Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31,
☒ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2022. |
or
☐ | ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition from _____________ to _______________.
|
Commission File Number: 333-82900 
ThermoGenesis Holdings, Inc. (Exact name of registrant as specified in its charter) |
| | |
Delaware (State of incorporation) | | 94-3018487 (I.R.S. Employer Identification No.) |
|
2711 Citrus Road Rancho Cordova, California 95742 (Address of principal executive offices) (Zip Code) (916) 858-5100 (Registrant’s telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | | Trading symbol(s) | | Name of each exchange on which registered |
Common Stock, $.001 par value | | THMO | | Nasdaq Capital Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class | | Outstanding at May 18,November 8, 2022 | |
| Common stock, $.001 par value | | 12,829,87745,997,792
| |
ThermoGenesis Holdings, Inc.
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ThermoGenesis Holdings, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
| | | March 31, 2022 | | | December 31, 2021 | | | September 30, 2022 | | | December 31, 2021 | |
ASSETS | | |
Current assets: | | |
Cash and cash equivalents | | $ | 3,652,000 | | | $ | 7,280,000 | | | $ | 3,903,000 | | | $ | 7,280,000 | |
Accounts receivable, net of allowance for doubtful accounts of $156,000 at March 31, 2022 and December 31, 2021 | | 2,175,000 | | | 733,000 | | |
Accounts receivable, net of allowance for doubtful accounts of $149,000 ($156,000 at December 31, 2021) | | | 2,056,000 | | | 733,000 | |
Inventories | | 5,893,000 | | | 5,373,000 | | | 4,912,000 | | | 5,373,000 | |
Prepaid expenses and other current assets | | | 1,474,000 | | | | 1,578,000 | | | | 612,000 | | | | 1,578,000 | |
Total current assets | | 13,194,000 | | | 14,964,000 | | | 11,483,000 | | | 14,964,000 | |
| | | |
Inventories non-current, net | | 1,197,000 | | | 1,709,000 | | | 930,000 | | | 1,709,000 | |
Equipment and leasehold improvements, net | | 1,224,000 | | | 1,261,000 | | | 1,271,000 | | | 1,261,000 | |
Right-of-use operating lease assets, net | | 525,000 | | | 571,000 | | | 426,000 | | | 571,000 | |
Right-of-use operating lease assets – related party, net | | | 3,653,000 | | | -- | |
Goodwill | | 781,000 | | | 781,000 | | | 781,000 | | | 781,000 | |
Other intangible assets, net | | 1,310,000 | | | 1,318,000 | | | 1,294,000 | | | 1,318,000 | |
Other assets | | | 48,000 | | | | 48,000 | | | | 255,000 | | | | 48,000 | |
Total assets | | $ | 18,279,000 | | | $ | 20,652,000 | | | $ | 20,093,000 | | | $ | 20,652,000 | |
| | | |
LIABILITIES AND EQUITY | | |
Current liabilities: | | |
Accounts payable | | $ | 1,866,000 | | | $ | 1,280,000 | | | $ | 1,007,000 | | | $ | 1,280,000 | |
Accrued payroll and related expenses | | 456,000 | | | 348,000 | | | 493,000 | | | 348,000 | |
Deferred revenue – short-term | | 1,159,000 | | | 719,000 | | | 841,000 | | | 719,000 | |
Convertible promissory note – related party | | 10,000,000 | | | -- | | | 5,133,000 | | | -- | |
Interest payable – related party | | 153,000 | | | 2,231,000 | | | 1,099,000 | | | 2,231,000 | |
Convertible promissory note, net | | 1,000,000 | | | 813,000 | | | 1,000,000 | | | 813,000 | |
Other current liabilities | | | 843,000 | | | | 957,000 | | | | 1,395,000 | | | | 957,000 | |
Total current liabilities | | 15,477,000 | | | 6,348,000 | | | 10,968,000 | | | 6,348,000 | |
| | | |
Convertible promissory note – related party, net | | -- | | | 9,245,000 | | | -- | | | 9,245,000 | |
Operating lease obligations – long-term | | 338,000 | | | 398,000 | | | 205,000 | | | 398,000 | |
Operating lease obligations – related party – long-term | | | 3,622,000 | | | -- | |
Deferred revenue – long-term | | 1,163,000 | | | 1,244,000 | | | 1,014,000 | | | 1,244,000 | |
Other noncurrent liabilities | | | 19,000 | | | | 20,000 | | | | 18,000 | | | | 20,000 | |
Total liabilities | | | 16,997,000 | | | | 17,255,000 | | | | 15,827,000 | | | | 17,255,000 | |
| | | |
Commitments and contingencies | | | | | |
| | | |
Stockholders’ equity: | | |
Preferred stock, $0.001 par value; 2,000,000 shares authorized, none outstanding | | -- | | | -- | | |
Preferred stock, $0.001 par value; 2,000,000 shares authorized, none outstanding | | | -- | | | -- | |
| | | |
Common stock, $0.001 par value; 350,000,000 shares authorized; 12,829,877 issued and outstanding (11,911,784 at December 31, 2021) | | 13,000 | | | 12,000 | | |
Common stock, $0.001 par value; 350,000,000 shares authorized; 31,321,362 issued and outstanding (11,911,784 at December 31, 2021) | | | 31,000 | | | 12,000 | |
Additional paid in capital | | 258,614,000 | | | 268,447,000 | | | 267,731,000 | | | 268,447,000 | |
Accumulated deficit | | (256,833,000 | ) | | (264,662,000 | ) | | (262,761,000 | ) | | (264,662,000 | ) |
Accumulated other comprehensive loss | | | 45,000 | | | | 31,000 | | | | 98,000 | | | | 31,000 | |
Total ThermoGenesis Holdings, Inc. stockholders’ equity | | 1,839,000 | | | 3,828,000 | | | 5,099,000 | | | 3,828,000 | |
| | | |
Noncontrolling interests | | | (557,000 | ) | | | (431,000 | ) | | | (833,000 | ) | | | (431,000 | ) |
Total equity | | | 1,282,000 | | | | 3,397,000 | | | | 4,266,000 | | | | 3,397,000 | |
Total liabilities and equity | | $ | 18,279,000 | | | $ | 20,652,000 | | | $ | 20,093,000 | | | $ | 20,652,000 | |
See accompanying notes to the condensed consolidated financial statements.
ThermoGenesis Holdings, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
| | | Three Months Ended
March 31, | | | Three Months Ended
September 30, | | Nine Months Ended September 30, | |
| | | 2022 | | | 2021 | | | 2022 | | | 2021 | | | 2022 | | | 2021 | |
| | | |
Net revenues | | $ | 2,663,000 | | | $ | 1,517,000 | | | $ | 2,115,000 | | | $ | 3,158,000 | | | $ | 7,807,000 | | | $ | 6,876,000 | |
Cost of revenues | | | 1,723,000 | | | | 809,000 | | | | 1,678,000 | | | | 2,043,000 | | | | 5,491,000 | | | | 4,067,000 | |
| | | |
Gross profit | | | 940,000 | | | | 708,000 | | | | 437,000 | | | | 1,115,000 | | | | 2,316,000 | | | | 2,809,000 | |
| | | |
Expenses: | | |
| | | |
Selling, general and administrative | | 1,693,000 | | | 1,992,000 | | | 1,982,000 | | | 1,677,000 | | | 5,665,000 | | | 7,171,000 | |
Research and development | | | 456,000 | | | | 379,000 | | | | 470,000 | | | | 543,000 | | | | 1,317,000 | | | | 1,544,000 | |
| | | |
Total operating expenses | | | 2,149,000 | | | | 2,371,000 | | | | 2,452,000 | | | | 2,220,000 | | | | 6,982,000 | | | | 8,715,000 | |
| | | |
Loss from operations | | (1,209,000 | ) | | (1,663,000 | ) | | (2,015,000 | ) | | (1,105,000 | ) | | (4,666,000 | ) | | (5,906,000 | ) |
| | | |
Other income (expenses): | | |
| Other expenses: | | |
Interest expense | | (823,000 | ) | | (1,519,000 | ) | | (1,391,000 | ) | | (1,530,000 | ) | | (3,572,000 | ) | | (4,573,000 | ) |
Other income (expenses) | | (4,000 | ) | | (1,000 | ) | |
Gain / (loss) on extinguishment of debt | | | -- | | | | 652,000 | | |
Total other expenses | | | (827,000 | ) | | | (868,000 | ) | |
Gain on extinguishment of debt | | | -- | | | -- | | | -- | | | 652,000 | |
Other income/(expense) | | | | 3,000 | | | | 843,000 | | | | (1,000 | ) | | | 833,000 | |
| | | |
Total other expense | | | | (1,388,000 | ) | | | (687,000 | ) | | | (3,573,000 | ) | | | (3,088,000 | ) |
| | | |
Net loss | | | (2,036,000 | ) | | | (2,531,000 | ) | | | (3,403,000 | ) | | | (1,792,000 | ) | | | (8,239,000 | ) | | | (8,994,000 | ) |
| | | |
Loss attributable to noncontrolling interests | | | (126,000 | ) | | | (118,000 | ) | | | (163,000 | ) | | | (18,000 | ) | | | (402,000 | ) | | | (269,000 | ) |
Net loss attributable to common stockholders | | $ | (1,910,000 | ) | | $ | (2,413,000 | ) | | $ | (3,240,000 | ) | | $ | (1,774,000 | ) | | $ | (7,837,000 | ) | | $ | (8,725,000 | ) |
| | | |
COMPREHENSIVE LOSS | | |
Net loss | | $ | (2,036,000 | ) | | $ | (2,531,000 | ) | | $ | (3,403,000 | ) | | $ | (1,792,000 | ) | | $ | (8,239,000 | ) | | $ | (8,994,000 | ) |
Other comprehensive loss: | | |
Foreign currency translation adjustments gain (loss) | | | 14,000 | | | | 1,000 | | | | 22,000 | | | | (1,000 | ) | | | 67,000 | | | | 12,000 | |
Comprehensive loss | | (2,022,000 | ) | | (2,530,000 | ) | | (3,381,000 | ) | | (1,793,000 | ) | | (8,172,000 | ) | | (8,982,000 | ) |
Comprehensive loss attributable to noncontrolling interests | | | (126,000 | ) | | | (118,000 | ) | | | (163,000 | ) | | | (18,000 | ) | | | (402,000 | ) | | | (269,000 | ) |
Comprehensive loss attributable to common stockholders | | $ | (1,896,000 | ) | | $ | (2,412,000 | ) | | $ | (3,218,000 | ) | | $ | (1,775,000 | ) | | $ | (7,770,000 | ) | | $ | (8,713,000 | ) |
| | | |
Per share data: | | |
| | | |
Basic and diluted net loss per common share | | $ | (0.16 | ) | | $ | (0.21 | ) | | $ | (0.10 | ) | | $ | (0.15 | ) | | $ | (0.41 | ) | | $ | (0.74 | ) |
Weighted average common shares outstanding basic and diluted | | | 12,288,517 | | | | 11,446,366 | | |
| | | |
Weighted average common shares outstanding – basic and diluted | | | | 31,265,797 | | | | 11,911,784 | | | | 19,075,331 | | | | 11,757,211 | |
See accompanying notes to the condensed consolidated financial statements.
