Company Quick10K Filing
Iovance Biotherapeutics
Price17.99 EPS-1
Shares126 P/E-14
MCap2,270 P/FCF-22
Net Debt-362 EBIT-167
TEV1,908 TEV/EBIT-11
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-05
10-K 2019-12-31 Filed 2020-02-25
10-Q 2019-09-30 Filed 2019-11-04
10-Q 2019-06-30 Filed 2019-08-01
10-Q 2019-03-31 Filed 2019-05-07
10-K 2018-12-31 Filed 2019-02-28
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10-K 2017-12-31 Filed 2018-03-12
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10-K 2016-12-31 Filed 2017-03-09
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10-K 2015-12-31 Filed 2016-03-11
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10-K 2014-12-31 Filed 2015-03-16
10-Q 2014-09-30 Filed 2014-11-13
10-Q 2014-06-30 Filed 2014-08-08
10-Q 2014-03-31 Filed 2014-05-14
10-K 2013-12-31 Filed 2014-03-28
10-Q 2013-09-30 Filed 2013-11-14
10-Q 2013-03-31 Filed 2013-10-23
10-Q 2013-03-31 Filed 2013-10-23
10-K 2012-12-31 Filed 2013-09-23
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 2011-09-30 Filed 2011-11-21
10-Q 2011-06-30 Filed 2011-08-22
10-Q 2011-03-31 Filed 2011-05-20
10-K 2010-12-31 Filed 2011-04-14
10-Q 2010-09-30 Filed 2010-11-17
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10-K 2009-12-31 Filed 2010-03-31
8-K 2020-06-10
8-K 2020-06-08
8-K 2020-06-02
8-K 2020-05-27
8-K 2020-05-27
8-K 2020-05-22
8-K 2020-05-08
8-K 2020-05-05
8-K 2020-02-25
8-K 2019-11-04
8-K 2019-08-01
8-K 2019-07-02
8-K 2019-06-19
8-K 2019-06-10
8-K 2019-05-28
8-K 2019-05-22
8-K 2019-05-15
8-K 2019-05-07
8-K 2019-02-26
8-K 2019-01-07
8-K 2018-11-09
8-K 2018-11-06
8-K 2018-10-19
8-K 2018-10-16
8-K 2018-10-12
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8-K 2018-09-05
8-K 2018-08-06
8-K 2018-06-07
8-K 2018-06-06
8-K 2018-05-10
8-K 2018-03-28
8-K 2018-03-12
8-K 2018-03-09
8-K 2018-02-26
8-K 2018-02-07
8-K 2018-01-29
8-K 2018-01-24
8-K 2018-01-24
8-K 2018-01-08

IOVA 10Q Quarterly Report

Part I. Financial Information
Item 1.Financial Statements
Note 1. General Organization and Business
Note 2. Summary of Significant Accounting Policies
Note 3. Cash Equivalents and Short - Term Investments
Note 4. Balance Sheet Components
Note 5. Stockholders' Equity
Note 6. Stock Based Compensation
Note 7. Licenses and Agreements
Note 8. Legal Proceedings
Note 9. Leases
Note 10. Related Party Transactions
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
Part II. Other Information
Item 1.Legal Proceedings
Item 1A.Risk Factors
Item 2.Unregistered Sales of Securities and Use of Proceeds.
Item 3.Defaults Upon Senior Securities.
Item 4.Mine Safety Disclosures
Item 5.Other Information.
Item 6.Exhibits
EX-31.1 iova-20200331xex31d1.htm
EX-31.2 iova-20200331xex31d2.htm
EX-32.1 iova-20200331xex32d1.htm
EX-32.2 iova-20200331xex32d2.htm

Iovance Biotherapeutics Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
0.50.40.30.10.0-0.12012201420172020
Assets, Equity
0.10.10.0-0.0-0.1-0.12012201420172020
Rev, G Profit, Net Income
0.20.10.0-0.0-0.1-0.22012201420172020
Ops, Inv, Fin

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Table of Contents

U. S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  to .

Commission File Number 001-36860

IOVANCE BIOTHERAPEUTICS, INC.

(Exact name of issuer as specified in its charter)

Delaware

75-3254381

(State or other jurisdiction of

(I.R.S. employer

incorporation or organization)

identification number)

999 Skyway Road, Suite 150, San Carlos, CA 94070

(Address of principal executive offices and zip code)

(650) 260-7120

(Registrant’s telephone number, including area code)

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 þ 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 that the registrant was required to submit such files). Yes þ 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 definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  þ

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 þ

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

   

Trading Symbol(s)

   

Name of each exchange on which registered

Common stock, par value $0.000041666 per share

 

IOVA

 

The Nasdaq Stock Market, LLC

At April 28, 2020, the issuer had 126,861,580 shares of common stock, par value $0.000041666 per share, outstanding.

Table of Contents

IOVANCE BIOTHERAPEUTICS, INC.

