Company Quick10K Filing
Cellular Biomedicine
Price9.90 EPS-2
Shares19 P/E-4
MCap191 P/FCF-7
Net Debt-46 EBIT-45
TEV145 TEV/EBIT-3
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-06
10-K 2019-12-31 Filed 2020-02-28
10-Q 2019-09-30 Filed 2019-11-06
10-Q 2019-06-30 Filed 2019-08-06
10-Q 2019-03-31 Filed 2019-04-30
10-K 2018-12-31 Filed 2019-02-19
10-Q 2018-09-30 Filed 2018-11-06
10-Q 2018-06-30 Filed 2018-08-07
10-Q 2018-03-31 Filed 2018-05-07
10-K 2017-12-31 Filed 2018-03-05
10-Q 2017-09-30 Filed 2017-11-08
10-Q 2017-06-30 Filed 2017-08-08
10-Q 2017-03-31 Filed 2017-05-08
10-K 2016-12-31 Filed 2017-03-13
10-Q 2016-09-30 Filed 2016-11-08
10-Q 2016-06-30 Filed 2016-08-09
10-Q 2016-03-31 Filed 2016-05-09
10-K 2015-12-31 Filed 2016-03-14
10-Q 2015-09-30 Filed 2015-11-13
10-Q 2015-06-30 Filed 2015-08-13
10-Q 2015-03-31 Filed 2015-05-15
10-K 2014-12-31 Filed 2015-03-31
10-Q 2014-09-30 Filed 2014-11-19
10-Q 2014-06-30 Filed 2014-08-14
10-Q 2014-03-31 Filed 2014-05-15
10-K 2013-12-31 Filed 2014-04-01
10-K 2013-12-31 Filed 2014-04-15
10-Q 2013-09-30 Filed 2013-12-26
10-Q 2013-03-31 Filed 2013-05-20
10-K 2012-12-31 Filed 2013-04-04
10-Q 2012-09-30 Filed 2012-11-09
10-Q 2012-06-30 Filed 2012-08-14
10-Q 2012-03-31 Filed 2012-05-15
10-K 2011-12-31 Filed 2012-03-30
10-Q 2011-12-31 Filed 2013-08-14
10-Q 2011-09-30 Filed 2011-11-14
10-Q 2011-06-30 Filed 2011-08-15
10-Q 2011-03-31 Filed 2011-05-16
10-K 2010-12-31 Filed 2011-04-14
10-Q 2010-09-30 Filed 2010-11-15
10-Q 2010-06-30 Filed 2010-08-13
10-Q 2010-03-31 Filed 2010-05-14
10-K 2009-12-31 Filed 2010-04-15
8-K 2020-06-22
8-K 2020-04-03
8-K 2020-02-21
8-K 2020-01-29
8-K 2019-12-07
8-K 2019-11-11
8-K 2019-11-11
8-K 2019-11-08
8-K 2019-10-12
8-K 2019-10-01
8-K 2019-09-27
8-K 2019-09-12
8-K 2019-09-11
8-K 2019-08-27
8-K 2019-07-23
8-K 2019-06-17
8-K 2019-05-15
8-K 2019-04-26
8-K 2019-04-25
8-K 2019-04-23
8-K 2019-03-28
8-K 2019-03-21
8-K 2019-03-20
8-K 2019-03-01
8-K 2019-01-19
8-K 2019-01-17
8-K 2019-01-08
8-K 2018-12-31
8-K 2018-12-21
8-K 2018-11-07
8-K 2018-10-29
8-K 2018-10-10
8-K 2018-10-02
8-K 2018-10-02
8-K 2018-09-25
8-K 2018-06-22
8-K 2018-04-27
8-K 2018-04-23
8-K 2018-04-19
8-K 2018-03-16
8-K 2018-03-06
8-K 2018-02-15
8-K 2018-02-06
8-K 2018-02-05
8-K 2018-01-30

CBMG 10Q Quarterly Report

Part I – Financial Information
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Note 1 – Description of Business
Note 2 – Basis of Presentation and Significant Accounting Policies
Note 3 – Variable Interest Entities
Note 4 – Restricted Cash and Short - Term Debt
Note 6 – Investments
Note 7 – Fair Value Accounting
Note 8 – Intangible Assets
Note 9 – Leases
Note 10 – Related Party Transactions
Note 11 – Equity
Note 12 – Commitments and Contingencies
Note 13 – Stock Based Compensation
Note 14 – Net Loss per Share
Note 15 – Income Taxes
Note 16 – Segment Information
Note 17 – Subsequent Events
Item 2. Management’S Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-10.1 cbmg_ex101.htm
EX-31.1 cbmg_ex311.htm
EX-32.1 cbmg_ex321.htm

Cellular Biomedicine Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
12510075502502012201420172020
Assets, Equity
4.7-0.2-5.2-10.1-15.1-20.02012201420172020
Rev, G Profit, Net Income
4533219-3-152012201420172020
Ops, Inv, Fin

10-Q 1 cbmg_10q.htm QUARTERLY REPORT cbmg_10q
 

  UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2020
 
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Commission File Number 001-36498
 
CELLULAR BIOMEDICINE GROUP, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
 
86-1032927
State of Incorporation
 
IRS Employer Identification No.
 
1345 Avenue of Americas, 15th Floor
New York, New York 10105
 (Address of principal executive offices)
 
 (347) 905 5663
(Registrant’s telephone number)
 
Securities registered pursuant to Section 12(b) of the Exchange Act:
 
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.001
CBMG
The Nasdaq Global Select Market
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period than the registrant was required to submit such files). Yes ☑ No ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of “accelerated filer,” and “large accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer 
Accelerated filer 
Non-accelerated filer 
Smaller reporting company 


Emerging growth company 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
 
As of May 4, 2020, there were 19,391,343 shares of common stock, par value $.001 per share, outstanding.
 

 
 
 
TABLE OF CONTENTS
 
PART I FINANCIAL INFORMATION
     
 
 
     
Item 1.
Condensed Consolidated Financial Statements (unaudited)
3
 
 
     
 
Condensed Consolidated Balance Sheets (unaudited)
3
 
 
 
 
Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited)
4
 
 
 
 
Condensed Consolidated Statements of Cash Flows (unaudited)
5
 
 
       
 
Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited)
6
 
 
       
 
Condensed Notes to Consolidated Financial Statements (unaudited)
7
 
 
       
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
21
 
 
       
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
39
 
 
       
Item 4.
Controls and Procedures
41
 
 
       
PART II OTHER INFORMATION
       
 
 
       
Item 1.
Legal Proceedings
42
 
 
       
Item 1A.
Risk Factors
42
 
 
       
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
43
 
 
       
Item 3.
Defaults Upon Senior Securities
43
 
 
       
Item 4.
Mine Safety Disclosures
43
 
 
       
Item 5.
Other Information
43
 
 
       
Item 6.
Exhibits
44
 
 
       
SIGNATURES
45
 
 
2
 
 
PART I – FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
 
 CELLULAR BIOMEDICINE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
AS OF MARCH 31, 2020 AND DECEMBER 31, 2019
 
 
 
March 31,
 
 
December 31,
 
 
 
2020
 
 
2019
 
Assets
 
 
 
 
 
 
Cash and cash equivalents
 $21,597,360 
 $15,443,649 
Restricted cash
  - 
  17,000,000 
Other receivables
  253,749 
  750,943 
Prepaid expenses
  1,707,265 
  835,048 
Total current assets
  23,558,374 
  34,029,640 
 
    
    
Investments
  - 
  240,000 
Property, plant and equipment, net
  21,338,143 
  21,434,414 
Right of use
  19,280,349 
  20,106,163 
Goodwill
  7,678,789 
  7,678,789 
Intangibles, net
  7,035,420 
  7,376,940 
Long-term prepaid expenses and other assets
  6,997,391 
  6,458,354 
Total assets (1)
 $85,888,466 
 $97,324,300 
 
    
    
Liabilities and Stockholders' Equity
    
    
 
    
    
Liabilities:
    
    
Short-term debt
 $14,000,000 
 $14,334,398 
Accounts payable
  1,620,314 
  2,039,686 
Accrued expenses
  2,372,410 
  1,904,829 
Taxes payable
  30,420 
  26,245 
Other current liabilities
  5,509,393 
  5,367,708 
Total current liabilities
  23,532,537 
  23,672,866 
 
    
    
Other non-current liabilities
  17,204,688 
  17,933,743 
Total liabilities (1)
  40,737,225 
  41,606,609 
 
    
    
Commitments and Contingencies (note 12)
    
    
 
    
    
Stockholders' equity:
    
    
 
    
    
