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utr:sqft

 

 

 

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 September 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 November 12, 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 1
  Condensed Consolidated Balance Sheets 2
  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 27
     
Item 3. Quantitative and Qualitative Disclosures about Market Risk 43
     
Item 4. Controls and Procedures 44
     
PART II: OTHER INFORMATION  
     
Item 1. Legal Proceedings 45
     
Item 1A. Risk Factors 45
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 46
     
Item 3. Defaults Upon Senior Securities 46
     
Item 4. Mine Safety Disclosures 46
     
Item 5. Other Information 46
     
Item 6. Exhibits 46
     
SIGNATURES 47

 

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

 

   September 30, 2021   December 31, 2020 
    (Unaudited)      
ASSETS          
Current assets:          
Cash and cash equivalents  $25,648,849   $17,164,177 
Investment in debt securities - available for sale, at fair value   28,864,364     
Accrued interest on investment in debt securities   38,404     
Advances and deposits on clinical programs and other current assets   2,213,262    1,660,695 
           
Total current assets   56,764,879    18,824,872 
           
Property and equipment (at cost, less accumulated depreciation and amortization)   486,022    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   816,520    1,047,336 
Other intangible assets, net       113,660 
Deposits and other assets   58,761    58,761 
           
Total other assets   22,217,616    18,407,915 
           
Total assets  $79,468,517   $37,527,338 

 

See accompanying notes to the condensed consolidated financial statements.

 

 1 

 

 

CELSION CORPORATION

 

CONDENSED CONSOLIDATED

BALANCE SHEETS

(Continued)

 

   September 30, 2021   December 31, 2020 
    (Unaudited)      
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities:          
Accounts payable – trade  $2,615,992   $2,244,847 
Other accrued liabilities   2,824,788    2,458,532 
Notes payable – current portion, net of deferred financing costs       1,116,663 
Operating lease liability - current portion   534,256    433,413 
Deferred revenue - current portion   500,000    500,000 
Total current liabilities   6,475,036    6,753,455 
           
Earn-out milestone liability   7,345,000    7,018,000 
Notes payable – non-current portion, net of deferred financing costs   5,808,774    3,934,497 
Operating lease liability - non-current portion   373,526    710,305 
Deferred revenue - non-current portion   125,000    500,000 
Total liabilities   20,127,336    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 September 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 September 30, 2021 and December 31, 2020, respectively, and 86,557,736 and 40,701,022 shares outstanding at September 30, 2021 and December 31, 2020, respectively)   865,581    407,014 
Additional paid-in capital   387,106,934    330,289,596 
Accumulated other comprehensive loss   2,139     
Accumulated deficit   (328,548,285)   (312,000,341)
Total stockholders’ equity before treasury stock   59,426,369    18,696,269 
           
Treasury stock, at cost (334 shares at September 30, 2021 and December 31, 2020)   (85,188)   (85,188)
Total stockholders’ equity   59,341,181    18,611,081 
           
Total liabilities and stockholders’ equity  $79,468,517   $37,527,338 

 

See accompanying notes to the condensed consolidated financial statements.

 

 2 

 

 

CELSION CORPORATION

 

CONDENSED CONSOLIDATED

STATEMENTS OF OPERATIONS

(Unaudited)

 

                 
  

Three Months Ended

September 30,

  

Nine Months Ended

September 30,

 
   2021   2020   2021   2020 
                 
Licensing revenue  $125,000   $125,000   $375,000   $375,000 
                     
Operating expenses:                    
Research and development   2,468,066    2,491,696    7,633,051    8,534,606 
General and administrative   2,718,510    1,792,904    8,258,271    5,532,946 
Total operating expenses   5,186,576    4,284,600    15,891,322    14,067,552 
                     
Loss from operations   (5,061,576)   (4,159,600)   (15,516,322)   (13,692,552)
                     
Other (expense) income:                    
Loss from change in fair-value of earn-out milestone liability   (257,000)   (1,099,721)   (327,000)   (1,397,291)
Impairment of in-process research and development       (2,370,257)       (2,370,257)
Investment income   3,552    10,114    5,614    119,383 
Interest expense   (95,520)   (450,732)   (474,361)   (1,130,699)
Recognized loss on extinguishment of debt           (234,419)    
Other (expense) income       (1,400)   (1,456)   7 
Total other (expense) income, net   (348,968)   (3,911,996)   (1,031,622)   (4,778,857)
                     
Net loss  $(5,410,544)  $(8,071,596)  $(16,547,944)  $(18,471,409)
                     
Net loss per common share                    
Basic and diluted  $(0.06)  $(0.24)  $(0.21)  $(0.62)
                     
Weighted average shares outstanding                    
Basic and diluted   86,557,736    34,112,254    79,667,613    29,934,764 

 

See accompanying notes to the condensed consolidated financial statements.

 

 3 

 

 

CELSION CORPORATION

 

CONDENSED CONSOLIDATED

STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

 

                 
  

Three Months Ended

September 30,

  

Nine Months Ended

September 30,

 
   2021   2020   2021   2020 
Other comprehensive (loss) gain                    
                     
Changes in:                    
Realized (gains) losses on debt securities recognized in investment income, net  $2,736   $(7,257)  $4,521   $(53,354)
Unrealized (losses) gains on debt securities, net   3,173    (609)   (2,382)   10,576 
                     
Change in unrealized (losses) gains on available for sale securities, net   5,909    (7,866)   2,139    (42,778)
                     
Net loss   (5,410,544)   (8,071,596)   (16,547,944)   (18,471,409)
                     
Comprehensive loss  $(5,404,635)  $(8,079,462)  $(16,545,805)  $(18,514,187)

 

See accompanying notes to the condensed consolidated financial statements.

 

 4 

 

 

CELSION CORPORATION

 

CONDENSED CONSOLIDATED

STATEMENTS OF CASH FLOWS

(Unaudited)

 

         
  

Nine Months Ended

September 30,

 
   2021   2020 
Cash flows from operating activities:          
           
Net loss  $(16,547,944)  $(18,471,409)
           
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   542,740    572,065 
Change in fair value of earn-out milestone liability   327,000    1,397,291 
Recognition of deferred revenue   (375,000)   (375,000)
Stock-based compensation costs   3,073,569    1,448,202 
Deferred income tax asset   1,845,823    1,819,324 
Impairment of in-process research and development       2,370,257 
Amortization of deferred finance charges and debt discount associated with notes payable   191,571    439,786 
Fair value of warrants issued in exchange for services       44,798 
Net changes in:          
Accrued interest on investment securities   (38,404)   21,369 
Advances, deposits, and other current assets   (552,567)   (286,991)
Accounts payable and accrued liabilities   397,701    (866,748)
Net cash used in operating activities   (11,135,511)   (11,887,056)
           
Cash flows from investing activities:          
Purchases of investment securities   (40,862,225)   (9,956,892)
Proceeds from sale and maturity of investment securities   12,000,000    17,900,000 
Purchases of property and equipment   (285,971)   (13,918)
Net cash (used in) provided by investing activities   (29,148,196)   7,929,190 
           
Cash flows from financing activities:          
Proceeds from sale of common stock equity, net of issuance costs   52,688,945    20,250,426 
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)   (5,200,000)
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   54,768,379    15,422,321 
           
Change in cash, cash equivalents and restricted cash   14,484,672    11,464,455 
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  $31,648,849   $18,339,728 

 

See accompanying notes to the condensed consolidated financial statements.

 

 5 

 

 

CELSION CORPORATION

 

CONDENSED CONSOLIDATED

STATEMENTS OF CASH FLOWS (continued)

(Unaudited)

 

  

Nine Months Ended

September 30,

 
   2021   2020 
         
Supplemental disclosures of cash flow information:          
Interest paid  $(307,985)  $(685,913)
           
Cash paid for amounts included in measurement of lease liabilities:          
Operating cash flows from lease payments  $418,696   $393,947 
           
Common stock issued to settle accrued bonuses  $   $498,632 
           
Fair value of warrants issued in connection with debt facility, net of cancelled warrants  $   $81,102 
           
Realized and unrealized gains (losses), net, on investment securities  $2,139   $(42,778)

 

See accompanying notes to the condensed consolidated financial statements.

 

 6 

 

 

CELSION CORPORATION

 

CONDENSED CONSOLIDATED

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

 

THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

 

                                 
Three Months Ended 

Common Stock

Outstanding

  

Additional

Paid in

   Treasury Stock   Accumulated Other Comprehensive   Accumulated     
September 30, 2021  Shares   Amount   Capital   Shares   Amount   Income   Deficit   Total 
                                 
Balance at July 1, 2021   86,557,736   $865,581   $386,414,630    334   $(85,188)  $(3,770)  $(323,137,741)  $64,053,512 
Net loss   -    -    -    -    -    -    (5,410,544)   (5,410,544)
Sale of equity through equity financing facilities   -    -    (8,320)   -    -    -    -    (8,320)
Realized and unrealized gains and losses, net, on investments securities   -    -    -    -    -    5,909    -    5,909 
Stock-based compensation expense   -    -    700,624    -    -    -    -    700,624 
Balance at September 30, 2021   86,557,736   $865,581   $387,106,934    334   $(85,188)  $2,139   $(328,548,285)  $59,341,181 

 

Three Months Ended 

Common Stock

Outstanding

  

Additional

Paid in

   Treasury Stock   Accumulated Other Comprehensive   Accumulated     
September 30, 2020  Shares   Amount   Capital   Shares   Amount   Income   Deficit   Total 
                                 
Balance at July 1, 2020   33,229,380   $332,297   $324,869,780    334   $(85,188)  $7,866   $(300,916,593)  $24,208,162 
Net loss   -    -    -    -    -    -    (8,071,596)   (8,071,596)
Sale of equity through equity financing facilities   2,927,400    29,274    2,038,553    -    -    -    -    2,067,827 
Common stock warrants issued in exchange for services   -    -    44,798    -    -    -    -    44,798 
Issuance of restricted stock   3,000    30    (30)   -    -    -    -    - 
Realized and unrealized gains and losses, net, on investments securities   -    -    -    -    -    (7,866)   -    (7,866)
Stock-based compensation expense   -    -    417,476    -    -    -    -    417,476 
Balance at September 30, 2020   36,159,780   $361,601   $327,370,577    334   $(85,188)  $-   $(308,988,189)  $18,658,801 

 

See accompanying notes to the condensed consolidated financial statements.

 

 7 

 

 

CELSION CORPORATION

 

CONDENSED CONSOLIDATED

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (continued)

(Unaudited)

 

NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

 

Nine Months Ended 

Common Stock

Outstanding

  

Additional

Paid in

   Treasury Stock   Accumulated Other Comprehensive   Accumulated     
September 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   -    -    -    -    -    -    (16,547,944)   (16,547,944)
Sale of equity through equity financing facilities   44,632,547    446,326    52,242,619    -    -    -    -    52,688,945 
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   -    -    -    -    -    2,139    -    2,139 
Stock-based compensation expense   -    -    3,073,569    -    -    -    -    3,073,569 
Balance at September 30, 2021   86,557,736   $865,581   $387,106,934    334   $(85,188)  $2,139   $(328,548,285)  $59,341,181 

 

Nine Months Ended 

Common Stock

Outstanding

  

Additional

Paid in

   Treasury Stock   Accumulated Other Comprehensive   Accumulated     
September 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   -    -    -    -    -    -    (18,471,409)   (18,471,409)
Sale of equity through equity financing facilities   12,330,243    123,301    20,127,125    -    -    -    -    20,250,426 
Issuance of common stock upon exercise of options   140,864    1,409    370,486    -    -    -    -    371,895 
Common stock warrants issued in exchange for services   -    -    44,798    -    -    -    -    44,798 
Issuance of restricted stock   3,000    30    (30)   -    -    -    -    - 
Realized and unrealized gains and losses, net, on investments securities   -    -    -    -    -    (42,778)   -    (42,778)
Stock-based compensation expense   -    -    1,448,202    -    -    -    -    1,448,202 
Common stock issued to settle accrued bonuses   429,855    4,299    494,333    -    -    -    -    498,632 
Balance at September 30, 2020   36,159,780   $361,601   $327,370,577    334   $(85,188)  $-   $(308,988,189)  $18,658,801 

 

See accompanying notes to the condensed consolidated financial statements.

 

 8 

 

 

CELSION CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(UNAUDITED)

 

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 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-month and nine-month periods ended September 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 consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 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 September 30, 2021, the Company has incurred approximately $329 million of cumulative net losses and had approximately $60.6 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 Data Management Committee (“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 cumulative NOL’s from 2011 to 2018 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 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.

 

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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 condensed consolidated 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 of 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 $60.6 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.

 

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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 (for example, warrants) 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 is currently evaluating the impact of adopting ASU 2021-04 on its consolidated financial statements.

 

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 (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 $6.0 million as of September 30, 2021. This amount is presented in part as restricted cash in other non-current assets on the accompanying condensed consolidated balance sheets.

 

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

 

   September 30, 2021   September 30, 2020 
Cash and cash equivalents  $25,648,849   $18,339,728 
Money market investments, restricted   6,000,000    - 
Total  $31,648,849   $18,339,728 

 

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 9,250,354 and 8,507,041 shares for the three-month and nine-month periods ended September 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 nine-months of 2020. These warrants were exercised in October 2020. For the three-month and nine-month periods ended September 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 nine 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 $28,864,364 as of September 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.

 

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A summary of the cost, fair value and maturities of the Company’s short-term investments is as follows:

 

   September 30, 2021   December 31, 2020 
   Cost   Fair Value   Cost   Fair Value 
Short-term investments                    
Commercial paper  $7,784,165   $7,784,894   $-    - 
Government backed debt securities   21,078,059    21,079,470    -    - 
Total  $28,862,224   $28,864,364   $-   $- 

 

   September 30, 2021   December 31, 2020 
   Cost   Fair Value   Cost   Fair Value 
Short-term investment maturities                    
Within 3 months  $11,998,304   $11,999,400   $-   $- 
Between 3-12 months   16,863,920    16,864,964    -    - 
Total  $28,862,224   $28,864,364   $-   $- 

 

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, 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.

 

   September 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  $21,029,520   $3,055   $-   $- 
Investments with unrealized losses   7,834,844    (916)   -    - 
Total  $28,864,364   $2,139   $-   $- 

 

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:

 

   2021   2020 
  

Three Months Ended

September 30,

 
   2021   2020 
Interest and dividends accrued and paid  $6,288   $2,857 
Realized (losses) gains   (2,736)   7,257 
Investment income, net  $3,552   $10,114 

 

   2021   2020 
  

Nine Months Ended

September 30,

 
   2021   2020 
Interest and dividends accrued and paid  $10,135   $66,029 
Realized (losses) gains   (4,521)   53,354 
Investment income, net  $5,614   $119,383 

 

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;

 

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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 nine-months ended September 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).

 

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, 2021                    
Investment in debt securities - available for sale, at fair value  $28,864,364   $   $28,864,364   $ 
                     
Non-recurring items as of September 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)  $