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.

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 Securities Act. ☐

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

As of ~~November 12, 2020, 4,116,754~~May 11, 2021, 6,472,398 shares of the Company’s common stock, $0.01 par value, were outstanding.

	September 30,			December 31,			March 31,			December 31,
	2020			2019			2021			2020
Assets
Current assets
Cash and cash equivalents	$	10,899		$	10,002		$	26,600		$	28,575
Restricted cash		181			181			50			181
Accounts receivables, net		103			21
Accounts receivable, net								75			57
Inventories		839			654			1,109			855
Prepaid expenses and other current assets		1,860			1,759			2,369			2,670
Total current assets		13,882			12,617			30,203			32,338
Property, plant and equipment, net		1,318			735			1,321			1,351
Deferred offering costs		268			—
Right-of-use assets		1,097			860			791			946
Total assets	$	16,565		$	14,212		$	32,315		$	34,635

Liabilities and Stockholders' Equity (Deficit)
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$	1,502		$	4,533		$	1,234		$	1,774
Accrued expenses		6,085			6,947			5,927			5,241
Deferred revenue, current		501			482			502			525
Lease liabilities, current		556			664			433			495
Convertible notes payable, current		2,000			—			2,000			2,000
Warrant liability		—			3,368
Total current liabilities		10,644			15,994			10,096			10,035
Deferred revenue, non-current		2,103			2,378			1,856			2,072
Lease liabilities, non-current		542			197			357			450
Convertible notes payable, non-current		—			2,000
Total liabilities		13,289			20,569			12,309			12,557

Commitments and contingencies (Note 13)		—			—			—			—

Stockholders' equity (deficit)
Preferred stock, $.01 par value; 10,000,000 shares authorized; 21,473 and 41,517 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively		—			—
Common stock, $.01 par value; 1,000,000,000 shares authorized; 4,035,558 and 67,091 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively*		40			1
Stockholders' equity
Preferred stock, $.01 par value; 10,000,000 shares authorized; 20,480 and 20,631 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively								—			—
Common stock, $.01 par value; 40,000,000 shares authorized; 6,251,257 and 5,996,101 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively								63			60
Additional paid-in capital		391,545			364,785			422,027			417,449
Accumulated deficit		(388,298	)		(371,171	)		(402,074	)		(395,327	)
Accumulated other comprehensive income		(11	)		28			(10	)		(104	)
Total stockholders' equity (deficit)		3,276			(6,357	)
Total liabilities and stockholders' equity (deficit)	$	16,565		$	14,212
Total stockholders' equity								20,006			22,078
Total liabilities and stockholders' equity							$	32,315		$	34,635

* reflects, a one-for-seven hundred (1:700) reverse stock split effected on December 24, 2019.

(in thousands, except share and per share data)	(in thousands, except share and per share data)												(in thousands, except share and per share data)





	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
	2020			2019			2020			2019			2021			2020
Product revenue	$	340		$	216		$	778		$	528		$	261		$	176
Other revenue		126			164			361			535			127			118
Cost of goods sold		(188	)		(172	)		(434	)		(440	)		(112	)		(78	)
Gross profit		278			208			705			623			276			216

Operating expenses:
Research and development expenses		3,260			1,778			8,457			6,789			3,707			2,974
Selling, general and administrative expenses		1,998			4,002			6,571			9,204			3,296			2,316
Total operating expenses		5,258			5,780			15,028			15,993			7,003			5,290
Operating loss		(4,980	)		(5,572	)		(14,323	)		(15,370	)		(6,727	)		(5,074	)

Change in fair value of the warrant liability, net		—			434			(2,832	)		451			—			(2,832	)
Loss on issuance of financial instrument		—			(1,714	)		—			(1,721	)
Interest expense		(44	)		(671	)		(154	)		(4,735	)
Interest expense, net														(41	)		(36	)
Other income		33			4			182			4			21			81
Net loss		(4,991	)		(7,519	)		(17,127	)		(21,371	)

Deemed dividend for triggering of warrant down round feature		—			—			(55	)		—
Net loss attributable to common stockholders	$	(4,991	)	$	(7,519	)	$	(17,182	)	$	(21,371	)

Net loss	$	(4,991	)	$	(7,519	)	$	(17,127	)	$	(21,371	)		(6,747	)		(7,861	)

Other comprehensive (loss) income:
Foreign currency translation adjustments		(103	)		89			(39	)		39			94			65
Total other comprehensive loss	$	(5,094	)	$	(7,430	)	$	(17,166	)	$	(21,332	)	$	(6,653	)	$	(7,796	)

Common share data:
Basic loss per common share*	$	(1.16	)	$	(73.82	)	$	(7.75	)	$	(207.58	)
Diluted loss per common share*	$	(1.16	)	$	(73.82	)	$	(7.75	)	$	(207.58	)
Basic loss per common share													$	(1.04	)	$	(108.07	)
Diluted loss per common share													$	(1.04	)	$	(108.07	)

Weighted average number of basic shares outstanding*		4,288,593			101,862			2,217,611			102,956
Weighted average number of diluted shares outstanding*		4,288,593			101,862			2,217,611			102,956

* reflects, one-for-seven hundred (1:700) reverse stock split effected on December 24, 2019.
Weighted average number of basic shares outstanding														6,496,922			72,740
Weighted average number of diluted shares outstanding														6,496,922			72,740


See accompanying Notes to Condensed Consolidated Financial Statements.	See accompanying Notes to Condensed Consolidated Financial Statements.												See accompanying Notes to Condensed Consolidated Financial Statements.

Common Stock

Preferred Stock

$0.01 Par Value

$0.01 Par Value

No. of
Shares

Amount

No. of
Shares

Amount

Additional
Paid
in Capital

Accumulated
Deficit

Accumulated
Other
Comprehensive
Income

Total

Balance at January 1, 2020

67,091

$
1

41,517

$
—

$
364,785

$
(371,171
)

$
28

$
(6,357
)
Compensation expense for issuance
   of stock options

—

—

—

—

25

—

—

25

Compensation expense for issuance
   of restricted stock

2,717

—

—

—

30

—

—

30

Conversion of Preferred stock into
   common stock

2,915

—

(70
)

—

—

—

—

—

Fractional rounding related to reverse
   stock split

50

—

—

—

—

—

—

—

Registration of Series E and Series
   E-1 Preferred stock and related
   warrants

—

—

—

—

(106
)

—

—

(106
)
Fair value of warrants reclassified
   from liability to equity

—

—

—

—

6,199

—

—

6,199

Net loss

—

—

—

—

—

(7,861
)

—

(7,861
)
Total comprehensive income

—

—

—

—

—

—

65

65

Balance at March 31, 2020

72,773

$
1

41,447

$
—

$
370,933

$
(379,032
)

$
93

$
(8,005
)
Compensation expense for issuance
   of restricted stock

70,259

1

—

—

605

—

—

606

Conversion of Preferred stock into
   common stock

1,549,609

15

(15,497
)

—

(16
)

—

—

(1
)
Exercise of prefunded warrants

6,000

—

—

—

—

—

—

—

Public Offering - issuance of common
   stock and warrants

1,823,000

18

—

—

19,360

—

—

19,378

Net loss

—

—

—

—

—

(4,275
)

—

(4,275
)
Total comprehensive loss

—

—

—

—

—

—

(1
)

(1
)
Balance at June 30, 2020

3,521,641

$
35

25,950

$
—

$
390,882

$
(383,307
)

$
92

$
7,702

Conversion of Preferred stock into
   common stock

447,700

4

(4,477
)

—

(4
)

—

—

—

Exercise of warrants into common
   stock

60,117

1

—

—

601

—

—

602

ATM Offering

6,100

—

—

—

66

—

—

66

Net loss

—

—

—

—

—

(4,991
)

—

(4,991
)
Total comprehensive loss

—

—

—

—

—

—

(103
)

(103
)
Balance at September 30, 2020

4,035,558

$
40

21,473

$
—

$
391,545

$
(388,298
)

$
(11
)

$
3,276

	Preferred Stock					Common Stock
	$0.01 Par Value					$0.01 Par Value
	No. of Shares			Amount		No. of Shares		Amount		Additional Paid in Capital		Accumulated Deficit			Accumulated Other Comprehensive Income			Total
Balance at January 1, 2021		20,631		$	—		5,996,101	$	60	$	417,449	$	(395,327	)	$	(104	)	$	22,078
Compensation expense for issuance of stock options		—			—		—		—		2,148		—			—			2,148
Shares settled for services		—			—		2,636		—		57		—			—			57
Conversion of Preferred stock into common stock		(150	)		—		15,000		—		—		—			—			—
Exercise of warrants into common stock		—			—		237,520		3		2,373		—			—			2,376
Net loss		—			—		—		—		—		(6,747	)		—			(6,747	)
Total comprehensive loss		—			—		—		—		—		—			94			94
Balance at March 31, 2021		20,481		$	-		6,251,257	$	63	$	422,027	$	(402,074	)	$	(10	)	$	20,006



	Preferred Stock					Common Stock Issued
	$0.01 Par Value					$0.01 Par Value
	No. of Shares			Amount		No. of Shares		Amount		Additional Paid in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income		Total
Balance at January 1, 2020		41,517		$	—		67,091	$	1	$	364,785		$	(371,171	)	$	28	$	(6,357	)
Compensation expense for issuance of stock options		—			—		—		—		25			—			—		25
Shares settled for services		—			—		2,717		—		30			—			—		30
Conversion of Preferred stock into common stock		(70	)		—		2,915		—		—			—			—		—
Fractional rounding related to Reverse Stock Split		—			—		50		—		—			—			—		—
Registration costs		—			—		—		—		(106	)		—			—		(106	)
Fair value of warrants reclassified from liability to equity		—			—		—		—		6,199			—			—		6,199
Net loss		—			—		—		—		—			(7,861	)		—		(7,861	)
Total comprehensive loss		—			—		—		—		—			—			65		65
Balance at March 31, 2020		41,447		$	—		72,773	$	1	$	370,933		$	(379,032	)	$	93	$	(8,005	)

DELCATH SYSTEMS, INC.

Condensed Consolidated Statement of Stockholders' Equity (Deficit), continued

(Unaudited)

(in thousands, except share and per share data)

Common Stock Issued

Preferred Stock

$0.01 Par Value

$0.01 Par Value

No. of
Shares

Amount

No. of
Shares

Amount

Additional
Paid
in Capital

Accumulated
Deficit

Accumulated
Other
Comprehensive
Income

Total

Balance at January 1, 2019

14,715

$
—

101

$
—

$
329,065

$
(344,054
)

$
50

$
(14,939
)
Compensation expense for
   issuance of stock options

—

—

—

—

54

—

—

54

Compensation expense for
   issuance of restricted stock

20

—

—

—

4

—

—

4

Issuance of Series D Preferred Stock

—

—

15

—

150

—

—

150

Conversion of Series D Preferred
   Stock to Debt

—

—

(116
)

—

(1,160
)

—

—

(1,160
)
Exercise of pre-funded warrants

5,885

—

—

—

—

—

—

—

Net loss

—

—

—

—

—

(7,894
)

—

(7,894
)
Total comprehensive income

—

—

—

—

—

—

7

7

Balance at March 31, 2019

20,620

$
—

—

$
—

$
328,113

$
(351,948
)

$
57

$
(23,778
)
Compensation expense for issuance
   of stock options

—

—

—

—

75

—

—

75

Exercise of prefunded warrants

5,399

—

—

—

—

—

—

—

Exchange of warrants

91

—

—

—

13

—

—

13

Net loss

—

—

—

—

—

(5,959
)

—

(5,959
)
Total comprehensive loss

—

—

—

—

—

—

(80
)

(80
)
Balance at June 30, 2019

26,110

$
—

—

$
—

$
328,201

$
(357,907
)

$
(23
)

$
(29,729
)
Compensation expense for issuance
   of stock options

—

—

—

—

70

—

—

70

Issuance of Series E Preferred Stock

—

—

32,572

—

42,915

(13,340
)

—

29,575

Issuance of Series E-1 Preferred Stock

—

—

9,510

—

14,408

(4,898
)

—

9,510

Fair value of warrants issued

—

—

—

—

(20,844
)

—

—

(20,844
)
Net loss

—

—

—

—

—

(7,519
)

—

(7,519
)
Total comprehensive loss

—

—

—

—

—

—

112

112

Balance at September 30, 2019

26,110

$
—

42,082

$
—

$
364,750

$
(383,664
)

$
89

$
(18,825
)

*reflects a one-for-seven hundred (1:700) reverse stock split effected on December 24, 2019.

	Nine months ended September 30,						Three months ended March 31,
	2020			2019			2021			2020
Cash flows from operating activities:
Net loss	$	(17,127	)	$	(21,371	)	$	(6,747	)	$	(7,861	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock option compensation expense		25			199			2,148			25
Restricted stock compensation expense		406			4			—			30
Depreciation expense		125			168			39			48
Amortization of right of use assets		492			1,535			—			11
Warrant liability fair value adjustment		2,832			(451	)		—			2,832
Non-cash interest income		—			(23	)		(1	)		(3	)
Equitization of expenses		—			1,474
Loss on issuance of financial instruments		—			1,715
Interest expense accrued related to convertible notes		120			33			39			40
Debt discount amortization		—			4,467
Changes in assets and liabilities:
(Increase) decrease in prepaid expenses and other assets		(100	)		43			302			(880	)
(Increase) decrease in accounts receivable		(82	)		564
(Increase) decrease in inventories		(185	)		85
Increase in deferred offering costs		(268	)		—
Decrease in accounts payable and accrued expenses		(3,784	)		(4,289	)
Increase in accounts receivable								(18	)		(48	)
Increase in inventories								(254	)		(136	)
Increase in accounts payable and accrued expenses								164			901
Decrease in deferred revenue		(256	)		(360	)		(239	)		(188	)
Decrease in operating lease liabilities		(466	)		(1,488	)
Decrease in other liabilities		—			(627	)
Net cash used in operating activities		(18,268	)		(18,322	)		(4,567	)		(5,229	)

Cash flows from investing activities:
Purchase of property, plant, and equipment		(708	)		(2	)
Purchase of property, plant and equipment								(9	)		(180	)
Net cash used in investing activities		(708	)		(2	)		(9	)		(180	)

Cash flows from financing activities:
Principal payments on financing leases		(26	)		(49	)		—			(11	)
Net proceeds from the issuance of debt		—			3,719
Net proceeds from sale of Series D Preferred Stock		—			150
Net proceeds from sale of Series E Preferred Stock and warrants		—			26,510
Net payments related to reverse stock split		(106	)		—
Net proceeds from Public Offering		19,377			—
Net payments related to registration costs								—			(106	)
Net proceeds from the exercise of warrants		601			—			2,376			—
Gross proceeds from ATM Offering		70			—
Issuance costs related to ATM Offering		(4	)		—
Net cash provided by financing activities		19,912			30,330
Net cash provided by/(used in) financing activities								2,376			(117	)
Foreign currency effects on cash		(39	)		(69	)		94			64
Net increase in total cash		897			11,937
Net decrease in total cash								(2,106	)		(5,462	)

Total Cash:
Beginning of period		10,183			3,578			28,756			10,183
End of period	$	11,080		$	15,515		$	26,650		$	4,721




							Three months ended March 31,
							2021			2020
Supplemental Disclosure of Cash Flow Information:
Cash paid during the periods for:
Interest expense							$	3		$	4

Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Reclassification of 2019 warrants from liability to equity							$	—		$	6,199
Issuance of restricted stock for accrued fees due to a former board member							$	57		$	—

The unaudited interim condensed consolidated financial statements of Delcath Systems, Inc. (“Delcath” or the “Company”) as of and for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019~~2020 (the “Annual Report”), which was filed with the Securities and Exchange Commission (the “SEC”) on March ~~25, 2020~~31, 2021 and may also be found on the Company’s website (www.delcath.com). In these notes to the condensed consolidated financial statements the terms “us”, “we” or “our” refer to Delcath and its consolidated subsidiaries.

~~Delcath Systems, Inc. is~~We are an interventional oncology company focused on the treatment of primary and metastatic liver cancers. ~~Delcath’s proprietary technology enables~~Our lead product candidate, the ~~administration of~~HEPZATO™ KIT (melphalan hydrochloride for injection/hepatic delivery system), or HEPZATO™, is a drug/device combination product. HEPZATO is designed to administer high-dose chemotherapy to the liver while controlling systemic exposure and associated side effects. In ~~the United States, the HEPZATO™ KIT (melphalan hydrochloride for injection/hepatic delivery system), or HEPZATO™, is currently the focus of a Phase 3 pivotal trial. HEPZATO~~Europe, our commercial product is a ~~combination drug~~stand-alone medical device ~~product regulated~~having the same device components as ~~a drug product by~~ the ~~United States Food and Drug Administration, or~~HEPZATO KIT but without the ~~FDA. In Europe, the~~melphalan hydrochloride. The device is ~~commercially available as a stand-alone device without drug~~approved for sale under the trade name ~~Delcath~~ CHEMOSAT® Hepatic Delivery System for Melphalan, ~~(“CHEMOSAT”),~~or CHEMOSAT, where it has been used at major medical centers to treat a wide range of cancers of the liver.

Our clinical development program ~~(“CDP”)~~ for HEPZATO is primarily comprised of the FOCUS Clinical Trial for Patients with Hepatic Dominant Ocular Melanoma ~~(the “FOCUS Trial”)~~(FOCUS Trial), a global registration clinical trial that is investigating objective response rate in metastatic ocular melanoma, or mOM, and the ALIGN Trial, a global Phase 3 clinical trial for intrahepatic cholangiocarcinoma, or ICC (the “ALIGN Trial”). The FOCUS trial initiated treatment on the final enrolled patient on October 2, 2020. Presently, we have paused our work on the ALIGN trial while we reevaluate the trial design and are focusing our efforts on the FOCUS trial conclusion and subsequent NDA filing.mOM. We are currently reviewing the incidence, unmet need, available efficacy data and development requirements for a broad set of liver cancers in order to select a portfolio of follow-on indications which will maximize the value of the HEPZATO platform. Whether we continue the ALIGN trial will be dependent on the relative value of the ICC indication versus other alternative indications. In addition, our CDP also includes a registry for CHEMOSAT commercial cases performed in Europe and sponsorship of select investigator-initiated trials, or IITs.

Due to the global outbreak of SARS-CoV-2, a novel strain of coronavirus that causes Coronavirus disease (COVID-19), the Company experienced an impact on certain areas of its business. These effects included a slowing of patient recruitment in the FOCUS trial and a reduction in the pace at which we can monitor data at our clinical trial sites. The resulting delay in completing enrollment and additional time required to monitor data ~~has~~ caused our ~~planned~~ announcement for the top-line data from our FOCUS ~~trial~~Trial to shift to early ~~2021.~~2021 and to be modified to a preliminary analysis. We now plan to submit a New Drug Application (NDA) to the FDA in the first quarter of 2022 for the treatment of mOM. The ability to achieve this goal is contingent on our ability to monitor data at our clinical sites and therefore the timeline may shift as access to the clinical sites changes in response to the rapidly evolving situation. We have also experienced ~~a decline~~an increased volatility in EU commercial product revenue and additional impacts to the business may arise that we are not aware of currently. The ultimate impact of the pandemic on the Company’s results of operations, financial position, liquidity, or capital resources cannot be reasonably estimated at this time.

The accompanying interim condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses since inception and expects to continue incurring losses for the next several years. These losses, among other factors, raise substantial doubt about the Company’s ability to continue as a going concern.

The Company’s existence is dependent upon management’s ability to obtain additional funding sources or to enter into strategic alliances. Adequate additional financing may not be available to the Company on acceptable terms, or at all. If the Company is unable to raise additional capital and/or enter into strategic alliances when needed or on attractive terms, it would be forced to delay, reduce, or eliminate its research and development programs or any commercialization efforts. There can be no assurance that the Company’s efforts will result in the resolution of the Company’s liquidity needs. If Delcath is not able to continue as a going concern, it is likely that holders of its common stock will lose all of their investment. The accompanyinginterim condensed consolidated financial statements do not include any adjustments that might result should the Company be unable to continue as a going concern.

The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales. These circumstances raise substantial doubt about the Company's ability to continue as a going concern within one year after the date that the financial statements are issued. Additional working capital will be required to continue operations. Operations of the Company are subject to certain risks and uncertainties, including, among others, uncertainty of product development and clinical trial results; uncertainty regarding regulatory approval; technological uncertainty; uncertainty regarding patents and proprietary rights; comprehensive government regulations; limited commercial manufacturing, marketing, or sales experience; and dependence on key personnel.

These interim condensed consolidated financial statements are unaudited and were prepared by the Company in accordance with generally accepted accounting principles in the United States of America (GAAP) and with the SEC’s instructions to Form 10-Q and Article 10 of Regulation S-X. They include the accounts of all entities controlled by Delcath and all significant inter-company accounts and transactions have been eliminated in consolidation. ~~All historical share and per share amounts have been retrospectively adjusted for the one-for-seven hundred reverse stock split effected on December 24, 2019.~~

The preparation of interim condensed consolidated financial statements requires management to make assumptions and estimates that impact the amounts reported. These interim condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the Company’s results of operations, financial position and cash flows for the interim periods ended ~~September 30, 2020~~March 31, 2021 and ~~2019;~~2020; however, certain information and footnote disclosures normally included in our audited consolidated financial statements included in our Annual Report on Form 10-K have been condensed or omitted as permitted by GAAP. It is important to note that the Company’s results of operations and cash flows for interim periods are not necessarily indicative of the results of operations and cash flows to be expected for a full fiscal year or any interim period.

There have been no material changes to our significant accounting policies as set forth in Note 3 Summary of Significant Accounting Policies to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, except for the following:

Deferred offering costs are expenses directly related to an at-the-market offering of the Company’s common stock (the “ATM Offering”) (see Note 9), which is pursuant to a prospectus supplement which is part of a shelf registration that was declared effective by the SEC on December 31, 2018 (the “Shelf Registration”). These costs consist of legal, accounting, printing, and filing fees that the Company has capitalized, including fees incurred by the independent registered public accounting firm directly related to the offerings. Deferred costs associated with the ATM Offering will be amortized to additional paid in capital on a pro-rata basis as the Company raises funds pursuant to the ATM Offering, with any remaining deferred offering costs charged to the results of operations at the end of the life of the Shelf Registration. As of September 30, 2020, the unamortized deferred offering costs were $268.0.

. Certain prior period balances have been reclassified in order to conform to current period presentation. These reclassifications have no effect on previously reported results of operations or loss per share.

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Simplifying the Accounting for Income Taxes. The list of changes is comprehensive; however the changes will not significantly impact the Company due to the full valuation allowance that is recorded against the Company’s deferred tax assets. ~~ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.~~ Early adoption of ASU 2019-12 is permitted, including adoption in any interim period for public business entities for periods for which financial statements have not yet been issued. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an entity that elects early adoption must adopt all the amendments in the same period. The Company ~~will adopt~~adopted ASU 2019-12 ~~in 2021.~~on January 1, 2021 and there was no material impact on the Company’s financial statements or disclosures.

Cash and cash equivalents that are restricted as to withdrawal or use under the terms of certain contractual agreements are recorded in Restricted Cash on the balance sheets. Restricted cash does not include required minimum balances.

¹Other consists of various prepaid expenses and other current assets, with no individual item accounting for more than 5% of prepaid expenses and other current assets at September 30, 2020 and December 31, 2019.

On July 31, 2020, the Company exercised its option to purchase its 95-97 Park Road office location in Queensbury, NY for $460.3, pursuant to the terms of the lease agreement dated September 17, 2018, as amended on January 29, 2019, and further amended on July 31, 2020.

Depreciation expense for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 was approximately ~~$32.7 and $124.7~~$38.8 as compared to approximately ~~$45.8 and $168.0~~$47.6 for the same ~~periods~~period in ~~2019.~~2020.

¹~~Other consists of various accrued expenses, with no individual item accounting for more than 5% of current liabilities at September 30, 2020 and December 31, 2019.~~

The Company recognizes right-of-use (“ROU”) assets and lease liabilities when it obtains the right to control an asset under a leasing arrangement with an initial term greater than twelve months. The Company leases its facilities under non-cancellable operating and financing leases.

The Company evaluates the nature of each lease at the inception of an arrangement to determine whether it is an operating or financing lease and recognizes the ROU asset and lease liabilities based on the present value of future minimum lease payments over the expected lease term. The Company’s leases do not generally contain an implicit interest rate and therefore the Company uses the incremental borrowing rate it would expect to pay to borrow on a similar collateralized basis over a similar term in order to determine the present value of its lease payments.

The following table summarizes the Company’s operating ~~and financing~~ leases as of and for the ~~nine~~three months ended ~~September 30, 2020:~~March 31, 2021:

(in thousands)	US			Ireland			Total
										US			Ireland			Total
Lease cost
Operating lease cost	$	353		$	156		$	509		$	112		$	57		$	169
Financing lease cost	27				—			27
Sublease income		—			(162	)		(162	)		—			(44	)		(44	)
Total	$	380		$	(6	)	$	374		$	112		$	13		$	125

Other information
Operating cash flows out from operating leases		(353	)		(156	)		(509	)		(112	)		(57	)		(169	)
Operating cash flows in from operating leases		-			162			162			-			44			44
Operating cash flows out from financing leases		(26	)		—			(26	)
Right-of-use assets exchanged for new operating lease liabilities		729			—			729
Weighted average remaining lease term		2.4			0.8						1.9			0.3
Weighted average discount rate - operating leases		8	%		8	%					8	%		8	%

Remaining maturities of the Company’s operating leases, excluding short-term leases, are as follows:

On June 6, 2019, the Company entered into an agreement with two institutional investors, pursuant to which the investors agreed to transfer and surrender to the Company for cancellation, warrants to purchase 5,605 shares of the Company’s common stock (the “Series D Warrants”) and warrants to purchase 0.1 million shares of the Company’s common stock (the “Pre-Funded Series D Warrants”). Under the terms of the Purchase Agreement, the Company agreed to sell and issue to the investors 8% Senior Secured Promissory Notes in an aggregate principal amount of $2,000 and with a July 16, 2021 maturity date, in full payment and satisfaction of the purchase price for the Series D Warrants and Pre-Funded Series D Warrants. This agreement was effective on July 15, 2019, upon the closing of the Company’s July 2019 Private Placement discussed in Note 9 herein and discussed further in Notes 10 and 11 to the Company’s audited consolidated financial statements contained in its Annual Report. Following the closing of the July 2019 Private Placement, the Company entered into an agreement under which the 8% Senior Secured Promissory Notes became

The note payable is convertible into ~~shares of Series E~~ Preferred ~~Stock and Warrants (the “Unit”) at the price of $1,500 per Unit. The principal is recognized in Convertible notes payable, on the condensed consolidated balance sheet.~~Stock.

~~On July 11, 2019,~~During the ~~Company entered~~three months ended March 31, 2021, 150 shares of Preferred Stock were converted into ~~a securities purchase agreement with certain accredited investors pursuant to which Delcath sold to investors~~15,000 shares of the Company’s common stock.

As of March 31, 2021, there were an aggregate of 20,000 shares of our Series E convertible preferred stock, par value $0.01 per share, or the “Series E Preferred Stock”, at a price of $1,000 per share and a warrant, or a “2019 E Warrant”, to purchase a number of shares of common stock equal to the number of shares of common stock issuable upon conversion of the Series E Preferred Stock purchased by the investor, or the “July 2019 Private Placement”. In connection with the July 2019 Private Placement, the Company exchanged $11,800 of debt, interest and Series D Warrants for 11,50020,481 shares of Series E Preferred Stock and related 2019 E Warrants, $100 in accounts payables for 149 shares of Series E Preferred Stock and related 2019 E Warrants and issued 923 shares of Series E Preferred Stock and related 2019 E Warrants to certain investors in exchange for a waiver of rights under exchange agreements signed in December 2018 and March 2019, or the “Debt Exchange”.

On August 19, 2019, the Company entered into a securities purchase agreement with certain accredited investors pursuant to which Delcath sold to investors an aggregate of 9,510 shares of Series E-1 convertible preferred stock, par value $0.01 per share, or the Series E-1 Preferred Stock, at a price of $1,000 per share and a warrant, or a “2019 E-1 Warrant”, and together with the 2019 E Warrant, the “2019 Warrants”, to purchase a number of shares of common stock of the Company equal to the number of shares of common stock issuable upon conversion of the Series E-1 Preferred Stock purchased by the investor, or the “August 2019 Private Placement”, and, collectively with the July 2019 Private Placement, the “Private Placements”.

~~Each share of Series E Preferred Stock~~ and Series E-1 Preferred Stock or, collectively, the “Preferred Stock”, is convertible at any time at the option of the holder into the number of shares of common stock determined by dividing the current conversion price. At December 31, 2019, the conversion price was $23.04 and was subsequently adjusted to $10.00 upon the pricing of a $21,996 public offering of the Company’s common stock and warrants on May 5, 2020, as discussed further below. As a result of the price adjustment, the excess of the fair value of the common stock that will be received on conversion, measured on the price reset date, exceeded the original proceeds allocated to the Preferred Stock by $12,000. The holders of the Preferred Stock are entitled to receive dividends on shares of Preferred Stock equal (on an “as converted” basis) to and in the same form as dividends paid on shares of the common stock. Any such dividends that are not paid to the holders of the Preferred Stock will increase the stated value. No other dividends will be paid on shares of Preferred Stock.

Each 2019 Warrant had an exercise price equal to $23.04 per share at December 31, 2019. The exercise price was subsequently adjusted to $10.00 per share upon the pricing of a $21,996 offering on May 5, 2020, as discussed further below, which resulted in the recognition of a $54.5 deemed dividend. The 2019 Warrants are exercisable until 5:00 p.m. (NYC time) on December 24, 2024.

~~As of September 30, 2020, there were 21,473 shares of Preferred Stock outstanding and 1,826,579 2019 Warrants~~ outstanding.

On May 5, 2020, the Company closed a public offering of 1,823,000 shares of common stock, 377,000 pre-funded warrants and Series F warrants to purchase 2,224,900 shares of common stock at an exercise price of $10.00 per share (the “Public Offering”). Delcath received gross proceeds of approximately $21,996 from the offering, before deducting the underwriting discount and estimated offering expenses. As a result of the Public Offering, the Preferred Stock conversion price was adjusted to $10.00 per share and the exercise price of the 2019 Warrants was adjusted to $10.00 per share and neither instrument is subject to further price resets.

On August 18, 2020, the Company entered into a sales agreement with Cantor Fitzgerald & Co. (“Cantor Fitzgerald”), pursuant to which the Company may offer and sell, from time to time, through Cantor Fitzgerald, as sales agent or principal, shares of the Company’s common stock, (the “Placement Shares”), having an aggregate offering price of up to $10,000 (the “ATM Offering”). The Company has no obligation to sell any Placement Shares under the sales agreement. Subject to the terms and conditions of the sales agreement, Cantor Fitzgerald will use commercially reasonable efforts, consistent with its normal trading and sales practices, applicable state and federal law, rules and regulations and the rules of the Nasdaq Stock Market, to sell Placement Shares from time to time based upon the Company’s instructions, including any price, time or size limits specified by the Company. The Company will pay Cantor Fitzgerald a commission of 3.0% of the aggregate gross proceeds from each sale of Placement Shares, reimburse Cantor Fitzgerald’s legal fees and disbursements up to $50.0 and provide Cantor Fitzgerald with customary indemnification and contribution rights. The sales agreement may be terminated by Cantor Fitzgerald or the Company upon notice to the other party as provided in the sales agreement, or by Cantor Fitzgerald at any time in certain circumstances, including the occurrence of a material and adverse change in the Company’s business or financial condition that makes it impractical or inadvisable to market the Placement Shares or to enforce contracts for the sale of the Placement Shares.

In connection with the ATM Offering, in consideration for a fee equal to 1.05% of the gross sales price per share sold in the ATM Offering, ROTH Capital Advisors, LLC (“Roth”) waived, solely with respect to the ATM Offering, (i) Roth’s right, pursuant to certain engagement letters dated August 14, 2019 and January 13, 2020 between Roth and the Company, to act as placement agent or underwriter with respect to offerings of the Company’s securities and to receive a minimum of 35% of the fees paid to the agents or underwriters for such offerings and (ii) the lock-up provision included in a certain Underwriting Agreement dated May 1, 2020 between Roth and the Company requiring the prior written consent of Roth for any offer or sale of the Company’s common stock by the Company during the 90-day period following the date of the Underwriting Agreement.

Rosalind Master Fund L.P. and Rosalind Opportunities Fund I L.P. (together, “Rosalind”) waived, solely with respect to the ATM Offering, Rosalind’s right, pursuant to that certain Support and Conversion Agreement dated March 11, 2020 between Rosalind and the Company, as amended, to participate in any offer or sale of the Company’s common stock by the Company occurring within a two-year period.

On August 18, 2020, the Company and the holders of a requisite number of shares of the Company’s Series E Convertible Preferred Stock and Series E-1 Convertible Preferred Stock and related warrants (the “Holders”) entered into an Amendment to those certain Securities Purchase Agreements, dated July 11, 2020 and August 15, 2019, among the Company and the parties signatory thereto, for the purpose of clarifying that offerings of the Company’s common stock in “at the market” transactions are excluded from the rights of the holders set forth therein.

~~Through September 30, 2020, the Company sold 6,100 shares of common stock for aggregate gross proceeds of $70.5 pursuant to the ATM Offering.~~

During the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021, the Company issued ~~2,000,224 shares of the Company’s common stock pursuant to conversions of Preferred Stock.~~

~~During the nine months ended September 30, 2020, the Company issued 6,000~~237,520 shares of common stock associated with the exercise of ~~pre-funded warrants and 60,117 shares~~warrants.

Issuance of ~~common stock associated with other warrants.~~Unregistered Securities

In February 2021, the Company issued ~~72,976~~2,636 shares of unregistered common stock ~~as compensation.~~in lieu of a cash payment of deferred accrued director fees to a former director.

~~On September 30, 2020 (the “Effective Date”), the Company’s 2020 Omnibus Equity Incentive Plan (the “2020 Plan”) was adopted by the Company’s Board~~As of Directors. If subsequently approved by the Company’s stockholders, the 2020 Plan will continue in effect until the tenth anniversary of the Effective Date, or until earlier terminated by the Board. The 2020 Plan will be administered by the Board of Directors or a committee designated by the Board of Directors. The 2020 Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards, as well as other stock-based awards or cash awards that are deemed to be consistent with the purposes of the plan to Company employees, directors and consultants. There areMarch 31, 2021, there were 675,000 shares of the Company’s common stock reserved under the 2020 Plan, of which ~~all~~95,000 remained available to be ~~issued as~~issued. On March 30, 2021, the Company’s Board of ~~September 30,~~Directors approved an amendment of the 2020 ~~(see Note 14 – Subsequent Events – Option Grants~~Plan to increase the number of shares of the Company’s common stock available for ~~details of awards granted on October 1, 2020). Upon~~issuance under the 2020 Plan by 1,800,000, subject to stockholder approval of the amendment. The amendment of the 2020 Plan ~~no further grants~~was approved by the stockholders at the Company’s annual meeting of ~~awards will be made under~~stockholders held on May 6, 2021 and, effective as of such date, the ~~2019 Equity Incentive Plan.~~

~~The Company’s 2019 Equity Incentive Plan (the “Plan”) allows for grants in the form~~number of ~~incentive stock options, nonqualified stock options, stock units, stock awards, stock appreciation rights, and other stock-based awards. All~~shares of the Company’s ~~officers, directors, employees, consultants, and advisors are eligible to receive grants under the Plan. The maximum number of shares reserved~~common stock available for issuance under the 2020 Plan ~~is 2,142. Options to purchase~~increased by 1,800,000 resulting in a total share reserve of 2,475,000 shares of common ~~stock are granted at exercise prices not less than 100% of fair value on the dates of grant. As of September 30, 2020, the Plan had approximately 1,643 shares available for grant.~~ stock.

The following is a summary of stock option activity under the 2019 Plan and the 2020 Plan for the ~~nine~~three months ended ~~September 30, 2020:~~ March 31, 2021:

~~At September 30, 2020, there was no unrecognized compensation expense related to non-vested share-based compensation awards under the Plan.~~

The following table summarizes information for stock option shares outstanding and exercisable at March 31, 2021

The following is a summary of share-based compensation expense in the statement of operations for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021

At March 31, 2021, there was $6,677 of aggregate unrecognized compensation expense related employee and board stock option grants. This will be recognized over the next 33 months.

The following is a summary of warrant activity for the ~~nine~~three months ended ~~September 30, 2020:~~March 31, 2021:

The following table presents information related to stock warrants at March 31, 2021

As of ~~September 30, 2020,~~March 31, 2021, warrants to purchase 371,000 shares of the Company’s common stock were pre-funded, and the exercise price was $0.01 per share. The remaining warrants were exercisable at $10.00 per share. Each 2019 Warrant had an exercise price equal to $23.04 per share at December 31, 2019. The exercise price was subsequently adjusted to $10.00 per share upon the pricing of a $22,000 offering on May 5, 2020, as discussed below, which resulted in the recognition of a $54.5 deemed dividend.

As a result of the expiration of certain provisions in the 2019 Warrants, the $6,199 fair value of the 2019 Warrants ~~were~~was reclassified from liability to equity on February 19, 2020.

~~The table below presents the activity within Level 3 of the fair value hierarchy for the nine months ended September 30, 2020:~~

The fair value of the outstanding warrants at February 19, 2020, the date the 2019 Warrants were no longer classified as a liability, ~~and December 31, 2019~~ was determined by using option pricing models with the following assumptions:

The table below presents the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2020, aggregated by the level in the fair value hierarchy within which those measurements fall in accordance with ASC 820.

Basic net loss per share is determined by dividing net loss by the weighted average shares of common stock outstanding during the period, without consideration of potentially dilutive securities, except for those shares that are issuable for little or no cash consideration. Diluted net loss per share is determined by dividing net loss by diluted weighted average shares outstanding. Diluted weighted average shares reflects the dilutive effect, if any, of potentially dilutive common shares, such as stock options and warrants calculated using the treasury stock method. In periods with reported net operating losses, all common stock options and warrants are generally deemed anti-dilutive such that basic net loss per share and diluted net loss per share are equal.

The following potentially dilutive securities were excluded from the computation of earnings per share as of ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ because their effects would be anti-dilutive:

~~The following table reconciles net loss per share for the three and nine months ended September 30, 2020 and 2019:~~

Three months ended September 30,

Nine months ended September 30,

(in thousands, except share data)
2020

2019

2020

2019

Net loss
$
(4,991
)

$
(7,519
)

$
(17,127
)

$
(21,371
)
Deemed dividend for triggering of warrant down round feature

—

—

(55
)

—

Net loss attributable to common stockholders
$
(4,991
)

$
(7,519
)

$
(17,182
)

$
(21,371
)

Weighted average shares outstanding - basic*

4,288,593

101,862

2,217,611

102,956

Weighted average shares outstanding - diluted*

4,288,593

101,862

2,217,611

102,956

Net loss per share - basic*
$
(1.16
)

$
(73.82
)

$
(7.75
)

$
(207.58
)
Net loss per share - diluted*
$
(1.16
)

$
(73.82
)

$
(7.75
)

$
(207.58
)

* reflects, one-for-seven hundred (1:700) reverse stock split effected on December 24, 2019.

	March 31,
	2021		2020
Stock options		1,078,499		1,640
Common stock warrants - equity		3,994,107		1,826,599
Common stock reserved for conversion of preferred shares		2,048,101		1,799,093
Assumed conversion of convertible notes		146,288		63,493
Total		7,266,995		3,690,825

At ~~September 30, 2020,~~March 31, 2021, the Company had 371,000 pre-funded warrants outstanding. The following table provides a reconciliation of the weighted average shares outstanding calculation for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:

As discussed in Note 14 Income Taxes of the Company’s Annual Report, the Company has a valuation allowance against the full amount of its net deferred tax assets. The Company currently provides a valuation allowance against deferred tax assets when it is more likely than not that some portion or all of its deferred tax assets will not be realized. The Company has not recognized any unrecognized tax benefits in its balance sheets.

The Company is subject to income tax in the U.S., as well as various state and international jurisdictions. The federal and state tax authorities can generally reduce a net operating loss (but not create taxable income) for a period outside the statute of limitations in order to determine the correct amount of net operating loss which may be allowed as a deduction against income for a period within the statute of limitations. Additional information regarding the statutes of limitations can be found in Note 14 Income Taxes of the Company’s Annual Report.

On March 27, 2020, President Trump signed into law the $2 trillion bipartisan Coronavirus Aid, Relief, and Economic Security (CARES) Act (H.R. 748). The CARES Act includes a variety of economic and tax relief measures intended to stimulate the economy, including loans for small businesses, payroll tax credits/deferrals, and corporate income tax relief. Due to the Company’s history of tax loss carryforwards and full valuation allowance, the CARES Act did not have a significant effect to the income tax provision, as the corporate income tax relief was directed towards cash taxpayers.

During the nine months ended September 30, 2020 the Company settled intercompany debt of its two Ireland subsidiaries, Delcath Systems Limited and Delcath Holdings Limited, as capital contributions. During the nine months ended September 30, 2020, Delcath Holdings Limited ceased operations with an intent to liquidate after the receipt of tax clearance. When Delcath Holdings Limited liquidates, the Company will generate a $20,000 U.S. deferred tax benefit from a loss on its investment, which may be subject to limitations under Internal Revenue Code Sections 382 and 383 and will be fully offset by a valuation allowance.

Following the May 18, 2020 resignation (effective June 1, 2020) of Jennifer Simpson, the Company’s former President and Chief Executive Officer, and Barbra Keck, the Company’s former Chief Financial Officer (the “Claimants”), it became evident that there was a dispute regarding the Company’s compensation obligations to the Claimants. In a letter dated June 29, 2020, an attorney representing the Claimants made certain claims and threatened litigation against the Company. On or about July 27, 2020, the Claimants filed a statement of claim with the American Arbitration Association against the Company. The Claimants seek payment of certain purported unpaid compensation amounts claimed to be due to them, in an approximate amount of $1,140 in the aggregate, as well as unspecified statutory damages under New York Labor Law, attorneys’ fees and costs, and statutory interest. The Company intends to defend the claims vigorously. The arbitrator ~~has~~had scheduled hearings to take place during the week of May 17, 2021. However, the Claimants and the Company ~~have~~ recently agreed to participate in non-binding mediation of their dispute before a neutral mediator, which ~~will result~~resulted in the arbitration proceedings being placed in abeyance pending the outcome of the mediation process. At this time, the mediation process between the Claimants and the Company is ~~unable to predict the timing for the mediation process, nor whether mediation will result in an amicable resolution of its dispute with the Claimants.~~ongoing. As of ~~September 30, 2020,~~March 31, 2021, the Company has accrued for the full purported unpaid compensation amounts.

Pursuant to a 2014 sublease agreement (the “2014 Sublease”) and a 2015 sublease agreement (the “2015 Sublease”) the Company subleased portions of its leased premises in Dublin, Ireland to a sublessee. On May 15, 2020, the Company and its sublessee entered into amendments to the 2014 Sublease and 2015 Sublease pursuant to which (i) the 2014 Sublease and 2015 Sublease were extended from May 31, 2020 to August 2, 2021, (ii) effective July 1, 2020, the leased premises under the 2015 Sublease would be expanded to include an additional 4,999 square feet of space, and (iii) effective July 1, 2020, the rent under the 2015 Sublease would increase from approximately $14.6 per month to $20.6 per month. The Company analyzed the terms of the amended 2014 Sublease and 2015 Sublease and determined that its ROU asset for the master operating lease was not impaired as a result of the amendments.

On June 25, 2020, the Company entered into a sub-lease agreement (the “2021 Sub-Lease”) with its current sublessee under the 2014 Sublease and 2015 Sublease pursuant to which, effective August 2, 2021, the current sublessee would become the lessee and the Company would then sub-lease its portion of the premises from the current sublessee. The Company rent under the 2021 Sub-Lease will be approximately $3.7 per month for a term of five years. Aside from the 2021 Sub-Lease, the Company has no operating or financing leases that have not yet commenced.

On September 22, 2020, the Company entered into an amendment (the “Second Amendment to Sublease”) to a sub-lease agreement executed in March 2016 for approximately 6,877 square feet of office space at 1633 Broadway, New York, NY. The term began in April 2016 and under the terms of the Second Amendment to Sublease is extended through February 2023 and provides for total annual base rent of $405.7.

Subsequent to ~~September 30, 2020,~~March 31, 2021, warrants to purchase ~~9,653~~6,141 shares of the Company’s common stock with an exercise price of $10.00 per share were exercised for proceeds of ~~$93.5.~~

~~Subsequent~~$61.4. In addition, pre-funded warrants to ~~September 30, 2020 71,544~~purchase 215,000 shares of the Company’s common stock with an exercise price of $0.01 per share were ~~sold in the ATM Offering at the prevailing market prices~~exercised for proceeds of ~~$814.7.~~$2.2.

In April 2021, the Company issued an invoice for $1,178 to medac, the Company’s ~~new Chief Executive Officer~~EU product distribution partner, for the achievement of the milestone requirement pertaining to the positive results related to the FOCUS trial, as outlined in the License, Supply and ~~a Class I Director. Pursuant to an employment agreement~~Marketing Agreement dated ~~as of August 31, 2020~~December 10, 2018 between the Company and Mr. Michel (the “Employment Agreement”), the term of Mr. Michel’s employment began on October 1, 2020. Under the Employment Agreement, Mr. Michel will receive an annual base salary of $450 subject to annual review by the Board’s Compensation and Stock Option Committee, and will be eligible to participate in the Company’s annual incentive plan with a target annual cash bonus equal to 50% of his then-current base salary. In addition, the Company will reimburse Mr. Michel up to $6.5 per month to cover his temporary expenses incurred in connection with traveling to and living in the New York City tristate area to work onsite at the Company’s principal corporate office for the initial eighteen (18) months of his employment.medac.

Pursuant to the Employment Agreement, on October 1, 2020, the Company granted to Mr. Michel a nonqualified and non-plan stock option to purchase 498,000 shares of the Company’s common stock. The option vests ratably over a 36-month period. The exercise price of the option is equal to (i) $11.67 per share , the closing trading price per share of the Company’s common stock on October 1, 2020 as to the first 396,000 option shares to vest, (ii) 1.5 times the closing trading price per share of the Company’s common stock on October 1, 2020 as to the next 51,000 option shares to vest and (iii) 2.0 times the closing trading price per share of the Company’s common stock on October 1, 2020 as to the remaining 51,000 option shares to vest.

If Mr. Michel resigns his at-will employment for Good Reason, as defined, or the Company terminates Mr. Michel’s employment other than for Cause, as defined, then Mr. Michel shall be entitled to his accrued and unpaid compensation and, subject to him entering into and not revoking a general release of claims in favor of the Company and fully complying with the terms of an Employee Confidentiality, Invention Assignment and Restrictive Covenants Agreement (the “Restrictive Covenants Agreement”), Mr. Michel shall also be entitled to: (a) a severance payment equal in the aggregate to twelve (12) months of his annual base salary at the time of termination, payable in twelve (12) equal monthly installments; and (b) specified continuing health plan benefits until the earlier of (i) the twelve (12) month anniversary of his termination date; (ii) the last day he’s eligible for coverage pursuant to COBRA; or (iii) the date on which he becomes eligible for similar coverage from another employer.

On October 1, 2020, John Purpura was elevated to the position of Chief Operating Officer and he resigned from his position as the Company’s Interim Chief Executive Officer. In connection with his promotion, Mr. Purpura will be paid an annual base salary of $385 and will have an annual bonus opportunity of up to 45% of his annual base salary.

On October 1, 2020, the Company granted ten-year options to directors and employees to purchase an aggregate of 550,000 shares of common stock at an exercise price of $11.67 per share, subject to shareholder approval of the pending 2020 Plan. The options vest ratably on a monthly basis over 36 months.

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

The following discussion and analysis of the financial condition and results of operations of Delcath Systems, Inc. (“Delcath” or the “Company”) should be read in conjunction with the unaudited interim condensed consolidated financial statements and notes thereto contained in Item 1 of Part I of this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019~~2020 to provide an understanding of its results of operations, financial condition and cash flows.

All references in this Quarterly Report to “we,” “our,” “us” and the “Company” refer to Delcath Systems, Inc., and its subsidiaries unless the context indicates otherwise.

This Quarterly Report on Form 10-Q contains certain “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 with respect to our business, financial condition, liquidity, and results of operations. Words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “could,” “would,” “will,” “may,” “can,” “continue,” “potential,” “should,” and the negative of these terms or other comparable terminology often identify forward-looking statements. Statements in this Quarterly Report on Form 10-Q that are not historical facts are hereby identified as “forward-looking statements” for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements, including the risks discussed in ~~this Quarterly Report on Form 10-Q in Part II, Item 1A under “Risk Factors” as well as in Part I,~~ Item 3 “Quantitative and Qualitative Disclosures About Market Risk,” and the risks discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019~~2020 in Item 1A under “Risk Factors” ~~as well as~~and in Item 7A “Quantitative and Qualitative Disclosures About Market Risk,” and the risks detailed from time to time in our future reports filed with the Securities and Exchange Commission (the “SEC”). These forward-looking statements include, but are not limited to, statements about:

Many of the important factors that will determine these results are beyond our ability to control or predict. You are cautioned not to put undue reliance on any forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. Except as otherwise required by law, we do not assume any obligation to publicly update or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events.

The following section should be read in conjunction with Part I, Item 1: Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q as well as Part I, Item 1: Business; and Part II, Item 8: Financial Statements and Supplementary Data of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019.~~2020.

We are an interventional oncology company focused on the treatment of primary and metastatic liver cancers. Our lead product candidate, the HEPZATO™ KIT (melphalan hydrochloride for injection/hepatic delivery system), or HEPZATO™, is a drug/device combination product. HEPZATO is designed to administer high-dose chemotherapy to the liver while controlling systemic exposure and associated side effects. HEPZATO has not been approved for sale in the United States. In Europe, our commercial product is a stand-alone medical device having the same device components as the HEPZATO KIT but without the melphalan hydrochloride. The device is approved for sale under the trade name ~~Delcath~~ CHEMOSAT® Hepatic Delivery System for Melphalan, or CHEMOSAT, where it has been used ~~as a stand-alone device~~ at major medical centers to treat a wide range of cancers of the liver.

In the United States, HEPZATO is regulated as a combination drug and device by the United States Food and Drug Administration (FDA). Primary jurisdiction for regulation of HEPZATO has been assigned to the FDA’s Center for Drug Evaluation and Research. The FDA has granted the active moiety melphalan hydrochloride five orphan drug designations for the treatment of patients with ocular (uveal) melanoma, cutaneous melanoma, hepatocellular carcinoma, intrahepatic cholangiocarcinoma, and neuroendocrine tumors. The FDA has granted the active moiety doxorubicin one orphan drug designation for the treatment of patients with hepatocellular carcinoma. In Europe, CHEMOSAT is regulated as a Class IIb medical device and received its CE Mark in 2012. We are commercializing CHEMOSAT in select markets in the United Kingdom and the European Union, or the EU, where we believe the prospect of securing reimbursement coverage for the use of CHEMOSAT is strongest.

Our ~~research and~~most advanced development ~~efforts are primarily focused on~~program is the treatment of ocular melanoma liver ~~metastases. There are numerous other cancers which metastasize to the~~metastases, or mOM, a type of primary liver ~~and for which there is a high unmet medical need. Follow-on indications under strategic assessment include intrahepatic cholangiocarcinoma, metastatic neuroendocrine tumors, metastatic breast~~ cancer, ~~and metastatic colorectal cancers.~~

~~Our clinical development program (“CDP”) for~~with HEPZATO. HEPZATO is ~~comprised of~~being studied in the FOCUS Clinical Trial for Patients with Hepatic Dominant Ocular Melanoma ~~(the “FOCUS Trial”)~~(FOCUS Trial), a global registration clinical trial that is investigating objective response rate in ~~metastatic~~ ~~ocular melanoma, or mOM, and the ALIGN Trial, a global Phase 3 clinical trial for intrahepatic cholangiocarcinoma, or ICC (the “ALIGN Trial”).~~mOM. The FOCUS ~~trial~~Trial is being conducted at approximately 30 sites in the United States and Europe. The FOCUS Trial initiated treatment on the final enrolled patient on October 2, 2020. ~~Presently, we~~The primary endpoint of the FOCUS Trial is Objective Response Rate (ORR) as measured by RECISTv1.1, in the Intent to Treat (ITT) population. The single arm trial was powered to demonstrate a superior ORR versus checkpoint inhibitors, one of the few mOM treatment categories with a significant amount of peer reviewed publications. The checkpoint inhibitor ORR was calculated based on a meta-analysis covering 16 different publications which included 476 patients. The pooled overall response rate was 5.5% [95% CI: 3.6, 8.3]. To achieve statistical significance at a 95% Confidence Interval the lower bound of the ORR for HEPZATO is required to exceed the 8.3% upper bound of the meta-analysis. Secondary endpoints include Duration of Response (DOR), Disease Control Rate (DCR), Overall Survival (OS), and Progression-Free Survival (PFS). Additional exploratory outcome measures include time to objective response, hepatic progression-free survival, hepatic objective response, and quality of life, safety, and other pharmacokinetic measures. Initially, the trial was a randomized controlled trial which was amended to a single arm trial given slow enrollment due to the rarity of ocular melanoma, absence of crossover to the experimental trial arm, competing clinical trials and the commercial availability of CHEMOSAT in Europe. Included in the prespecified analyses are comparisons against the Best Alternative Care (BAC) arm which enrolled 32 patients prior to the amendment to a single-arm trial.

We have paused ~~our work on~~a global Phase 3 clinical trial of HEPZATO in patients with intrahepatic cholangiocarcinoma, (the ALIGN Trial) due to difficulties in enrollment. In addition to the FOCUS Trial and the ALIGN ~~trial while we reevaluate the trial design~~Trial, our commercial development plan also includes a registry for CHEMOSAT cases performed in Europe and ~~in order to be able to concentrate our efforts on the FOCUS trial conclusion and subsequent NDA filing.~~ support of select investigator-initiated trials, or IITs.

We are currently reviewing the incidence, unmet need, available efficacy data and development requirements for a broad set of liver cancers in order to select a portfolio of ~~follow-on~~ indications which will maximize the value of the HEPZATO platform. ~~Whether we continue~~This may result in a restart of the ALIGN ~~trial will be dependent on~~Trial. We believe that the ~~relative value~~disease states we are investigating and intend to investigate are unmet medical needs that represent significant market opportunities.

On March 31, 2021 Delcath released a preliminary analysis of the ~~ICC indication~~FOCUS trial data based on 87% of enrolled patients using prespecified analyses. An Independent Review Committee assessed an ORR of 29.2% [95% CI: 20.1, 39.8] in the ITT population, the lower bound of which exceeded the upper bound of the predefined success criteria (8.3%) for the primary ORR endpoint. In the per protocol populations, evaluable patients in the HEPZATO arm had a statistically significant improvement over BAC in prespecified endpoints including: ORR of 32.9% [95% CI: 22.8, 44.4] versus ~~other alternative indications.~~13.8% [CI: 3.9, 31.7] for the BAC arm (Chi-square P<0.05), Median PFS of 9.0 months [95% CI: 6.2, 11.8] versus 3.1 months ([95% CI: 2.7, 5.7] for the BAC arm (HR=0.41 p<0.001), and DCR of 70.9% [95% CI: 59.6, 80.6] versus 37.9% [95% CI: 20.7, 57.7] for the BAC arm (p<0.002). In ~~addition, our CDP also includes a registry~~this preliminary analysis, DOR and OS

were not yet evaluable. Since not all patients were evaluable for ~~CHEMOSAT commercial cases performed in Europe and sponsorship of select investigator-initiated trials or IITs.~~all time points, these preliminary analyses may change as data matures.

In the ~~United States,~~ HEPZATO ~~is considered~~safety population of 94 patients, 38 patients (40.4%) experienced a ~~combination drug~~treatment-emergent serious adverse event. The most commonly reported treatment-emergent serious adverse events were thrombocytopenia (14.9% of patients), neutropenia (10.6% of patients), and ~~device product and is regulated as a drug by~~leukopenia (4.2% of patients), which were well-manageable. 5% of patients experienced treatment-emergent serious cardiac adverse events. In all cases the United States Food and Drug Administration, or the FDA. The FDA has granted Delcath six orphan drug designations (five for melphalan in ocular melanoma, cutaneous melanoma, cholangiocarcinoma, hepatocellular carcinoma, and neuroendocrine tumor indications and one for doxorubicinevents resolved with no ongoing complications. There were no treatment-related deaths in the ~~hepatocellular carcinoma indication). HEPZATO has not been approved for sale~~trial.

~~In Europe, our CHEMOSAT product is regulated as~~FOCUS Trial and a ~~Class IIb medical device and received its CE Mark in 2012. We are commercializing the CHEMOSAT hepatic delivery system in select markets~~reduction in the ~~United Kingdom~~pace at which we can monitor data at our clinical trial sites. The resulting delay in completing enrollment and additional time required to monitor data caused our announcement for the ~~European Union, or~~top-line data from our FOCUS Trial to shift to early 2021 and to be modified to a preliminary analysis. We intend to submit a New Drug Application (NDA) to the FDA in the first quarter of 2022 for the treatment of mOM once the FOCUS Trial has been completed. The ability to achieve this goal is contingent on our ability to monitor data at our clinical sites and therefore the timeline may shift as access to the clinical sites changes in response to the rapidly evolving situation. COVID-19 has caused us to experience an increase in volatility in EU ~~where we believe~~commercial product revenue. The results of the ~~prospect of~~FOCUS Trial should also support securing reimbursement coverage for the use of CHEMOSAT ~~is strongest.~~

The Company’s Board of Directors appointed Gerard Michel as the Chief Executive Officer of the Company, effective October 1, 2020. Mr. Michel also serves as a member of the Company’s Board of Directors. Prior to joining the Company, Mr. Michel was the Chief Financial Officer and Vice President of Corporate Development at Vericel Corporation and was a key member of the executive team that successfully restructured Vericel enabling it to become a commercial leader in ~~the fields of advanced Cell Therapy and specialty Biologics.~~

In addition to Mr. Michel’s appointment as CEO, John Purpura, was appointed as Chief Operating Officer, effective October 1, 2020. Mr. Purpura’s leadership and operational excellence in areas of regulatory affairs, manufacturing and distribution have been a critical component of preparing the Company for its planned New Drug Application (NDA) resubmission to the FDA in the first quarter of 2022.

The COVID-19 pandemic has affected many countries, including the United States and several European countries, where we are currently conducting our FOCUS Trial and ALIGN Trial. In response to the pandemic, hospitals participating in the trials in affected countries have taken a number of actions, including restricting elective and other procedures that are not deemed to be life-threatening, suspending clinical trial activities and limiting access to data monitoring. As a result, patients enrolled in our clinical trials have had the start of their treatments postponed and ongoing treatment regimens may be delayed. In addition, access to monitor trial data has decreased, causing an increase in the timelines to complete the FOCUS trial. We currently expect to announce top-line data from our FOCUS trial in early-2021 and submit an NDA to the FDA in the first quarter of 2022.

The extent to which the COVID-19 pandemic continues to affect our clinical trial operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of the outbreak, the spread and severityEurope. Additional impacts of COVID-19 ~~and the effectiveness of governmental actions in response to the pandemic. Furthermore, the spread of COVID-19 may materially and adversely affect our ability to recruit and retain patients.~~

We expect that actions taken in response to the COVID-19 pandemic will also materially and adversely affect the EU commercial sales of CHEMOSAT. As noted above, some hospitals are restricting procedures that are not deemed to be life-threatening at this time. Because CHEMOSAT is not deemed to be an essential procedure, we expect that the number of procedures performed could potentially decline. While we do not expect revenues from CHEMOSAT procedures to be material to us, a decrease in the number of procedures performed would adversely affect our expected revenues and our financial results.

The COVID-19 pandemic has delayed and could further adversely affect our ability to obtain regulatory approval and commercialize our products according to current timelines, increase our operating expenses, and could have a material adverse effect on ~~our financial results. The situation continues to rapidly change and additional impacts to~~ our business may arise that we are not aware of currently. The ultimate impact of the pandemic on the Company’s results of operations, financial position, liquidity, or capital resources cannot be reasonably estimated at this time.

The European Commission recently reviewed the Medical Device Directive legislative framework and promulgated REGULATION (EU) 2017/745 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 5 April 2017 on medical devices, amending Directive 2001/83/EC, Regulation EC) No 178/2002 and Regulation (EC) No 1223/2009 and repealing Council Directives 90/385/EEC and 93/42/EEC. This new Medical Device Regulation became effective on May 25, 2017, marking the start of a 3-year transition period for manufacturers selling medical devices in Europe to comply with the new medical device regulation, or MDR, which governs all facets of medical devices. The transition task is highly complex and touches every aspect of product development, manufacturing production, distribution, and post marketing evaluation. As a result of the worldwide COVID-19 pandemic, on April 17, 2020, the European Parliament adopted the European Commission’s proposal to postpone the implementation of the MDR (EU) 2017/745 by 12 months. This urgently drafted proposal to delay the MDR is in response to the exceptional circumstances associated with the COVID-19 pandemic and the potential impact it may have had on the MDR implementation. The new Date of Application (DoA) for the MDR will be May 26, 2021.

Effectively addressing these changes will require a complete review of our device operations to determine what is necessary to comply. We do not believe the MDR regulatory changes will impact our business at this time, though implementation of the medical device legislation may adversely affect our business, financial condition and results of operations or restrict our operations.

On August 18, 2020, the Company entered into a sales agreement with Cantor Fitzgerald & Co. (“Cantor Fitzgerald”), pursuant to which the Company may offer and sell, from time to time, through Cantor Fitzgerald, as sales agent or principal, shares of the Company’s common stock, (the “Placement Shares”), having an aggregate offering price of up to $10.0 million (the “ATM Offering”). The Company has no obligation to sell any Placement Shares under the sales agreement. Subject to the terms and conditions of the sales agreement, Cantor Fitzgerald will use commercially reasonable efforts, consistent with its normal trading and sales practices, applicable state and federal law, rules and regulations and the rules of the Nasdaq Stock Market, to sell Placement Shares from time to time based upon the Company’s instructions, including any price, time or size limits specified by the Company. The Company will pay Cantor Fitzgerald a commission of 3.0% of the aggregate gross proceeds from each sale of Placement Shares, reimburse Cantor Fitzgerald’s legal fees and disbursements up to $50,000 and provide Cantor Fitzgerald with customary indemnification and contribution rights. The sales agreement may be terminated by Cantor Fitzgerald or the Company upon notice to the other party as provided in the sales agreement, or by Cantor Fitzgerald at any time in certain circumstances, including the occurrence of a material and adverse change in the Company’s business or financial condition that makes it impractical or inadvisable to market the Placement Shares or to enforce contracts for the sale of the Placement Shares.

On September 9, 2020, the FDA issued its conditional acceptance of the trade name HEPZATO™ KIT for the Company’s melphalan hydrochloride for injection/hepatic delivery system. A request for final approval for HEPZATO™ KIT will be included when the Company submits an NDA for the treatment of mOM.

Results of Operations for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 (in thousands)

Three months ended ~~September 30, 2020~~March 31, 2021 Compared with Three months ended ~~September 30, 2019~~March 31, 2020

We ~~had~~recorded approximately $388.5 in revenue ~~of approximately $0.5 million~~ for the three months ended ~~September 30, 2020~~March 31, 2021 compared to ~~$0.4 million~~$293.4 for the three months ended ~~September 30, 2019.~~ March 31, 2020. The increase in revenue is partly due to an increase in CHEMOSAT unit sales to medac and an increase of 5% for the royalty income calculation from medac, which started on January 1, 2021.

For the three months ended ~~September 30, 2020,~~March 31, 2021, we recorded cost of goods sold of approximately ~~$0.2 million~~$111.9 compared to ~~$0.2 million~~$78.0 for the three months ended ~~September 30, 2019.~~March 31, 2020. An increase of $38.8 is related to the increase in sales volume.

development expenses increased to ~~$3.3 million~~$3,707.4 from ~~$1.8 million. In February of 2019, cash constraints resulted~~$2,974.0 in ~~certain activities related~~the prior year period. The increase is primarily due to the ~~FOCUS trials, such as new patient enrollment, site level data entry and site monitoring, to be paused. In January~~recording stock option expenses of ~~2020, these activities resumed resulting~~$630 in ~~an increase in research and development expenses.~~the first quarter of 2021.

Selling, general and administrative expenses consist primarily of payroll, rent and professional services such as accounting and legal services. For the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ selling, general and administrative expenses were ~~$2.0 million~~$3,296.0 and ~~$4.0 million,~~$2,315.5, respectively. The ~~decrease~~increase is primarily related to ~~reduced personnel expenses as a result~~the recording of ~~reduced headcount.~~stock option expense of $1,466 during the three months ended March 31, 2021.

Other income/expense is primarily related to income or expense associated with financial instruments. For the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ other income/expense ~~was a negligible expense~~were $20.2 and ~~$1.9 million~~$2,786.4 of expense, respectively. The prior year period included a ~~$1.7 million loss on~~$2,831 expense related to the ~~issuance of a financial instrument and $0.7 million of interest expense, partially offset by a $0.4 million gain~~change in ~~the~~ fair value of a warrant liability. ~~The decrease in the note principal balance from $10.5 million at June 30, 2019 to $2.0 million at September 30, 2019 and September 30, 2020 is the primary reason for the decrease in interest expense.~~

Our net loss for the three months ended ~~September 30, 2020~~March 31, 2021 was ~~$5.0 million,~~$6,746.9, a decrease of ~~$2.5 million~~$1,114.0 compared to net loss of ~~$7.5 million~~$7,860.5 for the three months ended ~~September 30, 2019.~~March 31, 2020. The decrease in net loss is primarily due to the ~~$1.9 million decrease in~~$2,831 other income/expense ~~and a $0.5 million decrease in operating expenses.~~

~~Nine months ended September 30, 2020 Compared with Nine months ended September 30, 2019~~

~~We had revenue of approximately $1.1 million for the nine months ended September 30, 2020 compared to $1.1 million for the nine months ended September 30, 2019.~~

~~For the nine months ended September 30, 2020, we recorded cost of goods sold of approximately $0.4 million compared to $0.4 million for the nine months ended September 30, 2019.~~

Research and development expenses are incurred for the development of HEPZATO and consist primarily of payroll and payments to contract research and development companies. To date, these costs are related to generating clinical data and the cost of manufacturing HEPZATO for clinical trials and conducting clinical trials. For the nine months ended September 30, 2020 and 2019, research and development expenses increased to $8.5 million from $6.8 million. In February of 2019, cash constraints resulted in certain activities related to the FOCUS trials, such as new patient enrollment, site level data entry and site monitoring, to be paused. In January of 2020, these activities resumed resulting in an increase in research and development expenses.

Selling, general and administrative expenses consist primarily of payroll, rent and professional services such as accounting and legal services. For the nine months ended September 30, 2020 and 2019, selling, general and administrative expenses were $6.6 million and $9.2 million, respectively. The decrease is primarily related to reduced personnel expenses as a result of reduced headcount.

Other income/expense is primarily related income or expense associated with financial instruments. For the nine months ended September 30, 2020 and 2019, other income/expense was $2.8 million of expense and $6.0 million of expense, respectively. The current year period included a $2.8 million losschange in the fair value of athe warrant liability ~~and $0.2 million of interest expense, partially~~booked in the three months ended March 31, 2020 which was offset by ~~$0.2 million~~the recording of ~~other income. The prior year period included $4.7 million of interest~~$2,148 stock option expense ~~and a $1.7 million loss on the issuance of a financial instrument, partially offset by a $0.4 million gain~~ in the ~~fair value~~first quarter of a warrant liability. The decrease in the note principal balance from $10.5 million at June 30, 2019 to $2.0 million at September 30, 2019 and 2020 is the primary reason for the decrease in interest expense.

Our net loss for the nine months ended September 30, 2020 was $17.1 million, a decrease of $4.3 million, compared to the net loss of $21.4 million for the nine months ended September 30, 2019. The decrease in net loss is primarily due to the $3.2 million decrease in other income/expense and a $1.0 million decrease in operating expenses.2021.

In May 2020, we consummated an underwritten public offering resulting in gross proceeds of approximately $22.0 million. In August 2020, we launched an at-the market offering of our common stock at an aggregate offering price of up to $10 million. We expect that the ongoing ATM Offering (see Note 9), and our existing cash resources will be sufficient to fund our expected operations through the second quarter of 2021, however since the proceeds from the ATM Offering are contingent on a variety of factors, including price and volume, we may choose or need to raise capital through other means prior to that. Beyond the second quarter we will need to raise additional capital to support our operations. We expect that any such financing activity will involve the public or private offering of our equity and/or equity-related securities. If we are unable to obtain sufficient capital to fund our operations, we would be required to curtail certain aspects of our operations or consider other means of obtaining additional financing, although there is no guarantee that we would be able to obtain the financing necessary to continue our operations.

At ~~September 30, 2020,~~March 31, 2021, we had cash, cash equivalents and restricted cash totaling ~~$11.1 million,~~$26,650.0, as compared to cash, cash equivalents and restricted cash totaling ~~$10.2 million~~$28,756.0 at December 31, ~~2019~~2020 and ~~$15.5 million~~$4,721.0 at ~~September 30, 2019.~~March 31, 2020. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ we used ~~$18.3 million~~$4,566.7 and ~~$18.3 million,~~$5,229.3, respectively, of cash in our operating activities. In the three months ended March 31, 2021, we raised $2,376 of cash related to the exercises of warrants.

These conditions raise substantial doubt about our ability to continue as a going concern for a period of at least one year from the date that the financial statements included elsewhere in this Quarterly Report on Form 10-Q are issued. Our financial statements do not include adjustments to the amounts and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern. Our ability to continue as a going concern depends on our ability to raise additional capital through the sale of equity or debt securities to support our future operations.

Our future results are subject to substantial risks and uncertainties. We have operated at a loss for our entire history, and we anticipate that our losses will continue for the foreseeable future. There can be no assurance that we will ever generate significant revenues or achieve profitability. We expect to use cash, cash equivalents and investment proceeds to fund our future clinical and operating activities. Our future liquidity and capital requirements will depend on numerous factors, including the initiation and progress of clinical trials and research and product development programs; obtaining approvals and complying with regulations; the timing and effectiveness of product commercialization activities, including marketing arrangements; the timing and costs involved in preparing, filing, prosecuting, defending and enforcing intellectual property rights; and the effect of competing technological and market developments.

Our financial statements have been prepared in accordance with generally accepted accounting principles in the United States of ~~America (GAAP).~~America. During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, there were no material changes to our critical accounting policies as reported in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019.~~2020. A description of certain accounting policies that may have a significant impact on amounts reported in the financial statements is disclosed in Note 3 to the Company’s audited consolidated financial statements contained in its Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019.~~

We may be minimally exposed to market risk through changes in market interest rates that could affect the interest earned on our cash balances.

We measure all derivatives, including certain derivatives embedded in contracts, at fair value and recognize them on the balance sheet as an asset or a liability, depending on our rights and obligations under the applicable derivative contract.

The proceeds allocated to the warrants we issued in 2019 (the “2019 Warrants”) were initially classified as derivative instrument liabilities that were subject to mark-to-market adjustments each period and were reclassified to equity during the first quarter of 2020. During the nine months ended September 30, 2020, we recorded a pre-tax derivative instrument loss of $2.8 million. As a result of the reclassification from liability to equity, there was no derivative liability on the balance sheets at September 30, 2020. Management expects that the warrants outstanding at September 30, 2020 will either be exercised or expire worthless. The fair value of the 2019 Warrants at February 19, 2020, the date the 2019 Warrants were no longer classified as a liability, and December 31, 2019 was determined by using option pricing models assuming the following:

The Company’s management, with the participation of our Chief Executive Officer and Interim Principal Accounting Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act). Based on that evaluation, our Chief Executive Officer and Interim Principal Accounting Officer concluded that our disclosure controls and procedures as of ~~September 30, 2020~~March 31, 2021 (the end of the period covered by this Quarterly Report on Form 10-Q), have been designed and are functioning effectively to provide reasonable assurance that the information required to be disclosed in our 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, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Interim Principal Accounting Officer, as appropriate to allow timely decisions regarding required disclosure.

There was no change in our internal control over financial reporting (as define in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended ~~September 30, 2020~~March 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

From time to time, claims are made against the Company in the ordinary course of business, which could result in litigation. Claims and associated litigation are subject to inherent uncertainties and unfavorable outcomes could occur, such as monetary damages, fines, penalties, or injunctions prohibiting us from selling our products or engaging in other activities.

Following the May 18, 2020 resignation (effective June 1, 2020) of Jennifer Simpson, the Company’s former President and CEO, and Barbra Keck, the Company’s former CFO (the “Claimants”), it became evident that there was a dispute regarding the Company’s compensation obligations. In a letter dated June 29, 2020, an attorney representing the Claimants made certain claims and threatened litigation against the Company. On or about July 27, 2020, the Claimants filed a statement of claim with the American Arbitration Association against the Company. The Claimants seek payment of certain purported unpaid compensation amounts claimed to be due to them, in an approximate amount of $1.14 million in the aggregate, as well as unspecified statutory damages under New York Labor Law, attorneys’ fees and costs, and statutory interest. The Company intends to defend the claims vigorously. The arbitrator ~~has~~had scheduled hearings to take place during the week of May 17, 2021. However, the Claimants and the Company ~~have~~ recently agreed to participate in non-binding mediation of their dispute before a neutral mediator, which ~~will result~~resulted in the arbitration proceedings being placed in abeyance pending the outcome of the mediation process. At this time, the mediation process between the Claimants and the Company is ~~unable to predict~~ongoing. As of March 31, 2021, the ~~timing~~Company has accrued for the ~~mediation process, nor whether mediation will result in an amicable resolution of its dispute with the Claimants. The Company intends to defend the claims vigorously.~~full purported unpaid compensation amounts.

The occurrence of an unfavorable outcome in any specific period could have a material adverse effect on our results of operations for that period or future periods.

~~There have been no material changes from the risk factors disclosed in “Part I, Item 1A—Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.~~

On ~~November 11, 2020,~~February 18, 2021, the Company issued ~~a press release reporting its financial results for~~2,636 shares of unregistered common stock in lieu of cash payment of deferred accrued director fees to former director, William Rueckert. The issuance to Mr. Rueckert was made in reliance on the ~~fiscal quarter ended September 30, 2020, a copy~~exemption from registration in Section 4(a)(2) under the Securities Act of ~~which is furnished as Exhibit 99.4 to this Quarterly Report on Form 10-Q.~~1933.

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.

Delaware		06-1245881
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common stock, $0.01 par value per share		DCTH		The ~~Nasdaq~~NASDAQ Capital Market

~~Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.~~		~~Yes~~ ☐ No ☒
~~Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.~~		~~Yes~~ ☐ No ☒

Large accelerated filer ☐	Accelerated filer	☐

Non-accelerated filer ☒	Smaller reporting company	☒

	Emerging growth company	☐

		Page
PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets as of ~~September 30, 2020 (Unaudited)~~March 31, 2021 and December 31, ~~2019~~2020	3
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	4
	Unaudited Condensed Consolidated Statements of Stockholders’ ~~Deficit~~Equity (Deficit) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	76
	Notes to the Condensed Consolidated Financial Statements	97
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2115
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2719
Item 4.	Controls and Procedures	2719

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	28
~~Item 1A.~~	~~Risk Factors~~	2820
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
~~Item 3.~~	~~Defaults upon Senior Securities~~	28
~~Item 4.~~	~~Mine Safety Disclosures~~	28
~~Item 5.~~	~~Other Information~~	2820
Item 6.	Exhibits	2921

SIGNATURES		3022

DELCATH SYSTEMS, INC.
Condensed Consolidated Statement of Stockholders' Equity (Deficit), continued
(Unaudited)
(in thousands, except share and per share data)



	Common Stock Issued				Preferred Stock
	$0.01 Par Value				$0.01 Par Value
	No. of Shares		Amount		No. of Shares			Amount		Additional Paid in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income			Total
Balance at January 1, 2019		14,715	$	—		101		$	—	$	329,065		$	(344,054	)	$	50		$	(14,939	)
Compensation expense for issuance of stock options		—		—		—			—		54			—			—			54
Compensation expense for issuance of restricted stock		20		—		—			—		4			—			—			4
Issuance of Series D Preferred Stock		—		—		15			—		150			—			—			150
Conversion of Series D Preferred Stock to Debt		—		—		(116	)		—		(1,160	)		—			—			(1,160	)
Exercise of pre-funded warrants		5,885		—		—			—		—			—			—			—
Net loss		—		—		—			—		—			(7,894	)		—			(7,894	)
Total comprehensive income		—		—		—			—		—			—			7			7
Balance at March 31, 2019		20,620	$	—		—		$	—	$	328,113		$	(351,948	)	$	57		$	(23,778	)
Compensation expense for issuance of stock options		—		—		—			—		75			—			—			75
Exercise of prefunded warrants		5,399		—		—			—		—			—			—			—
Exchange of warrants		91		—		—			—		13			—			—			13
Net loss		—		—		—			—		—			(5,959	)		—			(5,959	)
Total comprehensive loss		—		—		—			—		—			—			(80	)		(80	)
Balance at June 30, 2019		26,110	$	—		—		$	—	$	328,201		$	(357,907	)	$	(23	)	$	(29,729	)
Compensation expense for issuance of stock options		—		—		—			—		70			—			—			70
Issuance of Series E Preferred Stock		—		—		32,572			—		42,915			(13,340	)		—			29,575
Issuance of Series E-1 Preferred Stock		—		—		9,510			—		14,408			(4,898	)		—			9,510
Fair value of warrants issued		—		—		—			—		(20,844	)		—			—			(20,844	)
Net loss		—		—		—			—		—			(7,519	)		—			(7,519	)
Total comprehensive loss		—		—		—			—		—			—			112			112
Balance at September 30, 2019		26,110	$	—		42,082		$	—	$	364,750		$	(383,664	)	$	89		$	(18,825	)

DELCATH SYSTEMS, INC.
Condensed Consolidated Statements of Cash Flows, continued
(Unaudited)
(in thousands)


	Nine months ended September 30,
	2020		2019
Supplemental Disclosure of Cash Flow Information:
Cash paid during the periods for:
Interest expense	$	7	$	4

Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Conversions of Preferred Stock into common stock	$	20	$	—
Reclassification of 2019 warrants from liability to equity	$	6,199	$	—
Conversion of Series D Preferred Stock to debt	$	—	$	1,160
Exchange of 2019 warrants	$	—	$	13
Fair value of warrants issued			$	20,844
Adoption of ASC 842 lease standard			$	1,652
Right of use assets obtained in exchange for lease obligations	$	729	$	874

	September 30,			December 31,			Estimated	March 31,			December 31,			Estimated
(in thousands)	2020			2019			Useful Life
								2021			2020			Useful Life
Buildings and land	$	1,109		$	589		30 years - Buildings	$	1,120		$	1,109		30 years - Buildings
Enterprise hardware and software		1,805			1,739		3 years		1,861			1,862		3 years
Leaseholds		1,808			1,695		Lesser of lease term or estimated useful life		1,809			1,826		Lesser of lease term or estimated useful life
Equipment		1,045			1,025		7 years		1,061			1,063		7 years
Furniture		203			198		5 years		203			204		5 years
Property, plant, and equipment, gross		5,970			5,246
Property, plant and equipment, gross									6,054			6,064
Accumulated depreciation		(4,652	)		(4,511	)			(4,733	)		(4,713	)
Property, plant and equipment, net	$	1,318		$	735			$	1,321		$	1,351

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value		Number of Option		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding at December 31, 2019		1,640		$	196.70	9.1	$	—
Outstanding at January 1, 2021										1,078,499	$	12.68
Granted		—								—		—
Exercised		—								—		—
Cancelled/Forfeited		(1,141	)							—		—
Outstanding at September 30, 2020		499		$	196.70	8.4	$	—
Exercisable at September 30, 2020		499		$	196.70	8.4	$	—
Outstanding at March 31, 2021										1,078,499	$	12.68	9.5	$	710
Exercisable at March 31, 2021										175,164	$	13.05	9.5	$	131

			Options Exercisable
Range of Exercise Prices	Outstanding Number of Options		Weighted Average Remaining Option Term (in years)	Number of Options
$10 - $15		946,000	9.5		157,665
$15 - $20		81,000	9.5		8,500
$20 - $25		51,000	9.5		8,500
$25+		499	7.8		499
		1,078,499	9.5		175,164

	Warrants			Exercise Price per Share	Weighted Average Exercise Price		Weighted Average Remaining Life (Years)
Outstanding at December 31, 2019		1,826,608		$7.00 - $23.04	$	23.04		5.0
Issued		2,601,900				10.00
Exercised		(66,117	)			9.09
Expired		(18	)			7.00
Outstanding at September 30, 2020		4,362,373		$0.01- $10.00	$	9.15		4.5

	Warrants			Weighted Average Exercise Price		Weighted Average Remaining Life (in years)		Aggregate Intrinsic Value
Outstanding at January 1, 2021		4,236,687		$	9.13
Warrants issued		—			—
Warrants exercised		(242,580	)		10.00
Warrants expired		—			—
Outstanding at March 31, 2021		3,994,107		$	9.07		3.9	$	13,372
Exercisable at March 31, 2021		3,994,107		$	9.07		3.9	$	13,372

				Warrants Exercisable
Range of Exercise Prices		Outstanding Number of Warrants		Weighted Average Remaining Warrant Term (in years)	Number of Warrants
$	0.01		371,000	4.1		371,000
$	10.00		3,623,107	3.9		3,623,107
			3,994,107	3.9		3,994,107

(in thousands)	Warrant Liability
Balance at December 31, 2019	$	3,368
Total change in the liability included in earnings		2,832
Fair value of warrants reclassified from liability to equity		(6,200	)
Balance at September 30, 2020	$	—

	February 19,	December 31,
	2020	2019
Expected life (in years)	4.3		4.6
Expected volatility	208.2%	207.5%
Risk-free interest rates	1.4%	1.7%

	Assets and Liabilities Measured at Fair Value on a Recurring Basis
(in thousands)	Level 1				Level 2				Level 3				Total
	September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019
Liabilities
Derivative instrument liabilities	$	—	$	—	$	—	$	—	$	—	$	3,368	$	—	$	3,368

	Three months ended September 30,						Nine months ended September 30,
(in thousands, except share data)	2020			2019			2020			2019
Net loss	$	(4,991	)	$	(7,519	)	$	(17,127	)	$	(21,371	)
Deemed dividend for triggering of warrant down round feature		—			—			(55	)		—
Net loss attributable to common stockholders	$	(4,991	)	$	(7,519	)	$	(17,182	)	$	(21,371	)

Weighted average shares outstanding - basic*		4,288,593			101,862			2,217,611			102,956
Weighted average shares outstanding - diluted*		4,288,593			101,862			2,217,611			102,956

Net loss per share - basic*	$	(1.16	)	$	(73.82	)	$	(7.75	)	$	(207.58	)
Net loss per share - diluted*	$	(1.16	)	$	(73.82	)	$	(7.75	)	$	(207.58	)


* reflects, one-for-seven hundred (1:700) reverse stock split effected on December 24, 2019.

Exhibit No.		Description

~~1.1~~
3.1		~~Controlled Equity Offering~~ ^SM ~~Sales Agreement, dated August 18, 2020, between Delcath Systems, Inc.,~~Amended and ~~Cantor Fitzgerald & Co.~~Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit ~~1.1 of~~3.1 to the Company’s Registration Statement on Form ~~8-K~~S-1/A filed on August 18, 2020)***September 25, 2019).

~~10.1~~3.2		~~Employment Agreement~~Amendment to the Amended and Restated Certificate of Incorporation of the Company dated ~~August 31, 2020, between Delcath Systems, Inc., and Gerard Michel.~~October 17, 2019 (incorporated by reference to Exhibit ~~10.1 of~~3.1 to the Company’s Current Report on Form 8-K filed on October ~~1, 2020)***#~~23, 2019).

~~10.2~~3.3		~~Inducement Award Stock Option Award Agreement~~Certificate of Correction to Amendment to the Amended and Restated Certificate of Incorporation of the Company dated October ~~1, 2020, between Delcath Systems, Inc., and Gerard Michel.~~22, 2019 (incorporated by reference to Exhibit ~~10.2 of~~3.2 to the Company’s Current Report on Form 8-K filed on October ~~1, 2020)***#~~23, 2019).
3.4		Amendment to the Amended and Restated Certificate of Incorporation of the Company, effective December 24, 2019 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on December 30, 2019).

~~10.3~~3.5		~~Employee Confidentiality, Invention Assignment~~Certificate of Amendment to the Amended and ~~Restrictive Covenants Agreement,~~Restated Certificate of Incorporation of the Company, dated ~~August 31,~~November 23, 2020 ~~between Delcath Systems, Inc., and Gerard Michel.~~ (incorporated by reference to Exhibit ~~10.3 of~~3.1 to the Company’s Current Report on Form 8-K filed on ~~October 1,~~November 24, 2020)***#.

~~10.4~~3.6		~~Second~~Amended and Restated By-Laws of the Company (incorporated by reference to Exhibit 3.2 to Amendment No. 1 to Sublease, dated September 22, 2020, between Delcath Systems, Inc., and Kasowitz Benson Torres LLP.*Company’s Registration Statement on Form SB-2).

31.1		Certification by Chief Executive Officer Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

31.2		Certification by Interim Principal Accounting Officer Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32.1		Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

32.2		Certification by Interim Principal Accounting Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

~~99.1~~		Limited Waiver dated July 17, 2020, between Delcath Systems, Inc. and ROTH Capital Partners, LLC. (incorporated by reference to Exhibit 99.1 of the Company’s Form 8-K filed on August 18, 2020)***

~~99.2~~		Limited Waiver, dated July 10, 2020, between Delcath Systems, Inc. and Rosalind Master Fund L.P. and Rosalind Opportunities Fund I L.P. (incorporated by reference to Exhibit 99.2 of the Company’s Form 8-K filed on August 18, 2020)***

~~99.3~~		Amendment to Securities Purchase Agreements, dated as of August 18, 2020, among Delcath Systems, Inc., and the other parties thereto. (incorporated by reference to Exhibit 99.3 of the Company’s Form 8-K filed on August 18, 2020)***

~~99.4~~		Third Quarter 2020 Earnings Press Release**

101.INS		XBRL Instance Document *

101.SCH		XBRL Taxonomy Extension Schema Document *

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document *

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document *

101.LAB		XBRL Taxonomy Extension Label Linkbase Document *

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document *

~~November 12, 2020~~	DELCATH SYSTEMS, INC.


May 11, 2021	/s/ Gerard Michel
	Gerard Michel
	Chief Executive Officer

~~November 12, 2020~~May 11, 2021	/s/ Christine Padula
	Christine Padula
	Interim Principal Accounting Officer