UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM

10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2021~~

2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File

Number: 001-16133

DELCATH SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

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

1633 Broadway, Suite 22C

New York, NY 10019

(Address of principal executive offices)

(212)

489-2100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule

12b-2

of the Exchange Act.

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 May 11, ~~2021, 6,472,398~~2022, 7,906,728 shares of the Company’s common stock, $0.01 par value, were outstanding.

DELCATH SYSTEMS, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except share and per share data)

March 31,

December 31,

2021

2020

Assets

Current assets

Cash and cash equivalents

$
26,600

$
28,575

Restricted cash

50

181

Accounts receivable, net

75

57

Inventories

1,109

855

Prepaid expenses and other current assets

2,369

2,670

Total current assets

30,203

32,338

Property, plant and equipment, net

1,321

1,351

Right-of-use assets

791

946

Total assets

$
32,315

$
34,635

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable

$
1,234

$
1,774

Accrued expenses

5,927

5,241

Deferred revenue, current

502

525

Lease liabilities, current

433

495

Convertible notes payable, current

2,000

2,000

Total current liabilities

10,096

10,035

Deferred revenue, non-current

1,856

2,072

Lease liabilities, non-current

357

450

Total liabilities

12,309

12,557

Commitments and contingencies (Note 13)

—

—

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

422,027

417,449

Accumulated deficit

(402,074
)

(395,327
)
Accumulated other comprehensive income

(10
)

(104
)
Total stockholders' equity

20,006

22,078

Total liabilities and stockholders' equity

$
32,315

$
34,635


	March 31, 2022			December 31, 2021
Assets
Current assets
Cash and cash equivalents	$	16,340		$	22,802
Restricted cash		4,151			4,151
Accounts receivable, net		178			44
Inventories		2,011			1,412
Prepaid expenses and other current assets		2,704			2,743

Total current assets		25,384			31,152
Property, plant and equipment, net		1,406			1,348
Right-of-use assets		527			624

Total assets	$	27,317		$	33,124

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	1,243		$	638
Accrued expenses		4,495			4,109
Deferred revenue, current		0			170
Lease liabilities, current		404			416
Loan payable, current		2,520			621

Total current liabilities		8,662			5,954
Lease liabilities, non-current		122			207
Loan payable, non-current		8,633			10,372
Convertible notes payable, non-current		4,675			4,639

Total liabilities		22,092			21,172

Commitments and contingencies (Note 13)		0—			0—
Stockholders’ equity
Preferred stock, $.01 par value; 10,000,000 shares authorized; 11,357 shares issued and outstanding at March 31, 2022 and December 31, 2021		0—			0—
Common stock, $.01 par value; 40,000,000 shares authorized; 7,906,728 shares issued and outstanding at March 31, 2022 and December 31, 2021		79			79
Additional paid-in capital		434,305			432,831
Accumulated deficit		(429,179	)		(420,976	)
Accumulated other comprehensive income		20			18

Total stockholders’ equity		5,225			11,952

Total liabilities and stockholders’ equity	$	27,317		$	33,124

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

DELCATH SYSTEMS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(in thousands, except share and per share data)

Three months ended March 31,

2021

2020

Product revenue
$
261

$
176

Other revenue

127

118

Cost of goods sold

(112
)

(78
)
Gross profit

276

216

Operating expenses:

Research and development expenses

3,707

2,974

Selling, general and administrative expenses

3,296

2,316

Total operating expenses

7,003

5,290

Operating loss

(6,727
)

(5,074
)

Change in fair value of the warrant liability, net

—

(2,832
)
Interest expense, net

(41
)

(36
)
Other income

21

81

Net loss

(6,747
)

(7,861
)

Other comprehensive (loss) income:

Foreign currency translation adjustments

94

65

Total other comprehensive loss
$
(6,653
)

$
(7,796
)

Common share data:

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

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.

~~DELCATH SYSTEMS, INC.~~

~~Condensed Consolidated Statements of Stockholders’ Equity (Deficit)~~

~~(Unaudited)~~

(in thousands, except share and per share data)

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


	Three months ended March 31,
	2022		��	2021
Product revenue	$	207		$	261
Other revenue		171			127
Cost of goods sold		(33	)		(112	)

Gross profit		345			276

Operating expenses:
Research and development expenses		4,240			3,707
Selling, general and administrative expenses		3,648			3,296

Total operating expenses		7,888			7,003

Operating loss		(7,543	)		(6,727	)
Interest expense, net		(645	)		(41	)
Other income (expense), net		(15	)		21

Net loss		(8,203	)		(6,747	)
Other comprehensive income:
Foreign currency translation adjustments		2			94

Total other comprehensive loss	$	(8,201	)	$	(6,653	)

Common share data:
Basic and diluted loss per common share	$	(1.00	)	$	(1.04	)

Weighted average number of basic and diluted shares outstanding		8,190,483			6,496,922

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
)

See accompanying Notes to Condensed Consolidated Financial Statements.

DELCATH SYSTEMS, INC.

Condensed Consolidated Statements of ~~Cash Flows~~

Stockholders’ Equity

(Unaudited)

~~(in thousands)~~

Three months ended March 31,

2021

2020

Cash flows from operating activities:

Net loss

$
(6,747
)

$
(7,861
)
Adjustments to reconcile net loss to net cash used in operating activities:

Stock option compensation expense

2,148

25

Restricted stock compensation expense

—

30

Depreciation expense

39

48

Amortization of right of use assets

—

11

Warrant liability fair value adjustment

—

2,832

Non-cash interest income

(1
)

(3
)
Interest expense accrued related to convertible notes

39

40

Changes in assets and liabilities:

(Increase) decrease in prepaid expenses and other assets

302

(880
)
Increase in accounts receivable

(18
)

(48
)
Increase in inventories

(254
)

(136
)
Increase in accounts payable and accrued expenses

164

901

Decrease in deferred revenue

(239
)

(188
)
Net cash used in operating activities

(4,567
)

(5,229
)

Cash flows from investing activities:

Purchase of property, plant and equipment

(9
)

(180
)
Net cash used in investing activities

(9
)

(180
)

Cash flows from financing activities:

Principal payments on financing leases

—

(11
)
Net payments related to registration costs

—

(106
)
Net proceeds from the exercise of warrants

2,376

—

Net cash provided by/(used in) financing activities

2,376

(117
)
Foreign currency effects on cash

94

64

Net decrease in total cash

(2,106
)

(5,462
)

Total Cash:

Beginning of period

28,756

10,183

End of period

$
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

$
—

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

~~DELCATH SYSTEMS, INC.~~

~~Notes to the Condensed Consolidated Financial Statements~~

(in thousands, except share and per share data)


	Preferred Stock $0.01 Par Value				Common Stock $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, 2022		11,357	$	—		7,906,728	$	79	$	432,831	$	(420,976	)	$	18	$	11,952
Compensation expense for issuance of stock options		—		—		—		—		1,474		—			—		1,474
Net loss		—		—		—		—		—		(8,203	)		—		(8,203	)
Total comprehensive income		—		—		—		—		—		—			2		2

Balance at March 31, 2022		11,357	$	—		7,906,728	$	79	$	434,305	$	(429,179	)	$	20	$	5,225

~~(1)~~

~~General~~


	Preferred Stock $0.01 Par Value					Common Stock Issued $0.01 Par Value
	No. of Shares			Amount		No. of Shares		Amount		Additional Paid in Capital		Accumulated Deficit			Accumulated Other Comprehensive (Loss)			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 income		—			—		—		—		—		—			94			94

Balance at March 31, 2021		20,481		$	—		6,251,257	$	63	$	422,027	$	(402,074	)	$	(10	)	$	20,006

See accompanying Notes to Condensed Consolidated Financial Statements.

