Actinium Pharmaceuticals, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS The accompanying consolidated financial statements have been prepared by the Company and are unaudited. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at September 30, 2021 and December 31, 2020, and the results of operations and cash flows for the three and nine months ended September 30, 2021 and 2020, respectively, have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s audited financial statements for the year ended December 31, 2020 in the Company’s Annual Report on Form 10-K. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the operating results for the full year. 1 Actinium Pharmaceuticals, Inc. Condensed Consolidated Balance Sheets (amounts in thousands, except share and per share data) September 30, 2021 December 31, 2020 (Unaudited) Assets Current Assets: Cash and cash equivalents $ 82,032 $ 63,560 Restricted cash – current 48 48 Prepaid expenses and other current assets 1,181 1,317 Total Current Assets 83,261 64,925 Property and equipment, net of accumulated depreciation of $ 367 and $ 291 369 312 Operating leases right-of-use assets 328 579 Finance leases right-of-use assets 79 140 Security deposit 50 50 Restricted cash 392 391 Total Assets $ 84,479 $ 66,397 Liabilities and Stockholders’ Equity Current Liabilities: Accounts payable and accrued expenses $ 3,773 $ 4,340 Operating leases current liability 333 342 Finance leases current liability 84 85 Total Current Liabilities 4,190 4,767 Long-term operating leases obligations - 245 Long-term finance leases obligations 4 66 Total Liabilities 4,194 5,078 Commitments and contingencies (Note 2) Stockholders’ Equity: Preferred stock, $ 0.001 par value; 50,000,000 shares authorized, 0 shares issued and outstanding — — Common stock, $ 0.001 par value; 1,000,000,000 shares authorized; 22,030,838 and 17,532,893 shares issued and outstanding, respectively 22 18 Additional paid-in capital 328,001 292,275 Accumulated deficit ( 247,738 ) ( 230,974 ) Total Stockholders’ Equity 80,285 61,319 Total Liabilities and Stockholders’ Equity $ 84,479 $ 66,397 See accompanying notes to the condensed consolidated financial statements. 2 Actinium Pharmaceuticals, Inc. Condensed Consolidated Statements of Operations (Unaudited) (amounts in thousands, except share and per share data) For the Three Months Ended September 30, For the Nine months Ended September 30, 2021 2020 2021 2020 Revenue Revenue $ - $ - $ - $ - Other revenue 233 - 1,121 - Total revenue 233 - 1,121 - Operating expenses: Research and development, net of reimbursements 4,708 3,788 12,615 11,446 General and administrative 1,994 1,825 5,422 4,512 Total operating expenses 6,702 5,613 18,037 15,958 Loss from operations ( 6,469 ) ( 5,613 ) ( 16,916 ) ( 15,958 ) Other income: Interest income - net 46 73 152 123 Total other income 46 73 152 123 Net loss $ ( 6,423 ) $ ( 5,540 ) $ ( 16,764 ) $ ( 15,835 ) Deemed dividend for warrant down-round protection provision - - - ( 1 ) Net loss applicable to common stockholders $ ( 6,423 ) $ ( 5,540 ) $ ( 16,764 ) $ ( 15,836 ) Net loss per share of common stock – basic and diluted $ ( 0.30 ) $ ( 0.36 ) $ ( 0.84 ) $ ( 1.46 ) Weighted average shares of common stock outstanding, including outstanding pre-funded warrants– basic and diluted 21,539,455 15,432,857 20,060,315 10,875,712 See accompanying notes to the condensed consolidated financial statements. 3 Actinium Pharmaceuticals, Inc. Condensed Consolidated Statement of Changes in Stockholders’ Equity For the Three and Nine months Ended September 30, 2021 (Unaudited) (amounts in thousands, except share amounts) Common Stock Additional Paid-In Accumulated Stockholders’ Shares Amount Capital Deficit Equity Balance, January 1, 2021 17,532,893 $ 18 $ 292,275 $ ( 230,974 ) $ 61,319 Stock-based compensation - - 376 - 376 Sale of common stock, net of costs 1,712,745 1 14,360 - 14,361 Net loss - - - ( 5,320 ) ( 5,320 ) Balance, March 31, 2021 19,245,638 $ 19 $ 307,011 $ ( 236,294 ) $ 70,736 Stock-based compensation 8,705 - 459 - 459 Sale of common stock, net of costs 1,835,688 2 14,317 - 14,319 Issuance of shares from exercise of stock options 900 - 6 - 6 Net loss - - - ( 5,021 ) ( 5,021 ) Balance, June 30, 2021 21,090,931 $ 21 $ 321,793 $ ( 241,315 ) $ 80,499 Stock-based compensation 12,601 - 412 - 412 Sale of common stock, net of costs 927,306 1 5,796 - 5,797 Net loss - - - ( 6,423 ) ( 6,423 ) Balance, September 30, 2021 22,030,838 $ 22 $ 328,001 $ ( 247,738 ) $ 80,285 See accompanying notes to the condensed consolidated financial statements. 4 Actinium Pharmaceuticals, Inc. Condensed Consolidated Statement of Changes in Stockholders’ Equity For the Three and Nine months Ended September 30, 2020 (Unaudited) (amounts in thousands, except share amounts) Common Stock Additional Paid-In Accumulated Stockholders’ Shares Amount Capital Deficit Equity Balance, January 1, 2020 5,490,038 $ 5 $ 214,397 $ ( 208,758 ) $ 5,644 Stock-based compensation - - 372 - 372 Sale of common stock, net of costs 337,944 1 2,673 - 2,674 Net loss - - - ( 5,670 ) ( 5,670 ) Balance, March 31, 2020 5,827,982 $ 6 $ 217,442 $ ( 214,428 ) $ 3,020 Stock-based compensation 5,240 - 210 - 210 Issuance of common stock from exercise of pre-funded warrants 1,200,000 1 3 - 4 Sale of common stock and pre-funded warrants, net of costs 6,138,602 6 52,159 - 52,165 Deemed dividend for warrant down-round protection provision - - 1 ( 1 ) - Net loss - - - ( 4,625 ) ( 4,625 ) Balance, June 30, 2020 13,171,824 $ 13 $ 269,815 $ ( 219,054 ) $ 50,774 Stock-based compensation 1,023 - 288 - 288 Issuance of common stock from exercise of warrants and stock options 2,609 - 37 - 37 Issuance of common stock from exercise of pre-funded warrants 411,069 1 1 - 2 Costs related to prospectus filed on Form S-3 - - ( 134 ) - ( 134 ) Net loss - - - ( 5,540 ) ( 5,540 ) Balance, September 30, 2020 13,586,525 $ 14 $ 270,007 $ ( 224,594 ) $ 45,427 See accompanying notes to the condensed consolidated financial statements. 5 Actinium Pharmaceuticals, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (amounts in thousands) For the Nine months Ended September 30, 2021 2020 Cash Flows From Operating Activities: Net loss $ ( 16,764 ) $ ( 15,835 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 1,246 870 Depreciation & amortization expenses 387 327 Changes in operating assets and liabilities: Prepaid expenses and other current assets 137 ( 112 ) Accounts payable and accrued expenses ( 566 ) ( 375 ) Operating lease liabilities ( 254 ) ( 234 ) Net Cash Used In Operating Activities ( 15,814 ) ( 15,359 ) Cash Flows Used In Investing Activities: Purchase of property and equipment ( 133 ) ( 8 ) Net Cash Used In Investing Activities ( 133 ) ( 8 ) Cash Flows From Financing Activities: Payments on note payable - ( 343 ) Payments on finance leases ( 63 ) ( 58 ) Sales of shares of common stock and pre-funded warrants, net of costs - 54,705 Sales of shares of common stock, net of costs 34,477 - Proceeds from exercise of stock options 6 6 Proceeds from exercise of pre-funded warrants - 37 Net Cash Provided By Financing Activities 34,420 54,347 Net change in cash, cash equivalents, and restricted cash 18,473 38,980 Cash, cash equivalents, and restricted cash at beginning of period 63,999 9,693 Cash, cash equivalents, and restricted cash at end of period $ 82,472 $ 48,673 Supplemental disclosure of cash flow information: Cash paid for interest on note payable $ - $ 7 Cash paid for taxes $ - $ - Supplemental disclosure of non-cash flow information: Deemed dividend for warrant down-round protection provision $ - $ 1 See accompanying notes to the condensed consolidated financial statements. 6 Actinium Pharmaceuticals, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) Note 1 - Description of Business and Summary of Significant Accounting Policies Nature of Business - Actinium Pharmaceuticals, Inc. (the “Company”, “Actinium”, or “We”) is a clinical-stage, biopharmaceutical company applying its proprietary platform technology and deep understanding of radiobiology to the development of novel targeted therapies known as ARCs or Antibody Radiation-Conjugates. Radiation is an effective therapeutic modality that is used in the treatment of over fifty percent of all cancer patients and often combined with chemotherapy and immunotherapy for greater therapeutic effect. ARCs combine the cell-killing ability of a radioisotope payload with a targeting agent, such as a monoclonal antibody, or mAb, to deliver radiation inside the body to specific cells, to potentially generate greater efficacy and less toxicity. ARCs usage is broader than externally delivered radiation as they can be used for both solid tumors and blood cancers. Blood or hematologic cancers are highly sensitive to radiation and our clinical pipeline is focused on ARCs targeting the antigens CD45 and CD33, both of which are expressed in multiple hematologic cancers. The Company’s clinical programs are focused on two primary areas: targeted conditioning prior to bone marrow transplant, adoptive cell or gene therapies and therapeutics, in combination with other therapeutic modalities. The Company’s product development strategy is actively informed by clinical data with its ARCs in approximately 600 patients, including the pivotal Phase 3 SIERRA trial for the Company’s lead asset Iomab-B, which completed enrollment of 150 patients in September 2021. The clinical pipeline has emanated from its Antibody Warhead Enabling (“AWE”) technology platform, which is protected by over 160 issued patents and pending patent applications, trade secrets and know-how and is being utilized in a collaborative research partnership with Astellas Pharma, Inc., (“Astellas”). The AWE technology platform is also being used to advance Actinium’s research objectives focused on developing next-generation targeted radiotherapies. Basis of Presentation - Unaudited Interim Financial Information - The accompanying unaudited interim consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) with respect to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim consolidated financial statements furnished reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s annual report on Form 10-K for the year ended December 31, 2020. Principles of Consolidation - The consolidated financial statements include the Company’s accounts and those of the Company’s wholly owned subsidiaries. Use of Estimates in Financial Statement Presentation - The preparation of these consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Impact of COVID–19 Pandemic on Financial Statements - The global health crisis caused by the novel coronavirus (“COVID-19”) pandemic and its resurgences has and may continue to negatively impact global economic activity, which, despite progress in vaccination efforts, remains uncertain and cannot be predicted with confidence. In addition, the Delta variant of COVID-19, which appears to be the most transmissible variant to date, has spread globally. The full impact of the Delta variant cannot be predicted at this time, and could depend on numerous factors, including vaccination rates among the population, the effectiveness of COVID-19 vaccines against the Delta variant and the response by governmental bodies and regulators. 7 Many countries around the world have continued to impose quarantines and restrictions on travel and mass gatherings to slow the spread of the virus. Accordingly, the Company’s ability to continue to operate its business may also be limited. Such events may result in a period of business, supply and drug product manufacturing disruption, and in reduced operations, any of which could materially affect the Company’s business, financial condition and results of operations. In response to COVID-19, the Company implemented remote working and thus far, has not experienced a significant disruption or delay in its operations as it relates to the clinical development or drug production of our drug candidates. A continuation or worsening of the levels of market disruption and volatility seen in the recent past could have an adverse effect on the Company’s ability to access capital, which could in the future negatively affect the Company’s liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect the Company’s business and the value of the Company’s common stock. Additionally, COVID-19 may result in delays in receiving approvals from local and foreign regulatory authorities, delays in necessary interactions with IRB’s or Institutional Review Boards, local and foreign regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees. To date, COVID-19 has not had a financial impact on the Company. The Company continues to monitor the impacts of COVID-19 on the global economy and on its business operations. However, at this time, it is difficult to predict how long the potential operational impacts of COVID-19 will last or to what degree further disruption might impact the Company’s operations and financial results. Cash, Cash Equivalents and Restricted Cash - The Company considers all highly liquid accounts with original maturities of three months or less to be cash equivalents. Balances held by the Company are typically in excess of Federal Deposit Insurance Corporation insured limits. The following is a summary of cash, cash equivalents and restricted cash at September 30, 2021 and December 31, 2020: (in thousands) September 30, 2021 December 31, 2020 Cash and cash equivalents $ 82,032 $ 63,560 Restricted cash – current 48 48 Restricted cash – long-term 392 391 Cash, cash equivalents and restricted cash $ 82,472 $ 63,999 Current restricted cash relates to credit card accounts, while long-term restricted cash relates to a certificate of deposit held as collateral for a letter of credit issued in connection with the Company’s lease for corporate office space. Leases - The Company has operating and finance leases for corporate office space, office equipment and furniture located at the corporate office space. Leases with an initial term of 12 months or less are not recorded on the balance sheet; lease expense for these leases is recognized on a straight-line basis over the lease term. See Note 3 for additional information. Fair Value of Financial Instruments - Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. A fair value hierarchy has been established for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. Revenue Recognition - The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) Topic 606, Revenue From Contracts With Customers (“ASC 606”). Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements within the scope of ASC 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue as the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration to which it is entitled in exchange for the goods or services it transfers to the customer. 8 At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses whether the promised goods or services promised within each contract are distinct and, therefore, represent a separate performance obligation. Goods and services that are determined not to be distinct are combined with other promised goods and services until a distinct bundle is identified. In determining whether goods or services are distinct, the Company evaluates certain criteria, including whether (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (capable of being distinct) and (ii) the good or service is separately identifiable from other goods or services in the contract (distinct in the context of the contract). The Company then determines the transaction price, which is the amount of consideration it expects to be entitled from a customer in exchange for the promised goods or services for each performance obligation and recognizes the associated revenue as each performance obligation is satisfied. The Company’s estimate of the transaction price for each contract includes all variable consideration to which it expects to be entitled. Variable consideration includes payments in the form of collaboration milestone payments. If an arrangement includes collaboration milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. ASC 606 requires the Company to allocate the arrangement consideration on a relative standalone selling price basis for each performance obligation after determining the transaction price of the contract and identifying the performance obligations to which that amount should be allocated. The relative standalone selling price is defined in the revenue standard as the price at which an entity would sell a promised good or service separately to a customer. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation as each performance obligation is satisfied, either at a point in time or over time, and if over time, recognition is based on the use of an output or input method. Collaborative Arrangements - The Company follows the accounting guidance for collaboration agreements with third parties, which requires that certain transactions between the Company and collaborators be recorded in its consolidated statements of operations and comprehensive loss on either a gross basis or net basis, depending on the characteristics of the collaborative relationship, and requires enhanced disclosure of collaborative relationships. The Company evaluates its collaboration agreements for proper classification in its consolidated statements of operations and comprehensive loss based on the nature of the underlying activity. When the Company has concluded that it has a customer relationship with one of its collaborators, the Company follows the guidance of ASC 606 . Grant Revenue – The Company has a grant from a government-sponsored entity for research and development related activities that provide for payments for reimbursed costs, which includes overhead and general and administrative costs as well as an administrative fee. The Company recognizes revenue from grants as it performs services under this arrangement. Associated expenses are recognized when incurred as research and development expense. Revenue and related expenses are presented gross in the consolidated statements of operations. Research and Development Costs - Research and development costs are expensed as incurred. These costs include the costs of manufacturing drug product, the costs of clinical trials, costs of employees and associated overhead, and depreciation and amortization costs related to facilities and equipment. Research and development reimbursements are recorded by the Company as a reduction of research and development costs. Share-Based Payments - The Company estimates the fair value of each stock option award at the grant date by using the Black-Scholes option pricing model. The fair value determined represents the cost for the award and is recognized over the vesting period during which an employee is required to provide service in exchange for the award. The Company accounts for forfeitures of stock options as they occur. 9 Net Loss Per Common Share - Basic loss per common share is computed by dividing the net loss available to common stockholders by the weighted average number of shares of common stock outstanding during the reporting period. For periods of net income, and when the effects are not anti-dilutive, diluted earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of shares outstanding plus the impact of all potential dilutive common shares, consisting primarily of common shares underlying common stock options and warrants using the treasury stock method. The Company issued pre-funded warrants in April 2020 and June 2020 that were considered outstanding shares for the purposes of calculating net loss per common share for the three months and nine months ended September 30, 2020, see Note 5 for additional information. As of December 31, 2020, all of the pre-funded warrants were exercised and there were no pre-funded warrants outstanding during the nine months ended September 30, 2021. For periods of net loss, diluted loss per share is calculated similarly to basic loss per share because the impact of all potential dilutive common shares is anti-dilutive. For the three months and nine months ended September 30, 2021 and 2020, the Company’s potentially dilutive shares, which include outstanding common stock options and warrants have not been included in the computation of diluted net loss per share as the result would have been anti-dilutive. As of September 30, 2021 and 2020, outstanding options and warrants are as follows: (in thousands) September 30, 2021 September 30, 2020 Options 1,426 750 Warrants 2,114 2,113 Total 3,540 2,863 Accounting Standards Recently Adopted - In August 2020, FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity , which, among other things, provides guidance on how to account for contracts on an entity’s own equity. This ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. Specifically, the ASU eliminated the need for the Company to assess whether a contract on the entity’s own equity (1) permits settlement in unregistered shares, (2) whether counterparty rights rank higher than shareholder’s rights, and (3) whether collateral is required. In addition, the ASU requires incremental disclosure related to contracts on the entity’s own equity and clarifies the treatment of certain financial instruments accounted for under this ASU on earnings per share. This ASU may be applied on a full retrospective of modified retrospective basis. This ASU is effective January 1, 2022 and interim periods presented, although early adoption of this ASU was permitted effective January 1, 2021. The Company early adopted this standard effective January 1, 2021 and the standard did not have a significant impact on the Company’s financial statements. Accounting Standards Recently Issued - In May 2021, FASB issued ASU 2021-04, Earnings Per Share (topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50), Compensation – Stock Compensation (Topic 718) and Derivatives and Hedging – Contracts in an Entity’s Own Equity (Subtopic 815-40) – Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options , which provides guidance of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as (1) an adjustment to equity and, if so, the related earnings per share (EPS) effects, if any, or (2) an expense and, if so, the manner and pattern of recognition. The amendments in this ASU are effective January 1, 2022, including interim periods. Early adoption is permitted. The Company will apply the amendments prospectively to modifications or exchanges occurring on or after January 1, 2022. The Company will evaluate the impact of ASU 2017-09 on any future changes to the terms and conditions of its warrants. 10 Note 2 - Commitments and Contingencies Agreements The Company has entered into agreements with third parties for the rights to certain intellectual property, manufacturing and clinical trial services under which the Company may incur obligations to make payments including upfront payments as well as milestone and royalty payments. A notable inclusion in this category is: On June 15, 2012, the Company entered into a license and sponsored research agreement with Fred Hutchinson Cancer Research Center (“FHCRC”) to build upon previous and ongoing clinical trials with BC8 (licensed antibody), currently known as apamistamab. FHCRC has completed both a Phase 1 and Phase 2 clinical trial with apamistamab. The Company has been granted exclusive rights to the apamistamab antibody and related master cell bank developed by FHCRC. A milestone payment of $ 1 million will be due to FHCRC upon FDA approval of the first drug utilizing the licensed apamistamab antibody. Upon commercial sale of the drug, royalty payments of 2% of net sales will be due to FHCRC. Note 3 - Leases The Company determines if an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys to the Company the right to control the use of a fixed asset for a period of time in exchange for consideration. Control of an underlying asset is conveyed to the Company if the Company obtains the rights to direct the use of and to obtain substantially all of the economic benefits from using the underlying asset. The Company has lease agreements which include lease and non-lease components, which the Company has elected to account for as a single lease component for all classes of underlying assets. Lease expense for variable lease components are recognized when the obligation is probable. Right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ASC 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. As an implicit interest rate is not readily determinable in the Company’s leases, the incremental borrowing rate is used based on the information available at commencement date in determining the present value of lease payments. The lease term for all of the Company’s leases includes the non-cancellable period of the lease plus any additional periods covered by either a Company option to extend (or not to terminate) the lease that the Company is reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor. Options for lease renewals have been excluded from the lease term (and lease liability) for the majority of the Company’s leases as the reasonably certain threshold is not met. At September 30, 2021, the Company has an operating lease for corporate office space and two finance leases for office equipment and furniture located in the corporate office space. In addition, the Company has auxiliary corporate office space that it rents on a month-to-month basis; this rental is accounted for as an operating lease with the same term as the Company’s main office in the same building. The components of lease expense are as follows: Three months ended Nine months ended (in thousands) September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 Operating lease expense $ 93 $ 93 $ 279 $ 279 Finance lease cost Amortization of right-to-use assets $ 20 $ 20 $ 61 $ 61 Interest on lease liabilities $ 2 $ 4 $ 7 $ 12 Total finance lease cost $ 22 $ 24 $ 68 $ 73 11 Supplemental cash flow information related to leases are as follows: Cash flow information: Nine months ended (in thousands) September 30, 2021 September 30, 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flow use from operating leases $ 282 $ 281 Operating cash flow use from finance leases $ 7 $ 12 Financing cash flow use from finance leases $ 63 $ 58 Non-cash activity: Right-of-use assets obtained in exchange for lease obligations: Operating leases $ - $ 83 Finance Leases $ - $ - Weighted average remaining lease terms are as follows at September 30, 2021: Weighted average remaining lease term: Operating leases 1.0 year Finance Leases 0.9 year As the rate implicit in the leases was not readily determinable, the Company used its incremental borrowing rate based on the information available in determining the present value of lease payments. The Company’s incremental borrowing rate was based on the term of the lease, the economic environment of the lease and reflect the rate the Company would have had to pay to borrow on a secured basis. Below is information on the weighted average discount rates used at the time that the leases were evaluated: Weighted average discount rates: Operating leases 8 % Finance Leases 8 % Maturities of lease liabilities are as follows: (in thousands) Year ending December 31, Operating Leases Finance Leases 2021 (excluding nine months ended September 30, 2021) $ 94 $ 24 2022 252 64 2023 - 4 Total lease payments $ 346 $ 92 Less imputed interest ( 13 ) ( 4 ) Present value of lease liabilities $ 333 $ 88 Note 4 - Other revenue The Company has a grant from a government-sponsored entity for research and development related activities that provide for payments for reimbursed costs, which includes overhead and general and administrative costs as well as an administrative fee. The Company recognizes revenue from grants as it performs services under this arrangement. Associated expenses are recognized when incurred as research and development expense. Revenue of $ 0.2 million was recognized during the three and nine months ended September 30, 2021. 12 The Company determined that certain collaborations with a third-party are within the scope of ASC 606. The collaboration agreement is made up of multiple modules related to various research activities. The Company identified a single performance obligation to provide research services within each module for which the Company receives monetary consideration. The third-party can choose to proceed with each module or can terminate the agreement at any time. The Company recognizes revenue for each module on a straight-line basis over the expected module period. Revenue for succeeding modules is not recognized until all contingencies are resolved, inclusive of the third-party’s ability to terminate the module. The consideration is recognized to revenue over each module and revenue recognized during the nine months ended September 30, 2021 was $ 0.9 million. Note 5 - Equity In August 2020, the Company entered into the Capital on Demand™ Sales Agreement with JonesTrading Institutional Services LLC (“JonesTrading”), pursuant to which the Company may sell, from time to time, through or to JonesTrading, up to an aggregate of $ 200 million of its common stock. Shares of common stock are offered pursuant to the Company’s shelf registration statement on Form S-3 filed with the SEC on August 7, 2020. As of December 31, 2020, the Company had sold 2.1 million shares of common stock, resulting in gross proceeds of $ 22.6 million and net proceeds of $ 21.7 million. For the nine months ended September 30, 2021, the Company sold 4.5 million shares of common stock, resulting in gross proceeds of $ 35.6 million and net proceeds of $ 34.5 million. On April 24, 2020, the Company issued and sold 4.3 million shares of common stock and 2.8 million pre-funded warrants to purchase shares of common stock. The price to the public in this offering for each share of common stock was $ 4.50 and for each pre-funded warrant was $ 4.497 . Each pre-funded warrant had an exercise price of $ 0.003 per share and was exercisable immediately upon issuance. Gross proceeds from this offering were $ 31.6 million, before deducting underwriting discounts and commissions and other offering expenses payable by the Company. Net proceeds from this offering were $ 29.1 million. During the nine months ended September 30, 2020, holders of 1.4 million pre-funded April 2020 warrants exercised their warrants at $ 0.003 per share and received 1.4 million shares of common stock. On June 19, 2020, the Company issued and sold 1.9 million shares of common stock and 0.7 million pre-funded warrants to purchase shares of common stock. The price to the public in this offering for each share of common stock was $ 9.75 and for each pre-funded warrant was $ 9.747 . Each pre-funded warrant had an exercise price of $ 0.003 per share and was exercisable immediately upon issuance. Gross proceeds from this offering were $ 25.0 million, before deducting underwriting discounts and commissions and other offering expenses payable by the Company. Net proceeds from this offering were $ 23.0 million. During the nine months ended September 30, 2020, holders of 0.2 million pre-funded June 2020 warrants exercised their warrants at $ 0.003 per share and received 0.2 million shares of common stock. 13 Stock Options The following is a summary of stock option activity for the nine months ended September 30, 2021: (in thousands, except for per-share amounts) Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value Outstanding, January 1, 2021 815 $ 21.53 8.51 $ 120 Granted 880 6.43 Exercised ( 1 ) 6.69 Cancelled ( 268 ) 19.65 Outstanding, September 30, 2021 1,426 12.57 8.55 2,207 Exercisable, September 30, 2021 337 29.19 5.38 134 During the nine months ended September 30, 2021, the Company granted employees options to purchase 880 thousand shares of the Company’s common stock with an exercise price ranging from $ 6.02 to $ 9.25 per share, a term of 10 years, and a vesting period of 4 years. The options have an aggregated fair value of $ 3.9 million that was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate range from 0.65% to 1.07% (2) expected life of 6 years, (3) expected volatility range from 79.8% to 85.1%, and (4) no expected dividends. During the nine months ended September 30, 2021, options to purchase 1 thousand shares were exercised and options to purchase 268 thousand shares were cancelled upon the termination of employment for several employees. The fair values of all options issued and outstanding are being amortized over their respective vesting periods. The unrecognized compensation expense at September 30, 2021 was $ 5.4 million related to unvested options, which is expected to be expensed over a weighted average of 3.5 years. During the nine months ended September 30, 2021 and 2020, the Company recorded compensation expense related to stock options of $ 1.0 million and $ 0.8 million, respectively. Pre-funded Warrants As part of the April 2020 offering and the June 2020 offering, the Company issued pre-funded warrants. Each pre-funded warrant had an exercise price of $ 0.003 per share and was exercisable immediately upon issuance. Management determined that the pre-funded warrants were freestanding instruments and that the pre-funded warrants should be classified as permanent equity. As of December 31, 2020, all of the pre-funded warrants were exercised and there were no pre-funded warrants outstanding during the nine months ended September 30, 2021. As of September 30, 2020, there were 1.8 million pre-funded warrants outstanding. 14 Warrants Following is a summary of warrant activity for the nine months ended September 30, 2021: (in thousands, except for per-share amounts) Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value Outstanding, January 1, 2021 2,113 $ 20.55 2.76 $ 362 Granted 1 8.30 Exercised - - Cancelled/Expired - - Outstanding, September 30, 2021 2,114 $ 20.54 2.01 $ 414 Exercisable, September 30, 2021 2,112 $ 20.55 2.01 $ 414 The Company has an outstanding warrant to purchase 1,907 shares of common stock, issued on March 14, 2017 to Sandesh Seth, the Company’s Chairman and Chief Executive Officer. The warrant included down-round protection up until it was amended on August 11, 2020. For warrants with down-round protection, a deemed dividend is recorded for the change in fair value of the warrants when the down-round provision is triggered. As a result of the April 2020 offering and June 2020 offering, the exercise price of the warrant was reset from $ 26.40 per share to $ 15.62 per share. The down-round protection provision in the above warrants created a deemed dividend to common stockholders of $ 1 thousand in the nine months ended September 30, 2020 which is reflected in the accompanying consolidated statement of operations and consolidated statement of changes in stockholders’ equity. On August 11, 2020, the Company and Mr. Seth agreed to amend the warrant to remove the anti-dilution provision that had been in the warrant. Accordingly, pursuant to the amendment, as of August 11, 2020, the exercise price of the warrant will no longer be subject to a proportional adjustment if and when the Company issues any shares of its common stock for a consideration less than the exercise price of the warrant. All other terms of the warrant remained the same. 15