Imunon(IMNN) - 2021 Q3 - Quarterly Report

PART I: FINANCIAL INFORMATION Presents Celsion's unaudited condensed consolidated financial statements and notes on business, policies, and financial condition for Q3 2021 and 2020 Item 1. Financial Statements Presents Celsion's unaudited condensed consolidated financial statements, including balance sheets, operations, cash flows, and equity, with detailed notes for Q3 2021 and 2020 Condensed Consolidated Balance Sheets Summarizes Celsion's financial position, including assets, liabilities, and stockholders' equity, as of September 30, 2021, and December 31, 2020 | Metric | September 30, 2021 (Unaudited) | December 31, 2020 | | :----------------------------------- | :----------------------------- | :------------------ | | Total Assets | $79,468,517 | $37,527,338 | | Total Liabilities | $20,127,336 | $18,916,257 | | Total Stockholders' Equity | $59,341,181 | $18,611,081 | - Total assets increased significantly from $37.5 million at December 31, 2020, to $79.5 million at September 30, 2021, primarily driven by an increase in cash and cash equivalents and investment in debt securities[14] - Stockholders' equity more than tripled from $18.6 million at December 31, 2020, to $59.3 million at September 30, 2021, largely due to increased additional paid-in capital[17] Condensed Consolidated Statements of Operations Details Celsion's revenues, expenses, and net loss for the three and nine months ended September 30, 2021 and 2020 | Metric (in thousands) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Licensing Revenue | $125 | $125 | $375 | $375 | | Total Operating Expenses | $5,187 | $4,285 | $15,891 | $14,068 | | Loss from Operations | $(5,062) | $(4,160) | $(15,516) | $(13,693) | | Net Loss | $(5,411) | $(8,072) | $(16,548) | $(18,471) | | Net Loss per Common Share (Basic and Diluted) | $(0.06) | $(0.24) | $(0.21) | $(0.62) | - Net loss decreased for both the three-month period (from $8.1 million to $5.4 million) and nine-month period (from $18.5 million to $16.5 million) ended September 30, 2021, compared to the prior year, despite an increase in total operating expenses[20] - Basic and diluted net loss per common share improved significantly from $(0.24) to $(0.06) for the three-month period and from $(0.62) to $(0.21) for the nine-month period, primarily due to a higher weighted average number of shares outstanding[20] Condensed Consolidated Statements of Comprehensive Loss Reports Celsion's comprehensive loss, including net loss and other comprehensive income/loss items, for the three and nine months ended September 30, 2021 and 2020 | Metric (in thousands) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net Loss | $(5,410,544) | $(8,071,596) | $(16,547,944) | $(18,471,409) | | Change in unrealized (losses) gains on available for sale securities, net | $5,909 | $(7,866) | $2,139 | $(42,778) | | Comprehensive Loss | $(5,404,635) | $(8,079,462) | $(16,545,805) | $(18,514,187) | - The company reported a comprehensive loss of $(16.5) million for the nine months ended September 30, 2021, an improvement from $(18.5) million in the prior year, primarily influenced by the net loss and changes in unrealized gains/losses on available-for-sale securities[23] Condensed Consolidated Statements of Cash Flows Outlines Celsion's cash inflows and outflows from operating, investing, and financing activities for the nine months ended September 30, 2021 and 2020 | Cash Flow Activity (in thousands) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(11,135) | $(11,887) | | Net cash (used in) provided by investing activities | $(29,148) | $7,929 | | Net cash provided by financing activities | $54,768 | $15,422 | | Change in cash, cash equivalents and restricted cash | $14,485 | $11,464 | | Cash, cash equivalents and restricted cash at end of period | $31,649 | $18,340 | - Net cash provided by financing activities increased significantly to $54.8 million in the first nine months of 2021, up from $15.4 million in 2020, primarily due to proceeds from common stock sales[26] - Investing activities shifted from providing $7.9 million in cash in 2020 to using $29.1 million in 2021, mainly due to increased purchases of investment securities[26] Condensed Consolidated Statements of Changes in Stockholders' Equity Presents the changes in Celsion's stockholders' equity, including