UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
OR
| 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:
(Exact name of Registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
(Address of principal executive offices)
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||
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.
Indicate
by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant
was required to submit such files).
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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check One):
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Smaller
reporting company | ||
| Emerging
growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
As of November 9, 2022, the Registrant had shares of common stock, $0.01 par value per share, outstanding.
IMUNON, INC.
QUARTERLY REPORT ON
FORM 10-Q
TABLE OF CONTENTS
| Page(s) | ||
| PART I: FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements and Notes | 1 |
| Condensed Consolidated Balance Sheets as of September 30, 2022 (Unaudited) and December 31, 2021 | 1 | |
| 3 | ||
| 4 | ||
| 5 | ||
| 7 | ||
| 8 | ||
| Notes to the Condensed Consolidated Financial Statements (Unaudited) | 9 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 23 |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 38 |
| Item 4. | Controls and Procedures | 38 |
| PART II: OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 39 |
| Item 1A. | Risk Factors | 39 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 39 |
| Item 3. | Defaults Upon Senior Securities | 39 |
| Item 4. | Mine Safety Disclosures | 39 |
| Item 5. | Other Information | 39 |
| Item 6. | Exhibits | 40 |
| SIGNATURES | 41 | |
| i |
Cautionary Note Regarding Forward-Looking Statements
This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact are “forward-looking statements” for purposes of this Quarterly Report on Form 10-Q, including, without limitation, any projections of earnings, revenue or other financial items, any statements of the plans and objectives of management for future operations (including, but not limited to, pre-clinical development, clinical trials, manufacturing and commercialization), uncertainties and assumptions regarding the impact of the COVID-19 pandemic on our business, operations, clinical trials, supply chain, strategy, goals and anticipated timelines, any statements concerning proposed drug candidates, potential therapeutic benefits, or other new products or services, any statements regarding future economic conditions or performance, any changes in the course of research and development activities and in clinical trials, any possible changes in cost and timing of development and testing, capital structure, financial condition, working capital needs and other financial items, and any statements of assumptions underlying any of the foregoing. In some cases, forward-looking statements can be identified using terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “estimates,” “potential” or “continue,” or the negative thereof or other comparable terminology. Although we believe that our expectations are based on reasonable assumptions within the bounds of our knowledge of our industry, business, and operations, we cannot guarantee that actual results will not differ materially from our expectations.
Our future financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risks and uncertainties, including, but not limited to, the inherent uncertainty in the drug development process, our ability to raise additional capital to fund our planned future operations, our ability to obtain or maintain FDA and foreign regulatory approvals for our drug candidates, potential impact of the outbreak, duration and severity of the COVID-19 pandemic on our business, our ability to enroll patients in our clinical trials, risks relating to third parties conduct of our clinical trials, risks relating to government, private health insurers and other third-party payers coverage or reimbursement, risks relating to commercial potential of a drug candidate in development, changes in technologies for the treatment of cancer, impact of development of competitive drug candidates by others, risks relating to intellectual property, volatility in the market price of our common stock, potential inability to maintain compliance with The Nasdaq Marketplace Rules and the impact of adverse capital and credit market conditions. These and other risks, assumptions are described in Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, and in other documents that we file or furnish with the SEC. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. All forward-looking statements speak only as of the date they are made, and we do not intend to update any forward-looking statements, except as required by law or applicable regulations. We operate in a highly competitive, highly regulated, and rapidly changing environment and our business is in a state of evolution. Therefore, it is likely that new risks will emerge, and that the nature and elements of existing risks will change, over time. It is not possible for management to predict all such risk factors or changes therein, or to assess either the impact of all such risk factors on our business or the extent to which any individual risk factor, combination of factors, or new or altered factors, may cause results to differ materially from those contained in any forward-looking statement.
Except where the context otherwise requires, in this Quarterly Report on Form 10-Q, the “Company,” “Imunon,” “we,” “us,” and “our” refer to Imunon, Inc., a Delaware corporation and its wholly owned subsidiaries.
Trademarks
The Company’s brand and product names contained in this document are trademarks, registered trademarks, or service marks of Imunon, Inc. or its subsidiary in the United States (“U.S.”) and certain other countries. This document also contains references to trademarks and service marks of other companies that are the property of their respective owners.
| ii |
PART I: FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
IMUNON, INC.
CONDENSED CONSOLIDATED
BALANCE SHEETS
September 30, 2022 | December 31, 2021 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Investment in debt securities - available for sale, at fair value | ||||||||
| Accrued interest receivable on investment securities | ||||||||
| Advances and deposits on clinical programs and other current assets | ||||||||
| Total current assets | ||||||||
Property and equipment (at cost, less accumulated depreciation and amortization) | ||||||||
| Other assets: | ||||||||
| Money market investments, restricted cash | ||||||||
| Deferred income tax asset | ||||||||
| In-process research and development, net | ||||||||
| Operating lease right-of-use assets, net | ||||||||
| Deposits and other assets | ||||||||
| Total other assets | ||||||||
| Total assets | $ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
| 1 |
IMUNON, INC.
CONDENSED CONSOLIDATED
BALANCE SHEETS
(Continued)
September 30, 2022 | December 31, 2021 | |||||||
| (Unaudited) | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable – trade | $ | $ | ||||||
| Other accrued liabilities | ||||||||
| Operating lease liability - current portion | ||||||||
| Note payable – current portion, net of deferred financing costs | ||||||||
| Deferred revenue - current portion | ||||||||
| Total current liabilities | ||||||||
| Earn-out milestone liability | ||||||||
| Notes payable – non-current portion, net of deferred financing costs | ||||||||
| Operating lease liability - non-current portion | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock - $ par value ( shares authorized, and shares issued or outstanding at September 30, 2022 and December 31, 2021) | ||||||||
| Common stock - $ par value ( shares authorized; and shares issued at September 30, 2022 and December 31, 2021, respectively; and and shares outstanding at September 30, 2022 and December 31, 2021, respectively) | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity before treasury stock | ||||||||
| Treasury stock, at cost ( shares at September 30, 2022 and December 31, 2021) | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
| 2 |
IMUNON, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Licensing revenue | $ | $ | $ | $ | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (expense) income: | ||||||||||||||||
| Loss from change in valuation of earn-out milestone liability | ( | ) | ( | ) | ||||||||||||
| Investment income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Recognized loss on extinguishment of debt | ( | ) | ||||||||||||||
| Other income (expense) | ( | ) | ||||||||||||||
| Total other income (expense), net | ( | ) | ( | ) | ( | ) | ||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per common share | ||||||||||||||||
| Basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average shares outstanding | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
See accompanying notes unaudited to the condensed consolidated financial statements.
| 3 |
IMUNON, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Other comprehensive loss | ||||||||||||||||
| Changes in: | ||||||||||||||||
| Realized gains on debt securities recognized in investment income, net | $ | $ | $ | $ | ||||||||||||
| Unrealized gains (losses) on debt securities, net | ( | ) | ( | ) | ||||||||||||
| Change in realized and unrealized gains (losses) on available for sale securities, net | ( | ) | ||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total Comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
See accompanying notes unaudited to the condensed consolidated financial statements.
| 4 |
IMUNON, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Change in fair value of earn-out milestone liability | ||||||||
| Recognition of deferred revenue | ( | ) | ( | ) | ||||
| Stock-based compensation | ||||||||
| Realization of deferred income tax asset | ||||||||
| Amortization of deferred finance charges and debt discount associated with notes payable | ||||||||
| Net changes in: | ||||||||
| Accrued interest on investment securities | ( | ) | ||||||
| Advances, deposits, and other current assets | ( | ) | ( | ) | ||||
| Accounts payable and accrued liabilities | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchases of investment securities | ( | ) | ( | ) | ||||
| Proceeds from sale and maturity of investment securities | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from redeemable convertible preferred stock offering | ||||||||
| Payment upon redemption of redeemable convertible preferred stock | ( | ) | ||||||
| Proceeds from sale of common stock equity, net of issuance costs | ||||||||
| Proceeds from exercise of common stock warrants | ||||||||
| Proceeds from exercise of options to purchase common stock | ||||||||
| Proceeds from the SVB Loan Facility, net of issuance costs | ||||||||
| Payoff of the Horizon Credit Agreement and accrued end of term fees | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash, cash equivalents and restricted cash | ||||||||
| Cash, cash equivalents and restricted cash at beginning of period | ||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | $ | ||||||
See accompanying notes unaudited to the condensed consolidated financial statements.
| 5 |
IMUNON, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
| For
the Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Interest paid | $ | ( | ) | $ | ( | ) | ||
| Cash paid for amounts included in measurement of lease liabilities: | ||||||||
| Operating cash flows for lease payments | $ | $ | ||||||
| Realized and unrealized (losses) gains, net, on investment securities | $ | ( | ) | $ | ||||
See accompanying notes unaudited to the condensed consolidated financial statements.
| 6 |
IMUNON, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
Common Stock Outstanding | Additional Paid-in | Treasury Stock | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Capital | Shares | Amount | (Loss)/Income | Deficit | Equity | |||||||||||||||||||||||||
| Balance at July 1, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Fees incurred from registered direct offering | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||
| Realized and unrealized gains (losses), net, on investments securities | - | - | ||||||||||||||||||||||||||||||
| Stock-based compensation expense | - | - | ||||||||||||||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||
Common Stock Outstanding | Additional Paid-in | Treasury Stock | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Capital | Shares | Amount | (Loss)/Income | Deficit | Equity | |||||||||||||||||||||||||
| Balance at July 1, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Fees incurred from registered direct offering | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||
| Realized and unrealized gains (losses), net, on investments securities | - | - | ||||||||||||||||||||||||||||||
| Stock-based compensation expense | - | - | ||||||||||||||||||||||||||||||
| Balance at September 30, 2021 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||
See accompanying notes unaudited to the condensed consolidated financial statements.
| 7 |
IMUNON, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
Series A & B Preferred |
Common Stock Outstanding | Additional Paid-in | Treasury Stock | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||||||||||||
| Shares | Amount |
Shares | Amount | Capital | Shares | Amount | Loss | Deficit | Equity | |||||||||||||||||||||||||||||||
| Balance at January 1, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Effect of reverse stock split | - | ( | ) | - | ||||||||||||||||||||||||||||||||||||
| Issuance of preferred stock upon financing | - | - | ||||||||||||||||||||||||||||||||||||||
| Redemption of preferred stock | ( | ) | ( |
) | - | - | ||||||||||||||||||||||||||||||||||
| Sale of equity through equity financing facilities, net of costs | - | - | ||||||||||||||||||||||||||||||||||||||
| Realized and unrealized gains (losses), net, on investments securities | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Stock-based compensation expense | - | - | - | |||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||
Common Stock Outstanding | Additional Paid-in | Treasury Stock | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Capital | Shares | Amount | Income | Deficit | Equity | |||||||||||||||||||||||||
| Balance at January 1, 2021 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Sale of equity through equity financing facilities, net of costs | - | |||||||||||||||||||||||||||||||
| Shares issued upon exercise of common stock warrants, net of fees | - | |||||||||||||||||||||||||||||||
| Shares issued upon exercise of options to purchase common stock | - | |||||||||||||||||||||||||||||||
| Realized and unrealized gains (losses), net, on investments securities | - | - | ||||||||||||||||||||||||||||||
| Stock-based compensation expense | - | - | ||||||||||||||||||||||||||||||
| Balance at September 30, 2021 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||
See accompanying notes unaudited to the condensed consolidated financial statements.
| 8 |
IMUNON, INC.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
Note 1. Business Description
On September 19, 2022, Celsion Corporation announced a corporate name change to Imunon, Inc., reflecting the evolution of the Company’s business focus and its commitment to developing cutting-edge immunotherapies and next-generation vaccines to treat cancer and infectious diseases. The Company’s common stock will continue to trade on the Nasdaq Stock Market under the new ticker symbol “IMNN” effective as of the opening of trading on September 21, 2022. The Company filed an amendment to its Articles of Incorporation to effect the new corporate name.
Imunon, Inc. (“Imunon” and the “Company”) is a fully integrated, clinical stage biotechnology company focused on advancing a portfolio of innovative treatments that harness the body’s natural mechanisms to generate safe, effective, and durable responses across a broad array of human diseases, constituting a differentiating approach from conventional therapies. Imunon has two platform technologies: Our TheraPlas® platform for the development of immunotherapies and other anti-cancer nucleic acid-based therapies, and our PLACCINE platform for the development of nucleic acid vaccines for infectious diseases and cancer. The Company’s lead clinical program, GEN-1, is a DNA-based immunotherapy for the localized treatment of advanced ovarian cancer currently in Phase II development. GEN-1 works by instructing the body to produce safe and durable levels of powerful cancer fighting molecules, such as interleukin-12 and interferon gamma, at the tumor site. Additionally, the Company is conducting preclinical proof-of-concept studies on a nucleic acid vaccine candidate targeting SARS-CoV-2 virus in order to validate its PLACCINE platform. Imunon’s platform technologies are based on the delivery of nucleic acids with novel synthetic delivery systems that are independent of viral vectors or devices. We will continue to leverage these platforms and to advance the technological frontier of plasmid DNA to better serve patients with difficult to treat conditions.