DELCATH SYSTEMS, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)


		Three months ended March 31,
		2022			2021
Cash flows from operating activities:
Net loss		$	(8,203	)	$	(6,747	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock option compensation expense			1,474			2,148
Depreciation expense			31			39
Non-cash lease expense			97			155
Amortization of debt discount			194			—
Interest expense accrued related to convertible notes			40			39
Changes in assets and liabilities:
Decrease in prepaid expenses and other assets			39			301
Increase in accounts receivable			(134	)		(18	)
Increase in inventories	��		(599	)		(254	)
Increase in accounts payable and accrued expenses			953			164
Decrease in lease liabilities			(97	)		(155	)
Decrease in deferred revenue			(170	)		(239	)

Net cash used in operating activities			(6,375	)		(4,567	)

Cash flows from investing activities:
Purchase of property, plant and equipment			(89	)		(9	)

Net cash used in investing activities			(89	)		(9	)

Cash flows from financing activities:
Net proceeds from the exercise of warrants			—			2,376

Net cash provided by financing activities			—			2,376

Foreign currency effects on cash			2			94

Net decrease in total cash			(6,462	)		(2,106	)
Total Cash:
Beginning of period			26,953			28,756

End of period		$	20,491		$	26,650

Cash, Cash Equivalents and Restricted Cash consisted of the following:
Cash		$	16,340		$	26,600
Restricted Cash			4,151			50

Total		$	20,491		$	26,650


	Three months ended March 31,
	2022		2021
Supplemental Disclosure of Cash Flow Information:
Cash paid during the periods for:
Interest expense	$	411	$	3

Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Issuance of restricted stock for accrued fees due to a former board member	$	—	$	57

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

DELCATH SYSTEMS, INC.

Notes to the Condensed Consolidated Financial Statements

(1)

General

The unaudited interim condensed consolidated financial statements of Delcath Systems, Inc. (“Delcath” or the “Company”) as of and for the three months ended March 31, ~~2021~~2022 and ~~2020~~2021 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, ~~2020~~2021 (the “Annual Report”), which was filed with the Securities and Exchange Commission (the “SEC”) on March 31, ~~2021~~2022 and may also be found on the Company’s website (www.delcath.com). In these notes to the interim condensed consolidated financial statements the terms “us”, “we” or “our” refer to Delcath and its consolidated subsidiaries.

Description of Business

~~We are~~

The Company is an interventional oncology company focused on the treatment of primary and metastatic liver cancers. ~~Our~~The Company’s lead product candidate, the ~~HEPZATO™~~ HEPZATO

™

KIT (melphalan hydrochloride for injection/hepatic delivery system), or ~~HEPZATO™~~HEPZATO

™

, is a drug/device combination ~~product. HEPZATO is~~product 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~~the hepatic delivery system is a stand-alone medical device having the same device components as ~~the~~ HEPZATO, ~~KIT~~ but without the melphalan ~~hydrochloride. The device~~hydrochloride, and is approved for sale under the trade name ~~CHEMOSAT®~~ CHEMOSAT

Hepatic Delivery System for Melphalan, or CHEMOSAT, where it has been used at major medical centers to treat a wide range of cancers of the liver.

~~Our~~

The Company’s clinical development program for HEPZATO is ~~primarily~~ comprised of the FOCUS Clinical Trial for Patients with Hepatic Dominant Ocular Melanoma ~~(FOCUS Trial)~~(the “FOCUS Trial”), a global registration clinical trial that is investigating objective response rate in metastatic ocular melanoma, or mOM. ~~We are~~The Company is 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.

~~Risks~~

In the United States, HEPZATO is considered a combination drug and ~~Uncertainties~~

~~Due~~device product regulated by the Food and Drug Administration (“FDA”). Primary jurisdiction for regulation of HEPZATO has been assigned to the ~~global outbreak of SARS-CoV-2, a novel strain of coronavirus that causes Coronavirus disease (COVID-19),~~FDA’s Center for Drug Evaluation and Research. The FDA has granted the Company ~~experienced an impact on certain areas of its business. These effects included a slowing of patient recruitment~~six orphan drug designations (five for melphalan in ocular melanoma, cutaneous melanoma, cholangiocarcinoma, hepatocellular carcinoma, and neuroendocrine tumor indications and one for doxorubicin in the ~~FOCUS trial and a reduction in~~hepatocellular carcinoma indication).

In December 2021, 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 caused our announcement for~~Company announced that the ~~top-line data from our~~ FOCUS Trial ~~to shift to early 2021 and to be modified to a preliminary analysis. We now plan~~of HEPZATO met its pre-specific endpoint. Based on the FOCUS Trial results, the Company is preparing to submit a ~~New Drug Application (NDA)~~new drug application, or NDA, to the FDA for HEPZATO. The Company held a

pre-NDA

meeting with the FDA in April 2022 and is awaiting the ~~first~~official minutes from the meeting. Based on the feedback from the FDA, the Company does not believe any additional

pre-clinical

or clinical studies are required to

re-file

the NDA. Due to vendor delays in delivering certain reports, the Company plans to submit an NDA to the FDA by the end of the third quarter of 2022.

Risks and Uncertainties

Although the ~~treatment of mOM. The ability to achieve this goal~~Company 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 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~~any direct impacts of the ~~pandemic~~war between the Ukraine and the Russian Federation on its supply chain, the war could adversely impact the Company’s ~~results~~ability to obtain components and/or significantly increase the cost of ~~operations, financial position, liquidity,~~obtaining such components for the Company’s products from its third-party suppliers in a timely manner or ~~capital resources cannot be reasonably estimated~~at all. In addition, at this ~~time.~~

time, the Company is not aware of any direct impacts, the increase in COVID cases and associated restrictions, which could adversely impact the Company’s ability to obtain components and/or significantly increase the cost of obtaining such components for the Company’s products from its third-party suppliers in a timely manner or at all.

Liquidity and Going Concern

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 significant losses ~~since inception~~ and ~~expects to continue incurring losses for the next several years.~~has an accumulated deficit of $429.2 million as of March 31, 2022. These losses, among other factors, raise substantial doubt about the Company’s ability to continue as a going concern.

Table of Contents

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~~the Company 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 accompanying interim 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~~Company’s ability to continue as a going concern within one year after the date that the financial statements are ~~issued~~.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~~.

personnel.

Basis of Presentation

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~~wholly owned subsidiaries and all significant inter-company accounts and transactions have been eliminated in consolidation.

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 March 31, ~~2021~~2022 and ~~2020;~~2021; 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.

Significant Accounting Policies

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:~~

~~Reclassifications~~. 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.

2021.

Recently Adopted Accounting Pronouncements

In ~~December 2019,~~August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ~~2019-12, Simplifying~~

2020-06, “Accounting

for Convertible Instruments and Contracts in an Entity’s Own Equity.” ASU

2020-06

simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. ASU

2020-06

requires entities to provide expanded disclosures about the terms and features of convertible instruments and amends certain guidance in Accounting Standards Codification 260, Earnings per Share, relating to the computation of earnings per share for convertible instruments and contracts in an entity’s own equity. The guidance becomes effective for the Company on January 1, 2024, with early adoption permitted. The Company early adopted ASU

2020-06

on January 1, 2022 and the adoption did not have any immediate effect on the Company’s condensed consolidated financial statements. Going forward, the Company will no longer be required to assess convertible instruments for beneficial conversion features.

In October 2020, the FASB issued ASU

2020-10

“Codification Improvements”, which improves consistency by amending the Codification to include all disclosure guidance in the appropriate disclosure sections and clarifies application of various provisions in the Codification by amending and adding new headings, cross referencing to other guidance, and refining or correcting terminology. The guidance was effective for the Company beginning in the first quarter of fiscal year 2022 with early adoption permitted. The Company adopted this guidance on January 1, 2022 and it did not have a material impact on its condensed consolidated financial statements.

Table of Contents

On May 3, 2021, the FASB issued ASU

2021-04,

“Earnings Per Share” (Topic 260), “Debt—Modifications and Extinguishments” (Subtopic

470-50),

“Compensation—Stock Compensation” (Topic 718), and “Derivatives and Hedging—Contracts in Entity’s Own Equity” (Subtopic

815-40):

“Issuer’s Accounting for ~~Income Taxes. The list~~Certain Modifications or Exchanges of ~~changes~~Freestanding Equity-Classified Written Call Options.” This new standard provides clarification and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (such as warrants) that remain equity classified after modification or exchange. This standard is ~~comprehensive; however~~effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Issuers should apply the ~~changes will not significantly impact~~new standard prospectively to modifications or exchanges occurring after the ~~Company due to~~effective date of the ~~full valuation allowance that is recorded against the Company’s deferred tax assets.~~new standard. Early adoption ~~of ASU 2019-12~~ is permitted, including adoption in ~~any~~an interim ~~period for public business entities for periods for which financial statements have not yet been issued. An entity that~~period. If an issuer elects to early adopt the ~~amendments~~new standard in an interim period, the guidance should ~~reflect any adjustments~~be applied as of the beginning of the ~~annual period~~fiscal year that includes that interim period. ~~Additionally, an entity that elects early adoption must adopt all the amendments in the same period.~~ The Company adopted ~~ASU 2019-12~~this guidance on January 1, ~~2021~~2022 and ~~there was no~~it did not have a material impact on ~~the Company’s~~its condensed consolidated financial ~~statements or disclosures.~~

statements.

(2)	Cash, Cash Equivalents and Restricted Cash

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.

Cash, cash equivalents, and r~~estricted~~restricted cash balances were as ~~follows:~~

follows (in thousands):

March 31,

December 31,

2021

2020

Cash and cash equivalents

$
26,600

$
28,575

Letters of credit

—

131

Security for credit cards

50

50

Total cash, cash equivalents and restricted cash shown in
the statements of cash flows

$
26,650

$
28,756


	March 31, 2022		December 31, 2021
Cash and cash equivalents	$	16,340	$	22,802
Restricted balance for loan agreement		4,000	$	4,000
Letters of credit		101		101
Security for credit cards		50		50

Total cash, cash equivalents and restricted cash shown in the statements of cash flows	$	20,491	$	26,953

Under the terms of a

sub-lease

agreement for office space at 1633 Broadway, New York, NY, as of March 31, 2022, the Company is required to maintain a letter of credit which will expire with the sublease in February 2023.

(3)	Inventories

Inventories consist of the ~~following:~~

following (in thousands):

March 31,

December 31,

2021

2020

Raw materials

$
486

$
435

Work-in-process

623

420

Total inventories

$
1,109

$
855


	March 31, 2022		December 31, 2021
Raw materials	$	841	$	767
Work-in-process		881		645
Finished goods		289		0

Total inventories	$	2,011	$	1,412

(4)	Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the ~~following:~~

following (in thousands):

March 31,

December 31,

2021

2020

Clinical trial expenses

$
1,497

$
1,497

Insurance premiums

498

845

Professional services

125

66

Other

249

262

Total prepaid expenses and other current assets

$
2,369

$
2,670


	March 31, 2022		December 31, 2021
Clinical trial expenses	$	1,630	$	1,630
Insurance premiums		645		890
Other		429		223

Total prepaid expenses and other current assets	$	2,704	$	2,743

(5)	Property, Plant, and Equipment

Property, plant, and equipment consist of the ~~following:~~

following (in thousands):

March 31,

December 31,

Estimated

2021

2020

Useful Life
Buildings and land

$
1,120

$
1,109

30 years - Buildings
Enterprise hardware and software

1,861

1,862

3 years
Leaseholds

1,809

1,826

Lesser of lease term or estimated useful life
Equipment

1,061

1,063

7 years
Furniture

203

204

5 years
Property, plant and equipment, gross

6,054

6,064

Accumulated depreciation

(4,733
)

(4,713
)

Property, plant and equipment, net

$
1,321

$
1,351


	March 31, 2022			December 31, 2021			Estimated Useful Life
Buildings and land	$	1,222		$	1,222			30 years- Buildings
Enterprise hardware and software		1,858			1,858			3 years
Leaseholds		1,788			1,796			Lesser of lease term or estimated useful life
Equipment		1,184			1,094			7 years
Furniture		202			203			5 years

Property, plant and equipment, gross		6,254			6,173
Accumulated depreciation		(4,848	)		(4,825	)

Property, plant and equipment, net	$	1,406		$	1,348

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 months ended March 31, ~~2021~~2022 was approximately ~~$38.8~~$31,000 as compared to approximately ~~$47.6~~$39,000 for the same period in ~~2020.~~

2021.

(6)	Accrued Expenses

Accrued expenses consist of the ~~following:~~

following (in thousands):

March 31,

December 31,

2021

2020

Clinical expenses

$
3,511

$
2,698

Compensation, excluding taxes

1,514

1,598

Professional fees

335

225

Interest on convertible note

274

234

Other

293

486

Total accrued expenses

$
5,927

$
5,241


	March 31, 2022		December 31, 2021
Clinical expenses	$	1,578	$	1,517
Compensation, excluding taxes		796		893
Short term financing		315		551
Professional fees		1,298		603
Interest on convertible note		433		393
Other		75		152

Total accrued expenses	$	4,495	$	4,109

(7)

Leases

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 leases as of and for the three months ended March 31, ~~2021:~~

2022 (in thousands):

US

Ireland

Total

Lease cost

Operating lease cost

$
112

$
57

$
169

Sublease income

—

(44
)

(44
)
Total

$
112

$
13

$
125

Other information

Operating cash flows out from operating leases

(112
)

(57
)

(169
)
Operating cash flows in from operating leases

-

44

44

Weighted average remaining lease term

1.9

0.3

Weighted average discount rate - operating leases

8
%

8
%


	U.S.			Ireland			Total
Lease cost:
Operating lease cost	$	101		$	8		$	109

Other information:
Operating cash flows out from operating leases	$	(101	)	$	(8	)	$	(109	)
Weighted average remaining lease term		0.9			4.4
Weighted average discount rate - operating leases		8	%		8	%

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

US

Ireland

Total

Year ended December 31, 2021

$
304

$
73

$
377

Year ended December 31, 2022

406

-

406

Year ended December 31, 2023

67

-

67

Total

777

73

850

Less present value discount

(59
)

(1
)

(60
)
Operating lease liabilities included in the condensed
consolidated balance sheet at March 31, 2021

$
718

$
72

$
790

follows (in thousands):


	U.S.			Ireland			Total
Year ended December 31, 2022	$	304		$	35		$	339
Year ended December 31, 2023		67			46			113
Year ended December 31, 2024		—			46			46
Year ended December 31, 2025		—			46			46
Year ended December 31, 2026		—			26			26

Total		371			199			570
Less present value discount		(14	)		(30	)		(44	)

Operating lease liabilities included in the consolidated balance sheets at March 31, 2022	$	357		$	169		$	526

(8)

~~(8)~~

Loans and Convertible ~~notes payable~~

Notes Payable

Conversion
price

Current interest
rate

Principal

Current convertible notes payable

8.0% July 2019 Notes (maturity date - July 16, 2021)

$
1,500

8
%

$
2,000

~~The note payable is convertible into Preferred Stock.~~

~~(9)~~

~~Stockholders’ Equity~~

(in thousands):

~~Preferred Stock~~

~~Series E~~

March 31, 2022

December 31, 2021


Gross

Discount

Net

Gross

Discount

Net

Loan - Avenue
[1]
   12,638 (1,485 ) 11,153 12,638 (1,645 ) 10,993
Loan - Avenue
[1]
- Less Current Portion
   (2,856 ) 336 (2,520 ) (714 ) 93 (621 )

Total - Loans Payable,
Non-Current
   $ 9,782 $ (1,149 ) $ 8,633 $ 11,924 $ (1,552 ) $ 10,372

Convertible Note Payable - Rosalind    2,000 —   2,000 2,000 —   2,000
Convertible Portion of Loan Payable - Avenue    3,000 (325 ) 2,675 3,000 (361 ) 2,639

Total - Convertible Notes Payable -
Non-Current
   $ 5,000 $ (325 ) $ 4,675 $ 5,000 $ (361 ) $ 4,639

[1]	The gross amount includes the 4.25% final payment of $638,000.