common stock, additional paid-in capital, and accumulated deficit, for the nine months ended September 30, 2021 | Metric (in thousands) | Sep 30, 2021 | Dec 31, 2020 | | :-------------------- | :----------- | :----------- | | Common Stock (shares) | 86,557,736 | 40,701,022 | | Common Stock (amount) | $866 | $407 | | Additional Paid-in Capital | $387,107 | $330,290 | | Accumulated Deficit | $(328,548) | $(312,000) | | Total Stockholders' Equity | $59,341 | $18,611 | - Total stockholders' equity increased substantially from $18.6 million at January 1, 2021, to $59.3 million at September 30, 2021, driven by significant equity financing activities, including sales of common stock and warrant exercises[34] - The number of outstanding common shares more than doubled from 40.7 million at January 1, 2021, to 86.6 million at September 30, 2021, reflecting substantial equity issuances[34] Notes to the Condensed Consolidated Financial Statements Provides detailed explanations and disclosures supporting the condensed consolidated financial statements Note 1. Business Description Describes Celsion Corporation's core business as a clinical-stage biotechnology company focused on developing immunotherapies, vaccines, and chemotherapies - Celsion Corporation is a clinical-stage biotechnology company focused on developing DNA-based immunotherapies, next-generation vaccines, and directed chemotherapies[35] - Key product candidates include GEN-1 (DNA-based immunotherapy for ovarian cancer) and ThermoDox (heat-activated liposomal doxorubicin for various cancer indications)[35] - The company also has two feasibility-stage platform technologies for novel nucleic acid-based immunotherapies and vaccines, utilizing synthetic, non-viral vectors[35] Note 2. Basis of Presentation Explains the accounting principles and assumptions used in preparing the unaudited condensed consolidated financial statements - The unaudited condensed consolidated financial statements are prepared in accordance with GAAP for interim financial information and SEC regulations, with all significant intercompany balances and transactions eliminated[36] - Management's estimates and assumptions are used in preparing the financial statements, and actual results could differ materially[38] - The company continues to monitor the impact of the COVID-19 pandemic on its financial condition, operations, and asset valuations, noting potential future impacts[38] Note 3. Financial Condition and Business Plan Discusses Celsion's financial position, cumulative losses, capital resources, and strategic plans, including the halt of the OPTIMA Study - Celsion has incurred cumulative net losses of approximately $329 million since inception and expects operating losses to continue due to ongoing R&D and product development efforts[39][40] | Metric | September 30, 2021 | | :------------------------------------------------ | :------------------- | | Cash and cash equivalents, restricted cash, short-term investments and interest receivable | $60.6 million | - The company believes it has sufficient capital resources to fund operations through the end of 2024, supported by recent financings and potential future sales of New Jersey net operating losses[45] - The global Phase III OPTIMA Study for ThermoDox in HCC was halted in February 2021 due to futility, following a DMC recommendation[42] Note 4. New Accounting Pronouncements Outlines the adoption and evaluation of new accounting standards by Celsion Corporation - The company adopted ASU 2016-13 (Credit Losses) and ASU 2019-12 (Income Taxes) in Q1 2021, neither of which had a material impact on its consolidated financial statements[48][49] - Celsion is currently evaluating the effects of adopting ASU 2020-04 (Reference Rate Reform) and ASU 2021-04 (Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options)[50][51] Note 5. Restricted Cash Details the nature and amount of Celsion's restricted cash, primarily held as collateral for a loan facility - As a condition of the $10 million SVB Loan Facility, Celsion is required to maintain $6.0 million in a segregated money market account as cash collateral, which is classified as restricted cash[52] | Metric | September 30, 2021 | September 30, 2020 | | :-------------------------- | :------------------- | :------------------- | | Cash and cash equivalents | $25,648,849 | $18,339,728 | | Money market investments, restricted | $6,000,000 | - | | Total | $31,648,849 | $18,339,728 | Note 6. Net Loss per Common Share Explains the calculation of basic and diluted net loss per common share, noting anti-dilutive potential common shares - Basic and diluted loss per share were the same for the three and nine months ended September 30, 2021 and 2020, as potential common shares were anti-dilutive[55] | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :-------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net loss per common share (Basic and diluted) | $(0.06) | $(0.24) | $(0.21) | $(0.62) | | Weighted average shares outstanding (Basic and diluted) | 86,557,736 | 34,112,254 | 79,667,613 | 29,934,764 | Note 7. Investment in Debt Securities-Available for Sale Provides details on Celsion's investment in debt securities classified as available-for-sale, including fair values and investment income - As of September 30, 2021, investments in debt securities available for sale totaled $28.9 million, consisting of government-backed debt securities and commercial paper, with unrealized gains and losses reported in accumulated other comprehensive loss[56][59] | Investment Category | September 30, 2021 Fair Value | | :------------------ | :---------------------------- | | Commercial paper | $7,784,894 | | Government backed debt securities | $21,079,470 | | Total | $28,864,364 | | Investment Income (in thousands) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Interest and dividends accrued and paid | $6 | $3 | $10 | $66 | | Realized (losses) gains | $(3) | $7 | $(5) | $53 | | Investment income, net | $4 | $10 | $6 | $119 | Note 8. Fair Value Measurements Describes Celsion's fair value measurements for financial and non-financial assets and liabilities, categorized by a three-level hierarchy - The company uses a three-level hierarchy for fair value measurements, with investments in debt securities classified as Level 2[61][63] - In-process R&D and earn-out milestone liability are classified as Level 3, valued using significant unobservable inputs[64] | Asset/Liability | Fair Value (Sep 30, 2021) | Level 1 | Level 2 | Level 3 | | :----------------------------------- | :------------------------ | :------ | :------ | :------ | | Investment in debt securities - available for sale | $28,864,364 | $0 | $28,864,364 | $0 | | In-process R&D | $13,366,234 | $0 | $0 | $13,366,234 | | Earn-out milestone liability | $7,345,000 | $0 | $0 | $7,345,000 | Note 9. Intangible Assets Details Celsion's intangible assets, including acquired in-process R&D and goodwill, and their impairment status - Acquired in-process research and development (IPR&D) from EGEN, Inc. includes TheraPlas and TheraSilence platforms, with the ovarian cancer indication valued at $13.3 million and not impaired as of September 30, 2021[66][67] - The GBM product candidate IPR&D, originally valued at $9.4 million, was fully impaired and written off in Q3 2020, resulting in a $2.4 million non-cash charge[68] - Goodwill of approximately $2.0 million, resulting from the EGEN acquisition, was not impaired as of September 30, 2021[70] | Intangible Asset | Balance at Jan 1, 2021, net | Amortization | Balance at Sep 30, 2021, net | | :----------------- | :-------------------------- | :----------- | :--------------------------- | | IPR&D | $13,366,234 | - | $13,366,234 | | Goodwill | $1,976,101 | - | $1,976,101 | | Covenant Not To Compete | $113,660 | $(113,660) | $0 | Note 10. Accrued Liabilities Presents a breakdown of Celsion's accrued liabilities as of September 30, 2021, and December 31, 2020 | Accrued Liability | September 30, 2021 | December 31, 2020 | | :------------------------------------------ | :------------------- | :------------------- | | Amounts due to contract research organizations and other contractual agreements | $1,276,317 | $636,000 | | Accrued payroll and related benefits | $1,247,460 | $1,736,271 | | Accrued professional fees | $265,350 | $66,850 | | Accrued interest | $16,250 | - | | Other | $19,411 | $19,411 | | Total | $2,824,788 | $2,458,532 | - Total other accrued liabilities increased to $2.8 million at September 30, 2021, from $2.5 million at December 31, 2020, primarily due to higher amounts due to contract research organizations and professional fees[72] Note 11. Notes Payable Details Celsion's