The Company provides the AutoXpress® and BioArchive® platforms for automated clinical bio-banking, PXP® platform for point-of-care cell-based therapies and CAR-TXpress™ platform for bio-manufacturing for immuno-oncology applications.large scale cell manufacturing services. All product lines are reporting as a single reporting segment in the financial statements.
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-Q10-Q and Article 8 of Regulation S-X.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 presentation 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.
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. All significant intercompany accounts and transactions have been eliminated upon consolidation.
2.
| GOING CONCERN
4. Related Party Transactions |
At Convertible Promissory Note and Revolving Credit Agreement
In March 2017, ThermoGenesis Holdings entered into a Credit Agreement with Boyalife Asset Holding II, Inc. (the “Lender”). The Lender is a wholly owned subsidiary of the Boyalife Group (USA), Inc., 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 to the Company the right to borrow up to $10,000,000 (the “Loan”) at any time prior to March 6, 2022 (the “Maturity Date”). As of December 31, 2021, the Company had cash and cash equivalentsan outstanding principal balance on the Loan of $10,014,000 and working capital of $6,413,000. The Company has incurred recurring operating losses and as of $10,000,000. On March 31, 2021 had an accumulated deficit of $255,696,000. These recurring losses raise substantial doubt about the Company’s ability to continue as a going concern within one year from the filing of this report. 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 cash 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 4, 2022, the Company if at all.amended the Loan extending the Maturity Date by one year to March 6, 2023.
The accompanying condensed consolidated financial statements have been prepared assumingCredit Agreement and the Convertible Promissory Note issued thereunder (as amended, the “Note”) provide that the Companyprincipal and all accrued and unpaid interest under the Loan will continue as a going concern; however, the above conditions raise substantial doubt about the Company’s ability to do so. The condensed consolidated financial statements do not include any adjustments to reflect the possible future effectsbe due and payable on the recoverability and classificationMaturity Date, with payments of assetsinterest-only due on the last day of each calendar year. The Loan bears interest at 22% per annum, simple interest. The Company has five business days after the Lender demands payment to pay the interest due before the Loan is considered in default. The Loan can be prepaid in whole or the amounts and classifications of liabilities that may result shouldin part by the Company be unable to continue as a going concern.at any time without penalty.
The following summarizes the Note:
| | Maturity Date | | Stated Interest Rate | | | Conversion Price | | | Carrying Value | |
At March 31, 2022 | 3/6/2023 | | | 22 | % | | $ | 0.64 | | | $ | 10,000,000 | |
At December 31, 2021 | 3/6/2022 | | | 22 | % | | $ | 1.80 | | | $ | 9,245,000 | |
The Note includes a down round provision that lowers its conversion price if the Company sells shares of common stock at a lower price per share. In February 2022, the Company sold shares of common stock at a price lower than the conversion price of the Note, resulting in a down round triggering event lowering the conversion price of the Note to $0.64 per share. The Company determined that the triggering event created incremental value of $213,000 which was treated as a debt discount and amortized over the remaining term of the Note. A Black-Scholes pricing model was utilized to determine the change in the before and after incremental value of the conversion option with the following inputs:
| | | Before | | | After | |
Conversion Price | | $ | 1.80 | | | $ | 0.64 | |
Term (in years) | | | 0.02 | | | | 0.02 | |
Volatility | | | 39.53 | % | | | 39.53 | % |
Dividend rate | | | 0 | % | | | 0 | % |
Risk free rate | | | 1.97 | % | | | 1.97 | % |
The Company amortized $213,000 and $827,000 of debt discount to interest expense for the three months ended March 31, 2022 and 2021, respectively. In addition to the amortization, the Company also recorded interest expense of $550,000 for each of the quarters ended March 31, 2022 and 2021. The interest payable balance as of March 31, 2022 and December 31, 2021 was $153,000 and $2,231,000, respectively.
On March 4, 2022, the Company amended the Credit Agreement and the Note to extend the due date by one year to March 6, 2023. No other terms of the Note were changed as a part of the extension. The Company performed a debt extinguishment vs. modification analysis. The analysis determined that the extension would be considered an extinguishment from an accounting standpoint, due to the change in the value of the conversion option. However, no gain or loss was recorded to the consolidated statement of operations for the quarter ended March 31, 2022 as it was determined that the fair value of the Note was $10,000,000 both before and after the extension.
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 contract development and manufacturing organization (“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 newly formed division named TG Biosynthesis.
Under the terms of the agreement, the Company transferred its remaining 8.64% interest in ImmuneCyte to Boyalife Genomics and agreed to pay a running royalty of 7.5% of its annual net sales of products and services that are covered by one or more of Boyalife Genomics’ granted U.S. patents and a royalty of 5.0% of other products and services covered by other licensed intellectual property. In the quarter ended March 31, 2022, 0 royalty payments were made to Boyalife Genomics.
Z3 Investment
Also on March 24, 2022, the Company entered into a five year Lease Agreement with Z3 Investment LLC, an affiliate of the Company’s Chairman and CEO, beginning April 1, 2022, for approximately 35,475 square feet of laboratory and office space in Rancho Cordova, California. Under the terms of the agreement, monthly rent will be $46,000 per month for the firstsix months, then increasing to $104,000 per month (with a 4% annual increase) thereafter.
5. Convertible Promissory Note
July 2019 Note
On July 23, 2019, the Company entered into a private placement with the Accredited Investor, pursuant to which the Company issued and sold to such investor an unsecured convertible promissory note in the original principal amount of $1,000,000 (the “July 2019 Note”). The July 2019 Note is convertible into shares of the Company's common stock at a conversion price equal to the lower of (a) $1.80 per share or (b) 90% of the closing sale price of the Company’s common stock on the date of conversion (subject to a floor conversion price of $0.50). The July 2019 Note bears interest at the rate of twenty-four percent (24%) per annum and is payable quarterly in arrears. Unless sooner converted in the manner described below, all principal under the July 2019 Note, together with all accrued and unpaid interest thereupon, will be due and payable three years from the date of the issuance on July 31, 2022.
The following summarizes the July 2019 Note:
| | Maturity Date | | Stated Interest Rate | | | Conversion Price | | | Carrying Value | |
At March 31, 2022 | 7/31/2022 | | | 24 | % | | $ | 0.61 | | | $ | 1,000,000 | |
At December 31, 2021 | 7/31/2022 | | | 24 | % | | $ | 0.91 | | | $ | 813,000 | |
Amortization of debt discount on the July 2019 Note was $0 and $80,000 for the three months ended March 31, 2022 and 2021, respectively. Interest expense related to the July 2019 Note was $60,000 for both the quarters ended March 31, 2022 and 2021.
6. Stockholders’ Equity
Common Stock
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 $15,280,313 to $19,555,261, which enables the Company to sell an additional $4,275,000 of shares after taking into account prior sales under the Offering Agreement (the “Additional Shares”). Amendment No.2 also amended the Offering Agreement to change the expiration date of the Offering Agreement from August 9, 2022 to the date on which all of the Additional Shares are sold by the Company or until the Offering Agreement is otherwise mutually terminated, subject to the early termination provisions set forth in the agreement. The terms and conditions of the Offering Agreement otherwise remain unchanged. The Company sold a total of 918,093 shares of common stock under the Offering Agreement for aggregate gross proceeds of $681,000 at an average selling price of $0.74 per share, resulting in net proceeds of approximately $594,000 after deducting commissions and other transaction costs of approximately $87,000.
Equity Plans
On January 13, 2022, the Company’s stockholders approved an amendment of the Company’s Amended 2016 Equity Incentive Plan to increase the aggregate number of shares of the Company’s common stock that may be issued under the plan from 392,500 shares to 1,200,000 shares.
Net Loss Per Share
Net loss per share is computed by dividing the net loss by the weighted average number of common shares 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 March 31:
| | | 2022 | | | 2021 | |
Common stock equivalents of convertible promissory note and accrued interest | | | 17,420,222 | | | | 6,449,950 | |
Warrants – other | | | 653,248 | | | | 653,248 | |
Stock options | | | 342,670 | | | | 889,636 | |
Total | | | 18,416,140 | | | | 7,992,834 | |
3.
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
7. Revenue |
There have been no material changes in the Company’s significant accounting policies to those disclosed in the 2020 Annual Report.