FORM 10-Q

For the Quarter Ended March 31, 2020

 

Table of Contents

 

2

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

IOVANCE BIOTHERAPEUTICS, INC.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share information)

March 31, 

December 31, 

    

2020

    

2019

(unaudited)

ASSETS

 

  

 

  

 

  

 

  

Current Assets

 

  

 

  

Cash and cash equivalents

$

52,540

$

13,969

Short-term investments

 

193,112

 

293,112

Prepaid expenses and other assets

 

10,729

 

9,412

Total Current Assets

 

256,381

 

316,493

 

 

Property and equipment, net

 

13,607

 

8,536

Operating lease right-of-use assets

 

9,305

 

10,695

Restricted cash

5,525

5,450

Long-term assets

 

3,480

 

3,481

Total Assets

$

288,298

$

344,655

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

Current Liabilities

 

 

Accounts payable

$

10,614

$

15,567

Accrued expenses

 

22,500

 

16,265

Operating lease liabilities - current

 

6,431

 

7,252

Total Current Liabilities

 

39,545

 

39,084

 

 

Non-Current Liabilities

 

 

Operating lease liabilities – noncurrent

 

3,088

 

4,248

Other liabilities

 

2,352

 

2,352

Total Non-Current Liabilities

 

5,440

 

6,600

Total Liabilities

 

44,985

 

45,684

 

 

Commitments and contingencies (Note 8 and 9)

 

 

 

 

Stockholders’ Equity

 

 

Series A Convertible Preferred stock, $0.001 par value; 17,000 shares designated, 194 shares issued and outstanding as of March 31, 2020 and December 31, 2019 (aggregate liquidation value of $194)

 

 

Series B Convertible Preferred stock, $0.001 par value; 11,500,000 shares designated, 3,581,119 shares issued and outstanding as of March 31, 2020 and December 31, 2019 (aggregate liquidation value of $17,010)

 

4

 

4

Common stock, $0.000041666 par value; 300,000,000 shares authorized, 126,823,156 and 126,411,808 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively

 

5

 

5

Accumulated other comprehensive income

 

912

 

220

Additional paid-in capital

 

882,599

 

869,354

Accumulated deficit

 

(640,207)

 

(570,612)

Total Stockholders’ Equity

 

243,313

 

298,971

Total Liabilities and Stockholders’ Equity

$

288,298

$

344,655

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

3

Table of Contents

IOVANCE BIOTHERAPEUTICS, INC.

Condensed Consolidated Statements of Operations

(unaudited; in thousands, except per share information)

Three Months Ended

March 31, 

    

2020

    

2019

Revenues

$

$

 

 

Costs and expenses

 

 

Research and development expenses

 

56,952

 

30,905

General and administrative expenses

 

13,858

 

9,081

Total costs and expenses

 

70,810

 

39,986

 

 

Loss from operations

 

(70,810)

 

(39,986)

Other income

 

 

Interest income, net

 

1,215

 

3,036

Net Loss

$

(69,595)

$

(36,950)

Net Loss Per Common Share, Basic and Diluted

$

(0.55)

$

(0.30)

 

 

Weighted- Average Common Shares Outstanding, Basic and Diluted

 

126,568

 

123,415

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

4

Table of Contents

IOVANCE BIOTHERAPEUTICS, INC.

Condensed Consolidated Statements of Comprehensive Loss

(unaudited; in thousands)

Three Months Ended

March 31, 

    

2020

    

2019

Net Loss

$

(69,595)

$

(36,950)

Other comprehensive income:

 

 

Unrealized gain on short-term investments

 

692

 

180

Comprehensive Loss

$

(68,903)

$

(36,770)

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

5

Table of Contents

IOVANCE BIOTHERAPEUTICS, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited; in thousands, except share information)

Series A 

Series B

Convertible

Convertible

Additional

Accumulated other

Total

Preferred Sock

Preferred Stock

Common Stock

Paid-In

Comprehensive

Accumulated

Stockholders’

    

Shares

    

Amount

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Income

    

Deficit

    

Equity

Balance - December 31, 2019

 

194

$

 

3,581,119

$

4

 

126,411,808

$

5

$

869,354

$

220

$

(570,612)

$

298,971

Stock-based compensation expense

 

9,412

 

9,412

Vesting of restricted shares issued for services

 

7,273

 

 

 

Tax payments related to shares withheld for vested restricted stock units

 

(118)

 

(118)

Common stock issued upon exercise of stock options

 

404,075

 

 

3,951

 

3,951

Unrealized gain on short-term investments

 

692

 

692

Net loss

 

(69,595)

 

(69,595)

Balance - March 31, 2020

 

194

$

 

3,581,119

$

4

 

126,823,156

$

5

$

882,599

$

912

$

(640,207)

$

243,313

Balance - December 31, 2018

 

194

$

 

5,854,845

$

6

 

123,415,576

$

5

$

838,984

$

(42)

$

(372,760)

$

466,193

Adoption of ASU 2018-07

296

(296)

Stock-based compensation expense

 

5,846

 

5,846

Vesting of restricted shares issued for services

 

7,037

1

 

1

Tax payments related to shares withheld for vested restricted stock units

 

(71)

 

(71)

Common stock issued upon exercise of stock options

5,000

 

 

69

 

69

Unrealized gain on short-term investments

180

 

 

180

Cancellation of common shares from settlement of dispute

(32,500)

(1)

(335)

(336)

Net loss

(36,950)

(36,950)

Balance - March 31, 2019

 

194

$

 

5,854,845

$

6

 

123,395,113

$

5

$

844,789

$

138

$

(410,006)

$

434,932

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IOVANCE BIOTHERAPEUTICS, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited; in thousands)

Three Months Ended

March 31, 

    

2020

    

2019

Cash Flows from Operating Activities

 

  

 

  

Net loss

$

(69,595)

