See accompanying notes to consolidated financial statements.
See accompanying notes to consolidated financial statements.
*Accumulated other comprehensive loss.
See accompanying notes to consolidated financial statements.
See accompanying notes to consolidated financial statements.
Notes to Consolidated Financial Statements
1.
|
Description of Business
|
The Company develops and commercializes a range of automated technologies for cell-banking, cell-processing, and cell-based therapeutics. Since the 1990’s, ThermoGenesis Holdings has been a pioneer in, and a leading provider of automated systems that isolate, purify and cryogenically store units of hematopoietic stem and progenitor cells for the cord blood banking industry. The Company was founded in 1986 and is incorporated in the State of Delaware and headquartered in Rancho Cordova, CA.
Medical Device Products for Automated Cell Processing
The Company provides the AutoXpress® and BioArchive® platforms for automated clinical bio-banking, PXP® platform for point-of-care cell-based therapies and the CAR-TXpress™ platform for large scale cell manufacturing services. All product lines are reporting as a single reporting segment in the financial statements.
Planned CDMO Business
In March 2022, our Board of Directors approved the planned expansion of the Company’s business to include contract development and manufacturing services for cell and cell-based gene therapies. The Company plans to develop and build-out the capabilities to become a Contract Development and Manufacturing Organization (“CDMO”) for cell and cell-based gene therapies by partnering with Boyalife Genomics Tianjin Ltd., a China-based CDMO (“Boyalife Genomics”), to in-license certain know-how and other intellectual property from Boyalife Genomics, and by leasing and building out a cell manufacturing facility in Sacramento, California. We intend to leverage our existing technology and combine it with the in-licensed technologies to develop a proprietary manufacturing platform for cell manufacturing activities and other cell manufacturing solutions for clients with therapeutic candidates in various stages of development.
Our common stock is traded on the Nasdaq Capital Market exchange under the ticker symbol “THMO”.
At December 31, 2022, the Company had cash and cash equivalents of $4,177,000 and negative working capital of $625,000. The Company has incurred historical losses from operations and expects to continue to incur operating losses in the near future. The Company may need to raise additional capital to grow its business, fund operating expenses and make interest payments. The Company’s ability to fund its liquidity needs is subject to various risks, many of which are beyond its control. The Company may seek additional funding through debt borrowings, sales of debt or equity securities or strategic partnerships. The Company cannot guarantee that such funding will be available on a timely basis, in needed quantities or on terms favorable to the Company, if at all. These factors and other indicators raise substantial doubt about the Company’s ability to continue as a going concern within one year from the filing date of this report.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The consolidated financial statements 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 should the Company be unable to continue as a going concern.
3.
|
Summary of Significant Accounting Policies
|
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP).
Reverse Stock Split
On December 22, 2022, the Company effected a one (1) for forty-five (45) reverse stock split of its issued and outstanding common stock. The total number of shares of common stock authorized for issuance by the Company of 350,000,000 shares did not change in connection with the reverse stock split.
All historical share amounts disclosed herein have been retroactively restated to reflect the reverse split and subsequent share exchange. No fractional shares were issued as a result of the reverse stock split, as fractional shares of common stock were rounded up to the nearest whole share.
Principles of Consolidation
The consolidated financial statements include the accounts of ThermoGenesis Holdings, Inc. and its wholly-owned subsidiaries, ThermoGenesis Corp. and TotipotentRX Cell Therapy, Pvt. Ltd and ThermoGenesis Corp’s majority-owned subsidiary, CARTXpress Bio. All significant intercompany accounts and transactions have been eliminated upon consolidation.
Non-controlling Interests
The 20% ownership interest of CARTXpress Bio that is not owned by ThermoGenesis Holdings is accounted for as a non-controlling interest as the Company has an 80% ownership interest in CARTXpress Bio. Earnings or losses attributable to other stockholders of a consolidated affiliated company are classified separately as "non-controlling interest" in the Company's consolidated statements of operations. Net loss attributable to non-controlling interests reflects only its share of the after-tax earnings or losses of an affiliated company. The Company's consolidated balance sheets reflect non-controlling interests within the equity section.
Use of Estimates
Preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are used for, but not limited to, the allowance for doubtful accounts, carrying amounts of inventories, depreciation and amortization, warranty obligations, assumptions made in valuing financial instruments issued in various compensation and financing arrangements, deferred income taxes and related valuation allowance and the fair values of intangibles and goodwill. Actual results could materially differ from the estimates and assumptions used in the preparation of the Company’s consolidated financial statements.
Revenue Recognition
Revenue is recognized based on the following five-step process as outlined in the Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers”: (i) Identify the Contract with the Customer; (ii) Identify Performance Obligations in the Contract; (iii) Determine the Transaction Price; (iv) Allocate the Transaction Price; and (v) Satisfaction of the Performance Obligations (and Recognize Revenue). Revenues are recorded net of discounts. Shipping and handling fees billed to customers are included in net revenues, while the related costs are included in cost of revenues. For more information on revenues, see Note 12.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents. The Company’s cash and cash equivalents is maintained in checking accounts with reputable financial institutions that may at times exceed amounts covered by insurance provided by the U.S. Federal Deposit Insurance Corporation (“FDIC”). The Company has cash and cash equivalents of $47,000 and $87,000 at December 31, 2022 and 2021 in India. The Company has not experienced any realized losses on the Company’s deposits of cash and cash equivalents.
Foreign Currency Translation
The Company’s reporting currency is the US dollar. The functional currency of the Company’s subsidiary in India is the Indian rupee (“INR”). Assets and liabilities are translated into US dollars at period end exchange rates. Revenue and expenses are translated at average rates of exchange prevailing during the periods presented. Cash flows are also translated at average exchange rates for the period, therefore, amounts reported on the consolidated statement of cash flows do not necessarily agree with changes in the corresponding balances on the consolidated balance sheet. Equity accounts other than retained earnings are translated at the historic exchange rate on the date of investment.
Goodwill, Intangible Assets and Impairment Assessments
Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and intangible assets acquired. Intangible assets that are not considered to have an indefinite useful life are amortized over their useful lives, which generally range from three to ten years. Each period the Company evaluates the estimated remaining useful lives of purchased intangible assets and whether events or changes in circumstances warrant a revision to the remaining periods of amortization.
For goodwill and indefinite-lived intangible assets, the carrying amounts are periodically reviewed for impairment (at least annually) and whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. According to ASC 350, “Intangibles-Goodwill and Other”, the Company can opt to perform a qualitative assessment or a quantitative assessment; however, if the qualitative assessment determines that it is more likely than not (i.e., a likelihood of more than 50 percent) the fair value is less than the carrying amount; the Company would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value.
Fair Value of Financial Instruments
In accordance with ASC 820, Fair Value Measurements and Disclosures, fair value is defined as the exit price, or the amount that would be received for the sale of an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date.
The guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability. The guidance establishes three levels of inputs that may be used to measure fair value:
|
Level 1:
|
Quoted market prices in active markets for identical assets or liabilities.
|
|
Level 2:
|
Other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
|
|
Level 3:
|
Unobservable inputs reflecting the reporting entity’s own assumptions.
|
The carrying values of cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to their short duration.
Accounts Receivable and Allowance for Doubtful Accounts
The Company’s receivables are recorded when billed and represent claims against third parties that will be settled in cash. The carrying value of the Company’s receivables, net of the allowance for doubtful accounts, represents their estimated net realizable value. The Company estimates the allowance for doubtful accounts based on historical collection trends, age of outstanding receivables and existing economic conditions. If events or changes in circumstances indicate that a specific receivable balance may be impaired, further consideration is given to the collectability of those balances and the allowance is adjusted accordingly. A customer’s receivable balance is considered past-due based on its contractual terms. Past-due receivable balances are written-off when the Company’s internal collection efforts have been unsuccessful in collecting the amount due.
Inventories
Inventories are stated at the lower of cost or net realizable value and include the cost of material, labor and manufacturing overhead. Cost is determined on a first-in, first-out basis. The Company writes-down inventory to its estimated net realizable value when conditions indicate that the selling price could be less than cost due to physical deterioration, obsolescence, changes in price levels, or other causes, which it includes as a component of cost of revenues. Additionally, the Company provides valuation allowances for excess and slow-moving inventory on hand that are not expected to be sold to reduce the carrying amount of slow-moving inventory to its estimated net realizable value. The valuation allowances are based upon estimates about future demand from its customers, distributors and market conditions.
At times, the Company will purchase inventories in larger quantities to obtain volume purchase discounts. In some cases, purchases may exceed expected sales for certain products in the following year. If the Company purchases inventory which is likely to not be sold in the next year, that inventory is classified as non-current. As of December 31, 2022 and December 31, 2021, the Company had $1,003,000 and $1,709,000, respectively of non-current inventory.
