10-Q 1 pstv-10q_20200630.htm 10-Q pstv-10q_20200630.htm

0q

 

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, 2020

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 001-34375

 

PLUS THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

 

 

DELAWARE

 

33-0827593

(State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

4200 MARATHON BLVD., SUITE 200, AUSTIN, TX

 

78756

(Address of principal executive offices)

 

(Zip Code)

 

(737) 255-7194

(Registrant’s telephone number, including area code)

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

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

PSTV

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 definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

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 financing 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 3, 2020, there were 4,273,878 shares of the registrant’s common stock outstanding.

 



PLUS THERAPEUTICS, INC.

INDEX

 

 

 

 

 

Page

PART I

 

FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

 

Item 1.

 

Financial Statements (Unaudited)

 

4

 

 

 

 

 

 

 

 

 

 

 

Consolidated Condensed Balance Sheets

 

4

 

 

 

 

 

 

 

 

 

 

 

Consolidated Condensed Statements of Operations and Comprehensive Loss

 

5

 

 

 

 

 

 

 

 

 

 

 

Consolidated Condensed Statements of Stockholders’ Equity

 

6

 

 

 

 

 

 

 

 

 

 

 

Consolidated Condensed Statements of Cash Flows

 

7

 

 

 

 

 

 

 

 

 

 

 

Notes to Consolidated Condensed Financial Statements

 

8

 

 

 

 

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

18

 

 

 

 

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

24

 

 

 

 

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

24

 

 

 

 

 

 

 

PART II

 

OTHER INFORMATION

 

 

 

 

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

24

 

 

 

 

 

 

 

 

 

Item 1A.

 

Risk Factors

 

24

 

 

 

 

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

29

 

 

 

 

 

 

 

 

 

Item 5.

 

Other Information

 

29

 

 

 

 

 

 

 

 

 

Item 6.

 

Exhibits

 

30

 

2


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report contains statements that may be deemed “forward-looking statements” within the meaning of U.S. securities laws.  All statements in this report, other than statements of historical fact, are forward-looking statements. These forward-looking statements may be identified by terms such as “intend,” “expect,” “believe,” “anticipate,” “will,” “should,” “would,” “could,” “may,” “designed,” “potential,” and similar expressions, or the negative of such expressions. Such statements are based upon certain assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate.

These statements include, without limitation, statements regarding: our anticipated expenditures, including research and development, sales and marketing, and general and administrative expenses; our ability to benefit from the NIH/NCI award for continued clinical development of RNL™ for recurrent glioblastoma; the ability of RNL™ to safely and effectively deliver radiation directly to the tumor at large doses; the duration of any therapies employing RNL™; our ability to expand testing of RNL™ to additional sites; the potential size of the market for our products; future development and/or expansion of our products and therapies in our markets; our ability to generate product or development revenues and the sources of such revenue; the amounts that we will be obligated to pay under license agreements; our ability to effectively manage our gross profit margins; our ability to obtain and maintain regulatory approvals; expectations as to our future performance; portions of the “Liquidity and Capital Resources” section of this report; our need for additional financing and the availability thereof; any changes to our interest expenses; our ability to continue as a going concern; our ability to remain listed on the Nasdaq Capital Market; our ability to repay or refinance some or all of our outstanding indebtedness and our ability to raise capital in the future; our expectations as to the impact of recently issued or adopted accounting standards; our expectations as to the impact of the COVID-19 pandemic on our business and operating results; our beliefs as to the impact of any liability that may arise as a result of any legal proceedings; and the potential enhancement of our cash position through development, marketing, and licensing arrangements. Our actual results will likely differ, perhaps materially, from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to: the early stage of our product candidates and therapies, the results of our research and development activities, including uncertainties relating to the clinical trials of our product candidates and therapies; our need and ability to raise additional cash, the outcome of our partnering/licensing efforts, risks associated with laws or regulatory requirements applicable to us, market conditions, product performance, potential litigation, competition within the regenerative medicine field, and the COVID-19 pandemic. The forward-looking statements included in this report are also subject to a number of additional material risks and uncertainties, including but not limited to the risks described under “Part I - Item 1A - Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, and under “Part II, Item 1A - Risk Factors” in this Quarterly Report on Form 10-Q.  These risks and uncertainties that could cause actual results to differ materially from expectations or those expressed in these forward-looking statements.  We encourage you to read these risks carefully. We caution you not to place undue reliance on the forward-looking statements contained in this report. These statements, like all statements in this report, speak only as of the date of this report (unless an earlier date is indicated) and we undertake no obligation to update or revise the statements except as required by law.  

 

3


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PLUS THERAPEUTICS, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and par value data)

 

 

 

As of June 30,

2020

 

 

As of December 31,

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

9,266

 

 

$

17,552

 

Accounts receivable

 

 

951

 

 

 

1,169

 

Restricted cash

 

 

 

 

 

40

 

Inventories, net

 

 

107

 

 

 

107

 

Other current assets

 

 

469

 

 

 

957

 

Total current assets

 

 

10,793

 

 

 

19,825

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

2,014

 

 

 

2,179

 

Operating lease right-of-use assets

 

 

707

 

 

 

781

 

Other assets

 

 

18

 

 

 

72

 

Goodwill

 

 

372

 

 

 

372

 

Total assets

 

$

13,904

 

 

$

23,229

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

3,608

 

 

$

3,279

 

Operating lease liability

 

 

139

 

 

 

147

 

Term loan obligations, net of discount

 

 

6,026

 

 

 

11,060

 

Total current liabilities

 

 

9,773

 

 

 

14,486

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncurrent operating lease liability

 

 

589

 

 

 

646

 

Warrant liability

 

 

242

 

 

 

6,929

 

Other noncurrent liabilities

 

 

 

 

 

8

 

Total liabilities

 

 

10,604

 

 

 

22,069

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value; 5,000,000 shares authorized; 1,959 shares issued and outstanding at June 30, 2020 and December 31, 2019

 

 

 

 

 

 

Common stock, $0.001 par value; 100,000,000 shares authorized; 4,273,857 and 3,880,588 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively

 

 

4

 

 

 

4

 

Additional paid-in capital

 

 

431,492

 

 

 

426,426

 

Accumulated deficit

 

 

(428,196

)

 

 

(425,270

)

Total stockholders’ equity

 

 

3,300

 

 

 

1,160

 

Total liabilities and stockholders’ equity

 

$

13,904

 

 

$

23,229

 

 

See Accompanying Notes to these Consolidated Condensed Financial Statements

 

 

4


PLUS THERAPEUTICS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

(in thousands, except share and per share data)

 

 

 

 

 

For the Three Months Ended June 30,

 

 

For the Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Development revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Government contracts and other

 

$

185

 

 

$

302

 

 

$

303

 

 

$

1,039

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

327

 

 

 

1,289

 

 

 

1,268

 

 

 

2,715

 

In process research and development acquired from NanoTx

 

 

781

 

 

 

 

 

 

781

 

 

 

 

Sales and marketing

 

 

105

 

 

 

97

 

 

 

215

 

 

 

211

 

General and administrative

 

 

1,324

 

 

 

875

 

 

 

2,832

 

 

 

2,237

 

Total operating expenses

 

 

2,537

 

 

 

2,261

 

 

 

5,096

 

 

 

5,163

 

Operating loss

 

 

(2,352

)

 

 

(1,959

)

 

 

(4,793

)

 

 

(4,124

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

9

 

 

 

7

 

 

 

45

 

 

 

14

 

Interest expense

 

 

(252

)

 

 

(597

)

 

 

(601

)

 

 

(1,111

)

Change in fair value of warrants

 

 

756

 

 

 

282

 

 

 

2,423

 

 

 

492

 

Total other income (expense)

 

 

513

 

 

 

(308

)

 

 

1,867

 

 

 

(605

)

Loss from continuing operations

 

 

(1,839

)

 

 

(2,267

)

 

 

(2,926

)

 

 

(4,729

)

Loss from discontinued operations

 

 

 

 

 

(6,880

)

 

 

 

 

 

(7,568

)

Net loss

 

$

(1,839

)

 

$

(9,147

)

 

$

(2,926

)

 

$

(12,297

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per share attributable to common stockholders - continuing operations

 

$

(0.45

)

 

$

(5.12

)

 

$

(0.74

)

 

$

(11.89

)

Basic and diluted net loss per share attributable to common stockholders - discontinued operations

 

$

 

 

$

(15.55

)

 

$

 

 

$

(19.02

)

Net loss per share, basis and diluted

 

$

(0.45

)

 

$

(20.67

)

 

$

(0.74

)

 

$

(30.91

)

Basic and diluted weighted average shares used in calculating net loss per share attributable to common stockholders

 

 

4,053,242

 

 

 

442,512

 

 

 

3,967,392

 

 

 

397,827

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See Accompanying Notes to these Consolidated Condensed Financial Statements

 

 

5


PLUS THERAPEUTICS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

other

 

 

 

 

 

 

 

 

Total

 

 

 

preferred stock

 

 

Common stock

 

 

 

paid-in

 

 

 

comprehensive

 

 

 

Accumulated

 

 

 

stockholders’

 

 

 

Shares

 

 

 

Amount

 

 

Shares

 

 

 

Amount

 

 

 

capital

 

 

 

income

 

 

 

deficit

 

 

 

equity

 

Balance at December 31, 2018

 

 

4,606

 

 

$

 

 

 

 

296,609

 

 

$

 

 

 

$

 

418,390

 

 

$

 

1,218

 

 

$

 

(414,383

)

 

$

 

5,225

 

Share-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

49

 

 

 

 

 

 

 

 

 

 

 

 

49

 

Sale of common stock, net

 

 

 

 

 

 

 

 

 

139,855

 

 

 

 

 

 

 

 

1,873

 

 

 

 

 

 

 

 

 

 

 

 

1,873

 

Conversion of Series B Convertible Preferred

     Stock into common stock

 

 

(66

)

 

 

 

 

 

 

1,653

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment and

     accumulated other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(140

)

 

 

 

 

 

 

 

(140

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,150

)

 

 

 

(3,150

)

Balance at March 31, 2019

 

 

4,540

 

 

$

 

 

 

 

438,117

 

 

$

 

 

 

$

 

420,312

 

 

$

 

1,078

 

 

$

 

(417,533

)

 

$

 

3,857

 

Share-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

28

 

 

 

 

 

 

 

 

 

 

 

 

28

 

Sale of common stock, net

 

 

 

 

 

 

 

 

 

5,000

 

 

 

 

 

 

 

 

64

 

 

 

 

 

 

 

 

 

 

 

 

64

 

Foreign currency translation adjustment and

     accumulated other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,078

)

 

 

 

 

 

 

 

(1,078

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,147

)

 

 

 

(9,147

)

Balance at June 30, 2019

 

 

4,540

 

 

$

 

 

 

 

443,117

 

 

$

 

 

 

$

 

420,404

 

 

$

 

 

 

$

 

(426,680

)

 

$

 

(6,276

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2019

 

 

1,959

 

 

$

 

 

 

 

3,880,588

 

 

$

 

4

 

 

$

 

426,426

 

 

$

 

 

 

$

 

(425,270

)

 

$

 

1,160

 

Share-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12

 

 

 

 

 

 

 

 

 

 

 

 

12

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,087

)

 

 

 

(1,087

)

Balance at March 31, 2020

 

 

1,959

 

 

$

 

 

 

 

3,880,588

 

 

$

 

4

 

 

$

 

426,438

 

 

$

 

 

 

$

 

(426,357

)

 

$

 

85

 

Issuance of common stock for exercise of warrants

 

 

 

 

 

 

 

 

 

162,500

 

 

 

 

 

 

 

 

366

 

 

 

 

 

 

 

 

 

 

 

 

366

 

Reclassification of warrant liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,264

 

 

 

 

 

 

 

 

 

 

 

 

4,264

 

Issuance of common stock for in process research and development acquired from NanoTx Therapeutics

 

 

 

 

 

 

 

 

 

230,769

 

 

 

 

 

 

 

 

381

 

 

 

 

 

 

 

 

 

 

 

 

381

 

Share-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

43

 

 

 

 

 

 

 

 

 

 

 

 

43

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,839

)

 

 

 

(1,839

)

Balance at June 30, 2020

 

 

1,959

 

 

$

 

 

 

 

4,273,857

 

 

$

 

4

 

 

$

 

431,492

 

 

$

 

 

 

$

 

(428,196

)

 

$

 

3,300

 

 

See Accompanying Notes to these Consolidated Condensed Financial Statements

 

6


PLUS THERAPEUTICS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

 

 

 

For the Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

Cash flows used in operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(2,926

)

 

$

(12,297

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

188

 

 

 

617

 

Amortization of deferred financing costs and debt discount

 

 

275

 

 

 

257

 

In process research and development acquired from NanoTx Therapeutics

 

 

781

 

 

 

 

Noncash lease expenses

 

 

9

 

 

 

39

 

Change in fair value of warrants

 

 

(2,423

)

 

 

(492

)

Share-based compensation expense

 

 

55

 

 

 

77

 

Loss on sale of business

 

 

 

 

 

6,508

 

Increases (decreases) in cash caused by changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

218

 

 

 

(28

)

Inventories

 

 

 

 

 

235

 

Other current assets

 

 

487

 

 

 

216

 

Other assets

 

 

54

 

 

 

257

 

Accounts payable and accrued expenses

 

 

371

 

 

 

108

 

Deferred revenues

 

 

 

 

 

29

 

Other long-term liabilities

 

 

 

 

 

54

 

Net cash used in operating activities

 

 

(2,911

)

 

 

(4,420

)

Cash flows provided by (used in) investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(23

)

 

 

(6

)

In process research and development acquired from NanoTx Therapeutics

 

 

(400

)

 

 

 

Proceeds from sale of business

 

 

 

 

 

5,637

 

Net cash provided by (used in) investing activities

 

 

(423

)

 

 

5,631

 

Cash flows used in financing activities:

 

 

 

 

 

 

 

 

Principal payments of long-term obligations

 

 

(5,307

)

 

 

(3,490

)

Payment of financing lease liability

 

 

(51

)

 

 

(28

)

Proceeds from exercise of warrants

 

 

366

 

 

 

 

Proceeds from sale of common stock, net

 

 

 

 

 

1,984

 

Net cash used in financing activities

 

 

(4,992

)

 

 

(1,534

)

Effect of exchange rate changes on cash and cash equivalents

 

 

 

 

 

(4

)

Net decrease in cash and cash equivalents

 

 

(8,326

)

 

 

(327

)

Cash, cash equivalents, and restricted cash at beginning of period

 

 

17,592

 

 

 

5,301

 

Cash, cash equivalents, and restricted cash at end of period

 

 

9,266

 

 

 

4,974

 

Supplemental disclosure of cash flows information:

 

 

 

 

 

 

 

 

Cash paid during period for:

 

 

 

 

 

 

 

 

Interest

 

$

372

 

 

$

826

 

Supplemental schedule of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Common stock issued in payment for in process research and development

 

$

381

 

 

$

 

 

See Accompanying Notes to these Consolidated Condensed Financial Statements

 

 

7


PLUS THERAPEUTICS, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

June 30, 2020

(UNAUDITED)

 

 

1.

Basis of Presentation and New Accounting Standards

The accompanying consolidated condensed financial statements as of June 30, 2020 and for the three and six months ended June 30, 2020 and 2019 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information.  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements.  The consolidated condensed balance sheet at December 31, 2019 has been derived from the audited financial statements at December 31, 2019, but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the financial position and results of operations of Plus Therapeutics, Inc., and its subsidiaries (collectively, the “Company”) have been included.  Operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. These financial statements should be read in conjunction with the consolidated financial statements and notes therein included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission on March 30, 2020.

On March 30, 2019, the Company entered into an Asset and Share Sale and Purchase Agreement (the “Lorem Purchase Agreement”) with Lorem Vascular Pte. Ltd. (“Lorem”), pursuant to which, among other things, Lorem agreed to purchase the Company’s UK subsidiary, Cytori Ltd. (the “UK Subsidiary”), and the Company’s cell therapy assets, excluding such assets used in Japan or relating to the Company’s contract with the U.S. Department of Health and Human Service’s Biomedical Advanced Research and Development Authority (“BARDA”). Both the Company and Lorem made customary representations, warranties and covenants in the Lorem Purchase Agreement. The transaction was completed on April 24, 2019 and the Company received $4.0 million of cash proceeds, of which $1.7 million was used to pay down principal, interest and fees under the Loan and Security Agreement, dated May 29, 2015 (the “Loan and Security Agreement”) (Note 5), with Oxford Finance, LLC (“Oxford”).

On April 19, 2019, the Company entered into an Asset and Share Sale and Purchase Agreement (the “Shirahama Purchase Agreement”) with Seijirō Shirahama, pursuant to which, among other things, Mr. Shirahama agreed to purchase the Company’s Japanese subsidiary, Cytori Therapeutics, K.K. (the “Japanese Subsidiary”), and substantially all of the Company’s cell therapy assets used in Japan. Both the Company and Mr. Shirahama made customary representations, warranties and covenants in the Shirahama Purchase Agreement. The transaction was completed on April 25, 2019 and the Company received $3.0 million of cash proceeds, of which $1.4 million was used to pay down principal, interest and fees under the Loan and Security Agreement.

Amendments to Certificate of Incorporation and Reverse Stock Split

On July 29, 2019, the Company amended its Certificate of Incorporation with the State of Delaware to change its corporate name from Cytori Therapeutics, Inc. to Plus Therapeutics, Inc. The Company also changed its trading symbol for its common stock on the Nasdaq Capital Market to “PSTV”.

On August 5, 2019, following stockholder and Board approval, the Company filed a Certificate of Amendment (the “August 2019 Amendment”) to its Amended and Restated Certificate of Incorporation (the Amendment), as amended, with the Secretary of State of the State of Delaware to effectuate a one-for-fifty (1:50) reverse stock split (the “August 2019 Reverse Stock Split”) of its common stock, par value $0.001 per share, without any change to its par value. The August 2019 Amendment became effective on the filing date. The August 2019 Reverse Stock Split became effective for trading purposes as of the commencement of trading on the Nasdaq Capital Market on August 6, 2019. There was no change in the Company’s Nasdaq ticker symbol, “PSTV,” as a result of the August 2019 Reverse Stock Split. Upon effectiveness, each 50 shares of issued and outstanding common stock were converted into one newly issued and outstanding share of common stock. The Company’s 5,000,000 shares of authorized Preferred Stock were not affected by the August 2019 Reverse Stock Split. No fractional shares were issued in connection with the August 2019 Reverse Stock Split. Any fractional shares of common Stock that would have otherwise resulted from the August 2019 Reverse Stock Split were rounded up to the nearest whole share. Outstanding equity awards and the shares available for future grant under the Company’s Amended and Restated 2004 Equity Incentive Plan, 2011 Employee Stock Purchase Plan, 2014 Amended and Restated Equity Incentive Plan and 2015 New Employee Incentive Plan were proportionately reduced (rounded down to the nearest whole share), and the exercise prices of outstanding equity awards were proportionately increased (rounded up to the nearest whole cent) to give effect to the August 2019 Reverse Stock Split.

 

8


 

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The standard amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses for most financial assets and certain other instruments that aren’t measured at fair value through net income. For available-for-sale debt securities, entities will be required to recognize an allowance for credit losses rather than a reduction in carrying value of the asset. Entities will no longer be permitted to consider the length of time that fair value has been less than amortized cost when evaluating when credit losses should be recognized. This new guidance is effective in the first quarter of 2023 for calendar-year SEC filers that are smaller reporting companies as of the one-time determination date. Early adoption is permitted beginning in 2019. The Company plans to adopt the new guidance on January 1, 2023, and it does not expect that adoption of this standard will have an impact on its consolidated financial statements and related disclosures.

Recently Adopted Accounting Pronouncements

In August 2018, the FASB issued ASU No. 2018-13 (ASU 2018-13), Changes to the Disclosure Requirements for Fair Value Measurement. This ASU eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. The standard is effective for all entities for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company adopted ASU 2018-13 as of January 1, 2020, which has not had a material impact on the Company's financial statements.

 

 

2.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period.  The Company’s most significant estimates and critical accounting policies involve recognizing revenue, reviewing assets for impairment, determining the assumptions used in measuring share-based compensation expense, valuing warrants, and valuing allowances for doubtful accounts.

Actual results could differ from these estimates. Management’s estimates and assumptions are reviewed regularly, and the effects of revisions are reflected in the consolidated financial statements in the periods they are determined to be necessary.

 

3.

Liquidity and Going Concern

The Company incurred net losses of $1.8 million and $2.9 million for the three and six months ended June 30, 2020, respectively.  The Company had an accumulated deficit of 428.2 million as of June 30, 2020.  Additionally, it used net cash of $2.9 million to fund its operating activities for the six months ended June 30, 2020. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

To date, these operating losses have been funded primarily from outside sources of invested capital, proceeds raised from the Loan and Security Agreement, and gross profits.  The Company has had, and will continue to have, an ongoing need to raise additional cash from outside sources to fund its future clinical development programs and other operations. The Company’s inability to raise additional cash would have a material and adverse impact on its business and operations and would cause it to default on its loan.

 

The Company continues to seek additional capital through strategic transactions and from other financing alternatives. Without additional capital, the Company’s current working capital will not provide adequate funding to make debt repayments or support its research, sales and marketing efforts and product development activities at their current levels. If sufficient additional capital is not raised, the Company will at a minimum need to significantly reduce or curtail its research and development and other operations, and this would negatively affect its ability to achieve corporate growth goals.

Should the Company fail to raise additional cash from outside sources, this would have a material adverse impact on its operations.

The accompanying consolidated condensed financial statements have been prepared assuming the Company will continue to operate as a going concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from uncertainty related to its ability to continue as a going concern.

 

9


4.

Fair Value Measurements

Fair value measurements are market-based measurements, not entity-specific measurements.  Therefore, fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability.  The Company follows a three-level hierarchy to prioritize the inputs used in the valuation techniques to derive fair values.  The basis for fair value measurements for each level within the hierarchy is described below:

 

Level 1: Quoted prices in active markets for identical assets or liabilities.

 

 

Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets.

 

 

Level 3: Valuations derived from valuation techniques in which one or more significant inputs are unobservable in active markets.

 

 

Warrants issued by the Company in connection with a rights offering originally filed under a Form S-1 registration statement in April 2018 (“Series T Warrants”) and in an underwritten public offering in September 2019 (“Series U Warrants”) are classified as liability instruments initially upon issuance. Because some of the inputs to the Company’s valuation model are either not observable or are not derived principally from or corroborated by observable market data by correlation or other means, the warrant liability is classified as Level 3 in the fair value hierarchy.

The estimated fair value of the Series T Warrants as of June 30, 2020 and December 31, 2019 was determined by using an option pricing model with the following assumptions. The Series T Warrants will be marked to market as of each balance sheet date until they are exercised or upon expiration, with the changes in fair value recorded as non-operating income or loss in the statements of operations and comprehensive loss.

 

 

 

As of

June 30, 2020

 

 

As of

December 31,

2019

 

Expected term

 

0.8 years

 

 

1.1 years

 

Common stock market price

 

$

2.12

 

 

$

2.40

 

Risk-free interest rate

 

 

0.17

%

 

 

1.59

%

Expected volatility

 

 

119

%

 

 

168

%

Resulting fair value (per warrant)

 

$

0.82

 

 

$

1.47

 

 

The Company estimated the fair value of the Series U Warrants with the Black Scholes model with the following assumptions. The Series U Warrants that have not been amended (Note 11) will be marked to market as of each balance sheet date until they are exercised or upon expiration, with the changes in fair value recorded as non-operating income or loss in the statements of operations and comprehensive loss.

 

 

 

As of

June 30, 2020

 

 

As of

December 31,

2019

 

Expected term

 

4.2 years

 

 

4.75 years

 

Common stock market price

 

$

2.12

 

 

$

2.40

 

Risk-free interest rate

 

 

0.25

%

 

 

1.68

%

Expected volatility

 

 

142

%

 

 

135

%

Resulting fair value (per warrant)

 

$

1.64

 

 

$

1.94

 

 

The following table summarizes the change in Level 3 warrant liability value (in thousands):

 

 

Three Months Ended

 

 

Six Months Ended

 

Warrant liability

June 30, 2020

 

June 30, 2019

 

 

June 30, 2020

 

June 30, 2019

 

Beginning balance

$