$

(36,950)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

Stock-based compensation expense

9,412

5,846

Noncash lease expense

1,870

1,424

Amortization of premiums on investments

(50)

(1,232)

Depreciation and amortization

 

252

 

271

Gain on settlement of dispute

 

 

(336)

Changes in assets and liabilities:

 

 

Prepaid expenses, other assets, and long-term assets

 

(1,316)

 

1,592

Operating lease liabilities (Right-of-use assets)

 

(2,461)

 

(942)

Accounts payable

 

(7,768)

 

4,583

Accrued expenses and other liabilities

 

4,364

 

(3,346)

Net cash used in operating activities

 

(65,292)

 

(29,090)

 

  

 

  

Cash Flows from Investing Activities

 

  

 

  

Maturities of short-term investments

 

113,665

 

91,042

Purchase of short-term investments

 

(12,923)

 

(89,185)

Purchase of property and equipment

 

(637)

 

(824)

Net cash provided by investing activities

 

100,105

 

1,033

 

  

 

  

Cash Flows from Financing Activities

 

  

 

  

Tax payments related to shares withheld for vested restricted stock awards

 

(118)

 

(71)

Proceeds from the issuance of common stock upon exercise of options

 

3,951

 

69

Net cash provided by / (used in) financing activities

 

3,833

 

(2)

Net increase / (decrease) in cash, cash equivalents and restricted cash

 

38,646

 

(28,059)

Cash, Cash Equivalents, and Restricted Cash, Beginning of Period

 

19,419

 

82,152

Cash, Cash Equivalents, and Restricted Cash, End of Period (Note 2)

$

58,065

$

54,093

 

  

 

Supplemental disclosure of non-cash investing and financing activities:

 

  

 

Net unrealized gain on short-term investments

$

692

$

180

Acquisitions of property and equipment included in accounts payable and accrued expenses

 

(4,686)

 

(268)

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

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IOVANCE BIOTHERAPEUTICS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1. GENERAL ORGANIZATION AND BUSINESS

Iovance Biotherapeutics, Inc. (the “Company”, “we”, “us” or “our”) is a clinical-stage biopharmaceutical company focused on the development and commercialization of cell therapies as novel cancer immunotherapy products designed to harness the power of a patient’s own immune system to eradicate cancer cells. Tumor infiltrating lymphocyte or TIL therapy is an autologous cell therapy platform technology that was originally developed by the National Cancer Institute (NCI), which conducted initial clinical trials in diseases such as metastatic melanoma and cervical cancer. The Company has developed a new, shorter manufacturing process for TIL therapy known as Generation 2, or Gen 2, which yields a cryopreserved TIL product. This proprietary and scalable manufacturing method is being further investigated in multiple indications. The Company’s lead product candidates include lifileucel for metastatic melanoma and LN-145 for metastatic cervical cancer. In addition to metastatic melanoma and metastatic cervical cancer, it is investigating the effectiveness and safety of TIL therapy and peripheral blood lymphocyte therapy for the treatment of squamous cell carcinoma of the head and neck, non-small cell lung cancer, and chronic lymphocytic leukemia through its sponsored trials, as well as in other oncology indications through collaborations. On June 1, 2017, the Company reincorporated to become a company governed by Delaware corporation laws.

Basis of Presentation of Unaudited Condensed Consolidated Financial Information

The unaudited condensed consolidated financial statements of the Company for the three months ended March 31, 2020 and 2019 have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-K. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the financial position and the results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as of December 31, 2019, was derived from the audited financial statements included in the Company's financial statements as of and for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 25, 2020. These financial statements should be read in conjunction with that report.

Liquidity

The Company is currently engaged in the development of therapeutics to fight cancer, specifically solid tumors. The Company currently does not have any commercial products and has not yet generated any revenues from its business. The Company currently does not anticipate that it will generate any revenues from the sale or licensing of any of its product candidates during the 12 months from the date these financial statements are issued. The Company has incurred a net loss of $69.6 million for the three months ended March 31, 2020 and used $65.3 million of cash in its operating activities during the three months ended March 31, 2020. As of March 31, 2020, the Company had $251.2 million in cash, cash equivalents, short-term investments, and restricted cash ($52.5 million of cash and cash equivalents, $193.1 million in short-term investments and $5.5 million in restricted cash).

The Company expects to continue its research and development activities, increase pre-commercial activities and initiate the construction on the tenant improvements on its new manufacturing facility, which will increase the amount of cash used during 2020 and beyond. Specifically, the Company expects continued spending on its current and planned clinical trials, continued expansion of manufacturing activities, including construction of a manufacturing facility, higher payroll expenses as the Company increases its professional and scientific staff, and continuation of pre-commercial activities. Based on the funds the Company has available as of the date these financial statements are issued, the Company believes that it has sufficient capital to fund its anticipated operating expenses and capital expenditures for at least the next twelve months from the date these financial statements are issued. The Company has latitude as to the timing and amount of expenditures for its commercial-scale production facility under construction in Philadelphia, Pennsylvania.

Impact of COVID-19

In December 2019, a novel (new) coronavirus known as SARS-CoV-2 was first detected in Wuhan, Hubei Province, People’s Republic of China, causing outbreaks of the coronavirus disease, known as COVID-19, that has now spread globally. On January 30,

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2020 the World Health Organization (WHO) declared COVID-19 a pandemic (the "COVID-19 Pandemic"). The Secretary of Health and Human Services declared a public health emergency on January 31, 2020, under section 319 of the Public Health Service Act (42 U.S.C. 247d), in response to the COVID-19 Pandemic. The full impact of the COVID-19 Pandemic is unknown and rapidly evolving. While the potential economic impact brought by and the duration of the COVID-19 Pandemic may be difficult to assess or predict, the Company believes the COVID-19 Pandemic has resulted in significant disruption of global financial markets, which could in the future negatively affect its liquidity. In addition, a recession or market volatility resulting from the COVID-19 Pandemic could affect the Company’s business. Given the nature and type of the Company’s short-term investments in US government securities, the Company does not believe the COVID-19 Pandemic will have a material impact on the Company's current investment liquidity.

Concentrations of Risk

The Company is subject to credit risk from its portfolio of cash equivalents and short-term investments. Under its investment policy, the Company limits amounts invested in such securities by credit rating, maturity, industry group, investment type and issuer, except for securities issued by the U.S. government. The Company does not believe it is exposed to any significant concentrations of credit risk from these financial instruments. The goals of its investment policy, in order of priority, are as follows: safety and preservation of principal and diversification of risk and liquidity of investments sufficient to meet cash flow requirements.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash, Cash Equivalents, and Short-term Investments

The Company’s cash and cash equivalents include short-term investments with original maturities of three months or less when purchased. The Company's short-term investments are classified as “available-for-sale”. The Company includes these investments in current assets and carries them at fair value. Unrealized gains and losses on available-for-sale securities are included in accumulated other comprehensive income. Any impairment losses related to credit losses (if any) are included in an allowance for credit losses with an offsetting entry to net loss. No impairment losses related to credit losses were recognized for the three months ended March 31, 2020 or for the same period in 2019. The cost of debt securities is adjusted for the amortization of premiums and accretion of discounts to maturity. Such amortization and accretion are included in net interest income in the condensed consolidated statements of operations. Gains and losses on securities sold are recorded based on the specific identification method and are included in net interest income in the condensed consolidated statements of operations. The Company has not incurred any realized gains or losses from sales of securities to date. The Company’s investment policy limits investments to certain types of instruments such as certificates of deposit, money market instruments, obligations issued by the U.S. government and U.S. government agencies as well as corporate debt securities, and places restrictions on maturities and concentration by type and issuer. Currently the Company invests excess cash only in obligations issued by the U.S. government and U.S. government agencies.

The Company maintains a certain minimum balance, currently $5.5 million in a segregated bank account in connection with two letters of credit, one for $5.45 million for the benefit of the landlord for its commercial manufacturing facility used as a security deposit for the lease (See Note 9 - Leases), and a second one for $74,685 for the benefit of a utilities service provider. The total amount is classified as Restricted Cash on the Balance Sheet. The letter of credit will expire on May 28, 2020, however, it will be automatically extended, without written agreement, for one-year periods to May 28 in each succeeding calendar year, through at least 60 days after the lease expiration rate. Further, on the expiration of the seventh year of the lease, and each anniversary date thereafter, the letter of credit may be decreased by $1,000,000, with a minimum security deposit of $1,450,000 maintained through the end of the lease term. The $74,685 letter of credit will expire on February 25, 2021, however, it will be automatically extended, without written agreement, to the expiration date of December 1, 2022. As of March 31, 2020, restricted cash consisted of $5.5 million and this amount has been classified as a non-current asset on the Company’s condensed consolidated balance sheets.

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The following table provides a reconciliation of cash, cash equivalents, and restricted cash, reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows:

    

March 31, 

    

March 31, 

2020

2019

Cash and cash equivalents

$

52,540

$

54,093

Restricted cash (included in non-current assets on the condensed consolidated balance sheets)

 

5,525

 

Total cash, cash equivalents and restricted cash

$

58,065

$

54,093

Loss per Share

Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period.

Diluted net loss per share is computed by dividing the net loss by the sum of the weighted average number of shares of common stock outstanding and the dilutive common stock equivalent shares outstanding during the period. The Company’s potentially dilutive common stock equivalent shares, which include incremental common shares issuable upon (i) the exercise of outstanding stock options and warrants (ii) vesting of restricted stock units and restricted stock awards, and (iii) conversion of preferred stock, are only included in the calculation of diluted net loss per share when their effect is dilutive.

At March 31, 2020 and 2019, the following outstanding common stock equivalents have been excluded from the calculation of net loss per share because their impact would be anti-dilutive.

March 31, 

    

2020

    

2019

Stock options

 

12,136,899

 

9,274,973

Series A Convertible Preferred Stock*

 

97,000

 

97,000

Series B Convertible Preferred Stock*

 

3,581,119

 

5,854,845

Restricted stock units

 

11,458

 

57,285

 

15,826,476

 

15,284,103

* on an as-converted basis

The effect of potentially dilutive securities would be reflected in diluted earnings per common share by application of the treasury stock method. Under the treasury stock method, an increase in the fair market value of the Company's common stock could result in a greater dilutive effect from potentially dilutive securities.

Fair Value Measurements

Under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, fair value is defined as the price at which an asset could be exchanged, or a liability transferred in a transaction between knowledgeable, willing parties in the principal or most advantageous market for the asset or liability. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or parameters are not available, valuation models are applied.

Assets and liabilities recorded at fair value in the Company’s financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:

Level 1–These are investments where values are based on unadjusted quoted prices for identical assets in an active market that the Company has the ability to access.

Level 2–These are investments where values are based on quoted market prices in markets that are not active or model derived valuations in which all significant inputs are observable in active markets

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The Company does not have fair valued assets classified under Level 2 as of March 31, 2020 and December 31, 2019.

Level 3–These are financial instruments where values are derived from techniques in which one or more significant inputs are unobservable.

The Company does not have fair valued assets classified under Level 3 as of March 31, 2020 and December 31, 2019.

The Company’s financial instruments consist of cash and cash equivalents and short-term investments, all of which are reported at their respective fair value on its condensed consolidated balance sheets.

As of March 31, 2020 and December 31, 2019, financial assets measured at fair value on a recurring basis are categorized in the table below based upon the lowest level of significant input to the valuations (in thousands):

Assets at Fair Value as of March 31, 2020

    

Level 1

    

Level 2

    

Level 3

    

Total

US treasury securities

$

161,512

$

$

$

161,512

US government agency securities

 

31,600

 

 

 

31,600

Total

$

193,112

$

$

$

193,112

Assets at Fair Value as of December 31, 2019

    

Level 1

    

Level 2

    

Level 3

    

Total

US treasury securities

$

242,249

$

$

$

242,249

US government agency securities

 

50,863

 

 

 

50,863

Total

$

293,112

$

$

$

293,112

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the assumptions made in valuing stock instruments issued for services and used in measuring operating right-of-use assets and operating lease liabilities, valuation of short-term investments, accounting for potential liabilities, and the valuation allowance associated with the Company’s deferred tax assets.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of Iovance Biotherapeutics, Inc. and its wholly-owned subsidiaries, Iovance Biotherapeutics Manufacturing LLC, and Iovance Biotherapeutics GmbH. All intercompany accounts and transactions have been eliminated. The U.S. dollar is the functional currency for all the Company's consolidated operations.

Income Taxes

The Company accounts for income taxes using the asset and liability method whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

ASC Topic 740-10-30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740-10-40 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company will classify as income

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tax expense any interest and penalties. The Company has no material uncertain tax positions for any of the reporting periods presented.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted and signed into law, and GAAP requires recognition of the tax effects of new legislation during the reporting period that includes the enactment date. The CARES Act, among other things, includes changes to the tax provisions that benefits business entities and makes certain technical corrections to the 2017 Tax Cuts and Jobs Act. The tax relief measures for business include a five-year net operating loss (“NOL”) carrybacks, suspension of annual deduction limitation of 80% taxable income from net operating losses generated in a tax year beginning after December 31, 2017, changes in the deductibility of interest, acceleration of alternative minimum tax credit refunds, payroll tax relief, and technical correction to allow accelerated deductions for qualified improvement property. The CARES Act also provides other non-tax benefits to assist those impacted by the pandemic. The Company evaluated the impact of the CARES Act and determined no material tax provision impact for the quarter ended March 31, 2020.

Leases

The Company determines if an arrangement includes a lease at inception. Operating leases are included in its condensed consolidated balance sheet as Operating lease right-of-use assets and Operating lease liabilities as of March 31, 2020 and December 31, 2019. Operating lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the net present value of lease payments, the Company uses an estimated incremental borrowing rate that is applicable to the Company based on the information available at the later of the lease commencement date or the date of adoption of Accounting Standard Update (ASU) No. 2016-02 and ASU No. 2018-10, Leases (together “Topic 842”). The operating lease right-of-use assets also include any lease payments made less lease incentives. The Company’s leases may include options to extend or terminate the lease, which is considered in the lease term when it is reasonably certain that the Company will exercise any such options. Lease expense is recognized on a straight-line basis over the expected lease term. The Company has elected not to apply the recognition requirements of Topic 842 for short-term leases.

For lease agreements entered into after the adoption of Topic 842 that include lease and non-lease components, such components are generally accounted for separately.

Stock-Based Compensation

The Company periodically grants stock options to employees in non-capital raising transactions as compensation for services rendered. The Company accounts for stock option grants to employees based on the authoritative guidance provided by the FASB where the value of the award is measured on the date of grant and recognized over the vesting period. Upon the adoption of ASU No. 2018-07, Compensation-Stock Compensation (“Topic 718”), the Company accounts for stock option grants to non-employees in a similar manner as stock option grants to employees except for the term used in the grant date fair value, therefore no longer requiring a re-measurement at the then-current fair values at each reporting date until the share options have vested. The nonemployee awards that contain a performance condition that affects the quantity or other terms of the award are measured based on the outcome that is probable.

The fair value of the Company's common stock option grants is estimated using a Black-Scholes option pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the common stock options, and future dividends. The stock-based compensation expense is recorded based upon the value derived from the Black-Scholes option pricing model. The assumptions used in the Black-Scholes option pricing model could materially affect compensation expense recorded in future periods.

The Company has in the past issued restricted stock units (RSU) and restricted stock awards (RSA) as part of its share-based compensation programs. The Company measures the compensation cost with respect to RSUs and RSAs issued to employees based upon the estimated fair value of the equity instruments at the date of the grant, which is recognized as an expense over the period during which an employee is required to provide services in exchange for the awards.

The fair value of RSUs and RSAs is based on the closing price of the Company’s common stock on the grant date.

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Total stock-based compensation expense related to all of the Company’s stock-based awards was recorded on the statements of operations as follows (in thousands):

Three Months Ended

March 31, 

    

2020

    

2019

Research and development

$

4,318

$

2,701

General and administrative

 

5,094

 

3,145

Total stock-based compensation expense

$

9,412

$

5,846

Total stock-based compensation expenses broken down based on each individual instrument were as follows (in thousands):

Three Months Ended

March 31, 

    

2020

    

2019

Stock option expense

$

9,345

$

5,779

Restricted stock unit expense

 

67

 

67

Total stock-based compensation expense

$

9,412

$

5,846

Preferred Stock

The Company applies the accounting standards for distinguishing liabilities from equity when determining the classification and measurement of its preferred stock. Preferred shares subject to mandatory redemption are classified as liability instruments and are measured at fair value. Conditionally redeemable preferred shares (including preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, preferred shares are classified as stockholders’ equity.

Convertible Instruments

The Company applies the accounting standards for derivatives and hedging and for distinguishing liabilities from equity when accounting for hybrid contracts that feature conversion options. The accounting standards require companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (i) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (ii) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (iii) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. The derivative is subsequently marked to market at each reporting date based on current fair value, with the changes in fair value reported in results of operations.

Conversion options that contain variable settlement features such as provisions to adjust the conversion price upon subsequent issuances of equity or equity linked securities at exercise prices more favorable than that featured in the hybrid contract generally result in their bifurcation from the host instrument.

The Company also records, when necessary, deemed dividends for the intrinsic value of the conversion options embedded in preferred stock based upon the difference between the fair value of the underlying common stock at the commitment date of the transaction and the effective conversion price embedded in the preferred stock.

Recent Accounting Standards

Financial Instruments

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, and also issued subsequent amendments to the initial guidance, ASU 2018-19, ASU 2019-04, ASU 2019-05, and ASU 2019-11 (collectively, Topic 326), to introduce a new impairment model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses (“CECL”). Under Topic 326, an entity is required to estimate CECL on available-for-sale (“AFS”) debt securities only when the fair value is below the amortized cost of the asset and is no longer based on an impairment being “other-than-temporary”. Topic 326 also

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requires the impairment calculation on an individual security level and requires an entity use present value of cash flows when estimating the CECL. The credit-related losses are required to be recognized through earnings and non-credit related losses are reported in other comprehensive income. In April 2019, the FASB further clarified the scope of Topic 326 and addressed issues related to accrued interest receivable balances, recoveries, variable interest rates and prepayment. Topic 326 will be effective for public entities in fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The new guidance requires modified retrospective application to all outstanding instruments, with a cumulative effect adjustment recorded to opening retained earnings as of the beginning of the first period in which the guidance becomes effective. The Company adopted this guidance on January 1, 2020, however, the adoption of this new guidance did not have any material impact on its condensed consolidated financial statements.

Cloud Computing Arrangements

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40) Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (ASU 2018-15). The guidance requires a customer in a cloud computing arrangement that is a service contract to follow the internal use software guidance to determine which implementation costs to defer and recognize as an asset. It therefore requires a customer to defer potentially significant implementation costs incurred in a cloud computing arrangement that were often expensed as incurred under the legacy GAAP and recognize them as expense over the term of the hosting arrangement. ASU 2018-15 is effective for fiscal years beginning subsequent to December 15, 2019. The Company adopted this guidance on January 1, 2020. There was no impact on its condensed consolidated balance sheets and statements of operations as of and for the three months ended March 31, 2020, however, the Company believes it will have a material impact on its condensed consolidated balance sheets and statements of operations in 2020 by deferring recognition of costs as it prepares to invest in information technology infrastructure for its commercial manufacturing build-out.

Subsequent Event

The Company’s management evaluates events that have occurred after the balance sheet date but before the financial statements are issued.

Reclassifications

Certain amounts within the condensed consolidated statements of cash flows and notes to the financial statements for the prior period have been reclassified to conform with the current period presentation. These reclassifications had no impact on the Company's previously reported financial position or cash flows for any of the periods presented.

NOTE 3. CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

Cash equivalents and short-term investments consist of the following (in thousands):

    

March 31, 

    

December 31, 

2020

2019

Cash equivalents - Money market funds

$

39,924

$

10,049

Cash equivalents total

$

39,924

$

10,049

Cash equivalents in the tables above exclude cash demand deposits of $12.6 million and $3.9 million as of March 31, 2020 and December 31, 2019, respectively (in thousands).

    

March 31, 

    

December 31, 

Short-term Investments

2020

2019

US treasury securities

$

161,512

$

242,249

US government agency securities

 

31,600

 

50,863

Short-term investments total

$

193,112

$

293,112

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The cost and fair value of cash equivalents and short-term investments at March 31, 2020 and December 31, 2019 were as follows (in thousands):

Gross

Gross

Accretion

Unrealized

Unrealized

As of March 31, 2020

    

Cost

    

(Amortization)

    

Gains

    

Losses

    

Fair Value

US treasury securities

$

160,708

$

(16)

$

820

$

$

161,512

US government agency securities

 

31,463

 

45

 

92

 

31,600

Total

$

192,171

$

29

$

912

$

$

193,112

Gross

Gross

Unrealized

Unrealized

As of December 31, 2019

    

Cost

    

Accretion

    

Gains

    

Losses

    

Fair Value

US treasury securities

$

241,709

$

364

$

179

$

(3)

$

242,249

US government agency securities

 

50,712

 

107

 

44

 

 

50,863

Total

$

292,421

$

471

$

223

$

(3)

$

293,112

Upon adoption of Topic 326 on January 1, 2020, the Company is required to assess and estimate CECL on AFS debt securities only when the fair value is below the amortized cost of the asset and is no longer based on an impairment being “other-than-temporary”. The credit-related losses are required to be recognized through the statements of operations and non-credit related losses are reported in other comprehensive income. For the three months ended March 31, 2020, no CECL was recognized in the condensed consolidated statement of operations and all unrealized gains and losses are included in accumulated other comprehensive income. All short-term investments held by the Company as of March 31, 2020 and December 31, 2019 have a maturity of less than one year.

NOTE 4. BALANCE SHEET COMPONENTS

Accrued liabilities consist of the following (in thousands):

March 31, 

December 31, 

    

2020

    

2019

Clinical related

$

10,211

$

4,692

Accrued payroll and employee related expenses

 

4,118

 

6,866

Manufacturing related

 

3,527

 

2,184

Commercial manufacturing facility related

 

1,869

 

17

Legal and related services

 

1,100

 

866

Accrued other

 

1,675

 

1,640

$

22,500

$

16,265

NOTE 5. STOCKHOLDERS’ EQUITY

Public Offerings

In January 2018, the Company closed an underwritten public offering of 15,000,000 shares of the Company’s common stock at a public offering price of $11.50 per share, before underwriting discounts, which included 1,956,521 shares issued upon the exercise in full by the underwriter of its option to purchase additional shares at the public offering price less the underwriting discount. The gross proceeds from the offering, before deducting the underwriting discounts and commissions and other offering expenses payable by the Company, were $172.5 million, with net proceeds to the Company of $162.0 million.

On October 17, 2018, the Company completed an underwritten public offering of 25,300,000 shares of the Company’s common stock at a public offering price of $9.97 per share, before underwriting discounts, which included 3,300,000 shares issued upon the exercise in full by the underwriter of its option to purchase additional shares at the public offering price less the underwriting discount. The gross proceeds from the offering, before deducting the underwriting discounts and commissions and other estimated offering expenses payable by the Company, were $252.2 million, with net proceeds to the Company of $236.7 million.

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On June 10, 2019, the certificate of incorporation of the Company was amended to increase the number of authorized shares of the Company’s common stock, par value $0.000041666, from 150,000,000 shares to 300,000,000 shares (the “Certificate of Amendment”). The Certificate of Amendment was approved by the Company’s stockholders at the Company’s 2019 Annual Meeting of Stockholders held on June 10, 2019.

Preferred Stock

The Company’s certificate of incorporation authorizes the issuance of up to 50,000,000 shares of “blank check” preferred stock. At March 31, 2020, 17,000 shares were designated as Series A Convertible Preferred Stock (“Series A Convertible Preferred Stock”) and 11,500,000 shares were designated as Series B Convertible Preferred Stock (“Series B Convertible Preferred Stock”).

Series A Convertible Preferred Stock

A total of 17,000 shares of Series A Convertible Preferred Stock have been authorized for issuance under the Company’s Certificate of Designation of Preferences and Rights of Series A Convertible Preferred Stock. The shares of Series A Convertible Preferred Stock have a stated value of $1,000 per share and are initially convertible into shares of common stock at a price of $2.00 per share, subject to adjustment.

The Series A Convertible Preferred Stock may, at the option of each investor, be converted into fully paid and non-assessable shares of common stock. The holders of shares of Series A Convertible Preferred Stock do not have the right to vote on matters that come before the Company’s stockholders. In the event of any dissolution or winding up of the Company, proceeds shall be paid pari passu among the holders of common stock and preferred stock, pro rata based on the number of shares held by each holder. The Company may not declare, pay or set aside any dividends on shares of capital stock of the Company (other than dividends on shares of common stock payable in shares of common stock) unless the holders of the Series A Convertible Preferred Stock shall first receive an equal dividend on each outstanding share of Series A Convertible Preferred Stock. The common shares issued were determined on a formula basis of 500 common shares for each share of Series A Convertible Preferred Stock converted.

No Shares of Series A Convertible Preferred Stock were converted during the three months ended March 31, 2020 or 2019. At March 31, 2020 and December 31, 2019, 194 shares of Series A Convertible Preferred Stock (that are convertible into 97,000 shares of common stock) remained outstanding.

Series B Convertible Preferred Stock

A total of 11,500,000 shares of Series B Convertible Preferred Stock are authorized for issuance under the Company’s Series B Certificate of Designation of Rights, Preferences and Privileges of Series B Convertible Preferred Stock. The shares of Series B Convertible Preferred Stock have a stated value of $4.75 per share and are convertible into shares of the Company’s common stock at an initial conversion price of $4.75 per share.

Holders of Series B Convertible Preferred Stock are entitled to dividends on an as-if-converted basis in the same form as any dividends actually paid on shares of the Series A Convertible Preferred Stock or the Company’s common stock. So long as any Series B Convertible Preferred Stock remains outstanding, the Company may not redeem, purchase or otherwise acquire any material amount of the Series A Convertible Preferred Stock or any securities junior to the Series B Convertible Preferred Stock.

No shares of Series B Convertible Preferred Stock were converted during the three months ended March 31, 2020 and 2019. At March 31, 2020 and December 31, 2019, 3,581,119 shares of Series B Preferred Stock (that are convertible into 3,581,119 shares of common stock) remained outstanding.

Cancellation of Common Shares

On September 30, 2013, Iovance and a third party entered into an agreement under which the Company issued 50,000 shares of unregistered stock in the Company to the third party. On January 16, 2019, the two parties entered into a confidential settlement agreement in connection with a dispute related to their prior relationship and activities. As part of the settlement, the third party returned 32,500 shares of common stock to the Company for cancellation and retained the remaining 17,500 shares. The Company included a gain of $335,000 on cancellation of 32,500 shares in Other income in its condensed consolidated statement of operations.

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NOTE 6. STOCK BASED COMPENSATION

Stock Plans

On October 14, 2011, the Company adopted the 2011 Equity Incentive Plan (the “2011 Plan”). Employees, directors, consultants and advisors of the Company are eligible to participate in the 2011 Plan. The 2011 Plan initially had 180,000 shares of common stock reserved for issuance in the form of incentive stock options, non-qualified options, common stock, and grant appreciation rights. The 2011 Plan was not approved by the Company’s stockholders within the required one-year period following its adoption and, accordingly, no incentive stock options can be granted under that plan. In August 2013, the Company’s Board of Directors and a majority of the Company’s stockholders approved an amendment to increase the number of shares available under the 2011 Plan from 180,000 shares to 1,700,000 shares, and an amendment to increase the number options or other awards that can be granted to any one person during a twelve (12) month period from 50,000 shares to 300,000 shares. The foregoing amendment to the 2011 Plan became effective in September 2013. On August 20, 2014, the Company’s Board of Directors amended the 2011 Plan to increase the number of shares available for issuance upon the exercise of stock options under the 2011 Plan from 1,700,000 to 1,900,000 shares, effective immediately. At March 31, 2020, 151,240 shares were available for future grant under the 2011 Plan.

On September 19, 2014, the Company’s Board of Directors adopted the Iovance Biotherapeutics, Inc. 2014 Equity Incentive Plan (the “2014 Plan”). The 2014 Plan was approved by the Company’s stockholders at the Company’s 2014 Annual Meeting of Stockholders held in November 2014. The 2014 Plan, as approved by the stockholders, authorized the issuance up to an aggregate of 2,350,000 shares of the Company’s common stock. On April 10, 2015, the Board amended the 2014 Plan to increase the total number of shares that can be issued under the 2014 Plan to 4,000,000 shares of the Company’s common stock. The increase in shares available for issuance under the 2014 Plan was approved by the Company’s stockholders at the Company’s 2015 Annual Meeting of Stockholders in June 2015.

On August 16, 2016, the Company’s stockholders approved an increase in the total number of shares that can be issued under the 2014 Plan to 9,000,000 shares of the Company’s common stock. At March 31, 2020, 89,408 shares were available for grant under the Company’s 2014 Plan.

On April 22, 2018, the Board of Directors adopted the Iovance Biotherapeutics, Inc. 2018 Equity Incentive Plan (the “2018 Plan”). The 2018 Plan was approved by the Company’s stockholders at the annual meeting of stockholders held in June 2018. The 2018 Plan as approved by the stockholders authorized the issuance up to an aggregate of 6,000,000 shares of common stock reserved for issuance in the form of incentive (qualified) stock options, non-qualified options, common stock, stock appreciation rights, restricted stock awards, restricted stock units, other stock-based awards, other cash-based awards or any combination of the foregoing. At March 31, 2020, 336,222 shares of common stock were available for grant under the Company’s 2018 Plan.

Restricted Stock Units

On June 1, 2016, the Company entered into a restricted stock unit agreement with the Company’s new Chief Executive Officer, Maria Fardis, Ph.D., pursuant to which the Company granted Dr. Fardis 550,000 non-transferrable restricted stock units at fair market value of $5.87 per share as an inducement of employment pursuant to the exception to The Nasdaq Global Market rules that generally require stockholder approval of equity incentive plans. The 550,000 restricted stock units vest in installments as follows: (i) 137,500 restricted stock units vested upon the first anniversary of the effective date of Dr. Fardis’ employment agreement; (ii) 275,000 restricted stock units vest upon the satisfaction of certain clinical trial milestones; and (iii) 137,500 restricted stock units vest in equal monthly installments over the 36-month period following the first anniversary of the effective date of Dr. Fardis’ employment, provided that Dr. Fardis has been continuously employed with the Company as of such vesting dates. At March 31, 2020, 11,458 restricted stock units remained unvested.

Stock-based compensation expense for restricted stock units are measured based on the closing fair market value of the Company’s common stock on the date of grant. The stock-based compensation expenses relating to restricted stock units were $0.1 million and $0.1 million for the three months ended March 31, 2020 and 2019, respectively, recorded as part of general and administrative expenses.

As of March 31, 2020, $0.04 million of total unrecognized compensation costs related to non-vested restricted stock units to be recognized over a weighted average period of 0.17 years.

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Stock Options

A summary of the status of stock options at March 31, 2020, and the changes during the three months then ended, is presented in the following table:

    

    

    

Weighted

    

Weighted

    

Aggregate

Number

Average

Average

Intrinsic

of

Exercise

Remaining

Value (in

Options

Price

Contract Life

thousands)

Outstanding at January 1, 2020

 

9,494,712

$

12.00

 

 

Granted

 

3,276,351

 

24.58

 

 

Exercised

 

(404,075)

 

9.78