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

Registrant’s telephone number, including area code: ~~(858) 458-0900~~(737) 255-7194

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange ~~Act~~ ~~(Check one)~~.Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financing accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~October~~July 31, ~~2018,~~2019, there were ~~13,201,410~~453,116 shares of the registrant’s common stock outstanding.

	As of September 30, 2018			As of December 31, 2017			As of June 30, 2019			As of December 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	6,806		$	9,550		$	4,530		$	5,261
Accounts receivable, net of reserves of $185 in 2018 and $167 in 2017		440			145
Accounts receivable, net of reserves of $181 in 2019 and $185 in 2018								80			178
Restricted cash		40			675			40			40
Inventories, net		2,814			3,183			107			107
Other current assets		654			1,311			503			785
Current assets held for sale								—			3,277
Total current assets		10,754			14,864			5,260			9,648

Property and equipment, net		2,648			3,052			2,297			2,299
Operating lease right-of-use assets								905			—
Other assets		1,938			2,570			50			39
Intangibles, net		6,270			7,207
Noncurrent assets held for sale								—			11,633
Goodwill		3,922			3,922			372			372
Total assets	$	25,532		$	31,615		$	8,884		$	23,991
Liabilities and Stockholders’ Equity
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable and accrued expenses	$	3,645		$	4,790		$	2,953		$	2,777
Operating lease liability								157			—
Term loan obligations, net of discount		14,007			13,624			10,813			14,202
Current liabilities held for sale								—			580
Total current liabilities		17,652			18,414			13,923			17,559

Deferred revenues		187			94
Long-term deferred rent and other		83			107
Other noncurrent liabilities								65			46
Noncurrent operating lease liability								748			—
Warrant liability		1,472			—			424			916
Noncurrent liabilities held for sale								—			245
Total liabilities		19,394			18,615			15,160			18,766

Commitments and contingencies (Note 8)
Commitments and contingencies (Notes 8 and 9)

Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; 23,500 shares issued; 4,624 and 2,431 shares outstanding in 2018 and 2017, respectively		—		—
Common stock, $0.001 par value; 100,000,000 shares authorized; 11,691,293 and 5,782,573 shares issued and outstanding in 2018 and 2017, respectively		67			58
Stockholders’ equity (deficit):
Preferred stock, $0.001 par value; 5,000,000 shares authorized; 30,233 shares issued; 4,540 and 4,606 shares outstanding in 2019 and 2018, respectively								—			—
Common stock, $0.001 par value; 100,000,000 shares authorized; 443,117 and 296,609 shares issued and outstanding in 2019 and 2018, respectively								—			—
Additional paid-in capital		417,036			413,304			420,404			418,390
Accumulated other comprehensive income		1,182			1,387			—			1,218
Accumulated deficit		(412,147	)		(401,749	)		(426,680	)		(414,383	)
Total stockholders’ equity		6,138			13,000
Total liabilities and stockholders’ equity	$	25,532		$	31,615
Total stockholders’ equity (deficit)								(6,276	)		5,225
Total liabilities and stockholders’ equity (deficit)							$	8,884		$	23,991

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017
Product revenues	$	858		$	467		$	2,249		$	2,027
Cost of product revenues		322			181			918			992
Amortization of intangible assets		306			306			919			919
Gross profit (loss)		230			(20	)		412			116
													2019			2018			2019			2018
Development revenues:
Government contracts and other		454			1,306			2,270			2,856		$	302		$	899		$	1,039		$	1,816
		454			1,306			2,270			2,856			302			899			1,039			1,816
Operating expenses:
Research and development		1,916			3,004			6,366			9,284			1,289			1,267			2,715			2,661
Sales and marketing		453			840			1,656			3,043			97			185			211			478
General and administrative		1,486			1,785			5,199			6,012			875			1,293			2,237			3,302
Change in fair value of warrants		(1,676	)		—			(1,676	)		—
In process research and development acquired from Azaya Therapeutics		—			—			—			1,686
Total operating expenses		2,179			5,629			11,545			20,025			2,261			2,745			5,163			6,441
Operating loss		(1,495	)		(4,343	)		(8,863	)		(17,053	)		(1,959	)		(1,846	)		(4,124	)		(4,625	)

Other income (expense):
Interest income		11			5			30			24			7			5			14			19
Interest expense		(512	)		(474	)		(1,379	)		(1,603	)		(597	)		(444	)		(1,111	)		(866	)
Other income (expense), net		9			5			157			233
Issuance costs of warrants		(343	)		—			(343	)		—
Change in fair value of warrants														282			—			492			—
Total other expense		(835	)		(464	)		(1,535	)		(1,346	)		(308	)		(439	)		(605	)		(847	)
Loss from continuing operations													$	(2,267	)	$	(2,285	)	$	(4,729	)	$	(5,472	)
Loss from discontinued operations														(6,880	)		(1,374	)		(7,568	)		(2,596	)
Net loss	$	(2,330	)	$	(4,807	)	$	(10,398	)	$	(18,399	)	$	(9,147	)	$	(3,659	)	$	(12,297	)	$	(8,068	)
Beneficial conversion feature for convertible preferred stock		(2,487	)	$	—			(2,487	)	$	—
Net loss allocable to common stockholders	$	(4,817	)	$	(4,807	)	$	(12,885	)	$	(18,399	)

Basic and diluted net loss per share attributable to common stockholders	$	(0.55	)	$	(1.39	)	$	(1.85	)	$	(6.22	)
Basic and diluted net loss per share attributable to common stockholders from continuing operations													$	(5.12	)	$	(18.53	)	$	(11.89	)	$	(44.91	)
Basic and diluted net loss per share attributable to common stockholders from discontinued operations														(15.55	)		(11.14	)		(19.02	)		(21.31	)
Net loss per share, basic and diluted													$	(20.67	)	$	(29.67	)	$	(30.91	)	$	(66.22	)
Basic and diluted weighted average shares used in calculating net loss per share attributable to common stockholders		8,716,194			3,449,083			6,972,615			2,956,403			442,512			123,330			397,827			121,843

Comprehensive loss:
Net loss	$	(2,330	)	$	(4,807	)	$	(10,398	)	$	(18,399	)	$	(9,147	)	$	(3,659	)	$	(12,297	)	$	(8,068	)
Other comprehensive loss – foreign currency translation adjustments		(55	)		16			(205	)		(59	)
Other comprehensive (loss) income – foreign currency translation adjustments														—			131			—			(150	)
Comprehensive loss	$	(2,385	)	$	(4,791	)	$	(10,603	)	$	(18,458	)	$	(9,147	)	$	(3,528	)	$	(12,297	)	$	(8,218	)


	Convertible												Accumulated						Total
	preferred stock					Common stock				Additional			other						stockholders’
	Shares			Amount		Shares		Amount		paid-in capital			comprehensive income			Accumulated deficit			equity (deficit)
Balance at December 31, 2017		2,431		$	—		115,652	$	—	$	413,362		$	1,387		$	(401,749	)	$	13,000
Share-based compensation		—			—		—		—		143			—			—			143
Sale of common stock, net		—			—		202		—		27			—			—			27
Conversion of Series B Convertible Preferred Stock into common stock		(1,228	)		—		7,375		—		—			—			—			—
Foreign currency translation adjustment and accumulated other comprehensive income		—			—		—		—		—			(281	)		—			(281	)
Net loss		—			—		—		—		—			—			(4,409	)		(4,409	)
Balance at March 31, 2018		1,203		$	—		123,229	$	—	$	413,532		$	1,106		$	(406,158	)	$	8,480
Share-based compensation		—			—		—		—		96			—			—			96
Sale of common stock, net		—			—		192		—		(297	)		—			—			(297	)
Conversion of Series B Convertible Preferred Stock into common stock		(17	)		—		103		—		—			—			—			—
Foreign currency translation adjustment and accumulated other comprehensive income		—			—		—		—		—			131						131
Net loss		—			—		—		—		—			—			(3,659	)		(3,659	)
Balance at June 30, 2018		1,186		$	—		123,524	$	—	$	413,331		$	1,237		$	(409,817	)	$	4,751


Balance at December 31, 2018		4,606		$	—		296,609	$	—	$	418,390		$	1,218		$	(414,383	)	$	5,225
Share-based compensation		—			—		—		—		49			—			—			49
Sale of common stock, net		—			—		139,855		—		1,873			—			—			1,873
Conversion of Series C Convertible Preferred Stock into common stock		(66	)		—		1,653		—		—			—			—			—
Foreign currency translation adjustment and accumulated other comprehensive income		—			—		—		—		—			(140	)		—			(140	)
Net loss		—			—		—		—		—			—			(3,150	)		(3,150	)
Balance at March 31, 2019		4,540		$	—		438,117	$	—	$	420,312		$	1,078		$	(417,533	)	$	3,857
Share-based compensation		—			—		—		—		28			—			—			28
Sale of common stock, net		—			—		5,000		—		64			—			—			64
Foreign currency translation adjustment and accumulated other comprehensive income		—			—		—		—		—			(1,078	)		—			(1,078	)
Net loss		—			—		—		—		—			—			(9,147	)		(9,147	)
Balance at June 30, 2019		4,540		$	—		443,117	$	—	$	420,404		$	—		$	(426,680	)	$	(6,276	)

	For the Nine Months Ended September 30,						For the Six Months Ended June 30,
	2018			2017			2019			2018
Cash flows from operating activities:
Net loss	$	(10,398	)	$	(18,399	)	$	(12,297	)	$	(8,068	)
Adjustments to reconcile net loss to net cash used in operating activities:
Non Cash Lease Expense							39				—
Depreciation and amortization		1,465			1,618			617			975
Amortization of deferred financing costs and debt discount		383			580			257			212
In process research and development acquired from Azaya Therapeutics		—			1,686
Provision for excess inventory		433			413			—			398
Allocation of issuance costs associated with warrants		343			—
Change in fair value of warrants		(1,676	)		—			(492	)		—
Share-based compensation expense		325			588			77			239
Loss on asset disposal		23			9			—			20
Loss on sale of business								6,306			—
Increases (decreases) in cash caused by changes in operating assets and liabilities:
Accounts receivable		(316	)		991			(28	)		(274	)
Inventories		615			457			235			371
Other current assets		514			(284	)		216			344
Other assets		7			74			257			(1	)
Accounts payable and accrued expenses		(1,274	)		(1,746	)		(94	)		(1,165	)
Deferred revenues		93			6			29			123
Long-term deferred rent		(24	)		103
Other long-term liabilities								54			(14	)
Net cash used in operating activities		(9,487	)		(13,904	)		(4,824	)		(6,840	)
Cash flows from investing activities:
Purchases of property and equipment		(128	)		(271	)		(6	)		(78	)
Proceeds from sale of assets		—			10
Purchase of long-lived assets part of Azaya Therapeutics' acquisition		—			(1,201	)
Proceeds from sale of business, net								2,789			—
Net cash used in investing activities		(128	)		(1,462	)		2,783			(78	)
Cash flows from financing activities:
Principal payments on long-term obligations		—			(4,720	)
Proceeds from sale of common and preferred stock, net		6,246			12,377
Net cash provided by financing activities		6,246			7,657
Principal payment of long-term obligations								(642	)		—
Payment of financing lease liability								(28	)		—
Proceeds from sale of common stock, net								1,984			(200	)
Net cash provided by (used in) financing activities								1,314			(200	)
Effect of exchange rate changes on cash and cash equivalents		(10	)		11			(4	)		12
Net decrease in cash and cash equivalents		(3,379	)		(7,698	)		(731	)		(7,106	)
Cash, cash equivalents, and restricted cash at beginning of period		10,225			12,910			5,301			10,225
Cash, cash equivalents, and restricted cash at end of period	$	6,846		$	5,212		$	4,570		$	3,119
Supplemental disclosure of cash flows information:
Cash paid during period for:
Interest	$	990		$	1,059		$	826		$	649
Supplemental schedule of non-cash investing and financing activities:
Proceeds from sales of business, net, paid directly to lender for principal payment of long-term obligations							$	3,050		$	—
Conversion of preferred stock into common stock	$	7		$	—		$	—		$	4
Common stock issued in payment for the assets acquired from Azaya Therapeutics	$	—		$	2,311

Our accompanying unaudited consolidated condensed financial statements as of ~~September~~June 30, ~~2018~~2019 and for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. Our consolidated condensed balance sheet at December 31, ~~2017~~2018 has been derived from the audited financial statements at December 31, ~~2017,~~2018, but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the financial position and results of operations of ~~Cytori~~Plus Therapeutics, Inc., and our subsidiaries (collectively, the “Company” or “Plus Therapeutics”) have been included. Operating results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. These financial statements should be read in conjunction with the consolidated financial statements and notes therein included in our Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, filed with the Securities and Exchange Commission on March ~~9, 2018.~~29, 2019.

On March 30, 2019, the Company entered into an Asset and Share Sale and Purchase Agreement (the “Lorem Purchase Agreement”) with Lorem Vascular Pte. Ltd. (“Lorem”), pursuant to which, among other things, Lorem agreed to purchase the Company’s UK subsidiary, Cytori Ltd. (the “UK Subsidiary”), and the Company’s Cell Therapy assets, excluding such assets used in Japan or relating to the Company’s contract with the U.S. Department of Health and Human Service’s Biomedical Advanced Research and Development Authority (“BARDA”). Both the Company and Lorem made customary representations, warranties and covenants in the Lorem Purchase Agreement. The transaction was completed on April 24, 2019 and the Company received $4.0 million of cash proceeds, of which $1.7 million was used to pay down principal, interest and fees under the Loan and Security Agreement, dated May 29, 2015 (the “Loan and Security Agreement”), with Oxford Finance, LLC (“Oxford”).

On April 19, 2019, the Company entered into an Asset and Share Sale and Purchase Agreement (the “Shirahama Purchase Agreement”) with Seijirō Shirahama, pursuant to which, among other things, Mr. Shirahama agreed to purchase the Company’s Japanese subsidiary, Cytori Therapeutics, K.K. (the “Japanese Subsidiary”), and substantially all of the Company’s Cell Therapy assets used in Japan. Both the Company and Mr. Shirahama made customary representations, warranties and covenants in the Shirahama Purchase Agreement. The transaction was completed on April 25, 2019 and the Company received $3.0 million of cash proceeds, of which $1.4 million was used to pay down principal, interest and fees under the Loan and Security Agreement (defined in Note 4)

On July 29, 2019, the Company amended its Certificate of Incorporation with the State of Delaware to change its corporate name from Cytori Therapeutics, Inc. to Plus Therapeutics, Inc. The Company also changed its trading symbol for its common stock on the Nasdaq Capital Market to “PSTV”. Additionally, the Company changed its trading symbol for its Series S warrants to “PSTVZ”.

On May 23, 2018, following stockholder and Board approval, the Company filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation, as amended (the “Amendment”), with the Secretary of State of the State of Delaware to (i) effectuate a one-for-ten (1:10) reverse stock split (the “Reverse Stock Split”) of its common stock, par value $0.001 per share, without any change to its par value, and (ii) increase the number of authorized shares of the Company’s common stock from 75 million to 100 million shares (which amount is not otherwise affected by the Reverse Stock Split). The Amendment became effective on the filing date. Upon effectiveness of the Reverse Stock Split, the number of shares of the Company’s common stock (x) issued and outstanding decreased from approximately 61.6 million shares (as of May 23, 2018) to approximately 6.2 million shares; (y) reserved for issuance upon exercise of outstanding warrants and options decreased from approximately 23.4 million shares to approximately 2.3 million shares, and (z) reserved but unallocated under our current equity incentive plans (including the stockholder-approved share increase to the Company’s 2014 Equity Incentive Plan) decreased from approximately 9.1 million common shares to approximately 0.9 million common shares. The Company’s 5,000,000 shares of authorized Preferred Stock were not affected by the Reverse Stock Split. No fractional shares were issued in connection with the Reverse Stock Split. Proportional adjustments for the reverse stock split were made to the Company's outstanding stock options, warrants and equity incentive plans for all periods presented.

On August 5, 2019, following stockholder and Board approval, the Company filed a Certificate of Amendment (the “August 2019 Amendment”) to its Amended and Restated Certificate of Incorporation (the Amendment), as amended, with the Secretary of State of the State of Delaware to effectuate a one-for-fifty (1:50) reverse stock split (the “August 2019 Reverse Stock Split”)) of its common stock, par value $0.001 per share, without any change to its par value. The August 2019 Amendment became effective on the filing date. The August 2019 Reverse Stock Split became effective for trading purposes as of the commencement of trading on the Nasdaq Capital Market on August 6, 2019. There was no change in the Company’s Nasdaq ticker symbol, “PSTV,” as a result of the August 2019 Reverse Stock Split. Upon effectiveness, each 50 shares of issued and outstanding Common Stock were converted into one newly issued and outstanding share of Common Stock. The Company’s 5,000,000 shares of authorized Preferred Stock were not affected by the August 2019 Reverse Stock Split. No fractional shares were issued in connection with the August 2019 Reverse Stock Split. Any fractional shares of Common Stock that would have otherwise resulted from the August 2019 Reverse Stock Split were rounded up to the nearest whole share. Outstanding equity awards and the shares available for future grant under the Company’s Amended and Restated 2004 Equity Incentive Plan, 2011 Employee Stock Purchase Plan, 2014 Amended and Restated Equity Incentive Plan and 2015 New Employee Incentive Plan were proportionately reduced (rounded down to the nearest whole share), and the exercise prices of outstanding equity awards were proportionately increased (rounded up to the nearest whole cent) to give effect to the August 2019 Reverse Stock Split.

In February ~~2016,~~2017, the Financial Accounting Standards Board (the “FASB”) issued ~~Accounting Standards Update (“ASU”) 2016-02,~~ ~~Leases~~. Under this new guidance, at the commencement date, lessees will be required to recognize (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. This guidance is not applicable for leases with a term of 12 months or less. The new standard is effective for annual reporting periods, and interim periods within those periods, beginning after December 15, 2018, with early adoption permitted. Although ASU 2016-02 is required to be adopted at the earliest period presented using a modified retrospective approach, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which allows for an alternative transition method of adoption by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company plans to adopt ASU 2016-02 on January 1, 2019 utilizing the alternative transition method allowed for under ASU 2018-11. Although the Company is in the process of evaluating the impact the adoption of ASU 2016-02 will have on its financial statements, the Company expects the most significant changes will be the recognition of right-of-use assets and lease liabilities on the Company’s balance sheet for its real estate operating lease commitments.

~~In February 2017, the FASB issued~~ ASU 2017-04, Simplifying the Test for Goodwill Impairment, to simplify how all entities assess goodwill for impairment by eliminating Step 2 from the goodwill impairment test. As amended, the goodwill impairment test will consist of one step comparing the fair value of a reporting unit with its carrying amount. An entity should recognize a goodwill impairment charge for the amount by which the reporting unit's carrying amount exceeds its fair value. This update is effective for annual periods beginning after December 15, 2019, and interim periods within those periods. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We are currently evaluating the impact that this standard will have on our consolidated financial statements.

~~In July 2017, the FASB issued ASU 2017-11,~~ Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. ASU 2017-11 allows companies to exclude a down round feature when determining whether a financial instrument (or embedded conversion feature) is considered indexed to the entity’s own stock. As a result, financial instruments (or embedded conversion features) with down round features may no longer be required to be accounted for as derivative liabilities. A company will recognize the value of a down round feature only when it is triggered and the strike price has been adjusted downward. For equity-classified freestanding financial instruments, an entity will treat the value of the effect of the down round as a dividend and a reduction of income available to common shareholders in computing basic earnings per share. For convertible instruments with embedded conversion features containing down round provisions, entities will recognize the value of the down round as a beneficial conversion discount to be amortized to earnings. The new standard is effective for annual reporting periods, and interim periods within those periods, beginning after December 31, 2018, with early adoption permitted. We are currently evaluating the impact that this standard will have on our consolidated financial statements.