ThermoGenesis Holdings, Inc.
Condensed Consolidated Statements of Equity
For the Three and Nine Months Ended March 31,September 30, 2022 and 2021
(Unaudited)
| | | Shares | | Common Stock | | Paid in Capital in Excess of Par | | Accumulated Deficit | | AOCL* | | Non- Controlling interests | | Total Equity | | | Shares | | Common Stock | | Paid in Capital in Excess of Par | | Accumulated Deficit | | AOCL* | | Non- Controlling Interests | | Total Equity | |
Balance at January 1, 2022 | | 11,911,784 | | | $ | 12,000 | | | $ | 268,447,000 | | | $ | (264,662,000 | ) | | $ | 31,000 | | | $ | (431,000 | ) | | $ | 3,397,000 | | | 11,911,784 | | | $ | 12,000 | | | $ | 268,447,000 | | | $ | (264,662,000 | ) | | $ | 31,000 | | | $ | (431,000 | ) | | $ | 3,397,000 | |
| | | | | | | | | | | | | | | | | |
Adoption of ASU 2020-06 | | -- | | | -- | | | (10,681,000 | ) | | 9,739,000 | | | -- | | | -- | | | (942,000 | ) | | -- | | | -- | | | (10,681,000 | ) | | 9,739,000 | | | -- | | | -- | | | (942,000 | ) |
Stock-based compensation expense | | -- | | | -- | | | 42,000 | | | -- | | | -- | | | -- | | | 42,000 | | | -- | | | -- | | | 42,000 | | | -- | | | -- | | | -- | | | 42,000 | |
Issuance of common stock via at-the-market offering, net | | 918,093 | | | 1,000 | | | 593,000 | | | -- | | | -- | | | -- | | | 594,000 | | | 918,093 | | | 1,000 | | | 593,000 | | | -- | | | -- | | | -- | | | 594,000 | |
Related party convertible note price reset | | | | | | | 213,000 | | | | | | | | | | 213,000 | | | | | | | | 213,000 | | | | | | | | | | 213,000 | |
Foreign currency translation gain | | -- | | | -- | | | -- | | | -- | | | 14,000 | | | -- | | | 14,000 | | | -- | | | -- | | | -- | | | -- | | | 14,000 | | | -- | | | 14,000 | |
Net loss | | | -- | | | -- | | | -- | | | (1,910,000 | ) | | -- | | | (126,000 | ) | | (2,036,000 | ) | | | -- | | | -- | | | -- | | | (1,910,000 | ) | | -- | | | (126,000 | ) | | (2,036,000 | ) |
Balance at March 31, 2022 | | | 12,829,877 | | | $ | 13,000 | | | $ | 258,614,000 | | | $ | (256,833,000 | ) | | $ | 45,000 | | | $ | (557,000 | ) | | $ | 1,282,000 | | | | 12,829,877 | | | $ | 13,000 | | | $ | 258,614,000 | | | $ | (256,833,000 | ) | | $ | 45,000 | | | $ | (557,000 | ) | | $ | 1,282,000 | |
| | | | | | | | | | | | | | | | | |
Stock-based compensation expense | | | -- | | | -- | | | 72,000 | | | -- | | | -- | | | -- | | | 72,000 | |
Issuance of common stock via at-the-market offering, net | | | 4,397,329 | | | 4,000 | | | 1,446,000 | | | -- | | | -- | | | -- | | | 1,450,000 | |
Related party convertible note price reset | | | -- | | | -- | | | 2,475,000 | | | -- | | | -- | | | -- | | | 2,475,000 | |
Conversion of related party note payable to common stock | | | 10,552,234 | | | 11,000 | | | 2,989,000 | | | -- | | | -- | | | -- | | | 3,000,000 | |
Foreign currency translation gain | | | -- | | | -- | | | -- | | | -- | | | 31,000 | | | -- | | | 31,000 | |
Net loss | | | | -- | | | -- | | | -- | | | (2,688,000 | ) | | -- | | | (113,000 | ) | | (2,801,000 | ) |
Balance at June 30, 2022 | | | | 27,779,440 | | | 28,000 | | | 265,596,000 | | | (259,521,000 | ) | | 76,000 | | | (670,000 | ) | | 5,509,000 | |
| | | | | | | | | | | | | | | | | |
Stock-based compensation expense | | | -- | | | -- | | | 70,000 | | | -- | | | -- | | | -- | | | 70,000 | |
Issuance of common stock via at-the-market offering, net | | | 3,541,922 | | | 3,000 | | | 990,000 | | | -- | | | -- | | | -- | | | 993,000 | |
Related party convertible note price reset | | | -- | | | -- | | | 1,075,000 | | | -- | | | -- | | | -- | | | 1,075,000 | |
Foreign currency translation gain | | | -- | | | -- | | | -- | | | -- | | | 22,000 | | | -- | | | 22,000 | |
Net loss | | | | -- | | | -- | | | -- | | | (3,240,000 | ) | | -- | | | (163,000 | ) | | (3,403,000 | ) |
Balance at September 30, 2022 | | | | 31,321,362 | | | $ | 31,000 | | | $ | 267,731,000 | | | $ | (262,761,000 | ) | | $ | 98,000 | | | $ | (833,000 | ) | | $ | 4,266,000 | |
| | | Shares | | | Common Stock | | | Paid in Capital in Excess of Par | | | Accumulated Deficit | | | AOCL* | | | Non-Controlling interests | | | Total Equity | |
Balance at January 1, 2021 | | | 8,934,952 | | | $ | 9,000 | | | $ | 259,058,000 | | | $ | (253,283,000 | ) | | $ | 16,000 | | | $ | 70,000 | | | $ | 5,870,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Stock-based compensation expense | | | -- | | | | -- | | | | 258,000 | | | | -- | | | | -- | | | | -- | | | | 258,000 | |
Issuance of common stock via at- the-market offering, net | | | 2,976,832 | | | | 3,000 | | | | 6,829,000 | | | | -- | | | | -- | | | | -- | | | | 6,832,000 | |
Foreign currency translation gain | | | -- | | | | -- | | | | -- | | | | -- | | | | 1,000 | | | | -- | | | | 1,000 | |
Net loss | | | -- | | | | -- | | | | -- | | | | (2,413,000 | ) | | | -- | | | | (118,000 | ) | | | (2,531,000 | ) |
Balance at March 31, 2021 | | | 11,911,784 | | | $ | 12,000 | | | $ | 266,145,000 | | | $ | (255,696,000 | ) | | $ | 17,000 | | | $ | (48,000 | ) | | $ | 10,430,000 | |
* Accumulated other comprehensive loss.
See accompanying notes to the condensed consolidated financial statements.
| | | Shares | | | Common Stock | | | Paid in Capital in Excess of Par | | | Accumulated Deficit | | | AOCL* | | | Non- Controlling Interests | | | Total Equity | |
Balance at January 1, 2021 | | | 8,934,952 | | | $ | 9,000 | | | $ | 259,058,000 | | | $ | (253,283,000 | ) | | $ | 16,000 | | | $ | 70,000 | | | $ | 5,870,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Stock-based compensation expense | | | -- | | | | -- | | | | 258,000 | | | | -- | | | | -- | | | | -- | | | | 258,000 | |
Issuance of common stock via at-the-market offering, net | | | 2,976,832 | | | | 3,000 | | | | 6,829,000 | | | | -- | | | | -- | | | | -- | | | | 6,832,000 | |
Foreign currency translation gain | | | -- | | | | -- | | | | -- | | | | -- | | | | 1,000 | | | | -- | | | | 1,000 | |
Net loss | | | -- | | | | -- | | | | -- | | | | (2,413,000 | ) | | | -- | | | | (118,000 | ) | | | (2,531,000 | ) |
Balance at March 31, 2021 | | | 11,911,784 | | | $ | 12,000 | | | $ | 266,145,000 | | | $ | (255,696,000 | ) | | $ | 17,000 | | | $ | (48,000 | ) | | $ | 10,430,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Stock-based compensation expense | | | -- | | | | -- | | | | 2,099,000 | | | | -- | | | | -- | | | | -- | | | | 2,099,000 | |
Foreign currency translation gain | | | -- | | | | -- | | | | -- | | | | -- | | | | 12,000 | | | | -- | | | | 12,000 | |
Net loss | | | -- | | | | -- | | | | -- | | | | (4,539,000 | ) | | | -- | | | | (133,000 | ) | | | (4,672,000 | ) |
Balance at June 30, 2021 | | | 11,911,784 | | | $ | 12,000 | | | $ | 268,244,000 | | | $ | (260,235,000 | ) | | $ | 29,000 | | | $ | (181,000 | ) | | $ | 7,869,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Stock-based compensation expense | | | -- | | | | -- | | | | 92,000 | | | | -- | | | | -- | | | | -- | | | | 92,000 | |
Foreign currency translation gain | | | -- | | | | -- | | | | -- | | | | -- | | | | (1,000 | ) | | | -- | | | | (1,000 | ) |
Net loss | | | -- | | | | -- | | | | -- | | | | (1,774,000 | ) | | | -- | | | | (18,000 | ) | | | (1,792,000 | ) |
Balance at September 30, 2021 | | | 11,911,784 | | | $ | 12,000 | | | $ | 268,336,000 | | | $ | (262,009,000 | ) | | $ | 28,000 | | | $ | (199,000 | ) | | $ | 6,168,000 | |
ThermoGenesis Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | Three Months Ended March 31, | |
| | | 2022 | | | 2021 | |
Cash flows from operating activities: | | | | | | | | |
Net loss | | $ | (2,036,000 | ) | | $ | (2,531,000 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | |
Depreciation and amortization | | | 150,000 | | | | 166,000 | |
Stock-based compensation expense | | | 42,000 | | | | 258,000 | |
Amortization of debt discount/premium, net | | | 213,000 | | | | 908,000 | |
Reserve for excess and slow-moving inventories | | | 374,000 | | | | (4,000 | ) |
Gain on extinguishment of debt | | | -- | | | | (652,000 | ) |
Net change in operating assets and liabilities: | | | | | | | | |
Accounts receivable | | | (1,442,000 | ) | | | 556,000 | |
Inventories | | | (383,000 | ) | | | (718,000 | ) |
Prepaid expenses and other assets | | | 103,000 | | | | 148,000 | |
Accounts payable | | | 599,000 | | | | (38,000 | ) |
Interest payable – related party | | | (2,078,000 | ) | | | (1,532,000 | ) |
Accrued payroll and related expenses | | | 107,000 | | | | 124,000 | |
Deferred revenue – short term | | | 441,000 | | | | 88,000 | |
Other current liabilities | | | (112,000 | ) | | | (603,000 | ) |
Long-term deferred revenue and other noncurrent liabilities | | | (137,000 | ) | | | (122,000 | ) |
| | | | | | | | | |
Net cash used in operating activities | | | (4,159,000 | ) | | | (3,952,000 | ) |
| | | | | | | | | |
Cash flows from investing activities: | | | | | | | | |
Capital expenditures | | | (65,000 | ) | | | (27,000 | ) |
Net cash used in investing activities | | | (65,000 | ) | | | (27,000 | ) |
| | | | | | | | | |
Cash flows from financing activities: | | | | | | | | |
Proceeds from issuance of common stock, net of $87,000 in expenses | | | 594,000 | | | | 6,832,000 | |
Net cash provided by financing activities | | | 594,000 | | | | 6,832,000 | |
| | | | | | | | | |
Effects of foreign currency rate changes on cash and cash equivalents | | | 2,000 | | | | -- | |
Net increase (decrease) in cash and cash equivalents | | | (3,628,000 | ) | | | 2,853,000 | |
| | | | | | | | | |
Cash and cash equivalents at beginning of period | | | 7,280,000 | | | | 7,161,000 | |
Cash and cash equivalents at end of period | | $ | 3,652,000 | | | $ | 10,014,000 | |
| | | | | | | | | |
Supplemental disclosures of cash flow information: | | | | | | | | |
Cash paid for related party interest | | $ | 2,628,000 | | | $ | 2,082,000 | |
Cash paid for interest | | $ | 60,000 | | | $ | 60,000 | |
| Related party convertible note price reset | | $ | 213,000 | | | | -- | |
* Accumulated other comprehensive loss.
See accompanying notes to the condensed consolidated financial statements.
ThermoGenesis Holdings, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
| | | Nine Months Ended September 30, | |
| | | 2022 | | | 2021 | |
| Cash flows from operating activities: | | | | | | | | |
Net loss | | $ | (8,239,000 | ) | | $ | (8,994,000 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | |
Depreciation and amortization | | | 666,000 | | | | 477,000 | |
Stock based compensation expense | | | 184,000 | | | | 2,449,000 | |
Amortization of debt discount, net | | | 1,897,000 | | | | 2,723,000 | |
Reserve for excess and slow-moving inventories | | | 654,000 | | | | 336,000 | |
Gain on extinguishment of debt | | | -- | | | | (652,000 | ) |
| Net change in operating assets and liabilities: | | | | | | | | |
Accounts receivable | | | (1,323,000 | ) | | | (1,190,000 | ) |
Inventories | | | 582,000 | | | | (742,000 | ) |
Prepaid expenses and other assets | | | 757,000 | | | | (260,000 | ) |
Accounts payable | | | (210,000 | ) | | | 145,000 | |
Interest payable – related party | | | (1,132,000 | ) | | | (413,000 | ) |
Accrued payroll and related expenses | | | 145,000 | | | | 111,000 | |
Deferred revenue – short-term | | | 122,000 | | | | 334,000 | |
Other current liabilities | | | 446,000 | | | | (271,000 | ) |
Long-term deferred revenue and other noncurrent liabilities | | | (650,000 | ) | | | (347,000 | ) |
| | | | | | | | | |
Net cash used in operating activities | | | (6,101,000 | ) | | | (6,294,000 | ) |
| | | | | | | | | |
Cash flows from investing activities: | | | | | | | | |
Capital expenditures | | | (308,000 | ) | | | (64,000 | ) |
| | | | | | | | | |
Net cash used in investing activities | | | (308,000 | ) | | | (64,000 | ) |
| | | | | | | | | |
Cash flows from financing activities: | | | | | | | | |
| | | | | | | | | |
Proceeds from issuance of common stock, net of expenses | | | 3,037,000 | | | | 6,832,000 | |
| | | | | | | | | |
Net cash provided by financing activities | | | 3,037,000 | | | | 6,832,000 | |
| | | | | | | | | |
Effects of foreign currency rate changes on cash and cash equivalents | | | (5,000 | ) | | | (1,000 | ) |
Net increase (decrease) in cash, cash equivalents and restricted cash | | | (3,377,000 | ) | | | 473,000 | |
| | | | | | | | | |
Cash, cash equivalents and restricted cash at beginning of period | | | 7,280,000 | | | | 7,161,000 | |
Cash, cash equivalents and restricted cash at end of period | | $ | 3,903,000 | | | $ | 7,634,000 | |
| | | | | | | | | |
| Supplemental disclosures of cash flow information: | | | | | | | | |
Cash paid for related party interest | | $ | 2,628,000 | | | $ | 2,082,000 | |
Cash paid for interest | | $ | 180,000 | | | $ | 180,000 | |
Right-to-use asset acquired under operating lease | | $ | 3,863,000 | | | | -- | |
Related party promissory note converted to common stock | | $ | 3,000,000 | | | | -- | |
Related party convertible note price reset | | $ | 3,763,000 | | | | -- | |
Transfer of inventory to fixed assets | | | -- | | | $ | 181,000 | |
See accompanying notes to the condensed consolidated financial statements.
ThermoGenesis Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Description of Business | Description of Business |
The CompanyThermoGenesis Holdings, Inc. (“ThermoGenesis Holdings,” the “Company,” “we,” “our,” “us”) develops and commercializes a range of automated technologies for cell-banking, cell-processing, and cell-based therapeutics. Since the 1990’s, ThermoGenesis Holdings has been a pioneer in, and a leading provider of automated systems that isolate, purify and cryogenically store units of hematopoietic stem and progenitor cells for the cord blood banking industry. The Company was founded in 1986 and is incorporated in the State of Delaware and headquartered in Rancho Cordova, CA.
Medical Device Products for Automated Cell Processing
The Company provides the AutoXpress® and BioArchive® platforms for automated clinical bio-banking, PXP® platform for point-of-care cell-based therapies and the CAR-TXpress™ platform for large scale cell manufacturing services. All product lines are reporting as a single reporting segment in the financial statements.
2. Going ConcernPlanned CDMO Business
At In March 31, 2022, our Board of Directors approved the planned expansion of the Company’s business to include contract development and manufacturing services for cell and cell-based gene therapies. The Company had cashplans to develop and cash equivalentsbuild-out the capabilities to become a Contract Development and Manufacturing Organization (“CDMO”) for cell and cell-based gene therapies by partnering with Boyalife Genomics Tianjin Ltd., a China-based CDMO (“Boyalife Genomics”), to in-license certain know-how and other intellectual property from Boyalife Genomics, and by leasing and building out a cell manufacturing facility in Sacramento, California. We intend to leverage our existing technology and combine it with the in-licensed technologies to develop a proprietary manufacturing platform for cell manufacturing activities and other cell manufacturing solutions for clients with therapeutic candidates in various stages of $3,652,000 and working capitaldevelopment. We are targeting the launch of $(2,283,000). our CDMO services to customers in 2023.
The Company has incurred historical losses from operations and expects to continue to incur operating losses in the near future. The Company may need to raise additional capital to grow its business, fund operating expenses and make interest payments. The Company’s ability to fund its liquidity needs is subject to various risks, many of which are beyond its control. The Company may seek additional funding through debt borrowings, sales of debt or equity securities or strategic partnerships. The Company cannot guarantee that such funding will be available on a timely basis, in needed quantities or on terms favorable to the Company, if at all. These factors and other indicators raise substantial doubt about the Company’s ability to continue as a going concern within one year from the filing date of this report.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.
3. Summary of Significant Accounting Polices
3. | Summary of Significant Accounting Polices |
There have been no material changes in the Company’s significant accounting policies to those disclosed in the 2021 Annual Report.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP)(“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q10-Q and Article 8 of Regulation S-X.S-X. Accordingly, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such Securities and Exchange Commission (SEC)(“SEC”) rules and regulations and accounting principles applicable for interim periods. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Events subsequent to the balance sheet date have been evaluated for inclusion in the accompanying condensed consolidated financial statements through the date of issuance.
Operating results for the three-month period and nine months ended March 31,September 30, 2022 are not necessarily indicative of the results that may be expected for the Company’s fiscal year ending ended December 31, 2022. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in ThermoGenesis Holdings’ Annual Report on Form 10-K10-K for the year ended December 31, 2021.
Principles of Consolidation
The consolidated financial statements include the accounts of ThermoGenesis Holdings and its wholly-owned subsidiaries, ThermoGenesis Corp. and TotipotentRX Cell Therapy, Pvt. Ltd and ThermoGenesis Corp’s majority-owned subsidiary, CARTXpress Bio. All significant intercompany accounts and transactions have been eliminated upon consolidation.
The 20% ownership interest of CARTXpress Bio that is not owned by ThermoGenesis Holdings is accounted for as a non-controlling interest as the Company has an 80% ownership interest in CARTXpress Bio. Earnings or losses attributable to other stockholders of a consolidated affiliated company are classified separately as "non-controlling interest" in the Company's consolidated statements of operations. Net loss attributable to non-controlling interests reflects only its share of the after-tax earnings or losses of an affiliated company. The Company's condensed consolidated balance sheets reflect non-controlling interests within the equity section.
Recently Adopted Accounting Standards
On January 1, 2022, we adopted Accounting Standards Update (“ASU”) 2020-062020-06 “Debt-Debt with Conversion and Other Options (“Subtopic 470-20470-20”) and Derivatives and Hedging-Contracts in Entity’s Own Equity (“Subtopic 815-40815-40”):Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity,” using the modified retrospective method. ASU 2020-062020-06 provides guidance on how to account for contracts on an entity’s own equity. This ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. Specifically, the ASU eliminated the need for the Company to assess whether a contract on the entity’s own equity (1)(1) permits settlement in unregistered shares, (2)(2) whether counterparty rights rank higher than shareholder’s rights, and (3)(3) whether collateral is required. The Company recognized a cumulative effect of $9,739,000 of initially applying the ASU as an adjustment to the January 1, 2022 opening balance of accumulated deficit. Due to the recombination of the equity conversion component of our convertible debt outstanding, the 2022 opening balance of additional paid in capital was reduced by $10,681,000 and the debt discounts of the convertible promissory notes were reduced $10,681,000 and $942,000, respectively.$942,000.
4. Related Party Transactions | Related Party Transactions |
Convertible Promissory Note and Revolving Credit Agreement
In March 2017, ThermoGenesis Holdings entered into a Credit Agreement with Boyalife Asset Holding II,Group (USA), Inc. (the “Lender”). The Lender is a wholly owned subsidiary of the Boyalife Group (USA), Inc., which is owned and controlled by the Company’s Chief Executive Officer and Chairman of our Board of Directors. The Credit Agreement, as amended, grants to the Company the right to borrow up to $10,000,000 (the “Loan”) at any time prior to March 6, 2022 (the2023 (the “Maturity Date”). The Company performed a debt extinguishment vs. modification analysis. The analysis determined that the extension would be considered an extinguishment from an accounting standpoint, due to the change in the value of the conversion option. In June 2022, the Lender converted a total of $3,000,000 of the outstanding balance of the convertible note into 10,552,234 shares of our common stock. As of September 30, 2022 and December 31, 2021, the Company had an outstanding principalprinciple balance onof the Loan of $10,000,000. On March 4, 2022, the Company amended the Loan extending the Maturity Date by one year to March 6, 2023.was $7,000,000 and $10,000,000, respectively.
The Credit Agreement and the Convertible Promissory Note issued thereunder, (asas amended the(the “Note”) provide that the principal and all accrued and unpaid interest under the Loan will be due and payable on the Maturity Date, with payments of interest-only due on the last day of each calendar year. The Loan bears interest at 22% per annum, simple interest. The Company has five business days after the Lender demands payment to pay the interest due before the Loan is considered in default. The Loan can be prepaid in whole or in part by the Company at any time without penalty.
The following summarizes the Note:
| | Maturity Date | | Stated Interest Rate | | | Conversion Price | | | Carrying Value | |
At March 31, 2022 | 3/6/2023 | | | 22 | % | | $ | 0.64 | | | $ | 10,000,000 | |
At December 31, 2021 | 3/6/2022 | | | 22 | % | | $ | 1.80 | | | $ | 9,245,000 | |
| | Maturity Date | | Stated Interest Rate | | | Conversion Price | | | Face Value | | | Debt Discount | | | Carrying Value | |
September 30, 2022 | 3/6/2023 | | | 22 | % | | $ | 0.21 | | | $ | 7,000,000 | | | $ | (1,867,000 | ) | | $ | 5,133,000 | |
December 31, 2021 | 3/6/2022 | | | 22 | % | | $ | 1.80 | | | $ | 10,000,000 | | | $ | (755,000 | ) | | $ | 9,245,000 | |
The Note includes a down rounddown-round anti-dilution provision that lowers its conversion price if the Company sells shares of common stock or issues convertible debt at a lower price per share. In 2022, the anti-dilution provision was triggered three times, as noted below:
In February 2022, when the conversion price of the Note was at $1.80 per share, the Company sold shares of common stock at $0.64 per share. This resulted in a price lower thantriggering event lowering the conversion price of the Note to that value. The Company determined that it created an incremental value of $213,000 which was treated as a debt discount and amortized over the remaining term of the Note.
In June 2022, the Company sold shares of common stock at $0.28 per share, resulting in a down round triggering event lowering the conversion price of the Note to $0.64 per share.that value. The Company determined that the triggering event created an incremental value of $213,000$2,475,000 which was treated as a debt discount and will be amortized over the remaining term of the Note.
In July 2022, the Company modified a convertible debt agreement, lowering the conversion price of the debt to $0.21 per share, resulting in a down round triggering event lowering the conversion price of the Note to that value. The triggering event created an incremental value of $1,075,000 which was treated as a debt discount and will be amortized over the remaining term of the Note.
A Black-Scholes pricing model was utilized to determine the change in the before and after incremental value of the conversion option at each triggering event, with the following inputs:
| | | Before | | After | | | February 2022 | | | June 2022 | | | July 2022 | |
Conversion Price | | $ | 1.80 | | | $ | 0.64 | | |
Term (in years) | | 0.02 | | | 0.02 | | |
Conversion price before | | | $ | 1.80 | | | $ | 0.64 | | | $ | 0.28 | |
Conversion price after | | | $ | 0.64 | | | $ | 0.28 | | | $ | 0.21 | |
Term (years) | | | 0.02 | | | 0.69 | | | 0.61 | |
Volatility | | 39.53 | % | | 39.53 | % | | 39.53 | % | | 85.6 | % | | 99.5 | % |
Dividend rate | | 0 | % | | 0 | % | | 0 | % | | 0 | % | | 0 | % |
Risk free rate | | 1.97 | % | | 1.97 | % | | 1.97 | % | | 3.2 | % | | 2.8 | % |
The Company amortized $213,000$940,000 and $827,000$1,897,000 of debt discount to interest expense for the three and nine months ended March 31, 2022 and 2021, respectively.September 30, 2022. The amortization included $742,000, which related to accelerated amortization for the portion of the Note that was converted in June 2022. In addition to the amortization, the Company also recorded interest expense of $550,000$394,000 and $1,496,000 for each of the quartersthree and nine months ended March 31,September 30, 2022, and $562,000 and $1,668,000 for the three and nine months ended September 30, 2021. The interest payable balance as of March 31,September 30, 2022 and December 31, 2021 was $153,000$1,099,000 and $2,231,000, respectively.
On March 4, 2022, the Company amended the Credit Agreement and the Note to extend the due date by one year to March 6, 2023. No other terms of the Note were changed as a part of the extension. The Company performed a debt extinguishment vs. modification analysis. The analysis determined that the extension would be considered an extinguishment from an accounting standpoint, due to the change in the value of the conversion option. However, no gain or loss was recorded to the consolidated statement of operations for the quarter ended March 31, 2022 as it was determined that the fair value of the Note was $10,000,000 both before and after the extension.
Boyalife Genomics
On March 24, 2022, the Company entered into a License and Technology Access Agreement with Boyalife Genomics Tianjin Ltd. (“Boyalife Genomics”), a China-based contract development and manufacturing organization (“CDMO”)CDMO and an affiliate of ThermoGenesis’ Chairman and Chief Executive Officer, Chris Xu, Ph.D. The agreement provides for a U.S. license to certain existing and future know-how and other intellectual property relating to cell manufacturing and related processes. The Company plans to develop and operate the CDMO cell therapy manufacturing business through a newly formed division named TG Biosynthesis.
Under the terms of the agreement, the Company transferred its remaining 8.64% interest in ImmuneCyte to Boyalife Genomics and agreed to pay a running royalty of 7.5% of its annual net sales of products and services that are covered by one or more of Boyalife Genomics’ granted U.S. patents and a royalty of 5.0% of other products and services covered by other licensed intellectual property. In the quarterthree and nine months ended March 31,September 30, 2022, 0no sales were recorded under the license agreement and no royalty payments were made to Boyalife Genomics.
Z3 Investment
Also on On March 24, 2022, the Company entered into a five year Lease Agreement with Z3 Investment LLC, an affiliate of the Company’s Chairman and CEO, beginning April 1, 2022, for approximately 35,47535,000 square feet of laboratory and office space in Rancho Cordova, California. Under the terms of the agreement, monthly rent will beis $46,000 per month for the firstsix months, then increasing to $104,000 per month (with a 4% annual increase) thereafter. Additionally, the Company will pay all operating expenses as they become due estimated to be approximately $5,000 per month and will be expensed in the period incurred. The Company has the option to renew the lease for two 5-year periods. Additionally, the Company has the ability to opt out of the lease after one year if the CDMO facility is unable to be constructed as planned.
The Company performed an analysis of the lease and determined it to be an operating lease. A right-of-use asset and lease obligation were recorded at inception of the lease.
Operating Lease
Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets. To determine the present value of lease payments not yet paid, we use the Company’s cost of capital based on existing debt instruments. We recognize the expense for this lease on a straight-line basis over the lease term.
The following summarizes the Company’s operating lease:
| | | September 30, 2022 | |
Right-of-use operating lease assets – related party, net | | $ | 3,653,000 | |
Current lease liability (included in other current liabilities) | | | 397,000 | |
Non-current lease liability – related party | | | 3,622,000 | |
| | | | | |
Weighted average remaining lease term | | | 5.00 | |
Discount rate | | | 22 | % |
Maturities of lease liabilities by year for our operating lease are as follows:
2022 (Remaining) | | $ | 311,000 | |
2023 | | | 1,256,000 | |
2024 | | | 1,307,000 | |
2025 | | | 1,359,000 | |
2026 | | | 1,428,000 | |
Thereafter | | | 1,133,000 | |
Total lease payments | | $ | 6,794,000 | |
Less: imputed interest | | | (2,775,000 | ) |
Present value of operating lease liabilities | | $ | 4,019,000 | |
Statement of Cash Flows
Cash paid for amounts included in the measurement of operating lease liabilities was $138,000 and $277,000 for the three and nine months ended September 30, 2022, respectively.
5. Convertible Promissory Note
6. | Convertible Promissory Note |
July 2019 Note
On July 23, 2019, the Company entered into a private placement with the Accredited Investor, pursuant to which the Company issued and sold to such investor an unsecured convertible promissory note in the original principal amount of $1,000,000 (the “July“July 2019 Note”). The July 2019 Note is convertible into shares of the Company's common stock at a conversion price equal to the lower of (a) $1.80 per share or (b) 90% of the closing sale price of the Company’s common stock on the date of conversion (subject to a floor conversion price of $0.50). The July 2019 Note bears interest at thea rate of twenty-four percent (24%) per annum and is payable quarterly in arrears. Unless sooner converted in the manner described below, all principal under the July 2019 Note, together with all accrued and unpaid interest thereupon, will be due and payable three years from the date of the issuance on July 31, 2022.
On July 25, 2022, the Company entered into an amendment to the July 2019 Note, which extended the maturity date of the July 2019 Note to January 31, 2023 and modified when interest is due from quarterly to January 31, 2023. The amendment also (i) deleted the market price-based conversion right, which previously allowed for the July 2019 Note to be converted at a conversion price of 90% of the Company’s stock price on the day of conversion (subject to a $0.50 floor); and (ii) changed to a fixed conversion price to $0.21 per share, provided that in the event that the Company issues shares, options, warrants, or convertible securities, at an effective price per common share lower than $0.21, then the conversion price will be adjusted to such lower issuance price.
The Company performed a debt extinguishment vs. modification analysis on the amendment to the July 2019 Note and determined that the extension would be considered an extinguishment, due to an increase of more than 10% to the value of the embedded conversion option. No gain or loss was recorded in the consolidated statement of operations for the quarter ended September 30, 2022 as it was determined that the fair value of the amendment of the July 2019 Note and accrued interest was $1,020,000 both before and after the extension.
The following summarizes the July 2019 Note:
| | Maturity Date | | Stated Interest Rate | | | Conversion Price | | | Carrying Value | |
At March 31, 2022 | 7/31/2022 | | | 24 | % | | $ | 0.61 | | | $ | 1,000,000 | |
At December 31, 2021 | 7/31/2022 | | | 24 | % | | $ | 0.91 | | | $ | 813,000 | |
| | Maturity Date | | Stated Interest Rate | | | Conversion Price | | | Carrying Value | |
September 30, 2022 | 1/31/2023 | | | 24 | % | | $ | 0.21 | | | $ | 1,000,000 | |
December 31, 2021 | 7/31/2022 | | | 24 | % | | $ | 0.91 | | | $ | 813,000 | |
AmortizationThe Company recorded amortization of debt discount on the July 2019 Note was $0of $80,000 and $80,000$241,000 for the three and nine months ended March 31, 2022 and 2021, respectively.September 30, 2021. Interest expense related to the July 2019 Note was $60,000 and $180,000 for both the quartersthree and nine months ended March 31,September 30, 2022 and 2021.
Common Stock
On February 3, 2022, the Company entered into Amendment No.2 to the At the Market Offering Agreement (the “Offering Agreement”) with H.C. Wainwright & Co., LLC to further increase the maximum aggregate offering price of shares of Common Stock that may be offered and sold from time to time under the Offering Agreement from $15,280,313$15,280,000 to $19,555,261,$19,555,000, which enables the Company to sell an additional $4,275,000 of shares after taking into account prior sales under the Offering Agreement (the “Additional Shares”). Amendment No.2 also amendedAfter filing the Offering AgreementCompany’s 2021 Form 10-K in March 2022, the total offering price was updated to change$18,573,000 based on the expiration date of the Offering Agreement from August 9, 2022 to the dateshares currently available on which all of the Additional Shares are sold by the Company or until the Offering Agreement is otherwise mutually terminated, subject to the early termination provisions set forth in the agreement.Company’s existing Form S-3. The terms and conditions of the Offering Agreement otherwise remain unchanged. TheFor the nine months ended September 30, 2022, the Company sold a total of 918,0938,857,344 shares of common stock under the Offering Agreement for aggregate gross proceeds of $681,000$3,293,000 at an average selling price of $0.74$0.37 per share, resulting in net proceeds of approximately $594,000$3,037,000 after deducting commissions and other transaction costs of approximately $87,000.$256,000.
Equity Plans
On January 13, 2022, the Company’s stockholders approved an amendment of the Company’s Amended 2016 Equity Incentive Plan to increase the aggregate number of shares of the Company’s common stock that may be issued under the plan from 392,500 shares to 1,200,000 shares.
Net Loss Per Share
Net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding. The calculation of the basic and diluted earnings per share is the same for all periods presented, as the effect of the potential common stock equivalents noted below is anti-dilutive due to the Company’s net loss position for all periods presented. Anti-dilutive securities consisted of the following at March 31:September 30:
| | | 2022 | | | 2021 | |
Common stock equivalents of convertible promissory note and accrued interest | | | 17,420,222 | | | | 6,449,950 | |
Warrants – other | | | 653,248 | | | | 653,248 | |
Stock options | | | 342,670 | | | | 889,636 | |
Total | | | 18,416,140 | | | | 7,992,834 | |
| | | 2022 | | | 2021 | |
Common stock equivalents of convertible promissory notes and accrued interest | | | 43,612,759 | | | | 7,071,241 | |
Warrants – other | | | 653,248 | | | | 653,248 | |
Stock options | | | 287,081 | | | | 366,595 | |
Total | | | 44,553,088 | | | | 8,091,084 | |
7. Revenue
The following table summarizespresents net sales by geographic areas:
| | | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
| | | 2022 | | | 2021 | | | 2022 | | | 2021 | |
United States | | $ | 1,535,000 | | | $ | 1,517,000 | | | $ | 4,973,000 | | | $ | 3,558,000 | |
China | | | 364,000 | | | | 1,357,000 | | | | 1,570,000 | | | | 1,445,000 | |
Thailand | | | 2,000 | | | | -- | | | | 10,000 | | | | 400,000 | |
Other | | | 214,000 | | | | 284,000 | | | | 1,254,000 | | | | 1,473,000 | |
Total | | $ | 2,115,000 | | | $ | 3,158,000 | | | $ | 7,807,000 | | | $ | 6,876,000 | |
The following tables summarize the revenues by product line and type:
| | | Three Months Ended March 31, 2022 | | | Three Months Ended September 30, 2022 | |
| | | Device Revenue | | | Service Revenue | | | Other Revenue | | | Total Revenue | | | Device Revenue | | | Service Revenue | | | Other Revenue | | | Total Revenue | |
AXP | | $ | 1,711,000 | | | $ | 55,000 | | | $ | -- | | | $ | 1,766,000 | | | $ | 1,034,000 | | | $ | 75,000 | | | $ | -- | | | $ | 1,109,000 | |
BioArchive | | 155,000 | | | 298,000 | | | -- | | | 453,000 | | | 201,000 | | | 321,000 | | | -- | | | 522,000 | |
CAR-TXpress | | 199,000 | | | 43,000 | | | 71,000 | | | 313,000 | | | 190,000 | | | 44,000 | | | 72,000 | | | 306,000 | |
Manual Disposables | | 105,000 | | | -- | | | -- | | | 105,000 | | | 150,000 | | | -- | | | -- | | | 150,000 | |
Other | | | 17,000 | | | | -- | | | | 9,000 | | | | 26,000 | | | | 20,000 | | | | -- | | | | 8,000 | | | | 28,000 | |
Total | | $ | 2,187,000 | | | $ | 396,000 | | | $ | 80,000 | | | $ | 2,663,000 | | | $ | 1,595,000 | | | $ | 440,000 | | | $ | 80,000 | | | $ | 2,115,000 | |
| | | Three Months Ended March 31, 2021 | | | Nine Months Ended September 30, 2022 | |
| | | Device Revenue | | | Service Revenue | | | Other Revenue | | | Total Revenue | | | Device Revenue | | | Service Revenue | | | Other Revenue | | | Total Revenue | |
AXP | | $ | 225,000 | | | $ | 39,000 | | | $ | -- | | | $ | 264,000 | | | $ | 4,668,000 | | | $ | 171,000 | | | $ | -- | | | $ | 4,839,000 | |
BioArchive | | 208,000 | | | 542,000 | | | -- | | | 750,000 | | | 694,000 | | | 924,000 | | | -- | | | 1,618,000 | |
CAR-TXpress | | 255,000 | | | 28,000 | | | 71,000 | | | 354,000 | | | 551,000 | | | 146,000 | | | 214,000 | | | 911,000 | |
Manual Disposables | | 129,000 | | | -- | | | -- | | | 129,000 | | | 357,000 | | | -- | | | -- | | | 357,000 | |
Other | | | 7,000 | | | | -- | | | | 13,000 | | | | 20,000 | | | | 59,000 | | | | -- | | | | 23,000 | | | | 82,000 | |
Total | | $ | 824,000 | | | $ | 609,000 | | | $ | 84,000 | | | $ | 1,517,000 | | | $ | 6,329,000 | | | $ | 1,241,000 | | | $ | 237,000 | | | $ | 7,807,000 | |
| | | Three Months Ended September 30, 2021 | |
| | | Device Revenue | | | Service Revenue | | | Other Revenue | | | Total Revenue | |
AXP | | $ | 2,217,000 | | | $ | 72,000 | | | $ | 21,000 | | | $ | 2,310,000 | |
BioArchive | | | 221,000 | | | | 297,000 | | | | -- | | | | 518,000 | |
CAR-TXpress | | | 160,000 | | | | 31,000 | | | | 71,000 | | | | 262,000 | |
Manual Disposables | | | 55,000 | | | | -- | | | | -- | | | | 55,000 | |
Other | | | 9,000 | | | | -- | | | | 4,000 | | | | 13,000 | |
Total | | $ | 2,662,000 | | | $ | 400,000 | | | $ | 96,000 | | | $ | 3,158,000 | |
| | | Nine Months Ended September 30, 2021 | |
| | | Device Revenue | | | Service Revenue | | | Other Revenue | | | Total Revenue | |
AXP | | $ | 3,490,000 | | | $ | 159,000 | | | $ | 21,000 | | | $ | 3,670,000 | |
BioArchive | | | 652,000 | | | | 1,165,000 | | | | -- | | | | 1,817,000 | |
CAR-TXpress | | | 702,000 | | | | 89,000 | | | | 214,000 | | | | 1,005,000 | |
Manual Disposables | | | 300,000 | | | | -- | | | | -- | | | | 300,000 | |
Other | | | 46,000 | | | | -- | | | | 38,000 | | | | 84,000 | |
Total | | $ | 5,190,000 | | | $ | 1,413,000 | | | $ | 273,000 | | | $ | 6,876,000 | |
Contract Balances
Generally, all sales are contract sales (with either an underlying contract or purchase order). The Company does not have any material contract assets. When invoicing occurs prior to revenue recognition, a contract liability is recorded (as deferred revenue on the consolidated balance sheet). Revenues recognized during the three and nine months ended March 31,September 30, 2022 that were included in the beginning balance of deferred revenue were $446,000.$144,000 and $620,000, respectively. Short-term deferred revenues were $1,159,000$841,000 and $719,000 at March 31,September 30, 2022 and December 31, 2021, respectively. Long-term deferred revenue was $1,163,000$1,014,000 and $1,244,000 at March 31,September 30, 2022 and December 31, 2021, respectively.
Backlog of Remaining Customer Performance Obligations
The following table represents revenue expected to be recognized in the future from the backlog of performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period:
| | | Remainder of 2022 | | 2023 | | 2024 | | 2025 | | 2026 and beyond | | Total | | | Remainder of 2022 | | 2023 | | 2024 | | 2025 | | 2026 and beyond | | Total | |
Service revenue | | $ | 1,075,000 | | | $ | 666,000 | | | $ | 184,000 | | | $ | 83,000 | | | $ | -- | | | $ | 2,008,000 | | | $ | 407,000 | 0.25 | | $ | 1,089,000 | 1 | | $ | 664,000 | 1 | | $ | 176,000 | 1 | | $ | -- | 1 | | $ | 2,336,000 | |
Device revenue (1) | | 712,000 | | | 733,000 | | | 41,000 | | | -- | | | -- | | | 1,486,000 | | | 21,000 | 0.25 | | 733,000 | 1 | | 41,000 | 1 | | -- | 1 | | -- | 1 | | 795,000 | |
Exclusivity fee | | 214,000 | | | 286,000 | | | 286,000 | | | 286,000 | | | 190,000 | | | 1,262,000 | | | 71,000 | 0.25 | | 286,000 | 1 | | 286,000 | 1 | | 286,000 | 1 | | 190,000 | 1 | | 1,119,000 | |
| Other | | | 10,000 | | | 13,000 | | | 13,000 | | | 13,000 | | | 140,000 | | | 189,000 | | | | 3,000 | 0.25 | | 13,000 | 1 | | 13,000 | 1 | | 13,000 | 1 | | 122,000 | 1 | | 164,000 | |
Total | | $ | 2,011,000 | | | $ | 1,698,000 | | | $ | 524,000 | | | $ | 382,000 | | | $ | 330,000 | | | $ | 4,945,000 | | | $ | 502,000 | 0.25 | | $ | 2,121,000 | 1 | | $ | 1,004,000 | 1 | | $ | 475,000 | 1 | | $ | 312,000 | 1 | | $ | 4,414,000 | |
| | (1)(1)
| Represents the minimum purchase requirements under the distribution agreement the Company signed with its AXP distributor in China. |
8. Concentrations
The Company had certain customers whose revenue individually represented 10% or more of the Company’s total revenue, or whose accounts receivable balances individually represented 10% or more of the Company’s total accounts receivable as follows:
Accounts Receivable | | March 31, 2022 | | | December 31, 2021 | |
Customer 1 | | | 35 | % | | | -- | |
Customer 2 | | | 16 | % | | | -- | |
Customer 3 | | | 1 | % | | | 23 | % |
Customer 4 | | | 9 | % | | | 23 | % |
Accounts Receivable
| | | Three Months Ended March 31, | | | September 30, 2022 | | December 31, 2021 | |
Revenues | | 2022 | | 2021 | | |
Customer 1 | | $ | 1,271,000 | | | 48 | % | | $ | 151,000 | | | 10 | % | | 49 | % | | -- | % |
Customer 2 | | $ | 2,000 | | | -- | | | $ | 316,000 | | | 21 | % | | 15 | % | | 28 | % |
Customer 3 | | | 13 | % | | -- | % |
Customer 4 | | | 1 | % | | 27 | % |
Revenues
| | | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
| | | 2022 | | | 2021 | | | 2022 | | | 2021 | |
Customer 1 | | | 36 | % | | | 22 | % | | | 36 | % | | | 15 | % |
Customer 2 | | | 14 | % | | | 1 | % | | | 6 | % | | | 1 | % |
Customer 3 | | | 1 | % | | | 44 | % | | | 14 | % | | | 20 | % |
9.Subsequent Events
Effective April 1,On October 25, 2022, the Company entered intoannounced the pricing of a leasepublic offering (the "Offering") of an aggregate of 11,783,572 units (the "Units") and 2,892,858 pre-funded units (the "Pre-Funded Units”) for a 35,745 square foot laboratory, officepurchase price of $0.14 per unit, resulting in aggregate gross proceeds of approximately $2,055,000. The Offering closed on October 28, 2022. Each Unit sold in the Offering consisted of one share of the Company's common stock and manufacturing facilityone common warrant to purchase one share of common stock, and each Pre-Funded Unit consisted of one pre-funded warrant to purchase one share of common stock and one common warrant to purchase one share of common stock. The common warrants will be exercisable at an exercise price of $0.14 per share beginning on the effective date of Company stockholder approval of the issuance of the shares upon exercise of the warrants (the "Warrant Stockholder Approval”) and will expire on the fifth anniversary of the effective date of the Warrant Stockholder Approval. The 2,892,858 pre-funded warrants sold in Rancho Cordova, California for its CDMO business. The lease expiresthe Offering were exercised on September 30, 2027.October 25, 2022.
1014
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Note Regarding Forward‑Looking Statements
This report contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. The forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements contained herein. When used in this report, the words "anticipate," "believe," "estimate," "expect" and similar expressions as they relate to the Company or its management are intended to identify such forward-looking statements. Actual results, performance or achievements could differ materially from the results expressed in, or implied by these forward-looking statements. Readers should be aware of important factors that, in some cases, have affected, and in the future could affect, actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of the Company. These factors include without limitation, the ability to obtain capital and other financing in the amounts and at the times needed to launch new products, market acceptance of new products, the nature and timing of regulatory approvals for both new products and existing products for which the Company proposes new claims, realization of forecasted revenues, expenses and income, initiatives by competitors, price pressures, failure to meet U.S. Food and Drug Administration (“FDA”) regulated requirements governing the Company’s products and operations (including the potential for product recalls associated with such regulations), risks associated with initiating manufacturing for new products, failure to meet Foreign Corrupt Practice Act regulations, legal proceedings, uncertainty associated with the COVID-19 pandemic, risks associated with expanding into the Company’s planned CDMO business, and other risk factors listed from time to time in our reports with the Securities and Exchange Commission (“SEC”), including, in particular, those set forth in the Company’s Form 10-K for the year ended December 31, 2021.
Business Overview
ThermoGenesis Holdings, Inc. (“ThermoGenesis Holdings,” the “Company,” “we,” “our,” “us”), develops, commercializes and markets a range of automated technologies for CAR-T and other cell-based therapies. The Company currently markets a full suite of solutions for automated clinical biobanking, point-of-care applications, and automation for immuno-oncology, including its semi-automated, functionally closed CAR-TXpress™ platform, which streamlines the manufacturing process for the emerging CAR-T immunotherapy market. The Company was founded in 1986 and is incorporated in the State of Delaware and headquartered in Rancho Cordova, CA.
Our business involves the manufacturing and related service of cell based medical devices, including the AutoXpress® and BioArchive® platforms for automated clinical bio-banking, PXP® platform for point-of-care cell-based therapies and CAR-TXpress™ platform for large scale cell manufacturing services. The Company and its subsidiaries currently manufacture and market the following products:
Clinical Bio-Banking Applications:
| | ● | AXP®II Automated Cell Separation System – an automated, fully closed cell separation system for isolating stem and progenitor cells from umbilical cord blood, registered as a U.S. FDA 510(k) medical device. |
| | ● | BioArchive® Automated Cryopreservation System – an automated, robotic, liquid nitrogen controlled-rate-freezing and cryogenic storage system for cord blood samples and cell therapeutic products used in clinical applications, registered as a U.S. FDA 510(k) medical device. |
Point-of-Care Applications:
| | ● | PXP® Point-of-Care System – an automated, fully closed, sterile system allows for the rapid, automated processing of autologous peripheral blood or bone marrow aspirate derived stem cells at the point-of-care, such as surgical centers or clinics, registered as a U.S. FDA 510(k) medical device. |
| | ● | PXP-LAVARE System – an automated, fully closed system that is designed to wash, re-suspend and volume reduce cell suspensions. It allows for volume manipulation, supernatant or media exchange, and cell washing to occur without comprising cell viabilities and maximizing recoveries, registered as a U.S. FDA 510(k) medical device. |
| | ● | PXP-1000 System – an automated, fully closed system that provides fast, reproducible separation of multiple cellular components from blood with minimal red blood cell contamination, registered as a U.S. FDA 510(k) medical device. |
Large Scale Cell Processing and Biomanufacturing:
| | ● | X-Series® Products for general laboratory use: X-Lab® for cell isolation, X-Wash® System for cell washing and reformulation, X-Mini® for high efficiency small scale cell purification, and X-BACS® System under development for large scale cell purification using our proprietary Buoyancy-Activated Cell Sorting (“BACS”) technology. |
| | ● | CAR-TXpress™ Platform for Clinical Manufacturing – a modular designed, functionally closed manufacturing platform that addresses the critical unmet need for large scale cellular processing and chemistry, manufacturing and controls (“CMC”) needs for manufacturing cellular therapies, including chimeric antigen receptor (“CAR”) T cell therapies. The CAR-TXpress Platform is owned and developed through a subsidiary CAR-TXpress Bio, Inc. (“CARTXpress Bio”) in which the Company owns 80% of the equity interest. |
Planned Expansion of Business-- Business – Contract Development and Manufacturing Services for Cell and Cell-Based Gene Therapies
In March 2022, our Board of Directors approved the planned expansion of the Company’s business to include contract development and manufacturing services for cell and cell-based gene therapies. The Company plans to develop and build-out the capabilities to become a world-class Contract Development and Manufacturing Organization (“CDMO”)CDMO for cell and cell-based gene therapies by partnering with Boyalife Genomics Tianjin Ltd., a China-based CDMO (“Boyalife Genomics”), to in-license certain know-how and other intellectual property from Boyalife Genomics, and by leasing and building out a cell manufacturing facility in Sacramento, California. We intend to leverage our existing technology and combine it with the in-licensed technologies to develop a proprietary manufacturing platform for cell manufacturing activities.
The Company plans to develop and operate its planned CDMO business through a newly formed division named TG BiosynthesisTM. It is anticipated that TG Biosynthesis will provide high-quality development and manufacturing capabilities, cell and tissue processing development, quality systems, regulatory compliance, and other cell manufacturing solutions for clients with therapeutic candidates in various stages of development.
We are targeting the launch of our CDMO services to customers by the end of 2022.in 2023. The successful development and launch of TG Biosynthesis will require us to raise additional capital, acquire various equipment for the planned operations, hire certain personnel needed to launch the operation, and timely complete the build-out of our leased Sacramento facility. There is no assurance that we will be able to successfully obtain such additional capital resources, as such capital may not be available on reasonable terms, or available at all. We will need to hire, train, and retain additional employees who have experiencesexperience in the cell manufacturing field in order for our CDMO business to be successful.
Results of Operations
Three Months Ended March 31,September 30, 2022 as Compared to the Three Months Ended March 31,September 30, 2021
Net Revenues
Net revenues decreased by $1,043,000 or 33%, from $3,158,000 to $2,115,000 for the three months ended March 31,September 30, 2022 were $2,663,000as compared to $1,517,000 for the three months ended March 31, 2021, an increase of $1,146,000 or 76%.September 30, 2021. The increaserevenue decrease was due to $1,201,000 in lower sales for AXP driven by AXP®approximately $1,300,000 less AXP disposable sales which increased by approximately $1,500,000 with approximately 600 more cases soldto our distributors in the first quarter of 2022 as compared to 2021. The primary driver of the change was the COVID-19 pandemic which had a significant impact on our sales first quarter of 2021. Many of our customers choose not to place new orders for AXP disposables in the first quarter last year. As we enter the beginning of 2022, AXP sales returned to a more normal level for the first quarter. This increase wasChina offset by a decrease$95,000 more in BioArchive sales, primarily due to approximately $250,000 less in service revenue, as the result of a large one-time service revenue that was recognized in the first quarter of last year.manual disposable sales.
| | | March 31, 2022 | | | March 31, 2021 | |
AXP | | $ | 1,766,000 | | | $ | 264,000 | |
BioArchive | | | 453,000 | | | | 750,000 | |
CAR-TXpress | | | 313,000 | | | | 354,000 | |
Manual Disposables | | | 105,000 | | | | 129,000 | |
Other | | | 26,000 | | | | 20,000 | |
| | | $ | 2,663,000 | | | $ | 1,517,000 | |
The following table summarizes revenue by product line:
| | | September 30, 2022 | | | September 30, 2021 | |
AXP | | $ | 1,109,000 | | | $ | 2,310,000 | |
BioArchive | | | 522,000 | | | | 518,000 | |
CAR-TXpress | | | 306,000 | | | | 262,000 | |
Manual Disposables | | | 150,000 | | | | 55,000 | |
Other | | | 28,000 | | | | 13,000 | |
Total | | $ | 2,115,000 | | | $ | 3,158,000 | |
Gross Profit
The Company’s gross profit was $940,000decreased by $678,000 to $437,000 or 35%21% of net revenues for the three months ended March 31,September 30, 2022, compared to $708,000$1,115,000 or 47%35% for three months ended September 30, 2021. The primary driver of netthe decrease was the decline in revenues, forwhich reduced gross profit by approximately $300,000. The remainder of the variance is driven by higher costs from our AXP disposable contract manufacturer of approximately $100,000 and increased overhead charges of approximately $275,000 due to lower absorption in the three months ended March 31, 2021, an increase of $232,000. The increase was driven by the increase in AXP® disposables sold in the quarter ended March 31, 2022, resulting in approximately $700,000 more gross profit. This increase was offset by approximately $250,000 less in BioArchive service revenue in the quarter ended March 31, 2022 as compared to the same period in 2021.September 30, 2022.
Selling, General and Administrative
Sales, general and administrative expenses for the three months ended March 31,September 30, 2022 were $1,693,000$1,982,000 compared to $1,992,000$1,677,000 for the three months ended March 31,September 30, 2021, a decreasean increase of $299,000$305,000 or 15%18%. The decreaseincrease was primarily due to lower stock compensationdriven by rent expense of approximately $200,000$325,000 for the new CDMO facility leased by the Company beginning in the quarter ended March 31, 2022, driven by stock compensation expense incurred in the prior quarter for awards that were subsequently voluntarily surrendered by Company executives later in 2021 and were no longer outstanding in the first quarter ofApril 2022.
Research and Development Expenses
Research and development expenses were $456,000$470,000 for the three months ended March 31,September 30, 2022 as compared to $379,000$543,000 for the three months ended March 31,September 30, 2021, an increasea decrease of $77,000$73,000 or 20%13%. The increasedecrease was driven by higher expenses forapproximately $80,000 less in salaries and benefits in the quarter ended March 31, 2022.benefits.
Interest Expense
Interest expense for the three months ended March 31,September 30, 2022 was $823,000, as$1,391,000, compared to $1,519,000$1,530,000, for the three months ended March 31,September 30, 2021, a decrease of $696,000$139,000 or 46%9%. The decrease is due to approximately $900,000 less in debt discount from the adoption of ASU 2020-06 and approximately $170,000 in lower interest expense due to the portion of the Boyalife Convertible Promissory Note that was converted in June 2022. This was offset by the down round triggering events of approximately $940,000 that occurred in 2022 relating to the Boyalife Convertible Promissory Note.
Other Income / Expense
Other income decreased in the three months ended September 30, 2022 due to the Employee Retention Tax Credits recorded by the Company in the three months ended September 30, 2021.
Nine Months Ended September 30, 2022 as Compared to the Nine Months Ended September 30, 2021
Net Revenues
Net revenues increased by $931,000 or 14%, from $6,876,000 to $7,807,000 for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021. The revenue increase was driven by additional AXP sales of $1,169,000 related to increased sales from our domestic customers of approximately $1,650,000. The increase is also offset by a decrease in sales $199,000 in BioArchive and $94,000 in CAR-TXpress sales.
The following table summarizes revenue by product line:
| | | Nine Months Ended September 30, | |
| | | 2022 | | | 2021 | |
AXP | | $ | 4,839,000 | | | $ | 3,670,000 | |
BioArchive | | | 1,618,000 | | | | 1,817,000 | |
CAR-TXpress | | | 911,000 | | | | 1,005,000 | |
Manual Disposables | | | 357,000 | | | | 300,000 | |
Other | | | 82,000 | | | | 84,000 | |
Total | | $ | 7,807,000 | | | $ | 6,876,000 | |
Gross Profit
The Company’s gross profit was $2,316,000 or 30% of net revenues for the nine months ended September 30, 2022, compared to $2,809,000 or 41% of net revenues for the nine months ended September 30, 2021, a decrease of $493,000. The decrease was driven by approximately $300,000 more in inventory reserves and higher costs from our AXP disposable contract manufacturer of approximately $575,000; offset by approximately $275,000 in gross profit from additional sales in the nine months ended September 30, 2022.
Selling, General and Administrative
Sales, general and administrative expenses for the nine months ended September 30, 2022 were $5,665,000 compared to $7,171,000 for the nine months ended September 30, 2021, a decrease of $1,506,000 or 21%. The decrease was driven by stock compensation expense, which decreased by approximately $2,050,000 primarily due to the accelerated expense for the stock options that were voluntarily surrendered by Company executives in the nine months ended September 30, 2021. This was offset by approximately $650,000 for the new CDMO facility leased by the Company beginning in April 2022.
Research and Development Expenses
Research and development expenses were $1,317,000 for the nine months ended September 30, 2022, compared to $1,544,000 for the nine months ended September 30, 2021, a decrease of $227,000 or 15%. The decrease was driven by approximately $225,000 less in stock compensation expense.
Interest Expense
Interest expense decreased to $3,572,000 for the nine months ended September 30, 2022 as compared to $4,573,000 for the nine months ended September 30, 2021 a decrease of $1,001,000 or 22%. The decrease is due to approximately $2,700,000 less in debt discount from the adoption of ASU 2020-06 and approximately $170,000 in lower amortizationinterest expense due to the portion of the debt discount related to theBoyalife Convertible Promissory Note and Revolving Credit Agreement withthat was converted in June 2022. This was offset by the down round triggering events of approximately $1,900,000 that occurred in 2022 relating to the Boyalife Asset Holding II, Inc. and the July 2019Convertible Promissory Note. In the quarter ended March 31, 2021, the Company recorded amortization
Gain on Extinguishment of Debt
The Company recorded no gain on the extinguishment of debt in the threenine months ended March 31,September 30, 2022 as compared to a gain of $652,000 for the threenine months ended March 31,September 30, 2021. The gain was related to the principal and accrued interest for the Paycheck Protection Program loan the Company received in 2020 and forgiven in March 2021.
Other Income / Expense
Other income decreased in the nine months ended September 30, 2022 due to the Employee Retention Tax Credits recorded by the Company in the nine months ended September 30, 2021.
Liquidity and Capital Resources
At March 31,September 30, 2022, the Company had cash and cash equivalents of $3,652,000$3,903,000 and working capital of ($2,283,000).$515,000. This compares to cash and cash equivalents of $7,280,000 and working capital of $8,616,000 at December 31, 2021. We have primarily financed operations through private and public placement of equity securities and our line of credit facility.
The Company has incurred historical losses from operations and expects to continue to incur operating losses in the near future. The Company maywill need to raise additional capital to grow its business, fund operating expenses and make interest payments.payments, as well as to fund its planned expansion into CDMO business. The Company’s ability to fund its liquidity needs is subject to various risks, many of which are beyond its control. The Company may seek additional funding through debt borrowings, sales of debt or equity securities or strategic partnerships. The Company cannot guarantee that such funding will be available on a timely basis, in needed quantities or on terms favorable to the Company, if at all. These factors and other indicators raise substantial doubt about the Company’s ability to continue as a going concern within one year from the filing date of this report.
We manage the concentration of credit risk with our customers and distributors through a variety of methods including, pre-shipment deposits, credit reference checks and credit limits. Although management believes that our customers and distributors are sound and creditworthy, a severe adverse impact on their business operations could have a corresponding material effect on their ability to pay timely and therefore on our net revenues, cash flows and financial condition.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
ThermoGenesis Holdings is a smaller reporting company as defined by Rule 12b-2 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) and is not required to provide information under this item.
ITEM 4. Controls and Procedures
The Company carried out an evaluation, under the supervision, and with the participation of management, including both the Company’s Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined by Exchange Act Rule 13a-15(e) or 15d-15(e)) as of March 31,September 30, 2022. Disclosure controls and procedures cover controls and other procedures that are designed to ensure that information required to be disclosed by the Company in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have both concluded that the Company’s disclosure controls and procedures were effective as of March 31,September 30, 2022.
There were no changes in the Company’s internal controls over financial reporting that occurred during the three months ended March 31,September 30, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting. Management believes that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within any company, have been detected.
PART II - OTHER INFORMATION
ITEM 1.Legal Proceedings | Legal Proceedings |
In the normal course of operations, we may have disagreements or disputes with distributors, vendors or employees. Such potential disputes are seen by management as a normal part of business and while the outcome of such disagreements and disputes cannot be predicted with certainty, except as described below, we do not believe that any pending legal proceedings are material. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
The material set forth in Note 8, “Commitments and Contingencies,” in “Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements” is incorporated herein by reference.
ITEM 1A.Risk Factors | Risk Factors |
There have been no material changes to the risk factors relating to the Company set forth in, f, “Item IA. Risk Factors” of its Annual Report on Form 10-K, other than noted below, for the year ended December 31, 2021.
ITEM 2.Unregistered SalesIf we are uable to comply with the continued listed standard of Equity Securitiesthe Nasdaq Capital Market Stock Exchange (“Nasdaq”), our shares may be delisted; which could adversely affect the price of our common stock and Useits liquidity. Our common stock is currently listed on Nasdaq. We must comply with Nasdaq’s continued listing requirements related to, among other things, stockholders’ equity, market value, minimum bid price, and corporate governance in order to remain so listed. There can be no assurances that we will be able to comply with the applicable listing requirements. As previously noted on March 7, 2022, the Company received written notice ("Notification Letter”) from the Nasdaq Listing Qualifications Department ("NASDAQ”) notifying the Company that it was not in compliance with the minimum bid price requirements set forth in NASDAQ Listing Rule 5550(a)(2) for continued listing on the Capital Market, due to the bid price of Proceedsthe Company’s common stock closing below the minimum $1 per share for the thirty (30) consecutive business days prior to the date of the Notification Letter. In accordance with listing rules, the Company was afforded 180 days, or until September 5, 2022, to regain compliance. The Company was unable to regain compliance with the bid price requirement by September 5, 2022. However, on September 7, 2022, the Company received a notice from NASDAQ granting the Company an additional 180 calendar days, or until March 6, 2023, to regain compliance with the minimum $1.00 bid price per share requirement for continued listing on the Capital Market. NASDAQ determined that the Company is eligible for the second compliance period due to the Company meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on the Capital Market, with the exception of the bid price requirement, and the Company’s written notice of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary.
ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
None.
ITEM 3.Defaults Upon Senior Securities | Defaults Upon Senior Securities |
None.
ITEM 4.Mine Safety Disclosure | Mine Safety Disclosure |
Not applicable.
ITEM 5.Other Information | Other Information |
None.
Exhibit No. | Description |
1.13.1
| At the Market Offering Agreement, dated December 13, 2019 by and between ThermoGenesis Holding, Inc. and H.C. Wainwright & Co., LLC incorporated herein by reference to Exhibit 1.2 to the Registration Statement on Form S-3 (Registration No. 333-235509) filed on December 13, 2019.
|
1.2
| Amendment No. 1 to At the Market Offering Agreement, dated May 19, 2020, between ThermoGenesis Holdings, Inc. and H.C. Wainwright & Co., LLC, incorporated herein by reference to Exhibit 1.1 to the Form 8-K filed on May 20, 2020. |
1.3
| Amendment No. 2 to At the Market Offering Agreement, dated February 3, 2022, by and between ThermoGenesis Holdings, Inc. and H.C. Wainwright & Co., LLC, incorporated herein by reference to Exhibit 1.3 to the Form 8-K filed on February 3, 2022. |
3.1 | Amended and Restated Certificate of Incorporation of ThermoGenesis Holdings, Inc. dated as of June 5, 2020, incorporated by reference to Exhibit 3.1 to Form 8-K filed June 6, 2020. |
3.2 | Amended and Restated Bylaws of ThermoGenesis Holdings, Inc., incorporated by reference to Exhibit 3.2 to Form 8-K filed with the SEC on October 30, 2019. |
3.3 | First Amendment to the Amended and Restated Bylaws of ThermoGenesis Holdings, Inc., incorporated by reference to Exhibit 3.1 to Form 8-K filed December 17, 2021. |
| 3.4 | Second Amendment to Amended and Restated Bylaws of ThermoGenesis Holdings, Inc. dated June 30, 2022, incorporate by reference to Exhibit 3.1 to Form 8-K filed July 6, 2022. |
4.1 | Form of Common Stock Purchase Warrant, incorporated by reference to Exhibit 4.1 to Form 8-K filed with the SEC on March 28, 2018. |
4.2 | Form of Common Warrant, incorporated by reference to Exhibit 10.37 of amended Registration Statement on Form S-1 filed with the SEC on May 14, 2018. |
4.3 | Investors’ Rights Agreement, dated January 1, 2019, among CARTXpress Bio, Inc., Bay City Capital Fund V, L.P., and Bay City Capital Fund V Co-Investment Fund, L.P., incorporated by referenced to Exhibit 10.3 to Form 8-K filed with the SEC on January 4, 2019. |
4.4 | Form of Convertible Promissory Note, dated as of July 23, 2019, between ThermoGenesis Holdings, Inc. and Orbrex USA Co., incorporated by reference to Exhibit 4.1 to Form 8-K filed with the SEC on July 29, 2019. |
| 4.5 | Form of Pre-Funded Warrant (Incorporated by reference to Exhibit 10.41 to Amendment No. 1 to Form S-1 filed with the SEC on April 29, 2022). |
| 4.6 | Form of Common Warrant (Incorporated by reference to Exhibit 10.40 to Amendment No. 3 to Form S-1 filed with the SEC on October 17, 2022). |
4.7 | Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934, as amended, incorporated by reference to Exhibit 4.8 to Form 10-K filed with the SEC on March 24, 2020. |
10.1 | Fourth Amendment to the Company’s Amended 2016 Equity Incentive Plan, Effective June 4, 2020, incorporatedForm of Securities Purchase Agreement (Incorporated by reference to exhibit 10.1Exhibit 10.39 to Amendment No. 3 to Form 8-KS-1 filed January 14, 2022.with the SEC on October 17, 2022).
|
10.2
| Amended 2016 Equity Incentive Plan, incorporated by reference to exhibit 10.2 to Form 8-K filed January 14, 2022.
|
10.3
| Amendment No.1 to Second Amended and Restated Convertible Promissory Note, Dated March 4, 2022, between ThermoGenesis Holdings, Inc. and Boyalife Asset Holding II, Inc.
|
10.4
| Amendment No. 2 to First Amended and Restated Revolving Credit Agreement, dated March 4, 2022, between ThermoGenesis Holdings, Inc. and Boyalife Asset Holding II, Inc.
|
10.5
| License and Technology Access Agreement, dated March 24, 2022, between ThermoGenesis Holdings, Inc. and Boyalife Genomics Tianjin Ltd.
|
10.6
| Lease Agreement, dated March 24, 2022, between ThermoGenesis Holdings, Inc. and Z3 Investment LLC.
|
31.1 | Certification by the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2 | Certification by the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32 | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 |
101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its Inline XBRL tags are embedded within the Inline XBRL document |
101.SCH | Inline XBRL Taxonomy Extension Schema Document |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101) |
ThermoGenesis Holdings, Inc.
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.
| | | ThermoGenesis Holdings, Inc. (Registrant) | |
| | | |
Dated: May 19,November 10, 2022 | | /s/ Xiaochun (Chris) Xu, Ph.D. |
| |
| | Xiaochun (Chris) Xu, Ph.D. Chief Executive Officer (Principal Executive Officer) | |
| | | |
| | | |
Dated: May 19,November 10, 2022 | | /s/ Jeffery Cauble |
| |
| | Jeffery Cauble Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | |