UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

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:  001-16133

 

DELCATH SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

06-1245881

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification No.)

1633 Broadway, Suite 22C

New York, NY 10019

(Address of principal executive offices)

(212) 489-2100

(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

 

DCTH

 

The Nasdaq Capital Market

 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

 

Yes   No  

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

 

Yes   No  

 

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 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 financial accounting standards provided pursuant to Section 13(a) of the Securities 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 13, 2020, 3,935,968 shares of the Company’s common stock, $0.01 par value, were outstanding.

 

 

 

1


DELCATH SYSTEMS, INC.

Table of Contents

 

 

Page

PART I—FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements

 

 

Condensed Consolidated Balance Sheets as of June 30, 2020 (Unaudited) and December 31, 2019

3

 

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2020 and 2019

4

 

Unaudited Condensed Consolidated Statements of Stockholders’ Deficit for the three and six months ended June 30, 2020 and 2019

5

 

Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019

7

 

Notes to the Condensed Consolidated Financial Statements

9

Item 2.

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

18

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

23

Item 4.

Controls and Procedures

24

 

 

 

PART II—OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

25

Item 1A. 

Risk Factors

25

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

25

Item 3.

Defaults upon Senior Securities

25

Item 4.

Mine Safety Disclosures

25

Item 5.

Other Information

25

Item 6.

Exhibits

26

 

 

 

SIGNATURES

27

 

 

 

 

 

 

2


DELCATH SYSTEMS, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except share and per share data)

 

 

 

June 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

16,011

 

 

$

10,002

 

Restricted cash

 

 

181

 

 

 

181

 

Accounts receivables, net

 

 

147

 

 

 

21

 

Inventories

 

 

723

 

 

 

654

 

Prepaid expenses and other current assets

 

 

1,992

 

 

 

1,759

 

Total current assets

 

 

19,054

 

 

 

12,617

 

Property, plant and equipment, net

 

 

864

 

 

 

735

 

Right-of-use assets

 

 

525

 

 

 

860

 

Total assets

 

$

20,443

 

 

$

14,212

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity (Deficit)

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,174

 

 

$

4,533

 

Accrued expenses

 

 

5,429

 

 

 

6,947

 

Lease liabilities, current portion

 

 

508

 

 

 

664

 

Warrant liability

 

 

 

 

 

3,368

 

Total current liabilities

 

 

8,111

 

 

 

15,512

 

Deferred revenue

 

 

2,613

 

 

 

2,860

 

Lease liabilities, long-term portion

 

 

17

 

 

 

197

 

Convertible notes payable, long-term

 

 

2,000

 

 

 

2,000

 

Total liabilities

 

 

12,741

 

 

 

20,569

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 13)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity (deficit)

 

 

 

 

 

 

 

 

Preferred stock, $.01 par value; 10,000,000 shares authorized; 25,950 and 41,517 shares

   issued and outstanding at June 30, 2020 and December 31, 2019, respectively

 

 

 

 

 

 

Common stock, $.01 par value; 1,000,000,000 shares authorized; 3,521,641 and

   67,091 shares issued and outstanding at June 30, 2020 and

   December 31, 2019, respectively*

 

 

35

 

 

 

1

 

Additional paid-in capital

 

 

390,882

 

 

 

364,785

 

Accumulated deficit

 

 

(383,307

)

 

 

(371,171

)

Accumulated other comprehensive income

 

 

92

 

 

 

28

 

Total stockholders' equity (deficit)

 

 

7,702

 

 

 

(6,357

)

Total liabilities and stockholders' equity (deficit)

 

$

20,443

 

 

$

14,212

 

 

 

 

 

 

 

 

 

 

* reflects, a one-for-seven hundred (1:700) reverse stock split effected on December 24, 2019.

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

 

3


DELCATH SYSTEMS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(in thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Product revenue

$

262

 

 

$

221

 

 

$

437

 

 

$

311

 

Other revenue

 

117

 

 

 

191

 

 

 

235

 

 

 

371

 

Cost of goods sold

 

(168

)

 

 

(172

)

 

 

(246

)

 

 

(268

)

Gross profit

 

211

 

 

 

240

 

 

 

426

 

 

 

414

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development expenses

 

2,223

 

 

 

1,714

 

 

 

5,197

 

 

 

5,011

 

Selling, general and administrative expenses

 

2,257

 

 

 

2,653

 

 

 

4,573

 

 

 

5,203

 

Total operating expenses

 

4,480

 

 

 

4,367

 

 

 

9,770

 

 

 

10,214

 

Operating loss

 

(4,269

)

 

 

(4,127

)

 

 

(9,344

)

 

 

(9,800

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of the warrant liability, net

 

 

 

 

10

 

 

 

(2,832

)

 

 

17

 

Loss on issuance of financial instrument

 

 

 

 

(6

)

 

 

 

 

 

(6

)

Interest expense

 

(52

)

 

 

(1,837

)

 

 

(109

)

 

 

(4,064

)

Other income

 

46

 

 

 

1

 

 

 

149

 

 

 

 

Net loss

 

(4,275

)

 

 

(5,959

)

 

 

(12,136

)

 

 

(13,853

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deemed dividend for triggering of warrant down round feature

 

(55

)

 

 

 

 

 

(55

)

 

 

 

Net loss attributable to common stockholders

$

(4,330

)

 

$

(5,959

)

 

$

(12,191

)

 

$

(13,853

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(4,275

)

 

$

(5,959

)

 

$

(12,136

)

 

$

(13,853

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

(1

)

 

 

(23

)

 

 

65

 

 

 

(74

)

Total other comprehensive loss

$

(4,276

)

 

$

(5,982

)

 

$

(12,071

)

 

$

(13,927

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common share data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic loss per common share*

$

(1.90

)

 

$

(58.50

)

 

$

(10.40

)

 

$

(134.55

)

Diluted loss per common share*

$

(1.90

)

 

$

(58.50

)

 

$

(10.40

)

 

$

(134.55

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of basic shares outstanding*

 

2,273,187

 

 

 

101,862

 

 

 

1,171,994

 

 

 

102,956

 

Weighted average number of diluted shares outstanding*

 

2,273,187

 

 

 

101,862

 

 

 

1,171,994

 

 

 

102,956

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* reflects, one-for-seven hundred (1:700) reverse stock split effected on December 24, 2019.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to Condensed Consolidated Financial Statements.

 

 

 

 

 

4


DELCATH SYSTEMS, INC.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(Unaudited)

(in thousands, except share and per share data)

 

 

 

Common Stock

 

 

Preferred Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$0.01 Par Value

 

 

$0.01 Par Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

No. of Shares

 

 

Amount

 

 

No. of

Shares

 

 

Amount

 

 

Additional

Paid

in Capital

 

 

Accumulated

Deficit

 

 

Accumulated

Other

Comprehensive

Income

 

 

Total

 

Balance at January 1, 2020

 

 

67,091

 

 

$

1

 

 

 

41,517

 

 

$

 

 

$

364,785

 

 

$

(371,171

)

 

$

28

 

 

$

(6,357

)

Compensation expense for

   issuance of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25

 

 

 

 

 

 

 

 

 

25

 

Compensation expense for

   issuance of restricted stock

 

 

2,717

 

 

 

 

 

 

 

 

 

 

 

 

30

 

 

 

 

 

 

 

 

 

30

 

Conversion of Preferred stock into common stock

 

 

2,915

 

 

 

 

 

 

(70

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fractional rounding related to reverse stock split

 

 

50

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Registration of Series E and Series E-1 Preferred stock and related warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(106

)

 

 

 

 

 

 

 

 

(106

)

Fair value of warrants reclassified from liability to equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,199

 

 

 

 

 

 

 

 

 

6,199

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,861

)

 

 

 

 

 

(7,861

)

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

65

 

 

 

65

 

Balance at March 31, 2020

 

 

72,773

 

 

$

1

 

 

 

41,447

 

 

$

 

 

$

370,933

 

 

$

(379,032

)

 

$

93

 

 

$

(8,005

)

Compensation expense for issuance of restricted stock

 

 

70,259

 

 

 

1

 

 

 

 

 

 

 

 

 

605

 

 

 

 

 

 

 

 

 

606

 

Conversion of Preferred stock into common stock

 

 

1,549,609

 

 

 

15

 

 

 

(15,497

)

 

 

 

 

 

(16

)

 

 

 

 

 

 

 

 

(1

)

Exercise of prefunded warrants

 

 

6,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Public Offering - issuance of common stock and warrants

 

 

1,823,000

 

 

 

18

 

 

 

 

 

 

 

 

 

19,360

 

 

 

 

 

 

 

 

 

19,378

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,275

)

 

 

 

 

 

(4,275

)

Total comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

(1

)

Balance at June 30, 2020

 

 

3,521,641

 

 

$

35

 

 

 

25,950

 

 

$

 

 

$

390,882

 

 

$

(383,307

)

 

$

92

 

 

$

7,702

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5


DELCATH SYSTEMS, INC.

 

Condensed Consolidated Statement of Stockholders' Equity (Deficit), continued

 

(Unaudited)

 

(in thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock Issued

 

 

Preferred Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$0.01 Par Value

 

 

$0.01 Par Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

No. of

Shares

 

 

Amount

 

 

No. of

Shares

 

 

Amount

 

 

Additional

Paid

in Capital

 

 

Accumulated

Deficit

 

 

Accumulated

Other

Comprehensive

Income

 

 

Total

 

Balance at January 1, 2019

 

 

14,715

 

 

$

 

 

 

101

 

 

$

 

 

$

329,065

 

 

$

(344,054

)

 

$

50

 

 

$

(14,939

)

Compensation expense for

   issuance of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

54

 

 

 

 

 

 

 

 

 

54

 

Compensation expense for

   issuance of restricted stock

 

 

20

 

 

 

 

 

 

 

 

 

 

 

 

4

 

 

 

 

 

 

 

 

 

4

 

Issuance of Series D Preferred Stock

 

 

 

 

 

 

 

 

15

 

 

 

 

 

 

150

 

 

 

 

 

 

 

 

 

150

 

Conversion of Series D Preferred Stock to Debt

 

 

 

 

 

 

 

 

(116

)

 

 

 

 

 

(1,160

)

 

 

 

 

 

 

 

 

(1,160

)

Exercise of pre-funded warrants

 

 

5,885

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,894

)

 

 

 

 

 

(7,894

)

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7

 

 

 

7

 

Balance at March 31, 2019

 

 

20,620

 

 

$

 

 

 

 

 

$

 

 

$

328,113

 

 

$

(351,948

)

 

$

57

 

 

$

(23,778

)

Compensation expense for issuance of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

75

 

 

 

 

 

 

 

 

 

75

 

Exercise of prefunded warrants

 

 

5,399

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exchange of warrants

 

 

91

 

 

 

 

 

 

 

 

 

 

 

 

13

 

 

 

 

 

 

 

 

 

13

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,959

)

 

 

 

 

 

(5,959

)

Total comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(80

)

 

 

(80

)

Balance at June 30, 2019

 

 

26,110

 

 

$

 

 

 

 

 

$

 

 

$

328,201

 

 

$

(357,907

)

 

$

(23

)

 

$

(29,729

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*reflects a one-for-seven hundred (1:700) reverse stock split effected on December 24, 2019.

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

 

6


 

DELCATH SYSTEMS, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

 

 

 

Six months ended June 30,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(12,136

)

 

$

(13,853

)

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

 

 

 

 

 

 

 

 

Stock option compensation expense

 

 

25

 

 

 

129

 

Restricted stock compensation expense

 

 

635

 

 

 

4

 

Depreciation expense

 

 

92

 

 

 

122

 

Amortization of right of use assets

 

 

335

 

 

 

552

 

Warrant liability fair value adjustment

 

 

2,832

 

 

 

(17

)

Loss on issuance of financial instruments

 

 

 

 

 

6

 

Interest expense accrued related to convertible notes

 

 

80

 

 

 

329

 

Debt discount amortization

 

 

 

 

 

3,444

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

(Increase) decrease in prepaid expenses and other assets

 

 

(232

)

 

 

232

 

(Increase) decrease in accounts receivable

 

 

(125

)

 

 

404

 

(Increase) decrease in inventories

 

 

(70

)

 

 

143

 

Increase (decrease) in accounts payable and accrued expenses

 

 

(3,957

)

 

 

3,827

 

Decrease in deferred revenue

 

 

(248

)

 

 

(240

)

Decrease in operating lease liabilities

 

 

(313

)

 

 

(540

)

Decrease in other non-current liabilities

 

 

 

 

 

(504

)

Net cash used in operating activities

 

 

(13,082

)

 

 

(5,962

)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property, plant and equipment

 

 

(221

)

 

 

(2

)

Net cash used in investing activities

 

 

(221

)

 

 

(2

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Principal payments on financing leases

 

 

(23

)

 

 

 

Net proceeds from the issuance of debt

 

 

 

 

 

3,719

 

Net proceeds from sale of Series D Preferred Stock

 

 

 

 

 

150

 

Net payments related to reserve stock split

 

 

(106

)

 

 

 

Net proceeds from Public Offering

 

 

19,378

 

 

 

 

Net cash provided by financing activities

 

 

19,249

 

 

 

3,869

 

Foreign currency effects on cash

 

 

63

 

 

 

(69

)

Net increase (decrease) in cash and cash equivalents

 

 

6,009

 

 

 

(2,162

)

 

 

 

 

 

 

 

 

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

Beginning of period

 

 

10,183

 

 

 

3,578

 

End of period

 

$

16,192

 

 

$

1,416

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

7


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DELCATH SYSTEMS, INC.

 

Condensed Consolidated Statements of Cash Flows, continued

 

(Unaudited)

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended June 30,

 

 

 

2020

 

 

2019

 

Supplemental Disclosure of Cash Flow Information:

 

 

 

 

 

 

 

 

Cash paid during the periods for:

 

 

 

 

 

 

 

 

Interest expense

 

$

7

 

 

$

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosure of Non-Cash Investing and Financing Activities:

 

 

 

 

 

 

 

 

Conversions of preferred stock into common stock

 

$

15

 

 

$

 

Reclassification of 2019 warrants from liability to equity

 

$

6,199

 

 

$

 

Conversion of Series D preferred stock to debt

 

$

 

 

$

1,160

 

Exchange of 2019 warrants

 

$

 

 

$

13

 

Adoption of ASC 842 lease standard

 

$

 

 

$

1,652

 

Right of use assets obtained in exchange for lease obligations

 

$

 

 

$

874

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.


 

8


 

DELCATH SYSTEMS, INC.

Notes to the Condensed Consolidated Financial Statements

 

(1)

General

The unaudited interim condensed consolidated financial statements of Delcath Systems, Inc. (“Delcath” or the “Company”) as of and for the three and six months ended June 30, 2020 and 2019 should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “Annual Report”), which was filed with the Securities Exchange Commission (the “SEC”) on March 25, 2020 and may also be found on the Company’s website (www.delcath.com). In these notes to the condensed consolidated financial statements the terms “us”, “we” or “our” refer to Delcath and its consolidated subsidiaries. 

Description of Business

 

Delcath Systems, Inc. is an interventional oncology company focused on the treatment of primary and metastatic liver cancers. Our investigational product—Melphalan Hydrochloride for Injection for use with the Delcath Hepatic Delivery System (“Melphalan/HDS”) —is designed to administer high-dose chemotherapy to the liver while controlling systemic exposure and associated side effects. In Europe, our system is commercially available under the trade name Delcath CHEMOSAT® Hepatic Delivery System for Melphalan (“CHEMOSAT”), where it has been used at major medical centers to treat a wide range of cancers of the liver.

 

Our clinical development program (“CDP”) for Melphalan/HDS is comprised of The FOCUS Clinical Trial for Patients with Hepatic Dominant Ocular Melanoma (the “FOCUS Trial”), a global registration clinical trial that is investigating objective response rate in ocular melanoma liver metastases, or mOM, and the ALIGN Trial, a global Phase 3 clinical trial for intrahepatic cholangiocarcinoma, or ICC (the “ALIGN Trial”). Our CDP also includes a registry for CHEMOSAT commercial cases performed in Europe and sponsorship of select investigator-initiated trials or IITs.

 

Risks and Uncertainties

 

The recent outbreak of a novel strain of coronavirus (COVID-19) has had an impact on our ability to monitor data at our clinical trial sites and is likely to cause a decline in product revenue for the foreseeable future as many hospitals are prioritizing the treatment of patients diagnosed with COVID-19. We expected to announce top-line data from our FOCUS trial in mid-2020; however, COVID-19 has impacted our ability to enroll and treat patients in this trial and to monitor data at our clinical trial sites.  As a result, we will not be able to release the top-line data from the FOCUS Trial within the timeframe we had anticipated. Once our clinical trial sites are able to return to normal operating procedures, we will assess the impact and update our expected timing accordingly. This situation is rapidly changing and additional impacts to the business may arise that we are not aware of currently. The ultimate impact of the pandemic on the Company’s results of operations, financial position, liquidity or capital resources cannot be reasonably estimated at this time.

Liquidity and Going Concern

The accompanying interim condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses since inception and expects to continue incurring losses for the next several years. These losses, among other factors, raise substantial doubt about the Company’s ability to continue as a going concern.

The Company’s existence is dependent upon management’s ability to obtain additional funding sources or to enter into strategic alliances. There can be no assurance that the Company’s efforts will result in the resolution of the Company’s liquidity needs. The accompanying statements do not include any adjustments that might result should the Company be unable to continue as a going concern. 

Basis of Presentation

These interim condensed consolidated financial statements are unaudited and were prepared by the Company in accordance with generally accepted accounting principles in the United States of America (GAAP) and with the SEC’s instructions to Form 10-Q and Article 10 of Regulation S-X. They include the accounts of all entities controlled by Delcath and all significant inter-company accounts and transactions have been eliminated in consolidation. All historical share and per share amounts have been retrospectively adjusted for the one-for-seven hundred stock split effected on December 24, 2019.

 

9


 

The preparation of interim condensed consolidated financial statements requires management to make assumptions and estimates that impact the amounts reported. These interim condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the Company’s results of operations, financial position and cash flows for the interim periods ended June 30, 2020 and 2019; however, certain information and footnote disclosures normally included in our Annual Report have been condensed or omitted as permitted by GAAP. It is important to note that the Company’s results of operations and cash flows for interim periods are not necessarily indicative of the results of operations and cash flows to be expected for a full fiscal year or any interim period.

 

Significant Accounting Policies

A description of our significant accounting policies has been provided in Note 3 Summary of Significant Accounting Policies to the Consolidated Financial Statements included in the Company’s Annual Report.

Recently Issued Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Simplifying the Accounting for Income Taxes. The list of changes is comprehensive, however the changes will not significantly impact the Company due to the full valuation allowance that is recorded against the Company’s deferred tax assets ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption of ASU 2019-12 is permitted, including adoption in any interim period for public business entities for periods for which financial statements have not yet been issued. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an entity that elects early adoption must adopt all the amendments in the same period. The Company will adopt ASU 2019-12 in 2021.

 

(2)

Cash, Cash Equivalents and Restricted Cash

 

Cash and cash equivalents that are restricted as to withdrawal or use under the terms of certain contractual agreements are recorded in Restricted Cash on the balance sheets. Restricted cash does not include required minimum balances.

 

Cash, cash equivalents, and restricted cash balances were as follows:

 

 

 

June 30,

 

 

December 31,

 

(in thousands)

 

 

2020

 

 

 

2019

 

Cash and cash equivalents

 

$

16,011

 

 

$

10,002

 

Letters of credit

 

 

131

 

 

 

131

 

Security for credit cards

 

 

50

 

 

 

50

 

Total cash, cash equivalents and restricted cash shown in

   the statements of cash flows

 

$

16,192

 

 

$

10,183

 

 

 

 

(3)

Inventories

Inventories consist of the following:

 

 

 

June 30,

 

 

December 31,

 

(in thousands)

 

2020

 

 

2019

 

Raw materials

 

$

389

 

 

$

375

 

Work-in-process

 

 

334

 

 

 

279

 

Total inventories

 

$

723

 

 

$

654

 

 

 

 

10


 

(4)

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following:

 

 

 

June 30,

 

 

December 31,

 

(in thousands)

 

2020

 

 

2019

 

Clinical trial expenses

 

$

1,497

 

 

$

725

 

Insurance premiums

 

 

244

 

 

 

589

 

Other1

 

 

251

 

 

 

445

 

Total prepaid expenses and other current assets

 

$

1,992

 

 

$

1,759

 

 

1 Other consists of various prepaid expenses and other current assets, with no individual item accounting for more than 5% of prepaid expenses and other current assets at June 30, 2020 and December 31, 2019.

 

 

(5)

Property, Plant, and Equipment

Property, plant, and equipment consist of the following:

 

 

 

June 30,

 

 

December 31,

 

 

Estimated

(in thousands)

 

2020

 

 

2019

 

 

Useful Life

Buildings and land

 

$

634

 

 

$

589

 

 

30 years - Buildings

Enterprise hardware and software

 

 

1,802

 

 

 

1,739

 

 

3 years

Leaseholds

 

 

1,797

 

 

 

1,695

 

 

Lesser of lease term or estimated useful life

Equipment

 

 

1,032

 

 

 

1,025

 

 

7 years

Furniture

 

 

202

 

 

 

198

 

 

5 years

Property, plant and equipment, gross

 

 

5,467

 

 

 

5,246

 

 

 

Accumulated depreciation

 

 

(4,603

)

 

 

(4,511

)

 

 

Property, plant and equipment, net

 

$

864

 

 

$

735

 

 

 

 

Depreciation expense for the three and six months ended June 30, 2020 was approximately $44 thousand and $92 thousand as compared to approximately $57 thousand and $122 thousand for the same periods in 2019.

 

 

(6)

Accrued Expenses

Accrued expenses consist of the following:

 

 

 

June 30,

 

 

December 31,

 

(in thousands)

 

2020

 

 

2019

 

Clinical expenses

 

$

2,565

 

 

$

2,497

 

Compensation, excluding taxes

 

 

2,379

 

 

 

3,525

 

Other1

 

 

485

 

 

 

925

 

Total accrued expenses

 

$

5,429

 

 

$

6,947

 

 

1 Other consists of various accrued expenses, with no individual item accounting for more than 5% of current liabilities at June 30, 2020 and December 31, 2019.

 

(7)

Leases

The Company recognizes right-of-use (“ROU”) assets and lease liabilities when it obtains the right to control an asset under a leasing arrangement with an initial term greater than twelve months. The Company leases its facilities under non-cancellable operating and financing leases.

The Company evaluates the nature of each lease at the inception of an arrangement to determine whether it is an operating or financing lease and recognizes the ROU asset and lease liabilities based on the present value of future minimum lease payments over the expected lease term. The Company’s leases do not generally contain an implicit interest rate and therefore the Company

 

11


 

uses the incremental borrowing rate it would expect to pay to borrow on a similar collateralized basis over a similar term in order to determine the present value of its lease payments.

Pursuant to a 2014 sublease agreement (the “2014 Sublease”) and a 2015 sublease agreement (the “2015 Sublease”) the Company subleases portions of its leased premises in Dublin, Ireland to a sublessee. On May 15, 2020, the Company and its sublessee entered into amendments to the 2014 Sublease and 2015 Sublease pursuant to which (i) the 2014 Sublease and 2015 Sublease were extended from May 31, 2020 to August 2, 2021, and (ii) effective  July 1, 2020, the leased premises under the 2015 Sublease would be expanded to include an additional 4,999 square ft of space, and (ii) effective July 1, 2020, the rent under the 2015 Sublease would increase from approximately $14,559 per month to $20,643 per month. The Company analyzed the terms of the amended 2014 Sublease and 2015 Sublease and determined that its ROU for the master operating lease was not impaired as a result of the amendments.

On June 25, 2020, the Company entered into a sub-lease agreement (the “2021 Sub-Lease”) with its current sublessee under the 2014 Sublease and 2015 Sublease pursuant to which, effective August 2, 2021, the current sublessee would become the lessee and the Company would then sub-lease its portion of the premises from such current sublessee.  The Company Rent under the 2021 Sub-Lease will be approximately $3,721.50 per month.  Aside from the 2021 Lease, the Company has no operating or financing leases that have not yet commenced.

 

The following table summarizes the Company’s operating and financing leases as of and for the six months ended June 30, 2020:

 

(in thousands)

 

US

 

 

Ireland

 

 

Total

 

Lease cost

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease cost

 

$

236

 

 

$

103

 

 

$

339

 

Financing lease cost

 

23

 

 

 

 

 

 

23

 

Sublease income

 

 

 

 

 

(98

)

 

 

(98

)

Total

 

$

259

 

 

$

5

 

 

$

264

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other information

 

 

 

 

 

 

 

 

 

 

 

 

Operating cash flows out from operating leases

 

 

(236

)

 

 

(103

)

 

 

(339

)

Operating cash flows in from operating leases

 

 

-

 

 

 

98

 

 

 

98

 

Operating cash flows out from financing leases

 

 

(22

)

 

 

 

 

 

(22

)

Weighted average remaining lease term

 

 

0.7

 

 

 

1.1

 

 

 

 

 

Weighted average discount rate - operating leases

 

 

8

%

 

 

8

%

 

 

 

 

 

Remaining maturities of the Company’s operating leases, excluding short-term leases, are as follows:

 

(in thousands)

 

US

 

 

Ireland

 

 

Total

 

Year ended December 31, 2020

 

$

239

 

 

$

105

 

 

$

344

 

Year ended December 31, 2021

 

$

78

 

 

 

122

 

 

 

200

 

Total

 

$

317

 

 

 

227

 

 

 

544

 

Less present value discount

 

$

(9

)

 

 

(10

)

 

 

(19

)

Operating lease liabilities included in the condensed consolidated balance sheet at June 30, 2020

 

$

308

 

 

$

217

 

 

$

525

 

 

 

(8)

Outstanding Debt

 

On June 6, 2019, the Company entered into an agreement with two institutional investors, pursuant to which the investors agreed to transfer and surrender to the Company for cancellation, warrants to purchase 5,605 shares of the Company’s common stock (the “Series D Warrants”) and warrants to purchase 0.1 million shares of the Company’s common stock (the “Pre-Funded Series D Warrants”). Under the terms of the Purchase Agreement, the Company agreed to sell and issue to the investors 8% Senior Secured Promissory Notes in an aggregate principal amount of $2.0 million and with a July 16, 2021 maturity date, in full payment and satisfaction of the purchase price for the Series D Warrants and Pre-Funded Series D Warrants. This agreement was effective on July 15, 2019, upon the closing of the Company’s July 2019 Private Placement discussed further in Notes 10 and 11 to the Company’s audited consolidated financial statements contained in its Annual Report. Following the closing of the July 2019 Private Placement, the Company entered into an agreement under which the 8% Senior Secured Promissory Notes became convertible into shares of Series E Preferred Stock and Warrants (the “Unit”) at the price of $1,500 per Unit. The principal is recognized in Convertible notes payable, long-term on the Condensed Consolidated Balance Sheet.

 

12


 

The following tables provide a summary of the notes outstanding at June 30, 2020:

 

 

 

Conversion

price

 

 

Current interest

rate

 

 

Principal

 

Long term convertible notes payable

 

 

 

 

 

 

 

 

 

 

 

 

8.0% July 2019 Notes

 

$

1,500

 

 

 

8

%

 

$

2,000,000

 

 

 

 

 

(9)

Stockholders’ Equity

 

Preferred Stock

 

Series E and Series E-1 Preferred Stock

 

On July 11, 2019, the Company entered into a securities purchase agreement with certain accredited investors pursuant to which Delcath sold to investors an aggregate of 20,000 shares of our Series E convertible preferred stock, par value $0.01 per share, or the “Series E Preferred Stock”, at a price of $1,000 per share and a warrant, or a “2019 E Warrant”, to purchase a number of shares of common stock equal to the number of shares of common stock issuable upon conversion of the Series E Preferred Stock purchased by the investor, or the “July 2019 Private Placement”. In connection with the July 2019 Private Placement, the Company exchanged $11.8 million of debt, interest and Series D Warrants for 11,500 shares of Series E Preferred Stock and related 2019 E Warrants, $0.1 million in accounts payables for 149 shares of Series E Preferred Stock and related 2019 E Warrants and issued 923 shares of Series E Preferred Stock and related 2019 E Warrants to certain investors in exchange for a waiver of rights under exchange agreements signed in December 2018 and March 2019, or the “Debt Exchange”.

 

On August 19, 2019, the Company entered into a securities purchase agreement with certain accredited investors pursuant to which Delcath sold to investors an aggregate of 9,510 shares of Series E-1 convertible preferred stock, par value $0.01 per share, or the Series E-1 Preferred Stock, at a price of $1,000 per share and a warrant, or a “2019 E-1 Warrant”, and together with the 2019 E Warrant, the “2019 Warrants”, to purchase a number of shares of common stock of the Company equal to the number of shares of common stock issuable upon conversion of the Series E-1 Preferred Stock purchased by the investor, or the “August 2019 Private Placement”, and, collectively with the July 2019 Private Placement, the “Private Placements”.

 

Each share of Series E Preferred Stock and Series E-1 Preferred Stock, or, collectively, the “Preferred Stock”, is convertible at any time at the option of the holder into the number of shares of common stock determined by dividing the current conversion price. At December 31, 2019, the conversion price was $23.04 and was subsequently adjusted to $10.00 upon the pricing of a $22.0 million offering on May 5, 2020, as discussed further below. As a result of the price adjustment, the excess of the fair value of the common stock that will be received on conversion, measured on the price reset date, exceeded the original proceeds allocated to the Preferred Stock by $12.0 million. The holders of the Preferred Stock are entitled to receive dividends on shares of Preferred Stock equal (on an “as converted” basis) to and in the same form as dividends paid on shares of the common stock. Any such dividends that are not paid to the holders of the Preferred Stock will increase the stated value. No other dividends will be paid on shares of Preferred Stock.

 

Each 2019 Warrant had an exercise price equal to $23.04 at December 31, 2019. The exercise price was subsequently adjusted to $10.00 upon the pricing of a $22.0 million offering on May 5, 2020, as discussed further below, which resulted in the recognition of a $55 thousand deemed dividend. The 2019 Warrants are exercisable until 5:00 p.m. (NYC time) on December 24, 2024.

 

As of June 30, 2020, there were 25,950 shares of Preferred Stock outstanding and 1.8 million 2019 Warrants outstanding.

 

 

 

 

 

 

 

 

 

 

 

 

13


 

 

 

Public Offering and Nasdaq Uplisting

On May 5, 2020, the Company closed a public offering of 1,823,000 shares of common stock, 377,000 pre-funded warrants and Series F warrants to purchase 2,224,900 shares of common stock at an exercise price of $10.00 per share. Delcath received gross proceeds of approximately $22.0 million from the offering, before deducting the underwriting discount and estimated offering expenses. The securities were offered pursuant to a registration statement on Form S-1 (File No. 333-235904) previously filed with the SEC and declared effective on April 30, 2020. In connection with this offering, the Company’s common stock was approved for listing and began trading on the Nasdaq Capital Market on May 1, 2020. As a result of this offering, the Preferred Stock conversion price was adjusted to $10.00 and the exercise price of the 2019 Warrants was adjusted to $10.00 and neither instrument is subject to further price resets.

Other Common Stock Issuances

During the six months ended June 30, 2020 the Company issued 1,549,609 shares of the Company’s common stock pursuant to conversions of Preferred Stock.

During the six months ended June 30, 2020, the Company issued 6,000 shares of common stock associated with the exercise of pre-funded warrants.

During the six months ended June 30, 2020, the Company issued 72,976 shares of common stock as compensation.

 

 

Share-Based Compensation

The Company’s 2019 Equity Incentive Plan (the “Plan”) allows for grants in the form of incentive stock options, nonqualified stock options, stock units, stock awards, stock appreciation rights, and other stock-based awards.  All of the Company’s officers, directors, employees, consultants and advisors are eligible to receive grants under the Plan.  The maximum number of shares reserved for issuance under the Plan is 2,142.  Options to purchase shares of common stock are granted at exercise prices not less than 100% of fair value on the dates of grant. As of June 30, 2020, the Plan had approximately 502 shares available for grant.  

The following is a summary of stock option activity under the Plan for the six months ended June 30, 2020:  

 

 

 

Number of Shares

 

 

Weighted Average Exercise

Price

 

 

Weighted

Average

Remaining

Contractual

Term (Years)

 

Aggregate Intrinsic

Value

 

Outstanding at December 31, 2019

 

 

1,640

 

 

$

196.70

 

 

9.1

 

$

 

Granted

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

Cancelled/Forfeited

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at June 30, 2020

 

 

1,640

 

 

$

196.70

 

 

8.6

 

$

 

Exercisable at June 30, 2020

 

 

1,640

 

 

$

196.70

 

 

8.6

 

$

 

 

At June 30, 2020, there was no unrecognized compensation expense related to non-vested share-based compensation awards under the Plan. The following is a summary of share-based compensation expense in the statement of operations:         

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

(in thousands)

2020

 

 

2019

 

 

2020

 

 

2019

 

Selling, general and administrative

$

606

 

 

$

58

 

 

$

655

 

 

$

106

 

Research and development

 

 

 

 

17

 

 

 

5

 

 

 

27

 

Total

$

606

 

 

$

75

 

 

$

660

 

 

$

133

 

 

14


 

Warrants

 

The following is a summary of warrant activity for the six months ended June 30, 2020:

 

 

 

Warrants

 

 

Exercise Price per

Share

 

Weighted

Average

Exercise

Price

 

 

Weighted Average

Remaining Life

(Years)

 

Outstanding at December 31, 2019

 

 

1,826,608

 

 

$7.00 - $23.04

 

$

23.04

 

 

 

5.0

 

Issued

 

 

2,601,900

 

 

 

 

 

10.00

 

 

 

 

 

Exercised

 

 

(6,000

)

 

 

 

 

0.01

 

 

 

 

 

Expired

 

 

(9

)

 

 

 

 

7.00

 

 

 

 

 

Outstanding at June 30, 2020

 

 

4,422,499

 

 

$0.01- $10.00

 

$

9.16

 

 

 

4.7

 

 

As of June 30, 2020, warrants to purchase 371,000 shares of common stock were pre-funded and the exercise price was $0.01 per share. The remaining warrants were exercisable at $10.00 per share.

 

  

 

(10)

Fair Value Measurements

 

As a result of the expiration of certain provisions in the 2019 Warrants, the 2019 Warrants were reclassified from liability to equity on February 19, 2020.

The table below presents the activity within Level 3 of the fair value hierarchy for the six months ended June 30, 2020:

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

 

(in thousands)

 

Warrant Liability

 

Balance at December 31, 2019

 

$

3,368

 

Total change in the liability included in earnings

 

 

2,832

 

Fair value of warrants reclassified from liability to equity

 

 

(6,200

)

Balance at June 30, 2020

 

$

 

 

The fair value of the outstanding warrants at February 19, 2020, the date the 2019 Warrants were no longer classified as a liability, and December 31, 2019 was determined by using option pricing models with the following assumptions:

 

 

 

February 19,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Expected life (in years)

 

4.3

 

 

 

4.6

 

Expected volatility

 

208.2%

 

 

207.5%

 

Risk-free interest rates

 

1.4%

 

 

1.7%

 

 

The table below presents the Company’s assets and liabilities measured at fair value on a recurring basis as of June 30, 2020, aggregated by the level in the fair value hierarchy within which those measurements fall in accordance with ASC 820.

 

 

 

Assets and Liabilities Measured at Fair Value on a Recurring Basis

 

(in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

June 30, 2020

 

 

December 31, 2019

 

 

June 30, 2020

 

 

December 31, 2019

 

 

June 30, 2020

 

 

December 31, 2019

 

 

June 30, 2020

 

 

December 31, 2019

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative instrument liabilities

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

3,368

 

 

$

 

 

$

3,368

 

  

   

(11)

Net Loss per Common Share  

 

Basic net loss per share is determined by dividing net loss by the weighted average shares of common stock outstanding during the period, without consideration of potentially dilutive securities, except for those shares that are issuable for little or no cash

 

15


 

consideration. Diluted net loss per share is determined by dividing net loss by diluted weighted average shares outstanding. Diluted weighted average shares reflects the dilutive effect, if any, of potentially dilutive common shares, such as stock options and warrants calculated using the treasury stock method. In periods with reported net operating losses, all common stock options and warrants are generally deemed anti-dilutive such that basic net loss per share and diluted net loss per share are equal.

 

The following potentially dilutive securities were excluded from the computation of earnings per share as of June 30, 2020 and 2019 because their effects would be anti-dilutive:

 

 

 

June 30,

 

(in thousands, except share data)

 

2020

 

 

2019

 

Stock options

 

 

1,640

 

 

 

1,667

 

Common stock warrants - equity

 

 

4,051,499

 

 

 

6,004

 

Common stock warrants - liabilities

 

 

 

 

 

179

 

Common stock reserved for conversion of preferred shares

 

 

2,595,087

 

 

 

 

Assumed conversion of convertible notes

 

 

146,288

 

 

 

480

 

Total

 

 

6,794,514

 

 

 

8,329

 

 

However, in certain periods in which the exercise price of the warrants was less than the last reported sales price of Delcath’s common stock on the final trading day of the period and there is a gain recorded pursuant to the change in fair value of the warrant derivative liability, the impact of gains related to the mark-to-market adjustment of the warrants outstanding at the end of the period is reversed and the treasury stock method is used to determine diluted earnings per share.

 

 

 

The following table reconciles net loss per share for the three and six months ended June 30, 2020 and 2019:

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

(in thousands, except share data)

2020

 

 

2019

 

 

2020

 

 

2019

 

Net loss

$

(4,275

)

 

$

(5,959

)

 

$

(12,136

)

 

$

(13,853

)

Deemed dividend for triggering of warrant down round feature

 

(55

)

 

 

 

 

 

(55

)

 

 

 

Net loss attributable to common stockholders

$

(4,330

)

 

$

(5,959

)

 

$

(12,191

)

 

$

(13,853

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - basic*

 

2,273,187

 

 

 

101,862

 

 

 

1,171,994

 

 

 

102,956

 

Weighted average shares outstanding - diluted*

 

2,273,187

 

 

 

101,862

 

 

 

1,171,994

 

 

 

102,956

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share - basic*

$

(1.90

)

 

$

(58.50

)

 

$

(10.40

)

 

$

(134.55

)

Net loss per share - diluted*

$

(1.90

)

 

$

(58.50

)

 

$

(10.40

)

 

$

(134.55

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* reflects, one-for-seven hundred (1:700) reverse stock split effected on December 24, 2019.

 

 

 

At June 30, 2020, the Company had 371,000 pre-funded warrants outstanding. The following table provides a reconciliation of the weighted average shares outstanding calculation for the three and six months ended June 30, 2020 and 2019:

 

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Weighted average shares issued

 

2,038,297

 

 

 

25,587

 

 

 

1,054,549

 

 

 

26,681

 

Weighted average pre-funded warrants

 

234,890

 

 

 

76,275

 

 

 

117,445

 

 

 

76,275

 

Weighted average shares outstanding

 

2,273,187

 

 

 

101,862

 

 

 

1,171,994

 

 

 

102,956

 

 

16


 

 

 

 

(12)Taxes

 

As discussed in Note 14 Income Taxes, of the Company’s Annual Report, the Company has a valuation allowance against the full amount of its net deferred tax assets. The Company currently provides a valuation allowance against deferred tax assets when it is more likely than not that some portion or all of its deferred tax assets will not be realized. The Company has not recognized any unrecognized tax benefits in its balance sheet.

 

The Company is subject to income tax in the U.S., as well as various state and international jurisdictions. The federal and state tax authorities can generally reduce a net operating loss (but not create taxable income) for a period outside the statute of limitations in order to determine the correct amount of net operating loss which may be allowed as a deduction against income for a period within the statute of limitations. Additional information regarding the statutes of limitations can be found in Note 14, Income Taxes, of the Company’s Annual Report.

 

On March 27, 2020, President Trump signed into law the $2 trillion bipartisan Coronavirus Aid, Relief, and Economic Security (CARES) Act (H.R. 748). The CARES Act includes a variety of economic and tax relief measures intended to stimulate the economy, including loans for small businesses, payroll tax credits/deferrals, and corporate income tax relief. Due to the Company’s history of tax loss carryforwards and full valuation allowance, the CARES Act did not have a significant effect to the income tax provision, as the corporate income tax relief was directed towards cash taxpayers.

 

During the six months ending June 30, 2020, the Company settled intercompany debt of its two Ireland subsidiaries, Delcath Systems Limited and Delcath Holdings Limited, as capital contributions. During the six months ending June 30, 2020, Delcath Holdings Limited ceased operations with an intent to liquidate after the receipt of tax clearance. When Delcath Holdings Limited liquidates, the Company will generate a $19.9 million U.S. deferred tax benefit from a loss on its investment, which may be subject to limitations under Internal Revenue Code Sections 382 and 383 and will be fully offset by a valuation allowance.

 

(13)   Commitments and Contingencies

 

Following the May 18, 2020 resignation of Jennifer Simpson, the Company’s former President and Chief Executive Officer, and Barbra Keck, the Company’s former Chief Financial Officer (the “Claimants”), it became evident that there was a dispute regarding the Company’s compensation obligations to the Claimants. In a letter dated, June 29, 2020, an attorney representing the Claimants made certain claims and threatened litigation against the Company. On or about July 27, 2020, the Claimants filed a statement of claim with the American Arbitration Association against the Company. The Claimants seek payment of certain purported unpaid compensation amounts claimed to be due to them, in an approximate amount of $1.14 million in the aggregate, as well as unspecified statutory damages under New York Labor Law, attorneys’ fees and costs, and statutory interest. The Company intends to defend the claims vigorously. As of June 30, 2020, the Company has accrued for the full purported unpaid compensation amounts.

(14)

Subsequent Events  

 

Preferred Stock Conversions

 

 

Subsequent to June 30, 2020, the Company issued 372,500 shares of the Company’s common stock upon the conversion of Preferred Stock.

 

Property Purchase

 

On July 31, 2020, the Company exercised its option to purchase its 95-97 Park Road office location in Queensbury, NY for $460,263, pursuant to the terms of the lease agreement dated September 17, 2018, as amended on January 29, 2019 and further amended on July 31, 2020.

 

Stock Warrant Exercises

 

Subsequent to June 30, 2020, warrants to purchase 41,827 shares of the Company’s common stock with an exercise price of $10.00 per share were exercised for proceeds of $418,270.

 

17


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the financial condition and results of operations of Delcath Systems, Inc. (“Delcath” or the “Company”) should be read in conjunction with the unaudited interim condensed consolidated financial statements and notes thereto contained in Item 1 of Part I of this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 to provide an understanding of its results of operations, financial condition and cash flows.

All references in this Quarterly Report to “we,” “our,” “us” and the “Company” refer to Delcath Systems, Inc. and its subsidiaries unless the context indicates otherwise.

Disclosure Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains certain “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 with respect to our business, financial condition, liquidity and results of operations. Words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “could,” “would,” “will,” “may,” “can,” “continue,” “potential,” “should,” and the negative of these terms or other comparable terminology often identify forward-looking statements. Statements in this Quarterly Report on Form 10-Q that are not historical facts are hereby identified as “forward-looking statements” for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements, including the risks discussed in this Quarterly Report on Form 10-Q in Part II, Item 1A under “Risk Factors” as well as in Part I, Item 3 “Quantitative and Qualitative Disclosures About Market Risk,” our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 in Item 1A under “Risk Factors” as well as in Item 7A “Quantitative and Qualitative Disclosures About Market Risk,” and the risks detailed from time to time in our future reports filed with the Securities and Exchange Commission (the “SEC”). These forward-looking statements include, but are not limited to, statements about:

 

our estimates regarding sufficiency of our cash resources, anticipated capital requirements and our need for additional financing;

 

the commencement of future clinical trials and the results and timing of those clinical trials;

 

our ability to successfully commercialize CHEMOSAT and Melphalan/HDS, generate revenue and successfully obtain reimbursement for the procedure and system;

 

the progress and results of our research and development programs;

 

our expectations about the COVID-19 pandemic and any potential disruption or impact to our operations;

 

submission and timing of applications for regulatory approval and approval thereof;

 

our ability to successfully source certain components of the system and enter into supplier contracts;

 

our ability to successfully manufacture CHEMOSAT and Melphalan/HDS;

 

our ability to successfully negotiate and enter into agreements with distribution, strategic and corporate partners; and

 

our estimates of potential market opportunities and our ability to successfully realize these opportunities.

Many of the important factors that will determine these results are beyond our ability to control or predict. You are cautioned not to put undue reliance on any forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. Except as otherwise required by law, we do not assume any obligation to publicly update or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events.

Overview

The following section should be read in conjunction with Part I, Item 1: Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q as well as Part I, Item 1: Business; and Part II, Item 8: Financial Statements and Supplementary Data of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

 

 

18


 

Company Overview

We are an interventional oncology company focused on the treatment of primary and metastatic liver cancers. Our lead product candidate, Melphalan Hydrochloride for Injection for use with the Delcath Hepatic Delivery System, or Melphalan/HDS, is designed to administer high-dose chemotherapy to the liver while controlling systemic exposure and associated side effects. In Europe, Melphalan/HDS is approved for sale under the trade name Delcath CHEMOSAT® Hepatic Delivery System for Melphalan, or CHEMOSAT, where it has been used at major medical centers to treat a wide range of cancers of the liver.

Our primary research focus is on ocular melanoma liver metastases, or mOM, and intrahepatic cholangiocarcinoma, or ICC, a type of primary liver cancer, as well as certain other cancers that are metastatic to the liver. We believe that the disease states we are investigating are unmet medical needs that represent significant market opportunities.

We are investigating the objective response rate of Melphalan/HDS in patients with mOM in our FOCUS Clinical Trial for Patients with Hepatic Dominant Ocular Melanoma, or the FOCUS Trial, a global registration clinical trial.

We are also conducting the ALIGN Trial, a global Phase 3 clinical trial of Melphalan/HDS in patients with ICC, or the ALIGN Trial.

In addition to the FOCUS Trial and the ALIGN Trial, our commercial development plan also includes a registry for CHEMOSAT cases performed in Europe and sponsorship of select investigator-initiated trials, or IITs.

In the United States, Melphalan/HDS is considered a combination drug and device product and is regulated as a drug by the United States Food and Drug Administration, or the FDA. The FDA has granted us six orphan drug designations (one for doxorubicin in hepatocellular indication and five for melphalan in ocular melanoma, cutaneous melanoma, cholangiocarcinoma, hepatocellular carcinoma and neuroendocrine tumor indications), including three orphan designations for the potential use of the drug melphalan for the treatment of patients with mOM, hepatocellular carcinoma and ICC. Melphalan/HDS has not been approved for sale in the United States.

In Europe, our CHEMOSAT product is regulated as a Class IIb medical device and received its CE Mark in 2012. We are commercializing the CHEMOSAT system in select markets in the United Kingdom and the European Union, or EU, where we believe the prospect of securing reimbursement coverage for the use of CHEMOSAT is strongest.

Recent Developments

COVID-19

The COVID-19 pandemic has affected many countries, including the United States and several European countries, where we are currently conducting our FOCUS Trial and ALIGN Trial. In response to the pandemic, hospitals participating in the trials in affected countries have taken a number of actions, including restricting elective and other procedures that are not deemed to be life-threatening, suspending clinical trial activities and limiting access to data monitoring. As a result, patients enrolled in our clinical trials have had the start of their treatments postponed and ongoing treatment regimens may be delayed. In addition, we do not have sufficient access to monitor trial data on a timely basis. These restrictions have had a materially adverse effect on our clinical operations. We expected to announce top-line data from our FOCUS trial in mid-2020. We will not be able to release the top-line data from the FOCUS Trial within the timeframe we had anticipated. Once our clinical trial sites are able to return to normal operating procedures, we will assess the impact and update our expected timing accordingly.

The extent to which the COVID-19 pandemic may affect our clinical trial operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of the outbreak, the spread and severity of COVID-19, and the effectiveness of governmental actions in response to the pandemic. Furthermore, the spread of COVID-19 may materially and adversely affect our ability to recruit and retain patients.

We expect that actions taken in response to the COVID-19 pandemic will also materially and adversely affect sales of CHEMOSAT. As noted above, some hospitals are restricting procedures that are not deemed to be life-threatening at this time. Because CHEMOSAT is not deemed to be an essential procedure, we expect that the number of procedures performed could decline. While we do not expect revenues from CHEMOSAT procedures to be material to us, a decrease in the number of procedures performed would adversely affect our expected revenues and our financial results.

 

 

19


 

These consequences of the COVID-19 pandemic will delay and could adversely affect our ability to obtain regulatory approval for and to commercialize our products, increase our operating expenses, and could have a material adverse effect on our financial results. The situation continues to rapidly change and additional impacts to our business may arise that we are not aware of currently. The ultimate impact of the pandemic on the Company’s results of operations, financial position, liquidity or capital resources cannot be reasonably estimated at this time.

Medical Device Directive Transition to Medical Device Regulation

The European Commission recently reviewed the Medical Device Directive legislative framework and promulgated REGULATION (EU) 2017/745 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 5 April 2017 on medical devices, amending Directive 2001/83/EC, Regulation EC) No 178/2002 and Regulation (EC) No 1223/2009 and repealing Council Directives 90/385/EEC and 93/42/EEC. This new Medical Device Regulation became effective on May 25, 2017, marking the start of a 3-year transition period for manufacturers selling medical devices in Europe to comply with the new medical device regulation, or MDR, which governs all facets of medical devices. The transition task is highly complex and touches every aspect of product development, manufacturing production, distribution and post marketing evaluation.  As a result of the worldwide COVID-19 pandemic, on April 17, 2020, the European Parliament adopted the European Commission’s proposal to postpone the implementation of the MDR (EU) 2017/745 by 12 months. This urgently drafted proposal to delay the MDR is in response to the exceptional circumstances associated with the COVID-19 pandemic and the potential impact it may have had on the MDR implementation. The new Date of Application (DoA) for the MDR will be May 26, 2021.

Effectively addressing these changes will require a complete review of our device operations to determine what is necessary to comply. We do not believe the MDR regulatory changes will impact our business at this time, though implementation of the medical device legislation may adversely affect our business, financial condition and results of operations or restrict our operations.

Public Offering

On May 5, 2020, we closed a public offering of 2.2 million shares of common stock (or common stock equivalents) and Series F warrants to purchase up to 2.2 million shares of common stock. We received gross proceeds of approximately $22.0 million from the offering, before deducting the underwriting discount and estimated offering expenses. The securities were offered pursuant to a registration statement on Form S-1 (File No. 333-235904) previously filed with the SEC and declared effective on April 30, 2020. In connection with this offering, the Company’s common stock was approved for listing and began trading on the Nasdaq Capital Market on May 1, 2020.

 

 

20


 

Results of Operations  

 

 

Three Months Ended June 30, 2020 Compared with Three Months Ended June 30, 2019

Revenue

We had revenue of approximately $0.4 million for the three months ended June 30, 2020 compared to $0.4 million for the three months ended June 30, 2019.  

Cost of Goods Sold

For the three months ended June 30, 2020, we recorded cost of goods sold of approximately $0.2 million compared to $0.2 million for the three months ended June 30, 2019.

Research and Development Expenses

Research and development expenses are incurred for the development of Melphalan/HDS and consist primarily of payroll and payments to contract research and development companies. To date, these costs are related to generating pre-clinical data and the cost of manufacturing Melphalan/HDS for clinical trials and conducting clinical trials. For the three months ended June 30, 2020 and 2019, research and development expenses increased to $2.2 million from $1.7 million. The increase was primarily due to our FOCUS trial becoming enrolled during the first quarter of 2020.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of payroll, rent and professional services such as accounting and legal services. For the three months ended June 30, 2020 and 2019, selling, general and administrative expenses were $2.3 million and $2.7 million, respectively. The decrease is primarily related to reduced personnel expenses as a result of reduced headcount.      

Other Income/Expense

 

Other income and expense is primarily related to the amortization of debt discounts and the interest on convertible notes. For the three months ended June 30, 2020, interest expense decreased $1.8 million compared to the three months ended June 30, 2019. The decrease in the note principal balance from $10.5 million at June 30, 2019 to $2.0 million at June 30, 2020 is the primary reason for the decrease in interest expense. 

Net Loss

Our net loss for the three months ended June 30, 2020 was $4.3 million, a decrease of $1.7 million compared to net loss of $6.0 million for the three months ended June 30, 2019. The decrease in net loss is primarily due to the $1.8 million decrease in interest expense on the convertible notes discussed above.      

 


 

21


 

Six Months Ended June 30, 2020 Compared with Six Months Ended June 30, 2019

Revenue

We had revenue of approximately $0.7 million for the six months ended June 30, 2020 compared to $0.7 million for the six months ended June 30, 2019.

Cost of Goods Sold

For the six months ended June 30, 2020, we recorded cost of goods sold of approximately $0.2 million compared to $0.3 million for the six months ended June 30, 2019.

Research and Development Expenses

Research and development expenses are incurred for the development of Melphalan/HDS and consist primarily of payroll and payments to contract research and development companies. To date, these costs are related to generating pre-clinical data and the cost of manufacturing Melphalan/HDS for clinical trials and conducting clinical trials. For the six months ended June 30, 2020 and 2019, research and development expenses increased to $5.2 million from $5.0 million. The increase was primarily due to our FOCUS trials becoming enrolled during the first quarter of 2020.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of payroll, rent and professional services such as accounting and legal services. For the six months ended June 30, 2020 and 2019, selling, general and administrative expenses were $4.6 million and $5.2 million, respectively. The decrease is primarily related to reduced personnel expenses as a result of reduced headcount.    

