| Stockholders' Equity | (1 1 )
Stockholders’ Equity Authorized Shares The Company is authorized to issue 10,000,000 shares of preferred stock, $0.01 per 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). On November 23, 2020, the Company filed a Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company with the Secretary of State of the State of Delaware. The Certificate of Amendment, which became effective immediately upon its filing, decreased the total number of shares of common stock, $0.01 par value, that the Company is authorized to issue from 1,000,000,000 shares to 40,000,000 shares. The Board of Directors of the Company adopted a resolution approving the Certificate of Amendment on September 30, 2020. Stock Incentive Plans The Company’s 2019 Equity Incentive Plan (the “2019 Plan”) allows for grants in the form of incentive stock options, nonqualified stock options, stock units, stock awards, stock appreciation rights, and other stock-based awards. All of the Company’s officers, directors, employees, consultants, and advisors are eligible to receive grants under the 2019 Plan. The 2019 Plan provides for the grant of options to purchase shares of common stock at exercise prices not less than 100% of fair value on the dates of grant. The maximum number of shares reserved for issuance under the 2019 Plan was 2,142. The 2019 Plan has been superseded by the 2020 Plan discussed below and no further awards will be made under the 2019 Plan; however, outstanding awards granted under the 2019 Plan will remain outstanding and continue to be administered in accordance with the terms of the 2019 Plan and the applicable award agreements. . On September 30, 2020, the 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 December 31, 2020, there are 675,000 shares of common stock reserved under the 2020 Plan, of which 95,000 remained available to be issued. Equity Offerings and Placements Confidentially Marketed Public Offering On December 11, 2020, the Company closed a confidentially marketed public offering with the issuance of 1,679,031 shares of the Company’s common stock at a price to the public of $13.25 per share. The Company received gross proceeds of $22,247, offset by $1,861 of underwriting discounts, commissions, and other estimated offering expenses. At-the-Market Offering On August 18, 2020, the Company entered into a sales agreement with Cantor Fitzgerald & Co. (“Cantor Fitzgerald”), pursuant to which the Company may offer and sell, from time to time, through Cantor Fitzgerald, as sales agent or principal, shares of the Company’s common stock, (the “Placement Shares”), having an aggregate offering price of up to $10,000 (the “ATM Offering”). The Company has no obligation to sell any Placement Shares under the sales agreement. Subject to the terms and conditions of the sales agreement, Cantor Fitzgerald 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 Nasdaq Stock Market, to sell Placement Shares from time to time based upon the Company’s instructions, including any price, time or size limits specified by the Company. The Company will pay Cantor Fitzgerald a commission of 3.0% of the aggregate gross proceeds from each sale of Placement Shares, reimburse Cantor Fitzgerald’s legal fees and disbursements up to $50.0 and provide Cantor Fitzgerald with customary indemnification and contribution rights. The sales agreement may be terminated by Cantor Fitzgerald or the Company upon notice to the other party as provided in the sales agreement, or by Cantor Fitzgerald at any time in certain circumstances, including the occurrence of a material and adverse change in the Company’s business or financial condition that makes it impractical or inadvisable to market the Placement Shares or to enforce contracts for the sale of the Placement Shares. In connection with the ATM Offering, in consideration for a fee equal to 1.05% of the gross sales price per share sold in the ATM Offering, ROTH Capital Advisors, LLC (“Roth”) waived, solely with respect to the ATM Offering, (i) Roth’s right, pursuant to certain engagement letters dated August 14, 2019 and January 13, 2020 between Roth and the Company, to act as placement agent or underwriter with respect to offerings of the Company’s securities and to receive a minimum of 35% of the fees paid to the agents or underwriters for such offerings and (ii) the lock-up provision included in a certain underwriting agreement dated May 1, 2020 between Roth and the Company requiring the prior written consent of Roth for any offer or sale of the Company’s common stock by the Company during the 90-day period following the date of such underwriting agreement. Through December 31, 2020, the Company sold 77,644 shares of common stock pursuant to the ATM Offering for aggregate gross proceeds of $910, partially offset by $44 of issuance costs. May 2020 Public Offering On May 5, 2020, the Company closed a public offering of 1,823,000 shares of common stock, 377,000 pre-funded warrants and Series F warrants to purchase 2,224,900 shares of the Company’s common stock at an exercise price of $10.00 per share. Delcath received gross proceeds of approximately $21,996 from the public offering, partially offset by $2,618 of underwriting discounts and other offering expenses. As a result of the public offering, the conversion prices of the Company’s Series E and Series E-1 Preferred Stock were adjusted to $10.00 per share and the exercise price of the 2019 Warrants was adjusted to $10.00 per share and neither instrument is subject to further price resets. Series E and Series E-1 Preferred Stock Private Placements On July 11, 2019, the Company issued 32,572 shares of our Series E convertible preferred stock, par value $0.01 per share (the “Series E Preferred Stock”). The Company entered into a securities purchase agreement with certain accredited investors pursuant to which Delcath sold an aggregate of 20,000 shares of Series E Preferred Stock, at a price of $1,000 per share and a warrant, or a “2019 E Warrant”, to purchase a number of shares of common stock equal to the number of shares of common stock issuable upon conversion of the Series E Preferred Stock purchased by the investor, or the “July 2019 Private Placement”. In connection with the July 2019 Private Placement, the Company exchanged $11,800 of debt, interest and Series D Warrants for 11,500 shares of Series E Preferred Stock and related 2019 E Warrants, $100 in accounts payables for 149 shares of Series E Preferred Stock and related 2019 E Warrants and issued 923 shares of Series E Preferred Stock and related 2019 E Warrants to certain investors in exchange for a waiver of rights under exchange agreements signed in December 2018 and March 2019, or the “Debt Exchange”. On August 19, 2019, the Company entered into a securities purchase agreement with certain accredited investors pursuant to which Delcath sold to investors an aggregate of 9,510 shares of Series E-1 convertible preferred stock, par value $0.01 per share, or the Series E-1 Preferred Stock, at a price of $1,000 per share and a warrant, or a “2019 E-1 Warrant”, and together with the 2019 E Warrant, the “2019 Warrants”, to purchase a number of shares of common stock of the Company equal to the number of shares of common stock issuable upon conversion of the Series E-1 Preferred Stock purchased by the investor, or the “August 2019 Private Placement”, and, collectively with the July 2019 Private Placement, the “Private Placements”. The Company received net cash proceeds after expenses of $26.5 million. Of the net proceeds and equitized value received, the Company allocated an estimated fair value of $20,844 to the 2019 Warrants, which was classified as a derivative liability due to the price reset features discussed below. As a result of the Series E Preferred Stock and Series E-1 Preferred Stock having an effective conversion price that was lower than the market price on the date of issuance, the Company has recognized a beneficial conversion feature of $18,238. Due to the Series E Preferred Stock and Series E-1 Preferred Stock being immediately convertible, the beneficial conversion feature was recognized in full as a deemed dividend. Each share of Series E Preferred Stock and Series E-1 Preferred Stock, or, collectively, the “Preferred Stock”, is convertible at any time at the option of the holder into the number of shares of common stock determined by dividing the stated value by the conversion price of $42.00, subject to certain limitations and adjustments, or the Conversion Price. Except for certain adjustments, the holders of the Preferred Stock are entitled to receive dividends on shares of Preferred Stock equal (on an “as converted” basis) to and in the same form as dividends paid on shares of the common stock. Any such dividends that are not paid to the holders of the Preferred Stock will increase the stated value. No other dividends will be paid on shares of Preferred Stock. Each 2019 Warrant had an original exercise price equal to $42.00, subject to adjustment in accordance with the terms of the 2019 Warrants, or the Exercise Price, and became exercisable at any time upon the consummation of the Reverse Split and will be exercisable until 5:00 p.m. (NYC time) on the date that is five years following the date of the Reverse Split. Pursuant to the terms of the Preferred Stock and the 2019 Warrants, the Conversion Price of the Preferred Stock and the Exercise Price of the 2019 Warrants were initially subject to adjustment in each of the following circumstances: (i) on the third trading day following the date that the Company effects a reverse stock split, or the Reverse Split Reset Date, (ii) the date that the initial registration statement covering the shares of common stock issuable upon the conversion of the Preferred Stock and the exercise of the 2019 Warrants is declared effective by the SEC, or the Registration Reset Date, and (iii) in the event that all of the shares of common stock which we were required to register with the SEC were not then registered on an effective registration statement, the date that all of the shares underlying the respective Preferred Stock and 2019 Warrants may be sold pursuant to Rule 144, or the Rule 144 Reset Date, each of such reset dates, a Reset Date and, collectively, the Reset Dates. On each Reset Date, the Conversion Price and the Exercise Price were to be reduced, and only reduced, to equal the lesser of (x) the then effective Conversion Price or Exercise Price, as applicable, and (y) 90% of the average of the five daily volume weighted average prices of the common stock immediately prior to each Reset Date, or the Reset Formula. In the event of a reduction in the Exercise Price, the aggregate number of Warrant Shares issuable upon the exercise of the 2019 Warrants were to be increased such that the aggregate Exercise Price of the Warrants on the day immediately following such Reset Date equaled the aggregate Exercise Price immediately prior to such adjustment. In addition, from the date of issuance of the Preferred Stock and Warrants until such time that the Company’s common stock is listed or quoted on a national exchange, the Conversion Price and the Exercise Price are subject to price-based anti-dilution protections. The Registration Reset Date occurred on November 7, 2019. However, pursuant to the Reset Formula, no reduction in the Conversion Price or the Exercise Price occurred on the Registration Reset Date. The Reverse Split Reset Date occurred on December 30, 2019. Pursuant to the Reset Formula, the Conversion Price and the Exercise Price were reduced to $23.04 per share as of the Reverse Split Reset Date. The Rule 144 Reset Date with respect to the Series E Preferred Stock and the Series E Warrants occurred on January 15, 2020, but no reset in the Conversion Price or the Exercise Price of the Series E Preferred Stock or the Series E Warrants occurred as of such date because all of the shares of common stock issuable in respect of such securities had been registered for resale. The Rule 144 Reset Date with respect to the Series E-1 Preferred Stock and the Series E-1 Warrants occurred on February 19, 2020, but no reset in the Conversion Price or the Exercise Price of the Series E-1 Preferred Stock or the Series E-1 Warrants occurred as of such date because all of the shares of common stock issuable in respect of such securities had been registered for resale. As a consequence of the reduction of the Conversion Price on the Reverse Split Reset Date, an additional 813,473 shares of common stock became issuable upon the conversion of the Preferred Stock and, as a consequence of the reduction of the Exercise Price on the Reverse Split Reset Date, an additional 824,587 shares of common stock became issuable upon the exercise of the 2019 Warrants, or collectively the Reset Shares. Pursuant to the terms of the registration rights agreements entered into in connection with the Private Placements and the Debt Exchange we were required to register a number of shares of our common stock that would be issuable assuming that the Conversion Price and the Exercise Price were $16.10 per share, regardless of the actual Conversion Price or the Exercise Price. Pursuant to that requirement, even though we were obligated to issue only the Reset Shares as a result of the Reverse Split, we registered a total of 3,429,680 shares of common stock for sale or other disposition by the selling stockholders on our registration statement on Form S-1 (File No. 333-235751), which included the Reset Shares. During the year ended December 31, 2020, the Company incurred $106 of costs to register the shares of common stock underlying the Preferred Stock and the 2019 Warrants. The conversion price of the Preferred Stock and the exercise price of the 2019 Warrant were subsequently adjusted to $10.00 per share (and they are no longer subject to price resets) upon the pricing of the Company’s May 2020 public offering. As a result of the price adjustment, the excess of the fair value of the common stock that will be received on conversion of the Preferred Stock, measured on the price reset date, exceeded the original proceeds allocated to the Preferred Stock by $12,000. The repricing of the exercise price of the 2019 Warrants resulted in the recognition of a $55 deemed dividend. Because the 2019 Warrants are no longer subject to price resets, the $6,200 estimated fair value of the warrants was reclassified from derivative liability to equity. During the years ended December 31, 2020 and 2019, 20,887 and 565 shares of Series E and Series E-1 Convertible Preferred Stock were converted into 2,084,507 and 13,455 shares of common stock, respectively. As of December 31, 2020, there were 20,631 shares of Preferred Stock outstanding. Other Common Stock Issuances During the years ended December 31, 2020 and 2019, the Company issued 72,976 and 20 shares of common stock with a grant date value of $636 and $4, respectively, as compensation. The 2020 issuances include shares valued at $230 which were issued to satisfy 2019 accrued compensation. During the year ended December 31, 2020, the Company issued 6,000 shares of common stock associated with the exercise of pre-funded warrants and 185,803 shares of common stock associated with other warrants for combined proceeds of $1,858. In April 2019, the Company entered into an exchange agreement with an institutional investor with respect to warrants held by such investor. Pursuant to the exchange agreement, the Company issued 92 shares of the Company’s common stock in exchange for warrants to purchase 82,521 shares of common stock at a weighted average exercise price of $170 per share. The exchange resulted in a loss of approximately $6 which is recognized within loss on issuance of financial instrument in the statement of operations. Series D Preferred Stock Issuance and Exchange On November 5, 2018, the Company’s Board authorized the establishment of a new series of preferred stock designated as Series D Preferred Stock, $0.01 par value, the terms of which are set forth in the certificate of designations for such series of Preferred Stock. During 2019, the Company issued an additional 15 shares of Series D Preferred Stock (in addition to the 101 shares issued previously) for gross proceeds of $150. On March 29, 2019, the Company exchanged all 116 issued and outstanding shares of its Series D Preferred Stock (having an aggregate stated