Item 9A. Controls and Procedures
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures. As of December 31, 2021, management carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)). Our disclosure controls and procedures are designed to provide reasonable assurance that information we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms. Based upon that evaluation, our Chief Executive and Chief Financial Officers concluded that, as of December 31, 2021, our disclosure controls and procedures were effective.
Management’s Annual Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) or Rule 15d-15(f) under the Exchange Act). Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In making this assessment, our management used the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO Framework. Our management has concluded that, as of December 31, 2021, our internal control over financial reporting was effective based on these criteria.
The effectiveness of our internal control over financial reporting as of December 31, 2021 was audited by KPMG LLP, our independent registered public accounting firm, as stated in their report.
Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting during the quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls. Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected.
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ITEM 9B. OTHER INFORMATION.
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2022 Annual Meeting of Stockholders.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2022 Annual Meeting of Stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2022 Annual Meeting of Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2022 Annual Meeting of Stockholders.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2022 Annual Meeting of Stockholders.
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PART IV
ITEM 15. EXHIBITS and FINANCIAL STATEMENT SCHEDULES.
1. Consolidated Financial Statements
The following consolidated financial statements of TG Therapeutics, Inc. are filed as part of this report.
Contents
Page
Report of Independent Registered Public Accounting Firm (KPMG LLP, New York, NY, Audit Firm ID: 185) (CohnReznick, LLP, New York, NY, Audit Firm ID: 596)
F-1
Consolidated Balance Sheets as of December 31, 2021 and 2020
F-4
Consolidated Statements of Operations for the years ended December 31, 2021, 2020 and 2019
F-5
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2021, 2020 and 2019
F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019
F-7
Notes to Consolidated Financial Statements
F-8
2. Consolidated Financial Statement Schedules
All schedules are omitted as the information required is inapplicable or the information is presented in the consolidated financial statements or the related notes.
3. Exhibits
Exhibit
Number
Exhibit Description
3.1
Amended and Restated Certificate of Incorporation of TG Therapeutics, Inc. dated April 26, 2012 (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 10-Q for the quarter ended June 30, 2012).
3.2
Certificate of Amendment to Amended and Restated Certificate of Incorporation of TG Therapeutics, Inc. dated June 9, 2014 (incorporated by reference to Exhibit 3.2 to the Registrant’s Form 10-Q for the quarter ended June 30, 2014).
3.3
Certificate of Amendment to Amended and Restated Certificate of Incorporation of TG Therapeutics, Inc. dated June 16, 2021 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on June 21, 2021).
3.4
Amended and Restated Bylaws of TG Therapeutics, Inc. dated July 18, 2014 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on July 21, 2014).
4.1
Specimen common stock certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 10-K for the year ended December 31, 2011).
4.2
Stockholder Protection Rights Agreement, dated July 18, 2014 between TG Therapeutics, Inc. and American Stock Transfer & Trust Company, LLC, as Rights Agent (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on July 21, 2014).
4.3
Description of Securities of TG Therapeutics, Inc. (incorporated by reference to Exhibit 4.5 of the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020).
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10.1
Employment Agreement, effective December 29, 2011, between the Registrant and Michael Weiss (incorporated by reference to Exhibit 10.30 to the Registrant’s Form 10-K for the fiscal year ended December 31, 2011). †
10.2
Restricted Stock Subscription Agreement, effective December 29, 2011, between the Registrant and Michael Weiss (incorporated by reference to Exhibit 10.31 to the Registrant’s Form 10-K for the fiscal year ended December 31, 2011). †
10.3
Amendment to Restricted Stock Agreement, dated July 12, 2013, by and between TG Therapeutics, Inc. and Michael S. Weiss (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on July 16, 2013). †
10.4
Amendment to Restricted Stock Agreements, dated December 31, 2014, by and between TG Therapeutics, Inc. and Michael S. Weiss (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on January 7, 2015). †
10.5
Employment Agreement, effective December 29, 2011, between the Registrant and Sean Power (incorporated by reference to Exhibit 10.32 to the Registrant’s Form 10-K for the fiscal year ended December 31, 2011). †
10.6
Restricted Stock Subscription Agreement, effective December 29, 2011 between the Registrant and Sean Power (incorporated by reference to Exhibit 10.33 to the Registrant’s Form 10-K for the fiscal year ended December 31, 2011). †
10.7
Amendment to Restricted Stock Agreement, dated July 12, 2013, by and between TG Therapeutics, Inc. and Sean A. Power (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on July 16, 2013). †
10.8
Amendment to Restricted Stock Agreements, dated December 31, 2014, by and between TG Therapeutics, Inc. and Sean A. Power (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on January 7, 2015). †
10.9
License Agreement dated January 30, 2012, by and among the Registrant, GTC Biotherapeutics, Inc., LFB Biotechnologies S.A.S. and LFB/GTC LLC (incorporated by reference to Exhibit 10.35 to the Registrant’s Form 10-K for the fiscal year ended December 31, 2011). *
10.10
TG Therapeutics, Inc. Amended and Restated 2012 Incentive Plan, dated May 14, 2012 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q/A for the quarter ended March 31, 2012). †
10.11
First Amendment to TG Therapeutics, Inc. Amended and Restated 2012 Incentive Plan, filed with the Registrant’s Definitive Proxy Statement for the Annual Meeting of Stockholders on June 4, 2015, filed on April 24, 2015, and incorporated herein by reference. †
10.12
Second Amendment to TG Therapeutics, Inc. Amended and Restated 2012 Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on June 24, 2020). †
10.13
Sublicense Agreement between TG Therapeutics, Inc. and Ildong Pharmaceutical Co. Ltd., dated November 13, 2012 (incorporated by reference to Exhibit 10.37 to the Registrant’s Form 10-K for the fiscal year ended December 31, 2012). *
10.14
License Agreement between TG Therapeutics, Inc. and Ligand Pharmaceuticals Incorporated, dated June 23, 2014 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter ended June 30, 2014).*
10.15
License Agreement between TG Therapeutics, Inc. and Rhizen Pharmaceuticals SA, dated September 22, 2014 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on January 20, 2015). *
10.16
Collaboration Agreement between TG Therapeutics, Inc. and Checkpoint Therapeutics, Inc., dated March 3, 2015 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter ended March 31, 2015). *
10.17
Sublicense Agreement between TG Therapeutics, Inc. and Checkpoint Therapeutics, Inc., dated May 27, 2016, (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter ended June 30, 2016). *
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10.18
Amendment to Employment Agreement, effective January 1, 2017, between TG Therapeutics, Inc. and Michael S. Weiss (incorporated by reference to Exhibit 10.18 to the Registrant’s Form 10-K/A for the year ended December 31, 2016). †
10.19
Advisory Agreement, effective January 1, 2017, between TG Therapeutics, Inc. and Caribe BioAdvisors, LLC (incorporated by reference to Exhibit 10.19 to the Registrant’s Form 10-K/A for the year ended December 31, 2016).
10.20
License Agreement between TG Therapeutics, Inc. and Jiangsu Hengrui Medicine Co., dated January 8, 2018 (incorporated by reference to Exhibit 10.20 to the Registrant’s Form 10-K for the year ended December 31, 2017). *
10.21
Joint Venture and License Option Agreement by and between TG Therapeutics, Inc. and Novimmune S.A., dated June 18, 2018 (incorporated by reference to Exhibit 10.20 to the Registrant’s Form 10-Q for the quarter ended June 30, 2018). *
10.22
Master Services Agreement between Samsung Biologics Co., Ltd. And TG Therapeutics, Inc., effective February 21, 2018 (incorporated by reference to the Exhibit 10.2 to the Registrant’s Form 10-Q for the quarter ended June 30, 2019). *
10.23
Loan and Security Agreement, dated February 28, 2019, by and among TG Therapeutics, Inc., TG Biologics, Inc. and Hercules Capital, Inc. (incorporated by reference to the Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on March 5, 2019).