loan facility with Silicon Valley Bank, including terms, interest rates, and repayment schedule - In June 2021, Celsion entered into a $10 million loan facility with Silicon Valley Bank (SVB), using $6 million to retire all outstanding indebtedness with Horizon Technology Finance Corporation[73] - The SVB Loan Facility bears interest at a WSJ Prime-based variable rate (currently 3.25%), with interest-only payments for the first 24 months, followed by a 24-month amortization period[74] - The company recognized a $234,419 loss on the termination of the Horizon Credit Agreement during the nine months ended September 30, 2021, which included early termination and end-of-term fees[87] | SVB Loan Facility Future Principal Payments | Amount | | :---------------------------------------- | :------- | | 2022 | $0 | | 2023 | $750,000 | | 2024 | $3,000,000 | | 2025 and thereafter | $2,250,000 | | Subtotal of future principal payments | $6,000,000 | | Unamortized debt premium, net | $(191,226) | | Total | $5,808,774 | Note 12. Stockholders' Equity Describes Celsion's equity financing activities, including shelf registration, direct offerings, and warrant exercises, impacting common stock and additional paid-in capital - Celsion filed a new $100 million shelf registration statement on Form S-3 in March 2021, declared effective on March 30, 2021, allowing for the issuance of common stock, preferred stock, or warrants[89] - During the first nine months of 2021, the company raised approximately $6.9 million in gross proceeds from its Capital on Demand facility, $35 million from a January 2021 registered direct offering, $15 million from an April 2021 registered direct offering, and $1.5 million from warrant exercises[91][95][97][197][198] - The LPC Purchase Agreement with Lincoln Park Capital Fund, LLC, under which Celsion could sell up to $26.0 million in shares, was terminated in January 2021[100] Note 13. Stock-Based Compensation Details Celsion's stock-based compensation plans, including amendments to the incentive plan, outstanding awards, and recognized compensation costs - The 2018 Stock Incentive Plan was amended in June 2021, increasing available shares by 7.7 million to a total of 14.1 million for equity awards[102] | Metric | Sep 30, 2021 | Jan 1, 2021 | | :-------------------------------- | :----------- | :---------- | | Stock Options Outstanding | 6,602,705 | 4,624,725 | | Restricted Stock Awards Outstanding | 10,750 | 2,750 | | Compensation Cost (in thousands) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total stock-based compensation cost | $701 | $417 | $3,074 | $1,448 | | R&D portion | $241 | $164 | $1,123 | $542 | | G&A portion | $459 | $253 | $1,950 | $906 | - As of September 30, 2021, there was $2.4 million of unrecognized compensation cost, expected to be recognized over a weighted-average period of 1.0 years[110] Note 14. Earn-Out Milestone Liability Explains the earn-out milestone liability related to the Ovarian Cancer Indication, including its fair value and changes recognized - The earn-out milestone liability related to the Ovarian Cancer Indication was modified in March 2019, offering two payment options: $7.0 million in cash or $12.4 million in cash/stock[113][116] | Metric | September 30, 2021 | December 31, 2020 | | :-------------------------------- | :------------------- | :------------------- | | Fair value of earn-out milestone liability | $7,345,000 | $7,018,000 | - A non-cash charge of $0.3 million was recognized for the nine months ended September 30, 2021, due to changes in the fair value of the earn-out milestone liability, with both payment options weighted at 50% probability[113][115] Note 15. Warrants Summarizes Celsion's warrant activity, including outstanding warrants, exercises, and weighted average exercise price | Warrant Activity | Number of Warrants Issued | Weighted Average Exercise Price | | :------------------------------- | :------------------------ | :------------------------------ | | Warrants outstanding at Dec 31, 2020 | 3,853,566 | $1.35 | | Warrants exercised during 9M 2021 | (1,216,667) | $1.24 | | Warrants outstanding at Sep 30, 2021 | 2,636,899 | $1.40 | - As of September 30, 2021, 2.6 million warrants were outstanding with a weighted average exercise price of $1.40 and a remaining contractual term of 4.1 years[117] Note 16. Leases Details Celsion's operating lease arrangements for office and R&D facilities, including lease liabilities and expenses - Celsion has operating leases for office and R&D facilities in New Jersey and Alabama, with the New Jersey lease extended to September 1, 2023, and the Alabama lease amended in 2021[118][119] - The adoption of ASC Topic 842 in January 2019 resulted in the recognition of right-of-use (ROU) assets and lease liabilities for operating leases on the balance sheet[120] | Lease Metric | September 30, 2021 | | :-------------------------- | :------------------- | | Total lease liabilities | $907,782 | | Weighted average remaining life | 1.7 years | | Weighted average discount rate | 8.28% | | Operating lease expense (9M 2021) | $413,577 | Note 17. Technology Development and Licensing Agreements Describes Celsion's commercial supply and technology development agreements, particularly with Zhejiang Hisun Pharmaceutical Co. Ltd - Celsion has a long-term commercial supply agreement with Zhejiang Hisun Pharmaceutical Co. Ltd. (Hisun) for ThermoDox production in China, with Hisun responsible for technical and regulatory support[122] - A $5.0 million non-refundable technology development fee received from Hisun in 2013 for ThermoDox development in China is being recognized as revenue ratably over a 10-year term through 2022[123][126] - An expanded partnership with Hisun for GEN-1 (IL-12 immunotherapy) includes technology transfer for clinical and commercial manufacturing and supply in Greater China, with potential for global expansion[125][128] Note 18. Commitments and Contingencies Outlines Celsion's legal commitments and contingencies, including shareholder lawsuits and a corporate books and records demand - A shareholder derivative and putative class action lawsuit (O'Connor v. Braun et al.) regarding the 2018 Stock Incentive Plan was settled in April 2020, involving repricing of stock options and payment of $187,500 in legal fees[127][129] - Two additional lawsuits were filed: a securities class action (Spar v. Celsion Corporation, et al.) in October 2020 alleging misleading statements about ThermoDox, and a derivative shareholder lawsuit (Fidler v. Michael H. Tardugno et al.) in February 2021 alleging breach of fiduciary duty related to ThermoDox[130][131] - A complaint regarding a corporate books and records demand (Pacheco v. Celsion Corporation) was filed in August 2021 concerning the OPTIMA Study[132] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Celsion's financial condition, operations, and strategic initiatives, covering clinical pipeline, R&D, financing, and liquidity for Q3 2021 and 2020 Strategic and Clinical Overview Provides an overview of Celsion's strategic focus as a clinical-stage biotechnology company and its product pipeline - Celsion is a clinical-stage biotechnology company focused on advancing DNA-based immunotherapies, next-generation vaccines, and directed chemotherapies[135] - The product pipeline includes GEN-1 for ovarian cancer and ThermoDox for various cancer indications, along with TheraPlas and PLACCINE platform technologies[135] IMMUNO-ONCOLOGY Program Details Celsion's immuno-oncology program, focusing on the TheraPlas technology platform and GEN-1 for ovarian cancer - The TheraPlas technology platform, acquired from EGEN, Inc., is a synthetic non-viral carrier for DNA and mRNA therapeutics, designed to improve gene transfer activity and safety[136][137][138] - GEN-1, a DNA-based IL-12 immunotherapy for ovarian cancer, is delivered via the TheraPlas system and is currently in Phase II development (OVATION 2 Study)[141][147] - The OVATION 2 Study, which combines GEN-1 with standard-of-care neoadjuvant chemotherapy, has enrolled approximately one-third of its anticipated 110 patients, with interim data showing an 80% R0 resection rate for GEN-1 treated patients versus 58% for the control arm[154][155][159] - GEN-1 received Fast Track designation from the FDA and Orphan Medicinal Product designation from the EMA for ovarian cancer[151][155] PLACCINE DNA VACCINE TECHNOLOGY PLATFORM Introduces Celsion's PLACCINE DNA vaccine technology platform, its design, and preclinical findings for infectious disease prevention - Celsion filed a provisional U.S. patent application for its PLACCINE DNA vaccine technology platform, designed for preventing or treating infections from a broad range of infectious agents, including SARS-CoV-2[156] - PLACCINE utilizes a single multi-cistronic DNA plasmid vector expressing multiple pathogen antigens and an immune modifier (IL-12), delivered with a synthetic system, offering potential for broad-spectrum protection and stability[157][161][162][163][164] - Preclinical in vivo studies showed PLACCINE induced antibodies and cytotoxic T-cell responses specific to the SARS-CoV-2 spike antigen, with antibodies preventing infection of cultured cells[167] THERMODOX- DIRECTED CHEMOTHERAPY Discusses ThermoDox, Celsion's heat-activated liposomal doxorubicin, including the halt of the OPTIMA Study and ongoing investigator-sponsored trials - ThermoDox is a proprietary heat-activated liposomal encapsulation of doxorubicin, designed to release the drug directly at tumor sites when heated by technologies like RFA, improving efficacy and reducing systemic exposure[168][169] - The global Phase III OPTIMA Study for ThermoDox in combination with RFA for primary liver cancer (HCC) was halted in February 2021 due to futility, as independent analyses did not find sufficient evidence to justify continuing patient follow-up for overall survival[170][177][179] - Celsion continues to support investigator-sponsored studies using ThermoDox in breast cancer, pancreatic cancer (Phase I study with HIFU at Oxford University), and bladder cancer (potential NIH study)[180][182] Business Plan Outlines Celsion's financial outlook, including cumulative losses, capital resources, and the impact of the COVID-19 pandemic - Celsion has incurred substantial operating losses since inception, totaling approximately $329 million, and expects these losses to continue as it advances product development[183][184] - The company had $60.6 million in cash, cash equivalents, restricted cash, short-term investments, and interest receivable as of September 30, 2021, and believes it has sufficient capital to fund operations through the end of 2024[190] - The COVID-19 pandemic has not significantly impacted business or operations through 2021, but future developments could materially affect financial condition, results, and cash flows, potentially disrupting clinical trials and capital raising[185] - Celsion continues to participate in the New Jersey Technology Business Tax Certificate Program, selling net operating losses to generate proceeds, with $1.85 million received in May 2021 and an application for $1.6 million in 2021[188] Financing Overview Summarizes Celsion's financing activities, including equity offerings, debt facilities, and sales of net operating losses - Celsion has utilized various financing methods, including equity offerings, debt facilities, and sales of New Jersey net operating losses (NOLs)[193] - In 2021, the company raised approximately $6.9 million from its Capital on Demand facility, $35 million from a January registered direct offering, $15 million from a March registered direct offering, and $1.5 million from warrant exercises[197][198][200] - A new $100 million shelf registration statement on Form S-3 was filed and declared effective in March 2021 to support future capital needs[196] - The company secured a $10 million loan facility with Silicon Valley Bank in June 2021, using $6 million to repay the Horizon Credit Agreement[194] Financial Review for the Three and Nine Months Ended September 30, 2021 and 2020 Analyzes Celsion's financial performance, including licensing revenue, R&D expenses, G&A expenses, and other financial metrics Licensing Revenue Reviews Celsion's licensing revenue, primarily from the amortization of a technology transfer fee | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Licensing Revenue | $125,000 | $125,000 | $375,000 | $375,000 | - Licensing revenue remained flat at $125,000 for both the three-month periods and $375,000 for both the nine-month periods ended September 30, 2021 and 2020, derived from the amortization of a $5.0 million non-refundable technology transfer fee from Hisun[204][212] Research and Development Expenses Examines Celsion's research and development expenses, highlighting changes in spending across various clinical programs | R&D Expense (in thousands) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total R&D Expenses | $2,468 | $2,492 | $7,633 | $8,535 | | OVATION 2 Study costs | $200 | $200 | $1,000 | $700 | | OPTIMA Study costs | $200 | $500 | $600 | $1,800 | | GEN-1 & PLACCINE development | $1,100 | $700 | $3,100 | $2,300 | | CMC costs | $300 | $600 | $1,100 | $1,700 | - Total R&D expenses decreased by $0.9 million to $7.6 million for the nine months ended September 30, 2021, primarily due to reduced costs for the OPTIMA Study following its halt, despite increased spending on the OVATION 2 Study and GEN-1/PLACCINE development[213] - R&D expenses for the three months ended September 30, 2021, remained stable at $2.5 million compared to the prior year, with a decrease in OPTIMA study costs offset by increases in GEN-1/PLACCINE development[205] General and Administrative Expenses Analyzes Celsion's general and administrative expenses, detailing the factors contributing to changes in these costs | G&A Expense (in thousands) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total G&A Expenses | $2,719 | $1,793 | $8,258 | $5,533 | - General and administrative expenses increased by $0.9 million to $2.7 million for the three months ended September 30, 2021, and by $2.7 million to $8.3 million for the nine months, mainly due to higher non-cash stock compensation, professional fees, and directors' and officers' insurance premiums[206][214] Impairment of IPR&D Liability Reports on the impairment of Celsion's in-process research and development (IPR&D) asset for the GBM product candidate - In Q3 2020, Celsion recognized a non-cash impairment charge of $2.4 million for its GBM product candidate IPR&D asset, fully writing off its remaining value[207][215] - No IPR&D asset impairment charges were recorded during the three or nine months ended September 30, 2021[207][215] Change in Earn-out Milestone Liability and Warrant Expense Discusses changes in the fair value of Celsion's earn-out milestone liability and related non-cash charges - The fair value of the earn-out milestone liability for the Ovarian Cancer Indication was $7.3 million at September 30, 2021, up from $7.0 million at December 31, 2020[216] - A non-cash charge of $0.3 million was recognized for the nine months ended September 30, 2021, due to the change in fair value, with both $7.0 million and $12.4 million payment options weighted at 50% probability[216] - For the three months ended September 30, 2021, a non-cash benefit of $0.2 million was recognized from the change in fair value of the earn-out milestone liability[208] Investment Income and Interest Expense Reviews Celsion's investment income and interest expense, noting the impact of debt refinancing | Metric (in thousands) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Investment income | Insignificant | Insignificant | Insignificant | $100 | | Interest expense | $100 | $500 | $500 | $1,100 | - Interest expense decreased significantly to $0.1 million for the three months and $0.5 million for the nine months ended September 30, 2021, compared to the prior year, following the payoff of the Horizon Credit Agreement and new SVB loan facility[211][219] - A $0.2 million loss on debt extinguishment was recognized in the first nine months of 2021 due to early termination and end-of-term charges paid to Horizon[219] Financial Condition, Liquidity and Capital Resources Assesses Celsion's financial condition, liquidity, and capital resources, including accumulated deficit and future funding needs - Celsion has an accumulated deficit of $329 million as of September 30, 2021, and expects continued operating losses due to significant R&D and clinical trial expenditures[220] | Metric | September 30, 2021 | | :------------------------------------------------ | :------------------- | | Total current assets | $56.8 million | | Total current liabilities | $6.5 million | | Net working capital | $50.3 million | | Cash, cash equivalents, short-term investments, interest receivable and restricted cash | $60.6 million | - The company believes its current capital resources are sufficient to fund operations through the end of 2024, but may seek additional capital through equity, debt, strategic alliances, or NOL sales, which could dilute existing stockholders[222][223] Off-Balance Sheet Arrangements and Contractual Obligations States that Celsion Corporation has no off-balance sheet arrangements or contractual obligations to report - Celsion Corporation has no off-balance sheet arrangements or contractual obligations to report[225] Item 3. Quantitative and Qualitative Disclosures about Market Risk Outlines Celsion's market risk exposure, focusing on interest rate fluctuations affecting its investment portfolio, aiming for capital preservation and income maximization - The primary objective of Celsion's investment activities is capital preservation and maximizing income without significantly increasing risk[226] - The company's cash flow and earnings are subject to fluctuations due to changes in interest rates, as it maintains a diversified portfolio of debt securities classified as available-for-sale[226] Item 4. Controls and Procedures Management concluded Celsion's disclosure controls and procedures were effective as of September 30, 2021, with no material changes in internal control over financial reporting - As of September 30, 2021, Celsion's disclosure controls and procedures were deemed effective at the reasonable assurance level[228] - No changes in internal control over financial reporting materially affected or are reasonably likely to materially affect the company's internal control during the reporting period[229] - Management acknowledges that control systems provide only reasonable, not absolute, assurance against all errors and fraud due to inherent limitations[230] PART II: OTHER INFORMATION Provides additional information not included in the financial statements, such as legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings Details Celsion's ongoing and settled legal proceedings, including shareholder derivative, securities class action, and corporate books and records demands related to ThermoDox - A shareholder derivative and putative class action lawsuit (O'Connor v. Braun et al.) regarding the 2018 Stock Incentive Plan was settled in April 2020, involving repricing of stock options and payment of $187,500 in legal fees[233][234] - A putative securities class action (Spar v. Celsion Corporation, et al.) was filed in October 2020, alleging false and misleading statements regarding ThermoDox, which the company intends to vigorously defend[235] - A derivative shareholder lawsuit (Fidler v. Michael H. Tardugno et al.) was filed in February 2021, alleging breach of fiduciary duty related to ThermoDox, which the company also intends to contest vigorously[236] - A complaint for a corporate books and records demand (Pacheco v. Celsion Corporation) was filed in August 2021 concerning the OPTIMA Study[237] Item 1A. Risk Factors No material changes to risk factors from the 2020 Annual Report on Form 10-K were identified, though new or immaterial risks may emerge - No material changes to risk factors from the 2020 Annual Report on Form 10-K were identified[238] - The company acknowledges that new or currently immaterial risks may emerge and adversely affect its business, financial condition, or results of operations[238] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds to report - There were no unregistered sales of equity securities or use of proceeds to report[239] Item 3. Defaults Upon Senior Securities No defaults upon senior securities to report - There were no defaults upon senior securities to report[239] Item 4. Mine Safety Disclosures Mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable to the company[240] Item 5. Other Information No other information to report - There is no other information to report[241] Item 6. Exhibits Lists exhibits filed with Form 10-Q, including stock incentive plan amendments, loan agreements, CEO/CFO certifications, and XBRL financial statements - Exhibits include the Third Amendment to the Celsion Corporation 2018 Stock Incentive Plan and the Loan and Security Agreement with Silicon Valley Bank dated June 18, 2021[244] - Certifications from the Chief Executive Officer and Chief Financial Officer, pursuant to the Sarbanes-Oxley Act, are filed herewith[244] - The financial statements are also provided in XBRL (Extensible Business Reporting Language) format[244] SIGNATURES The report is duly signed by the Chairman, President, Chief Executive Officer, and Executive Vice President, Chief Financial Officer - The report is duly signed on November 15, 2021, by Michael H. Tardugno, Chairman, President and Chief Executive Officer, and Jeffrey W. Church, Executive Vice President and Chief Financial Officer[246][247]