Remaining maturities of the Company’s loan and ~~Series E-1 Preferred Stock~~

~~During~~convertible note payables are as follows (in thousands):


	Loans		Convertible Notes		Total
Year ended December 31, 2022	$	714	$	—	$	714
Year ended December 31, 2023		8,571		—		8,571
Year ended December 31, 2024		3,353		5,000		8,353

Total	$	12,638	$	5,000	$	17,638

Table of Contents

Term Loan from Avenue Venture Opportunities Fund, L.P.

million

(the “Avenue Loan”). The Avenue Loan bears interest at an annual rate equal to the greater of (a) the sum of 7.70% plus the prime rate as reported in The Wall Street Journal and (b) 10.95%. The interest rate at March 31, 2022 was 10.95%. The Avenue Loan is secured by all of the Company’s assets globally, including intellectual property. The Avenue Loan matures on August 1, 2024.

The initial tranche of the Avenue Loan is $15.0

million,

including $4.0

million

which has been funded into a restricted account and will be released upon achievement of (a)(x) positive FOCUS trial efficacy per the trial’s predefined Statistical Analysis Plan (SAP) (specifically the Overall Response Rate exceeds the

pre-specified

threshold for success defined in the SAP by a statistically significant amount); and (y) based on data contained within the FOCUS trial database and appropriate for use with the U.S. Food and Drug Administration, safety and tolerability among FOCUS trial participants is within the range of currently approved and commonly used cytotoxic chemotherapeutic agents; and (b) raising subsequent net equity proceeds of at least $20

million

. The Company may request an additional $5.0

million

of gross proceeds between October 1, 2022 and December 31, 2022, with funding, subject to the approval of Avenue’s Investment Committee.

Up to $3

million

of the principal amount of the Avenue Loan outstanding may be converted, at the option of Avenue, into shares of the Company’s common stock at a conversion price of $11.98 per share.

In connection with the Avenue Loan, the Company issued to Avenue a warrant (the “Avenue Warrant”) to purchase 127,755 shares of common stock at an exercise price per share equal to $0.01. The Avenue Warrant is exercisable until August 31, 2026.

The Company will make monthly interest-only payments during the first fifteen months of the term of the Avenue Loan, which could be increased to up to twenty-four months upon the achievement of specified performance milestones. Following the interest-only period, the Company will make equal monthly payments of principal plus interest until the maturity date, when all remaining principal outstanding and accrued interest must be paid. If the Company prepays the Avenue Loan, it will be required to pay (a) a prepayment fee of 3% if the Avenue Loan is prepaid during the interest-only period; and (b) a prepayment fee of 1% if the Avenue Loan is prepaid after the interest-only period. The Company must make an incremental final payment equal to 4.25% of the aggregate funding.

The Company paid an aggregate commitment fee of $150,000 at closing. Upon funding a second tranche of the Avenue Loan, the Lender will earn a 1.0% fee on the $5.0 million of incremental committed capital, for a total commitment fee of $0.2 million.

The Avenue Loan Agreement requires the Company to make and maintain representations and warranties and other agreements that are customary in loan agreements of this type. The Avenue Loan Agreement also contains customary events of default, including

non-payment

of principal or interest, violations of covenants, bankruptcy and material judgments.

The Company determined that the embedded conversion option associated with the Avenue Loan was not required to be bifurcated. The Company determined that the Avenue Warrant met the criteria to be equity-classified. The $0.6 million value of the final payment was treated as original issue discount. The $1.2 million relative fair value of the Avenue Warrant was credited to Additional Paid in Capital while it was debited as debt discount. Of the $563,000 of cash issuance costs, $519,000 was allocated to the Avenue Loan and was recorded as debit discount, while $44,000 was allocated to the Avenue Warrant and was debited to Additional Paid in Capital. Of the $2.3 million of aggregate debt discount, $1.9 million was allocated to the

non-convertible

portion of the Avenue Loan, while $418,000 was allocated to the convertible portion of the Avenue Loan. Aggregate debt discount amortization of $0.2 million was recorded during the three months ended March 31, ~~2021, 150 shares~~2022, including $159,000 related to the

non-convertible

portion of ~~Preferred Stock were converted into 15,000 shares~~the Avenue Loan and $35,000 related to the convertible portion of the Avenue Loan. The Company also determined that the convertible portion of the Avenue Loan did not include a beneficial conversion feature, because the effective conversion price exceeded the commitment date market price of the Company’s common stock.

Interest expense incurred was $0.4 million for the three months ended March 31, 2022.

The Avenue Warrant was valued at issuance at $1.3 million using the Black-Scholes option pricing method using the following assumptions:


	August 6, 2021
Contractual term (years)		5.07
Expected volatility		187.0	%
Risk-free interest rate		0.77	%
Expected dividends		0.00	%

Table of Contents

Convertible Notes Payable

The Company has $2.0 million of principal outstanding related to Senior Secured Promissory Notes (the “Rosalind Notes”) which bear interest at 8% per annum. Pursuant to their original terms, the Rosalind Notes were convertible into Series E Preferred Stock at a price of $1,500 per share and were to mature on July 16, 2021

Interest expense was $40 for the three months ended March 31, 2022 and 2021, respectively.

On August 6, 2021, the Company executed an agreement to amend the Rosalind Notes to (a) reduce the conversion price to $1,198 per share of the Company’s Series E Convertible Preferred Stock; and (b) extend the maturity date to October 30, 2024.

In addition, in order to induce Avenue. to provide the Avenue Loan described above, the holders of the Rosalind Notes agreed to subordinate (a) all of the Company’s indebtedness and obligations to the holders; and (b) all of the holders’ security interest, to the Avenue Loan and Avenue’s security interest in the Company’s property.

(9)	Stockholders’ Equity

Authorized Shares

The Company is authorized to issue 40,000,000 shares of common stock, $0.01 par value, and

10,000,000 shares of preferred stock, $0.01 par value. To date, the Company has designated the following preferred stock: Series A (4,200 shares), Series B (2,360 shares), Series C (590 shares), Series D (10,000 shares), Series E (40,000 shares) and Series

E-1

(12,960 shares).

Preferred Stock

As of March ~~31, 2021,~~30, 2022, there were an aggregate of ~~20,481~~11,707 shares of Series E and Series E-1 Convertible Preferred Stock outstanding.

