Imunon(IMNN) - 2020 Q1 - Quarterly Report

PART I: FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Celsion Corporation's unaudited condensed consolidated financial statements for Q1 2020 show a net loss of $5.1 million, an increase from $2.4 million in the prior year - The company recorded a net loss of $5.1 million in Q1 2020, an increase from $2.4 million in Q1 2019[21][184] Condensed Consolidated Balance Sheet Summary | Indicator | March 31, 2020 (Unaudited) | December 31, 2019 | | :------------------- | :----------------------- | :------------------- | | Assets: | | | | Cash and cash equivalents | $5,746,184 | $6,875,273 | | Investment in debt securities - available for sale | $9,887,455 | $7,985,886 | | Receivable from sale of net operating losses | $1,819,324 | $0 | | Total current assets | $18,876,700 | $16,235,198 | | Total assets | $38,936,624 | $38,278,367 | | Liabilities and Stockholders' Equity: | | | | Total current liabilities | $7,430,184 | $7,894,457 | | Earn-out milestone liability | $5,758,983 | $5,717,709 | | Total liabilities | $22,728,088 | $23,719,332 | | Total stockholders' equity | $16,208,536 | $14,559,035 | Condensed Consolidated Statements of Operations Summary (Three Months Ended) | Indicator | March 31, 2020 | March 31, 2019 | | :------------------- | :------------- | :------------- | | Technology development and licensing revenue | $125,000 | $125,000 | | Research and development expenses | $3,052,049 | $2,767,659 | | General and administrative expenses | $1,838,906 | $2,217,864 | | Total operating expenses | $4,890,995 | $4,985,523 | | Operating loss | $(4,765,955) | $(4,860,523) | | Change in fair value of earn-out milestone liability (loss) gain | $(41,274) | $3,130,000 | | Net loss | $(5,056,878) | $(2,367,452) | | Basic and diluted net loss per common share | $(0.20) | $(0.12) | | Weighted-average common shares outstanding | 25,804,349 | 19,104,785 | Condensed Consolidated Statements of Cash Flows Summary (Three Months Ended) | Indicator | March 31, 2020 | March 31, 2019 | | :------------------- | :------------- | :------------- | | Net cash used in operating activities | $(4,975,067) | $(5,535,858) | | Net cash used in investing activities | $(1,948,769) | $(5,996,980) | | Net cash provided by financing activities | $5,794,747 | $1,754,885 | | Decrease in cash and cash equivalents | $(1,129,089) | $(9,777,953) | | Cash and cash equivalents at end of period | $5,746,184 | $3,575,590 | Condensed Consolidated Balance Sheets Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Comprehensive Loss Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Changes in Stockholders' Equity Notes to the Condensed Consolidated Financial Statements These notes detail the company's business, accounting policies, financial condition, new accounting standards, and various financial instruments, highlighting ongoing operating losses and future financing needs for R&D and commercialization - The company has accumulated net losses of approximately $296 million since inception, with cash, investment securities, and receivables totaling approximately $17.5 million as of March 31, 2020[43][215] - Operating losses are expected to continue, requiring substantial additional capital to fund R&D activities and advance product candidates[44][216] - The COVID-19 pandemic may significantly impact the company's future financial condition, operating results, and cash flows, potentially disrupting clinical trial progress and patient enrollment[45][47][166] Note 1. Business Description Celsion Corporation is a clinical-stage oncology company developing ThermoDox and GEN-1, aiming for more efficient and targeted cancer therapies - Celsion Corporation is a clinical-stage oncology company focused on developing product candidates including ThermoDox (for primary liver cancer in Phase III trials) and GEN-1 (a DNA-mediated immunotherapy for ovarian cancer)[38] - The company utilizes two platform technologies, Lysolipid Thermally Sensitive Liposomes and TheraPlas (novel nucleic acid therapeutics), to develop highly efficient and targeted oncology treatments[38] Note 2. Basis of Presentation The condensed consolidated financial statements are prepared in accordance with GAAP and SEC regulations, with management monitoring COVID-19's impact on financial condition and asset valuations - Financial statements are prepared in accordance with GAAP and Form 10-Q instructions, with all significant intercompany balances and transactions eliminated[39] - Management is monitoring the potential impact of the COVID-19 pandemic on the company's financial condition, operating results, and the valuation of long-lived assets, intangible assets, and goodwill[41] Note 3. Financial Condition and Business Plan The company has incurred significant operating losses since inception, with accumulated net losses of approximately $296 million and $17.5 million in cash and investments as of March 31, 2020, anticipating further losses and additional funding needs, potentially impacted by COVID-19 - As of March 31, 2020, the company had accumulated net losses of approximately $296 million, with cash, investment securities, interest receivable, and receivables from the sale of New Jersey net operating losses totaling approximately $17.5 million[43][52] - Operating losses are expected to continue, with profitability dependent on successful government approvals, manufacturing, and sales of new product candidates[44] - The COVID-19 pandemic may adversely affect the company's ability to raise additional capital and impact clinical trial progress and patient enrollment[46][47] Note 4. New Accounting Pronouncements The company is evaluating the impact of new accounting pronouncements, including ASU 2016-13 and ASU 2019-12, while ASU 2018-13 adoption had no financial statement impact - The company will adopt ASU 2016-13 in Q1 2021, with no significant impact expected on the condensed consolidated financial statements[55] - The adoption of ASU 2018-13 had no impact on the company's condensed consolidated financial statements[56] - The company is evaluating the impact of adopting ASU 2019-12 (Income Taxes) on the condensed consolidated financial statements[57] Note 5. Net Loss per Common Share Basic and diluted loss per share are calculated by dividing net loss by weighted-average shares outstanding, with diluted loss per share being identical to basic due to anti-dilutive potential common shares Net Loss per Common Share (Three Months Ended) | Indicator | March 31, 2020 | March 31, 2019 | | :------------------- | :------------- | :------------- | | Basic and diluted net loss per share | $(0.20) | $(0.12) | | Weighted-average common shares outstanding | 25,804,349 | 19,104,785 | - Diluted net loss per share is the same as basic net loss per share due to the anti-dilutive effect of other warrants and equity awards[59] Note 6. Investment in Debt Securities Available for Sale As of March 31, 2020, the company held available-for-sale debt securities with a fair value of $9,887,455, measured at fair value with unrealized gains/losses reported in equity Investment in Debt Securities Available for Sale (Fair Value) | Date | Fair Value | | :------------- | :------------- | | March 31, 2020 | $9,887,455 | | December 31, 2019 | $7,985,886 | Net Investment Income (Three Months Ended) | Indicator | March 31, 2020 | March 31, 2019 | | :------------- | :------------- | :------------- | | Interest and dividends | $45,077 | $104,410 | | Realized gains | $43,232 | $9,381 | | Net investment income | $88,309 | $113,791 | Note 7. Fair Value Measurements The company uses a three-level fair value hierarchy under FASB ASC Section 820, classifying available-for-sale securities as Level 2 and earn-out milestone liabilities and IPR&D as Level 3 - The company classifies available-for-sale securities as Level 2 fair value measurements, while earn-out milestone liabilities and in-process research and development (IPR&D) are classified as Level 3[67] Summary of Assets and Liabilities by Fair Value Hierarchy | Item | Total Fair Value March 31, 2020 | Total Fair Value December 31, 2019 | | :--------------------------------- | :----------------------- | :------------------- | | Assets: | | | | Corporate debt securities, available for sale (Level 2) | $9,887,455 | $7,985,886 | | Liabilities: | | | | Earn-out milestone liability (Level 3) | $5,758,983 | $5,717,709 | Note 8. Intangible Assets Intangible assets primarily comprise IPR&D and goodwill from the EGEN Inc. acquisition, including ovarian cancer and GBM candidates, with the GBM candidate having a $7 million accumulated impairment, and non-compete agreements being amortized - In-process research and development (IPR&D) acquired from EGEN Inc. was initially valued at $24.2 million, including $13.3 million for ovarian cancer indication and $9.4 million for a glioblastoma multiforme (GBM) candidate[70] - The GBM candidate had an accumulated impairment of $7 million as of 2018, with a remaining carrying value of $2.4 million as of March 31, 2020, and December 31, 2019[72] Summary of Intangible Assets Net Fair Value (March 31, 2020) | Item | Net Balance March 31, 2020 | Net Balance January 1, 2020 | | :------------------- | :------------------- | :------------------- | | In-process research and development (IPR&D) | $15,736,491 | $15,736,491 | | Goodwill | $1,976,101 | $1,976,101 | | Non-compete agreement | $284,147 | $340,976 | Note 9. Accrued Liabilities Other accrued liabilities primarily consist of amounts due to contract research organizations, accrued salaries and benefits, and accrued professional fees Summary of Other Accrued Liabilities | Item | March 31, 2020 | December 31, 2019 | | :--------------------------------- | :------------- | :------------- | | Amounts due to contract research organizations and other contractual agreements | $305,000 | $475,440 | | Accrued salaries and related benefits | $924,659 | $1,604,541 | | Accrued professional fees | $150,000 | $204,155 | | Other | $19,411 | $19,411 | | Total | $1,399,070 | $2,303,547 | Note 10. Note Payable The company entered into a $10 million credit agreement with Horizon Technology Finance Corporation, subsequently agreeing in May 2020 to defer two principal payments totaling $833,333 due in August and September 2020 - The company entered into a $10 million credit agreement with Horizon Technology Finance Corporation and, on May 13, 2020, agreed to defer two principal payments totaling $833,333 due in August and September 2020[51][82][170][174] Horizon Credit Agreement Future Principal Payment Schedule (as of March 31, 2020) | Year | Amount | | :------------------- | :------------- | | 2020 | $2,500,000 | | 2021 | $4,583,333 | | 2022 | $2,916,667 | | 2023 and thereafter | $0 | | Subtotal future principal payments | $10,000,000 | | Net unamortized debt issuance costs | $(100,257) | | Total | $9,899,743 | Note 11. Stockholders' Equity The company raised capital through various equity financing instruments, including a common stock purchase agreement with Aspire Capital Fund, LLC and an at-the-market offering with JonesTrading Institutional Services LLC, completing a registered direct offering of 4.57 million common shares for approximately $4.8 million in February 2020 - In Q1 2020, the company sold 1 million shares of common stock through a common stock purchase agreement with Aspire Capital Fund, LLC, generating approximately $1.6 million in gross proceeds[85][176] - On February 27, 2020, the company completed a registered direct offering of 4,571,428 shares of common stock at $1.05 per share, generating approximately $4.8 million in gross proceeds[88][175] - As part of the registered direct offering, the company issued new warrants to investors to purchase 3,200,000 shares of common stock at an exercise price of $1.24 per share[88][175] Note 12. Stock-Based Compensation The company grants stock options and restricted stock to employees and directors under its 2018 Equity Incentive Plan, with $1.2 million in unrecognized stock-based compensation cost as of March 31, 2020, expected to be recognized over a weighted-average period of 0.9 years - As of March 31, 2020, 4,151,038 shares of Celsion common stock were reserved for issuance under equity awards from the 2018 and 2007 plans[96] Stock-Based Compensation Cost (Three Months Ended) | Indicator | March 31, 2020 | March 31, 2019 | | :------------------- | :------------- | :------------- | | Total stock-based compensation cost | $451,965 | $691,145 | | Charged to research and development expenses | $177,936 | $240,387 | | Charged to general and administrative expenses | $274,029 | $450,758 | - As of March 31, 2020, total unrecognized stock-based compensation cost was $1.2 million, expected to be recognized over a weighted-average period of 0.9 years[98] Note 13. Earn-out Milestone Liability As of March 31, 2020, the earn-out milestone liability had a fair value of $5.8 million, with the company recognizing $0.1 million in non-cash expense, valued based on risk-adjusted probabilities of 80% for a $7 million payment and 20% for a $12.4 million payment Earn-out Milestone Liability Fair Value | Date | Fair Value | | :------------- | :------------- | | March 31, 2020 | $5,758,983 | | December 31, 2019 | $5,717,709 | | March 31, 2019 | $5,800,000 | | December 31, 2018 | $8,900,000 | - The company recognized a non-cash loss of $41,274 in Q1 2020 due to changes in the fair value of the earn-out milestone liability[101][103][193] - The liability's valuation is based on assigning 80% probability to a $7 million payment and 20% probability to a $12.4 million payment option[101][102][193][194] Note 14. Warrants As of March 31, 2020, the company had 3,826,098 warrants outstanding with a weighted-average exercise price of $1.34, including 200,000 warrants issued to EGWU, Inc. at a $0.01 exercise price with no expiration date Summary of Warrant Activity (as of March 31, 2020) | Indicator | Number of Warrants | Weighted-Average Exercise Price | | :--------------------------------- | :------------- | :------------- | | Warrants outstanding December 31, 2019 | 626,098 | $1.87 | | Warrants issued Q1 2020 | 3,200,000 | $1.24 | | Warrants outstanding March 31, 2020 | 3,826,098 | $1.34 | - 200,000 warrants issued to EGWU, Inc. have an exercise price of $0.01 and no expiration date[105] Note 15. Leases The company leases office and R&D facilities, recognizing right-of-use assets and lease liabilities on its consolidated balance sheet since adopting ASC Topic 842 on January 1, 2019, with total lease liabilities of $1,438,914 and a weighted-average remaining lease term of 3.2 years as of March 31, 2020 - The company adopted ASC Topic 842 on January 1, 2019, resulting in the recognition of right-of-use assets and lease liabilities on the consolidated balance sheets[108] Operating Lease Liabilities and Maturities (as of March 31, 2020) | Year | Lease Payment Amount | | :------------------- | :------------- | | Remainder of 2020 | $395,178 | | 2021 | $530,734 | | 2022 | $535,579 | | 2023 | $233,117 | | 2024 and thereafter | $0 | | Subtotal future lease payments | $1,694,608 | | Less estimated interest | $(255,694) | | Total lease liabilities | $1,438,914 | | Weighted-average remaining term | 3.2 years | | Weighted-average discount rate | 9.98% | - Operating lease expense for Q1 2020 was $130,595, with cash paid for operating leases in operating cash flow totaling $130,631[110] Note 16. Technology Development and Licensing Agreements The company has technology development, manufacturing, and commercial supply agreements with Zhejiang Hisun Pharmaceutical Co., Ltd. (Hisun) for ThermoDox and GEN-1, with Hisun's $5 million non-refundable R&D payment recognized as deferred revenue and amortized over 10 years - The company has a long-term commercial supply agreement with Hisun for ThermoDox, with Hisun responsible for manufacturing and regulatory support[111] - Hisun's $5 million non-refundable R&D payment is recorded as deferred revenue and amortized over 10 years, recognizing $125,000 in revenue quarterly[112][116][187] - The company also has technology transfer, manufacturing, and commercial supply agreements with Hisun for GEN-1 to support clinical studies and future supply in the US and China[115][118][161] Note 17. Commitments and Contingencies The company faces a shareholder derivative and class action lawsuit alleging breaches of fiduciary duty by directors and officers regarding the 2018 Equity Incentive Plan's shareholder approval, with the outcome currently uncertain - The company is subject to a shareholder derivative and class action lawsuit alleging breaches of fiduciary duty by directors and officers in connection with the shareholder approval of the 2018 Equity Incentive Plan[119][208] - The lawsuit seeks damages, invalidation of the 2018 Equity Incentive Plan, and disgorgement of equity awards granted[208] Note 18. Subsequent Events Subsequent events include the April 2020 sale of New Jersey net operating losses for $1.8 million and the May 2020 return of a $632,220 Paycheck Protection Program (PPP) loan - In April 2020, the company completed the sale of New Jersey net operating losses, receiving $1.8 million in net proceeds[120][168][172] - The company received a $632,220 loan under the Paycheck Protection Program (PPP) on April 23, 2020, but fully repaid it on May 13, 2020, out of an abundance of caution[121][173] - The company and Horizon agreed to defer two principal payments totaling $833,333 due in August and September 2020[122][170][174] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section discusses the company's financial condition and operating results as of March 31, 2020, focusing on R&D progress, financial performance, liquidity, and future capital needs, highlighting ongoing operating losses and financing challenges, particularly amid the COVID-19 pandemic - The company reported a net loss of $5.1 million in Q1 2020, an increase from $2.4 million in Q1 2019[184] - As of March 31, 2020, the company held $17.5 million in cash, investments, and receivables, projected to fund operations through mid-2021[171][185] - The COVID-19 pandemic may adversely affect the company's ability to raise additional capital and impact clinical trial progress and patient enrollment[165][166] Strategic and Clinical Overview Celsion Corporation, a clinical-stage oncology company, focuses on ThermoDox for primary liver cancer (Phase III OPTIMA study) and GEN-1 for ovarian cancer (OVATION 2 study), with OPTIMA's second interim efficacy analysis expected in Q2 2020 and GEN-1 showing positive early clinical data and EU orphan drug designation - ThermoDox is undergoing a Phase III OPTIMA study for primary liver cancer, with 556 patients enrolled by August 2018[133] - The second interim efficacy analysis for the OPTIMA study is anticipated in Q2 2020, requiring a hazard ratio of 0.70 for success[140] - GEN-1's Phase I/II OVATION 2 study demonstrated positive early clinical data, with an 82% R0 resection rate in the high-dose cohort, and received EU orphan drug designation[155][156][158] ThermoDox® GEN-1 TheraPlas Technology Platform Technology Development and Licensing Agreements Business Plan As a clinical-stage biopharmaceutical company, the company faces ongoing operating losses and substantial future capital needs for R&D and commercialization, with COVID-19 potentially impacting financing and clinical trials, but existing capital is projected to support operations through mid-2021 through net operating loss sales and equity financing - The company has incurred significant operating losses since inception, with accumulated net losses of approximately $296 million as of March 31, 2020[164] - The COVID-19 pandemic may adversely affect the company's ability to raise additional capital and impact clinical trial progress and patient enrollment[165][166] - The company has secured funding through the sale of New Jersey net operating losses and anticipates existing capital resources will support operations through mid-2021[168][171] Financing Overview The company raises capital through equity offerings, debt financing, and net operating loss sales, securing approximately $6.4 million in Q1 2020 via a registered direct offering and Aspire Capital agreement, and deferring some principal payments on its $10 million credit agreement with Horizon in May 2020 - In April 2020, the company completed the sale of New Jersey net operating losses, generating $1.8 million in net proceeds[172] - In February 2020, the company issued approximately 5.6 million shares of common stock through a registered direct offering and Aspire Capital agreement, generating approximately $6.4 million in gross proceeds[175][176] - The company fully repaid a $632,220 loan received under the Paycheck Protection Program (PPP) on May 13, 2020[173] Significant Accounting Policies The company is evaluating the impact of new accounting pronouncements, including ASU 2016-13 and ASU 2019-12, while ASU 2018-13 adoption had no financial statement impact - The company will adopt ASU 2016-13 in Q1 2021, with no significant impact expected on the consolidated financial statements[179] - The adoption of ASU 2018-13 had no impact on the company's financial statements[180] - The company is evaluating the impact of adopting ASU 2019-12 (Income Taxes) on the consolidated financial statements[181] Financial Review for the Three Months Ended March 31, 2020 and 2019 The company's Q1 2020 net loss expanded to $5.1 million from $2.4 million in Q1 2019, with R&D expenses increasing 10.3% to $3.1 million due to OVATION 2 study costs, and G&A expenses decreasing 17.0% to $1.8 million from reduced personnel and professional fees Summary of Operating Results (Three Months Ended) | Indicator | 2020 (in thousands) | 2019 (in thousands) | Change (Inc/Dec) | Percentage Change | | :--------------------------------- | :------------- | :------------- | :------------- | :------------- | | Licensing revenue | $125 | $125 | $0 | 0% | | Research and development expenses | $3,052 | $2,768 | $284 | 10.3% | | General and administrative expenses | $1,839 | $2,218 | $(379) | (17.0)% | | Total operating expenses | $4,891 | $4,986 | $(95) | (4.2)% | | Operating loss | $(4,766) | $(4,861) | $(95) | 1.9% | - R&D expenses increased by $0.3 million to $3.1 million, primarily due to increased costs for the OVATION 2 study[188] - General and administrative expenses decreased by $0.4 million to $1.8 million, primarily attributable to lower personnel costs (including non-cash stock-based compensation expense) and professional fees[190] Licensing Revenue Research and Development Expenses General and Administrative Expenses Change in Earn-out Milestone Liability and Warrant Expense Investment income and interest expense Financial Condition, Liquidity and Capital Resources The company has incurred continuous losses since inception, with an accumulated deficit of $296 million as of March 31, 2020, holding $11.5 million in net working capital, and anticipates needing additional capital through equity, debt, strategic alliances, or net operating loss sales to fund future R&D and commercialization - As of March 31, 2020, the company had an accumulated deficit of $296 million[197] Summary of Working Capital | Indicator | March 31, 2020 | December 31, 2019 | | :------------------- | :------------- | :------------- | | Total current assets | $18.9 million | $16.2 million | | Total current liabilities | $7.4 million | $7.9 million | | Net working capital | $11.5 million | $8.3 million | - The company expects to seek additional capital through equity offerings, debt financing, strategic alliances and licensing agreements, and the sale of net operating losses[200] Off-Balance Sheet Arrangements and Contractual Obligations The company currently has no off-balance sheet arrangements or contractual obligations - The company currently has no off-balance sheet arrangements or contractual obligations[202] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company's investment objectives are capital preservation and maximizing returns without significant risk, managing cash flow and earnings exposure to interest rate changes by maintaining a diversified investment portfolio across issuers, types, and maturities - The company's primary investment objectives are capital preservation and maximizing investment income without significantly increasing risk[203] - The company's cash flows and earnings are exposed to changes in interest rates on its investment portfolio, with risk managed by maintaining a diversified portfolio of issuers, types, and maturities[203] Item 4. Controls and Procedures As of March 31, 2020, management, including the CEO and CFO, assessed and concluded the company's disclosure controls and procedures were effective, with no significant changes to internal controls during the period, acknowledging inherent limitations in preventing all errors and fraud - As of March 31, 2020, the company's disclosure controls and procedures were deemed effective[204] - No significant changes in internal controls occurred during the reporting period[205] - Management acknowledges the inherent limitations of control systems, which cannot provide absolute assurance against all errors and fraud[206] PART II: OTHER INFORMATION Item 1. Legal Proceedings The company faces a shareholder derivative and class action lawsuit alleging breaches of fiduciary duty by directors and officers regarding the 2018 Equity Incentive Plan's shareholder approval, with the outcome currently uncertain - The company is subject to a shareholder derivative and class action lawsuit alleging breaches of fiduciary duty by directors and officers in connection with the shareholder approval of the 2018 Equity Incentive Plan[208] - The lawsuit seeks damages, invalidation of the 2018 Equity Incentive Plan, and disgorgement of equity awards granted[208] Item 1A. Risk Factors This section details significant risks, including ongoing operating losses, product development failures, financing needs, regulatory uncertainties, COVID-19 impacts, intellectual property risks, reliance on third-party collaborations, market competition, and product liability, which could materially adversely affect the company's business, financial condition, and operating results - The company has incurred significant operating losses since inception, with an accumulated deficit of $296 million as of March 31, 2020, and expects to continue incurring losses in the future[210][215] - Drug development is a lengthy, expensive, and highly uncertain process, with ThermoDox failing to meet its primary endpoint in an earlier Phase III clinical trial, highlighting the risk of product development failure[213][214] - The COVID-19 pandemic may adversely affect the company's clinical trials, supply chain, financing capabilities, and overall business operations, including delays in patient enrollment and disruptions in regulatory approvals[225][226] RISKS RELATED TO OUR BUSINESS RISKS RELATED TO OUR SECURITIES Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds during this reporting period - There were no unregistered sales of equity securities or use of proceeds during this reporting period[312] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities during this reporting period - There were no defaults upon senior securities during this reporting period[312] Item 4. Mine Safety Disclosures This disclosure is not applicable - This disclosure is not applicable[313] Item 5. Other Information There were no other information disclosures during this reporting period - There were no other information disclosures during this reporting period[314] Item 6. Exhibits This section lists exhibits filed with the report, including common stock purchase warrants, CEO and CFO certifications, and financial information in XBRL format - Exhibits include common stock purchase warrants, CEO and CFO certifications, and financial information in XBRL format[316] SIGNATURES