Other Income/Expense

 

Other income and expense is primarily related to the amortization of debt discounts and the interest on convertible notes, plus the change in fair value of the warrant liability.  For the six months ended June 30, 2020, interest expense decreased $4.0 million compared to June 30, 2019. The decrease in the note principal balance from $10.5 million at June 30, 2019 to $2.0 million at June 30, 2020 is the primary reason for the decrease in interest expense. In addition, we recorded a $2.8 million charge during the six months ended June 30, 2020 (with no such prior period charge), due to the change in the fair value of the warrant liability.

Net Loss

Our net loss for the six months ended June 30, 2020 was $12.1 million, a decrease of $1.8 million, compared to the net loss of $13.9 million for the six months ended June 30, 2019. The decrease in net loss is primarily due to the $4.0 million decrease in interest expense related to the convertible notes, partially offset by the $2.8 million change in fair value of the warrant liability.   

 

 


 

22


 

Liquidity and Capital Resources

In May 2020 we consummated an underwritten public offering resulting in gross proceeds of approximately $22.0 million.  We expect that the proceeds of the offering and our existing cash resources will be sufficient to fund our expected operations through the second quarter of 2021. We may need to raise additional capital in the future to support our operations.  We expect that any such financing activity will involve the public or private offering of our equity and/or equity-related securities. If we are unable to obtain sufficient capital to fund our operations, we would be required to curtail certain aspects of our operations or consider other means of obtaining additional financing, although there is no guarantee that we would be able to obtain the financing necessary to continue our operations.

At June 30, 2020, we had cash, cash equivalents and restricted cash totaling $16.2 million, as compared to cash, cash equivalents and restricted cash totaling $10.2 million at December 31, 2019 and $1.4 million at June 30, 2019. During the six months ended June 30, 2020 and 2019, we used $13.1 million and $6.0 million, respectively, of cash in our operating activities.

Our future results are subject to substantial risks and uncertainties. We have operated at a loss for our entire history and we anticipate that our losses will continue for the foreseeable future.  There can be no assurance that we will ever generate significant revenues or achieve profitability. We expect to use cash, cash equivalents and investment proceeds to fund our future clinical and operating activities. Our future liquidity and capital requirements will depend on numerous factors, including the initiation and progress of clinical trials and research and product development programs; obtaining approvals and complying with regulations; the timing and effectiveness of product commercialization activities, including marketing arrangements; the timing and costs involved in preparing, filing, prosecuting, defending and enforcing intellectual property rights; and the effect of competing technological and market developments.

The Company has no off-balance sheet arrangements.

Application of Critical Accounting Policies

Our financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP).  During the six months ended June 30, 2020, there were no material changes to our critical accounting policies as reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019. A description of certain accounting policies that may have a significant impact on amounts reported in the financial statements is disclosed in Note 3 to the Company’s audited consolidated financial statements contained in its Annual Report on Form 10-K for the fiscal year ended December 31, 2019. 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

We may be minimally exposed to market risk through changes in market interest rates that could affect the interest earned on our cash balances.

 

We measure all derivatives, including certain derivatives embedded in contracts, at fair value and recognizes them on the balance sheet as an asset or a liability, depending on our rights and obligations under the applicable derivative contract.

 

The proceeds allocated to the warrants we issued in 2019 (the “2019 Warrants”) were initially classified as derivative instrument liabilities that were subject to mark-to-market adjustments each period and were reclassified to equity during the first quarter of 2020. During the six months ended June 30, 2020, we recorded a pre-tax derivative instrument loss of $2.8 million. As a result of the reclassification from liability to equity, there was no derivative liability on the balance sheets at June 30, 2020. Management expects that the warrants outstanding at June 30, 2020 will either be exercised or expire worthless. The fair value of the 2019 Warrants at February 19, 2020, the date the 2019 Warrants were no longer classified as a liability, was determined by using option pricing models assuming the following:

 

 

 

February 19,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Expected life (in years)

 

4.3

 

 

 

4.6

 

Expected volatility

 

208.2%

 

 

207.5%

 

Risk-free interest rates

 

1.4%

 

 

1.7%

 

 

 

 

 

23


 

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of our Interim Chief Executive Officer and Interim Principal Accounting Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act). Based on that evaluation, our Interim Chief Executive Officer and Interim Principal Accounting Officer concluded that our disclosure controls and procedures as of June 30, 2020 (the end of the period covered by this Quarterly Report on Form 10-Q), have been designed and are functioning effectively to provide reasonable assurance that the information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Interim Chief Executive Officer and Interim Principal Accounting Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls over Financial Reporting

There was no change in our internal control over financial reporting (as define in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended June 30, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 

 

24


 

PART II: OTHER INFORMATION

Item 1.

Legal Proceedings

 

From time to time, claims are made against the Company in the ordinary course of business, which could result in litigation. Claims and associated litigation are subject to inherent uncertainties and unfavorable outcomes could occur, such as monetary damages, fines, penalties or injunctions prohibiting us from selling our products or engaging in other activities.

Following the May 18, 2020 resignation of Jennifer Simpson, the Company’s former President and CEO, and Barbra Keck, the Company’s former CFO (the “Claimants”), it became evident that there was a dispute regarding the Company’s compensation obligations. In a letter dated, June 29, 2020, an attorney representing the Claimants made certain claims and threatened litigation against the Company. On or about July 27, 2020, the Claimants filed a statement of claim with the American Arbitration Association against the Company.  The Claimants seek payment of certain purported unpaid compensation amounts claimed to be due to them, in an approximate amount of $1.14 million in the aggregate, as well as unspecified statutory damages under New York Labor Law, attorneys’ fees and costs, and statutory interest. The Company intends to defend the claims vigorously.

The occurrence of an unfavorable outcome in any specific period could have a material adverse effect on our results of operations for that period or future periods.

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in “Part I, Item 1A—Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

 

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

 

On May 6, 2020, the Company issued an aggregate of 70,259 shares of unregistered Common Stock, consisting of (i) 22,963 shares of unregistered Common Stock to the executive officers of the Company (the “Executives”) pursuant to the terms of a Support and Conversion Agreement, dated March 11, 2020 and amended on April 8, 2020, among the Company, the Executives and the other parties thereto, in lieu of paying certain accrued bonus amounts to the Executive Officers in an aggregate amount of $221,000, and (ii) 47,296 shares of unregistered Common Stock to Encode Ideas, L.P. (“Encode”) in relation to certain advisory services provided to the Company, 25,283 of which shares were issued pursuant to the Company’s obligation to issue shares to Encode in connection with the Company’s original retention of that firm, and 22,013 of which shares were issued in lieu of paying in cash a $175,000 fee for research services which came due prior to that date.  In each case the Company relied upon the exemption provided in Section 4(a)(2) of the Securities Act of 1933 and Rule 506 of Regulation D thereunder, as each of the Executive Officers and Encode are “accredited investors” as defined in Rule 501(d) of Regulation D.

Item 3.

Defaults upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

Not Applicable.

Item 5.

Other Information

None.

 

 

 


 

25


 

Item 6.

Exhibits

 

Exhibit No.

 

Description

 

 

 

4.1

 

Form of Warrant Agency Agreement between the Company and American Stock Transfer & Trust Company, LLC, including the form of Series F warrant (incorporated by reference to Exhibit 4.8 of the Company’s Form S-1/A filed on April 20, 2020)***

 

10.1

 

Board Appointment Agreement dated as of April 8, 2020 among the Company and the other parties thereto. (incorporated by reference to Exhibit 10.57 of the Company’s Form S-1/A filed on April 20, 2020)***

 

10.2

 

Support and Conversion Agreement dated as of March 11, 2020 among the Company and the other parties thereto (incorporated by reference to Exhibit 10.55 to the Company’s Form S-1/A filed on April 20, 2020), as amended by Amendment to Support and Conversion Agreement dated as of April 8, 2020 among the Company and the other parties thereto (incorporated by reference to Exhibit 10.56 to the Company’s Form S-1/A filed on April 20, 2020)***

 

 31.1

*

Certification by Interim Chief Executive Officer Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

 31.2

*

Certification by Interim Principal Accounting Officer Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

 32.1

** 

Certification by Interim Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

 32.2

** 

Certification by Interim Principal Accounting Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

101.INS

 

XBRL Instance Document

 

 

 

101.SCH

 

XBRL Taxonomy Extension Schema Document

 

 

 

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

 

 

 

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

 

 

 

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document

 

*

Filed herewith.

**

Furnished herewith.

*** Previously filed.

 

 

 

 

26


 

DELCATH SYSTEMS, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

August 13, 2020

DELCATH SYSTEMS, INC.

 

 

 

 

 

/s/ John Purpura

 

John Purpura

 

Interim Chief Executive Officer

 

 

 

 

August 13, 2020

/s/ Christine Padula

 

Christine Padula

 

Interim Principal Accounting Officer

 

 

 

 

 

 

 

27

dcth-ex311_9.htm

Exhibit 31.1

DELCATH SYSTEMS, INC.

 

CERTIFICATION

PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, John Purpura, certify that:

1)

I have reviewed this Quarterly Report on Form 10-Q of Delcath Systems, Inc;

2)

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3)

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4)

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5)

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

August 13, 2020

 

 

 

 

/s/ John Purpura

 

John Purpura

 

Interim Chief Executive Officer

 

 

 

dcth-ex312_7.htm

Exhibit 31.2

DELCATH SYSTEMS, INC.

 

CERTIFICATION

PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Christine Padula, certify that:

1)

I have reviewed this Quarterly Report on Form 10-Q of Delcath Systems, Inc;

2)

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3)

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4)

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5)

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

August 13, 2020

 

 

 

 

/s/ Christine Padula

 

Christine Padula

 

Interim Principal Accounting Officer

 

 

 

 

 

dcth-ex321_6.htm

Exhibit 32.1

DELCATH SYSTEMS, INC.

 

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of DELCATH SYSTEMS, INC. (the “Company”) on Form 10-Q for the period ended June 30, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John Purpura, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

August 13, 2020

 

 

/s/ John Purpura

 

John Purpura

 

Interim Chief Executive Officer

 

 

 

dcth-ex322_8.htm

Exhibit 32.2

DELCATH SYSTEMS, INC.

 

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of DELCATH SYSTEMS, INC. (the “Company”) on Form 10-Q for the period ended June 30, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Christine Padula, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The report fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

August 13, 2020

 

 

/s/ Christine Padula

 

Christine Padula

 

Interim Principal Accounting Officer

 

 

 

v3.20.2
Document and Entity Information - shares
6 Months Ended
Jun. 30, 2020
Aug. 13, 2020
Cover [Abstract]    
Entity Registrant Name DELCATH SYSTEMS, INC.  
Entity Central Index Key 0000872912  
Current Fiscal Year End Date --12-31  
Entity Filer Category Non-accelerated Filer  
Document Quarterly Report true  
Document Transition Report false  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Incorporation, State or Country Code DE  
Entity Interactive Data Current Yes  
Entity File Number 001-16133  
Entity Tax Identification Number 06-1245881  
Entity Address, Address Line One 1633 Broadway  
Entity Address Address Line2 Suite 22C  
Entity Address City Or Town New York  
Entity Address State Or Province NY  
Entity Address Postal Zip Code 10019  
City Area Code 212  
Local Phone Number 489-2100  
Entity Shell Company false  
Entity Current Reporting Status Yes  
Entity Common Stock, Shares Outstanding   3,935,968
Document Fiscal Year Focus 2020  
Trading Symbol DCTH  
Title of 12(b) Security Common stock  
Document Fiscal Period Focus Q2  
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Jun. 30, 2020  
Security Exchange Name NASDAQ  
v3.20.2
Condensed Consolidated Balance Sheets (Unaudited) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Current assets    
Cash and cash equivalents $ 16,011 $ 10,002
Restricted cash 181 181
Accounts receivables, net 147 21
Inventories 723 654
Prepaid expenses and other current assets 1,992 1,759
Total current assets 19,054 12,617
Property, plant and equipment, net 864 735
Right-of-use assets 525 860
Total assets 20,443 14,212
Current liabilities    
Accounts payable 2,174 4,533
Accrued expenses 5,429 6,947
Lease liabilities, current portion 508 664
Warrant liability   3,368
Total current liabilities 8,111 15,512
Deferred revenue 2,613 2,860
Lease liabilities, long-term portion 17 197
Convertible notes payable, long-term 2,000 2,000
Total liabilities 12,741 20,569
Commitments and contingencies (Note 13)
Stockholders' equity (deficit)    
Preferred stock, $.01 par value; 10,000,000 shares authorized; 25,950 and 41,517 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively 0 0
Common stock, $.01 par value; 1,000,000,000 shares authorized; 3,521,641 and 67,091 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively* 35 1
Additional paid-in capital 390,882 364,785
Accumulated deficit (383,307) (371,171)
Accumulated other comprehensive income 92 28
Total stockholders' equity (deficit) 7,702 (6,357)
Total liabilities and stockholders' equity (deficit) $ 20,443 $ 14,212
v3.20.2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares
Jun. 30, 2020
Dec. 31, 2019
Statement Of Financial Position [Abstract]    
Preferred stock, par value (in dollars per share) $ 0.01 $ 0.01
Preferred stock, shares authorized (in shares) 10,000,000 10,000,000
Preferred stock, shares issued (in shares) 25,950 41,517
Preferred stock, shares outstanding (in shares) 25,950 41,517
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 1,000,000,000 1,000,000,000
Common stock, shares issued (in shares) 3,521,641 67,091
Common stock, shares outstanding (in shares) 3,521,641 67,091
v3.20.2
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Cost of goods sold $ (168) $ (172) $ (246) $ (268)
Gross profit 211 240 426 414
Operating expenses:        
Research and development expenses 2,223 1,714 5,197 5,011
Selling, general and administrative expenses 2,257 2,653 4,573 5,203
Total operating expenses 4,480 4,367 9,770 10,214
Operating loss (4,269) (4,127) (9,344) (9,800)
Change in fair value of the warrant liability, net   10 (2,832) 17
Loss on issuance of financial instrument   6   6
Interest expense (52) (1,837) (109) (4,064)
Other income 46 1 149  
Net loss (4,275) (5,959) (12,136) (13,853)
Deemed dividend for triggering of warrant down round feature (55)   (55)  
Net loss attributable to common stockholders (4,330) (5,959) (12,191) (13,853)
Net loss (4,275) (5,959) (12,136) (13,853)
Other comprehensive (loss) income:        
Foreign currency translation adjustments (1) (23) 65 (74)
Total other comprehensive loss $ (4,276) $ (5,982) $ (12,071) $ (13,927)
Common share data:        
Basic loss per common share [1],[2] $ (1.90) $ (58.50) $ (10.40) $ (134.55)
Diluted loss per common share [1],[2] $ (1.90) $ (58.50) $ (10.40) $ (134.55)
Weighted average number of basic shares outstanding [1],[2] 2,273,187 101,862 1,171,994 102,956
Weighted average number of diluted shares outstanding [1],[2] 2,273,187 101,862 1,171,994 102,956
Product Revenue [Member]        
Revenue $ 262 $ 221 $ 437 $ 311
Other Revenue [Member]        
Revenue $ 117 $ 191 $ 235 $ 371
[1] * reflects, one-for-seven hundred (1:700) reverse stock split effected on December 24, 2019.
[2] reflects, one-for-seven hundred (1:700) reverse stock split effected on December 24, 2019.
v3.20.2
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) (Parenthetical)
Dec. 24, 2019
Income Statement [Abstract]  
Reverse stock split 1:700
Reverse stock split ratio 0.00142
v3.20.2
Condensed Consolidated Statements of Stockholders' Equity (Deficit) (Unaudited) - USD ($)
$ in Thousands
Total
Common Stock [Member]
Preferred Stock [Member]
Additional Paid in Capital [Member]
Accumulated Deficit [Member]
Accumulated Other Comprehensive Income [Member]
Balance at Dec. 31, 2018 $ (14,939)     $ 329,065 $ (344,054) $ 50
Balance (in shares) at Dec. 31, 2018   14,715 101      
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Compensation expense for issuance of stock options 54     54    
Compensation expense for issuance of restricted stock 4     4    
Compensation expense for issuance of restricted stock (in shares)   20        
Issuance of Series D Preferred Stock 150     150    
Issuance of Series D Preferred Stock (in shares)     15      
Conversion of Series D Preferred Stock to Debt (1,160)     (1,160)    
Conversion of Series D Preferred Stock to Debt (in shares)     (116)      
Exercise of pre-funded warrants (in shares)   5,885        
Net loss (7,894)       (7,894)  
Total comprehensive income (loss) 7         7
Balance at Mar. 31, 2019 (23,778)     328,113 (351,948) 57
Balance (in shares) at Mar. 31, 2019   20,620        
Balance at Dec. 31, 2018 (14,939)     329,065 (344,054) 50
Balance (in shares) at Dec. 31, 2018   14,715 101      
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net loss (13,853)          
Balance at Jun. 30, 2019 (29,729)     328,201 (357,907) (23)
Balance (in shares) at Jun. 30, 2019   26,110        
Balance at Mar. 31, 2019 (23,778)     328,113 (351,948) 57
Balance (in shares) at Mar. 31, 2019   20,620        
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Compensation expense for issuance of stock options 75     75    
Exercise of pre-funded warrants (in shares)   5,399        
Exchange of warrants 13     13    
Exchange of warrants (in shares)   91        
Net loss (5,959)       (5,959)  
Total comprehensive income (loss) (80)         (80)
Balance at Jun. 30, 2019 (29,729)     328,201 (357,907) (23)
Balance (in shares) at Jun. 30, 2019   26,110        
Balance at Dec. 31, 2019 (6,357) $ 1   364,785 (371,171) 28
Balance (in shares) at Dec. 31, 2019   67,091 41,517      
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Compensation expense for issuance of stock options 25     25    
Compensation expense for issuance of restricted stock 30     30    
Compensation expense for issuance of restricted stock (in shares)   2,717        
Conversion of Preferred stock into common stock (in shares)   2,915 (70)      
Fractional rounding related to reverse stock split (in shares)   50        
Registration of Series E and Series E-1 Preferred stock and related warrants (106)     (106)    
Fair value of warrants reclassified from liability to equity 6,199     6,199    
Net loss (7,861)       (7,861)  
Total comprehensive income (loss) 65         65
Balance at Mar. 31, 2020 (8,005) $ 1   370,933 (379,032) 93
Balance (in shares) at Mar. 31, 2020   72,773 41,447      
Balance at Dec. 31, 2019 $ (6,357) $ 1   364,785 (371,171) 28
Balance (in shares) at Dec. 31, 2019   67,091 41,517      
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Conversion of Preferred stock into common stock (in shares) 1,549,609          
Exercise of pre-funded warrants (in shares) 6,000          
Net loss $ (12,136)          
Balance at Jun. 30, 2020 7,702 $ 35   390,882 (383,307) 92
Balance (in shares) at Jun. 30, 2020   3,521,641 25,950      
Balance at Mar. 31, 2020 (8,005) $ 1   370,933 (379,032) 93
Balance (in shares) at Mar. 31, 2020   72,773 41,447      
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Compensation expense for issuance of restricted stock 606 $ 1   605    
Compensation expense for issuance of restricted stock (in shares)   70,259        
Conversion of Preferred stock into common stock (1) $ 15   (16)    
Conversion of Preferred stock into common stock (in shares)   1,549,609 (15,497)      
Exercise of pre-funded warrants (in shares)   6,000        
Public Offering - issuance of common stock and warrants 19,378 $ 18   19,360    
Public Offering - issuance of common stock and warrants (in shares)   1,823,000        
Net loss (4,275)       (4,275)  
Total comprehensive income (loss) (1)         (1)
Balance at Jun. 30, 2020 $ 7,702 $ 35   $ 390,882 $ (383,307) $ 92
Balance (in shares) at Jun. 30, 2020   3,521,641 25,950      
v3.20.2
Condensed Consolidated Statements of Stockholders' Equity (Deficit) (Unaudited) (Parenthetical)
Dec. 24, 2019
Statement Of Stockholders Equity [Abstract]  
Reverse stock split 1:700
Reverse stock split ratio 0.00142
v3.20.2
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Cash flows from operating activities:    
Net loss $ (12,136) $ (13,853)
Adjustments to reconcile net loss to net cash used in operating activities:    
Stock option compensation expense 25 129
Restricted stock compensation expense 635 4
Depreciation expense 92 122
Amortization of right of use assets 335 552
Warrant liability fair value adjustment 2,832 (17)
Loss on issuance of financial instruments 0 6
Interest expense accrued related to convertible notes 80 329
Debt discount amortization 0 3,444
Changes in assets and liabilities:    
(Increase) decrease in prepaid expenses and other assets (232) 232
(Increase) decrease in accounts receivable (125) 404
(Increase) decrease in inventories (70) 143
Increase (decrease) in accounts payable and accrued expenses (3,957) 3,827
Decrease in deferred revenue (248) (240)
Decrease in operating lease liabilities (313) (540)
Decrease in other non-current liabilities 0 (504)
Net cash used in operating activities (13,082) (5,962)
Cash flows from investing activities:    
Purchase of property, plant and equipment (221) (2)
Net cash used in investing activities (221) (2)
Cash flows from financing activities:    
Principal payments on financing leases (23) 0
Net proceeds from the issuance of debt 0 3,719
Net payments related to reserve stock split (106) 0
Net proceeds from Public Offering 19,378 0
Net cash provided by financing activities 19,249 3,869
Foreign currency effects on cash 63 (69)
Net increase (decrease) in cash and cash equivalents 6,009 (2,162)
Cash and cash equivalents:    
Beginning of period 10,183 3,578
End of period 16,192 1,416
Supplemental Disclosure of Cash Flow Information:    
Interest expense 7 0
Supplemental Disclosure of Non-Cash Investing and Financing Activities:    
Conversions of preferred stock into common stock 15 0
Reclassification of 2019 warrants from liability to equity 6,199 0
Exchange of 2019 warrants 0 13
Adoption of ASC 842 lease standard 0 1,652
Right of use assets obtained in exchange for lease obligations 0 874
Series D Preferred Stock [Member]    
Cash flows from financing activities:    
Net proceeds from sale of Series D Preferred Stock 0 150
Supplemental Disclosure of Non-Cash Investing and Financing Activities:    
Conversion of Series D preferred stock to debt $ 0 $ 1,160
v3.20.2
General
6 Months Ended
Jun. 30, 2020
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
General

(1)

General

The unaudited interim condensed consolidated financial statements of Delcath Systems, Inc. (“Delcath” or the “Company”) as of and for the three and six months ended June 30, 2020 and 2019 should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “Annual Report”), which was filed with the Securities Exchange Commission (the “SEC”) on March 25, 2020 and may also be found on the Company’s website (www.delcath.com). In these notes to the condensed consolidated financial statements the terms “us”, “we” or “our” refer to Delcath and its consolidated subsidiaries. 

Description of Business

 

Delcath Systems, Inc. is an interventional oncology company focused on the treatment of primary and metastatic liver cancers. Our investigational product—Melphalan Hydrochloride for Injection for use with the Delcath Hepatic Delivery System (“Melphalan/HDS”) —is designed to administer high-dose chemotherapy to the liver while controlling systemic exposure and associated side effects. In Europe, our system is commercially available under the trade name Delcath CHEMOSAT® Hepatic Delivery System for Melphalan (“CHEMOSAT”), where it has been used at major medical centers to treat a wide range of cancers of the liver.

 

Our clinical development program (“CDP”) for Melphalan/HDS is comprised of The FOCUS Clinical Trial for Patients with Hepatic Dominant Ocular Melanoma (the “FOCUS Trial”), a global registration clinical trial that is investigating objective response rate in ocular melanoma liver metastases, or mOM, and the ALIGN Trial, a global Phase 3 clinical trial for intrahepatic cholangiocarcinoma, or ICC (the “ALIGN Trial”). Our CDP also includes a registry for CHEMOSAT commercial cases performed in Europe and sponsorship of select investigator-initiated trials or IITs.

 

Risks and Uncertainties

 

The recent outbreak of a novel strain of coronavirus (COVID-19) has had an impact on our ability to monitor data at our clinical trial sites and is likely to cause a decline in product revenue for the foreseeable future as many hospitals are prioritizing the treatment of patients diagnosed with COVID-19. We expected to announce top-line data from our FOCUS trial in mid-2020; however, COVID-19 has impacted our ability to enroll and treat patients in this trial and to monitor data at our clinical trial sites.  As a result, we will not be able to release the top-line data from the FOCUS Trial within the timeframe we had anticipated. Once our clinical trial sites are able to return to normal operating procedures, we will assess the impact and update our expected timing accordingly. This situation is rapidly changing and additional impacts to the business may arise that we are not aware of currently. The ultimate impact of the pandemic on the Company’s results of operations, financial position, liquidity or capital resources cannot be reasonably estimated at this time.

Liquidity and Going Concern

The accompanying interim condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses since inception and expects to continue incurring losses for the next several years. These losses, among other factors, raise substantial doubt about the Company’s ability to continue as a going concern.

The Company’s existence is dependent upon management’s ability to obtain additional funding sources or to enter into strategic alliances. There can be no assurance that the Company’s efforts will result in the resolution of the Company’s liquidity needs. The accompanying statements do not include any adjustments that might result should the Company be unable to continue as a going concern. 

Basis of Presentation

These interim condensed consolidated financial statements are unaudited and were prepared by the Company in accordance with generally accepted accounting principles in the United States of America (GAAP) and with the SEC’s instructions to Form 10-Q and Article 10 of Regulation S-X. They include the accounts of all entities controlled by Delcath and all significant inter-company accounts and transactions have been eliminated in consolidation. All historical share and per share amounts have been retrospectively adjusted for the one-for-seven hundred stock split effected on December 24, 2019.

The preparation of interim condensed consolidated financial statements requires management to make assumptions and estimates that impact the amounts reported. These interim condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the Company’s results of operations, financial position and cash flows for the interim periods ended June 30, 2020 and 2019; however, certain information and footnote disclosures normally included in our Annual Report have been condensed or omitted as permitted by GAAP. It is important to note that the Company’s results of operations and cash flows for interim periods are not necessarily indicative of the results of operations and cash flows to be expected for a full fiscal year or any interim period.

 

Significant Accounting Policies

A description of our significant accounting policies has been provided in Note 3 Summary of Significant Accounting Policies to the Consolidated Financial Statements included in the Company’s Annual Report.

Recently Issued Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Simplifying the Accounting for Income Taxes. The list of changes is comprehensive, however the changes will not significantly impact the Company due to the full valuation allowance that is recorded against the Company’s deferred tax assets ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption of ASU 2019-12 is permitted, including adoption in any interim period for public business entities for periods for which financial statements have not yet been issued. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an entity that elects early adoption must adopt all the amendments in the same period. The Company will adopt ASU 2019-12 in 2021.

 

v3.20.2
Cash, Cash Equivalents and Restricted Cash
6 Months Ended
Jun. 30, 2020
Cash And Cash Equivalents [Abstract]  
Cash, Cash Equivalents and Restricted Cash

(2)

Cash, Cash Equivalents and Restricted Cash

 

Cash and cash equivalents that are restricted as to withdrawal or use under the terms of certain contractual agreements are recorded in Restricted Cash on the balance sheets. Restricted cash does not include required minimum balances.

 

Cash, cash equivalents, and restricted cash balances were as follows:

 

 

 

June 30,

 

 

December 31,

 

(in thousands)

 

 

2020

 

 

 

2019

 

Cash and cash equivalents

 

$

16,011

 

 

$

10,002

 

Letters of credit

 

 

131

 

 

 

131

 

Security for credit cards

 

 

50

 

 

 

50

 

Total cash, cash equivalents and restricted cash shown in

   the statements of cash flows

 

$

16,192

 

 

$

10,183

 

v3.20.2
Inventories
6 Months Ended
Jun. 30, 2020
Inventory Disclosure [Abstract]  
Inventories

(3)

Inventories

Inventories consist of the following:

 

 

 

June 30,

 

 

December 31,

 

(in thousands)

 

2020

 

 

2019

 

Raw materials

 

$

389

 

 

$

375

 

Work-in-process

 

 

334

 

 

 

279

 

Total inventories

 

$

723

 

 

$

654

 

 

v3.20.2
Prepaid Expenses and Other Current Assets
6 Months Ended
Jun. 30, 2020
Deferred Costs Capitalized Prepaid And Other Assets Disclosure [Abstract]  
Prepaid Expenses And Other Current Assets

(4)

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following:

 

 

 

June 30,

 

 

December 31,

 

(in thousands)

 

2020

 

 

2019

 

Clinical trial expenses

 

$

1,497

 

 

$

725

 

Insurance premiums

 

 

244

 

 

 

589

 

Other1

 

 

251

 

 

 

445

 

Total prepaid expenses and other current assets

 

$

1,992

 

 

$

1,759

 

 

1 Other consists of various prepaid expenses and other current assets, with no individual item accounting for more than 5% of prepaid expenses and other current assets at June 30, 2020 and December 31, 2019.

v3.20.2
Property, Plant, and Equipment
6 Months Ended
Jun. 30, 2020
Property Plant And Equipment [Abstract]  
Property, Plant, and Equipment

(5)

Property, Plant, and Equipment

Property, plant, and equipment consist of the following:

 

 

 

June 30,

 

 

December 31,

 

 

Estimated

(in thousands)

 

2020

 

 

2019

 

 

Useful Life

Buildings and land

 

$

634

 

 

$

589

 

 

30 years - Buildings

Enterprise hardware and software

 

 

1,802

 

 

 

1,739

 

 

3 years

Leaseholds

 

 

1,797

 

 

 

1,695

 

 

Lesser of lease term or estimated useful life

Equipment

 

 

1,032

 

 

 

1,025

 

 

7 years

Furniture

 

 

202

 

 

 

198

 

 

5 years

Property, plant and equipment, gross

 

 

5,467

 

 

 

5,246

 

 

 

Accumulated depreciation

 

 

(4,603

)

 

 

(4,511

)

 

 

Property, plant and equipment, net

 

$

864

 

 

$

735

 

 

 

 

Depreciation expense for the three and six months ended June 30, 2020 was approximately $44 thousand and $92 thousand as compared to approximately $57 thousand and $122 thousand for the same periods in 2019.

 

v3.20.2
Accrued Expenses
6 Months Ended
Jun. 30, 2020
Payables And Accruals [Abstract]  
Accrued Expenses

(6)

Accrued Expenses

Accrued expenses consist of the following:

 

 

 

June 30,

 

 

December 31,

 

(in thousands)

 

2020

 

 

2019

 

Clinical expenses

 

$

2,565

 

 

$

2,497

 

Compensation, excluding taxes

 

 

2,379

 

 

 

3,525

 

Other1

 

 

485

 

 

 

925

 

Total accrued expenses

 

$

5,429

 

 

$

6,947

 

 

1 Other consists of various accrued expenses, with no individual item accounting for more than 5% of current liabilities at June 30, 2020 and December 31, 2019.

v3.20.2
Leases
6 Months Ended
Jun. 30, 2020
Leases [Abstract]  
Leases

(7)

Leases

The Company recognizes right-of-use (“ROU”) assets and lease liabilities when it obtains the right to control an asset under a leasing arrangement with an initial term greater than twelve months. The Company leases its facilities under non-cancellable operating and financing leases.

The Company evaluates the nature of each lease at the inception of an arrangement to determine whether it is an operating or financing lease and recognizes the ROU asset and lease liabilities based on the present value of future minimum lease payments over the expected lease term. The Company’s leases do not generally contain an implicit interest rate and therefore the Company uses the incremental borrowing rate it would expect to pay to borrow on a similar collateralized basis over a similar term in order to determine the present value of its lease payments.

Pursuant to a 2014 sublease agreement (the “2014 Sublease”) and a 2015 sublease agreement (the “2015 Sublease”) the Company subleases portions of its leased premises in Dublin, Ireland to a sublessee. On May 15, 2020, the Company and its sublessee entered into amendments to the 2014 Sublease and 2015 Sublease pursuant to which (i) the 2014 Sublease and 2015 Sublease were extended from May 31, 2020 to August 2, 2021, and (ii) effective  July 1, 2020, the leased premises under the 2015 Sublease would be expanded to include an additional 4,999 square ft of space, and (ii) effective July 1, 2020, the rent under the 2015 Sublease would increase from approximately $14,559 per month to $20,643 per month. The Company analyzed the terms of the amended 2014 Sublease and 2015 Sublease and determined that its ROU for the master operating lease was not impaired as a result of the amendments.

On June 25, 2020, the Company entered into a sub-lease agreement (the “2021 Sub-Lease”) with its current sublessee under the 2014 Sublease and 2015 Sublease pursuant to which, effective August 2, 2021, the current sublessee would become the lessee and the Company would then sub-lease its portion of the premises from such current sublessee.  The Company Rent under the 2021 Sub-Lease will be approximately $3,721.50 per month.  Aside from the 2021 Lease, the Company has no operating or financing leases that have not yet commenced.

 

The following table summarizes the Company’s operating and financing leases as of and for the six months ended June 30, 2020:

 

(in thousands)

 

US

 

 

Ireland

 

 

Total

 

Lease cost

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease cost

 

$

236

 

 

$

103

 

 

$

339

 

Financing lease cost

 

23

 

 

 

 

 

 

23

 

Sublease income

 

 

 

 

 

(98

)

 

 

(98

)

Total

 

$

259

 

 

$

5

 

 

$

264

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other information

 

 

 

 

 

 

 

 

 

 

 

 

Operating cash flows out from operating leases

 

 

(236

)

 

 

(103

)

 

 

(339

)

Operating cash flows in from operating leases

 

 

-

 

 

 

98

 

 

 

98

 

Operating cash flows out from financing leases

 

 

(22

)

 

 

 

 

 

(22

)

Weighted average remaining lease term

 

 

0.7

 

 

 

1.1

 

 

 

 

 

Weighted average discount rate - operating leases

 

 

8

%

 

 

8

%

 

 

 

 

 

Remaining maturities of the Company’s operating leases, excluding short-term leases, are as follows:

 

(in thousands)

 

US

 

 

Ireland

 

 

Total

 

Year ended December 31, 2020

 

$

239

 

 

$

105

 

 

$

344

 

Year ended December 31, 2021

 

$

78

 

 

 

122

 

 

 

200

 

Total

 

$

317

 

 

 

227

 

 

 

544

 

Less present value discount

 

$

(9

)

 

 

(10

)

 

 

(19

)

Operating lease liabilities included in the condensed consolidated balance sheet at June 30, 2020

 

$

308

 

 

$

217

 

 

$

525

 

 

 

v3.20.2
Outstanding Debt
6 Months Ended
Jun. 30, 2020
Debt Disclosure [Abstract]  
Outstanding Debt

(8)

Outstanding Debt

 

On June 6, 2019, the Company entered into an agreement with two institutional investors, pursuant to which the investors agreed to transfer and surrender to the Company for cancellation, warrants to purchase 5,605 shares of the Company’s common stock (the “Series D Warrants”) and warrants to purchase 0.1 million shares of the Company’s common stock (the “Pre-Funded Series D Warrants”). Under the terms of the Purchase Agreement, the Company agreed to sell and issue to the investors 8% Senior Secured Promissory Notes in an aggregate principal amount of $2.0 million and with a July 16, 2021 maturity date, in full payment and satisfaction of the purchase price for the Series D Warrants and Pre-Funded Series D Warrants. This agreement was effective on July 15, 2019, upon the closing of the Company’s July 2019 Private Placement discussed further in Notes 10 and 11 to the Company’s audited consolidated financial statements contained in its Annual Report. Following the closing of the July 2019 Private Placement, the Company entered into an agreement under which the 8% Senior Secured Promissory Notes became convertible into shares of Series E Preferred Stock and Warrants (the “Unit”) at the price of $1,500 per Unit. The principal is recognized in Convertible notes payable, long-term on the Condensed Consolidated Balance Sheet.

The following tables provide a summary of the notes outstanding at June 30, 2020:

 

 

 

Conversion

price

 

 

Current interest

rate

 

 

Principal

 

Long term convertible notes payable

 

 

 

 

 

 

 

 

 

 

 

 

8.0% July 2019 Notes

 

$

1,500

 

 

 

8

%

 

$

2,000,000

 

 

v3.20.2
Stockholders' Equity
6 Months Ended
Jun. 30, 2020
Stockholders Equity Note [Abstract]  
Stockholders' Equity

 

 

 

(9)

Stockholders’ Equity

 

Preferred Stock

 

Series E and Series E-1 Preferred Stock

 

On July 11, 2019, the Company entered into a securities purchase agreement with certain accredited investors pursuant to which Delcath sold to investors an aggregate of 20,000 shares of our Series E convertible preferred stock, par value $0.01 per share, or the “Series E Preferred Stock”, at a price of $1,000 per share and a warrant, or a “2019 E Warrant”, to purchase a number of shares of common stock equal to the number of shares of common stock issuable upon conversion of the Series E Preferred Stock purchased by the investor, or the “July 2019 Private Placement”. In connection with the July 2019 Private Placement, the Company exchanged $11.8 million of debt, interest and Series D Warrants for 11,500 shares of Series E Preferred Stock and related 2019 E Warrants, $0.1 million in accounts payables for 149 shares of Series E Preferred Stock and related 2019 E Warrants and issued 923 shares of Series E Preferred Stock and related 2019 E Warrants to certain investors in exchange for a waiver of rights under exchange agreements signed in December 2018 and March 2019, or the “Debt Exchange”.

 

On August 19, 2019, the Company entered into a securities purchase agreement with certain accredited investors pursuant to which Delcath sold to investors an aggregate of 9,510 shares of Series E-1 convertible preferred stock, par value $0.01 per share, or the Series E-1 Preferred Stock, at a price of $1,000 per share and a warrant, or a “2019 E-1 Warrant”, and together with the 2019 E Warrant, the “2019 Warrants”, to purchase a number of shares of common stock of the Company equal to the number of shares of common stock issuable upon conversion of the Series E-1 Preferred Stock purchased by the investor, or the “August 2019 Private Placement”, and, collectively with the July 2019 Private Placement, the “Private Placements”.

 

Each share of Series E Preferred Stock and Series E-1 Preferred Stock, or, collectively, the “Preferred Stock”, is convertible at any time at the option of the holder into the number of shares of common stock determined by dividing the current conversion price. At December 31, 2019, the conversion price was $23.04 and was subsequently adjusted to $10.00 upon the pricing of a $22.0 million offering on May 5, 2020, as discussed further below. As a result of the price adjustment, the excess of the fair value of the common stock that will be received on conversion, measured on the price reset date, exceeded the original proceeds allocated to the Preferred Stock by $12.0 million. The holders of the Preferred Stock are entitled to receive dividends on shares of Preferred Stock equal (on an “as converted” basis) to and in the same form as dividends paid on shares of the common stock. Any such dividends that are not paid to the holders of the Preferred Stock will increase the stated value. No other dividends will be paid on shares of Preferred Stock.

 

Each 2019 Warrant had an exercise price equal to $23.04 at December 31, 2019. The exercise price was subsequently adjusted to $10.00 upon the pricing of a $22.0 million offering on May 5, 2020, as discussed further below, which resulted in the recognition of a $55 thousand deemed dividend. The 2019 Warrants are exercisable until 5:00 p.m. (NYC time) on December 24, 2024.

 

As of June 30, 2020, there were 25,950 shares of Preferred Stock outstanding and 1.8 million 2019 Warrants outstanding.

 

 

 

 

 

 

 

 

 

 

 

 

 

Public Offering and Nasdaq Uplisting

On May 5, 2020, the Company closed a public offering of 1,823,000 shares of common stock, 377,000 pre-funded warrants and Series F warrants to purchase 2,224,900 shares of common stock at an exercise price of $10.00 per share. Delcath received gross proceeds of approximately $22.0 million from the offering, before deducting the underwriting discount and estimated offering expenses. The securities were offered pursuant to a registration statement on Form S-1 (File No. 333-235904) previously filed with the SEC and declared effective on April 30, 2020. In connection with this offering, the Company’s common stock was approved for listing and began trading on the Nasdaq Capital Market on May 1, 2020. As a result of this offering, the Preferred Stock conversion price was adjusted to $10.00 and the exercise price of the 2019 Warrants was adjusted to $10.00 and neither instrument is subject to further price resets.

Other Common Stock Issuances

During the six months ended June 30, 2020 the Company issued 1,549,609 shares of the Company’s common stock pursuant to conversions of Preferred Stock.

During the six months ended June 30, 2020, the Company issued 6,000 shares of common stock associated with the exercise of pre-funded warrants.

During the six months ended June 30, 2020, the Company issued 72,976 shares of common stock as compensation.

 

 

Share-Based Compensation

The Company’s 2019 Equity Incentive Plan (the “Plan”) allows for grants in the form of incentive stock options, nonqualified stock options, stock units, stock awards, stock appreciation rights, and other stock-based awards.  All of the Company’s officers, directors, employees, consultants and advisors are eligible to receive grants under the Plan.  The maximum number of shares reserved for issuance under the Plan is 2,142.  Options to purchase shares of common stock are granted at exercise prices not less than 100% of fair value on the dates of grant. As of June 30, 2020, the Plan had approximately 502 shares available for grant.  

The following is a summary of stock option activity under the Plan for the six months ended June 30, 2020:  

 

 

 

Number of Shares

 

 

Weighted Average Exercise

Price

 

 

Weighted

Average

Remaining

Contractual

Term (Years)

 

Aggregate Intrinsic

Value

 

Outstanding at December 31, 2019

 

 

1,640

 

 

$

196.70

 

 

9.1

 

$

 

Granted

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

Cancelled/Forfeited

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at June 30, 2020

 

 

1,640

 

 

$

196.70

 

 

8.6

 

$

 

Exercisable at June 30, 2020

 

 

1,640

 

 

$

196.70

 

 

8.6

 

$

 

 

At June 30, 2020, there was no unrecognized compensation expense related to non-vested share-based compensation awards under the Plan. The following is a summary of share-based compensation expense in the statement of operations:         

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

(in thousands)

2020

 

 

2019

 

 

2020

 

 

2019

 

Selling, general and administrative

$

606

 

 

$

58

 

 

$

655

 

 

$

106

 

Research and development

 

 

 

 

17

 

 

 

5

 

 

 

27

 

Total

$

606

 

 

$

75

 

 

$

660

 

 

$

133

 

Warrants

 

The following is a summary of warrant activity for the six months ended June 30, 2020:

 

 

 

Warrants

 

 

Exercise Price per

Share

 

Weighted

Average

Exercise

Price

 

 

Weighted Average

Remaining Life

(Years)

 

Outstanding at December 31, 2019

 

 

1,826,608

 

 

$7.00 - $23.04

 

$

23.04

 

 

 

5.0

 

Issued

 

 

2,601,900

 

 

 

 

 

10.00

 

 

 

 

 

Exercised

 

 

(6,000

)

 

 

 

 

0.01

 

 

 

 

 

Expired

 

 

(9

)

 

 

 

 

7.00

 

 

 

 

 

Outstanding at June 30, 2020

 

 

4,422,499

 

 

$0.01- $10.00

 

$

9.16

 

 

 

4.7

 

 

As of June 30, 2020, warrants to purchase 371,000 shares of common stock were pre-funded and the exercise price was $0.01 per share. The remaining warrants were exercisable at $10.00 per share.

v3.20.2
Fair Value Measurements
6 Months Ended
Jun. 30, 2020
Fair Value Disclosures [Abstract]  
Fair Value Measurements

(10)

Fair Value Measurements

 

As a result of the expiration of certain provisions in the 2019 Warrants, the 2019 Warrants were reclassified from liability to equity on February 19, 2020.

The table below presents the activity within Level 3 of the fair value hierarchy for the six months ended June 30, 2020:

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

 

(in thousands)

 

Warrant Liability

 

Balance at December 31, 2019

 

$

3,368

 

Total change in the liability included in earnings

 

 

2,832

 

Fair value of warrants reclassified from liability to equity

 

 

(6,200

)

Balance at June 30, 2020

 

$

 

 

The fair value of the outstanding warrants at February 19, 2020, the date the 2019 Warrants were no longer classified as a liability, and December 31, 2019 was determined by using option pricing models with the following assumptions:

 

 

 

February 19,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Expected life (in years)

 

4.3

 

 

 

4.6

 

Expected volatility

 

208.2%

 

 

207.5%

 

Risk-free interest rates

 

1.4%

 

 

1.7%

 

 

The table below presents the Company’s assets and liabilities measured at fair value on a recurring basis as of June 30, 2020, aggregated by the level in the fair value hierarchy within which those measurements fall in accordance with ASC 820.

 

 

 

Assets and Liabilities Measured at Fair Value on a Recurring Basis

 

(in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

June 30, 2020

 

 

December 31, 2019

 

 

June 30, 2020

 

 

December 31, 2019

 

 

June 30, 2020

 

 

December 31, 2019

 

 

June 30, 2020

 

 

December 31, 2019

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative instrument liabilities

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

3,368

 

 

$

 

 

$

3,368

 

  

   

v3.20.2
Net Loss per Common Share
6 Months Ended
Jun. 30, 2020
Earnings Per Share [Abstract]  
Net Loss per Common Share

(11)

Net Loss per Common Share  

 

Basic net loss per share is determined by dividing net loss by the weighted average shares of common stock outstanding during the period, without consideration of potentially dilutive securities, except for those shares that are issuable for little or no cash consideration. Diluted net loss per share is determined by dividing net loss by diluted weighted average shares outstanding. Diluted weighted average shares reflects the dilutive effect, if any, of potentially dilutive common shares, such as stock options and warrants calculated using the treasury stock method. In periods with reported net operating losses, all common stock options and warrants are generally deemed anti-dilutive such that basic net loss per share and diluted net loss per share are equal.

 

The following potentially dilutive securities were excluded from the computation of earnings per share as of June 30, 2020 and 2019 because their effects would be anti-dilutive:

 

 

 

June 30,

 

(in thousands, except share data)

 

2020

 

 

2019

 

Stock options

 

 

1,640

 

 

 

1,667

 

Common stock warrants - equity

 

 

4,051,499

 

 

 

6,004

 

Common stock warrants - liabilities

 

 

 

 

 

179

 

Common stock reserved for conversion of preferred shares

 

 

2,595,087

 

 

 

 

Assumed conversion of convertible notes

 

 

146,288

 

 

 

480

 

Total

 

 

6,794,514

 

 

 

8,329

 

 

However, in certain periods in which the exercise price of the warrants was less than the last reported sales price of Delcath’s common stock on the final trading day of the period and there is a gain recorded pursuant to the change in fair value of the warrant derivative liability, the impact of gains related to the mark-to-market adjustment of the warrants outstanding at the end of the period is reversed and the treasury stock method is used to determine diluted earnings per share.

 

 

 

The following table reconciles net loss per share for the three and six months ended June 30, 2020 and 2019:

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

(in thousands, except share data)

2020

 

 

2019

 

 

2020

 

 

2019

 

Net loss

$

(4,275

)

 

$

(5,959

)

 

$

(12,136

)

 

$

(13,853

)

Deemed dividend for triggering of warrant down round feature

 

(55

)

 

 

 

 

 

(55

)

 

 

 

Net loss attributable to common stockholders

$

(4,330

)

 

$

(5,959

)

 

$

(12,191

)

 

$

(13,853

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - basic*

 

2,273,187

 

 

 

101,862

 

 

 

1,171,994

 

 

 

102,956

 

Weighted average shares outstanding - diluted*

 

2,273,187

 

 

 

101,862

 

 

 

1,171,994

 

 

 

102,956

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share - basic*

$

(1.90

)

 

$

(58.50

)

 

$

(10.40

)

 

$

(134.55

)

Net loss per share - diluted*

$

(1.90

)

 

$

(58.50

)

 

$

(10.40

)

 

$

(134.55

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* reflects, one-for-seven hundred (1:700) reverse stock split effected on December 24, 2019.

 

 

 

At June 30, 2020, the Company had 371,000 pre-funded warrants outstanding. The following table provides a reconciliation of the weighted average shares outstanding calculation for the three and six months ended June 30, 2020 and 2019:

 

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Weighted average shares issued

 

2,038,297

 

 

 

25,587

 

 

 

1,054,549

 

 

 

26,681

 

Weighted average pre-funded warrants

 

234,890

 

 

 

76,275

 

 

 

117,445

 

 

 

76,275

 

Weighted average shares outstanding

 

2,273,187

 

 

 

101,862

 

 

 

1,171,994

 

 

 

102,956

 

 

v3.20.2
Taxes
6 Months Ended
Jun. 30, 2020
Income Tax Disclosure [Abstract]  
Taxes

 

 

(12)Taxes

 

As discussed in Note 14 Income Taxes, of the Company’s Annual Report, the Company has a valuation allowance against the full amount of its net deferred tax assets. The Company currently provides a valuation allowance against deferred tax assets when it is more likely than not that some portion or all of its deferred tax assets will not be realized. The Company has not recognized any unrecognized tax benefits in its balance sheet.

 

The Company is subject to income tax in the U.S., as well as various state and international jurisdictions. The federal and state tax authorities can generally reduce a net operating loss (but not create taxable income) for a period outside the statute of limitations in order to determine the correct amount of net operating loss which may be allowed as a deduction against income for a period within the statute of limitations. Additional information regarding the statutes of limitations can be found in Note 14, Income Taxes, of the Company’s Annual Report.

 

On March 27, 2020, President Trump signed into law the $2 trillion bipartisan Coronavirus Aid, Relief, and Economic Security (CARES) Act (H.R. 748). The CARES Act includes a variety of economic and tax relief measures intended to stimulate the economy, including loans for small businesses, payroll tax credits/deferrals, and corporate income tax relief. Due to the Company’s history of tax loss carryforwards and full valuation allowance, the CARES Act did not have a significant effect to the income tax provision, as the corporate income tax relief was directed towards cash taxpayers.

 

During the six months ending June 30, 2020, the Company settled intercompany debt of its two Ireland subsidiaries, Delcath Systems Limited and Delcath Holdings Limited, as capital contributions. During the six months ending June 30, 2020, Delcath Holdings Limited ceased operations with an intent to liquidate after the receipt of tax clearance. When Delcath Holdings Limited liquidates, the Company will generate a $19.9 million U.S. deferred tax benefit from a loss on its investment, which may be subject to limitations under Internal Revenue Code Sections 382 and 383 and will be fully offset by a valuation allowance.

 

v3.20.2
Commitments and Contingencies
6 Months Ended
Jun. 30, 2020
Commitments And Contingencies Disclosure [Abstract]  
Commitments and Contingencies

(13)   Commitments and Contingencies

 

Following the May 18, 2020 resignation of Jennifer Simpson, the Company’s former President and Chief Executive Officer, and Barbra Keck, the Company’s former Chief Financial Officer (the “Claimants”), it became evident that there was a dispute regarding the Company’s compensation obligations to the Claimants. In a letter dated, June 29, 2020, an attorney representing the Claimants made certain claims and threatened litigation against the Company. On or about July 27, 2020, the Claimants filed a statement of claim with the American Arbitration Association against the Company. The Claimants seek payment of certain purported unpaid compensation amounts claimed to be due to them, in an approximate amount of $1.14 million in the aggregate, as well as unspecified statutory damages under New York Labor Law, attorneys’ fees and costs, and statutory interest. The Company intends to defend the claims vigorously. As of June 30, 2020, the Company has accrued for the full purported unpaid compensation amounts.

v3.20.2
Subsequent Events
6 Months Ended
Jun. 30, 2020
Subsequent Events [Abstract]  
Subsequent Events

(14)

Subsequent Events  

 

Preferred Stock Conversions

 

 

Subsequent to June 30, 2020, the Company issued 372,500 shares of the Company’s common stock upon the conversion of Preferred Stock.

 

Property Purchase

 

On July 31, 2020, the Company exercised its option to purchase its 95-97 Park Road office location in Queensbury, NY for $460,263, pursuant to the terms of the lease agreement dated September 17, 2018, as amended on January 29, 2019 and further amended on July 31, 2020.

 

Stock Warrant Exercises

 

Subsequent to June 30, 2020, warrants to purchase 41,827 shares of the Company’s common stock with an exercise price of $10.00 per share were exercised for proceeds of $418,270.

v3.20.2
General (Policies)
6 Months Ended
Jun. 30, 2020
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
Risk And Uncertainties

Risks and Uncertainties

 

The recent outbreak of a novel strain of coronavirus (COVID-19) has had an impact on our ability to monitor data at our clinical trial sites and is likely to cause a decline in product revenue for the foreseeable future as many hospitals are prioritizing the treatment of patients diagnosed with COVID-19. We expected to announce top-line data from our FOCUS trial in mid-2020; however, COVID-19 has impacted our ability to enroll and treat patients in this trial and to monitor data at our clinical trial sites.  As a result, we will not be able to release the top-line data from the FOCUS Trial within the timeframe we had anticipated. Once our clinical trial sites are able to return to normal operating procedures, we will assess the impact and update our expected timing accordingly. This situation is rapidly changing and additional impacts to the business may arise that we are not aware of currently. The ultimate impact of the pandemic on the Company’s results of operations, financial position, liquidity or capital resources cannot be reasonably estimated at this time.

Liquidity And Going Concern

Liquidity and Going Concern

The accompanying interim condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses since inception and expects to continue incurring losses for the next several years. These losses, among other factors, raise substantial doubt about the Company’s ability to continue as a going concern.

The Company’s existence is dependent upon management’s ability to obtain additional funding sources or to enter into strategic alliances. There can be no assurance that the Company’s efforts will result in the resolution of the Company’s liquidity needs. The accompanying statements do not include any adjustments that might result should the Company be unable to continue as a going concern. 

Basis of Presentation

Basis of Presentation

These interim condensed consolidated financial statements are unaudited and were prepared by the Company in accordance with generally accepted accounting principles in the United States of America (GAAP) and with the SEC’s instructions to Form 10-Q and Article 10 of Regulation S-X. They include the accounts of all entities controlled by Delcath and all significant inter-company accounts and transactions have been eliminated in consolidation. All historical share and per share amounts have been retrospectively adjusted for the one-for-seven hundred stock split effected on December 24, 2019.

The preparation of interim condensed consolidated financial statements requires management to make assumptions and estimates that impact the amounts reported. These interim condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the Company’s results of operations, financial position and cash flows for the interim periods ended June 30, 2020 and 2019; however, certain information and footnote disclosures normally included in our Annual Report have been condensed or omitted as permitted by GAAP. It is important to note that the Company’s results of operations and cash flows for interim periods are not necessarily indicative of the results of operations and cash flows to be expected for a full fiscal year or any interim period.

Recently Adopted and Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Simplifying the Accounting for Income Taxes. The list of changes is comprehensive, however the changes will not significantly impact the Company due to the full valuation allowance that is recorded against the Company’s deferred tax assets ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption of ASU 2019-12 is permitted, including adoption in any interim period for public business entities for periods for which financial statements have not yet been issued. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an entity that elects early adoption must adopt all the amendments in the same period. The Company will adopt ASU 2019-12 in 2021.

v3.20.2
Cash, Cash Equivalents and Restricted Cash (Tables)
6 Months Ended
Jun. 30, 2020
Cash And Cash Equivalents [Abstract]  
Schedule of Cash, Cash Equivalents, and Restricted Cash

Cash, cash equivalents, and restricted cash balances were as follows:

 

 

 

June 30,

 

 

December 31,

 

(in thousands)

 

 

2020

 

 

 

2019

 

Cash and cash equivalents

 

$

16,011

 

 

$

10,002

 

Letters of credit

 

 

131

 

 

 

131

 

Security for credit cards

 

 

50

 

 

 

50

 

Total cash, cash equivalents and restricted cash shown in

   the statements of cash flows

 

$

16,192

 

 

$

10,183

 

v3.20.2
Inventories (Tables)
6 Months Ended
Jun. 30, 2020
Inventory Disclosure [Abstract]  
Schedule of inventories

Inventories consist of the following:

 

 

 

June 30,

 

 

December 31,

 

(in thousands)

 

2020

 

 

2019

 

Raw materials

 

$

389

 

 

$

375

 

Work-in-process

 

 

334

 

 

 

279

 

Total inventories

 

$

723

 

 

$

654

 

 

v3.20.2
Prepaid Expenses and Other Current Assets (Tables)
6 Months Ended
Jun. 30, 2020
Deferred Costs Capitalized Prepaid And Other Assets Disclosure [Abstract]  
Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following:

 

 

 

June 30,

 

 

December 31,

 

(in thousands)

 

2020

 

 

2019

 

Clinical trial expenses

 

$

1,497

 

 

$

725

 

Insurance premiums

 

 

244

 

 

 

589

 

Other1

 

 

251

 

 

 

445

 

Total prepaid expenses and other current assets

 

$

1,992

 

 

$

1,759

 

 

1 Other consists of various prepaid expenses and other current assets, with no individual item accounting for more than 5% of prepaid expenses and other current assets at June 30, 2020 and December 31, 2019.

v3.20.2
Property, Plant, and Equipment (Tables)
6 Months Ended
Jun. 30, 2020
Property Plant And Equipment [Abstract]  
Components of property, plant and equipment

Property, plant, and equipment consist of the following:

 

 

 

June 30,

 

 

December 31,

 

 

Estimated

(in thousands)

 

2020

 

 

2019

 

 

Useful Life

Buildings and land

 

$

634

 

 

$

589

 

 

30 years - Buildings

Enterprise hardware and software

 

 

1,802

 

 

 

1,739

 

 

3 years

Leaseholds

 

 

1,797

 

 

 

1,695

 

 

Lesser of lease term or estimated useful life

Equipment

 

 

1,032

 

 

 

1,025

 

 

7 years

Furniture

 

 

202

 

 

 

198

 

 

5 years

Property, plant and equipment, gross

 

 

5,467

 

 

 

5,246

 

 

 

Accumulated depreciation

 

 

(4,603

)

 

 

(4,511

)

 

 

Property, plant and equipment, net

 

$

864

 

 

$

735

 

 

 

v3.20.2
Accrued Expenses (Tables)
6 Months Ended
Jun. 30, 2020
Payables And Accruals [Abstract]  
Schedule of accrued expenses

Accrued expenses consist of the following:

 

 

 

June 30,

 

 

December 31,

 

(in thousands)

 

2020

 

 

2019

 

Clinical expenses

 

$

2,565

 

 

$

2,497

 

Compensation, excluding taxes

 

 

2,379

 

 

 

3,525

 

Other1

 

 

485

 

 

 

925

 

Total accrued expenses

 

$

5,429

 

 

$

6,947

 

 

1 Other consists of various accrued expenses, with no individual item accounting for more than 5% of current liabilities at June 30, 2020 and December 31, 2019.

v3.20.2
Leases (Tables)
6 Months Ended
Jun. 30, 2020
Leases [Abstract]  
Summary of Operating and Financing Leases

 

The following table summarizes the Company’s operating and financing leases as of and for the six months ended June 30, 2020:

 

(in thousands)

 

US

 

 

Ireland

 

 

Total

 

Lease cost

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease cost

 

$

236

 

 

$

103

 

 

$

339

 

Financing lease cost

 

23

 

 

 

 

 

 

23

 

Sublease income

 

 

 

 

 

(98

)

 

 

(98

)

Total

 

$

259

 

 

$

5

 

 

$

264

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other information

 

 

 

 

 

 

 

 

 

 

 

 

Operating cash flows out from operating leases

 

 

(236

)

 

 

(103

)

 

 

(339

)

Operating cash flows in from operating leases

 

 

-

 

 

 

98

 

 

 

98

 

Operating cash flows out from financing leases

 

 

(22

)

 

 

 

 

 

(22

)

Weighted average remaining lease term

 

 

0.7

 

 

 

1.1

 

 

 

 

 

Weighted average discount rate - operating leases

 

 

8

%

 

 

8

%

 

 

 

 

Schedule of Remaining Maturity of Operating Leases Excluding Short-Term Leases

Remaining maturities of the Company’s operating leases, excluding short-term leases, are as follows:

 

(in thousands)

 

US

 

 

Ireland

 

 

Total

 

Year ended December 31, 2020

 

$

239

 

 

$

105

 

 

$

344

 

Year ended December 31, 2021

 

$

78

 

 

 

122

 

 

 

200

 

Total

 

$

317

 

 

 

227

 

 

 

544

 

Less present value discount

 

$

(9

)

 

 

(10

)

 

 

(19

)

Operating lease liabilities included in the condensed consolidated balance sheet at June 30, 2020

 

$

308

 

 

$

217

 

 

$

525

 

v3.20.2
Outstanding Debt (Tables)
6 Months Ended
Jun. 30, 2020
Debt Disclosure [Abstract]  
Summary of Various Notes Issued

The following tables provide a summary of the notes outstanding at June 30, 2020:

 

 

 

Conversion

price

 

 

Current interest

rate

 

 

Principal

 

Long term convertible notes payable

 

 

 

 

 

 

 

 

 

 

 

 

8.0% July 2019 Notes

 

$

1,500

 

 

 

8

%

 

$

2,000,000

 

 

v3.20.2
Stockholders' Equity (Tables)
6 Months Ended
Jun. 30, 2020
Stockholders Equity Note [Abstract]  
Summary of Stock Option Activity

The following is a summary of stock option activity under the Plan for the six months ended June 30, 2020:  

 

 

 

Number of Shares

 

 

Weighted Average Exercise

Price

 

 

Weighted

Average

Remaining

Contractual

Term (Years)

 

Aggregate Intrinsic

Value

 

Outstanding at December 31, 2019

 

 

1,640

 

 

$

196.70

 

 

9.1

 

$

 

Granted

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

Cancelled/Forfeited

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at June 30, 2020

 

 

1,640

 

 

$

196.70

 

 

8.6

 

$

 

Exercisable at June 30, 2020

 

 

1,640

 

 

$

196.70

 

 

8.6

 

$

 

Summary of Recognized Share-based Compensation Cost The following is a summary of share-based compensation expense in the statement of operations:

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

(in thousands)

2020

 

 

2019

 

 

2020

 

 

2019

 

Selling, general and administrative

$

606

 

 

$

58

 

 

$

655

 

 

$

106

 

Research and development

 

 

 

 

17

 

 

 

5

 

 

 

27

 

Total

$

606

 

 

$

75

 

 

$

660

 

 

$

133

 

Summary of Warrant Activity

The following is a summary of warrant activity for the six months ended June 30, 2020:

 

 

 

Warrants

 

 

Exercise Price per

Share

 

Weighted

Average

Exercise

Price

 

 

Weighted Average

Remaining Life

(Years)

 

Outstanding at December 31, 2019

 

 

1,826,608

 

 

$7.00 - $23.04

 

$

23.04

 

 

 

5.0

 

Issued

 

 

2,601,900

 

 

 

 

 

10.00

 

 

 

 

 

Exercised

 

 

(6,000

)

 

 

 

 

0.01

 

 

 

 

 

Expired

 

 

(9

)

 

 

 

 

7.00

 

 

 

 

 

Outstanding at June 30, 2020

 

 

4,422,499

 

 

$0.01- $10.00

 

$

9.16

 

 

 

4.7

 

v3.20.2
Fair Value Measurements (Tables)
6 Months Ended
Jun. 30, 2020
Fair Value Disclosures [Abstract]  
Fair value measurements using significant unobservable inputs The table below presents the activity within Level 3 of the fair value hierarchy for the six months ended June 30, 2020

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

 

(in thousands)

 

Warrant Liability

 

Balance at December 31, 2019

 

$

3,368

 

Total change in the liability included in earnings

 

 

2,832

 

Fair value of warrants reclassified from liability to equity

 

 

(6,200

)

Balance at June 30, 2020

 

$

 

 

Schedule of fair value of the outstanding warrants The fair value of the outstanding warrants at February 19, 2020, the date the 2019 Warrants were no longer classified as a liability, and December 31, 2019 was determined by using option pricing models with the following assumptions:

 

 

 

February 19,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Expected life (in years)

 

4.3

 

 

 

4.6

 

Expected volatility

 

208.2%

 

 

207.5%

 

Risk-free interest rates

 

1.4%

 

 

1.7%

 

Assets and liabilities measured at fair value on a recurring basis

 

The table below presents the Company’s assets and liabilities measured at fair value on a recurring basis as of June 30, 2020, aggregated by the level in the fair value hierarchy within which those measurements fall in accordance with ASC 820.

 

 

 

Assets and Liabilities Measured at Fair Value on a Recurring Basis

 

(in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

June 30, 2020

 

 

December 31, 2019

 

 

June 30, 2020

 

 

December 31, 2019

 

 

June 30, 2020

 

 

December 31, 2019

 

 

June 30, 2020

 

 

December 31, 2019

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative instrument liabilities

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

3,368

 

 

$

 

 

$

3,368

 

  

v3.20.2
Net Loss per Common Share (Tables)
6 Months Ended
Jun. 30, 2020
Earnings Per Share [Abstract]  
Anti-dilutive securities excluded from the computation of earnings per share

The following potentially dilutive securities were excluded from the computation of earnings per share as of June 30, 2020 and 2019 because their effects would be anti-dilutive:

 

 

 

June 30,

 

(in thousands, except share data)

 

2020

 

 

2019

 

Stock options

 

 

1,640

 

 

 

1,667

 

Common stock warrants - equity

 

 

4,051,499

 

 

 

6,004

 

Common stock warrants - liabilities

 

 

 

 

 

179

 

Common stock reserved for conversion of preferred shares

 

 

2,595,087

 

 

 

 

Assumed conversion of convertible notes

 

 

146,288

 

 

 

480

 

Total

 

 

6,794,514

 

 

 

8,329

 

Calculation of net loss and number of shares used to compute basic and diluted earnings per share

However, in certain periods in which the exercise price of the warrants was less than the last reported sales price of Delcath’s common stock on the final trading day of the period and there is a gain recorded pursuant to the change in fair value of the warrant derivative liability, the impact of gains related to the mark-to-market adjustment of the warrants outstanding at the end of the period is reversed and the treasury stock method is used to determine diluted earnings per share.

 

 

 

The following table reconciles net loss per share for the three and six months ended June 30, 2020 and 2019:

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

(in thousands, except share data)

2020

 

 

2019

 

 

2020

 

 

2019

 

Net loss

$

(4,275

)

 

$

(5,959

)

 

$

(12,136

)

 

$

(13,853

)

Deemed dividend for triggering of warrant down round feature

 

(55

)

 

 

 

 

 

(55

)

 

 

 

Net loss attributable to common stockholders

$

(4,330

)

 

$

(5,959

)

 

$

(12,191

)

 

$

(13,853

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - basic*

 

2,273,187

 

 

 

101,862

 

 

 

1,171,994

 

 

 

102,956

 

Weighted average shares outstanding - diluted*

 

2,273,187

 

 

 

101,862

 

 

 

1,171,994

 

 

 

102,956

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share - basic*

$

(1.90

)

 

$

(58.50

)

 

$

(10.40

)

 

$

(134.55

)

Net loss per share - diluted*

$

(1.90

)

 

$

(58.50

)

 

$

(10.40

)

 

$

(134.55

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* reflects, one-for-seven hundred (1:700) reverse stock split effected on December 24, 2019.

 

 

 

Summary of reconciliation of weighted average shares outstanding calculation The following table provides a reconciliation of the weighted average shares outstanding calculation for the three and six months ended June 30, 2020 and 2019:

 

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Weighted average shares issued

 

2,038,297

 

 

 

25,587

 

 

 

1,054,549

 

 

 

26,681

 

Weighted average pre-funded warrants

 

234,890

 

 

 

76,275

 

 

 

117,445

 

 

 

76,275

 

Weighted average shares outstanding

 

2,273,187

 

 

 

101,862

 

 

 

1,171,994

 

 

 

102,956

 

 

v3.20.2
Cash, Cash Equivalents and Restricted Cash - Schedule of Cash, Cash Equivalents, and Restricted Cash (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Jun. 30, 2019
Dec. 31, 2018
Cash And Cash Equivalents [Abstract]        
Cash and cash equivalents $ 16,011 $ 10,002    
Letters of credit 131 131    
Security for credit cards 50 50    
Total cash, cash equivalents and restricted cash shown in the statements of cash flows $ 16,192 $ 10,183 $ 1,416 $ 3,578
v3.20.2
Inventories - Schedule of Inventories (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Inventory Disclosure [Abstract]    
Raw materials $ 389 $ 375
Work-in-process 334 279
Total inventories $ 723 $ 654
v3.20.2
Prepaid Expenses and Other Current Assets - Schedule of Prepaid Expenses and Other Current Assets (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Prepaid Expense And Other Assets Current [Abstract]    
Clinical trial expenses $ 1,497 $ 725
Insurance premiums 244 589
Other [1] 251 445
Total prepaid expenses and other current assets $ 1,992 $ 1,759
[1] 1 Other consists of various prepaid expenses and other current assets, with no individual item accounting for more than 5% of prepaid expenses and other current assets at June 30, 2020 and December 31, 2019.
v3.20.2
Prepaid Expenses and Other Current Assets - Schedule of Prepaid Expenses and Other Current Assets (Details) (Parenthetical)
Jun. 30, 2020
Dec. 31, 2019
Prepaid Expense And Other Assets Current [Abstract]    
Maximum percentage of prepaid expenses and other current assets (in hundredths) 5.00% 5.00%
v3.20.2
Property, Plant, and Equipment - Components of Property, Plant, and Equipment (Details) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2020
Dec. 31, 2019
Property Plant And Equipment [Line Items]    
Property, plant and equipment, gross $ 5,467 $ 5,246
Accumulated depreciation (4,603) (4,511)
Property, plant and equipment, net 864 735
Buildings and Land [Member]    
Property Plant And Equipment [Line Items]    
Property, plant and equipment, gross 634 589
Enterprise Hardware and Software [Member]    
Property Plant And Equipment [Line Items]    
Property, plant and equipment, gross $ 1,802 1,739
Property, plant and equipment, estimated useful life 3 years  
Leaseholds [Member]    
Property Plant And Equipment [Line Items]    
Property, plant and equipment, gross $ 1,797 1,695
Property, plant and equipment, estimated useful life Lesser of lease term or estimated useful life  
Equipment [Member]    
Property Plant And Equipment [Line Items]    
Property, plant and equipment, gross $ 1,032 1,025
Property, plant and equipment, estimated useful life 7 years  
Furniture [Member]    
Property Plant And Equipment [Line Items]    
Property, plant and equipment, gross $ 202 $ 198
Property, plant and equipment, estimated useful life 5 years  
Buildings [Member]    
Property Plant And Equipment [Line Items]    
Property, plant and equipment, estimated useful life 30 years  
v3.20.2
Property, Plant, and Equipment - Additional Information (Details) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Property Plant And Equipment [Abstract]        
Depreciation expense $ 44 $ 57 $ 92 $ 122
v3.20.2
Accrued Expenses - Schedule of Accrued Expenses (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Payables And Accruals [Abstract]    
Clinical expenses $ 2,565 $ 2,497
Compensation, excluding taxes 2,379 3,525
Other [1] 485 925
Total accrued expenses $ 5,429 $ 6,947
[1] 1 Other consists of various accrued expenses, with no individual item accounting for more than 5% of current liabilities at June 30, 2020 and December 31, 2019.
v3.20.2
Accrued Expenses - Schedule of Accrued Expenses (Parenthetical) (Details)
Jun. 30, 2020
Dec. 31, 2019
Payables And Accruals [Abstract]    
Maximum percentage of current liabilities accrued (in hundredths) 5.00% 5.00%
v3.20.2
Leases - Additional Information (Details)
6 Months Ended
Jul. 02, 2020
USD ($)
Jul. 01, 2020
USD ($)
Jun. 25, 2020
USD ($)
Jun. 30, 2020
USD ($)
ft²
Lessor Lease Description [Line Items]        
Lease term       12 months
Lease, description       (i) the 2014 Sublease and 2015 Sublease were extended from May 31, 2020 to August 2, 2021, and (ii) effective July 1, 2020, the leased premises under the 2015 Sublease would be expanded to include an additional 4,999 square ft of space, and (ii) effective July 1, 2020, the rent under the 2015 Sublease would increase from approximately $14,559 per month to $20,643 per month
Extension of sublease       May 31, 2020 to August 2, 2021
Sub lease expiration date       Aug. 02, 2021
Operating or finance lease     $ 0 $ 264,000
2015 Sub-Lease Agreement [Member]        
Lessor Lease Description [Line Items]        
Additional area of space | ft²       4,999
Increase in sublease rent $ 20,643 $ 14,559    
2021 Sub-Lease Agreement [Member]        
Lessor Lease Description [Line Items]        
Sublease rent     $ 3,721.50  
v3.20.2
Leases - Summary of Operating and Financing Leases (Details) - USD ($)
$ in Thousands
6 Months Ended
Jun. 25, 2020
Jun. 30, 2020
Lease cost    
Operating lease cost   $ 339
Financing lease cost   23
Sublease income   (98)
Total $ 0 264
Other information    
Operating cash flows out from operating leases   (339)
Operating cash flows in from operating leases   98
Operating cash flows out from financing leases   (22)
U.S. [Member]    
Lease cost    
Operating lease cost   236
Financing lease cost   23
Total   259
Other information    
Operating cash flows out from operating leases   (236)
Operating cash flows out from financing leases   $ (22)
Weighted average remaining lease term   8 months 12 days
Weighted average discount rate - operating leases   8.00%
Ireland [Member]    
Lease cost    
Operating lease cost   $ 103
Sublease income   (98)
Total   5
Other information    
Operating cash flows out from operating leases   (103)
Operating cash flows in from operating leases   $ 98
Weighted average remaining lease term   1 year 1 month 6 days
Weighted average discount rate - operating leases   8.00%
v3.20.2
Leases - Schedule of Remaining Maturity of Operating Leases Excluding Short-Term Leases (Details)
$ in Thousands
Jun. 30, 2020
USD ($)
Lessee Lease Description [Line Items]  
Year ended December 31, 2020 $ 344
Year ended December 31, 2021 200
Total 544
Less present value discount (19)
Operating lease liabilities included in the condensed consolidated balance sheet at June 30, 2020 525
U.S. [Member]  
Lessee Lease Description [Line Items]  
Year ended December 31, 2020 239
Year ended December 31, 2021 78
Total 317
Less present value discount (9)
Operating lease liabilities included in the condensed consolidated balance sheet at June 30, 2020 308
Ireland [Member]  
Lessee Lease Description [Line Items]  
Year ended December 31, 2020 105
Year ended December 31, 2021 122
Total 227
Less present value discount (10)
Operating lease liabilities included in the condensed consolidated balance sheet at June 30, 2020 $ 217
v3.20.2
Outstanding Debt - Additional Information (Details) - USD ($)
$ / shares in Units, $ in Millions
Jun. 06, 2019
May 05, 2020
Debt Instrument [Line Items]    
Debt instrument, warrants price per unit   $ 10.00
Series E Preferred Stock and Related Warrants [Member]    
Debt Instrument [Line Items]    
Debt instrument, warrants price per unit $ 1,500  
Senior Secured Promissory Notes [Member]    
Debt Instrument [Line Items]    
Debt instrument, principal face amount $ 2.0  
Debt instrument maturity date Jul. 16, 2021  
Interest rate 8.00%  
Series D Warrants [Member]    
Debt Instrument [Line Items]    
Number of common shares issuable on cancellation of warrants 5,605  
Pre-Funded Series D Warrants [Member]    
Debt Instrument [Line Items]    
Number of common shares issuable on cancellation of warrants 100,000  
v3.20.2
Outstanding Debt - Summary of Various Notes Issued (Details) - USD ($)
Jun. 30, 2020
May 05, 2020
Debt Instrument [Line Items]    
Conversion price   $ 10.00
Long Term Convertible Notes Payable [Member] | 8.0% July 2019 Notes [Member]    
Debt Instrument [Line Items]    
Interest rate 8.00%  
Conversion price $ 1,500  
Principal $ 2,000,000  
v3.20.2
Stockholders' Equity - Preferred Stock Issuances - Additional Information (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 6 Months Ended
May 05, 2020
Jul. 11, 2019
Jun. 30, 2020
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Aug. 19, 2019
Jun. 06, 2019
Stockholders Equity Note [Line Items]                
Preferred stock, par value (in dollars per share)     $ 0.01 $ 0.01   $ 0.01    
Shares issued, par value per share     0.01 $ 0.01   $ 0.01    
Conversion price $ 10.00              
Offering price       $ 19,378 $ 0      
Warrant exercise price     $ 10.00 $ 10.00        
Deemed dividend for triggering of warrant down round feature     $ (55) $ (55)        
Preferred stock, shares outstanding (in shares)     25,950 25,950   41,517    
Number of warrants outstanding (in shares)     4,422,499 4,422,499   1,826,608    
2019 Warrants [Member]                
Stockholders Equity Note [Line Items]                
Offering price $ 22,000              
Warrant exercise price $ 10.00         $ 23.04    
Deemed dividend for triggering of warrant down round feature $ 55              
Number of warrants outstanding (in shares)     1,800,000 1,800,000        
Series E Convertible Preferred Stock [Member] | July 2019 Private Placement [Member] | Securities Purchase Agreement [Member]                
Stockholders Equity Note [Line Items]                
Number of shares issued   20,000            
Preferred stock, par value (in dollars per share)   $ 0.01            
Shares issued, price per share   1,000            
Shares issued, par value per share   $ 0.01            
Series E Preferred Stock and Related Warrants [Member]                
Stockholders Equity Note [Line Items]                
Conversion price               $ 1,500
Series E Preferred Stock and Related Warrants [Member] | July 2019 Private Placement [Member]                
Stockholders Equity Note [Line Items]                
Debt and warrants exchanged for preferred stock   $ 11,800            
Number of preferred stock and warrants issued upon conversion   11,500            
Value of accounts payable exchanged   $ 100            
Number of shares issued upon exchange of accounts payable   149            
Number of shares issued upon exchange of investor waiver rights   923            
Series E-1 Convertible Preferred Stock [Member] | August 2019 Private Placement [Member] | Securities Purchase Agreement [Member]                
Stockholders Equity Note [Line Items]                
Number of shares issued             9,510  
Preferred stock, par value (in dollars per share)             $ 0.01  
Shares issued, price per share             1,000  
Shares issued, par value per share             $ 0.01  
Preferred Stock [Member]                
Stockholders Equity Note [Line Items]                
Conversion price $ 10.00         $ 23.04    
Offering price $ 22,000              
Excess of the fair value of the common stock $ 12,000              
v3.20.2
Stockholders' Equity - Common Stock Issuances - Additional Information (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 6 Months Ended
May 05, 2020
Jun. 30, 2020
Mar. 31, 2020
Jun. 30, 2019
Mar. 31, 2019
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Stockholders Equity Note [Line Items]                
Warrant exercise price   $ 10.00       $ 10.00    
Net proceeds from Public Offering           $ 19,378 $ 0  
Conversion price $ 10.00              
Conversion of Preferred stock into common stock           1,549,609    
Exercise of pre-funded Series D Warrants (in shares)           6,000    
Common stock shares issued           72,976    
Remaining Warrants exercise price   10.00       $ 10.00    
Series F warrants [Member]                
Stockholders Equity Note [Line Items]                
Warrants issued to purchase of common stock 2,224,900              
Warrant exercise price $ 10.00              
Warrants issued to purchase of common stock 2,224,900              
Remaining Warrants exercise price $ 10.00              
Pre-Funded Warrants [Member]                
Stockholders Equity Note [Line Items]                
Warrants issued to purchase of common stock 377,000              
Warrants issued to purchase of common stock 377,000              
Common Stock [Member]                
Stockholders Equity Note [Line Items]                
Warrants issued to purchase of common stock           371,000    
Warrant exercise price   $ 0.01       $ 0.01    
Warrants issued to purchase of common stock           371,000    
Net proceeds from Public Offering $ 22,000              
Conversion of Preferred stock into common stock   1,549,609 2,915          
Exercise of pre-funded Series D Warrants (in shares)   6,000   5,399 5,885      
Remaining Warrants exercise price   $ 0.01       $ 0.01    
Common Stock [Member] | IPO [Member]                
Stockholders Equity Note [Line Items]                
Shares issued in public offering 1,823,000              
2019 Warrants [Member]                
Stockholders Equity Note [Line Items]                
Warrant exercise price $ 10.00             $ 23.04
Net proceeds from Public Offering $ 22,000              
Remaining Warrants exercise price $ 10.00             $ 23.04
v3.20.2
Stockholders' Equity - Share-Based Compensation - Additional Information (Details)
$ in Millions
6 Months Ended
Jun. 30, 2020
USD ($)
shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]  
Unrecognized compensation expense related to non-vested share-based compensation awards | $ $ 0
2019 Equity Incentive Plan [Member]  
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]  
Shares available for grant 502
2019 Equity Incentive Plan [Member] | Maximum [Member]  
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]  
Number of shares reserved for issuance 2,142
2019 Equity Incentive Plan [Member] | Minimum [Member]  
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]  
Stock options, exercise price of common stock granted as percentage of fair value on the date of grant 100.00%
v3.20.2
Stockholders' Equity - Summary of Stock Option Activity (Details) - $ / shares
6 Months Ended 12 Months Ended
Jun. 30, 2020
Dec. 31, 2019
Stockholders Equity Note [Abstract]    
Number of Shares, Outstanding 1,640  
Number of Shares, Outstanding 1,640 1,640
Number of Shares, Exercisable 1,640  
Weighted Average Exercise Price, Outstanding $ 196.70  
Weighted Average Exercise Price, Outstanding 196.70 $ 196.70
Weighted Average Exercise Price, Exercisable $ 196.70  
Weighted Average Remaining Contractual Term (Years), Outstanding 8 years 7 months 6 days 9 years 1 month 6 days
Weighted Average Remaining Contractual Term (Years), Exercisable 8 years 7 months 6 days  
v3.20.2
Stockholders' Equity - Summary of Recognized Share-based Compensation Cost (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]        
Share-based compensation (Income) expense $ 606 $ 75 $ 660 $ 133
Selling, General and Administrative [Member]        
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]        
Share-based compensation (Income) expense $ 606 58 655 106
Research and Development [Member]        
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]        
Share-based compensation (Income) expense   $ 17 $ 5 $ 27
v3.20.2
Stockholders' Equity - Summary of Warrant Activity (Details) - $ / shares
6 Months Ended 12 Months Ended
Jun. 30, 2020
Dec. 31, 2019
Warrants outstanding [Roll Forward]    
Outstanding, beginning of period (in shares) 1,826,608  
Warrants issued (in shares) 2,601,900  
Exercised (in shares) (6,000)  
Warrants expired (in shares) (9)  
Outstanding, end of period (in shares) 4,422,499 1,826,608
Warrants, Exercise Price per Share [Roll Forward]    
Outstanding, (in dollars per share) $ 10.00  
Warrants, Weighted Average Exercise Price [Roll Forward]    
Outstanding, beginning of period (in dollars per share) 23.04  
Issued (in dollars per share) 10.00  
Exercised (in dollars per share) 0.01  
Warrants expired (in dollars per share) 7.00  
Outstanding, end of period (in dollars per share) $ 9.16 $ 23.04
Weighted average remaining life 4 years 8 months 12 days 5 years
Minimum [Member]    
Warrants, Exercise Price per Share [Roll Forward]    
Outstanding, (in dollars per share) $ 0.01 $ 7.00
Maximum [Member]    
Warrants, Exercise Price per Share [Roll Forward]    
Outstanding, (in dollars per share) $ 10.00 $ 23.04
v3.20.2
Fair Value Measurements - Fair Value Measurements Using Significant Unobservable Inputs (Details)
$ in Thousands
6 Months Ended
Jun. 30, 2020
USD ($)
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) [Roll Forward]  
Beginning balance $ 3,368
Total change in the liability included in earnings 2,832
Fair value of warrants reclassified from liability to equity $ (6,200)
v3.20.2
Fair Value Measurements - Schedule of Fair Value of Outstanding Warrants (Details)
Feb. 19, 2020
Dec. 31, 2019
Contractual Term [Member]    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Warrants expiration period 4 years 3 months 18 days 4 years 7 months 6 days
Expected Volatility [Member]    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Warrants measurement input 2.082 2.075
Risk-free Interest Rates [Member]    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Warrants measurement input 0.014 0.017
v3.20.2
Fair Value Measurements - Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - Derivative Instruments Liabilities [Member] - Recurring [Member]
$ in Thousands
Dec. 31, 2019
USD ($)
Liabilities [Abstract]  
Total Liabilities $ 3,368
Level 3 [Member]  
Liabilities [Abstract]  
Total Liabilities $ 3,368
v3.20.2
Net Loss per Common Share - Anti-Dilutive Securities Excluded from Computation of Earnings Per Share (Details) - shares
6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]    
Antidilutive securities excluded from computation of earnings per share (in shares) 6,794,514 8,329
Stock Options [Member]    
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]    
Antidilutive securities excluded from computation of earnings per share (in shares) 1,640 1,667
Common Stock Warrants - Equity [Member]    
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]    
Antidilutive securities excluded from computation of earnings per share (in shares) 4,051,499 6,004
Common Stock Warrants - Liabilities [Member]    
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]    
Antidilutive securities excluded from computation of earnings per share (in shares)   179
Common Stock Reserved For Conversion of Preferred Shares [Member]    
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]    
Antidilutive securities excluded from computation of earnings per share (in shares) 2,595,087  
Assumed Conversion of Convertible Notes [Member]    
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]    
Antidilutive securities excluded from computation of earnings per share (in shares) 146,288 480
v3.20.2
Net Loss per Common Share - Calculation of Net Loss and Number of Shares Used to Compute Basic and Diluted Earnings per Share (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Mar. 31, 2020
Jun. 30, 2019
Mar. 31, 2019
Jun. 30, 2020
Jun. 30, 2019
Earnings Per Share [Abstract]            
Net loss $ (4,275) $ (7,861) $ (5,959) $ (7,894) $ (12,136) $ (13,853)
Deemed dividend for triggering of warrant down round feature (55)       (55)  
Net loss attributable to common stockholders $ (4,330)   $ (5,959)   $ (12,191) $ (13,853)
Weighted average shares outstanding - basic [1],[2] 2,273,187   101,862   1,171,994 102,956
Weighted average shares outstanding - diluted [1],[2] 2,273,187   101,862   1,171,994 102,956
Net loss per share - basic [1],[2] $ (1.90)   $ (58.50)   $ (10.40) $ (134.55)
Net loss per share - diluted [1],[2] $ (1.90)   $ (58.50)   $ (10.40) $ (134.55)
[1] * reflects, one-for-seven hundred (1:700) reverse stock split effected on December 24, 2019.
[2] reflects, one-for-seven hundred (1:700) reverse stock split effected on December 24, 2019.
v3.20.2
Net Loss per Common Share - Calculation of Net Loss and Number of Shares Used to Compute Basic and Diluted Earnings per Share (Parenthetical) (Details)
Dec. 24, 2019
Earnings Per Share [Abstract]  
Reverse stock split 1:700
Reverse stock split ratio 0.00142
v3.20.2
Net Loss per Common Share - Additional Information (Details)
6 Months Ended
Jun. 30, 2020
shares
Earnings Per Share [Abstract]  
Pre-funded penny warrants outstanding 371,000
v3.20.2
Net Loss per Common Share - Summary of Reconciliation of Weighted Average Shares Outstanding Calculation (Details) - shares
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Earnings Per Share [Abstract]        
Weighted average shares issued 2,038,297 25,587 1,054,549 26,681
Weighted average pre-funded warrants 234,890 76,275 117,445 76,275
Weighted average shares outstanding 2,273,187 101,862 1,171,994 102,956
v3.20.2
Taxes - Additional Information (Details)
$ in Millions
6 Months Ended
Jun. 30, 2020
USD ($)
subsidiary
Ireland [Member]  
Operating Loss Carryforwards [Line Items]  
Number of subsidiaries | subsidiary 2
Delcath Holdings Limited [Member]  
Operating Loss Carryforwards [Line Items]  
Deferred tax benefit | $ $ 19.9
v3.20.2
Commitments and Contingencies - Additional Information (Details) - Pending Litigation [Member] - USD ($)
$ in Thousands
Jul. 27, 2020
Jun. 30, 2020
Loss Contingencies [Line Items]    
Accrued unpaid compensation amounts   $ 1,140
Subsequent Event [Member]    
Loss Contingencies [Line Items]    
Unpaid compensation amounts claimed $ 1,140  
v3.20.2
Subsequent Events - Additional Information (Details) - USD ($)
3 Months Ended 6 Months Ended
Jul. 31, 2020
Jul. 01, 2020
Jun. 30, 2020
Mar. 31, 2020
Jun. 30, 2020
Subsequent Event [Line Items]          
Convertible preferred stock, shares issued upon conversion         1,549,609
Warrant exercise price     $ 10.00   $ 10.00
95-97 Park Road office Queensbury, NY [Member] | Subsequent Event [Member]          
Subsequent Event [Line Items]          
Payments to acquire real estate $ 460,263        
Common Stock [Member]          
Subsequent Event [Line Items]          
Convertible preferred stock, shares issued upon conversion     1,549,609 2,915  
Warrant exercise price     $ 0.01   $ 0.01
Warrants issued to purchase of common stock         371,000
Common Stock [Member] | Subsequent Event [Member]          
Subsequent Event [Line Items]          
Convertible preferred stock, shares issued upon conversion   372,500      
Stock Warrant Exercises [Member] | Subsequent Event [Member]          
Subsequent Event [Line Items]          
Warrant exercise price   $ 10.00      
Warrants issued to purchase of common stock   41,827      
Proceeds from warrant exercises   $ 418,270