~~Other Common Stock Issuances~~

~~During~~

Omnibus Equity Incentive Plan

On September 30, 2020, the ~~three months ended March 31, 2021, the Company issued 237,520 shares of common stock associated with the exercise of warrants.~~

~~Issuance of Unregistered Securities~~

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

~~Stock Incentive Plans~~

Company’s 2020 Omnibus Equity Incentive Plan

(the “2020 Plan”) was adopted by the Company’s Board of Directors. On November 23, 2020, the Company’s stockholders approved the 2020 Plan. The 2020 Plan will continue in effect until the tenth anniversary of the date of its adoption by the Board or until earlier terminated by the Board. The 2020 Plan is 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. As of March 31, ~~2021,~~2022, there ~~were 675,000~~are 2,475,000 shares of ~~the Company’s~~ common stock reserved under the 2020 Plan, of which ~~95,000~~737,957 remained available to be issued. ~~On March 30,~~

Employee Stock Purchase Plan

In August 2021, the Company’s Board of Directors, ~~approved an amendment~~with shareholder approval in May 2022, adopted the Employee Stock Purchase Plan (ESPP). The Company ESPP’s plan provides for a maximum of 260,295 shares of common stock to

be purchased by

participating employees. Employees who elect to participate in the Company’s ESPP will be able to purchase common stock at the lower of 85% of the fair market value of common stock on the first or last day of the applicable six-month offering period.

Equity Offerings and Placements

At-the-Market

Offering

On August 18, 2020, ~~Plan~~the Company entered into a sales agreement with Cantor Fitzgerald & Co. (“Cantor Fitzgerald”), pursuant to ~~increase~~which the ~~number of~~Company may offer and sell, from time to time, through Cantor Fitzgerald, as sales agent or principal, shares of the Company’s common stock, ~~available for issuance~~(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 ~~2020 Plan by 1,800,000, subject~~sales agreement. Subject to ~~stockholder approval~~the terms and conditions of the ~~amendment. The amendment~~sales agreement, Cantor Fitzgerald is required to 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 ~~2020 Plan was approved~~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 ~~stockholders~~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 ~~annual meeting~~business or financial condition that makes it impractical or inadvisable to market the Placement Shares or to enforce contracts for the sale of ~~stockholders held on~~the Placement Shares.

Table of Contents

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 ~~6, 2021~~1, 2020 between Roth and ~~effective as~~the Company requiring the prior written consent of ~~such date, the number of shares~~Roth for any offer or sale of the Company’s common stock ~~available for issuance under~~by the ~~2020 Plan increased by 1,800,000 resulting in a total share reserve~~Company during the

90-day

period following the date of ~~2,475,000~~such underwriting agreement.

There were 0 shares sold during the three months ended March 31, 2022.

Stock Options

The Company values stock options using the Black-Scholes option pricing model and used the following assumptions during the reporting periods:


	Three months ended March 31,
	2022			2021
Expected terms (years)		5.46 - 6.46		N/A
Expected volatility		174.81% - 177.09	%	N/A
Risk-free interest rate		1.75% - 1.90	%	N/A
Expected dividends		0.00	%	N/A

The weighted average estimated fair value of ~~common stock.~~

~~Share-Based Compensation~~

the stock options granted during the three months ended March 31, 2022 was approximately $6.86 per share.

Table of Contents

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

Number of Option

Weighted Average Exercise
Price Per Share

Weighted Average
Remaining Contractual Term
(in years)

Aggregate Intrinsic
Value

Outstanding at January 1, 2021

1,078,499

$
12.68

Granted

—

—

Exercised

—

—

Cancelled/Forfeited

—

—

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

2022:


	Number of Option			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding at January 1, 2022		1,732,460		$	11.69
Granted		549,333			7.10
Expired		(6,650	)		10.88
Cancelled/Forfeited		(37,040	)		10.42

Outstanding at March 31, 2022		2,238,103		$	10.60		9.2	$	0

Exercisable at March 31, 2022		766,619		$	11.83		8.7	$	0

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

2022:

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


			Options Exercisable
Range of Exercise Prices	Outstanding Number of Options		Weighted Average Remaining Option Term (in years)		Number of Options
$6.61 - $9.99		825,256		9.2		110,389
$10.00 - $14.99		1,280,348		8.7		592,317
$15.00 - $24.99		132,000		8.5		63,414
$25 +		499		6.8		499

		2,238,103		8.7		766,619

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

2022 (in thousands):

Three months ended March 31,

2021

2020

Selling, general and administrative

$
1,466

$
49

Research and development

630

5

Cost of goods sold

52

—

Total

$
2,148

$
55


	Three months ended March 31,
	2022		2021
Selling, general and administrative	$	919	$	1,466
Research and development		503		630
Cost of goods sold		52		52

Total	$	1,474	$	2,148

At March 31, ~~2021,~~2022, there was ~~$6,677~~$9.2

million of aggregate unrecognized compensation expense related employee and board stock option grants. ~~This will~~The cost is expected to be recognized over ~~the next 33 months.~~

a weighted average period of 3 years.

Warrants

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

2022:

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		Weighted Average Exercise Price		Weighted Average Remaining Life (in years)
Outstanding at January 1, 2022		3,894,498	$	9.27
Warrants issued		0		0
Warrants exercised		0		0
Warrants expired		0		0

Outstanding at March 31, 2022		3,894,498	$	9.27		3.0

Exercisable at March 31, 2022		3,894,498	$	9.27		3.0

Table of Contents

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

2022

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

As of 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.


			Warrants Exercisable
Range of Exercise Prices	Outstanding Number of Warrants		Weighted Average Remaining Warrant Term (in years)		Number of Warrants
$0.01		283,755		3.7		283,755
$10.00		3,610,743		2.9		3,610,743

		3,894,498		3.0		3,894,498

(10)	~~Fair Value Measurements~~

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

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

		~~February 19,~~
		~~2020~~
~~Expected life (in years)~~		~~4.3~~
~~Expected volatility~~		~~208.2%~~
~~Risk-free interest rates~~		~~1.4%~~

~~(11)~~

Net Loss per Common Share

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 March 31, ~~2021~~2022 and ~~2020~~2021 because their effects would be anti-dilutive:

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


	March 31,
	2022		2021
Stock options		2,238,103		1,078,499
Common stock warrants - equity		3,894,498		3,994,107
Assumed conversion of Series E and Series E-1 Preferred Stock		1,135,721		2,048,101
Assumed conversion of convertible notes		488,031		146,288

Total		7,756,353		7,266,995

At March 31, ~~2021,~~2022, the Company had ~~371,000~~ 283,755

pre-funded

warrants outstanding. The following table provides a reconciliation of the weighted average shares outstanding calculation for the three months ended March 31, ~~2021~~2022 and ~~2020:~~

2021:

Three months ended March 31,

2021

2020

Weighted average shares issued

6,125,922

72,740

Weighted average pre-funded warrants

371,000

-

Weighted average shares outstanding

6,496,922

72,740


	Three months ended March 31,
	2022		2021
Weighted average shares issued		7,906,728		6,125,922
Weighted average pre-funded warrants		283,755		371,000

Weighted average shares outstanding		8,190,483		6,496,922

(11)	Income Taxes

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 sheet.

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.

Table of Contents

~~(12)~~

(

)

Commitments and Contingencies

Litigation, Claims and Assessments

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 had scheduled hearings to take place during the week of May 17, 2021. However, the Claimants and the Company recently agreed to participate in non-binding mediation of their dispute before a neutral mediator, which 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 ongoing. As of March 31, 2021, the Company has accrued for the full purported unpaid compensation amounts.

~~(13)~~

~~Subsequent Events~~

medac Matter

~~Stock Warrant Exercises~~

Subsequent to March 31, 2021, warrants to purchase 6,141 shares of the Company’s common stock with an exercise price of $10.00 per share were exercised for proceeds of $61.4. In addition, pre-funded warrants to purchase 215,000 shares of the Company’s common stock with an exercise price of $0.01 per share were exercised for proceeds of $2.2.

