Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations includes the following sections:

• Overview that discusses our business and some of the relevant trends.

Overview

Plus Therapeutics is committed to developing and delivering innovative treatments for rare and difficult to treat cancers, with a focus on cancers of the central nervous system. Plus Therapeutics’ mission is to transform the clinical care of cancer patients through its innovative drugs that have the potential to improve survival and quality of life.

Plus has a nanoscale drug development platform and the requisite expertise to innovate and produce new and better therapeutics for rare cancers. We believe that this approach will produce investigational drugs that provide unique benefits such as improved mechanism of action, better tumor targeting, improved pharmacokinetics and higher treatment doses to the tumor. Benefits such as these may then improve the overall efficacy of drugs while reducing the side effects associated with more traditional drug delivery methods. To support this goal, Plus Therapeutics has an established, GMP-validated nanoscale drug R&D and commercial scale manufacturing facility in San Antonio, TX. This facility is ideally suited to produce nanoliposomal drug candidates for research, development, clinical and commercial use.

As part of our strategy to leverage our nanotechnology platform and expertise, we use a simple multi-step model that management believes allows Plus to best address unmet market needs or underserved medical conditions while managing risks and minimizing development costs. This model includes: (1) market landscape mapping, (2) internal drug redesign, (3) in house drug manufacturing, (4) performance of critical non-clinical (i.e. bench, animal) analyses, (5) scale-up manufacturing for commercial purposes and performance of early-stage clinical trials, and (6) partnering for late-stage clinical trials, regulatory approval, and, ultimately, commercial launch.

Pipeline

Plus Therapeutics currently has four investigational drugs, three of which are at the clinical stage for rare and difficult to treat cancers. The three clinical stage drugs in our pipeline are:

In addition, Plus has an early preclinical investigational drug which is a proprietary combination of Rhenium Nanpoliposomes and liposomal doxorubicin. Theoretically, this combination could provide a synergistic combination of both chemotherapy and radiation in a single treatment.

Current business activities related to both DocePLUS and DoxoPLUS are focused on identification of potential partners for these two drugs.

Plus’ RNLTM technology was a key part of the licensed radiotherapeutic portfolio that we acquired from NanoTx, Corp. (“NanoTx”) on May 7, 2020. The licensed radiolabeled nanoliposome platform can be applied toward several cancer targets and was developed by a multi-institutional consortium based in Texas at the Mays Cancer Center / UT Health San Antonio MD Anderson Cancer Center now led by Dr. Andrew Brenner, MD, PhD, who is the Kolitz Chair in Neuro-Oncology Research and Co-Leader of the Experimental and Developmental Therapeutics Program. The licensed technology was previously funded by both the National Institutes of Health/National Cancer Institute (NIH/NCI) and the Cancer Prevention and Research Institute of Texas (CPRIT). Dr.

Brenner’s RNL research program has an active $3M award from NIH/NCI which will financially support the continued clinical development of RNL for recurrent glioblastoma through the completion of a Phase 2 clinical trial and enrollment of up to 55 patients.

Plus Therapeutics’ lead investigational drug, RNLTM, is a novel injectable radiotherapy designed to deliver targeted high dose radiation directly into a brain tumor in a safe, effective, and convenient manner to optimize patient outcomes. RNLTM, which is composed of radionuclide Rhenium-186 (186Re) and a nanoliposomal carrier, is infused directly into the brain tumor via precision brain mapping and convection enhanced delivery. The RNL radiation dose delivered to patients may be up to 15-20x greater than what is possible with external beam radiation therapy (EBRT). Some additional potential benefits of RNL compared to EBRT include:

Recurrent glioblastoma (GBM) affects approximately 12,000 patients annually in the U.S. and is the most common and lethal form of brain cancer. The average life expectancy with glioblastoma is less than 24 months, with a one-year survival rate of 40.8% and a five-year survival rate of only 6.8%. GBM can cause headaches, seizures, vision changes and other neurological complications. Despite the best available medical treatments to eliminate the initial brain tumor, some microscopic disease frequently remains, with tumor regrowth within months. In fact, approximately 90% of patients experience tumor recurrence. This tumor type is incredibly difficult to remove completely, and often is resistant or quickly develops resistance to most available therapies. The treatment of GBM remains a significant challenge and it has been nearly a decade since the FDA approved a new therapy for this disease. There is no clear standard of care for recurrent GBM and even the few currently approved treatments, in aggregate, provide only marginal survival benefit. Current approved therapies are associated with significant side effects, which limit dosing and prolonged use.

By infusing the RNLTM drug directly into the tumor, bypassing the blood-brain barrier, normal brain and external tissues may be spared from radiation damage. We believe that radiation in the form of high energy electrons may be effective against glioblastoma if an adequate dose can be effectively delivered. For comparison, current EBRT protocols for recurrent glioblastoma typically recommend a total maximum dose of about 35 Gy. In contrast, the most recently dosed patient with RNL in our clinical trial received over 500 Gy without significant adverse effects to-date.

RNL is currently being evaluated for the treatment of recurrent glioblastoma in the Phase 1 multi-center ReSPECTTM dose-finding clinical trial. ReSPECT is evaluating the safety, tolerability, and distribution of RNL for the treatment of recurrent glioblastoma. Thus far, RNL has demonstrated early potential efficacy signals in patients with adequate dosing and tumor coverage with two patients surviving more than 30 months, compared to a median survival of approximately 9 months with the current standard of care. The sixth dose escalation cohort of this trial has been completed, which increased the RNL drug volume to 8.8 milliliters and radiation dose to 22.3 millicuries. The increased treatment volume in the sixth cohort will allow treatment of tumors up to approximately 4.5 cm in size, which may include the majority of glioblastoma tumors that appear in the recurrent setting. No treatment-related SAEs have been observed thus far. ReSPECT is supported by an award from the National Cancer Institute (NCI), part of the U.S. National Institutes of Health (NIH).

In September 2020, the FDA granted both Orphan Drug designation and Fast Track designation to RNL for the treatment of patients with glioblastoma.

Based on substantial preclinical work completed and published, RNL is thought to have potential clinical benefits in other difficult to treat cancers such as leptomeningeal carcinomatosis, peritoneal carcinomatosis, recurrent head and neck cancer, and pediatric brain cancer.

Recent Developments

Piramal Master Services Agreement

On January 8, 2021, we entered into a Master Services Agreement (the “MSA”) with Piramal Pharma Solutions, Inc. (“Piramal”), for Piramal to perform certain services related to the development, manufacture, and supply of our RNL-Liposome Intermediate Drug Product. The MSA includes the transfer of analytical methods, development of microbiological methods, process transfer and optimization, intermediate drug product manufacturing, and stability studies for us. The transfer will be performed at

Piramal’s facility located in Lexington, Kentucky. The parties contemplate that the MSA will lead to clinical and commercial supply agreements between us and Piramal.

The MSA has a term of five years and will automatically renew for successive one-year terms unless either party notifies the other no later than six months prior to the original term or any additional terms of its intention to not renew the MSA. We have the right to terminate the MSA for convenience upon thirty days’ prior written notice. Either party may terminate the MSA upon an uncured material breach by the other party or upon the bankruptcy or insolvency of the other party.

Clinical Trials

In December 2020, we completed the sixth cohort of our National Cancer Institute (NCI)-supported, multi-center ReSPECTTM Phase 1 dose-finding clinical trial evaluating Rhenium NanoLiposomes (RNLTM) for the treatment of recurrent glioblastoma (GBM). The sixth cohort of the ReSPECT trial included an increase in both the RNL drug volume and radiation dose to 8.8 milliliters and 22.3 millicuries, respectively. RNL is designed to safely, effectively and conveniently deliver a very high dose of radiation, with a dose that is up to 25 times greater than currently used external beam radiation therapy, directly into the brain tumor for maximum effect. In addition, in December 2020, we started using University of Texas MD Anderson Cancer Center as an active clinical trial site in our ongoing ReSPECTTM Phase 1 clinical trial, currently supported by the National Cancer Institute (NCI).

Recent Financings

At-the-Market Transaction

On October 23, 2020, we entered into an Equity Distribution Agreement (the “Distribution Agreement”) with Canaccord Genuity LLC (“Canaccord”), pursuant to which we may issue and sell, from time to time, shares of our common stock having an aggregate offering price of up to $10,000,000 (the “ATM Shares”), depending on market demand, with Canaccord acting as an agent for sales. Sales of the ATM Shares may be made by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) of the Securities Act of 1933, as amended (the “Securities Act”), including, without limitation, sales made directly on or through the NASDAQ Capital Market. Canaccord will use its commercially reasonable efforts to sell the ATM Shares we request to be sold on our behalf, consistent with Canaccord’s normal trading and sales practices, under the terms and subject to the conditions set forth in the Distribution Agreement. We have no obligation to sell any of the ATM Shares. We may instruct Canaccord not to sell the ATM Shares if the sales cannot be effected at or above the price we designate from time to time and we may at any time suspend sales pursuant to the Distribution Agreement. During the year ended December 31, 2020, we issued 1,616,331 shares under the Distribution Agreement for net proceeds of approximately $3.2 million. During 2021 and through the date of filing of this Form 10-K, the Company issued 536,070 shares under the Distribution Agreement for net proceeds of $1.5 million.

Lincoln Park Purchase Agreement

On September 30, 2020, we entered into a purchase agreement (the “2020 Purchase Agreement”) and registration rights agreement pursuant to which Lincoln Park Capital Fund, LLC (“Lincoln Park”) has committed to purchase up to $25.0 million of our common stock. Under the terms and subject to the conditions of the 2020 Purchase Agreement, we have the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase up to $25.0 million of our common stock. Such sales of common stock by us, if any, will be subject to certain limitations, and may occur from time to time, at our sole discretion, over the 36-month period commencing November 6, 2020, subject to the satisfaction of certain conditions. The number of shares we may sell to Lincoln Park on any single business day in a regular purchase is 50,000, but that amount may be increased up to 100,000 shares, depending upon the market price of our common stock at the time of sale and subject to a maximum limit of $500,000 per regular purchase. The purchase price per share for each such regular purchase will be based on prevailing market prices of our common stock immediately preceding the time of sale as computed under the 2020 Purchase Agreement. In addition to regular purchases, we may also direct Lincoln Park to purchase other amounts as accelerated purchases or as additional accelerated purchases if the closing sale price of the common stock exceeds certain threshold prices as set forth in the 2020 Purchase Agreement. We issued 180,701 shares of common stock to Lincoln Park as a commitment fee in connection with entering into the 2020 Purchase Agreement. During the year ended December 31, 2020, we issued 353,113 shares, excluding 180,701 shares issued as commitment fee, under the 2020 Purchase Agreement for net proceeds of approximately $0.7 million. During 2021 and through the date of filing of this Form 10-K, we issued 985,186 shares of our common stock under the 2020 Purchase Agreement for total proceeds of $2.9 million.

Recent Exercise of Warrants

In February 2021, certain warrant holders exercised warrants to purchase 896,500 shares of our common stock for total exercise proceeds of $2.0 million.

COVID-19 Impact

A novel strain of coronavirus (COVID-19) was declared a global pandemic by the World Health Organization in March 2020. COVID-19 has presented substantial public health and economic challenges and is affecting economies, financial markets, and business operations around the world. International and U.S. governmental authorities in impacted regions have taken action in an effort to slow the spread of COVID-19, including issuing varying forms of “stay-at-home” orders, and restricting business functions outside of one’s home. In response, we have put restrictions on employee travel and working from our executive offices with many employees continuing their work remotely. While we have implemented additional health and safety precautions and protocols in response to the pandemic and government guidelines, we have not experienced a significant impact on our business and operations. However, we may experience disruptions that could adversely impact our business operations as well as our preclinical studies and clinical trials. We are currently continuing the clinical trials we have underway in sites across the U.S., and we expect that COVID-19 precautions may directly or indirectly impact the timeline for some of our clinical trials. Some of our clinical trial sites, including those located in areas severely impacted by the pandemic, have placed new patient enrollment into clinical trials on hold or, for patients traveling from out-of-state, have implemented a 14-day self-quarantine before appointments. In addition, some clinical trial sites have imposed limited accessibility to conduct clinical monitoring and training on-site. We considered the impacts of COVID-19 on the assumptions and estimates used to prepare our financial statements and determined that there were no material adverse impacts on our results of operations and financial position at December 31, 2020.

The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. For example, as certain states and regions across the United States have relaxed various restrictions on businesses and other activities, it is uncertain whether and to what extent federal, state, or local governments may reinstate additional restrictions and safety protocols in response to any increases in COVID-19 cases. Although there are vaccines available, the ability to obtain a vaccine or know when herd immunity will be met, is difficult to anticipate As such, it is uncertain as to the full magnitude that the pandemic will have on our operations, including our preclinical studies and clinical trials, financial condition, liquidity, and future results of operations. Management is actively monitoring the global situation and its impact on our clinical program and timeline, financial condition, liquidity, operations, suppliers, industry, and workforce. We continue to evaluate the extent to which delays as a result of the COVID-19 pandemic will impact our ability to manufacture our product candidates for our clinical trials and conduct other research and development operations and maintain applicable timelines. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, we are not able to estimate the effects of the COVID-19 outbreak on our results of operations, financial condition, or liquidity for fiscal year 2020.

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020. The CARES Act, among other things, includes tax provisions relating to refundable payroll tax credits, deferment of employer’s social security payments, net operating loss utilization and carryback periods, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property (QIP). The CARES Act had no material impact on our income tax provision for the year ended December 31, 2020. We continue to evaluate the impact of the CARES Act on our financial position, results of operations, and cash flows.

Results of Operations

Development revenue

We recognized a total of $0.3 million in revenue for the year ended December 31, 2020, as well as $0.3 million in qualified expenditures for those periods. Our BARDA contract was terminated in December 2019 and the contract close out process was completed during 2020, and we do not expect additional BARDA revenue in the future.

Development revenue for the year ended December 31, 2019 was $7.0 million, which included $4.6 million of revenue recognized under the BARDA contract based on finalization of the indirect cost rates during fiscal years 2012 through 2019.

Research and development expenses

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

The following table summarizes the components of our research and development expenses for the years ended December 31, 2020 and 2019 (in thousands):

Years ended December 31,

Share-based compensation 32 40

Total research and development expenses $ 2,700 $ 5,365

The decrease in research and development expenses for the year ended December 31, 2020 as compared to the same period in 2019 is due primarily to decreased professional services as a result of discontinuing manufacturing subsequent to sale of our former cell therapy business, as well as reduction in research and development expenses related to Doceplus and Doxoplus.

We expect aggregate research and development expenditures to increase in absolute dollars during 2021 due to the expected costs of development of the RNLTM therapy acquired from NanoTx.

In process research and development acquired from NanoTx

In process research and development acquired from NanoTx in the amount of $781,000 represents the upfront cash payment and fair value of 230,769 shares of common stock, with fair value of $1.65 per share, issued to NanoTx in accordance with the terms of the License Agreement.

General and administrative expenses

General and administrative expenses include costs for administrative personnel, legal and other professional expenses, and general corporate expenses. The following table summarizes the general and administrative expenses for the years ended December 31, 2020 and 2019 (in thousands):

Years ended December 31,

General and administrative $ 6,191 $ 5,203

Share-based compensation 215 87

Total general and administrative expenses $ 6,406 $ 5,290

General and administrative expenses increased by $1.1 million during the year ended December 31, 2020, as compared to the same period in 2019 due to increase of legal and professional fees in the year ended December 31, 2020.

We expect general and administrative expenditures to remain generally consistent in 2021 as compared with the year ended December 31, 2020.

Share-based compensation expenses

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

The following table summarizes the components of our share-based compensation expenses for the years ended December 31, 2020 and 2019 (in thousands):

Years ended December 31,

Research and development $ 32 $ 40

General and administrative 215 87

Total share-based compensation $ 247 $ 127

On June 16, 2020, our stockholders approved the 2020 Stock Incentive Plan (the “2020 Plan”). The 2020 Plan replaced our 2014 Equity Incentive Plan. Pursuant to the 2020 Plan, we reserved for issuance 550,000 shares of our common stock for future awards, and granted 444,000 options to our employees, directors, and, as appropriate, to non-employee service providers. In addition, previously-granted options will continue to vest in accordance with their original terms. As of December 31, 2020, the total

compensation cost related to non-vested stock options and stock awards not yet recognized for all our plans is approximately $704,000 which is expected to be recognized as a result of vesting under service conditions over a weighted average period of 2.81 years.

Financing items

The following table summarizes interest income, interest expense, and other income and expense for the years ended December 31, 2020 and 2019 (in thousands):

Years ended December 31,

Interest income 50 55

Change in fair value of liability instruments 2,400 3,407

Issuance cost of warrants — (1,233 )

The decrease in interest expense for the year ended December 31, 2020 as compared to the same period in 2019 was primarily due to the repayments of debt principal of $3.1 million 2019 and $5.0 million in 2020. The changes in fair value of our warrant liabilities are primarily due to fluctuations in the valuation inputs for the warrants. See Note 3 to the consolidated financial statements included elsewhere herein for disclosure and discussion of our warrant liabilities.

We expect interest expense in 2021 to decrease as compared with 2020 due to principal repayment of $5.0 million on April 1, 2020. In April, June, July and September 2020, we entered into revised warrant agreements with the holders of 3,447,500 Series U warrants and in September 2020, we entered into revised warrant agreements for 75,000 of Representative Warrants (defined below). In return for reducing the strike price of the warrants, the warrant holders agreed to amend the settlement provisions upon fundamental transactions. The amended Series U warrants meet the requirements for equity classification under authoritative accounting guidance and are no longer subject to fair value accounting post amendment.

Liquidity and Capital Resources

Short-term and long-term liquidity

The following is a summary of our key liquidity measures (for continuing operations) at December 31, 2020 and 2019 (in thousands):

As of December 31,

To date, these operating losses have been funded primarily from outside sources of invested capital in our common stock, proceeds raised from the Loan and Security Agreement, and gross profits. We have had, and we will continue to have, an ongoing need to raise additional cash from outside sources to fund our future clinical development programs and other operations. Our inability to raise additional cash would have a material and adverse impact on operations and would cause us to default on our loan.

On October 23, 2020, we entered into the Distribution Agreement with Canaccord, pursuant to which we may issue and sell, from time to time, ATM Shares, depending on market demand, with Canaccord acting as an agent for sales. Sales of the ATM Shares may be made by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) of the Securities Act of 1933, as amended (the “Securities Act”), including, without limitation, sales made directly on or through the NASDAQ Capital Market. Canaccord will use its commercially reasonable efforts to sell the ATM Shares we request to be sold on our behalf, consistent with Canaccord’s normal trading and sales practices, under the terms and subject to the conditions set forth in the Distribution Agreement. We have no obligation to sell any of the ATM Shares. We may instruct Canaccord not to sell the ATM Shares if the sales cannot be effected at or above the price we designate from time to time and we may at any time suspend sales pursuant to the Distribution Agreement. During the year ended December 31, 2020, we issued 1,616,331 shares under the Distribution Agreement for net proceeds of approximately $3.2 million. During 2021 and through the date of filing of this Form 10-K, the Company issued 536,070 shares under the Distribution Agreement for net proceeds of $1.5 million.

On September 30, 2020, we entered into the 2020 Purchase Agreement and a registration rights agreement with Lincoln Park, pursuant to which Lincoln Park committed to purchase up to $25.0 million of our common stock. Under the terms and subject to the conditions of the 2020 Purchase Agreement, we have the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase up to $25.0 million of our common stock. Such sales of common stock by us, if any, will be subject to certain limitations, and may occur from time to time, at our sole discretion, over the 36-month period commencing November 6, 2020, subject to satisfaction of certain conditions. The net proceeds under the 2020 Purchase Agreement will depend on the frequency and prices at which we sell shares of our common stock to Lincoln Park. We expect that any proceeds received from such sales to Lincoln Park will be used for working capital and general corporate purposes. During the year ended December 31, 2020, we issued 353,113 shares, excluding 180,701 shares issued as commitment fee, under the 2020 Purchase Agreement for net proceeds of approximately $0.7 million. During 2021 and through the date of filing of this Form 10-K, we issued 985,186 shares of our common stock under the 2020 Purchase Agreement for total proceeds of $2.9 million.

On March 29, 2020, we entered into the Ninth Amendment, pursuant to which, among other things, Oxford agreed to defer the start date of principal repayment from May 1, 2020 to May 1, 2021. In addition, on April 1, 2020, we made a $5.0 million paydown of principal upon execution of the Ninth Amendment. As a result of this Ninth Amendment, the term of the Term Loan has been extended from September 1, 2021 to September 1, 2024, with all other major terms remained consistent.

In September 2019, we finalized the indirect cost rate under the BARDA Agreement for indirect costs incurred during the years 2012 through 2019, which resulted in approximately $4.6 million of revenue recognized during the year ended December 31, 2019. The BARDA contract was terminated in December 2019 and the contract close out process was completed during the year ended December 31, 2020.

In September 2019, we entered into an underwriting agreement with H.C. Wainwright & Co., LLC (the “Representative”), as representative of the underwriters (the “Underwriters”), pursuant to which we sold in an underwritten public offering an aggregate of (i) 289,000 Class A Units, each consisting of one share of our common stock, par value $0.001 per share, and one Series U warrant to purchase one share of common stock, and (ii) 2,711,000 Class B Units, each consisting of one pre-funded Series V warrant to purchase one share of common stock and one Series U warrant to purchase one share of common stock at a public offering price of $5.00 per Class A Unit and $4.9999 per Class B Unit (the “September 2019 Offering”). In addition, we granted the Underwriters a 45-day option to purchase up to an additional 450,000 shares of our common stock and/or Series U warrants at the public offering price, less the underwriting discounts and commissions. The Underwriters exercised their option to purchase an additional 450,000 Series U warrants. We also issued to the Representative warrants (in the form of the Series U warrants) to purchase 75,000 shares of common stock with an exercise price of $6.25 per share of common stock (the “Representative Warrants”). In September 2020, we entered into revised warrant agreements for the Representative Warrants that reduced the strike price of the warrants to $2.82 per share.

On April 24, 2019, we received $3.3 million of net cash proceeds related to the sale of the UK subsidiary and our cell therapy assets (excluding such assets used in Japan or relating to our contract with BARDA), of which $1.7 million was used to pay down principal, interest and fees on the Loan and Security Agreement, and on April 25, 2019, we received $2.4 million of net cash proceeds related to the sale of our Japanese subsidiary, Cytori Therapeutics, K.K., and substantially all of our cell therapy assets used in Japan, of which $1.4 million was used to pay down principal, interests and fees on the Loan and Security Agreement.

In August 2019, we consummated a 1-for-50 reverse stock split pursuant to which the minimum bid price of our common stock rose above $1.00. On August 29, 2019, the Company received written notice from Nasdaq staff that the Company had regained compliance with the Nasdaq Stock Market Listing Rule 5550(a)(2) concerning our minimum bid price per share of its common stock.

On August 16, 2019, we received written notice from the Nasdaq indicating that the Company no longer meets the requirements for continued listing under Nasdaq Listing Rule 5550(a)(4) due to the our failure to meet the minimum 500,000 publicly held shares requirement for continued listing. On September 11, 2019, we received written notice from Nasdaq staff that, based on having 786,807 publicly held shares outstanding as of August 31, 2019, we had regained compliance with Nasdaq Listing Rule 5550(a)(4).

On August 19, 2019, we received written notice from Nasdaq indicating that, based on our stockholders’ deficit of $6.3 million as of June 30, 2019, as reported in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, we were no longer in compliance with the minimum stockholders’ equity requirement for continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(b)(1), which requires listed companies to maintain stockholders’ equity of at least $2.5 million.

We continue to seek additional capital through strategic transactions and other financing alternatives. Without additional capital, current working capital and cash generated from sales will not provide adequate funding for research and product development activities at their current levels. If sufficient capital is not raised, we will at a minimum need to significantly reduce or curtail our research and development and other operations, and this would negatively affect our ability to achieve corporate growth goals. Although the stock markets and our stock price have recovered to some extent in recent weeks, there may likely be continued market volatility due to the pandemic or other events, which could cause our stock price to decline. This in turn will likely negatively impact our ability to raise funds through equity-related financings. Further, a continued global economic downturn may impair our ability to obtain additional financing through other means, such as strategic transactions or debt financing. The overall deterioration

of the credit and financial markets due to the COVID-19 pandemic will likely generally reduce our ability to obtain additional financing to fund our operations.

Should we be unable to raise additional cash from outside sources or if we are unable to do so in a timely manner or on commercially reasonable terms, it would have a material adverse impact on our operations.

Cash (used in) provided by operating, investing and financing activities for the years ended December 31, 2020 and 2019 is summarized as follows (in thousands):

Years Ended December 31,

Net cash used in operating activities $ (8,434 ) $ (5,906 )

Net cash (used in) provided by investing activities (493 ) 5,570

Net cash (used in) provided by financing activities (319 ) 12,631

Effect of exchange rate changes on cash and cash equivalents — (4 )

Net (decrease) increase in cash and cash equivalents $ (9,246 ) $ 12,291

Operating activities

Net cash used in operating activities for the year ended December 31, 2020 was $8.4 million compared to $5.9 million in the same period of 2019. Overall, our operational cash use increased during the year ended December 31, 2020 as compared to the same period in 2019, due primarily to timing of cash payments made for operating assets and liabilities.

Investing activities

Net cash used in investing activities for year ended December 31, 2020 was primarily related to cash payments of $0.4 million made for in process research and development assets from NanoTx, and $0.1 million for purchases of fixed assets. Net cash provided by investing activities for the year ended December 31, 2019 were related to the sale of the cell therapy business for gross proceeds of $5.6 million.

Financing Activities

Net cash used for financing activities for the year ended December 31, 2020 was related to repayment of $5.0 million of the Term Loan in April 2020, and cash payments of $0.1 million for our finance leases, offset by cash proceeds received from issuance of common stock of $4.0 million and warrant exercises of $1.1 million. Net cash provided by financing activities for the year ended December 31, 2019 was primarily related to net proceeds of $16 million received from the September 2019 Offering, and the sale of common stock under the purchase agreement dated September 21, 2018 with Lincoln Park, proceeds from the exercise of warrants of $0.5 million, partially offset by the principal payment of long-term obligations of $3.7 million.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements (as defined by applicable regulations of the SEC) that are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies and Significant Estimates

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

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

We believe it is important for you to understand our most critical accounting policies. These are our policies that require us to make our most significant judgments and, as a result, could have the greatest impact on our future financial results.

Impairment

We assess certain of our long-lived assets, such as property and equipment and intangible assets other than goodwill, for potential impairment when there is a change in circumstances that indicates carrying values of assets may not be recoverable. Such long-lived assets are deemed to be impaired when the undiscounted cash flows expected to be generated by the asset (or asset group) are less than the asset’s carrying amount. Any required impairment loss would be measured as the amount by which the asset’s carrying value exceeds its fair value and would be recorded as a reduction in the carrying value of the related asset and a charge to operating expense. There was no impairment in 2020 or 2019.

Goodwill

Goodwill is reviewed for impairment annually or more frequently if indicators of impairment exist. We perform our impairment test annually during the fourth quarter. The goodwill is considered to be impaired if we determine that the carrying value of the reporting unit exceeds its respective fair value. We perform the annual impairment analysis by comparing our estimated fair value, calculated from our market capitalization, to our carrying amount. In connection with the sale of our Cell Therapy business to Lorem Vascular Pte, Ltd. (“Lorem”) pursuant to the Asset and Shares Sale and Purchase Agreement (the “Lorem Purchase Agreement”) dated March 30, 2019, we disposed approximately $3.5 million of goodwill that was attributed to the businesses sold. As of December 31, 2020, we had $0.4 million of remaining goodwill related to our ongoing business. Our annual evaluation for impairment of goodwill consists of one reporting unit. We completed our most recent annual evaluation for impairment as of December 31, 2020, and determined that no impairment existed and, consequently, no impairment charge has been recorded during the year.

Warrant Liability

Liability classified warrants issued in connection with the September 2019 Offering and the rights offering closed on July 25, 2018 and originally filed under a Form S-1 registration statement in April 2018 (the “2018 Rights Offering”) do not trade in an active securities market, and as such, we estimate the fair value of these warrants using an option pricing model. Following the authoritative accounting guidance, warrants with variable exercise price features or with potential cash settlement outside control of the Company are accounted for as liabilities, with changes in the fair value included in operating expenses. We estimated the fair value of the warrants using the option pricing model. As mentioned above, in April, June, July and September 2020, we entered into revised warrant agreements with the holders of 3,447,500 Series U warrants, and in September 2020, we entered into revised warrant agreements for 75,000 of Representative Warrants, both originally issued in connection with the September 2019 Offering and initially accounted for as liabilities. In return for reducing the strike price of the warrants, the warrant holders agreed to amend the settlement provisions upon fundamental transactions. The amended Series U warrants meet the requirements for equity classification under authoritative accounting guidance and are no longer subject to fair value accounting post amendment.

Recent Accounting Pronouncements

See Note 2 to the Consolidated Financial Statements included elsewhere herein for disclosure and discussion of new accounting standards.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 8. Financial Statements and Supplementary Data

Page

Report of BDO USA, LLP, Independent Registered Public Accounting Firm 52

Consolidated Balance Sheets as of December 31, 2020 and 2019 54

Notes to Consolidated Financial Statements 58

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors

Plus Therapeutics, Inc.

Austin, Texas

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Plus Therapeutics, Inc. (the “Company”) (formerly Cytori Therapeutics, Inc.) as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for the years then ended and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Going Concern Uncertainty

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses and negative cash flows from operations that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee of the Company’s board of directors and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Classification of Warrants

As described in Note 12 to the consolidated financial statements, between April and September 2020, the Company entered into revised warrant agreements with the holders of the Series U warrants. In return for reducing the strike price of the warrants, the

warrant holders agreed to amend certain settlement provisions such that the warrants would meet the requirements to be classified within stockholders’ equity. As a result, the Company reclassified the fair value of the Series U warrant liability of approximately $4.5 million to stockholders' equity at the date of modification.

We identified the classification of warrants as a critical audit matter. The assessment of the warrants’ classification involves an evaluation of the relevant terms and provisions of the warrant contract to determine the accounting guidance to be applied in the recognition of the warrants in the consolidated financial statements. The accounting guidance surrounding the classification of warrants is complex and therefore, applying such guidance to the contract terms is subjective and requires significant judgment. Auditing management’s conclusions related to this matter involved especially challenging auditor judgment due to the nature and extent of audit evidence and effort required to address these matters, including the extent of specialized skills and knowledge needed.

The primary procedures we performed to address this critical audit matter included:

Utilizing personnel with specialized knowledge and skills in technical accounting to assist in assessing management’s analysis over the warrant classification including: (i) evaluating the revised warrant contracts to identify relevant terms that affect the recognition in the consolidated financial statements, and (ii) assessing the appropriateness of conclusions reached by management.

/s/ BDO USA, LLP

We have served as the Company's auditor since 2016.

San Diego, California

February 22, 2021

PLUS THERAPEUTICS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and par value data)

As of December31,

Assets

Current assets:

Accounts receivable — 1,169

Restricted cash — 40

Inventories, net — 107

Operating lease right-use-of assets 636 781

Intangible assets, net 86 —

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable and accrued expenses $ 2,081 $ 3,279

Operating lease liability 123 147

Term loan obligation, net of discount 6,335 11,060

Noncurrent operating lease liability 528 646

Other noncurrent liabilities — 8

Commitments and contingencies (Note 7)

Stockholders’ equity:

Total liabilities and stockholders’ equity $ 12,105 $ 23,229

See Accompanying Notes to these Consolidated Financial Statements

PLUS THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except share and per share data)

For the Years Ended December 31,

Development revenue:

Government contracts and other $ 303 $ 6,998

Operating expenses:

In process research and development acquired from NanoTx 781 —

Other income (expense):

Interest income 50 55

Change in fair value of liability instruments 2,400 3,407

Issuance cost of warrants — (1,233 )

Loss from continuing operations $ (8,241 ) $ (3,283 )

Loss from discontinued operations — (7,604 )

Loss from continuing operations $ (8,241 ) $ (3,283 )

Beneficial conversion feature for convertible preferred stock — (554 )

Net loss allocable to common stockholders - discontinued operations - (7,604 )

Net loss allocable to common stockholders $ (8,241 ) $ (11,441 )

Net loss per share, basic and diluted $ (1.86 ) $ (8.27 )

See Accompanying Notes to these Consolidated Financial Statements

PLUS THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

(in thousands, except share data)

Accumulated

Convertible Additional other Total

preferred stock Common stock paid-in comprehensive Accumulated stockholders’

Shares Amount Shares Amount capital income deficit equity

Share-based compensation — — — — 127 — — 127

Share-based compensation — — — — 247 — — 247

Issuance of common stock for exercise of warrants — — 487,521 1 1,097 — — 1,098

Reclassification of warrant liabilities — — — — 4,504 — — 4,504

See Accompanying Notes to these Consolidated Financial Statements

PLUS THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

For the Years Ended December 31,

Cash flows used in operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization 366 896

Amortization of deferred financing costs and debt discount 584 550

In process research and development acquired from NanoTx Therapeutics 781 —

Change in fair value of liability instruments (2,400 ) (3,407 )

Share-based compensation expense 247 127

Inventory write off 107 —

Noncash lease expense 3 12

Loss on sale of business — 6,508

Allocation of issuance cost associated with warrants — 1,233

Inventories — 259

Other current assets 126 (211 )

Accounts payable and accrued expenses (1,234 ) (28 )

Deferred revenue — 29

Other long-term liabilities — (47 )

Net cash used in operating activities (8,434 ) (5,906 )

Cash flows from (used in) investing activities:

Purchases of property and equipment and intangible assets (93 ) (67 )

In process research and development acquired from NanoTx Therapeutics (400 ) —

Proceeds from sale of business — 5,637

Net cash provided by (used in) investing activities (493 ) 5,570

Cash flows from financing activities:

Principal payments of long-term obligations (5,307 ) (3,692 )

Payment of financing lease liability (117 ) (131 )

Proceeds from exercise of warrants 1,098 490

Proceeds from sale of common stock 4,007 15,964

Net cash (used in) provided by financing activities (319 ) 12,631

Effect of exchange rate changes on cash and cash equivalents — (4 )

Net increase (decrease) in cash and cash equivalents (9,246 ) 12,291

Cash, cash equivalents, and restricted cash at beginning of period 17,592 5,301

Cash, cash equivalents, and restricted cash at end of period $ 8,346 $ 17,592

Supplemental disclosure of cash flows information:

Cash paid during period for:

Supplemental schedule of non-cash investing and financing activities:

Issuance costs paid in common stock $ 463 $ —

Common stock issued in payment for in process research and development $ 381 $ —

Unpaid offering cost $ 125 $ —

Reclassification of warrants liability to equity $ 4,504 $ 794

Offering cost paid in warrants $ — $ 213

See Accompanying Notes to these Consolidated Financial Statements

PLUS THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2020

1. Organization and Operations

The Company

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

Principles of Consolidation

The accompanying consolidated financial statements include the Company’s accounts and those of its subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.

Up to the sale transactions as described below, the Company had five wholly-owned subsidiaries located in Japan, United Kingdom, Switzerland, India and Spain that have been established primarily to support our sales and marketing activities in these regions.

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

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

Amendments to Certificate of Incorporation and Reverse Stock Split

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

On August 5, 2019, following stockholder and Board approval, the Company filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to effectuate a one-for-fifty (1:50) reverse stock split of its common stock, par value $0.001 per share, without any change to its par value. Proportional adjustments for the reverse stock split were made to the Company's outstanding stock options, warrants and equity incentive plans for all periods presented.

Certain Risks and Uncertainties

The Company’s prospects are subject to the risks and uncertainties frequently encountered by companies in the early stages of development and commercialization, especially those companies in rapidly evolving and technologically advanced industries such as the biotech/medical device field. The Company’s future viability largely depends on its ability to complete development of new products and receive regulatory approvals for those products. No assurance can be given that the Company’s new products will be successfully developed, regulatory approvals will be granted, or acceptance of these products will be achieved.

Liquidity and Going Concern

The Company incurred net losses of $8.2 million for the year ended December 31, 2020, and as of December 31, 2020, the Company had an accumulated deficit of $433.5 million and cash and cash equivalents of $8.3 million. Additionally, the

Company used net cash of $8.4 million to fund its operating activities for the year ended December 31, 2020. In addition, as discussed in Note 13, the full magnitude of the coronavirus pandemic on the Company’s financial condition, liquidity and future results of operations is uncertain.These factors raise substantial doubt about the Company’s ability to continue as a going concern.

On October 23, 2020, the Company entered into an Equity Distribution Agreement (the “Distribution Agreement”) with Canaccord Genuity LLC (“Canaccord”), pursuant to which the Company may issue and sell, from time to time, shares of our common stock having an aggregate offering price of up to $10,000,000 (the “ATM Shares”), depending on market demand, with Canaccord acting as an agent for sales. The Company has no obligation to sell any of the ATM Shares. The Company may instruct Canaccord not to sell the ATM Shares if the sales cannot be effected at or above the price the Company designates from time to time and the Company may at any time suspend sales pursuant to the Distribution Agreement. During the year ended December 31, 2020, the Company issued 1,616,299 shares of its common stock for aggregate net proceeds of $3.2 million. During 2021 and through the date of filing of this Form 10-K, the Company issued 536,070 shares under the Distribution Agreement for net proceeds of $1.5 million.

On September 30, 2020, the Company entered into a purchase agreement (the “2020 Purchase Agreement”) and registration rights agreement pursuant to which Lincoln Park Capital Fund LLC (“Lincoln Park”) has committed to purchase up to $25.0 million of the Company’s common stock. Under the terms and subject to the conditions of the 2020 Purchase Agreement, the Company has the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase up to $25.0 million of the Company’s common stock. Such sales of common stock by the Company, if any, will be subject to certain limitations, and may occur from time to time, at the Company’s sole discretion, over the 36-month period commencing on the date that the registration statement covering the resale of shares of common stock that have been and may be issued under the 2020 Purchase Agreement, is declared effective by the SEC and a final prospectus in connection therewith is filed. During the year ended December 31, 2020, the Company sold 353,113 shares, excluding 180,701 shares issued as commitment fee, of common stock under the 2020 Purchase Agreement for net proceeds of $0.7 million. During 2021 and through the date of filing of this Form 10-K, the Company issued 985,186 shares of its common stock under the 2020 Purchase Agreement for total proceeds of $2.9 million.

In September 2019, the Company finalized the indirect cost rate under the contract we were awarded in September 2012 with the Biomedical Advanced Research and Development Authority, or BARDA, a division of the U.S. Department of Health and Human Services (the “BARDA Agreement”), for indirect costs incurred during the years 2012 through 2019, which resulted in approximately $4.6 million of revenue recognized during the year ended December 31, 2019.

In September 2019, the Company entered into an underwriting agreement with H.C. Wainwright & Co., LLC (the “Representative”), as representative of the underwriters (the “Underwriters”), pursuant to which the Company sold in an underwritten public offering an aggregate of (i) 289,000 Class A Units, each consisting of one share of common stock, par value $0.001 per share, of the Company and one Series U warrant to purchase one share of common stock, and (ii) 2,711,000 Class B Units, each consisting of one pre-funded Series V warrant to purchase one share of common stock and one Series U Warrant to purchase one share of common stock at a public offering price of $5.00 per Class A Unit and $4.9999 per Class B Unit (the “September 2019 Offering”). In addition, the Company granted the Underwriters a 45-day option to purchase up to an additional 450,000 shares of the Company’s common stock and/or Series U Warrants at the public offering price, less the underwriting discounts and commissions. The Underwriters exercised their option to purchase an additional 450,000 Series U warrants. The Company also issued to the Representative warrants (in the form of the Series U warrants) to purchase 75,000 shares of common stock with an exercise price of $6.25 per share of common stock (the “Representative Warrants”).

On April 24, 2019, the Company received $3.3 million of net cash proceeds related to the sale of the UK Subsidiary and the Cell Therapy Assets (excluding such assets used in Japan or relating to the Company’s contract with BARDA), of which $1.7 million was used to pay down principal, interest and fees on the Loan and Security Agreement, and on April 25, 2019 the Company received $2.4 million of net cash proceeds related to the sale of the Japanese Subsidiary, and substantially all of the Company’s Cell Therapy assets used in Japan, of which $1.4 million was used to pay down principal, interests and fees on the Loan and Security Agreement.

The Company continues to seek additional capital through strategic transactions and from other financing alternatives. Without additional capital, the Company’s current working capital will not provide adequate funding to make debt repayments or support its research, and product development activities at their current levels. If sufficient capital is not raised, the Company will at a minimum need to significantly reduce or curtail its research and development and other operations, and this would negatively affect its ability to achieve corporate growth goals.

Should the Company fail to raise additional cash from outside sources, this would have a material adverse impact on its operations.

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

2. Summary of Significant Accounting Policies

Use of Estimates

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

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

Cash and cash equivalents

The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.

Cash and cash equivalents includes cash in readily available checking and savings accounts. The Company held no investments as of December 31, 2020 and 2019. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant risk on its cash balances due to the financial position of the depository institution in which those deposits are held.

Restricted Cash

Restricted cash consists of cash invested in certificate of deposits used as collateral for the issuance of letters of credit pursuant to lease agreements for leasing of property at 3020 and 3030 Callan Road, San Diego, CA, which required us to execute a letter of credit for $40,000 naming the landlord as a beneficiary as of December 31, 2019. There was no restricted cash as of December 31, 2020.

Accounts Receivable

Accounts receivable are recorded at the invoiced amount and do not bear interest. As of December 31, 2019, accounts receivable represents outstanding invoices under the BARDA Agreement for work performed prior to the BARDA contract termination. There were no accounts receivable as of December 31, 2020.

Financial Instruments

Financial instruments include cash equivalents, accounts receivable, other current assets, accounts payable, accrued expenses, other liabilities and long-term debt. The carrying values of cash equivalents, accounts receivable, other current assets, accounts payable, accrued expenses, other liabilities generally approximate fair value due to the short-term nature of these instruments. Based on level 3 inputs and the borrowing rates current available for loans with similar terms, the Company believes the fair value the long-term debt approximates its carrying value.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation. Depreciation expense, which includes the amortization of capitalized leasehold improvements, is provided for on a straight-line basis over the estimated useful lives of the assets, or the life of the lease, whichever is shorter, and range from three to five years. When assets are sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss, if any, is included in operations. Maintenance and repairs are charged to operations as incurred.

Impairment

The Company assesses its property and equipment for potential impairment when there is a change in circumstances that indicates carrying values of assets may not be recoverable. Such long-lived assets are deemed to be impaired when the undiscounted cash flows expected to be generated by the asset (or asset group) are less than the asset’s carrying amount. Any required impairment loss would be measured as the amount by which the asset’s carrying value exceeds its fair value and would be recorded as a reduction in the carrying value of the related asset and a charge to operating expense. The Company recognized no impairment losses during any of the periods presented in these financial statements.

Goodwill

The Company’s goodwill represents the excess of the cost over the fair value of net assets acquired from its business combinations. The determination of the value of goodwill arising from business combinations requires extensive use of accounting estimates and judgments to allocate the purchase price to the fair value of the net tangible and intangible assets acquired.

Goodwill is not amortized; however, it is assessed for impairment using fair value measurement techniques on an annual basis or more frequently if facts and circumstance warrant such a review. Goodwill is considered to be impaired if the Company determines that the carrying value of the reporting unit exceeds its fair value.

The Company performs its impairment test annually during the fourth quarter by comparing the Company’s estimated fair value, calculated from the Company’s market capitalization, to its carrying amount. The Company’s annual evaluation for impairment of goodwill consists of one reporting unit. The Company completed its most recent annual evaluation for impairment as of December 31, 2020 and determined that no impairment existed.

Warrant Liability

Warrants are accounted for in accordance with the applicable authoritative accounting guidance as either liabilities or as equity instruments depending on the specific terms of the agreements. Liability-classified instruments are recorded at fair value at each reporting period with any change in fair value recognized as a component of change in fair value of warrant liabilities in the consolidated statements of operations and comprehensive loss.

Revenue Recognition

Development Revenue

The Company earns revenue for performing tasks under research and development agreements with governmental agencies like BARDA. Revenue derived from reimbursement of direct out-of-pocket expenses for research costs associated with government contracts are recorded as government contract and other within development revenue. Government contract revenue is recorded at the gross amount of the reimbursement. The costs associated with these reimbursements are reflected as a component of research and development expense in our statements of operations. The Company recognized $0.3 million and $7.0 million in BARDA revenue for the years ended December 31, 2020 and 2019, respectively.

The BARDA Agreement was terminated by the U.S. Department of Health and Human Services effective in December 2019 and the contract close out process was completed during 2020.

Concentration of Significant Customers & Geographical Sales

After the Company sold its Cell Therapy business, BARDA accounted for 100% of our revenue from continuing operations which are recognized for year ended December 31, 2020 and 2019 and accounted for 100% of total outstanding accounts receivable presented in the accompanying consolidated financial statements.

Research and Development

Research and development expenditures, which are charged to operations in the period incurred, include costs associated with the design, development, testing and enhancement of the Company’s products, regulatory fees, the purchase of laboratory supplies, and pre-clinical and clinical studies as well as salaries and benefits for our research and development employees.

Also included in research and development expenditures are costs incurred to support the government reimbursement contract, including $0.3 million and $1.5 million qualified expenses that were incurred for the years ended December 31, 2020 and 2019, related to the BARDA Agreement.

Deferred Financing Costs and Other Debt-Related Costs

Deferred financing costs are capitalized, recorded as an offset to debt balances and amortized to interest expense over the term of the associated debt instrument using the effective interest method. If the maturity of the debt is accelerated because of default or early debt repayment, then the amortization would be accelerated.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income (loss) in the years in which those temporary differences are expected to be recovered or settled. Due to our history of losses, a full valuation allowance has been recognized against our deferred tax assets.

The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense. For the years ended December 31, 2020 and 2019, the Company has not recorded any interest or penalties related to income tax matters. The Company does not foresee any material changes to unrecognized tax benefits within the next twelve months.

Share-Based Compensation

The Company recognizes the fair value of all share-based payment awards in our statements of operations over the requisite vesting period of each award, which approximates the period during which the employee and non-employee director is required to provide service in exchange for the award. The Company estimates the fair value of these options using the Black-Scholes option pricing model using assumptions for expected volatility, expected term, and risk-free interest rate. Expected volatility is based primarily on historical volatility and is computed using daily pricing observations for recent periods that correspond to the expected term of the options. The expected term is calculated based on historical data for and applied to all employee awards as a single group as the Company does not expect (nor does historical data suggest) substantially different exercise or post-vesting termination behavior amongst our employee population. The risk-free interest rate is the interest rate for treasury instruments with maturities that approximate the expected term.

Segment Information

For the years ended December 31, 2020 and 2019, the Company is managed as a single operating segment, therefore we report our results in one operating segment.

Loss Per Share

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

The Company excluded all potentially dilutive securities from the calculation of diluted loss per share attributable to common stockholders for the years ended December 31, 2020 and 2019, as their inclusion would be antidilutive.

Reclassification

Certain amounts have been reclassified to conform to current year presentation.

Recently Issued and Recently Adopted Accounting Pronouncements

Recently Issued Accounting Pronouncements

In September 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The standard amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses for most financial assets and certain other instruments that aren’t measured at fair value through net income. For available-for-sale debt securities, entities will be required to recognize an allowance for credit losses rather than a reduction in carrying value of the asset. Entities will no longer be permitted to consider the length of time that fair value has been less than amortized cost when evaluating when credit losses should be recognized. This new guidance is effective in the first quarter of 2023 for calendar-year SEC filers that are smaller reporting companies as of the one-time determination date. Early adoption is permitted beginning in 2019. The Company plans to adopt the new guidance on January 1, 2023, and it does not expect that adoption of this standard will have a material impact on its consolidated financial statements and related disclosures.

In August 2020, the FASB issued ASU No. 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) (“ASU 2020-06”). ASU 2020-06 eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, ASU 2020-06 modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation. The amendments in ASU 2020-06 are effective for smaller reporting companies as defined by the SEC for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact of ASU 2020-06 on its financial statements.

Recently Adopted Accounting Pronouncements

In August 2018, the FASB issued ASU No. 2018-13 (ASU 2018-13), Changes to the Disclosure Requirements for Fair Value Measurement. This ASU eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. The standard is effective for all entities for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company adopted ASU 2018-13 as of January 1, 2020, which did not have a material impact on the Company's financial statements.

3. Fair Value Measurements

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

• Level 1: Quoted prices in active markets for identical assets or liabilities.

Warrants issued by the Company in connection with the 2018 Rights Offering in July 2018 (“Series T Warrants”) and in the September 2019 Offering (“Series U Warrants”) were classified as liabilities at issuance. The Series T and Series U warrants were marked to market at each subsequent reporting date through as non-operating income or loss in the statement of operations. As described in more detail in Note 12, during 2020 the Company amended the terms of 3,522,500 Series U Warrants such that those amended Series U Warrants met the requirements to be classified within stockholders’ equity and were no longer required to be re-measured at fair value at each balance sheet date.

Expected volatility was computed using daily pricing observations of traded shares of the Company for recent periods that correspond to the expected term of the warrants. The Company believes this method produces an estimate that is representative of our expectations of future volatility over the expected term of these warrants. The Company currently has no reason to believe future volatility over the expected remaining life of these warrants is likely to differ materially from historical volatility. The expected life is based on the remaining contractual term of the warrants. The risk-free interest rate is the U.S. Treasury bond rate as of the valuation date. Because some of the inputs to our valuation model are either not observable or are not derived principally from or corroborated by observable market data by correlation or other means, the warrant liability is classified as Level 3 in the fair value hierarchy. Fluctuations in the fair value of the warrants are impacted by unobservable inputs. Significant increases (decreases) in this input in isolation would result in a significantly higher (lower) fair value measurement.

The Series T Warrants are not traded in an active securities market, and as such the estimated fair value as of December 31, 2020 and 2019 was determined by using an option pricing model with the following assumptions. All outstanding Series T warrants expired unexercised in January 2021.

Expected term 0.1 years 1.1 years

Common stock market price $ 2.02 $ 2.40

Risk-free interest rate 0.08 % 1.59 %

Expected volatility 57 % 168 %

Resulting fair value (per warrant) $ 0.05 $ 1.47

The Company estimated the fair value of the liability-classified Series U Warrants on the issuance date as well as at each subsequent balance sheet date with the Black Scholes model. The assumptions used in the Black Scholes option pricing model to determine the fair value of the Series U warrants were as follows:

Expected term 3.75 years 4.75 years

Common stock market price $ 2.02 $ 2.40

Risk-free interest rate 0.24 % 1.68 %

Resulting fair value (per warrant) $ 1.56 $ 1.94

The following table summarizes the change in our Level 3 warrant liability value (in thousands):

Years ended December 31,

Issuance of warrants — 10,214

Exercises — (794 )

Change in fair value of warrants (2,418 ) (3,407 )

Reclassification to equity (4,504 ) —

Ending balance $ 7 $ 6,929

On September 30, 2020, the Company committed to issue 180,701 shares to Lincoln Park as a committee fee (“Commitment Shares”) in connection with the 2020 Purchase Agreement, and these shares were issued on October 2, 2020. The change in fair value of the Commitment Shares between September 30, 2020 and the issuance date, in the amount of $18,000 and calculated using the closing stock prices on respective dates, was recorded in change in fair value of liability-classified instruments on the statement of operations and comprehensive income/loss.

Nonfinancial Assets and Liabilities

The Company applies fair value techniques on a non-recurring basis, if and when necessary, associated with: (1) valuing potential impairment losses related to goodwill which are accounted for pursuant to the authoritative guidance for intangibles—goodwill and other; and (2) valuing potential impairment losses related to long-lived assets which are accounted for pursuant to the authoritative guidance for property, plant and equipment.

4. Discontinued Operations

As explained in Note 1, on April 24, 2019 and April 25, 2019, the Company completed the sale of its Cell Therapy business to Lorem and Mr. Shirahama. The following table summarizes the calculation of the loss on sale of the Cell Therapy business, which was finalized during the fourth quarter of 2019 (in thousands):

Consideration received $ 7,000

Transaction costs (1,363 )

Net cash proceeds 5,637

Less:

Carrying value of business and assets sold 12,145

Net loss on sale of business $ (6,508 )

There were no assets or liabilities related to discontinued operations as of December 31, 2020 or 2019.

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

Year ended December 31,

Product revenue $ 901

Cost of revenue 857

Gross profit 44

Operating expenses:

Research and development 656

Sales and marketing 411

General and administrative 185

Total operating expenses 1,252

Operating loss (1,208 )

Other income (expense) 112

Loss from discontinued operations $ (1,096 )

Loss from sale of business (6,508 )

Net loss from discontinued operations $ (7,604 )

During the year ended December 31, 2019, revenue from discontinued operations were related to the Cell Therapy business. Because of the sale of the Cell Therapy business to Lorem and Mr. Shirahama, all product revenue and costs of product revenue for these periods have been recorded in loss from discontinued operations in the consolidated statements of operations.

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

For the year ended December 31, 2019

Depreciation and amortization $ 467

Provision for excess inventory $ —

Loss on asset disposal $ —

5. Loss per Share

The following were excluded from the diluted loss per share calculation for the periods presented because their effect would be anti-dilutive:

For the Year Ended December 31,

Net loss per share for the year ended December 31, 2019 included a deemed dividend of $554,000 due to beneficial conversion feature recorded as a result of the adjustment of the conversion price of Series C Preferred Stock from $39.93 to $7.50 per share in August 2019.

6. Composition of Certain Financial Statement Captions

Other Current Assets

As of December 31, 2020 and 2019, other current assets were comprised of the following (in thousands):

December 31,

Property and Equipment, net

As of December 31, 2020 and 2019, property and equipment, net, were comprised of the following (in thousands):

December 31,

Office and computer equipment $ 1,525 $ 1,518

Less accumulated depreciation (1,387 ) (1,021 )

Depreciation expense totaled $0.4 million and $0.9 million for the years ended December 31, 2020 and 2019, respectively.

Intangible Assets, net

As of December 31, 2020, intangible assets included the net book value of costs incurred for software upgrades.

Accounts Payable and Accrued Expenses

As of December 31, 2020 and 2019, accounts payable and accrued expenses were comprised of the following (in thousands):

December 31,

Accrued payroll and bonus 738 679

Accrued professional fees 276 332

Accrued vacation and compensation 245 166

Finance lease obligation - current 10 120

Other current liabilities 23 6

Accrued expenses — 791

Accrued R&D studies — 858

7. Commitments and Contingencies

Leases

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

The Company records lease liabilities within current liabilities or long-term liabilities based upon the length of time associated with the lease payments. The Company records its operating lease right-of-use assets as long-term assets. Right-of-use assets for financing leases are recorded within property and equipment, net in the Balance Sheet. Leases with an initial term of 12 months or less are not recorded on the Balance Sheet. Instead, the Company recognizes lease expense for these leases on a straight-line basis over the lease term. In connection with certain operating leases, the Company has security deposits recorded and maintained as restricted cash totaling $40 thousand as of December 31, 2019. There was no security deposit as of December 31, 2020.

The Company leases laboratory, office and storage facilities in San Antonio, Texas, under operating lease agreements that expire in 2028. The Company also leases certain office space in Austin, Texas under a month-to-month operating lease agreement. In addition, the Company leases certain equipment under various operating and finance leases. The lease agreements generally provide for periodic rent increases, and renewal and termination options. The Company’s lease agreements do not contain any material variable lease payments, residual value guarantees or material restrictive covenants.

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

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

Assets

Total leased assets $ 643 $ 915

Liabilities

Current:

Noncurrent:

Financing — 8

Total lease liabilities $ 661 $ 921

Weighted-average remaining lease term (years) - operating leases 6.57 6.89

Weighted-average remaining lease term (years) - finance leases 0.42 1.08

Weighted-average discount rate - operating leases 7.79 % 7.93 %

Weighted-average discount rate - finance leases 5.00 % 5.00 %

The table below summarizes the Company’s lease costs from its consolidated statements of operations, and cash payments from its consolidated statements of cash flows.

Year Ended December 31,

Lease expense:

Operating lease expense $ 210 $ 225

Finance lease expense:

Depreciation of right-of-use assets 127 116

Interest expense on lease liabilities 4 9

Total lease expense $ 341 $ 350

Cash payment information:

Operating cash used for operating leases $ 204 $ 213

Financing cash used for financing leases 117 131

Total rent expenses for the years ended December 31, 2020 and 2019 was $0.2 million and $0.7 million, respectively, which includes leases in the table above, month-to-month operating leases, and common area maintenance charges.

The Company’s future minimum annual lease payments under operating and financing leases at December 31, 2020 are as follows (in thousands):

Financing Leases Operating Leases

Thereafter — 233

Total minimum lease payments $ 10 $ 853

Less: amount representing interest — (202 )

Present value of obligations under leases 10 651

Less: current portion $ 10 $ (123 )

Noncurrent lease obligations — 528

Other commitments

The Company has entered into agreements with various research organizations for pre-clinical and clinical development studies, which have provisions for cancellation. Under the terms of these agreements, the vendors provide a variety of services including conducting research, recruiting and enrolling patients, monitoring studies and data analysis. Payments under these agreements typically include fees for services and reimbursement of expenses. The timing of payments due under these agreements is estimated based on current study progress. As of December 31, 2020, the Company did not have any clinical research study obligations.

The Company is subject to various claims and contingencies related to legal proceedings. Due to their nature, such legal proceedings involve inherent uncertainties including, but not limited to, court rulings, negotiations between affected parties and governmental actions. Management assesses the probability of loss for such contingencies and accrues a liability and/or discloses the relevant circumstances, as appropriate.

The Company is currently engaged in a dispute with a third party arising out of its sale of certain assets pursuant to an asset and equity purchase agreement entered into in 2019 (the "APA"). In October 2020, the Company received correspondence from such third party informing it of an alleged breach of certain representations and warranties in the APA and asserting indemnification claims. In December 2020, the Company responded to the third party and asserted that its improper use of the Company’s intellectual property constituted a breach of the APA and further asserted an indemnification claim against the third party for the Company’s losses in connection therewith. While management believe the claims asserted against the Company to be spurious and without merit, this dispute remains ongoing and there can be no assurance that it will not result in litigation. Resolution of this matter or any resulting litigation would be expensive and time-consuming and the outcome is uncertain. It is not possible to predict with certainty the outcome of these unresolved legal actions or the range of possible loss.

8. Term Loan Obligations

On May 29, 2015, the Company entered into the Loan and Security Agreement, pursuant to which Oxford funded an aggregate principal amount of $17.7 million (the “Term Loan”), subject to the terms and conditions set forth in the Loan and Security Agreement. The Term Loan accrues interest at a floating rate of at least 8.95% per annum, comprised of a three-month LIBOR rate with a floor of 1.00% plus 7.95%. Pursuant to the Loan and Security Agreement, as amended, the Company is required to make interest only payments through May 1, 2021 and thereafter it is required to make payments of principal and accrued interest in equal monthly installments sufficient to amortize the Term Loan through September 1, 2024, the maturity date. At maturity of the Term Loan, or earlier repayment in full following voluntary prepayment or upon acceleration, the Company is required to make a final payment in an aggregate amount equal to approximately $3.2 million. In connection with the Term Loan, on May 29, 2015, the Company issued to Oxford warrants to purchase an aggregate of 188 shares of the Company’s common stock at an exercise price of $5,175 per share. These warrants became exercisable as of November 30, 2015 and will expire on May 29, 2025 and, following the authoritative accounting guidance, are equity classified and its respective fair value was recorded as a discount to the debt.

From September 2017 to March 2019, the Company entered into a total of seven amendments to the Term Loan which, amongst other things, extended the interest only period, required repayment of $3.1 million using the proceeds received from sale of the Company’s former UK and Japan subsidiaries as described in Note 1, increased the final payment, increased the final payment fee upon maturity or early repayment of the Term Loan, and increased the minimum liquidity covenant level to $2.0 million.

On March 29, 2020, the Company entered into the Ninth Amendment of the Loan and Security Agreement (“Ninth Amendment”), pursuant to which Oxford agreed to defer the start date of principal repayment from May 1, 2020 to May 1, 2021 and extended the term of the Term loan from September 1, 2021 to September 1, 2024. In addition, pursuant to the Ninth Amendment, on April 1, 2020, the Company made a $5.0 million paydown of principal upon execution of the Ninth Amendment and $0.3 million of related final payment. After giving effect to this payment,$4.3 million of principal remains outstanding under the Loan Agreement. In addition, an amendment fee of $1.0 million will be payable in connection with the Amendment at the earlier of the maturity date, acceleration of the loans and the making of certain prepayments. All other major terms remained consistent.

Under authoritative guidance, the Ninth Amendment does not meet the criteria to be accounted for as a troubled debt restructuring. In addition, the Company performed a quantitative analysis and determined that the terms of the new debt and original debt instrument are not substantially different. Accordingly, the Ninth Amendment is accounted for as debt modification. A new effective interest rate that equates the revised cash flows to the carrying amount of the original debt is computed and applied prospectively.

The Term Loan, as amended, is collateralized by a security interest in substantially all of the Company’s existing and subsequently acquired assets, including its intellectual property assets, subject to certain exceptions set forth in the Loan and Security Agreement, as amended. The intellectual property asset collateral will be released upon the Company achieving a certain liquidity level when the total principal outstanding under the Loan and Security Agreement is less than $3 million. As of December 31, 2020, there was $4.3 million principal amount outstanding under the Term Loan, excluding the $3.2 million final payment fee, and the Company was in compliance with all of the debt covenants under the Loan and Security Agreement.

The Company’s interest expense for the years ended December 31, 2020 and 2019 was $1.1 million and $1.9 million, respectively. Interest expense is calculated using the effective interest method, therefore it is inclusive of non-cash amortization in the amount of $0.6 million and $0.5 million for the year ended December 31, 2020 and 2019, respectively, related to the amortization of the debt discount, capitalized loan costs, and accretion of final payment.

The Loan and Security Agreement, as amended, contains customary indemnification obligations and customary events of default, including, among other things, the Company’s failure to fulfill certain obligations under the Term Loan, as amended, and the occurrence of a material adverse change, which is defined as a material adverse change in the Company’s business, operations, or condition (financial or otherwise), a material impairment of the prospect of repayment of any portion of the loan. In the event of default by the Company or a declaration of material adverse change by its lender, under the Term Loan, the lender would be entitled to exercise its remedies thereunder, including the right to accelerate the debt, upon which the Company may be required to repay all amounts then outstanding under the Term Loan, which could materially harm the Company’s financial condition. As of December 31, 2020, the Company has not received any notification or indication from Oxford to invoke the material adverse change clause. However, due to the Company’s current cash flow position and the substantial doubt about its ability to continue as a going concern, the entire principal amount of the Term Loan is presented as short-term. The Company will continue to evaluate the debt classification on a quarterly basis and evaluate for reclassification in the future should its financial condition improve.

Additional details relating to the outstanding Term Loan as of December 31, 2020 and 2019 are presented in the following table (in thousands):

* Monthly payment as of December 2019, which reflects interest only

** 3 month LIBOR rate with a floor of 1% plus 7.95%

*** Monthly payment as of December 2020, which reflects interest only

As of December 31, 2020, the future contractual principal and final fee payments on all of our debt obligations are as follows (as thousands):

Years Ending December 31,

Reconciliation of Face Value to Book Value as of December 31, 2019

Total debt obligations, including final payment fee (Face Value) $ 7,481

Less: Debt discount (1,146 )

Total obligation $ 6,335

9. Income Taxes

The Company has recorded a full valuation allowance against deferred tax assets and due to our net losses for the years ended December 31, 2020 and 2019, there was no provision or benefit for income taxes recorded.

The components of income/(loss) from continuing operations before income tax provision (benefit) as of December 31, 2020 and 2019 are as follows (in thousands):

A reconciliation of the total income tax provision tax rate to the statutory federal income tax rates of 21% for the years ended December 31, 2020 and 2019, respectively, is as follows:

Income tax expense (benefit) at federal statutory rate (21.0 )% (21.0 )%

Change in valuation allowance 23.6 % 23.0 %

Income tax expense (benefit) at state statutory rate (8.9 )% (12.2 )%

Stock compensation 6.9 % 13.7 %

Mark to market adjustment (6.1 )% (24.0 )%

NOLs expiring and adjustments to NOL 6.0 % 19.2 %

Research credit (1.1 )% (1.8 )%

Return to provision 1.0 % 3.1 %

Change in state rate (0.5 )% (1.3 )%

Permanent interest adjustments — 1.1 %

Other, net 0.1 % 0.2 %

The tax effects of temporary differences that give rise to significant portions of our deferred tax assets and deferred tax liabilities as of December 31, 2020 and 2019 are as follows (in thousands):

Deferred tax assets:

Allowances and reserves $ — $ 6

Stock based compensation 168 657

Income tax credit carryforwards 8,756 8,749

Property and equipment, principally due to differences in depreciation 16 95

Total deferred tax assets, net of allowance 178 214

Deferred tax liabilities:

Total deferred tax liability (178 ) (214 )

Net deferred tax assets (liability) $ — $ —

The Company has established a valuation allowance against its net deferred tax assets due to the uncertainty surrounding the realization of such assets. The Company periodically evaluates the recoverability of the deferred tax assets. At such time as it is determined that it is more likely than not that deferred assets are realizable, the valuation allowance will be reduced. The Company has recorded a full valuation allowance of $104.8 million as of December 31, 2020 as it does not believe it is more likely than not our net deferred tax assets will be realized. The Company increased its valuation allowance by approximately $1.9 million during the year ended December 31, 2020.

At December 31, 2020, we had federal, and state tax loss carry forwards of approximately $396.2 million, and $173.7 million, respectively. The federal and state net operating loss carry forwards begin to expire in 2021 and 2028, respectively, if unused. The federal net operating loss carryover includes $33.6 million of net operating losses generated in 2019. Federal net operating losses generated from 2018 onwards carryover indefinitely and may generally be used to offset up to 80% of future taxable income. At December 31, 2020, we had federal and state tax credit carry forwards of approximately $6.4 million and $5.5 million, respectively, after reduction for uncertain tax positions. The Company has not performed a formal research and development credit study with respect to these credits. The federal credits will begin to expire in 2021, if unused, and the state credits carry forward indefinitely.

Pursuant to the Internal Revenue Code (“IRC”) of 1986, as amended, specifically IRC §382 and IRC §383, The Company’s ability to use net operating loss and R&D tax credit carry forwards (“tax attribute carry forwards”) to offset future taxable income is limited if we experience a cumulative change in ownership of more than 50% within a three-year testing period. The Company has not completed an ownership change analysis pursuant to IRC Section 382 for taxable years ended after December 31, 2007. If ownership changes within the meaning of IRC Section 382 are identified as having occurred subsequent to 2007, the amount of remaining tax attribute carry forwards available to offset future taxable income and income tax expense in future years may be significantly restricted or eliminated. Further, the Company’s deferred tax assets associated with such tax attributes could be significantly reduced upon realization of an ownership change within the meaning of IRC §382.

The Company follows the provisions of income tax guidance which provides recognition criteria and a related measurement model for uncertain tax positions taken or expected to be taken in income tax returns. The guidance requires that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not that the position would be sustained upon examination by tax authorities. Tax positions that meet the more likely than not threshold are then measured using a probability weighted approach recognizing the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. The Company has not recognized any liability for uncertain tax positions as of December 31, 2020 and 2019.

Following is a tabular reconciliation of the unrecognized tax benefits activity during the years ended December 31, 2020 and 2019 (in thousands):

Unrecognized Tax Benefits – Beginning $ 2,234 $ 2,216

Gross decreases – tax positions in prior period (44 ) (18 )

Gross increase – current-period tax positions 33 36

Unrecognized Tax Benefits – Ending $ 2,223 $ 2,234

The unrecognized tax benefit amounts are reflected in the determination of the Company’s deferred tax assets. If recognized, none of these amounts would affect the Company’s effective tax rate, since it would be offset by an equal reduction in the deferred tax asset valuation allowance. The Company does not foresee material changes to its liability for uncertain tax benefits within the next twelve months.

The Company did not recognize interest related to unrecognized tax benefits in interest expense and penalties in operating expenses as of December 31, 2020.

The Company’s material tax jurisdictions are the United States and California. To its knowledge, the Company is currently not under examination by the Internal Revenue Service or any other taxing authority.

The Company’s tax years for 2016 (federal) and 2015 (CA) remain open to examination by the taxing authority. While not open to examination, the tax attributes generated in tax years 1998 (federal) and 1997 (CA) and forward are subject to adjustment by the taxing authorities if utilized in tax years which are still open to examination.

10. Employee Benefit Plan

We implemented a 401(k) retirement savings and profit sharing plan (the “Plan”) effective January 1, 1999. We may make discretionary annual contributions to the Plan, which is allocated to the profit sharing accounts based on the number of years of employee service and compensation. At the sole discretion of the Board of Directors, we may also match the participants’ contributions to the Plan. We made no discretionary or matching contributions to the Plan in 2020 or 2019.

11. NanoTx License Agreement

On March 29, 2020, the Company and NanoTx, Corp. (“NanoTx”) entered into a Patent and Know-How License Agreement (the“NanoTx License Agreement”), pursuant to which NanoTx granted the Company an irrevocable, perpetual, exclusive, fully paid-up license, with the right to sublicense and to make, develop, commercialize and otherwise exploit certain patents, know-how and technology related to the development of radiolabeled nanoliposomes.

On May 7, 2020, all closing conditions under the NanoTx License Agreement were satisfied and the Company paid an upfront payment of $400,000 in cash and issued 230,769 shares of its common stock to NanoTx. Cash and the fair value of common stock issued totaled $781,000 and is recorded as in-process research and development expenses, pursuant to authoritative literature for asset acquisition, in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2020, . Pursuant to the terms of the NanoTx License Agreement, the Company may be required to pay up to $136.5 million in development and sales milestone payments and a tiered single-digit royalty on U.S. and European sales.

12. Stockholders’ Equity

Preferred Stock

The Company has authorized 5,000,000 shares of preferred stock, par value $0.001 per share. The Company’s Board of Directors is authorized to designate the terms and conditions of any preferred stock the Company issues without further action by the common stockholders. There were no shares of Series A 3.6% Convertible Preferred Stock outstanding as of December 31, 2020 and 2019. There were 1,016 and 1,021 shares of Series B Convertible Preferred Stock outstanding as of each of

December 31, 2020 and December 31, 2019, respectively. There were 938 shares of Series C Preferred Stock outstanding as of December 31, 2020 and December 31, 2019.

As of December 31, 2020, there were 938 outstanding shares of Series C Preferred Stock that can be converted into an aggregate of 416,889 shares of common stock, and 1,016 shares of Series B Convertible Preferred Stock that can be converted into an aggregate of 6,096 shares of common stock. On September 25, 2019, in connection with the September 2019 Offering, the conversion price of the Series C Preferred Stock was reduced from $7.50 to $3.2132. In April 2020, in connection with the Warrant Amendments (defined below), the conversion price of the Series C Preferred Stock was reduced from $3.2132 per share to $2.25 per share.

Warrants

On April 27, 2018, the Company registered and distributed to holders of its common stock and Series B Convertible Preferred Stock, at no charge, non-transferable subscription rights to purchase up to an aggregate of 20,000 units for $1,000 a unit. Each unit consisted of one share of Series C Preferred Stock and 1,050 warrants (“Series T Warrants”). Pursuant to the rights offering the 2018 Rights Offering, the Company sold an aggregate of 6,723 units, resulting in total net proceeds to the Company of approximately $5.7 million. In April 2020, in connection with Warrant Amendments (defined below), the exercise price of the Series T Warrants was further adjusted such that every 50 warrants can be exercised into one share of common stock for $2.25.

As of December 31, 2020, there were 3,787,350 outstanding Series T Warrants which can be exercised into in aggregate 75,747 shares of common stock. All Series T Warrants expired unexercised in January 2021.

On September 25, 2019, the Company completed an underwritten public offering. The Company issued 289,000 shares of its common stock, along with pre-funded warrants to purchase 2,711,000 shares of its common stock and Series U Warrants to purchase 3,450,000 shares of its common stock at $5.00 per share. The Series U Warrants have a term of five years from the issuance date. In addition, the Company issued warrants to H.C. Wainwright & Co., LLC, as representatives of the underwriters, to purchase 75,000 shares of its common stock at $6.25 per share with a term of 5 years from the issuance date, in the form of Series U Warrants (the “Representative Warrants”).

In accordance with authoritative guidance, the pre-funded warrants are classified as equity. The Series U Warrants and the Representative Warrants are classified at issuance as liabilities due to a contingent obligation for the Company to settle the Series U Warrants with cash upon certain change in control events.

Between April and September 2020, the Company entered into revised warrant agreements with the holders of 3,447,500 Series U Warrants (“Warrant Amendments”). In return for reducing the strike price of the warrants to $2.25 per share, the warrant holders agreed to amend the settlement provisions upon a fundamental transaction such that the warrants would meet the requirements to be classified within stockholders’ equity. In September 2020, the Company entered into revised warrant agreements for the Representative Warrants that reduced the strike price of the warrants to $2.81 per share, and the warrant holders agreed to amend the settlement provisions upon a fundamental transaction such that the Representative Warrants would meet the requirements to be classified within stockholders’ equity. Accordingly, approximately $4.5 million of warrant liability was reclassified to stockholders’ equity on the respective effective date of the Warrant Amendments. In addition, approximately $0.7 million of other income representing change in the fair value of amended warrants from April 1, 2020 to the respective effective date of the Warrant Amendments is recorded in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2020.

As of December 31, 2020, there were 3,037,500 outstanding Series U Warrants which can be exercised into an aggregate of 3,037,500 shares of common stock.

Common Stock

Lincoln Park Purchase Agreements

On September 21, 2018, the Company entered into a purchase agreement (the “2018 Purchase Agreement”) with Lincoln Park pursuant to which the Company had the right to sell to Lincoln Park and Lincoln Park was obligated to purchase up to $5.0 million of shares of the Company’s common stock over the 24-month period following October 15, 2018. Through December 31, 2018, the Company sold a total of 12,802 shares for proceeds of approximately $0.3 million through the 2018 Purchase Agreement. During the year ended December 31, 2019, the Company sold a total of 32,170 shares for proceeds of approximately $0.3 million. There was no amount remaining available under this financing facility as of December 31, 2020.

On September 30, 2020, the Company entered into a new purchase agreement (the “2020 Purchase Agreement”) and registration rights agreement pursuant to which Lincoln Park has committed to purchase up to $25.0 million of the Company’s common stock. Under the terms and subject to the conditions of the 2020 Purchase Agreement, the Company has the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase up to $25.0 million of the Company’s common

stock. Such sales of common stock by the Company, if any, will be subject to certain limitations, and may occur from time to time, at the Company’s sole discretion, over the 36-month period commencing on November 6, 2020, subject to the satisfaction of certain conditions.

The 2020 Purchase Agreement provides that the number of shares the Company may sell to Lincoln Park on any single business day in a regular purchase is 50,000, but that amount may be increased up to 100,000 shares, depending upon the market price of the Company’s common stock at the time of sale and subject to a maximum limit of $500,000 per regular purchase. The purchase price per share for each such regular purchase will be based on prevailing market prices of the Company’s common stock immediately preceding the time of sale as computed under the 2020 Purchase Agreement. In addition to regular purchases, the Company may also direct Lincoln Park to purchase other amounts as accelerated purchases or as additional accelerated purchases if the closing sale price of the common stock exceeds certain threshold prices as set forth in the 2020 Purchase Agreement. There are no trading volume requirements or restrictions under the Lincoln Park Purchase Agreement. There is no upper limit on the price per share that Lincoln Park must pay for common stock under a regular purchase or an accelerated purchase and in no event will shares be sold to Lincoln Park on a day when the Company’s common stock closing sale price is less than $0.25 per share.

On June 16, 2020, the Company received stockholder approval to permit issuances of the Company’s common stock (including the issuance of more than 19.99% of the Company’s common stock) to Lincoln Park pursuant to the 2020 Purchase Agreement. Based on the closing price of the Company’s common stock of $1.05 per share on March 16, 2020, the maximum number of shares the Company could issue and sell under the 2020 Purchase Agreement is approximately 23.8 million shares. Accordingly, the Company requested and received stockholder approval for the issuance of up to 23.8 million shares of the Company’s common stock under the 2020 Purchase Agreement. The Company would seek additional stockholder approval before issuing more than 23.8 million shares.

Lincoln Park has no right to require the Company to sell any shares of common stock to Lincoln Park, but Lincoln Park is obligated to make purchases as the Company directs, subject to certain conditions.

Actual sales of shares of common stock to Lincoln Park under the 2020 Purchase Agreement will depend on a variety of factors to be determined by the Company from time to time, including, among others, market conditions, the trading price of the common stock and determinations by the Company as to the appropriate sources of funding for the Company and its operations. During the year ended December 31, 2020, the Company issued 353,113 shares, excluding 180,701 shares issued as commitment fee, of common stock under the 2020 Purchase Agreement for total net proceeds of approximately $0.7 million. During 2021 and through the date of filing of this Form 10-K, the Company issued 985,186 shares of its common stock under the 2020 Purchase Agreement for total proceeds of $2.9 million.

The net proceeds under the 2020 Purchase Agreement to the Company will depend on the frequency and prices at which the Company sells shares of its stock to Lincoln Park. On October 2, 2020, the Company issued 180,701 shares of common stock, with the fair value of $0.5 million, to Lincoln Park as a commitment fee in connection with entering into the 2020 Purchase Agreement, which was recorded as cost of capital in stockholders’ equity.

At-the-market Issuances

On October 23, 2020, the Company entered into an Equity Distribution Agreement (the “Distribution Agreement”) with Canaccord Genuity LLC (“Canaccord”), pursuant to which the Company may issue and sell, from time to time, shares of its common stock having an aggregate offering price of up to $10,000,000 (the “ATM Shares”), depending on market demand, with Canaccord acting as an agent for sales. The Company has no obligation to sell any of the ATM Shares. The Company may instruct Canaccord not to sell the ATM Shares if the sales cannot be effected at or above the price the Company designates from time to time and the Company may at any time suspend sales pursuant to the Distribution Agreement. During the year ended December 31, 2020, the Company issued 1,616,331 shares under the Distribution Agreement for net proceeds of approximately $3.2 million. During 2021 and through the date of filing of this Form 10-K, the Company issued 536,070 shares under the Distribution Agreement for net proceeds of $1.5 million.

13. Stock-based Compensation

On February 6, 2020, the Company amended the Company’s 2015 New Employee Incentive Plan (the “2015 Plan”) to increase the total number of shares of common stock reserved for issuance under the plan by 250,000 shares. Awards may only be granted under the 2015 Plan to employees who were not previously an employee or director of the Company, or following a bona fide period of non-employment, as a material inducement to entering into employment with the Company. As of December 31, 2020 there were 210,389 shares of common stock remaining and available for future issuances under the 2015 Plan.

On June 16, 2020, the stockholders of the Company approved the Company’s 2020 Stock Incentive Plan (“2020 Plan”), which replaced the Company’s 2014 Equity Incentive Plan. The 2020 Plan provides for the award or sale of shares of common stock (including restricted stock), the award of stock units and stock appreciation rights, and the grant of both incentive stock options to purchase common stock. The 2020 Plan provides for the issuance of up to 550,000 shares of common stock, and the number of shares available for issuance will be increased to the extent that awards granted under the 2020 Plan and the Company’s 2014 Equity Incentive Plan are forfeited or expire (except as otherwise provided in the 2020 Plan). As of December 31, 2020, there were 159,939shares of common stock remaining and available for future issuances under the 2020 Plan.

Stock Options

Generally, options issued under the 2020 Plan are subject to a two-year or four-year vesting schedule with 25% of the options vest on one year anniversary of the grant date, and have a contractual term of 10 years.

A summary of activity for the year ended December 31, 2020 is as follows:

Options Weighted Average Exercise Price

The Company settles exercises of stock options with newly issued shares of its common stock. There were no stock options exercised in 2020 or 2019.

The fair value of each option awarded during the years ended December 31, 2020 and 2019 was estimated on the date of grant using the Black-Scholes-Merton option valuation model based on the following weighted-average assumptions:

Expected term 5.8 years 7.0 years

Risk-free interest rate 0.58 % 2.41 %

Dividends 0 % 0 %

Resulting fair value $ 1.87 $ 0.26

The weighted average risk-free interest rate represents the interest rate for treasury constant maturity instruments published by the Federal Reserve Board. If the term of available treasury constant maturity instruments is not equal to the expected term of an employee option, we use the weighted average of the two Federal Reserve securities closest to the expected term of the employee option.

The dividend yield has been assumed to be zero as the Company (a) has never declared or paid any dividends and (b) does not currently anticipate paying any cash dividends on its outstanding shares of common stock in the foreseeable future.

The following table summarizes share-based compensation recognized during the years ended December 31, 2020 and 2019 in the statement of operations and comprehensive loss:

Years ended December 31,

Research and development $ 32 $ 40

General and administrative 215 87

Total share-based compensation $ 247 $ 127

As of December 31, 2020, the total compensation cost related to non-vested stock options and stock awards not yet recognized for all our plans is approximately $704,000, which is expected to be recognized as a result of vesting under service conditions over a weighted average period of 2.81 years.

14. COVID-19 Pandemic and CARES Act

A novel strain of coronavirus (COVID-19) was declared a global pandemic by the World Health Organization in March 2020. COVID-19 has presented substantial public health and economic challenges and is affecting economies, financial markets and business operations around the world. International and U.S. governmental authorities in impacted regions have taken action in an effort to slow the spread of COVID-19, including issuing varying forms of “stay-at-home” orders, and restricting business functions outside of one’s home. In response, the Company put restrictions on employee travel and working from its executive offices with many employees continuing their work remotely. While the Company has implemented additional health and safety precautions and protocols in response to the pandemic and government guidelines, the Company has not experienced a significant impact on its business and operations. However, the Company may experience disruptions that could adversely impact its business operations as well as its preclinical studies and clinical trials. The Company is currently continuing the clinical trials it has underway in sites across the U.S., and, although there has been no significant impact to date, the Company expects that COVID-19 precautions may directly or indirectly impact the timeline for some of its clinical trials. Some of the Company’s clinical trial sites, including those located in areas severely impacted by the pandemic, have placed new patient enrollment into clinical trials on hold or, for patients traveling from out-of-state, have implemented a 14-day self-quarantine before appointments. In addition, some clinical trial sites have imposed limited accessibility to conduct clinical monitoring and training on-site. Although there are vaccines available, the ability to obtain a vaccine or know when herd immunity will be met, is difficult to anticipate. The Company considered the impacts of COVID-19 on the assumptions and estimates used to prepare its consolidated financial statements and determined that there were no material adverse impacts on the Company’s results of operations and financial position at December 31, 2020. The full extent to which the COVID-19 pandemic will directly or indirectly impact its business, results of operations and financial condition, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat it, as well as the economic impact on local, regional, national and international markets.

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020. The CARES Act, among other things, includes tax provisions relating to refundable payroll tax credits, deferment of employer’s social security payments, net operating loss utilization and carryback periods, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property (QIP). The CARES Act had no material impact on the Company’s income tax provision for the year ended December 31, 2020. The Company continues to evaluate the impact of the CARES Act on its financial position, results of operations and cash flows.

PSTV US Equity

PSTV · 10-K · period ended 2020-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

PSTV US Equity☆

PSTV · 10-K · period ended 2020-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

PSTV US Equity