Recently Adopted Accounting Standards
In December 2019,The following table summarizes the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12 “Income Taxes (Topic 740): Simplifying the Accounting of Income Taxes”, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740revenues by product line and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2020. The Company was not profitable for the three months ended March 31, 2021 and has a full valuation allowance on all net operating loss (“NOL”) tax carryforwards. As such, the adoption of this standard did not have a material impact on the Company’s financial statements.type:
| | | Three Months Ended March 31, 2022 | |
| | | Device Revenue | | | Service Revenue | | | Other Revenue | | | Total Revenue | |
AXP | | $ | 1,711,000 | | | $ | 55,000 | | | $ | -- | | | $ | 1,766,000 | |
BioArchive | | | 155,000 | | | | 298,000 | | | | -- | | | | 453,000 | |
CAR-TXpress | | | 199,000 | | | | 43,000 | | | | 71,000 | | | | 313,000 | |
Manual Disposables | | | 105,000 | | | | -- | | | | -- | | | | 105,000 | |
Other | | | 17,000 | | | | -- | | | | 9,000 | | | | 26,000 | |
Total | | $ | 2,187,000 | | | $ | 396,000 | | | $ | 80,000 | | | $ | 2,663,000 | |
In January 2020, the FASB issued ASU 2020-01, “Investments – Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815”. The new guidance clarifies the interaction of accounting for the transition into and out of the equity method and the accounting for measuring certain purchased options and forward contracts to acquire investments. It is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The adoption of this standard did not have a material impact on the Company’s financial statements.
Revenue Recognition
Revenue is recognized based on the five-step process outlined in Accounting Standards Codification (“ASC”) 606: (i) identification of the contract with the customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when the performance obligation is satisfied.
| | | Three Months Ended March 31, 2021 | |
| | | Device Revenue | | | Service Revenue | | | Other Revenue | | | Total Revenue | |
AXP | | $ | 225,000 | | | $ | 39,000 | | | $ | -- | | | $ | 264,000 | |
BioArchive | | | 208,000 | | | | 542,000 | | | | -- | | | | 750,000 | |
CAR-TXpress | | | 255,000 | | | | 28,000 | | | | 71,000 | | | | 354,000 | |
Manual Disposables | | | 129,000 | | | | -- | | | | -- | | | | 129,000 | |
Other | | | 7,000 | | | | -- | | | | 13,000 | | | | 20,000 | |
Total | | $ | 824,000 | | | $ | 609,000 | | | $ | 84,000 | | | $ | 1,517,000 | |
Disaggregation of Revenue
The Company’s primary revenue streams include device sales and service revenue from device maintenance contracts, as summarized in the following table:
| | | Three Months Ended March 31, 2021 | |
| | | Device Revenue | | | Service Revenue | | | Other Revenue | | | Total Revenue | |
AXP | | $ | 225,000 | | | $ | 39,000 | | | $ | -- | | | $ | 264,000 | |
BioArchive | | | 208,000 | | | | 542,000 | | | | -- | | | | 750,000 | |
CAR-TXpress | | | 255,000 | | | | 28,000 | | | | 71,000 | | | | 354,000 | |
Manual Disposables | | | 129,000 | | | | -- | | | | -- | | | | 129,000 | |
Other | | | 7,000 | | | | -- | | | | 13,000 | | | | 20,000 | |
Total | | $ | 824,000 | | | $ | 609,000 | | | $ | 84,000 | | | $ | 1,517,000 | |
| | | Three Months Ended March 31, 2020 | |
| | | Device Revenue | | | Service Revenue | | | Other Revenue | | | Total Revenue | |
AXP | | $ | 2,208,000 | | | $ | 24,000 | | | $ | -- | | | $ | 2,232,000 | |
BioArchive | | | 164,000 | | | | 332,000 | | | | -- | | | | 496,000 | |
CAR-TXpress | | | 152,000 | | | | 12,000 | | | | 71,000 | | | | 235,000 | |
Manual Disposables | | | 203,000 | | | | -- | | | | -- | | | | 203,000 | |
Other | | | 14,000 | | | | -- | | | | 20,000 | | | | 34,000 | |
Total | | $ | 2,741,000 | | | $ | 368,000 | | | $ | 91,000 | | | $ | 3,200,000 | |
Performance Obligations
In most cases, there is no right of return provided for distributors or customers. For distributors, the Company has no control over the movement of goods to the end customer. The Company’s distributors control the timing, terms and conditions of the transfer of goods to the end customer. If a right of return does exist, the Company records an allowance for expected returns and records revenue net of the allowance.
Payments from domestic customers are normally due in two months or less after the title transfers, the service contract is executed or the services have been rendered. For international customers payment terms may extend up to 120 days. All sales have fixed pricing and there are currently no variable components included in the Company’s revenue.
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 recognized during the three months ended March 31, 2021 that were included in the beginning balance of deferred revenue were $273,000. Short-term deferred revenues were $696,000Convertible Promissory Note and $608,000 at March 31, 2021 and December 31, 2020, respectively. Long-term deferred revenue was $1,520,000 and $1,596,000 at March 31, 2021 and December 31, 2020, respectively.Revolving Credit Agreement
Exclusivity Fee
On August 30, 2019, the CompanyIn March 2017, ThermoGenesis Holdings entered into a SupplyCredit Agreement with Corning IncorporatedBoyalife Asset Holding II, Inc. (the “Supply Agreement”“Lender”). The Supply Agreement has an initial term of five years with automatic two-year renewal terms, unless terminated by either party in accordance with the termsLender is a wholly owned subsidiary of the SupplyBoyalife Group (USA), Inc., which is owned and controlled by the Company’s Chief Executive Officer and Chairman of our Board of Directors. The Credit Agreement, (collectively, the “Term”). Pursuantas amended, grants to the Supply Agreement, Company the right to borrow up to $10,000,000 (the “Loan”) at any time prior to March 6, 2022 (the “Maturity Date”). As of December 31, 2021, the Company has grantedhad an outstanding principal balance on the Loan of $10,000,000. On March 4, 2022, the Company amended the Loan extending the Maturity Date by one year to Corning exclusive worldwide distribution rights for substantiallyMarch 6, 2023.
The Credit Agreement and the Convertible Promissory Note issued thereunder (as amended, the “Note”) provide that the principal and all X-Series® productsaccrued and unpaid interest under the CAR-TXpress™ platform (the “Products”) manufacturedLoan 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 22% per annum, simple interest. The Company has five business days after the Lender demands payment to pay the interest due before the Loan is considered in default. The Loan can be prepaid in whole or in part by its subsidiary, ThermoGenesis Corp., for the duration of the Term, subject to certain geographical and other exceptions. In addition to any amounts payable throughout the Term for the Products, as consideration for the exclusive worldwide distribution rights for the Products, Corning paid a $2,000,000 exclusivity fee. For the three months ended March 31, 2021 and 2020, the Company recorded revenue of $71,000 related to the exclusivity fee. The remaining balance of the $2,000,000 payment of $1,548,000 was recorded to deferred revenue, with $286,000 in short term deferred revenue and $1,262,000 recorded in long-term deferred revenue.at any time without penalty.
Backlog of Remaining Customer Performance Obligations
The following table includes revenue expected to be recognized and recorded as sales insummarizes the future from the backlog of performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period.Note:
| | | Remainder of 2021 | | | 2022 | | | 2023 | | | 2024 | | | 2025 and beyond | | | Total | |
Service revenue | | $ | 1,013,000 | | | $ | 804,000 | | | $ | 412,000 | | | $ | 152,000 | | | $ | 85,000 | | | $ | 2,466,000 | |
Clinical revenue | | | 10,000 | | | | 13,000 | | | | 13,000 | | | | 13,000 | | | | 162,000 | | | | 211,000 | |
Exclusivity fee | | | 214,000 | | | | 286,000 | | | | 286,000 | | | | 286,000 | | | | 476,000 | | | | 1,548,000 | |
Total | | $ | 1,237,000 | | | $ | 1,103,000 | | | $ | 711,000 | | | $ | 451,000 | | | $ | 723,000 | | | $ | 4,225,000 | |
Revenues are net of normal discounts. Shipping and handling fees billed to customers are included in net revenues, while the related costs are included in cost of revenues.
Fair Value Measurements
In accordance with ASC 820, “Fair Value Measurements and Disclosures,” fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date.
| | Maturity Date | | Stated Interest Rate | | | Conversion Price | | | Carrying Value | |
At March 31, 2022 | 3/6/2023 | | | 22 | % | | $ | 0.64 | | | $ | 10,000,000 | |
At December 31, 2021 | 3/6/2022 | | | 22 | % | | $ | 1.80 | | | $ | 9,245,000 | |
The guidance also establishesNote includes a hierarchy for inputs useddown round provision that lowers its conversion price if the Company sells shares of common stock at a lower price per share. In February 2022, the Company sold shares of common stock at a price lower than the conversion price of the Note, resulting in measuring fair value that maximizesa down round triggering event lowering the useconversion price of observable inputs and minimizes the use of unobservable inputs by requiringNote to $0.64 per share. The Company determined that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuingtriggering event created incremental value of $213,000 which was treated as a debt discount and amortized over the asset or liability and are developed based on market data obtained from sources independentremaining term of the Company. Unobservable inputs are inputs that reflectNote. A Black-Scholes pricing model was utilized to determine the Company’s assumptions aboutchange in the factors that market participants would use in valuingbefore and after incremental value of the asset or liability. The guidance establishes three levels of inputs that may be used to measure fair value:conversion option with the following inputs:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs which are supported by little or no market activity.
| | | Before | | | After | |
Conversion Price | | $ | 1.80 | | | $ | 0.64 | |
Term (in years) | | | 0.02 | | | | 0.02 | |
Volatility | | | 39.53 | % | | | 39.53 | % |
Dividend rate | | | 0 | % | | | 0 | % |
Risk free rate | | | 1.97 | % | | | 1.97 | % |
The carrying valuesCompany amortized $213,000 and $827,000 of cash debt discount to interest expense for the three months ended March 31, 2022 and cash equivalents, accounts receivable 2021, respectively. In addition to the amortization, the Company also recorded interest expense of $550,000 for each of the quarters ended March 31, 2022 and accounts2021. The interest payable approximate fair valuebalance as of March 31, 2022 and December 31, 2021 was $153,000 and $2,231,000, respectively.
On March 4, 2022, the Company amended the Credit Agreement and the Note to extend the due date by one year to March 6, 2023. No other terms of the Note were changed as a part of the extension. The Company performed a debt extinguishment vs. modification analysis. The analysis determined that the extension would be considered an extinguishment from an accounting standpoint, due to their short duration. Thethe change in the value of the conversion option. However, no gain or loss was recorded to the consolidated statement of operations for the quarter ended March 31, 2022 as it was determined that the fair value of the Company’s derivative obligation liability is classified as Level 3 withinNote was $10,000,000 both before and after the fair value hierarchy since extension.
Boyalife Genomics
On March 24, 2022, the valuation modelCompany entered into a License and Technology Access Agreement with Boyalife Genomics Tianjin Ltd. (“Boyalife Genomics”), a China-based contract development and manufacturing organization (“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 newly formed division named TG Biosynthesis.
Under the terms of the derivative obligation is based on unobservable inputs.agreement, the Company transferred its remaining 8.64% interest in ImmuneCyte to Boyalife Genomics and agreed to pay a running royalty of 7.5% of its annual net sales of products and services that are covered by one or more of Boyalife Genomics’ granted U.S. patents and a royalty of 5.0% of other products and services covered by other licensed intellectual property. In the quarter ended March 31, 2022, 0 royalty payments were made to Boyalife Genomics.
ReclassificationsZ3 Investment
Certain prior period amounts have been reclassified
Also on March 24, 2022, the Company entered into a five year Lease Agreement with Z3 Investment LLC, an affiliate of the Company’s Chairman and CEO, beginning April 1, 2022, for approximately 35,475 square feet of laboratory and office space in Rancho Cordova, California. Under the terms of the agreement, monthly rent will be $46,000 per month for the firstsix months, then increasing to conform to the current period presentation. The reclassifications did not have an impact on net loss as previously reported. For the three$104,000 per month period ended March 31, 2021, sales and marketing and general and administrative expenses were combined into one line item identified as sales, general and administrative expenses on the Statement of Operations.(with a 4% annual increase) thereafter.
5. Convertible Promissory Note
July 2019 Note
On July 23, 2019, the Company entered into a private placement with the Accredited Investor, pursuant to which the Company issued and sold to such investor an unsecured convertible promissory note in the original principal amount of $1,000,000 (the “July 2019 Note”). The July 2019 Note is convertible into shares of the Company's common stock at a conversion price equal to the lower of (a) $1.80 per share or (b) 90% of the closing sale price of the Company’s common stock on the date of conversion (subject to a floor conversion price of $0.50). The July 2019 Note bears interest at the rate of twenty-four percent (24%) per annum and is payable quarterly in arrears. Unless sooner converted in the manner described below, all principal under the July 2019 Note, together with all accrued and unpaid interest thereupon, will be due and payable three years from the date of the issuance on July 31, 2022.
4.
The following summarizes the July 2019 Note: | | Maturity Date | | Stated Interest Rate | | | Conversion Price | | | Carrying Value | | At March 31, 2022 | 7/31/2022 | | | 24 | % | | $ | 0.61 | | | $ | 1,000,000 | | At December 31, 2021 | 7/31/2022 | | | 24 | % | | $ | 0.91 | | | $ | 813,000 | |
Amortization of debt discount on the July 2019 Note was $0 and $80,000 for the three months ended March 31, 2022 and 2021, respectively. Interest expense related to the July 2019 Note was $60,000 for both the quarters ended March 31, 2022 and 2021. 6. Stockholders’ Equity Common Stock 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 $15,280,313 to $19,555,261, which enables the Company to sell an additional $4,275,000 of shares after taking into account prior sales under the Offering Agreement (the “Additional Shares”). Amendment No.2 also amended the Offering Agreement to change the expiration date of the Offering Agreement from August 9, 2022 to the date on which all of the Additional Shares are sold by the Company or until the Offering Agreement is otherwise mutually terminated, subject to the early termination provisions set forth in the agreement. The terms and conditions of the Offering Agreement otherwise remain unchanged. The Company sold a total of 918,093 shares of common stock under the Offering Agreement for aggregate gross proceeds of $681,000 at an average selling price of $0.74 per share, resulting in net proceeds of approximately $594,000 after deducting commissions and other transaction costs of approximately $87,000. Equity Plans On January 13, 2022, the Company’s stockholders approved an amendment of the Company’s Amended 2016 Equity Incentive Plan to increase the aggregate number of shares of the Company’s common stock that may be issued under the plan from 392,500 shares to 1,200,000 shares. Net Loss Per Share | 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. There were 224,445 pre-funded warrants included in the quarter ended March 31, 2020 calculation.
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 March 31:
| | | 2022 | | | 2021 | |
Common stock equivalents of convertible promissory note and accrued interest | | | 17,420,222 | | | | 6,449,950 | |
Warrants – other | | | 653,248 | | | | 653,248 | |
Stock options | | | 342,670 | | | | 889,636 | |
Total | | | 18,416,140 | | | | 7,992,834 | |
| | | 2021 | | | 2020 | |
Common stock equivalents of convertible promissory note and accrued interest | | | 6,449,950 | | | | 5,159,496 | |
Vested Series A warrants | | | -- | | | | 40,441 | |
Unvested Series A warrants(1) | | | -- | | | | 69,853 | |
Warrants – other | | | 653,248 | | | | 1,273,461 | |
Stock options | | | 889,636 | | | | 287,849 | |
Total | | | 7,992,834 | | | | 6,831,100 | |
8
___________
| (1)
| The unvested Series A warrants were subject to vesting based upon the amount of funds actually received by the Company in the second close of the August 2015 financing which never occurred. The warrants remained outstanding but unvested until they expired in February 2021.
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5.
| RELATED PARTY TRANSACTIONS
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HealthBanks Biotech (USA) Inc.7. Revenue
On November 26, 2019 the Company entered into an agreement with HealthBanks Biotech (USA) Inc. (“HealthBanks”) to form a new company called ImmuneCyte, Inc. (“ImmuneCyte”) to commercialize the Company’s proprietary cell processing platform, CAR-TXpress™, for use in immune cell banking as well as for cell-based contract development and manufacturing services (CMO/CDMO). Under the terms of the agreement, ImmuneCyte was initially owned 80% by HealthBanks and 20% by the Company. Healthbanks is a subsidiary of the Boyalife Group (USA), Inc. which is owned by Dr. Xiaochun (Chris) Xu, the Company’s Chief Executive Officer and Chairman of our Board of Directors. Due to the significant influence the Company has over ImmuneCyte’s operations, the investment was accounted for by the Company using the equity method.
