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Item 2. Management’s Discussion and Analysis

2021-04-22 compared with 2020-10-22 · 153 added, 152 removed, 83 unchanged (79% of the section changed)

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

The following discussion and analysis should be read in conjunction with the unaudited consolidated condensed financial information and the notes thereto included herein, as well as the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2019, as filed on March 30, 2020.

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

The following discussion and analysis should be read in conjunction with the unaudited financial information and the notes thereto included herein, as well as the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2020, as filed on February 22, 2021, as amended by the Form 10-K/A filed on February 26, 2021.

This discussion contains forward-looking statements that involve risks and uncertainties.

Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under the caption “Cautionary Note Regarding Forward-Looking Statements” in this report, as well as under "Part I – Item 1A - Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2019, in other subsequent filings with the SEC, and elsewhere in this Quarterly Report on Form 10-Q.

Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under the caption “Cautionary Note Regarding Forward-Looking Statements” in this report, as well as under "Part I – Item 1A - Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2020, in other subsequent filings with the SEC, and elsewhere in this Quarterly Report on Form 10-Q.

These statements, like all statements in this report, speak only as of the date of this Quarterly Report on Form 10-Q (unless another date is indicated), and we undertake no obligation to update or revise these statements in light of future developments.

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations includes the following sections:

Overview that discusses our business and some of the relevant trends.

Results of Operations that includes a detailed discussion of our revenue and expenses.

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, includes the following sections:

Overview that discusses our operating results and some of the trends that affect our business.

Results of Operations that includes a more detailed discussion of our revenue and expenses.

Liquidity and Capital Resources which discusses key aspects of our statements of cash flows, changes in our financial position and our financial commitments.

Significant changes since our most recent Annual Report on Form 10-K in the Critical Accounting Policies and Significant Estimates that we believe are important to understanding the assumptions and judgments underlying our financial statements.

Plus Therapeutics, Inc.

is a clinical-stage pharmaceutical company focused on the development, manufacture and commercialization of complex and innovative treatments for patients battling cancer and other life-threatening diseases.

Our proprietary nanotechnology platform is currently centered around the enhanced delivery of a variety of drugs using novel liposomal encapsulation technology.

Liposomal encapsulation has been extensively explored and undergone significant technical and commercial advances since it was first developed.

Our platform is designed to facilitate new delivery approaches and/or formulations of safe and effective, injectable drugs, potentially enhancing the safety, efficacy and convenience for patients and healthcare providers.

We plan to leverage our nanotechnology platform and expertise using a simple multi-step model that enables us to address unmet needs or underserved conditions while managing risks and minimizing development costs through:

(1) mapping of the current and anticipated market landscape to clearly understand the clinical and commercial opportunities and defining nanotechnology options, (2) redesign of known, safe and effective active pharmaceutical ingredients with new nanotechnology, (3) manufacture-to-scale of the reformulated drug along with critical non-clinical (i.e.

bench, animal) analyses, (4) evaluation of early-stage clinical utility with a focus on proving safety and defining efficacy over the current standard of care, and (5) partnering the innovative treatment for late-stage clinical trials, regulatory approval, and commercial launch.

Plus’ current pipeline includes three clinical stage drugs:

Rhenium NanoLiposomes (RNL™), a novel liposomal radiotherapeutic, the lead indication is recurrent glioblastoma (rGBM) that is currently being evaluated in the U.S.

NIH/NCI-supported, multi-center ReSPECT™ Phase 1 dose finding clinical trial;

DocePLUS™, a novel liposomal chemotherapeutic, which has completed a U.S.

Phase 1 clinical trial;

DoxoPLUS™, a novel liposomal chemotherapeutic, clinical bioequivalence demonstrated to Janssen’s CAELYX® in ovarian cancer patients.

BMEDA-Chelated Rhenium NanoLiposomes (RNL™), is our lead drug asset and is initially being developed for recurrent glioblastoma.

RNL™ was part of the licensed radiotherapeutic portfolio that we acquired from NanoTx, Corp.

Plus Therapeutics is committed to developing and delivering innovative treatments for rare and difficult to treat cancers.

Plus Therapeutics’ mission is to transform the clinical care of cancer patients through its innovative drugs that have the potential to improve survival and quality of life .

Plus has a nanoscale drug development platform and the requisite expertise to innovate and produce new and better therapeutics for rare cancers.

We believe that this approach will produce investigational drugs that provide unique benefits such as improved mechanism of action, better tumor targeting, improved pharmacokinetics and higher treatment doses to the tumor.

Benefits such as these may then improve the overall efficacy of drugs while reducing the side effects associated with more traditional drug delivery methods.

To support this goal, Plus Therapeutics has an established, GMP-validated nanoscale drug R&D and commercial scale manufacturing facility in San Antonio, TX.

This facility is ideally suited to produce nanoliposomal drug candidates for research, development, clinical and commercial use .

As part of our strategy to leverage our nanotechnology platform and expertise, we use a simple multi-step model that management believes allows Plus to best address unmet market needs or underserved medical conditions while managing risks and minimizing development costs.

This model includes:

(1) market landscape mapping, (2) internal drug redesign, (3) in house drug manufacturing, (4) performance of critical non-clinical (i.e.

bench, animal) analyses, (5) scale-up manufacturing for commercial purposes and performance of early-stage clinical trials, and (6) partnering for late-stage clinical trials, regulatory approval, and, ultimately, commercial launch .

Plus Therapeutics’ lead investigational drug, Rhenium NanoLiposomes (RNL™), is a patented radiotherapy for patients with recurrent glioblastoma (rGBM).

The RNL™ technology was a key part of the licensed radiotherapeutic portfolio that we acquired from NanoTx, Corp.

(“NanoTx”) on May 7, 2020.

The licensed radiolabeled nanoliposome platform includes nanoliposome-encapsulated radionucleotides for several cancer targets and was developed by a multi-institutional consortium based in Texas at the Mays Cancer Center / UT Health San Antonio MD Anderson Cancer Center led by Dr.

Andrew Brenner, MD, PhD, who is the Kolitz Chair in Neuro-Oncology Research and Co-Leader of the Experimental and Developmental Therapeutics Program.

The licensed radiolabeled nanoliposome platform can be applied toward several cancer targets.

The licensed technology was previously funded by both the National Institutes of Health/National Cancer Institute (NIH/NCI) and the Cancer Prevention and Research Institute of Texas (CPRIT).

Brenner’s RNL research program has an active $3M award from NIH/NCI which will financially support the continued clinical development of RNL for recurrent glioblastoma.

In treating recurrent glioblastoma, RNL ™ is infused directly into the brain tumor via precision brain mapping and convection enhanced delivery technology that allows delivery of very high doses of radiation in patients whose cancer has recurred following initial surgical resection and treatment with chemo radiation.

RNL™ is intended to safely and effectively deliver a dose of radiation directly to the tumor that is up to 15-20 times greater than that currently being given to patients using external beam radiation therapy.

Furthermore, unlike standard external beam radiation therapy (EBRT) that is delivered day after day for weeks in order to achieve a tolerated cumulative dose, RNL™ is administered to the patient in a single procedure during a 4-day hospital stay.

RNL™ has a number of technical features that give it advantages over other approaches to treating glioblastoma and potentially other tumors.

First, very high doses of Rhenium beta radiation, perhaps up to 15-20 times greater than EBRT, are delivered.

Second, the Rhenium-186 isotope is a dual energy emitter.

It's made in a nuclear reactor and delivers both a beta particle, or high energy free electron to kill rapidly dividing cancer cells, but it also emits a gamma particle for imaging person purposes, so doctors know with precision where the radiation is at any time during and after treatment.

Third, it has a long half-life, or time on tumor, of approximately 90 hours.

Fourth, RNL™ is delivered beyond the blood-brain barrier directly to the tumor with novel delivery and imaging technologies.

Fifth, it has tumor micro fields that increase each Rhenium’s atom another 2 to 4 millimeters to help reach a residual non-enhancing tumor.

Sixth, it’s metabolized safely by the kidneys without collateral damage to local structures and radio sensitive organs such as bone marrow, very similar to I-131 for thyroid cancer.

Recurrent glioblastoma is a cancer that affects about 12,000 people per year in the U.S.

and for which there are currently few approved treatments that in aggregate provide only a marginal survival benefit.

And notably, essentially all primary tumors recur after initial treatment.

Even today, EBRT is the most effective component of the standard multimodal therapeutic regime used to treat glioblastoma.

Multiple randomized studies show five-month improvement in survival with EBRT compared to an additional 2.5 months with the addition of chemotherapy and 3 months for tumor treating fields.

By infusing the RNL™ drug directly into the tumor, bypassing the blood-brain barrier, normal brain and external tissues are spared from radiation damage.

In the case of these drugs the mechanism of action is unambiguous.

We believe that radiation in the form of high energy electrons is effective against glioblastoma if an adequate dose can be effectively delivered.

For comparison, current EBRT protocols for recurrent glioblastoma typically recommend a total max dose of about 35 Gy.

In contrast to most recent patient dosed with RNL™ in our clinical trial received over 500 Gy without significant adverse effect to date.

In terms of the current clinical trial status, we are currently in a U.S.

FDA approved Phase 1 dose finding study at two sites in Texas at UT Health San Antonio and UT Southwestern Medical Center in Dallas, with plans underway to expand to one additional sites in Texas, MD Anderson in Houston.

Thus far, we have completed the fifth dosing escalation cohort.

The radiation dose in the current cohort is now at approximately 15 times the dose that is typically delivered by EBRT.

Current activities related to both DocePLUS and DoxoPLUS are restricted to the identification of potential partners for these two drugs.

In addition, the RNL research program has an active $3M award from NIH/NCI which will financially support the continued clinical development of RNL for recurrent glioblastoma through the completion of a Phase 2 clinical trial and enrollment of up to 55 patients.

RNL™, is a novel injectable radiotherapy designed to deliver targeted high dose radiation directly into a brain tumor in a safe, effective, and convenient manner to optimize patient outcomes.

RNL™, which is composed of radionuclide Rhenium-186 (186Re) and a nanoliposomal carrier, is infused directly into the brain tumor via precision brain mapping and convection enhanced delivery.

The RNL radiation dose delivered to patients may be up to 15-20x greater than what is possible with external beam radiation therapy (EBRT).

Some additional potential benefits of RNL compared to EBRT include:

RNL can be visualized in real-time during administration, possibly giving doctors better control of radiation dosing and distribution.

Potentially more effectively treats the bulk tumor and microscopic disease in surrounding healthy tissue.

Using a small catheter, RNL is infused directly into the targeted tumor, which may reduce radiation exposure to healthy cells.

By contrast, EBRT is less targeted and selective.

RNL is given during a single 3- to 4-day in-patient hospital visit, while EBRT requires out-patient visits 5 days a week for approximately 6 weeks.

Recurrent glioblastoma (GBM) affects approximately 12,000 patients annually in the U.S.

and is the most common and lethal form of brain cancer.

The average life expectancy with glioblastoma is less than 24 months, with a one-year survival rate of 40.8% and a five-year survival rate of only 6.8%.

GBM can cause headaches, seizures, vision changes and other neurological complications.

Despite the best available medical treatments to eliminate the initial brain tumor, some microscopic disease frequently remains, with tumor regrowth within months.

In fact, approximately 90% of patients experience tumor recurrence.

This tumor type is incredibly difficult to remove completely, and often is resistant or quickly develops resistance to most available therapies.

The treatment of GBM remains a significant challenge and it has been nearly a decade since the FDA approved a new therapy for this disease.

There is no clear standard of care for recurrent GBM and even the few currently approved treatments, in aggregate, provide only marginal survival benefit.

Current approved therapies are associated with significant side effects, which limit dosing and prolonged use.

By infusing the RNL™ drug directly into the tumor, bypassing the blood-brain barrier, normal brain and external tissues may be spared from radiation damage.

We believe that radiation in the form of high energy electrons may be effective against glioblastoma if an adequate dose can be effectively delivered.

For comparison, current EBRT protocols for recurrent glioblastoma typically recommend a total maximum dose of about 35 Gy.

In contrast, the most recently dosed patient with RNL in our clinical trial received over 500 Gy without significant adverse effects to-date.

RNL is currently being evaluated for the treatment of recurrent glioblastoma in the Phase 1 multi-center ReSPECT™ dose-finding clinical trial.

ReSPECT is evaluating the safety, tolerability, and distribution of RNL for the treatment of recurrent glioblastoma.

Thus far, RNL has demonstrated early potential efficacy signals in patients with adequate dosing and tumor coverage with two patients surviving more than 30 months, compared to a median survival of approximately 9 months with the current standard of care.

The sixth dose escalation cohort of this trial is in progress, which increases the RNL drug volume to 8.8 milliliters and radiation dose to 22.3 millicuries.

The increased treatment volume in the sixth cohort will allow treatment of tumors up to approximately 4.5 cm in size, which may include the majority of glioblastoma tumors that appear in the recurrent setting.

No treatment-related SAEs have been observed thus far.

ReSPECT is supported by an award from the National Cancer Institute (NCI), part of the U.S.

National Institutes of Health (NIH).

In September 2020, the FDA granted both Orphan Drug designation and Fast Track designations to RNL for the treatment of patients with glioblastoma.

Based on substantial preclinical work completed and published, RNL is thought to have potential clinical benefits in other difficult to treat cancers such as leptomeningeal carcinomatosis, peritoneal carcinomatosis, recurrent head and neck cancer, and pediatric brain cancer.

We are in the process of developing additional indications utilizing RNL, in particular pediatric brain cancer and leptomeningeal carcinomatosis pending FDA feedback.

Plus Therapeutics also has two other clinical stage drugs in our pipeline which are:

1) DocePLUS™, a patented chemotherapy incorporating docetaxel for patients with solid tumors that has been evaluated in a completed U.S.

single-center Phase 1 clinical trial;

2) DoxoPLUS™, a generic chemotherapy incorporating doxorubicin that has been evaluated in a completed, bioequivalence clinical trial in the U.S., Canada, and Ukraine versus Janssen’s CAELYX® in patients with ovarian cancer.

Current business activities related to both DocePLUS and DoxoPLUS are focused on identification of potential partners.

In addition, Plus Therapeutics is developing a chemoradionuclide therapy with Rhenium-186-labeled NanoLiposomal doxorubicin.

The pharmacokinetics, imaging, and biodistribution of this novel therapy were determined after intravenous administration in a head and neck cancer xenograft model in nude rats.

Another study was performed to determine this therapy’s maximum tolerated dose and therapeutic effects, investigate associated toxicities, and calculate radiation absorbed dose in head and neck tumor xenografts and normal organs.

The most recent preclinical study determined the efficacy of this therapy in combination with radiofrequency (RF) ablation of human head and neck squamous cell carcinoma xenograft in nude rats.

Recent Developments

Piramal Master Services Agreement

On January 8, 2021, we entered into a Master Services Agreement (the “MSA”) with Piramal Pharma Solutions, Inc.

(“Piramal”), for Piramal to perform certain services related to the development, manufacture, and supply of our RNL-Liposome Intermediate Drug Product.

The MSA includes the transfer of analytical methods, development of microbiological methods, process transfer and optimization, intermediate drug product manufacturing, and stability studies for us.

The transfer will be performed at Piramal’s facility located in Lexington, Kentucky.

The parties contemplate that the MSA will lead to clinical and commercial supply agreements between us and Piramal.

The MSA has a term of five years and will automatically renew for successive one-year terms unless either party notifies the other no later than six months prior to the original term or any additional terms of its intention to not renew the MSA.

We have the right to terminate the MSA for convenience upon thirty days’ prior written notice.

Either party may terminate the MSA upon an uncured material breach by the other party or upon the bankruptcy or insolvency of the other party.

Recent Financings

At-the-Market Transaction

On October 23, 2020, we entered into an Equity Distribution Agreement (the “Distribution Agreement”) with Canaccord Genuity LLC (“Canaccord”), pursuant to which we may issue and sell, from time to time, shares of our common stock having an aggregate offering price of up to $10,000,000 (the “ATM Shares”), depending on market demand, with Canaccord acting as an agent for sales.

Refer to “Liquidity and Capital Resources” section below for additional details on the Distribution Agreement.

During the year ended December 31, 2020, we issued 1,616,331 shares under the Distribution Agreement for net proceeds of approximately $3.2 million.

During the three months ended March 31, 2021, we issued 1,137,193 shares under the Distribution Agreement for net proceeds of $3.2 million .

Lincoln Park Purchase Agreement

On September 30, 2020, we entered into a purchase agreement (the “2020 Purchase Agreement”) and registration rights agreement pursuant to which Lincoln Park Capital Fund, LLC (“Lincoln Park”) has committed to purchase up to $25.0 million of our common stock.

Under the terms and subject to the conditions of the 2020 Purchase Agreement, we have the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase up to $25.0 million of our common stock.

Such sales of common stock by us, if any, will be subject to certain limitations, and may occur from time to time, at our sole discretion, over the 36-month period commencing on the date that the registration statement covering the resale of shares of common stock that have been and may be issued under the 2020 Purchase Agreement, is declared effective by the SEC and a final prospectus in connection therewith is filed .

The number of shares we may sell to Lincoln Park on any single business day in a regular purchase is 50,000, but that amount may be increased up to 100,000 shares, depending upon the market price of our common stock at the time of sale and subject to a maximum limit of $500,000 per regular purchase.

The purchase price per share for each such regular purchase will be based on prevailing market prices of our common stock immediately preceding the time of sale as computed under the 2020 Purchase Agreement.

In addition to regular purchases, we may also direct Lincoln Park to purchase other amounts as accelerated purchases or as additional accelerated purchases if the closing sale price of the common stock exceeds certain threshold prices as set forth in the 2020 Purchase Agreement.

We agreed to issue 180,701 shares of common stock to Lincoln Park as a commitment fee in connection with entering into the 2020 Purchase Agreement.

Fast Track Designation

On September 4, 2020, we were granted Fast Track designation from the U.S.

Food and Drug Administration (FDA) for our lead investigational drug, Rhenium NanoLiposomes (RNL ™ ), for the treatment of patients with recurrent glioblastoma.

As previously reported, we also received orphan drug designation from the FDA for RNL for the treatment of patients with glioblastoma.

Fast Track designation confers several benefits to the drug development program including 1) more frequent meetings with the FDA to discuss the drug's development plan, 2) more frequent written communication from the FDA about such things as the design of the

proposed clinical trials and use of biomarkers, 3) eligibility for Accelerated Approval and Priority Review, if relevant criteria are met, and 4) Rolling Review, which means that a drug company can submit completed sections of its New Drug Application (NDA) for review by the FDA, rather than waiting until every section of the NDA is completed before the entire application ca n be reviewed.

NDA review usually does not begin until the drug company has submitted the entire application to the FDA.

Refer to “Liquidity and Capital Resources” section below for additional details on the 2020 Purchase Agreement.

During the year ended December 31, 2020, we issued 353,113 shares, excluding 180,701 shares issued as commitment fee, under the 2020 Purchase Agreement for net proceeds of approximately $0.7 million.

During the three months ended March 31, we issued 1,397,686 shares of our common stock under the 2020 Purchase Agreement for total proceeds of $3.9 million.

During the period from April 1, 2021 through the date of the filing of this Quarterly Report on Form 10-Q, we issued 55,000 shares of its common stock under the Purchase Agreement for net proceeds of $124,000.

Recent Exercise of Warrants

In February 2021, certain warrant holders exercised warrants to purchase 896,500 shares of our common stock for total exercise proceeds of $2.0 million.

COVID-19 Impact

A novel strain of coronavirus (COVID-19) was declared a global pandemic by the World Health Organization in March 2020.

COVID-19 has presented substantial public health and economic challenges and is affecting economies, financial markets and business operations around the world.

The COVID-19 pandemic has presented substantial public health and economic challenges and is affecting economies, financial markets, and business operations around the world.

International and U.S.

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In response, we have put restrictions on employee travel and working from our executive offices with many employees continuing their work remotely.

While we have implemented additional health and safety precautions and protocols in response to the pandemic and government guidelines, we have not yet experienced a significant impact on our business and operations.

While we have implemented additional health and safety precautions and protocols in response to the pandemic and government guidelines, we have not experienced a significant impact on our business and operations.

However, we may experience disruptions that could adversely impact our business operations as well as our preclinical studies and clinical trials.

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In addition, some clinical trial sites have imposed limited accessibility to conduct clinical monitoring and training on-site.

We considered the impacts of COVID-19 on the assumptions and estimates used to prepare our financial statements and determined that there were no material adverse impacts on our results of operations and financial position at September 30, 2020.

We considered the impacts of

COVID-19 on the assumptions and estimates used to prepare our financial statements and determined that there were no material adverse impacts on our results of operations and financial position at Ma r ch 31, 2021 .

The full impact of the COVID-19 outbreak continues to evolve as of the date of this report.

For example, as certain states and regions across the United States have relaxed various restrictions on businesses and other activities, it is uncertain whether and to what extent federal, state, or local governments may reinstate additional restrictions and safety protocols in response to any increases in COVID-19 cases.

As such, it is uncertain as to the full magnitude that the pandemic will have on our operations, including our preclinical studies and clinical trials, financial condition, liquidity, and future results of operations.

Although there are vaccines available, the ability to obtain a vaccine or know when herd immunity will be met, is difficult to anticipate As such, it is uncertain as to the full magnitude that the pandemic will have on our operations, including our preclinical studies and clinical trials, financial condition, liquidity, and future results of operations.

Management is actively monitoring the global situation and its impact on our clinical program and timeline, financial condition, liquidity, operations, suppliers, industry, and workforce.

We continue to evaluate the extent to which delays as a result of COVID-19 will impact our ability to manufacture our product candidates for our clinical trials and conduct other research and development operations and maintain applicable timelines.

Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, we are not able to estimate the effects of the COVID-19 outbreak on our results of operations, financial condition, or liquidity for fiscal year 2020.

We continue to evaluate the extent to which delays as a result of the COVID-19 pandemic will impact our ability to manufacture our product candidates for our clinical trials and conduct other research and development operations and maintain applicable timelines.

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020.

The CARES Act, among other things, includes tax provisions relating to refundable payroll tax credits, deferment of employer’s social security payments, net operating loss utilization and carryback periods, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property (QIP).

The CARES Act had no material impact on our income tax provision for the three and nine months ended September 30, 2020.

The CARES Act had no material impact on our income tax provision for the year ended December 31, 2020 or the three months ended March 31, 2021.

We continue to evaluate the impact of the CARES Act on our financial position, results of operations, and cash flows.

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Development revenues

Under our government contract with BARDA, we recognized a total of $0 and $0.3 million in revenues for the three and nine months ended September 30, 2020, and $0 and $0.3 million in qualified expenditures for those periods.

The BARDA contract was terminated in December 2019 and the contract close out process was completed during the three months ended September 30, 2020.

Development revenue for the nine months ended September 30, 2019 included $4.6 million of revenue recognized under the BARDA contract based on retrospective changes in indirect cost rates during fiscal years 2012 through 2019.

Under our government contract with BARDA, we recognized a total of $0.1 million in revenues for the three months ended March 31, 2020 and $0.1 million in qualified expenditures.

The BARDA contract was terminated in December 2019 and the close out process was completed in 2020.

There were no revenue or expenses recognized relating to the BARDA contract during the three months ended March 31, 2021, and we do not expect additional BARDA revenue in the near future.

Research and development expenses

Research and development expenses include costs associated with the design, development, testing and enhancement of our products, payment of regulatory fees, laboratory supplies, pre-clinical studies and clinical studies.

The following table summarizes the components of our research and development expenses for the three and nine months ended September 30 , 20 20 and 201 9 (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Research and development expenses include costs associated with the design, development, testing, and enhancement of our product candidates, payment of regulatory fees, laboratory supplies, pre-clinical studies, and clinical studies .

The following table summarizes the components of our research and development expenses for the three months ended March 31, 2021 and 2020 (in thousands):

For the Three Months Ended March 31,

Research and development

Share-based compensation

Stock-based compensation

Total research and development expenses

The decrease in research and development expenses for the three and nine months ended September 30, 2020 as compared to the same period in 2019 is due primarily to decreased professional services as a result of discontinuing manufacturing subsequent to sale of our former cell therapy business, as well as reduction in research and development expenses related to Doceplus and Doxoplus.

We expect aggregate research and development expenditures to increase during the remainder of 2020 due to the expected costs of development of the RNL™ therapy acquired from NanoTx.

In process research and development acquired from NanoTx

In process research and development acquired from NanoTx in the amount of $781,000 represents the upfront cash payment and fair value of 230,769 shares of common stock, with fair value of $1.65 per share, issued to NanoTx in accordance with the terms of the License Agreement.

Sales and marketing expenses

Sales and marketing expenses include costs of marketing personnel, events and tradeshows, primary and secondary market research, and product and service promotion.

The following table summarizes the components of our sales and marketing expenses for the three and nine months ended September 30, 2020 and 2019 (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Sales and marketing

Share-based compensation

Total sales and marketing expenses

Sales and marketing expenses remained generally consistent for the three and nine months ended September 30, 2020 compared with the same period of 2019.

We expect sales and marketing expenditures to remain generally consistent on a quarterly basis for the remainder of 2020 as compared with the quarter ended September 30, 2020.

The increase of $0.2 million in research and development expenses for the three months ended March 31, 2021 as compared to the same period in 2020 was due primarily to an increase of $0.2 million related to the development of RNL for the phase 3 pivotal trial.

We expect aggregate research and development expenditures to increase in absolute dollars during the remainder of 2021 due to the expected costs of development of the RNL™ therapy acquired from NanoTx .

General and administrative expenses

General and administrative expenses include costs for administrative personnel, legal and other professional expenses, and general corporate expenses.

The following table summarizes the general and administrative expenses for the three and nine months ended September 30, 2020 and 2019 (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

The following table summarizes the general and administrative expenses for the three months ended March 31, 2021 and 2020 (in thousands):

For the Three Months Ended March 31,

General and administrative

Share-based compensation

Stock-based compensation

Total general and administrative expenses

General and administrative expenses decreased by $0.1 million during the three months ended September 30, 2020 , as compared to the same period in 2019 due to reduction of $0.1 million of legal and professional fees in the three months ended September 30, 2020.

General and administrative expenses increased by $0.5 million during the nine months ended September 30, 2020 , as compared to the same period in 2019 due to increase of $0.5 million of legal and professional fees in the nine months ended September 30, 2020.

We expect general and administrative expenditures to remain generally consistent on a quarterly basis for the remainder of 2020 as compared with the quarter ended September 30, 2020.

Share-based compensation expense

Share-based compensation expense includes charges related to options and restricted stock awards issued to employees, directors and non-employees.

General and administrative expenses decreased by $0.3 million during the three months ended March 31, 2021 , as compared to the same period in 2020.

The decrease was primarily driven by a reduction of legal expenses of $0.2 million and a reduction of $0.1 million of recruiting expenses.

We expect general and administrative expenditures to remain consistent on a quarterly basis for the remainder of 2021 as compared with 2020.

Stock-based compensation expense

Stock-based compensation expense includes charges related to options and restricted stock awards issued to employees, directors and non-employees.

We measure stock-based compensation expense based on the grant-date fair value of any awards granted to our employees.

Such expense is recognized over the requisite service period.

The following table summarizes the components of our share-based compensation expenses for the three and nine months ended September 30, 2020 and 2019 (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

The following table summarizes the components of our stock-based compensation expenses for the three months ended March 31, 2021 and 2020 (in thousands):

For the Three Months Ended March 31,

Research and development

Sales and marketing

General and administrative

Total share-based compensation

On June 16, 2020, our stockholders approved the 2020 Stock Incentive Plan (the “2020 Plan”).

The 2020 Plan replaced our 2014 Equity Incentive Plan.

Pursuant to the 2020 Plan, we reserved for issuance 550,000 shares of our common stock for future awards, and granted 444,000 options to our employees, directors, and, as appropriate, to non-employee service providers.

In addition, previously-granted options will continue to vest in accordance with their original terms.

As of September 30, 2020, the total compensation cost related to non-vested stock options and stock awards not yet recognized for all our plans is approximately $786,000 which is expected to be recognized as a result of vesting under service conditions over a weighted average period of 2.99 years.

Total stock-based compensation

The increase/decrease in stock-based compensation expense for the three months ended March 31, 2021 as compared to the same period in 2020 is primarily related to increased stock options grants in the three months ended March 31, 2021, as compared to the same period in 2020 .

We expect to continue to grant stock options (which will result in an expense) to our employees, directors, and, as appropriate, to non-employee service providers.

In addition, previously-granted stock options will continue to vest in accordance with their original terms.

As of March 31, 2021, the total compensation cost related to non-vested stock options and stock awards not yet recognized for all our plans is approximately $1.1 million which is expected to be recognized as a result of vesting under service conditions over a weighted average period of 3.14 years.

Financing items

The following table summarizes interest income, interest expense, and other income and expense for the three and nine months ended September 30, 2020 and 2019 (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

The following table summarizes interest income, interest expense, and other income and expense for the three months ended March 31, 2021 and 2020 (in thousands):

Three Months Ended March 31,

Interest income

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Change in fair value of warrants

Warrant issuance cost

The decrease in interest expense for the three and nine months ended September 30, 2020 as compared to the same period in 2019 was primarily due to the repayments of debt principal of $3.1 million in April 2019 and $5.0 million in April 2020.

The decrease in interest expense for the three months ended March 31, 2021 as compared to the same period in 2020 was primarily due to the repayment of debt principal of $5.0 million in April 2020.

The changes in fair value of our warrant liabilities are primarily due to fluctuations in the valuation inputs for the warrants.

See Note 4 to the consolidated condensed financial statements included elsewhere herein for disclosure and discussion of our warrant liabilities.

We expect interest expense in 2020 to decrease as compared with 2019 due to principal repayment of $5.0 million on April 1, 2020.

In April, June, July and September 2020, we entered into revised warrant agreements with the holders of 3,447,500 Series U warrants and in September 2020, we entered into revised warrant agreements for 75,000 of Representative Warrants.

See Note 4 to the unaudited consolidated condensed financial statements included elsewhere herein for disclosure and discussion of our warrant liabilities.

We expect interest expense in 2021 to decrease as compared with 2020 due to the principal repayment of $5.0 million on April 1, 2020.

In return for reducing the strike price of the warrants, the warrant holders agreed to amend the settlement provisions upon fundamental transactions.

The amended Series U warrants meet the requirements for equity classification under authoritative accounting guidance and are no longer subject to mark to market accounting post amendment.

The amended Series U warrants meet the requirements for equity classification under authoritative accounting guidance and are no longer subject to fair value accounting post amendment.

Liquidity and Capital Resources

Short-term and long-term liquidity

The following is a summary of our key liquidity measures at September 30, 2020 and December 31, 2019 (in thousands):

As of September 30,

The following is a summary of our key liquidity measures at March 31, 20 2 1 and December 31, 20 20 (in thousands):

As of March 31,

As of December 31,

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Working capital

We incurred net losses of $4.7 million for the nine months ended September 30, 2020.

We have an accumulated deficit of $429.9 million as of September 30, 2020.

Additionally, we used net cash of $5.2 million to fund our operating activities for the nine months ended September 30, 2020.

We incurred net losses of $2.7 million for the three months ended March 31, 2021.

We have an accumulated deficit of $436.2 million as of March 31, 2021.

Additionally, we used net cash of $3.0 million to fund our operating activities for the three months ended March 31, 2021.

These factors raise substantial doubt about our ability to continue as a going concern.

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Our inability to raise additional cash would have a material and adverse impact on operations and would cause us to default on our loan .

On September 30, 2020, we entered into the 2020 Purchase Agreement and a registration rights agreement pursuant to which Lincoln Park committed to purchase up to $25.0 million of our common stock.

On October 23, 2020, we entered into the Distribution Agreement with Canaccord, pursuant to which we may issue and sell, from time to time, ATM Shares, depending on market demand, with Canaccord acting as an agent for sales.

Sales of the ATM Shares may be made by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) of the Securities Act of 1933, as amended (the “Securities Act”), including, without limitation, sales made directly on or through the NASDAQ Capital Market.

Canaccord will use its commercially reasonable efforts to sell the ATM Shares we request to be sold on our behalf, consistent with Canaccord’s normal trading and sales practices, under the terms and subject to the conditions set forth in the Distribution Agreement.

We have no obligation to sell any of the ATM Shares.

We may instruct Canaccord not to sell the ATM Shares if the sales cannot be effected at or above the price we designate from time to time and we may at any time suspend sales pursuant to the Distribution Agreement.

During the year ended December 31, 2020, we issued 1,616,331 shares under the Distribution Agreement for net proceeds of approximately $3.2 million.

During the three months ended March 31, 2021, we issued 1,137,193 shares under the Distribution Agreement for net proceeds of $3.2 million.

On September 30, 2020, we entered into the 2020 Purchase Agreement and a registration rights agreement with Lincoln Park, pursuant to which Lincoln Park committed to purchase up to $25.0 million of our common stock.

Such sales of common stock by us, if any, will be subject to certain limitations, and may occur from time to time, at our sole discretion, over the 36-month period commencing November 6, 2020, subject to satisfaction of certain conditions.

The net proceeds under the 2020 Purchase Agreement will depend on the frequency and prices at which we sell shares of our common stock to Lincoln Park.

We expect that any proceeds received from such sales to Lincoln Park will be used for working capital and general corporate purposes.

During the year ended December 31, 2020, we issued 353,113 shares, excluding 180,701 shares issued as commitment fee, under the 2020 Purchase Agreement for net proceeds of approximately $0.7 million.

During the three months ended March 31, 2021, we issued 1,397,686 shares of our common stock under the 2020 Purchase Agreement for net proceeds of $3.9 million.

On March 29, 2020, we entered into the Ninth Amendment, pursuant to which, among other things, Oxford agreed to defer the start date of principal repayment from May 1, 2020 to May 1, 2021.

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As a result of this Ninth Amendment, the term of the Term Loan has been extended from September 1, 2021 to September 1, 2024, with all other major terms remained consistent.

In September 2019, we finalized the indirect cost rate under the BARDA Agreement for indirect costs incurred during the years 2012 through 2019, which resulted in approximately $4.6 million of revenue recognized during the year ended December 31, 2019.

The BARDA contract was terminated in December 2019 and the contract close out process was completed during the three months ended September 30, 2020.

In September 2019, we entered into an underwriting agreement with H.C.

Wainwright & Co., LLC (the “Representative”), as representative of the underwriters (the “Underwriters”), pursuant to which we sold in an underwritten public offering an aggregate of (i) 289,000 Class A Units, each consisting of one share of our common stock, par value $0.001 per share, and one Series U warrant to purchase one share of common stock, and (ii) 2,711,000 Class B Units, each consisting of one pre-funded Series V warrant to purchase one share of common stock and one Series U warrant to purchase one share of common stock at a public offering price of $5.00 per Class A Unit and $4.9999 per Class B Unit (“September 2019 Offering”).

In addition, we granted the Underwriters a 45-day option to purchase up to an additional 450,000 shares of our common stock and/or Series U warrants at the public offering price, less the underwriting discounts and commissions.

The Underwriters exercised their option to purchase an additional 450,000 Series U warrants.

We also issued to the Representative warrants (in the form of the Series U warrants) to purchase 75,000 shares of common stock with an exercise price of $6.25 per share of common stock (“Representative Warrants”).

In September 2020, we entered into revised warrant agreements for the Representative Warrants that reduced the strike price of the warrants to $2.82 per share.

On April 24, 2019, we received $3.3 million of net cash proceeds related to the sale of the UK subsidiary and our cell therapy assets (excluding such assets used in Japan or relating to our contract with BARDA), of which $1.7 million was used to pay down principal, interest and fees on the Loan and Security Agreement, and on April 25, 2019, we received $2.4 million of net cash proceeds related to the sale of our Japanese subsidiary, Cytori Therapeutics, K.K., and substantially all of our cell therapy assets used in Japan, of which $1.4 million was used to pay down principal, interests and fees on the Loan and Security Agreement.

We continue to seek additional capital through strategic transactions and other financing alternatives.

Without additional capital, current working capital and cash generated from sales will not provide adequate funding for research, sales and marketing efforts and product development activities at their current levels.

Without additional capital, current working capital and cash generated from sales will not provide adequate funding for research and product development activities at their current levels.

If sufficient capital is not raised, we will at a minimum need to significantly reduce or curtail our research and development and other operations, and this would negatively affect our ability to achieve corporate growth goals.

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Should we be unable to raise additional cash from outside sources or if we are unable to do so in a timely manner or on commercially reasonable terms, it would have a material adverse impact on our operations

Cash provided by (used in) operating, investing, and financing activities for the nine months ended September 30 , 20 20 and 20 19 is summarized as follows (in thousands):

For the Nine Months Ended September 30,

Cash (used in) provided by operating, investing, and financing activities for the three months ended March 31, 20 21 and 2020 is summarized as follows (in thousands):

For the March 31,

Net cash used in operating activities

Net cash provided by (used in) investing activities

Net cash used in investing activities

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Operating activities

Net cash used in operating activities for the nine months ended September 30, 2020 was $5.2 million compared to $6.9 million in the same period of 2019.

Overall, our operational cash use decreased during the nine months ended September 30, 2020 as compared to the same period in 2019, due primarily to timing of cash payments made for operating assets and liabilities.

Net cash used in operating activities for the three months ended March 31, 2021 was $3.0 million compared to $1.5 million in the same period of 2020.

Our operational cash use increased during the three months ended March 31, 2021 as compared to the same period in 2020, due primarily to timing of cash payments made for operating assets and liabilities.

Investing activities

Net cash used in investing activities for the nine months ended September 30, 2020 was primarily related to cash payments made for in process research and development assets from NanoTx, and purchases of fixed assets.

Net cash provided by investing activities for the nine months ended September 30, 2019 were related to the sale of the cell therapy business for gross proceeds of $5.6 million.

Net cash used in investing activities for the three months ended March 31, 2021 and 2020 were related to purchases of fixed assets.

Financing Activities

Net cash used for financing activities for the nine months ended September 30, 2020 was related to repayment of $5.0 million of the Term Loan in April 2020, and cash payments for our finance leases, offset by cash proceeds received from warrant exercises of $1.1 million.

Net cash used in financing activities for the nine months ended September 30, 2019 was primarily related to net proceeds received in the September 2019 Offering and sale of common stock under the Lincoln Park Purchase Agreement of $16.0 million, proceeds from exercise of warrants of $0.5 million, offset by the principal payment of long-term obligations of $3.5 million.

Net cash provided by financing activities for the three months ended March 31, 2021 was primarily related to sales of common stock of $7.2 million, net of offering cost through the 2020 Purchase Agreement with Lincoln Park and the Distribution Agreement with Canaccord, as well as $2.0 million from exercise of warrants.

Net cash used for financing activities for the three months ended March 31, 2020 was related to cash payments for our finance leases.

Critical Accounting Policies and Significant Estimates

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We perform our impairment test annually during the fourth quarter.

We operate in a single operating segment and reporting unit.

The Company operates in a single operating segment and reporting unit.

We monitor the fluctuations in our share price and have experienced significant volatility during the year.

We estimate the fair value of liability classified warrants using an option pricing model.

Following the authoritative accounting guidance, warrants with variable exercise price features or with potential cash settlement outside control of the Company are accounted for as liabilities, with changes in the fair value included in operating expenses.

Following the authoritative accounting guidance, warrants with potential cash settlement outside control of the Company are accounted for as liabilities, with changes in the fair value included in operating expenses.

We believe it is important for you to understand our most critical accounting policies.

Our critical accounting policies and estimates are discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and there have been no material changes during the nine months ended September 30, 2020.

Our critical accounting policies and estimates are discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and there have been no material changes during the three months ended March 30, 2021.

Quantitative and Qualitative Disclosures about Market Risk

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis