Actinium Pharmaceuticals, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors of Actinium Pharmaceuticals, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Actinium Pharmaceuticals, Inc. (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, changes in stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2022 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. /s/ Marcum llp Marcum llp We have served as the Company’s auditor since 2012 . Houston, Texas March 31, 2023 F- 1 Actinium Pharmaceuticals, Inc. Consolidated Balance Sheets (amounts in thousands, except share and per share data) December 31, 2022 December 31, 2021 Assets Current Assets: Cash and cash equivalents $ 108,910 $ 77,829 Restricted cash – current 396 392 Security deposit - 50 Prepaid expenses and other current assets 1,636 1,478 Total Current Assets 110,942 79,749 Property and equipment, net of accumulated depreciation of $ 487 and $ 335 604 340 Restricted cash – long term 302 - Operating lease right-of-use assets 2,341 241 Finance leases right-of-use assets 3 58 Total Assets $ 114,192 $ 80,388 Liabilities and Stockholders’ Equity Current Liabilities: Accounts payable and accrued expenses $ 10,130 $ 5,535 Other revenue deferred – current liability - 998 Operating leases current liability 494 245 Finance leases current liability 4 62 Total Current Liabilities 10,628 6,840 Long-term license revenue deferred 35,000 - Long-term operating lease obligations 2,083 - Long-term finance lease obligations - 3 Total Liabilities 47,711 6,843 Commitments and contingencies 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; 25,674,823 and 22,143,974 shares issued and outstanding 26 22 Additional paid-in capital 355,220 329,271 Accumulated deficit ( 288,765 ) ( 255,748 ) Total Stockholders’ Equity 66,481 73,545 Total Liabilities and Stockholders’ Equity $ 114,192 $ 80,388 See accompanying notes to the consolidated financial statements. F- 2 Actinium Pharmaceuticals, Inc. Consolidated Statements of Operations (amounts in thousands, except share and per share data) For the Year ended December 31, 2022 2021 Revenue Revenue $ - $ - Other Revenue 1,030 1,144 Total revenue 1,030 1,144 Operating expenses: Research and development, net of reimbursements 23,135 18,031 General and administrative 11,999 8,077 Total operating expenses 35,134 26,108 Loss from operations ( 34,104 ) ( 24,964 ) Other income: Interest income - net 1,087 190 Total other income 1,087 190 Net loss $ ( 33,017 ) $ ( 24,774 ) Net loss per common share - basic and diluted $ ( 1.37 ) $ ( 1.20 ) Weighted average common shares outstanding - basic and diluted 24,141,545 20,568,373 See accompanying notes to the consolidated financial statements. F- 3 Actinium Pharmaceuticals, Inc. Consolidated Statements of Changes in Stockholders’ Equity For the Years Ended December 31, 2022 and 2021 (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 21,306 - 1,694 - 1,694 Sale of common stock, net of offering costs 4,588,875 4 35,296 - 35,300 Issuance of common stock from exercise of stock options 900 - 6 - 6 Net loss - - - ( 24,774 ) ( 24,774 ) Balance, December 31, 2021 22,143,974 $ 22 $ 329,271 $ ( 255,748 ) $ 73,545 Stock-based compensation 19,639 - 2,795 - 2,795 Sale of common stock, net of offering costs 3,511,210 4 23,154 - 23,158 Net loss - - - ( 33,017 ) ( 33,017 ) Balance, December 31, 2022 25,674,823 $ 26 $ 355,220 $ ( 288,765 ) $ 66,481 See accompanying notes to the consolidated financial statements. F- 4 Actinium Pharmaceuticals, Inc. Consolidated Statements of Cash Flows (amounts in thousands) For the Year ended December 31, 2022 2021 Cash Flows from Operating Activities: Net loss $ ( 33,017 ) $ ( 24,774 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 2,795 1,694 Depreciation and amortization expense 699 524 Changes in operating assets and liabilities: Prepaid expenses and other current assets ( 158 ) ( 161 ) Accounts payable and accrued expenses 4,595 1,195 Other revenue deferred – current liability ( 998 ) 998 Long-term license revenue deferred 35,000 - Operating lease liabilities ( 272 ) ( 342 ) Net Cash Provided By/Used In Operating Activities 8,644 ( 20,866 ) Cash Flows Used in Investing Activities: Purchase of property and equipment ( 366 ) ( 133 ) Net Cash Used In Investing Activities ( 366 ) ( 133 ) Cash Flows from Financing Activities: Payments on finance leases ( 49 ) ( 85 ) Proceeds from sales of shares of common stock, net of offering costs 23,158 35,300 Proceeds from the exercise of stock options - 6 Net Cash Provided By Financing Activities 23,109 35,221 Net change in cash, cash equivalents and restricted cash 31,387 14,222 Cash, cash equivalents and restricted cash at beginning of year 78,221 63,999 Cash, cash equivalents and restricted cash at end of year $ 109,608 $ 78,221 Supplemental disclosures of cash flow information: Cash paid for interest $ - $ - Cash paid for taxes $ - $ - Supplemental disclosure of non-cash investing and financing activities: Right-of-use assets obtained in exchange for lease liabilities $ 2,605 $ - Equipment obtained in exchange for security deposit $ 50 $ - See accompanying notes to the consolidated financial statements. F- 5 Actinium Pharmaceuticals, Inc. Notes to Consolidated Financial Statements Note 1 - Description of Business and Summary of Significant Accounting Policies Nature of Business - Actinium Pharmaceuticals, Inc. is a biopharmaceutical company developing targeted radiotherapies to deliver cancer-killing radiation with cellular level precision to treat patients with high unmet medical needs. Principles of Consolidation - The consolidated financial statements include the Company’s accounts and those of the Company’s wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Use of Estimates in Financial Statement Presentation - The preparation of these consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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. Cash and 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. Following is a summary of cash, cash equivalents and restricted cash at December 31, 2022 and December 31, 2021: (in thousands) December 31, 2022 December 31, 2021 Cash and cash equivalents $ 108,910 $ 77,829 Restricted cash – current 396 392 Restricted cash – long-term 302 - Cash, cash equivalents and restricted cash $ 109,608 $ 78,221 Restricted cash relates to certificates of deposit held as collateral for letters of credit issued in connection with the Company’s leases of corporate office spaces. Property and Equipment - Machinery and equipment are recorded at cost and depreciated on a straight-line basis over estimated useful lives of three to five years. Furniture and fixtures are recorded at cost and depreciated on a straight-line basis over estimated useful lives of seven years. When assets are retired, the cost and related accumulated depreciation are removed from the accounts, and any related gain or loss is reflected in operations. Repairs and maintenance expenditures are charged to operations. Capitalized lease assets are recorded at the lesser of the present value of minimum lease payments or fair value and amortized over the estimated useful life of the related property or term of the lease. Leases – The Company has operating and finance leases for corporate office space and office equipment 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. The Company entered into a lease for corporate office space effective June 1, 2022 and paid a security deposit to the landlord. A certificate of deposit was provided as collateral for a letter of credit issued with this office space during 2022 and at that time, the security deposit was returned to the Company. F- 6 Fair Value Measurement - 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. 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 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 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 had a grant from a government-sponsored entity for research and development related activities that provided for payments for reimbursed costs, which included overhead and general and administrative costs as well as an administrative fee. The Company recognized revenue from grants as it performed services under this arrangement. Associated expenses were recognized when incurred as research and development expense. Revenue and related expenses are presented gross in the consolidated statements of operations. F- 7 License Revenue – The Company entered into a product licensing agreement whereby the Company allowed a third party to commercialize a certain product in specified territories using the Company’s trademarks. The terms of this arrangement includes payment to the Company for a combination of one or more of the following: upfront license fees; development, regulatory and sales-based milestone payments; and royalties on net sales of licensed products. The Company uses its judgment to determine whether milestones or other variable consideration should be included in the transaction price. Upfront license fees : If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company will recognize revenue from upfront license fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company determines whether the combined performance obligation is satisfied over time or at a point in time. Development, regulatory or commercial milestone payments : At the inception of each arrangement that includes payments based on the achievement of certain development, regulatory and sales-based or commercial events, the Company evaluates whether the milestones are considered probable of being achieved 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. Milestone payments that are not within the Company’s or the licensee’s control, such as regulatory approvals, are not considered probable of being achieved until regulatory approval is received. At the end of each subsequent reporting period, the Company will re-evaluate the probability of achieving such development and regulatory milestones and any related constraint, and if necessary, adjust the Company’s estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis and recorded as part of license revenue during the period of adjustment. Sales-based milestone payments and royalties : For arrangements that include sales-based royalties, including milestone payments based on the volume of sales, the Company will determine whether the license is deemed to be the predominant item to which the royalties or sales-based milestones relate and if such is the case, the Company will recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). Upfront payments and fees may require deferral of revenue recognition to a future period until the Company performs its obligations under these arrangements or when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur or when the uncertainty associated with any variable consideration is subsequently resolved. Amounts payable to the Company are recorded as accounts receivable when the Company’s right to consideration is unconditional. 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. Income Taxes - The Company accounts for income taxes in accordance with ASC 740 Income Taxes , which requires the asset and liability method to calculate deferred taxes. Deferred taxes are recognized based on the differences between the financial reporting and income tax bases of assets and liabilities using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company reviews deferred tax assets for a valuation allowance based upon whether it is more likely than not that the deferred tax asset will be fully realized. ASC 740 prescribes guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions. Tax positions must meet a “more-likely-than-not” recognition threshold to be recognized. There were no tax positions for which it is considered reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within the next year. The Company recognizes interest related to unrecognized tax benefits in interest expense and penalties in operating expenses F- 8 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 common shares outstanding during the reporting period. 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 years ended December 31, 2022 and 2021, the Company’s potentially dilutive shares, which include outstanding common stock options, restricted stock units and warrants, have not been included in the computation of diluted net loss per share as the result would have been anti-dilutive. (in thousands) December 31, 2022 December 31, 2021 Stock Options 3,396 1,362 Restricted Stock Units 325 - Warrants 1,443 2,112 Total 5,164 3,474 Subsequent Events - The Company’s management reviewed all material events through the date the consolidated financial statements were issued for subsequent event disclosure consideration. Recently Adopted Accounting Pronouncements – 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. The Company adopted this standard effective January 1, 2022 and the standard did not have a material effect on the Company’s financial statements. In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832), Disclosures by Business Entities about Government Assistance , which provides guidance on disclosure requirements to entities other than not-for-profit entities about transaction with a government that are accounted for by applying a grant or contribution accounting model by analogy. ASU 2021-10 requires an entity to make annual disclosures related to (1) the nature of the transactions and the related accounting policy used to account for the government transactions, (2) quantification and disclosure of amounts related to the government transactions included in balance sheet and income statement financial statement line items, and (3) significant terms and conditions of the government transactions, including commitments and contingencies. The amendments of ASU 2021-10 are effective January 1, 2022, including interim periods. The Company adopted this standard effective January 1, 2022, and the standard did not have a material impact on the Company’s financial statements. F- 9 Recently Issued Accounting Pronouncements – In October 2021, FASB issued ASU 2021-08, Business Combinations (Topic 805), Account for Contract Assets and Contract Liabilities from Contracts with Customers , which provides guidance on accounting for contract assets and contract liabilities acquired in a business combination in accordance with ASC 606. To achieve this, an acquirer may assess how the acquiree applied ASC 606 to determine what to record for the acquired revenue contracts. Generally, this should result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements. The amendments of ASU 2021-08 are effective January 1, 2023, including interim periods. Early adoption is permitted, including adoption in an interim period. The Company will evaluate the impact of ASU 2021-08 on any future business combinations the Company may enter in the future. Note 2 - Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consisted of the following at December 31, 2022 and 2021: December 31, December 31, 2022 2021 Prepaid insurance $ 684 $ 874 Prepaid clinical trial expenses 887 543 Other prepaid expenses and other current assets 65 61 Total prepaid expenses and other current assets $ 1,636 $ 1,478 Note 3 - Property and Equipment Property and equipment consisted of the following at December 31, 2022 and 2021: December 31, December 31, (in thousands) Lives 2022 2021 Lab equipment 5 years $ 776 $ 476 Office equipment and furniture 3 - 7 years 315 199 Less: accumulated depreciation ( 487 ) ( 335 ) Property and equipment, net $ 604 $ 340 Depreciation expense consisted of the following for the years ended December 31, 2022 and 2021, respectively: December 31, December 31, (in thousands) 2022 2021 Research and development $ 141 $ 88 General administrative 11 17 Total Depreciation expense $ 152 $ 105 Note 4 - 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. The Company made an accounting policy election to exclude from balance sheet reporting those leases with initial terms of 12 months or less. 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 was not readily determinable in the Company’s leases, the incremental borrowing rate was used based on the information available at commencement date in determining the present value of lease payments. F- 10 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. The Company entered into a lease for corporate office space, effective June 1, 2022. The lease has a term of 5 years 2 months , with an expiration date on July 30, 2027 and current annual rent of $ 0.6 million. The Company is also responsible for certain other costs, such as insurance, utilities and maintenance. At December 31, 2022, for capitalization purposes under ASC842, the Company has this operating lease and a finance lease for office equipment. At December 31, 2021, for capitalization purposes under ASC842, the Company had an operating lease for corporate office space that expired in 2022 and 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 was accounted for as an operating lease with the same term as the Company’s office space. The components of lease expense are as follows: (in thousands) Year ended December 31, 2022 Year ended December 31, 2021 Operating lease expense $ 584 $ 372 Finance lease cost Amortization of right-to-use assets $ 55 $ 81 Interest on lease liabilities $ 2 $ 9 Total finance lease cost 57 $ 90 Supplemental cash flow information related to leases are as follows: Year ended (in thousands) December 31, 2022 December 31, 2021 Cash flow information: Cash paid for amounts included in the measurement of lease liabilities: Operating cash flow use from operating leases $ 352 $ 377 Operating cash flow use from finance leases $ 2 $ 9 Financing cash flow use from finance leases $ 49 $ 85 Non-cash activity: Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 2,605 $ - Finance Leases $ - $ - Weighted average remaining lease terms are as follows at December 31, 2022: Weighted average remaining lease term: Operating leases 4.6 years Finance Leases 1.0 years F- 11 As the interest rate implicit in the leases was not readily determinable at the time that the leases were evaluated, 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 4.8 % Finance Leases 8.0 % Maturities of lease liabilities are as follows: Year ending December 31, Operating Leases Finance Leases 2023 606 4 2024 618 - 2025 630 - 2026 643 - 2027 380 - Total lease payments $ 2,877 $ 4 Less imputed interest ( 300 ) - Present value of lease liabilities $ 2,577 $ 4 Note 5 - Other revenue 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 of $ 0.9 million was recognized during each of the years ended December 31, 2022 and December 31, 2021. The Company had a grant from a government-sponsored entity for research and development related activities that provide for payments for reimbursed costs, which included overhead and general and administrative costs as well as an administrative fee. The Company recognized revenue from grants as it performed services under this arrangement. Associated expenses are recognized when incurred as research and development expense. Other revenue recognized from this grant during the years ended December 31, 2022 and 2021 was $ 0.1 million and $ 0.2 million, respectively. On April 7, 2022, the Company entered into a license and supply agreement (the “License Agreement”) with Immedica Pharma AB (“Immedica”), pursuant to which Immedica licensed the exclusive product rights for commercialization of Iomab-B (I-131 apamistamab) in the European Economic Area, Middle East and North Africa (EUMENA) including Algeria, Andorra, Bahrain, Cyprus, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Libya, Monaco, Morocco, Oman, Palestine, Qatar, San Marino, Saudi Arabia, Switzerland, Syria, Tunisia, Turkey, the United Arab Emirates, the United Kingdom, the Vatican City and Yemen. Upon signing, the Company was entitled to an upfront payment of $ 35 million from Immedica, which was received in May 2022. Under the terms of the License Agreement, the Company is eligible to receive regulatory and commercial milestone payments and is entitled to receive royalties in the mid-20 percent range on net sales of the product in certain countries that may result from the License Agreement. The Company will continue to be responsible for certain clinical development activities and the manufacturing of Iomab-B and will retain commercialization rights in the U.S. and rest of the world. The Company’s contract liabilities are recorded within Other revenue deferred – current liability or Long-term license revenue deferred in its condensed consolidated balance sheets, depending on the short-term or long-term nature of the payments to be recognized. The Company’s contract liabilities primarily consist of advanced payments from licensees. There was no Other revenue deferred – current liability at December 31, 2022 and $ 1.0 million at December 31, 2021. Long-term license revenue deferred was $ 35.0 million at December 31, 2022; there was no Long-term license revenue deferred at December 31, 2021. This deferred revenue will be recognized upon European Union regulatory approval of Iomab B. F- 12 Note 6 - Commitments and Contingencies 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 apamistamab (licensed antibody). FHCRC has completed both a Phase 1 and Phase 2 clinical trial with apamistamab. The Company has been granted exclusive rights to the 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 antibody. Upon commercial sale of the drug, royalty payments of 2% of net sales will be due to FHCRC. Note 7 - Equity In August 2020, the Company entered into the Capital on Demand™ Sales Agreement with JonesTrading Institutional Services LLC, or 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 a shelf registration statement on Form S-3 filed with the SEC on August 7, 2020. For the year ended December 31, 2022, the Company sold 3.5 million shares of common stock, resulting in gross proceeds of $ 23.9 million and net proceeds of $ 23.2 million. For the year ended December 31, 2021, the Company sold 4.6 million shares of common stock, resulting in gross proceeds of $ 36.5 million and net proceeds of $ 35.3 million. On June 28, 2022, the Company entered into an Amendment and Restated Capital on Demand™ Sales Agreement (the “A&R Sales Agreement”) with JonesTrading and B. Riley Securities, Inc. (“B. Riley Securities”). The A&R Sales Agreement modifies the original Capital on Demand™ Sales Agreement to include B. Riley Securities as an additional sales agent thereunder. 2019 Amended and Restated Stock Plan In December 2019, the Company’s 2019 Stock Plan was established. The expiration date of the plan is October 18, 2029 and the total number of shares of the Company’s common stock available for grant to employees, directors and consultants of the Company was 333,333 shares. After a number of amendments approved by stockholders, the number of shares authorized under the plan was 5,833,333 shares. At the Company’s Annual Meeting of Stockholders held on December 30, 2022, its stockholders authorized an increase in the number of shares authorized under the plan, resulting in the number of shares authorized in the plan to be 9,333,333 shares. 2013 Amended and Restated Stock Plan In September 2013, the Company’s 2013 Stock Plan was established. The expiration date of the plan is September 9, 2023 and at the time of approval, the total number of shares of the Company’s common stock available for grant to employees, directors and consultants of the Company under the plan was 91,666 shares. After a number of amendments approved by stockholders, the number of shares authorized under the plan is 758,333 shares. 2013 Equity Incentive Plan In September 2013, the Company’s 2013 Equity Incentive Plan was established. The expiration date of the plan is September 9, 2023 and the total number of shares of the Company’s common stock available for grant to employees, directors and consultants of the Company under the plan was 15,000 shares. In December 2013, the shareholders of the Company approved the plan and increased the number of shares authorized under the plan to 33,333 shares. F- 13 Stock Options Following is a summary of stock option activity for the years ended December 31, 2022 and 2021: (in thousands, except for per-share amount) Number of Options 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 881 6.43 Exercised ( 1 ) 6.69 Cancelled ( 333 ) 18.78 Outstanding, December 31, 2021 1,362 12.45 8.69 - Granted 2,094 5.25 Exercised - - Cancelled ( 60 ) 12.90 Outstanding, December 31, 2022 3,396 8.00 8.85 15,204 Exercisable, December 31, 2022 804 15.30 7.58 2,432 During 2022, the Company granted its employees and members of the Board of Directors options to purchase 2.1 million shares of common stock with an exercise price ranging from $ 4.96 to $ 13.54 per share, a term of 10 years, and a vesting period from 4 to 4.2 years. The options have an aggregated fair value of $ 7.7 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 1.5 % to 4.3 % (2) expected life of 6 years, (3) expected volatility range from 78.8 % to 81.1 %, and (4) zero expected dividends. During 2021, the Company granted its employees and members of the Board of Directors options to purchase 881 thousand shares of common stock with an exercise price ranging from $ 6.02 to $ 9.25 per share, a term of 10 years, and a vesting period from 4 to 4.2 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 1.28 % (2) expected life of 6 years, (3) expected volatility range from 79.8 % to 85.1 %, and (4) zero expected dividends. During the years ended December 31, 2022 and 2021, options to purchase 60 thousand and 333 thousand common shares were cancelled, respectively, upon the termination of employment. During 2021, 1 thousand options were exercised for shares of common stock. There were no exercises of options during 2022. The fair values of all options issued and outstanding are being amortized over their respective vesting periods. The unrecognized compensation expense at December 31, 2022 was $ 10.0 million related to unvested options, which is expected to be expensed over a weighted average of 3.3 years. During 2022 and 2021, the Company recorded total option expense of $ 2.5 million and $ 1.5 million, respectively. Restricted Stock Units The Company issued 325 thousand restricted stock units (“RSUs”) to employees during 2022: (in thousands, except for per-share amount) RSUs Weighted Average Grant date Fair Value Per Share ($) Outstanding, January 1, 2022 - - Granted 325 5.96 Vested - - Outstanding, December 31, 2022 325 5.96 The RSUs vest at the earliest of a change of control event, the termination of the recipient’s continuous service status for any reason other than by the Company for cause and the third anniversary of the date of the grant. The fair value of the RSUs, $ 1.9 million, was determined based on the stock prices on the dates of the grants and is being recognized over three years . The unrecognized compensation expense at December 31, 2022 of $ 1.7 million is expected to be expensed over 2.4 years. During 2022, the Company recorded compensation expense related to RSUs of $ 0.2 million. F- 14 Warrants Following is a summary of warrant activities for the years ended December 31, 2022 and 2021: (in thousands, except for per-share amounts) Number of Warrants 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 ( 2 ) 50.17 Outstanding, December 31, 2021 2,112 20.52 1.76 276 Granted - - Exercised - - Cancelled ( 669 ) 29.01 Outstanding, December 31, 2022 1,443 16.58 1.33 5 Exercisable, December 31, 2022 1,440 15.95 1.33 4 On August 2, 2022, warrants to purchase an aggregate of 0.6 million shares of common stock expired. These warrants were issued on August 2, 2017, when the Company completed an underwritten offering of 0.7 million shares of common stock and warrants to purchase 0.6 million shares of common stock at a price of $ 22.50 per share and related warrant. The warrants were exercisable for a period of 5 years at an exercise price of $ 31.50 per share. During the years ended December 31, 2022 and 2021, the Company recorded stock-based compensation expense related to warrants of $ 6 thousand and $ 16 thousand, respectively. Note 8 - Income Taxes Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities at December 31, 2022 and 2021 are as follows: (in thousands) 2022 2021 Deferred tax assets: Net operating losses carry forward $ 44,233 $ 36,405 Share-based compensation 1,334 1,213 Research and development/orphan drug credits 17,247 14,536 Capitalized research and development expenses 13,210 10,426 Others 69 19 Less: valuation allowance ( 76,093 ) ( 62,599 ) Deferred tax assets, net $ - $ - The Company has recorded a valuation allowance of $ 76.1 million and $ 62.6 million against its deferred tax assets at December 31, 2022 and 2021 respectively, because management determined that it is not more-likely-than not that those assets will be realized. F- 15 For federal income tax purposes, the Company has $ 178.6 million of unused net operating losses (“NOLs”) at December 31, 2022 available for carry forward to future years. NOLs of $118.4 million generated prior to 2018 will begin to expire if unused in 2023. NOLs generated in 2018 and later years of $60.2 million have an indefinite life, but will be limited to 80% of their value if used in a tax year ending after January 1, 2023. For state income tax purposes, the Company has $ 271.1 million of unused NOLs at December 31, 2022 available for carry forward to future years. These NOLs will begin to expire in 2034 if unused. The Company has federal research and development tax credits of $ 3.4 million at December 31, 2022 which will begin to expire in 2034 if unused and orphan drug credits of $ 13.8 million which will begin to expire in 2028 if unused. Federal and state tax laws impose limitations on the utilization of net operating losses and credit carryforwards in the event of an ownership change for tax purposes, as defined in Section 382 of the Internal Revenue Code. Accordingly, the Company’s ability to utilize these carryforwards may be limited as a result of an ownership change which may have already happened or may happen in the future. Such an ownership change could result in a limitation in the use of the net operating losses in future years and possibly a reduction of the net operating losses available. The difference between the income tax provision and the amount that would result if the U.S. Federal statutory rates were applied to pre-tax losses for the year ended December 31, 2022 and 2021 are as follows: (in thousands) December 31, 2022 December 31, 2021 Federal statutory income taxes $ ( 6,943 ) ( 21.0 )% $ ( 5,202 ) ( 21.0 )% State income taxes ( 4,863 ) ( 14.7 )% ( 373 ) ( 1.5 )% Deferred true-up 89 0.3 % 562 2.3 % Research and development/orphan drug tax credit ( 2,711 ) ( 8.2 )% ( 1,898 ) ( 7.7 )% Other 934 2.8 % 486 2.0 % Change in valuation allowance 13,494 40.8 % 6,425 25.9 % Provision for income tax $ - - $ - - Note 9 - Subsequent Event Since December 31, 2022, the Company has sold 0.1 million shares of common stock under its A&R Sales Agreement, resulting in net proceeds of $ 0.8 million. F- 16 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None.