Equipment and Leasehold Improvements, Net
Equipment consisting of machinery and equipment, computers and software, office equipment and leasehold improvements is recorded at cost less accumulated depreciation. Repairs and maintenance costs are expensed as incurred. Depreciation for machinery and equipment, computers and software and office furniture are computed under the straight-line method over the estimated useful lives. Leasehold improvements are amortized under the straight-line method over their estimated useful lives or the remaining lease period, whichever is shorter. When equipment and leasehold improvements are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and the impact of any resulting gain or loss is recognized within general and administrative expenses in the consolidated statement of operations for the period.
Warranty
We provide for the estimated cost of product warranties at the time revenue is recognized. While we engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of our component suppliers, our warranty obligation is affected by product failure rates, material usage and service delivery costs incurred in correcting a product failure. Should actual product failure rates, material usage or service delivery costs differ from our estimates, revisions to the estimated warranty liability could have a material impact on our financial position, cash flows or results of operations.
Debt Discount and Issue Costs
The Company amortizes debt discount and debt issue costs over the life of the associated debt instrument, using the straight-line method which approximates the interest rate method.
Stock-Based Compensation
We use the Black-Scholes-Merton option-pricing formula in determining the fair value of our options at the grant date and apply judgment in estimating the key assumptions that are critical to the model such as the expected term, volatility and forfeiture rate of an option. Our estimate of these key assumptions is based on historical information and judgment regarding market factors and trends. If any of the key assumptions change significantly, stock-based compensation expense for new awards may differ materially in the future from that recorded in the current period. The compensation expense is then amortized over the vesting period.
The Company has three stock-based compensation plans, which are described more fully in Note 11.
Valuation and Amortization Method – The Company estimates the fair value of stock options granted using the Black-Scholes-Merton option-pricing formula. This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. The formula does not include a discount for post-vesting restrictions, as we have not issued awards with such restrictions.
Expected Term – For options which the Company has limited available data, the expected term of the option is based on the simplified method. This simplified method averages an award’s vesting term and its contractual term. For all other options, the Company's expected term represents the period that the Company's stock-based awards are expected to be outstanding and was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior.
Expected Volatility – Expected volatility is based on historical volatility. Historical volatility is computed using daily pricing observations for recent periods that correspond to the expected term of the options.
Expected Dividend – The Company has not declared dividends and does not anticipate declaring any dividends in the foreseeable future. Therefore, the Company uses a zero value for the expected dividend value factor to determine the fair value of options granted.
Risk-Free Interest Rate – The Company bases the risk-free interest rate used in the valuation method on the implied yield currently available on U.S. Treasury zero-coupon issues with the same expected term.
Estimated Forfeitures – When estimating forfeitures, the Company considers voluntary and involuntary termination behavior as well as analysis of actual option forfeitures.
Research and Development
Research and development costs, consisting of salaries and benefits, costs of disposables, facility costs, contracted services and stock-based compensation from the engineering, regulatory and scientific affairs departments, that are useful in developing and clinically testing new products, services, processes or techniques, as well as expenses for activities that may significantly improve existing products or processes are expensed as incurred. Costs to acquire technologies that are utilized in research and development and that have no future benefit are expensed when incurred.
Acquired In-Process Research and Development
Acquired in-process research and development that the Company acquires through business combinations represents the fair value assigned to incomplete research projects which, at the time of acquisition, have not reached technological feasibility. The amounts are capitalized and are accounted for as indefinite-lived intangible assets, subject to impairment testing until completion or abandonment of the projects. Upon successful completion of each project, the Company will make a determination as to the then useful life of the intangible asset, generally determined by the period in which the substantial majority of the cash flows are expected to be generated and begin amortization. The Company tests intangible assets for impairment at least annually, or more frequently if impairment indicators exist, by first assessing qualitative factors to determine whether it is more likely than not that the fair value of the intangible asset is less than it’s carrying amount. If the Company concludes it is more likely than not that the fair value is less than the carrying amount, a quantitative test that compares the fair value of the intangible asset with its’ carrying value is performed. If the fair value is less than the carrying amount, an impairment loss is recognized in operating results.
Patent Costs
The costs incurred in connection with patent applications, in defending and maintaining intellectual property rights and litigation proceedings are expensed as incurred.
Credit Risk
Currently, the Company primarily manufactures and sells cellular processing systems and thermodynamic devices principally to the blood and cellular component processing industry and performs ongoing evaluations of the credit worthiness of the Company’s customers. The Company believes that adequate provisions for uncollectible accounts have been made in the accompanying consolidated financial statements. To date, the Company has not experienced significant credit related losses.
Income Taxes
The tax years 2003-2021 remain open to examination by the major taxing jurisdictions to which the Company is subject; however, there is no current examination. The Company’s policy is to recognize interest and penalties related to the underpayment of income taxes as a component of income tax expense. To date, there have been no interest or penalties charged to the Company in relation to the underpayment of income taxes. There were no unrecognized tax benefits during the periods presented.
The Company’s estimates of income taxes and the significant items resulting in the recognition of deferred tax assets and liabilities reflect the Company’s assessment of future tax consequences of transactions that have been reflected in the financial statements or tax returns for each taxing jurisdiction in which the Company operates. The Company bases the provision for income taxes on the Company’s current period results of operations, changes in deferred income tax assets and liabilities, income tax rates, and changes in estimates of uncertain tax positions in the jurisdictions in which the Company operates. The Company recognizes deferred tax assets and liabilities when there are temporary differences between the financial reporting basis and tax basis of assets and liabilities and for the expected benefits of using net operating loss and tax credit loss carryforwards. The Company establishes valuation allowances when necessary to reduce the carrying amount of deferred income tax assets to the amounts that the Company believes are more likely than not to be realized. The Company evaluates the need to retain all or a portion of the valuation allowance on recorded deferred tax assets. When a change in the tax rate or tax law has an impact on deferred taxes, the differences are expected to reverse. As the Company operates in more than one state, changes in the state apportionment factors, based on operational results, may affect future effective tax rates and the value of recorded deferred tax assets and liabilities. The Company records a change in tax rates in the consolidated financial statements in the period of enactment.
Income tax consequences that arise in connection with a business combination include identifying the tax basis of assets and liabilities acquired and any contingencies associated with uncertain tax positions assumed or resulting from the business combination. Deferred tax assets and liabilities related to temporary differences of an acquired entity are recorded as of the date of the business combination and are based on the Company’s estimate of the appropriate tax basis that will be accepted by the various taxing authorities and its determination as to whether any of the acquired deferred tax liabilities could be a source of taxable income to realize the Company’s pre-existing deferred tax assets.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current period presentation. The reclassifications did not have an impact on net loss as previously reported. As a result of the reverse stock split effected by the Company on December 22, 2022, common stock and additional paid in capital amounts from prior periods were adjusted as to reflect if the reverse split had occurred in the prior periods.
Recently Adopted Accounting Standards
On January 1, 2022, we adopted Accounting Standards Update (“ASU”) 2020-06 “Debt-Debt with Conversion and Other Options (“Subtopic 470-20”) and Derivatives and Hedging-Contracts in Entity’s Own Equity (“Subtopic 815-40”): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity,” using the modified retrospective method. ASU 2020-06 provides guidance on how to account for contracts on an entity’s own equity. This ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. Specifically, the ASU eliminated the need for the Company to assess whether a contract on the entity’s own equity (1) permits settlement in unregistered shares, (2) whether counterparty rights rank higher than shareholder’s rights, and (3) whether collateral is required. The Company recognized a cumulative effect of $9,739,000 of initially applying the ASU as an adjustment to the January 1, 2022 opening balance of accumulated deficit. Due to the recombination of the equity conversion component of our convertible debt outstanding, the 2022 opening balance of additional paid in capital was reduced by $10,681,000 and the debt discounts of the convertible promissory notes were reduced $942,000.
Recently Issued Accounting Standards
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (“Topic 326”). The ASU introduced a new accounting model, the Current Expected Credit Losses model (“CECL”), which requires earlier recognition of credit losses and additional disclosures related to credit risk. The CECL model utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses at the time the financial asset is originated or acquired. ASU 2016-13 is effective for annual reporting periods beginning after December 15, 2022, including interim reporting periods within those annual reporting periods. The Company is in the process of assessing the impact of the adoption of the ASU on the Company’s financial statements.
4.
|
Equipment and Leasehold Improvements
|
Equipment and leasehold improvements consisted of the following:
|
|
Year Ended December 31,
|
|
|
2022
|
|
|
2021
|
|
Estimated Useful Life (in years)
|
Machinery and equipment(1)
|
|
$ |
6,610,000 |
|
|
$ |
6,270,000 |
|
2.5
|
- |
10 |
Computer and software
|
|
|
631,000 |
|
|
|
631,000 |
|
2
|
- |
5 |
Office equipment
|
|
|
256,000 |
|
|
|
256,000 |
|
5
|
- |
10 |
Leasehold improvements
|
|
|
932,000 |
|
|
|
932,000 |
|
5 years or remaining lease term
|
Total equipment
|
|
|
8,429,000 |
|
|
|
8,089,000 |
|
|
|
|
Less accumulated depreciation
|
|
|
(7,175,000 |
) |
|
|
(6,828,000 |
) |
|
|
|
Total equipment and leasehold improvements, net
|
|
$ |
1,254,000 |
|
|
$ |
1,261,000 |
|
|
|
|
|
(1)
|
Includes $391,000 and $140,000 for cost related to construction in progress for the years ended December 31, 2022 and 2021, respectively.
|
Depreciation expense for the years ended December 31, 2022 and 2021 was $387,000 and $429,000, respectively.
5. Intangible Assets and Goodwill
In 2022, in accordance with ASC 350, the Company performed a qualitative analysis, which determined that it was not more likely than not that the fair value of the reporting units or the fair value of the intangible assets was less than the carrying value of the goodwill and intangible assets recorded on the Company’s books as of December 31, 2022. As a result, no impairment was recorded and a quantitative analysis was not performed. In performing the assessment, the Company used current market capitalization, discounted future cash flows, internal forecasts and other factors as the best evidence of fair value. These assumptions represent Level 3 inputs.
|
|
Intangible Assets
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2021, net
|
|
$ |
1,358,000 |
|
|
$ |
781,000 |
|
Amortization and foreign exchange
|
|
|
(40,000 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2021, net
|
|
$ |
1,318,000 |
|
|
$ |
781,000 |
|
Amortization and foreign exchange
|
|
|
(32,000 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2022, net
|
|
$ |
1,286,000 |
|
|
$ |
781,000 |
|
Intangible assets consist of the following based on the Company’s determination of the fair value of identifiable assets acquired:
|
|
As of December 31, 2022
|
|
|
|
Weighted
Average
Amortization
Period
(in Years)
|
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
Trade names
|
|
|
3 |
|
|
$ |
49,000 |
|
|
$ |
(49,000 |
) |
|
$ |
- |
|
Developed technology
|
|
|
10 |
|
|
|
318,000 |
|
|
|
(175,000 |
) |
|
|
143,000 |
|
Licenses
|
|
|
7 |
|
|
|
377,000 |
|
|
|
(377,000 |
) |
|
|
- |
|
Device registration
|
|
|
7 |
|
|
|
71,000 |
|
|
|
(71,000 |
) |
|
|
- |
|
Customer relationships
|
|
|
3 |
|
|
|
387,000 |
|
|
|
(387,000 |
) |
|
|
- |
|
Amortizable intangible assets
|
|
|
|
|
|
$ |
1,202,000 |
|
|
$ |
(1,059,000 |
) |
|
$ |
143,000 |
|
In process technology
|
|
|
|
|
|
|
1,143,000 |
|
|
|
- |
|
|
|
1,143,000 |
|
Total
|
|
|
|
|
|
$ |
2,345,000 |
|
|
$ |
(1,059,000 |
) |
|
$ |
1,286,000 |
|
|
|
As of December 31, 2021
|
|
|
|
Weighted
Average
Amortization
Period
(in Years)
|
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
Trade names
|
|
|
3 |
|
|
$ |
52,000 |
|
|
$ |
(52,000 |
) |
|
$ |
- |
|
Developed technology
|
|
|
10 |
|
|
|
318,000 |
|
|
|
(143,000 |
) |
|
|
175,000 |
|
Licenses
|
|
|
7 |
|
|
|
418,000 |
|
|
|
(418,000 |
) |
|
|
- |
|
Device registration
|
|
|
7 |
|
|
|
78,000 |
|
|
|
(78,000 |
) |
|
|
- |
|
Customer relationships
|
|
|
3 |
|
|
|
425,000 |
|
|
|
(425,000 |
) |
|
|
- |
|
Amortizable intangible assets
|
|
|
|
|
|
$ |
1,291,000 |
|
|
$ |
(1,116,000 |
) |
|
$ |
175,000 |
|
In process technology
|
|
|
|
|
|
|
1,143,000 |
|
|
|
-- |
|
|
|
1,143,000 |
|
Total
|
|
|
|
|
|
$ |
2,434,000 |
|
|
$ |
(1,116,000 |
) |
|
$ |
1,318,000 |
|
The change in the gross carrying amount is due to foreign currency exchange fluctuations. In process technology has not yet been introduced to the market place and is therefore not yet subject to amortization. The Company’s estimated future amortization expense for amortizable intangible assets in subsequent years, are as follows:
Year Ended December 31,
|
|
2023
|
|
$ |
32,000 |
|
2024
|
|
|
32,000 |
|
2025
|
|
|
32,000 |
|
2026
|
|
|
32,000 |
|
2027
|
|
|
15,000 |
|
Total
|
|
$ |
143,000 |
|
6.
|
Related Party Transactions
|
HealthBanks Biotech (USA) Inc.
On November 26, 2019, the Company entered into an agreement with HealthBanks Biotech (USA) Inc. (“HealthBanks”) to form a new company called ImmuneCyte, Inc. (“ImmuneCyte”) to commercialize the Company’s proprietary cell processing platform, CAR-TXpress™, for use in immune cell banking as well as for cell-based contract development and manufacturing services (CMO/CDMO). Under the terms of the agreement, ImmuneCyte was initially owned 80% by HealthBanks and 20% by the Company. Healthbanks is a subsidiary of the Boyalife Group (USA), Inc. which is owned by Dr. Xiaochun (Chris) Xu, the Company’s Chief Executive Officer and Chairman of our Board of Directors. Due to the significant influence the Company has over ImmuneCyte’s operations, the investment was accounted for by the Company using the equity method.
Between November 26, 2019 and September 30, 2020, ImmuneCyte closed on a series of investments with a private institution and qualified investors. After the investments, ImmuneCyte was owned 75.16% by HealthBanks, 18.79% by the Company and 6.05% by the private investors.
In March 2021, ImmuneCyte completed an acquisition to acquire Boyalife’s Cellular Therapy Division, for 12,000,000 shares in ImmuneCyte and Shanghai KDW info Technology Co. Ltd. for 500,000 shares in ImmuneCyte. Following the acquisitions, the Company’s ownership percentage in ImmuneCyte decreased from 18.79% to 8.64%. The Company performed an analysis of the transaction and noted that none of the factors supporting significant influence changed as a result of the acquisition. Therefore, it was concluded that significant influence remains and the Company will continue to account for the transaction using the equity method. The Company recognized a dilution gain of $262,000 representing its share of the net assets acquired by ImmuneCyte. However, at the time of the acquisition, the Company had accumulated losses of $428,000 in its investment in ImmuneCyte. As the accumulated losses were greater than the dilution gain, no entry was recorded by the Company for its investment in ImmuneCyte following the transaction.
Boyalife Genomics
On March 24, 2022, the Company entered into a License and Technology Access Agreement with Boyalife Genomics Tianjin Ltd. (“Boyalife Genomics”), a China-based CDMO and an affiliate of ThermoGenesis’ Chairman and Chief Executive Officer, Chris Xu, Ph.D. The agreement provides for a U.S. license to certain existing and future know-how and other intellectual property relating to cell manufacturing and related processes. The Company plans to develop and operate the CDMO cell therapy manufacturing business through a newly formed division named TG Biosynthesis.
Under the terms of the agreement, the Company transferred its remaining 8.64% interest in ImmuneCyte to Boyalife Genomics and agreed to pay a running royalty of 7.5% of its annual net sales of products and services that are covered by one or more of Boyalife Genomics’ granted U.S. patents and a royalty of 5.0% of other products and services covered by other licensed intellectual property. In the year ended December 31, 2022, no sales were recorded under the license agreement and no royalty payments were made to Boyalife Genomics.
Convertible Promissory Note and Revolving Credit Agreement
In March 2017, ThermoGenesis Holdings entered into a Credit Agreement with Boyalife Group (USA) (the “Lender”), which is owned and controlled by the Company’s Chief Executive Officer and Chairman of our Board of Directors. The Credit Agreement, as amended, grants to the Company the right to borrow up to $10,000,000 (the “Loan”) at any time prior to March 6, 2023 (the “Maturity Date”). In June 2022, the Lender converted a total of $3,000,000 of the outstanding balance of the convertible note into 10,552,234 shares of our common stock. As of December 31, 2022, the Company had an outstanding principal balance on the Loan of $7,000,000.
The Credit Agreement and the Convertible Promissory Note issued thereunder (as amended, the “Note”) provide that the principal and all accrued and unpaid interest under the Loan will be due and payable on the Maturity Date, with payments of interest-only due on the last day of each calendar year. The Loan bears interest at 22% per annum, simple interest. The Company has five business days after the Lender demands payment to pay the interest due before the Loan is considered in default. The Loan can be prepaid in whole or in part by the Company at any time without penalty.
The following summarizes the Note:
|
Maturity
Date
|
|
Stated
Interest Rate
|
|
|
Conversion
Price
|
|
|
Face
Value
|
|
|
Debt
Discount
|
|
|
Carrying
Value
|
|
At December 31, 2022
|
12/31/2023
|
|
|
22 |
% |
|
$ |
6.30 |
|
|
$ |
7,000,000 |
|
|
$ |
(1,223,000 |
) |
|
$ |
5,777,000 |
|
At December 31, 2021
|
3/6/2022
|
|
|
22 |
% |
|
$ |
81.00 |
|
|
$ |
10,000,000 |
|
|
$ |
(755,000 |
) |
|
$ |
9,245,000 |
|
The Credit Agreement includes a down-round provision that lowers the conversion price of the Note if the Company issues shares of common stock at a lower price per share. In 2022, the anti-dilution provision was triggered four times, as noted below:
In February 2022, when the conversion price of the Note was at $81.00 per share, the Company sold shares of common stock at $28.80 per share. This resulted in a triggering event lowering the conversion price of the Note to that value. The Company determined that it created an incremental value of $213,000 which was treated as a debt discount and amortized over the remaining term of the Note.
In June 2022, the Company sold shares of common stock at $12.60 per share, resulting in a down round triggering event lowering the conversion price of the Note to that value. The triggering event created an incremental value of $2,475,000 which was treated as a debt discount and will be amortized over the remaining term of the Note.
In July 2022, the Company modified a convertible debt agreement, lowering the conversion price of the debt to $9.45 per share, resulting in a down round triggering event lowering the conversion price of the Note to that value. The triggering event created an incremental value of $1,075,000 which was treated as a debt discount and will be amortized over the remaining term of the Note.
In October 2022, the Company sold shares of common stock at $6.30 per share, resulting in a down round triggering event lowering the conversion price of the Note to that value. The triggering event created an incremental value of $872,000 which was treated as a debt discount and will be amortized over the remaining term of the Note.
Subsequent to December 31, 2022, the Company entered into an Amendment No. 2 (the “Amendment to Note”) to its Second Amended and Restated Convertible Promissory Note with Boyalife Group Inc. (the “Note”), and an Amendment No. 3 (the “Amendment to Credit Agreement”) to its First Amended and Restated Revolving Credit Agreement with Boyalife Group Inc. (the “Credit Agreement”). The Amendment to Note amends and extends the maturity date of the Note from March 6, 2023 to December 31, 2023, and provides that interest accrued and unpaid as of March 6, 2023 will be added to the principal balance of the Note.
A Black-Scholes pricing model was utilized to determine the change in the before and after incremental value of the conversion option at each triggering event, with the following inputs:
|
|
February
2022
|
|
|
June
2022
|
|
|
July
2022
|
|
|
October
2022
|
|
Conversion price before
|
|
$ |
81.00 |
|
|
$ |
28.80 |
|
|
$ |
12.60 |
|
|
$ |
9.45 |
|
Conversion price after
|
|
$ |
28.80 |
|
|
$ |
12.60 |
|
|
$ |
9.45 |
|
|
$ |
6.30 |
|
Term (years)
|
|
|
0.02 |
|
|
|
0.69 |
|
|
|
0.61 |
|
|
|
0.35 |
|
Volatility
|
|
|
39.53 |
% |
|
|
85.6 |
% |
|
|
99.5 |
% |
|
|
165 |
% |
Dividend rate
|
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
Risk free rate
|
|
|
1.97 |
% |
|
|
3.2 |
% |
|
|
2.8 |
% |
|
|
4.02 |
% |
The Company amortized a debt discount of $3,413,000 and $3,310,000 for the years ended December 31, 2022 and 2021, respectively. The debt discount for the period ended December 31, 2022 related to down round triggering events that occurred during the year. The amortization included $742,000, which related to accelerated amortization for the portion of the Note that was converted in June 2022. In addition to the amortization, the Company also recorded interest expense of $1,890,000 and $2,231,000 for the years ended December 31, 2022 and 2021, respectively. The interest payable balance as of December 31, 2022 and December 31, 2021 was $1,492,000 and $2,231,000, respectively.
7.
|
Convertible Promissory Note
|
July 2019 Note
On July 23, 2019, the Company entered into a private placement with the accredited investor, pursuant to which the Company issued and sold to such investor an unsecured convertible promissory note in the original principal amount of $1,000,000 (the “July 2019 Note”). The July 2019 Note is convertible into shares of the Company's common stock at a conversion price equal to the lower of (a) $81.00 per share or (b) 90% of the closing sale price of the Company’s common stock on the date of conversion (subject to a floor conversion price of $22.50). The July 2019 Note bears interest at the rate of twenty-four percent (24%) per annum and is payable quarterly in arrears. Unless sooner converted in the manner described below, all principal under the July 2019 Note, together with all accrued and unpaid interest thereupon, will be due and payable three years from the date of the issuance on July 31, 2022.
On July 25, 2022, the Company entered into an amendment to the July 2019 Note, which extended the maturity date of the July 2019 Note to January 31, 2023 and modified when interest is due from quarterly to January 31, 2023. The amendment also (i) deleted the market price-based conversion right, which previously allowed for the July 2019 Note to be converted at a conversion price of 90% of the Company’s stock price on the day of conversion (subject to a $22.50 floor); and (ii) changed to a fixed conversion price to $9.45 per share, provided that in the event that the Company issues shares, options, warrants, or convertible securities, at an effective price per common share lower than $9.45, then the conversion price will be adjusted to such lower issuance price.
The Company performed a debt extinguishment vs. modification analysis on the amendment to the July 2019 Note and determined that the extension would be considered an extinguishment, due to an increase of more than 10% to the value of the embedded conversion option. No gain or loss was recorded in the consolidated statement of operations for the year ended December 31, 2022 as it was determined that the fair value of the amendment of the July 2019 Note and accrued interest was the same before and after the extension.
In October 2022, the Company sold shares of common stock at $6.30 per share, resulting in a down round triggering event lowering the conversion price of the Note to that value. The triggering event created an incremental value of $112,000 which was treated as a debt discount and will be amortized over the remaining term of the Note.
Subsequent to December 31, 2022, the Company entered into an Amendment No. 3 to the July 2019 Note with Orbrex (USA) Co. Limited (the "July 2019 Note Amendment”). The July 2019 Note Amendment amends the July 2019 Note, dated July 23, 2019, as amended by Amendment No. 1 dated effective July 23, 2019, and Amendment No. 2 dated July 25, 2022, between the Company and Orbrex (USA) Co. Limited. The July 2019 Note Amendment extends the maturity date of the July 2019 Note from January 31, 2023 to July 31, 2023. The Note Amendment also changed the fixed conversion price to $2.87 per share, provided that in the event that the Company issues shares, options, warrants, or convertible securities, subject to certain exceptions, at an effective price per common share lower than $2.87, then the conversion price will be adjusted to such lower issuance price.
The following summarizes the July 2019 Note:
|
Maturity
Date
|
|
Stated
Interest Rate
|
|
|
Conversion
Price
|
|
|
Face
Value |
|
|
Debt
Discount |
|
|
|
Carrying
Value
|
|
At December 31, 2022
|
7/31/2023 |
|
|
24 |
% |
|
$ |
6.30 |
|
|
$ |
1,000,000 |
|
|
$ |
(38,000 |
) |
|
$ |
962,000 |
|
At December 31, 2021
|
7/31/2022 |
|
|
24 |
% |
|
$ |
40.95 |
|
|
$ |
1,000,000 |
|
|
$ |
(187,000 |
) |
|
$ |
813,000 |
|
The Company amortized a debt discount on the July 2019 Note of $74,000 and $321,000 for the years ended December 31, 2022 and 2021, respectively. The debt discount for the period ended December 31, 2022 related to a down round triggering event that occurred during the year. Interest expense related to the July 2019 Note was $240,000 for the years ended December 31, 2022 and 2021. The interest payable balance as of December 31, 2022 and 2021 was $120,000 and $60,000, respectively.
Z3 Investment
On March 24, 2022, the Company entered into a five year Lease Agreement with Z3 Investment LLC, an affiliate of the Company’s Chairman and CEO, and COO, beginning April 1, 2022, for approximately 35,000 square feet of laboratory and office space in Rancho Cordova, California. Under the terms of the agreement, monthly rent is $46,000 per month for the first six months, then increasing to $104,000 per month (with a 4% annual increase) thereafter. Additionally, the Company will pay all operating expenses as they become due estimated to be approximately $5,000 per month and will be expensed in the period incurred. The Company has the option to renew the lease for two 5-year periods. Additionally, the Company has the ability to opt out of the lease after one year if the CDMO facility is unable to be constructed as planned.
The Company performed an analysis of the lease and determined it to be an operating lease. A right-of-use asset and lease obligation were recorded at inception of the lease.
Operating Lease
Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets. To determine the present value of lease payments not yet paid, we use the Company’s cost of capital based on existing debt instruments. We recognize the expense for this lease on a straight-line basis over the lease term.
The following summarizes the Company’s operating lease:
|
|
December 31,
2022
|
|
Right-of-use operating lease assets – related party, net
|
|
$ |
3,550,000 |
|
Current lease liability (included in other current liabilities)
|
|
|
433,000 |
|
Non-current lease liability – related party
|
|
|
3,495,000 |
|
|
|
|
|
|
Weighted average remaining lease term
|
|
|
4.8 |
|
Discount rate
|
|
|
22 |
% |
Maturities of lease liabilities by year for our operating lease are as follows:
2023
|
|
$ |
1,256,000 |
|
2024
|
|
|
1,307,000 |
|
2025
|
|
|
1,359,000 |
|
2026
|
|
|
1,428,000 |
|
2027
|
|
|
1,133,000 |
|
Total lease payments
|
|
$ |
6,483,000 |
|
Less: imputed interest
|
|
|
(2,555,000 |
) |
Present value of operating lease liabilities
|
|
$ |
3,928,000 |
|
Operating Lease Costs
Lease costs recognized in consolidated statements of operations are summarized below:
|
|
December 31,
2022
|
|
Operating lease cost
|
|
$ |
964,000 |
|
Variable lease cost
|
|
|
71,000 |
|
Total lease cost
|
|
$ |
1,035,000 |
|
Statement of Cash Flows
Cash paid for amounts included in the measurement of operating lease liabilities was $587,000 for the year ended December 31, 2022.
The Company leases an approximately 28,000 square foot facility located in Rancho Cordova, California for its corporate offices and in-house manufacturing. The lease was renewed in the first quarter of 2019 and is accounted for as an operating lease. The lease expires in May 2024.
Operating Leases
Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets. To determine the present value of lease payments not yet paid, we use the Company’s cost of capital based on existing debt instruments. Our material leases typically contain rent escalations over the lease term. We recognize expense for these leases on a straight-line basis over the lease term.
The following summarizes the Company’s operating leases:
|
|
December 31,
2022
|
|
|
December 31,
2021
|
|
Right-of-use operating lease assets, net
|
|
$ |
372,000 |
|
|
$ |
571,000 |
|
Current lease liability (included in other current liabilities)
|
|
|
267,000 |
|
|
|
206,000 |
|
Non-current lease liability
|
|
|
131,000 |
|
|
|
398,000 |
|
|
|
|
|
|
|
|
|
|
Weighted average remaining lease term
|
|
|
1.4 |
|
|
|
2.4 |
|
Discount rate
|
|
|
22 |
% |
|
|
22 |
% |
Maturities of lease liabilities by year for our operating leases are as follows:
2023
|
|
$ |
329,000 |
|
2024
|
|
|
139,000 |
|
Total lease payments
|
|
$ |
468,000 |
|
Less: imputed interest
|
|
|
(70,000 |
) |
Present value of operating lease liabilities
|
|
$ |
398,000 |
|
Operating Lease Costs
Lease costs recognized in consolidated statements of operations are summarized below:
|
|
December 31,
|
|
|
|
2022
|
|
|
2021
|
|
Operating lease cost
|
|
$ |
311,000 |
|
|
$ |
311,000 |
|
Variable lease cost
|
|
|
111,000 |
|
|
|
105,000 |
|
Total lease cost
|
|
$ |
422,000 |
|
|
$ |
416,000 |
|
Statement of Cash Flows
In January 2019, the Company signed an amendment to its Rancho Cordova, California lease. The amendment was accounted for as a modification and resulted in a right-of-use asset of $966,000 being recognized as a non-cash addition on the date of the amendment. Cash paid for amounts included in the measurement of operating lease liabilities in cash flows from operating activities were $319,000 and $310,000 for the years ended December 31, 2022 and 2021, respectively.
Finance Leases
Finance leases are included in equipment and other current and non-current liabilities on the consolidated balance sheet. The amortization and interest expense are included in general and administrative expense and interest expense, respectively on the statement of operations. These leases were not material for the years ended December 31, 2022 and 2021.
10.
|
Commitments and Contingences
|
Financial Covenants
On July 13, 2020, the Company, entered into a Manufacturing and Supply Amending Agreement #2 with CBR Systems, Inc. (“CBR”) with an effective date of July 13, 2020 (the “Amendment”). The Amendment amends the Manufacturing and Supply Agreement entered into on May 15, 2017 and Amendment #1 dated March 16, 2020 by the Company and CBR. The Amendment, among other things, revised the amounts of certain products to be purchased, pricing of those products and removal of the safety stock requirement. In addition, the Amendment updated the financial requirement to exclude convertible debt from the definition of short-term debt under events or conditions that constitute a default. The Amendment states that the Company’s cash balance and short-term investments net of non-convertible debt and borrowed funds that are payable within one year must be greater than $1,000,000 at any month end. The Company was in compliance with this agreement as of December 31, 2022.
Potential Severance Payments
We have entered into an employment agreement with the Company Chief Executive Officer under which payment and benefits would become payable in the event of termination by us for any reason other than cause, or upon a change in control of our Company, or by the employee for good reason.
Contingencies
In the normal course of operations, the Company may have disagreements or disputes with customers, employees or vendors. Such potential disputes are seen by management as a normal part of business. As of December 31, 2022, management believes any liability that may ultimately result from the resolution of these matters will not have a material adverse effect on the Company’s consolidated financial position, operating results or cash flows.
Common Stock
On February 3, 2022, the Company entered into Amendment No. 2 to the At the Market Offering Agreement (the “Offering Agreement”) with H.C. Wainwright & Co., LLC to further increase the maximum aggregate offering price of shares of Common Stock that may be offered and sold from time to time under the Offering Agreement from $15,280,000 to $19,555,000, which enables the Company to sell an additional $4,275,000 of shares after taking into account prior sales under the Offering Agreement (the “Additional Shares”). In March 2022, the total offering price was updated to $18,573,000 based on the shares that were currently available on Company’s existing Form S-3. The terms and conditions of the Offering Agreement otherwise remain unchanged. For the year ended of December 31, 2022, the Company sold a total of 196,843 shares of common stock under the Offering Agreement for aggregate gross proceeds of $3,293,000 at an average selling price of $16.73 per share, resulting in net proceeds of approximately $3,037,000 after deducting commissions and other transaction costs of approximately $256,000.
On October 28, 2022, the Company completed a public offering (the "Offering") of an aggregate of 326,171 units (the "Units") and 64,286 pre-funded units (the "Pre-Funded Units”) for a purchase price of $6.30 per unit, resulting in aggregate gross proceeds of approximately $2,055,000 resulting in net proceeds of approximately $1,549,000 after deducting commissions and other transaction costs of approximately $506,000. The Offering closed on October 28, 2022. Each Unit sold in the Offering consisted of one share of the Company's common stock and one common warrant to purchase one share of common stock, and each Pre-Funded Unit consisted of one pre-funded warrant to purchase one share of common stock and one common warrant to purchase one share of common stock. The common warrants will be exercisable at an exercise price of $6.30 per share beginning on the effective date of Company stockholder approval of the issuance of the shares upon exercise of the warrants (the "Warrant Stockholder Approval”) and will expire on the fifth anniversary of the effective date of the Warrant Stockholder Approval. The Company evaluated the common warrants issued and determined that they should be classified as equity. As of December 31, 2022, all 64,286 pre-funded warrants sold in the Offering have been exercised and none are currently outstanding.
Warrants
A summary of warrant activity is as follows:
|
|
Number
of
Shares
|
|
|
Weighted-
Average Exercise
Price Per Share
|
|
|
Weighted-
Average
Remaining
Contract Term
|
|
Balance at January 1, 2021
|
|
|
24,814 |
|
|
$ |
1,677.28 |
|
|
|
0.49 |
|
Warrants granted
|
|
|
- |
|
|
$ |
- |
|
|
|
|
|
Warrants exercised
|
|
|
- |
|
|
$ |
- |
|
|
|
|
|
Warrants expired/canceled
|
|
|
(10,296 |
) |
|
$ |
3,600.00 |
|
|
|
|
|
Outstanding and Exercisable at December 31, 2021
|
|
|
14,518 |
|
|
$ |
313.71 |
|
|
|
1.44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2022
|
|
|
14,518 |
|
|
$ |
313.71 |
|
|
|
1.44 |
|
Warrants granted(1)
|
|
|
326,171 |
|
|
$ |
6.30 |
|
|
|
|
|
Pre-funded warrants granted
|
|
|
64,286 |
|
|
$ |
0.045 |
|
|
|
|
|
Pre-funded warrants exercised
|
|
|
(64,286 |
) |
|
$ |
0.045 |
|
|
|
|
|
Warrants expired/canceled
|
|
|
- |
|
|
$ |
- |
|
|
|
|
|
Outstanding at December 31, 2022
|
|
|
340,689 |
|
|
$ |
19.40 |
|
|
|
0.31 |
|
Exercisable at December 31, 2022
|
|
|
14,518 |
|
|
$ |
313.71 |
|
|
|
0.44 |
|
(1)
|
Warrants are subject to stockholder approval and will remain outstanding but unvested until the Company receives such approval. Subsequent to December 31, 2022, the Company’s stockholders approved the warrants.
|
Equity Plans and Agreements
The Amended 2016 Equity Incentive Plan (the “Amended 2016 Plan”) was approved by the stockholders in May 2017, under which up to 1,334 shares may be issued pursuant to grants of shares, options, or other forms of incentive compensation. On June 22, 2018, the stockholders approved an amendment to the Amended 2016 Plan to increase the number of shares that may be issued to 2,945 shares. On May 30, 2019, the stockholders approved an amendment to the Amended 2016 Plan to increase the number of shares that may be issued from 2,945 shares to 8,723 shares. On January 13, 2022, the stockholders approved an amendment to the Amended 2016 Plan to increase the number of shares that may be issued from 8,723 to 26,667 shares. On December 15, 2022, the stockholders approved an amendment to the Amended 2016 Plan to increase the number of shares that may be issued under the plan from 26,667 the 66,667. As of December 31, 2022, 60,197 awards were available for issuance under the Amended 2016 Plan.
On December 29, 2017, the Board of Directors of ThermoGenesis Corp. adopted the ThermoGenesis Corp. 2017 Equity Incentive Plan (the “ThermoGenesis Plan”) and on the same day granted options to purchase an aggregate of 280,000 shares of ThermoGenesis Corp. common stock to employees, directors, consultants, and advisors of ThermoGenesis Corp. The ThermoGenesis Plan was unanimously approved by the ThermoGenesis stockholders (including the Company) on December 29, 2017. The ThermoGenesis Plan authorizes the issuance of up to 1,000,000 shares of ThermoGenesis common stock. There are 40,000 shares available for issuance as of December 31, 2022. As the ThermoGenesis Plan is for the Company’s subsidiary it was not affected by the reverse split effected on December 22, 2022.
Stock Based Compensation
The Company recorded stock-based compensation of $267,000 for the year ended December 31, 2022 and $2,560,000 for the year ended December 31, 2021, as comprised of the following:
|
|
Year Ended December 31,
|
|
|
|
2022
|
|
|
2021
|
|
Cost of revenues
|
|
$ |
18,000 |
|
|
$ |
17,000 |
|
Selling, general and administrative
|
|
|
229,000 |
|
|
|
2,275,000 |
|
Research and development
|
|
|
20,000 |
|
|
|
268,000 |
|
|
|
$ |
267,000 |
|
|
$ |
2,560,000 |
|
On June 4, 2020, the Chief Executive Officer, Chief Financial Officer and other employees were granted 12,567 options to purchase shares of the Company’s common stock at an exercise price of $267.30 per share. In May 2021, five Company executives voluntarily surrendered the options they were awarded. At the time they were surrendered, the exercise price of the options was underwater. No payment or other consideration was paid to the Company executives for surrendering the options. In total 10,889 options were cancelled. As a result of the cancellation, the remaining unamortized expense of $2,008,000 was accelerated and expensed in the year ended December 31, 2021.
Stock Options
The Company issues new shares of common stock upon exercise of stock options. The following is a summary of option activity for the Company’s stock option plans:
|
|
Number
of Shares
|
|
|
Weighted-
Average
Exercise
Price
|
|
|
Weighted-
Average
Remaining
Contractual
Life
|
|
Outstanding at January 1, 2022
|
|
|
7,885 |
|
|
$ |
546.10 |
|
|
|
6.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Expired
|
|
|
(129 |
) |
|
$ |
7,361.38 |
|
|
|
|
|
Forfeited/cancelled
|
|
|
(1,353 |
) |
|
$ |
443.23 |
|
|
|
|
|
Outstanding at December 31, 2022
|
|
|
6,403 |
|
|
$ |
430.53 |
|
|
|
5.93 |
|
Vested and Expected to Vest at December 31, 2022
|
|
|
6,246 |
|
|
$ |
435.36 |
|
|
|
5.89 |
|
Exercisable at December 31, 2022
|
|
|
6,048 |
|
|
$ |
441.00 |
|
|
|
5.84 |
|
The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock.
Non-vested stock option activity for the year ended December 31, 2022, is as follows:
|
|
Non-vested Stock
Options
|
|
|
Weighted-Average
Grant Date Fair Value
|
|
Outstanding at January 1, 2022
|
|
|
1,643 |
|
|
$ |
266.84 |
|
Granted
|
|
|
- |
|
|
|
|
|
Vested
|
|
|
(983 |
) |
|
$ |
280.95 |
|
Cancelled/forfeited
|
|
|
(305 |
) |
|
$ |
278.55 |
|
Outstanding at December 31, 2022
|
|
|
355 |
|
|
$ |
217.71 |
|
At December 31, 2022, the total compensation cost related to options granted under the Company’s stock option plans but not yet recognized was $30,000. This cost will be amortized on a straight-line basis over a weighted-average period of approximately one year and will be adjusted for subsequent forfeitures.
Net Loss Per Share
Net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding. The calculation of the basic and diluted earnings per share is the same for all periods presented, as the effect of the potential common stock equivalents noted below is anti-dilutive due to the Company’s net loss position for all periods presented. Anti-dilutive securities consisted of the following at December 31:
|
|
2022
|
|
|
2021
|
|
Common stock equivalents of convertible promissory notes and accrued interest
|
|
|
1,525,751 |
|
|
|
176,907 |
|
Warrants
|
|
|
340,689 |
|
|
|
14,518 |
|
Stock options
|
|
|
6,403 |
|
|
|
7,885 |
|
Total
|
|
|
1,872,843 |
|
|
|
199,310 |
|
The Company’s revenues primarily consist of device sales and service revenue.
Device Sales
Device sales include devices and consumables for BioArchive, AXP, CAR-TXpress and manual disposables. Revenue is recognized when control of the devices passes to the customer, and the Company’s performance obligation has been satisfied.
Service Revenue
Service revenue principally consists of maintenance contracts for BioArchive, AXP and CAR-TXpress products. Devices sold have warranty periods of one to two years. After the warranty expires, the Company offers separately priced annual maintenance contracts. Under these contracts, customers pay in advance. These prepayments are recorded as deferred revenue and recognized over time as the contract performance obligations are satisfied.
Revenue is recognized based on the following five-step process as outlined in the Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers”: (i) Identify the Contract with the Customer; (ii) Identify Performance Obligations in the Contract; (iii) Determine the Transaction Price; (iv) Allocate the Transaction Price; and (v) Satisfaction of the Performance Obligations (and Recognize Revenue).
Revenues are recorded net of discounts. Shipping and handling fees billed to customers are included in net revenues, while the related costs are included in cost of revenues. Most sales are made with FOB origin shipping terms, with title and control of the goods passing to the customer at the time of shipment. Payments from domestic customers are normally due in two months or less after the title transfers, the service contract is executed, or the services have been rendered. For international customers, payment terms may extend up to 120 days. All sales have fixed pricing and there are currently no variable components included in the Company’s revenue.
Generally, all sales are contract sales (with either an underlying contract or purchase order). The Company does not have any material contract assets. When invoicing occurs prior to revenue recognition, a contract liability is recorded (as deferred revenue on the consolidated balance sheet).
Except for limited exceptions, there is no right of return provided for distributors or customers. For distributors, the Company has no control over the movement of goods to the end customer. The Company’s distributors control the timing, terms and conditions of the transfer of goods to the end customer. Additionally, for sales of products made to distributors, the Company considers a number of factors in determining when revenue is recognized. These factors include, but are not limited to, whether the payment terms offered to the distributor are considered to be non-standard, the distributor’s history of adhering to the terms of its contractual arrangements with the Company, whether the Company has a pattern of granting concessions for the benefit of the distributor, and whether there are other conditions that may indicate that the sale to the distributor is not substantive.
The following table presents net sales by geographic areas:
|
|
Years Ended December 31,
|
|
|
|
2022
|
|
|
2021
|
|
United States
|
|
$ |
6,641,000 |
|
|
$ |
5,304,000 |
|
China
|
|
|
1,984,000 |
|
|
|
1,771,000 |
|
Portugal
|
|
|
211,000 |
|
|
|
548,000 |
|
Thailand
|
|
|
9,000 |
|
|
|
401,000 |
|
South Korea
|
|
|
325,000 |
|
|
|
222,000 |
|
Vietnam
|
|
|
515,000 |
|
|
|
332,000 |
|
Other
|
|
|
798,000 |
|
|
|
716,000 |
|
Total
|
|
$ |
10,483,000 |
|
|
$ |
9,294,000 |
|
The following table summarizes the revenues by product line and type:
|
|
Year Ended December 31, 2022
|
|
|
|
Device
Revenue
|
|
|
Service
Revenue
|
|
|
Other
Revenue
|
|
|
Total
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AXP
|
|
$ |
5,911,000 |
|
|
$ |
480,000 |
|
|
$ |
- |
|
|
$ |
6,391,000 |
|
BioArchive
|
|
|
1,247,000 |
|
|
|
968,000 |
|
|
|
- |
|
|
|
2,215,000 |
|
CAR-TXpress
|
|
|
654,000 |
|
|
|
190,000 |
|
|
|
285,000 |
|
|
|
1,129,000 |
|
Manual Disposables
|
|
|
655,000 |
|
|
|
- |
|
|
|
- |
|
|
|
655,000 |
|
Other
|
|
|
64,000 |
|
|
|
- |
|
|
|
29,000 |
|
|
|
93,000 |
|
Total
|
|
$ |
8,531,000 |
|
|
$ |
1,638,000 |
|
|
$ |
314,000 |
|
|
$ |
10,483,000 |
|
|
|
Year Ended December 31, 2021
|
|
|
|
Device
Revenue
|
|
|
Service
Revenue
|
|
|
Other
Revenue
|
|
|
Total
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AXP
|
|
$ |
4,940,000 |
|
|
$ |
198,000 |
|
|
$ |
- |
|
|
$ |
5,138,000 |
|
BioArchive
|
|
|
827,000 |
|
|
|
1,518,000 |
|
|
|
- |
|
|
|
2,345,000 |
|
CAR-TXpress
|
|
|
875,000 |
|
|
|
123,000 |
|
|
|
286,000 |
|
|
|
1,284,000 |
|
Manual Disposables
|
|
|
421,000 |
|
|
|
- |
|
|
|
- |
|
|
|
421,000 |
|
Other
|
|
|
65,000 |
|
|
|
- |
|
|
|
41,000 |
|
|
|
106,000 |
|
Total
|
|
$ |
7,128,000 |
|
|
$ |
1,839,000 |
|
|
$ |
327,000 |
|
|
$ |
9,294,000 |
|
Contract Balances
Generally, all sales are contract sales (with either an underlying contract or purchase order). The Company does not have any material contract assets. When invoicing occurs prior to revenue recognition, a contract liability is recorded (as deferred revenue on the consolidated balance sheet). Revenues recognized during the year ended December 31, 2022 and 2021 that were included in the beginning balance of deferred revenue were $719,000 and $608,000, respectively. Short-term deferred revenues were $782,000 and $719,000 at December 31, 2022 and 2021, respectively. Long-term deferred revenue was $911,000 and $1,244,000 at December 31, 2022 and 2021, respectively.
Exclusivity Fee
In 2019, the Company entered into a Supply Agreement with Corning Incorporated (the “Supply Agreement”). The Supply Agreement has an initial term of five years with Corning having two options to renew for an additional two-years (up to four years total), unless terminated by either party in accordance with the terms of the Supply Agreement (collectively, the “Term”). Pursuant to the Supply Agreement, the Company has granted Corning exclusive worldwide distribution rights for substantially all X-Series® products under the CAR-TXpress™ platform (the “Products”) for the duration of the Term, subject to certain geographical and other exceptions. In addition to any amounts payable throughout the Term for the Products, as consideration for the exclusive worldwide distribution rights Corning paid a $2,000,000 exclusivity fee. The Company recorded $286,000 in revenue for the years ended December 31, 2022 and 2021.
Distribution Agreement
The Company signed a new agreement with its AXP distributor in China through 2023. The new agreement contains annual purchase minimums. In return for the minimum purchase commitment, the Company provided the distributor with AXP processing devices to use during the term of the agreement. The Company maintains ownership of these devices and they must be returned to the Company at the end of the agreement. The Company analyzed the relevant accounting guidance and determined that the equipment and AXP bagsets represented distinct performance obligations. The equipment was concluded to be an embedded lease, accounted for as a sales-type operating lease. For the years December 31, 2022 and 2021, the Company recorded $82,000 and $41,000 in revenue relating to the lease.
Backlog of Remaining Customer Performance Obligations
The following table represents revenue expected to be recognized in the future from the backlog of performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period:
|
|
2023
|
|
|
2024
|
|
|
2025
|
|
|
2026 and
beyond
|
|
|
Total
|
|
Service revenue1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
|
|
$ |
1,157,000 |
|
|
$ |
637,000 |
|
|
$ |
244,000 |
|
|
$ |
- |
|
|
$ |
2,038,000 |
|
Device revenue (1)
|
|
|
845,000 |
|
|
|
41,000 |
|
|
|
- |
|
|
|
- |
|
|
|
886,000 |
|
Exclusivity fee
|
|
|
286,000 |
|
|
|
286,000 |
|
|
|
286,000 |
|
|
|
189,000 |
|
|
|
1,047,000 |
|
Clinical revenue
|
|
|
13,000 |
|
|
|
13,000 |
|
|
|
13,000 |
|
|
|
118,000 |
|
|
|
157,000 |
|
Total
|
|
$ |
2,301,000 |
|
|
$ |
977,000 |
|
|
$ |
543,000 |
|
|
$ |
307,000 |
|
|
$ |
4,128,000 |
|
|
(1)
|
Represents the minimum purchase requirements under the distribution agreement the Company signed with its AXP distributor in China and other revenue deferred at December 31, 2022.
|
The Company had accounts receivable balances or revenues in excess of 10% for the years ended December 31, 2022 and 2021 as shown in the table below:
Accounts Receivable
|
|
2022
|
|
|
2021
|
|
Customer 1
|
|
|
29 |
% |
|
|
0 |
%
|
Customer 2
|
|
|
27 |
% |
|
|
0 |
%
|
Customer 3
|
|
|
15 |
% |
|
|
6 |
% |
Revenues
|
|
2022
|
|
|
2021
|
|
Customer 1
|
|
|
33 |
% |
|
|
22 |
% |
Customer 2
|
|
|
15 |
% |
|
|
16 |
% |
One supplier accounted for 70% and 71% of total inventory purchases during the years ended December 31, 2022 and 2021, respectively.
14.
|
Employee Retention Tax Credit
|
Employee Retention Tax Credits (“ERTC”), created in the March 2020 CARES Act and then subsequently amended by the Consolidated Appropriation Act (“CAA”) of 2021 and the American Rescue Plan Act (“ARPA”) of 2021, is a refundable payroll credit for qualifying businesses keeping employees on their payroll during the COVID-19 pandemic. Under CAA and ARPA amendments, employers can claim a refundable tax credit against the employer share of social security tax equal to 70% of the qualified wages (including certain health care expenses) paid to employees from January 1, 2021 to September 30, 2021. Qualified wages are limited to $10,000 per employee per quarter in 2021 so the maximum ERTC available is $7,000 per employee per quarter.
The Company was eligible to receive the ERTC credits under the gross receipts decline test when comparing the first, second and third quarters of 2021 to the same quarters in 2019, which qualified the Company to claim ERTC the first three quarters of 2021 under the amended ERTC program. The Company qualified for a refundable payroll tax credit totaling $842,000 for the first three quarters of 2021, which is recorded in other income on the Company’s consolidated statement of operations for the year ended December 31, 2021, and prepaid and other current assets on the Company’s consolidated balance sheet as of December 31, 2021.
Loss before income tax benefits were comprised of $11,752,000 from U.S. and $60,000 from foreign jurisdictions for the year ended December 31, 2022 and $11,850,000 from U.S. and $30,000 from foreign jurisdictions for the year ended December 31, 2021.
The reconciliation of federal income tax attributable to operations computed at the federal statutory tax rate to income tax benefit is as follows for the:
|
|
Year Ended December 31,
|
|
|
|
2022
|
|
|
2021
|
|
Statutory federal income tax benefit
|
|
$ |
(2,481,000 |
) |
|
$ |
(2,495,000 |
) |
Intangible assets
|
|
|
- |
|
|
|
- |
|
PPP loan forgiveness
|
|
|
|
|
|
|
(137,000 |
) |
Incentive stock options
|
|
|
- |
|
|
|
257,000 |
|
Change in valuation allowance
|
|
|
(284,000 |
) |
|
|
(72,000 |
) |
Expiration of net operating losses
|
|
|
1,356,000 |
|
|
|
1,242,000 |
|
Disallowed financing costs
|
|
|
1,179,000 |
|
|
|
1,282,000 |
|
State and local taxes
|
|
|
200,000 |
|
|
|
(195,000 |
) |
Foreign rate differential
|
|
|
11,000 |
|
|
|
26,000 |
|
Other
|
|
|
19,000 |
|
|
|
92,000 |
|
Total income tax expense
|
|
$ |
- |
|
|
$ |
- |
|
At December 31, 2022, we had federal net operating loss carryforwards of approximately $123,182,000 to offset future federal taxable income, with $96,250,000 available through 2037 and $26,931,000 available indefinitely. We also had state net operating loss carryforwards of approximately $46,750,000 that may offset future state taxable income through 2042. We also had foreign net operating loss carryforwards of approximately $426,000 that may offset future foreign taxable income through 2030.