Between November 26, 2019The following table summarizes the revenues by product line and September 30, 2020, ImmuneCyte closed on a series of investments with a private institution and qualified investors. After the investments, ImmuneCyte was owned 75.16% by HealthBanks, 18.79% by the Company and 6.05% by the private investors.type:
| | | Three Months Ended March 31, 2022 | |
| | | Device Revenue | | | Service Revenue | | | Other Revenue | | | Total Revenue | |
AXP | | $ | 1,711,000 | | | $ | 55,000 | | | $ | -- | | | $ | 1,766,000 | |
BioArchive | | | 155,000 | | | | 298,000 | | | | -- | | | | 453,000 | |
CAR-TXpress | | | 199,000 | | | | 43,000 | | | | 71,000 | | | | 313,000 | |
Manual Disposables | | | 105,000 | | | | -- | | | | -- | | | | 105,000 | |
Other | | | 17,000 | | | | -- | | | | 9,000 | | | | 26,000 | |
Total | | $ | 2,187,000 | | | $ | 396,000 | | | $ | 80,000 | | | $ | 2,663,000 | |
In March 2021, ImmuneCyte completed an acquisition to acquire Boyalife’s Cellular Therapy Division, for 12,000,000 shares in ImmuneCyte and Shangai KDWinfo Technology Co. Ltd. For 500,000 shares in ImmuneCyte. Following the acquisitions, the Company’s ownership percentage in ImmuneCyte decreased from 18.79% to 8.64%. The Company performed an analysis of the transaction and noted that none of the factors supporting significant influence changed as a result of the acquisition. Therefore, it was concluded that significant influence remains and the Company will continue to account for the transaction using the equity method. The Company recognized a dilution gain of $262,000 representing its share of the net assets acquired by ImmuneCyte. However, as of the quarter ended March 31, 2021, the Company had accumulated losses of $428,000 in its investment in ImmuneCyte. As the accumulated losses were greater than the dilution gain, no entry was recorded by the Company for its investment in ImmuneCyte for the quarter ended March 31, 2021.
For the quarter ended March 31, 2021 and 2020, the Company recorded $0 and a loss of $13,000, respectively on its equity investment in ImmuneCyte. At March 31, 2021, the value of the Company’s investment in ImmuneCyte on its Balance Sheet is $0. For the quarter ended March 31, 2021, ImmuneCyte had a net loss of $253,000, its current assets were $3,514,000 and current liabilities were $2,375,000.
| | | Three Months Ended March 31, 2021 | |
| | | Device Revenue | | | Service Revenue | | | Other Revenue | | | Total Revenue | |
AXP | | $ | 225,000 | | | $ | 39,000 | | | $ | -- | | | $ | 264,000 | |
BioArchive | | | 208,000 | | | | 542,000 | | | | -- | | | | 750,000 | |
CAR-TXpress | | | 255,000 | | | | 28,000 | | | | 71,000 | | | | 354,000 | |
Manual Disposables | | | 129,000 | | | | -- | | | | -- | | | | 129,000 | |
Other | | | 7,000 | | | | -- | | | | 13,000 | | | | 20,000 | |
Total | | $ | 824,000 | | | $ | 609,000 | | | $ | 84,000 | | | $ | 1,517,000 | |
Convertible Promissory Note and Revolving Credit Agreement
In March 2017, ThermoGenesis Holdings entered into a Credit Agreement with Boyalife Asset Holding II, Inc. (the “Lender”). The Lender is a wholly owned subsidiary of the Boyalife Group (USA), Inc., 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 to the Company the right to borrow up to $10,000,000 (the “Loan”) at any time prior to March 6, 2022 (the(the “Maturity Date”). As of MarchDecember 31, 2021, and December 31, 2020, the Company had an outstanding principal balance on the Loan of $10,000,000. On March 4, 2022, the Company amended the Loan extending the Maturity Date by one year to March 6, 2023.
The Credit Agreement and the Convertible Promissory Note issued thereunder (as amended, the “Note”) 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 22% per annum, simple interest. The Company has five business days after the Lender demands payment to pay the interest due before the Loan is considered in default. In January 2021, the Company paid the Lender, the interest due as of December 31, 2020 in the amount of $2,082,000. The NoteLoan can be prepaid in whole or in part by the Company at any time without penalty.
The Credit Agreement andfollowing summarizes the Note:
| | Maturity Date | | Stated Interest Rate | | | Conversion Price | | | Carrying Value | |
At March 31, 2022 | 3/6/2023 | | | 22 | % | | $ | 0.64 | | | $ | 10,000,000 | |
At December 31, 2021 | 3/6/2022 | | | 22 | % | | $ | 1.80 | | | $ | 9,245,000 | |
The Note were amended in April 2018, granting the Lender the right to convert, at any time, outstanding principal and accrued but unpaid interest into shares of the Company’s common stock atincludes a conversion price of $16.10 per share. The amendment included a down-rounddown round provision that lowered thelowers its conversion price if the Company issuessells shares of common stock at a lower price per share,share. In February 2022, the Company sold shares of common stock at a price lower than the conversion price of the Note, is lowered to that amount. The Company completedresulting in a transaction in 2018, which lowereddown round triggering event lowering the conversion price of the Note to $1.80.$0.64 per share. The Company determined that the triggering event created incremental value of $213,000 which was treated as a debt discount and amortized over the remaining term of the Note. A Black-Scholes pricing model was utilized to determine the change in the before and after incremental value of the conversion option with the following inputs:
The following summarizes the Note:
| | Maturity Date | | Stated Interest Rate | | | Conversion Price | | | Face Value | | | Remaining Debt Discount | | | Carrying Value | |
At March 31, 2021 | 3/6/2022 | | | 22% | | | $ | 1.80 | | | $ | 10,000,000 | | | $ | (3,238,000 | ) | | $ | 6,762,000 | |
At December 31, 2020 | 3/6/2022 | | | 22% | | | $ | 1.80 | | | $ | 10,000,000 | | | $ | (4,065,000 | ) | | $ | 5,935,000 | |
| | | Before | | | After | |
Conversion Price | | $ | 1.80 | | | $ | 0.64 | |
Term (in years) | | | 0.02 | | | | 0.02 | |
Volatility | | | 39.53 | % | | | 39.53 | % |
Dividend rate | | | 0 | % | | | 0 | % |
Risk free rate | | | 1.97 | % | | | 1.97 | % |
The Company amortized $827,000$213,000 and $546,000$827,000 of debt discount to interest expense for the three months ended March 31, 2021 2022 and 2020,2021, respectively. In addition to the amortization, the Company also recorded interest expense of $550,000 and $443,000 for each of the three monthsquarters ended March 31, 2021 2022 and 2020, respectively.2021. The interest payable balance as of March 31, 2021 2022 and December 31, 2020 2021 was $550,000$153,000 and $2,082,000,$2,231,000, respectively.
On March 4, 2022, the Company amended the Credit Agreement and the Note to extend the due date by one year to March 6, 2023. No other terms of the Note were changed as a part of the extension. The Company performed a debt extinguishment vs. modification analysis. The analysis determined that the extension would be considered an extinguishment from an accounting standpoint, due to the change in the value of the conversion option. However, no gain or loss was recorded to the consolidated statement of operations for the quarter ended March 31, 2022 as it was determined that the fair value of the Note was $10,000,000 both before and after the extension.
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 contract development and manufacturing organization (“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 newly formed division named TG Biosynthesis.
Under the terms of the agreement, the Company transferred its remaining 8.64% interest in ImmuneCyte to Boyalife Genomics and agreed to pay a running royalty of 7.5% of its annual net sales of products and services that are covered by one or more of Boyalife Genomics’ granted U.S. patents and a royalty of 5.0% of other products and services covered by other licensed intellectual property. In the quarter ended March 31, 2022, 0 royalty payments were made to Boyalife Genomics.
Z3 Investment
Also on March 24, 2022, the Company entered into a five year Lease Agreement with Z3 Investment LLC, an affiliate of the Company’s Chairman and CEO, beginning April 1, 2022, for approximately 35,475 square feet of laboratory and office space in Rancho Cordova, California. Under the terms of the agreement, monthly rent will be $46,000 per month for the firstsix months, then increasing to $104,000 per month (with a 4% annual increase) thereafter.
6.
| CONVERTIBLE PROMISSORY NOTE
5. Convertible Promissory Note |
July 2019 Note
On July 23, 2019, the Company entered into a private placement with the Accredited Investor, pursuant to which the Company issued and sold to such investor an unsecured convertible promissory note in the original principal amount of $1,000,000 (the “July“July 2019 Note”). The July 2019 Note is convertible into shares of the Company's common stock at a conversion price equal to the lower of (a) $1.80 per share or (b) 90% of the closing sale price of the Company’s common stock on the date of conversion (subject to a floor conversion price of $0.50). The July 2019 Note bears interest at the rate of twenty-four percent (24%) per annum and is payable quarterly in arrears. Unless sooner converted in the manner described below, all principal under the July 2019 Note, together with all accrued and unpaid interest thereupon, will be due and payable three years from the date of the issuance on July 31, 2022.
The following summarizes the July 2019 Note:
| | Maturity Date | | Stated Interest Rate | | | Conversion Price | | | Face Value | | | Remaining Debt Discount | | | Carrying Value | |
At March 31, 2021 | 7/31/2022 | | | 24% | | | $ | 1.80 | | | $ | 1,000,000 | | | $ | (428,000 | ) | | $ | 572,000 | |
At December 31, 2020 | 7/31/2022 | | | 24% | | | $ | 1.80 | | | $ | 1,000,000 | | | $ | (507,000 | ) | | $ | 493,000 | |
| | Maturity Date | | Stated Interest Rate | | | Conversion Price | | | Carrying Value | |
At March 31, 2022 | 7/31/2022 | | | 24 | % | | $ | 0.61 | | | $ | 1,000,000 | |
At December 31, 2021 | 7/31/2022 | | | 24 | % | | $ | 0.91 | | | $ | 813,000 | |
The Company recorded amortization expenseAmortization of $80,000debt discount on the July 2019 Note was $0 and $80,000 for the three months ended March 31, 2021 2022 and interest2021, respectively. Interest expense ofrelated to the July 2019 Note was $60,000 for both the three monthsquarters ended March 31, 2021 2022 and 2020.2021.
6. Stockholders’ Equity
Common Stock
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 $15,280,313 to $19,555,261, which enables the Company to sell an additional $4,275,000 of shares after taking into account prior sales under the Offering Agreement (the “Additional Shares”). Amendment No.2 also amended the Offering Agreement to change the expiration date of the Offering Agreement from August 9, 2022 to the date on which all of the Additional Shares are sold by the Company or until the Offering Agreement is otherwise mutually terminated, subject to the early termination provisions set forth in the agreement. The terms and conditions of the Offering Agreement otherwise remain unchanged. The Company sold a total of 918,093 shares of common stock under the Offering Agreement for aggregate gross proceeds of $681,000 at an average selling price of $0.74 per share, resulting in net proceeds of approximately $594,000 after deducting commissions and other transaction costs of approximately $87,000.
Equity Plans
On January 13, 2022, the Company’s stockholders approved an amendment of the Company’s Amended 2016 Equity Incentive Plan to increase the aggregate number of shares of the Company’s common stock that may be issued under the plan from 392,500 shares to 1,200,000 shares.
Net Loss Per Share
Net loss per share is computed by dividing the net loss by the weighted average number of common shares 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 March 31:
| | | 2022 | | | 2021 | |
Common stock equivalents of convertible promissory note and accrued interest | | | 17,420,222 | | | | 6,449,950 | |
Warrants – other | | | 653,248 | | | | 653,248 | |
Stock options | | | 342,670 | | | | 889,636 | |
Total | | | 18,416,140 | | | | 7,992,834 | |
The Company leases an approximately 28,000 square foot facility located in Rancho Cordova, California for its corporate offices and in-house manufacturing. The lease was renewed in the first quarter of 2019 and is accounted for as an operating lease. The lease expires in May 2024.
Operating Leases7. Revenue
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. Our material leases typically contain rent escalations over the lease term. We recognize expense for these leases on a straight-line basis over the lease term.
The following table summarizes the Company’s operating leases:revenues by product line and type:
| | | March 31, 2021 | | | December 31, 2020 | |
Right-of-use operating lease assets, net | | $ | 693,000 | | | $ | 730,000 | |
Current lease liability (included in other current liabilities) | | | 168,000 | | | | 157,000 | |
Non-current lease liability | | | 558,000 | | | | 604,000 | |
| | | | | | | | | |
Weighted average remaining lease term | | | 3.2 | | | | 3.4 | |
Discount rate | | | 22 | % | | | 22 | % |
| | | Three Months Ended March 31, 2022 | |
| | | Device Revenue | | | Service Revenue | | | Other Revenue | | | Total Revenue | |
AXP | | $ | 1,711,000 | | | $ | 55,000 | | | $ | -- | | | $ | 1,766,000 | |
BioArchive | | | 155,000 | | | | 298,000 | | | | -- | | | | 453,000 | |
CAR-TXpress | | | 199,000 | | | | 43,000 | | | | 71,000 | | | | 313,000 | |
Manual Disposables | | | 105,000 | | | | -- | | | | -- | | | | 105,000 | |
Other | | | 17,000 | | | | -- | | | | 9,000 | | | | 26,000 | |
Total | | $ | 2,187,000 | | | $ | 396,000 | | | $ | 80,000 | | | $ | 2,663,000 | |
Maturities of lease liabilities by year for our operating leases are as follows:
2021 (Remaining) | | $ | 234,000 | |
2022 | | | 319,000 | |
2023 | | | 328,000 | |
2024 | | | 139,000 | |
Total lease payments | | $ | 1,020,000 | |
Less: imputed interest | | | (294,000 | ) |
Present value of operating lease liabilities | | $ | 726,000 | |
| | | Three Months Ended March 31, 2021 | |
| | | Device Revenue | | | Service Revenue | | | Other Revenue | | | Total Revenue | |
AXP | | $ | 225,000 | | | $ | 39,000 | | | $ | -- | | | $ | 264,000 | |
BioArchive | | | 208,000 | | | | 542,000 | | | | -- | | | | 750,000 | |
CAR-TXpress | | | 255,000 | | | | 28,000 | | | | 71,000 | | | | 354,000 | |
Manual Disposables | | | 129,000 | | | | -- | | | | -- | | | | 129,000 | |
Other | | | 7,000 | | | | -- | | | | 13,000 | | | | 20,000 | |
Total | | $ | 824,000 | | | $ | 609,000 | | | $ | 84,000 | | | $ | 1,517,000 | |
Statement of Cash FlowsContract Balances
In January 2019, theGenerally, all sales are contract sales (with either an underlying contract or purchase order). The Company signed an amendmentdoes not have any material contract assets. When invoicing occurs prior to its Rancho Cordova, California lease. The amendment was accounted for asrevenue recognition, a modification and resulted in a right-of-use asset of $966,000 being recognized as a non-cash additioncontract liability is recorded (as deferred revenue on the date ofconsolidated balance sheet). Revenues recognized during the amendment. Cash paid for amountsthree months ended March 31, 2022 that were included in the measurementbeginning balance of operating lease liabilities was $76,000deferred revenue were $446,000. Short-term deferred revenues were $1,159,000 and $74,000 for the quarters ended $719,000 at March 31, 2022 and December 31, 2021, respectively. Long-term deferred revenue was $1,163,000 and 2020, respectively, $1,244,000 at March 31, 2022 and is included in cash flows from operating activities.December 31, 2021, respectively.
Operating Lease Costs
Operating lease costs were $109,000 and $103,000 for the quarters ended March 31, 2021 and 2020, respectively. These costs are primarily related to long-term operating leases, but also include amounts for variable lease costs, as well as immaterial and short-term leases.
Finance Leases
Finance leases are included in equipment and other current and non-current liabilities on the condensed consolidated balance sheet. The amortization and interest expense are included in general and administrative expense and interest expense, respectively on the statementBacklog of operations. These leases were not material for the quarter ended March 31, 2021 or March 31, 2020.Remaining Customer Performance Obligations
8.
| COMMITMENTS AND CONTINGENCIES
|
Contingencies
In the normal course of operations, the Company may have disagreements or disputes with customers, employees or vendors. Such potential disputes are seen by management as a normal part of business. As of March 31, 2021, except as disclosed, management believes any liability that may ultimately result from the resolution of these matters will not have a material adverse effect on the Company’s condensed consolidated financial position, operating results or cash flows.
Financial Covenants
On July 13, 2020, the Company, entered into a Manufacturing and Supply Amending Agreement #2 with CBR Systems, Inc. (“CBR”) with an effective date of July 13, 2020 (the “Amendment”). The Amendment amends the Manufacturing and Supply Agreement entered into on May 15, 2017 and Amendment #1 dated March 16, 2020 by the Company and CBR. The Amendment, among other things, revised the amount of certain products to be purchased, pricing of those products and removal of the safety stock requirement. In addition, the Amendment updated the financial requirement to exclude convertible debt from the definition of short-term debt under events or conditions that constitute a default. The Amendment states that the Company’s cash balance and short-term investments net of non-convertible debt and borrowed funds that are payable within one year must be greater than $1,000,000 at any month end. The Company was in compliance with this agreement as of March 31, 2021.
Warranty
The Company offers a warranty on all of its non-disposable products of one to two years. The Company warrants disposable products through their expiration date. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.
The warranty liability is included in other current liabilities in the unaudited condensed consolidated balance sheets. The change in the warranty liability for the three months ended March 31, 2021 is summarized in the following table:
Balance at December 31, 2020 | | $ | 154,000 | |
Warranties issued during the period | | | 6,000 | |
Settlements made during the period | | | (66,000 | ) |
Changes in liability for pre-existing warranties during the period | | | 12,000 | |
Balance at March 31, 2021 | | $ | 106,000 | |
9.
| PAYMENT PROTECTION PROGRAM
|
On April 21, 2020, the Company entered into a promissory note and received a Paycheck Protection Program loan “PPP Loan” from the Small Business Association “SBA”, which was established under the CARES Act. The Company received net proceeds of $646,000 from the PPP Loan. The term of the PPP Loan is two years with an interest rate of 1.00% per annum, which was deferred for the first six months of the term of the loan or after an application is filed for loan forgiveness, whichever is later. Each monthly payment shall be in the amount which would fully amortize the principal balance outstanding under the PPP Loan. Pursuant to the terms of the CARES Act, the proceeds of the PPP Loan may be used for payroll costs, mortgage interest, rent or utility costs. The promissory note of the PPP Loan contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, or provisions of the promissory note. The occurrence of an event of default may result in a claim for the immediate repayment of the amount outstanding under the PPP Loan. In late December 2020, the Company applied with the SBA for forgiveness of the PPP Loan and was notified on March 30, 2021 that the SBA had approved our application to forgive the entire amount of the loan and accrued interest. For the three months ended March 31, 2021, the Company recorded a gain on extinguishment of debt of $652,000 representing the principal and accrued interest for the PPP Loan.
Common Stock
On December 13, 2019, the Company entered into an At The Market Offering Agreement, by and between the Company and H.C. Wainwright & Co., LLC, as agent (“H.C. Wainwright”) (the “ATM Agreement”), pursuant to which the Company may offer and sell, from time to time through H.C. Wainwright, shares of the Company’s common stock, having an aggregate offering price of up to $4,400,000 and on May 19, 2020 the ATM Agreement was amended to increase the aggregate value of up to $15,280,313 (the “HCW Shares”). As of March 31, 2021, the Company sold a total of 5,597,484 shares of the Company’s common stock for aggregate gross proceeds of $15,280,000 at an average selling price of $2.73 per share, resulting in net proceeds of approximately $14,568,000 after deducting legal expenses, audit fees, commissions and other transaction costs of approximately $712,000. For the three months ended March 31, 2021, the Company sold 2,976,832 shares of common stock for net proceeds of $6,832,000 after deducting $224,000 in commissions and other transaction costs.
Stock Based Compensation
The Company recorded stock-based compensation of $258,000 and $67,000 for the three months ended March 31, 2021 and 2020, respectively, as comprised of the following:
| | | Three Months Ended March 31, | |
| | | 2021 | | | 2020 | |
Cost of goods sold | | $ | 5,000 | | | $ | -- | |
Sales, general and administrative | | | 216,000 | | | | 52,000 | |
Research and development | | | 37,000 | | | | 15,000 | |
| | | $ | 258,000 | | | $ | 67,000 | |
The following is a summarytable represents revenue expected to be recognized in the future from the backlog of option activity forperformance obligations that are unsatisfied (or partially unsatisfied) at the Company’s stock option plans:
| | | Number of Shares | | | Weighted- Average Exercise Price | | | Weighted- Average Remaining Contractual Life | | | Aggregate Intrinsic Value | |
Outstanding at December 31, 2020 | | | 889,636 | | | $ | 8.57 | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Forfeited | | | -- | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Outstanding at March 31, 2021 | | | 889,636 | | | | 8.57 | | | | 8.5 | | | $ | -- | |
| | | | | | | | | | | | | | | | | |
Vested and expected to vest at March 31, 2021 | | | 631,053 | | | $ | 9.54 | | | | 8.3 | | | $ | -- | |
| | | | | | | | | | | | | | | | | |
Exercisable at March 31, 2021 | | | 230,836 | | | $ | 15.21 | | | | 7.2 | | | $ | -- | |
The aggregate intrinsic value is calculated as the difference between the exercise priceend of the underlying awards and the quoted price of the Company’s common stock. There were no options exercised during the three months ended March 31, 2021.reporting period:
Warrants
| | | Remainder of 2022 | | | 2023 | | | 2024 | | | 2025 | | | 2026 and beyond | | | Total | |
Service revenue | | $ | 1,075,000 | | | $ | 666,000 | | | $ | 184,000 | | | $ | 83,000 | | | $ | -- | | | $ | 2,008,000 | |
Device revenue (1) | | | 712,000 | | | | 733,000 | | | | 41,000 | | | | -- | | | | -- | | | | 1,486,000 | |
Exclusivity fee | | | 214,000 | | | | 286,000 | | | | 286,000 | | | | 286,000 | | | | 190,000 | | | | 1,262,000 | |
| Other | | | 10,000 | | | | 13,000 | | | | 13,000 | | | | 13,000 | | | | 140,000 | | | | 189,000 | |
Total | | $ | 2,011,000 | | | $ | 1,698,000 | | | $ | 524,000 | | | $ | 382,000 | | | $ | 330,000 | | | $ | 4,945,000 | |
A summary of warrant activity for the three months ended March 31, 2021 follows:
| (1) | Represents the minimum purchase requirements under the distribution agreement the Company signed with its AXP distributor in China. |
| | | Number of Shares | | | Weighted-Average Exercise Price Per Share | | | Weighted- Average Remaining Contract Term | |
Balance at December 31, 2020 | | | 1,116,484 | | | $ | 37.27 | | | | 0.49 | |
Warrants expired | | | 463,236 | | | | | | | | | |
Warrants exercised | | | -- | | | $ | -- | | | | | |
| | | | | | | | | | | | | |
Outstanding at March 31, 2021 | | | 653,248 | | | $ | 6.97 | | | | 2.20 | |
| | | | | | | | | | | | | |
Exercisable at March 31, 2021 | | | 653,248 | | | $ | 6.97 | | | | 2.20 | |
11.
| MAJOR CUSTOMERS AND ACCOUNTS RECEIVABLE8. Concentrations
|
The Company had certain customers whose revenue individually represented 10% or more of the Company’s total revenue, or whose accounts receivable balances individually represented 10% or more of the Company’s total accounts receivable as follows:
Accounts Receivable | | March 31, 2022 | | | December 31, 2021 | |
Customer 1 | | | 35 | % | | | -- | |
Customer 2 | | | 16 | % | | | -- | |
Customer 3 | | | 1 | % | | | 23 | % |
Customer 4 | | | 9 | % | | | 23 | % |
For the three months ended March 31, 2021 and 2020, one customer accounted for 21% and 2% of revenue, a second customer accounted for 15% and 6% of revenue, and a third customer accounted for 3% and 50%, respectively.
| | | Three Months Ended March 31, | |
Revenues | | 2022 | | | 2021 | |
Customer 1 | | $ | 1,271,000 | | | | 48 | % | | $ | 151,000 | | | | 10 | % |
Customer 2 | | $ | 2,000 | | | | -- | | | $ | 316,000 | | | | 21 | % |
9.Subsequent Events
At March 31, 2021, three customers accountedEffective April 1, 2022, the Company entered into a lease for 67% of accounts receivable. At December 31, 2020, three customers accounteda 35,745 square foot laboratory, office and manufacturing facility in Rancho Cordova, California for 72% of accounts receivable.its CDMO business. The lease expires on September 30, 2027.
10
The Company has evaluated events subsequent to the balance sheet date for inclusion in the accompanying consolidated financial statements through the date of issuance and determined that no subsequent events have occurred that would require recognition in the consolidated financial statements or disclosures in the notes thereto.
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, uncertainty associated with the COVID-19 pandemic, 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 ThermoGenesis Holdings’the Company’s Form 10-K for the year ended December 31, 2020.2021.
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.
The Company providesOur 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 bio-manufacturing for immuno-oncology applications.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, cell separationsterile system allows for isolatingthe rapid, automated processing of autologous peripheral blood or bone marrow aspirate derived stem and progenitor cells from umbilical cord blood, registeredat the point-of-care, such as surgical centers or clinics, 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.
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Point-of-Care Applications:
| ●
| PXP®Point-of-CarePXP-LAVARE System – an automated, fully closed sterile system that is designed to wash, re-suspend and volume reduce cell suspensions. It allows for the rapid, automated processing of autologous peripheral bloodvolume manipulation, supernatant or bone marrow aspirate derived stem cells at the point-of-care, suchmedia exchange, and cell washing to occur without comprising cell viabilities and maximizing recoveries, registered 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.
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| | ● | 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: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 sortingBuoyancy-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. |
ThermoGenesis Holdings is an affiliatePlanned Expansion of the Boyalife Group, a global diversified life science holding company that focuses on stem cell technologyBusiness-- Contract Development and cell-based therapeutics.Manufacturing Services for Cell and Cell-Based Gene Therapies
COVID-19
We believe thatIn March 2022, our Board of Directors approved the COVID-19 pandemic has had a material negative impact onplanned expansion of the Company’s business to include contract development and resultsmanufacturing services for cell and cell-based gene therapies. The Company plans to develop and build-out the capabilities to become a world-class Contract Development and Manufacturing Organization (“CDMO”) for cell and cell-based gene therapies by partnering with Boyalife Genomics Tianjin Ltd., a China-based CDMO (“Boyalife Genomics”), to in-license certain know-how and other intellectual property from Boyalife Genomics, and by leasing and building out a cell manufacturing facility in Sacramento, California. 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 plans to develop and operate its planned 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 operations.development.
We are targeting the launch of our CDMO services to customers by the end of 2022. The pandemic had a significant impact onsuccessful development and launch of TG Biosynthesis will require us to raise additional capital, acquire various equipment for the cord blood industry, with fewer cord blood units being stored globally afterplanned operations, hire certain personnel needed to launch the startoperation, and timely complete the build-out of the pandemic. The continued impact of the pandemic on the Company’s business and results of operationsour leased Sacramento facility. There is no assurance that we will depend on future developments relatingbe able to the pandemic in general and the cord blood industry in particular, andsuccessfully obtain such future developments are highly uncertain and cannot be predicted. Such developments may include the continued geographic spread of the virus, the severity of the disease, the duration of the outbreak, the actions that may be taken by various governmental authorities in response to the outbreak, and the possible continued impact on the U.S. or global economy. As a result, at the time of this filing, it is impossible to predict the continued impact of the pandemic on the Company’s business, liquidity,additional capital resources, as such capital may not be available on reasonable terms, or available at all. We will need to hire, train, and financial results.
Critical Accounting Policies
Management’s discussion and analysis of its financial condition and results of operations is based uponretain additional employees who have experiences in the condensed consolidated financial statements, which have been preparedcell manufacturing field in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Estimates are based on historical experience and on various other assumptions that are believedorder for our CDMO business to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. For a full discussion of our accounting estimates and assumptions that have been identified as critical in the preparation of the Company’s condensed consolidated financial statements, please refer to ThermoGenesis Holdings’ Form 10-K for the year ended December 31, 2020.successful.
Results of Operations for the
Three Months Ended March 31, 20212022 as Compared to the Three Months Ended March 31, 20202021
Net Revenues
Net revenues for the three months ended March 31, 20212022 were $1,517,000$2,663,000 compared to $3,200,000$1,517,000 for the three months ended March 31, 2020, a decrease2021, an increase of $1,683,000$1,146,000 or 53%76%. The decreaseincrease was driven by AXP® disposable sales which declinedincreased by approximately $1,900,000$1,500,000 with approximately 900 fewer600 more cases sold in the first quarter of 20212022 as compared to 2020.2021. The primary driver of the decreasechange was the COVID-19 pandemic which has had a significant impact on our sales since it began overfirst quarter of 2021. Many of our customers choose not to place new orders for AXP disposables in the first quarter last year. As we enter the beginning of 2022, AXP sales returned to a year ago. Asmore normal level for the pandemic has begunfirst quarter. This increase was offset by a decrease in BioArchive sales, primarily due to subsideapproximately $250,000 less in service revenue, as the result of a large one-time service revenue that was recognized in the first quarter of 2021, we are hopeful that the industry will start to turn around in the second quarter. Inquiries for orders increased in March and we currently expect revenue to rebound in the second quarter and return to pre-pandemic levels by the end of 2021. The decrease was offset by approximately $250,000 more in BioArchive® sales, primarily due to increased service revenue in the first quarter of 2021 as compared to 2020.last year.
| | | March 31, 2021 | | | March 31, 2020 | | | March 31, 2022 | | | March 31, 2021 | |
AXP | | $ | 264,000 | | | $ | 2,232,000 | | | $ | 1,766,000 | | | $ | 264,000 | |
BioArchive | | | 750,000 | | | | 496,000 | | | 453,000 | | | 750,000 | |
CAR-TXpress | | | 354,000 | | | | 235,000 | | | 313,000 | | | 354,000 | |
Manual Disposables | | | 129,000 | | | | 203,000 | | | 105,000 | | | 129,000 | |
Other | | | 20,000 | | | | 34,000 | | | | 26,000 | | | | 20,000 | |
| | | $ | 1,517,000 | | | $ | 3,200,000 | | | $ | 2,663,000 | | | $ | 1,517,000 | |
Gross Profit
The Company’s gross profit was $940,000 or 35% of net revenues for the three months ended March 31, 2022, compared to $708,000 or 47% of net revenues for the three months ended March 31, 2021, compared to $1,492,000 or 47%an increase of net revenues for the three months ended March 31, 2020, a decrease of $784,000.$232,000. The decreaseincrease was driven by the declineincrease in AXP® disposables sold in the quarter ended March 31, 2022, resulting in approximately $1,075,000 less$700,000 more gross profit. This decreaseincrease was offset by approximately $250,000 moreless in BioArchive service revenue and approximately $50,000 more in CAR-TXpress revenue in the quarter ended March 31, 2022 as compared to the same period in 2021.
Selling, General and Administrative
Sales, general and administrative expenses for the three months ended March 31, 20212022 were $1,992,000$1,693,000 compared to $2,092,000$1,992,000 for the three months ended March 31, 2020,2021, a decrease of $100,000$299,000 or 5%15%. The decrease was driven by the absenceprimarily due to lower stock compensation expense of legal and other expenses related to the Mavericks lawsuit that were incurredapproximately $200,000 in the quarter ended March 31, 2020, of approximately $220,0002022, driven by stock compensation expense incurred in the prior quarter for awards that were subsequently voluntarily surrendered by Company executives later in 2021 and reduced travel expenses of approximately $60,000 as compared towere no longer outstanding in the first quarter of 2020. These decreases were offset by increased stock compensation expense2022.
Research and Development Expenses
Research and development expenses were $456,000 for the three months ended March 31, 2022, compared to $379,000 for the three months ended March 31, 2021, compared to $609,000 for the three months ended March 31, 2020, a decreasean increase of $230,000$77,000 or 38%20%. The decreaseincrease was driven by lowerhigher expenses for salaries and benefits of approximately $225,000 in the quarter ended March 31, 2021.2022.
Interest Expense
Interest expense for the three months ended March 31, 20212022 was $1,519,000,$823,000, as compared to $3,531,000$1,519,000 for the three months ended March 31, 2020,2021, a decrease of $2,012,000$696,000 or 57%46%. The decrease was driven by the accelerated expenselower amortization of the unamortized debt discount of $2,486,000 forrelated to the beneficial conversion feature associated with the portions of theConvertible Promissory Note and Revolving Credit Agreement with Boyalife Asset Holding II, Inc. which were converted duringand the firstJuly 2019 Note. In the quarter ended March 31, 2021, the Company recorded amortization of 2020. The decrease was offset by approximately $450,000 more in debt discount amortization andto interest expense for these convertible notes totaling $906,000, as compared to $213,000 for the quarter ended March 31, 2022.
Gain on Extinguishment of Debt
The Company recorded no gain on the extinguishment of debt in the three months ended March 31, 2022 as compared to a gain of $652,000 for the three months ended March 31, 2021. The gain was related to the additional draw down fromprincipal and accrued interest for the Loan completed byPaycheck Protection Program loan the Company received in April 2020.2020 and forgiven in March 2021.
Liquidity and Capital Resources
At March 31, 2021,2022, the Company had cash and cash equivalents of $10,014,000$3,652,000 and working capital of $6,413,000.($2,283,000). This compares to cash and cash equivalents of $7,161,000$7,280,000 and working capital of $9,155,000$8,616,000 at December 31, 2020.2021. We have primarily financed operations through private and public placement of equity securities and our line of credit facility.
The Company has a Revolving Credit Agreement with Boyalife Asset Holding II, Inc. As of March 31, 2021, the Company had drawn down the full $10,000,000 that is available under the Revolving Credit Agreement, which matures in March of 2022. Boyalife Asset Holding II, Inc. is a wholly-owned subsidiary of Boyalife Group Inc. (USA), which is owned and controlled by the Company’s Chief Executive Officer and Chairman of our Board of Directors.
During 2020, the Company received a loan totalling net proceeds of $646,000 from the SBA under the Payment Protection Program of the CARES Act, in response to the Coronavirus pandemic described above. The CARES Act permits that a loan may be forgiven if certain criteria are met. In March 2021, the SBA approved the Company’s application to forgive the entire amount of the debt.
The Company has incurred recurringhistorical losses from operations and expects to continue to incur operating losses and as of March 31, 2021 had an accumulated deficit of $255,696,000. These conditions raise substantial doubt aboutin the Company’s ability to continue as a going concern within one year from the filing of this report.near future. The Company may requireneed to raise additional capital to grow theits business, to fund other operating expenses and to make interest payments. The Company’s ability to fund its cashliquidity needs is subject to various risks, many of which are beyond its control. The Company may seek additional funding through bankdebt borrowings, or public or private 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 us,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.
We manage the concentration of credit risk with our customers and distributors through a variety of methods including, pre-shipment deposits, credit reference checks and credit limits. Although management believes that our customers and distributors are sound and creditworthy, a severe adverse impact on their business operations could have a corresponding material effect on their ability to pay timely and therefore on our net revenues, cash flows and financial condition.
Non-GAAP Measures
In addition to the results reported in accordance with US GAAP, we also use a non-GAAP measure, adjusted EBITDA, to evaluate operating performance and to facilitate the comparison of our historical results and trends. The Company calculates adjusted EBITDA as income or (loss) from operations less depreciation, amortization, stock compensation, equity method investments and impairment of intangible assets. This financial measure is not a measure of financial performance under US GAAP and should not be considered in isolation or as a substitute for loss as a measure of performance. The calculation of this non-GAAP measure may not be comparable to similarly titled measures used by other companies. Reconciliations to the most directly comparable GAAP measure are provided below.
| | | Three Months Ended March 31, | |
| | | 2021 | | | 2020 | |
Net loss | | $ | (2,531,000 | ) | | $ | (4,743,000 | ) |
| | | | | | | | | |
Deduct: | | | | | | | | |
Interest expense | | | (1,519,000 | ) | | | (3,531,000 | ) |
Other income / expense | | | (1,000 | ) | | | (3,000 | ) |
Gain on extinguishment of debt | | | 652,000 | | | | -- | |
Loss from operations | | $ | (1,663,000 | ) | | $ | (1,209,000 | ) |
| | | | | | | | | |
Add: | | | | | | | | |
Depreciation and amortization | | | 166,000 | | | | 199,000 | |
Stock-based compensation expense | | | 258,000 | | | | 67,000 | |
Adjusted EBITDA | | $ | (1,239,000 | ) | | $ | (943,000 | ) |
The adjusted EBITDA loss was $1,239,000 for the three months ended March 31, 2021 compared to an adjusted EBITDA loss of $943,000 for the three months ended March 31, 2020, an increase in the adjusted EBITDA loss of $296,000 or 31%. The adjusted EBITDA loss increase was due to the decrease of $784,000 in gross profit driven by lower AXP disposable sales, offset by a $100,000 decrease in Selling, General and Administrative expenses, a $230,000 decrease in Research and Development expenses and lower stock compensation expense in the quarter ended March 31, 2021 of $191,000 as compared to the first quarter of 2020.
Off-Balance Sheet Arrangements
As of March 31, 2021, the Company had no off-balance sheet arrangements.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
ThermoGenesis Holdings is a smaller reporting company as defined by Rule 12b-2 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) and is not required to provide information under this item.
ITEM 4. Controls and Procedures
The Company carried out an evaluation, under the supervision, and with the participation of management, including both the Company’s Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined by Exchange Act Rule 13a-15(e) or 15d-15(e)) as of March 31, 2021.2022. Disclosure controls and procedures cover controls and other procedures that are designed to ensure that information required to be disclosed by the Company in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have both concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2021.2022.
There were no changes in the Company’s internal controls over financial reporting that occurred during the three months ended March 31, 20212022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting. Management believes that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within any company, have been detected.
PART II - OTHER INFORMATION
ITEM 1.Legal Proceedings | LEGAL PROCEEDINGS.
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In the normal course of operations, we may have disagreements or disputes with distributors, vendors or employees. Such potential disputes are seen by management as a normal part of business and while the outcome of such disagreements and disputes cannot be predicted with certainty, except as described below, we do not believe that any pending legal proceedings are material. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
The material set forth in Note 8, “Commitments and Contingencies,” in “Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements” is incorporated herein by reference.
ITEM 1A.Risk Factors | RISK FACTORS.
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There have been no material changes to the risk factors relating to the Company set forth in f, “Item IA. Risk Factors” of its Annual Report on Form 10-K for the year ended December 31, 2020.2021.
ITEM 2.Unregistered Sales of Equity Securities and Use of Proceeds | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
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None.
ITEM 3.Defaults Upon Senior Securities | DEFAULTS UPON SENIOR SECURITIES.
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None.
ITEM 4.Mine Safety Disclosure | MINE SAFETY DISCLOSURE.
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Not applicable.
ITEM 5.Other Information | OTHER INFORMATION.
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None.
An index of exhibits is found on page 26 of this report.
Item 6.
| Exhibits.
ITEM 6.Exhibits |
Exhibit No. | Description |
1.1 | At the Market Offering Agreement, dated December 13, 2019 by and between ThermoGenesis Holding, Inc. and H.C. Wainwright & Co., LLC incorporated herein by reference to Exhibit 1.2 to the Registration Statement on Form S-3 (Registration No. 333-235509) filed on December 13, 2019. |
1.2 | Amendment No. 1 to At the Market Offering Agreement, dated May 19, 2020, between ThermoGenesis Holdings, Inc. and H.C. Wainwright & Co., LLC, incorporated herein by reference to Exhibit 1.1 to the Form 8-K filed on May 20, 2020. |
1.3 | Amendment No. 2 to At the Market Offering Agreement, dated February 3, 2022, by and between ThermoGenesis Holdings, Inc. and H.C. Wainwright & Co., LLC, incorporated herein by reference to Exhibit 1.3 to the Form 8-K filed on February 3, 2022. |
| 3.1 | Amended and Restated Certificate of Incorporation of ThermoGenesis Holdings, Inc. dated as of June 5, 2020, incorporated by reference to Exhibit 3.1 to Form 8-K filed June 6, 2020. |
| 3.2 | Amended and Restated Bylaws of ThermoGenesis Holdings, Inc., incorporated by reference to Exhibit 3.2 to Form 8-K filed with the SEC on October 30, 2019. |
| 3.3 | First Amendment to the Amended and Restated Bylaws of ThermoGenesis Holdings, Inc., incorporated by reference to Exhibit 3.1 to Form 8-K filed December 17, 2021. |
| 4.1 | Form of Common Stock Purchase Warrant, incorporated by reference to Exhibit 4.1 to Form 8-K filed with the SEC on March 28, 2018. |
| 4.2 | Form of Common Warrant, incorporated by reference to Exhibit 10.37 of amended Registration Statement on Form S-1 filed with the SEC on May 14, 2018. |
| 4.3 | Investors’ Rights Agreement, dated January 1, 2019, among CARTXpress Bio, Inc., Bay City Capital Fund V, L.P., and Bay City Capital Fund V Co-Investment Fund, L.P., incorporated by referenced to Exhibit 10.3 to Form 8-K filed with the SEC on January 4, 2019. |
| 4.4 | Form of Convertible Promissory Note, dated as of July 23, 2019, between ThermoGenesis Holdings, Inc. and Orbrex USA Co., incorporated by reference to Exhibit 4.1 to Form 8-K filed with the SEC on July 29, 2019. |
| 4.5 | Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934, as amended, incorporated by reference to Exhibit 4.8 to Form 10-K filed with the SEC on March 24, 2020. |
10.1 | Fourth Amendment to the Company’s Amended 2016 Equity Incentive Plan, Effective June 4, 2020, incorporated by reference to exhibit 10.1 to Form 8-K filed January 14, 2022. |
10.2 | Amended 2016 Equity Incentive Plan, incorporated by reference to exhibit 10.2 to Form 8-K filed January 14, 2022. |
10.3 | Amendment No.1 to Second Amended and Restated Convertible Promissory Note, Dated March 4, 2022, between ThermoGenesis Holdings, Inc. and Boyalife Asset Holding II, Inc. |
10.4 | Amendment No. 2 to First Amended and Restated Revolving Credit Agreement, dated March 4, 2022, between ThermoGenesis Holdings, Inc. and Boyalife Asset Holding II, Inc. |
10.5 | License and Technology Access Agreement, dated March 24, 2022, between ThermoGenesis Holdings, Inc. and Boyalife Genomics Tianjin Ltd. |
10.6 | Lease Agreement, dated March 24, 2022, between ThermoGenesis Holdings, Inc. and Z3 Investment LLC. |
31.1 | Certification by the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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31.2 | Certification by the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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32 | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 |
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101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
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101.SCH | Inline XBRL Taxonomy Extension Schema Document |
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101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101) |
Footnotes to Exhibit Index
ThermoGenesis Holdings, Inc.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | ThermoGenesis Holdings, Inc. (Registrant) |
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Dated: May 19, 2022 | | /s/ Xiaochun (Chris) Xu, Ph.D. |
| | Xiaochun (Chris) Xu, Ph.D. Chief Executive Officer (Principal Executive Officer) |
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Dated: May 13, 2021 | /s/ Xiaochun (Chris) Xu, Ph.D.19, 2022
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| Xiaochun (Chris) Xu, Ph.D.
Chief Executive Officer
(Principal Executive Officer)
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Dated: May 13, 2021
| /s/ Jeffery Cauble |
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| | Jeffery Cauble Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | |
