NightHawk Biosciences(NHWK) - 2020 Q1 - Quarterly Report

PART I—FINANCIAL INFORMATION Item 1. Financial Statements Heat Biologics reported $0.9 million grant revenue and a $6.3 million net loss for Q1 2020, with cash and investments rising to $26.4 million from financing activities Consolidated Balance Sheets Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2020 (USD) | December 31, 2019 (USD) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $20,738,776 | $9,039,887 | | Total Current Assets | $27,126,630 | $15,209,123 | | Total Assets | $37,821,300 | $25,956,581 | | Liabilities & Stockholders' Equity | | | | Total Current Liabilities | $6,936,541 | $8,435,398 | | Total Liabilities | $11,290,486 | $12,798,731 | | Total Stockholders' Equity | $26,530,814 | $13,157,850 | Consolidated Statements of Operations and Comprehensive Loss Consolidated Statement of Operations Highlights (Unaudited) | Account | Three Months Ended March 31, 2020 (USD) | Three Months Ended March 31, 2019 (USD) | | :--- | :--- | :--- | | Grant and licensing revenue | $901,880 | $701,062 | | Research and development | $2,782,506 | $3,172,247 | | General and administrative | $3,270,548 | $3,347,601 | | Loss from operations | $(5,124,174) | $(5,933,076) | | Net loss attributable to Heat Biologics, Inc. | $(6,292,106) | $(5,715,476) | | Net loss per share (basic and diluted) | $(0.11) | $(0.17) | Consolidated Statements of Cash Flows Consolidated Statement of Cash Flows Highlights (Unaudited) | Cash Flow Activity | For the Three Months Ended March 31, 2020 (USD) | For the Three Months Ended March 31, 2019 (USD) | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(5,780,851) | $(4,175,721) | | Net Cash Used in Investing Activities | $(54,849) | $(81,382) | | Net Cash Provided by Financing Activities | $17,551,473 | $0 | | Net Change in Cash and Cash Equivalents | $11,698,889 | $(4,257,430) | | Cash and Cash Equivalents – End of Period | $20,738,776 | $17,896,821 | Notes to the Consolidated Financial Statements - The company has an accumulated deficit of approximately $110.9 million as of March 31, 2020, and expects to incur continued losses. However, its cash, cash equivalents, and short-term investments of $26.4 million are believed to be sufficient to fund operations for one year from the filing date[27][29] - The COVID-19 pandemic is identified as a significant risk that could materially adversely affect the company's business, financial condition, and clinical development, though financial impacts were limited at the time of reporting[30][32] - In January 2020, the company closed a public offering of 20 million shares of common stock and warrants, raising gross proceeds of approximately $7.0 million[83] - The company's subsidiary, Pelican, was awarded a $15.2 million grant from CPRIT, of which $11.2 million has been recognized as revenue through March 31, 2020. The grant requires Pelican to provide $7.6 million in matching funds[101][102][103] - Subsequent to the quarter end, the company issued an additional 5.35 million shares in at-the-market offerings for $2.9 million in net proceeds and filed a new shelf registration statement to offer up to $150 million in securities, including a $50 million ATM program[119][120] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2020 financials, including increased grant revenue, decreased R&D, a $6.3 million net loss, and enhanced liquidity to $26.4 million, while highlighting COVID-19 risks Overview - Heat Biologics is a biopharmaceutical company developing immune therapies and vaccines based on its gp96 platform, designed to activate the immune system for applications in cancer and infectious disease[123] - Key clinical programs include HS-110 (viagenpumatucel-L) in a Phase 2 trial for NSCLC, HS-130 in a Phase 1 trial, and PTX-35, a T-cell co-stimulator agonist antibody[123][124] - The company initiated a new COVID-19 vaccine program under its Zolovax subsidiary, utilizing the gp96 platform to secrete SARS-CoV-2 antigens, with preclinical testing planned to commence in Q2 2020[123][138][139] Results of Operations - Grant revenue increased to $0.9 million in Q1 2020 from $0.7 million in Q1 2019, reflecting the timing of qualified expenditures under the CPRIT grant[152] - Research and development expenses decreased by 12.5% to $2.8 million in Q1 2020, primarily due to a $0.8 million decrease in HS-110 program costs as patients transitioned to long-term follow-up[153][156] R&D Expense Breakdown (in millions) | Program | Q1 2020 (USD millions) | Q1 2019 (USD millions) | | :--- | :--- | :--- | | HS-110 | $0.0 | $0.8 | | HS-130 | $0.2 | $0.1 | | PTX 35 | $0.8 | $0.9 | | Other programs | $0.0 | $0.1 | | Unallocated R&D expenses | $1.8 | $1.3 | | Total | $2.8 | $3.2 | - Net loss attributable to Heat Biologics, Inc. was $6.3 million, or ($0.11) per share, in Q1 2020, compared to a net loss of $5.7 million, or ($0.17) per share, in Q1 2019[158] Liquidity and Capital Resources - The company financed operations through public offerings and at-the-market sales. In Q1 2020, it received net proceeds of $6.4 million from an underwritten public offering and $11.1 million from at-the-market offerings[159] - As of March 31, 2020, the company had approximately $26.4 million in cash, cash equivalents, and short-term investments, which is expected to be sufficient to fund operations into the third quarter of 2021[160][161] - Net cash used in operating activities was $5.8 million for Q1 2020, while net cash provided by financing activities was $17.6 million[162][164] - The company will need to obtain substantial additional future funding for its planned clinical trials and is considering alternatives like equity/debt financings, partnerships, and collaborations[160][166] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is a smaller reporting company and is not required to provide this information - As a smaller reporting company, Heat Biologics is not required to provide quantitative and qualitative disclosures about market risk[170] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2020, with no material changes to internal control over financial reporting - Based on an evaluation as of March 31, 2020, the Chief Executive Officer and Vice President of Finance concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level[171] - There were no changes in the company's internal control over financial reporting during the quarter ended March 31, 2020, that have materially affected, or are reasonably likely to materially affect, internal controls[172] PART II—OTHER INFORMATION Item 1. Legal Proceedings The company is not currently a party to any legal proceedings that would have a material adverse effect on its business, financial condition, or operations - The company reports that it is not presently a party to any material legal proceedings[174] Item 1A. Risk Factors Significant risks include a $110.9 million accumulated deficit, the need for additional capital, potential Nasdaq delisting, and adverse impacts from the COVID-19 pandemic - The company has a history of net losses, with an accumulated deficit of $110.9 million as of March 31, 2020, and expects to continue incurring losses[176] - There is a significant risk related to the need to raise additional capital to fund future operations. Failure to obtain funding could force delays or elimination of development programs[178][181] - The company faces a risk of delisting from The Nasdaq Capital Market for failing to meet the minimum bid price requirement. Nasdaq has extended the compliance period to August 31, 2020, due to market conditions[182] - The COVID-19 pandemic poses a significant risk that could adversely impact business operations, clinical trials (e.g., enrollment delays, site initiation issues), and supply chains[185][186][187] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company issued 85,000 shares of common stock for 125,000 warrants in an unregistered transaction, relying on Section 3(a)(9) of the Securities Act - The company issued 85,000 shares of common stock in exchange for 125,000 warrants in an unregistered transaction, relying on the exemption provided by Section 3(a)(9) of the Securities Act[194] Item 6. Exhibits This section provides an index of exhibits filed with the Form 10-Q, including various agreements and certifications - An index of exhibits filed with the Form 10-Q is provided, including various agreements and certifications[202][204]