value of $1,160) and received $400 in cash proceeds in exchange for the issuance of a senior secured promissory note (the “March 2019 Note”) in the principal amount of $1,560. The March 2019 Note bore interest at the rate of 8% per annum, was scheduled to mature on April 1, 2020, and was not convertible. The March 2019 Note was exchanged as part of the July 2019 preferred stock private placement discussed above and is no longer outstanding. Stock Options Pursuant to his Employment Agreement, on October 1, 2020, the Company granted a ten-year nonqualified and non-plan stock option to purchase 498,000 shares of the Company’s common stock to the Company’s new Chief Executive Officer, Gerard Michel. The exercise price of the option is equal to (i) $11.67 per share , the closing trading price per share of the Company’s common stock on October 1, 2020 as to the first 396,000 option shares to vest, (ii) 1.5 times the closing trading price per share of the Company’s common stock on October 1, 2020 as to the next 51,000 option shares to vest and (iii) 2.0 times the closing trading price per share of the Company’s common stock on October 1, 2020 as to the remaining 51,000 option shares to vest. The options vest ratably on a monthly basis over 36 months. The grant date value of the awards was $5,629, which will be recognized based on a graded approach On October 1, 2020, the Company granted ten-year options to directors and employees to purchase an aggregate of 550,000 shares of common stock at an exercise price of $11.67 per share. The options vest ratably on a monthly basis over 36 months. The grant date value of the awards was $6,230, which will be recognized using a graded approach over the vesting period. On December 7, 2020, the Company granted ten-year options to a new employee to purchase an aggregate of 30,000 shares of common stock at an exercise price of $15.32 per share. The options vest ratably on a monthly basis over 36 months. The grant date value of the award was $446, which will be recognized using a graded approach over the vesting period. The Company values stock options using the Black-Scholes option pricing model and used the following assumptions during the reporting periods:
For the year ended December 31, 2020
For the year ended December 31, 2019
Expected terms (years)
5.77
5.50
Expected volatility
181.00%
147.63%
Risk-free interest rate
0.27% - 0.40%
2.51% - 2.59%
Expected dividends
0.00%
0.00%
The weighted average estimated fair value of the stock options granted during the years ended December 31, 2020 and 2019 was approximately $11.41 and $181.41 per share, respectively. The following is a summary of stock option activity under the 2019 Plan and the 2020 Plan For the year ended December 31, 2020:
Number of Options
Weighted Average Exercise Price Per Share
Weighted Average Remaining Contractual Term (in years)
Aggregate Intrinsic Value
Outstanding at January 1, 2020
1,640
$
196.70
Granted
1,078,000
$
12.60
Exercised
—
—
Cancelled/Forfeited
(1,141
)
$
196.70
Outstanding at December 31, 2020
1,078,499
$
12.68
9.8
$
6,012
Exercisable at December 31, 2020
87,834
$
13.57
9.8
$
494
The following table summarizes information for stock option shares outstanding and exercisable at December 31, 2020:
Options Exercisable
Range of Exercise Prices
Outstanding Number of Options
Weighted Average Remaining Option Term (in years)
Number of Options
$10 - $15
946,000
9.8
78,835
$15 - $20
81,000
9.8
4,250
$20 - $25
51,000
9.8
4,250
$25+
499
8.1
499
1,078,499
9.8
87,834
At December 31, 2020, there was approximately $8,824 of aggregate unrecognized compensation expense related to employee and board stock option grants. The cost is expected to be recognized over a weighted average period of 9.8 year. For the years ended December 31, 2020 and 2019, the Company recognized compensation expense $3,505 and $273, respectively, related to stock options granted to employees and board members, which were charged to the statement of operations as detailed below:
For the year ended December 31, 2020
For the year ended December 31, 2019
Selling, general and administrative
$
2,304
$
214
Research and development
1,110
59
Cost of goods sold
91
—
Total
$
3,505
$
273
Warrants The following is a summary of warrant activity for the year ended December 31, 2020 :
Warrants
Weighted Average Exercise Price
Weighted Average Remaining Life (Years)
Aggregate Intrinsic Value
Outstanding at January 1, 2020
1,826,608
$
23.04
Warrants issued
2,601,900
$
8.55
Warrants exercised
(191,803
)
$
9.69
Warrants expired
(18
)
$
10.00
Outstanding at December 31, 2020
4,236,687
$
9.13
4.2
37,261
Exercisable at December 31, 2020
4,236,687
$
9.13
4.2
37,261
The following table presents information related to stock warrants at December 31, 2020:
Warrants Exercisable
Range of Exercise Prices
Outstanding Number of Warrants
Weighted Average Remaining Warrants Term (in years)
Number of Warrants
$
0.01
371,000
4.3
371,000
$
10.00
3,865,687
4.2
3,865,687
4,236,687
4.2
4,236,687
As of December 31, 2020, warrants to purchase 371,000 shares of common stock were pre-funded, and the exercise price was $0.01 per share. The remaining warrants were exercisable at $10.00 per share. See Series E and Series E-1 Preferred Stock Private Placement above for additional information related to the price reset of the 2019 Warrants. See the May 2020 Public Offering section above for additional information related to the warrants issued during the year ended December 31, 2020. See the |