10.24
Warrant Agreement, dated February 28, 2019, by and between TG Therapeutics, Inc. and Hercules Capital, Inc. (incorporated by reference to the Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on March 5, 2019).
10.25
Warrant Agreement, dated February 28, 2019, by and between TG Therapeutics, Inc. and Hercules Technology III, L.P. (incorporated by reference to the Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on March 5, 2019).
10.26
Amended and Restated Collaboration Agreement by and between TG Therapeutics, Inc. and Checkpoint Therapeutics, Inc., dated June 19, 2019 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter ended June 30, 2019). *
10.27
Amended and Restated Employment Agreement by and between TG Therapeutics, Inc. and Michael S. Weiss, dated June 18, 2021 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10 Q for the quarter ended June 30, 2021). †
10.28
Amended and Restated Loan and Security Agreement, dated December 30, 2021, by and among TG Therapeutics, Inc., TG Biologics, Inc. and Hercules Capital, Inc. #
10.29
Warrant Agreement, dated December 30, 2021, by and between TG Therapeutics, Inc. and Hercules Capital Inc. #
10.30
Warrant Agreement, dated December 30, 2021, by and between TG Therapeutics, Inc. and Hercules Private Credit Fund I L.P. #
10.31
Warrant Agreement, dated December 30, 2021, by and between TG Therapeutics, Inc. and Hercules Private Global Venture Growth Fund I L.P. #
21.1
Subsidiaries of TG Therapeutics, Inc. #
23.1
Consent of Independent Registered Public Accounting Firm (KPMG, LLP). #
23.2
Consent of Independent Registered Public Accounting Firm (CohnReznick, LLP). #
31.1
Certification of Principal Executive Officer. #
31.2
Certification of Principal Financial Officer. #
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32.1
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. #
32.2
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. #
101
The following financial information from TG Therapeutics, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2021, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Stockholders’ Equity, (iv) Consolidated Statements of Cash Flows, (v) the Notes to Consolidated Financial Statements.
104
Cover Page Interactive Data File (embedded within the Inline XBRL document).
#
Filed Herewith.
†
Indicates management contract or compensatory plan or arrangement.
*
Certain portions of this exhibit have been omitted pursuant to Item 601(b)(10) of Regulation S-K.
TG Therapeutics, Inc.
Consolidated Financial Statements
Page
Report of Independent Registered Public Accounting Firm (KPMG LLP, New York, NY, Audit Firm ID: 185) (CohnReznick, LLP, New York, NY, Audit Firm ID: 596)
F-1
Consolidated Balance Sheets as of December 31, 2021 and 2020
F-4
Consolidated Statements of Operations for the years ended December 31, 2021, 2020 and 2019
F-5
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2021, 2020 and 2019
F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019
F-7
Notes to Consolidated Financial Statements
F-8
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Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
TG Therapeutics, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of TG Therapeutics, Inc. and subsidiaries (the Company) as of December 31, 2021, the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the year ended December 31, 2021, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the year ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 1, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ KPMG LLP
We have served as the Company’s auditor since 2021.
New York, New York
March 1, 2022
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
TG Therapeutics, Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited TG Therapeutics, Inc. and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2021, the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the year ended December 31, 2021, and the related notes (collectively, the consolidated financial statements), and our report dated March 1, 2022 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
New York, New York
March 1, 2022
F-2
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
TG Therapeutics, Inc.
Opinion on th e Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of TG Therapeutics, Inc. (the “Company”) as of December 31, 2020, and the rel ated consolidated statements of operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ CohnReznick LLP
We served as the Company’s auditor from 2003 to 2020.
New York, New York
March 1, 2022
F-3
Table of Contents
TG Therapeutics, Inc. and Subsidiaries
Consolidated Balance Sheets as of December 31
(in thousands, except share and per share amounts)
2021
2020
Assets
Current assets:
Cash and cash equivalents
$
298,887
$
553,439
Short-term investment securities
15,876
51,987
Accounts receivable, net
1,389
—
Prepaid research and development
11,929
5,231
Other current assets
2,884
1,083
Total current assets
330,965
611,740
Restricted cash
1,264
1,259
Long-term investment securities
35,533
—
Right of use assets
8,629
9,312
Leasehold interest, net
1,839
2,051
Equipment, net
600
481
Goodwill
799
799
Total assets
$
379,629
$
625,642
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses
$
51,294
$
37,014
Other current liabilities
1,512
18,236
Loan payable – current portion
975
22,179
Lease liability – current portion
1,437
1,669
Accrued compensation
10,166
8,456
Total current liabilities
65,384
87,554
Deferred revenue, net of current portion
457
610
Loan payable – non-current
66,788
7,716
Lease liability – non-current
9,847
10,412
Total liabilities
142,476
106,292
Commitments and contingencies
Stockholders’ equity:
Common stock, $ 0.001 par value per share ( 175,000,000 shares authorized, 143,292,043 and 140,617,606 shares issued, 143,250,734 and 140,576,297 shares outstanding at December 31, 2021 and December 31, 2020, respectively)
143
141
Additional paid-in capital
1,565,942
1,500,040
Treasury stock, at cost, 41,309 shares at December 31, 2021 and December 31, 2020
( 234 )
( 234 )
Accumulated deficit
( 1,328,698 )
( 980,597 )
Total stockholders’ equity
237,153
519,350
Total liabilities and stockholders’ equity
$
379,629
$
625,642
The accompanying notes are an integral part of the consolidated financial statements.
F-4
Table of Contents
TG Therapeutics, Inc. and Subsidiaries
Consolidated Statements of Operations for the Years Ended December 31
(in thousands, except share and per share amounts)
2021
2020
2019
Revenue:
Product revenue, net
$
6,537
$
—
$
—
License revenue
152
152
152
Total revenue
6,689
152
152
Costs and expenses:
Cost of product revenue
790
—
—
Research and development:
Noncash stock expense associated with in-licensing agreements
—
—
100
Noncash compensation
24,047
13,962
5,811
Other research and development
198,532
151,934
148,269
Total research and development
222,579
165,896
154,180
Selling, general and administrative:
Noncash compensation
37,227
66,327
5,523
Other selling, general and administrative
90,863
41,523
9,504
Total selling, general and administrative
128,090
107,850
15,027
Total costs and expenses
351,459
273,746
169,207
Operating loss
( 344,770 )
( 273,594 )
( 169,055 )
Other expense (income):
Interest expense
5,638
6,329
5,287
Other income
( 2,307 )
( 542 )
( 1,471 )
Total other expense (income), net
3,331
5,787
3,816
Net loss
$
( 348,101 )
$
( 279,381 )
$
( 172,871 )
Basic and diluted net loss per common share
$
( 2.63 )
$
( 2.42 )
$
( 1.96 )
Weighted-average shares used in computing basic and diluted net loss per common share
132,222,753
115,333,693
88,368,844
The accompanying notes are an integral part of the consolidated financial statements.
F-5
Table of Contents
TG Therapeutics, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31
(in thousands, except share amounts)
Additional
Common Stock
paid-in
Treasury Stock
Accumulated
Shares
Amount
capital
Shares
Amount
Deficit
Total
Balance at January 1, 2019
83,911,855
84
552,531
41,309
( 234 )
( 528,345 )
24,036
Issuance of restricted stock
1,851,520
1
( 1 )
—
—
—
—
Warrants issued with debt financing
—
—
993
—
993
Forfeiture of restricted stock
( 116,463 )
*
*
—
—
—
—
Issuance of common stock in offerings (net of offering costs of $ 0.2 million)
10,149,783
10
77,465
—
—
—
77,475
Issuance of common stock in At-the-Market offerings (net of offering costs of $ 2.0 million)
13,620,165
14
97,533
—
—
—
97,547
Compensation in respect of restricted stock granted to employees, directors and consultants
—
—
11,335
—
—
—
11,335
Shares issued in connection with in-licensing agreements
8,383
*
100
—
—
—
100
Net loss
—
—
—
—
—
( 172,871 )
( 172,871 )
Balance at December 31, 2019
109,425,243
109
739,956
41,309
( 234 )
( 701,216 )
38,615
Issuance of common stock in connection with exercise of options
35,814
*
146
146
Issuance of restricted stock
4,909,829
5
( 5 )
—
—
—
—
Forfeiture of restricted stock
( 128,666 )
*
—
—
—
—
—
Issuance of common stock in offerings (net of offering costs of $ 29.9 million)
17,043,000
17
462,212
—
—
—
462,229
Issuance of common stock in At-the-Market offerings (net of offering costs of $ 4.0 million)
9,332,386
10
217,442
—
—
—
217,452
Compensation in respect of restricted stock granted to employees, directors and consultants
—
—
80,289
—
—
—
80,289
Net loss
—
—
—
—
—
( 279,381 )
( 279,381 )
Balance at December 31, 2020
140,617,606
$
141
$
1,500,040
41,309
$
( 234 )
$
( 980,597 )
$
519,350
Issuance of common stock in connection with exercise of options
52,694
*
216
—
—
—
216
Issuance of restricted stock
2,738,974
2
( 2 )
—
—
—
—
Warrants issued with debt financing
—
—
2,195
—
—
—
2,195
Forfeiture of restricted stock
( 189,231 )
*
—
—
—
—
—
Offering costs paid
—
—
( 204 )
—
—
—
( 204 )
Issuance of common stock in At-the-Market offerings (net of offering costs of $ 0.1 million)
72,000
*
2,423
—
—
—
2,423
Compensation in respect of restricted stock granted to employees, directors and consultants
—
—
61,274
—
—
—
61,274
Net loss
—
—
—
—
—
( 348,101 )
( 348,101 )
Balance at December 31, 2021
143,292,043
$
143
$
1,565,942
41,309
$
( 234 )
$
( 1,328,698 )
$
237,153
* Amount less than one thousand dollars.
The accompanying notes are an integral part of the consolidated financial statements.
F-6
Table of Contents
TG Therapeutics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows for the Years Ended December 31
(in thousands)
2021
2020
2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
$
( 348,101 )
$
( 279,381 )
$
( 172,871 )
Adjustments to reconcile net loss to net cash used in operating activities:
Noncash stock compensation expense
61,274
80,289
11,335
Shares issued in connection with in-licensing agreement
—
—
100
Depreciation and amortization
282
158
100
Amortization of premium on investment securities
517
( 30 )
( 257 )
Amortization of debt issuance costs
1,080
925
772
Amortization of leasehold interest
212
216
182
Noncash change in lease liability and right of use asset
1,896
2,325
2,519
Change in fair value of notes payable
( 578 )
748
124
Changes in assets and liabilities:
(Increase) decrease in other current assets
( 8,508 )
2,257
1,384
Increase in accounts receivable
( 1,389 )
—
—
Increase (decrease) in accounts payable and accrued expenses
15,991
11,631
( 4,795 )
Decrease in lease liabilities
( 2,012 )
( 1,988 )
( 1,548 )
(Decrease) increase in other current liabilities
( 16,146 )
( 31,505 )
30,301
Decrease in deferred revenue
( 152 )
( 152 )
( 152 )
Net cash used in operating activities
( 295,634 )
( 214,507 )
( 132,806 )
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturity of short-term securities
55,600
43,250
29,250
Investment in held-to-maturity securities
( 55,531 )
( 67,403 )
( 29,837 )
Purchases of PPE
( 401 )
( 357 )
( 131 )
Net cash used in investing activities
( 332 )
( 24,510 )
( 718 )
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of loan payable
( 30,000 )
—
—
Proceeds from sale of common stock, net
2,219
679,680
175,021
Proceeds from exercise of options
216
147
—
Proceeds from debt financings
70,000
—
29,987
Financing costs paid
( 1,016 )
—
( 795 )
Net cash provided by financing activities
41,419
679,827
204,213
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
( 254,547 )
440,810
70,689
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD
554,698
113,888
43,199
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD
$
300,151
$
554,698
$
113,888
Reconciliation to amounts on consolidated balance sheets:
Cash and cash equivalents
$
298,887
$
553,439
$
112,637
Restricted cash
1,264
1,259
1,251
Total cash, cash equivalents and restricted cash
$
300,151
$
554,698
$
113,888
Cash paid for:
Interest
$
3,466
$
4,501
$
2,622
NONCASH TRANSACTIONS
Deferred financing costs
$
4,165
$
—
$
988
Warrants issued with debt financing
$
2,196
$
—
$
993
Shares issued in connection with in-licensing
$
—
$
—
$
100
The accompanying notes are an integral part of the consolidated financial statements.
F-7
Table of Contents
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Unless the context requires otherwise, references in this report to “TG,” “Company,” “we,” “us” and “our” refer to TG Therapeutics, Inc. and our subsidiaries.
NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
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, we have received accelerated approval from the U.S. Food and Drug Administration (FDA) for UKONIQ ® (umbralisib), for the treatment of adult patients with relapsed or refractory marginal zone lymphoma who have received at least one prior anti-CD20-based regimen and relapsed or refractory follicular lymphoma who have received at least three prior lines of systemic therapies. Currently, we have three 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.
LIQUIDITY AND CAPITAL RESOURCES
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 December 31, 2021, we have an accumulated deficit of $ 1.3 billion.
Our major sources of cash have been proceeds from private placement and public offering of equity securities, and from our loan and security agreements executed with Hercules Capital, Inc. (Hercules) (see Note 6 for more information). In February 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 product sales.
As of December 31, 2021, we had $ 350.3 million in cash and cash equivalents, and investment securities. We anticipate that our cash and cash equivalents, and investment securities as of December 31, 2021 will provide sufficient liquidity for more than a twelve-month period from the date of filing this Annual Report on Form 10-K. 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 quoted on the Nasdaq Capital Market and trades under the symbol “TGTX.”
RECENTLY ISSUED ACCOUNTING STANDARDS
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have an effect on the Company’s financial statements.
F-8
Table of Contents
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
USE OF ESTIMATES
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (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 revenue, accrued clinical trial 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 December 31, 2021 and 2020, 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 7).
INVESTMENT SECURITIES
Investment securities at December 31, 2021 and 2020 consist of short-term and long-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. Dividend and interest income are recognized when earned.
CREDIT RISK
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.
REVENUE RECOGNITION
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.
F-9
Table of Contents
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
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, which are described below: chargebacks, government rebates, trade discounts and allowances, product returns, and co-payment assistance.
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 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.
GPO and Payor Rebates: The Company contracts with various private payor organizations and group purchasing organizations (GPO), primarily insurance companies, pharmacy benefit managers and clinics, for the payment of rebates with respect to utilization of our product. The Company estimates these rebates and records such estimates in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability.
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; and
●
product that the Company, at its sole discretion, has specified can be returned for credit.
F-10
Table of Contents
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
As of December 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 December 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 and 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 year ended December 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.
INVENTORY
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.
RESEARCH AND DEVELOPMENT COSTS
Generally, research and development costs are expensed as incurred. Research and development expenses consist primarily of costs incurred to third-party service providers for the conduct of research, preclinical and clinical studies, contract manufacturing costs, license milestone fees, personnel costs for our research and development employees, consulting, and other related expenses. We recognize research, preclinical and clinical study expenses based on services performed, pursuant to contracts with third-party research and development organizations that conduct and manage research, preclinical and clinical activities on our behalf. We accrue these expenses based on the progress or stage of completion of services and the contracted fees to be paid for such services. If the actual timing of the performance of services or the level of effort varies from the original accrual, we will adjust the accrual accordingly. With respect to clinical trial costs, the financial terms of these agreements are subject to an initial 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. As such, certain expense accruals related to clinical site costs are recognized based on the degree of performance of the event or events specified in the specific clinical study or trial contract.
Prepaid research and development in our consolidated balance sheets includes, among other things, costs related to agreements with CROs, 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 December 31, 2021 and December 31, 2020, we recorded approximately $ 11.9 million and $ 5.2 million, respectively, in prepaid research and development related to such advance agreements.
F-11
Table of Contents
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
INCOME TAXES
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. 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. Refer to Note 8 for further information on impact of tax reform.
The Coronavirus Aid, Relief, and Economic Security Act of 2020 (“CARES Act”) was enacted on March 27, 2020 in response to the economic fallout of the COVID-19 pandemic in the United States. There are several provisions of the CARES Act that were considered in the December 31, 2021 year-end tax provision. However, the Company chose not to utilize any provisions or participate in certain programs due to lack of a benefit to the Company.
STOCK-BASED COMPENSATION
The Company measures employee and non-employee stock-based compensation based on the grant date fair value of the stock-based compensation award. The Company grants stock options at exercise prices equal to the fair value of the Company’s common stock on the date of grant, based on observable market prices. The Company uses the Black-Scholes option-pricing model to measure the fair value of stock option awards. We recognize all stock-based payments to employees and non-employee directors (as compensation for service) as noncash compensation expense in the consolidated financial statements. 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
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 amounts of potentially dilutive securities excluded from the calculation were 13,280,608 , 11,976,276 and 8,361,739 at December 31, 2021, 2020 and 2019, respectively. During the years ended December 31, 2021, 2020 and 2019, the Company incurred a net loss; therefore, all of the securities are antidilutive and excluded from the computation of diluted loss per share.
F-12
Table of Contents
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The following table summarizes our potentially dilutive securities at December 31, 2021, 2020 and 2019:
December 31,
2021
2020
2019
Unvested restricted stock
10,532,029
9,285,020
5,591,786
Options
2,467,537
2,526,166
2,605,730
Warrants
262,100
147,058
147,058
Shares issuable upon note conversion
18,942
18,032
17,165
Total
13,280,608
11,976,276
8,361,739
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. There was no impairment to goodwill as of December 31, 2021.
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 for 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 year ended December 31, 2021:
Year ended
(in thousands)
December 31, 2021
Gross product revenue
$
8,172
Gross-to-net adjustments:
Chargebacks and administrative fees
( 840 )
Trade discounts and allowances
( 383 )
Government rebates and co-payment assistance
( 372 )
Sales returns and allowances
( 40 )
Total gross-to-net adjustments (1)
$
( 1,635 )
Net product revenue
$
6,537
(1) As of December 31, 2021, approximately $ 0.4 million of estimated gross-to-net-accruals have been recorded as a reduction of accounts receivable, net and within accounts payable and accrued expenses on the consolidated balance sheets.
F-13
Table of Contents
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
NOTE 3 – INVESTMENT SECURITIES
Our investments as of December 31, 2021 and 2020 are classified as held-to-maturity. Held-to-maturity investments are recorded at amortized cost.
The following tables summarize our investment securities at December 31, 2021 and 2020:
December 31, 2021
Amortized
Gross
Gross
cost, as
unrealized
unrealized
Estimated fair
(in thousands)
adjusted
holding gains
holding losses
value
Short-term investments:
Obligations of domestic governmental agencies (maturing between January 2022 and April 2022) (held-to-maturity)
$
15,876
$
—
$
4
$
15,872
Long-term investments:
Obligations of domestic governmental agencies (maturing between February 2023 and June 2023) (held-to-maturity)
35,533
—
160
35,373
Total short-term and long-term investment securities
$
51,409
$
—
$
164
$
51,245
December 31, 2020
Amortized cost, as adjusted
Gross unrealized holding gains
Gross unrealized holding losses
Estimated fair value
Short-term investments:
Obligations of domestic governmental agencies (maturing between January 2021 and December 2021) (held-to-maturity)
$
51,987
$
1
$
4
$
51,984
Total short-term investment securities
$
51,987
$
1
$
4
$
51,984
Long-term investments:
Obligations of domestic governmental agencies (held-to-maturity)
$
—
$
—
$
—
$
—
Total long-term investment securities
$
—
$
—
$
—
$
—
NOTE 4 – FAIR VALUE MEASUREMENTS
We measure certain financial assets and liabilities at fair value on a recurring basis in the financial statements. The fair value hierarchy ranks the quality and reliability of inputs, or assumptions, used in the determination of fair value and requires financial assets and liabilities carried at fair value to be classified and disclosed in one of the following three categories:
● Level 1 – quoted prices in active markets for identical assets and liabilities;
● Level 2 – inputs other than Level 1 quoted prices that are directly or indirectly observable; and
● Level 3 – unobservable inputs that are not corroborated by market data.
As of December 31, 2021 and 2020, the fair values of cash and cash equivalents, restricted cash, accounts receivable, and notes and interest payable approximate their carrying value.
F-14
Table of Contents
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
At the time of our merger (we were then known as Manhattan Pharmaceuticals, Inc. (Manhattan)) with Ariston Pharmaceuticals, Inc. (Ariston) in March 2010, Ariston issued $ 15.5 million of five-year 5 % notes payable (the 5 % Notes) in satisfaction of several note payable issuances. 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 obligations under the 5% Notes aside from the conversion feature.
The following tables provide the fair value measurements of applicable financial liabilities as of December 31, 2021 and 2020:
Financial liabilities at fair value as of December 31, 2021
(in thousands)
Level 1
Level 2
Level 3
Total
5 % Notes
$
—
$
—
$
360
$
360
Total
$
—
$
—
$
360
$
360
Financial liabilities at fair value as of December 31, 2020
Level 1
Level 2
Level 3
Total
5 % Notes
$
—
$
—
$
938
$
938
Total
$
—
$
—
$
938
$
938
The Level 3 amounts above represent the fair value of the 5 % Notes and related accrued interest.
The Company’s financial instruments include cash, cash equivalents consisting of money market funds, accounts receivable, accounts payable and debt. 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 for the years ended December 31, 2020 and 2021:
(in thousands)
Balance at January 1, 2020
$
190
Interest accrued on face value of 5% Notes
976
Change in fair value of Level 3 liabilities
( 228 )
Balance at December 31, 2020
938
Interest accrued on face value of 5 % Notes
1,023
Change in fair value of Level 3 liabilities
( 1,601 )
Balance at December 31, 2021
$
360
The change in the fair value of the Level 3 liabilities is reported in other (income) expense in the accompanying consolidated statements of operations.
F-15
Table of Contents
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
NOTE 5 – STOCKHOLDERS’ EQUITY
Preferred Stock
Our amended and restated certificate of incorporation authorizes the issuance of up to 10,000,000 shares of preferred stock, $ 0.001 par value, with rights senior to those of our common stock, issuable in one or more series. Upon issuance, the Company can determine the rights, preferences, privileges and restrictions thereof. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of common stock.
Stockholder Rights Plan
On July 18, 2014, we adopted a stockholder rights plan. The stockholder rights plan is embodied in the Stockholder Protection Rights Agreement dated as of July 18, 2014 (the Rights Agreement), between us and American Stock Transfer & Trust Company, LLC, as rights agent (the Rights Agent).
Accordingly, the Board of Directors declared a distribution of one right (a “Right”) for each outstanding share of common stock, to stockholders of record at the close of business on July 28, 2014, for each share of common stock issued (including shares distributed from Treasury) by us thereafter and prior to the Separation Time (as defined in the Rights Agreement), and for certain shares of common stock issued after the Separation Time. Following the Separation Time, each Right entitles the registered holder to purchase from us one one-thousandth (1/1,000) of a share of Series A Junior Participating Preferred Stock, par value $0.001 per share (the Preferred Stock), at a purchase price of $100.00 (the Exercise Price), subject to adjustment. The description and terms of the Rights are set forth in the Rights Agreement. Each one one-thousandth of a share of Preferred Stock has substantially the same rights as one share of common stock. Subject to the terms and conditions of the Rights Agreement, Rights become exercisable ten days after the public announcement that a “Person” has become an “Acquiring Person” (as each such term is defined in the Rights Agreement). Any Rights held by an Acquiring Person are void and may not be exercised.
The Rights Agreement was approved by our Board of Directors on July 18, 2014. The Rights will expire at the close of business on its ten-year anniversary, unless earlier exchanged or terminated by us.
Common Stock
Our amended and restated certificate of incorporation authorizes the issuance of up to 175,000,000 shares of $ 0.001 par value common stock.
In May 2017, we filed a shelf registration statement on Form S-3 (the 2017 S-3), which was declared effective in June 2017, replacing the 2015 S-3. Under the 2017 S-3, we may sell up to a total of $ 300 million of securities. In connection with the 2017 S-3, we entered into an At-the-Market Issuance Sales Agreement (the 2017 ATM) with Jefferies LLC, Cantor Fitzgerald & Co., FBR Capital Markets & Co., SunTrust Robinson Humphrey, Inc., Raymond James & Associates, Inc., Ladenburg Thalmann & Co. Inc. and H.C. Wainwright & Co., LLC (each a "2017 Agent" and collectively, the 2017 Agents), relating to the sale of shares of our common stock. Under the 2017 ATM we pay the 2017 Agents a commission rate of up to 3.0 % of the gross proceeds from the sale of any shares of common stock.
During the year ended December 31, 2019, we sold a total of 13,620,165 shares of common stock under the 2017 ATM for aggregate total gross proceeds of approximately $ 99.3 million at an average selling price of $ 7.29 per share, resulting in net proceeds of approximately $ 97.5 million after deducting commissions and other transactions costs.
On March 1, 2019, we completed a public offering of 4,100,000 shares of our common stock (plus a 30-day underwriter overallotment option to purchase up to an additional 615,000 shares of common stock, which was exercised) at a price of $ 5.87 per share. Net proceeds from this offering, including the overallotment, were approximately $ 27.5 million after underwriting discounts and offering expenses of approximately $ 0.2 million.
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TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
On September 5, 2019, we filed an automatic “shelf registration” statement on Form S-3 (the 2019 WKSI Shelf) as a “well-known seasoned issuer” as defined in Rule 405 under the Securities Act, which registered an unlimited and indeterminate amount of debt or equity securities for future issuance and sale. The 2019 WKSI Shelf was declared effective in September 2019. In connection with the 2019 WKSI Shelf, we entered into an At-the-Market Issuance Sales Agreement (the 2020 ATM) with Jefferies LLC, Cantor Fitzgerald & Co. and B. Riley Securities, Inc. (each a 2020 Agent and collectively, the 2020 Agents), relating to the sale of shares of our common stock. 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. In November 2020, we entered into an At-the-Market Issuance Sales Agreement (the 2021 ATM) with the same terms and agents (each a 2021 Agent and collectively, the 2021 Agents) as the 2020 ATM.
During the year ended December 31, 2020, we sold a total of 8,528,286 shares of common stock under the 2020 ATM for aggregate total gross proceeds of approximately $ 187.5 million at an average selling price of $ 21.99 per share, resulting in net proceeds of approximately $ 184.2 million after deducting commissions and other transactions costs.
During the year ended December 31, 2020, we sold a total of 804,100 shares of common stock under the 2021 ATM for aggregate total gross proceeds of approximately $ 33.9 million at an average selling price of $ 42.18 per share, resulting in net proceeds of approximately $ 33.3 million after deducting commissions and other transactions costs.
During the year ended December 31, 2021, we sold a total of 72,000 shares of common stock under the 2021 ATM for aggregate total gross proceeds of approximately $ 2.5 million at an average selling price of $ 34.25 per share, resulting in net proceeds of approximately $ 2.4 million after deducting commissions and other transactions costs.
On December 22, 2019, we completed a securities purchase agreement with an institutional investor in which we agreed to sell 5,434,783 shares of our common stock at a price of $ 9.20 per share. Net proceeds from this offering were approximately $ 50.0 million.
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.
On December 17, 2020, we completed a public offering of 6,320,000 shares of our common stock (plus a 30-day underwriter overallotment option to purchase up to an additional 948,000 shares of common stock, which was exercised) at a price of $ 43.50 per share. Net proceeds from this offering, including the overallotment, were approximately $ 297.2 million after underwriting discounts and offering expenses of approximately $ 19.0 million.
The 2019 WKSI Shelf is currently our only active shelf-registration statement. We may offer any combination of the securities registered under the 2019 WKSI Shelf from time to time in response to market conditions or other circumstances if we believe such a plan of financing is in the best interests of our stockholders. We believe that the 2019 WKSI Shelf provides us with the flexibility to raise additional capital to finance our operations as needed.
Treasury Stock
As of December 31, 2021 and 2020, 41,309 shares of common stock are being held in Treasury, at a cost of approximately $ 0.2 million, representing the fair market value on the date the shares were surrendered to the Company to satisfy employee tax obligations.
Equity Incentive Plans
The TG Therapeutics, Inc. Amended and Restated 2012 Incentive Plan (2012 Incentive Plan) was approved by stockholders in June 2020. Pursuant to this amendment, 8,000,000 shares were added to the 2012 Incentive Plan. As of December 31, 2021 and 2020, 12,032,040 and 10,785,034 shares of restricted stock and 2,467,537 and 2,526,166 options, respectively, were outstanding and up to an additional 1,511,105 shares may be issued under the 2012 Incentive Plan.
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TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Stock Options
The estimated fair value of the options granted in the year ended December 31, 2020 and 2019 was determined utilizing the Black-Scholes option-pricing model at the date of grant. The following table summarizes stock option activity for the years ended December 31, 2021, 2020 and 2019:
Weighted-
average
Weighted-
contractual
Number of
average
term
Aggregate
shares
exercise price
(in years)
intrinsic value
Outstanding at January 1, 2019
1,916,900
—
—
$
—
Granted
815,000
6.50
Exercised
—
—
Forfeited
( 126,170 )
6.10
Expired
—
—
Outstanding at December 31, 2019
2,605,730
$
6.73
8.92
$
11,706,110
Granted
75,000
8.21
Exercised
( 35,814 )
4.10
Forfeited
( 118,750 )
10.16
Expired
—
—
Outstanding at December 31, 2020
2,526,166
$
6.99
8.10
$
115,472,832
Granted
—
—
Exercised
( 52,694 )
4.10
Forfeited
( 5,935 )
4.10
Expired
—
Outstanding at December 31, 2021
2,467,537
$
7.06
6.99
$
29,503,551
Exercisable at December 31, 2021
1,368,106
$
6.57
7.05
$
17,023,532
Total ex pense associated with the stock options was approximately $ 2.9 million, $ 6.0 million and $ 3.5 million during the years ended December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021, there was approximately $ 0.2 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 1.0 year. As of December 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. We recognized stock-based compensation expense of $ 1.4 million during the year ended December 31, 2021 for these stock options. We did not grant any options for the year ended December 31, 2021.
The fair value of the Company’s option awards were estimated using the assumptions below:
Year Ended
December 31, 2021
December 31, 2020
Volatility
0
186.91 - 191.05
Expected term (in years)
0
5.0 - 6.25
Risk-free rate
—
%
0.34 - 0.54
%
Expected dividend yield
—
%
—
%
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TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Restricted Stock
Certain employees, directors and consultants have been awarded restricted stock. The restricted stock vesting consists of milestone and time-based vesting. The following table summarizes restricted share activity for the years ended December 31, 2021, 2020 and 2019:
Weighted-average
grant date fair
Number of shares
value
Outstanding at January 1, 2019
6,095,692
$
8.07
Granted
1,851,520
12.95
Vested
( 738,960 )
9.08
Forfeited
( 116,463 )
7.96
Outstanding at December 31, 2019
7,091,789
7.78
Granted
4,909,829
20.34
Vested
( 1,087,918 )
8.40
Forfeited
( 128,666 )
8.70
Outstanding at December 31, 2020
10,785,034
13.38
Granted
2,738,974
39.49
Vested
( 1,302,737 )
18.14
Forfeited
( 189,231 )
21.8
Outstanding at December 31, 2021
12,032,040
$
18.67
Total compensation expense associated with restricted stock grants was $ 58.4 million, $ 74.2 million and $ 7.8 million during the years ended December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021, there was approximately $ 50.7 million of total unrecognized compensation expense related to unvested time-based restricted stock, which is expected to be recognized over a weighted-average period of 1 year . This amount does not include, as of December 31, 2021, 4,016,281 shares of restricted stock outstanding which are milestone-based and vest upon certain corporate milestones; and 1,088,750 shares of restricted stock outstanding issued to non-employees. Milestone-based noncash compensation expense will be measured and recorded if and when a milestone becomes probable.
Warrants
The Company’s only outstanding warrants are the warrants issued to Hercules as part of our debt agreement to purchase 147,058 and 115,042 shares of common stock with exercise prices of $ 4.08 and $17.95, respectively. See Note 6 for further details. 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. (Hercules), the proceeds of which were used for research and development programs and for general corporate purposes. The Term Loan is governed by a loan and security agreement, dated February 28, 2019 (the Loan Agreement), which provides for up to four separate advances. The first advance of $ 30.0 million was drawn on the Closing Date. An additional $ 30.0 million was available with different milestones and time points that have lapsed.
On December 30, 2021 (the First Amendment Closing Date), the Company entered into an Amended and Restated Loan and Security Agreement (the Amended Loan Agreement) with Hercules Capital, Inc. The Amended Loan Agreement amended the terms of the Loan Agreement to, among other things, (i) increase the aggregate principal amount of the loan, available at the Company’s option, from $ 60.0 million to $ 200.0 million (the Amended Term Loan), (ii) issue a first advance of $ 70.0 million drawn at the First Amendment Closing date, a portion of which was used to refinance the current outstanding loan balance of approximately $ 7.8 million and pay for expenses incurred by the Lender in executing the agreements, (iii) change the draw amounts and dates available in Tranche 2 through Tranche 4 including increasing the amount available under Tranche 2 subject to the achievement of performance milestones from $ 10.0 million to
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TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
$ 20.0 million, increasing the amount available under Tranche 3 subject to the achievement of performance milestones from $ 10.0 million to $ 45.0 million, and increasing the amount under Tranche 4 subject to the approval of Hercules’ investment committee from $ 10.0 million to $ 65.0 million, (iv) extend the maturity date of the facility from the original March 1, 2022 to January 1, 2026, (v) reset and extend the interest only period from April 1, 2021 to February 1, 2025 and extendable to August 1, 2025 subject to the achievement of certain performance milestones, and (vi) modify the cash interest rate to be the greater of either (a) the “prime rate” as reported in The Wall Street Journal plus 2.15 %, and (b) 5.40 %. The performance milestones are based on achievement of certain U.S. Food and Drug Administration approvals and impact the potential extension of the interest only period, access to future advances under the Loan Agreement and minimum cash levels required under the Amended Loan Agreement.
The Amended Loan Agreement contains financial covenants from and after October 15, 2022 that require the Company to maintain certain levels of unrestricted cash and additional financial covenants related to market capitalization and unrestricted cash commencing on July 1, 2023 at any time when the Amended Term Loan advances made under the Amended Loan Agreement are greater than $70 million.
The Amended Loan Agreement also contains warrant coverage of 2.95 % of the total amount funded. A warrant (the Warrant) was issued by the Company to Hercules to purchase 115,042 shares of common stock with an exercise price of $ 17.95 for the initial amount funded at closing. The Warrant shall be exercisable for seven years from the date of issuance. Hercules may exercise the Warrant either by (a) cash or check or (b) through a net issuance conversion.
In addition, the Company is required to pay a final payment fee equal to 5.95% of the aggregate principal amount of the Term Loan Advances.
The Company may, at its option, prepay the Amended Term Loan in full or in part, subject to a prepayment penalty equal to (i) 2.0 % of the principal amount prepaid if the prepayment occurs prior to the first anniversary of the First Amendment Closing Date, (ii) 1.5 % of the principal amount prepaid if the prepayment occurs on or after the first anniversary and prior to the second anniversary of the First Amendment Closing Date, and (iii) 1.0 % of the principal amount prepaid if the prepayment occurs on or after the second anniversary and prior to the third anniversary of the First Amendment Closing Date.
The Company evaluated whether the Amended Term Loan entered into in December 2021 represented a debt modification or extinguishment of the Term Loan in accordance with ASC 470-50, Debt – Modifications and Extinguishments. As a result of the repayment and retirement of the Term Loan, the Term Loan was accounted for by the Company under the extinguishment accounting model. The Company recorded a loss on extinguishment of debt of approximately $0.2 million on the Company’s statement of operations for the twelve months ended December 31, 2021, representing the write-off of deferred financing costs.
The Company estimated the fair value of the Warrant using the Black-Scholes model based on the following key assumptions:
Amended Term Loan
Exercise price
$
17.95
Common share price on date of issuance
$
19.35
Volatility
184.4
%
Risk-free interest rate
1.44
%
Expected dividend yield
—
%
Contractual term (in years)
7.00 years
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TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The Company incurred financing expenses of $ 7.4 million (including the fair value of the Warrant) related to the Amended Loan Agreement which are recorded as debt issuance costs and as an offset to loan payable on the Company’s 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 will be included in interest expense in the Company’s consolidated statements of operations. Amortization of debt issuance costs was $ 1.1 million, $ 0.9 million and $ 0.8 million for the years ended December 31, 2021, 2020 and 2019, respectively. At December 31, 2021, the remaining unamortized balance of debt issuance costs was $7.4 million.
The loan payable as of December 31, 2021 and 2020, is as follows:
December 31,
December 31,
(in thousands)
2021
2020
Loan payable
$
70,000
$
30,000
End of term fee
5,140
975
75,140
30,975
Less: unamortized debt issuance costs
( 7,377 )
( 1,080 )
67,763
29,895
Less: principal payments
—
—
Total loan payable
67,763
29,895
Less: current portion
( 975 )
( 22,179 )
Loan payable non-current
$
66,788
$
7,716
NOTE 7 – LEASES
In October 2014, we entered into an agreement (the Office Agreement) with Fortress Biotech, Inc. (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 $ 1.4 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 and corresponding 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 $ 11.3 million and $ 8.6 million, respectively, as of December 31, 2021. Our leases have remaining lease terms of approximately 3 years to 10 years . One lease has a renewal option to extend the lease for an additional term of five 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 December 31, 2021, the allocation rate is 63 % and will be evaluated again in August 2022 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 October 2019, we finalized a five-year lease for office space in New Jersey (the NJ Lease). We approximate an average annual rental obligation of $0.3 million under the NJ Lease. We took possession of this space in October 2019, with rental payments beginning in November 2019.
In October 2021, we finalized a five-year lease for office space in North Carolina (the NC Lease). We approximate an average annual rental obligation of $ 0.2 million under the NC Lease. We took possession of this space in February 2022, with rental payments beginning in April 2022.
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TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The following components of lease expense are included in the Company’s consolidated statements of operations for the years ended December 31, 2021, 2020, and 2019:
Year ended
December 31,
(in thousands)
2021
2020
2019
Operating lease cost
$
2,154
$
2,656
$
2,651
Net lease cost
$
2,154
$
2,656
$
2,651
As of December 31, 2021, the weighted-average remaining operating lease term was 7.9 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 year ended December 31, 2021 was $ 2.0 million.
The balance sheet classification of lease liabilities was as follows:
December 31,
December 31,
(in thousands)
2021
2020
Liabilities
Lease liability current portion
$
1,437
$
1,669
Lease liability non-current
9,847
10,412
Total lease liability
$
11,284
$
12,081
As of December 31, 2021, the maturities of lease liabilities were as follows:
Operating
(in thousands)
leases
2022
$
2,035
2023
2,040
2024
1,924
2025
1,653
2026
1,678
After 2026
8,219
Total lease payments
17,549
Less: interest
( 6,265 )
Present value of lease liabilities(*)
$
11,284
(*) As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date and considering the term of the lease to determine the present value of lease payments. We used the incremental borrowing rate of 10.25 % on February 28, 2019, for all operating leases, including those that commenced prior to that date.
NOTE 8 – INCOME TAXES
We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized. In determining the need for a valuation allowance, management reviews both positive and negative evidence, including current and historical results of operations, future income projections and the overall prospects of our business. Based upon management's assessment of all available evidence, we believe that it is more-likely-than-not that the deferred tax assets will not be realizable, and therefore, a valuation allowance has been established. The valuation allowance for deferred tax assets was approximately $ 367.4 million and $ 276.7 million as of December 31, 2021 and 2020, respectively.
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TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The Coronavirus Aid, Relief, and Economic Security Act of 2020 (“CARES Act”) was enacted on March 27, 2020 in response to the economic fall out of the COVID-19 pandemic in the United States. The CARES Act allows employers to defer the deposit and payment of the employer’s share of Social Security taxes during the payroll tax deferral period of March 27, 2020 through December 31, 2020. The CARES Act provides for half of the deferred payroll taxes to be paid by December 31, 2021 and the second half to be paid by December 31, 2022. The Company did not participate in this deferral program.
As of December 31, 2021, we have U.S. net operating loss carryforwards of approximately $ 1.3 billion, research and development credit carryforwards (“R&D credits”) of approximately $ 35.7 million and business interest expense carryforward of $ 9.8 million. For income tax purposes, these NOLs and R&D credits will expire in various amounts through 2038. NOLs generated after 2017 and the business interest expense carryforwards do not expire. The Tax Reform Act of 1986 contains provisions which limit the ability to utilize net operating loss carryforwards and R&D credit carryforwards in the case of certain events including significant changes in ownership interests. The Exchange Transaction with TG Bio may have resulted in a “change in ownership” as defined by IRC Section 382 of the Internal Revenue Code of 1986, as amended. Additionally, stock issuance activities may have resulted in a “change in ownership” as defined by IRC Section 382 of the Internal Revenue Code of 1986, as amended. Accordingly, a substantial portion of the Company’s NOLs above may be subject to annual limitations in reducing any future year’s taxable income, and a substantial portion of the R&D Credit carryforwards may be subject to annual limitations in reducing any future year’s tax.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2021 and 2020 are presented below.
(in thousands)
2021
2020
Deferred tax assets:
Net operating loss carryforwards
$
295,985
$
223,685
Research and development credit
35,665
27,558
Noncash compensation
32,356
22,381
Disallowed interest
2,434
1,855
Other
1,006
1,224
Deferred tax asset, excluding valuation allowance
367,446
276,703
Less valuation allowance
( 367,446 )
( 276,703 )
Net deferred tax assets
$
—
$
—
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TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
There was no current or deferred income tax expense for the year ended December 31, 2021. Income tax expense differed from amounts computed by applying the US Federal income tax rate of 21 % for the years ending December 31, 2021, 2020 and 2019, to pretax loss as follows:
For the year ended December 31,
(in thousands)
2021
2020
2019
Loss before income taxes, as reported in the consolidated statements of operations
$
( 348,101 )
$
( 279,381 )
$
( 172,871 )
Computed “expected” tax benefit
$
( 73,101 )
$
( 58,670 )
$
( 36,303 )
Increase (decrease) in income taxes resulting from:
Expected benefit from state and local taxes
( 3,445 )
( 10,801 )
( 2,128 )
Research and development credits
( 8,337 )
( 5,265 )
( 7,266 )
Other
867
1,065
641
Stock options
( 6,726 )
( 1,558 )
1,292
Enactment of federal tax reform
—
( 14,763 )
—
Change in the balance of the valuation allowance for deferred tax assets
90,742
89,992
43,764
$
—
$
—
$
—
We file income tax returns in the U.S Federal and various state and local jurisdictions. With certain exceptions, the Company is no longer subject to U.S. Federal and state income tax examinations by tax authorities for years prior to 2018. However, NOLs and tax credits generated from those prior years could still be adjusted upon audit.
The Company would recognize interest and penalties, if any, to uncertain tax position in income tax expense in the statement of operations. There was no accrual for interest and penalties related to uncertain tax positions for 2021. We do not believe that there will be a material change in our unrecognized tax positions over the next twelve months. All of the unrecognized tax benefits, if recognized, would be offset by the valuation allowance
NOTE 9 – LICENSE AGREEMENTS
TG-1101 (Ublituximab)
In November 2012, we entered into an exclusive (within the territory) sublicense agreement with Ildong Pharmaceutical Co. Ltd. (Ildong) relating to the development and commercialization of ublituximab in South Korea and Southeast Asia. Under the terms of the sublicense agreement, Ildong has been granted a royalty bearing, exclusive right, including the right to grant sublicenses, to develop and commercialize ublituximab in South Korea, Taiwan, Singapore, Indonesia, Malaysia, Thailand, Philippines, Vietnam, and Myanmar.
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 $ 0.2 million for each of the years ended December 31, 2021, 2020 and 2019, and, at December 31, 2021 and 2020, have deferred revenue of approximately $ 0.6 million and $ 0.8 million, respectively, associated with this $ 2 million payment (approximately $ 0.2 million of which has been classified in current liabilities at December 31, 2021 and 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 of ublituximab (the LFB License Agreement). Under the
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TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
terms of the LFB License Agreement, we have acquired the exclusive worldwide rights (exclusive of France/Belgium) for the development and commercialization of ublituximab. For the period ended December 31, 2021, we incurred approximately $ 7.0 million in expense related to the achievement of certain milestones of the LFB License Agreement. These expenses are included in other research and development expenses in the accompanying consolidated statements of operations. As of December 31, 2021, we had approximately zero recorded in accounts payable related to the LFB License Agreement.
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 or UKONIQ)
On September 22, 2014, we exercised our option to license the global rights to umbralisib, thereby entering into an exclusive licensing agreement (the TGR-1202 License) with Rhizen Pharmaceuticals, SA (Rhizen) for the development and commercialization of umbralisib.
Under the terms of the TGR-1202 License, Rhizen received a $ 4.0 million cash payment and 371,530 shares of our common stock as an upfront license fee. For the year ended December 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 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 year ended December 31, 2021, the Company recorded $ 0.5 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 December 31, 2021, $ 0.2 million in royalties were payable under the Umbralisib License. Rhizen shall 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, or (ii) by either party due to a breach of the agreement.
TG-1501: PDL1 (Cosibelimab)
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 in March of 2020. We incurred expenses of approximately $ 0.1 million, $ 1.1 million and $ 4.1 million for the years ended December 31, 2021, 2020 and 2019, respectively, the majority of which relates to manufacturing expenses and milestone payments of PD-L1. The relevant expenses are recorded in other research and development in the accompanying consolidated statements of operations.
TG-1601: BET
In May 2016, as part of a broader agreement with Jubilant Biosys (Jubilant), we entered into a sub-license agreement (JBET Agreement) with Checkpoint Therapeutics, Inc. (Checkpoint) (see Note 10), for the development and commercialization of Jubilant’s novel BET inhibitor program in the field of hematological malignancies.
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TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
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.
TG-1701: BTK
In January 2018, we entered into a global exclusive license agreement with Jiangsu Hengrui Medicine Co. (Hengrui), to acquire worldwide intellectual property rights, excluding Asia but including Japan, and for the research, development, manufacturing, and commercialization of products containing or comprising of any of Hengrui’s Bruton’s Tyrosine Kinase inhibitors containing the compounds of either TG-1701 (SHR1459 or EBI1459) or TG1702 (SHR1266 or EBI1266). Hengrui is eligible to receive milestone payments totaling approximately $ 350 million upon and subject to the achievement of certain milestones. Various provisions allow for payments in conjunction with the agreement to be made in cash or our common stock, while others limit the form of payment. 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. In July 2020, we paid Hengrui $2.0 million as part of a milestone in accordance with the license agreement. Royalty payments in the low double digits are due on net sales of licensed products and revenue from sublicenses.
TG-1801: anti-CD47/anti-CD19
In June 2018, we entered into a Joint Venture and License Option Agreement with Novimmune SA (Novimmune) to collaborate on the development and commercialization of Novimmune’s novel first-in-class anti-CD47/anti-CD19 bispecific antibody known as TG-1801 (previously NI-1701). The companies will jointly develop the product on a worldwide basis, focusing on indications in the area of hematologic B-cell malignancies. We serve as the primary responsible party for the development, manufacturing and commercialization of the product. 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. The Company and Novimmune will each maintain an exclusive option, exercisable at specific times during development, for the Company to license the rights to TG-1801, in which case Novimmune is eligible to receive additional milestone payments totaling approximately $ 185 million as well as tiered royalties on net sales in the high single to low double digits upon and subject to the achievement of certain milestones.
NOTE 10 – RELATED PARTY TRANSACTIONS
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 $0.9 million, $0.8 million, and $0.9 million for shared services for the years ended December 31, 2021, 2020 and 2019, respectively, primarily related to shared personnel. Mr. Weiss, our Chairman and Chief Executive Officer, also serves as a director and Executive Vice Chairman, Strategic Development of FBIO.
In March 2015, we entered into the Collaboration Agreement with Checkpoint, a subsidiary of FBIO, for the development and commercialization of anti-PD-L1 and anti-GITR antibody research programs in the field of hematological malignancies. In May 2016, as part of a broader agreement with Jubilant, we entered into a sublicense agreement (JBET Agreement) with Checkpoint for the development and commercialization of Jubilant’s novel BET inhibitor program in the field of hematological malignancies. Mr. Weiss also serves as Chairman of the Board of Directors of Checkpoint.
Please refer to Note 7 - Leases for details regarding the Office Agreement with FBIO, as well as Note 9 - License Agreements for details regarding the Collaboration Agreement and JBET Agreement with Checkpoint.
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TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
NOTE 11 – COMMITMENTS AND CONTINGENCIES
As of December 31, 2021, we have known contractual obligations; commitments and contingencies of $93.6 million related to our short- and long-term liabilities and operating lease obligations.
Less than
More than
Payment due by period (in thousands)
Total
1 year
1-3 years
3-5 years
5 years
Contractual obligations
Operating leases
$
18,454
$
2,063
$
4,290
$
3,831
$
8,270
Loan payable
75,140
975
—
74,165
—
Total
$
93,594
$
3,038
$
4,290
$
77,996
$
8,270
Leases
See Note 7 - leases for a detailed description of our lease arrangements in New York, New Jersey and North Carolina. Total rental expense was approximately $ 2.2 million, $ 2.7 million and $ 2.7 million for the years ended December 31, 2021, 2020, and 2019, respectively.
Future minimum lease commitments as of December 31, 2021, in the aggregate total approximately $ 18.5 million through December 31, 2032. The preceding table shows future minimum lease commitments, which include our office leases in New York, New Jersey, and North Carolina by year as of December 31, 2021.
Loan Payable
See Note 6 – Loan payable for a detail description of our loan agreement.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TG THERAPEUTICS, INC.
Date: March 1, 2022
By:
/s/ Michael S. Weiss
Michael S. Weiss
Chairman and Chief Executive Officer
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POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Michael S. Weiss and Sean A. Power, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and his name, place and stead, in any and all capacities, to sign any or all amendments to this annual report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the SEC, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or any of his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Form 10-K has been signed by the following persons on behalf of the Registrant on March 1, 2022, and in the capacities indicated:
Signatures
Title
/s/ Michael S. Weiss
Michael S. Weiss
Chairman and Chief Executive Officer
/s/ Sean A. Power
Sean A. Power
Chief Financial Officer (principal financial and accounting officer)
/s/ Laurence N. Charney
Laurence N. Charney
Director
/s/ Yann Echelard
Yann Echelard
Director
/s/ Kenneth Hoberman
Kenneth Hoberman
Director
/s/ Daniel Hume
Daniel Hume
Director
/s/ Sagar Lonial
Sagar Lonial
Director
98