    Preferred stock, par value $.001, 50,000,000 shares
    
    
    authorized; none issued and outstanding as of
    
    
    March 31, 2020 and December 31, 2019, respectively
  - 
  - 
 
    
    
    Common stock, par value $.001, 300,000,000 shares authorized;
    
    
    20,427,185 and 20,359,889 issued; and 19,371,686 and 19,304,390 outstanding,
    
    
    as of March 31, 2020 and December 31, 2019, respectively
  20,427 
  20,360 
   Treasury stock at cost; 1,055,499 shares of common stock
  (14,992,694)
  (14,992,694)
    as of March 31, 2020 and December 31, 2019, respectively
    
    
Additional paid in capital
  273,535,311 
  272,117,518 
    Accumulated deficit
  (211,514,040)
  (199,966,543)
    Accumulated other comprehensive loss
  (1,897,763)
  (1,460,950)
Total stockholders' equity
  45,151,241 
  55,717,691 
 
    
    
Total liabilities and stockholders' equity
 $85,888,466 
 $97,324,300 
_______________
 
(1)
The Company’s consolidated assets as of March 31, 2020 and December 31, 2019 included $47,512,515 and $54,668,966, respectively, of assets of variable interest entities, or VIEs, that can only be used to settle obligations of the VIEs. Each of the following amounts represent the balances as of March 31, 2020 and December 31, 2019, respectively. These assets include cash and cash equivalents of $6,166,998 and $13,424,425; other receivables of $230,062 and $201,532; prepaid expenses of $1,518,325 and $770,127; property, plant and equipment, net, of $20,605,081 and $20,762,271; right of use of $12,849,397 and $13,541,518; intangibles of $1,195,862 and $1,226,955; and long-term prepaid expenses and other assets of $4,946,790 and $4,742,138. The Company’s consolidated liabilities as of March 31, 2020 and December 31, 2019 included $18,229,381 and $32,865,763, respectively, of liabilities of the VIEs whose creditors have no recourse to the Company. These liabilities include short-term debt of nil and $14,334,398; accounts payable of $1,572,746 and $1,324,792; other payables of $3,933,933 and $4,090,154; payroll accrual of $1,423,447 and $1,208,491, which mainly includes bonus accrual of $1,277,861 and $1,207,560; deferred income of nil and $10,994; and other non-current liabilities of $11,299,255 and $11,896,934. See further description in Note 3, Variable Interest Entities.
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
 
3
 
 
CELLULAR BIOMEDICINE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
 
 
 
For the Three Months Ended
 
 
 
March 31,
 
 
 
2020
 
 
2019
 
Net sales and revenue
 $- 
 $49,265 
 
    
    
Operating expenses:
    
    
Cost of sales
  - 
  8,087 
General and administrative
  3,431,344 
  3,447,734 
Selling and marketing
  - 
  42,260 
Research and development
  7,759,358 
  5,968,096 
Impairment of investments
  240,000 
  - 
         Total operating expenses
  11,430,702 
  9,466,177 
Operating loss
  (11,430,702)
  (9,416,912)
 
    
    
Other (expense) income
    
    
Interest income, net
  12,772 
  97,034 
Other expense, net
  (127,792)
  (14,510)
        Total other (expense) income
  (115,020)
  82,524 
Loss before taxes
  (11,545,722)
  (9,334,388)
 
    
    
Income taxes provision
  (1,775)
  (2,400)
 
    
    
 
    
    
Net loss
 $(11,547,497)
 $(9,336,788)
Other comprehensive income:
    
    
Cumulative translation adjustment
  (436,813)
  396,126 
Total other comprehensive income:
  (436,813)
  396,126 
 
    
    
Comprehensive loss
 $(11,984,310)
 $(8,940,662)
 
    
    
 
    
    
Net loss per share :
    
    
  Basic and diluted
 $(0.60)
 $(0.51)
 
    
    
Weighted average common shares outstanding:
    
    
  Basic and diluted
  19,340,982 
  18,152,429 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
 
4
 
 
CELLULAR BIOMEDICINE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
 
 
 
For the Three Months Ended
 
 
 
March 31,
 
 
 
2020
 
 
2019
 
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
  Net loss
 $(11,547,497)
 $(9,336,788)
  Adjustments to reconcile net loss to net cash
    
    
     used in operating activities:
    
    
Depreciation and amortization
  1,593,078 
  1,329,699 
Loss on disposal of assets
  - 
  (23)
Stock based compensation expense
  936,062 
  1,124,562 
Other than temporary impairment on investments
  240,000 
  - 
  Changes in operating assets and liabilities:
    
    
Accounts receivable
  - 
  788 
Other receivables
  493,853 
  (161,074)
Prepaid expenses
  (884,281)
  (1,038,324)
Long-term prepaid expenses and other assets
  (472,222)
  (378,024)
Accounts payable
  (744,090)
  426,027 
Accrued expenses
  486,538 
  12,704 
Other current liabilities
  599,822 
  155,980 
Taxes payable
  4,175 
  - 
Other non-current liabilities
  - 
  (71,221)
          Net cash used in operating activities
  (9,294,562)
  (7,935,694)
 
    
    
CASH FLOWS FROM INVESTING ACTIVITIES:
    
    
   Proceeds from disposal of assets
  - 
  359 
Purchases of intangibles
  (51,687)
  (619,165)
Purchases of property, plant and equipment
  (1,582,479)
  (3,545,355)
          Net cash used in investing activities
  (1,634,166)
  (4,164,161)
 
    
    
CASH FLOWS FROM FINANCING ACTIVITIES:
    
    
Net proceeds from the issuance of common stock
  - 
  16,038,504 
Proceeds from exercise of stock options
  481,798 
  109,261 
Proceeds from short-term debt
  14,000,000 
  6,131,723 
Repayment of short-term debt
  (14,315,898)
  - 
Repurchase of treasury stock
  - 
  (1,039,028)
          Net cash provided by financing activities
  165,900 
  21,240,460 
 
    
    
EFFECT OF EXCHANGE RATE CHANGES ON CASH
  (83,461)
  84,032 
 
    
    
INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
  (10,846,289)
  9,224,637 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD
  32,443,649 
  52,812,880 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD
 $21,597,360 
 $62,037,517 
 
    
    
 
    
    
SUPPLEMENTAL CASH FLOW INFORMATION
    
    
 
    
    
Income tax refund
 $3,200 
 $- 
 
    
    
Cash paid for income taxes
 $800 
 $2,400 
 
    
    
Interest expense paid
 $99,271 
 $30,506 
 
    
    
Interest income from pledged bank deposits received, netting off withholding tax
 $460,041 
 $- 
 
 
 
March 31,
 
 
March 31,
 
 
 
2020
 
 
2019
 
Reconciliation of cash, cash equivalents and restricted cash in condensed consolidated statements of cash flows:
 
 
 
 
 
 
Restricted cash
 $- 
 $17,000,000 
Cash and cash equivalents
  21,597,360 
  45,037,517 
 
    
    
Cash, cash equivalents and restricted cash
 $21,597,360 
 $62,037,517 
 
 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
 
5
 
 
CELLULAR BIOMEDICINE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated Other
 
 
 
 
 
 
Common Stock
 
 
Preferred Stock
 
 
Treasury Stock
 
 
Additional
 
 
Accumulated
 
 
Comprehensive
 
 
 
 
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Paid in Capital
 
 
Deficit
 
 
Income (Loss)
 
 
Total
 
Balance at December 31, 2019
  20,359,889 
 $20,360 
  - 
 $- 
  1,055,499 
 $(14,992,694)
 $272,117,518 
 $(199,966,543)
 $(1,460,950)
 $55,717,691 
 
    
    
    
    
    
    
    
    
    
    
Restricted stock grants
  20,061 
  20 
  - 
  - 
  - 
  - 
  434,385 
  - 
  - 
  434,405 
Accrual of share-based compensation costs
  - 
  - 
  - 
  - 
  - 
  - 
  501,657 
  - 
  - 
  501,657 
Exercise of stock options
  47,235 
  47 
  - 
  - 
  - 
  - 
  481,751 
  - 
  - 
  481,798 
Foreign currency translation
  - 
  - 
  - 
  - 
  - 
  - 
  - 
  - 
  (436,813)
  (436,813)
Net loss
  - 
  - 
  - 
  - 
  - 
  - 
  - 
  (11,547,497)
  - 
  (11,547,497)
 
    
    
    
    
    
    
    
    
    
    
Balance at March 31, 2020
  20,427,185 
 $20,427 
  - 
 $- 
  1,055,499 
 $(14,992,694)
 $273,535,311 
 $(211,514,040)
 $(1,897,763)
 $45,151,241 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated Other
 
 
 
 
 
 
Common Stock
 
 
Preferred Stock
 
 
Treasury Stock
 
 
Additional
 
 
Accumulated
 
 
Comprehensive
 
 
 
 
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Paid in Capital
 
 
Deficit
 
 
Income (Loss)
 
 
Total
 
Balance at December 31, 2018
  19,120,781 
 $19,121 
  - 
 $- 
  (1,001,499)
 $(13,953,666)
 $250,604,618 
 $(149,982,489)
 $(1,469,192)
 $85,218,392 
 
    
    
    
    
    
    
    
    
    
    
Common stock issued with public offering
  1,029,412 
  1,029 
  - 
  - 
  - 
  - 
  16,037,475 
  - 
  - 
  16,038,504 
Restricted stock grants
  20,053 
  20 
  - 
  - 
  - 
  - 
  341,919 
  - 
  - 
  341,939 
Accrual of share-based compensation costs
  - 
  - 
  - 
  - 
  - 
  - 
  782,623 
  - 
  - 
  782,623 
Exercise of stock options
  12,408 
  13 
  - 
  - 
  - 
  - 
  109,248 
  - 
  - 
  109,261 
Treasury stock purchase
  - 
  - 
  - 
  - 
  (54,000)
  (1,039,028)
  - 
  - 
  - 
  (1,039,028)
Foreign currency translation
  - 
  - 
  - 
  - 
  - 
  - 
  - 
  - 
  396,126 
  396,126 
Net loss
  - 
  - 
  - 
  - 
  - 
  - 
  - 
  (9,336,788)
  - 
  (9,336,788)
 
    
    
    
    
    
    
    
    
    
    
Balance at March 31, 2019
  20,182,654 
 $20,183 
  - 
 $- 
  (1,055,499)
 $(14,992,694)
 $267,875,883 
 $(159,319,277)
 $(1,073,066)
 $92,511,029 
 
 Note: No dividend was declared for the three months ended March 31, 2020 and 2019.
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
 
6
 
 
CELLULAR BIOMEDICINE GROUP, INC.
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1 – DESCRIPTION OF BUSINESS
 
As used in this quarterly report, “we”, “us”, “our”, “CBMG”, “Company” or “our company” refers to Cellular Biomedicine Group, Inc. and, unless the context otherwise requires, all of its subsidiaries and variable interest entities.
 
Overview
 
We are a clinical-stage biopharmaceutical company committed to using our proprietary cell-based technologies to develop immunotherapies for the treatment of cancer and stem cell therapies for the treatment of degenerative diseases. We view ourselves as a leader in the cell therapy industry through our diverse, multi-target, broad pipeline ranging from immuno-oncology, featuring Chimeric antigen receptor T-cell (CAR-T), T-cell receptor-engineered T-cell (TCR-T) and tumor infiltrating lymphocytes (TILs) to regenerative medicine. Our focus is to bring our potentially highly competitive products to market while also aiming to reduce manufacturing cycle time and aggregate cost as well as ensuring quality products of cell therapies. We provide comprehensive and integrated research and manufacturing services throughout the discovery, development and manufacturing spectrum for cell-based technologies. We have two major components to our global strategy. First, we intend on developing our own internal pipeline, focusing on immune cell therapy, regenerative medicine, as well as other innovative biotechnology modalities that can leverage our infrastructure, human capital and intellectual property. Second, we plan to partner with leading companies to monetize our innovative technologies in markets where we do not currently have a presence or limited resources and may also seek to bring their technologies to markets where we have infrastructure.
 
Our end-to-end platform enables discovery, development and manufacturing of cell-based therapies from concept to commercial manufacturing in a cost-efficient manner. The manufacturing and delivery of T-cell therapies involve complex, integrated processes, comprised of isolating T-cells from patients, T-cell enrichment, activation, viral vector transduction, expansion, harvest and fill-finish. Our in-house cell therapy manufacturing is comprised of a semi-automated, fully closed system and can manufacture high quality plasmids, and serum-free reagents as well as viral vectors for our immuno-oncology cell therapy products. Because we are vertically integrated, we are able to reduce the aggregate cost of cell therapies. We plan to build out our manufacturing capacity to scale for commercial supply at an economical cost. We hone our manufacturing process in our good manufacturing practice (GMP) facilities in China to achieve cycle time reduction, improve quality assurance and control and increase efficiency and early development to understand our therapies’ efficacy. Upon completion of our Rockville, Maryland GMP facility in late Q3, 2020 we plan to: (a) transfer protocol from our China GMP facility to the Rockville site to support our U.S. FDA clinical trials on anti-CD20/CD19 bi-specific CAR for NHL, and (b) initiate U.S. FDA clinical trials on TIL for Non-Small-Cell Lung Cancer (NSCLC). Our other objective on institutionalizing our manufacturing process is portability and ease of tech transfer to other facilities and ease of deployment in future locations.
 
In September 2018, we executed a License and Collaboration Agreement (hereinafter Novartis LCA) with Novartis AG (Novartis) to manufacture and supply their U.S. FDA-approved CD19 CAR-T cell therapy product Kymriah® (tisagenlecleucel) in China. Pursuant to the Novartis LCA agreement, we also granted Novartis a worldwide license to certain of our CAR-T intellectual property for the development, manufacture and commercialization of CAR-T products. We are entitled to an escalating single-digit percentage royalty of Kymriah®’s net sales in China. CBMG is responsible for the cost of bi-directional technology transfers between the two companies. We will receive collaboration payments equal to a single-digit escalating percentage of net sales of Kymriah® in China, subject to certain caps set forth under the Novartis LCA, for sales in diffuse large B-cell lymphoma and pediatric acute lymphoblastic leukemia indications and up to a maximum amount to be agreed upon for sales in other indications. We are also obligated to assist Novartis with the development of Kymriah® in China as Novartis may request and we are responsible for a certain percentage of the total development cost for the development of Kymriah® in China for indications other than diffuse large B-cell lymphoma and pediatric acute lymphoblastic leukemia indications. As of March 31, 2020, we have achieved several major milestones on the technology transfer and collaboration with Novartis on commercialization of Kymriah®, specifically: process and analytical training, feasibility, export license for feasibility/comparability and majority of our manufacturing comparability run.
 
On October 2, 2018, we executed a nonexclusive license agreement with the U.S. National Cancer Institute (NCI) for ten tumor infiltrating lymphocytes patents, pursuant to which we acquired rights to the worldwide development, manufacture and commercialization of autologous, tumor-reactive lymphocyte adoptive cell therapy products, isolated from tumor infiltrating lymphocytes for the treatment of non-small cell lung, stomach, esophagus, colorectal and head and neck cancer(s) in humans. We plan to use our Maryland GMP facility to launch clinical trials in the U.S. upon institutionalizing our process development.
 
In order to expedite fulfillment of patient treatment, we have been actively developing technologies and products with strong intellectual property protection. CBMG’s worldwide exclusive license to the T-cell patent rights owned by Augusta University provides an opportunity to expand the application of CBMG’s cancer therapy-enabling technologies and to initiate clinical trials with leading cancer hospitals. On February 14, 2019, Augusta University granted us an exclusive, worldwide license with sublicense rights to its patent rights to Human Alpha Fetoprotein-Specific T-cell Receptor modified T-cells (AFP TCR-T). We started the AFP TCR-T Investigator Initiated Trial (IIT) in October 2019 and have commenced enrolling HCC patients in China at the low dose since then.
 
Corporate History
 
Headquartered in New York, the Company is a Delaware biopharmaceutical company focused on developing treatments for cancer and orthopedic diseases for patients in China. We also plan to develop our products targeting certain solid tumor and other cancer indications in the United States. The Company started its regenerative medicine business in China in 2009 and expanded to CAR-T therapies in 2014.
 
 
7
 
 
NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
 
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”) for reporting on Form 10-Q. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements herein. The unaudited Condensed Consolidated Financial Statements herein should be read in conjunction with the historical consolidated financial statements of the Company for the year ended December 31, 2019 included in our Annual Report on Form 10-K for the year ended December 31, 2019. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.
 
Principles of Consolidation
 
Our unaudited condensed consolidated financial statements reflect all adjustments, which are, in the opinion of management, necessary for a fair presentation of our financial position and results of operations. Such adjustments are of a normal recurring nature, unless otherwise noted. The balance sheet as of March 31, 2020 and the results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results to be expected for any future period.
 
Our unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP. These accounting principles require us to make certain estimates, judgments and assumptions that affect the reported amounts if assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We believe that the estimates, judgments and assumptions are reasonable, based on information available at the time they are made. Actual results could differ materially from those estimates.
 
Reclassification of Prior Period Presentation
 
Certain reclassifications have been made to conform the prior period date to the current presentation. These reclassifications had no material effect on the reported results.
 
Liquidity and Going Concern
 
The Company recorded accumulated deficit of $211,514,040, cash and cash equivalents and restricted cash of $21,597,360 as of March 31, 2020, compared with accumulated deficit of $199,966,543, cash and cash equivalents of $32,443,649 as of December 31, 2019. Management believes that, based on the progress of our clinical development, the Company can secure financial resources amid the COVID-19 pandemic to satisfy the Company’s current liabilities and the capital expenditure needs in the next 12 months, however, there are no guarantees that these financial resources will be secured. If these financial resources are not secured, there is substantial doubt about the ability of the Company to continue as a going concern and it may be unable to realize its assets and discharge its liabilities in the normal course of business. In order to finance our operations, management intends to rely upon external financing. This financing may be in the form of equity and or debt, private placements and/or public offerings or arrangements with private lenders. The condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
 
Recent Accounting Pronouncements
 
Accounting pronouncements adopted during the three months ended March 31, 2020
 
In August 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2018-13, “Fair Value Measurement (Topic 820)” which eliminates, adds and modifies certain disclosure requirements for fair value measurements. The modified standard eliminates the requirement to disclose changes in unrealized gains and losses included in earnings for recurring Level 3 fair value measurements and requires changes in unrealized gains and losses be included in other comprehensive income for recurring Level 3 fair value measurements of instruments. The standard also requires the disclosure of the range and weighted average used to develop significant unobservable inputs and how weighted average is calculated for recurring and nonrecurring Level 3 fair value measurements. The amendment is effective for fiscal years beginning after December 15, 2019 and interim periods within that fiscal year with early adoption permitted. The Company adopted Topic 820 on January 1, 2020. The adoption of the ASU 2018-13 did not have a material impact on the Company’s consolidated financial statements.
 
In January 2017, the FASB issued ASU No. 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”) which removes Step 2 from the goodwill impairment test. An entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The new guidance does not amend the optional qualitative assessment of goodwill impairment. Public business entity that is a U.S. Securities and Exchange Commission filer should adopt the amendments in this ASU for its annual or any interim goodwill impairment test in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company adopted ASU 2017-04 on January 1, 2020. The adoption of the ASU 2017-04 did not have a material impact on the Company’s consolidated financial statements.
 
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. (“ASU 2016-13”). Financial Instruments—Credit Losses (Topic 326) amends guideline on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available-for-sale debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write-down. ASU 2016-13 affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables and any other financial assets not excluded from the scope that have the contractual right to receive cash. In October 2019, the FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842), which defers the effective date for public filers that are considered small reporting companies as defined by the Securities and Exchange Commission to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Since the Company is a smaller reporting company, implementation is not needed until January 1, 2023. Adoption of the standard requires using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the effective date to align existing credit loss methodology with the new standard. The Company is evaluating the impact of this standard on its consolidated financial statements, including accounting policies, processes, and systems, and expects the standard will have a minor impact on its consolidated financial statements.
 
 
8
 
 
Accounting pronouncements not yet effective to adopt
 
In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes” (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 will simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. We do not expect that the requirements of ASU 2019-12 will have a material impact on our consolidated financial statements.
 
NOTE 3 – VARIABLE INTEREST ENTITIES
 
VIEs are those entities in which a company, through contractual arrangements, bears the risk of, and enjoys the rewards normally associated with ownership of the entity, and therefore the Company is the primary beneficiary of the entity. Cellular Biomedicine Group Ltd (Shanghai) (“CBMG Shanghai”) and its subsidiaries are variable interest entities (VIEs) through which the Company conducts stem cell and immune therapy research and clinical trials in China. The registered shareholders of CBMG Shanghai are Lu Junfeng and Chen Mingzhe, who together own 100% of the equity interests in CBMG Shanghai. The initial capitalization and operating expenses of CBMG Shanghai are funded by our wholly foreign-owned enterprise (“WFOE”), Cellular Biomedicine Group Ltd. (Wuxi) (“CBMG Wuxi”). The registered capital of CBMG Shanghai is 10 million RMB and was incorporated on October 19, 2011. Beijing Agreen Biotechnology Co., Ltd. (“AG”) was 100% acquired by CBMG Shanghai in September 2014. The registered capital of AG is 5 million RMB and was incorporated on April 27, 2011. In 2017, CBMG Shanghai established two subsidiaries in Wuxi and Shanghai. Wuxi Cellular Biopharmaceutical Group Ltd. was established on January 17, 2017 with registered capital of 20 million RMB and wholly owned by CBMG Shanghai. Shanghai Cellular Biopharmaceutical Group Ltd. (“SH SBM”) was established on January 18, 2017 with registered capital of 100 million RMB and wholly owned by CBMG Shanghai. For the period ended March 31, 2020 and 2019, nil and 32% of the Company revenue is derived from VIEs respectively.
 
In February 2012, CBMG Wuxi provided financing to CBMG Shanghai in the amount of $1,587,075 for working capital purposes. In conjunction with the provided financing, exclusive option agreements were executed granting CBMG Wuxi the irrevocable and exclusive right to convert the unpaid portion of the provided financing into equity interest of CBMG Shanghai at CBMG Wuxi’s sole and absolute discretion. CBMG Wuxi and CBMG Shanghai additionally executed a business cooperation agreement whereby CBMG Wuxi is to provide CBMG Shanghai with technical and business support, consulting services and other commercial services. The shareholders of CBMG Shanghai pledged their equity interest in CBMG Shanghai as collateral in the event CBMG Shanghai does not perform its obligations under the business cooperation agreement.
 
The Company has determined it is the primary beneficiary of CBMG Shanghai by reference to the power and benefits criterion under ASC Topic 810, Consolidation. This determination was reached after considering the financing provided by CBMG Wuxi to CBMG Shanghai is convertible into equity interest of CBMG Shanghai and the business cooperation agreement grants the Company and its officers the power to manage and make decisions that affect the operation of CBMG Shanghai.
 
There are substantial uncertainties regarding the interpretation, application and enforcement of PRC laws and regulations, including but not limited to the laws and regulations governing our business or the enforcement and performance of our contractual arrangements. See Risk Factors below regarding “Risks Related to Our Structure.” The Company has not provided any guarantees related to VIEs and no creditors of VIEs have recourse to the general credit of the Company.
 
As the primary beneficiary of CBMG Shanghai and its subsidiaries, the Company consolidates in its financial statements the financial position, results of operations and cash flows of CBMG Shanghai and its subsidiaries, and all intercompany balances and transactions between the Company and CBMG Shanghai and its subsidiaries are eliminated in the consolidated financial statements.
 
 
9
 
 
The Company has aggregated the financial information of CBMG Shanghai and its subsidiaries in the table below. The aggregate carrying value of assets and liabilities of CBMG Shanghai and its subsidiaries (after elimination of intercompany transactions and balances) in the Company’s condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019 are as follows:
 
 
 
 
March 31,
 
 
December 31,
 
 
 
2020
 
 
2019
 
Assets
 
 
 
 
 
 
Cash
 $6,166,998 
 $13,424,425 
Other receivables
  230,062 
  201,532 
Prepaid expenses
  1,518,325 
  770,127 
Total current assets
  7,915,385 
  14,396,084 
 
    
    
Property, plant and equipment, net
  20,605,081 
  20,762,271 
Right of use
  12,849,397 
  13,541,518 
Intangibles
  1,195,862 
  1,226,955 
Long-term prepaid expenses and other assets
  4,946,790 
  4,742,138 
Total assets
 $47,512,515 
 $54,668,966 
 
    
    
Liabilities
    
    
Short-term debt
 $- 
 $14,334,398 
Accounts payable
  1,572,746 
  1,324,792 
Other payables
  3,933,933 
  4,090,154 
Accrued payroll *
  1,423,447 
  1,208,491 
Deferred income
  - 
  10,994 
Total current liabilities
 $6,930,126 
 $20,968,829 
 
    
    
Other non-current liabilities
  11,299,255 
  11,896,934 
Total liabilities
 $18,229,381 
 $32,865,763 
 
* Accrued payroll mainly includes bonus accrual of $1,277,861 and $1,207,560 as of March 31, 2020 and December 31, 2019, respectively.
 
 
10
 
 
NOTE 4 – RESTRICTED CASH AND SHORT-TERM DEBT
 
On January 19, 2019, SH SBM, a wholly owned subsidiary of CBMG Shanghai, entered into a credit agreement (the “Credit Agreement”) with China Merchants Bank, Shanghai Branch (the “Merchants Bank”). Pursuant to the Credit Agreement, the Merchants Bank agreed to extend credit of up to 100 million RMB (approximately $14.5 million) to SH SBM via revolving and/or one-time credit lines. The credit period under the Credit Agreement ran until December 30, 2019. As of December 31, 2019, all $14.3 million had been drawn down under the Credit Agreement. The Company subsequently repaid all the bank borrowings in February 2020.
  
Convertible Debt 
 
 On January 28, 2020, the Board of Directors of the Company accepted the Special Committee of the Board and its advisers’ recommendation to arrange a bridge loan (the “Bridge Loan”) of sixteen million dollars ($16,000,000) in accordance with a Bridge Loan Agreement entered into with Winsor Capital Limited on January 28, 2020. TF Capital Ranok Ltd., an affiliate of Winsor Capital Limited, is a member of the consortium that submitted a non-binding going-private proposal to the Company on November 11, 2019, and remained as a member of the consortium in the schedule 13D/A filed on April 1, 2020. The Bridge Loan Agreement is not conditioned upon the consortium bid. The Bridge Loan was funded in three tranches. The Company received with the first two tranches of $7 million each in January and March, 2020, respectively, and received the last tranche of $2 million on April 2, 2020. The Company will repay all unpaid principal amount together with the unpaid and accrued interest payable for the first tranche on the earliest of (i) the date falling nine months from the date of a convertible promissory note (the “Note”) issued pursuant to the terms of the Bridge Loan Agreement, or (ii) the occurrence of an Event of Default (as described in Section 6 of the Note) by converting and issuing to the account holder all (but not part) of the outstanding amount into the common stock of the Company at a conversion price equal to the lower of (A) $19.50 per share and (B) an amount representing a 15% discount to the volume weighted average price over the preceding 30 trading days prior to and including the Maturity Date (as defined in the Note). If a consortium of investors acquires 100% of the shares of the Company or takes the Company private by way of merger or otherwise (the “Acquisition”), at the election of Winsor Capital Limited, all unpaid principal amount together with the unpaid and accrued interest payable under all tranches of the outstanding Bridge Loan may be converted into the common stock of the Company at a conversion price equal to the price per share payable in the Acquisition and issued to Winsor Capital Limited and Section 3 (Repayment) of the Note shall not apply. Related interest payables of $104,712 was recorded in other current liabilities as of March 31, 2020.
 
The Company follows ASC 480-10, Distinguishing Liabilities from Equity (“ASC 480-10”) in its evaluation of the accounting for a hybrid instrument. A financial instrument that embodies an unconditional obligation, or a financial instrument other than an outstanding share that embodies a conditional obligation, that the issuer must or may settle by issuing a variable number of its equity shares shall be classified as a liability (or an asset in some circumstances) if, at inception, the monetary value of the obligation is based solely or predominantly on any one of the following: (a) a fixed monetary amount known at inception. (b) variations in something other than the fair value of the issuer’s equity shares. or (c) variations inversely related to changes in the fair value of the issuer’s equity shares.
 
The general measurement guidance in ASC 480 requires obligations that can be settled in shares with a fixed monetary value at settlement to be carried at fair value unless other accounting guidance specifies another measurement attribute. The Company has determined that ASC 835-30 is the appropriate accounting guidance for the share-settled debt using the effective interest method over the term of the note. 
 
Notwithstanding the fact that the above instruments can be settled in shares, FASB concluded that equity classification is not appropriate because instruments with those characteristics do not expose the counterparty to risks and rewards similar to those of an owner and, therefore do not create a shareholder relationship. The Company is instead using its shares as the currency to settle its obligation. 
 
The details of the short-term debt as of March 31, 2020 and December 31, 2019 are as follows:
 
 
 
 
 
 
 
 
As of March 31,
2020
 
 
As of December 31,
2019
 
Lender
Inception date
Maturity date
 
Interest rate
 
 
USD
 
 
USD
 
Merchants Bank
January 21, 2019 ~ January 31, 2019
January 21, 2020 ~ January 31, 2020
  4.785%
  - 
  3,496,361 
Merchants Bank
February 22, 2019 ~ June 24, 2019
February 22, 2020 ~ June 24, 2020
  4.35%
  - 
  10,838,037 
Winsor Capital Limited
January 29, 2020 ~ March 2, 2020
the earliest of (i) the date falling nine months from the inception date, or (ii) the occurrence of an event of default as defined in the loan agreement by converting and issuing to the account holder all (but not part) of the outstanding amount into the common stock of the Company.
  6%
  14,000,000 
  - 
 
    
    
    
 
    
  14,000,000 
  14,334,398 
 
 
11
 
 
NOTE 5 – PROPERTY, PLANT AND EQUIPMENT
 
As of March 31, 2020 and December 31, 2019, property, plant and equipment, carried at cost, consisted of the following:
 
 
 
March 31,
2020
 
 
December 31,
2019
 
Office equipment
 $161,265 
 $160,315 
Manufacturing equipment
  15,764,293 
  14,963,621 
Computer equipment
  669,875 
  576,499 
Leasehold improvements
  15,492,900 
  15,516,570 
Construction work in process
  281,406 
  196,240 
 
  32,369,739 
  31,413,245 
Less: accumulated depreciation
  (11,031,596)
  (9,978,831)
 
 $21,338,143 
 $21,434,414 
 
 For the three months ended March 31, 2020 and 2019, depreciation expense was $1,218,594 and $971,856, respectively.
 
NOTE 6 – INVESTMENTS
 
The Company’s investments represent the investment in equity securities listed in Over-The-Counter (“OTC”) markets of the United States of America:
 
March 31, 2020
 
 
Cost
 
 
 
Gross Unrealized Gains/(losses)
 
 
Gross Unrealized Losses more than 12 months
 
 
Gross Unrealized Losses less than 12 months
 
 
 
Market or Fair Value
 
Equity position in Arem Pacific Corporation
 $480,000 
 $- 
 $(240,000)
 $(240,000)
 $- 
 
 
December 31, 2019
 
 
Cost
 
 
  
Gross Unrealized Gains/(losses)
 
 
Gross Unrealized Losses more than 12 months
 
 
Gross Unrealized Losses less than 12 months
 
 
 
Market or Fair Value
 
Equity position in Arem Pacific Corporation
 $480,000 
 $- 
 $(240,000)
 $- 
 $240,000 
 
There were no sales of investments for the three months period ended March 31, 2020 and 2019.
 
There were no unrealized holding gains or losses for the investments that were recognized in other comprehensive income for the three months ended March 31, 2020 and 2019.
 
The Company tracks each investment with an unrealized loss and evaluates them on an individual basis for other-than-temporary impairments, including obtaining corroborating opinions from third-party sources, performing trend analyses and reviewing management’s future plans. When investments have declines determined by management to be other-than-temporary, the Company recognizes write downs through earnings. Other-than-temporary impairment of investments for the three month period ended March 31, 2020 and 2019 was $240,000 and nil, respectively. In March 2020, the Company contacted certain brokers to handle our Arem Pacific Corporation (“ARPC”) restricted legend removal from the stock certificates to convert to free-trade shares. Because of ARPC’s non-filing status and illiquid nature of the stock, the brokers’ compliance department summarily rejected our request. Considering the serious doubt over the liquidity of the ARPC stock, full impairment was made over ARPC stock in first quarter 2020.
 
 
12
 
 
NOTE 7 – FAIR VALUE ACCOUNTING
 
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The hierarchy for determining that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The Company has adopted ASC Topic 820, Fair Value Measurement and Disclosure, which defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. It does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. It establishes a three-level valuation hierarchy of valuation techniques based on observable and unobservable inputs, which may be used to measure fair value, and includes the following:
 
Level 1 – Quoted prices in active markets for identical assets or liabilities.
 
Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
 
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
 
Classification within the hierarchy is determined based on the lowest level of input that is significant to the fair value measurement.
 
The carrying value of financial items of the Company including cash and cash equivalents, accounts receivable, other receivables, accounts payable and accrued liabilities, approximate their fair values due to their short-term nature and are classified within Level 1 of the fair value hierarchy. As of March 31, 2020, the carrying value of the Company’s Bridge Loan approximates fair value as the borrowing bears interest rates that are similar to existing market rates.
 
The Company’s investments are classified within Level 2 of the fair value hierarchy because of the insufficient volatility of the three stocks traded in OTC market. The Company did not have any Level 3 financial instruments as of March 31, 2020 and December 31, 2019.
 
Assets measured at fair value within Level 2 on a recurring basis as of March 31, 2020 and December 31, 2019 are summarized as follows:
 
 
 
As of December 31, 2019
 
 
 
Fair Value Measurements at Reporting Date Using:
 
 
 
 
 
 
Quoted Prices in
 
 
Significant Other
 
 
Significant
 
 
 
 
 
 
Active Markets for
 
 
Observable
 
 
Unobservable
 
 
 
 
 
 
Identical Assets
 
 
Inputs
 
 
Inputs
 
 
 
 Total
 
 
 (Level 1)
 
 
 (Level 2)
 
 
 (Level 3)
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Equity position in ARPC
 $240,000 
 $- 
 $240,000 
 $- 
 
No shares were acquired in the three months ended March 31, 2020 and 2019.
 
As of March 31, 2020 and December 31, 2019, the Company holds 8,000,000 shares in Arem Pacific Corporation, 2,942,350 shares in Alpha Lujo, Inc. (“ALEV”) and 2,057,131 shares in Wonder International Education and Investment Group Corporation (“Wonder”), respectively.  Full impairment has been provided for shares of ALEV, Wonder and ARPC as of March 31, 2020. All available-for-sale investments held by the Company at December 31, 2019 have been valued based on level 2 inputs due to the limited trading of these companies.  
 
 
13
 
 
NOTE 8 – INTANGIBLE ASSETS
 
Most of our intellectual properties are developed internally. Because we do not capitalize our research and development expenses related to our home-grown intellectual properties, as of March 31, 2020, the intellectual properties acquired from the Agreen acquisition still account for the majority of the net book value of our intangible assets. We continue to apply the acquired Agreen intellectual properties in our immuno-oncology research and development activities. As such, there is no impairment on the continued use of the acquired Agreen intellectual properties.
 
As of March 31, 2020 and December 31, 2019, intangible assets, net consisted of the following:
 
Patents & knowhow & license 
 
 
 
March 31,
2020
 
 
December 31,
2019
 
Cost basis
 $15,236,962 
 $15,265,211 
Less: accumulated amortization
  (8,648,997)
  (8,317,085)
 
    
    
 
 $6,587,965 
 $6,948,126 
 
Software 
 
 
 
March 31,
2020
 
 
December 31,
2019
 
Cost basis
 $657,359 
 $612,679 
Less: accumulated amortization
  (209,904)
  (183,865)
 
 $447,455 
 $428,814 
 
    
    
 
    
    
Total intangibles, net
 $7,035,420 
 $7,376,940 
   
All software is provided by a third-party vendor, is not internally developed and has an estimated useful life of five years. Patents, knowhow and license are amortized using an estimated useful life of five to ten years.  Amortization expense for the three months ended March 31, 2020 and 2019 was $374,484 and $357,843, respectively.
 
Estimated amortization expense for each of the ensuing years are as follows for the twelve months ending March 31:
 
Twelve months ending March 31,
 
Amount
 
2021
 $1,495,984 
2022
  1,489,134 
2023
  1,480,299 
2024
  1,459,204 
2025 and thereafter
  1,110,799 
 
 $7,035,420 
 
 
14
 
 
NOTE 9 – LEASES
 
The Company leases facilities and equipment under non-cancellable operating lease agreements. These facilities and equipment are located in the United States, Hong Kong and China. The Company recognizes rental expense on a straight-line basis over the life of the lease period.
 
The Company recognized an operating liability with a corresponding ROU asset of the same amounts based on the present value of the minimum rental payments of such leases. Related liabilities were recorded in other current liabilities and other non-current liabilities. We applied the short-term lease practical expedient to all leases of one year or less.
 
Quantitative information regarding the Company’s leases is as follows:
 
 
 
For the Three Months Ended
 
 
 
March 31,
 
 
 
2020
 
 
2019
 
Lease cost
 
 
 
 
 
 
Operating lease cost
  888,787 
  707,180 
Short-term lease cost
  61,780 
  55,510 
Total lease cost
  950,567 
  762,690 
 
Supplemental cash flow information related to leases was as follows:
 
 
For the Three Months Ended
 
March 31,
 
 
2020
 
 
2019
 
Cash paid for the amounts included in the measurement of lease liabilities for operating leases:
    
   
Operating cashflows
  1,228,316 
  1,268,993 
 
Supplemental balance sheet information related to leases was as follows:
 
 
 
March 31,
2020
 
 
December 31,
2019
 
Operating lease right-of-use assets
  19,280,349 
  20,106,163 
Other current liabilities
  2,404,520 
  2,506,413 
Other non-current liabilities
  16,875,829 
  17,599,750 
 
    
    
Weighted Average Remaining Lease Term (in years): Operating leases
  7.7 
  7.9 
 
    
    
Weighted Average Discount Rate: Operating leases
  5%
  5%
 
 
15
 
 
As of March 31, 2020, the Company has the following future minimum lease payments due under the foregoing lease agreements:
 
Years ending March 31,
 
Amount
 
2021
 $3,464,776 
2022
  3,129,891 
2023
  3,210,172 
2024
  3,143,939 
2025 and thereafter
  11,051,249 
 
    
 
 $24,000,027 
 
NOTE 10 – RELATED PARTY TRANSACTIONS
 
The Company may advance petty cash to officers for business travel purpose.  As of March 31, 2020 and December 31, 2019, other receivables due from officers for business travel purpose was nil.
 
NOTE 11 – EQUITY
 
ASC Topic 505 Equity paragraph 505-50-30-6 establishes that share-based payment transactions with nonemployees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.
 
During the three months ended March 31, 2020 and 2019, the Company expensed $501,657 and $782,623 associate with unvested options awards, $434,405 and $341,939 associated with restricted common stock, respectively.
 
During the three months ended March 31, 2020 and 2019, options for 47,235 and 12,408 underlying shares were exercised, 47,235 and 12,408 shares of the Company’s common stock were issued, respectively.
 
During the three months ended March 31, 2020 and 2019, 20,061 and 20,053 shares of the Company's restricted common stock were issued to directors, employees and advisors respectively.
 
On February 21, 2020, the Special Committee of the Board of Directors of the Company received a new preliminary non-binding proposal letter, dated the same day, from a consortium led by Mr. Tony (Bizuo) Liu, certain other senior management members of the Company, Hillhouse Bio Holdings, L.P., TF Capital Ranok Ltd., Dangdai International Group Co., Limited, Mission Right Limited, Maplebrook Limited, Viktor Pan, Zheng Zhou, OPEA SRL, Wealth Map Holdings Limited and Earls Mill Limited (the “Consortium Members”), to acquire all Shares of the Company (other than those Shares held by the Consortium Members that may be rolled over in connection with the transaction proposed in the Letter) for $19.50 per Share in cash in a going-private transaction. As of March 31, 2020, the Special Committee of the Board, with the assistance of its advisors, has not made a decision on the proposal.
 
 
16
 
 
NOTE 12 – COMMITMENTS AND CONTINGENCIES
 
Capital commitments
 
As of March 31, 2020, the capital commitments of the Company are summarized as follows:
 
 
 
March 31,
2020
 
Contracts for acquisition of plant and equipment being or to be executed
 $727,979 
To be excecuted approved budget for US GMP facilities construction
  3,744,408 
 
 $4,472,387 
 
NOTE 13 – STOCK BASED COMPENSATION
 
Our stock-based compensation arrangements include grants of stock options and restricted stock awards under the Stock Option Plan (consisting of the 2009 Plan, 2011 Plan, 2013 Plan, 2014 Plan and the 2019 Plan) and certain awards granted outside of these plans. The compensation cost that has been charged against income related to stock options for the three months ended March 31, 2020 and 2019 was $501,657 and $782,623, respectively. The compensation cost that has been charged against income related to restricted stock awards for the three months ended March 31, 2020 and 2019 was $434,405 and $341,939, respectively.
 
As of March 31, 2020, there was $1,644,172 all unrecognized compensation cost related to an aggregate of 213,814 of non-vested stock option awards and $2,586,983 related to an aggregate of 212,823 of non-vested restricted stock awards.  These costs are expected to be recognized over a weighted-average period of 0.9 years for the stock options awards and 1.2 years for the restricted stock awards.
 
During the three months ended March 31, 2020 and 2019, no options of the Company’s common stock were issued under the Stock Option Plan.
 
 
17
 
 
The following table summarizes stock option activity as of March 31, 2020 and December 31, 2019 and for the three months ended March 31, 2020:
 
 
 
Number of Options
 
 
Weighted- Average Exercise Price
 
 
Weighted- Average Remaining Contractual Term (in years)
 
 
Aggregate Intrinsic Value
 
Outstanding at December 31, 2019
  1,788,888 
 $12.37 
  5.4 
 $9,394,219 
Grants
  - 
    
    
    
Forfeitures
  (46,160)
    
    
    
Exercises
  (47,235)
    
    
    
Outstanding at March 31, 2020
  1,695,493 
 $12.30 
  5.2 
 $8,497,235 
 
    
    
    
    
Vested and exercisable at March 31, 2020
  1,481,679 
 $11.83 
  4.7 
 $8,172,473 
 
 
Exercise
 
 
Number of Options
 
 
Price
 
 
Outstanding
 
 
Exercisable
 
 $3.00 - 4.95 
  185,547 
  185,547 
 $5.00 - 9.19 
  416,304 
  409,824 
 $9.20 - 15.00 
  487,501 
  407,828 
 $15.01 - 20.00 
  464,141 
  346,680 
 $20.10+
  142,000 
  131,800 
    
  1,695,493 
  1,481,679 
 
The aggregate intrinsic value for stock options outstanding is defined as the positive difference between the fair market value of our common stock and the exercise price of the stock options.
 
Cash received from option exercises under all share-based payment arrangements for the three months ended March 31, 2020 and 2019 was $481,798 and $109,261.  
 
 
18
 
 
NOTE 14 – NET LOSS PER SHARE
 
Basic and diluted net loss per common share is computed on the basis of our weighted average number of common shares outstanding, as determined by using the calculations outlined below:
 
 
 
For the Three Months Ended
 
 
 
March 31,
 
 
 
2020
 
 
2019
 
Net loss
 $(11,547,497)
 $(9,336,788)
 
    
    
Weighted average shares of common stock
  19,340,982 
  18,152,429 
Dilutive effect of stock options
  - 
  - 
Restricted stock vested not issued
  - 
  - 
Common stock and common stock equivalents
  19,340,982 
  18,152,429 
 
    
    
Net loss per basic and diluted share
 $(0.60)
 $(0.51)
 
For the three months ended March 31, 2020 and 2019, the effect of conversion and exercise of the Company’s outstanding options are excluded from the calculations of dilutive net loss per share as their effects would have been anti-dilutive since the Company had generated losses for the three months ended March 31, 2020 and 2019.
 
NOTE 15 – 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 differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. 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 of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period during which such rates are enacted.
 
The Company considers all available evidence to determine whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become realizable. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carry-forward periods), and projected taxable income in assessing the realizability of deferred tax assets. In making such judgments, significant weight is given to evidence that can be objectively verified. Based on all available evidence, in particular our three-year historical cumulative losses, recent operating losses and U.S. pre-tax loss for the three months ended March 31, 2020, we recorded a valuation allowance against our U.S. and China net deferred tax assets.
 
In each period since its inception, the Company has recorded a valuation allowance for the full amount of net deferred tax assets, as the realization of deferred tax assets is uncertain. As a result, the Company has not recorded any federal or state income tax benefit in the consolidated statements of operations and comprehensive income (loss).
 
Pursuant to the December 2017 Tax Cut and Jobs Act (H.R.1) (the “TCJA”), major changes were made to the Internal Revenue Code of 1986, as amended, including modification to the net operating loss (“NOL”). The TCJA limits the NOL deduction to 80% of taxable income (before the deduction). It also generally eliminates NOL carrybacks for individuals and non-REIT corporations, but allows indefinite NOL carryforwards. The new NOL rules apply to losses arising in taxable years beginning in 2018. As of March 31, 2020, the Company had net operating loss carry-forwards of $39 million for U.S. federal income tax purposes and $17.4 million for U.S. state income tax purposes.
 
 The Company’s effective tax rate differs from statutory rates of 21% for U.S. federal income tax purposes, 15% to 25% for Chinese income tax purpose and 16.5% for Hong Kong income tax purposes due to the effects of the valuation allowance and certain permanent differences as it pertains to book-tax differences in the value of client shares received for services.
 
Pursuant to the Corporate Income Tax Law of the PRC, all of the Company’s PRC subsidiaries are liable to PRC Corporate Income Taxes (“CIT”) at a rate of 25% except for CBMG Shanghai and Shanghai SBM.
 
According to Guoshuihan 2009 No. 203, if an entity is certified as an “advanced and new technology enterprise”, it is entitled to a preferential income tax rate of 15%. CBMG Shanghai obtained the certificate of “advanced and new technology enterprise” dated October 30, 2015 with an effective period of three years and the provision for PRC corporate income tax for CBMG Shanghai is calculated by applying the income tax rate of 15% from 2015. CBMG Shanghai re-applied and Shanghai SBM applied for the certificate of “advanced and new technology enterprise” in 2018. Both of them received approval on November 27, 2018. On August 23, 2018, State Administration of Taxation (“SAT”) issued a Bulletin on Enterprise Income Tax Issues Related to the Extension of Loss Carry-forward Period for Advanced and New Technology Enterprises and Small and Medium-sized Technology Enterprises (“Bulletin 45”). According to the Bulletin 45, an enterprise that obtains the two type of qualification in 2018, is allowed to carry forward all its prior year loss incurred between 2013 and 2017 to up to ten years instead of five years. The same requirement applies to the enterprise obtaining the qualification after 2018.
 
 
19
 
 
As of March 31, 2020, all of the deferred income tax expense is offset by changes in the valuation allowance pertaining to the Company’s existing net operating loss carryforwards due to the unpredictability of future profit streams prior to the expiration of the tax losses. 
 
NOTE 16 – SEGMENT INFORMATION
 
The Company is engaged in the development of new treatments for cancerous and degenerative diseases utilizing proprietary cell-based technologies, which have been organized as one reporting segment as they have substantially similar economic characteristic since they have similar nature and economic characteristics. The Company’s chief operating decision maker, the Chief Executive Officer, receives and reviews the result of the operation for all major cell platforms as a whole when making decisions about allocating resources and assessing performance of the Company. In accordance with FASB ASC 280-10, the Company is not required to report the segment information.
 
NOTE 17 – SUBSEQUENT EVENTS
 
On April 2, 2020, the Company received $2 million from the third tranche of the Bridge Loan.
 
On April 13, 2020, our Gaithersburg, Maryland site successfully imported our Shanghai, China produced GMP grade lentiviral vector and plasmid material designated for in vitro research and development in the U.S.
 
On April 18, 2020, the Company retained a U.S. based contract research organization to assist with its preparation of the U.S. pre-FDA TYPE-C meetings, Investigational New Drug (IND) gap analysis, PRE-IND and IND application for C-CAR039 anti-CD20/CD19 bi-specific CAR for Non-Hodgkin Lymphoma (NHL), and Tumor Infiltrating Lymphocyte therapy (our TIL051) for Non-Small-Cell Lung Cancer.
 
On April 30, 2020, our wholly-owned subsidiary CBMG Wuxi received approval from Nanjing Bank for a one-year line of credit of up to CNY 30 million (approximately $4.2 million). Use of proceeds from the credit line is limited to working capital for research and development activities. This line of credit carries an interest rate of not less than Loan Prime Rate (LPR) +0.5%. LPR is the benchmark for pricing existing floating-rate loans set by People’s Bank of China. As of April 30, 2020, the LPR for a one-year loan is 3.85%. This facility is only in effect while the Company remains as a publicly traded entity. We have not drawn on this line of credit.
 
 
20
 
 
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following is management’s discussion and analysis summarizing the significant factors affecting our results of operations, financial condition and liquidity position for the three months ended March 31, 2020 and 2019, and should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this filing.
 
This report contains forward-looking statements. Generally, the words “believes,” “anticipates,” “may,” “will,” “should,” “could,” “expect,” “plans,” “intend,” “estimate,” “projects,” “presidents,” “potential,” “continue” and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking statements. These statements reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements.
 
A variety of factors, some of which are outside our control, may cause our operating results to fluctuate significantly. They include:
 
●            
the severity, magnitude, and duration of the COVID-19 pandemic, including impacts of the pandemic and of responses to the pandemic by governments, business and individuals on our operations;
 
●            
our ability to timely complete and equip our Rockville, Maryland GMP facility amid the COVID-19 pandemic;
 
●            
our ability to deal with the COVID-19 related travel challenges in connection with the technical transfer of our institutionalized process from our Shanghai, China facility to the new Rockville site to support clinical trial in the U.S.;
 
●            
our anticipated cash needs and our estimates regarding our anticipated expenses, capital requirements and our needs for additional financings;
 
the success, cost and timing of our product development activities and clinical trials;
 
●            
our ability and the potential to successfully advance our technology platform to improve the safety and effectiveness of our existing product candidates; the potential for our identified research priorities to advance our cancer and degenerative disease technologies;
 
●            
our ability to obtain drug designation or breakthrough status for our product candidates and any other product candidates, or to obtain and maintain regulatory approval of our product candidates, and any related restrictions, limitations and/or warnings in the label of an approved product candidate;
 
●            
the ability to generate or license additional intellectual property relating to our product candidates;
 
●            
regulatory developments in China, United States and other foreign countries;
 
●            
the potential of the technologies we are developing;
 
●            
fluctuations in the exchange rate between the U.S. dollars and the Chinese Yuan;
 
●            
our plans to continue to develop our manufacturing facilities; and
 
●            
the additional risks, uncertainties and other factors described under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019.
 
 
21
 
 
We discuss many of these risks in greater detail under the heading “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission on February 28, 2020.
 
Unless required by law, we undertake no obligation to update or revise any forward-looking statements to reflect new information or future events or developments. Thus, you should not assume that our silence over time means that actual events are bearing out as expressed or implied in such forward-looking statements.
 
For additional information, see Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview” of our 2019 Annual Report on Form 10-K.
 
OVERVIEW
 
The “Company”, “CBMG”, “we”, “us”, “our” and similar terms refer to Cellular Biomedicine Group, Inc. (a Delaware corporation) as a combined entity including each of its subsidiaries and controlled companies, unless the context otherwise requires.
 
Impact of COVID-19
 
The COVID-19 pandemic has created new challenges for CBMG, the broader biotech community, and society as a whole. We are prioritizing the safety and well-being of our employees and have implemented work-from-home policies for our U.S.- and China-based employees. In China, employees must obtain advance permission and are only permitted onsite as needed, and must adhere to the Company’s COVID-19 prophylactic process and procedures. In compliance with local rules and ordinances, our U.S. employees continue to work remotely from home. Because of our long tradition of collaborating with various stakeholders from different locations across different time zones, we have not experienced major setbacks in our operations as a result of the work-from-home policies. Commensurate to impacts throughout the biopharma industry, we have observed some broad-based COVID-19 supply chain related issues and are continuing to mitigate its impact to our operations by implementing concrete measures to prioritize the safety and physical wellbeing of our employees. Amid the COVID-19 pandemic we are working with our clinical studies partners in China to mitigate risk to patients participating in our studies while taking into account regulatory, institutional, and government guidance and policies. Because of factors such as redirected health-care resources from partnering hospitals, travel restrictions, and patients’ unwillingness to go to the hospital during the outbreak we have observed delay to our clinical studies in China. China has recently eased some of the aforementioned restrictions and we have seen a corresponding return to normalcy in our IIT patient enrollment. We estimate that the COVID-19 pandemic has delayed our clinical studies schedule by approximately one quarter. However, the actual delay cannot be predicted and may vary by clinical study and by program depending on a variety of currently unknown factors. 
 
The Company remains committed to maintaining its development plans but acknowledges the potential impact on clinical studies amid the rapidly evolving pandemic environment.
 
Recent Developments
 
On January 28, 2020, the Board of Directors of the Company accepted the Special Committee of the Board and its advisers’ recommendation to arrange a bridge loan (the “Bridge Loan”) of sixteen million dollars ($16,000,000) in accordance with a Bridge Loan Agreement entered into with Winsor Capital Limited on January 28, 2020. TF Capital Ranok Ltd., an affiliate of Winsor Capital Limited, is a member of the consortium that submitted a non-binding going-private proposal to the Company on November 11, 2019. The Bridge Loan Agreement is not conditioned upon the consortium bid.
 
On February 19, 2020, the Company commenced its collaboration with Ruijin Hospital on a pilot clinical study on inhalation of our mesenchymal stem cells exosomes treating severe novel coronavirus pneumonia. Other collaborators in this pilot clinical study include the Shanghai Public Health Clinical Center and the Wuhan Jinyintan Hospital. Patient recruitment has slowed down amid the tapering off of the COVID-19 outbreak in China.
 
On February 20, 2020, the Company repaid the $14.3 million short-term borrowings from China Merchant Bank.
 
On February 20, 2020, Shanghai Cellular Biopharmaceutical Group Ltd. and Novartis entered into a Quality Agreement for external manufacturing, pursuant to which both parties specified the quality assurance roles and responsibilities of Novartis AG and CBMG Shanghai with regard to the manufacture and supply of Kymriah® to Novartis in China.
 
On February 21, 2020, the Special Committee of the Board of Directors of the Company received a new preliminary non-binding proposal letter, dated the same day, from a consortium led by Mr. Tony (Bizuo) Liu, the Chief Executive Officer of the Company, certain other senior management members of the Company, Hillhouse Bio Holdings, L.P., TF Capital Ranok Ltd., Dangdai International Group Co., Limited and Mission Right Limited, Maplebrook Limited, Viktor Pan, Zheng Zhou, OPEA SRL, Wealth Map Holdings Limited and Earls Mill Limited to acquire all outstanding shares of common stock of the Company (other than those shares held by members of the consortium that may be rolled over in connection with the transaction proposed in the letter) for $19.50 per share in cash in a going private transaction. A consortium consisting of certain but not all of the above consortium members submitted a preliminary non-binding proposal to acquire the Company in a going private transaction on November 11, 2019. The Special Committee, with the assistance of its advisors, has been considering the proposal letter but has not made a decision on the proposal.
 
On March 31, 2020, the National Medical Products Administration of China (NMPA) accepted our drug application for clinical trials in China for the anti-BCMA CAR-T (C-CAR088) for relapsed or refractory multiple myeloma (C-CAR088). As of April 13, 2020 we have enrolled 20 patients for the study from four hospitals. 19 patients have been infused with C-CAR088 and 17 patients have evaluable data for clinical efficacy. Only one grade 3 cytokine release syndrome (CRS) has been observed. The early favorable clinical outcome warrants continued development of C-CAR088.
 
On March 31, 2020, encouraged by three of the four infused patients’ evaluable data for clinical efficacy in our IIT anti-CD20/CD19 bi-specific CAR-T for NHL, which is enabled by our bespoken fast-cycle, economical manufacturing process, the Company decided to explore feasibility of clinical trials in the U.S. market. The targeted NHL indications are comprised of diffuse large B-cell lymphoma (DLBCL), chronic lymphocytic leukemia (CLL) and follicle center lymphoma (FCL).
 
 
22
 
 
In the next 12 months, we aim to accomplish the following, though there can be no assurances that we will be able to accomplish any of these goals:
 
Bifurcate our markets and launch clinical studies in the U.S. upon establishing good Point of Care (POC) from the clinical studies in China and transfer the clinical assets from Shanghai to the U.S., including our quick cycle-time, highly differentiated, proprietary manufacturing process comprised of short cycle-time, semi-automation and closed system;
 
Meet with the U.S. FDA on pre-IND filing and prepare our IND package for C-CAR039 (anti-CD20/CD19 bi-specific CAR-T) for NHL;
 
Meet with the U.S. FDA on pre-IND filing and prepare our IND package for TIL051 for NSCLC;
 
 Prepare and submit our IND for C-CAR039 (anti-CD20/CD19 bi-specific CAR-T) for NHL with the U.S. FDA;
 
Advance our Rockville site’s research and development and manufacturing to support our clinical development in the U.S.;
 
Explore the need to bring our proprietary virus manufacturing process from Shanghai to our Rockville site to enable U.S. clinical trials;
 
Collaborate with Duke University on TIL process development to improve cycle time and institutionalized scalability;
 
Explore the feasibility of establishing a new R&D and clinical manufacturing site in China to adapt to our rapid business expansion and explore the addition of Contract Development, and Manufacturing Organization (CDMO) business to support certain specific market-oriented business strategies;
 
Evaluate our strategy to further increase our enterprise value, and expand our capital market strategy;
 
Pursue additional short-term funding to shore up our balance sheet to weather the COVID-19 pandemic;
 
Execute the technology transfer and align the manufacturing processes with the global CAR-T leader to support the development of the world’s first CAR-T therapy in China;
 
Explore and introduce a gene therapy technology platform, product development and manufacturing for our current business to create synergy with our cell therapy pipelines;
 
Invest more into R&D resources and enrich our intellectual property portfolio globally;
 
Evaluate and implement a digital data tracking and storage technology system for research and development, material management, GMP production and integrated clinical data management;
 
Follow up on the pilot clinical study on inhalation of our mesenchymal stem cells exosomes treating severe novel coronavirus pneumonia;
 
Evaluate the feasibility of using our mesenchymal stem cells exosomes to treat atypical pneumonia;
 
Evaluate emerging regenerative medicine technology platform for other indications and review recent developments in the competitive landscape;
 
Strengthen our Quality Management System (QMS) centralized document control system and electronic batch recording system for quality assurance, and laboratory information management system (LMS) for quality control;
 
Leverage our QMS system a