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Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 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: 001-36783
 
BELLICUM PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter) 

Delaware20-1450200
(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification Number)
 2710 Reed Road, Ste. 160
Houston, TX 77051
(832384-1100
(Address, including zip code, and telephone number, including
area code, of registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareBLCMThe Nasdaq Capital Market


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes    ☒   No    ☐
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes    ☒   No    ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


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

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

As of October 30, 2020, there were 5,059,779 outstanding shares of Bellicum’s common stock, par value, $0.01 per share.



TABLE OF CONTENTS
 

Page
    
    
    
    


2


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements
Bellicum Pharmaceuticals, Inc.
 Condensed Consolidated Balance Sheets
(in thousands, except par value and share data)
September 30, 2020December 31, 2019
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$53,125 $91,028 
Restricted cash, current 2,788 
Accounts receivable, interest and other receivables
125 303 
Prepaid expenses and other current assets
1,243 884 
Assets held for sale 16,851 
Total current assets
54,493 111,854 
Operating lease right-of-use assets
1,296 1,042 
Property and equipment, net
2,861 2,529 
Restricted cash, non-current1,501  
Other assets
342 825 
Total assets
$60,493 $116,250 
LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable
$1,463 $2,643 
Accrued expenses and other current liabilities
6,677 9,770 
Warrant derivative liability
23,683 52,184 
Private placement option liability
26,339 12,094 
Current portion of long-term debt
9,585 11,000 
Current portion of lease liabilities
781 454 
Liabilities held for sale 6,273 
Total current liabilities
68,528 94,418 
    Long-term debt, net of deferred issuance costs
17,682 25,717 
    Long-term lease liabilities
1,005 864 
Total liabilities
87,215 120,999 
Commitments and contingencies
Preferred stock: $0.01 par value; 10,000,000 shares authorized
   Series 1 redeemable convertible preferred stock, $0.01 par value, 1,517,500 shares authorized at September 30, 2020 and December 31, 2019, 534,000 shares issued and outstanding at September 30, 2020; 538,000 shares issued and outstanding at December 31, 2019
21,308 21,468 
Stockholders’ deficit:
   Common stock, $0.01 par value; 80,000,000 and 40,000,000 shares authorized at September 30, 2020 and December 31, 2019, respectively, 5,127,525 shares issued and 5,059,779 shares outstanding at September 30, 2020; 5,076,593 shares issued and 5,008,846 shares outstanding at December 31, 2019
51 507 
Treasury stock: 67,746 shares held at September 30, 2020 and December 31, 2019
(5,056)(5,056)
Additional paid-in capital
516,858 511,684 
Accumulated other comprehensive loss
(353)(327)
Accumulated deficit
(559,530)(533,025)
Total stockholders’ deficit
(48,030)(26,217)
Total liabilities, preferred stock and stockholders' deficit
$60,493 $116,250 

See accompanying notes, which are an integral part of these unaudited consolidated financial statements.
3


Bellicum Pharmaceuticals, Inc.
 Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share amounts)
(Unaudited) 

Three Months Ended September 30,
Nine Months Ended September 30,
2020201920202019
Revenues
Grants
$ $103 $ $2,010 
Total revenues
 103  2,010 
Operating expenses
Research and development
8,140 14,331 30,346 51,211 
General and administrative
4,163 9,209 12,095 24,263 
Total operating expenses
12,303 23,540 42,441 75,474 
Gain on dispositions, net  (3,761) 
Loss from operations
(12,303)(23,437)(38,680)(73,464)
Other income (expense):
Interest income
10 323 392 1,044 
Interest expense
(725)(1,079)(2,473)(3,237)
   Change in fair value of warrant and private placement option liabilities
12,131 (4,850)14,256 (4,850)
  Other expense (2,989) (2,989)
Total other income (expense)
11,416 (8,595)12,175 (10,032)
Net loss
$(887)$(32,032)$(26,505)$(83,496)
Net loss per common share attributable to common shareholders, basic and diluted
$(0.18)$(6.79)$(5.25)$(18.21)
Weighted-average shares outstanding, basic and diluted
5,059,779 4,720,895 5,050,603 4,584,592 
Net loss
$(887)$(32,032)$(26,505)$(83,496)
Other comprehensive income (loss):
Unrealized (loss) gain on available-for-sale securities, net of tax
 (8) 48 
Foreign currency translation adjustment
36 (23)(26)(41)
Comprehensive loss
$(851)$(32,063)$(26,531)$(83,489)
 
See accompanying notes, which are an integral part of these unaudited consolidated financial statements.

4

Table of Contents
Bellicum Pharmaceuticals, Inc.
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ (Deficit) Equity
(amounts in thousands, except share data)

Three and Nine Months Ended September 30, 2020
Series 1 PreferredCommon StockTreasury StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive LossTotal Stockholders' Deficit
SharesAmountSharesAmountSharesAmount
Balance, December 31, 2019
538,000 $21,468 5,076,593 $507 (67,746)$(5,056)$511,684 $(533,025)$(327)$(26,217)
1-for-10 Reverse Stock Split— — — (457)— — 457 — — — 
Share-based compensation— — — — — — 1,323 — — 1,323 
Issuance of common stock upon vesting of restricted stock units— — 1,045 — — — — — — — 
Conversion of redeemable convertible preferred stock into common stock(4,000)(160)40,000 1 — — 159 — — 160 
Comprehensive income— — — — — — — 17,576 (13)17,563 
Balance, March 31, 2020534,000 $21,308 5,117,638 $51 (67,746)$(5,056)$513,623 $(515,449)$(340)$(7,171)
Share-based compensation— — — — — — 1,564 — — 1,564 
Issuance of common stock - Employee Stock Purchase Plan— — 9,526 — — — 65 — — 65 
Issuance of common stock upon vesting of restricted stock units— — 361 — — — — — — — 
Comprehensive loss— — — — — — — (43,194)(49)(43,243)
Balance, June 30, 2020534,000 $21,308 5,127,525 $51 (67,746)$(5,056)$515,252 $(558,643)$(389)$(48,785)
Share-based compensation— — — — — — 1,606 — — 1,606 
Comprehensive loss— — — — — — — (887)36 (851)
Balance, September 30, 2020534,000 $21,308 5,127,525 $51 (67,746)$(5,056)$516,858 $(559,530)$(353)$(48,030)

See accompanying notes, which are an integral part of these unaudited consolidated financial statements.










5

Table of Contents
Bellicum Pharmaceuticals, Inc.
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ (Deficit) Equity
(amounts in thousands, except share data)

Three and Nine Months Ended September 30, 2019
Series 1 PreferredCommon StockTreasury StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive LossTotal Stockholders' Equity
SharesAmountSharesAmountSharesAmount
Balance, December 31, 2018
— $— 4,424,205 $442 (67,746)$(5,056)$493,784 $(420,548)$(144)$68,478 
Share-based compensation— — — — — — 2,136 — — 2,136 
Exercise of stock options— — 2,765 — — — 70 — — 70 
Issuance of common stock upon vesting of restricted stock units— — 2,271 — — — — — — — 
Issuance of common stock in open market transactions, net of issuance costs— — 135,065 14 — — 4,611 — — 4,625 
Comprehensive loss— — — — — — — (24,528)79 (24,449)
Balance, March 31, 2019— $— 4,564,306 $456 (67,746)$(5,056)$500,601 $(445,076)$(65)$50,860 
Share-based compensation— — — — — — 1,996 — — 1,996 
Exercise of stock options— — 221 — — — 6 — — 6 
Issuance of common stock - Employee Stock Purchase Plan— — 4,000 1 — — 70 — — 71 
Issuance of common stock upon vesting of restricted stock units— — 585 — — — — — — — 
Issuance of common stock in open market transactions, net of issuance costs— — 124,050 12 — — 4,340 — — 4,352 
Comprehensive loss— — — — — — — (26,936)(41)(26,977)
Balance, June 30, 2019 $ 4,693,162 $469 (67,746)$(5,056)$507,013 $(472,012)$(106)$30,308 
Share-based compensation— — — — — — 1,648 — — 1,648 
Issuance of common stock upon vesting of restricted stock units— — 840 — — — — — — — 
Issuance of redeemable convertible preferred stock in public offering, net575,000 22,944 — — — — — — — — 
Conversion of redeemable convertible preferred stock into common stock(33,500)(1,336)335,000 34 — — 1,302 — — 1,336 
Comprehensive loss— — — — — — — (32,032)(31)(32,063)
Balance, September 30, 2019541,500 $21,608 5,029,002 $503 (67,746)$(5,056)$509,963 $(504,044)$(137)$1,229 

See accompanying notes, which are an integral part of these unaudited consolidated financial statements.

6


Bellicum Pharmaceuticals, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited) 

Nine Months Ended September 30,
20202019
Cash flows from operating activities:
     Net loss
$(26,505)$(83,496)
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation
4,493 5,762 
Depreciation and amortization expense
1,229 5,479 
Change in fair value of warrant and private placement option liabilities
(14,256)4,850 
(Gain) loss on dispositions, net(3,761)4 
Amortization of discount on investment securities, net
 (29)
      Amortization of right-of-use assets
297 996 
      Accretion of lease liability
371 590 
      Amortization of deferred issuance costs
550 662 
Expense of issuance costs on warrants and private placement option 3,047 
       Changes in operating assets and liabilities:
Accounts receivable, interest and other receivables
178 581 
Prepaid expenses and other assets
103 (1,524)
Accounts payable
(1,345)(2,474)
Accrued liabilities and other
(4,629)2,727 
Deferred revenue
 (2,010)
Net cash used in operating activities
(43,275)(64,835)
Cash flows from investing activities:
Proceeds from sale of investment securities
 45,229 
Proceeds from sale of property and equipment, net14,909  
Purchases of property and equipment
(807)(554)
Net cash provided by investing activities
14,102 44,675 
Cash flows from financing activities:
 Payment on debt(10,000) 
     Proceeds from issuance of common stock in a public offering, net 8,977 
Proceeds from issuance of redeemable convertible preferred stock in a public offering, net 22,944 
 Proceeds from issuance of warrants in a public offering, net 30,995 
 Proceeds received from private placement option, net 11,254 
 Proceeds from issuance of stock from employee stock purchase plan 65 71 
    Proceeds from exercise of stock options
 76 
    Payment on financing lease obligations
(56)(30)
Net cash (used in) provided by financing activities
(9,991)74,287 
Effect of exchange rate changes on cash
(26)(41)
Net change in cash, cash equivalents, and restricted cash
(39,190)54,086 
Cash, cash equivalents and restricted cash at beginning of period
93,816 48,668 
Cash, cash equivalents and restricted cash at end of period
$54,626 $102,754 
Supplemental cash flow information:
Cash paid during the period for interest
$1,973 $2,611 
Non-cash investing and financing activities:
Purchases of property and equipment in accounts payables and accrued liabilities $859 $ 
Leasehold improvements paid by landlord$113 $ 
Conversion of redeemable preferred stock into common stock$160 $1,336 
Reclassification of property and equipment, net to assets held for sale$199 $ 
Accrued issuance costs for public offering$ $210 
Financing leases incurred for equipment$ $167 

See accompanying notes, which are an integral part of these unaudited consolidated financial statements.
7


Bellicum Pharmaceuticals, Inc.
 
Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 1 - ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Bellicum Pharmaceuticals, Inc. (“Bellicum”) is a clinical stage biopharmaceutical company focused on discovering and developing novel cellular immunotherapies for various forms of cancer, including both hematological cancers and solid tumors. Bellicum is devoting substantially all of its present efforts to developing next-generation product candidates in areas of cellular immunotherapy, including CAR-T therapy.

Bellicum has two wholly-owned subsidiaries, Bellicum Pharma Limited, a private limited company organized under the laws of the United Kingdom, and Bellicum Pharma GmbH, a private limited liability company organized under German law. Both were formed for the purpose of developing product candidates in Europe. Bellicum, Bellicum Pharma Limited and Bellicum Pharma GmbH are collectively referred to herein as the “Company”. All intercompany balances and transactions among the consolidated entities have been eliminated in consolidation.

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker. The Company has determined that it has one operating and reporting segment as it allocates resources and assesses financial performance on a consolidated basis. The Company’s chief operating decision maker is its Chief Executive Officer who manages operations and reviews the financial information as a single operating segment for purposes of allocating resources and evaluating its financial performance.
Reverse Stock Split
On February 5, 2020, the Company filed a Certificate of Amendment of the Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to (i) effect a reverse stock split of all issued and outstanding shares of the Company’s common stock at a ratio of 1-for-10 and (ii) reduce the number of authorized shares of the Company’s common stock from 200,000,000 to 40,000,000. On June 15, 2020, the Company filed with the Secretary of State of the State of Delaware a Second Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation to increase the authorized number of shares of the Company’s common stock from 40,000,000 shares to 80,000,000 shares.

The accompanying condensed consolidated financial statements and notes to the condensed consolidated financial statements gives retroactive effect to the reverse stock split for all periods presented.
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in conformity with the authoritative U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (SEC). Accordingly, the accompanying unaudited condensed consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements. The unaudited interim financial statements reflect all adjustments, which, in the opinion of management, are necessary for a fair statement of the results for the periods presented. All such adjustments are of a normal and recurring nature. The operating results presented in these unaudited condensed consolidated financial statements are not necessarily indicative of the results that may be expected for any future periods. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto in the Company’s Annual Report on Form 10-K (“Annual Report”) for the fiscal year ended December 31, 2019, as filed with the SEC on March 12, 2020.

The accompanying interim condensed financial statements have been prepared on a basis that assumes that the Company will continue as a going concern, and do not include any adjustments that may result from the outcome of this uncertainty. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of the Company’s liabilities and commitments in the normal course of business and does not include any adjustments to reflect the possible future effects of the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company has recorded losses from operations since its inception and if the Company does not successfully obtain regulatory approval and commercialize any of its product candidates, the Company will not be able to achieve profitability. As of September 30, 2020, and December 31, 2019, the Company had an accumulated deficit of $559.5 million and $533.0 million, respectively.
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Table of Contents
The Company is subject to risks common to companies in the biotechnology industry and the future success of the Company is dependent on its ability to successfully complete the development of, and obtain regulatory approval for, its product candidates, manage the growth of the organization, obtain additional financing necessary in order to develop, launch and commercialize its product candidates, and compete successfully with other companies in its industry.

The Company believes that its current capital resources, which consist of cash and cash equivalents are sufficient to fund operations through at least the next twelve months from the date the accompanying interim financial statements are issued based on the expected cash burn rate. The Company may be required to raise additional capital to fund future operations through the sale of additional equity, incurrence of additional debt allowed under existing debt arrangements, the entry into licensing or collaboration agreements with partners, grants or other sources of financing. Sufficient funds may not be available to the Company at all or on attractive terms when needed from equity or debt financings. If the Company is unable to obtain additional funding from these or other sources when needed, or to the extent needed, it may be necessary to significantly reduce its controllable and variable expenditures and current rate of spending through reductions in staff and delaying, scaling back, or suspending certain research and development, sales and marketing programs and other operational goals.

Reclassifications
Certain reclassifications have been made to prior year financial statements to conform to the current year presentation.
Use of Estimates
The preparation of the interim condensed consolidated financial statements in accordance with GAAP requires management to make certain estimates and judgments that affect the reported amounts of assets, liabilities, and expenses. Actual results could differ from those estimates.
Significant Accounting Policies
There have been no significant changes to the accounting policies during the nine months ended September 30, 2020 as compared to the significant accounting policies described in Note 1 of the “Notes to Consolidated Financial Statements” in the Company’s audited financial statements included in its Annual Report for the fiscal year ended December 31, 2019.
Revenue Recognition
Cancer Research Grant Contract

On August 9, 2017, the Company entered into a Cancer Research Grant Contract (the “CPRIT Agreement”) with the Cancer Prevention Research Institute of Texas (“CPRIT”), pursuant to which CPRIT awarded a grant of approximately $16.9 million to the Company to fund development of rivo-cel for hematologic cancer (the “CPRIT Award”). The CPRIT Award is contingent upon funds being available during the term of the CPRIT Agreement and subject to CPRIT’s ability to perform its obligations under the CPRIT Agreement.

During 2017, the Company received $4.2 million in advance funding from CPRIT, which was recorded as deferred revenue. During the three and nine month periods ended September 30, 2020, the Company did not incur expenses or recognize revenue for work performed under the CPRIT grant. During the three and nine month periods ended September 30, 2019, the Company incurred expenses and recognized revenue of $0.1 million and $2.0 million, respectively, for work performed under the CPRIT grant.

The CPRIT Agreement was due to expire on February 29, 2020, but was terminated early by the Company on January 31, 2020. Upon termination of the CPRIT Agreement, the Company reclassified the remaining unexpended award proceeds of $0.8 million from deferred revenue to accrued liabilities. During the nine months ended September 30, 2020, the Company returned the remaining unexpended award proceeds to CPRIT and released the accrued liability.

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Cash, Cash Equivalents and Restricted Cash
The Company considers all short-term, highly liquid investments with maturity of three months or less from the date of purchase and that can be liquidated without prior notice or penalty, to be cash equivalents.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the balance sheets that sum to the total of the same such amounts shown in the statements of cash flows.

(in thousands)September 30, 2020December 31, 2019
Cash and cash equivalents$53,125 $91,028 
Restricted cash, current 2,788 
Restricted cash, non-current1,501  
Total cash, cash equivalents and restricted cash shown in the statements of cash flows$54,626 $93,816 

In addition to the restricted cash held and released by CPRIT, there was $1.1 million of restricted cash as of December 31, 2019 in escrow to cover specific construction of manufacturing improvement costs related to the facility lease. The release of the funds was subject to the authorized completion of certain aspects of the manufacturing improvements. The funds were released during the nine months ended September 30, 2020.
In connection with the closing of the Asset Purchase Agreement with M.D. Anderson on April 14, 2020, $1.5 million of the cash proceeds received are subject to certain escrow provisions and recorded as restricted cash, non-current. The funds are required to be held for a period of up to 18 months subsequent to the April 14, 2020 closing date.
Dispositions and Derecognition of Liabilities
Disposition of Assets and Liabilities Held for Sale
In 2019, the Company completed the buildout of manufacturing space at its leased headquarters in Houston, Texas and began in-house clinical supply manufacturing. The facility included capacity far in excess of the Company's anticipated current and near-term manufacturing needs and management decided to seek a partner for the facility with the goal of reducing the Company's costs while maintaining dedicated cell therapy manufacturing capacity to support the Company's product candidates.
The disposal of the assets and liabilities of such facility was completed on April 14, 2020, at a purchase price of $15.0 million. The disposal group consisted of property and equipment, net of $12.0 million, right-of-use assets of $4.8 million, current portion of lease liabilities of $1.4 million and long-term lease liabilities of $4.6 million. During the nine month period ended September 30, 2020, the Company recognized a net gain of $3.8 million in connection with the disposal, which is presented within Gain on dispositions, net within the accompanying condensed consolidated statements of operations and comprehensive loss. The primary reason for the disposal was to reduce the Company's fixed operating expenses by transitioning from an in-house clinical supply manufacturer to a third party manufacturer.
Derecognition of Liabilities
On September 15, 2020, the Company suspended the Miltenyi supply agreement that had previously obligated the Company to remit a payment that was recorded within accrued expenses and other current liabilities of the accompanying condensed consolidated balance sheets. During the three and nine month periods ended September 30, 2020, the Company recognized a gain of $1.1 million in connection with the derecognition of this liability, which is presented within research and development within the accompanying condensed consolidated statements of operations and comprehensive loss.
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Accrued Expenses and Other Current Liabilities
Accrued expenses and other liabilities consist of the following:
(in thousands)September 30, 2020December 31, 2019
Accrued payroll$2,237 $2,032 
Accrued patient treatment costs951 1,162 
Accrued manufacturing costs408 2,230 
Accrued professional services584 654 
Accrued construction costs694  
Accrued obligations under material supply agreements  1,121 
Accrued other1,803 2,571 
Total accrued expenses and other current liabilities $6,677 $9,770 

Warrant Derivatives

Freestanding warrants are classified as liabilities in the accompanying consolidated balance sheets as they are exercisable for multiple underlying instruments that are potentially redeemable. The Company accounts for these warrants at fair value on the date of issuance and are subject to re-measurement to fair value at each balance sheet date. Any change in fair value is recognized as a component of other income (expense) on the accompanying consolidated statements of operations and comprehensive loss. The Company will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of the warrants or a change in control, as defined. The warrants are freely exercisable at any time from the issuance date until the expiration date, provided exercise does not cause a warrant holder to exceed a pre-determined beneficial ownership limit.

The Company estimates the fair value of these liabilities using the Black-Scholes valuation technique, which utilizes assumptions including (i) the fair value of the underlying stock at the valuation measurement date, (ii) volatility of the price of the underlying stock, (iii) the expected term, and (iv) risk-free interest rates.

Private Placement Option

The Company has entered into a security purchase agreement that contains a call option on preferred shares that are callable outside the control of the Company. The Company recorded the option as a liability and measured the fair value of the option at the time of issuance. The Company will re-measure the option to fair value at each balance sheet date and record changes in fair value in other income (expense) in the accompanying condensed consolidated statement of operations and comprehensive loss at each reporting period. Offering expenses arising from the issuance of the private placement option were expensed as incurred.

The Company estimates the fair value of these liabilities using a binomial lattice model, which utilizes assumptions including (i) the fair value of the underlying stock at the valuation measurement date, (ii) volatility of the price of the underlying stock, (iii) the expected term, and (iv) risk-free interest rates.

Preferred Stock

Preferred shares issued by the Company that are subject to mandatory redemption are classified as liability instruments in the accompanying condensed consolidated balance sheets and are measured at fair value at the date of issuance. Conditionally redeemable preferred shares (including preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified within mezzanine equity in the accompanying condensed consolidated balance sheets. At all other times, preferred shares are classified within stockholders’ (deficit) equity.

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Operating Leases

At the inception of a contractual arrangement, the Company determines whether the contract contains a lease by assessing whether there is an identified asset and whether the contract conveys the right to control the use of the identified asset in exchange for consideration over a period of time. If both criteria are met, upon lease commencement, the Company records a lease liability which represents the Company’s obligation to make lease payments arising from the lease, and a corresponding right-of-use (“ROU”) asset which represents the Company’s right to use an underlying asset during the lease term.

Operating leases are recognized as ROU assets and operating lease liabilities on the balance sheet based on the present value of the future minimum lease payments over the lease term at commencement date calculated using the Company's incremental borrowing rate applicable to the underlying asset unless the implicit rate is readily determinable. Any lease incentives received are deferred and recorded as a reduction of the ROU asset and amortized over the term of the lease. Rent expense, comprised of amortization of the ROU asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term. The Company determines the lease term as the non-cancellable period of the lease and may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. Leases with a term of 12 months or less are not recognized on the balance sheets.

Fair Value of Financial Instruments
Fair value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a liability in an orderly transaction between market participants in a principal market on the measurement date.
Accounting standards include disclosure requirements around fair values used for certain financial instruments and establish a fair value hierarchy. The three-tier hierarchy defines a three-tiered valuation hierarchy for disclosures that prioritizes valuation inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market, as described further in Note 2.
Observable inputs reflect readily obtainable data from independent sources, and unobservable inputs reflect the Company’s market assumptions.
These inputs are classified into the following hierarchy:
Level 1 Inputs - quoted prices (unadjusted) in active markets for identical assets that the reporting entity has the ability to access at the measurement date;
Level 2 Inputs - inputs other than quoted prices included within Level 1 that are observable for the asset, either directly or indirectly; and
Level 3 Inputs - unobservable inputs for the assets.
The categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The Company believes the recorded values of its financial instruments, including cash and cash equivalents, accounts payable, accrued liabilities, and debt approximate their fair values due to the short-term nature of these instruments.
Financial Instruments and Credit Risks
Financial instruments that potentially subject the Company to credit risk include cash and cash equivalents and accounts receivable. Cash is deposited in demand accounts in federally insured domestic institutions to minimize risk. Insurance is provided through the Federal Deposit Insurance Corporation and Security Investor Protection Corporation. Although the balances in these accounts exceed the federally insured limit from time to time, the Company has not incurred losses related to these deposits.

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Equity Issuance Costs
Equity issuance costs represent costs paid to third parties in order to obtain equity financing. The costs related to preferred and common stock have been offset against the proceeds of the equity issuances.
Net Loss and Net Loss per Share of Common Stock Attributable to Common Stockholders

Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period without consideration for common stock equivalents. Diluted earnings per share is based on the treasury stock method and includes the effect from potential issuance of ordinary shares, such as shares issuable pursuant to the conversion of preferred stock to common stock, exercise of warrants to purchase common stock, exercise of stock options, and vesting of restricted stock units.
The following outstanding shares of common stock equivalents were excluded from the computations of diluted net loss per share of common stock attributable to common stockholders for the periods presented as the effect of including such securities would be anti-dilutive.
September 30, 2020September 30, 2019
Common Stock Equivalents:Number of Shares
Redeemable convertible series 1 preferred stock5,340,000 5,415,000 
Warrants to purchase common stock5,750,000 5,750,000 
Private placement option9,675,000 9,675,000 
Options to purchase common stock1,142,470 701,020 
Unvested shares of restricted stock units182,227 16,609 
Total common stock equivalents22,089,697 21,557,629 

New Accounting Requirements and Disclosures

Fair Value Measurement

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which modifies fair value disclosures and removes some disclosure requirements for both public and private companies. In addition, public companies are subject to some new disclosure requirements which requires to disclose the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. ASU No. 2018-13 is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company adopted the standard effective January 1, 2020 with no material effect on its financial statements.

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Financial Instruments – Credit Losses

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement of all expected credit losses for financial assets including trade receivables held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. ASU No. 2016-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company adopted the standard effective January 1, 2020 with no material effect on its financial statements. Subsequent to the issuance of ASU 2016-13, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses. This ASU does not change the core principle of the guidance in ASU 2016-13, instead these amendments are intended to clarify and improve operability of certain topics included within the credit losses guidance. The FASB also subsequently issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Derivatives and Hedging (Topic 815), and Financial Instruments (Topic 842), which did not change the core principle of the guidance in ASU 2016-13 but clarified that expected recoveries of amounts previously written off and expected to be written off should be included in the valuation account and should not exceed amounts previously written off and expected to be written off. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019 for public business entities, excluding smaller reporting companies. Early adoption is permitted. As a smaller reporting company, the guidance will be effective for the Company during the first quarter of 2023. The Company is in the process of assessing the impact adoption will have on its consolidated financial statements.

Income Taxes

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). The guidance eliminates certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. This guidance also includes guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. ASU 2019-12 is effective for annual and interim periods in fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the impact this change will have on its consolidated financial statements.

Investments

In January 2020, the FASB issued Accounting Standards Update No. 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the Emerging Issues Task Force), which clarifies the interaction of the accounting for equity securities, investments accounted for under the equity method, and certain forward contracts and purchased options. This update is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, and early adoption is permitted. The Company is in the process of determining the impact the adoption will have on its consolidated financial statements as well as whether to early adopt the new guidance.

NOTE 2 - FAIR VALUE MEASUREMENTS AND INVESTMENT SECURITIES
 
Investment Securities

The following table presents the Company’s investment securities (including, if applicable, those classified on the Company’s balance sheet as cash equivalents) that are measured at fair value on a recurring basis:
Fair Value at September 30, 2020
Fair Value at December 31, 2019
(in thousands)
Level 1
Level 2
 Level 3
Level 1Level 2 Level 3
Cash equivalents:
Money market funds and treasury bills$48,259 $ $ $77,170 $ $ 
Total cash equivalents$48,259 $ $ $77,170 $ $ 
As of September 30, 2020, the $1.5 million of restricted cash, non-current, on the Company's balance sheet is held in a money market fund.

Money market funds, U.S. Treasury, U.S. government agency-backed securities, corporate debt securities and municipal bonds are valued based on various observable inputs such as benchmark yields, reported trades, broker/dealer quotes, benchmark securities and bids.
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Warrant Derivative Liability and Private Placement Option Liability

The Company's financial liabilities recorded at fair value on a recurring basis include the fair values of the warrant derivative liability and the private placement option liability. As of September 30, 2020, the fair values of the warrant derivative liability and the private placement option liability are classified as current liabilities in the accompanying condensed consolidated balance sheets. These liabilities will be shown as current liabilities on the balance sheet when it is deemed more probable than not by management to be exercised within one year.

The fair value of the warrants has been estimated with the following weighted-average assumptions:

September 30, 2020December 31, 2019
Risk-free interest rate
0.33%1.83%
Volatility of underlying stock price
90.00%78.67%
Expected term (years)
5.896.64

The fair value of the private placement option has been estimated with the following weighted-average assumptions:

September 30, 2020
Risk-free interest rate0.55%
Volatility of underlying stock price90.00%
Expected term (years)7.00

The following table provides the warrant derivative and private placement option reported at fair value and measured on a recurring basis:

Fair Value at September 30, 2020
Fair Value at December 31, 2019
(in thousands)Level 1Level 2Level 3Level 1Level 2Level 3
Warrant derivative liability$ $ $23,683 $ $ $52,184 
Private placement option liability  26,339   12,094 
Total fair value$ $ $50,022 $ $ $64,278 

The ending balance of the Level 3 financial instruments presented above represents management's best estimate of valuation and may not be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments.

NOTE 3 - LEASES

The Company determines whether an arrangement is a lease at its inception. Operating leases relate primarily to office and laboratory space with remaining lease terms of approximately two to three years. If operating leases include options to extend the lease term, management will consider the options in determining the lease term used to establish the Company's ROU assets and lease liabilities.

The Company entered into a lease agreement for office and laboratory space in Houston, Texas commencing in July 2020 and expiring in 2023. The Company recorded ROU assets of $0.5 million and a corresponding lease liability of $0.6 million upon lease commencement. The Company received a construction allowance of $0.1 million which was capitalized as leasehold improvements during the three and nine months ended September 30, 2020.

As most of the Company's leases do not provide an implicit rate, the Company's incremental borrowing rate based on the information available at lease commencement date was used to determine the present value of lease payments.

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Components of lease cost are as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
(in thousands)2020201920202019
Finance lease cost:
Amortization of leased asset$18 $18 $54 $42 
Interest on lease liabilities5 7 17 17 
Operating lease cost169 594 668 1,587 
Short-term lease cost235  476 47 
Total lease cost$427 $619 $1,215 $1,693 


September 30, 2020
Weighted-average remaining lease term:
Operating leases2.43 years
Finance leases1.66 years
Weighted-average discount rate:
Operating leases11.55 %
Finance leases13.18 %


Supplemental cash flow information and non-cash activity related to the Company's operating leases are as follows:
Nine Months Ended September 30,
(in thousands)20202019
Operating cash flow information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$827 $1,741 
Operating cash flows from finance leases17 17 
Financing cash flows from finance leases56 30 
Non-cash activity:
Right-of-use assets obtained in exchange for lease obligations$597 $2,263 

Maturities of lease liabilities by year for leases are as follows:
(in thousands)Operating LeasesFinancing Leases
2020
$279 $24 
2021757 90 
2022571 39 
2023286  
2024 and beyond  
Total lease payments1,893 153 
Less: Imputed interest(244)(16)
Present value of lease liabilities$1,649 $137 

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NOTE 4 - DEBT
On December 21, 2017 (the “Oxford Closing Date”), the Company entered into a loan and security agreement with Oxford Finance LLC, as the collateral agent and a lender ("Oxford"), and the lenders listed on Schedule 1.1 thereto or otherwise party thereto from time to time (the "Lenders"), pursuant to which the Company borrowed $35.0 million in a single term loan (the “Oxford Loan”) on the Oxford Closing Date. On the Oxford Closing Date, the Company used approximately $32.9 million of the proceeds from the Oxford Loan to repay its indebtedness to a previous lender.
On December 24, 2019, the Company entered into a First Amendment to Loan and Security Agreement (the “First Amendment”) with Oxford, in connection with the Asset Sale with M.D. Anderson. On March 31, 2020, the Company entered into a Second Amendment to Loan and Security Agreement (the "Second Amendment") with Oxford Finance LLC, in connection with the Asset Sale. The loan and security agreement with Oxford, as amended by the First and Second Amendment, is referred to as the "Oxford Loan Agreement."
The Company’s obligations under the Oxford Loan Agreement are secured by a first priority security interest in substantially all of the Company’s current and future assets, including its intellectual property. The Company has also agreed not to encumber its intellectual property assets, except as permitted by the Oxford Loan Agreement. The Oxford Loan matures on December 1, 2022 (the “Oxford Maturity Date”) and was originally interest-only through January 31, 2020, followed by 35 equal monthly payments of principal and unpaid accrued interest. The Oxford Loan bears interest at a floating per annum rate equal to (i) 7.25% plus (ii) the greater of (a) the 30-day U.S. Dollar LIBOR rate reported in The Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue and (b) 1.25%.

The Company will be required to make a final payment of 8.70% of the principal amount of the Oxford Loan borrowed (the “Oxford Final Payment Fee”), payable on the earlier of (i) the Oxford Maturity Date, (ii) the acceleration of the Oxford Loan, or (iii) the prepayment of the Oxford Loan. The Company may prepay all, but not less than all, of the borrowed amounts, provided that the Company will be obligated to pay a prepayment fee equal to (i) 3.00% of the outstanding principal balance if prepaid on or before the first anniversary of the Closing Date, (ii) 2.00% of the outstanding principal balance, if prepaid after the first anniversary and before the second anniversary of the Closing Date, and (iii) 1.00% of the outstanding principal balance prepaid thereafter and prior to the Maturity Date (each, a “Prepayment Fee”). While any amounts are outstanding under the Oxford Loan Agreement, the Company is subject to a number of affirmative and restrictive covenants, including covenants regarding delivery of financial statements, payment of taxes, maintenance of insurance, dispositions of property, business combinations or acquisitions, incurrence of additional indebtedness and transactions with affiliates, among other customary covenants. The Company is also restricted from paying dividends or making other distributions or payments of its capital stock, subject to limited exceptions. Upon the occurrence of certain events, including but not limited to the Company’s failure to satisfy its payment obligations under the Oxford Loan Agreement, the breach of certain of its other covenants under the Oxford Loan Agreement, or the occurrence of a material adverse change, the collateral agent will have the right, among other remedies, to declare all principal and interest immediately due and payable, and the lender will have the right to receive the Oxford Final Payment Fee and, if the payment of principal and interest is due prior to the Oxford Maturity Date, a Prepayment Fee.

Pursuant to the Second Amendment, the Loan Agreement was amended to, among other things: (i) provide for Oxford's and the Lenders’ consent to the Company’s consummation of the Asset Sale with M.D. Anderson, provided such sale occurs on or prior to June 30, 2020; (ii) if such Asset Sale occurs on or prior to June 30, 2020, extend the interest-only period through as late as July 31, 2021; (iii) if Asset Sale closes on or prior to June 30, 2020, provide for a partial repayment to the Lenders of a significant percentage of the proceeds of the asset sale that varies in accordance with the timing of closing and the associated amortization schedule, a portion of which will be applied as partial payment of the Final Payment Percentage (as defined in the Loan Agreement); and (iv) grant the Lenders and Oxford a security interest in the Company’s intellectual property as of the date of the Second Amendment, in each case as set forth in the Second Amendment. The sale of certain assets subject to the Second Amendment closed on April 14, 2020. Pursuant to the Second Amendment, the closing of the Asset Sale to M.D. Anderson triggered the Company’s obligation to provide partial repayment to the Lenders of $7.0 million, of which $0.6 million was applied as partial payment of the Oxford Final Payment Fee. The interest-only period was extended through December 31, 2020.


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The Company paid expenses related to the Oxford Loan Agreement of $0.1 million, which, along with the final facility charge of $3.0 million, have been recorded as deferred issuance costs, which offset long-term debt on the Company's condensed consolidated balance sheet. The deferred issuance costs are being amortized over the term of the loan as interest expense using the effective interest method. Interest expense of amortized deferred issuance costs included $0.2 million and $0.2 million during the three months ended September 30, 2020 and 2019, respectively, and $0.6 million and $0.7 million during the nine months ended September 30, 2020 and 2019, respectively. The interest rate on amounts borrowed under the Oxford Loan Agreement was 10.98% at September 30, 2020.

Management believes that the carrying value of the debt facility approximates its fair value, as the Company's debt facility bears interest at a rate that approximates prevailing market rates for instruments with similar characteristics. The fair value of the Company's debt facility is determined under Level 2 in the fair value hierarchy.

NOTE 5 - AUGUST 2019 PUBLIC OFFERING AND PRIVATE PLACEMENT
August 2019 Public Offering
On August 16, 2019, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Jefferies LLC and Wells Fargo Securities, LLC, as representatives of the several underwriters named therein (the “Underwriters”), relating to an underwritten public offering (the “Offering”) of 575,000 shares of the Series 1 Redeemable Convertible Non-Voting Preferred Stock of the Company (the “Series 1 Preferred Stock”) and warrants (the “Public Warrants”) to purchase up to 5,750,000 shares of its common stock. Each share of Series 1 Preferred Stock was sold together with a warrant to purchase 10 shares of common stock at a combined price to the public of $100.00. Under certain circumstances, each warrant to purchase 10 shares of common stock will be exercisable, at the irrevocable election of the holder, for one share of Series 1 Preferred Stock. The offering closed on August 21, 2019, and the net proceeds to the Company from the Offering was approximately $53.8 million after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company, and excluding any proceeds that the Company may receive upon exercise of the Public Warrants.

All of the Public Warrants sold in the Offering have an exercise price of $13.00 per share of common stock or, in certain circumstances, for $130.00 per share of Series 1 Preferred Stock, subject to proportional adjustments in the event of stock splits or combinations or similar events. The Public Warrants were immediately exercisable upon issuance, provided that the holder is prohibited, subject to certain exceptions, from exercising a warrant for shares of common stock to the extent that immediately prior to or after giving effect to such exercise, the holder, together with its affiliates and other attribution parties, would own more than 9.99% of the total number of shares of common stock then issued and outstanding, which percentage may be changed at the holder’s election to a lower percentage at any time or to a higher percentage not to exceed 19.99% upon 61 days’ notice to the Company. The Public Warrants will expire on August 21, 2026, unless exercised prior to that date.

Private Placement

On August 16, 2019, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain institutional investors named therein (the “Purchasers”), pursuant to which the Company agreed to issue in a private placement (i) 350,000 shares of its Series 2 Redeemable Convertible Non-Voting Preferred Stock (the “Series 2 Preferred Stock”), at a purchase price of $100.00 per share, and related warrants (the “Private Warrants”) to purchase up to 2,800,000 shares of common stock at an exercise price of $10.00 per share, and (ii) 250,000 shares of its Series 3 Redeemable Convertible Non-Voting Preferred Stock (the “Series 3 Preferred Stock” and, together with the Series 1 Preferred Stock and Series 2 Preferred Stock, the “Preferred Stock”), at a purchase price of $140.00 per share, and related warrants (also, “Private Warrants”) to purchase up to 875,000 shares of common stock at an exercise price of $14.00 per share. The purchase and sale of the securities issuable under the private placement agreement may occur in two or more separate closings, each to be conducted at the Purchasers’ discretion within five days’ notice to the Company. The purchase and sale was subject to the Company’s obtaining stockholder approval for additional authorized shares of Common Stock or a reverse stock split (the “Required Stockholder Approval”), which occurred in the first quarter of 2020. The right of the Purchasers to purchase such securities will expire two and a half years after the Required Stockholder Approval, on July 15, 2022, with respect to the Series 2 Preferred Stock, and three years after such stockholder approval, on January 15, 2023, with respect to the Series 3 Preferred Stock, if not exercised prior to that date.

The Company received $11.2 million in option proceeds, net of offering costs, upon the execution of the Securities Purchase Agreement. Total offering costs incurred by the Company related to the Public Warrants, Private Warrants and options amounted to $3.0 million.

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The following table reflects the fair value roll forward reconciliation of the warrant derivative and private placement option liabilities for the period ended September 30, 2020:

(in thousands)Warrant Derivative LiabilityPrivate Placement Option LiabilityTotal
Balance, December 31, 2019
$52,184 $12,094 $64,278 
Change in fair value(28,501)14,245 (14,256)
Balance, September 30, 2020
$23,683 $26,339 $50,022 

NOTE 6 - REDEEMABLE CONVERTIBLE PREFERRED STOCK

In August 2019, the Company sold Series 1 preferred stock pursuant to the Offering. The Company has 10,000,000 authorized shares of preferred stock with a par value of $0.01, of which the Company has designated 1,517,500 shares as Series 1 redeemable convertible non-voting preferred stock, 350,000 shares as Series 2 redeemable convertible non-voting preferred stock and 250,000 shares as Series 3 redeemable convertible non-voting preferred stock. There were 534,000 shares of Series 1 preferred stock issued and outstanding as of September 30, 2020. There were no shares of Series 2 or 3 preferred stock issued and outstanding as of September 30, 2020.

As of September 30, 2020, the Company classified the Series 1 preferred stock within mezzanine equity, as the Series 1 preferred stock is redeemable at the option of the holders upon passage of time, which is outside of the Company’s control to prevent.

The Series 1 preferred stock is not currently redeemable and is only redeemable upon a fundamental change at a redemption price. The Company does not believe a fundamental change is considered probable until it occurs. Subsequent adjustment of the amount presented within mezzanine equity to its redemption amount is unnecessary if it is not probable that the instrument will become redeemable. As (i) the Series 1 preferred stock is only redeemable upon a fundamental change, the occurrence of which is not probable, and (ii) the occurrence of Transition Date (defined below) is probable, the Company did not accrete the Series 1 preferred stock to its redemption amount.

Optional Conversion

Each share of Preferred Stock is initially convertible into 10 shares of Common Stock. The conversion price at which Preferred Stock may be converted into shares of common stock, is subject to adjustment in connection with certain specified events.

Redemption

Until the applicable Transition Date (defined below), at any time on or after the date that is the fifth (5th) anniversary of the initial issue date of the applicable series of preferred stock, all or any portion of the preferred stock is redeemable at the option of the holder at a redemption price of $100.00 per share (for Series 1 and Series 2 preferred stock) and $140.00 per share (for Series 3 preferred stock).  The “Transition Date” means:

With respect to the Series 1 preferred stock, the first date following August 21, 2021, on which each of the Conditions (as defined below) is met (the “Series 1 Transition Date”);

With respect to the Series 2 preferred stock, the first date following the six-month anniversary of the Series 1 Transition Date on which each of the Conditions is met (the “Series 2 Transition Date”); and

With respect to the Series 3 preferred stock, the first date following the six-month anniversary of the Series 2 Transition Date on which each of the Conditions is met.

The “Conditions” mean: (1) the closing price of the Company’s common stock has been equal to or exceeded $25.00 per share for 180 calendar days (for determining if the Conditions are met for the Series 1 preferred stock and Series 2 preferred stock) and $35.00 per share (for the Series 3 preferred stock) for 180 calendar days; (2) the 50-day average trading volume of the Company’s common stock on the Nasdaq stock market is greater than 50,000 shares; and (3) a Phase 3 or Phase 2 pivotal clinical trial for one of the Company’s CAR T product candidates has been initiated, meaning that at least one clinical trial site has been activated.

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Dividends

Shares of Preferred Stock will be entitled to receive dividends equal to (on an as-if-converted-to-common stock basis), and in the same form and manner as, dividends actually paid on shares of common stock.

Liquidation

Until the applicable Transition Date, in the event of a liquidation, dissolution, winding up or deemed liquidation, holders of the Preferred Stock will receive a payment equal to the applicable per share purchase price of their Preferred Stock before any proceeds are distributed to the holders of Common Stock. The liquidation preferences, protective voting provisions and redemption rights of the Preferred Stock will terminate upon the occurrence of certain events.

Voting

Shares of Preferred Stock will generally have no voting rights, except to the extent expressly provided in the Company’s certificate of incorporation or as otherwise required by law.

NOTE 7 - STOCKHOLDERS' EQUITY AND SHARE-BASED COMPENSATION PLANS

Stockholders' Equity

On October 5, 20