UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM
|
|
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended |
or
|
|
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition from _____________ to _______________. |
Commission File Number:
(Exact name of registrant as specified in its charter)
|
|
(State of incorporation) |
(I.R.S. Employer Identification No.) |
|
(Address of principal executive offices) (Zip Code)
( (Registrant’s telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the Act:
|
Title of each class |
Trading symbol(s) |
Name of each exchange on which registered |
||
|
|
|
|
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.
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).
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 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 ☐ |
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
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
|
Class |
Outstanding at November 9, 2023 |
|
|
Common stock, $.001 par value |
|
INDEX
| Page Number | ||
| PART I | FINANCIAL INFORMATION | |
| ITEM 1. | Financial Statements | 1 |
| ITEM 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
16 |
| ITEM 3. | Quantitative and Qualitative Disclosures about Market Risk | 22 |
| ITEM 4. | Controls and Procedures | 22 |
| PART II | OTHER INFORMATION | |
| ITEM 1. | Legal Proceedings | 22 |
| ITEM 1A. | Risk Factors | 22 |
| ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 22 |
| ITEM 3. | Defaults upon Senior Securities | 23 |
| ITEM 4. | Mine Safety Disclosure | 23 |
| ITEM 5. | Other Information | 23 |
| ITEM 6. | Exhibits | 24 |
| Signatures | 25 | |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ThermoGenesis Holdings, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
|
September 30, |
December 31, |
|||||||
|
ASSETS |
||||||||
|
Current assets: |
||||||||
|
Cash and cash equivalents |
$ | $ | ||||||
|
Accounts receivable, net of allowance for credit losses of $ |
||||||||
|
Inventories |
||||||||
|
Prepaid expenses and other current assets |
||||||||
|
Total current assets |
||||||||
|
Inventories, non-current |
||||||||
|
Equipment and leasehold improvements, net |
||||||||
|
Right-of-use operating lease assets, net |
||||||||
|
Right-of-use operating lease assets – related party, net |
3,550,000 | |||||||
|
Goodwill |
||||||||
|
Intangible assets, net |
||||||||
|
Other assets |
||||||||
|
Total assets |
$ | $ | ||||||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
|
Current liabilities: |
||||||||
|
Accounts payable |
$ | $ | ||||||
|
Accrued payroll and related expenses |
||||||||
|
Deferred revenue – short-term |
||||||||
|
Convertible promissory note – related party |
||||||||
|
Interest payable – related party |
||||||||
|
Convertible promissory note, net |
||||||||
|
Other current liabilities |
||||||||
|
Total current liabilities |
||||||||
|
Operating lease obligations – long-term |
-- | |||||||
|
Operating lease obligations – related party – long-term |
3,495,000 | |||||||
|
Deferred revenue – long-term |
||||||||
|
Other noncurrent liabilities |
||||||||
|
Total liabilities |
||||||||
|
Commitments and contingencies |
|
|
||||||
|
Stockholders’ equity: |
||||||||
|
Preferred stock, $ |
-- | |||||||
|
Common stock, $ |
||||||||
|
Additional paid in capital |
||||||||
|
Accumulated deficit |
( |
) | ( |
) | ||||
|
Accumulated other comprehensive loss |
||||||||
|
Total ThermoGenesis Holdings, Inc. stockholders’ equity |
||||||||
|
Noncontrolling interests |
( |
) | ( |
) | ||||
|
Total equity |
||||||||
|
Total liabilities and equity |
$ | $ | ||||||
See accompanying notes to the condensed consolidated financial statements.
ThermoGenesis Holdings, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
|
Three Months Ended |
Nine Months Ended September 30, |
|||||||||||||||
|
2023 |
2022 |
2023 |
2022 |
|||||||||||||
|
Net revenues |
$ | $ | $ | $ | ||||||||||||
|
Cost of revenues |
||||||||||||||||
|
Gross profit |
||||||||||||||||
|
Expenses: |
||||||||||||||||
|
Selling, general and administrative |
||||||||||||||||
|
Research and development |
||||||||||||||||
|
Total operating expenses |
||||||||||||||||
|
Loss from operations |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other expenses: | ||||||||||||||||
|
Interest expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Loss on retirement of debt |
( |
) | -- | ( |
) | -- | ||||||||||
|
Other income/(expense) |
( |
) | ||||||||||||||
|
Total other expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Net loss |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Loss attributable to noncontrolling interests |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Net loss attributable to common stockholders |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
|
COMPREHENSIVE LOSS |
||||||||||||||||
|
Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
|
Other comprehensive loss: |
||||||||||||||||
|
Foreign currency translation adjustments gain |
||||||||||||||||
|
Comprehensive loss |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Comprehensive loss attributable to noncontrolling interests |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Comprehensive loss attributable to common stockholders |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
|
Per share data: |
||||||||||||||||
|
Basic and diluted net loss per common share |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
|
Weighted average common shares outstanding – basic and diluted |
||||||||||||||||
See accompanying notes to the condensed consolidated financial statements.
ThermoGenesis Holdings, Inc.
Condensed Consolidated Statements of Equity
For the Three and Nine Months Ended September 30, 2023
(Unaudited)
|
Shares |
Common Stock |
Paid in Capital in Excess of Par |
Accumulated Deficit |
AOCL* |
Non- Controlling Interests |
Total Equity |
||||||||||||||||||||||
|
Balance at January 1, 2023 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||||||
|
Stock-based compensation expense |
-- | -- | -- | -- | -- | |||||||||||||||||||||||
|
Related party convertible note price reset |
-- | -- | -- | -- | -- | |||||||||||||||||||||||
|
Convertible note price reset |
-- | -- | -- | -- | -- | |||||||||||||||||||||||
|
Conversion of note payable to common stock |
-- | -- | -- | |||||||||||||||||||||||||
|
Sale of common stock and warrants, net |
-- | -- | -- | -- | ||||||||||||||||||||||||
|
Exercise of warrants |
-- | -- | -- | -- | ||||||||||||||||||||||||
|
Foreign currency translation gain |
-- | -- | -- | -- | ( |
) | -- | ( |
) | |||||||||||||||||||
|
Net loss |
-- | -- | -- | ( |
) | -- | ( |
) | ( |
) | ||||||||||||||||||
|
Balance at March 31, 2023 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||||||
|
Stock-based compensation expense |
-- | -- | -- | -- | -- | |||||||||||||||||||||||
|
Exercise of pre-funded warrants |
-- | -- | -- | -- | -- | -- | ||||||||||||||||||||||
|
Net loss |
-- | -- | -- | ( |
) | -- | ( |
) | ( |
) | ||||||||||||||||||
|
Balance at June 30, 2023 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||||||
|
Stock-based compensation expense |
-- | -- | -- | -- | -- | |||||||||||||||||||||||
|
Related party convertible note converted to common stock |
-- | -- | -- | |||||||||||||||||||||||||
|
Related party convertible note price reset |
-- | -- | -- | -- | -- | |||||||||||||||||||||||
|
Foreign currency translation gain |
-- | -- | -- | -- | -- | |||||||||||||||||||||||
|
Net loss |
-- | -- | -- | ( |
) | -- | ( |
) | ( |
) | ||||||||||||||||||
|
Balance at September 30, 2023 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||||||
ThermoGenesis Holdings, Inc.
Condensed Consolidated Statements of Equity
For the Three and Nine Months Ended September 30, 2022
|
Shares |
Common Stock |
Paid in Capital in Excess of Par |
Accumulated Deficit |
AOCL* |
Non- Controlling Interests |
Total Equity |
||||||||||||||||||||||
|
Balance at January 1, 2022 |
$ | -- | $ | $ | ( |
) | $ | $ | ( |
) | $ | |||||||||||||||||
|
Adoption of ASU 2020-06 |
-- | -- | ( |
) | -- | -- | ( |
) | ||||||||||||||||||||
|
Stock-based compensation expense |
-- | -- | -- | -- | -- | |||||||||||||||||||||||
|
Issuance of common stock via at-the-market offering, net |
-- | -- | -- | -- | ||||||||||||||||||||||||
|
Related party convertible note price reset |
||||||||||||||||||||||||||||
|
Foreign currency translation gain |
-- | -- | -- | -- | -- | |||||||||||||||||||||||
|
Net loss |
-- | -- | -- | ( |
) | -- | ( |
) | ( |
) | ||||||||||||||||||
|
Balance at March 31, 2022 |
$ | -- | $ | $ | ( |
) | $ | $ | ( |
) | $ | |||||||||||||||||
|
Stock-based compensation expense |
-- | -- | -- | -- | -- | |||||||||||||||||||||||
|
Issuance of common stock via at-the-market offering, net |
-- | -- | -- | -- | ||||||||||||||||||||||||
|
Related party convertible note price reset |
-- | -- | -- | -- | -- | |||||||||||||||||||||||
|
Conversion of related party note payable to common stock |
-- | -- | -- | |||||||||||||||||||||||||
|
Foreign currency translation gain |
-- | -- | -- | -- | -- | |||||||||||||||||||||||
|
Net loss |
-- | -- | -- | ( |
) | -- | ( |
) | ( |
) | ||||||||||||||||||
|
Balance at June 30, 2022 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||||||
|
Stock-based compensation expenses |
-- | -- | -- | -- | -- | |||||||||||||||||||||||
|
Issuance of common stock via at-the-market offering, net |
-- | -- | -- | -- | ||||||||||||||||||||||||
|
Related party convertible note price reset |
-- | -- | -- | -- | -- | |||||||||||||||||||||||
|
Foreign currency translation gain |
-- | -- | -- | -- | -- | |||||||||||||||||||||||
|
Net loss |
-- | -- | -- | ( |
) | -- | ( |
) | ( |
) | ||||||||||||||||||
|
Balance at September 30, 2022 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||||||
|
* |
|
See accompanying notes to the condensed consolidated financial statements.
ThermoGenesis Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
Nine Months Ended September 30, |
||||||||
|
2023 |
2022 |
|||||||
|
Cash flows from operating activities: |
||||||||
|
Net loss |
$ | ( |
) | $ | ( |
) | ||
|
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
|
Depreciation and amortization |
||||||||
|
Stock based compensation expense |
||||||||
|
Amortization of debt discount/premium, net |
||||||||
|
Reserve for excess and slow-moving inventories |
||||||||
|
Loss on retirement of debt |
-- | |||||||
|
Net change in operating assets and liabilities: |
||||||||
|
Accounts receivable |
( |
) | ||||||
|
Inventories |
||||||||
|
Prepaid expenses and other assets |
||||||||
|
Accounts payable |
( |
) | ( |
) | ||||
|
Interest payable – related party |
( |
) | ( |
) | ||||
|
Accrued payroll and related expenses |
||||||||
|
Deferred revenue – short-term |
||||||||
|
Other current liabilities |
||||||||
|
Long-term deferred revenue and other noncurrent liabilities |
( |
) | ( |
) | ||||
|
Net cash used in operating activities |
( |
) | ( |
) | ||||
|
Cash flows from investing activities: |
||||||||
|
Capital expenditures |
( |
) | ( |
) | ||||
|
Net cash used in investing activities |
( |
) | ( |
) | ||||
|
Cash flows from financing activities: |
||||||||
|
Proceeds from issuance of common stock, net of expenses |
||||||||
|
Proceeds from the exercise of warrants |
-- | |||||||
|
Net cash provided by financing activities |
||||||||
|
Effects of foreign currency rate changes on cash and cash equivalents |
( |
) | ( |
) | ||||
|
Net increase (decrease) in cash and cash equivalents |
( |
) | ( |
) | ||||
|
Cash and cash equivalents at beginning of period |
||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
|
Supplemental disclosures of cash flow information: |
||||||||
|
Cash paid for related party interest |
$ | $ | ||||||
|
Cash paid for interest |
$ | $ | ||||||
|
Fair value of January 2023 amended convertible note issued in connection with the extinguishment of original convertible note |
$ | -- | ||||||
|
Fair value of July 2023 amended convertible note issued in connection with the extinguishment of original convertible note |
$ | -- | ||||||
|
Right-to-use asset acquired under operating lease, related party |
-- | $ | ||||||
|
Convertible note price reset |
$ | -- | ||||||
|
Related party convertible note converted to common stock |
$ | $ | ||||||
|
Related party convertible note price reset |
$ | $ | 3,763,000 | |||||
|
Promissory note converted to common stock |
$ | -- | ||||||
See accompanying notes to the condensed consolidated financial statements.
ThermoGenesis Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
|
1. |
Description of Business |
Overview
ThermoGenesis Holdings, Inc. (“ThermoGenesis Holdings,” the “Company,” “we,” “our,” “us”) develops and commercializes a range of automated technologies for cell-banking, cell-processing, and cell-based therapeutics. Since the 1990’s, ThermoGenesis Holdings has been a pioneer in, and a leading provider of automated systems that isolate, purify and cryogenically store units of hematopoietic stem and progenitor cells for the cord blood banking industry. The Company was founded in 1986 and is incorporated in the State of Delaware and headquartered in Rancho Cordova, CA. Our common stock is traded on the Nasdaq Capital Market under the ticker symbol “THMO”.
Medical Device Products for Automated Cell Processing
The Company provides the AutoXpress® and BioArchive® platforms for automated clinical bio-banking, PXP® platform for point-of-care cell-based therapies and the CAR-TXpress™ platform for large scale cell manufacturing services. All product lines are reporting as a single reporting segment in the financial statements.
CDMO Business
The Company is expanding its business to include contract development and manufacturing services for cell and cell-based gene therapies. The Company is in the process of building out the capabilities to become a world-class Contract Development and Manufacturing Organization (“CDMO”) for cell and cell-based gene therapies. The Company is building out a new facility in the Sacramento metro area, containing a total of 12, class-7, ReadyStart cGMP Suites available for lease by early-stage life science and cell gene therapy companies. The ReadyStart Suites are located in a 35,500+ square foot cGMP facility that will meet the highest scientific, quality, and regulatory requirements. The CDMO facility was completed in October of 2023.
Reverse Stock Split
On December 22, 2022, we effected a one (1) for forty-five () reverse stock split of our issued and outstanding common stock. All historical share amounts disclosed in this quarterly report on Form 10-Q have been retroactively restated to reflect the reverse split and subsequent share exchange. No fractional shares were issued as a result of the reverse stock split, as fractional shares of common stock were rounded up to the nearest whole share.
|
2. |
Going Concern |
The Company has incurred historical losses from operations and expects to continue to incur operating losses in the near future. The Company may need to raise additional capital to grow its business, fund operating expenses and make interest payments. The Company’s ability to fund its liquidity needs is subject to various risks, many of which are beyond its control. The Company may seek additional funding through debt borrowings, sales of debt or equity securities or strategic partnerships. The Company cannot guarantee that such funding will be available on a timely basis, in needed quantities or on terms favorable to the Company, if at all. These factors and other indicators raise substantial doubt about the Company’s ability to continue as a going concern within one year from the filing date of this report.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.
|
3. |
Summary of Significant Accounting Polices |
There have been no material changes in the Company’s significant accounting policies to those disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Basis of Presentation
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 with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such Securities and Exchange Commission (“SEC”) rules and regulations and accounting principles applicable for interim periods. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of the results for the periods presented have been included. Events subsequent to the balance sheet date have been evaluated for inclusion in the accompanying condensed consolidated financial statements through the date of issuance.
Operating results for the three and nine months ended September 30, 2023, are not necessarily indicative of the results that may be expected for the Company’s fiscal year ending December 31, 2023. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in ThermoGenesis Holdings’ Annual Report on Form 10-K for the year ended December 31, 2022.
Principles of Consolidation
The consolidated financial statements include the accounts of ThermoGenesis Holdings and its wholly-owned subsidiaries, ThermoGenesis Corp. and TotipotentRX Cell Therapy, Pvt. Ltd and ThermoGenesis Corp’s majority-owned subsidiary, CARTXpress Bio, Inc. (“CARTXpress Bio”). All significant intercompany accounts and transactions have been eliminated upon consolidation.
The
Recently Adopted Accounting Standards
On January 1, 2022, we adopted Accounting Standards Update (“ASU”) 2020-06 “Debt-Debt with Conversion and Other Options (“Subtopic 470-20”) and Derivatives and Hedging-Contracts in Entity’s Own Equity (“Subtopic 815-40”): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity,” using the modified retrospective method. ASU 2020-06 provides guidance on how to account for contracts on an entity’s own equity. This ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. Specifically, the ASU eliminated the need for the Company to assess whether a contract on the entity’s own equity (1) permits settlement in unregistered shares, (2) whether counterparty rights rank higher than shareholder’s rights, and (3) whether collateral is required. The Company recognized a cumulative effect of $
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (“Topic 326”). The ASU introduced a new accounting model, the Current Expected Credit Losses model (“CECL”), which requires earlier recognition of credit losses and additional disclosures related to credit risk. The CECL model utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses at the time the financial asset is originated or acquired. ASU 2016-13 is effective for annual reporting periods beginning after December 15, 2022, including interim reporting periods within those annual reporting periods. The Company adopted the standard effective January 1, 2023. Based on the composition of the Company’s trade receivables and unbilled revenue, and expected future losses, the adoption of ASU 2016-13 did not have a material impact on its condensed consolidated financial statements.
|
4. |
Related Party Transactions |
Convertible Promissory Note and Revolving Credit Agreement
In March 2017, ThermoGenesis Holdings entered into a Credit Agreement with Boyalife Group (USA), Inc. (the “Lender”), which is owned and controlled by the Company’s Chief Executive Officer and Chairman of our Board of Directors. The Credit Agreement, as amended, grants the Company the right to borrow up to $
The Company performed a debt extinguishment vs. modification analysis on the Amendment to the Note and determined that the amendment would be considered an extinguishment, due to an increase of more than 10% to the value of the embedded conversion option. However, no gain or loss was recorded in the condensed consolidated statements of operations and comprehensive loss at the time of the Amendment as it was determined that the fair value of the Amendment to the Note and accrued interest was the same before and after the extension.
On September 28, 2023, the Company received a conversion notice from the Lender to convert a total of $
The Credit Agreement and the Note, as amended provide that the principal and all accrued and unpaid interest under the Loan will be due and payable on the Maturity Date, with payments of interest-only due on the last day of each calendar year. The Loan bears interest at
The following summarizes the Note:
|
Maturity Date |
Stated Interest Rate |
Conversion Price |
Face Value |
Debt Discount |
Carrying Value |
||||||||||||||||
|
September 30, 2023 |
|
% | $ | $ | $ | ( |
) | $ | |||||||||||||
|
December 31, 2022 |
|
% | $ | $ | $ | ( |
) | $ | |||||||||||||
The Note includes a down-round anti-dilution provision that lowers its conversion price if the Company sells shares of common stock or issues convertible debt at a lower price per share. Through September 30, 2023, the down-round provision was triggered as noted below:
In January 2023, when the conversion price of the Note was at $
In March 2023, the Company sold shares of common stock and warrants at $
In July 2023, when the conversion price of the Note was at $
A Black-Scholes pricing model was utilized to determine the change in the before and after incremental value of the conversion option at each triggering event, with the following inputs:
|
January 2023 |
March 2023 |
July 2023 |
||||||||||
|
Conversion price before |
$ | $ | $ | |||||||||
|
Conversion price after |
$ | $ | $ | |||||||||
|
Term (years) |
||||||||||||
|
Volatility |
% | % | % | |||||||||
|
Dividend rate |
% | % | % | |||||||||
|
Risk free rate |
% | % | % | |||||||||
For the three and nine months ended September 30, 2023, the Company amortized $
Boyalife Genomics
On March 24, 2022, the Company entered into a License and Technology Access Agreement with Boyalife Genomics Tianjin Ltd. (“Boyalife Genomics”), a China-based CDMO and an affiliate of ThermoGenesis’ Chairman and Chief Executive Officer, Chris Xu, Ph.D. The agreement provides for a U.S. license to certain existing and future know-how and other intellectual property relating to cell manufacturing and related processes. The Company plans to develop and operate the CDMO cell therapy manufacturing business through a division named TG Biosynthesis.
Under the terms of the agreement, the Company transferred its remaining
|
5. |
Related Party Lease |
Z3 Investment
On March 24, 2022, the Company entered into a Lease Agreement with Z3 Investment LLC, an affiliate owned by the Company’s CEO and Chairman of the Board and the Company’s Chief Operating Officer who is also a Board Member, beginning April 1, 2022, for approximately
Operating Lease
Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets. To determine the present value of lease payments not yet paid, we use the Company’s cost of capital based on existing debt instruments. We recognize the expense for this lease on a straight-line basis over the lease term.
The following summarizes the Company’s operating lease:
|
September 30, 2023 |
December 31, 2022 |
|||||||
|
Right-of-use operating lease assets – related party, net |
$ | $ | ||||||
|
Current lease liability (included in other current liabilities) |
||||||||
|
Non-current lease liability – related party |
||||||||
|
Weighted average remaining lease term |
||||||||
|
Discount rate |
% | % | ||||||
Maturities of lease liabilities by year for our operating lease are as follows:
|
2023 (Remaining) |
$ | |||
|
2024 |
||||
|
2025 |
||||
|
2026 |
||||
|
Thereafter |
||||
|
Total lease payments |
$ | |||
|
Less: imputed interest |
( |
) | ||
|
Present value of operating lease liabilities |
$ |
Statement of Cash Flows
Cash paid for amounts included in the measurement of operating lease liabilities was $
|
6. |
Convertible Promissory Note |
July 2019 Note
On July 23, 2019, the Company entered into a private placement with Orbrex (USA) Co. Limited (“Orbrex”), pursuant to which the Company issued and sold to Orbrex an unsecured convertible promissory note, as amended, in the original principal amount of $
|
● |
On January 31, 2023, the Company entered into Amendment No. 3 to the July 2019 Note, which extended the maturity date from January 31, 2023 to July 31, 2023 and changed the fixed conversion price to $ |
|
● |
On July 31, 2023, the Company entered into an Amendment No. 4 to the July 2019 Note, which extended the maturity date of the July 2019 Note from July 31, 2023 to January 31, 2024 and changed the fixed conversion price to $ |
The following summarizes the July 2019 Note:
|
Maturity Date |
Stated Interest Rate |
Conversion Price |
Face |
Debt |
Carrying Value |
||||||||||||||||
|
September 30, 2023 |
|
$ | $ | $ | $ | ||||||||||||||||
|
December 31, 2022 |
|
$ | $ | $ | ( |
) | $ | ||||||||||||||
The July 2019 Note includes a down-round anti-dilution provision that lowers its conversion price if the Company sells shares of common stock or issues convertible debt at a lower price per share. In 2023, the anti-dilution provision was triggered, as noted below:
In March 2023, the Company sold shares of common stock at $
A Black-Scholes pricing model was utilized to determine the change in the before and after incremental value of the conversion option at each triggering event, with the following inputs:
|
March 2023 |
||||
|
Conversion price before |
$ | |||
|
Conversion price after |
$ | |||
|
Term (years) |
||||
|
Volatility |
% | |||
|
Dividend rate |
% | |||
|
Risk free rate |
% | |||
The Company recorded amortization expense for the July 2019 Note of ($
|
7. |
Stockholders’ Equity |
Common Stock
On March 15, 2023, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an accredited investor (the “Investor”) pursuant to which the Company agreed to issue and sell to the Investor in a private placement (the “Offering”) (i)
In connection with the Offering, the Company entered into a Warrant Amendment Agreement (the "Warrant Amendment Agreement”), dated March 15, 2023, with the Investor, whereby the Company agreed to amend existing warrants, held by the Investor, to purchase up to an aggregate of
The warrant repricing resulted in an immediate and incremental increase of approximately $
|
March 2023 |
||||
|
Conversion price before |
$ | |||
|
Conversion price after |
$ | |||
|
Term (years) |
||||
|
Volatility |
% | |||
|
Dividend rate |
% | |||
|
Risk free rate |
% | |||
On February 3, 2022, the Company entered into Amendment No. 2 to the At the Market Offering Agreement (the “Offering Agreement”) with H.C. Wainwright & Co., LLC to further increase the maximum aggregate offering price of shares of Common Stock that may be offered and sold from time to time under the Offering Agreement from $
Net Loss Per Share
Net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding plus the pre-funded warrants. For the purpose of calculating basic net loss per share, the additional shares of common stock that are issuable upon exercise of the pre-funded warrants have been included since the shares are issuable for a negligible consideration and have no vesting or other contingencies associated with them. All pre-funded warrants previously issued have been exercised and none are outstanding. The calculation of the basic and diluted earnings per share is the same for all periods presented, as the effect of the potential common stock equivalents noted below is anti-dilutive due to the Company’s net loss position for all periods presented. Anti-dilutive securities consisted of the following at September 30:
|
2023 |
2022 |
|||||||
|
Common stock equivalents of convertible promissory notes and accrued interest |
||||||||
|
Warrants |
||||||||
|
Stock options |
||||||||
|
Total |
||||||||
Warrants
A summary of warrant activity for the nine months ended September 30, 2023 is as follows:
|
Number of Shares |
Weighted-Average Exercise Price Per Share |
Weighted- Average Remaining Contract Term |
||||||||||
|
Balance at December 31, 2022 |
$ | |||||||||||
|
Warrants granted |
||||||||||||
|
Warrants expired |
( |
) | ||||||||||
|
Pre-funded warrants granted |
||||||||||||
|
Pre-funded warrants exercised |
( |
) | ||||||||||
|
Warrants exercised |
( |
) | ||||||||||
|
Exercisable and Outstanding at September 30, 2023 |
$ | |||||||||||
|
8. |
Revenue |
The following table presents net sales by geographic areas:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
|
2023 |
2022 |
2023 |
2022 |
|||||||||||||
|
United States |
$ | $ | $ | $ | ||||||||||||
|
China |
||||||||||||||||
|
United Arab Emirates |
-- | -- | ||||||||||||||
|
Other |
||||||||||||||||
|
Total |
$ | $ | $ | $ | ||||||||||||
The following tables summarize the revenues by product line and type:
|
Three Months Ended September 30, 2023 |
||||||||||||||||
|
Device Revenue |
Service Revenue |
Other Revenue |
Total Revenue |
|||||||||||||
|
AXP |
$ | $ | $ | -- | $ | |||||||||||
|
BioArchive |
-- | |||||||||||||||
|
CAR-TXpress |
||||||||||||||||
|
Manual Disposables |
-- | -- | ||||||||||||||
|
Other |
-- | |||||||||||||||
|
Total |
$ | $ | $ | $ | ||||||||||||
|
Nine Months Ended September 30, 2023 |
||||||||||||||||
|
Device Revenue |
Service Revenue |
Other Revenue |
Total Revenue |
|||||||||||||
|
AXP |
$ | $ | $ | -- | $ | |||||||||||
|
BioArchive |
-- | |||||||||||||||
|
CAR-TXpress |
||||||||||||||||
|
Manual Disposables |
-- | -- | ||||||||||||||
|
Other |
-- | |||||||||||||||
|
Total |
$ | $ | $ | $ | ||||||||||||
|
Three Months Ended September 30, 2022 |
||||||||||||||||
|
Device Revenue |
Service Revenue |
Other Revenue |
Total Revenue |
|||||||||||||
|
AXP |
$ | $ | $ | -- | $ | |||||||||||
|
BioArchive |
-- | |||||||||||||||
|
CAR-TXpress |
||||||||||||||||
|
Manual Disposables |
-- | -- | ||||||||||||||
|
Other |
-- | |||||||||||||||
|
Total |
$ | $ | $ | $ | ||||||||||||
|
Nine Months Ended September 30, 2022 |
||||||||||||||||
|
Device Revenue |
Service Revenue |
Other Revenue |
Total Revenue |
|||||||||||||
|
AXP |
$ | $ | $ | -- | $ | |||||||||||
|
BioArchive |
-- | |||||||||||||||
|
CAR-TXpress |
||||||||||||||||
|
Manual Disposables |
-- | -- | ||||||||||||||
|
Other |
-- | |||||||||||||||
|
Total |
$ | $ | $ | $ | ||||||||||||
Contract Balances
Generally, all sales are contract sales (with either an underlying contract or purchase order). The Company does not have any material contract assets. When invoicing occurs prior to revenue recognition, a contract liability is recorded (as deferred revenue on the consolidated balance sheet). Revenues that were included in the beginning balance of deferred revenue during the three and nine months ended September 30, 2023 were $
Backlog of Remaining Customer Performance Obligations
The following table represents revenue expected to be recognized in the future from the backlog of performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period:
|
Remainder of 2023 |
2024 |
2025 |
2026 |
2027 and beyond |
Total |
|||||||||||||||||||
|
Service revenue |
$ | $ | $ | $ | -- | $ | -- | $ | ||||||||||||||||
|
Device revenue (1) |
-- | -- | -- | |||||||||||||||||||||
|
Exclusivity fee |
-- | |||||||||||||||||||||||
|
Other |
||||||||||||||||||||||||
|
Total |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
|
|
|
|
9. |
Concentrations |
The Company had certain customers whose individual revenue was material to the Company’s total revenue, or whose accounts receivable balances were material to the Company’s total accounts receivable balances. Those customers are listed as follows:
Accounts Receivable
|
September 30, 2023 |
December 31, 2022 |
|||||||
|
Customer 1 |
-- | |||||||
|
Customer 2 |
-- | |||||||
|
Customer 3 |
-- | |||||||
Revenues
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
|
2023 |
2022 |
2023 |
2022 |
|||||||||||||
|
Customer 1 |
||||||||||||||||
|
Customer 2 |
||||||||||||||||
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Note Regarding Forward‑Looking Statements
This report contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. The forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements contained herein. When used in this report, the words "anticipate," "believe," "estimate," "expect" and similar expressions as they relate to the Company or its management are intended to identify such forward-looking statements. Actual results, performance or achievements could differ materially from the results expressed in, or implied by these forward-looking statements. Readers should be aware of important factors that, in some cases, have affected, and in the future could affect, actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of the Company. These factors include without limitation, the ability to obtain capital and other financing in the amounts and at the times needed to launch new products, market acceptance of new products, the nature and timing of regulatory approvals for both new products and existing products for which the Company proposes new claims, realization of forecasted revenues, expenses and income, initiatives by competitors, price pressures, failure to meet U.S. Food and Drug Administration (“FDA”) regulated requirements governing the Company’s products and operations (including the potential for product recalls associated with such regulations), risks associated with initiating manufacturing for new products, failure to meet Foreign Corrupt Practice Act regulations, legal proceedings, risks associated with expanding into the Company’s new CDMO business, and other risk factors listed from time to time in our reports with the Securities and Exchange Commission (“SEC”), including, in particular, those set forth in the Company’s Form 10-K for the year ended December 31, 2022.
Business Overview
ThermoGenesis Holdings, Inc. (“ThermoGenesis Holdings,” the “Company,” “we,” “our,” “us”), develops, commercializes and markets a range of automated technologies for CAR-T and other cell-based therapies. The Company currently markets a full suite of solutions for automated clinical biobanking, point-of-care applications, and automation for immuno-oncology, including its semi-automated, functionally closed CAR-TXpress™ platform, which streamlines the manufacturing process for the emerging CAR-T immunotherapy market. The Company was founded in 1986 and is incorporated in the State of Delaware and headquartered in Rancho Cordova, CA.
Our business involves the manufacturing and related service of cell based medical devices, including the AutoXpress® and BioArchive® platforms for automated clinical bio-banking, PXP® platform for point-of-care cell-based therapies and CAR-TXpress platform for large scale cell manufacturing services. The Company and its subsidiaries currently manufacture and market the following products:
Clinical Bio-Banking Applications:
|
● |
AXP® II Automated Cell Separation System – an automated, fully closed cell separation system for isolating stem and progenitor cells from umbilical cord blood, registered as a U.S. FDA 510(k) medical device. |
|
● |
BioArchive® Automated Cryopreservation System – an automated, robotic, liquid nitrogen controlled-rate-freezing and cryogenic storage system for cord blood samples and cell therapeutic products used in clinical applications, registered as a U.S. FDA 510(k) medical device. |
Point-of-Care Applications:
|
● |
PXP® Point-of-Care System – an automated, fully closed, sterile system allows for the rapid, automated processing of autologous peripheral blood or bone marrow aspirate derived stem cells at the point-of-care, such as surgical centers or clinics, registered as a U.S. FDA 510(k) medical device. |
|
● |
PXP-LAVARE System – an automated, fully closed system that is designed to wash, re-suspend and volume reduce cell suspensions. It allows for volume manipulation, supernatant or media exchange, and cell washing to occur without comprising cell viabilities and maximizing recoveries, registered as a U.S. FDA 510(k) medical device. |
|
● |
PXP-1000 System – an automated, fully closed system that provides fast, reproducible separation of multiple cellular components from blood with minimal red blood cell contamination, registered as a U.S. FDA 510(k) medical device. |
Large Scale Cell Processing and Biomanufacturing:
|
● |
X-Series® Products for general laboratory use: X-Lab® for cell isolation, X-Wash® System for cell washing and reformulation, X-Mini® for high efficiency small scale cell purification, and X-BACS® System under development for large scale cell purification using our proprietary Buoyancy-Activated Cell Sorting (“BACS”) technology. |
|
● |
CAR-TXpress Platform for Clinical Manufacturing – a modular designed, functionally closed manufacturing platform that addresses the critical unmet need for large scale cellular processing and chemistry, manufacturing and controls (“CMC”) needs for manufacturing cellular therapies, including chimeric antigen receptor (“CAR”) T cell therapies. The CAR-TXpress Platform is owned and developed through a subsidiary CAR-TXpress Bio, Inc. (“CARTXpress Bio”) in which the Company owns 80% of the equity interest. |
Expansion of Business – Contract Development and Manufacturing Services for Cell and Cell-Based Gene Therapies
The Company expanded its business to include contract development and manufacturing services for cell and cell-based gene therapies. The Company is in the process of building out the capabilities to become a world-class Contract Development and Manufacturing Organization (“CDMO”) for cell and cell-based gene therapies. The Company is rolling out a new facility in the Sacramento metro area, containing a total of 12, class-7, ReadyStart cGMP Suites available for lease by early-stage life science and cell gene therapy companies. The ReadyStart Suites are located in a 35,500+ square foot cGMP facility that will meet the highest scientific, quality, and regulatory requirements. We intend to leverage our existing technology and combine it with the in-licensed technologies to develop a proprietary manufacturing platform for cell manufacturing activities.
The Company will operate its new CDMO business through a newly formed division named TG BiosynthesisTM. It is anticipated that TG Biosynthesis will provide high-quality development and manufacturing capabilities, cell and tissue processing development, quality systems, regulatory compliance, and other cell manufacturing solutions for clients with therapeutic candidates in various stages of development.
The CDMO facility was completed in October of 2023. The successful development and launch of TG Biosynthesis will require us to hire certain personnel needed to operate our leased Sacramento facility. There is no assurance that the Company will be able to achieve market acceptance of the new CDMO business. We will need to hire, train, and retain additional employees who have experience in the cell manufacturing field in order for our CDMO business to be successful.
Results of Operations
Three Months Ended September 30, 2023 as Compared
to the Three Months Ended September 30, 2022
Net Revenues
Net revenues increased by $79,000 or 4%, from $2,115,000 to $2,194,000 for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022. The increase in revenue was driven by a new distributor in the United Arab Emirates, offset by lower CAR-TXpress sales for the quarter ended September 30, 2023.
The following table summarizes revenue by product line:
|
September 30, 2023 |
September 30, 2022 |
|||||||
|
AXP |
$ | 1,574,000 | $ | 1,109,000 | ||||
|
BioArchive |
453,000 | 522,000 | ||||||
|
CAR-TXpress |
147,000 | 306,000 | ||||||
|
Manual Disposables |
8,000 | 150,000 | ||||||
|
Other |
12,000 | 28,000 | ||||||
|
Total |
$ | 2,194,000 | $ | 2,115,000 | ||||
Gross Profit
The Company’s gross profit decreased by $42,000 to $395,000 or 18% of net revenues for the three months ended September 30, 2023, compared to $437,000 or 21% for three months ended September 30, 2022. The primary driver of the decrease was lower absorption driven by excess manufacturing capacity in the third quarter of 2023.
Selling, General and Administrative
Sales, general and administrative expenses for the three months ended September 30, 2023 were $1,686,000 compared to $1,982,000 for the three months ended September 30, 2022, a decrease of $296,000 or 15%. The decrease was driven primarily by lower employee benefit expenses of approximately $200,000 and $70,000 in lower investor relations expenses.
Research and Development Expenses
Research and development expenses were $266,000 for the three months ended September 30, 2023 as compared to $470,000 for the three months ended September 30, 2022, a decrease of $204,000 or 43%. The decrease was primarily due to approximately $100,000 less in project expenses and approximately $50,000 in lower personnel expenses during the quarter.
Interest Expense
Interest expense for the three months ended September 30, 2023 was $2,118,000 compared to $1,391,000, for the three months ended September 30, 2022, an increase of $727,000. The increase was driven by an increase of approximately $700,000 in amortization expense related to triggering events from a decrease in the conversion price of the Note in the three months ended September 30, 2023 as compared to the same period in 2022.
Loss on Retirement of Debt
Loss on retirement of debt was $87,000 in the three months ended September 30, 2023 as a result of the July 2023 amendment to the July 2019 Note which extended the due date for six months and lowered the conversion price of the note.
Nine Months Ended September 30, 2023 as Compared to
the Nine Months Ended September 30, 2022
Net Revenues
Net revenues decreased by $768,000 or 10%, from $7,807,000 to $7,039,000 for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022. The decrease in revenue was driven by lower AXP disposable sales to the Company’s distributor in China and lower CAR-TXpress sales which were offset by BioArchive device revenue and sales to the new distributor in the United Arab Emirates for the nine months ended September 30, 2023.
|
Nine Months Ended September 30, |
||||||||
|
2023 |
2022 |
|||||||
|
AXP |
$ | 4,429,000 | $ | 4,839,000 | ||||
|
BioArchive |
1,899,000 | 1,618,000 | ||||||
|
CAR-TXpress |
423,000 | 911,000 | ||||||
|
Manual Disposables |
||||||||