In ~~May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers~~ (Topic 606). The new standard is based on the principle that revenue should be recognized in an amount that reflects the consideration to which the entity expects to be entitled in exchange for the transfer of promised goods or services. ASU 2014-09 and all subsequent amendments (collectively, the “new standards”) may be applied using either the full retrospective method, in which case the standard would be applied to each prior reporting period presented, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. We have adopted the standards beginning this first quarter of 2018 using the modified retrospective method. Overall, the timing or amounts related to the revenue recognition under the new standards did not differ from our previously applied revenue recognition policy. Our product revenues are recognized at a point in time, which is when control transfers to the customer. We have made an accounting policy election to treat shipping and handling activities that occur after the customer obtains control of the goods as fulfillment costs. There was no ~~cumulative effect of applying the new standards as of the adoption date on~~ ~~January 1, 2018.~~

~~In November~~February 2016, the FASB issued ~~ASU 2016-18,~~Accounting Standards Update (“ASU”) 2016-02, ~~Restricted Cash~~Leases,. Under this new guidance, at the commencement date, lessees will be required to recognize (i) a lease liability, which ~~requires entities~~is a lessee’s obligation to ~~show~~make lease payments arising from a lease, measured on a discounted basis and (ii) a right-of-use asset, which is an asset that represents the ~~changes~~lessee’s right to use, or control the use of, a specified asset for the lease term. This guidance is not applicable for leases with a term of 12 months or less. The Company adopted ASC 842 as of January 1, 2019, electing the optional transition method that allows for a cumulative-effect adjustment in the ~~total~~period of ~~cash, cash equivalents, restricted cash~~adoption and ~~restricted cash equivalents in~~did not restate prior periods. The Company elected the ~~statement~~package of ~~cash flows.~~practical expedients permitted under the transition guidance. As a result ~~entities will no longer present transfers between cash~~of the adoption, the Company recorded right-of-use assets and ~~cash equivalents~~liabilities. As of June 30, 2019, the Company’s right-of-use assets and ~~restricted cash and restricted cash equivalents in the statement of cash flows. The adoption of this standard,~~ ~~in the first quarter of 2018,~~ ~~changed the presentation of our statement of cash flows to include our restricted cash balance~~liabilities were $0.9 million associated with ~~the non-restricted cash balances. The new guidance did not have a material impact~~its operating leases. See Note 8 for further discussion on the Company's consolidated financial statements. Cash, cash equivalents, and restricted cash reported on the consolidated condensed statements of cash flows includes restricted cash of $0.4 million, $0.4 million, $0.7 million, and $40,000 as of December 31, 2016, ~~September~~ ~~30, 2017, December 31, 2017 and~~ ~~September~~ ~~30, 2018, respectively.~~leases.

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Our most significant estimates and critical accounting policies involve recognizing revenue, reviewing ~~goodwill and intangible~~ assets for impairment, determining the assumptions used in measuring share-based compensation expense, valuing warrants, measuring expense related to our in-process research and development acquisition, and valuing allowances for doubtful ~~accounts and inventory reserves.~~accounts.

Actual results could differ from these estimates. Management’s estimates and assumptions are reviewed regularly, and the effects of revisions are reflected in the consolidated financial statements in the periods they are determined to be necessary.

We incurred ~~net~~ losses from continuing operations of ~~$2.3 million and $10.4~~$4.7 million for the ~~three and nine~~six months ended ~~September~~June 30, ~~2018~~.2019, respectively. We have an accumulated deficit of ~~$412.1~~$426.7 million as of ~~September~~June 30, ~~2018. Additionally, we have used net cash of $9.5 million to fund our operating activities for the nine months ended September~~ ~~30, 2018~~.2019. These factors raise substantial doubt about ~~the Company’s~~our ability to continue as a going concern.

Further, the Loan and Security Agreement ~~(defined in Note 4),~~ with Oxford, ~~Finance, LCC (“Oxford”),~~ as further described in Note 4, requires ~~maintaining~~maintenance of a minimum of ~~$1.5~~$2.0 million in unrestricted cash and cash equivalents on hand to avoid an event of ~~default under the Loan and Security Agreement and requires us to make an aggregate of $7.0 million in principal payments on or before December 31, 2018.~~default. Based on our cash and cash equivalents on hand of approximately ~~$6.8~~$4.5 million at ~~September~~June 30, ~~2018, the Company estimates~~2019, we estimate that itwe will need to raise additional capital and/or obtain a waiver or restructure the Loan and Security Agreement in the near term to avoid defaulting under ~~its $1.5~~our $2.0 million minimum ~~cash/~~cash and cash equivalents ~~covenant and to~~

~~make an aggregate of $7.0 million in principal payments on or before December 31, 2018.~~covenant.

To date, these operating losses have been funded primarily from outside sources of invested capital including our ~~recently completed~~ 2018 Rights Offering (defined ~~in Note 3~~ below), our Lincoln Park Purchase Agreement (defined in Note 11) with Lincoln Park Capital Fund, LLC (“Lincoln Park”)~~, the 2017 Rights Offering (defined in Note 3 below)~~, the Loan and Security Agreement and gross profits. We have had, and we will continue to have, an ongoing need to raise additional cash from outside sources to fund our future clinical development programs and other operations. Our inability to raise additional cash would have a material and adverse impact on operations and would cause us to default on ~~our loan.~~the Loan and Security Agreement with Oxford.

On April 11, 2017, we entered into an underwriting agreement (the “Underwriting Agreement”) with Maxim Group LLC “Maxim”) relating to the issuance and sale of 0.9 million shares of our common stock. The price to the public in this offering was $11.00 per share. Maxim purchased the shares from us pursuant to the Underwriting Agreement at a price of $10.40 per share. The net proceeds to us from the offering were approximately $8.7 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. The offering closed ~~on April 17, 2017. In addition, under the terms of the Underwriting Agreement, we granted Maxim a 45-day option to~~ ~~purchase up to 94,400 additional shares of common stock.~~ On May 31, 2017, Maxim exercised their overallotment option and purchased 84,900 shares at $11.00 per share. The net proceeds to us were $0.8 million, after deducting underwriting costs and offering expenses payable by us.

On September 5, 2017, we received a written notice from The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, based upon the closing bid price of our common stock for the last 30 consecutive business days, we no longer met the requirement to maintain a minimum bid price of $1 per share, as set forth in Nasdaq Listing Rule 5550(a)(2). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were provided a period of 180 calendar days, or until March 5, 2018, in which to regain compliance. We were granted an additional compliance period of 180 calendar days, or until September 4, 2018, in which to regain compliance after meeting the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital market, with the exception of the bid price requirement, and providing notice to Nasdaq of our intent to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary. In order to regain compliance with the minimum bid price requirement, the closing bid price of our common stock must have been at least $1 per share for a minimum of ten consecutive business days during the second 180-day period. On June 8, 2018, we received written notice from Nasdaq that we had regained compliance with the Nasdaq Stock Market Listing Rule 5500(a)(2) concerning our minimum bid price per share of our common stock.

On November 28, 2017, we closed a rights offering originally filed under a Form S-1 registration statement in August 2017 (“2017 Rights Offering”). Pursuant to the 2017 Rights Offering, the Company sold an aggregate of 10,000 units consisting of a total of 10,000 shares of Series B Convertible Preferred Stock, immediately convertible into approximately 3,000,000 shares of common stock and 18,000,000 warrants, exercisable for an aggregate of 1,800,000 shares of common stock at an exercise price of $3.333 per share of common stock, resulting in total net proceeds to the Company of $8.8 million. These warrants became exercisable upon stockholder approval of an increase in the Company’s authorized shares of common stock obtained at the 2018 Annual Meeting of Stockholders.

On June 1, 2018, we entered into a Sales Agreement with B. Riley FBR, Inc. (“B. Riley FBR”) to sell shares of our common stock having an aggregate offering price of up to $6.5 million from time to time, through an “at the market” equity offering program (the “ATM ~~program”~~Program”) under which B. Riley FBR will act as sales agent. ~~Through September 30, 2018, we have sold a total of 1.5 million shares for proceeds of approximately $0.8 million through the~~The ATM ~~program.~~Program financing facility has been exhausted and there is no availability remaining under this financing facility.

On July 25, 2018, we closed a rights offering originally filed under a Form S-1 registration statement in April 2018 (“2018 Rights Offering”). Pursuant to the 2018 Rights Offering, the Company sold an aggregate of 6,723 units consisting of a total of 6,723 shares of Series C Convertible Preferred Stock, immediately convertible into approximately ~~8.4~~0.2 million shares of common stock and 7,059,150 warrants, ~~with each warrant~~ exercisable for ~~one share~~an aggregate of 141,183 shares of common stock at an exercise price of ~~$0.7986~~$39.93 per share of common stock, resulting in total net proceeds to the Company of approximately $5.7 million.

On August 28, 2018, we received a written notice from ~~The~~ Nasdaq ~~Stock Market LLC (“Nasdaq”)~~staff indicating that, based upon the closing bid price of our common stock for the ~~last~~prior 30 consecutive business days, we no longer meet the requirement to maintain a minimum bid price of $1$1.00 per share, as set forth in Nasdaq Listing Rule 5550(a)(2). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we ~~have been~~were provided aan initial period of 180 calendar days, or until February 25, 2019, in which to regain compliance. In order to regain compliance with the minimum bid price requirement, the closing bid price of our common stock must have been at least $1 per share for a minimum of ten consecutive business days during the 180-day period. ~~In the event we do not regain compliance within this 180-day period, we may be eligible to seek~~We were also granted an additional compliance period of 180 calendar days, ~~if we meet~~or until August 26, 2019, in which to regain compliance after meeting the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exception of the bid price requirement, ~~if we provide written~~and providing notice to Nasdaq staff of our intent to cure the deficiency during this second compliance period, by effecting a reverse stock split, if necessary. In order to regain compliance with the minimum bid price requirement, the closing bid price of our common stock must have been at least $1.00 per share for a minimum of 10 consecutive business days during the 180-day period. In August 2019, we consummated a 1-for-50 reverse stock split pursuant to which the minimum bid price of our common stock rose above $1.00. If the closing bid price of our common stock remains above $1.00 per share, we expect to regain compliance with the minimum bid price requirement on August 19, 2019. However, based on our stockholders’ deficit of $6.3 million as of June 30, 2019, we will not meet the minimum stockholders’ equity requirement for continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(b)(1), which requires listed companies to maintain stockholders’ equity of at least $2.5 million, and we expect to receive written notice from Nasdaq staff to that effect following the filing of this Quarterly Report on Form 10-Q. In addition, as of June 30, 2019, we do not meet the alternative compliance standards relating to the market value of listed securities or net income from continuing operations. We intend to evaluate various courses of action to regain compliance with Nasdaq Listing Rule 5550(b)(1) within the compliance period specified by Nasdaq. However, there can be no assurance that we will be able to regain compliance within such compliance period.

On September 21, 2018, ~~Cytori~~the Company entered into a purchase agreement and a registration rights agreement, with Lincoln Park, pursuant to which the Company has the right to sell to Lincoln Park and Lincoln Park is obligated to purchase up to $5.0 million

of shares of the Company’s common stock over the 24-month period following October 15, 2018, subject to the satisfaction of certain conditions. Through December 31, 2018, the Company sold a total of 12,802 shares for proceeds of approximately $0.3 million through the Lincoln Park Purchase Agreement and 5,000 shares for proceeds of approximately $0.1 million were sold during the six months ended June 30, 2019. The Company believes there is less than $0.1 million remaining available under this financing facility. See Note 11 for further discussion on the Lincoln Park Agreement.

We continue to seek additional capital through product revenues, strategic transactions ~~including extension opportunities under our awarded U.S. Department of Health and Human Service’s Biomedical Advanced Research and Development Authority (“BARDA”) contract,~~ and from other financing alternatives. Without additional capital, current working capital and cash generated from sales will not provide adequate funding for research, sales and marketing efforts and product development activities at their current levels. If sufficient capital is not raised, we will at a minimum need to significantly reduce or curtail our research and development and other operations, and this would negatively affect our ability to achieve corporate growth goals.

On April 24, 2019 the Company received $3.4 million of net cash proceeds related to the sale of the UK Subsidiary and the Company’s Cell Therapy assets (excluding such assets used in Japan or relating to the Company’s contract with BARDA), of which $1.7 million was used to pay down principal, interest and fees on the Loan and Security Agreement, and on April 25, 2019 the Company received $2.5 million of net cash proceeds related to the sale of the Japanese Subsidiary, and substantially all of the Company’s Cell Therapy assets used in Japan, of which $1.4 million was used to pay down principal, interests and fees on the Loan and Security Agreement.

Should we be unable to raise additional cash from outside sources, this would have a material adverse impact on our operations.

The accompanying consolidated condensed financial statements have been prepared assuming the Company will continue to operate as a going concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from uncertainty related to its ability to continue as a going concern.

On May 29, 2015, the Company entered into the Loan and Security Agreement, ~~dated May 29, 2015, with Oxford (the “Loan and Security Agreement”),~~ pursuant to which itOxford funded an aggregate principal amount of $17.7 million (“Term Loan”), subject to the terms and conditions set forth in the Loan and Security Agreement. The Term Loan accrues interest at a floating rate of at least 8.95% per annum, comprised of three-month LIBOR rate with a floor of 1.00% plus 7.95%. Pursuant to the Loan and Security Agreement, we were previously required to make interest only payments through June 1, 2016 and thereafter we were required to make payments of principal and accrued interest in equal monthly installments sufficient to amortize the Term Loan through June 1, 2019, the maturity date. On February 23, 2016, we received an acknowledgement and agreement from Oxford related to the positive data on our U.S. ACT-OA clinical trial. As a result, pursuant to the Loan and Security Agreement, the period for which we are required to make interest-only payments was extended from July 1, 2016 to January 1, 2017. All unpaid principal and interest with respect to the Term Loan iswas scheduled to be due and payable in full on June 1, 2019. At maturity of the Term Loan, or earlier repayment in full following voluntary prepayment or upon acceleration, we are required to make a final payment in an aggregate amount equal to approximately $1.1 million. In connection with the Term Loan, on May 29, 2015, we issued to Oxford warrants to purchase an aggregate of ~~9,444~~189 shares of our common stock at an exercise price of ~~$103.50~~$5,175 per share. These warrants became exercisable as of November 30, 2015 and will expire on May 29, 2025 and, following the authoritative accounting guidance, are equity classified and its respective fair value was recorded as a discount to the debt.

On September 20, 2017, the Company entered into an amendment to the Term Loan, pursuant to which, among other things, Oxford agreed to reduce the minimum liquidity covenant level originally at $5 million to $1.5 million. The amendment also extended the interest-only period under the Loan and Security Agreement through August 1, 2018, as the Company successfully closed on a financing and received unrestricted net cash proceeds in excess of $5 million on or before December 29, 2017.

On June 19, 2018, the Company entered into a second amendment (the “Second Amendment”) to the Term Loan with Oxford. The Second Amendment ~~extends~~extended the interest-only period under the Term Loan to December 1, 2018 if the Company receives unrestricted gross cash proceeds of at least $15 million from the sale and issuance of the Company’s equity securities on or before August 31, 2018. The Company agreed to pay Oxford an amendment fee of $250,000 at the earlier of maturity or acceleration of the loan.

On August 31, 2018, the Company entered into a third amendment (the “Third Amendment”) to the Term Loan with Oxford. The Third Amendment extends the interest-only period under the Term Loan to December 31, 2018 and also requires that the Company pay to Oxford, in accordance with its pro rata share of the loans, 75% of all proceeds received (i) from the issuance and sale of unsecured subordinated convertible debt, (ii) in connection with a joint venture, collaboration or other partnering transaction, (iii) in connection with any licenses, (iv) from dividends (other than non-cash dividends from wholly owned subsidiaries) and (v) from the sale of any assets (such requirement, the “Prepayment Requirement”). The Prepayment Requirement does not apply to proceeds from the sale and issuance of the Company’s equity securities, other than convertible debt. The Prepayment Requirement shall apply until an aggregate principle amount of $7.0 million has been paid pursuant to the Prepayment Requirement. However, if less than $7.0 million has been paid pursuant to the Prepayment Requirement on December 31, 2018 then the Company is required to promptly make additional payments until an aggregate principal amount of $7.0 million has been paid. The Company agreed to pay Oxford an amendment fee of $50,000 at the earlier of maturity or acceleration of the loan.

On December 31, 2018, the Company entered into a fourth amendment (the “Fourth Amendment”) to the Term Loan with Oxford. Oxford agreed to extend the maturity date from June 1, 2019 to June 1, 2020. The Fourth Amendment increased the minimum liquidity covenant level from $1.5 million to $2.0 million and extended the interest-only period under the Loan and Security Agreement to March 1, 2019. The Fourth Amendment also required that the Company achieve one of the following by January 31, 2019: enter into an asset sale agreement with a minimum unrestricted net cash proceeds to the Company of $4.0 million; enter into a binding agreement for the issuance and sale of its equity securities or unsecured convertible subordinated debt which would result in unrestricted gross cash proceeds of not less than $7.5 million; or enter into a merger agreement pursuant to which the obligations under the Loan and Security Agreement would be paid down to a level satisfactory to Oxford. The Company agreed to pay Oxford an amendment fee of $350,000 at the earlier of maturity or acceleration of the loan.

On February 13, 2019, the Company entered into a fifth amendment (the “Fifth Amendment”) to the Term Loan primarily to extend the January 31, 2019 obligations under the Fourth Amendment to February 28, 2019. On March 4, 2019, the Company entered into a sixth amendment to the Term Loan primarily to extend the Fifth Amendment principal payment obligations to March 29, 2019. On April 29, 2019, the Company entered into a seventh amendment (the “Seventh Amendment”) to the Term Loan, pursuant to which, among other things, Oxford agreed to interest only payments starting May 1, 2019, with amortization payments resuming on May 1, 2020. On July 15, 2019, the Company entered into an eighth amendment (the “Eighth Amendment”) to the Term Loan primarily to obtain the consent from Oxford for its name change to Plus Therapeutics, Inc.

The Term Loan, as amended, is collateralized by a security interest in substantially all of the Company’s existing and subsequently acquired assets, ~~including its intellectual property assets,~~ subject to certain exceptions set forth in the Loan and Security Agreement, as amended. The intellectual property ~~asset~~assets collateral ~~will be~~which was directly related to the sales of cell therapy assets was released ~~upon~~in April 2019 after partial payment of the ~~Company achieving certain~~loan principal.

~~liquidity level when the total principal outstanding under the Loan Agreement is less than $3 million.~~ As of ~~September~~June 30, ~~2018~~,2019, we were in compliance with all of the debt covenants under the Loan and Security Agreement.

~~Our interest~~Interest expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~ 2019 and ~~2017~~2018 was ~~$0.5~~$0.6 million and ~~$1.4~~$1.1 million and was ~~$0.5~~$0.4 million and ~~$1.6~~$0.9 million, respectively. Interest expense is calculated using the effective interest method, therefore it is inclusive of non-cash amortization in the amount of ~~$0.2~~$0.1 million and ~~$0.4~~$0.3 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019, respectively, and $~~0.2~~0.1 million and ~~$0.6~~$0.2 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, respectively, related to the amortization of the debt discount, capitalized loan costs, and accretion of final payment.

The ~~Term~~ Loan and Security Agreement, as amended, contains customary indemnification obligations and customary events of default, including, among other things, our failure to fulfill certain obligations under the Term Loan, as amended, and the occurrence of a material adverse change, which is defined as a material adverse change in our business, operations, or condition (financial or otherwise), a material impairment of the prospect of repayment of any portion of the loan. In the event of default by us or a declaration of material adverse change by our lender, under the Term Loan, the lender would be entitled to exercise its remedies thereunder, including the right to accelerate the debt, upon which we may be required to repay all amounts then outstanding under the Term Loan, which could materially harm our financial condition. As of ~~September~~June 30, ~~2018~~,2019, we were in compliance with all covenants under the Term Loan and have not received any notification or indication from Oxford to invoke the material adverse change clause. However, due to our current cash flow position and the substantial doubt about our ability to continue as a going concern, the entire principal amount of the Term Loan ~~has been reclassified to~~is presented as short-term. We will continue to evaluate the debt classification on a quarterly basis and evaluate for reclassification in the future should our financial condition improve.

~~Our revenue is generated primarily from the sale of products. Product revenue primarily consists of sales of Celution devices and consumables for commercial and research purposes.~~

The Company’s contracts with customers only include one performance obligation (i.e., sale of the Company’s products). Typically, if there are multiple items included on a single order, they are delivered at the same time. Revenue is recognized at a point in time when delivery is completed and control of the promised goods is transferred to the customers. Revenue is measured as the amount of consideration the Company expects to be entitled to in exchange for those goods. The Company’s contracts do not involve financing elements as payment terms with customers are less than one year. The sale arrangements do not include any variable consideration. Advance payments from customers are recorded as deferred revenue.

Shipping and handling activities that occur after the customer obtains control of the goods are considered part of the Company’s obligation to transfer the products and therefore are recorded as direct selling expenses, as incurred.

~~Product revenues, classified by geographic location, are as follows (in thousands):~~

Three months ended

Nine months ended

September 30, 2018

September 30, 2017

September 30, 2018

September 30, 2017

Product
Revenues

% of
Total

Product
Revenues

% of
Total

Product
Revenues

% of
Total

Product
Revenues

% of
Total

Americas

$
199

23
%

$
112

24
%

$
249

11
%

$
315

15
%

Japan

535

62
%

279

60
%

1,693

75
%

1,434

71
%

EMEA

114

14
%

18

4
%

262

12
%

204

10
%

Asia Pacific

10

1
%

58

12
%

45

2
%

74

4
%

Total product revenues

$
858

100
%

$
467

100
%

$
2,249

100
%

$
2,027

100
%

~~Two direct customers accounted for 58% of our revenue recognized for the nine months ended~~ ~~September~~ ~~30, 2018. Three direct customers accounted for 72% of total outstanding accounts receivable (excluding receivables from BARDA) as of~~ ~~September~~ ~~30, 2018.~~

~~Six direct customers comprised 61% of our revenue recognized for the nine months ended~~ ~~September~~ ~~30, 2017. Four direct customers accounted for 78% of total outstanding accounts receivable as of~~ ~~September~~ ~~30, 2017.~~

We earn revenue for performing tasks under research and development agreements with governmental agencies like BARDA which is outside of the scope of the new revenue recognition guidance. Revenues derived from reimbursement of direct out-of-pocket expenses for research costs associated with government contracts are recorded as government contracts and other within development revenues. Government contract revenue is recorded at the gross amount of the reimbursement. The costs associated with these reimbursements are reflected as a component of research and development expense in our statements of operations. We recognized ~~$0.5~~$0.3 million and ~~$2.3~~$1.0 million in development revenue for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~,2019, respectively, as compared to ~~$1.3~~$0.9 million and ~~$2.9~~$1.8 million for the three and ~~nine~~ six months ended June 30, 2018, respectively.

On July 21, 2019, the Company received an order from the U.S. Department of Health and Human Services / Office of the Assistant Secretary for Preparedness and Response / Biomedical Advanced Research and Development Authority (“HHS/ASPR/BARDA”) regarding Contract HHSO100201200008C dated September 27, 2012 (as amended, the “Agreement”) to suspend all work on the Agreement, including the RELIEF clinical trial, except for certain activities related to orderly close out of the trial and contract. This order was based on previous discussions between the Company and HHS/ASPR/BARDA concerning the best path forward for both parties in the light of the difficulty of enrolling the RELIEF trial and the Company’s previously disclosed restructuring plan. Pursuant to the order, within a period no longer than 180 days (or by January 17, 2020), the contract will be terminated by HHS/ASPR/BARDA.

After the sales of cell therapy business, BARDA accounted for 53% of our revenue from continuing operations which are recognized for the six months ended June 30, ~~2017~~2019 and accounted for 100% of total outstanding accounts receivable .presented in the accompanying consolidated condensed financial statements.

As explained in Note 1, on April 24, 2019 and April 25, 2019, the ~~lower~~Company completed the sale of ~~cost or net realizable value, determined on~~its cell therapy business to Lorem and Mr. Shirahama. The following table summarizes the ~~first-in, first-out (FIFO) method.~~

~~Inventories consisted~~calculation of the ~~following~~loss on sale of the cell therapy business, which will be finalized during the fourth quarter of 2019 (in thousands):

Assets and liabilities related to discontinued operations or held for sale consisted of the following:

	June 30, 2019		December 31, 2018
Assets
Current assets held for sale:
Accounts receivable, net	$	230	$	108
Inventory, net		2,635		2,841
Other current assets		351		328

Long-term assets held for sale:
Property and equipment, net		211		260
Other noncurrent assets		1,471		1,866
Operating lease right-of-use assets		1,248		—
Goodwill		3,550		3,550
Intangible assets, net		5,540		5,957
Total assets	$	15,236	$	14,910

Liabilities
Current liabilities held for sale:
Accounts payable and accrued liabilities	$	526	$	580
Current lease liability		485		—
Noncurrent operating lease liability		828		—
Other noncurrent liabilities		67		78
Deferred revenues		196		167
Noncurrent liabilities	$	2,102	$	825

The following table summarizes the results of discontinued operations for the periods presented (in thousands)

During the three and six months ended June 30, 2019 and 2018, revenues from discontinued operations were related to the cell therapy business. Because of the sale of the cell therapy business to Lorem and Mr. Shirahama, all product revenues and costs of product revenues for these periods have been removed from the consolidated condensed statements of operations.

Included in the statement of cash flows are the following non-cash adjustments related to the discontinued operations (in thousands):

Basic per share data is computed by dividing net income or loss applicable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted per share data is computed by dividing net income or loss applicable to common stockholders by the weighted average number of common shares outstanding during the period increased to include, if dilutive, the number of additional common shares that would have been outstanding as calculated using the treasury stock method. Potential common shares were related to outstanding but unexercised options, multiple series of preferred stock, and warrants for all periods presented.

We have excluded all potentially dilutive securities from the calculation of diluted loss per share attributable to common stockholders as of ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, as their inclusion would be antidilutive. Potentially dilutive common shares excluded from the calculations of diluted loss per share were ~~14.1~~0.2 million as of ~~September~~June 30, ~~2018,~~2019, which includes ~~9.2~~0.1 million outstanding warrants and ~~0.2 million options, 4.7~~0.1 million shares of preferred stock, and options and restricted stock awards.~~Potentially dilutive common shares excluded from the calculation of diluted loss per share were 0.5 million as of~~ ~~September 30, 2017~~.

At the inception of a contractual arrangement, the Company determines whether the contract contains a lease by assessing whether there is an identified asset and whether the contract conveys the right to control the use of the identified asset in exchange for consideration over a period of time. If both criteria are met, the Company calculates the associated lease liability and corresponding right-of-use asset upon lease commencement using a discount rate based on the rate implicit in the lease or an incremental borrowing rate commensurate with the term of the lease.

The Company records lease liabilities within current liabilities or long-term liabilities based upon the length of time associated with the lease payments. The Company records its operating lease right-of-use assets as long-term assets. Right-of-use assets for financing leases are recorded within property and equipment, net in the Balance Sheet. Leases with an initial term of 12 months or less are not recorded on the Balance Sheet. Instead, the Company recognizes lease expense for these leases on a straight-line basis over the lease term. In connection with certain operating leases, the Company has security deposits recorded and maintained as restricted cash totaling $0.4 million as of June 30, 2019.

The Company leases office and storage facilities and equipment under various operating and financing lease agreements. The initial terms of these leases range from 2 to 11 years and generally provide for periodic rent increases, and renewal and termination options. The Company’s lease agreements do not contain any material variable lease payments, residual value guarantees or material restrictive covenants.

Certain leases require the Company to pay taxes, insurance, and maintenance. Payments for the transfer of goods or services such as common area maintenance and utilities represent non-lease components. The Company elected the package of practical expedients and therefore does not separate non-lease components from lease components.

The table below summarizes the Company’s lease liabilities and corresponding right-of-use assets (in thousands, except years and rates):

The table below summarizes the Company’s lease costs from its Unaudited Consolidated Statement of Operations, and cash payments from its Unaudited Consolidated Statement of Cash Flows during the three and six months ended June 30, 2019 (in thousands):

The Company’s future minimum annual lease payments under operating and financing leases at June 30, 2019 are as follows (in thousands):

We have entered into agreements with various research organizations for pre-clinical and clinical development studies, which have provisions for cancellation. Under the terms of these agreements, the vendors provide a variety of services including conducting research, recruiting and enrolling patients, monitoring studies and data analysis. Payments under these agreements typically include fees for services and reimbursement of expenses. The timing of payments due under these agreements is estimated based on current study progress. As of ~~September~~June 30, ~~2018~~2019, we have clinical research study obligations of ~~$3.2~~$2.5 million, ~~$1.7~~$1.8 million of which is expected to be paid within a year. Should the timing of the clinical trials change, the timing of the payment of these obligations would also change.

On February 27, 2017, we entered into a Lease Agreement for office space for our corporate headquarters in San Diego, California (the “Lease”). The initial term of the Lease was 63 months and could have been extended upon mutual agreement. The commencement date was originally expected to take place in November 2017 and subsequently amended to January 1, 2018. In connection with our restructuring announced in September 2017, we negotiated a buy-out of our obligations under the Lease for approximately $0.6 million, included in the general and administrative expenses.

On January 27, 2017, we entered into a Lease Agreement for office space for our office in Tokyo, Japan (the “Japan Lease”). The initial term of the Japan Lease is 61 months, and may be extended upon mutual agreement. The Japan Lease commenced on April 15, 2017.

~~We were party to an agreement with Roche Diagnostics Corporation~~ ~~(“Roche”)~~ ~~which required us to make certain product purchase minimums.~~ On June 8, 2018, the Company received written notice from Roche terminating its existing supply agreement with the Company due to failure by the Company to meet minimum purchase requirements. Roche has indicated to the Company that it will agree to negotiate in good faith with the Company with respect to a new supply agreement for enzymes with specifications similar to the enzymes that Roche was previously manufacturing for the Company.

We are subject to various claims and contingencies related to legal proceedings. Due to their nature, such legal proceedings involve inherent uncertainties including, but not limited to, court rulings, negotiations between affected parties and governmental actions. Management assesses the probability of loss for such contingencies and accrues a liability and/or discloses the relevant circumstances, as appropriate. Management believes that any liability to us that may arise as a result of currently pending legal proceedings will not have a material adverse effect on our financial condition, liquidity, or results of operations as a whole.

On ~~April 27, 2018, Lorem Vascular~~July 25, 2019, Tap Advisors LLC (“~~Lorem”~~Tap”) filed suit against the Company in the ~~U.S. District~~Supreme Court ~~for~~of the ~~Southern District~~State of ~~California~~New York, County of New York, alleging the Company breached an ~~oral~~ agreement made in 2013 to purchase 5% of Lorem’s common stock for an aggregate amount of $5.0 million, and seeking specific performance of the alleged oral agreement and damages in an amount to be determined at trial. The Company filed a motion to dismiss all of Lorem’s claims, and on July 11, 2018 the Court granted the Company’s motion to dismiss. Lorem filed an amended complaint on August 3, 2018, advancing similar causes of action and seeking similar relief. Cytori filed a renewed motion to dismiss on August 27, 2018, and on October 1, 2018, Lorem voluntarily dismissed its amended complaint in its entirety.

On August 31, 2018, we filed a Demand for Arbitration with the American Arbitration Association in San Diego, California, against Bimini Technologies LLC (“Bimini”) for fraud and breach of a Sale and Exclusive License/Supply Agreement made in 2013 under which Bimini licensed rights2017, whereby Tap would provide certain financial advisory services to the ~~Company’s Standalone Fat Transplantation, including the Puregraft Product Line and associated trademarks. Our arbitration demand alleges~~Company. Tap seeks to recover fees of approximately $3.7 million (plus attorneys’ fees) that ~~Bimini failed to make a $1.0 million milestone payment due to~~allegedly have not been paid by the Company ~~after Bimini achieved $10.0 million in gross profits from~~related to the sale of its cell therapy business in April 2019. The Company believes the ~~Company’s Puregraft product line,~~complaint is without merit and ~~Bimini deceived~~plans to vigorously defend itself in this matter. At June 30, 2019, the Company about Bimini’s true gross profits figures. Our arbitration demand seeks that $1.0 million milestone payment, as well prejudgment interest and attorneys’ fees. On October 29, 2018 Bimini made the $1.0 million milestone payment. The parties subsequently entered into a settlement agreement resolving the claims in the Demand for Arbitration.probable outcome of this litigation cannot be determined.

We disclose fair value information about all financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. The disclosures of estimated fair value of financial instruments at ~~September~~June 30, ~~2018~~2019, and as of December 31, ~~2017,~~2018, were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts.

The carrying amounts for cash and cash equivalents, accounts receivable, other current assets, accounts payable, accrued expenses and other liabilities approximate fair value due to the short-term nature of these instruments. Further, based on the borrowing rates currently available for loans with similar terms, we believe the fair value of long-term debt approximates its carrying value.

Fair value measurements are market-based measurements, not entity-specific measurements. Therefore, fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability. We follow a three-level hierarchy to prioritize the inputs used in the valuation techniques to derive fair values. The basis for fair value measurements for each level within the hierarchy is described below:

~~Warrants with exercise price reset features (down-round protection) are accounted for as liabilities, with~~The changes in the fair value of liability classified warrants are included in net income (loss) for the respective periods. Because some of the inputs to our valuation model are either not observable or are not derived principally from or corroborated by observable market data by correlation or other means, the warrant liability is classified as Level 3 in the fair value hierarchy.

~~On February 15, 2017 (the “Closing Date”),~~ the Company completed the acquisition from Azaya Therapeutics, Inc. (“Azaya”) of certain tangible assets which consisted of a research lab, equipment and leasehold improvements and the assumption of certain of liabilities of Azaya, pursuant to an Asset Purchase Agreement (the “Agreement”). The book value of the tangible assets acquired was approximately $3.0 million at the acquisition date. The assets acquired are located in a facility rented in San Antonio, TX, by t~~he Company. In addition, pursuant to the Agreement,~~ the Company acquired intangible assets comprised of two drug candidates in process research and development (IPR&D) stage (i) ATI-0918, a generic bioequivalent formulation of Doxil®/Caelyx®, a chemotherapy drug that is a liposomal formulation of doxorubicin; and (ii) ATI-1123, a chemotherapy drug that is a liposomal formulation of docetaxel.

At the closing of the acquisition, the Company (i) issued 117,325 of shares of its common stock in Azaya’s name, (A) 87,994 of which were delivered to Azaya promptly after the Closing, and (B) 29,331 of which were deposited into a 15-month escrow pursuant to a standard escrow agreement; and (ii) assumed the obligation to pay approximately $1.8 million of Azaya’s existing payables, all of which were paid on or prior to Dec~~ember~~ ~~31, 2017.~~

The Company accounted for the acquisition as an asset acquisition because the acquired set of assets did not meet the definition of a business. The total consideration of $4.3 million, which consists of $2.3 million related to the fair value of the common stock issued to Azaya at the acquisition date, $1.8 million in assumed liabilities and $0.2 million in acquisition costs, was allocated to the assets acquired based on their relative fair values at the time of acquisition. All other future payments were deemed contingent consideration which will be accounted for when the contingency is resolved and the consideration is paid or becomes payable. Because there was no current alternative use for the IPR&D, following the authoritative accounting guidance, the Company has expensed the total amount of $1.7 million on the Closing Date.

The Company has authorized 5,000,000 shares of preferred stock, par value $0.001 per share. The Company’s Board of Directors is authorized to designate the terms and conditions of any preferred stock we issue without further action by the common stockholders. There were 13,500 shares of Series A 3.6% Convertible Preferred Stock, ~~and~~ 10,000 Series B Convertible Preferred Stock and 6,723 Series C Convertible Preferred Stock that had been issued at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. There were no shares of Series A 3.6% Convertible Preferred Stock outstanding as of either date. There were ~~1,114 and 2,431 shares~~1,112 of Series B Convertible Preferred Stock outstanding as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018. There were 3,428 and 3,494 shares of Series C Preferred Stock outstanding as of June 30, 2019 and December 31, 2018, respectively.

On July 25, 2018, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock (the “Certificate of Designation”) with the Delaware Secretary of State creating a new series of its authorized preferred stock, par value $0.001 per share, designated as the Series C Convertible Preferred Stock (the “Series C Preferred Stock”). The number of shares initially constituting the Series C Preferred Stock was set at 7,000 shares. Pursuant to a registration statement on Form S-1 originally filed on April 27, 2018, as amended, and became effective on July 17, 2018, and related prospectus (as supplemented), the Company registered and distributed to holders of its common stock and Series B Convertible Preferred Stock, at no charge, non-transferable subscription rights to purchase up to an aggregate of 20,000 units each consisting of one share of Series C Preferred Stock and 1,050 warrants for $1,000 per unit. ~~Each warrant is~~The warrants are exercisable for ~~one share~~an aggregate of 141,183 shares of the Company’s common stock at an exercise price of ~~$0.7986~~$39.93 per share of common stock for 30 months from the date of issuance and each share of Series C Preferred Stock is convertible into ~~1,253~~25 shares of the Company's common stock. Pursuant to the 2018 Rights Offering, which closed on July 25, 2018, the Company sold an aggregate of 6,723 units, resulting in total net proceeds to the Company of approximately $5.7 million. On August 2, 2019, in connection with a sale of common stock, the Company notified holders of the Company’s Series C Preferred Stock that the conversion price of such stock was reduced from $0.7986 to $0.15, and the Company notified holders of the Company’s Series T Warrants that the exercise price of such warrants was reduced from $0.7986 to $0.15, each before giving effect to the August 2019 Reverse Stock Split.

The fair value of the common stock into which the Series C Preferred Stock was convertible on the date of issuance exceeded the proceeds allocated to the preferred stock, resulting in the beneficial conversion feature that we recognized as a deemed dividend to the preferred stockholders and, accordingly, an adjustment to net loss to arrive at net loss allocable to common stockholders. We recorded a deemed dividend within additional paid-in capital of $2.5 million for the quarter ended December 31, 2018, related to a beneficial conversion feature included in the issuance of our Series C Convertible Preferred Stock.

Based on the relevant authoritative accounting guidance, the warrants were liability classified at the issuance date. The warrants may be redeemed by the Company at $0.01 per warrant prior to their expiration if the Company’s common stock closes above $3.63 per share (or $181.50 after the August 2019 Reverse Stock Split), subject to adjustment, for 20 consecutive trading days. The initial fair value of the liability associated with these warrants was $3.1 million, and the fair value decreased to ~~$1.5~~$0.4 million as of ~~September~~June 30 ~~2018.~~, 2019. The main driver for the change in the fair value of warrants at ~~September~~June 30, ~~2018,~~2019, was related to the change in our stock price. All future changes in the fair value of the warrants will be recognized in our consolidated statements of operations until they are either exercised or expire. The warrants are not traded in an active securities market, and as such the estimated the fair value as of ~~September~~June 30, ~~2018~~2019 was determined by using an option pricing model with the following assumptions:


	As of September 30, 2018			As of July 25, 2018 (inception date)	As of June 30, 2019			As of December31, 2018
Expected term	2.3 years			2.5 years	1.6 years			2.1 years
Common stock market price	$	0.41	$	0.72	$	0.24	$	0.29
Risk-free interest rate		2.83%		2.70%		1.85%		2.48%
Expected volatility		120%		112%		114%		125%
Resulting fair value (per warrant)	$	0.21	$	0.45	$	0.06	$	0.13

Expected volatility was computed using daily pricing observations of traded shares of ~~Cytori~~the Company for recent periods that correspond to the expected term of the warrants. We believe this method produces an estimate that is representative of our expectations of future volatility over the expected term of these warrants. We currently have no reason to believe future volatility over the expected remaining life of these warrants is likely to differ materially from historical volatility. The expected life is based on the remaining contractual term of the warrants. The risk-free interest rate is the U.S. Treasury bond rate as of the valuation date.

Fluctuations in the fair value of the warrants are impacted by unobservable inputs, most significantly the assumption with regards to future equity issuances and its impact to the down-round protection feature. Significant increases (decreases) in this input in isolation would result in a significantly higher (lower) fair value measurement. The following table summarizes the change in our Level 3 warrant liability value (in thousands):

		Nine months ended
Warrant liability		September 30, 2018			June 30, 2019			December 31, 2018
Beginning balance	$	3,148		$	916		$	3,148
Change in fair value		(1,676	)		(492	)		(2,233	)
Ending balance	$	1,472		$	424		$	916

The fair value of the common stock into which the Series C Preferred Stock was convertible on the date of issuance exceeded the proceeds allocated to the preferred stock, resulting in the beneficial conversion feature that we recognized as a deemed dividend to the preferred stockholders and, accordingly, an adjustment to net loss to arrive at net loss allocable to common stockholders. We recorded a deemed dividend within additional paid-in capital of $2.5 million for the quarter ended September 30, 2018, related to a beneficial conversion feature included in the issuance of our Series C Convertible Preferred Stock. There were 3,510 shares of Series C Preferred Stock outstanding as of September 30, 2018.

On April 11, 2017, we entered into the Underwriting Agreement with Maxim relating to the issuance and sale of 0.9 million shares of our common stock. The price to the public in the offering was $11.00 per share. Maxim purchased the shares from us pursuant to the Underwriting Agreement at a price of $10.40 per share. The net proceeds to us from the offering were approximately $8.7 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. The offering closed ~~on April 17, 2017. In addition, under the terms of the Underwriting Agreement, we granted Maxim a 45-day~~ ~~overallotment~~ ~~option to purchase up to 94,400 additional shares of common stock.~~ On May 31, 2017, Maxim exercised their overallotment option and purchased 84,900 shares at $11.00 per share. The net proceeds to us were $0.8 million, after deducting underwriting costs and offering expenses payable by us.

On June 1, 2018, the Company entered into a Sales Agreement with B. Riley FBR to sell shares of its common stock having an aggregate offering price of up to $6.5 million through its ATM ~~program.~~Program. Through ~~September~~June 30, ~~2018,~~2019, the Company sold a total of ~~1.5~~0.2 million shares for proceeds of approximately ~~$0.8~~$3.8 million through the ATM ~~program.~~Program. The ATM Program financing facility has been exhausted and there is no availability remaining under this financing facility.

On September 21, 2018, the Company entered into a Purchase Agreement (the “Lincoln Park Purchase Agreement”) with Lincoln Park pursuant to which the Company has the right to sell to Lincoln Park and Lincoln Park is obligated to purchase up to $5.0 million of shares, of the Company’s common stock, over the 24-month period following October 15, 2018. The Company may direct Lincoln Park, at its sole discretion and subject to certain conditions, to purchase up to ~~250,000~~5,000 shares of common stock on any business day but in no event will the amount of a single Regular Purchase (as defined in the Lincoln Park Purchase Agreement) exceed $1.0 million. The purchase price of shares of common stock related to the Regular Purchases will be based on the prevailing market prices of such shares at the time of sales. The Company’s sales of shares of common stock to Lincoln Park under the Lincoln Park Purchase Agreement are limited to the number of shares that would result in the beneficial ownership by Lincoln Park and its affiliates, at any single point in time, of no more than 4.99% of the then outstanding shares of the common stock. There are no trading volume requirements or restrictions under the Lincoln Park Purchase Agreement. There is no upper limit on the price per share that Lincoln Park must pay for common stock under a Regular Purchase or an accelerated purchase and in no event under an accelerated purchase will shares be sold to Lincoln Park on a day the closing price of the Company’s common stock is less than the floor price of ~~$0.25~~$12.50 per share as set forth in the Lincoln Park Purchase Agreement. Through December 31, 2018, the Company sold a total of 12,802 shares for proceeds of approximately $0.3 million through the Lincoln Park Purchase Agreement and 5,000 shares for proceeds of approximately $0.1 million were sold during the six months ended June 30, 2019. The Company believes there is less than $0.1 million remaining available under this financing facility.

Item 2. ~~Management’s~~Management’s Discussion and Analysis of Financial Condition and Results of Operations

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, includes the following sections:

You should read this MD&A in conjunction with the financial statements and related notes in Item 1 and our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017.~~2018.

This report contains certain statements that may be deemed “forward-looking statements” within the meaning of U.S. securities laws. All statements, other than statements of historical fact, that address activities, events or developments that we intend, expect, project, believe or anticipate and similar expressions or future conditional verbs such as will, should, would, could or may occur in the future are forward-looking statements. Such statements are based upon certain assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate.

These statements include, without limitation, statements about our anticipated expenditures, including research and development, sales and marketing, and general and administrative expenses; the potential size of the market for our products; future development and/or expansion of our products and therapies in our markets, our ability to generate product or development revenues and the sources of such revenues; our ability to effectively manage our gross profit margins; our ability to obtain and maintain regulatory approvals; expectations as to our future performance; portions of the “Liquidity and Capital Resources” section of this report, including our potential need for additional financing and the availability thereof; our ability to continue as a going concern; our ability to remain listed on the Nasdaq Capital Market; our ability to repay or refinance some or all of our outstanding indebtedness and our ability to raise capital in the future; and the potential enhancement of our cash position through development, marketing, and licensing arrangements. Our actual results will likely differ, perhaps materially, from those anticipated in these forward-looking statements as a result of various factors, including: the early stage of our product candidates and therapies, the results of our research and development activities, including uncertainties relating to the clinical trials of our product candidates and therapies; our need and ability to raise additional cash, the outcome of our partnering/licensing efforts, risks associated with laws or regulatory requirements applicable to us, market conditions, product performance, potential litigation, and competition within the regenerative medicine field, to name a few. The forward-looking statements included in this report are subject to a number of additional material risks and uncertainties, including but not limited to the risks described under the “Risk Factors” in Item 1A of Part I below, which we encourage you to read carefully.

We encourage you to read the risks described under “Risk Factors” carefully. We caution you not to place undue reliance on the forward-looking statements contained in this report. These statements, like all statements in this report, speak only as of the date of this report (unless an earlier date is indicated) and we undertake no obligation to update or revise the statements except as required by law. Such forward-looking statements are not guarantees of future performance.

This Quarterly report on Form 10-Q refers to trademarks such as ~~Cytori Cell Therapy, Habeo Cell Therapy, Celution, StemSource, Celase, Intravase,~~Plus Therapeutics, DocePLUS, and ~~Cytori Nanomedicine~~.DoxoPLUS. Solely for convenience, our trademarks and tradenames referred to in this Form 10-Q may appear without the ® or ™ symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights to these trademarks and tradenames.

Plus Therapeutics, Inc. is a clinical-stage pharmaceutical company focused on the discovery, development, and manufacturing scale up of complex and innovative treatments for patients battling cancer and other life-threatening diseases.

Our ~~objective~~proprietary nanotechnology platform is currently centered around the enhanced delivery of a variety of drugs using novel liposomal encapsulation technology. Liposomal encapsulation has been extensively explored and undergone significant technical and commercial advances since it was first developed. Our platform is designed to ~~build a profitable~~facilitate new delivery approaches and/or formulations of safe and ~~growing specialty therapeutics company. To meet this objective, we have acquired~~effective, injectable drugs, potentially enhancing the safety, efficacy and ~~are developing two technology platforms that hold promise~~convenience for ~~treating millions of~~ patients and ~~represent significant potential for increasing shareholder value. Our current corporate activities fall substantially into advancing these platforms: Cytori Nanomedicine and Cytori Cell Therapy.~~

~~The Cytori Nanomedicine platform features a versatile nanoparticle technology for drug encapsulation and delivery that has thus far~~healthcare providers.

We plan to exploit our nanotechnology platform and expertise using a simple multi-step model that enables us to address unmet needs or underserved conditions while managing risks and minimizing development costs through: (1) mapping of current and evolving landscape to clearly understand the clinical and commercial opportunities and design nanotechnological solutions, (2) redesign of new nanotechnological solutions using, using in part, known, safe and effective active pharmaceutical ingredients, (3) manufacture to scale of the reformulated drug along with critical non-clinical (i.e. bench, animal) analyses, (4) evaluation of early-stage clinical utility with a focus on proving safety and defining efficacy over the current standard of care, and (5) partnering the innovative treatment for late-stage clinical trials, regulatory approval, and commercial launch.

Since the beginning of 2019, we have evaluated and transformed our pipeline to place a stronger emphasis on product candidates that can maximize returns for shareholders and make a clinically meaningful impact for patients. We plan to create and realize this value by developing drugs for niche and orphan markets, initially in oncology, that address significant unmet or substantially underserved medical needs and that represent global revenue opportunities estimated to be $250 million or more. We intend to focus our development activities in ways that can leverage the U.S. Food and Drug Administration’s, or the FDA, clearly defined accelerated regulatory pathways and enable us to apply its in-house expertise in nanoparticle drug design, complex formulation, and drug manufacturing and scale-up.

All of the product candidates in our development pipeline leverage our nanotechnology platform. The versatility of the platform has thus far provided the foundation to bring two drugs into mid/late stage clinical trials. ~~Nanoparticle encapsulation~~

Our lead product candidate, DocePLUS, is a ~~clinically proven technology~~patented protein-stabilized PEGylated liposomal formulation of docetaxel. Docetaxel was approved by the FDA in 1999 and today is administered as a workhorse drug for treating cancers affecting the breast, head, neck, stomach, prostate, and lung. In our nonclinical studies utilizing mouse tumor models (lung, prostate, pancreatic, and mesothelioma), DocePLUS retained the anti-tumor activity of docetaxel and was well-tolerated. In addition, our first-in-human, open-label, dose-escalation, Phase 1 clinical trial conducted under an approved FDA Investigational New Drug application to examine the safety, pharmacokinetics, and pharmacodynamics of DocePLUS in 29 patients with solid tumors has been ~~shown~~completed and published. The trial demonstrated that DocePLUS has an acceptable tolerability, a favorable pharmacokinetics profile, as well as promising anti-tumor activity that warrants further exploration in larger Phase 2 trials.

While there are a multitude of potential disease targets for DocePLUS, we intend to ~~help improve~~initially focus on developing a new second-line treatment option for small cell lung cancer patients, an area in which there has been few advances for patients over the ~~pharmacokinetic properties~~last 30 years. Single-agent chemotherapy with IV topotecan is currently the only FDA approved drug for platinum-sensitive patients who relapse at least 60 days after initiation of ~~many drugs, thus~~first-line treatment. However, while IV topotecan demonstrates activity in this population, overall response rate (24%), response duration (3.3 months), time to progression (3.1 months), and overall survival (5.8 months) were not statistically improved over CAV (cyclophosphamide, doxorubicin, and vincristine) treatment in a randomized comparative trial. Patients receive 1.5 mg/m2 IV infusion of topotecan over 30 minutes daily for 5 consecutive days, starting on Day 1 of a 21-day cycle. Thus, more effective and convenient treatment options are needed for patients with relapsed platinum-sensitive disease.

The proposed dosing regimen for DocePLUS in small cell lung cancer patients will be a 60-minute infusion on a single day, starting on Day 1 of a 21-day cycle. This approach will reduce the patient’s number of visits to an infusion center from 5 (IV topotecan) to 1 in a given 21-day cycle. Overall, DocePLUS is intended to provide an effective, safe, and convenient therapeutic option for small cell lung cancer patients, thereby improving the quality of life for this population.

We plan to conduct a Phase 2 clinical trial in small cell lung cancer under our existing, approved Investigation New Drug application. This trial will complement the nonclinical proof-of-concept, toxicity, and ~~patient benefits. Our lead oncology drug candidate, ATI-0918 is~~Phase 1 studies previously conducted with DocePLUS.

We are also developing DoxoPLUS, a generic version of Janssen’s ~~Caelyx® pegylated~~DOXIL®/CAELYX®, a PEGylated liposomal encapsulated doxorubicin for the treatment of breast and ovarian cancer, multiple myeloma, and Kaposi’s sarcoma. ~~Pegylated~~PEGylated liposomal encapsulated doxorubicin is a heavily relied upon chemotherapeutic used inglobally for treating many ~~cancer~~ types ~~on a global basis.~~of cancer. We believe that data from a 60-patient European study of ~~ATI-0918~~DoxoPLUS has met the statistical criteria for bioequivalence to ~~Janssen’s Caelyx®~~CAELYX®, the current reference listed drug in Europe. We ~~intend~~believe that these bioequivalence data ~~will~~for DoxoPLUS can serve as a basis for ~~our planned regulatory submission~~a Marketing Authorization Application to be submitted to the European Medicines Agency, or ~~EMA, for ATI-0918. We~~EMA.

In July 2019, we announced that, coinciding with our new focus on DocePLUS, DoxoPLUS no longer satisfies the aforementioned development and revenue criteria. As a result, we have elected to focus on divesting DoxoPLUS and are currently ~~evaluating our strategic options~~presenting this opportunity to bring ATI-0918 to the U.S., China, and other markets. Our second oncology drug candidate is ATI-1123, which is a patented, albumin-stabilized liposomal encapsulated docetaxel. Docetaxel is a well-accepted and often used chemotherapeutic drug used for many cancers. A Phase I clinical trial of ATI-1123 has been completed and published, and we are investigating possible expansion of this trial to Phase II, potentially in conjunction with a development partner. We recently received FDA orphan drug designation for ATI-1123 for the treatment of small cell lung cancer. Finally, in connection with our acquisition of the ATI-0918 and ATI-1123 drug candidates, we have acquired know-how (including proprietary processes and techniques) and a scalable nanoparticle manufacturing plant in San Antonio, Texas from which we intend to manufacture commercial quantities of our nanoparticle-encapsulated and -delivered drugs.external parties.

Cytori Cell Therapy, or CCT, is based on the scientific discovery that the human adipose or fat tissue compartment is a source of a unique mixed population of stem, progenitor and regenerative cells that may hold substantial promise in the treatment of numerous diseases and conditions. To bring this promise to health care providers and patients, we have developed certain novel therapies prepared and administered at the patient’s bedside with proprietary technologies that include therapy-specific reusable, automated, standardized Celution devices, single-use Celution consumable sets, Celase reagent, and Intravase reagent. ~~Our CCT lead product candidate, Habeo Cell Therapy, was evaluated in a Cytori-sponsored U.S. randomized, placebo-controlled, double-blind, multi-center clinical trial, STAR (~~S~~cleroderma~~ T~~reatment with Celution Processed~~ A~~dipose Derived~~ R~~egenerative Cells)~~, for the treatment of impaired hand function in patients with scleroderma. The STAR trial enrolled and evaluated 88 patients with scleroderma, including 51 patients within the diffuse cutaneous subset and 37 with limited cutaneous scleroderma.

On July ~~24, 2017,~~21, 2019, we ~~announced top-line, preliminary data and presented the full data analysis on October 18, 2017. Feedback~~received an order from ~~a FDA pre-submission meeting, indicated that~~ a clinical trial focused on more severely affected diffuse systemic sclerosis patients could be an appropriate next step given the results of the STAR clinical trial. FDA meeting minutes following the STAR trial are finalized but as of today, we are not prepared to commit, the financial and other resources required to conduct an additional clinical trial of Habeo. We will instead look to partnering or out-licensing opportunities as the primary basis for continued development. ~~In addition, on January 22, 2018~~, we announced the investigator-initiated and Cytori-supported SCLERADEC-II clinical trial in France using Habeo Cell Therapy completed its enrollment and data is anticipated in the fourth quarter of 2018. Additional CCT treatments are in various stages of development in the areas of urology, wounds, and orthopedics. Furthermore, our CCT platform is the subject of investigator-initiated trials conducted by our partners, licensees and other third parties, some of which are supported by us and/or funded by government agencies and other funding sources. In March 2018, we announced a Japanese investigator-initiated study of ECCI-50 Cell Therapy in men with stress urinary incontinence, or SUI, following prostatic surgery for prostate cancer or benign prostatic hypertrophy, called ADRESU, completed enrollment of 45 patients. Patients will be followed up for one-year post treatment and preliminary data on the ADRESU trial is expected in early 2019. The trial costs are substantially supported by the Japan Agency for Medical Research and Development, an independent administrative agency of the Government of Japan, with additional support from Cytori. We entered into an amendment to our agreement with the U.S. Department of Health and Human ~~Service’s~~Services / Office of the Assistant Secretary for Preparedness and Response / Biomedical Advanced Research and Development Authority, or HHS/ASPR/BARDA, ~~in May 2017~~regarding Contract HHSO100201200008C dated September 27, 2012, as amended, to suspend all work on the referenced contract, including the RELIEF clinical trial, except for ~~the initiation~~certain activities related to orderly close out of the ~~RELIEF pilot clinical~~ trial ~~of DCCT-10~~and contract. This order was based on previous discussions between the Company and HHS/ASPR/BARDA concerning the best path forward for both parties in ~~thermal burn injury. The amendment extends~~ the ~~term~~light of the ~~BARDA Agreement and the period~~difficulty of ~~performance of Option 2 of the BARDA Agreement to November 30, 2020. We have initiated the clinical trial and expect to begin enrollment of patients into~~enrolling the RELIEF trial and our previously disclosed restructuring plan. Pursuant to the order, within a period no longer than 180 days (or by January 17, 2020), the ~~next four months.~~contract will be terminated by HHS/ASPR/BARDA.

On April 24, 2019 we completed the sale transaction of our UK subsidiary, Cytori Ltd., and our Cell Therapy assets, and ~~Currently,~~on April 25, 2019 we ~~internally manufacture~~completed the ~~Celution devices, outsource Celution consumables in the United States~~sale of our Japanese subsidiary, Cytori Therapeutics, K.K., and ~~source~~substantially all of our ~~Celase and Intravase reagents from a third-party supplier. We have contracted with a third-party manufacturer for the production of the Celution consumables~~Cell Therapy assets used in the manufacturing of our products to improve scalability, reduce overhead and product costs of goods sold. We also have obtained regulatory approval to sell some of our CCT products, including our Celution devices and consumables and associated reagents, in certain markets outside the U.S. In those markets, we have been able to further develop and improve our core technologies, gain expanded clinical and product experience and data, and generate sales.Japan.

~~Product revenues consisted of revenues primarily from the sale of Cytori Cell Therapy-related products.~~

~~The following table summarizes the components for the three and nine months ended September 30, 2018 and 2017 (in thousands):~~

We experienced an increase of $0.4 million and $0.2 million in product revenue during the three and nine months ended September 30, 2018, respectively, as compared to the same periods in 2017. The increases in the three and nine months ended September 30, 2018 are primarily due to higher sales of Celution consumable sets in Japan.

~~The future:~~ We expect to continue to generate increased consumable utilization and a majority of product revenues from the sale of Cytori Cell Therapy-related products to researchers, clinicians, and distributors in all regions. In Japan and EMEA, researchers will use our technology in ongoing and new investigator-initiated and funded studies focused on, but not limited to, hand scleroderma, breast cancer-related lymphedema, Crohn’s disease, peripheral artery disease, erectile dysfunction, liver cirrhosis, and diabetic foot ulcers. In the US, researchers will use our technology in an ongoing study focused on hip osteonecrosis.

Cost of product revenues relate primarily to Cytori Cell Therapy-related products and includes material, manufacturing labor, and overhead costs, as well as amortization of intangible assets. The following table summarizes the components of our cost of revenues for the three and nine months ended September 30, 2018 and 2017 (in thousands):

Cost of product revenues as a percentage of product revenues was 73.2% and 81.7% for the three and nine months ended September 30, 2018 and 104.3% and 94.3% for the three and nine months ended September 30, 2017. Fluctuation in this percentage is due to our product mix, distributor and direct sales mix, geographic mix, foreign exchange rates, idle capacity, and allocation of overhead.

~~The future:~~ We expect to continue to see variation in our gross profit margin as the product mix, distributor and direct sales mix and geographic mix comprising revenues fluctuate. We are investigating various pricing options for our cellular therapeutics, which may help to increase our gross profit margins in 2018 and beyond.

Under our government contract with BARDA, we recognized a total of ~~$0.5~~$0.3 million and ~~$2.3~~$1.0 million in revenues for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019, respectively, which included allowable fees as well as cost reimbursements. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, we incurred ~~$0.4~~$0.2 million and ~~$2.1~~$0.9 million in qualified expenditures, respectively. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, we recognized revenue of ~~$1.3 million and $2.9~~$0.9 million and incurred ~~$1.2 million and $2.7~~$1.8 million in qualified expenditures, respectively. The decrease in revenues for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 as compared to the same ~~periods~~period in ~~2017~~2018 is primarily due to ~~slight~~a minor decrease in research and development activities related to BARDA delays experienced in enrollments.

The future: ~~We entered into~~On July 21, 2019, we received an ~~amendment with~~order from BARDA ~~in May 2017~~to suspend all work related to the RELIEF clinical trial, except for ~~the initiation~~certain activities related to orderly close out of the ~~RELIEF pilot clinical~~ trial ~~of DCCT-10 in thermal burn injury.~~ ~~The amendment extends~~and contract. Pursuant to the ~~term of~~order, within a period no longer than 180 days (or by January 17, 2020), the contract will be terminated by BARDA ~~Agreement and the period of performance of Option 2 of the BARDA Agreement to November 30, 2020~~. ~~We expect to begin enrollment of patients into the RELIEF trial within the next four months.~~

Research and development expenses relate to the development of a technology platform that involves using adipose tissue as a source of autologous regenerative cells for therapeutic applications, oncology drug program expenses, as well as the continued development efforts related to our clinical trials.

Research and development expenses include costs associated with the design, development, testing and enhancement of our ~~products,~~product candidates, payment of regulatory fees, laboratory supplies, pre-clinical studies and clinical studies.

The following table summarizes the components of our research and development expenses for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,				For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2018		2017		2018		2017		2019		2018		2019		2018
General research and development	$	1,892	$	2,976	$	6,296	$	9,168
Research and development									$	1,278	$	1,247	$	2,693	$	2,545
Share-based compensation		24		28		70		116		11		20		22		116
Total research and development expenses	$	1,916	$	3,004	$	6,366	$	9,284	$	1,289	$	1,267	$	2,715	$	2,661

The ~~decrease~~increase in research and development expenses for the ~~three and nine~~six months ended ~~September~~June 30, ~~2018~~2019 as compared to the same ~~periods~~period in ~~2017~~2018 is due primarily to ~~decreases~~an increase of ~~approximately $0.8 million and $1.6 million~~clinical activities on the RELIEF clinical trial. There is no material variance for the three ~~and nine~~ months ~~periods~~ended June 30, 2019 as compared to the same period in clinical study expenses as well as a decrease of $0.2 million and $1.0 million in salaries and benefits as a result of completion of enrollment in our U.S. STAR clinical trial enrolling in 2017, and decrease of $0.1 million and $0.4 million in rent expenses, offset by an increase of $0.2 million and $0.5 million for the three and nine months periods in professional services incurred as part of the RELIEF clinical trial activities.2018.

The future: We expect aggregate research and development expenditures to remain ~~consistent~~ at current levels for the balance of ~~2018,~~2019, as we work on clinical activities on the RELIEF clinical trial and our ongoing development efforts of ~~the recently acquired ATI-0918 asset from Azaya.~~DocePLUS.

Sales and marketing expenses include costs of sales and marketing personnel, events and tradeshows, customer and sales representative education and training, primary and secondary market research, and product and service promotion. The following table summarizes the components of our sales and marketing expenses for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,				For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2018		2017		2018		2017		2019		2018		2019		2018
Sales and marketing	$	442	$	812	$	1,605	$	2,952	$	95	$	158	$	204	$	387
Share-based compensation		11		28		51		91		2		27		7		91
Total sales and marketing expenses	$	453	$	840	$	1,656	$	3,043	$	97	$	185	$	211	$	478

Sales and marketing expenses decreased by ~~$0.4 million and $1.3~~$0.2 million during the ~~three and nine~~six months ended ~~September~~June 30, ~~2018~~2019 as compared to the same ~~periods~~period in ~~2017~~2018 due primarily to decreases of ~~$0.2 million and $0.5~~$0.1 million in salaries and benefits as well as of $0.1 ~~million and $0.5~~ million in professional services because of the decreased efforts of our commercial ~~activities~~activities. There is no material variance for ~~Habeo.~~the three months ended June 30, 2019 as compared to the same period in 2018.

The future: We expect sales and marketing expenditures to ~~slightly~~ decrease during the balance of ~~2018, as we decreased efforts on commercial readiness activities for Habeo~~2019 due to the sale of our Cell Therapy business in ~~the U.S.~~April 2019.

General and administrative expenses include costs for administrative personnel, legal and other professional expenses, and general corporate expenses. The following table summarizes the general and administrative expenses for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,				For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2018		2017		2018		2017		2019		2018		2019		2018
General and administrative	$	1,437	$	1,668	$	5,003	$	5,649	$	860	$	1,201	$	2,189	$	2,939
Share-based compensation		49		117		196		363		15		92		48		363
Total general and administrative expenses	$	1,486	$	1,785	$	5,199	$	6,012	$	875	$	1,293	$	2,237	$	3,302

General and administrative expenses decreased by ~~$0.2~~$0.3 million and ~~$0.6~~$0.7 million during the three and ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, respectively, as compared to the same periods in ~~2017.~~2018. The ~~decrease~~variance for three months is primarily due to ~~decreases~~the decrease of ~~$0.1 million and $0.7~~$0.3 million in salaries, benefits and ~~benefits as well as decreases of $0.2 million and $0.6 million in~~ professional ~~services, consistent with our ongoing cost curtailment efforts and restructuring activities implemented in September 2017. In addition,~~services. The decrease for the six months period is primarily driven by one-time expenses for the ~~nine-month~~six-month period ended June 30, 2018, which includes ~~an increase of~~ $0.6 million related to the termination of a Lease Agreement for office space for our corporate headquarters in San Diego, ~~California, or the Lease~~California. In addition, during 2019 .there was a decrease of $0.1 million in salaries and in professional services, consistent with our ongoing cost curtailment efforts.

The future: We expect general and administrative expenditures to ~~remain materially consistent at current levels for~~decrease during the balance of ~~2018.~~2019 due to the sale of our Cell Therapy business in April 2019.

Share-based compensation ~~expenses include~~expense includes charges related to options and restricted stock awards issued to employees, directors and non-employees. We measure ~~stock-based~~share-based compensation expense based on the grant-date fair value of any awards granted to our employees. Such expense is recognized over the requisite service period.

The following table summarizes the components of our share-based compensation expenses for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,				For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2018		2017		2018		2017		2019		2018		2019		2018
Cost of product revenues	$	2	$	5	$	8	$	18
Research and development-related		24		28		70		116		11		20		22		116
Sales and marketing-related		11		28		51		91		2		27		7		91
General and administrative-related		49		117		196		363		15		92		48		363
Total share-based compensation	$	86	$	178	$	325	$	588	$	28	$	139	$	77	$	570

The decrease in share-based compensation ~~expenses~~expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 as compared to the same periods in ~~2017~~2018 is primarily related to ~~a delayed annual grant to directors and officers,~~ lower annual grant activity to remaining employees caused by reductions in headcount and due to the decline in the stock price during ~~2018~~2019 as compared to the same ~~periods~~period in ~~2017,~~2018, and its corresponding impact on share-based compensation.

The future: We expect to continue to grant options and stock awards (which will result in an expense) to our employees, directors, and, as appropriate, to non-employee service providers. In addition, ~~previously-granted~~previously granted options will continue to vest in accordance with their original terms. As of ~~September~~June 30, ~~2018,~~2019, the total compensation cost related to non-vested stock options and stock awards not yet recognized for all our plans is approximately ~~$0.4~~$0.1 million which is expected to be recognized as a result of vesting under service conditions over a weighted average period of ~~1.42~~1.6 years.

The following table summarizes ~~the change in fair value of warrant liability~~ interest income, interest expense, and other income and expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 (in thousands):

Interest expense increased for the six months ended June 30, 2019 as compared to the same period in 2018, due to the inclusion of amendment fees added to our debt.

Changes in fair value of our warrant liability are primarily due to fluctuations in the valuation inputs. See Note 11 to the consolidated financial statements included elsewhere herein for disclosure and discussion of our warrant liability.

The future:~~Our stock price can be volatile and~~ We expect interest expense in 2019 to decrease slightly in the second half of this year. In addition, regarding to the changes in fair value of warrants, there could be material fluctuations in the value of warrants in future periods because our stock price can be volatile. Future changes in the fair value of the warrant liability will be recognized in earnings until such time as the ~~warrants’ exercise price becomes fixed, or~~ warrants are exercised or expire.

In February 2017, we entered into an agreement to acquire assets, including in process research and development, or IPR&D, related to two oncology drug product candidates, from Azaya Therapeutics. In connection with this agreement, we recorded an IPR&D charge totaling $1.7 million. The acquired IPR&D is in the early stage of development and has no alternative use. Additional research, pre-clinical studies, and regulatory approvals must be successfully completed prior to commercialization of any product.

~~The following table summarizes interest income, interest expense, and other income and expense for the three and nine months ended September 30, 2018 and 2017 (in thousands):~~

~~The future:~~ ~~We expect interest expense in 2018 to remain consistent for the balance of the year.~~

The following is a summary of our key liquidity measures at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 (in thousands):

	As of September 30,			As of December 31,			As of June 30,			As of December 31,
	2018			2017			2019			2018
Cash and cash equivalents	$	6,806		$	9,550		$	4,530		$	5,261

Current assets	$	10,754		$	14,864		$	5,260		$	9,648
Current liabilities		17,652			18,414			13,923			17,559
Working capital deficit	$	(6,898	)	$	(3,550	)	$	(8,663	)	$	(7,911	)

We incurred net losses from continuing operations of $2.3 million and ~~$10.4~~$4.7 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019, respectively. We have an accumulated deficit of ~~$412.1~~$426.7 million as of ~~September~~June 30, ~~2018.~~2019. Additionally, we ~~have~~ used net cash of ~~$9.5~~$4.8 million to fund our operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

Further, the Loan and Security Agreement ~~with Oxford, as amended and further described~~(defined in Note 4 to the consolidated ~~condensed~~ financial statements included elsewhere herein), with Oxford Finance, LLC, or Oxford, as further described in Note 4, requires ~~us to maintain~~maintenance of a minimum of ~~$1.5~~$2.0 million in unrestricted cash and cash equivalents on hand to avoid an event of default under the Loan and Security ~~Agreement and requires us to make an aggregate of $7.0 million in principal payments on or before December 31, 2018.~~Agreement. Based on our cash and cash equivalents on hand of approximately ~~$6.8~~$4.5 million at ~~September~~June 30, ~~2018, we estimate~~2019, the Company believes that weit will need to raise additional capital and/or obtain a waiver or restructure the Loan and Security Agreement in the near term to avoid defaulting under ~~our $1.5~~its $2.0 million minimum cash/cash equivalents ~~covenant and make an aggregate of $7.0~~covenant.

To date, these operating losses have been funded primarily from outside sources of invested capital including our recently completed 2018 Rights Offering (defined below), our Lincoln Park Purchase Agreement (defined below) with Lincoln Park Capital Fund, LLC, or Lincoln Park, ~~the 2017 Rights Offering (defined below),~~ the Loan and Security Agreement and gross profits. We have had, and we will likely continue to have, an ongoing need to raise additional cash from outside sources to fund our future clinical development programs and other operations. Our inability to raise additional cash would have a material and adverse impact on operations and would cause us to default on our loan.

On April 11, 2017, we entered into an underwriting agreement, or the Underwriting Agreement, with Maxim Group LLC, or Maxim, relating to the issuance and sale of 0.9 million shares of our common stock. The price to the public in this offering was $11.00 per share. Maxim purchased the shares from us pursuant to the Underwriting Agreement at a price of $10.40 per share. The net proceeds to us from the offering were approximately $8.7 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. The offering closed ~~on April 17, 2017. In addition, under the terms of the Underwriting Agreement, we granted Maxim a 45-day option to~~ ~~purchase up to 94,400 additional shares of common stock.~~ On May 31, 2017, Maxim exercised their overallotment option and purchased 84,900 shares at $11.00 per share. The net proceeds to us were $0.8 million, after deducting underwriting costs and offering expenses payable by us.

On September 5, 2018, we received a written notice from The Nasdaq Stock Market LLC, or Nasdaq, indicating that, based upon the closing bid price of our common stock for the prior 30 consecutive business days, we no longer met the requirement to maintain a minimum bid price of $1 per share, as set forth in Nasdaq Listing Rule 5550(a)(2). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have been provided a period of 180 calendar days, or until March 5, 2018, in which to regain compliance. We were granted an additional compliance period of 180 calendar days, or until September 4, 2018, in which to regain compliance after meeting the continued listing requirements for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exception of the bid price requirement, and providing notice to Nasdaq of our intent to cure the deficiency during this second compliance period, by effecting a reverse stock split, if necessary. In order to regain compliance with the minimum bid price requirement, the closing bid price of our common stock must have been at least $1 per share for a minimum of ten consecutive business days during the second 180-day period. On June 8, 2018, we received written notice from Nasdaq that we had regained compliance with the Nasdaq Stock Market Listing Rule 5500(a)(2) concerning our minimum bid price per share of our common stock.

~~On November 28, 2017, we closed a rights offering originally filed under a Form S-1 registration~~ statement in August 2017, or the 2017 Rights Offering. Pursuant to the 2017 Rights Offering, the Company sold an aggregate of 10,000 units consisting of a total of 10,000 shares of Series B Convertible Preferred Stock, immediately convertible into approximately 3,000,000 shares of common stock and 18,000,000 warrants, exercisable for an aggregate of 1,800,000 shares of common stock at an exercise price of $3.333 per share of common stock, resulting in total net proceeds to the Company of $8.8 million. These warrants became exercisable upon stockholder approval of an increase in the Company's authorized shares of common stock obtained at the 2018 Annual Meeting of Stockholders.

On June 1, 2018, we entered into a Sales Agreement with B. Riley FBR to sell shares of our common stock having an aggregate offering price of up to $6.5 million from time to time, through our ATM program under which B. Riley FBR will act as sales agent. Subject to the terms and conditions of the Sales Agreement, B. Riley FBR will use its commercially reasonable efforts to sell the shares, based upon our instructions, consistent with its normal trading and sales practices and applicable state and federal laws, rules and regulations and rules of Nasdaq. We will set the parameters for sales of shares through the ATM program, including the number of shares to be sold, the time period during which sales are requested to be made, any limitation on the number of shares that may be sold in one trading day, and any minimum price below which sales may not be made. Under the Sales Agreement, B. Riley FBR may sell the shares by any method permitted by law deemed to be an “at the market offering,” as defined in Rule 415 of the Securities Act of 1933, as amended, or the Securities Act. We have no obligation to sell any shares and may at any time suspend offers and sales under the Sales Agreement. We and B. Riley FBR each have the right to terminate the Sales Agreement at any time upon prior written notice as provided in the Sales Agreement. We will pay to B. Riley FBR a commission, or allow a discount, in an amount equal to 3.0% of the gross sales price per share of common stock sold through it as sales agent under the Sales Agreement. We have also agreed pursuant to the Sales Agreement to indemnify and provide contribution to B. Riley FBR against certain liabilities, including liabilities under the Securities Act. Although sales of our common stock have taken place pursuant to our ATM program, there can be no assurance that we will be successful in consummating future sales based on prevailing market conditions or in the quantities or at the prices that we deem appropriate. In addition, under current SEC regulations, at any time during which the aggregate market value of our common stock held by non-affiliates, or public float, is less than $75.0 million, the amount we can raise through primary public offerings of securities in any twelve-month period using shelf registration statements, including sales under our ATM program, is limited to an aggregate of one-third of our public float. As of ~~September~~June 30, ~~2018,~~2019, our public float was approximately ~~11.7~~0.4 million shares, the value of which was ~~$4.7~~$5.3 million based upon the closing price of our common stock of ~~$0.41~~$12.12 on such date. The value of one-third of our public float calculated on the same basis was approximately ~~$1.6~~$1.8 million.

On July 25, 2018, we closed a rights offering originally filed under a Form S-1 registration statement in April 2018, or the 2018 Rights Offering. Pursuant to the 2018 Rights Offering, the Company sold an aggregate of 6,723 units consisting of a total of 6,723 shares of Series C Convertible Preferred Stock, immediately convertible into approximately ~~8.4~~0.2 million shares of common stock and 7,059,150

warrants, ~~with each warrant~~ exercisable for ~~one share~~an aggregate of 141,183 shares of common stock at an exercise price of ~~$0.7986~~$39.93 per share of common stock, resulting in total net proceeds to the Company of approximately $5.7 million.

On August 28, 2018, we received a written notice from Nasdaq staff indicating that, based upon the closing bid price of our common stock for the prior 30 consecutive business days, we no longer meet the requirement to maintain a minimum bid price of $1$1.00 per share, as set forth in Nasdaq Listing Rule 5550(a)(2). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we ~~have been~~were provided aan initial period of 180 calendar days, or until February 25, 2019, in which to regain compliance. In order to regain compliance with the minimum bid price requirement, the closing bid price of our common stock must have been at least $1 per share for a minimum of ten consecutive business days during the 180-day period. ~~In the event we do not regain compliance within this 180-day period, we may be eligible to seek~~We were also granted an additional compliance period of 180 calendar days, ~~if we meet~~or until August 26, 2019, in which to regain compliance after meeting the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exception of the bid price requirement, ~~if we provide written~~and providing notice to Nasdaq staff of our intent to cure the deficiency during this second compliance period, by effecting a reverse stock split, if necessary. In order to regain compliance with the minimum bid price requirement, the closing bid price of our common stock must have been at least $1.00 per share for a minimum of 10 consecutive business days during the 180-day period. In August 2019, we consummated a 1-for-50 reverse stock split pursuant to which the minimum bid price of our common stock rose above $1.00. If the closing bid price of our common stock remains above $1.00 per share, we expect to regain compliance with the minimum bid price requirement on August 19, 2019. However, based on our stockholders’ deficit of $6.3 million as of June 30, 2019, we will not meet the minimum stockholders’ equity requirement for continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(b)(1), which requires listed companies to maintain stockholders’ equity of at least $2.5 million, and we expect to receive written notice from Nasdaq staff to that effect following the filing of this Quarterly Report on Form 10-Q. In addition, as of June 30, 2019, we do not meet the alternative compliance standards relating to the market value of listed securities or net income from continuing operations. We intend to evaluate various courses of action to regain compliance with Nasdaq Listing Rule 5550(b)(1) within the compliance period specified by Nasdaq. However, there can be no assurance that we will be able to regain compliance within such compliance period.

On September 21, 2018, we entered into a purchase agreement and a registration rights agreement, with Lincoln Park, pursuant to which we have the right to sell to Lincoln Park and Lincoln Park is obligated to purchase up to $5.0 million of shares of our common stock over the 24-month period following October 15, 2018, subject to the satisfaction of certain conditions. Through December 31, 2018, the Company sold a total of 12,802 shares for proceeds of approximately $0.3 million through the Lincoln Park Purchase Agreement and 5,000 shares for proceeds of approximately $0.1 million were sold during the six months ended June 30, 2019.

We continue to seek additional capital through product revenues, strategic transactions ~~including extension opportunities under our awarded BARDA contract,~~ and from other financing alternatives. Without additional capital, current working capital and cash generated from sales will not provide adequate funding for research, sales and

marketing efforts and product development activities at their current levels. If sufficient capital is not raised, we will at a minimum need to significantly reduce or curtail our research and development and other operations, and this would negatively affect our ability to achieve corporate growth goals.

Should we be unable to raise additional cash from outside sources, this would have a material adverse impact on our operations.

As of ~~September~~June 30, ~~2018,~~2019, there have been no material changes outside the ordinary course of our business to the contractual obligations we reported in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017,~~2018, except for the ~~changes~~amendments to the Loan and Security Agreement.

On April 24, 2019 the Company received $3.4 million of net cash proceeds related to the ~~termination~~sale of the ~~Lease~~ Company’s UK subsidiary, Cytori Ltd., and ~~Roche agreements.~~the Company’s Cell Therapy assets, of which $1.7 million was used to pay down principal, interest and fees on the Loan and Security Agreement and on April 25, 2019 the Company received $2.5 million of net cash proceeds related to the sale of the Company’s Japanese subsidiary, Cytori Therapeutics, K.K., and substantially all of the Company’s Cell Therapy assets used in Japan, of which $1.4 million was used to pay down principal, interest and fees on the Loan and Security Agreement.

Cash (used in) provided by operating, investing, and financing activities for the ~~nine~~three and six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 is summarized as follows (in thousands):

	For the Nine Months Ended September 30,						For the Six Months Ended June 30,
	2018			2017			2019			2018
Net cash used in operating activities	$	(9,487	)	$	(13,904	)	$	(4,824	)	$	(6,840	)
Net cash used in investing activities		(128	)		(1,462	)		2,783			(78	)
Net cash provided by financing activities		6,246			7,657			1,314			(200	)
Effect of exchange rate changes on cash and cash equivalents		(10	)		11			(4	)		12
Net decrease in cash and cash equivalents	$	(3,379	)	$	(7,698	)	$	(731	)	$	(7,106	)

Net cash used in operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 was ~~$9.5~~$4.8 million compared to ~~$13.9~~$6.8 million in the same period of ~~2017.~~2018. Overall, our operational cash use decreased during the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 as compared to the same period in ~~2017,~~2018, due primarily to a decrease in losses from operations (when adjusted for non-cash items) ~~of $4.4 million.~~.

Net cash provided by investing activities for the six months ended June 30, 2019 were related to the sale of the cell therapy business for net proceeds of $2.8 million. Net cash used in investing activities for the ~~nine~~six months ended ~~September~~June 30, 2018 is related to the purchase of fixed assets. ~~During the same period in 2017, there were cash outflows for payment for long-lived assets purchased as part of Azaya’s acquisition of $1.2 million.~~

Net cash ~~provided by~~used in financing activities for the ~~nine~~six months ended ~~September~~June 30, 2019 was primarily related to the principal payment of long-term obligations of $0.6 million offset by the sales of common stock of $2.0 million. Net cash used in financing activities for the six months ended June 30, 2018 is primarily related to ~~sales of common and preferred stocks of $6.2 million, net of~~ costs ~~from sale primarily through our 2018 Rights Offering and ATM program. The net cash provided by the activities in the same period in 2017 is related to the proceeds~~ from sale of common stock ~~of $12.4 million, net of the corresponding cost from sale, offset by the payment of long-term obligations of $4.7 million.~~in 2017 which were paid in 2018.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of our assets, liabilities, revenues and expenses, and that affect our recognition and disclosure of contingent assets and liabilities.

While our estimates are based on assumptions we consider reasonable at the time they were made, our actual results may differ from our estimates, perhaps significantly. If results differ materially from our estimates, we will make adjustments to our financial statements prospectively as we become aware of the necessity for an adjustment.

Goodwill is reviewed for impairment annually or more frequently if indicators of impairment exist. We perform our impairment test annually during the fourth quarter. The Company operates in a single operating segment and reporting unit. We monitor the fluctuations in our share price and have experienced significant volatility during the year. During Q3 2018, our stock price has significantly declined in comparison to the previous quarter. We performed a valuation of our reporting unit as of September 30, 2018. Based upon the results of our valuation, management concluded that the fair value of the reporting unit exceeded the carrying value. We determined that a blending of the income approach and an option pricing model back-solve was reasonable. Additionally, a further reduction in our market capitalization could be an indicator of impairment. Given the volatility of our stock price a continued decline in market capitalization could result in an impairment of our goodwill.

We believe it is important for you to understand our most critical accounting policies. Our critical accounting policies and estimates are discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017~~2018 and there have been no material changes, other than the adoption of Accounting Standards Codification ~~606~~842, ~~Revenue from Contracts with Customers~~Leases, during the ~~three and nine~~six months ended ~~September~~June 30, 2019~~, 2018.~~.

Item 3. Quantitative and ~~Qualitative~~Qualitative Disclosures about Market Risk

As of ~~September~~June 30, ~~2018,~~2019, there have been no material changes in our market risks from those described in Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017.~~2018, except that the Company no longer has ongoing operations outside of the United States following the sale of our cell therapy.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or furnished pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our ~~Chief Executive Officer~~principal executive officer and ~~Chief Financial Officer,~~principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our ~~Chief Executive Officer~~principal executive officer and ~~Chief Financial Officer,~~principal financial officer, of the effectiveness of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on the foregoing, our ~~Chief Executive Officer~~principal executive officer and ~~Chief Financial Officer~~principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report.

There have been no changes in our internal control over financial reporting during the quarter ended ~~September~~June 30, ~~2018~~2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

From time to time, we have been involved in routine litigation incidental to the conduct of our business. ~~As of September 30, 2018, we were not a party to any material legal proceeding.~~

On ~~April 27, 2018, Lorem Vascular, or Lorem,~~July 25, 2019, Tap Advisors LLC (“Tap”) filed suit against the Company in the ~~U.S. District~~Supreme Court ~~for~~of the ~~Southern District~~State of ~~California~~New York, County of New York, alleging the Company breached an ~~oral~~ agreement made in 2013 to purchase 5% of Lorem’s common stock for an aggregate amount of $5.0 million, and seeking specific performance of the alleged oral agreement and damages in an amount to be determined at trial. The Company filed a motion to dismiss all of Lorem’s claims, and on July 11, 2018 the Court granted the Company’s motion to dismiss. Lorem filed an amended complaint on August 3, 2018, advancing similar causes of action and seeking similar relief. Cytori filed a renewed motion to dismiss on August 27, 2018, and on October 1, 2018, Lorem voluntarily dismissed its amended complaint in its entirety.

On August 31, 2018, we filed a Demand for Arbitration with the American Arbitration Association in San Diego, California, against Bimini Technologies LLC (“Bimini”) for fraud and breach of a Sale and Exclusive License/Supply Agreement made in 2013 under which Bimini licensed rights2017, whereby Tap would provide certain financial advisory services to the ~~Company’s Standalone Fat Transplantation, including the Puregraft Product Line and associated trademarks. Our arbitration demand alleges~~Company. Tap seeks to recover fees of approximately $3.7 million (plus attorneys’ fees) that ~~Bimini failed to make a $1.0 million milestone payment due to~~allegedly have not been paid by the Company ~~after Bimini achieved $10.0 million in gross profits from~~related to the sale of its cell therapy business in April 2019. The Company believes the ~~Company’s Puregraft product line,~~complaint is without merit and ~~Bimini deceived~~plans to vigorously defend itself in this matter. At June 30, 2019, the Company about Bimini’s true gross profits figures. Our arbitration demand seeks that $1.0 million milestone payment, as well prejudgment interest and attorneys’ fees. On October 29, 2018 Bimini made the $1.0 million milestone payment. The parties subsequently entered intoprobable outcome of this litigation cannot be determined.

We are not currently a ~~settlement agreement resolving the claims in the Demand for Arbitration.~~party to any other material legal proceeding.

Our business is subject to various risks, including those described in Item 1A “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017~~2018 filed with the U.S. Securities and Exchange Commission on March ~~9, 2018 and our subsequent Quarterly Reports on Form 10-Q,~~29, 2019, which we strongly encourage you to review with all other information contained or incorporated by reference in this report before you decide to invest in our common stock. In addition to those risk factors, we identified the following new risks or substantive changes from the risks described in our Annual Report on Form ~~10-K and subsequent Quarterly Reports on Form 10-Q.~~10-K. If any of the risks described in our Annual Report on Form 10-K ~~our Quarterly Reports,~~ or discussed below actually occurs, our business, financial condition, results of operations and our future growth prospects could be materially and adversely affected. Under these circumstances, the trading price of our common stock could decline, and you may lose all or part of your investment.

We have incurred losses since inception, we expect to incur significant net losses in the foreseeable future and we may never become profitable.

We have almost always had negative cash flows from operations and have incurred net operating losses each year since we started business. For the six months ended June 30, 2019 and year ended December 31, 2018, we incurred net losses of $12.3 million and $12.6 million, respectively, and our net cash used in operating activities was $4.8 million and $12.0 million, respectively. As of December 31, 2018 and our accumulated deficit was $414.4 million. As of June 30, 2019, our accumulated deficit was $426.7 million. We expect to continue to incur net losses and negative cash flow from operating activities for at least the next year. As our focus on development of Nanomedicine and the development of therapeutic applications has increased, losses have resulted primarily from expenses associated with research and development and clinical trial-related activities, as well as general and administrative expenses. While we have implemented and continue to implement cost reduction measures where possible, we nonetheless expect to continue operating in a loss position on a consolidated basis and expect that recurring operating expenses will continue at similar levels as compared to the second quarter for the remainder of this year and are anticipated to be at higher levels next year as we prepare for and perform clinical trial and other development activities for our Nanomedicine product candidates.

Our ability to generate sufficient revenues from any of our product candidates or technologies to achieve profitability will depend on a number of factors including, but not limited to:

Because of the numerous risks and uncertainties associated with our commercialization and product development efforts, we are unable to predict the extent of our future losses or when or if we will become profitable and it is possible we will never become profitable. If we do not generate significant sales from any of our product candidates that may receive regulatory approval, there would be a material adverse effect on our business, results of operations, financial condition and prospects which could result in our inability to continue operations.

We will need substantial additional funding to develop our ~~products~~product candidates and for our future operations. If we are unable to obtain the funds necessary to do so, we ~~may~~will be required to delay, scale back or eliminate our product development activities or may be unable to continue our business.

We have had, and we will continue to have, an ongoing need to raise additional cash from outside sources to continue funding our operations, ~~to profitability,~~ including our continuing substantial research and development expenses. We do not currently believe that our cash balance ~~and the revenues from our operations~~ will be sufficient to fund the development and marketing efforts required to reach profitability without raising additional capital from accessible sources of financing in the near future. Although it is difficult to predict future liquidity requirements, we believe that our ~~$6.8~~$4.5 million in cash and cash equivalents on hand as of ~~September~~June 30, ~~2018~~2019 will be ~~sufficient~~insufficient to fund our currently contemplated ~~operations at least through the first quarter of 2019.~~operations. Our future capital requirements will depend on many factors, including:

We have secured capital historically from grant revenues, collaboration proceeds, and debt and equity offerings. We will need to secure substantial additional capital to fund our future operations. We cannot be certain that additional capital will be available on terms acceptable to us, or at all. Our ability to raise capital was adversely affected when the FDA put a hold on our ATHENA cardiac trials in mid-2014, which had an adverse impact to stock price performance and our corresponding ability to restructure our debt. Subsequently, a continued downward trend in our stock price resulting from a number of factors, including (i) general economic and industry conditions, (ii) challenges faced by the regenerative medicine industry as a whole, (iii) the market’s unfavorable view of certain of our recent equity financings conducted in 2014, 2015 and 2018 (which financings were priced at a discount to market and included 100% warrant coverage), (iv) market concerns regarding our continued need for capital (and the effects of any future capital raising transactions we may consummate), (v) market perceptions of our ATHENA, ACT-OA, and STAR clinical trial data, and (vi) our recent Nasdaq listing deficiency issues and resultant 1-for-15 reverse stock split in 2016 and 1-for-10 reverse stock split in 2018, made it more difficult to procure additional capital on terms reasonably acceptable to us. Though our recent acquisition of the Cytori Nanomedicine business from Azaya Therapeutics, including our ATI-0918 and ATI-1123 drug candidates, appear to have been viewed favorably by our investors and the marketplace, we cannot assure you that this acquisition will not ultimately be viewed negatively and thus further hamper our efforts to attract additional capital. If we are unsuccessful in our efforts to raise any such additional capital, we may be required to take actions that could materially and adversely harm our business, including a possible significant reduction in our research, development and administrative operations (including reduction of our employee base), surrendering of our rights to some technologies or product opportunities, delaying of our clinical trials or regulatory and reimbursement efforts, or curtailing of or even ceasing operations.

Our financing plans include pursuing additional cash through use of offering programs, strategic corporate partnerships, licensing and sales of assets and equity. In November 2017, we completed a public offering in which we distributed to holders of our common stock, at no charge, non-transferable subscription rights to purchase up to 10,000 units, each consisting of one share of our Series B Convertible Preferred Stock and 1,800 warrants to purchase shares of our common stock (~~exercisable for an aggregate of 180 shares of common stock~~), at a subscription price of $1,000 per unit, or the 2017 Rights Offering, raising a total of $10 million in gross proceeds. Each share of Series B Convertible Preferred Stock is convertible into approximately 300 shares of our common stock, subject to adjustment. We sold a total of 10,000 units as part of the 2017 Rights Offering. Additionally, in July 2018, we completed a public offering in which we distributed to holders of our common stock and Series B Convertible Preferred Stock, at no charge, non-transferable subscription rights to purchase up to an aggregate of 20,000 units each consisting of one share of Series C Preferred Stock and 1,050 warrants to purchase one share of our common stock at a subscription price of $1,000 per unit, or the 2018 Rights Offering. Each share of Series C Preferred Stock is convertible into ~~1,253~~25 shares of our common stock subject to adjustment. We sold an aggregate of 6,723 units as part of the 2018 Rights Offering.

In addition, in September 2018, we entered into a purchase agreement, or the Lincoln Park Purchase Agreement, with Lincoln Park Capital Fund, LLC, or Lincoln Park, pursuant to which we may direct Lincoln Park to purchase up to $5.0 million in shares of our common stock from time to time over the 24-month period following October 15, 2018, subject to the satisfaction of certain conditions. There is no guarantee that adequate funds will be available when needed from additional debt or equity financing, development and commercialization partnerships or from other sources or on terms acceptable to us. ~~In addition, under current SEC regulations, at any time~~Through December 31, 2018, the Company sold a total of 12,000 shares for proceeds of approximately $0.3 million through the Lincoln Park Purchase Agreement and 5,000 shares for proceeds of approximately $0.1 million were sold during ~~which~~ the ~~aggregate market value of our common stock held by non-affiliates, or public float,~~six months ended June 30, 2019. The Company believes there is less than ~~$75.0~~$0.1 million ~~the amount we can raise through primary public offerings of securities in any twelve-month period using shelf registration statements, including sales~~remaining available under ~~our ATM program, is limited to an aggregate of one-third of our public float. As of September 30, 2018, our public float was 11.7 million shares,~~this financing facility.

Further, the value of which was $4.7 million based upon the closing price of our common stock of $0.41 on such date. The value of one-third of our public float calculated on the same basis was approximately $1.6 million.

~~Further, our~~ Loan and Security Agreement, as amended, with Oxford Finance, LLC, or Oxford, ~~as amended,~~ requires ~~us to maintain~~maintaining a minimum of ~~$1.5~~$2.0 million in unrestricted cash and cash equivalents on hand to avoid an event of default under the Loan and Security ~~Agreement and requires us to make an aggregate of $7.0 million in principal payments on or before December 31, 2018.~~Agreement. Based on our cash and cash equivalents on hand of approximately ~~$6.8~~$4.5 million at ~~September~~June 30, ~~2018,~~2019, we estimate that we will need to raise additional capital and/or obtain a waiver or restructure the Loan and Security Agreement in the near term to avoid defaulting under our ~~$1.5~~$2.0 million minimum cash/cash equivalents ~~covenant and make an aggregate of $7.0 million in principal payments on or before December 31, 2018.~~covenant. If we are unable to avoid an event of default under the Loan and Security Agreement, our business could be severely harmed.

In addition to the funding sources previously mentioned, we continue to seek additional capital through product revenues and state and federal development ~~programs,~~programs.

Our level of indebtedness, and covenant restrictions under such indebtedness, could adversely affect our operations and liquidity.

Under our Loan and Security Agreement with Oxford, as collateral agent and lender, Oxford made a term loan to us in an aggregate principal amount of $17,700,000, or the Term Loan, subject to the terms and conditions set forth in the Loan and Security Agreement. The outstanding principal balance of the Term Loan is $9.3 million as of June 30, 2019.

The Term Loan accrues interest at a floating rate equal to the three-month LIBOR rate (with a floor of 1.00%) plus 7.95% per annum. On April 29, 2019, we and Oxford amended the Loan and Security Agreement to extend the interest-only period. Beginning May 2020, we will be required to make payments of principal (in the amount of approximately $0.7 million per month) and accrued interest in equal monthly installments of approximately $1.3 million to amortize the Term Loan through June 1, 2021, the maturity date.

As security for our obligations under the Loan and Security Agreement, we granted a security interest in substantially all of our existing and after-acquired assets, excluding our intellectual property assets, subject to certain exceptions set forth in the Loan and Security Agreement. If we are unable to discharge these obligations, Oxford could foreclose on these assets, which would, at a minimum, have a severe material adverse effect on our ability to operate our business.

Our indebtedness to Oxford could adversely affect our operations and liquidity, by, among other things:

The Loan and Security Agreement, as amended, requires us to maintain at least $2.0 million in unrestricted cash and/or cash equivalents and includes certain reporting and other covenants, that, among other things, restrict our ability to (i) dispose of assets, (ii) change the business we conduct, (iii) make acquisitions, (iv) engage in mergers or consolidations, (v) incur additional indebtedness, (vi) create liens on assets, (vii) maintain any collateral account, (viii) pay dividends, (ix) make investments, loans or advances, (x) engage in certain transactions with affiliates, and (xi) prepay certain other indebtedness or amend other financing arrangements. If we fail to comply with any of these covenants or restrictions, such failure may result in an event of default, which if not cured or waived, could result in Oxford causing the outstanding loan amount ($9.3 million as of June 30, 2019) to become immediately due and payable. If the maturity of our indebtedness is accelerated, we may not have, or be able to timely procure, sufficient cash resources to satisfy our debt obligations, and such acceleration would adversely affect our business and financial condition.

We may not be able to correctly estimate or control our future operating expenses, which could lead to cash shortfalls.

Our budgeted expense levels are based in part on our expectations concerning future research and development activities. We may be unable to reduce our expenditures in a timely manner to compensate for any unexpected events. Accordingly, unexpected events could have an immediate and material impact on our business and financial condition.

Our future success is in large part dependent upon our ability to successfully integrate and develop our Nanomedicine platform and commercialize our DoxoPLUS and DocePLUS Nanomedicine product candidates, and any failure to do so could significantly harm our business and prospects.

In February 2017, we acquired substantially all of the assets of Azaya Therapeutics Inc., or Azaya, including Azaya’s two product candidates, DoxoPLUS and DocePLUS, and related manufacturing equipment and inventory. Our ability to successfully integrate, develop and commercialize these assets is subject to a number of risks, including the following:

If we are unable to successfully partner with other companies to commercialize our product candidates, our business could materially suffer.

A key part of our business strategy is to leverage strategic partnerships/collaborations to commercialize our product candidates. We do not have the financial, human or other resources necessary to develop, commercialize, launch or sell our therapeutic offerings in all of the geographies that we are targeting, and thus it is important that we identify and partner with third parties who possess the necessary resources to bring our products to market. We expect that any such partners will provide regulatory and reimbursement/pricing expertise, sales and marketing resources, and other expertise and resources vital to the success of our product offerings in their territories. We further expect, but cannot guarantee, that any such partnering arrangements will include upfront cash payments to us in return for the rights to develop, manufacture, and/or sell our products in specified territories, as well as downstream revenues in the form of milestone payments and royalties.

Our current business strategy is to aggressively develop our Nanomedicine platforms, while simultaneously controlling expenses, which is a high-risk strategy for a number of reasons including the following:

We face intense competition, and if our competitors market and/or develop products that are marketed more effectively, approved more quickly than our product candidates or demonstrated to be safer or more effective than our products, our commercial opportunities could be reduced or eliminated.

The life science industry is characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary therapeutics. We face competition from a number of sources, some of which may target the same indications as our products or product candidates, including small and large, domestic and multinational, medical device, biotechnology and pharmaceutical companies, academic institutions, government agencies and private and public research institutions, many of which have greater financial resources, sales and marketing capabilities, including larger, well-established sales forces, manufacturing capabilities, experience in obtaining regulatory approvals for product candidates and other resources than we do.

We expect that product candidates in our pipeline, if approved, to compete on the basis of, among other things, product efficacy and safety, time to market, price, coverage and reimbursement by third-party payers, extent of adverse side effects and convenience of treatment procedures. One or more of our competitors may develop other products that compete with ours, obtain necessary approvals for such products from the FDA, EMA, Ministry of Health, Labour and Welfare or other agencies, if required, more rapidly than we do or develop alternative products or therapies that are safer, more effective and/or more cost effective than any products developed by us. The competition that we encounter with respect to any of our product candidates that receive the requisite regulatory approval and classification and are marketed may have an effect on our product prices, market share and results of operations. We may not be able to differentiate any products that we are able to market from those of our competitors, successfully develop or introduce new products that are less costly or offer better results than those of our competitors, or offer purchasers of our products payment and other commercial terms as favorable as those offered by our competitors. In addition, competitors may seek to develop alternative formulations of or technological approaches to our product candidates and/or drug delivery technologies that address our targeted indications.

We may face competition for our DocePLUS product candidate (which is intended for the treatment of small cell lung cancer) from multiple drug classes.

Companies that are developing or have commercialized nanoparticle-docetaxel products, including both oral and intravenous formulations, and may be future competitors for our DocePLUS product candidate include, but are not limited to, Adocia, Athenex, Bind Therapeutics, Cerulean, Cristal Therapeutics, Intas, LIDDS, Merrimack, Modra, NanOlogy, Oasmia, and Starpharma.

Competitors may have greater experience in developing drugs, conducting clinical trials, obtaining regulatory clearances or approvals, manufacturing and commercialization. It is possible that competitors may obtain patent protection, approval, or clearance from the FDA or achieve commercialization earlier than we can, any of which could have a substantial negative effect on our business. Compared to us, many of our potential competitors have substantially greater:

As a result of these factors, our competitors may obtain regulatory approval of their products more quickly than we are able to or may obtain patent protection or other intellectual property rights that limit or block us from developing or commercializing our product candidates. Our competitors may also develop products that are more effective, more useful, better tolerated, subject to fewer or less severe side effects, more widely prescribed or accepted or less costly than ours and may also be more successful than we are in manufacturing and marketing their products. If we are unable to compete effectively with the marketed therapeutics of our competitors or if such competitors are successful in developing products that compete with any of our product candidates that are approved, our business, results of operations, financial condition and prospects may be materially adversely affected.

Our clinical trials may fail to demonstrate acceptable levels of safety and efficacy for any of our product candidates, which could prevent or significantly delay their regulatory approval and commercialization, which would have a material and adverse impact on our business.

Clinical testing of our product candidates is a long, expensive and uncertain process, and the failure or delay of a clinical trial can occur at any stage. Many factors, currently known and unknown, can adversely affect clinical trials and the ability to evaluate a product candidate’s efficacy. During the course of treatment, patients can die or suffer other adverse events for reasons that may or may not be related to the proposed product being tested. Even if initial results of preclinical and nonclinical studies or clinical trial results are promising, we may obtain different results in subsequent trials or studies that fail to show the desired levels of safety and efficacy, or we may not obtain applicable regulatory approval for a variety of other reasons.

Further, with respect to the conduct and results of clinical trials generally, in the United States, Europe, Japan and other jurisdictions, the conduct and results of clinical trials can be delayed, limited suspended, or otherwise adversely affected for many reasons, including, among others:

We also face clinical trial-related risks with regard to our reliance on other third parties in the performance of many of the clinical trial functions, including CROs, that help execute our clinical trials, the hospitals and clinics at which our trials are conducted, the clinical investigators at the trial sites, and other third-party service providers. Failure of any third-party service provider to adhere to applicable trial protocols, laws and regulations in the conduct of one of our clinical trials could adversely affect the conduct and results of such trial (including possible data integrity issues), which could seriously harm our business.

Our success depends in substantial part on our ability to obtain regulatory approvals for our DocePLUS product candidate. However, we cannot be certain that we will receive regulatory approval for this product candidate or our other product candidates.

We have only a limited number of product candidates in development, and our business depends substantially on their successful development and commercialization. Our product candidates will require development, regulatory review and approval in multiple jurisdictions, substantial investment, access to sufficient commercial manufacturing capacity and significant marketing efforts before we can generate any revenues from sales of our product candidates. The research, testing, manufacturing, labeling, approval, sale, marketing and distribution of products are subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries, whose regulations differ from country to country.

We are not permitted to market our product candidates in the United States until we receive approval from the FDA, or in any foreign countries until we receive the requisite approval from the regulatory authorities of such countries (including centralized marketing authorization from the European Medicines Agency), and we may never receive such regulatory approvals. Obtaining regulatory approval for a product candidate is a lengthy, expensive and uncertain process, and may not be obtained. Any failure to obtain regulatory approval of any of our product candidates would limit our ability to generate future revenues (and any failure to obtain such approval for all of the indications and labeling claims we deem desirable could reduce our potential revenue), would potentially harm the development prospects of our product candidates and would have a material and adverse impact on our business.

Even if we successfully obtain regulatory approvals to market our product candidates, our revenues will be dependent, in part, on our ability to commercialize such products as well as the size of the markets in the territories for which we gain regulatory approval. If the markets for our product candidates are not as significant as we estimate, our business and prospects will be harmed.

If a product candidate is not approved in a timely fashion on commercially viable terms, or if development of any product candidate is terminated due to difficulties or delays encountered in the regulatory approval process, it could have a material adverse effect on our business, and we may become more dependent on the development of other proprietary products and/or our ability to successfully acquire other products and technologies. There can be no assurance that any product candidate will receive regulatory approval in a timely manner, or at all.

If our product candidates and technologies receive regulatory approval but do not achieve broad market acceptance, especially by physicians, the revenues that we generate will be limited.

The commercial success of any of our approved products or technologies will depend upon the acceptance of these products and technologies by physicians, patients and the medical community. The degree of market acceptance of these products and technologies will depend on a number of factors, including, among others:

Our DocePLUS product candidate, if developed and commercialized, would compete against a number of established drugs, including Taxotere® (Sanofi S.A.) and Hycamtin® (Novartis), as well as other products being developed and commercialized by competitors for the same target clinical indication.

We expect physicians’ inertia and skepticism to also be a significant barrier as we attempt to gain market penetration with our future products. We believe we will continue to need to finance lengthy time-consuming clinical studies to provide evidence of the medical benefit of our products and resulting therapies in order to overcome this inertia and skepticism.

Overall, our efforts to educate the medical community on the benefits of any of our products or technologies for which we obtain marketing approval from the FDA or other regulatory authorities and gain broad market acceptance may require significant resources and may never be successful. If our products and technologies do not achieve an adequate level of acceptance by physicians, pharmacists and patients, we may not generate sufficient revenue from these products to become or remain profitable.

Many potential applications of our product candidates are pre-commercial, which subjects us to development and marketing risks.

Our product candidates are at various stages of development. Successful development and market acceptance of our products is subject to developmental risks, including risk of negative clinical data from current and anticipated trials, failure of inventive imagination, ineffectiveness, lack of safety, unreliability, manufacturing hurdles, failure to receive necessary regulatory clearances or approvals, high commercial cost, preclusion or obsolescence resulting from third parties’ proprietary rights or superior or equivalent products, competition from copycat products and general economic conditions affecting purchasing patterns. There can be no assurance that we or our partners will successfully develop and commercialize our product candidates, or that our competitors will not develop competing technologies that are less expensive or superior. Failure to successfully develop and market our product candidates would have a substantial negative effect on our results of operations and financial condition.

If we or any party to a key collaboration, licensing, development, acquisition or similar arrangement fails to perform material obligations under such arrangement, or any arrangement is terminated for any reason, there could be an adverse effect on our business.

We are currently party to certain licensing, collaboration and acquisition agreements under which we may make or receive future payments in the form of milestone payments, maintenance fees, royalties and/or minimum product purchases. Our collaborators may not devote the attention and resources to such efforts to be successful. The termination of a key collaboration agreement by one of our collaborators could materially impact our ability to enter into additional collaboration agreements with new collaborators on favorable terms.

Risks relating to our current material collaborations (excluding our BARDA ~~contract.~~partnership, which is discussed below in these “Risk Factors”) include the following:

If we or collaborators fail to comply with regulatory requirements applicable to the development, manufacturing, and marketing of our products, regulatory agencies may take action against us or them, which could significantly harm our business.

Our product candidates, along with the clinical development process, the manufacturing processes, post-approval clinical data, labeling, advertising and promotional activities for these products, are subject to continual requirements and review by the FDA and state and foreign regulatory bodies. Regulatory authorities subject a marketed product, its manufacturer and the manufacturing facilities to continual review and periodic inspections. We, our collaborators, and our and their respective contractors, suppliers and vendors, will be subject to ongoing regulatory requirements, including complying with regulations and laws regarding advertising, promotion and sales of products, required submissions of safety and other post-market information and reports, registration requirements, Clinical Good Manufacturing Practices (cGMP) regulations (including requirements relating to quality control and quality assurance, as well as the corresponding maintenance of records and documentation), and the requirements regarding the distribution of samples to physicians and recordkeeping requirements. Regulatory agencies may change existing requirements or adopt new requirements or policies. We, our collaborators, and our and their respective contractors, suppliers and vendors, may be slow to adapt or may not be able to adapt to these changes or new requirements.

Failure to comply with regulatory requirements may result in any of the following:

We and our product candidates are subject to extensive regulation, and the requirements to obtain regulatory approvals in the United States and other jurisdictions can be costly, time-consuming and unpredictable. If we or our partners are unable to obtain timely regulatory approval for our product candidates, our business may be substantially harmed.

The worldwide regulatory process for our Nanomedicine product candidates can be lengthy and expensive, with no guarantee of approval.

Before any new drugs may be introduced to the U.S. market, the manufacturer generally must obtain FDA approval through either an abbreviated new drug application, or ANDA, process for generic drugs off patent that allow for bioequivalence to an existing reference listed drug, or RLD, or the lengthier new drug approval, or NDA, process, which typically requires multiple successful and successive clinical trials to generate clinical data supportive of safety and efficacy along with extensive pharmacodynamic and pharmacokinetic preclinical testing to demonstrate safety. Our lead product candidate under development (DocePLUS) is subject to the FDA’s 505(b)(2) NDA process. NDA drugs can take significant time due to the preclinical and clinical trial requirements.

There are numerous risks arising out of the regulation of our Nanomedicine product candidates include the following:

Any regulatory review committees and advisory groups and any contemplated new guidelines may lengthen the regulatory review process, require us to perform additional studies, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of our product candidates or lead to significant post-approval limitations or restrictions. As we advance our product candidates, we may be required to consult with these regulatory and advisory groups and comply with applicable guidelines. If we fail to do so, we may be required to delay or discontinue development of our product candidates. Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a product candidate to market could decrease our ability to generate sufficient revenue to maintain our business. Divergence in regulatory criteria for different regulatory agencies around the globe could result in the repeat of clinical studies and/or preclinical studies to satisfy local territory requirements, resulting in the repeating of studies and/or delays in the regulatory process. Some territories may require clinical data in their indigenous population, resulting in the repeat of clinical studies in whole or in part. Some territories may object to the formulation ingredients in the final finished product and may require reformulation to modify or remove objectionable components; resulting in delays in regulatory approvals. Such objectionable reformulations include, but are not limited to, human or animal components, BSE/TSE risks, banned packaging components, prohibited chemicals, banned substances, etc. There can be no assurances that the FDA or foreign regulatory authorities will accept our pre-clinical and/or clinical data.

Anticipated or unanticipated changes in the way or manner in which the FDA or other regulators regulate products or classes/groups of products can delay, further burden, or alleviate regulatory pathways that were once available to other products. There are no guarantees that such changes in the FDA’s or other regulators’ approach to the regulatory process will not deleteriously affect some or all of our products or product applications.

Our nanoparticle technology is subject to government regulations that are subject to change.

Our pipeline oncology products, such as DocePLUS, are being developed under existing government criteria, which are subject to change in the future. Clinical and/or pre-clinical criteria in addition to cGMP manufacturing requirements may change and impose additional regulatory burdens. Clinical requirements are subject to change which may result in delays in completing the regulatory process. Divergence in regulatory criteria for different regulatory agencies around the globe could result in the repeat of clinical studies and/or preclinical studies to satisfy local jurisdictional requirements, which would significantly lengthen the regulatory process and increase uncertainty of outcome. Some jurisdictions may require clinical data in their indigenous population, resulting in the repeat of clinical studies in whole or in part. Some jurisdictions may object to the formulation ingredients in the final finished product and may require reformulation to modify or remove objectionable components; resulting in delays in regulatory approvals. Such objectionable reformulations include, but are not limited to, human or animal components, bovine spongiform encephalopathy/ transmissible spongiform encephalopathy risks, banned packaging components, prohibited chemicals, banned substances, etc. There can be no assurance that the FDA or foreign regulatory authorities will accept our pre-clinical and/or clinical data.

Orphan drug designation may not ensure that we will enjoy market exclusivity in a particular market, and if we fail to obtain or maintain orphan drug designation or other regulatory exclusivity for some of our product candidates, our competitive position would be harmed.

A product candidate that receives orphan drug designation can benefit from potential commercial benefits following approval. Under the U.S. Orphan Drug Act, the FDA may designate a product candidate as an orphan drug if it is intended to treat a rare disease or condition, defined as affecting a patient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States. In the European Union, or EU, the EMA’s Committee for Orphan Medicinal Products, or COMP, grants orphan drug designation to promote the development of products that are intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting not more than 10,000 persons in the EU. Currently, this designation provides market exclusivity in the U.S. and the European Union for seven years and ten years, respectively, if a product is the first such product approved for such orphan indication. This market exclusivity does not, however, pertain to indications other than those for which the drug was specifically designated in the approval, nor does it prevent other types of drugs from receiving orphan designations or approvals in these same indications. Further, even after an orphan drug is approved, the FDA can subsequently approve a drug with similar chemical structure for the same condition if the FDA concludes that the new drug is clinically superior to the orphan product or a market shortage occurs. In the EU, orphan exclusivity may be reduced to six years if the drug no longer satisfies the original designation criteria or can be lost altogether if the marketing authorization holder consents to a second orphan drug application or cannot supply enough drug, or when a second applicant demonstrates its drug is “clinically superior” to the original orphan drug.

If we experience an interruption in supply from a material sole source supplier, our business may be harmed

We acquire some our components and other raw materials from sole source suppliers. If there is an interruption in supply of our raw materials from a sole source supplier, there can be no assurance that we will be able to obtain adequate quantities of the raw materials within a reasonable time or at commercially reasonable prices. Interruptions in supplies due to pricing, timing, availability or other issues with our sole source suppliers could have a negative impact on our ability to manufacture products and product candidates, which in turn could adversely affect the development and commercialization of our Nanomedicine product candidates and cause us to potentially breach our supply or other obligations under our agreements with certain other counterparties.

We are dependent on sole source suppliers to manufacture the API (active pharmaceutical ingredient) and certain other components of our Nanomedicine product candidates. There are no assurances that these sole source suppliers will enter into supply agreements with us to provide contractual assurance to us around supply and pricing. Regardless whether a sole source supplier enters into a written supply arrangement with us, such supplier could still delay, suspend or terminate supply of raw materials to us for a number of reasons, including manufacturing or quality issues, payment disputes with us, bankruptcy or insolvency, or other occurrences.

If a sole source supplier ceases supply of raw materials necessary there is no guarantee that we will find an alternative supplier for the necessary raw materials on terms acceptable to us, or at all. Further the qualification process for a new vendor could take months or even years, and any such day in qualification could significantly harm our business.

If we are unable to identify, hire and/or retain key personnel, we may not be able to sustain or grow our business.

Our ability to operate successfully and manage our potential future growth depends significantly upon our ability to attract, retain, and motivate highly skilled and qualified research, technical, clinical, regulatory, sales, marketing, managerial and financial personnel. We compete for talent with numerous companies, as well as universities and non-profit research organizations. In the future, we may hire a significant number of scientists, quality and regulatory personnel, and other technical staff with the requisite expertise to support and expand our Nanomedicine business. The manufacturing of our oncology drug assets is a highly complex process that requires significant experience and know-how. If we are unable to attract personnel with the necessary skills and experience to reestablish and expand our Nanomedicine business, which is currently conducted out of our San Antonio, Texas facility, our business could be harmed.

Our future success also depends on the personal efforts and abilities of the principal members of our senior management and scientific staff to provide strategic direction, manage our operations, and maintain a cohesive and stable environment. In particular, we are highly dependent on our executive officers, especially Marc Hedrick, M.D., our Chief Executive Officer. Given his leadership, extensive technical, scientific and financial expertise and management and operational experience, Dr. Hedrick would be difficult to replace. Consequently, the loss of services of Dr. Hedrick or any other executive officer could result in product development delays or the failure of our collaborations with current and future collaborators, which, in turn, may hurt our ability to develop and commercialize products and generate revenues. We have not entered into any employment agreements with our executive officers or key personnel, nor do we maintain key man life insurance on the lives of any of the members of our senior management. The loss of key personnel for any reason or our inability to hire, retain, and motivate additional qualified personnel in the future could prevent us from sustaining or growing our business.

Our restructuring activities may not be successful, and our restructuring activities may cause uncertainty regarding the future of our business and may adversely impact employee hiring and retention, our stock price and our results of operations and financial condition.

On July 1, 2019, we announced a corporate restructuring, including reducing combined staffing in our Texas and California facilities by 46% overall, reducing our office space in San Diego, California and streamlining and outsourcing our operations to better focus on our drug pipeline, and in particular DocePLUS, in order to extend our cash resources. As a result, we expect to incur a restructuring charge of approximately $0.1 million in connection with one-time employee termination costs, including severance and other benefits, which costs are expected to be incurred primarily in the third quarter of 2019. We are not yet able to make a determination of each other major type of cost associated with the restructuring. The estimates of costs that we expect to incur and the timing thereof are subject to a number of assumptions and actual results may differ from initial estimates.

Our ability to achieve the anticipated benefits, including the anticipated cost savings, of our restructuring activities within expected timeframes is subject to many estimates, assumptions and uncertainties. Additional restructuring or reorganization activities may also be required in the future, which could further increase the risks associated with these activities. There is no assurance that we will successfully implement, or fully realize the anticipated impact of, our restructuring or execute successfully on our restructuring plan, in the timeframes we desire or at all. If we fail to realize the anticipated benefits from these measures, or if we incur charges or costs in amounts that are greater than anticipated, our financial condition and operating results may be adversely affected. Additionally, our restructuring efforts, including a significant reduction in our employee headcount, may disrupt our staff and our business, and we may not be successful, or as successful, in advancing our existing Nanomedicine candidates, or in discovering or developing new Nanomedicine candidates as a result of lower staffing levels and potential reductions in our spending on these programs due to the restructuring.

The changes and potential changes to our operations and the workforce reduction measures as a result of the restructuring, may introduce uncertainty regarding our prospects and may result in disruption of our business. As a result of these actions, we incurred significant expenses and charges, including the approximately $570,000 charge incurred as a result of restructuring and cancelation of our San Diego headquarters lease announced on February 2018, and we may incur additional expenses and charges related to these actions. In addition, these changes and measures could distract our employees, decrease employee morale and make it more difficult to retain and hire new talent, and harm our reputation. These changes and activities caused our stock price to decline and may cause it to further decline in the future. As a result of these or other similar risks, our business, results of operations and financial condition may be adversely affected.

We face potential product liability exposure, and if successful claims are brought against us, we may incur substantial liability if our insurance coverage for those claims is inadequate.

The clinical use of our product candidates exposes us to the risk of product liability claims. This risk exists even if a product or product candidate is approved for commercial sale by applicable regulatory authorities and manufactured in facilities regulated by such authorities. Our product candidates are designed to affect important bodily functions and processes. Any side effects, manufacturing defects, misuse or abuse associated with our product candidates could result in injury to a patient or even death. For example, DoxoPLUS is cytotoxic, or toxic to living cells, and, if incorrectly or defectively manufactured or labeled, or incorrectly dosed or otherwise used in a manner not contemplated by its label, could result in patient harm and even death. In addition, a liability claim may be brought against us even if our product candidates merely appear to have caused an injury.

Product liability claims may be brought against us by consumers, health care providers, pharmaceutical companies or others selling or otherwise coming into contact with our products or product candidates, if approved, among others. If we cannot successfully defend ourselves against product liability claims, we will incur substantial liabilities. In addition, regardless of merit or eventual outcome, product liability claims may result in:

We have obtained product liability insurance coverage for clinical trials with a $10 million per occurrence and annual aggregate coverage limit. Our insurance coverage may not be sufficient to cover all of our product liability related expenses or losses and may not cover us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive, and, in the future, we may not be able to maintain insurance coverage at a reasonable cost, in sufficient amounts or upon adequate terms to protect us against losses due to product liability. If we determine that it is prudent to increase our product liability coverage, we may be unable to obtain this increased product liability insurance on commercially reasonable terms or at all. Large judgments have been awarded in class action or individual lawsuits based on drugs that had unanticipated side effects. A successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could decrease our cash and have a material adverse effect on our business, results of operations, financial condition and prospects.

Our success depends in part on our ability to protect our intellectual property. It is difficult and costly to protect our proprietary rights and technology, and we may not be able to ensure their protection.

Our success depends in part on our ability to obtain and maintain patent, trademark and trade secret protection of our platform technology and current product candidates, including but not limited to our Nanomedicine product candidates, including DoxoPLUS and DocePLUS, as well as successfully defending our intellectual property against third-party challenges. Our ability to stop unauthorized third parties from making using selling, offering to sell or importing our platform technology and/or our product candidates is dependent upon the extent to which we have rights under valid and enforceable patents or trade secrets that cover these activities.

The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage. For example:

The patent positions of pharmaceutical, biopharmaceutical and medical device companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. No consistent policy regarding the breadth of claims allowed in patents in these fields has emerged to date in the United States. There have been recent changes regarding how patent laws are interpreted, and both the U.S. Patent and Trademark Office, or the USPTO, and Congress have recently made significant changes to the patent system. There have been three U.S. Supreme Court decisions that now show a trend of the Supreme Court which is distinctly negative on patents. The trend of these decisions along with resulting changes in patentability requirements being implemented by the USPTO could make it increasingly difficult for us to obtain and maintain patents on our products. We cannot accurately predict future changes in the interpretation of patent laws or changes to patent laws which might be enacted into law. Those changes may materially affect our patents, our ability to obtain patents and/or the patents and applications of our collaborators and licensors. The patent situation in these fields outside the United States is even more uncertain. Changes in either the patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property or narrow the scope of our patent protection. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in the patents we own or to which we have a license or third-party patents.

Intellectual property law outside the United States is uncertain and in many countries is currently undergoing review and revisions. The laws of some countries do not protect our patent and other intellectual property rights to the same extent as United States laws. Third parties may attempt to oppose the issuance of patents to us in foreign countries by initiating opposition proceedings. Opposition proceedings against any of our patent filings in a foreign country could have an adverse effect on our corresponding patents that are issued or pending in the United States. It may be necessary or useful for us to participate in proceedings to determine the validity of our patents or our competitors’ patents that have been issued in countries other than the United States. This could result in substantial costs, divert our efforts and attention from other aspects of our business, and could have a material adverse effect on our results of operations and financial condition. We currently have pending patent applications in Europe, Australia, Japan, Canada, China, South Korea, Brazil, South Africa, among other jurisdictions.

Our intellectual property related to Nanomedicine was acquired from Azaya. As DoxoPLUS is a generic drug, we did not acquire any patents related to DoxoPLUS. We acquired two issued patents and one patent application related to DocePLUS from Azaya, and intend to file additional patent applications around our DocePLUS product candidate. There is no guaranty that any patent applications we file on DocePLUS will issue, or if issued, that we will be to use and enforce these patents as an effective component of our intellectual property strategy.

Failure to obtain or maintain patent protection or protect trade secrets, for any reason (or third-party claims against our patents, trade secrets, or proprietary rights, or our involvement in disputes over our patents, trade secrets, or proprietary rights, including involvement in litigation), could have a substantial negative effect on our results of operations and financial condition.

We could be delisted from Nasdaq, which could seriously harm the liquidity of our stock and our ability to raise capital.

Following notice from Nasdaq staff in June 2015 and December 2015, we had a hearing in January 2016 relating to our noncompliance with the $1.00 minimum bid price per share requirement. The Nasdaq Hearing Panel granted us until May 31, 2016 to come into compliance with the minimum bid price requirement, including requirements relating to obtaining stockholders approval of a reverse stock split that would bring our stock price above $1.00 per share for a minimum of 10 consecutive trading days. We transferred the listing of our common stock from the Nasdaq Global Market to the Nasdaq Capital Market in February 2016. In May 2016, we consummated a 1-for-15 reverse stock split pursuant to which the minimum bid price per share of our common stock rose above $1.00. Pursuant to a letter dated May 26, 2016, the Nasdaq staff delivered notice to us that we had regained compliance with Nasdaq’s minimum bid price rule.

On September 5, 2017, we received a written notice from Nasdaq staff indicating that, based upon the closing bid price of our common stock for the ~~last~~prior 30 consecutive business days, we no longer met the requirement to maintain a minimum bid price of $1$1.00 per share, as set forth in Nasdaq Listing Rule 5550(a)(2). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were provided a period of 180 calendar days, or until March 5, 2018, in which to regain compliance. We were granted an additional compliance period of 180 calendar days, or until September 4, 2018, in which to regain compliance after meeting the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exception of the bid price requirement, and providing notice to Nasdaq staff of our intent to cure the deficiency during this second compliance period, by

effecting a reverse stock split, if necessary. In May 2018, we consummated a 1-for-10 reverse stock split pursuant to which the minimum bid price of our common stock rose above $1.00. On June 8, 2018, we received written notice from Nasdaq that we had regained compliance with the Nasdaq Stock Market Listing Rule 5500(a)(2) concerning our minimum bid price per share of our common stock.

On August 28, 2018, we received a written notice from Nasdaq staff indicating that, based upon the closing bid price of our common stock for the ~~last~~prior 30 consecutive business days, we no longer meet the requirement to maintain a minimum bid price of $1$1.00 per share, as set forth in Nasdaq Listing Rule 5550(a)(2). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we ~~have been~~were provided aan initial period of 180 calendar days, or until February 25, 2019, in which to regain compliance. In order to regain compliance with the minimum bid price requirement, the closing bid price of our common stock must have been at least $1 per share for a minimum of ten consecutive business days during the 180-day period. ~~In the event we do not regain compliance within this 180-day period, we may be eligible to seek~~We were also granted an additional compliance period of 180 calendar days, ~~if we meet~~or until August 26, 2019, in which to regain compliance after meeting the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exception of the bid price requirement, ~~if we provide written~~and providing notice to Nasdaq staff of our intent to cure the deficiency during this second compliance period, by effecting a reverse stock split, if necessary. In order to regain compliance with the minimum bid price requirement, the closing bid price of our common stock must have been at least $1.00 per share for a minimum of 10 consecutive business days during the 180-day period. In August 2019, we consummated a 1-for-50 reverse stock split pursuant to which the minimum bid price of our common stock rose above $1.00. If the closing bid price of our common stock remains above $1.00 per share, we expect to regain compliance with the minimum bid price requirement on August 19, 2019. However, based on our stockholders’ deficit of $6.3 million as of June 30, 2019, we will not meet the minimum stockholders’ equity requirement for continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(b)(1), which requires listed companies to maintain stockholders’ equity of at least $2.5 million, and we expect to receive written notice from Nasdaq staff to that effect following the filing of this Quarterly Report on Form 10-Q. In addition, as of June 30, 2019, we do not meet the alternative compliance standards relating to the market value of listed securities or net income from continuing operations. We intend to evaluate various courses of action to regain compliance with Nasdaq Listing Rule 5550(b)(1) within the compliance period specified by Nasdaq. However, there can be no assurance that we will be able to regain compliance within such compliance period.

Absence of a public trading market for our Series S warrants may limit the ability to resell the Series S warrants.

Our Series S warrants, or ~~issuance of our common stock to Lincoln Park may cause dilution and~~PSTVZ Warrants, are listed for trading on Nasdaq under the ~~sale of~~symbol “PSTVZ,” but there can be no assurance that a robust market will exist for the ~~shares of common stock acquired by Lincoln Park, or~~PSTVZ Warrants. Even if a market for the ~~perception that such sales may occur, could cause~~PSTVZ Warrants does develop, the price of the PSTVZ Warrants may fluctuate and liquidity may be limited. If the PSTVZ Warrants cease to be eligible for continued listing on Nasdaq, or if the market for the PSTVZ Warrants does not fully develop (or subsequently weakens), then holders of the PSTVZ Warrants may be unable to resell the PSTVZ Warrants or sell them only at an unfavorable price for an extended period of time, if at all. Future trading prices of the PSTVZ Warrants will depend on many factors, including:

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.

~~DELAWARE~~Delaware		33-0827593
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

~~3020 CALLAN ROAD, SAN DIEGO, CALIFORNIA~~4200 MARATHON BLVD., SUITE 200, AUSTIN, TX		~~92121~~78756
(Address of principal executive offices)		(Zip Code)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001	PSTV	Nasdaq Capital Market
Series S Warrant	PSTVZ	Nasdaq Capital Market

			Page
PART I	~~FINANCIAL INFORMATION~~

	Item 1.	~~Financial Statements (Unaudited)~~ ~~(Unaudited)~~	3

		~~Consolidated Condensed Balance Sheets~~	3

		~~Consolidated Condensed Statements of~~ ~~Operations and Comprehensive Loss~~	4

		~~Consolidated Condensed Statements of ~~Cash Flows~~Stockholders’ Equity~~ (~~Deficit)~~	5

		~~Consolidated Condensed Statements of Cash Flows~~	6

		~~Notes to Consolidated Condensed~~ ~~Financial Statements~~	67

	Item 2.	~~Management’s Discussion and~~ ~~Analysis of Financial Condition and Results of Operations~~	1518

	Item 3.	~~Quantitative and~~ ~~Qualitative Disclosures~~ ~~about Market Risk~~	2325

	Item 4.	~~Controls and Procedures~~	2325

PART II	~~OTHER INFORMATION~~

	Item 1.	~~Legal Proceedings~~	2425

	Item 1A.	~~Risk Factors~~	2425

	Item 2.	~~Unregistered~~ ~~Sales of Equity Securities and Use of Proceeds~~	2738

	Item 3.	~~Defaults Upon Senior Securities~~	2739

	Item 4.	~~Mine Safety Disclosures~~	2739

	Item 5.	~~Other Information~~	2739

	Item 6.	~~Exhibits~~	2840

	September 30, 2018		December 31, 2017
Raw materials	$	698	$	681
Work in process		418		722
Finished goods		1,698		1,780
	$	2,814	$	3,183


Consideration received	$	7,000
Transaction costs	(1,161		)
Net cash proceeds	5,839
Less:
Carrying value of business and assets sold	12,145
Net loss on sale of business	$	6,306

Large Accelerated Filer	☐	Accelerated Filer	☐
Non-Accelerated Filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

	Three months ended				Nine months ended
	September 30, 2018		September 30, 2017		September 30, 2018		September 30, 2017
Consumable	$	692	$	389	$	1,845	$	1,338
Device		101		25		194		551
Other products		65		53		210		138
	$	858	$	467	$	2,249	$	2,027

	Three months ended June 30,						Six months ended June 30,
	2019			2018				2019			2018
Product revenue	$	197		$	660		$	901		$	1,391
Costs of revenue		199			630			857			1,209
Gross profit		(2	)		30			44			182
Operating expenses:
Research and development		237			684			656			1,790
Sales and marketing		97			340			411			723
General and administrative		39			176			185			413
Total operating expenses		373			1,200			1,252			2,926
Operating loss		(375	)		(1,170	)		(1,208	)		(2,744	)
Other income (expense)		(5	)		(204	)		142			148
Loss from discontinued operations	$	(380	)	$	(1,374	)	$	(1,066	)	$	(2,596	)

	For the six months ended June 30
	2019		2018
Depreciation and amortization	$	467	$	790
Provision for excess inventory	$	—	$	398
Loss on asset disposal	$	—	$	20

	June 30, 2019
Assets
Operating	$	905
Financing		181
Total leased assets	$	1,086

Liabilities
Current:
Operating	$	157
Financing		127
Noncurrent:
Operating	$	748
Financing		54
Total lease liabilities	$	1,086

Weighted-average remaining lease term (years) - operating leases	7.20
Weighted-average remaining lease term (years) - finance leases	1.59
Weighted-average discount rate - operating leases	7.97	%
Weighted-average discount rate - finance leases	5.00	%

	Three months ended June 30, 2019		Six months ended June 30, 2019
Lease expense:
Operating lease expense	$	55	$	109
Finance lease expense:
Depreciation of right-of-use assets		28		56
Interest expense on lease liabilities		6		12
Total lease expense	$	89	$	177

Cash payment information:
Operating cash used for operating leases	$	55	$	109
Financing cash used for financing leases		20		28
Total cash paid for amounts included in the measurement of lease liabilities	$	75	$	137

	Financing			Operating
	Leases			Leases
Remaining 2019	$	67		$	109
2020		120			205
2021		7			183
2022		—			123
2023		—			100
Thereafter		—			447
Total minimum lease payments	$	194		$	1,167
Less: amount representing interest		(13	)		(262	)
Present value of obligations under leases		181			905
Less: current portion		(127	)		(157	)
Noncurrent lease obligations	$	54		$	748


	~~CYTORI THERAPEUTICS, INC.~~

Exhibit Number	Exhibit Title	Filed with this Form 10-Q	Incorporated by Reference
Exhibit Number	Exhibit Title	Filed with this Form 10-Q	Form	File No.	Date Filed

2.1	~~Asset and Share Sale and Purchase Agreement, dated as of April 19,~~ ~~2019, by and between Cytori Therapeutics, Inc. and Seijirō Shirahama.~~⁽¹⁾		8-K	001-34375 Exhibit 2.1	04/23/2019

3.1	~~Composite Certificate of~~ ~~Incorporation.~~		10-K	001-34375 Exhibit 3.1	03/11/2016

3.2	~~Certificate of Amendment to Amended and Restated ~~Bylaws~~Certificate of ~~Cytori Therapeutics, Inc.~~Incorporation, as~~ ~~amended.~~		~~10-Q~~8-K	~~000-32501~~001-34375 Exhibit ~~3.2~~3.1	~~08/14/2003~~07/29/2019

3.3	~~Certificate of Amendment to Amended and Restated ~~Bylaws~~Certificate of ~~Cytori Therapeutics, Inc.~~Incorporation, as amended.~~		8-K	001-34375 Exhibit 3.1	~~05/~~08/06/~~2014~~2019

3.4	~~Amended and Restated Bylaws of Cytori Plus Therapeutics, Inc.~~		8-K	001-34375 Exhibit 3.2	07/29/2019

3.5	~~Certificate of Designation of Preferences, Rights and Limitations of Series A 3.6% Convertible Preferred Stock~~		8-K	001-34375 Exhibit 3.1	10/08/2014

~~3.5~~ 3.6	~~Certificate of Amendment to Amended and Restated Certificate of Incorporation, as amended~~		8-K	001-34375 Exhibit 3.1	05/10/2016

~~3.6~~ 3.7	~~Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock~~		8-K	001-34375 Exhibit 3.1	11/28/2017

~~3.7~~ 3.8	~~Certificate of Amendment to Amended and Restated Certificate of Incorporation, as amended~~		8-K	001-34375 Exhibit 3.1	05/23/2018

~~3.8~~ 3.9	~~Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock~~		8-K	001-34375 Exhibit 3.1	07/25/2018

~~4.1~~	~~Form of Series T Warrant~~		~~POS AM~~	~~333-224502~~ ~~Exhibit 4.28~~	~~07/09/2018~~

~~4.2~~	~~Form of Non-Transferable Subscription Rights Certificate~~		~~POS AM~~	~~333-224502~~ ~~Exhibit 4.35~~	~~07/09/2018~~

~~4.3~~	~~Form of Series T Warrant Agent Agreement between Cytori Therapeutics, Inc. and Broadridge Corporate Issuer Solutions, Inc.~~		~~POS AM~~	~~333-224502~~ ~~Exhibit 4.36~~	~~07/09/2018~~

10.1	~~~~Third~~Seventh Amendment to Loan and Security Agreement, ~~dated August 31, 2018,~~effective as of April 24, 2019, by and between Cytori Therapeutics, Inc. and Oxford Finance,~~ ~~LLC~~		~~S-1~~	~~333-227485~~ ~~Exhibit 10.51~~	~~09/21/2018~~

~~10.2~~	~~Purchase Agreement between Cytori Therapeutics, Inc. and Lincoln Park Capital Fund, LLC, dated~~ ~~September 21, 2018.~~		~~8-K~~	~~001-34375~~ ~~Exhibit 10.1~~	~~09/21/2018~~

~~10.3~~	~~Registration Rights Agreement between Cytori Therapeutics, Inc. and Lincoln Park~~ ~~Capital Fund, LLC, dated September 21, 2018.~~		~~8-K~~	~~001-34375~~ ~~Exhibit 10.2~~	~~09/21/2018~~

~~31.1~~	~~Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rule 13a-14(a), as adopted pursuant to Section~~ ~~302 of the Sarbanes-Oxley Act of 2002~~	X

~~31.2~~10.2	~~Eighth Amendment to Loan and~~ ~~Security Agreement, effective as of July 15, 2019, by and between Plus Therapeutics, Inc. and Oxford Finance, LLC~~	X

10.3	~~2014 Equity Incentive Plan of Plus Therapeutics, Inc., as Amended and Restated~~	X

31.1	~~Certification of Principal ~~Financial~~Executive Officer and ~~Accounting~~Principal Financial Officer Pursuant to Securities Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the~~ ~~Sarbanes-Oxley Act of 2002~~	X

32.1*	~~~~Certifications~~Certification Pursuant to 18 U.S.C. Section 1350/ Securities Exchange Act Rule 13a-14(b), as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002~~	X

101.INS	XBRL Instance Document

101.SCH	XBRL Schema Document

101.CAL	XBRL Calculation Linkbase Document

101.DEF	XBRL Definition Linkbase Document


101.LAB	XBRL Label Linkbase Document

101.PRE	XBRL Presentation Linkbase Document

	~~CYTORI~~PLUS THERAPEUTICS, INC.

	By:	/s/ Marc H. Hedrick
Dated: ~~November 14, 2018~~August 15, 2019		Marc H. Hedrick
		President & Chief Executive Officer

	~~By:~~	~~/s/ Tiago Girao~~
~~Dated: November 14, 2018~~		~~Tiago Girao~~
		~~VP of Finance~~(principal executive and ~~Chief Financial Officer~~financial officer)