note”) with an individual investor (the “Holder”) with an aggregate principal amount of $1.0 million. The Company received $1.0 million cash from the June Convertible Note. The June Convertible Note bears interest at 8% per annum, and is convertible into Series C preferred shares at $12.50 per share at the Holder's sole option. The Series C preferred shares are convertible into common stock 30 days after the debt conversion date. Each Series C preferred share is convertible into 25 shares of common stock.
During the six months ended June 30, 2023, the Company issued approximately 15.2 million shares of common stock with a fair value of $9.6 million to certain lenders in lieu of cash payments of $7.4 million of debt, including $0.7 million of accrued interest. In addition, pursuant to exchange agreements executed with various holders, the Company is required to potentially issue additional common stock (the “Share liability”) if the stock price is less than the price defined in the exchange agreement as of the true-up date. During the six months ended June 30, 2023, the Company extinguished Share liabilities of $1.1 million and recognized an additional $0.7 million in Share liabilities. The Company recognized an approximately $1.8 million debt extinguishment loss during the six months ended June 30, 2023 from the debt redemption.
During the six months ended June 30, 2023, the Company recognized $0.8 million change in fair value of embedded redemption option as this embedded feature had de minimis value based on the remaining life of the note and the next qualified financing.
During the six months ended June 30, 2023, the Company issued approximately 56,000 shares of Series C preferred stock with a fair value of $1.0 million to certain lenders in lieu of cash payments of $0.9 million in debt, including $0.1 million of accrued interest. The Company recognized an approximately $0.1 million debt extinguishment loss.
For the three months ended June 30, 2023 and 2022, interest expense related to outstanding debt totaled approximately $1.3 million and $1.4 million including amortization of debt discounts totaling $0.7 million and $0.7 million, respectively.
For the six months ended June 30, 2023 and 2022, interest expense related to outstanding debt totaled approximately $2.3 million and $3.3 million including amortization of debt discounts totaling $1.3 million and $1.5 million, respectively.
8. Net Loss per Share Applicable to Common Stockholders
Basic loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the reporting period. Diluted loss per common share would be computed similar to basic loss per common share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock. Because of the net loss from operations for each period, inclusion of such securities in the computation of loss per share would be anti-dilutive and thus they are excluded. Potentially dilutive weighted average common shares include common stock potentially issuable under the Company’s convertible notes and preferred stock, warrants and vested and unvested stock options.
The following securities were not included in the diluted net earnings (loss)loss per share calculation because their effect was anti-dilutive as of the periods presented (in thousands):
17
| | | | | | | | |
| | For the six months ended | | For the six months ended | ||||
| | June 30, | | June 30, | ||||
|
| 2022 |
| 2021 |
| 2023 |
| 2022 |
Series C convertible preferred stock | | 38,638 | | — | ||||
Common stock options | | 309,512 | | 257,005 | | 299,436 | | 309,512 |
Common stock warrants | | 153,110 | | 56,712 | | 117,863 | | 153,110 |
Convertible notes and accrued interest | | 76 |
| — | | 3,748 |
| 76 |
Potentially dilutive securities | | 462,698 | | 313,717 | | 459,685 | | 462,698 |
8.9. Related Party Transactions
Advent BioServices Agreement
The Company hashad three operational programs with Advent: (a) an ongoing manufacturing program at the GMP facility in London, (b) an ongoing development and manufacturing program at the Sawston GMP facility, and (c) a one-time program for specialized work, organized into 10 sets of one-time milestones, for the following:
● | Qualifying for and obtaining 3 required licenses for the Sawston facility: a license from the Human Tissue Authority to collect and process human cells and tissues, a license from the MHRA for manufacturing for clinical trials and compassionate use cases, and a license from the MHRA for commercial manufacturing. |
● | 6 workstreams relating to product matters required for an application for regulatory approval of DCVax-L, including Comparability, Stability, Potency, Product Profile, Mechanism of Action and Fill/Finish. |
● | Drafting of key portions of the application for product approval itself. |
Each of the three operational programs is covered by a separate contract. The ongoing manufacturing in the London facility is covered by a Manufacturing Services Agreement with Advent BioServices (“Advent”MSA”) forentered into on May 14, 2018. The development and manufacturing program at the manufacture of DCVax-L products at an existingSawston facility in London, as previously reported. The Company also hasis covered by an Ancillary Services Agreement entered into on November 18, 2019. The specialized work associated with Advent, whichthe 10 one-time milestones is covered by an SOW 6 entered into under the Ancillary Services Agreement as of April 1, 2022 and amended on September 26, 2022.
The Ancillary Services Agreement establishes a structure under which the Company and Advent submitsnegotiate and agree upon the scope and terms for Statements of Work (“SOWs”) for facility development activities relatedand compassionate use program activities. After an SOW is agreed and approved by the Company, Advent will proceed with, or continue, the applicable services and will invoice the Company pursuant to the development ofSOW. Since both the Sawston facility development and the compassionate use activitiesprogram involve pioneering and uncertainties in most aspects, the UK, as previously reported. Theinvoicing under the Ancillary Services Agreement had an original termis on the basis of eight months, whichcosts incurred plus fifteen percent. The SOWs may involve ongoing activities or specialized one-time projects and related one-time milestone payments. The current Ancillary Services Agreement ended in July 2020.September 2023. The Company subsequently extended the term by 12 months to July 2021 and another 12 months to July 2022,2024 with no other changes,changes.
SOW 6 provides for ongoing baseline costs for manufacturing at the Sawston facility and recently extended itone-time milestone incentives for another 12 months to July 2023.
During April 2022, the Company's Board approved and the Company entered into a Statement of Work #6 (the "SOW 6") with Advent BioServices for 5 workstreams that are prerequisites for an application for(a) regulatory approval of DCVax-L, for drafting of key portionseach of the application and for 3 licenses required licenses for the Sawston facility. The SOW provides for baseline costs and for milestone incentives forfacility, (b) successful completion of each of the 6 workstreams for theand (c) completion of thedrafting key portions of an application and regulatory acceptance of the submission, and for regulatory approval of each of the licenses.product approval. The milestone incentives will beare a combination of cash and stock, and willare not be paid until they arethe milestone is achieved and earned.
During the threesix months ended June 30, 2023, the Company paid an aggregate of $2.0 million in cash, of which $1.0 million was related to two milestones that were completed and fully expensed but unpaid as of December 31, 2022, and the other $1.0 million was partial payment for one milestone (obtaining a commercial manufacturing license from the MHRA) that was completed as of March 20, 2023. The Company issued 3.0 million common shares as a result of completion of the one-time milestone (obtaining a commercial manufacturing license from the MHRA) at fair value of $2.1 million, of which $0.5 million was recognized during the six months ended June 30, 2023 and $1.6 million had already been recognized (but not paid) in anticipation2022. During the six months ended June 30, 2023, the Company also expensed (but did not pay) an aggregate of $0.5 million related to completed cash milestone payments; the Company also expensed (but did not pay) an aggregate of $0.2 million related to future cash milestone payments that it is probable the milestonesCompany anticipates will be
18
achieved and earned, and $0.1 million related to fair value of future shares milestone payments that the Company anticipates will be achieved and earned over the course of the contract period, the Company recognizedperiod.
The following table summarizes total research and expensed an aggregate of $3.8 million (but only paid $0.5 million) related to the cash component of the anticipated milestones, and the Company recognized and expensed $5.3 million related to the stock component of the anticipated milestones (but only issued 1.5 million shares). The 1.5 million shares issued weredevelopment costs from Advent for the milestones that had been met by the regulatory approvals of 2 of the licenses required for the Sawston facility.three and six months ended June 30, 2023 and 2022, respectively (in thousands).
| | | | | | | | | | | | |
| | For the three months ended | | For the six months ended | ||||||||
| | June 30, | | June 30, | ||||||||
| | 2023 | | 2022 | | 2023 | | 2022 | ||||
Advent BioServices |
| |
|
| |
|
| |
|
| |
|
Manufacturing cost in London | | $ | 1,660 | | $ | 1,424 | | $ | 3,303 | | $ | 2,827 |
Manufacturing cost at Sawston facility | |
| 2,098 | |
| 1,276 | |
| 3,810 | |
| 2,701 |
SOW 6 one-time milestones - Shares | |
| | |
| | |
| | |
| |
Expensed and paid (milestone complete) (1) | |
| — | |
| 1,410 | |
| 520 | |
| 1,410 |
Expensed but unpaid, not yet due (milestone not yet complete) (2)(3) | |
| 40 | |
| 3,930 | |
| 140 | |
| 3,930 |
SOW 6 one-time milestones - Cash | |
| | |
|
| |
|
| |
|
|
Expensed and paid (milestone complete) (4) | |
| — | |
| 500 | |
| — | |
| 500 |
Expensed and due, but unpaid (milestone complete) (5) | |
| — | |
| 1,000 | |
| 550 | |
| 1,000 |
Expensed but unpaid, not yet due (milestone not yet complete) (6) | | | 60 | | | 2,314 | | | 210 | | | 2,314 |
Total | | $ | 3,858 | | $ | 11,854 | | $ | 8,533 | | $ | 14,682 |
(1) | The payment for the six months ended June 30, 2023 covers the one-time milestone for obtaining a commercial manufacturing license from the MHRA. The payment for the six months ended June 30, 2022 also covers 2 other one-time milestones: 2 required licenses for the Sawston facility (licenses from the Human Tissue Authority and from the MHRA for manufacturing for clinical trials and compassionate use cases). |
(2) | The expense for the six months ended June 30, 2023 covers the one-time milestone for drafting key portions of the application for product approval. |
(3) | The expense for the six months ended June 30, 2022 covers 6 one-time milestones: 5 workstreams (Comparability, Stability, Potency, Product Profile and Fill/Finish) and 1 one-time milestone for drafting key portions of the application for product approval. |
(4) | This covers one-time milestone: a required license for the Sawston facility from the Human Tissue Authority. |
(5) | The expense for the six months ended June 30, 2023 covers the one-time milestone workstream: Mechanism of Action. The expense for the six months ended June 30, 2022 covers one-time milestone: a required license for the Sawston facility from the MHRA for manufacturing for clinical trials and compassionate use cases. |
(6) | The expense for the six months ended June 30, 2023 covers the one-time milestone for drafting key portions of the application for product approval. The expense for the six months ended June 30, 2022 covers 6 one-time milestones: 5 workstreams (Comparability, Stability, Potency, Product Profile and Fill/Finish) and one-time milestone for drafting key portions of the application for product approval. |
Advent BioServices Sublease Agreement
On December 31, 2021, the Company entered into a Sub-lease Agreement (the “Agreement”) with Advent. The Agreement permits use by Advent of a portion of the space in the Sawston facility, which is leased by the Company under a separate head lease with a different counterparty (Huawei) that commenced on December 14, 2018. The Company subleased approximately 14,459 square feet of the 88,000 square foot building interior space, plus corresponding exterior support space and parking. The lease payments amount under the Agreement are 2two times the amount payable by the Company under the head lease (which is currently £5.75 (approximate $7.76or approximately $7.28 per square foot based on exchange rate as of December 31, 2021) rate per square foot payable under the head lease,June 30, 2023), but subject to a cap of $10 per square foot. Accordingly, the monthly lease payments under the Sublease are calculated based on $144,590$145,000 annually for 2022.2023. The total lease payments paid by the Company to Huawei for the 88,000 square foot facility, exterior spaces and parking under the head lease are 500,000 pounds£500,000 (approximately $633,000) per year. The term of the Agreement shall end on the same date as the head lease term ends.
19
During the three and six months ended June 30, 2022,2023, the Company recognized sub-lease income of $37,000$36,000 and $73,000,$72,000, respectively.
Related Party ExpensesAccounts Payable
As of June 30, 2023, there was approximately $0.2 million of unpaid board compensation to one of our Directors that was included in the accounts payable to related party on the condensed consolidated balance sheets.
As of June 30, 2023, there were outstanding unpaid accounts payable and Accounts Payableaccrued expenses owed to Advent as summarized in the following table (in thousands). These unpaid amounts are part of the Related Party expenses reported in the above section.
| | | | | | |
|
| June 30, |
| December 31, | ||
| | 2023 | | 2022 | ||
Advent BioServices - amount invoiced but unpaid | | $ | 2,855 | | $ | 1,844 |
Advent BioServices - amount accrued but unpaid | | | 3,496 | | | 4,736 |
Total payable and accrued, but unpaid to Advent BioServices | | $ | 6,351 | | $ | 6,580 |
10. Preferred Stock
Series C Convertible Preferred Stock
During the six months ended June 30, 2022 and 2021,2023, the Company capitalized $28,000 and $1.4 million costs, invoiced by Advent, relatedentered into various Subscription Agreements (the “Series C Subscription Agreements”) with certain investors (the “Series C Investors”). Pursuant to the Sawston facility buildout.Series C Subscription Agreements, the Company issued the Series C Investors an aggregate of 0.3 million shares of the Company’s Series C convertible preferred stock, par value $0.001 per share (the “Series C Shares”), at a weighted purchase price of $14.69 per share for proceeds of approximately $4.8 million.
During the six months ended June 30, 2023, the Company issued approximately 56,000 Series C Shares with a fair value of $1.0 million to certain lenders in lieu of cash payments of $0.9 million in debt, including $0.1 million accrued interest. The Company recognized an approximately $0.1 million debt extinguishment loss.
During the six months ended June 30, 2023, approximately 0.3 million Series C Shares with a book value of $3.6 million were converted into 6.4 million common shares at a ratio of 1:25.
The Company determined that the Series C Shares contain contingent redemption provisions allowing redemption by the holder upon certain defined events (“deemed liquidation events”). As the event that may trigger the redemption of the Series C Shares is not solely within the Company’s control, the Series C Shares are classified as mezzanine equity (temporary equity) in the Company’s condensed consolidated balance sheets.
11. Stockholders’ Deficit
Common Stock
On January 9, 2023, the Company filed a Certificate of Amendment of its Seventh Amended and Restated Certificate of Incorporation (the “Certificate of Amendment”) with the Secretary of the State of Delaware, which effected an increase in the Company’s authorized shares of common stock, from 1.2 billion to 1.7 billion, par value $0.001 per share.
During the six months ended June 30, 2023, the Company received $2.8 million from the exercise of outstanding warrants with an exercise price between $0.153 and $0.85, of which $1.2 million was received in December 2022 as investor advances. The Company issued approximately 12.3 million shares of common stock upon these warrant exercises.
During the six months ended June 30, 2023, certain options and warrants holders elected to exercise some of their options and warrants pursuant to cashless exercise formulas. The Company issued approximately 9.9 million shares of common stock upon exercise of 10.6 million warrants and 1.5 million options at exercise prices between $0.20 and $0.35.
1620
The following table summarizes outstanding unpaid accounts payable and accrued expenses held by related parties as of June 30, 2022 and December 31, 2021 (amount in thousands). These unpaid amounts include part of the expenses reported in the above section. The 2021 balance also included certain expenses incurred in prior periods.
| | | | | | |
|
| June 30, |
| December 31, | ||
| | 2022 | | 2021 | ||
Advent BioServices – amount invoiced | | $ | 1,407 | | $ | 3,046 |
Advent BioServices – amount accrued | | | 3,350 | | | — |
Accounts payable and accrued expenses to Advent BioServices | | $ | 4,757 | | $ | 3,046 |
As of June 30, 2022, there was approximately $0.9 million of unpaid Board compensation that was also included in the accounts payable to related party on the condensed consolidated balance sheets.
9. Stockholders’ Deficit
Common Stock
Common Stock Issued for Cash
During the six months ended June 30, 2022, thethe Company received $9.5 million from issuance of 13.1issued approximately 15.2 million shares of common stock to various investors.
Warrants Exercised for Cash
During the six months ended June 30, 2022, the Company received $9.6certain lenders in lieu of cash payments on $7.4 million from the exercise of warrants issued in the past with an exercise price between $0.18outstanding debt, including $0.7 million interest, and $0.70. The Company issued approximately 39.0settled $1.1 million shares of common stock upon these warrant exercises.
Warrants and Options Cashless Exercise
During the six months ended June 30, 2022, certain warrant holders elected to exercise some of their warrants pursuant to cashless exercise formulas. The Company issued approximately 26.8 million shares of common stock for exercise of 31.6 million warrants at an exercise price between $0.18 and $0.52.
During the six months ended June 30, 2022, certain options holders elected to exercise some of their options pursuant to cashless exercise formulas. The Company issued approximately 2.1 million shares of common stock for exercise of 3.3 million warrants at an exercise price between $0.25 and $0.34.true-up provision (see Note 7).
Stock Purchase Warrants
The following is a summary of warrant activity for the sixthree months ended June 30, 2022March 31, 2023 (dollars in thousands, except per share data):
| | | | | | | | | | | | | | |
|
| Number of |
| Weighted Average |
| Remaining |
| Number of |
| Weighted Average |
| Remaining | ||
| | Warrants | | Exercise Price | | Contractual Term | | Warrants | | Exercise Price | | Contractual Term | ||
Outstanding as of January 1, 2022 |
| 225,469 | | $ | 0.30 |
| 0.96 | |||||||
Outstanding as of January 1, 2023 |
| 141,048 | | $ | 0.31 |
| 1.16 | |||||||
Warrants exercised for cash |
| (39,004) | |
| 0.25 |
| |
| (12,320) | |
| 0.22 |
| — |
Cashless warrrants exercise | | (31,645) | | | 0.22 | | | | (10,615) | | | 0.20 | | — |
Warrants expired and cancellation |
| (1,710) | |
| 1.64 |
| |
| (250) | |
| 1.36 |
| — |
Outstanding as of June 30, 2022 |
| 153,110 | | $ | 0.31 |
| 1.40 | |||||||
Outstanding as of June 30, 2023 |
| 117,863 | | $ | 0.31 |
| 1.72 |
The options and warrants held by Ms. Powers and Mr. Goldman are subject to an ongoing suspension on a rolling basis pursuant to the Blocker Letter. In addition, other executive officers and directors extended their suspensions to various dates until at least August 31, 2022.Letter Agreement.
17
At June 30, 2022,2023, of the 153approximately 118 million total outstanding warrants listed above, approximately 14298 million warrants were under blockthe Blocker Letter Agreement or suspension agreements.
Warrant Modifications
Between January 10 and June 30, 2023, the Company amended multiple warrants whereby the maturity dates of certain warrants were extended for an additional approximately 3 months. The value of these modifications were calculated using the Black-Scholes-Merton option pricing model based on the following weighted average assumptions.
| | | | | | | |
|
| Post-modification |
| Pre-modification |
| ||
Exercise price | | $ | 0.29 | | $ | 0.30 | |
Expected term (in years) | |
| 1.9 | |
| 1.6 | |
Volatility | |
| 70 | % |
| 72 | % |
Risk-free interest rate | |
| 4.7 | % |
| 4.6 | % |
Dividend yield | |
| 0 | % |
| 0 | % |
At August 1, 2022,The incremental fair value attributable to the modified awards compared to the original awards immediately prior to the modification was calculated at $1.1 million, of which $0.2 million was associated with debt financing and was recognized as an additional debt discount (see Note 7), and the remaining $0.9 million was treated as a totaldeemed dividend and is reflected as “Deemed dividend related to warrant modifications” in the accompanying condensed consolidated statement of approximately 141 million warrants were under block or suspension until between August 15, 2022operations and December 15, 2022.comprehensive loss.
10.12. Commitments and Contingencies
Operating Lease- Lessee Arrangements
The Company has operating leases for corporate offices in the U.S. and U.K., and for manufacturing facilities in the U.K. Leases with an initial term of 12 months or less are not recorded in the balance sheet. The Company has elected the practical expedient to account for each separate lease component of a contract and its associated non-lease components as a single lease component, thus causing all fixed payments to be capitalized. The Company also elected the package of practical expedients permitted within the new standard, which among other things, allows the Company to carry forward historical lease classification. The lease renewal options have not been included in the calculation of the lease liabilities and right-of-use (“ROU”) assets as the Company has not yet determined whether to exercise the options. Variable lease payment amounts that cannot be determined at the commencement of the lease such as increases in lease payments based on changes in index rates or usage, are not included in the ROU assets or liabilities. These are expensed as incurred and recorded as variable lease expense.
At June 30, 2022, the Company had operating lease liabilities of approximately $4.9 million for both the 20-year lease of the building for the manufacturing facility in Sawston, U.K., and the current office lease in the U.S. ROU assets of approximately $4.3 million for the Sawston lease and U.S. office lease are included in the condensed consolidated balance sheet.
1821
At June 30, 2023, the Company had operating lease liabilities of approximately $4.8 million for both the 20-year lease of the building for the manufacturing facility in Sawston, U.K., and the current office lease in the U.S. and ROU assets of approximately $4.2 million for the Sawston lease and U.S. office lease are included in the condensed consolidated balance sheet.
The following summarizes quantitative information about the Company’s operating leases (amount in thousands):
| | | | | | | | | | | | | | | | | | |
| | For the Six Months ended | | For the six months ended | ||||||||||||||
| | June 30, 2022 | | June 30, 2023 | ||||||||||||||
|
| U.K |
| U.S |
| Total |
| U.K |
| U.S |
| Total | ||||||
Lease cost |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Operating lease cost | | $ | 309 | | $ | 130 | | $ | 439 | | $ | 293 | | $ | 124 | | $ | 417 |
Short-term lease cost | |
| 34 | |
| — | |
| 34 | |
| 49 | |
| — | |
| 49 |
Variable lease cost | |
| — | |
| 12 | |
| 12 | |
| — | |
| 7 | |
| 7 |
Sub-lease income | |
| (73) | |
| — | |
| (73) | |
| (72) | |
| — | |
| (72) |
Total | | $ | 270 | | $ | 142 | | $ | 412 | | $ | 270 | | $ | 131 | | $ | 401 |
| | | | | | | | | | | | | | | | | | |
Other information | |
|
| |
|
| |
|
| |
| | |
| | |
| |
Operating cash flows from operating leases | | $ | (325) | | $ | (144) | | $ | (469) | | $ | (308) | | $ | (148) | | $ | (457) |
Weighted-average remaining lease term – operating leases | |
| 8.7 | |
| 1.5 | |
|
| |
| 8.2 | |
| 0.9 | |
| |
Weighted-average discount rate – operating leases | |
| 12 | % |
| 12 | % |
|
| |
| 12 | % |
| 12 | % |
| |
| | | | | | | | | | | | | | | | | | |
| | For the Six Months ended | | For the Six Months ended | ||||||||||||||
| | June 30, 2021 | | June 30, 2022 | ||||||||||||||
|
| U.K |
| U.S |
| Total |
| U.K |
| U.S |
| Total | ||||||
Lease cost |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Operating lease cost | | $ | 330 | | $ | 147 | | $ | 477 | | $ | 309 | | $ | 130 | | $ | 439 |
Short-term lease cost | |
| 25 | |
| — | |
| 25 | |
| 34 | |
| — | |
| 34 |
Variable lease cost | |
| 48 | |
| 5 | |
| 53 | |
| — | |
| 12 | |
| 12 |
Total | | $ | 403 | | $ | 152 | | $ | 555 | | | (73) | | | — | | | (73) |
| | | | | | | | | | | $ | 270 | | $ | 142 | | $ | 412 |
Other information | |
| | |
| | |
| | |
| | |
| | |
| |
Operating cash flows from operating leases | | $ | (347) | | $ | (84) | | $ | (431) | | $ | (325) | | $ | (144) | | $ | (469) |
Weighted-average remaining lease term – operating leases | |
| 8.6 | |
| 2.1 | |
| | |
| 8.7 | |
| 1.5 | |
| |
Weighted-average discount rate – operating leases | |
| 12 | % |
| 12 | % |
| | |
| 12 | % |
| 12 | % |
| |
The Company recorded lease costs as a component of general and administrative expense during the three and six months ended June 30, 20222023 and 2021,2022, respectively.
Maturities of our operating leases, excluding short-term leases and sublease agreement, are as follows:
| | | | | | |
Six months ended December 31, 2022 | | $ | 450 | |||
Year ended December 31, 2023 |
| | 906 | |||
Six months ended December 31, 2023 | | $ | 466 | |||
Year ended December 31, 2024 | | | 812 |
| | 838 |
Year ended December 31, 2025 | | | 607 | | | 633 |
Year ended December 31, 2026 | | | 607 | | | 633 |
Year ended December 31, 2027 | | | 633 | |||
Thereafter | | | 7,269 | | | 6,947 |
Total | | | 10,651 | | | 10,151 |
Less present value discount | | | (5,748) | | | (5,397) |
Operating lease liabilities included in the Condensed Consolidated Balance Sheet at June 30, 2022 | | $ | 4,903 | |||
Operating lease liabilities included in the Condensed Consolidated Balance Sheet at June 30, 2023 | | $ | 4,754 |
1922
Maturities of our operating leases under the sublease agreement, based on the current exchange rate, are as follows:
| | | | | | |
Six months ended December 31, 2022 |
| $ | 72 | |||
Year ended December 31, 2023 |
| | 145 | |||
Six months ended December 31, 2023 |
| $ | 73 | |||
Year ended December 31, 2024 |
| | 145 |
| | 145 |
Year ended December 31, 2025 |
| | 145 |
| | 145 |
Year ended December 31, 2026 |
| | 145 |
| | 145 |
Thereafter |
| | 1,740 |
| | 1,740 |
Total | | $ | 2,392 | | $ | 2,248 |
ManufacturingAdvent BioServices Services Agreements
Advent BioServicesAgreement
On May 14, 2018, the Company entered into a DCVax®-L Manufacturing and Services Agreement (“MSA”) with Advent BioServices, a related party which was formerly part of Cognate BioServices and was spun off separately as part of an institutional financing of Cognate. The Advent AgreementMSA provides for manufacturing of DCVax-L products at an existing facility in London. The AgreementMSA is structured in the same manner as the Company’s prior agreements with Cognate BioServices. The Advent Agreement provided for a program initiation payment of approximately $1.0 million (which was fully paid in 2018), in connection with technology transfer and operations to the U.K. from Germany, development of new Standard Operating Procedures (SOPs) for the London facility, selection of new suppliers and auditing for GMP compliance, and other preparatory activities. The Advent AgreementMSA provides for certain payments for achievement of milestones and, as was the case under the prior agreement with Cognate BioServices, the Company is required to pay certain fees for dedicated production capacity reserved exclusively for DCVax production and pay for manufacturing of DCVax-L products for a certain minimum number of patients, whether or not the Company fully utilizes the dedicated capacity and number of patients. The MSA remains in force until five years after the first commercial sales of DCVax-L products pursuant to a marketing authorization, accelerated approval or other commercial approval, unless cancelled. Either party may terminate the MSA on twelve months’ notice, to allow for transition arrangements by both parties.
On November 8, 2019, During the Company and Advent entered into an Ancillary Services Agreement with an 8-month Termnotice period services would still be provided. Minimum required payments for U.K. Facility Development Activities and Compassionate Use Program Activities. The Ancillary Services Agreement establishes a structure under which Advent develops Statements of Work (“SOWs”) for the U.K. Facility Development Activities and Compassionate Use Program Activities and delivers those SOWsthis notice period are anticipated to the Company for review and approval. After an SOW is approved by the Company, Advent will proceed with or continue the applicable services and will invoice the Company pursuant to the SOW. Since both the U.K. Facility Development and the Compassionate Use Program involve pioneering and uncertainties in most aspects, the invoicing under the Ancillary Services Agreement is on the basis of costs incurred plus fifteen percent. The Agreement may also cover agreement by the parties and SOWs for operational milestones and related payments. The Ancillary Services Agreement had an original term of eight months, which ended in July 2020. The Company extended the term by 12 months to July 2021 and another 12 months to July 2022, with no other changes, and recently extended it for another 12 months to July 2023.
During April 2022, the Company entered into a Statement of Work #6 (the “SOW 6”) with Advent to be incorporated into the Ancillary Services Agreement. SOW 6 provides for 5 workstreams that are prerequisites for an application for regulatory approval of DCVax-L, for drafting of key portions of the application and for three required licenses for the Sawston facility. The SOW provides for baseline costs and for milestone incentives for successful completion of each of the workstreams, for the completion of the application and regulatory acceptance of the submission, and for regulatory approval of each of the licenses. The milestone incentives will be a combination of cash and stock, and will not be paid until they are achieved and earned, as described in Note 8. Related Parties Transactions above.total approximately £4.4 million ($5.6 million).
2023
The Company entered into SOW 6 with Advent, which was incorporated into the Ancillary Services Agreement on April 1, 2022 and amended it on September 26, 2022. The milestone incentives involve a combination of cash and stock and are not paid until they are achieved and earned, as described in Note9.
German Tax Matter
The German tax authorities have audited our wholly owned subsidiary, NW Bio GmbH, for 2013-2015. The2013-2015 and assessed additional tax against the subsidiary. NW Bio GmbH submitted substantial documentation to refute certain aspects of the assessments and the German tax authorities agreed in principle with the Company’s proposed revised approach and settlement offer. A final settlement bill was received from the German Tax Authority confirming that only a portion of the original bill was owed, €277,000 (approximately $329,000), for corporate taxes, interest, and reduced penalty for the period under audit, which the Company paid on September 2, 2021. The Company also received and paid the final settlement bill from the local authority for trade taxes for the audit period in the amount of €231,000 (approximately $272,000)$251,000). On November 4, 2021, the Company received a letter from the local tax authorities asking for additional late fees of €513,000 (now approximately $535,000)$558,000) on reimbursable withholding taxes that had been waived during the settlement process. On December 8, 2021, the Company appealed the assessment of additional late fees. Additionally, the Company requested that NW Bio GmbH be deregistered from the trade register, as it no longer had current operations. The deregistration was granted effective December 31, 2021. Between January 2022 and July 2022, the Company received tax bills for the corporate and trade taxes for the 2016-2020 tax years that totaled approximately €222,000 (approximately $232,000)$241,000). On July 27, 2022, we werethe Company was informed that the German Tax Authorities were prepared to waive €135,000 (approximately $141,000)$147,000) of the penalties. The Company isoffered to pay this reduced penalty if an extended payment plan was approved. A response was received dated November 14, 2022 indicating that the tax authority would not be able to grant a further deferral of payment of these penalties. In a letter dated December 27, 2022, the Leipzig tax authority sent letters to the former and current managing directors of NW Bio GmbH giving 30 days to respond to a tax liability questionnaire. Based on the responses to the liability questionnaires the tax authorities have currently assessing its optionsnot directed any further measures against former and response.current managing directors of NW Bio GmbH with respect to tax liability proceedings. The Company currently has €370,000accrued for the current amounts owed for these penalties of €377,000 (approximately $386,000) accrued$410,000) as well as for all unpaid taxes as of June 30, 2022.2023. Based on the Company’s current operating state in Germany and the negotiations, the Company concludesbelieves, based on its evaluation under ASC 740, that the resolution of these tax matters will not likely result in a net material charge to the Company.
Other Contingent Payment Obligation
11. Subsequent Events
Certificate of Elimination of Series A Preferred StockBetween May and Series B Preferred Stock
On July 20, 2022, the Company filed a Certificate of Elimination with the Secretary of State of the State of Delaware with respect to the Company’s Series A Preferred Stock and Series B Preferred Stock pursuant to which both series were eliminated and returned to the status of authorized and unissued preferred shares of the Company, as there are 0 Series A or Series B Preferred shares outstanding.
Certificate of Designation of Series C Preferred Stock
Also on July 20, 2022, the Company filed the Certificate of Designations for Series C Preferred Stock (the “Series C Certificate of Designations”) with the Secretary of State of the State of Delaware, setting forth the terms of the Series C Preferred Stock. The Series C Certificate of Designations, effective as of July 20, 2022, that was created out of the authorized and unissued shares of preferred stock of the Company the Series C Preferred Stock, provides for 10,000,000 shares, par value $0.001 per share, and establishes the rights, preferences and privileges of the Series C.
Financing
During July 2022,June 2023, the Company entered into various Subscription Agreements (the “Series C Subscription Agreements”)certain non-dilutive funding agreements with certainmultiple investors, (the “Series C Investors”). Pursuantpursuant to the Series C Subscription Agreements,which the Company is issuingreceived funding of $4.1 million related to the Series C Investors an aggregate of 299,858 shares ofa gain contingency. These agreements are accounted for under ASC 470 and are recognized as contingent payment obligations on the Company’s Series C Convertible Preferred Stock, par value $0.001 per share (the “Series C Shares”), at a purchase price between $15.75 and $16.00 per share for gross proceeds of approximately $4.7 million. Pursuant to some ofcondensed consolidated balance sheet. The Company’s payment obligations only apply when such are received by the Series C Subscription Agreements, the Company also made approximately $2.0 million partial debt repayment. The Company received approximately $2.7 million net proceeds from the July financing.
Each Series C Shares will be convertible at the option of the holder, only after the convertibility date as defined in the Series C Subscription Agreements, into a total of 25 shares of common stock, par value $0.001 per share.
Debt RedemptionCompany.
In24
13. Subsequent Events
Between July 2022,1, 2023 and August 9, 2023, the Company received $2.1 million in funding from the sale of preferred shares and proceeds of debt arrangements and proceeds related to a gain contingency.
Between July 1, 2023 and August 9, 2023, the Company issued approximately 2.884,000 shares of Series C preferred stock for proceeds of $1.1 million.
In July 2023, approximately 24,000 Series C Shares with a book value of $0.4 million were converted into 0.6 million common shares in accordance with their terms at a ratio of 1:25.
Between July and August 2, 2023, the Company issued approximately 4.9 million shares of common stock to certain lendersa lender in lieu of cash payments on $1.7$2.5 million of outstanding debt.debt, including $0.1 million interest. The Company also issued 0.3 million shares of common stock to that lender to extinguish $0.2 million Share liability.
On July 11, 2023, the Company entered into a one-year convertible note (the “July Convertible Note”) with an individual investor (the “Holder”) with an aggregate principal amount of $0.5 million. The Company received $0.5 million cash from the July Convertible Note. The July Convertible Note bears interest at 10% per annum, and is convertible into Series C preferred shares at $12.50 per share at the Holder’s sole option. The Series C preferred shares are convertible into common stock 30 days after the debt conversion date. Each Series C preferred share is convertible into 25 shares of common stock.
Between July 1, 2023 and August 9, 2023, the Company received $0.5 million in additional non-dilutive funding related to a gain contingency.
2125
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to those statements included with this report. In addition to historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. The words “believe,” “expect,” “intend,” “anticipate,” and similar expressions are used to identify forward-looking statements, but some forward-looking statements are expressed differently. Many factors could affect our actual results, including those factors described under “Risk Factors” in our Form 10-K for the year ended December 31, 20212022 and in Part II Item 1A of this report. These factors, among others, could cause results to differ materially from those presently anticipated by us. You should not place undue reliance on these forward-looking statements.
Overview
We are a biotechnology company focused on developing personalized immune therapies for cancer. We have developed a platform technology, DCVax®, which uses activated dendritic cells to mobilize a patient’s own immune system to attack their cancer.
Our lead product, DCVax®-L, is designed to treat solid tumor cancers in which the tumor can be surgically removed. We have completed a 331-patient international Phase III trial of DCVax-L for Glioblastoma multiformeglioblastoma brain cancer (GBM)(GBM). On May 10, 2022, top line data from the Phase III
The trial results were presented inat a scientific conference in May 2022, and were reported in a peer reviewed publication in JAMA Oncology, a top scientific and medical journal.
In June 2023, the Company presented substantial information from analyses conducted by independent experts on the underlying biology and mechanism of action of its DCVax technology at an Industry Theater presentation during the New York AcademyASCO (American Society of SciencesClinical Oncology) conference. The Company is pursuing further analyses by one of the investigators in the trial. The presentation was made available publicly on a third party site.independent experts, and plans to present further information at an appropriate future conference.
The Company is now working on preparationsin the final stages of preparing an application for seeking regulatory approval of DCVax-L.
Post-COVID difficulties continue to impact supply chains and program operations for The Company is working with teams of specialized consultants on preparation of the Companyapplication package as well as related activities. One of the pre-requisites - obtaining regulatory approval of a Pediatric Investigation Plan (PIP) - was completed during 2022 on an accelerated basis, including regulatory approval to use the same trial design with external controls as was used in the Company’s Phase 3 trial.
In parallel with preparing the application for other companies in this industryapproval of DCVax-L, the Company is working with the contract research organization (CRO) and others. with specialized consultants on preparing the Trial Master File and sites to be inspection-ready for regulators.
The independent service firms have limited capacity, and still have some restrictions on operations. Key experts at certain specialized service providers have been unavailable for periods of time. Other experts have gone on extended leave. Clinical trial site personnel have been unavailable due to being reassigned for COVID,Company and the limited site personnel have hadCRO continue to work under restrictions. Committee processes and regulatory processes have been similarly focused on COVID matters and delayed on other matters. Firms such as the ones storingconduct long-term follow-up in connection with the Phase III trial tissue samples thatof DCVax-L, as there are neededstill patients alive.
The Company and Advent are working together to prepare for certain analyses,potential commercial operations. The buildout of Phase 1B of the Sawston facility, which had been under way since last year, has been completed. On July 24, 2023 the Company changed the name of its UK subsidiary from Aracaris Limited to Northwest Biotherapeutics Limited.
The Company’s wholly owned subsidiary, Flaskworks, is continuing its development work to optimize a system for closed and the firms conducting the analyses, continue to have only limitedautomated manufacturing of DCVax-L products, including optimizing yields. The Company views this as a centerpiece of efforts toward scale-up for potential commercial operations. Even logistical matters such as the shipping of materials have been,
Supply chain issues and equipment backlogs continue to be subjected to substantial difficultiesfactors affecting operations both for Advent and delays.for Flaskworks. This includes months-long backlogs for certain equipment and materials. However, the work is progressing in spite of the backlogs.
On August 28, 2020, the Company acquired Flaskworks, LLC (“Flaskworks”), a company that has developed a system designed to close and automate the manufacturing of cell therapy products such as DCVax®. The Company acquired 100% of the ownership,is in active discussions in regard to certain combination treatment regimens, and Flaskworks became a wholly-owned subsidiary of the Company. Flaskworks was previously owned by its technical founders and Corning Inc. The technical team from Flaskworks joined the Company as part of the Acquisition. It is anticipated that the Flaskworks system will enable substantial scale-up of production volumes of DCVax products and substantial reduction of production costs. The Company’s buildout of the Sawston, UK facility has been designed to proceed in phases, as modules, bothplanning for efficiency in the timing of capital costs and to allow flexibility in operations and usage. The Company anticipates that implementation of the Flaskworks system will enable certain phases of the buildout to be simplified and streamlined.strategic trials with such combination treatments.
In the future, we plan to conduct clinical trials of DCVax-L for other types of solid tumor cancers, beyond brain cancer, when resources permit. Our second product, DCVax®-Direct, is designed to treat inoperable solid tumors. A 40-patient Phase I trial has been completed
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and it included treatment of a diverse range of more than a dozen types of cancers. The Company plansWe plan to work on preparations for Phase II trials of DCVax-Direct as resources permit.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect our reported amounts of assets, liabilities, revenues and expenses.
On an ongoing basis, we evaluate our estimates and judgments, including those related to derivative liabilities, accrued expenses and stock-based compensation. We based our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the reported amounts of revenues and expenses that are not readily apparent from other sources. Actual results could differ
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from those estimates, particularly given the significant social and economic disruptions and uncertainties associated with the ongoinglingering effects from the coronavirus pandemic (“COVID-19”) and the COVID-19 control responses.
Our critical accounting policies and significant estimates are detailed in our Annual Report on Form 10-K for the year ended December 31, 2021.2022. Our critical accounting policies and significant estimates have not changed substantially from those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.2022 other than those included below.
Sequencing
The Company adopted a sequencing policy under ASC 815-40-35 to determine if reclassification of contracts from equity to liabilities is necessary pursuant to ASC 815 due to the Company’s inability to demonstrate if it has sufficient authorized shares. Certain contracts were classified as liabilities as the result of the instruments containing a potentially indeterminable number of shares and, most recently, due to the Company entering into agreements providing for the potential issuance of more shares than authorized. While temporary agreements are in place to keep the potential exercises beneath the number authorized, certain instruments are classified as liabilities, after allocating available authorized shares on the basis of the earliest grant date of potentially dilutive instruments. Pursuant to ASC 815, issuance of stock-based awards to the Company’s employees, nonemployees or directors are not subject to the sequencing policy.
On January 9, 2023, the Company filed a Certificate of Amendment of its Seventh Amended and Restated Certificate of Incorporation (the “Certificate of Amendment”) with the Secretary of the State of Delaware, which effected an increase in the Company’s authorized shares of common stock, from 1.2 billion to 1.7 billion, par value $0.001 per share. As a result of this increase in authorized shares, the liability-classified warrants were reclassified to equity. Approximate 141 million warrants to purchase shares of the Company’s common stock were classified as liabilities through January 8, 2023.
Modification of Equity Classified Warrants
A change in the terms or conditions of a warrant is accounted for as a modification. For a warrant modification accounted for under ASC 815, the effect of a modification shall be measured as the difference between the fair value of the modified warrant over and the fair value of the original warrant immediately before its terms are modified, with each measured on the modification date. The accounting for any incremental fair value of the modified warrants over the original warrants is based on the specific facts and circumstances related to the modification. When a modification is directly attributable to an equity offering, the incremental change in fair value of the warrants is accounted for as an equity issuance cost. When a modification is directly attributable to a debt financing, the incremental change in fair value of the warrants is accounted for as a debt discount or debt issuance cost. For all other modifications, the incremental change in fair value is recognized as a deemed dividend.
Results of Operations
Operating costs:
OperatingOur operating costs and expenses consist primarily of research and development (R&D) expenses. R&D expenses includinginclude clinical trial expenses, which increase when we are actively participating in clinical trials or we are undertaking substantial one-time expenses following trials, such asand increased costs after completion of a Phase III trial, especially for statistical work under the Statistical Analysis Plan,extensive preparations, and other activities related to completion and assessmentteams of the trial and its results. The operating costs also include administrative expenses associated with trials, in addition to R&D expenses, and increase as such operating activities grow.expert consultants, required for an application for product approval.
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In addition to clinical trial relatedand post-trial costs, our operating costs may include ongoing work relating to our DCVax products, including R&D, product characterization, manufacturing process development, quality control process development, and related matters. Going forward, we are also incurring large amountsAdditional substantial costs relate to the development and expansion of costs to carry out and complete statistical analyses, validation work, data reports and other work associated with analyzing the trial results and proceeding.
Following our acquisition of Flaskworks, our operating costs now include the costs for its ongoing operations and its intellectual property filings.manufacturing capacity.
Our operating costs also include the costs of preparations for the launch of new or expanded clinical trial programs.programs, such as our anticipated trials of combination treatment regimens. The preparation costs include payments to regulatory consultants, lawyers, statisticians, sites and others, evaluation of potential investigators, the clinical trial sites and the CROs managing the trials and other service providers, and expenses related to institutional approvals, clinical trial agreements (business contracts with sites), training of medical and other site personnel, trial supplies and other. Additional substantial costs relate to the maintenance and substantial expansion of manufacturing capacity, in both the U.S. and Europe.
Our operating costs also include legal and accounting costs in operating the Company.
The foregoing operating costs include the costs for Flaskworks’ ongoing operations and intellectual property filings, and the operations of our subsidiaries in the U.K., the Netherlands and Germany.
Research and development:
Discovery and preclinical research and developmentR&D expenses include costs for substantial external scientific personnel, technical and regulatory advisers, and others, costs of laboratory supplies used in our internal research and development projects, travel, regulatory compliance, and expenditures for preclinical and clinical trial operation and management when we are actively engaged in clinical trials.
Because we are a pre-revenue company, we do not allocate research and developmentR&D costs on a project basis. We adopted this policy, in part, due to the unreasonable cost burden associated with accounting at such a level of detail and our limited number of financial and personnel resources.
General and administrative:
General and administrative expenses include personnel related salary and benefit expenses, cost of facilities, insurance, travel, legal services, property and equipment and amortization of stock options and warrants.
Three Months Ended June 30, 20222023 and 20212022
We recognized a net loss of $29.7$14.4 million and a net income of $4.4$29.7 million for the three months ended June 30, 20222023 and 2021,2022, respectively.
Research and Development Expense
For the three months ended June 30, 20222023 and 2021,2022, research and development expense was $13.6$6.2 million and $5.5$13.6 million, respectively. The increasedecrease in 2023 was mainly related to SOW 6 that was entered into in April, 2022 for five workstreams that are prerequisites for an application for regulatory approval of DCVax-L, for drafting of key portions of the application and for three required licenses for thefollowing factors:
● | We incurred $0.1 million and $9.1 million R&D expense related to one-time milestone activities under the SOW 6 with Advent BioServices for the three months ended June 30, 2023 and 2022, respectively. We completed 9 out of the total 10 one-time milestones as of March 31, 2023, and therefore, we only expensed $0.1 million for the three months ended June 30, 2023 related to the remaining one milestone. During the three months ended June 30, 2022, we expensed $3.8 million (but only paid $0.5 million) for one-time cash milestones and $5.3 million (but only issued 1.5 million shares of common stock at fair value of $1.4 million) for one-time stock-based milestones that we believe are probable to be achieved and hence to become payable during the contract period. |
● | The stock-based compensation in research and development related to stock options and Flaskworks performance-based awards were reduced by $0.5 million during the three months ended June 30, 2023 compared to the same period in 2022, which was related to less amortization related to previously granted awards. |
● | An increased level of research and development activities in 2023 compared to 2022, which resulted in other R&D expenses increased by approximate $2.0 million. |
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Sawston facility. DuringGeneral and Administrative Expense
For the three months ended June 30, 2023 and 2022, the Company expensed $3.8 million for cash milestones (but only paid $0.5 million) and $5.3 million for stock-based milestones that the Company believes are probable to be achieved and hence to become payable during the contract period. The $5.3 million stock-based compensation expense, for the milestones, were offset by a decrease of $1.9 million of stock-based compensation in research and development which was related to cancellation of certain unvested performance-based awards and less amortization related to previously granted awards.
General and Administrative Expense
Generalgeneral and administrative expenses werewas $7.6 million and $7.9 million, and $7.4 million for three months ended June 30, 2022 and 2021, respectively. The increasedecrease in 2023 was mainly related to a decrease of $0.3 million in consulting expense and $0.4 million in travel and conference expenses, which is partly offset by an increase of approximately $1.7$0.2 million in business travel costs, conferences expenses and D&O insurance premiums, and offset by a decrease of $1.2 million stock-based compensation, which were related to the cancellation of certain unvested performance-based awards and less amortization related to previously granted awards.
compensation.
Change in fair valueFair Value of derivativesDerivatives
DuringWe recognized a non-cash gain of $0.1 million and a non-cash loss of $4.3 million for the three months ended June 30, 2023 and 2022, and 2021, we recognized a non-cash loss of $4.3 million and arespectively. The non-cash gain in 2023 was primarily due to the decrease of $17.5 million, respectively. our stock price.
The 2022 loss was primarily due to the extension of the exercise periods of certain warrants and offset by a decrease of stock price as of June 30, 2022 compared to March 31, 2022. The 2021 gain was primarily due to the decrease of stock price as of June 30, 2021 compared to March 31, 2021.
Loss fromDebt Extinguishment of Debt
During the three months ended June 30, 2022 and 2021,2023, we recognized $0.1issued approximately 6.9 million shares of common stock with a fair value of $3.9 million to certain lenders in lieu of cash payments of $3.2 million of debt, including $0.5 million accrued interest. In addition, pursuant to exchange agreements executed with various holders, the Company is required to potentially issue additional common stock (the “Share liability”) if the stock price is less than the price defined in the exchange agreement as of the true-up date. During the three months ended June 30, 2023, we extinguished Share liabilities of $0.4 million and recognized an additional $0.1 million of Share liabilities. We recognized an approximately $0.4 million debt extinguishment loss during the three months ended June 30, 2023 from the redemptiondebt redemption.
During the three months ended June 30, 2023, we issued approximately 13,000 shares of Series C preferred stock at fair value of $0.2 million to certain loans, respectively. Changes are consistent compared to the same periodlenders in lieu of last year.cash payments of $0.2 million debt, including $25,000 accrued interest. We recognized an approximately $24,000 debt extinguishment loss.
Interest Expense
During the three months ended and June 30, 2023 and 2022, and 2021, we recognizedrecorded interest expense of $1.4$1.3 million and $0.8$1.4 million, respectively. The increasedecrease in interest expense in 2023 was primarily duemainly related to an increasea decrease of outstanding debt as a result of March 31, 2022 compared to the outstanding balance asredemption of March 31, 2021.approximate $18.1 million debt in 2022.
Foreign currency transaction lossgain (loss)
During the three months ended and June 30, 20222023 and 2021,2022, we recognized foreign currency transaction gain of $0.7 million and loss of $2.8 million, and foreign currency transaction gain of $0.3 million, respectively. The lossgain during the three months ended June 30, 2023 was due to the strengtheningweakening of the U.S. dollar relative to the British pound sterling, and Euro. The gainwhile the loss during the three months ended March 31, 2022 was due to the weakeningstrengthening of the U.S. dollar relative to the British pound sterling.
Six Months Ended June 30, 20222023 and 20212022
We recognized a net loss of $43.9$25.1 million and a net income of $0.3$43.9 million for the six months ended June 30, 20222023 and 2021,2022, respectively.
Research and Development Expense
For the six months ended June 30, 20222023 and 2021,2022, research and development expense was including the expense for milestones under SOW 6 with Advent that are expected to be achieved$13.1 million and become payable in the future) was $18.5 million, and $12.4 million, respectively. We incurred an increaseThe decrease in related party research and development expenses of $11.2 million by Advent, of which $9.2 million comprised amounts expensed for SOW 6 milestones that are anticipated to be achieved and become payable in the future (of which the Company only paid $0.5 million during the six months ended June 30, 2022), offset by a decrease of $5.1 million stock-based compensation, which2023 was mainly related to the cancellation of certain unvested performance-based awards and less amortization related to previously granted awards.followings:
We recognized and expensed approximately $14.7 million (including $9.2 million for milestones expected to be achieved and become payable in the future) and $3.5 million in expenses from related parties during the six months ended June 30, 2022 and 2021, respectively.
General and Administrative Expense
● | We incurred $1.4 million and $9.1 million R&D expense related to one-time milestone activities under the SOW 6 with Advent BioServices for the six months ended June 30, 2023 and 2022, respectively. Advent had completed 7 out of the total 10 one-time milestones as of December 31, 2022, and majority of the one-time R&D expense was recognized in 2022. Therefore, we only expensed $1.4 million for the six months ended June 30, 2023 related to the remaining 3 milestones. During the six months ended June 30, 2022, we expensed $3.8 million (but only paid $0.5 million) for one-time cash milestones and $5.3 million (but only issued |
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1.5 million shares of common stock at fair value of $1.4 million) for one-time stock-based milestones that we believe are probable to be achieved and hence to become payable during the contract period. |
● | The stock-based compensation in research and development related to stock options and Flaskworks performance-based awards were reduced by $0.8 million during the six months ended June 30, 2023 compared to the same period in 2022, which was related to less amortization related to previously granted awards. |
● | An increased level of research and development activities in 2023 compared to 2022, which resulted in other R&D expenses increasing by approximately $3.0 million. |
General and administrative expenses were $15.8 million and $20.3 million forAdministrative Expense
For the six months ended June 30, 2023 and 2022, general and 2021,administrative expenses was $14.5 million and $15.8 million, respectively. The decrease in 2023 was mainly related to a decrease of $7.2$1.2 million stock-based compensation,in consulting expense and $0.4 million in travel and conference expenses, which were related to the cancellation of certain unvested performance-based awards and less amortization related to previously granted awards, andis offset by an increase of approximately $2.2$0.1 million in business travel costs, conferences expenses and D&O insurance premiums.
stock-based compensation.
Change in fair valueFair Value of derivativesDerivatives
DuringWe recognized a non-cash gain of $4.0 million and a non-cash loss of $3.7 million for the six months ended June 30, 2023 and 2022, and 2021, we recognized a non-cash loss of $3.7 million and arespectively. The non-cash gain in 2023 was primarily due to the decrease of $35.1 million, respectively. our stock price.
The 2022 loss was primarily due to the extension of the exercise periods of certain warrants and offset by a decrease of stock price as of June 30, 2022 compared to December 31, 2021. The 2021 gain was primarily due to the decrease of stock price as of June 30, 2021 compared to December 31, 2020.
Gain (Loss) fromDebt Extinguishment of Debt
During the six months ended June 30, 20222023, we issued approximately 15.2 million shares of common stock with a fair value of $9.6 million to certain lenders in lieu of cash payments of $7.4 million of debt, including $0.7 million accrued interest. In addition, pursuant to exchange agreements executed with various holders, the Company is required to potentially issue additional common stock (the “Share liability”) if the stock price is less than the price defined in the exchange agreement as of the true-up date. During the six months ended June 30, 2023, we extinguished Share liabilities of $1.1 million and 2021, we recognized debt extinguishment gainan additional $0.6 million of $0.3Share liabilities. We recognized an approximately $1.8 million and debt extinguishment loss during the six months ended June 30, 2023 from the debt redemption.
During the six months ended June 30, 2023, we issued approximately 56,000 shares of Series C preferred stock at fair value of $1.0 million to certain lenders in lieu of cash payments of $0.9 million debt, including $0.1 million respectively. The gain in 2022 was related to $0.4 million gain from the forgiveness of two PPP loans and offset by a loss ofaccrued interest. We recognized an approximately $0.1 million from redemption of certain loans.debt extinguishment loss.
Interest Expense
During the six months ended and June 30, 20222023 and 2021,2022, we recorded interest expense of $3.3$2.3 million and $2.3$3.3 million, respectively. The increasedecrease in interest expense in 2023 was primarily duemainly related to an increasea decrease of outstanding debt as a result of December 31, 2021 compared to the outstanding balance asredemption of December 31, 2020.approximate $18.1 million debt in 2022.
Foreign currency transaction lossgain (loss)
During the sixthree months ended and June 30, 20222023 and 2021,2022, we recognized foreign currency transaction gain of $1.6 million and loss of $3.7 million, and $0.4 million, respectively. The gain during the six months ended June 30, 2023 was due to the weakening of the U.S. dollar relative to the British pound sterling, while the loss during the six months ended June 30, 2022 was due to the strengthening of the U.S. dollar relative to the British pound sterling and Euro, and the fluctuation was much higher this year compared to the same period of last year.sterling.
Liquidity and Capital Resources
We have experienced recurring losses from operations since inception. We have not yet established an ongoing source of revenues and must cover our operating expenses through debt and equity financings to allow us to continue as a going concern. Our ability to continue
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as a going concern depends on the ability to obtain adequate capital to fund operating losses until we generate adequate cash flows from operations to fund our operating costs and obligations. If we are unable to obtain adequate capital, we could be forced to cease operations.
We depend upon our ability, and will continue to attempt, to secure equity and/or debt financing. We cannot be certain that additional funding will be available on acceptable terms, or at all. Our management determined that there was substantial doubt about our ability to continue as a going concern withinfor at least one year after the condensedannual consolidated financial statements were issued, and management’s concerns about our ability to continue as a going concern within the year following this report persist.
Cash Flow
Operating Activities
During the six months ended June 30, 20222023 and 2021,2022, net cash used inoutflows from operations were approximately $27.8$22.8 million and $20.0$27.8 million, respectively. The increasedecrease in cash used in operating activities was primarily attributable to an increasea decrease of $4.2 million in clinical trial related expenditures.payments to external service providers and a decrease of $0.8 million interest payments to note holders.
Investing Activities
We spent approximately $2.6 million and $0.5 million in cash for the purchase of additional equipment and our build out in Sawston, UK during the six months ended June 30, 2023 and 2022, respectively.
Financing Activities
We received approximately $4.8 million of cash from issuance of 0.3 million shares of Series C convertible preferred stock during the six months ended June 30, 2023.
During the six months ended June 30, 2023, we received approximately $10.0 million in cash proceeds from the issuance of a loan to a commercial lender, and during the six months ended June 30, 2022, we received approximately $0.6 million in cash proceeds from the issuance of multiple loans to individual lenders.
We received approximately $1.6 million and $9.6 million of cash from the exercise of warrants during the three months ended June 30, 2023 and 2022, respectively.
We received approximately $9.5 million of cash from issuance of 13.1 million shares of common stock during the six months ended June 30, 2022.
We received approximately $9.6$1.1 million and $4.1 million, inof cash from the exercise of warrants and options during the six months ended June 30, 2022 and 2021, respectively.
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We received approximately $0.6 million from issuance of multiple loansconvertible notes to individual lenders during the six months ended June 30, 2022. 2023.
We received approximately $10.0 million cash proceeds from a loan from a commercial lender, $1.9 million cash from loans from various third-party lenders and $0.4$4.1 million from PPP loansissuance of non-dilutive funding agreements during the six months ended June 30, 2021.2023.
We made aggregate debt payments of $5.3$0.2 million and $0.8$5.3 million during the six months ended June 30, 2023 and 2022, and 2021, respectively.
We made repayment of $0.1 million of investor advances during the six months ended June 30, 2023.
Other factors affecting our ongoing funding requirements include the number of staff we employ, the number of sites, number of patients and amount of activity in our clinical trial programs, the costs of further product and process development work relating to our DCVax products, the costs of preparations for Phase II trials, the costs of expansion of manufacturing, and unanticipated developments. The extent of resources available to us will determine which programs can move forward and at what pace.
Off-Balance Sheet Arrangements
Since our inception, we have not engaged in any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk represents the risk of loss that may result from the change in value of financial instruments due to fluctuations in its market price. Market risk is inherent in all financial instruments. Market risk may be exacerbated in times of trading illiquidity when market
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participants refrain from transacting in normal quantities and/or at normal bid-offer spreads. Our exposure to market risk is directly related to derivatives, debt and equity linked instruments related to our financing activities.
Our assets and liabilities are overwhelmingly denominated in U.S. dollars. We do not use foreign currency contracts or other derivative instruments to manage changes in currency rates. We do not now, nor do we plan to, use derivative financial instruments for speculative or trading purposes. However, these circumstances might change.
The primary quantifiable market risk associated with our financial instruments is sensitivity to changes in interest rates. Interest rate risk represents the potential loss from adverse changes in market interest rates. We use an interest rate sensitivity simulation to assess our interest rate risk exposure. For purposes of presenting the possible earnings effect of a hypothetical, adverse change in interest rates over the 12-month period from our reporting date, we assume that all interest rate sensitive financial instruments will be impacted by a hypothetical, immediate 100 basis point increase in interest rates as of the beginning of the period. The sensitivity is based upon the hypothetical assumption that all relevant types of interest rates that affect our results would increase instantaneously, simultaneously and to the same degree. We do not believe that our cash and equivalents have significant risk of default or illiquidity.
The sensitivity analyses of the interest rate sensitive financial instruments are hypothetical and should be used with caution. Changes in fair value based on a 1% or 2% variation in an estimate generally cannot be extrapolated because the relationship of the change in the estimate to the change in fair value may not be linear. Also, the effect of a variation in a particular estimate on the fair value of financial instruments is calculated independent of changes in any other estimate; in practice, changes in one factor may result in changes in another factor, which might magnify or counteract the sensitivities. In addition, the sensitivity analyses do not consider any action that we may take to mitigate the impact of any adverse changes in the key estimates.
Based on our analysis, as of June 30, 2022,2023, the effect of a 100+/- basis point change in interest rates on the value of our financial instruments and the resultant effect on our net loss are considered immaterial.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation as of June 30, 2022,2023, of the design and operation of our disclosure controls and procedures, as such terms are defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based on this evaluation, management concluded that, as of such date, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
No change in internal control over financial reporting occurred during the most recent quarter with respect to our operations, which materially affected, or is reasonable likely to materially affect, our internal controls over financial reporting.
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Part II - Other Information
Item 1. Legal Proceedings
Derivative Lawsuits by Putative StockholdersOn December 1, 2022, we filed a Complaint in the United States District Court for the Southern District of New York against certain market makers. The Complaint alleges that the defendants engaged in manipulation of the Company’s stock, in violation of the Securities Exchange Act of 1934 and common law fraud, over a period of years. On March 20, 2023, the defendants filed a Motion to Dismiss the Complaint. On April 10, 2023, we filed an Amended Complaint against Canaccord Genuity LLC, Citadel Securities LLC, G1 Execution Services LLC, GTS Securities LLC, Instinet LLC, Lime Trading Corp., and Virtu Americas LLC (Northwest Biotherapeutics Inc. v. Canaccord, et al., No. 1:22-cv-10185-GHW-GWG). The Company plans to pursue this case vigorously.
In February and March,
As previously reported, three stockholders filed in the Delaware Court of Chancery three similar derivative lawsuits against the Company and certain of its directors and officers, including J. Cofer Black, Marnix L. Bosch, Alton L. Boynton, Leslie J. Goldman, Jerry Jasinowski, Navid Malik, and Linda F. Powers (the “Individual Defendants”), alleging the Individual Defendants (i) breached their fiduciary duties, and (ii) were unjustly enriched by director and officer compensation awarded to the Individual Defendants—notwithstanding the fact that approximately 90% of shareholders voted to approve of the Company’s executive compensation (the same compensation that these three stockholders are seeking to challenge) through its Say on Pay vote, and the director awards are subject to shareholder approval. On March 31, 2022, the Delaware Court of Chancery consolidated these actions into a single action under the caption In re Northwest Biotherapeutics, Inc. Stockholder Litigation (the “Derivative Action”).
The Company believes these cases are baseless and intends tois vigorously contestcontesting the Derivative Action.Action.On December 30, 2022, shareholders approved the challenged grants to the directors and ratified the challenged awards to the officers. On February 22, 2023, the Company filed a Motion to Dismiss the case. The parties fully briefed the motion in April 2023 and oral argument on the motion is scheduled for September 2023.
Item 1A. Risk Factors
Applicable risk factors are set forth in the Company’s report on Form 10-K for 2021.2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Not ApplicableNone.
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Item 6. Exhibits
21.1 | | |
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21.2 | | |
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31.1 |
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32.1 | | |
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101.INS | | Inline XBRL Instance Document. |
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101.SCH | | Inline XBRL Schema Document. |
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101.CAL | | Inline XBRL Calculation Linkbase Document. |
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101.DEF | | Inline XBRL Definition Linkbase Document. |
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101.LAB | | Inline XBRL Label Linkbase Document. |
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101.PRE | | Inline XBRL Presentation Linkbase Document. |
| | |
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104 | | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended |
* Filed herewith
** Furnished herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| NORTHWEST BIOTHERAPEUTICS, INC | ||
| | | |
Dated: August 9, | By: | /s/ Linda F. Powers | |
| | Name: | Linda F. Powers |
| | | |
| | | |
| | Title: | President and Chief Executive Officer |
| | | |
| | | Principal Executive Officer |
| | | |
| | | Principal Financial and Accounting Officer |
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