~~Other Transactions~~

In April 2021, the Company issued an invoice for ~~$1,178~~€1

million

(which currently converts to approximately $1.2

million)

to medac GmbH, a privately held, multi-national pharmaceutical company based in Germany (“medac”), the Company’s EU product distribution partner, for ~~the achievement of the~~a milestone ~~requirement pertaining to the positive results related to the FOCUS trial, as outlined in~~payment due under the License, Supply and Marketing Agreement (the “License Agreement”) dated December 10, 2018, between the Company and medac.

Pursuant to the License Agreement, a milestone is due upon achieving positive efficacy in the FOCUS

rial as defined by the FOCUS

rial

protocol. Per the

rial

protocol and associated Statistical Analysis Plan, positive efficacy is based on whether the Objective Response Rate (ORR) exceeds a pre

specified threshold. A preliminary analysis of the FOCUS

rial data based on 87% of enrolled patients was released on March 31, 2021, and subsequently

presented

at the American Society of Clinical Oncology (ASCO) Annual Meeting held virtually from the 4th through the 8th of June 2021. Per that analysis, the ORR exceeded the pre

specified threshold. While the final ORR is not yet known, given the magnitude by which the ORR exceeded the pre

specified endpoint and the small number of patients yet to be assessed, the final ORR will be greater than the pre

specified endpoint regardless of the responder status of the remaining patients. medac disagrees that the milestone is due and claims that a full clinical study report is required in addition to the existing ORR analysis. medac has not disputed the accuracy of the ORR analysis or underlying data, but simply asserts that a full clinical study report is required prior to payment. While the Company disagrees with this interpretation, since medac has stated

it doe

not intend to pay the invoice at this time, under revenue recognition criteria set out in ASC 606, the Company cannot recognize the revenue.

On October 12, 2021, the Company notified medac in writing that it was terminating the License Agreement due to medac’s nonpayment of the milestone payment due under the License Agreement, with the effective date of termination of the License Agreement being April 12, 2022. medac disputed having an obligation to make a milestone payment under the Agreement and demanded withdrawal of the termination notice. The Company declined to withdraw the termination notice and, on December 16, 2021, the Company initiated an arbitration proceeding pursuant to the dispute resolution provisions of the License Agreement.

On December 30, 2021, the Company received a letter from medac stating that, due to its failure to withdraw the termination notice, medac was terminating the License Agreement with immediate effect. In the letter, medac reserved its rights in full, including a purported claim for damages for wrongful termination. In a separate letter, medac agreed to an orderly transition through February 28, 2022 in order to minimize the impact of any termination on patients and physicians. The Company agreed to purchase inventory held at medac in

March 2022 for approximately

$0.2 million.

The arbitration proceeding is moving forward with the parties agreeing to stay the arbitration for a finite period to pursue settlement

discussions.

Table of Contents

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, ~~2020~~2021 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.

Disclosure Regarding Forward-Looking Statements

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 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, ~~2020~~2021 in Item 1A under “Risk Factors” ~~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:

our estimates regarding sufficiency of our cash resources, anticipated capital requirements and our need for additional financing;

the commencement of future clinical trials and the results and timing of those clinical trials;

our ability to successfully commercialize CHEMOSAT and HEPZATO, generate revenue and successfully obtain reimbursement for the procedure and ~~Delcath Hepatic Delivery~~ system;

the progress and results of our research and development programs;

~~our expectations about the COVID-19 pandemic and any potential disruption or impact to our operations;~~

submission and timing of applications for regulatory approval and approval thereof;

our ability to successfully source certain components of ~~CHEMOSTAT~~CHEMOSAT and HEPZATO and enter into supplier contracts;

our ability to successfully manufacture CHEMOSAT and HEPZATO;

our ability to successfully negotiate and enter into agreements with distribution, strategic and corporate partners; and

our estimates of potential market opportunities and our ability to successfully realize these opportunities.

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.

~~Overview~~

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, 2020.

Company Overview

We are an interventional oncology company focused on the treatment of primary and metastatic liver cancers. Our lead product candidate, the ~~HEPZATO™~~ HEPZATO

™

KIT (melphalan hydrochloride for injection/hepatic delivery system), or ~~HEPZATO™~~HEPZATO

™

, is a drug/device combination ~~product. HEPZATO is~~product 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~~the hepatic delivery system is a stand-alone medical device having the same device components as ~~the HEPZATO KIT~~HEZPATO, but without the melphalan ~~hydrochloride. The device~~hydrochloride, and is approved for sale under the trade name ~~CHEMOSAT®~~ CHEMOSAT

Hepatic Delivery System for Melphalan, or CHEMOSAT, where it has been used at major medical centers to treat a wide range of cancers of the liver.

In the United States, HEPZATO is ~~regulated as~~considered a combination drug and device product and is regulated as a drug by the United States Food and Drug Administration, ~~(FDA).~~or the 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~~Delcath six orphan drug designations (five for melphalan in the treatment of patients with ocular (uveal) melanoma, cutaneous melanoma, hepatocellular carcinoma, intrahepatic cholangiocarcinoma, and neuroendocrine ~~tumors. The FDA has granted the active moiety~~tumors) and one for doxorubicin ~~one orphan drug designation for~~in 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 prospectcarcinoma).

Table of ~~securing reimbursement coverage for the use of CHEMOSAT is strongest.~~

Contents

Our most advanced development program is the treatment of ocular melanoma liver metastases, or mOM, a type of primary liver cancer, with HEPZATO. HEPZATO is being studied in the FOCUS Clinical Trial for Patients with Hepatic Dominant Ocular Melanoma (FOCUS Trial), a global registration clinical trial that is investigating objective response rate in mOM. The FOCUS 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. 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 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, our commercial development plan also includes a registry for CHEMOSAT cases performed in Europe and support of select investigator-initiated trials, or IITs.

cancer. 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 indications which will maximize the value of the HEPZATO platform. ~~This may result in a restart of the ALIGN Trial.~~ We believe that the disease states we are investigating and intend to investigate are unmet medical needs that represent significant market opportunities.

~~Recent Developments~~

~~FOCUS Trial Preliminary Analysis~~

~~On March 31,~~

In December 2021, Delcath released a preliminary analysis of the 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 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 this preliminary analysis, DOR and OS

~~were not yet evaluable. Since not all patients were evaluable for all time points, these preliminary analyses may change as data matures.~~

In the HEPZATO safety population of 94 patients, 38 patients (40.4%) experienced a 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 leukopenia (4.2% of patients), which were well-manageable. 5% of patients experienced treatment-emergent serious cardiac adverse events. In all cases the events resolved with no ongoing complications. There were no treatment-related deaths in the trial.

~~COVID-19~~

~~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~~announced that the FOCUS Trial ~~and a reduction in~~for HEPZATO met its pre-specified endpoint. Based on 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 caused our announcement for the top-line data from our FOCUS Trial ~~to shift to early 2021 and to be modified to a preliminary analysis. We intend~~results, the Company is preparing to submit a ~~New Drug Application (NDA)~~new drug application, or NDA, to the FDA for HEPZATO. The Company held a

pre-NDA

meeting with the FDA in April 2022 and is awaiting the ~~first~~official minutes from the meeting. Based on the feedback from FDA, the Company does not believe any additional

pre-clinical

or clinical studies are required to

re-file

the NDA. Due to vendor delays in delivering certain reports, we plan to submit an NDA to the FDA by the end of the third quarter of 2022.

On February 28, 2022, CHEMOSAT received Medical Device Regulation certification under the European Medical Devices Regulation [2017/745/EU], which may be considered by jurisdictions when evaluating reimbursement. As of March 1, 2022, the Company has assumed direct responsibility 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~~sales, marketing 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 commercial product revenue. The results of the FOCUS Trial should also support securing reimbursement coverage for the usedistribution of CHEMOSAT in Europe. Additional impacts of COVID-19 on 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.

~~Medical Device Directive Transition to Medical Device Regulation~~

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.

Results of Operations for the three months ended March 31, ~~2021~~2022 (in thousands)

Three months ended March 31, ~~2021~~2022 Compared with Three months ended March 31, ~~2020~~

2021

Revenue

We recorded approximately ~~$388.5~~$378,000 in revenue for the three months ended March 31, ~~2021~~2022 compared to ~~$293.4~~$388,000 for the three months ended March 31, ~~2020.~~2021. The ~~increase~~slight decrease in product revenue ~~is partly~~was primarily due to ~~an increase~~the transition to direct sales in ~~CHEMOSAT unit sales to medac and an increase of 5% for the royalty income calculation from medac, which started on January 1, 2021.~~

Europe beginning in March 2022.

Cost of Goods Sold

For the three months ended March 31, ~~2021,~~2022, we recorded cost of goods sold of approximately ~~$111.9~~$33,000 compared to ~~$78.0~~$112,000 for the three months ended March 31, ~~2020. An increase of $38.8 is related~~2021 which decrease was attributable to the ~~increase~~transition of direct sales in ~~sales volume.~~

Europe beginning in March 2022.

Research and Development Expenses

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

pre-clinical

data and the cost of manufacturing HEPZATO for clinical trials and conducting clinical trials. For the three months ended March 31, ~~2021,~~2022, research and

development expenses increased to ~~$3,707.4~~$4.2 million from ~~$2,974.0~~$3.7 million in the prior year period. The increase of $0.5 million is primarily due to higher expenses in preparation of the

pre-NDA

meeting in April 2022 and preparation for the ~~recording stock option expenses of $630 in~~NDA submission by the ~~first~~third quarter of ~~2021.~~

2022.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of payroll, rent and professional services such as accounting and legal services. For the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, selling, general and administrative expenses were ~~$3,296.0~~$3.6 million and ~~$2,315.5,~~$3.3 million, respectively. The increase is primarily ~~related to~~higher costs in the ~~recording~~preparation for commercialization of ~~stock option expense of $1,466 during~~HEPZATO in the ~~three months ended March 31, 2021.~~

United States early next year.

Other Income/Expense

Other ~~income/expense~~income (expense) is primarily related to income or expense associated with financial instruments. For the three months ended March 31, 2022 and 2021, other expenses were $0.6 million and ~~2020, other income/expense were $20.2 and $2,786.4 of expense,~~$20,000, respectively. The ~~prior year period included a $2,831 expense related to the change~~increase in ~~fair value of a warrant liability.~~

~~Net Loss~~

~~Our net loss for the three months ended March 31, 2021 was $6,746.9, a decrease of $1,114.0 compared to net loss of $7,860.5 for the three months ended March 31, 2020. The decrease in net loss~~other expenses is primarily due to the ~~$2,831 other income/~~interest expense ~~related to~~and amortization expense for the ~~change in~~original issue discount on the ~~fair value of~~debt financing transaction discussed below between the ~~warrant liability booked in the three months ended March 31, 2020 which was offset by the recording of $2,148 stock option expense in the first quarter of 2021.~~

Company and its lender, Avenue Venture Opportunities Fund, L.P.

Liquidity and Capital Resources

At March 31, ~~2021,~~2022, we had cash, cash equivalents and restricted cash totaling ~~$26,650.0, as compared to cash, cash equivalents and restricted cash totaling $28,756.0 at December 31, 2020 and $4,721.0 at March 31, 2020.~~$20.5 million, During the three months ended March 31, ~~2021 and 2020, we~~2022, the Company used ~~$4,566.7 and $5,229.3, respectively,~~$6.4 million of cash in our operating activities. ~~In the three months ended March 31, 2021,~~

Our future results are subject to substantial risks and uncertainties. We have operated at a loss for our entire history and there can be no assurance that we ~~raised $2,376~~will ever achieve consistent profitability. We have historically funded our operations through a combination of ~~cash related~~private placements and public offerings of our securities. We will need to ~~the exercises~~raise additional capital under structures available to us, including debt and/or equity offerings.

Table of ~~warrants.~~

Contents

These ~~conditions~~circumstances raise substantial doubt about ~~our~~the Company’s ability to continue as a going concern ~~for a period of at least~~within one year ~~from~~after 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~~capital commitments over the next twelve months include $6.1 million to ~~substantial risks~~satisfy March 31, 2022 accounts payable, accrued expenses and ~~uncertainties.~~ lease liabilities and $2.9 million of loan principal payments. Our capital commitments past the next twelve months include (a) $0.1 million of lease liabilities; (b) $9.8 million of loan principal payments; and (c) $5.0 million of convertible note principal payments, if the holders do not elect to convert the notes into equity.

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. Wealso expect to use cash, cash equivalents and investment proceeds to fund our ~~future~~ clinical research 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 regulatory approvals and complying with applicable laws and 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.

If we are unable to secure additional capital, we may be required to curtail our research and development initiatives and take additional measures to reduce costs in order to conserve our cash.

On August 6, 2021, the Company entered into a Loan and Security Agreement (the “Avenue Loan Agreement”) with Avenue Venture Opportunities Fund, L.P. (the “Lender,” or “Avenue”) for a term loan in an aggregate principal amount of up to $20.0 million (the “Avenue Loan”). The ~~Company has~~Avenue Loan bears interest at an annual rate equal to the greater of (a) the sum of 7.70% plus the prime rate as reported in The Wall Street Journal and (b) 10.95%. The interest rate at March 31, 2022 was 10.95%. The Avenue Loan is secured by all of the Company’s assets globally, including intellectual property. The Avenue Loan matures on August 1, 2024. Additional information regarding the Avenue Loan can be found in Note 8 to the Company’s unaudited interim consolidated financial statements contained in this Quarterly Report on Form

10-Q.

Critical Accounting Estimates

During the three months ended March 31, 2022, there were no ~~off-balance sheet arrangements.~~

material changes to critical accounting estimates as reported in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the “Annual Report”), which was filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2022 and may also be found on the Company’s website (www.delcath.com).

Application of Critical Accounting Policies

Our financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America. During the three months ended March 31, ~~2021,~~2022, 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, ~~2020.~~2021. 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, ~~2020.~~

2021.

~~Item 3.~~

~~Quantitative and Qualitative Disclosures about Market Risk~~

~~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.

~~Item 4.~~

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of our ~~Chief Executive Officer~~principal executive and ~~Interim Principal Accounting Officer,~~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~~principal executive and ~~Interim Principal Accounting Officer~~principal accounting officer concluded that our disclosure controls and procedures as of March 31, ~~2021~~2022 (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~~principal executive and ~~Interim Principal Accounting Officer,~~principal accounting officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls over Financial Reporting

There was no change in our internal control over financial reporting (as ~~define~~defined in Rules

13a-15(f)

and

15d-15(f)

under the Exchange Act) that occurred during the quarter ended March 31, ~~2021~~2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II: OTHER INFORMATION

~~Item 1.~~

Item 1. Legal Proceedings

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.

medac Matter

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 had scheduled hearings to take place during the week of May 17, 2021. However, the Claimants and the Company recently agreed to participate in non-binding mediation of their dispute before a neutral mediator, which 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 ongoing. As of March 31, 2021, the Company has accrued for the 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.~~

~~Item 2.~~

~~Unregistered Sales of Equity Securities and Use of Proceeds~~

~~On February 18,~~April 2021, the Company issued ~~2,636 shares of unregistered common stock~~an invoice for €1 million (which currently converts to approximately $1.2 million) to medac GmbH, a privately held, multi-national pharmaceutical company based in ~~lieu of cash~~Germany (“medac”), the Company’s EU product distribution partner, for a milestone payment ~~of deferred accrued director fees to former director, William Rueckert. The issuance to Mr. Rueckert was made in reliance on the exemption from registration in Section 4(a)(2)~~due under the ~~Securities Act~~License, Supply and Marketing Agreement (the “License Agreement”) dated December 10, 2018, between the Company and medac. Pursuant to the License Agreement, a milestone is due upon achieving positive efficacy in the FOCUS Trial as defined by the FOCUS Trial protocol. Per the trial protocol and associated Statistical Analysis Plan, positive efficacy is based on whether the Objective Response Rate (ORR) exceeds a pre-specified threshold. A preliminary analysis of ~~1933.~~

the FOCUS Trial data based on 87% of enrolled patients was released on March 31, 2021, and subsequently presented at the American Society of Clinical Oncology (ASCO) Annual Meeting held virtually from the 4th through the 8th of June 2021. Per that analysis, the ORR exceeded the pre-specified threshold. While the final ORR is not yet known, given the magnitude by which the ORR exceeded the pre-specified endpoint and the small number of patients yet to be assessed, the final ORR will be greater than the pre-specified endpoint regardless of the responder status of the remaining patients. medac disagrees that the milestone is due and claims that a full clinical study report is required in addition to the existing ORR analysis. medac has not disputed the accuracy of the ORR analysis or underlying data, but simply asserts that a full clinical study report is required prior to payment. While the Company disagrees with this interpretation, since medac has stated they do not intend to pay the invoice at this time, under revenue recognition criteria set out in ASC 606, the Company did not recognize the revenue.

On December 30, 2021, the Company received a letter from medac stating that, due to its failure to withdraw the termination notice, medac was terminating the License Agreement with immediate effect. In the letter, medac reserved its rights in full, including a purported claim for damages for wrongful termination. In a separate letter, medac agreed to orderly transition through February 28, 2022 in order to minimize the impact of any termination on patients and physicians. The Company agreed to purchase inventory held at medac in March 2022 for approximately $0.2 million. The arbitration proceeding is moving forward with the parties agreeing to stay the arbitration for a finite period to pursue settlement discussions.

Item 6. Exhibits

~~Item 6.~~

~~Exhibits~~

~~Exhibit~~ ~~No.~~		~~Description~~
Exhibit No.		Description

3.1		Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1/A filed September 25, 2019).

3.2		Amendment to the Amended and Restated Certificate of Incorporation of the Company dated October 17, 2019 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on October 23, 2019).

3.3		Certificate of Correction to Amendment to the Amended and Restated Certificate of Incorporation of the Company dated October 22, 2019 (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on October 23, 2019).
~~3.4~~
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).

3.5		Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company, dated November 23, 2020 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on November 24, 2020).
~~3.6~~
3.6		Amended and Restated By-Laws of the Company (incorporated by reference to Exhibit 3.2 to Amendment No. 1 to Company’s Registration Statement on Form SB-2).
~~31.1~~
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.***

101.INS
~~101.INS~~		XBRL Instance Document * - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema Document *

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document *

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document *

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document *

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document *

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*	Filed herewith.

This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any filing, except to the extent the Company specifically incorporates it by reference.

DELCATH SYSTEMS, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


						DELCATH SYSTEMS, INC.


May 11, ~~2021~~ 2022						/s/ Gerard Michel
						Gerard Michel
						Chief Executive Officer (Principal Executive Officer)

	~~Page~~
				Page
PART I—FINANCIAL INFORMATION

Item 1.		Financial Statements
		Unaudited Condensed Consolidated Balance Sheets as of March 31, ~~2021~~2022 and December 31, ~~2020~~2021			3
		Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, ~~2021~~2022 and ~~2020~~2021			4
		Unaudited Condensed Consolidated Statements of Stockholders’ Equity ~~(Deficit)~~ for the three months ended March 31, ~~2021~~2022 and ~~2020~~2021			5
		Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, ~~2021~~2022 and ~~2020~~2021			6
		Notes to the Condensed Consolidated Financial Statements			7
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	15		18
~~Item 3.~~	~~Quantitative and Qualitative Disclosures about Market Risk~~	19
Item 4.		Controls and Procedures	19		20

PART II—OTHER INFORMATION

Item 1.		Legal Proceedings	20		22
~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~		20
Item 6.		Exhibits	21		23

SIGNATURES			22		24

	March 31,			December 31,
	2021			2020
Assets
Current assets
Cash and cash equivalents	$	26,600		$	28,575
Restricted cash		50			181
Accounts receivable, net		75			57
Inventories		1,109			855
Prepaid expenses and other current assets		2,369			2,670
Total current assets		30,203			32,338
Property, plant and equipment, net		1,321			1,351
Right-of-use assets		791			946
Total assets	$	32,315		$	34,635

Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$	1,234		$	1,774
Accrued expenses		5,927			5,241
Deferred revenue, current		502			525
Lease liabilities, current		433			495
Convertible notes payable, current		2,000			2,000
Total current liabilities		10,096			10,035
Deferred revenue, non-current		1,856			2,072
Lease liabilities, non-current		357			450
Total liabilities		12,309			12,557

Commitments and contingencies (Note 13)		—			—

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		422,027			417,449
Accumulated deficit		(402,074	)		(395,327	)
Accumulated other comprehensive income		(10	)		(104	)
Total stockholders' equity		20,006			22,078
Total liabilities and stockholders' equity	$	32,315		$	34,635

	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	)

	March 31,			December 31,			Estimated
	2021			2020			Useful Life
Buildings and land	$	1,120		$	1,109		30 years - Buildings
Enterprise hardware and software		1,861			1,862		3 years
Leaseholds		1,809			1,826		Lesser of lease term or estimated useful life
Equipment		1,061			1,063		7 years
Furniture		203			204		5 years
Property, plant and equipment, gross		6,054			6,064
Accumulated depreciation		(4,733	)		(4,713	)
Property, plant and equipment, net	$	1,321		$	1,351

	US			Ireland			Total
Lease cost
Operating lease cost	$	112		$	57		$	169
Sublease income		—			(44	)		(44	)
Total	$	112		$	13		$	125

Other information
Operating cash flows out from operating leases		(112	)		(57	)		(169	)
Operating cash flows in from operating leases		-			44			44
Weighted average remaining lease term		1.9			0.3
Weighted average discount rate - operating leases		8	%		8	%

	US			Ireland			Total
Year ended December 31, 2021	$	304		$	73		$	377
Year ended December 31, 2022		406			-			406
Year ended December 31, 2023		67			-			67
Total		777			73			850
Less present value discount		(59	)		(1	)		(60	)
Operating lease liabilities included in the condensed consolidated balance sheet at March 31, 2021	$	718		$	72		$	790

	March 31, 2022									December 31, 2021
	Gross			Discount			Net			Gross			Discount			Net
Loan - Avenue [1]		12,638			(1,485	)		11,153			12,638			(1,645	)		10,993
Loan - Avenue [1] - Less Current Portion		(2,856	)		336			(2,520	)		(714	)		93			(621	)

Total - Loans Payable, Non-Current	$	9,782		$	(1,149	)	$	8,633		$	11,924		$	(1,552	)	$	10,372

Convertible Note Payable - Rosalind		2,000			—			2,000			2,000			—			2,000
Convertible Portion of Loan Payable - Avenue		3,000			(325	)		2,675			3,000			(361	)		2,639

Total - Convertible Notes Payable - Non-Current	$	5,000		$	(325	)	$	4,675		$	5,000		$	(361	)	$	4,639

	Number of Option		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding at January 1, 2021		1,078,499	$	12.68
Granted		—		—
Exercised		—		—
Cancelled/Forfeited		—		—
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 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

May 11, ~~2021~~
2022

/s/ ~~Christine Padula~~
Anthony Dias

~~Christine Padula~~

Anthony Dias

~~Interim~~

Principal Accounting Officer