At December 31, 2022, the Company has research and experimentation credit carryforwards of $1,459,000 for federal tax purposes that expire in various years between 2023 and 2042, and $1,618,000 for state income tax purposes that do not have an expiration date, and some of which expire in 2031 and 2032.
Significant components of the Company’s deferred tax assets and liabilities for federal and state income taxes are as follows:
|
|
Year Ended December 31,
|
|
|
|
2022
|
|
|
2021
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$ |
26,465,000 |
|
|
$ |
27,088,000 |
|
Income tax credit carryforwards
|
|
|
2,738,000 |
|
|
|
2,797,000 |
|
Stock compensation
|
|
|
421,000 |
|
|
|
437,000 |
|
Lease obligation
|
|
|
908,000 |
|
|
|
127,000 |
|
Deferred revenue
|
|
|
251,000 |
|
|
|
313,000 |
|
Inventory Reserve
|
|
|
517,000 |
|
|
|
449,000 |
|
Sec. 174 Capitalized R&D
|
|
|
317,000 |
|
|
|
- |
|
Other
|
|
|
159,000 |
|
|
|
213,000 |
|
Total deferred tax assets
|
|
|
31,776,000 |
|
|
|
31,424,000 |
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
(252,000 |
) |
|
|
(320,000 |
) |
Lease asset
|
|
|
(824,000 |
) |
|
|
(120,000 |
) |
Total deferred tax liabilities
|
|
|
(1,076,000 |
) |
|
|
(440,000 |
) |
Valuation allowance
|
|
|
(30,700,000 |
) |
|
|
(30,984,000 |
) |
Net deferred taxes
|
|
$ |
- |
|
|
$ |
- |
|
ASC 740 requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is "more likely than not." Realization of the future tax benefits is dependent on the Company's ability to generate sufficient taxable income within the carryforward period. Because of the Company's recent history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a valuation allowance.
The valuation allowance decreased by $284,000 and decreased by $72,000 during the years ended December 31, 2022 and 2021, respectively.
In August 2016, the conversion of the Boyalife debentures effected an “ownership change” as defined under the provisions of the Tax Reform Act of 1986. As a result, any net operating loss and credit carryovers existing at that date will be subject to an annual limitation regarding their utilization against taxable income in future periods. Additionally, before the conversion of the debentures, it is possible that “ownership changes” occurred, which could create additional limitations on the use of our net operating losses and credit carryovers. Additionally, ownership changes may have occurred in the periods after 2016 which could limit our utilization of losses and credits generated in the years 2016 – 2022.
On March 27, 2020, the Coronavirus, Aid, Relief and Economic Stimulus Act (“CARES Act”) was enacted. The CARES Act made various tax law changes including among other things (i) increasing the limitation under Section 163(j) of the Internal Revenue Code of 1986, as amended (the “IRC”) for 2019 and 2020 to permit additional expensing of interest (ii) enacting a technical correction so that qualified improvement property can be immediately expensed under IRC Section 168(k), (iii) making modifications to the federal net operating loss rules including permitting federal net operating losses incurred in 2018, 2019, and 2020 to be carried back to the five preceding taxable years in order to generate a refund of previously paid income taxes, and (iv) enhancing the recoverability of alternative minimum tax credits. As of December 31, 2020, the Company has taken advantage of the PPP loan provided by the CARES Act. The PPP loan was forgiven in 2021 and forgiveness income has been fully reversed as per federal guidance. The provisions of the CARES Act have had no impact on the Company.
On December 22, 2017, the U.S. enacted comprehensive tax legislation (the “Tax Act”). The Tax Act made broad and complex changes to the U.S. tax code, including the amendment of Code Section 174 requiring capitalization of research and experimentation expenditures for tax years beginning after December 31, 2021. The capitalized expenses are amortized over a period of 5 or 15 years depending on whether they are U.S. or foreign based.
On August 16, 2022, the President signed into law H.R. 5376 (commonly called the “Inflation Reduction Act of 2022”). The primary tax provisions in the new law include an alternative minimum tax (“AMT”) on certain large corporations, a tax on stock buybacks and certain energy-related tax credits, each of which become effective after December 31, 2022. The provisions of the Inflation Reduction Act are not expected to have a material effect on the Company’s financial statements and related disclosures.
The Company does not have any uncertain tax positions at December 31, 2022 or December 31, 2021. For the most part, tax years after 2002 are all open to examination by federal and state tax authorities and after 2015 by foreign tax authorities.
16.
|
Employee Retirement Plan
|
401(k) Plan
The Company provides a retirement plan, in accordance with Section 401(k) of the Internal Revenue Code, to all eligible employees. Employees may elect to contribute up to the Internal Revenue Service maximum annual contribution limit. The Company matches employee contributions up to a maximum of 4% per year. The Company recognized an expense of $132,000 and $135,000 for the years ended December 31, 2022 and 2021, respectively, related to matching contributions.
On January 31, 2023, the Company entered into an Amendment No. 3 to the July 2019 Note with Orbrex (USA) Co. Limited (the "July 2019 Note Amendment”). The July 2019 Note Amendment amends the July 2019 Note, dated July 23, 2019, as amended by Amendment No. 1 dated effective July 23, 2019, and Amendment No. 2 dated July 25, 2022, between the Company and Orbrex (USA) Co. Limited. The July 2019 Note Amendment extends the maturity date of the July 2019 Note from January 31, 2023 to July 31, 2023. The Note Amendment also changed the fixed conversion price to $2.87 per share, provided that in the event that the Company issues shares, options, warrants, or convertible securities, subject to certain exceptions, at an effective price per common share lower than $2.87, then the conversion price will be adjusted to such lower issuance price.
The Company held a Special Meeting of Stockholders on February 23, 2023, at which time the Company’s stockholders approved the 326,171 warrants that were issued in the October 2022 Offering. As a result of the approval of the warrants, they are now exercisable as of February 23, 2023 and will be exercisable for a period of five (5) years thereafter, subject to the terms and conditions of the warrants.
In February and March of 2023 through several conversions, the holder of the July 2019 Note converted $603,000 of the Note for 215,000 shares. The current outstanding balance of the Note is $397,000.
On March 6, 2023, the Company entered into an Amendment No. 2 (the “Amendment to Note”) to its Second Amended and Restated Convertible Promissory Note with Boyalife Group Inc. (the “Note”), and an Amendment No. 3 (the “Amendment to Credit Agreement”) to its First Amended and Restated Revolving Credit Agreement with Boyalife Group Inc. (the “Credit Agreement”). The Amendment to Note amends and extends the maturity date of the Note from March 6, 2023 to December 31, 2023, and provides that interest accrued and unpaid as of March 6, 2023 will be added to the principal balance of the Note, resulting in an outstanding principal balance of $7,278,000 as of March 6, 2023.
On March 15, 2023, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an accredited investor (the “Investor”) pursuant to which the Company agreed to issue and sell to the Investor in a private placement (the “Offering”) (i) 125,000 shares of its common stock, $0.001 par value (the “Common Shares”), (ii) 946,429 pre-funded warrants to purchase Common Shares at a purchase price of $2.80, and (iii) warrants to purchase up to an aggregate 1,071,429 Common Shares were issued. The warrants have an exercise price of $2.65 per share and are exercisable immediately upon issuance and expire five and one-half years following the issuance for a total net proceeds of approximately $2.6 million, excluding legal and transaction fees. The transaction triggered the down round provision in the July 2019 Note Amendment and the Amendment to the Note lowering the conversion price of both notes to $2.65. The Offering closed on March 20, 2023.
As part of the Offering, the Company entered into a Registration Rights Agreement, dated March 15, 2023, with the Investor, pursuant to which the Company agreed to register the resale of the shares of Common Stock sold in the Offering and the shares of Common Stock issuable upon exercise of the Common Warrants and the Pre-Funded Warrants.
In connection with the Offering, the Company entered into a Warrant Amendment Agreement (the “Warrant Amendment Agreement”), dated March 15, 2023, with the Investor, whereby the Company agreed to amend existing warrants, held by the Investor, to purchase up to an aggregate of 158,731 shares of Common Stock that were previously issued in October 2022. These warrants had an exercise price of $6.30 per share and, pursuant to the Warrant Amendment Agreement, have been amended to reduce the exercise price to $2.65 per share effective upon the closing of the Offering. On March 21, 2023, the 158,731 warrants were exercised in full.