LISATA THERAPEUTICS, INC. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The financial statements and notes thereto required to be filed under this Item are presented commencing on page 50 of this Annual Report on Form 10-K. 45 Index Caladrius Biosciences, Inc. and Subsidiaries Table of Contents Report of Independent Registered Public Accounting Firm 48 Financial Statements: Consolidated Balance Sheets at December 31, 20 20 and 201 9 49 Consolidated Statements of Operations - Years Ended December 31, 20 2 0 and 2019 50 Consolidated Statements of Comprehensive Loss - Years Ended December 31, 20 20 and 2019 51 Consolidated Statements of Equity - Years Ended December 31, 20 20 and 2019 52 Consolidated Statements of Cash Flows - Years Ended December 31, 20 20 and 2019 53 Notes to Consolidated Financial Statements 70 46 Index REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders Caladrius Biosciences, Inc. Opinion on the financial statements We have audited the accompanying consolidated balance sheets of Caladrius Biosciences, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive loss, equity, and cash flows for each of the two years in the period ended December 31, 2020, 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, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, 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 audit 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/ GRANT THORNTON LLP We have served as the Company’s auditor since 2011. New York, New York February 25, 2021 47 Index CALADRIUS BIOSCIENCES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share data) December 31, 2020 December 31, 2019 ASSETS Current Assets Cash and cash equivalents $ 16,512 $ 14,032 Marketable securities 18,061 11,125 Prepaid and other current assets 758 815 Total current assets 35,331 25,972 Property and equipment, net 57 100 Other assets 614 1,081 Total assets $ 36,002 $ 27,153 LIABILITIES, NON-CONTROLLING INTERESTS AND EQUITY Liabilities Accounts payable $ 1,020 $ 1,490 Accrued liabilities 2,486 4,486 Total current liabilities 3,506 5,976 Other long-term liabilities 254 624 Total liabilities 3,760 6,600 Commitments and Contingencies Stockholders' Equity Preferred stock; authorized, 20,000,000 shares Series B convertible redeemable preferred stock liquidation value, 0.001 share of common stock, $ 0.01 par value; 825,000 shares designated; issued and outstanding, 10,000 shares at December 31, 2020 and December 31, 2019, respectively — — Common stock, $ 0.001 par value, authorized 500,000,000 shares; issued 19,389,413 and 10,528,689 shares, at December 31, 2020 and December 31, 2019, respectively; and outstanding, 19,378,333 and 10,517,609 shares, at December 31, 2020 and December 31, 2019, respectively 19 11 Additional paid-in capital 458,748 438,911 Treasury stock, at cost; 11,080 shares at December 31, 2020 and December 31, 2019 respectively ( 708 ) ( 708 ) Accumulated deficit ( 425,550 ) ( 417,400 ) Accumulated other comprehensive (loss) income ( 13 ) 2 Total Caladrius Biosciences, Inc. stockholders' equity 32,496 20,816 Noncontrolling interests ( 254 ) ( 263 ) Total equity 32,242 20,553 Total liabilities, non-controlling interests and equity $ 36,002 $ 27,153 See accompanying notes to consolidated financial statements. 48 Index CALADRIUS BIOSCIENCES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Year Ended December 31, 2020 2019 Operating Expenses: Research and development $ 9,253 $ 10,797 General, and administrative 9,892 9,295 Operating expenses 19,145 20,092 Operating loss ( 19,145 ) ( 20,092 ) Other income: Other income, net 132 740 Total other income, net 132 740 Net loss before benefit from income taxes and noncontrolling interests ( 19,013 ) ( 19,352 ) Benefit from income taxes ( 10,872 ) — Net loss $ ( 8,141 ) $ ( 19,352 ) Less - net income attributable to noncontrolling interests 9 9 Net loss attributable to Caladrius Biosciences, Inc. common shareholders $ ( 8,150 ) $ ( 19,361 ) Basic and diluted loss per share: Caladrius Biosciences, Inc. common shareholders $ ( 0.53 ) $ ( 1.88 ) Weighted average common shares outstanding: Basic and diluted shares 15,440 10,325 See accompanying notes to consolidated financial statements. 49 Index CALADRIUS BIOSCIENCES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (In thousands) Year Ended December 31, 2020 2019 Net loss $ ( 8,141 ) $ ( 19,352 ) Other comprehensive loss: Available for sale securities - net unrealized (loss) income ( 15 ) 34 Total other comprehensive (loss) income ( 15 ) 34 Comprehensive loss ( 8,156 ) ( 19,318 ) Comprehensive income attributable to noncontrolling interests 9 9 Comprehensive loss attributable to Caladrius Biosciences, Inc. common stockholders $ ( 8,165 ) $ ( 19,327 ) See accompanying notes to consolidated financial statements. 50 Index CALADRIUS BIOSCIENCES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY (In thousands) Series B Convertible Preferred Stock Common Stock Additional Paid in Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Treasury Stock Total Caladrius Biosciences, Inc. Stockholders' Equity Non- Controlling Interest in Subsidiary Total Equity Shares Amount Shares Amount Balance at December 31, 2018 10 $ — 9,866 $ 10 $ 436,433 $ ( 32 ) $ ( 397,977 ) $ ( 708 ) $ 37,726 $ ( 272 ) $ 37,454 Adoption of accounting standard — — — — — — ( 62 ) — ( 62 ) — ( 62 ) Net loss — — — — — — ( 19,361 ) — ( 19,361 ) 9 ( 19,352 ) Unrealized gain on marketable securities — — — — — 34 — — 34 — 34 Share-based compensation — — 94 — 1,165 — — — 1,165 — 1,165 Net proceeds from issuance of common stock — — 569 1 1,313 — — — 1,314 — 1,314 Balance at December 31, 2019 10 $ — 10,529 $ 11 $ 438,911 $ 2 $ ( 417,400 ) $ ( 708 ) $ 20,816 $ ( 263 ) $ 20,553 Net loss — — — — — — ( 8,150 ) — ( 8,150 ) 9 ( 8,141 ) Unrealized loss on marketable securities — — — — — ( 15 ) — — ( 15 ) — ( 15 ) Share-based compensation — — 53 — 1,117 — — — 1,117 — 1,117 Net proceeds from issuance of common stock and warrants — — 8,807 8 18,720 — — — 18,728 — 18,728 Balance at December 31, 2020 10 $ — 19,389 $ 19 $ 458,748 $ ( 13 ) $ ( 425,550 ) $ ( 708 ) $ 32,496 $ ( 254 ) $ 32,242 See accompanying notes to consolidated financial statements. 51 Index CALADRIUS BIOSCIENCES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2020 2019 Cash flows from operating activities: Net loss $ ( 8,141 ) $ ( 19,352 ) Adjustments to reconcile net loss to net cash used in operating activities: Equity-based compensation expense 1,265 1,295 Depreciation and amortization 63 65 Amortization/accretion on marketable securities 307 232 Changes in operating assets and liabilities: Prepaid and other current assets 56 238 Other assets 466 504 Accounts payable, accrued liabilities and other liabilities ( 2,839 ) ( 1,864 ) Net cash used in operating activities ( 8,823 ) ( 18,882 ) Cash flows from investing activities: Purchase of marketable securities ( 34,799 ) ( 32,938 ) Sales of marketable securities 27,542 54,370 Purchases of property and equipment ( 20 ) — Net cash (used in) provided by investing activities ( 7,277 ) 21,432 Cash flows from financing activities: Tax withholding payments on net share settlement equity awards ( 148 ) ( 130 ) Net proceeds from issuance of capital stock 18,728 1,313 Net cash provided by financing activities 18,580 1,183 Net increase in cash and cash equivalents 2,480 3,733 Cash and cash equivalents at beginning of year 14,032 10,299 Cash and cash equivalents at end of year $ 16,512 $ 14,032 Supplemental Disclosure of Cash Flow Information: Cash paid during the period for: Interest $ — $ — Taxes — — See accompanying notes to consolidated financial statements. 52 Index CALADRIUS BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 – The Business OVERVIEW Caladrius Biosciences, Inc. (“we,” “us,” "our," “Caladrius” or the “Company”) is a clinical-stage biopharmaceutical company dedicated to the development and commercialization of cellular therapies designed to reverse disease and/or promote the regeneration of damaged tissue. The Company is developing first-in-class therapeutics based on the characteristics of naturally occurring autologous CD34+ cells and their ability to stimulate the growth of new microvasculature. The Company's technology leverages these cells to enable the body's natural repair mechanisms using formulations unique to each medical indication. The Company's goal is to develop and commercialize products that address important unmet medical needs based on a broad and versatile portfolio of candidates. The Company’s current product candidates include: CLBS16, the subject of both a recently completed positive Phase 2a study and a newly initiated Phase 2b study in the U.S. for the treatment of coronary microvascular dysfunction (“CMD”); HONEDRA® (CLBS12), recipient of SAKIGAKE designation and eligible for early conditional approval in Japan for the treatment of critical limb ischemia (“CLI”) and Buerger’s Disease based on the results of an ongoing clinical trial; CLBS201, designed to assess the safety and efficacy of CD34+ cell therapy as a treatment for pre-dialysis patients with chronic kidney disease (“CKD”) and OLOGO™ (CLBS14), a Regenerative Medicine Advanced Therapy (“RMAT”) designated therapy for which the Company is in discussion with the U.S. Food and Drug Administration (the “FDA”) to finalize a Phase 3 protocol of reduced size and scope for a confirmatory trial in subjects with no-option refractory disabling angina (“NORDA”). Coronavirus Considerations In December 2019, a novel strain of coronavirus (SARS-CoV-2), which causes COVID-19, was reported to have surfaced in China. In March 2020, the World Health Organization declared the outbreak of COVID-19 to be a pandemic, and the world's economies began to experience pronounced effects. Despite the FDA approval of multiple COVID-19 vaccines in late 2020, there remains uncertainty around the extent and duration of disruption and any future related financial impact cannot be reasonably estimated at this time. In response to the pandemic, we have implemented work from home as well as social distancing and other hygiene policies for employees when they must be in the office. Our clinical study of HONEDRA® in Japan has experienced delays in enrollment due to the “State of Emergency” in effect in Japan for most of 2020 and re-implemented in Japan on Jan 7, 2021 and now extending through March 7, 2021 covering Tokyo and other regions in response to increased number of COVID-19 patients. Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Estimates also affect the reported amounts of expenses during the reporting period. The Company bases its estimates on historical experience and other assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. The Company makes critical estimate and assumptions in determining stock-based awards values. Accordingly, actual results could differ from those estimates and assumptions. Principles of Consolidation The Consolidated Financial Statements include the accounts of Caladrius Biosciences, Inc. and its wholly owned and majority owned subsidiaries and affiliates. All intercompany activities have been eliminated in consolidation. Note 2 – Summary of Significant Accounting Policies Cash and Cash Equivalents 53 Index Cash and cash equivalents include short-term, highly liquid, investments with maturities of ninety days or less when purchased. Concentration of Risks The Company is subject to credit risk from its portfolio of cash, cash equivalents and marketable securities. Under its investment policy, the Company limits amounts invested in such securities by credit rating, maturity, industry group, investment type and issuer, except for securities issued by the U.S. government. Cash is held at major banks in the United States. Therefore, the Company is not exposed to any significant concentrations of credit risk from these financial instruments. The goals of the Company's investment policy, in order of priority, are as follows: safety and preservation of principal and diversification of risk, liquidity of investments sufficient to meet cash flow requirements, and a competitive after-tax rate of return. Marketable Securities The Company determines the appropriate classification of its marketable securities at the time of purchase and reevaluates such designation at each balance sheet date. All of the Company's marketable securities are considered as available-for-sale and carried at estimated fair values and reported in cash equivalents and marketable securities. Unrealized gains and losses on available-for-sale securities are excluded from net income and reported in accumulated other comprehensive income (loss) as a separate component of stockholders' equity. Other income (expense), net, includes interest, dividends, amortization of purchase premiums and discounts, realized gains and losses on sales of securities and other-than-temporary declines in the fair value of securities, if any. The cost of securities sold is based on the specific identification method. The Company regularly reviews all of its investments for other-than-temporary declines in fair value. The Company's review includes the consideration of the cause of the impairment, including the creditworthiness of the security issuers, the number of securities in an unrealized loss position, the severity and duration of the unrealized losses, whether the Company has the intent to sell the securities and whether it is more likely than not that it will be required to sell the securities before the recovery of their amortized cost basis. When the Company determines that the decline in fair value of an investment is below its accounting basis and this decline is other-than-temporary, it reduces the carrying value of the security it holds and records a loss for the amount of such decline. Property and Equipment The cost of property and equipment is depreciated over the estimated useful lives of the related assets. Depreciation is computed on the straight-line method. Repairs and maintenance expenditures that do not extend original asset lives are charged to expense as incurred. The estimated useful lives of property and equipment are as follows: Furniture and fixtures 10 years Computer equipment 3 years Software 3 years Leasehold improvements Life of lease Long-lived Assets Long-lived assets consist of property and equipment. The assets are amortized on a straight line basis over their respective useful lives. The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset exceeds the fair value of the asset. If other events or changes in circumstances indicate that the carrying amount of an asset that the Company expects to hold and use may not be recoverable, the Company will estimate the undiscounted future cash flows expected to result from the use of the asset and/or its eventual disposition, and recognize an impairment loss, if any. The impairment loss, if determined to be necessary, would be measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. Share-Based Compensation The Company expenses all share-based payment awards to employees, directors, and consultants, including grants of stock options, warrants, and restricted stock, over the requisite service period based on the grant date fair value of the awards. Consultant awards are remeasured each reporting period through vesting. For awards with performance-based vesting criteria, the Company estimates the probability of achievement of the performance criteria and recognizes compensation expense related to those awards expected to vest. The Company determines the fair value of option awards using the Black-Scholes option-pricing model which uses both historical and current market data to estimate the fair value. This method incorporates various assumptions such as the risk-free interest rate, expected volatility, expected dividend yield and expected life of the options or warrants. The fair value of the Company’s restricted stock and restricted stock units is based on the closing market price of the Company’s common stock on the date of grant. 54 Index Loss Per Share Basic loss per share is based on the weighted effect of all common shares issued and outstanding and is calculated by dividing net loss attributable to common stockholders by the weighted average shares outstanding during the period. Diluted loss per share is calculated by dividing net loss attributable to common stockholders by the weighted average number of common shares used in the basic loss per share calculation plus the number of common shares that would be issued assuming conversion of all potentially dilutive securities outstanding. Diluted loss per share is not presented as such potentially dilutive securities are anti-dilutive to losses incurred in all periods presented. Treasury Stock Treasury stock purchases are accounted for under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock. Gains or losses on the subsequent reissuance of shares are credited or charged to additional paid in capital. Research and Development Costs Research and development (“R&D”) expenses include salaries, benefits, and other headcount related costs, clinical trial and related clinical manufacturing costs, contract and other outside service fees including sponsored research agreements, and facilities and overhead costs. The Company expenses the costs associated with research and development activities when incurred. To further drive the Company’s cell therapy initiatives, the Company will continue targeting key governmental agencies, congressional committees and not-for-profit organizations to contribute funds for the Company’s research and development programs. The Company accounts for such grants as a deduction to the related expense in research and development operating expenses when earned. New Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses, which will require companies to present assets held at amortized cost and available for sale debt securities net of the amount expected to be collected. The guidance requires the measurement of expected credit losses to be based on relevant information from past events, including historical experiences, current conditions and reasonable and supportable forecasts that affect collectability. The guidance was effective for fiscal years and interim periods beginning after December 15, 2019 and early adoption was permitted. The adoption of this guidance did not have a material impact on our consolidated financial statements. In July 2019, the FASB issued ASU 2019-07, "Codification Updates to SEC Sections", to codify the SEC releases that clarify and improve the disclosure and presentation requirements of a variety of codification topics, thereby eliminating certain disclosure requirements that were redundant, duplicative, overlapping, outdated, or superseded. For public companies, the amendments are effective upon issuance. The Company determined that the adoption of this new accounting guidance did not have a material impact on its consolidated financial statements and footnote disclosures. In October 2019, the FASB issued ASU 2019-12, which affects general principles within Topic 740, Income Taxes. The amendments of ASU 2019-12 are meant to simplify and reduce the cost of accounting for income taxes. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company believes that the adoption of this new accounting guidance will not have a material impact on its financial statements and footnote disclosures. 55 Index Note 3 – Available-for-Sale-Securities The following table is a summary of available-for-sale securities recorded in cash and cash equivalents in the Company's Consolidated Balance Sheets (in thousands): December 31, 2020 December 31, 2019 Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Corporate debt securities $ 8,406 $ — $ ( 7 ) $ 8,399 $ 11,673 $ 3 $ ( 1 ) $ 11,675 Money market funds 7,591 — 7,591 11,093 11,093 Municipal debt securities $ 14,753 — $ ( 6 ) 14,747 $ — — $ — — Total $ 30,750 $ — $ ( 13 ) $ 30,737 $ 22,766 $ 3 $ ( 1 ) $ 22,768 Estimated fair values of available-for-sale securities are generally based on prices obtained from commercial pricing services. The following table summarizes the classification of the available-for-sale debt securities on the Company's Consolidated Balance Sheets (in thousands): December 31, 2020 December 31, 2019 Cash and cash equivalents $ 12,676 $ 11,643 Marketable securities 18,061 11,125 Total $ 30,737 $ 22,768 The following table summarizes the Company's portfolio of available-for-sale securities by contractual maturity (in thousands): December 31, 2020 December 31, 2019 Amortized Cost Estimated Fair Value Amortized Cost Estimated Fair Value Less than one year $ 30,750 $ 30,737 $ 22,766 $ 22,768 Greater than one year — — — — Total $ 30,750 $ 30,737 $ 22,766 $ 22,768 Note 4 – Property and Equipment Property and equipment consisted of the following (in thousands): December 31, 2020 2019 Furniture and fixtures $ 26 $ 26 Computer equipment 254 247 Leasehold improvements 90 76 Property and equipment, gross 370 349 Accumulated depreciation ( 313 ) ( 249 ) Property and equipment, net $ 57 $ 100 The Company’s results included depreciation expense of approximately $ 0.1 million and $ 0.1 million for the years ended December 31, 2020 and 2019, respectively. 56 Index Note 5 – Loss Per Share For the years ended December 31, 2020 and 2019, the Company incurred net losses and therefore no common stock equivalents were utilized in the calculation of loss per share a s they are anti-dilutive in the periods presented. At December 31, 2020 and 2019, the Company excluded the following potentially dilutive securities (in thousands): December 31, 2020 2019 Stock Options 964 1,044 Warrants 2,638 30 Restricted Stock Units 340 118 Note 6 – Fair Value Measurements Fair value of financial assets and liabilities that are being measured and reported are defined as the exchange price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market at the measurement date (exit price). The Company is required to classify fair value measurements in one of the following categories: Level 1 inputs are defined as quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are defined as inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly. Level 3 inputs are defined as unobservable inputs for the assets or liabilities. Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. The Company's financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2020 and December 31, 2019 were as follows (in thousands): December 31, 2020 December 31, 2019 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets: Marketable securities - available for sale $ — $ 18,061 $ — $ 18,061 $ — $ 11,125 $ — $ 11,125 $ — $ 18,061 $ — $ 18,061 $ — $ 11,125 $ — $ 11,125 The carrying values of cash, cash equivalents, accounts payable and accrued expenses approximate fair value at December 31, 2020 and December 31, 2019, due to the short maturity nature of these items. Note 7 – Accrued Liabilities Accrued liabilities were as follow (in thousands): December 31, 2020 2019 Salaries, employee benefits and related taxes $ 1,716 $ 1,834 Operating lease liabilities - current 370 354 CIRM upfront funding - current — 1,600 Other 400 698 $ 2,486 $ 4,486 57 Index Note 8 – Operating Leases The Company adopted ASU No. 2016-02, Leases (Topic 842) on January 1, 2019 and recognized leases with duration greater than 12 months on the balance sheet using the modified retrospective approach. The Company has operating leases for two o ffices with terms that expire in 2022 and 2023. The Company estimates its incremental borrowing rate at lease commencement to determine the present value of lease payments since most of the Company's leases do not provide an implicit rate of return. The Company recognizes lease expense on a straight-line basis over the lease term. For lease agreements entered into or reassessed after the adoption of Topic 842, the Company elected to account for non-lease components associated with its leases and lease components as a single lease component. Each of the Company's leases includes options for the Company to extend the lease term and/or sub-lease space in whole or in part. Operating lease liabilities and right-of-use assets were recorded in the following captions of our balance sheet as follows (in thousands): December 31, 2020 December 31, 2019 Right-of Use Assets: Other assets $ 574 906 Total Right-of-Use Asset $ 574 906 Operating Lease Liabilities: Accrued liabilities $ 370 $ 353 Other long-term liabilities 254 624 Total Operating Lease Liabilities $ 624 $ 977 As of December 31, 2020, the weighted average remaining lease term for our operating leases was 1.83 years, and the weighted average discount rate for our operating leases was 9.625 %. Future minimum lease payments under the lease agreements as of December 31, 2020 were as follows (in thousands): Years ended Operating Leases 2021 $ 414 2022 239 2023 26 Total lease payments 679 Less: Amounts representing interest ( 55 ) Present value of lease liabilities $ 624 Note 9 – Stockholders' Equity Equity Plans The Company has used long-term incentive plans for the purpose of granting equity awards to employees of the Company, including officers, and nonemployees, including consultants and nonemployee members of the Company's board of directors (collectively, "Participants"). The Participants may receive awards as determined by a committee of independent members of the Company's board of directors or, to the extent authorized by such committee with respect to certain Participants, a duly authorized employee (collectively, the "Committee"). The incentive plan currently used by the Company is the 2018 Equity Incentive Compensation Plan (the "2018 Plan"), which was adopted by the stockholders of the Company in June 2018, and subsequently increased by the stockholders of the Company in June of 2020 with 2,500,000 shares authorized for issuance thereunder, plus any shares awarded under the 2015 Equity Compensation Plan (the "2015 Plan") or the Amended and Restated 2009 Equity Compensation Plan (the "2009 Plan") that are not issued due to their subsequent forfeiture, cancellation, or