Note 2. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements, which include the accounts of the Company and its wholly owned subsidiaries, have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. All significant intercompany balances and transactions have been eliminated in consolidation. During the quarter, there have been no changes to the Company’s accounting policies. Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.
In the opinion of management, all adjustments, consisting only of normal recurring accruals considered necessary for a fair presentation, have been included in the accompanying unaudited condensed consolidated financial statements. Operating results for the three-month and nine-month periods ended September 30, 2022 and 2021 are not necessarily indicative of the results that may be expected for any other interim period(s) or for any full year. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission (“SEC”) on March 31, 2022.
The preparation of financial statements in conformity with GAAP requires management to make judgments, estimates, and assumptions that affect the amount reported in the Company’s financial statements and accompanying notes. Actual results could differ materially from those estimates. Events and conditions arising subsequent to the most recent balance sheet date have been evaluated for their possible impact on the financial statements and accompanying notes. The Company continues to monitor the impact of the COVID-19 pandemic on its financial condition and results of operations, along with the valuation of its long-term assets and intangible assets. The effect of this matter could potentially have an impact on the valuation of such assets in the future.
Acquired in-process research and development (“IPR&D”) in years prior to 2022 has been reviewed for impairment at least annually in the third quarter of each year, and whenever events or changes in circumstances indicate that the carrying value of the assets might not be recoverable. Starting in 2022, the Company will review its IPR&D annually in the fourth quarter of each year, and whenever events or changes in circumstances indicate that the carrying value of the assets might not be recoverable (see Note 8).
| 9 |
The
Company has $
Note 3. New Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) and are adopted by us as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued accounting pronouncements will not have a material impact on the Company’s condensed consolidated financial position, results of operations, and cash flows, or do not apply to our operations.
In May 2021, the FASB issued ASU No. 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 Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force)”. This ASU is intended to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange. The guidance clarifies whether an issuer should account for a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as: (1) an adjustment to equity and, if so, the related earnings per share effects, if any, or (2) an expense and, if so, the manner and pattern of recognition. The amendments in this ASU affect all entities that issue freestanding written call options that are classified in equity. The amendments do not apply to modifications or exchanges of financial instruments that are within the scope of another Topic and do not affect a holder’s accounting for freestanding call options. The amendments in this ASU are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. Early adoption is permitted for all entities, including adoption in an interim period. The Company adopted this standard during the first quarter of 2022. The adoption of ASU 2021-04 did not have an impact on the Company’s consolidated financial statements since the Company has not modified its freestanding call options.
Note 4. Restricted Cash
As
a condition of the SVB Loan Facility entered into on June 18, 2021 as further discussed in Note 10, the Company is required at all times
to maintain on deposit with SVB as cash collateral in a segregated money market bank account in the name of the Company, unrestricted
and unencumbered cash (other than a lien in favor of SVB) in an amount of at least 100% of the aggregate outstanding amount of the SVB
loan facility. SVB may restrict withdrawals or transfers by or on behalf of the Company that would violate this requirement. The required
reserve totaled $
The following table reconciles cash and cash equivalents and restricted cash per the balance sheet to the condensed statements of cash flows:
| September 30, 2022 | September 30, 2021 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Money market investments, restricted | ||||||||
| Total | $ | $ | ||||||
Basic loss per share is calculated based upon the net loss available to common shareholders divided by the weighted average number of common shares outstanding during the period. Diluted loss per share is calculated after adjusting the denominator of the basic earnings per share computation for the effects of all dilutive potential common shares outstanding during the period. The dilutive effects of preferred stock, options and warrants and their equivalents are computed using the treasury stock method.
The total number of shares of common stock issuable upon exercise of warrants, stock option grants and equity awards were and shares for the periods ended September 30, 2022 and 2021, respectively. For the three-month and nine-month periods ended September 30, 2022 and 2021, diluted loss per common share was the same as basic loss per common share as the other warrants and equity awards that were convertible into shares of the Company’s common stock were excluded from the calculation of diluted loss per common share as their effect would have been anti-dilutive. The Company did not pay any dividends during the first nine months of 2022 or 2021.
| 10 |
Note 6. Investment in Debt Securities-Available for Sale
Investments
in debt securities available for sale with a fair value of $
Investments in debt securities available for sale are evaluated periodically to determine whether a decline in their value is other than temporary. The term “other than temporary” is not intended to indicate a permanent decline in value. Rather, it means that the prospects for near term recovery of value are not necessarily favorable, or that there is a lack of evidence to support fair values equal to, or greater than, the carrying value of the security. Management reviews criteria such as the magnitude and duration of the decline, as well as the reasons for the decline, to predict whether the loss in value is other than temporary. Once a decline in value is determined to be other than temporary, the value of the security is reduced and a corresponding charge to earnings is recognized. A summary of the cost, fair value and maturities of the Company’s short-term investments is as follows:
| September 30, 2022 | December 31, 2021 | |||||||||||||||
| Cost | Fair Value | Cost | Fair Value | |||||||||||||
| Short-term investments | ||||||||||||||||
| U.S. Treasury securities | $ | $ | $ | $ | ||||||||||||
| Corporate debt securities | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| September 30, 2022 | December 31, 2021 | |||||||||||||||
| Cost | Fair Value | Cost | Fair Value | |||||||||||||
| Short-term investment maturities | ||||||||||||||||
| Within 3 months | $ | $ | $ | $ | ||||||||||||
| Between 3-12 months | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
The following table shows the Company’s investment in debt securities available for sale gross unrealized gains (losses) and fair value by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2022 and December 31, 2021. The Company has reviewed individual securities to determine whether a decline in fair value below the amortizable cost basis is other than temporary.
| September 30, 2022 | December 31, 2021 | |||||||||||||||
| Available for sale securities (all unrealized holding gains and losses are less than 12 months at date of measurement) | Fair Value | Unrealized Holding Gains (Losses) | Fair Value | Unrealized Holding Gains (Losses) | ||||||||||||
| Investments in debt securities with unrealized gains | $ | $ | $ | $ | ||||||||||||
| Investments in debt securities with unrealized losses | ( | ) | ( | ) | ||||||||||||
| Total | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
Investment (loss) income, which includes net realized losses on sales of available for sale securities and investment income interest and dividends, is summarized as follows:
For the Three Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Interest and dividends accrued and paid | $ | $ | ||||||
| Realized losses | ( | ) | ( | ) | ||||
| Investment income, net | $ | $ | ||||||
| 11 |
For the Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Interest and dividends accrued and paid | $ | $ | ||||||
| Realized losses | ( | ) | ( | ) | ||||
| Investment income, net | $ | $ | ||||||
Note 7. Fair Value Measurements
FASB ASC Section 820, Fair Value Measurements and Disclosures establishes a three-level hierarchy for fair value measurements which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are as follows:
Level 1: Quoted prices (unadjusted) or identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date;
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data; and
Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions that market participants would use in pricing an asset or liability.
Cash and cash equivalents, other current assets, accounts payable and other accrued liabilities are reflected in the condensed consolidated balance sheets at their approximate estimated fair values primarily due to their short-term nature. The fair values of securities available for sale is determined by relying on the securities’ relationship to other benchmark quoted securities and classified its investments as Level 2 items in both 2022 and 2021. There were no transfers of assets or liabilities between Level 1 and Level 2 and no transfers in or out of Level 3 during the nine-month period ended September 30, 2022 or during the year ended December 31, 2021. The change in Level 3 liabilities in the first quarter of 2022 was the result of a change in the fair value of the earn-out milestone liability which is included in earnings and in-process R&D. During the third quarter and first nine months of 2022, there was no change in the fair value of the earn-out milestone liability. The earnout milestone liability is valued using a risk-adjusted assessment of the probability of payment of each milestone, discounted to present value using an estimated time to achieve the milestone (see Note 13).
Assets and liabilities measured at fair value are summarized below:
| Total Fair Value | Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
| Assets: | ||||||||||||||||
| Recurring items as of September 30, 2022 | ||||||||||||||||
| Corporate debt securities, available for sale | $ | $ | $ | $ | ||||||||||||