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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended June 30, 2021

 

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: 001-15911

 

CELSION CORPORATION

(Exact name of Registrant as specified in its charter)

 

Delaware   52-1256615

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

997 Lenox Drive, Suite 100,

Lawrenceville, NJ 08648

(Address of principal executive offices)

 

(609) 896-9100

(Registrant’s telephone number, including area code)

 

NA

(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

Common stock, par value $0.01 per share   CLSN   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 (§232.405 of this chapter) 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 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 ☐
  Non-accelerated filer Smaller reporting company
  Emerging growth company  

  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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

 

As of August 11, 2021, the Registrant had 86,557,736 shares of common stock, $0.01 par value per share, outstanding.

 

 

 

 
 

 

CELSION CORPORATION

QUARTERLY REPORT ON

FORM 10-Q

 

TABLE OF CONTENTS

 

    Page(s)
PART I: FINANCIAL INFORMATION  
     
Item 1. Financial Statements (Unaudited) 1
  Condensed Consolidated Balance Sheets 1
  Condensed Consolidated Statements of Operations 3
  Condensed Consolidated Statements of Comprehensive Loss 4
  Condensed Consolidated Statements of Cash Flows 5
  Condensed Consolidated Statements of Changes in Stockholders’ Equity 7
  Notes to the Condensed Consolidated Financial Statements 9
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 25
     
Item 3. Quantitative and Qualitative Disclosures about Market Risk 41
     
Item 4. Controls and Procedures 41
     
PART II: OTHER INFORMATION  
     
Item 1. Legal Proceedings 42
     
Item 1A. Risk Factors 42
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 42
     
Item 3. Defaults Upon Senior Securities 42
     
Item 4. Mine Safety Disclosures 42
     
Item 5. Other Information 42
     
Item 6. Exhibits 42
     
SIGNATURES 43

 

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 by the use of 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, 2020 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,” “Celsion,” “we,” “us,” and “our” refer to Celsion Corporation, a Delaware corporation and its wholly owned subsidiary CLSN Laboratories, Inc., also a Delaware corporation.

 

Trademarks

 

The Celsion brand and product names, including but not limited to Celsion® and ThermoDox® contained in this document are trademarks, registered trademarks or service marks of Celsion Corporation 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

 

CELSION CORPORATION

 

CONDENSED CONSOLIDATED

BALANCE SHEETS

 

   June 30, 2021   December 31, 2020 
   (Unaudited)     
ASSETS          
Current assets:          
Cash and cash equivalents  $26,437,424   $17,164,177 
Investment in debt securities - available for sale, at fair value   31,923,285     
Accrued interest on investment in debt securities   105,000     
Advances and deposits on clinical programs and other current assets   1,844,451    1,660,695 
           
Total current assets   60,310,160    18,824,872 
           
Property and equipment (at cost, less accumulated depreciation and amortization)   458,551    294,551 
           
Other assets:          
Money market investments, restricted cash   6,000,000     
Deferred income tax asset       1,845,823 
In-process research and development, net   13,366,234    13,366,234 
Goodwill   1,976,101    1,976,101 
Operating lease right-of-use assets, net   840,195    1,047,336 
Other intangible assets, net       113,660 
Deposits and other assets   58,761    58,761 
           
Total other assets   22,241,291    18,407,915 
           
Total assets  $83,010,002   $37,527,338 

 

See accompanying notes to the condensed consolidated financial statements.

 

1
 

 

CELSION CORPORATION

 

CONDENSED CONSOLIDATED

BALANCE SHEETS

(Continued)

 

   June 30, 2021   December 31, 2020 
   (Unaudited)     
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities:          
Accounts payable – trade  $2,109,479   $2,244,847 
Other accrued liabilities   2,312,705    2,458,532 
Notes payable – current portion, net of deferred financing costs       1,116,663 
Operating lease liability - current portion   458,168    433,413 
Deferred revenue - current portion   500,000    500,000 
Total current liabilities   5,380,352    6,753,455 
           
Earn-out milestone liability   7,088,000    7,018,000 
Notes payable – non-current portion, net of deferred financing costs   5,763,087    3,934,497 
Operating lease liability - non-current portion   475,051    710,305 
Deferred revenue - non-current portion   250,000    500,000 
Total liabilities   18,956,490    18,916,257 
           
Commitments and contingencies        
           
Stockholders’ equity:          
           
Preferred Stock - $0.01 par value (100,000 shares authorized, and no shares issued or outstanding at June 30, 2021 and December 31, 2020)        
           
Common stock - $0.01 par value (112,500,000 shares authorized; 86,558,070 and 40,701,356 shares issued at June 30, 2021 and December 31, 2020, respectively, and 86,557,736 and 40,701,022 shares outstanding at June 30, 2021 and December 31, 2020, respectively)   865,581    407,014 
Additional paid-in capital   386,414,630    330,289,596 
Accumulated other comprehensive loss   (3,770)    
Accumulated deficit   (323,137,741)   (312,000,341)
Total stockholders’ equity before treasury stock   64,138,700    18,696,269 
           
Treasury stock, at cost (334 shares at June 30, 2021 and December 31, 2020)   (85,188)   (85,188)
Total stockholders’ equity   64,053,512    18,611,081 
           
Total liabilities and stockholders’ equity  $83,010,002   $37,527,338 

 

See accompanying notes to the condensed consolidated financial statements.

 

2
 

 

CELSION CORPORATION

 

CONDENSED CONSOLIDATED

STATEMENTS OF OPERATIONS

(Unaudited)

 

   2021   2020   2021   2020 
  

Three Months Ended

June 30,

  

Six Months Ended

June 30,

 
   2021   2020   2021   2020 
                 
Licensing revenue  $125,000   $125,000   $250,000   $250,000 
                     
Operating expenses:                    
Research and development   2,593,412    2,990,861    5,164,985    6,042,910 
General and administrative   2,602,990    1,901,136    5,539,761    3,740,042 
Total operating expenses   5,196,402    4,891,997    10,704,746    9,782,952 
                     
Loss from operations   (5,071,402)   (4,766,997)   (10,454,746)   (9,532,952)
                     
Other (expense) income:                    
Gain (loss) from change in valuation of earn-out milestone liability   81,000    (256,296)   (70,000)   (297,570)
Investment income   (349)   20,960    2,062    109,269 
Interest expense   (221,227)   (340,602)   (378,841)   (679,967)
Recognized loss on extinguishment of debt   (234,419)       (234,419)    
Other (expense) income   (2,000)       (1,456)   1,407 
Total other (expense) income, net   (376,995)   (575,938)   (682,654)   (866,861) 
                     
Net loss  $(5,448,397)  $(5,342,935)  $(11,137,400)  $(10,399,813)
                     
Net loss per common share                    
Basic and diluted  $(0.06)  $(0.18)  $(0.15)  $(0.37)
                     
Weighted average shares outstanding                    
Basic and diluted   85,923,755    29,887,329    76,165,451    27,830,573 

 

See accompanying notes to the condensed consolidated financial statements.

 

3
 

 

CELSION CORPORATION

 

CONDENSED CONSOLIDATED

STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

 

   2021   2020   2021   2020 
  

Three Months Ended

June 30,

  

Six Months Ended

June 30,

 
   2021   2020   2021   2020 
Other comprehensive (loss) gain                    
                     
Changes in:                    
Realized gains (losses) on debt securities recognized in investment income, net  $1,785   $(2,865)  $1,785   $(46,097)
Unrealized (losses) gains on debt securities, net   (7,340)   6,918    (5,555)   11,185 
                     
Change in unrealized (losses) gains on available for sale securities, net   (5,555)   4,053    (3,770)   (34,912)
                     
Net loss   (5,448,397)   (5,342,935)   (11,137,400)   (10,399,813)
                     
Comprehensive loss  $(5,453,952)  $(5,338,882)  $(11,141,170)  $(10,434,725)

 

See accompanying notes to the condensed consolidated financial statements.

 

4
 

 

CELSION CORPORATION

 

CONDENSED CONSOLIDATED

STATEMENTS OF CASH FLOWS

(Unaudited)

 

   2021   2020 
  

Six Months Ended

June 30,

 
   2021   2020 
Cash flows from operating activities:          
           
Net loss  $(11,137,400)  $(10,399,813)
           
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   383,801    378,990 
Change in fair value of earn-out milestone liability   70,000    297,570 
Recognition of deferred revenue   (250,000)   (250,000)
Stock-based compensation costs   2,372,945    1,030,726 
Deferred income tax asset   1,845,823    1,819,324 
Amortization of deferred finance charges and debt discount associated with notes payable   145,884    192,793 
Net changes in:          
Accrued interest on investment securities   (105,000)   13,503 
Advances, deposits, and other current assets   (183,756)   (60,104)
Accounts payable and accrued liabilities   (491,694)   (946,265)
Net cash used in operating activities   (7,349,397)   (7,923,276)
           
Cash flows from investing activities:          
Purchases of investment securities   (40,927,055)   (9,940,894)
Proceeds from sale and maturity of investment securities   9,000,000    15,100,000 
Purchases of property and equipment   (227,000)   (11,837)
Net cash (used in) provided by investing activities   (32,154,055)   5,147,269 
           
Cash flows from financing activities:          
Proceeds from sale of common stock equity, net of issuance costs   52,697,265    18,182,599 
Proceeds from issuance of common stock upon conversion of stock warrants   1,508,666     
Proceeds from issuance of common stock upon conversion of stock options   4,725    371,895 
Proceeds from the SVB Loan Facility, net of issuance costs   5,756,630     
Payoff of the Horizon Credit Agreement and accrued end of term fees   (5,190,587)    
Proceeds from Payroll Protection Program (PPP) loans       1,324,750 
Repayments on Payroll Protection Program (PPP) loans       (1,324,750)
Net cash provided by financing activities   54,776,699    18,554,494 
           
Increase in cash, cash equivalents and restricted cash   15,273,247    15,778,487 
Cash, cash equivalents and restricted cash at beginning of period   17,164,177    6,875,273 
Cash, cash equivalents and restricted cash at end of period  $32,437,424   $22,653,760 

 

See accompanying notes to the condensed consolidated financial statements.

 

5
 

 

CELSION CORPORATION

 

CONDENSED CONSOLIDATED

STATEMENTS OF CASH FLOWS (continued)

(Unaudited)

 

   Six Months Ended June 30, 
   2021   2020 
         
Supplemental disclosures of cash flow information:          
Interest paid  $(267,360)  $(487,174)
           
Cash paid for amounts included in measurement of lease liabilities:          
Operating cash flows from lease payments  $264,546   $262,084 
           
Common stock issued to settle accrued bonuses  $   $498,632 
           
Realized and unrealized gains (losses), net, on investment securities  $3,770   $(34,912)

 

See accompanying notes to the condensed consolidated financial statements.

 

6
 

 

CELSION CORPORATION

 

CONDENSED CONSOLIDATED

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

 

THREE MONTHS ENDED JUNE 30, 2021 AND 2020

 

June 30, 2021  Shares   Amount   Capital   Shares   Amount   Income   Deficit   Total 
Three Months Ended 

Common Stock

Outstanding

  

Additional

Paid in

   Treasury Stock   Accumulated Other Comprehensive   Accumulated     
June 30, 2021  Shares   Amount   Capital   Shares   Amount   Income   Deficit   Total 
                                 
Balance at April 1, 2021   75,019,274   $750,196   $371,982,609    334   $(85,188)  $1,785   $(317,689,344)  $54,960,058 
Net loss   -    -    -    -    -    -    (5,448,397)   (5,448,397)
Sale of equity through equity financing facilities   11,538,462    115,385    13,638,402    -    -    -    -    13,753,787 
Realized and unrealized gains and losses, net, on investments securities   -    -    -    -    -    (5,555)   -    (5,555)
Stock-based compensation expense   -    -    793,619    -    -    -    -    793,619 
Balance at June 30, 2021   86,557,736   $865,581   $386,414,630    334   $(85,188)  $(3,770)  $(323,137,741)  $64,053,512 

 

Three Months Ended 

Common Stock

Outstanding

  

Additional

Paid in

   Treasury Stock   Accumulated Other Comprehensive   Accumulated     
June 30, 2020  Shares   Amount   Capital   Shares   Amount   Income   Deficit   Total 
                                 
Balance at April 1, 2020   29,257,101   $292,574   $311,570,995    334   $(85,188)  $3,813   $(295,573,658)  $16,208,536 
Net loss   -    -    -    -    -    -    (5,342,935)   (5,342,935) 
Sale of equity through equity financing facilities   3,831,415    38,314    12,349,538    -    -    -    -    12,387,852 
Issuance of common stock upon exercise of options   140,864    1,409    370,486    -    -    -    -    371,895 
Realized and unrealized gains and losses, net, on investments securities   -    -    -    -    -    4,053    -    4,053 
Stock-based compensation expense   -    -    578,761    -    -    -    -    578,761 
Balance at June 30, 2020   33,229,380   $332,297   $324,869,780    334   $(85,188)  $7,866   $(300,916,593)  $24,208,162 

 

See accompanying notes to the condensed consolidated financial statements

 

7
 

 

CELSION CORPORATION

 

CONDENSED CONSOLIDATED

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (continued)

(Unaudited)

 

SIX MONTHS ENDED JUNE 30, 2021 AND 2020

 

Six Months Ended 

Common Stock

Outstanding

  

Additional

Paid in

   Treasury Stock   Accumulated Other Comprehensive   Accumulated     
June 30, 2021  Shares   Amount   Capital   Shares   Amount   Income   Deficit   Total 
                                 
Balance at January 1, 2021   40,701,022   $407,014   $330,289,596    334   $(85,188)  $-   $(312,000,341)  $18,611,081 
Net loss   -    -    -    -    -    -    (11,137,400)   (11,137,400)
Sale of equity through equity financing facilities   44,632,547    446,326    52,250,939    -    -    -    -    52,697,265 
Shares issued upon exercise of common stock warrants, net of fees   1,216,667    12,166    1,496,500    -    -    -    -    1,508,666 
Shares issued upon exercise of options to purchase common stock   7,500    75    4,650    -    -    -    -    4,725 
Realized and unrealized gains and losses, net, on investments securities   -    -    -    -    -    (3,770)   -    (3,770)
Stock-based compensation expense   -    -    2,372,945    -    -    -    -    2,372,945 
Balance at June 30, 2021   86,557,736   $865,581   $386,414,630    334   $(85,188)  $(3,770)  $(323,137,741)  $64,053,512 

 

Six Months Ended 

Common Stock

Outstanding

  

Additional

Paid in

   Treasury Stock   Accumulated Other Comprehensive   Accumulated     
June 30, 2020  Shares   Amount   Capital   Shares   Amount   Income   Deficit   Total 
Balance at January 1, 2020   23,255,818   $232,562   $304,885,663    334   $(85,188)  $42,778   $(290,516,780)  $14,559,035 
Net loss   -    -    -    -    -    -    (10,399,813)   (10,399,813)
Sale of equity through equity financing facilities   9,402,843    94,027    18,088,572    -    -    -    -    18,182,599 
Issuance of common stock upon exercise of options   140,864    1,409    370,486    -    -    -    -    371,895 
Realized and unrealized gains and losses, net, on investments securities   -    -    -    -    -    (34,912)   -    (34,912)
Stock-based compensation expense   -    -    1,030,726    -    -    -    -    1,030,726 
Common stock issued to settle accrued bonuses   429,855    4,299    494,333    -    -    -    -    498,632 
Balance at June 30, 2020   33,229,380   $332,297   $324,869,780    334   $(85,188)  $7,866   $(300,916,593)  $24,208,162 

 

See accompanying notes to the condensed consolidated financial statements

 

8
 

 

CELSION CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(UNAUDITED)

 

FOR THE THREE AND SIX MONTHS ENDED JUNE 2021 AND 2020

 

Note 1. Business Description

 

Celsion Corporation (“Celsion” and the “Company”) is a fully integrated, clinical stage biotechnology company focused on advancing a portfolio of innovative treatments including DNA-based immunotherapies, next generation vaccines and directed chemotherapies through clinical trials and eventual commercialization. The Company’s product pipeline includes GEN-1, a DNA-based immunotherapy for the localized treatment of ovarian cancer and ThermoDox®, a proprietary heat-activated liposomal encapsulation of doxorubicin, currently under investigator-sponsored development for several cancer indications. Celsion has two feasibility stage platform technologies for the development of novel nucleic acid-based immunotherapies and next generation vaccines and other anti-cancer DNA or RNA therapies. Both are novel synthetic, non-viral vectors with demonstrated capability in nucleic acid cellular transfection.

 

Note 2. Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements, which include the accounts of the Company and its wholly owned subsidiaries, CLSN Laboratories, Inc. and Celsion, GmbH, 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. 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 and six-month periods June 30, 2021 and 2020 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 financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the Securities and Exchange Commission (SEC) on March 19, 2021.

 

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, intangible assets, and goodwill. The effect of this matter could potentially have an impact on the valuation of such assets in the future. The COVID-19 pandemic is discussed in more detail in Note 3 to the financial statements.

 

Note 3. Financial Condition and Business Plan

 

Since inception, the Company has incurred substantial operating losses, principally from expenses associated with the Company’s research and development programs, clinical trials conducted in connection with the Company’s product candidates, and applications and submissions to the U.S. Food and Drug Administration. The Company has not generated significant revenue and has incurred significant net losses in each year since our inception. As of June 30, 2021, the Company has incurred approximately $323 million of cumulative net losses and had approximately $64.5 million in cash and cash equivalents, restricted cash, short-term investments and interest receivable. We have substantial future capital requirements to continue our research and development activities and advance our product candidates through various development stages. The Company believes these expenditures are essential for the commercialization of its technologies.

 

The Company expects its operating losses to continue for the foreseeable future as it continues its product development efforts, and when it undertakes marketing and sales activities. The Company’s ability to achieve profitability is dependent upon its ability to obtain governmental approvals, manufacture, and market and sell its product candidates. There can be no assurance that the Company will be able to commercialize its technology successfully or that profitability will ever be achieved. The operating results of the Company have fluctuated significantly in the past.

 

9
 

 

In January 2020, the WHO declared an outbreak of coronavirus, COVID-19, to be a “Public Health Emergency of International Concern,” and the U.S. Department of Health and Human Services declared a public health emergency to aid the U.S. healthcare community in responding to COVID-19. This virus has spread to over 100 countries, including the U.S. Governments and businesses around the world have taken unprecedented actions to mitigate the spread of COVID-19, including, but not limited to, shelter-in-place orders, quarantines, significant restrictions on travel, as well as restrictions that prohibit many employees from going to work. Uncertainty with respect to the economic impacts of the pandemic has introduced significant volatility in the financial markets. The Company did not observe significant impacts on its business or results of operations during 2020 and into 2021 due to COVID-19. While the extent to which COVID-19 impacts the Company’s future results will depend on future developments, the pandemic and associated economic impacts could result in a material impact to the Company’s future financial condition, results of operations and cash flows. The Company’s ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, financial markets in the U.S. and worldwide resulting from the ongoing COVID-19 pandemic. The disruptions caused by COVID-19 may also disrupt the clinical trials process and enrolment of patients. This may delay commercialization efforts. The Company continues to monitor its operating activities in light of these events. The specific impact, if any, is not readily determinable as of the date of these financial statements.

 

The actual amount of funds the Company will need to operate is subject to many factors, some of which are beyond the Company’s control. These factors include the following:

 

the progress of research activities;
   
the number and scope of research programs;
   
the progress of preclinical and clinical development activities;
   
the progress of the development efforts of parties with whom the Company has entered into research and development agreements;
   
the costs associated with additional clinical trials of product candidates;
   
the ability to maintain current research and development licensing arrangements and to establish new research and development and licensing arrangements;
   
the ability to achieve milestones under licensing arrangements;
   
the costs involved in prosecuting and enforcing patent claims and other intellectual property rights; and
   
the costs and timing of regulatory approvals.

 

On July 13, 2020, the Company announced that it has received a recommendation from the independent DMC to consider stopping the global Phase III OPTIMA Study of ThermoDox® in combination with RFA for the treatment of HCC, or primary liver cancer. The recommendation was made following the second pre-planned interim safety and efficacy analysis by the DMC on July 9, 2020. The DMC’s analysis found that the pre-specified boundary for stopping the trial for futility of 0.900 was crossed with an actual value of 0.903. The Company followed the advice of the DMC and considered its options to either stop the study or continue to follow patients after a thorough review of the data, and an evaluation of the probability of success. On February 11, 2021, the Company issued a letter to shareholders stating that the Company was notifying all clinical sites to discontinue following patients in the OPTIMA Study.

 

During 2020, 2019 and 2018, the Company submitted applications to sell a portion of the Company’s State of New Jersey net operating losses as part of the Technology Business Tax Certificate Program sponsored by The New Jersey Economic Development Authority. Under the program, emerging biotechnology companies with unused NOLs and unused research and development credits are allowed to sell these benefits to other New Jersey-based companies. In 2018 and 2019, the Company sold NOLs totaling $13 million receiving net proceeds of $12.2 million. In June 2020 and as updated in September 2020, the Company filed an application with the New Jersey Economic Development Authority to sell substantially all of its remaining State of New Jersey net operating losses totaling $2.0 million available under the program. On February 12, 2021, the New Jersey Economic Development Authority approved the full amount of the Company’s application. In February of 2021, the Company entered into an agreement to sell the net operating losses from the 2020 application and the Company received net proceeds of approximately $1.85 million on May 10, 2021. During 2021, the New Jersey State Legislature increased the maximum lifetime benefit per company from $15 million to $20 million, which will allow the Company to participate in this innovative funding program in future years. On June 16, 2021, the Company filed another application to sell approximately $1.6 million of net operating losses during 2021 and expects to receive up to approximately $1.4 million under the current year program.

 

10
 

 

In June 2018, the Company entered into a Credit Agreement with Horizon Technology Finance Corporation (“Horizon”) that provided $10 million in capital (the “Horizon Credit Agreement”). The obligations under the Horizon Credit Agreement are secured by a first-priority security interest in substantially all assets of Celsion other than intellectual property assets. Payments under the loan agreement are interest only (calculated based on one-month LIBOR plus 7.625%) for the first 24 months through July 2020, followed by a 21-month amortization period of principal and interest starting on August 1, 2020 and ending through the scheduled maturity date on April 1, 2023. On August 28, 2020, in connection with an Amendment to the Horizon Credit Agreement, Celsion repaid $5 million of the $10 million loan and $0.2 million in related end of term charges, and the remaining $5 million in obligations were restructured. As more fully discussed in Note 11 to these financial statements, in June 2021, the Company entered into a $10 million loan facility with Silicon Valley Bank. The Company immediately used $6 million from this facility to retire all outstanding indebtedness with Horizon Technology Finance Corporation. The remaining $4 million will be available to be drawn down up to 12 months after closing and will be used for working capital and to fund the advancement of the Company’s product pipelines. The funding is in the form of money market secured indebtedness bearing interest at a calculated WSJ Prime-based variable rate (currently 3.25%). Payments under the loan agreement are interest only for the first 24 months after loan closing, followed by a 24-month amortization period of principal and interest through the scheduled maturity date.

 

As more fully discussed in Note 12, during 2021 through the date of the filing of this Quarterly Report on Form 10-Q, the Company has raised approximately $6.9 million in gross proceeds from the use of its JonesTrading Capital on DemandTM financing facility, $35 million from a registered direct financing completed in January 2021, $15 million from a registered direct financing completed on April 5, 2021, and $1.5 million from warrant exercises. With $64.5 million in cash and cash equivalents, restricted cash, short-term investments and interest receivable, the Company believes it has sufficient capital resources to fund its operations through the end of 2024.

 

The Company has based its estimates on assumptions that may prove to be wrong. The Company may need to obtain additional funds sooner or in greater amounts than it currently anticipates. Potential sources of financing include strategic relationships, public or private sales of the Company’s shares or debt, the sale of the Company’s State of New Jersey net operating losses and other sources. If the Company raises funds by selling additional shares of common stock or other securities convertible into common stock, the ownership interest of existing stockholders may be diluted.

 

Note 4. 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 June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which modifies the measurement of expected credit losses on certain financial instruments. The Company adopted ASU 2016-13 in the first quarter of 2021 utilizing the modified retrospective transition method. Based on the composition of the Company’s investment portfolio and current market conditions, the adoption of ASU 2016-13 did not have a material impact on its consolidated financial statements.

 

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740). The standard simplifies the accounting for incomes taxes by removing certain exceptions to the general principles in Topic 740 related to the approach for intra-period tax allocation and the recognition of deferred tax liabilities for outside basis differences. The standard also clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard also improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company adopted this standard during the first quarter of 2021. The adoption of ASU 2019-12 did not have a material impact on its consolidated financial statements.

 

In connection with the upcoming elimination of the London Inter-bank Offered Rate, (“LIBOR”) and other reference interest rates, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Reform on Financial Reporting. ASU 2020-04, which is available for contract modifications and hedging relationship modifications entered into or evaluated before December 31, 2022, provides certain practical expedients related to simplifying the accounting for contract modifications resulting from the change in terms from LIBOR to a new required interest rate benchmark. The Company is currently evaluating the effects of adopting this accounting standards update.

 

Note 5. Restricted Cash

 

As a condition of the $10 million loan facility with Silicon Valley Bank (“SVB”) entered into on June 18, 2021 as further discussed in Note 11, 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 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 $6.0 million as of June 30, 2021. This amount is presented in part as restricted cash in other non-current assets on the accompanying condensed consolidated balance sheets.

 

11
 

 

The following table reconciles cash and cash equivalents and restricted cash per the balance sheet to the condensed statement of cash flows:

 Schedule of Cash and Cash Equivalents and Restricted Cash

   June 30,   June 30, 
   2021   2020 
Cash and cash equivalents  $26,437,424   $22,653,760 
Money market investments, restricted   6,000,000    - 
Total  $32,437,424   $22,653,760 

 

Note 6. Net Loss per Common Share

 

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 9,325,228 and 8,560,124 shares for the three and six-month periods ended June 30, 2021 and 2020, respectively. Warrants with an exercise price of $0.01 exercisable for 200,000 shares of common stock were considered issued in calculating basic loss per share during the first six-months of 2020. These warrants were exercised in October 2020. For the three and six-month periods ended June 30, 2021 and 2020, 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 six months of 2021 or 2020.

 

Note 7. Investment in Debt Securities Available for Sale

 

Investments in debt securities available for sale with a fair value of $31,923,285 as of June 30, 2021, consisted of government backed debt securities and commercial paper. These investments are valued at estimated fair value, with unrealized gains and losses reported as a separate component of stockholders’ equity in accumulated other comprehensive loss. The Company only had investments in cash and cash equivalents on December 31, 2020.

 

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:

 Schedule of Cost, Fair Value and Maturities of Short Term Investments

   June 30, 2021   December 31, 2020 
   Cost   Fair Value   Cost   Fair Value 
Short-term investments                    
Commercial paper  $7,795,035   $7,792,785   $-    - 
Government backed debt securities   24,132,020    24,130,500     -    - 
Total  $31,927,055   $31,923,285   $-   $- 

 

   June 30, 2021   December 31, 2020 
   Cost   Fair Value   Cost   Fair Value 
Short-term investment maturities                    
Within 3 months  $2,999,420   $7,792,785   $-   $- 
Between 3-12 months   28,927,635    24,130,500    -    - 
Total  $31,927,055   $31,923,285   $-   $- 

 

12
 

 

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 June 30, 2021 and December 31, 2020. The Company has reviewed individual securities to determine whether a decline in fair value below the amortizable cost basis is other than temporary.

Summary of Investment Securities Gross Unrealized Gains (Losses)

   June 30, 2021   December 31, 2020 
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 with unrealized gains  $5,998,980   $1,073   $-   $- 
Investments with unrealized losses   25,924,305    (4,843)   -    - 
Total  $31,923,285   $(3,770)  $-   $- 

 

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:

 Summary of Net Realized Losses on Sales of Available for Sale Securities and Investment Income Interest and Dividends

   2021   2020 
  

Three Months Ended

June 30,

 
   2021   2020 
Interest and dividends accrued and paid  $1,436   $18,095 
Realized (losses) gains   (1,785)   2,865 
Investment (loss) income, net  $(349)  $20,960 

 

   2021   2020 
  

Six Months Ended

June 30,

 
   2021   2020 
Interest and dividends accrued and paid  $3,847   $63,172 
Realized (losses) gains   (1,785)   46,097 
Investment income, net  $2,062   $109,269 

 

Note 8. 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 sheet 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 2021 and 2020. 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 six-months ended June 30, 2021 or during the year ended December 31, 2020. The changes in Level 3 liabilities were the result of changes in the fair value of the earn-out milestone liability included in earnings and in-process R&D. 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 14).

 

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 June 30, 2021                    
Investment in debt securities - available for sale, at fair value  $31,923,285   $   $31,923,285   $ 
                     
Non-recurring items as of June 30, 2021                    
In-process R&D (Note 9)  $13,366,234   $   $   $13,366,234 
                     
Non-recurring items as of December 31, 2020                    
In-process R&D (Note 9)  $13,366,234   $   $   $13,366,234 
                     
Liabilities:                    
                     
Recurring items as of June 30, 2021                    
Earn-out milestone liability (Note 14)  $7,088,000   $   $   $7,088,000 
                     
Recurring items as of December 31, 2020                    
Earn-out milestone liability (Note 14)  $7,018,000   $   $   $7,018,000 

 

Note 9. Intangible Assets

 

In June 2014, we completed the acquisition of substantially all of the assets of EGEN, Inc., an Alabama corporation, which has changed its company name to EGWU, Inc. after the closing of the acquisition (“EGEN”). We acquired all of EGEN’s right, title and interest in and to substantially all of the assets of EGEN, including cash and cash equivalents, patents, trademarks and other intellectual property rights, clinical data, certain contracts, licenses and permits, equipment, furniture, office equipment, furnishings, supplies and other tangible personal property. In addition, CLSN Laboratories assumed certain specified liabilities of EGEN, including the liabilities arising out of the acquired contracts and other assets relating to periods after the closing date.

 

Acquired In-process Research and Development

 

Acquired in-process research and development (IPR&D) consists of EGEN’s drug technology platforms: TheraPlas and TheraSilence. The fair value of the IPR&D drug technology platforms was estimated to be $24.2 million as of the acquisition date. As of the closing of the acquisition, the IPR&D was considered indefinite lived intangible assets and will not be amortized. IPR&D is reviewed for impairment at least annually as of our third quarter ended September 30, and whenever events or changes in circumstances indicate that the carrying value of the assets might not be recoverable. The Company’s IPR&D consisted of three core elements, its RNA delivery system, its glioblastoma multiforme cancer (GBM) product candidate and its ovarian cancer indication.

 

The Company’s ovarian cancer indication, with original value of $13.3 million has not been impaired since its acquisition. At September 30, 2020, the Company evaluated its IPR&D of the ovarian cancer indication and concluded that it is not more likely than not that the asset is impaired. As no other indicators of impairment existed during the fourth quarter of 2020 or first half of 2021, no impairment charges were recorded during the three or six-months ended June 30, 2021 and 2020.

 

The Company’s GBM candidate, with original value of $9.4 million had cumulative impairments through 2018 of $7 million, with remaining carrying value of $2.4 million at December 31, 2019. On September 30, 2020, the Company evaluated its IPR&D for the (GBM) product candidate and concluded that it is more likely than not that the asset is further impaired. After this assessment on September 30, 2020, the Company wrote off the remaining $2.4 million of this asset, thereby recognizing a non-cash charge of $2.4 million in the third quarter of 2020.

 

14
 

 

Covenants Not to Compete

 

Pursuant to the EGEN Purchase Agreement, EGEN provided certain covenants (“Covenant Not To Compete”) to the Company whereby EGEN agreed, during the period ending on the seventh anniversary of the closing date of the acquisition on June 20, 2014, not to enter into any business, directly or indirectly, which competes with the business of the Company nor will it contact, solicit or approach any of the employees of the Company for purposes of offering employment. The Covenant Not to Compete which was valued at approximately $1.6 million at the date of the EGEN acquisition has a definitive life and is amortized on a straight-line basis over its life of 7 years. The Company recognized amortization expense of $56,830 in each of the three and six-month periods ended June 30, 2021 and 2020. The carrying value of the Covenant Not to Compete was fully amortized as of June 30, 2021 and $113,660, net of $1,477,554 accumulated amortization, as of December 31, 2020.

 

Goodwill

 

The purchase price exceeded the estimated fair value of the net assets acquired by approximately $2.0 million which was recorded as Goodwill. Goodwill represents the difference between the total purchase price for the net assets purchased from EGEN and the aggregate fair values of tangible and intangible assets acquired, less liabilities assumed. Goodwill is reviewed for impairment at least annually as of our third quarter ended September 30 or sooner if we believe indicators of impairment exist. As of June 30, 2021, we concluded that the Company’s fair value exceeded its carrying value therefore “it is not more likely than not” that the Goodwill was impaired.

 

Following is a summary of the net fair value of the assets acquired in the EGEN asset acquisition for the six-month period ended June 30, 2021:

 

   IPR&D   Goodwill   Covenant Not To Compete 
For the six-months ended June 30, 2021               
Balance at January 1, 2021, net  $13,366,234   $1,976,101   $113,660 
Amortization   -    -    (113,660)
Balance at June 30, 2021, net  $13,366,234   $1,976,101   $- 

 

Note 10. Accrued Liabilities

 

Other accrued liabilities at June 30, 2021 and December 31, 2020 include the following:

 

   June 30, 2021   December 31, 2020 
         
Amounts due to contract research organizations and other contractual agreements  $1,189,017   $636,000 
Accrued payroll and related benefits   1,016,610    1,736,271 
Accrued professional fees   80,625    66,850 
Accrued interest   7,042    - 
Other   19,411    19,411 
Total  $2,312,705   $2,458,532 

 

Note 11. Notes Payable

 

The SVB Loan Facility

 

On June 18, 2021, the Company entered into a $10 million loan facility (the “SVB Loan Facility”) with Silicon Valley Bank (“SVB”). Celsion immediately used $6 million from the SVB Loan Facility to retire all outstanding indebtedness with Horizon Technology Finance Corporation as further discussed below. Simultaneously with this transaction, the Company used $6.0 million of other available funds to establish a restricted cash account which serves as security for the SVB Loan Facility. The remaining $4 million will be available to be drawn down up to 12 months after closing and will be used for working capital and to fund the advancement of the Company’s product pipeline, including GEN-1 for the treatment of newly diagnosed advanced ovarian cancer, as well as other strategic initiatives intended to broaden its product pipeline.

 

15
 

 

The SVB Loan Facility is in the form of money market secured indebtedness bearing interest at a calculated WSJ Prime-based variable rate (currently 3.25%). A final payment equal to 3% of the total $10 million commitment amount is due upon maturity or prepayment of the SVB Loan Facility. There was no facility commitment fee and no stock or warrants were issued to SVB. Payments under the loan agreement are interest only for the first 24 months after loan closing, followed by a 24-month amortization period of principal and interest through the scheduled maturity date.

 

In connection with the SVB Loan Facility, the Company incurred financing fees and expenses totaling $243,370 which is recorded and classified as debt discount and are being amortized as interest expense using the effective interest method over the life of the loan. Also, in connection with the SVB Loan Facility, the Company is required to pay an end-of-term fee equal to 3.0% of the original loan amount at time of maturity. Therefore, these amounts totaling $300,000 were being amortized as interest expense using the effective interest method over the life of the loan. During the three and six-month periods ended June 30, 2021, the Company incurred $7,042 in interest expense and amortized $6,457 as interest expense for debt discounts and end-of-term fee in connection with the SVB Financing Facility.

 

Following is a schedule of future principal payments, net of unamortized debt discounts and amortized end-of-term fee, due on the SVB Loan Facility:

 

   As of June 30, 
2022  $ 
2023    
2024   3,000,000 
2025 and thereafter   3,000,000 
Subtotal of future principal payments   6,000,000 
Unamortized debt premium, net   (236,913)
Total  $5,763,087 

 

Horizon Credit Agreement

 

On June 27, 2018, the Company entered into a loan agreement with Horizon Technology Finance Corporation (“Horizon”) that provided $10 million in new capital (the “Horizon Credit Agreement”). The Company drew down $10 million upon closing of the Horizon Credit Agreement on June 27, 2018. On August 28, 2020, Horizon and the Company amended the Horizon Credit Agreement (the “Amendment”) whereby Celsion repaid $5 million of the $10 million loan and $0.2 million in related end of term charges, and the remaining $5 million in obligations were restructured as set forth below.

 

Pursuant to the Amendment, the remaining $5 million in obligations of Celsion under the Horizon Credit Agreement was secured by a first-priority security interest in substantially all assets of Celsion other than intellectual property assets. The obligations bore interest at a rate calculated based an amount by which the one-month LIBOR exceeds 2% plus 7.625%. In no event shall the interest rate be less than 9.625%. Payments pursuant to the Amendment were interest only for the first twelve (12) months after August 1, 2020, followed by a 21-month amortization period of principal and interest through the scheduled maturity date on April 1, 2023. In addition, the remaining $5 million in obligations was subject to an end of term fee equal, in the aggregate, to $275,000, which amount was payable upon the maturity of the obligations or upon the date of final payment or default, as applicable. In connection with the Amendment, Celsion agreed to a liquidity covenant which provides that, at all times, Celsion shall maintain unrestricted cash and/or cash equivalents on deposit in accounts over which the applicable Lenders maintain an account control agreement in an amount not less than $2.5 million. In addition, pursuant to the Amendment, Celsion agreed to provide evidence to Horizon on or before March 31, 2021, that it received aggregate cash proceeds of not less than $5 million from the sale of equity, debt, its New Jersey net operating losses, or a combination thereof, subsequent to the date of the Amendment. The Company met this requirement during the fourth quarter of 2020.

 

In connection with the Horizon Credit Agreement, the Company incurred financing fees and expenses totaling $175,000 which were recorded and classified as debt discount. In addition, the Company paid loan origination fees of $100,000 which were recorded and classified as debt discount. These debt discount amounts totaling $782,116 were being amortized as interest expense using the effective interest method over the life of the loan. Also, in connection with each of the Horizon Credit Agreement, the Company was required to pay an end of term charge equal to 4.0% of the original loan amount at time of maturity. Therefore, those amounts totaling $400,000 were being amortized as interest expense using the effective interest method over the life of the loan.

 

16
 

 

As a fee in connection with the Horizon Credit Agreement, Celsion issued Horizon warrants exercisable for a total of 190,114 shares of Celsion’s common stock (the “Existing Warrants”) at a per share exercise price of $2.63. The Horizon Warrants were immediately exercisable for cash or by net exercise from the date of grant and will expire after ten years from the date of grant. The Company valued the Horizon Warrants issued using the Black-Scholes option pricing model and recorded a total of $507,116 as a direct deduction from the debt liability, consistent with the presentation of debt discounts, and are being amortized as interest expense using the effective interest method over the life of the loan. Pursuant to the Amendment, one-half of the aggregate Existing Warrants, exercisable for a total of 95,057 shares of Celsion’s common stock, have been canceled, and, in connection with the Amendment, Celsion issued Horizon new warrants exercisable at a per share exercise price equal to $1.01 for a total of 247,525 shares of Celsion’s common stock (the “New Warrants” and, together with the Existing Warrants, the “Warrants”). The remaining 95,057 Existing Warrants issued in connection with the Horizon Credit Agreement remain outstanding at a per share exercise price of $2.63.

 

The New Warrants were immediately exercisable for cash or by net exercise from the date of grant and will expire after ten years from the date of grant. Effective October 27, 2020. The Horizon Credit Agreement contains customary representations, warranties and affirmative and negative covenants including, among other things, covenants that limit or restrict Celsion’s ability to grant liens, incur indebtedness, make certain restricted payments, merge, or consolidate and make dispositions of assets.

 

The Amendment was evaluated in accordance with FASB ASC 470-50, Debt-Modifications and Extinguishments, for debt modification and extinguishment accounting. We accounted for the $5 million we repaid as a debt extinguishment thereby reducing the principal obligations accordingly. Also, in connection with the $5 million repayment, we recognized as interest expense, approximately $0.2 million of unamortized debt discount, deferred financing and end of term fees related to the repaid obligation in August 2020.

 

We accounted for the remaining $5 million of obligation under the Amendment as a debt modification to the initial agreement with respect to the minor changes in cash flows. Also, in connection with the $5 million remaining obligations, we recorded $5,000 of financing fees and the New Warrant fair value of $247,548 as additional debt discount on the $5 million remaining obligation. Therefore, approximately $109,706 of unamortized debt discount will be amortized over the remaining life of the new obligations. The $275,000 of end of term fees, net of previously amortized end of term fees totaling $142,605 previously accrued on the original note associated with the $5 million remaining obligation, will be amortized as interest expense over the remaining life of the new obligations.

 

During the three and six-month periods ended June 30, 2021, the Company incurred $105,607 and $225,920, respectively, in interest expense and amortized $102,126 and $139,428 as interest expense for debt discounts and end of term charges in connection with the Horizon Credit Agreement. During the three and six-month periods ended June 30, 2020, the Company incurred $243,299 and $486,597, respectively, in interest expense and amortized $96,727 and $192,793, respectfully, as interest expense for debt discounts and end of term charges in connection with the Horizon Credit Agreement.

 

On June 18, 2021, as a condition of entering into the SVB Loan Facility, the Company paid the outstanding principal balance, an early termination fee and the end of term charges in full satisfaction of the Horizon Credit Agreement, as amended. Following is a schedule of the amounts paid to Horizon on June 18, 2021.

 

      
Principal balance at June 18, 2021  $5,000,000 
Early termination fees   150,000 
End of term charges   275,000 
Total  $5,425,000 

 

During the three and six months ended June 30, 2021, the Company recorded a loss of $234,419 on the termination of the Horizon Credit Agreement, as amended, which represented the early termination fee and the end of term fees, net of previously amortized interest expense totaling $190,581 on the date of its payoff.

 

Note 12. Stockholders’ Equity

 

In September 2018, the Company filed with the SEC a $75 million shelf registration statement on Form S-3 (the 2018 Shelf Registration Statement) that allows the Company to issue any combination of common stock, preferred stock or warrants to purchase common stock or preferred stock. This shelf registration was declared effective on October 12, 2018, and was fully utilized by the end of January 2021.

 

17
 

 

On March 19, 2021, the Company filed with the SEC a new $100 million shelf registration statement on Form S-3 (the “2021 Registration Statement”) that allows the Company to issue any combination of common stock, preferred stock or warrants to purchase common stock or preferred stock. This shelf registration was declared effective on March 30, 2021.

 

Capital on DemandTM Sales Agreement

 

On December 4, 2018, the Company entered into the Capital on Demand Agreement with JonesTrading, pursuant to which the Company may offer and sell, from time to time, through JonesTrading shares of Common Stock having an aggregate offering price of up to $16.0 million.

 

During 2020 through June 30, 2020, the Company sold and issued an aggregate of 1.2 million shares under the Capital on Demand Agreement, receiving approximately $3.5 million in gross proceeds. During the first half of 2021, the Company sold 7.2 million shares under the Capital on Demand Agreement, receiving approximately $6.9 million in gross proceeds under the Capital on Demand Agreement.

 

Registered Direct Offering

 

On February 27, 2020, we entered into a Securities Purchase Agreement (the “February 2020 Purchase Agreement”) with several institutional investors, pursuant to which we agreed to issue and sell, in a registered direct offering (the “February 2020 Offering”), an aggregate of 4,571,428 shares of our common stock at an offering price of $1.05 per Share for gross proceeds of approximately $4.8 million before the deduction of the Placement Agent fees and offering expenses. In a concurrent private placement (the “Private Placement”), the Company issued to the investors that participated in the February 2020 Offering, for no additional consideration, warrants to purchase up to 2,971,428 shares of common stock (the “Original Warrants”). The Original Warrants were initially exercisable six months following their date of issue and were set to expire on the five-year anniversary of such initial exercise date. The Original Warrants had an exercise price of $1.15 per share subject to adjustment as provided therein. On March 12, 2020, the Company entered into private exchange agreements (the “Exchange Agreements”) with holders of the Original Warrants. Pursuant to the Exchange Agreements, in return for a higher exercise price of $1.24 per share of common stock, the Company issued new warrants to the Investors to purchase up to 3,200,000 shares of common stock (the “Exchange Warrants”) in exchange for the Original Warrants. The Exchange Warrants, like the Original Warrants, are initially exercisable six months following their issuance (the “Initial Exercise Date”) and expire on the five-year anniversary of their Initial Exercise Date. Other than having a higher exercise price, different issue date, Initial Exercise Date and expiration date, the terms of the Exchange Warrants are identical to those of the Original Warrants. On July 31, 2020, the Company filed a Form S-3 Registration Statement to register the shares of common stock issuable under the Exchange Warrants; the Registration Statement was declared effective by the SEC on August 13, 2020. No Exchange Warrants were exercised during 2020. During 2021 through the date of this Quarterly Report on Form 10-Q, the Company issued 1.2 million shares pursuant to investors exercising Exchange Warrants, receiving approximately $1.5 million in net proceeds.

 

Underwritten Offering

 

On June 22, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Oppenheimer & Co. Inc. (the “Underwriter”), relating to the issuance and sale (the “Underwritten Offering”) of 2,666,667 shares of the Company’s common stock. Pursuant to the terms of the Underwriting Agreement, the Underwriter agreed to purchase the shares at a price of $3.4875 per share. The Underwriter offered the shares at a public offering price of $3.75 per share, reflecting an underwriting discount equal to $0.2625, or 7.0% of the public offering price. The net proceeds to the Company from the Underwritten Offering, after deducting the underwriting discount and estimated offering expenses payable by the Company, were approximately $9.1 million.

 

Pursuant to the Underwriting Agreement, until December 31, 2020, the Underwriter had a right of first refusal to act as sole underwriter, initial purchaser, placement/selling agent, or arranger, as the case may be, on any new financing for the Company (excluding equipment lease financings, loans or grants from governmental authorities or in connection with government programs and financings relating to or sales of tax attributes) during such period. The Underwriter common stock the sole right to determine whether or not any other broker dealer shall have the right to participate in any such offering and the economic terms of any such participation.

 

January 2021 Registered Direct Offering

 

On January 22, 2021, the Company entered into a Securities Purchase Agreement (the “January 2021 Purchase Agreement”) with several institutional investors, pursuant to which the Company agreed to issue and sell, in a registered direct offering (the “January 2021 Offering”), an aggregate of 25,925,925 shares of the Company’s common stock at an offering price of $1.35 per share for gross proceeds of approximately $35 million before the deduction of the January 2021 Placement Agents (as defined below) fee and offering expenses. The January 2021 Purchase Agreement contains customary representations, warranties and agreements by the Company and customary conditions to closing. The closing of the January 2021 Offering occurred on January 26, 2021.

 

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In connection with the January 2021 Offering, the Company entered into a placement agent agreement (the “January 2021 Placement Agent Agreement”) with A.G.P./Alliance Global Partners (together with Brookline Capital Markets, the “January 2021 Placement Agents”) pursuant to which the Company agreed to pay the January 2021 Placement Agents a cash fee equal to 7% of the aggregate gross proceeds raised from the sale of the securities sold in the January 2021 Offering and reimburse the January 2021 Placement Agents for certain of their expenses in an amount not to exceed $82,500.

 

March 2021 Registered Direct Offering

 

On March 31, 2021, the Company entered into a Securities Purchase Agreement (the “March 2021 Purchase Agreement”) with several institutional investors, pursuant to which the Company agreed to issue and sell, in a registered direct offering (the “March 2021 Offering”), an aggregate of 11,538,462 shares of the Company’s common stock, at an offering price of $1.30 per share for gross proceeds of approximately $15 million before the deduction of the placement agents fee and offering expenses. The shares were offered by the Company pursuant to the 2021 Registration Statement. The closing of the Offering occurred on April 5, 2021.

 

In connection with the March 2021 Offering, the Company entered into a placement agent agreement (the “March 2021 Placement Agent Agreement”) with A.G.P./Alliance Global Partners, as lead placement agent (“AGP,” and together with JonesTrading Institutional Services LLC and Brookline Capital Markets, a division of Arcadia Securities, LLC, serving as co-placement agents, the “March 2021 Placement Agents”) pursuant to which the Company agreed to pay the March 2021 Placement Agents an aggregate cash fee equal to 7% of the aggregate gross proceeds raised from the sale of the securities sold in the Offering and reimburse the Placement Agents for certain of their expenses in an amount not to exceed $82,500.

 

Under the March 2021 Purchase Agreement and March 2021 Placement Agent Agreement, the Company and its subsidiaries are prohibited, for a period of 90 days after the closing, from entering into any agreement to issue or announcing any issuance or proposed issuance of common stock or any other securities that are at any time convertible into, or exercisable or exchangeable for, or otherwise entitle the holder thereof to receive common stock without the prior written consent of AGP or the investors participating in the offering. For purposes of this offering, AGP and the investors from the Company’s January 2021 Offering waived a similar 90-day restriction in the placement agent agreement and purchase agreement for that transaction.

 

LPC Purchase Agreement

 

On September 8, 2020, the Company entered into a purchase agreement (the “LPC Purchase Agreement”) and a Registration Rights Agreement (the “Registration Rights Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which, upon the terms and subject to the conditions and limitations set forth therein, the Company has the right to sell to Lincoln Park up to $26.0 million of shares of the Company’s common stock at the Company’s discretion as described below (the “LPC Offering”). During 2020, the Company sold and issued an aggregate of 3.3 million shares, including the 437,828 commitment shares, under the LPC Purchase Agreement, receiving approximately $2.2 million in gross proceeds. On January 21, 2021, the Company terminated the LPC Purchase Agreement. The Company did not sell any shares under the LPC Purchase Agreement in 2021.

 

Note 13. Stock-Based Compensation

 

The Company has long-term compensation plans that permit the granting of equity-based awards in the form of stock options, restricted stock, restricted stock units, stock appreciation rights, other stock awards, and perf