other settlement thereof. Concurrent with the adoption of the 2018 Plan, no future awards will occur under the 2015 Plan or the 2009 Plan. The awards that may be made under the 2018 Plan include: (a) incentive stock options and nonqualified stock options, (b) shares of restricted stock, (c) restricted stock units, and (d) other kinds of equity-based compensation awards. All stock options under the 2015 Plan and 2009 Plan were granted and the 2018 Plan are granted at the fair market value of the common stock at the grant date. Stock options vest either on the date of grant, ratably over a period determined at time of grant, or upon the accomplishment of specified business milestones, and generally expire 2 , 3 , or 10 years from the grant date depending on the status of the recipient as a nonemployee, employee or director of the Company. As of December 31, 2020, there 58 Index were 1,376,030 shares available for future grants under the 2018 Plan. No additional awards may be made under the 2015 Plan or the 2009 Plan. The Company adopted an employee stock purchase plan effective January 1, 2013 and authorized 50,000 shares under the plan (the "2012 ESPP"). The plan has two six-month offering periods per year under which eligible employees may contribute up to 15 % of their compensation toward the purchase of the Company's common stock per offering period (with a $ 25,000 cap per calendar year). The employee's purchase price is equal to (i) 85 % of the closing price of a share of the Company's common stock on the enrollment date of such offering period or (ii) 85 % of the closing price of a share of the Company's common stock on the Exercise Date of such Offering Period, whichever is lower. In May 2017, the Company's stockholders approved an amendment and restatement to the 2012 ESPP (the "2017 ESPP") in order to effect an increase of authorized shares from 50,000 to 100,000 . In June 2018, the Company's stockholders approved an amendment to the 2017 ESPP (the " Amended 2017 ESPP") in order to effect an increase of authorized shares from 100,000 to 500,000 . During the year ended December 31, 2020, 32,137 shares were issued under the Amended 2017 ESPP. At December 31, 2020, the Company had 347,709 shares of the Company's common stock available for future grant in connection with this plan. Equity Issuances Purchase Agreement In March 2019, the Company and Lincoln Park Capital Fund, LLC (“Lincoln Park”) entered into a purchase agreement (the “Purchase Agreement”) and a registration rights agreement (the “Registration Rights Agreement”), pursuant to which the Company has the right to sell to Lincoln Park shares of the Company’s common stock having an aggregate value of up to $ 26.0 million, subject to certain limitations and conditions set forth in the Purchase Agreement (the “Offering”). As consideration for entering into the Purchase Agreement, the Company issued to Lincoln Park an additional 181,510 shares of common stock as commitment shares. Pursuant to the Purchase Agreement, Lincoln Park purchased 250,000 shares of common stock, at a price of $ 4.00 per share, for a total gross purchase price of $ 1,000,000 (the “Initial Purchase”) upon commencement. Thereafter, as often as every business day from and after one business day following the date of the Initial Purchase and over the 36 -month term of the Purchase Agreement the Company has the right, from time to time, at its sole discretion and subject to certain conditions, to direct Lincoln Park to purchase up to 100,000 shares of common stock, with such amount increasing as the closing sale price of the common stock increases; provided Lincoln Park’s obligation under any single such purchase will not exceed $ 2,500,000 , unless the Company and Lincoln Park mutually agree to increase the maximum amount of such single purchase (each, a “Regular Purchase”). If the Company directs Lincoln Park to purchase the maximum number of shares of common stock it then may sell in a Regular Purchase, then in addition to such Regular Purchase, and subject to certain conditions and limitations in the Purchase Agreement, the Company may direct Lincoln Park in an “accelerated purchase” to purchase an additional amount of common stock that may not exceed the lesser of (i) 300 % the number of shares purchased pursuant to the corresponding Regular Purchase or (ii) 30 % of the total number of shares of the Company’s common stock traded during a specified period on the applicable purchase date as set forth in the Purchase Agreement. Under certain circumstances and in accordance with the Purchase Agreement, the Company may direct Lincoln Park to purchase shares in multiple accelerated purchases on the same trading day. The Company controls the timing and amount of any sales of its common stock to Lincoln Park. There is no upper limit on the price per share that Lincoln Park must pay for its common stock under the Purchase Agreement, but in no event will shares be sold to Lincoln Park on a day the closing price is less than the floor price specified in the Purchase Agreement. In all instances, the Company may not sell shares of its common stock to Lincoln Park under the purchase agreement if it would result in Lincoln Park beneficially owning more than 9.99 % of its common stock. The Purchase Agreement does not limit the Company’s ability to raise capital from other sources at the Company’s sole discretion, except that (subject to certain exceptions) the Company may not enter into any Variable Rate Transaction (as defined in the Purchase Agreement, including the issuance of any floating conversion rate or variable priced equity-like securities) during the 36 months after the date of the Purchase Agreement. The Company has the right to terminate the Purchase Agreement at any time, at no cost to the Company. As of December 31, 2020, the Company had not made any sales of common stock to Lincoln Park under the Purchase Agreement other than the Initial Purchase. Common Stock Sales Agreement In February 2018, the Company entered into a common stock sales agreement with H.C. Wainwright & Co., LLC ("HCW") as sales agent, which was subsequently amended in August 2018 (the "Sales Agreement"), in connection with an “at the market offering” under which the Company from time to time may offer and sell shares of its common stock, having an 59 Index aggregate offering price of not more than $ 25.0 million. In March 2019, subsequent to the filing of the Company's 2018 Form 10-K, the aggregate market value of its outstanding common stock held by non-affiliates was approximately $ 52.8 million. Pursuant to General Instruction I.B.6 of Form S-3, since the aggregate market value of the Company's outstanding common stock held by non-affiliates was below $75.0 million at the time of its 2018 Form 10-K filing, the aggregate amount of securities that the Company was permitted to offer and sell at such time was reduced to $ 17.6 million (or a maximum of 4.8 million shares), which was equal to one-third of the aggregate market value of the Company's common stock held by non-affiliates at such time. Subject to the terms and conditions of the Sales Agreement, HCW will use its commercially reasonable efforts consistent with its normal trading and sales practices to sell the shares from time to time, based upon the Company's instructions, including any price, time or size limits specified by the Company. The Company has provided HCW with customary indemnification rights, and HCW will be entitled to a commission at a fixed commission rate equal to 3.0 % of the gross proceeds per share sold. The Company has no obligation to sell any of the shares and may at any time suspend sales under the Sales Agreement or terminate the Sales Agreement. The Sales Agreement will terminate upon the sale of all of the shares under the Sales Agreement unless terminated earlier by either party as permitted under the Sales Agreement. During the year-ended December 31, 2020, the Company issued 3,558,778 shares of common stock under the Sales Agreement for net proceeds of $ 8.5 million. As of year-ended December 31, 2020, the Company issued 3,784,912 shares of common stock under the Sales Agreement for net proceeds of $ 9.5 million since inception. On February 12, 2021, we suspended the use of the at-the-market transactions facility (the “ATM”) and terminated the continuous offering pursuant to Sales Agreement entered into in February 2018 with HCW. We will no longer make any sales of our common stock pursuant to the Sales Agreement unless and until a new prospectus supplement is filed with the Securities and Exchange Commission. Registered Direct Offerings In April 2020, the Company entered into a securities purchase agreement (the “April Purchase Agreement”) with certain investors (the “April Purchasers”). Pursuant to the terms of the April Purchase Agreement, the Company agreed to sell to the Purchasers an aggregate of 2,162,166 shares of its common stock at a purchase price equal to $ 2.3125 per share. In a concurrent private placement, the Company issued to the April Purchasers warrants to purchase an aggregate of 1,081,083 shares of its common stock. In connection with the registered direct offering and concurrent private placement, the Company received gross proceeds of $ 5.0 million. Each warrant is exercisable for one share of common stock and features an exercise price equal to $ 2.2500 per share. The warrants are exercisable immediately upon issuance and will expire five and one-half years from the issuance date. In May 2020, the Company entered into a securities purchase agreement (the “May Purchase Agreement”) with certain investors (the “May Purchasers”). Pursuant to the terms of the May Purchase Agreement, the Company agreed to sell to the May Purchasers an aggregate of 2,084,850 shares of its common stock at a purchase price equal to $ 2.0625 per share. In a concurrent private placement, the Company issued to the Purchasers warrants to purchase an aggregate of 1,042,425 shares of its common stock. In connection with the registered direct offering and concurrent private placement, the Company received gross proceeds of $ 4.3 million. Each warrant is exercisable for one share of common stock and features an exercise price equal to $ 2.0625 per share. The warrants are exercisable immediately upon issuance and will expire five and one-half years from the issuance date. Private Placement On July 10, 2020, the Company entered into a securities purchase agreement (the “Private Placement”) with certain investors (the “Private Placement Purchasers”). Pursuant to the terms of the Private Placement, the Company agreed to sell to the Private Placement Purchasers an aggregate of 969,694 shares of its common stock at a purchase price equal to $ 2.0625 per share, along with warrants to purchase an aggregate of 484,847 shares of its common stock. In connection with the Private Placement, the Company received gross proceeds of $ 2.0 million. Each warrant is exercisable for one share of common stock and features an exercise price equal to $ 2.0625 per share. The warrants are exercisable immediately upon issuance and will expire five and one-half years from the issuance date. 60 Index Stock Options and Warrants The following table summarizes the activity for stock options and warrants for the year ended December 31, 2020: Stock Options Warrants Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value (In Thousands) Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value (In Thousands) Outstanding at December 31, 2019 1,044,417 $ 18.31 6.06 $ — 30,000 $ 5.89 3.19 $ — Changes during the Year: Granted 248,176 $ 3.20 2,608,355 $ 2.14 Exercised — $ — — $ — Forfeited ( 86,251 ) $ 3.83 — $ — Expired ( 242,642 ) $ 22.57 — $ — Outstanding at December 31, 2020 963,700 $ 14.64 5.86 $ — 2,638,355 $ 2.18 4.98 $ — Vested at December 31, 2020 or expected to vest in the future 949,200 $ 14.81 5.82 $ — 2,638,355 $ 2.18 4.98 $ — Exercisable at December 31, 2020 714,426 $ 18.42 4.93 $ — 2,638,355 $ 2.18 4.98 $ — Restricted Stock During the years ended December 31, 2020 and 2019, the Company issued restricted stock for services as follows ($ in thousands, except share data): 2020 2019 Number of Restricted Stock Issued 156,184 123,564 Value of Restricted Stock Issued $ 512.3 $ 611.6 The weighted average estimated fair value of restricted stock issued for services in the years ended December 31, 2020 and 2019 was $ 3.28 and $ 4.95 per share, respectively. The fair value of the restricted stock was determined using the Company’s closing stock price on the date of issuance. The vesting terms of restricted stock issuances are generally between one to four years . Restricted Stock Units During the years ended December 31, 2020 and 2019, the Company issued restricted stock units for services as follows ($ in thousands, except share data): 2020 2019 Number of Restricted Stock Units Issued 325,853 184,454 Value of Restricted Stock Units Issued $ 863.0 $ 908.6 The weighted average estimated fair value of restricted stock units issued for services in the years ended December 31, 2020 and 2019 was $ 2.65 and $ 4.93 per share, respectively. The fair value of the restricted stock units was determined using the Company’s closing stock price on the date of issuance. The vesting terms of restricted stock unit issuances are generally one year , or upon the achievement of performance-based milestones. 61 Index Note 10 – Share-Based Compensation Share-based Compensation The Company utilizes share-based compensation in the form of stock options and restricted stock. The following table summarizes the components of share-based compensation expense for the years ended December 31, 2020 and 2019 ($ in thousands): Year Ended December 31, 2020 2019 Research and development $ 179 $ 274 General and administrative 1,086 1,021 Total share-based compensation expense $ 1,265 $ 1,295 Total compensation cost related to unvested awards not yet recognized and the weighted-average periods over which the awards are expected to be recognized at December 31, 2020 were as follows ($ in thousands): Stock Options Restricted Stock Units Restricted Stock Unrecognized compensation cost $ 356 $ 244 $ 308 Expected weighted-average period in years of compensation cost to be recognized 1.61 2.46 1.65 Total fair value of shares vested and the weighted average estimated fair values of shares granted for the years ended December 31, 2020 and 2019 were as follows ($ in thousands): Stock Options Year Ended December 31, 2020 2019 Total fair value of shares vested $ 536 $ 398 Weighted average estimated fair value of shares granted 2.11 3.18 Valuation Assumptions The fair value of stock options at the date of grant was estimated using the Black-Scholes option pricing model. The expected volatility is based upon historical volatility of the Company’s stock. The expected term for the options is based upon observation of actual time elapsed between date of grant and exercise of options for all employees. The range of assumptions made in calculating the fair values of stock options was as follow: Stock Options Year Ended December 31, 2020 2019 Expected term - minimum (in years) 6 6 Expected term - maximum (in years) 6 6 Expected volatility - minimum 75 % 74 % Expected volatility - maximum 79 % 74 % Weighted Average volatility 75 % 74 % Expected dividend yield — — Risk-free interest rate - minimum 0.40 % 2.35 % Risk-free interest rate - maximum 1.71 % 2.62 % 62 Index Note 11 – Research Funding California Institute of Regenerative Medicine Grant Award In February 2017, the California Institute for Regenerative Medicine ("CIRM") awarded the Company funds of up to $ 12.2 million to support the T-Rex Study. The funding is based upon the achievement of certain milestones related to the proportion of subjects enrolled in California, as well as manufacturing and development costs incurred in California. Based on the actual number of subjects enrolled in California, the total amount of funding was revised to $ 8.6 million, of which $ 8.2 million has been received through the grant project period completion. The Company received $ 5.7 million in initial funding in May 2017, a $ 1.9 million milestone payment in December 2017, a $ 0.3 million progress payment in March 2018, and a $ 0.2 million progress payment in May 2019, of which the total was amortized over the estimated award period through July 2020 as a reduction to the related research and development expenses, with the final true up payment of $ 46 thousand received in September 2020 and recorded as a reduction to the related research and development expenses. During the year ended December 31, 2020 and December 31, 2019, the Company amortized and recognized $ 1.6 million and $ 2.7 million in credits, respectively, in research and development related to CIRM funds received. Note 12 – Income Taxes The provision (benefit) for income taxes is based on loss from operations before provision for income taxes and noncontrolling interests as follows ($ in thousands): Years Ended December 31, Pre-tax book income 2020 2019 United States $ ( 19,013 ) $ ( 19,352 ) $ ( 19,013 ) $ ( 19,352 ) The provision (benefit) from income taxes was as follows ($ in thousands): Years Ended December 31, 2020 2019 Current U.S. Federal $ — $ — State and local — — $ — $ — Deferred U.S. Federal $ — $ — State and local ( 10,872 ) — $ ( 10,872 ) $ — Total U.S. Federal $ — $ — State and local ( 10,872 ) — $ ( 10,872 ) $ — 63 Index The provision (benefit) for income taxes is determined by applying the U.S. Federal statutory rate of 21 % to income before income taxes as a result of the following ($ in thousands): Years Ended December 31, 2020 2019 U.S. Federal benefit at statutory rate $ ( 3,993 ) $ ( 4,064 ) State and local (benefit) / expense net of U.S. federal tax — — Permanent non deductible expenses for U.S. taxes 5 14 AMT credit benefit — — Change in state deferred 5,122 ( 4,720 ) Return to actual — ( 17 ) Other true ups 387 1,941 Effect of change in deferred tax rate — — Sale of New Jersey State NOL's ( 10,872 ) — Valuation allowance for deferred tax assets ( 1,521 ) 6,846 Tax provision (benefit) $ ( 10,872 ) $ — Deferred income taxes at December 31, 2020 and 2019 consist of the following ($ in thousands): December 31, 2020 2019 Deferred Tax Assets: Accumulated net operating losses (tax effected) $ 68,286 $ 70,747 CIRM funding — 336 Right of use liability 176 205 Share-based compensation 5,025 3,584 Intangibles 131 141 Accumulated depreciation 19 9 Accrued payroll 167 121 Other 526 737 Deferred tax assets 74,330 75,880 Deferred Tax Liabilities: Right of use asset $ ( 161 ) $ ( 190 ) Deferred tax liabilities ( 161 ) ( 190 ) 74,169 75,690 Valuation allowance ( 74,169 ) ( 75,690 ) Net deferred tax asset $ — $ — In assessing the realizability of deferred tax assets, including the net operating loss carryforwards (NOLs), the Company assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize its existing deferred tax assets. Based on its assessment, the Company has provided a full valuation allowance against its net deferred tax assets as their future utilization remains uncertain at this time. As of December 31, 2020, and 2019, the Company had approximately $ 264 million and $ 246 million, respectively, of Federal NOLs available to offset future taxable income expiring from 2030 through 2036. As of December 31, 2020 and 2019, the Company had State NOLs available in New Jersey of $ 99 million and $ 187 million, respectively, California of $ 70 million and $ 70 million, respectively, and New York City of $ 13 million and $ 13 million, respectively, to offset future taxable income expiring from 2030 through 2040. In accordance with Section 382 of the Internal Revenue code, the usage of the Company’s NOLs could be limited in the event of a change in ownership. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period when those temporary differences become deductible. 64 Index The Company performed an analysis and determined that they have had ownership change of greater than 50% over a 3-year testing period. The last ownership change was determined to be on June 3, 2015. Based on a market capitalization of $ 125 million and using an applicable federal rate of 2.5% the annual limitation would be approximately $ 3.0 million. Post change losses from June 3, 2015 would not be subject to 382 limitations. The Company applies the FASB’s provisions for uncertain tax positions. The Company utilizes the two-step process to determine the amount of recognized tax benefit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company recognizes interest and penalties associated with certain tax positions as a component of income tax expense. As of December 31, 2020, management does not believe the Company has any material uncertain tax positions that would require it to measure and reflect the potential lack of sustainability of a position on audit in its financial statements. The Company will continue to evaluate its uncertain tax positions in future periods to determine if measurement and recognition in its financial statements is necessary. The Company does not believe there will be any material changes in its unrecognized tax positions over the next year. For years prior to 2017 the federal statute of limitations is closed for assessing tax. The Company’s state tax returns remain open to examination for a period of three to four years from date of filing. In December 2019, the Company received preliminary approval from the New Jersey Economic Development Authority ("NJEDA") to participate in the Technology Business Tax Certificate Transfer Program (the "Program"). The Program permits qualified companies to sell a percentage of their New Jersey net operating losses ("NJ NOLs") to unrelated profitable corporations. On April 21, 2020, the Company received final approval from NJEDA to sell $ 11.5 million of its NJ NOLs, which was subsequently sold to a qualifying and approved buyer pursuant to the Program for net proceeds of $ 10.9 million. The net proceeds have been recorded as a benefit from income taxes in the consolidated financial statements. Note 13 – Contingencies From time to time, the Company is subject to legal proceedings and claims, either asserted or unasserted, that arise in the ordinary course of business. While the outcome of pending claims cannot be predicted with certainty, the Company does not believe that the outcome of any pending claims will have a material adverse effect on the Company's financial condition or operating results. Note 14 – Subsequent Events Registered Direct Offerings On February 12, 2021, we entered into a Securities Purchase Agreement (the “Institutional Purchase Agreement”) with certain institutional investors (the “Institutional Purchasers”). Pursuant to the terms of the Institutional Purchase Agreement, we sold to the Institutional Purchasers in a registered direct offering an aggregate of 24,906,134 shares of our common stock and warrants to purchase an aggregate of 12,453,067 shares of our common stock at a combined purchase price equal to $ 2.45 per share and associated warrant. Each warrant features an exercise price equal to $ 2.90 per share, is exercisable immediately upon issuance and will expire five years from the issuance date. Additionally, in a concurrent non-brokered registered direct offering, we entered into a Securities Purchase Agreement (the “Additional Purchase Agreement”) with certain accredited investors (the “Additional Purchasers”). Pursuant to the terms of the Additional Purchase Agreement, we sold to the Additional Purchasers an aggregate of 1,632,652 shares of our common stock and warrants to purchase an aggregate of 816,326 shares of our common stock at a combined purchase price equal to $ 2.45 per share and associated warrant. Each warrant features an exercise price equal to $ 2.90 per share, is exercisable immediately upon issuance and will expire five years from the issuance date. The closing of the offerings occurred on February 17, 2021. In connection with the registered direct offerings, we received net proceeds of approximately $ 60.7 million. Sales Pursuant to Common Stock Sales Agreement On February 12, 2021, we suspended the use of the at-the-market transactions facility (the “ATM”) and terminated the continuous offering pursuant to the Common Stock Sales Agreement (“Sales Agreement”) entered into in February 2018 with H.C. Wainwright & Co., LLC (“HCW”). In accordance with the terms of the Sales Agreement, we could offer and sell shares of our common stock having an aggregate offering price of up to $ 25.0 million from time to time through HCW pursuant to the ATM program. As of February 12, 2021, we had sold an aggregate of 3,784,912 shares of our common stock pursuant to the Sales Agreement for aggregate gross proceeds of $ 9.5 million. We will no longer make any sales of our common stock pursuant to the Sales Agreement unless and until a new prospectus supplement is filed with the Securities and Exchange Commission. 65 Private Placement Offering On January 21, 2021, the Company entered into a securities purchase agreement (the “January Private Placement”) with certain investors (the “January Purchasers”). Pursuant to the terms of the January Private Placement, the Company agreed to sell to the January Purchasers an aggregate of 12,500,000 shares of its common stock at a purchase price equal to $ 2.00 per share, along with warrants to purchase an aggregate of 6,250,000 shares of its common stock. In connection with the January Private Placement, the Company received gross proceeds of $ 25.0 million. Each warrant is exercisable for one share of common stock and features an exercise price equal to $ 2.90 per share. The warrants are exercisable immediately upon issuance and will expire five and one-half years from the issuance date. Warrant Exercises Subsequent to December 31, 2020 the company issued 801,148 shares of common stock for net proceeds of $ 1.8 million in connection with warrant exercises associated with the April Purchase Agreement and May Purchase Agreement. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable.