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Liquidity and Going Concern

3 Months Ended

Mar. 31, 2020

3.	Liquidity and Going Concern

We incurred net losses of $1.1 million for the three months ended March 31, 2020. We have an accumulated deficit of $426.4 million as of March 31, 2020. Additionally, we used net cash of $1.5 million to fund our operating activities for the three months ended March 31, 2020. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

To date, these operating losses have been funded primarily from outside sources of invested capital in the Company’s 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 August 19, 2019, the Company received written notice from Nasdaq indicating that, based on the Company’s stockholders’ deficit of $6.3 million as of June 30, 2019, as reported in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, it is 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.

Based on the Company’s stockholders’ equity of $85,000 as of March 31, 2020, the Company does not meet the minimum stockholders’ equity requirement for continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(b)(1). In April 2020, the Company entered into agreements (the “Warrant Amendments”) with certain holders of the Series U Warrants (the “Amending Warrant Holders”) to amend the terms of the Amending Warrant Holders’ Series U Warrants to, among other things, (i) limit the Company’s obligation to make cash payments to the Amending Warrant Holders upon certain fundamental transactions and (ii) establish an exercise price of $2.25. Subsequent to the Warrant Amendments, the amended Series U warrants are expected to meet the criteria under authoritative guidance to be classified within stockholders’ equity. The Company expects that in April 2020, approximately $4.2 million of warrant liability will be reclassed to the stockholders’ equity section of the balance sheet. In addition, approximately $0.7 million of other income representing change in the fair value of amended warrants from April 1, 2020 to the amendment date will be recorded in the statement of operations and other comprehensive income (loss) for the three months ending June 30, 2020.

The Company continues to seek additional capital through strategic transactions and from other financing alternatives. Without additional capital, current working capital will not provide adequate funding to make debt repayments, for research, sales and marketing efforts 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.