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Financial Condition and Business Plan

3 Months Ended

Mar. 31, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Financial Condition and Business Plan

Note 3. Financial Condition and Business Plan

Since inception, the Company has incurred substantial operating losses, principally from expenses associated with the Company’s research and development programs, clinical trials conducted in connection with the Company’s product candidates, and applications and submissions to the U.S. Food and Drug Administration. The Company has not generated significant revenue and have incurred significant net losses in each year since our inception. As of March 31, 2020, the Company has incurred approximately $296 million of cumulative net losses and we had approximately $17.5 million in cash, investment securities, interest receivable and receivables from the sale of our State of New Jersey net operating losses. We have substantial future capital requirements to continue our research and development activities and advance our product candidates through various development stages. The Company believes these expenditures are essential for the commercialization of its technologies.

The Company expects its operating losses to continue for the foreseeable future as it continues its product development efforts, and when it undertakes marketing and sales activities. The Company’s ability to achieve profitability is dependent upon its ability to obtain governmental approvals, manufacture, and market and sell its new product candidates. There can be no assurance that the Company will be able to commercialize its technology successfully or that profitability will ever be achieved. The operating results of the Company have fluctuated significantly in the past.

COVID-19 Pandemic

In January 2020, the World Health Organization (WHO) declared an outbreak of coronavirus, COVID-19, to be a “Public Health Emergency of International Concern,” and the U.S. Department of Health and Human Services declared a public health emergency to aid the U.S. healthcare community in responding to COVID-19. This virus continues to spread globally and, as of mid-May 2020, has spread to over 100 countries, including the United States. Governments and businesses around the world have taken unprecedented actions to mitigate the spread of COVID-19, including, but not limited to, shelter-in-place orders, quarantines, significant restrictions on travel, as well as restrictions that prohibit many employees from going to work. Uncertainty with respect to the economic impacts of the pandemic has introduced significant volatility in the financial markets. The Company did not observe significant impacts on its business or results of operations for the three months ended March 31, 2020 due to the global emergence of COVID-19. While the extent to which COVID-19 impacts the Company’s future results will depend on future developments, the pandemic and associated economic impacts could result in a material impact to the Company’s future financial condition, results of operations and cash flows.

The Company’s ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic.

The disruptions caused by COVID-19 may also disrupt the clinical trials process and enrollment of patients. This may delay commercialization efforts. The Company is currently monitoring its operating activities in light of these events and it is reasonably possible that the virus could have a negative effect on the Company’s financial condition and results of operations, the specific impact is not readily determinable as of the date of these financial statements.

The actual amount of funds the Company will need to operate is subject to many factors, some of which are beyond the Company’s control. These factors include the following:

●	the progress of research activities;

●	the number and scope of research programs;

●	the progress of preclinical and clinical development activities;

●	the progress of the development efforts of parties with whom the Company has entered into research and development agreements;

●	the costs associated with additional clinical trials of product candidates;

●	the ability to maintain current research and development licensing arrangements and to establish new research and development and licensing arrangements;

●	the ability to achieve milestones under licensing arrangements;

●	the costs involved in prosecuting and enforcing patent claims and other intellectual property rights; and

●	the costs and timing of regulatory approvals.

The Company has based its estimate on assumptions that may prove to be wrong. The Company may need to obtain additional funds sooner or in greater amounts than it currently anticipates. Potential sources of financing include strategic relationships, public or private sales of the Company’s shares or debt, the sale of the Company’s State of New Jersey net operating losses and other sources. If the Company raises funds by selling additional shares of common stock or other securities convertible into common stock, the ownership interest of existing stockholders may be diluted.

During 2019 and 2018, the Company submitted applications to sell a portion of the Company’s State of New Jersey net operating losses as part of the Technology Business Tax Certificate Program sponsored by The New Jersey Economic Development Authority. Under the program, emerging biotechnology companies with unused NOLs and unused research and development credits are allowed to sell these benefits to other companies. As more fully discussed in Note 9, the Company received approval from the New Jersey Economic Development Authority to sell $1.9 million of its State of New Jersey net operating losses recognizing a tax benefit for the year ended December 31, 2019 for the net proceeds (approximately $1.8 million). In early 2020, the Company entered into an agreement to sell these net operating losses, In April of 2020, the Company completed the sale of the New Jersey net operating losses and received the $1.8 million net proceeds. In 2018, the Company completed the sale of a portion of its New Jersey net operating losses for 2011 - 2017 totaling approximately $11.1 for net proceeds of approximately $10.4 million in December 2018. The proceeds of $10.4 million were reflected as a tax benefit for the year ended December 31, 2018. The Company has approximately $2.0 million available in future tax benefits remaining under the NOL Program for future years.

In June 2018, the Company entered into the Horizon Credit Agreement with Horizon that provided $10 million in new capital. The obligations under the Horizon Credit Agreement are secured by a first-priority security interest in substantially all assets of Celsion other than intellectual property assets. Payments under the loan agreement are interest only (calculated based on one-month LIBOR plus 7.625%) for the first twenty-four (24) months after through July 2020, closing, followed by a 24-month amortization period of principal and interest starting on August 1, 2020 and ending through the scheduled maturity date. On May 13, 2020, the Company and Horizon agreed to defer the first two principal payments totaling $833,333 due in August and September 2020.

With $17.5 million in cash, investments, interest receivable and receivable from the sale of the New Jersey net operating losses at March 31, 2020, coupled with future sales of the Company’s New Jersey NOL’s as well as the remaining availability under the Capital-on-Demand Equity Facility with JonesTrading Institutional Services LLC, the Company believes it has sufficient capital resources to fund its operations through mid-2021.