What changed in this filing

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Item 1. Financial Statements

2021-05-10 compared with 2020-11-09 · 213 added, 344 removed, 285 unchanged (66% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

September 30,

Current assets:

1 unchanged sentence

Short-term investment securities

Accounts receivable, net

Prepaid research and development

14 unchanged sentences

Deferred revenue, net of current portion

Long-term debt

Loan payable – non-current

Lease liability – non-current

2 unchanged sentences

Stockholders’ equity:

Common stock, $ 0.001 par value per share ( 150,000,000 shares authorized, 128,959,861 and 109,425,243 shares issued, 128,918,552 and 109,383,934 shares outstanding at September 30, 2020 and December 31, 2019, respectively)

Preferred stock, $ 0.001 par value per share ( 10,000,000 shares authorized, no ne issued and outstanding as of March 31, 2021 and December 31, 2020)

Common stock, $ 0.001 par value per share ( 150,000,000 shares authorized, 141,520,696 and 140,617,606 shares issued, 141,479,387 and 140,576,297 shares outstanding at March 31, 2021 and December 31, 2020, respectively)

Additional paid-in capital

Treasury stock, at cost, 41,309 shares at September 30, 2020 and December 31, 2019

Treasury stock, at cost, 41,309 shares at March 31, 2021 and December 31, 2020

Accumulated deficit

( 1,071,225 )

Total stockholders’ equity

5 unchanged sentences

Three months ended

Nine months ended

September 30,

Product revenue, net

License revenue

Total revenue

Costs and expenses:

Cost of product revenue

Research and development:

Noncash stock expense associated with in-licensing agreements

Noncash compensation

1 unchanged sentence

Total research and development

General and administrative:

Selling, general and administrative:

Noncash compensation

Other general and administrative

Total general and administrative

Other selling, general and administrative

Total selling, general and administrative

Total costs and expenses

2 unchanged sentences

Interest expense

Total other expense, net

Total other expense (income), net

Basic and diluted net loss per common share

2 unchanged sentences

TG Therapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ (Deficit) Equity

Condensed Consolidated Statements of Changes in Stockholders’ (Deficit) Equity

(in thousands, except share and per share amounts)

1 unchanged sentence

Balance at January 1, 2020

Issuance of common stock in connection with exercise of options

Issuance of restricted stock

Warrants issued with debt financing

Forfeiture of restricted stock

Issuance of common stock in At-the-Market offerings (net of offering costs of $ 0.2 million)

Compensation in respect of restricted stock granted to employees, directors and consultants

Balance at March 31, 2020

Issuance of restricted stock

Forfeiture of restricted stock

Issuance of common stock in public offering

Issuance of common stock in At-the-Market offerings (net of offering costs of $ 0.5 million)

Compensation in respect of restricted stock granted to employees, directors and consultants

Shares issued in connection with in-licensing agreements

Balance at June 30, 2019

Issuance of restricted stock

Forfeiture of restricted stock

Issuance of common stock in At-the-Market offerings (net of offering costs of $ 0.4 million)

Compensation in respect of restricted stock granted to employees, directors and consultants

Shares issued in connection with in-licensing agreements

Balance at September 30, 2019

Treasury Stock

3 unchanged sentences

Forfeiture of restricted stock

Offering costs paid

Compensation in respect of restricted stock granted to employees, directors and consultants

Balance at March 31, 2021

Issuance of common stock in connection with exercise of options

Issuance of restricted stock

Forfeiture of restricted stock

Issuance of common stock in public offering (net of offering costs of $ 10.9 million)

Issuance of common stock in At-the-Market offerings (net of offering costs of $ 1.4 million)

Compensation in respect of restricted stock granted to employees, directors and consultants

Balance at June 30, 2020

Issuance of common stock in connection with exercise of options

Issuance of restricted stock

Forfeiture of restricted stock

Issuance of common stock in offerings (net of offering costs of $ 10.9 million)

Issuance of common stock in At the Market offering (net of offering costs of $ 2.0 million)

Compensation in respect of restricted stock and options granted to employees, directors and consultants

Balance at September 30, 2020

( 1,071,225 )

*Amount less than one thousand dollars

3 unchanged sentences

(in thousands)

Nine months ended

September 30,

Three months ended

CASH FLOWS FROM OPERATING ACTIVITIES

1 unchanged sentence

Noncash stock compensation expense

Noncash licensing expense

Depreciation and amortization

5 unchanged sentences

Changes in assets and liabilities:

Decrease in other current assets

Decrease in accrued interest receivable

Increase in other current assets

Increase in accounts receivable

Increase (decrease) in accounts payable and accrued expenses

Decrease in lease liabilities

Increase in interest payable

(Decrease) increase in other liabilities

Decrease in other liabilities

Decrease in deferred revenue

2 unchanged sentences

Proceeds from maturity of short-term securities

Investment in short-term securities

Investment in held-to-maturity securities

Purchases of equipment

Net cash provided by (used in) investing activities

Net cash (used in) provided by investing activities

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from sale of common stock, net

Proceeds from exercise of options

Proceeds from debt financings

Financing costs paid

Net cash provided by financing activities

NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

Offering costs paid

Net cash (used in) provided by financing activities

NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD

Reconciliation to amounts on condensed consolidated balance sheets:

Reconciliation to amounts on consolidated balance sheets:

Cash and cash equivalents

2 unchanged sentences

Cash paid for:

NONCASH TRANSACTIONS

Deferred financing costs

Warrants issued with debt financing

Shares issued in connection with in-licensing

The accompanying notes are an integral part of the condensed consolidated financial statements.

5 unchanged sentences

Description of Business

We are a biopharmaceutical company dedicated to developing and delivering medicines for patients with B-cell mediated diseases, including chronic lymphocytic leukemia (CLL), non-Hodgkin lymphoma (NHL) and multiple sclerosis (MS).

We have developed a robust B-cell directed research and development (R&D) platform for identification of key B-cell pathways of interest and rapid clinical testing.

Currently, we have five B-cell targeted drug candidates in clinical development, with the two lead therapies, ublituximab (TG-1101) and umbralisib (TGR-1202), in pivotal trials for CLL and NHL, with ublituximab also in pivotal trials for MS.

Ublituximab is a novel anti-CD20 monoclonal antibody (mAb) that has been glycoengineered for enhanced potency.

Umbralisib is an oral, once daily, dual inhibitor of PI3K-delta and CK1-epsilon.

When used together in combination therapy, ublituximab and umbralisib are referred to as “U2”.

Additionally, in early clinical development we have an anti-PD-L1 monoclonal antibody cosibelimab (TG-1501), an oral Bruton’s Tyrosine Kinase (BTK) inhibitor referred to as TG-1701, and an anti-CD47/CD19 bispecific antibody referred to as TG-1801.

TG Therapeutics is a fully integrated, commercial stage biopharmaceutical company focused on the acquisition, development and commercialization of novel treatments for B-cell malignancies and autoimmune diseases.

In addition to an active research pipeline including five investigational medicines across these therapeutic areas, UKONIQ received accelerated approval from the FDA for the treatment of adult patients with relapsed or refractory marginal zone lymphoma (MZL) who have received at least one prior anti-CD20-based regimen and relapsed or refractory follicular lymphoma (FL) who have received at least three prior lines of systemic therapies.

Currently, we have two programs in Phase 3 development for the treatment of patients with relapsing forms of multiple sclerosis (RMS) and patients with chronic lymphocytic leukemia (CLL) and several investigational medicines in Phase 1 clinical development.

We also actively evaluate complementary products, technologies and companies for in-licensing, partnership, acquisition and/or investment opportunities.

To date, we have not received approval for the sale of any of our drug candidates in any market and, therefore, have not generated any product sales from our drug candidates.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements were prepared in accordance with U.S.

4 unchanged sentences

The accompanying condensed December 31, 2020 balance sheet has been derived from these statements.

The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the entire fiscal year or any other interim period.

The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the entire fiscal year or any other interim period.

In December 2018, the Company created an Australian corporation, TG Therapeutics AUS Pty Ltd.

5 unchanged sentences

Liquidity and Capital Resources

We have incurred operating losses since our inception, expect to continue to incur operating losses for the foreseeable future, and may never become profitable.

As of September 30, 2020, we have an accumulated deficit of approximately $ 892.4 million.

Our major sources of cash have been proceeds from the private placement and public offering of equity securities, as well as debt financings.

We have not yet commercialized any of our drug candidates and cannot be sure if we will ever be able to do so.

Even if we commercialize one or more of our drug candidates, we may not become profitable.

Our ability to achieve profitability depends on many factors, including our ability to obtain regulatory approval for our drug candidates;

successfully complete any post-approval regulatory obligations;

and successfully commercialize our drug candidates alone or in partnership.

We may continue to incur substantial operating losses even if we begin to generate revenues from our drug candidates.

As of September 30, 2020, we had $ 254.2 million in cash and cash equivalents.

The Company believes its cash and cash equivalents on hand as of September 30, 2020, along with the additional capital raised in the fourth quarter of 2020 (see Note 5), will provide sufficient liquidity for more than a twelve-month period from the date of filing this Quarterly Report on Form 10-Q.

The actual amount of cash that we will need to operate is subject to many factors, including, but not limited to, the timing, design and conduct of clinical trials for our drug candidates.

We are dependent upon significant future financing to provide the cash necessary to execute our current operations, including the commercialization of any of our drug candidates.

Our common stock is listed on the Nasdaq Capital Market and trades under the symbol TGTX.

Recently Issued Accounting Standards

In July 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No.

2018-11, “Leases - Targeted Improvements” (“ASU 2018-11”) as an update to ASU 2016-02, Leases (“ASU 2016-02” or “Topic 842”) issued on February 25, 2016.

ASU 2016-02 is effective for public business entities for fiscal years beginning January 1, 2019.

ASU 2016-02 required companies to adopt the new leases standard at the beginning of the earliest period presented in the financial statements, which is January 1, 2017, using a modified retrospective transition method where lessees must recognize lease assets and liabilities for all leases even though those leases may have expired before the effective date of January 1, 2017.

Lessees must also provide the new and enhanced disclosures for each period presented, including the comparative periods.

ASU 2018-11 provides an entity with an additional (and optional) transition method to adopt the new leases standard.

Under this new transition method, an entity initially applies the new lease standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

Consequently, an entity’s reporting for the comparative periods presented in the financial statements in which it adopts the new lease standard will continue to be in accordance with Accounting Standard Codification (“ASC”) 840, Leases (“ASC 840”).

An entity that elects this additional (and optional) transition method must provide the required ASC 840 disclosures for all periods that continue to be in accordance with ASC 840.

The amendments do not change the existing disclosure requirements in ASC 840.

ASU 2018-11 was effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with earlier adoption permitted.

The Company adopted ASU 2018-11 on January 1, 2019 using a modified retrospective method and has not restated comparative periods.

We elected the package of practical expedients permitted under the transition guidance, which allows us to carryforward our historical lease classification and our assessment on whether a contract is or contains a lease.

The adoption of this guidance resulted in the addition of material balances of right of use assets and lease liabilities to our consolidated balance sheets at January 1, 2019, primarily relating to our lease of office space (see Note 8).

The impact to our consolidated statements of operations was not material as a result of this standard.

In June 2018, the FASB issued ASU No.

2018-07, “Improvements to Nonemployee Share-Based Payment Accounting” (“ASU 2018-07”).

ASU 2018-07 expands the scope of FASB Topic 718, “Compensation – Stock Compensation” (“Topic 718”) to include share-based payment transactions for acquiring goods and services from nonemployees.

An entity should only remeasure equity-classified awards for which a measurement date has not been established through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption.

Upon transition, the entity is required to measure these nonemployee awards at fair value as of the adoption date.

The entity must not remeasure assets that are completed.

Disclosures required at transition include the nature of and reason for the change in accounting principle and, if applicable, quantitative information about the cumulative effect of the change on retained earnings or other components of equity.

ASU 2018-07 was effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year.

Early adoption was permitted, but no earlier than an entity’s adoption date of ASC Topic 606, “Revenue from Contracts with Customers” (“ASC 606”).

The Company adopted ASU 2018-07 on January 1, 2019.

The adoption of ASU 2018-07 did not have a material effect on our consolidated financial statements as of January 1, 2019.

The adoption of ASU 2018-07 had no impact on nonemployee performance awards as they are measured based on the outcome that is probable.

Other pronouncements issued by the FASB or other authoritative accounting standards with future effective dates are either not applicable or not significant to our condensed consolidated financial statements.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the applicable reporting period.

On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses and stock-based compensation.

Actual results could differ from those estimates.

Such differences could be material to the financial statements.

Cash and Cash Equivalents

We treat liquid investments with original maturities of less than three months when purchased as cash and cash equivalents.

Restricted Cash

We record cash pledged or held in trust as restricted cash.

As of both September 30, 2020 and December 31, 2019, we have approximately $ 1.3 million of restricted cash pledged to secure a line of credit as a security deposit for an Office Agreement (see Note 8).

Investment Securities

Investment securities at December 31, 2019 consisted of short-term government securities.

We classify these securities as held-to-maturity.

Held-to-maturity securities are those securities in which we have the ability and intent to hold the security until maturity.

Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts.

Premiums and discounts are amortized or accreted over the life of the related held-to-maturity security as an adjustment to yield using the effective interest method.

A decline in the market value of any investment security below cost, that is deemed to be other than temporary, results in a reduction in the carrying amount to fair value.

The impairment is charged to operations and a new cost basis for the security is established.

Other-than-temporary impairment charges are included in interest and other income (expense), net.

Unrealized gains, if determined to be temporary, are included in accumulated other comprehensive income in equity.

Dividend and interest income are recognized when earned.

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and short-term investments.

The Company maintains its cash and cash equivalents and short-term investments with high-credit quality financial institutions.

At times, such amounts may exceed federally-insured limits.

We have incurred operating losses since our inception and expect to continue to incur operating losses for the foreseeable future and may never become profitable.

As of March 31, 2021, we have an accumulated deficit of $ 1.1 billion.

Our major sources of cash have been proceeds from private placements and public offerings of equity securities.

During the first quarter of 2021, umbralisib, now referred to as UKONIQ, was granted accelerated approval in the United States for the treatment of adult patients with relapsed or refractory MZL who have received at least one prior anti-CD20 based regimen and adult patients with relapsed or refractory FL who have received at least three prior lines of systemic therapy.

Commercial sales of UKONIQ commenced in the first quarter of 2021.

We have generated limited revenues to date from product sales.

Even with the commercialization of UKONIQ and the potential future commercialization of our other drug candidates, we may not become profitable.

Our ability to achieve profitability depends on many factors,

including our ability to generate revenue, our ability to obtain regulatory approvals for our drug candidates, our ability to successfully complete any post-approval regulatory obligations and our ability to successfully commercialize our drug candidates.

We may continue to incur substantial operating losses even as we begin to generate revenues from our drug candidates.

As of March 31, 2021, we had $ 523.8 million in cash and cash equivalents, and investment securities.

We anticipate that our cash and cash equivalents, and investment securities as of March 31, 2021 will provide sufficient liquidity for more than a twelve-month period from the date of filing this Quarterly Report on Form 10-Q.

The actual amount of cash that we will need to operate is subject to many factors, including, but not limited to, our UKONIQ commercialization efforts, preparations for the potential commercialization of our other drug candidates, and the timing, design and conduct of clinical trials for our drug candidates.

We are dependent upon significant future financing to provide the cash necessary to execute our ongoing and future operations, including the commercialization of any of our drug candidates.

Our common stock is quoted on the Nasdaq Capital Market and trades under the symbol “TGTX.”

Summary of Significant Accounting Policies

Our significant accounting policies are described in Note 1 of Notes to Consolidated Financial Statements included in our 2020 Annual Report on Form 10-K, except as it relates to revenue recognition, accounts receivable, inventory, cost of product revenue, and the adoption of new accounting standards during the three months ended March 31, 2021, as discussed below.

Revenue Recognition

The Company recognizes revenue under ASC 606.

The core principle of this revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.

The following five steps are applied to achieve that core principle:

Identify the contract with the customer

Identify the performance obligations in the contract

Determine the transaction price

Allocate the transaction price to the performance obligations in the contract

Recognize revenue when the Company satisfies a performance obligation

In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct.

A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met:

● The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct);

● The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).

If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct.

The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties (for example, some sales taxes).

The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both.

Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

The transaction price is allocated to each performance obligation on a relative standalone selling price basis.

The transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate.

Research and Development Costs

Generally, research and development costs are expensed as incurred.

Nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities are deferred and amortized over the period that the goods are delivered or the related services are performed, subject to an assessment of recoverability.

We make estimates of costs incurred in relation to external clinical research organizations, or “CROs,” and clinical site costs.

We analyze the progress of clinical trials, including levels of patient enrollment, invoices received and contracted costs when evaluating the adequacy of the amount expensed and the related prepaid asset and accrued liability.

Significant judgments and estimates must be made and used in determining the accrued balance and expense in any accounting period.

We review and accrue CRO expenses and clinical trial study expenses based on work performed and rely upon estimates of those costs applicable to the stage of completion of a study.

Accrued CRO costs are subject to revisions as such trials progress to completion.

Revisions are charged to expense in the period in which the facts that give rise to the revision become known.

With respect to clinical site costs, the financial terms of these agreements are subject to negotiation and vary from contract to contract.

Payments under these contracts may be uneven, and depend on factors such as the achievement of certain events, the successful recruitment of patients, the completion of portions of the clinical trial or similar conditions.

The objective of our policy is to match the recording of expenses in our financial statements to the actual services received and efforts expended.

As such, expense accruals related to clinical site costs are recognized based on our estimate of the degree of completion of the event or events specified in the specific clinical study or trial contract.

Prepaid research and development in our condensed consolidated balance sheets includes, among other things, certain costs to third party service providers related to development and manufacturing services as well as clinical development.

These agreements often require payments in advance of services performed or goods received.

Accordingly, as of September 30, 2020 and December 31, 2019, we recorded approximately $ 5.5 million and $ 8.1 million, respectively, in prepaid research and development related to such advance agreements.

Income taxes are accounted for under the asset and liability method.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, operating losses and tax credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date.

If the likelihood of realizing the deferred tax assets or liability is less than “more likely than not,” a valuation allowance is then created.

We, and our subsidiaries, file income tax returns in the U.S.

Federal jurisdiction and in various states, as well as in Australia.

We have tax net operating loss carryforwards that are subject to examination for a number of years beyond the year in which they were generated for tax purposes.

Since a portion of these net operating loss carryforwards may be utilized in the future, many of these net operating loss carryforwards will remain subject to examination.

We recognize interest and penalties related to uncertain income tax positions in income tax expense.

Coronavirus Aid, Relief and Economic Security Act (“CARES Act”)

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.

At this time, the Company does not believe that the CARES Act will have a material impact on the Company’s income tax provision for 2020.

The Company will continue to evaluate the impact of the CARES Act on its financial position, results of operations and cash flows.

Stock-Based Compensation

We recognize all stock-based payments to employees and non-employee directors (as compensation for service) as noncash compensation expense in the condensed consolidated financial statements based on the fair values of such payments.

Stock-based compensation expense recognized each period is based on the value of the portion of stock-based payment awards that is ultimately expected to vest during the period.

Forfeitures are recognized as they occur.

In addition, because some of the options, restricted stock and warrants issued to employees, consultants and other third parties vest upon achievement of certain milestones, the total expense is uncertain.

Compensation expense for such awards that vest upon the achievement of milestones is recognized when the achievement of such milestones becomes probable.

Basic and Diluted Net Loss Per Common Share

Pursuant to Topic 606, we recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

To achieve this core principle, Topic 606 includes provisions within a five-step model that includes i) identifying the contract with a customer, ii) identifying the performance obligations in the contract, iii) determining the transaction price, iv) allocating the transaction price to the performance obligations, and v) recognizing revenue when, or as, an entity satisfies a performance obligation.

At contract inception, we assess the goods or services promised within each contract and assess whether each promised good or service is distinct and determine those that are performance obligations.

We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied.

Product Revenue, Net - The Company recognizes product revenues, net of variable consideration related to certain allowances and accruals, when the customer takes control of the product, which is typically upon delivery to the customer.

Product revenue is recorded at the net sales price, or transaction price.

The Company records product revenue reserves, which are classified as a reduction in product revenues, to account for the components of variable consideration.

Variable consideration includes the following components:

chargebacks, government rebates, trade discounts and allowances, product returns, and co-payment assistance, which are described below.

These reserves are based on estimates of the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is expected to be settled with a credit against to the Company's customer account) or a liability (if the amount is expected to be settled with a cash payment).

The Company's estimates of reserves established for variable consideration are calculated based upon a consistent application of the expected value method, which is the sum of probability-weighted amounts in a range of possible consideration amounts.

These estimates reflect the Company's current contractual and statutory requirements, specific known market events and trends, industry data, and forecasted customer buying and payment patterns.

The amount of variable consideration that is included in the transaction price may be subject to constraint and is included in net product revenues only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period.

Actual amounts of consideration received may ultimately differ from the Company's estimates.

If actual results vary, the Company adjusts these estimates, which could have an effect on earnings in the period of adjustment.

Chargebacks and Administrative Fees:

Chargebacks for discounts represent the Company's estimated obligations resulting from contractual commitments to sell product to qualified healthcare providers and government agencies at prices lower than the list prices charged to the customers who directly purchase the product from the Company.

The customers charge the Company for the difference between what the customers pay the Company for the product and the customers’ ultimate contractually committed or government required lower selling price to the qualified healthcare providers.

As part of the Company's contractual commitments to sell product to qualified healthcare providers, the Company pays fees for administrative services, such as account management and data reporting.

Government Rebates:

Government rebates consist of Medicare, Tricare, and Medicaid rebates.

These reserves are recorded in the same period the related revenue is recognized.

For Medicare, the Company also estimates the number of patients in the prescription drug coverage gap for whom it will owe a rebate under the Medicare Part D program.

Trade Discounts and Allowances:

The Company provides its customers with discounts that are explicitly stated in the contracts and are recorded in the period the related product revenue is recognized.

In addition, the Company also receives sales order management, inventory management, and data services from its customers in exchange for certain fees.

Product Returns:

Consistent with industry practice, the Company generally offers customers a limited right of return for product that has been purchased from the Company.

The Company estimates the amount of its product sales that may be returned by its customers and records this estimate in the period the related product revenue is recognized.

The Company currently estimates product return liabilities based on data from similar products and other qualitative considerations, such as visibility into the inventory remaining in the distribution channel.

Subject to certain limitations, the Company’s return policy allows for eligible returns of UKONIQ for credit under the following circumstances:

● receipt of damaged product;

● shipment errors that were a result of an error by the Company;

● expired product that is returned during the period beginning three months prior to the product’s expiration and ending six months after the expiration date;

● product subject to a recall;

● product that the Company, at its sole discretion, has specified can be returned for credit.

As of March 31, 2021, the Company has not received any returns.

Co-Payment Assistance Programs:

Co-payment assistance is provided to qualified patients, whereby the Company may provide financial assistance to patients with prescription drug co-payments required by the patient's insurance provider.

Reserves for co-payment assistance are recorded in the same period the related revenue is recognized.

Accounts Receivable

In general, accounts receivable consists of amounts due from customers, net of customer allowances for cash discounts, product returns and chargebacks.

Our contracts with customers have standard payment terms.

We analyze accounts that are past due for collectability, and regularly evaluate the creditworthiness of our customers so that we can properly assess and respond to changes in their credit profiles.

As of March 31, 2021, we determined an allowance for expected credit losses related to outstanding accounts receivable was currently not required based upon our review of contractual payment terms and individual customer circumstances.

Cost of Product Revenue

Cost of product revenue consists primarily of materials, third-party manufacturing costs, as well as freight and royalties owed to our licensing partner for UKONIQ sales.

Based on our policy to expense costs associated with the

manufacture of our products prior to regulatory approval, the manufacturing costs of UKONIQ units recognized as revenue during the three months ended March 31, 2021 were expensed prior to receipt of FDA approval on February 5, 2021, and therefore are not included in costs of product revenue during the current period.

Prior to regulatory approval, we expense costs relating to the production of inventory as research and development expense in the period incurred.

Following regulatory approval, costs to manufacture those approved products will be capitalized.

Inventories are stated at the lower of cost or estimated net realizable value with cost based on the first-in-first-out method.

Inventory that can be used in either the production of clinical or commercial products is expensed as research and development costs when identified for use in clinical trials.

Prior to the approval of UKONIQ, all manufacturing and other potential costs related to the commercial launch of UKONIQ were expensed to research and development expense in the period incurred.

Net Loss Per Common Share

Basic net loss per share of our common stock is calculated by dividing net loss applicable to the common stock by the weighted-average number of our common stock outstanding for the period.

Diluted net loss per share of common stock is the same as basic net loss per share of common stock since potentially dilutive securities from stock options, stock warrants and convertible preferred stock would have an antidilutive effect either because we incurred a net loss during the period presented or because such potentially dilutive securities were out of the money and the Company realized net income during the period presented.

The cumulative amounts of potentially dilutive securities excluded from the calculation were 11,103,701 securities and 8,060,758 securities for the three and nine month periods ended September 30, 2020 and 2019, respectively.

Diluted net loss per share of common stock is the same as basic net loss per share of common stock since potentially dilutive securities from stock options, stock warrants and convertible preferred stock would have an antidilutive effect either because we incurred a net loss during the period presented or because such potentially dilutive securities were out of the money and should the Company realize net income during the period presented.

The cumulative amounts of potentially dilutive securities excluded from the calculation were 12,129,734 securities and 8,579,266 securities for the three month period ended March 31, 2021 and 2020, respectively.

The following outstanding shares of potentially dilutive securities were excluded from the computation of net loss per share attributable to common stockholders for the periods presented because including them would have been antidilutive:

Three and Nine Months Ended

September 30,

Three Months Ended

Unvested restricted stock

Shares issuable upon note conversion

Long-Lived Assets and Goodwill

Long-lived assets are reviewed for potential impairment when circumstances indicate that the carrying value of long-lived tangible and intangible assets with finite lives may not be recoverable.

Management’s policy in determining whether an impairment indicator exists, a triggering event, comprises measurable operating performance criteria as well as qualitative measures.

If an analysis is necessitated by the occurrence of a triggering event, we make certain assumptions in determining the impairment amount.

If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized.

Goodwill is reviewed for impairment annually, or earlier when events arise that could indicate that an impairment exists.

We test for goodwill impairment using a two-step process.

The first step compares the fair value of the reporting unit with the unit’s carrying value, including goodwill.

When the carrying value of the reporting unit is greater than fair value, the unit’s goodwill may be impaired, and the second step must be completed to measure the amount of the goodwill impairment charge, if any.

In the second step, the implied fair value of the reporting unit’s goodwill is compared with the carrying amount of the unit’s goodwill.

If the carrying amount is greater than the implied fair value, the carrying value of the goodwill must be written down to its implied fair value.

We will continue to perform impairment tests annually, at December 31, and whenever events or changes in circumstances suggest that the carrying value of an asset may not be recoverable.

NOTE 2 CASH AND CASH EQUIVALENTS

The following tables summarize our cash and cash equivalents at September 30, 2020 and December 31, 2019:

September 30,

Recently Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU No 2019-12, Income Taxes

Simplifying Accounting for Income Taxes (“ASU 2019-12”).

ASU 2019-12 removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocations, calculating income taxes in interim periods, and adds certain guidance to remove complexity in certain areas.

ASU 2019-12 is effective for all entities for annual and interim periods beginning after December 15, 2020.

Early adoption of either the entire standard or only those provisions that eliminate or modify requirements is permitted.

Adoption of ASU 2019-12 did not have any impact to our condensed consolidated financial statements.

In January 2017, the FASB issued ASU No.

2017-04, Simplifying the Test for Goodwill Impairment (“ASU 2017-04”).

ASU 2017-04 eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of today’s goodwill impairment test) to measure a goodwill impairment charge.

Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on today’s Step 1).

The standard has tiered effective dates, starting in 2020 for calendar-year public business entities PBEs that meet the definition of an SEC filer, excluding smaller reporting companies.

Early adoption is permitted for annual and interim

goodwill impairment testing dates after 1 January 2017.

Adoption of ASU 2017-04 did not have any impact to our condensed consolidated financial statements.

Other pronouncements issued by the FASB or other authoritative accounting standards with future effective dates are either not applicable or not significant to our consolidated financial statements.

NOTE 2 REVENUE RECOGNITION

Gross-to-Net Sales Adjustments

To date, our only source of product revenue has been from the U.S.

sales of UKONIQ, which we began shipping to our customers in February 2021.

We record our best estimate of sales discounts and allowances to which customers are likely to be entitled.

The reconciliation of gross product sales to net product sales by each significant category of gross-to-net adjustments was as follows for the three months ended March 31, 2021:

(in thousands)

Checking and bank deposits

Money market funds

Gross product revenue

Gross-to-net adjustments:

Chargebacks and administrative fees

Government rebates and co-payment assistance

Trade discounts and allowances

Sales returns and allowances

Total gross-to-net adjustments (1)

Net product revenue

(1) As of March 31, 2021 approximately $ 0.1 million of estimated gross-net-accruals have been recorded as a reduction of accounts receivable, net and within accounts payable and accrued expenses on the condensed consolidated balance sheets.

NOTE 3 INVESTMENT SECURITIES

Our investments as of December 31, 2019 are classified as held-to-maturity.

We had no investment securities as of September 30, 2020.

Our investments as of March 31, 2021 and December 31, 2020 are classified as held-to-maturity.

Held-to-maturity investments are recorded at amortized cost.

The following table summarize our investment securities at December 31, 2019:

The following table summarize our investment securities at March 31, 2021 and December 31, 2020:

March 31, 2021

(in thousands)

holding gains

holding losses

Short-term investments:

Obligations of domestic governmental agencies (maturing between April 2021 and March 2022) (held-to-maturity)

Total short-term investment securities

December 31, 2020

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Short-term investments:

Obligations of domestic governmental agencies (maturing between January 2020 and September 2020) (held-to-maturity)

Obligations of domestic governmental agencies (maturing between January 2021 and December 2021) (held-to-maturity)

Total short-term investment securities

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● Level 3 unobservable inputs that are not corroborated by market data.

As of September 30, 2020 and December 31, 2019, the fair values of cash and cash equivalents, restricted cash, and notes and interest payable, approximate their carrying values.

As of March 31, 2021 and December 31, 2020, the fair values of cash and cash equivalents, restricted cash, and notes and interest payable, approximate their carrying values.

At the time of our merger (we were then known as Manhattan Pharmaceuticals, Inc.) with Ariston Pharmaceuticals, Inc.

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and (b) the conversion feature, discussed above.

The cumulative liability to the Ariston subsidiary including accrued and unpaid interest of the 5 % Notes was approximately $ 20.0 million at September 30, 2020 and $ 19.3 million at December 31, 2019.

No payments have been made on the 5 % Notes since the merger and through September 30, 2020.

The cumulative liability to the Ariston subsidiary including accrued and unpaid interest of the 5 % Notes was approximately $ 20.5 million at March 31, 2021 and $ 20.3 million at December 31, 2020.

No payments have been made on the 5 % Notes since the merger and through March 31, 2021.

In December 2011, we elected the fair value option for valuing the 5 % Notes.

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As of December 31, 2013, as a result of expiring intellectual property rights and other factors, it was determined that net product cash flows from AST-726 were unlikely.

As we have no other obligations under the 5 % Notes aside from the net product cash flows and the conversion feature, the conversion feature was used to estimate the 5 % Notes’ fair value as of September 30, 2020 and December 31, 2019.

The assumptions, assessments and projections of future revenues are subject to uncertainties, difficult to predict, and require significant judgment.

The use of different assumptions, applying different judgment to inherently subjective matters and changes in future market conditions could result in significantly different estimates of fair value and the differences could be material to our condensed consolidated financial statements.

The following tables provide the fair value measurements of applicable financial liabilities as of September 30, 2020 and December 31, 2019:

Financial liabilities at fair value as of September 30, 2020

The following tables provide the fair value measurements of applicable financial liabilities as of March 31, 2021 and December 31, 2020:

Financial liabilities at fair value as of March 31, 2021

(in thousands)

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Cash, cash equivalents, accounts payable and debt are stated at their respective historical carrying amounts, which approximate fair value due to their short-term nature.

The following table summarizes the changes in Level 3 instruments during the nine months ended September 30, 2020:

The following table summarizes the changes in Level 3 instruments during the three months ended March 31, 2021:

(in thousands)

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Change in fair value of Level 3 liabilities

Balance at September 30, 2020

Balance at March 31, 2021

The change in the fair value of the Level 3 liabilities is reported in other (income) expense in the accompanying condensed consolidated statements of operations.

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Under the 2020 ATM, we pay the 2020 Agents a commission rate of up to 3.0 % of the gross proceeds from the sale of any shares of common stock.

During the nine months ended September 30, 2020, we sold an aggregate of 5,945,608 shares of common stock pursuant to the 2020 ATM for total gross proceeds of approximately $ 113.3 million at an average selling price of $ 19.06 per share, resulting in net proceeds of approximately $ 111.3 million after deducting commissions and other transactions costs.

Subsequent to the end of the third quarter, from October 1, 2020 through November 5, 2020, we sold an aggregate of 2,582,678 shares of common stock pursuant to the 2020 ATM for aggregate total gross proceeds of approximately $ 74.2 million at an average selling price of $ 28.73 per share, resulting in net proceeds of approximately $ 72.9 million after deducting commissions and other transactions costs

In May 2020, we completed an underwritten public offering of 8,500,000 shares of our common stock (plus an underwriter option to purchase up to an additional 1,275,000 shares of common stock, which was exercised) at a price of $ 18 per share.

Net proceeds from this offering, including the overallotment, were approximately $ 165.1 million, net of underwriting discounts and offering expenses of approximately $ 10.8 million.

The 2019 WKSI Shelf is currently our only active shelf-registration statement.

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Amended and Restated 2012 Incentive Plan (the “2012 Incentive Plan”) was approved by stockholders in June 2020.

As of September 30, 2020, 9,909,709 shares of restricted stock and 2,529,133 options were outstanding and up to an additional 5,054,913 shares may be issued under the 2012 Incentive Plan.

As of March 31, 2021, 10,974,039 shares of restricted stock and 2,490,396 options were outstanding and up to an additional 3,187,593 shares may be issued under the 2012 Incentive Plan.

Stock Options

The following table summarizes stock option activity for the nine months ended September 30, 2020:

The following table summarizes stock option activity for the three months ended March 31, 2021:

exercise price

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Outstanding at December 31, 2020

Outstanding at September 30, 2020

Total expense associated with the stock options was approximately $ 0.8 million during each of the three months ended September 30, 2020 and 2019, respectively, and $ 5.2 million and $ 2.3 million during the nine months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020, there was approximately $ 2.4 million of total unrecognized compensation cost related to unvested time-based stock options, which is expected to be recognized over a weighted-average period of 1.3 years.

As of September 30, 2020, the stock options outstanding include options granted to both employees and non-employees which are both time-based and milestone-based.

Outstanding at March 31, 2021

Total expense associated with the stock options was approximately $ 0.6 million and $ 3.9 million during the three months ended March 31, 2021 and 2020, respectively.

As of March 31, 2021, there was approximately $ 1.2 million of total unrecognized compensation cost related to unvested time-based stock options, which is expected to be recognized over a weighted-average period of 1.3 years.

As of March 31, 2021, the stock options outstanding include options granted to both employees and non-employees which are both time-based and milestone-based.

Stock-based compensation for milestone-based options will be recorded if and when a milestone occurs.

The fair value of the Company’s option awards granted during the nine months ended September 30, 2020 and 2019 were estimated on the grant date using the Black-Scholes option-pricing model using the assumptions below:

Nine months ended

September 30, 2020

September 30, 2019

186.91 - 191.05

172.99 - 291.61

Expected term (in years)

Risk-free rate

Expected dividend yield

There were no option awards granted during the three months ended March 31, 2021 and 2020.

Restricted Stock

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The restricted stock vesting consists of milestone and time-based vesting.

The following table summarizes restricted share activity for the nine months ended September 30, 2020:

The following table summarizes restricted share activity for the three months ended March 31, 2021:

Weighted-average

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Outstanding at December 31, 2020

Outstanding at September 30, 2020

Total expense associated with restricted stock grants was approximately $ 27.5 million and $ 1.3 million during the three months ended September 30, 2020 and 2019, respectively, and $ 41.6 million and $ 3.4 million during the nine months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020, there was approximately $ 55.0 million of total unrecognized compensation cost related to unvested time-based restricted stock, which is expected to be recognized over a weighted-average period of 1.0 year.

This amount does not include, as of September 30, 2020, 2,860,511 shares of restricted stock outstanding which are milestone-based and vest upon certain corporate milestones.

Outstanding at March 31, 2021

Total expense associated with restricted stock grants was approximately $ 16.0 million and $ 7.1 million during the three months ended March 31, 2021 and 2020, respectively.

As of March 31, 2021, there was approximately $ 79.5 million of total unrecognized compensation cost related to unvested time-based restricted stock, which is expected to be recognized over a weighted-average period of 1.0 year.

This amount does not include, as of March 31, 2021, 2,910,511 shares of restricted stock outstanding which are milestone-based and vest upon certain corporate milestones.

Until the measurement date is reached for milestone awards, the total amount of compensation expense remains uncertain.

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Stock-Based Compensation

The following table summarizes stock-based compensation expense information about restricted stock and stock options for the three and nine months ended September 30, 2020:

Three months and Nine months ended

September 30,

The following table summarizes stock-based compensation expense information about restricted stock and stock options for the three months ended March 31, 2021 and 2020:

Three months ended

(in thousands)

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Stock-based compensation expense associated with option grants

The following table summarizes warrant activity for the nine months ended September 30, 2020:

average exercise

intrinsic value

Outstanding at December 31, 2019

Outstanding at September 30, 2020

There was no stock compensation expense related to warrants during the nine months ended September 30, 2020 and 2019.

NOTE 6 OTHER LIABILITIES

The following is a summary of notes payable included in other current liabilities on the Company’s condensed consolidated balance sheets:

(in thousands)

September 30, 2020

December 31, 2019

Convertible 5 % Notes Payable

Convertible 5% Notes Payable

The 5 % Notes and accrued and unpaid interest thereon are convertible at the option of the holder into common stock at the conversion price of $ 1,125 per share.

We have no obligation under the 5 % Notes aside from (a) 50 % of the net product cash flows from Ariston’s product candidates, if any, payable to noteholders;

and (b) the conversion feature, discussed above.

Interest accrues monthly, is added to principal on an annual basis, every March 8, and is payable at maturity, which was March 8, 2015 (see Note 4 for further details).

The cumulative liability including accrued and unpaid interest of these notes was approximately $ 20.0 million at September 30, 2020 and $ 19.3 million at December 31, 2019.

No payments have been made on the 5 % Notes as of September 30, 2020.

In December 2011, we elected the fair value option for valuing the 5 % Notes.

The fair value option was elected in order to reflect in our financial statements the assumptions that market participants use in evaluating these financial instruments (see Note 4 for further details).

Other Current Liabilities

In 2018, we entered into an agreement with a contract manufacturer for the clinical and potential commercial supply of one of our product candidates.

As part of this agreement, the contract manufacturer agreed to defer payment of certain costs and expenses under the agreement in exchange for the payment of an administrative fee.

We have incurred expenses related to this agreement of approximately $ 53.4 million as of September 30, 2020, which include service fees, raw material costs and administrative fees.

Payments of $ 33.2 million have been made to the contract manufacturer as of September 30, 2020.

Accordingly, as of September 30, 2020, $ 19.4 million is included in other current liabilities in the Company’s unaudited condensed consolidated balance sheet.

As of September 30, 2020, there are no long-term liabilities in the Company’s unaudited condensed consolidated balance sheet related to this agreement.

We will incur an administrative fee of six percent ( 6 %) per year starting from the date of invoice issuance.

For the nine months ended September 30, 2020, we have accrued $ 2.6 million in administrative fees in connection with these costs, which has been included in interest expense in the Company’s unaudited condensed consolidated statements of operations.

NOTE 7 LONG-TERM DEBT

The Company’s only outstanding warrant is the warrant issued to Hercules as part of our debt agreement to purchase 147,058 shares of common stock with an exercise price of $ 4.08 .

See Note 6 for further details.

As the warrants could not require cash settlement, the warrants were classified as equity.

There will not be any ongoing stock compensation expense volatility associated with these warrants.

NOTE 6 LOAN PAYABLE

On February 28, 2019 (the “Closing Date”), we entered into a term loan facility of up to $ 60.0 million (“Term Loan”) with Hercules Capital, Inc.

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The first advance of $ 30.0 million was drawn on the Closing Date.

Two additional advances of $ 10.0 million may be drawn at our option, but are subject to the clinical trial milestones identified in the Term Loan, and the fourth advance of $ 10.0 million, available in minimum increments of $ 5.0 million, is available through December 15, 2020 subject to the approval of Hercules’ investment committee.

An additional $ 30.0 million was available with different milestones and time points that have lapsed.

The Term Loan will mature on March 1, 2022 (the “Loan Maturity Date”).

Each advance accrues interest at a per annum rate of interest equal to the greater of either (i) the “prime rate” as reported in The Wall Street Journal plus 4.75 %, and (ii) 10.25 %.

The Term Loan provides for interest-only payments until October 1, 2020.

The interest-only period may be extended to April 1, 2021 if, on or before September 30, 2020, we achieve either the third milestone or we have raised at least $ 150.0 million in unrestricted net cash proceeds from one or more equity financings, subordinated indebtedness and/or upfront proceeds from business development transactions permitted under the Loan Agreement, in each case after February 7, 2019, and prior to September 30, 2020 (“Milestone IV”).

Thereafter, amortization payments will be payable monthly in eighteen installments (or, if the period requiring interest-only payments has been extended to April 1, 2021, in twelve installments) of principal and interest (subject to recalculation upon a change in prime rates).

As a result of the Company having raised in excess of $ 150 million before the required timeline in the Loan Agreement, the interest-only period has been extended to April 1, 2021.

At our option upon seven business days’ prior written notice to Hercules, we may prepay all or any portion greater than or equal to $ 5.0 million of the outstanding advances by paying the entire principal balance (or portion thereof), all accrued and unpaid interest, subject to a prepayment charge of 3.0 %, if such advance is prepaid in any of the first twelve months following the Closing Date;

1.5 %, if such advance is prepaid after twelve months following the Closing Date but on or prior to twenty-four months following the Closing Date;

At our option upon seven business days’ prior written notice to Hercules, we may prepay all or any portion greater than or equal to $ 5.0 million of the outstanding advances by paying the entire principal balance (or portion thereof) and all accrued and unpaid interest, subject to a prepayment charges of:

3.0 % if such advance is prepaid in any of the first twelve months following the Closing Date;

1.5 % if such advance is prepaid after the first twelve months following the Closing Date but on or prior to twenty-four months following the Closing Date;

and 0 % thereafter.

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The Term Loan is secured by a lien on substantially all of our assets, other than intellectual property, and contains customary covenants and representations, including a liquidity covenant, financial reporting covenant and limitations on dividends, indebtedness, collateral, investments, distributions, transfers, mergers or acquisitions, taxes, corporate changes, deposit accounts, and subsidiaries.

As of September 30, 2020 and through the filing date of this report, the Company has been in compliance with all covenants.

As of March 31, 2021 and through the filing date of this report, the Company has been in compliance with all covenants.

The events of default under the Loan Agreement include, without limitation, and subject to customary grace periods, (1) our failure to make any payments of principal or interest under the Loan Agreement, promissory notes or other loan documents, (2) our breach or default in the performance of any covenant under the Loan Agreement, (3) the occurrence of a material adverse effect, (4) a false or misleading representation or warranty in any material respect, (5) our insolvency or bankruptcy, (6) certain attachments or judgments on our assets, or (7) the occurrence of any material default under certain agreements or obligations involving indebtedness in excess of $ 750,000 .

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A warrant (the “Hercules Warrant”) was issued to Hercules to purchase 147,058 shares of common stock with an exercise price of $ 4.08 .

The Hercules Warrant is exercisable for seven years from the date of issuance.

Hercules may exercise the Hercules Warrant either by (a) cash or check or (b) through a net issuance conversion.

The shares will be registered and freely tradeable within six months of issuance.

We accounted for the Hercules Warrant as an equity instrument since it was indexed to our common shares and met the criteria for classification in shareholders’ (deficit) equity.

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Contractual term (in years)

The Company incurred financing expenses of $ 2.8 million (including the fair value of the Hercules Warrant) related to the Hercules Loan Agreement which are recorded as debt issuance costs and as an offset to long-term debt on the Company’s unaudited condensed consolidated balance sheet.

The Company incurred financing expenses of $ 2.8 million (including the fair value of the Hercules Warrant) related to the Hercules Loan Agreement which are recorded as debt issuance costs and as an offset to loan payable on the Company’s unaudited condensed consolidated balance sheet.

The debt issuance costs are being amortized over the term of the debt using the straight-line method, which approximates the effective interest method, and are included in interest expense in the Company’s unaudited condensed consolidated statements of operations.

Amortization of debt issuance costs was $ 0.2 million and $ 0.7 million for the three and nine months ended September 30, 2020, respectively.

At September 30, 2020, the remaining unamortized balance of debt issuance costs was $ 1.3 million.

Long-term debt as of September 30, 2020 is as follows:

September 30,

Amortization of debt issuance costs was $ 0.2 million and $ 0.2 million for the three months ended March 31, 2021 and 2020.

At March 31, 2021, the remaining unamortized balance of debt issuance costs was $ 0.8 million.

The loan payable as of March 31, 2021 and December 31, 2020 is as follows:

(in thousands)

Long-term debt

End of term fee

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current portion

Long-term debt non-current

Loan payable non-current

NOTE 7 LEASES

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At January 1, 2019, we recognized a lease liability and corresponding Right-of-Use (“ROU”) asset of $ 9.5 million and $ 8.1 million, respectively, based on the present value of the remaining lease payments for all of our leased office spaces, the majority of which is comprised of our New York City office space.

The present values of our lease liability and corresponding ROU asset are $ 11.9 million and $ 9.1 million, respectively, as of March 31, 2021.

Our leases have remaining lease terms of 2 years to 10 years .

One lease has a renewal option to extend the lease for an additional term of two years .

The initial commitment period of the 45 % rate was for a period of three ( 3 ) years.

We and FBIO currently determine actual office space utilization annually and if our utilization differs from the amount we have been billed, we will either receive credits or be assessed incremental utilization charges.

As of September 30, 2020, the allocation rate is 65 % and will be evaluated again in August 2021 for the following rent year.

Also in connection with this lease, in October 2014, we pledged $ 0.6 million to secure a line of credit as a security deposit for the Office Agreement, which has been recorded as restricted cash in the accompanying consolidated balance sheets.

As of March 31, 2021, the allocation rate is 65 % and will be evaluated again in August 2021 for the following rent year.

Also in connection with this lease, in October 2014, we pledged

$ 0.6 million to secure a line of credit as a security deposit for the Office Agreement, which has been recorded as restricted cash in the accompanying condensed consolidated balance sheets.

Additional collateral of $ 0.6 million was pledged in April 2018 to increase the letter of credit for the office space.

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We took possession of this space in October 2019, with rental payments beginning in November 2019.

We incurred rent expense of $ 0.2 million for the nine months ended September 30, 2020.

The present values of our lease liability and corresponding ROU asset are $ 11.4 million and $ 9.0 million, respectively, as of September 30, 2020.

Our leases have remaining lease terms of less than 1 year to 11 years.

One lease has a renewal option to extend the lease for an additional term of 1 year.

The following components of lease expense are included in the Company’s condensed consolidated statements of operations for the three and nine months ended September 30, 2020:

September 30,

We incurred rent expense of $ 0.1 million for the three months ended March 31, 2021.

The following components of lease expense are included in the Company’s condensed consolidated statements of operations for the three months ended March 31, 2021 and 2020:

(in thousands)

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Net lease cost

As of September 30, 2020, the weighted-average remaining operating lease term was 7.8 years and the weighted-average discount rate for operating leases was 10.25 %.

Cash paid for amounts included in the measurement of operating lease liabilities during the nine months ended September 30, 2020 was $ 1.4 million.

As of March 31, 2021, the weighted-average remaining operating lease term was 7.6 years and the weighted-average discount rate for operating leases was 10.25 %.

Cash paid for amounts included in the measurement of operating lease liabilities during the three months ended March 31, 2021 was $ 0.5 million.

The balance sheet classification of lease liabilities was as follows:

September 30,

(in thousands)

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Total lease liability

As of September 30, 2020, the maturities of lease liabilities were as follows:

As of March 31, 2021, the maturities of lease liabilities were as follows:

(in thousands)

Remainder of 2020

Total lease payments

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An upfront payment of $ 2.0 million, which was received in December 2012, net of $ 0.3 million of income tax withholdings, is being recognized as license revenue on a straight-line basis over the life of the agreement, which is through the expiration of the last licensed patent right or 15 years after the first commercial sale of a product in such country, unless the agreement is earlier terminated, and represents the estimated period over which we will have certain ongoing responsibilities under the sublicense agreement.

We recorded license revenue of approximately $ 38,000 for each of the three months ended September 30, 2020 and 2019, and approximately $ 114,000 for each of the nine months ended September 30, 2020 and 2019, and at September 30, 2020 and December 31, 2019, have deferred revenue of approximately $ 0.8 million and $ 0.9 million, respectively, associated with this $ 2 million payment (approximately $ 152,000 of which has been classified in current liabilities at September 30, 2020 and December 31, 2019).

We recorded license revenue of approximately $ 38,000 for each of the three months ended March 31, 2021 and 2020, and at March 31, 2021 and December 31, 2020, have deferred revenue of approximately $ 0.7 million and $ 0.8 million, respectively, associated with this $ 2 million payment (approximately $ 0.1 million of which has been classified in current liabilities at March 31, 2021 and December 31, 2020).

We may receive up to an additional $ 5.0 million in payments upon the achievement of pre-specified milestones.

In addition, upon commercialization, Ildong will make royalty payments to us on net sales of ublituximab in the sublicense territory.

In January 2012, we entered into an exclusive license agreement with LFB Biotechnologies, GTC Biotherapeutics, and LFB/GTC LLC, all wholly owned subsidiaries of LFB Group, relating to the development and commercialization of ublituximab.

Under the license agreement, we have acquired the exclusive worldwide rights (exclusive of France/Belgium) for the development and commercialization of ublituximab.

As of March 31, 2021 we have incurred approximately $ 3.0 million and accrued approximately $ 3.0 million related to milestones.

LFB Group is eligible to receive payments of up to an aggregate of approximately $ 31.0 million upon our successful achievement of certain clinical development, regulatory, and sales milestones, in addition to royalty payments on net sales of ublituximab at a royalty rate that escalates from mid-single digits to high-single digits.

The license will terminate on a country by country basis upon the expiration of the last licensed patent right or 15 years after the first commercial sale of a product in such country, unless the agreement is earlier terminated (i) by LFB if the Company challenges any of the licensed patent rights, (ii) by either party due to a breach of the agreement, or (iii) by either party in the event of the insolvency of the other party.

TGR-1202 (Umbralisib)

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Prior to this, we had been jointly developing umbralisib in a 50:50 joint venture with Rhizen.

During the three months ended September 30, 2020, we paid Rhizen $ 12.0 million as part of a milestone in accordance with the terms of the Umbralisib License.

During the three months ended March 31, 2021, we paid Rhizen $ 12.0 million as part of a primary indication approval milestone for launch of product in the US in accordance with the terms of the Umbralisib License.

Rhizen will be eligible to receive additional approval and sales-based milestone payments in the aggregate of approximately $ 175 million payable upon approval in multiple jurisdictions for up to two oncology indications and one non-oncology indication and attaining certain sales milestones.

In addition, if umbralisib is co-formulated with another drug to create a new product (a "New Product"), Rhizen will be eligible to receive similar regulatory approval and sales-based milestone payments for such New Product.

Additionally, Rhizen will be entitled to tiered royalties that escalate from high single digits to low double digits on our future net sales of umbralisib and any New Product.

Additionally, Rhizen receives tiered royalties that escalate from high single digits to low double digits on any net sales of umbralisib and any New Product.

During the three months ended March 31, 2021, the Company recorded $ 0.1 million related to the worldwide royalty due under the Umbralisib License in cost of product revenue based on U.S.

sales of UKONIQ and as of March 31, 2021, $ 0.1 million in royalties were payable under the Umbralisib License Agreement.

Rhizen will also be eligible to participate in sublicensing revenue, if any, based on a percentage that decreases as a function of the number of patients treated in clinical trials following the exercise of the license option.

Rhizen will retain global manufacturing rights to umbralisib, provided that they are price competitive with alternative manufacturers.

The license will terminate on a country by country basis upon the expiration of the last licensed patent right or any other exclusivity right in such country, unless the agreement is earlier terminated (i) by us for any reason, (ii) by either party due to a breach of the agreement.

The license will terminate on a country by country basis upon the expiration of the last licensed

patent right or any other exclusivity right in such country, unless the agreement is earlier terminated (i) by us for any reason, or (ii) by either party due to a breach of the agreement.

PDL1 (Cosibelimab)

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(“Checkpoint”) for the development and commercialization of anti-PD-L1 and anti-GITR antibody research programs in the field of hematological malignancies.

The Collaboration Agreement was amended in June 2019 and in March of 2020 achieved the first Milestone event for which we incurred expenses of zero and approximately $ 0.9 million for the three and nine months ended September 30, 2020.

In May 2016, as part of a broader agreement with Jubilant Biosys (“Jubilant”), we entered into a sub-license agreement (“JBET Agreement”) with Checkpoint (see Note 10), for the development and commercialization of Jubilant’s novel BET inhibitor program in the field of hematological malignancies.

Under the terms of the agreement, we paid Checkpoint an up-front licensing fee of $ 1.0 million and will make additional payments contingent on certain preclinical, clinical, and regulatory milestones, including commercial milestones totaling up to approximately $ 177 million and a single-digit royalty on net sales.

TG will also provide funding to support certain targeted research efforts at Jubilant.

In January 2018, we entered into a global exclusive license agreement with Jiangsu Hengrui Medicine Co.

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In July 2019, we paid Hengrui the first milestone of $ 0.1 million in our common stock recorded to noncash stock expense associated with in-licensing agreements in our consolidated statement of operations.

During the three months ended September 30, 2020, we paid Hengrui $ 2.0 million as part of a milestone in accordance with the license agreement.

In July 2020, we paid Hengrui $ 2.0 million as part of a milestone in accordance with the license agreement.

Hengrui is eligible to receive milestone payments totaling approximately $ 350 million upon and subject to the achievement of certain milestones.

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Royalty payments in the low double digits are due on net sales of licensed products and revenue from sublicenses.

We incurred expenses of approximately $ 0.3 million and $ 0.6 million for the three months ended September 30, 2020 and 2019, respectively, and $ 2.1 million and $ 0.6 million for

the nine months ended September 30, 2020 and 2019, respectively, the majority of which relates to manufacturing expenses of BTK.

We incurred expenses of approximately $ 0.5 million and $ 0.8 million for the three months ended March 31, 2021 and 2020, respectively, the majority of which relates to manufacturing expenses of BTK.

The relevant expenses are recorded in other research and development in the accompanying unaudited condensed consolidated statement of operations.

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Pursuant to the agreement, in June 2018 we paid Novimmune an upfront payment of $ 3.0 million in our common stock recorded to noncash stock expense associated with in-licensing agreements in our consolidated statement of operations.

As of March 31, 2021 we accrued $ 2.0 million in milestone expense related to patient enrollment.

Further milestone payments will be paid based on early clinical development, and the Company will be responsible for the costs of clinical development of the product through the end of the Phase 2 clinical trials, after which the Company and Novimmune will be jointly responsible for all development and commercialization costs.

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NOTE 9 RELATED PARTY TRANSACTIONS

In October 2014, we entered into the Office Agreement with FBIO, to occupy approximately 45 % of the 24,000 square feet of New York City office space leased by FBIO.

The Office Agreement requires us to pay our respective share of the average annual rent and other costs of the 15-year lease.

We approximate an average annual rental obligation of $ 1.1 million under the Office Agreement.

We began to occupy this new space in April 2016, with rental payments beginning in the third quarter of 2016.

At January 1, 2019, we recognized a lease liability of $ 9.3 million, with a corresponding ROU asset of $ 7.7 million based on the present value of the remaining lease payments for all of our leased office spaces, the majority of which is comprised of our New York City office space.

Weiss, our Executive Chairman and CEO, is also Executive Vice Chairman of FBIO.

Under the Office Agreement, we agreed to pay FBIO our portion of the build out costs, which have been allocated to us at the 45 % rate mentioned above.

The allocated build-out costs have been recorded in Leasehold Interest, net on the Company's condensed consolidated balance sheets and will be amortized over the 15-year term of the Office Agreement.

The initial commitment period of the 45 % rate was for a period of three ( 3 ) years.

As of September 30, 2020, the allocation rate is 65 % and will be evaluated again in August 2021 for the following rent year.

Also, in connection with this lease, in October 2014 we pledged $ 0.6 million to secure a line of credit as a security deposit for the Office Agreement, which has been recorded as restricted cash in the accompanying consolidated balance sheets.

Additional collateral of $ 0.6 million was pledged in April 2018 to increase the letter of credit for the office space.

In July 2015, we entered into a Shared Services Agreement (the “Shared Services Agreement”) with FBIO to share the cost of certain services such as facilities use, personnel costs and other overhead and administrative costs.

This Shared Services Agreement requires us to pay our respective share of services utilized.

In connection with the Shared Services Agreement, we incurred expenses of approximately $ 0.6 million for shared services for each of the nine months ended September 30, 2020 and 2019, and expenses of approximately $ 0.2 million for each of the three months ended September 30, 2020 and 2019, primarily related to shared personnel.

In March 2015, we entered into a Global Collaboration Agreement (“Collaboration Agreement”) with Checkpoint for the development and commercialization of anti-PD-L1 and anti-GITR antibody research programs in the field of hematological malignancies.

The Collaboration Agreement was amended in June 2019 and upon execution of the amendment we incurred an upfront fee of $ 1.0 million.

We incurred expenses of approximately $ 1.0 million and $ 4.0 million for the nine months ended September 30, 2020 and 2019, respectively, and expenses of approximately $ 30,000 and $ 2.7 million for the three months ended September 30, 2020 and 2019, respectively.

In connection with the Shared Services Agreement, we incurred expenses of approximately $ 0.2 million for shared services for each of the three months ended March 31, 2021 and 2020, primarily related to shared personnel.

Please refer to Note 7 - Leases for details regarding the Office Agreement with FBIO, as well as Note 8 - License Agreements for details regarding the Collaboration Agreement with Checkpoint.

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 1. Financial Statements