10-Q 1 clbs-10qx20200331.htm 10-Q Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
FORM 10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2020
 
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Transition Period from __________________   to _________________________
 
Commission File Number 001-33650
 
CALADRIUS BIOSCIENCES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
22-2343568
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
 
110 Allen Road, 2nd Floor, Basking Ridge, New Jersey
07920
(Address of principal executive offices)
(zip code)
 
Registrant’s telephone number, including area code: 908-842-0100

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.001 per share
CLBS
The Nasdaq Capital Market
Securities registered pursuant to Section 12(g) of the Act: None

 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act:
Large accelerated filer      o
Accelerated filer     o
Non-accelerated filer   x    
Smaller reporting company     x
 
Emerging growth company      o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o     No x

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class
Outstanding as of May 6th, 2020
Common stock, $0.001 par value per share
12,840,403

shares




CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report (this "Quarterly Report") contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, as well as historical information. When used in this Quarterly Report, statements that are not statements of current or historical fact may be deemed to be forward-looking statements, including, without limitation, all statements  related to any expectations of revenues, expenses, cash flows, earnings or losses from operations, cash required to maintain current and planned operations, capital or other financial items; any statements of the plans, strategies and objectives of management for future operations; any plans or expectations with respect to product research, development and commercialization, including regulatory approvals; any other statements of expectations, plans, intentions or beliefs; and any statements of assumptions underlying any of the foregoing. Without limiting the foregoing, the words “plan,” “project,” “forecast,” “outlook,” “intend,” “may,” “will,” “expect,” “likely,” “believe,” “could,” “anticipate,” “estimate,” “continue” or similar expressions or other variations or comparable terminology are intended to identify such forward-looking statements, although some forward-looking statements are expressed differently. We remind readers that forward-looking statements are merely predictions and therefore inherently subject to uncertainties and other factors and involve known and unknown risks that could cause the actual results, performance, levels of activity or our achievements or industry results, to be materially different from any future results, performance, levels of activity or our achievements or industry results expressed or implied by such forward-looking statements. Factors that could cause our actual results to differ materially from anticipated results expressed or implied by forward-looking statements include, among others:

•
our ability to obtain sufficient capital or strategic business arrangements to fund our operations and expansion plans, including meeting our financial obligations under various licensing and other strategic arrangements, the funding of our clinical trials for product candidates, and the commercialization of the relevant technology;
•
our ability to build and maintain the management and human resources infrastructure necessary to support the growth of our business;
•
whether a market is established for our cell-based products and services and our ability to capture a meaningful share of this market;
•
scientific, regulatory and medical developments beyond our control;
•
our ability to obtain and maintain, as applicable, appropriate governmental licenses, accreditations or certifications or to comply with healthcare laws and regulations or any other adverse effect or limitations caused by government regulation of our business;
•
whether any of our current or future patent applications result in issued patents, the scope of those patents and our ability to obtain and maintain other rights to technology required or desirable for the conduct of our business; and our ability to commercialize products without infringing upon the claims of third-party patents;
•
whether any potential strategic or financial benefits of various licensing agreements will be realized;
•
the results of our development activities;
•
our ability to complete our other planned clinical trials (or initiate other trials) in accordance with our estimated timelines due to delays associated with enrolling patients due to the novelty of the treatment, the size of the patient population and the need of patients to meet the inclusion criteria of the trial or otherwise;
•
the extent to which the COVID-19 coronavirus may impact our business, including our clinical trials and financial condition; and
•
other factors discussed in "Risk Factors" in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on March 5, 2020 (our "2019 Form 10-K").

The factors discussed herein, including those risks described in "Item 1A. Risk Factors" and elsewhere in our 2019 Form 10-K and in our other periodic filings with the SEC, which are available for review at www.sec.gov, could cause actual results and developments to be materially different from those expressed or implied by such statements. All forward-looking statements attributable to us are expressly qualified in their entirety by these and other factors. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they were made. Except as required by law, we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.


2

TABLE OF CONTENTS
 
Page No.
Financial Statements:
 
Consolidated Balance Sheets at March 31, 2020 (unaudited) and December 31, 2019
 
Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019 (unaudited)
 
Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2020 and 2019 (unaudited)
 
Consolidated Statements of Equity for the three months ended March 31, 2020 and 2019 (unaudited)
 
Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019 (unaudited)
 
 
 
 

3

PART I. FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS

Item 1. CONSOLIDATED FINANCIAL STATEMENTS

CALADRIUS BIOSCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
 
March 31,
2020
 
December 31,
2019
ASSETS
(Unaudited)
 
 
Cash and cash equivalents
$
20,745

 
$
14,032

Marketable securities
—

 
11,125

Prepaid and other current assets
461

 
815

Total current assets
21,206

 
25,972

Property and equipment, net
87

 
100

Other assets
847

 
1,081

Total assets
$
22,140

 
$
27,153

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 

 
 

Liabilities
 

 
 

Accounts payable
$
64

 
$
1,490

Accrued liabilities
4,556

 
4,486

Total current liabilities
4,620

 
5,976

Other long-term liabilities
536

 
624

Total liabilities
$
5,156

 
$
6,600

Commitments and Contingencies


 


 
 
 
 
Stockholders' Equity
 
 
 

Preferred stock, authorized, 20,000,000 shares
Series B convertible redeemable preferred stock liquidation value, 0.001 share of common stock, $0.01 par value; 825,000 shares designated; issued and outstanding, 10,000 shares at March 31, 2020 and December 31, 2019, respectively
—

 
—

Common stock, $0.001 par value, authorized 500,000,000 shares; issued and outstanding, 10,638,771 and 10,528,689 shares at March 31, 2020 and December 31, 2019, respectively
11

 
11

Additional paid-in capital
439,330

 
438,911

Treasury stock, at cost; 11,080 shares at March 31, 2020 and December 31, 2019
(708
)
 
(708
)
Accumulated deficit
(421,390
)
 
(417,400
)
Accumulated other comprehensive income
—

 
2

Total Caladrius Biosciences, Inc. stockholders' equity
17,243

 
20,816

Noncontrolling interests
(259
)
 
(263
)
Total stockholders' equity
16,984

 
20,553

Total liabilities and stockholders' equity
$
22,140

 
$
27,153

See accompanying notes to consolidated financial statements.

4

CALADRIUS BIOSCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
(In thousands, except per share data)
 
Three Months Ended March 31,
 
2020
 
2019
Operating Expenses:
 
 
 
Research and development
$
1,499

 
$
2,038

General and administrative
2,558

 
2,554

Total operating expenses
4,057

 
4,592

 
 
 
 
Operating loss
(4,057
)
 
(4,592
)
 
 
 
 
Other income:
 
 
 
Investment income, net
71

 
227

Total other income
71

 
227

 
 
 
 
Net loss
$
(3,986
)
 
$
(4,365
)
Less - net income attributable to noncontrolling interests
4

 
2

Net loss attributable to Caladrius Biosciences, Inc. common stockholders
$
(3,990
)
 
$
(4,367
)
 
 
 
 
 
 
 
 
Basic and diluted loss per share
 
 
 
Caladrius Biosciences, Inc. common stockholders
$
(0.38
)
 
$
(0.44
)
 
 
 
 
Weighted average common shares outstanding
 
 
 
Basic and diluted shares
10,623

 
10,027


See accompanying notes to consolidated financial statements.

5

CALADRIUS BIOSCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited) 
(In thousands)
 
Three Months Ended March 31,
 
2020
 
2019
Net loss
$
(3,986
)
 
$
(4,365
)
 
 
 
 
Other comprehensive (loss) income:
 
 
 
Available for sale securities - net unrealized (loss) income
(2
)
 
14

Total other comprehensive (loss) income
(2
)
 
14

 
 
 
 
Comprehensive loss
(3,988
)
 
(4,351
)
 
 
 
 
Comprehensive income attributable to noncontrolling interests
4

 
2

 
 
 
 
Comprehensive loss attributable to Caladrius Biosciences, Inc. common stockholders
$
(3,992
)
 
$
(4,353
)
 
See accompanying notes to consolidated financial statements.

6

CALADRIUS BIOSCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited) 
(In thousands)
 
Series B Convertible
Preferred Stock
 
Common Stock
 
Additional
Paid in
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Accumulated
Deficit
 
Treasury
Stock
 
Total
Caladrius Biosciences,
Inc.
Stockholders'
Equity
 
Non-
Controlling
Interest in
Subsidiary
 
Total
Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
 
 
Balance at December 31, 2019
10

 
$
—

 
10,529

 
$
11

 
$
438,911

 
$
2

 
$
(417,400
)
 
$
(708
)
 
$
20,816

 
$
(263
)
 
$
20,553

Net loss
—

 
—

 
—

 
—

 
—

 
—

 
(3,990
)
 
—

 
(3,990
)
 
4

 
(3,986
)
Unrealized gain on marketable securities
—

 
—

 
—

 
—

 
—

 
(2
)
 
—

 
—

 
(2
)
 
—

 
(2
)
Share-based compensation
—

 
—

 
110

 
—

 
419

 
—

 
—

 
—

 
419

 
—

 
419

Balance at March 31, 2020
10

 
$
—

 
10,639

 
$
11

 
$
439,330

 
$
—

 
$
(421,390
)
 
$
(708
)
 
$
17,243

 
$
(259
)
 
$
16,984

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
Series B Convertible
Preferred Stock
 
Common Stock
 
Additional
Paid in
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Accumulated
Deficit
 
Treasury
Stock
 
Total
Caladrius Biosciences,
Inc.
Stockholders'
Equity
 
Non-
Controlling
Interest in
Subsidiary
 
Total
Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
 
 
Balance at December 31, 2018
10

 
$
—

 
9,866

 
$
10

 
$
436,433

 
$
(32
)
 
$
(397,977
)
 
$
(708
)
 
$
37,726

 
$
(272
)
 
$
37,454

Adoption of accounting standard
—

 
—

 
—

 
—

 
—

 
—

 
(62
)
 
—

 
(62
)
 
—

 
(62
)
Net loss
—

 
—

 
—

 
—

 
—

 
—

 
(4,367
)
 
—

 
(4,367
)
 
2

 
(4,365
)
Unrealized gain on marketable securities
—

 
—

 
—

 
—

 
—

 
14

 
—

 
—

 
14

 
—

 
14

Share-based compensation
—

 
—

 
96

 
—

 
417

 
—

 
—

 
—

 
417

 
—

 
417

Net proceeds from issuance of common stock
—

 
—

 
431

 
—

 
1,000

 
—

 
—

 
—

 
1,000

 
—

 
1,000

Balance at March 31, 2019
10

 
$
—

 
10,393

 
$
10

 
$
437,850

 
$
(18
)
 
$
(402,406
)
 
$
(708
)
 
$
34,728

 
$
(270
)
 
$
34,458

 
See accompanying notes to consolidated financial statements.
 

7

CALADRIUS BIOSCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 
 
Three Months Ended March 31,
 
2020
 
2019
Cash flows from operating activities:
 

 
 

Net loss
$
(3,986
)
 
$
(4,365
)
Adjustments to reconcile net loss to net cash used in operating activities:
 

 
 

Share-based compensation
567

 
547

Depreciation and amortization
15

 
17

Accretion on marketable securities
19

 
82

Changes in operating assets and liabilities:
 

 
 

Prepaid and other current assets
354

 
(223
)
Other assets
233

 
91

Accounts payable, accrued liabilities and other liabilities
(1,443
)
 
(1,635
)
Net cash used in operating activities
(4,241
)
 
(5,486
)
Cash flows from investing activities:
 

 
 

Purchase of marketable securities
—

 
(16,264
)
Sale of marketable securities
11,104

 
25,005

Acquisition of property and equipment
(2
)
 
—

Net cash provided by investing activities
11,102

 
8,741

Cash flows from financing activities:
 

 
 

Tax withholding payments on net share settlement equity awards
(148
)
 
(130
)
Net proceeds from issuance of common stock
—

 
1,000

Net cash (used in) provided by financing activities
(148
)
 
870

Net increase in cash and cash equivalents
6,713

 
4,125

Cash and cash equivalents at beginning of period
14,032

 
10,299

Cash and cash equivalents at end of period
$
20,745

 
$
14,424

 
 
 
 
See accompanying notes to consolidated financial statements.

8

CALADRIUS BIOSCIENCES, INC. AND SUBSIDIARIES
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – The Business
    
Overview

Caladrius Biosciences, Inc. (“we,” “us,” "our," “Caladrius” or the “Company”) is a clinical-stage biopharmaceutical company dedicated to the development and commercialization of cellular therapies designed to reverse disease and/or promote the regeneration of damaged tissue. The Company is developing first-in-class therapeutic products that are based on the characteristics of naturally occurring CD34+ cells and their ability to stimulate the growth of new microvasculature. The Company's technology leverages these cells using formulations unique to each medical indication and uses them to enable the body's natural repair mechanisms.

The Company's leadership team has decades of collective biopharmaceutical development experience and world-recognized scientific achievement in the field of cardiovascular disease, among other therapeutic areas. Its goal is to develop and commercialize products that address important unmet medical needs based on a broad and versatile portfolio of candidates. The Company's current product candidates include CLBS119, an emergent CD34+ stem cell therapy responding to the COVID-19 pandemic and the potentially permanent damage it inflicts on the lungs of many patients, as well as three other developmental treatments for ischemic diseases based on its CD34+ cell therapy platform: CLBS12, recipient of SAKIGAKE designation and eligible for early conditional approval in Japan for the treatment of critical limb ischemia ("CLI") based on the results of an ongoing clinical trial; CLBS16, the subject of a recently completed positive Phase 2 clinical trial in the U.S. for the treatment of coronary microvascular dysfunction ("CMD"); and CLBS14, a Regenerative Medicine Advanced Therapy ("RMAT") designated therapy for which the Company has finalized with the U.S. Food and Drug Administration (the "FDA") a protocol for a Phase 3 confirmatory trial in subjects with no-option refractory disabling angina ("NORDA").

Ischemic Repair (CD34 Cell Technology)

The CD34+ cell was discovered as a result of the deliberate search for a stem cell capable of stimulating the development and/or repair of blood vessels. All tissues in the body maintain their function by replacing cells over time. In addition to the maintenance function, the body must also be capable of building new blood vessels after injury. A CD34+ cell is a stem cell that has the ability to stimulate new blood vessel formation. No other native cell discovered to date has demonstrated this same capability.

The Company’s proprietary CD34+ cell technology has led to the development of therapeutic product candidates designed to address diseases and conditions caused by ischemia. Ischemia occurs when the supply of oxygenated blood to healthy tissue is restricted. Through the administration of CD34+ cells, the Company seeks to promote the development and formation of new microvasculature and thereby increase blood flow to the impacted area. Caladrius believes that a number of conditions caused by underlying ischemic injury can be improved through its CD34+ cell technology, including but not limited to, CLI, CMD, NORDA and COVID-19 induced lung damage.

CLBS119 for Treatment of COVID -19 Induced Lung Damage

COVID-19 appears to damage the vasculature of the lungs and Caladrius believes that repair of that vasculature will prove necessary for patients to achieve a full recovery. Survivors of COVID-19 often remain debilitated even after leaving the hospital due to the damage caused to their lungs, and while many developmental therapies responding to the COVID-19 pandemic are appropriately targeting the SARS-CoV-2 virus itself or the symptoms of the acute phase of the illness, Caladrius is aware of no therapy that has demonstrated the ability to repair COVID-19 induced lung damage. With consistent clinical and pre-clinical evidence that CD34+ cells can repair multiple organs, including models of severe lung inflammation, the Company sought and received FDA authorization for its investigational new drug (“IND”) application for the study of CLBS119, a CD34+ cell therapy for repair of COVID-19 induced lung damage. The planned study will target patients with severe SARS-CoV-2 infection who, after ventilatory support due to respiratory failure, had otherwise recovered but remained debilitated due to persistent pulmonary damage.

CLBS12 for Treatment of Critical Limb Ischemia

The Company's open-label, registration-eligible study of CLBS12 in Japan for the treatment of critical limb ischemia ("CLI"), a disease with no currently available approved therapy and a higher mortality rate than all cancers except that of lung cancer, has shown strong results to date. The initial responses observed in the subjects who have reached an endpoint in this open label study

9

are consistent with a positive therapeutic effect and safety profile as reported by previously published clinical trials in Japan. Although the study's enrollment, which had been targeted for completion this year, has been slowed by the pandemic's impact in Japan, the Company is encouraged by the patient pre-screening pipeline that has been identified and hopes to conclude the trial enrollment rapidly once the coronavirus abates. While the final outcome of the trial will depend on all data from all subjects, data from the concluded Buerger's Disease cohort and the data to date in the no-option CLI cohort remain very encouraging.

CLBS16 for Treatment of Coronary Microvascular Dysfunction

In 2017, with the assistance of a $1.9 million grant from the National Institutes of Health (Award Number R44HL135889), Caladrius initiated its program for CLBS16 for the treatment of coronary microvascular dysfunction ("CMD"), a disease that potentially afflicts annually millions of patients with no current treatment options. That study, titled ESCaPE-CMD, was a Phase 2 proof-of-concept study that enrolled patients at the Mayo Clinic in Rochester, MN and Cedars-Sinai Medical Center in Los Angeles, CA. In June 2019, the Company announced the completion of enrollment in this study. Results of the first 17 of 20 patients enrolled in this trial who reached 6-month follow-up were presented as a rapid fire oral presentation on November 16, 2019 at the annual meeting of the American Heart Association in Philadelphia, PA by one of the principal investigators, Dr. Noel Bairey Merz, FACC, FAHA, FESC, the director of the Barbra Streisand Women's Heart Center at Cedars-Sinai in Los Angeles, CA. That data set showed a positive therapeutic effect with a statistically significant improvement in angina frequency, coronary flow reserve, Canadian Cardiovascular Society Angina Class and Seattle Questionnaire score, as well as an acceptable safety profile. The full data from that study will be presented at the SCAI 2020 Scientific Sessions Virtual Conference on May 14, 2020 and we now expect to initiate the next CMD trial, a Phase 2b study, in the fall of 2020.

CLBS14 for Treatment of No Option Refractory Disabling Angina (NORDA)

The Company acquired the rights to data and regulatory filings for a CD34+ cell therapy program for refractory angina that had been advanced to Phase 3 by a previous sponsor.

Based on the clinical evidence from the completed studies that a single administration of CLBS14 reduces mortality, improves angina and increases exercise capacity in patients with otherwise untreatable angina, this product received Regenerative Medicine Advanced Therapy (“RMAT”) designation from the FDA. The Company, working closely with the FDA, has finalized the design of a confirmatory Phase 3 trial which, in combination with previously filed Phase 1, 2 and 3 data, will be considered for the registration of CLBS14. Notably, this study design includes a 6-month primary endpoint and, with the benefit of the RMAT designation, the biologics license application ("BLA"), once submitted, should receive a 6-month review. The Company has substantially completed the preparatory work for initiation of this trial. Caladrius will not, however, commence enrollment of patients until sufficient capital is acquired and dedicated to this program such that the Company has confidence that it can fund the trial uninterrupted through completion.

Additional Out-licensing Opportunities

The Company's broad intellectual property portfolio of cell therapy assets includes notable programs available for out-licensing in order to continue their clinical development. Its current long-term strategy focuses on advancing its therapies through development with the ultimate objective of obtaining market authorizations and entering commercialization, either alone or with partners, to provide treatment options to patients suffering from life-threatening medical conditions. The Company believes that it is well-positioned to realize potentially meaningful value increases within its own proprietary pipeline if the Company is successful in advancing its product candidates to their next significant development milestones.

Coronavirus Considerations

In December 2019, a novel strain of coronavirus (SARS-CoV-2), which causes COVID-19, was reported to have surfaced in China. In March 2020, the World Health Organization declared the outbreak of COVID-19 to be a pandemic, and the world's economies began to experience pronounced effects. While the disruption is currently expected to be temporary, there is uncertainty around the extent and duration, and any future related financial impact cannot be reasonably estimated at this time.

Basis of Presentation

The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying Consolidated Financial Statements of the Company and its subsidiaries, which are unaudited,

10

include all normal and recurring adjustments considered necessary to present fairly the Company’s financial position as of March 31, 2020, and the results of its operations and its cash flows for the periods presented. The unaudited consolidated financial statements herein should be read together with the historical consolidated financial statements of the Company for the years ended December 31, 2019 and 2018 included in our 2019 Form 10-K. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.
    
Use of Estimates
 
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Estimates also affect the reported amount of expenses during the reporting period. The Company bases its estimates on historical experience and other assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. The Company makes critical estimates and assumptions in determining stock-based awards values. Accordingly, actual results could differ from those estimates and assumptions.
 
Principles of Consolidation
 
The Consolidated Financial Statements include the accounts of Caladrius Biosciences, Inc. and its wholly owned and majority owned subsidiaries and affiliates. All intercompany activities have been eliminated in consolidation.

Note 2 – Summary of Significant Accounting Policies
 
In addition to the policies below, the Company's significant accounting policies are described in Note 2 of the Notes to Consolidated Financial Statements included in its 2019 Form 10-K. There were no changes to these policies during the three months ended March 31, 2020.

Concentration of Risks
The Company is subject to credit risk from its portfolio of cash, cash equivalents and marketable securities. Under its investment policy, the Company limits amounts invested in such securities by credit rating, maturity, industry group, investment type and issuer, except for securities issued by the U.S. government. Cash is held at major banks in the United States. Therefore, the Company is not exposed to any significant concentrations of credit risk from these financial instruments. The goals of the Company's investment policy, in order of priority, are as follows: safety and preservation of principal and diversification of risk, liquidity of investments sufficient to meet cash flow requirements, and a competitive after-tax rate of return.

Share-Based Compensation  

The Company expenses all share-based payment awards to employees, directors, and consultants, including grants of stock options, warrants, and restricted stock, over the requisite service period based on the grant date fair value of the awards. Consultant awards are remeasured each reporting period through vesting. For awards with performance-based vesting criteria, the Company estimates the probability of achievement of the performance criteria and recognizes compensation expense related to those awards expected to vest. The Company determines the fair value of option awards using the Black-Scholes option-pricing model which uses both historical and current market data to estimate the fair value. This method incorporates various assumptions such as the risk-free interest rate, expected volatility, expected dividend yield and expected life of the options or warrants. The fair value of the Company’s restricted stock and restricted stock units is based on the closing market price of the Company’s common stock on the date of grant.

New Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires that a lessee recognize lease assets and lease liabilities for those leases classified as operating leases. The guidance was effective for interim and annual periods beginning after December 15, 2018 and was adopted as of January 1, 2019. The Company adopted the standard using the optional transition method, with an immaterial adjustment to accumulated deficit upon adoption. The comparative information has not been restated and continues to be reported under the accounting standards that were in effect for those periods. The Company concluded that the adoption of ASU 2016-02 was non-cash in nature, did not affect the Company's cash position, and did not have a material impact on the Company's consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses, which will require companies to present assets held at amortized cost and available for sale debt securities net of the amount expected to be collected. The guidance requires

11

the measurement of expected credit losses to be based on relevant information from past events, including historical experiences, current conditions and reasonable and supportable forecasts that affect collectability. The guidance will be effective for fiscal years and interim periods beginning after December 15, 2019 and early adoption is permitted. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, "Improvements to Nonemployee Share-Based Payment Accounting," which supersedes ASC 505-50 and expands the scope of ASC 718 to include all share-based payments arrangements related to the acquisition of goods and services from both employees and nonemployees. For public companies, the amendments are effective for annual reporting periods beginning after December 15, 2018, including interim periods within those annual periods. Early adoption is permitted, but no earlier than a company's adoption date of ASC 606. The Company determined that the adoption of this new accounting guidance did not have a material impact on its consolidated financial statements and footnote disclosures.

In July 2019, the FASB issued ASU 2019-07, "Codification Updates to SEC Sections", to codify the SEC releases that clarify and improve the disclosure and presentation requirements of a variety of codification topics, thereby eliminating certain disclosure requirements that were redundant, duplicative, overlapping, outdated, or superseded. The Company determined that the adoption of this new accounting guidance did not have a material impact on its consolidated financial statements and footnote disclosures.

In October 2019, the FASB issued ASU 2019-12, which affects general principles within Topic 740, Income Taxes. The amendments of ASU 2019-12 are meant to simplify and reduce the cost of accounting for income taxes. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company believes that the adoption of this new accounting guidance will not have a material impact on its financial statements and footnote disclosures.

Note 3 – Available-for-Sale-Securities
 
The following table is a summary of available-for-sale securities recorded in cash and cash equivalents or marketable securities in our Consolidated Balance Sheets (in thousands):

 
March 31, 2020
 
December 31, 2019
 
Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Estimated Fair Value
 
Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Estimated Fair Value
Corporate debt securities
$
—

 
$
—

 
$
—

 
$
—

 
$
11,673

 
$
3

 
$
(1
)
 
$
11,675

Money market funds
17,037

 
—

 
—

 
17,037

 
11,093

 
—

 
—

 
11,093

Total
$
17,037

 
$
—

 
$
—

 
$
17,037

 
$
22,766

 
$
3

 
$
(1
)
 
$
22,768


Estimated fair values of available-for-sale securities are generally based on prices obtained from commercial pricing services. The following table summarizes the classification of the available-for-sale securities in our Consolidated Balance Sheets (in thousands):

 
March 31, 2020
 
December 31, 2019
Cash and cash equivalents
$
17,037

 
$
11,643

Marketable securities
—

 
11,125

Total
$
17,037

 
$
22,768


The following table summarizes our portfolio of available-for-sale securities by contractual maturity (in thousands):
 
 
March 31, 2020
 
Amortized Cost
 
Estimated Fair Value
Less than one year
$
17,037

 
$
17,037

Greater than one year
—

 
—

Total
$
17,037

 
$
17,037



12


Note 4 – Loss Per Share
 
For the three months ended March 31, 2020 and 2019, the Company incurred net losses and therefore no common stock equivalents were utilized in the calculation of diluted loss per share as they are anti-dilutive. At March 31, 2020 and 2019, the Company excluded the following potentially dilutive securities (in thousands):
 
March 31,
 
2020
 
2019
Stock Options
1,280

 
1,214

Warrants
30

 
30

Restricted Stock Units
313

 
118

 
Note 5 – Fair Value Measurements
 
The fair value of financial assets and liabilities that are being measured and reported are defined as the exchange price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market at the measurement date (exit price). The Company is required to classify fair value measurements in one of the following categories:
 
Level 1 inputs are defined as quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
 
Level 2 inputs are defined as inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly.
 
Level 3 inputs are defined as unobservable inputs for the assets or liabilities. Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.
 
The following table sets forth by level within the fair value hierarchy the Company's financial assets that were accounted for at fair value on a recurring basis as of March 31, 2020, and December 31, 2019 (in thousands).

 
 
March 31, 2020
 
December 31, 2019
 
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Marketable securities - available for sale
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
11,125

 
$
—

 
$
11,125

 
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
11,125

 
$
—

 
$
11,125


Note 6 – Accrued Liabilities

Accrued liabilities as of March 31, 2020 and December 31, 2019 were as follows (in thousands):
 
March 31, 2020
 
December 31, 2019
Salaries, employee benefits and related taxes
$
2,286

 
$
1,834

Operating lease liabilities -- current
339

 
354

CIRM upfront funding -- current
914

 
1,600

Other
1,017

 
698

Total
$
4,556

 
$
4,486


Note 7 – Operating Leases


13

The Company has operating leases for two offices with terms that expire in 2022 and 2023. In addition, the Company pays for facility space through a third-party manufacturing contract that contains an embedded operating lease, with an estimated expiration in 2020. The Company estimates its incremental borrowing rate, at lease commencement, to determine the present value of lease payments, since most of the Company's leases do not provide an implicit rate of return. The Company recognizes lease expense on a straight-line basis over the lease term. For lease agreements entered into or reassessed after the adoption of Topic 842, the Company elected to account for non-lease components associated with its leases and lease components as a single lease component. Each of the Company's leases include options for the Company to extend the lease term and/or sub-lease space in whole or in part.
    
Operating lease liabilities and right-of-use assets were recorded in the following captions of our balance sheet were as follows (in thousands):
 
March 31, 2020
 
December 31, 2019
Right-of Use Assets:
 
 
 
Other assets
$
807

 
$
906

Total Right-of-Use Asset
$
807

 
$
906

 
 
 
 
Operating Lease Liabilities:
 
 
 
Accrued liabilities
$
339

 
$
353

Other long-term liabilities
536

 
624

Total Operating Lease Liabilities
$
875

 
$
977

    
As of March 31, 2020, the weighted average remaining lease term for our operating leases was 1.7 years, and the weighted average discount rate for our operating leases was 9.625%. Future minimum lease payments under the lease agreements as of March 31, 2020 were as follows (in thousands):

Years ended
Operating Leases
2020
306

2021
414

2022
239

2023
27

Total lease payments
986

Less: Amounts representing interest
(111
)
Present value of lease liabilities
$
875


Note 8 – Stockholders' Equity

Equity Issuances

Purchase Agreement

In March 2019, the Company and Lincoln Park Capital Fund, LLC (“Lincoln Park”) entered into a purchase agreement (the “Purchase Agreement”) and a registration rights agreement (the “Registration Rights Agreement”), pursuant to which the Company has the right to sell to Lincoln Park shares of the Company’s common stock having an aggregate value of up to $26.0 million, subject to certain limitations and conditions set forth in the Purchase Agreement (the “Offering”). As consideration for entering into the Purchase Agreement, the Company issued to Lincoln Park an additional 181,510 shares of common stock as commitment shares.

Pursuant to the Purchase Agreement, Lincoln Park purchased 250,000 shares of common stock, at a price of $4.00 per share, for a total gross purchase price of $1.0 million (the “Initial Purchase”) upon commencement. Thereafter, as often as every business day from and after one business day following the date of the Initial Purchase and over the 36-month term of the Purchase Agreement the Company has the right, from time to time, at its sole discretion and subject to certain conditions, to direct Lincoln Park to purchase up to 100,000 shares of common stock, with such amount increasing as the closing sale price of the common stock increases; provided Lincoln Park’s obligation under any single such purchase will not exceed $2.5 million, unless the Company

14

and Lincoln Park mutually agree to increase the maximum amount of such single purchase (each, a “Regular Purchase”). If the Company directs Lincoln Park to purchase the maximum number of shares of common stock it then may sell in a Regular Purchase, then in addition to such Regular Purchase, and subject to certain conditions and limitations in the Purchase Agreement, the Company may direct Lincoln Park in an “accelerated purchase” to purchase an additional amount of common stock that may not exceed the lesser of (i) 300%  the number of shares purchased pursuant to the corresponding Regular Purchase or (ii) 30% of the total number of shares of the Company’s common stock traded during a specified period on the applicable purchase date as set forth in the Purchase Agreement. Under certain circumstances and in accordance with the Purchase Agreement, the Company may direct Lincoln Park to purchase shares in multiple accelerated purchases on the same trading day.

The Company controls the timing and amount of any sales of its common stock to Lincoln Park. There is no upper limit on the price per share that Lincoln Park must pay for its common stock under the Purchase Agreement, but in no event will shares be sold to Lincoln Park on a day the closing price is less than the floor price specified in the Purchase Agreement. In all instances, the Company may not sell shares of its common stock to Lincoln Park under the purchase agreement if it would result in Lincoln Park beneficially owning more than 9.99% of its common stock.

The Purchase Agreement does not limit the Company’s ability to raise capital from other sources at the Company’s sole discretion, except that (subject to certain exceptions) the Company may not enter into any Variable Rate Transaction (as defined in the Purchase Agreement, including the issuance of any floating conversion rate or variable priced equity-like securities) during the 36 months after the date of the Purchase Agreement. The Company has the right to terminate the Purchase Agreement at any time, at no cost to the Company.

As of March 31, 2020, the Company had not made any sales of common stock to Lincoln Park under the Purchase Agreement other than the Initial Purchase.

Common Stock Sales Agreement

In February 2018, the Company entered into a common stock sales agreement with H.C. Wainwright & Co., LLC ("HCW") as sales agent, which was subsequently amended in August 2018 (the "Sales Agreement"), in connection with an “at the market offering” under which the Company from time to time may offer and sell shares of its common stock having an aggregate offering price of not more than $25.0 million. In March 2019, subsequent to the filing of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (the "2018 Form 10-K"), the aggregate market value of our outstanding common stock held by non-affiliates was approximately $52.8 million. Pursuant to General Instruction I.B.6 of Form S-3, since the aggregate market value of our outstanding common stock held by non-affiliates was below $75.0 million at the time of our 2018 Form 10-K filing, the aggregate amount of securities that we were permitted to offer and sell at such time was reduced to $17.6 million (or a maximum of 4.8 million shares), which was equal to one-third of the aggregate market value of our common stock held by non-affiliates at such time.

Subject to the terms and conditions of the Sales Agreement, HCW will use its commercially reasonable efforts consistent with its normal trading and sales practices to sell the shares from time to time, based upon the Company's instructions, including any price, time or size limits specified by the Company. The Company has provided HCW with customary indemnification rights, and HCW will be entitled to a commission at a fixed commission rate equal to 3.0% of the gross proceeds per share sold. The Company has no obligation to sell any of the shares and may at any time suspend sales under the Sales Agreement or terminate the Sales Agreement. The Sales Agreement will terminate upon the sale of all of the shares under the Sales Agreement unless terminated earlier by either party as permitted under the Sales Agreement.

During the three months ended March 31, 2020, the Company did not issue shares of common stock under the Sales Agreement. As of March 31, 2020, the Company has issued 260,349 shares of common stock under the Sales Agreement for net proceeds of $1.3 million since inception.

Stock Options and Warrants

The following table summarizes the activity for stock options and warrants for the three months ended March 31, 2020:


15

 
 
Stock Options
 
Warrants
 
 
Shares
 
Weighted Average Exercise Price
 
Weighted Average Remaining Contractual Term (Years)
 
Aggregate Intrinsic Value (In Thousands)
 
Shares
 
Weighted Average Exercise Price
 
Weighted Average Remaining Contractual Term (Years)
 
Aggregate Intrinsic Value (In Thousands)
Outstanding at December 31, 2019
 
1,044,417

 
$
18.31

 
6.06
 
$
—

 
30,000

 
$
5.89

 
3.19
 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Changes during the period:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Granted
 
235,776

 
3.28

 
 
 
 
 
—

 
—

 
 
 
 
Exercised
 
—

 
—

 
 
 
 
 
—

 
—

 
 
 
 
Forfeited
 
—

 
—

 
 
 
 
 
—

 
—

 
 
 
 
Expired
 
—

 
—

 
 
 
 
 
—

 
—

 
 
 
 
Outstanding at March 31, 2020
 
1,280,193

 
$
15.54

 
6.54
 
$
—

 
30,000

 
$
5.89

 
2.95
 
$
—

Vested at March 31, 2020
or expected to vest in the future
 
1,244,418

 
$
15.88

 
6.46
 
$
—

 
30,000

 
$
5.89

 
2.95
 
$
—

Vested at March 31, 2020
 
946,985

 
$
19.63

 
5.60
 
$
—

 
30,000

 
$
5.89

 
2.95
 
$
—



Restricted Stock

During the three months ended March 31, 2020 and 2019, the Company issued restricted stock for services as follows ($ in thousands):

 
 
Three Months Ended March 31,
  
 
2020
 
2019
Number of restricted stock issued
 
156,184

 
123,564

Value of restricted stock issued
 
$
512

 
$
612


Restricted Stock Units

During the three months ended March 31, 2020 and 2019, the Company issued restricted stock units for services as follows ($ in thousands, except share data):

 
Three Months Ended March 31,
 
2020
 
2019
Number of restricted stock units issued
195,320

 
184,454

Value of restricted stock units issued
$
623

 
$
909


The weighted average estimated fair value of restricted stock issued for services in the three months ended March 31, 2020 and 2019 was $3.19 and $4.93 per share, respectively. The fair value of the restricted stock units was determined using the Company’s closing stock price on the date of issuance. The vesting terms of restricted stock unit issuances are generally one year, or upon the achievement of performance-based milestones.

Note 9 – Share-Based Compensation

Share-Based Compensation

We utilize share-based compensation in the form of stock options, restricted stock, and restricted stock units.  The following table summarizes the components of share-based compensation expense for the three months ended March 31, 2020 and 2019 (in thousands):


16

 
Three Months Ended March 31,
 
2020
 
2019
Research and development
$
125

 
$
124

General and administrative
442

 
423

Total share-based compensation expense
$
567

 
$
547

 
 
 
 

Total compensation cost related to non-vested awards not yet recognized and the weighted-average periods over which the awards were expected to be recognized at March 31, 2020 were as follows (in thousands):
 
Stock Options
 
Restricted Stock Units
 
Restricted Stock
Unrecognized compensation cost
$
891

 
$
267

 
$
260

Expected weighted-average period in years of compensation cost to be recognized
1.93

 
0.89

 
0.75


Total fair value of shares vested and the weighted average estimated fair values of shares granted for the three months ended March 31, 2020 and 2019 were as follows (in thousands):

 
Stock Options
 
Three Months Ended March 31,
 
2020
 
2019
Total fair value of shares vested
$
502

 
$
372

Weighted average estimated fair value of shares granted
$
2.16

 
$
3.24


Valuation Assumptions

The fair value of stock options and warrants at the date of grant was estimated using the Black-Scholes option pricing model. The expected volatility is based upon historical volatility of the Company’s stock. The expected term for the options is based upon observation of actual time elapsed between date of grant and exercise of options for all employees. The expected term for the warrants is based upon the contractual term of the warrants.

Note 10– Research Funding

California Institute of Regenerative Medicine Grant Award

In February 2017, the California Institute for Regenerative Medicine ("CIRM") awarded the Company funds of up to $12.2 million to support the T-Rex Study. The funding will be based upon the achievement of certain milestones related to the proportion of subjects enrolled in California, as well as manufacturing and development costs incurred in California. In March 2018, CIRM calculated the precise amount of the funding award as $8.1 million, based on the actual number of subjects enrolled in California. The Company received $5.7 million in initial funding in May 2017, a $1.9 million milestone payment in December 2017, a $0.3 million progress payment in March 2018, and a $200,000 progress payment in May 2019, of which the total will be amortized over the estimated award period through July 2020 as a reduction to the related research and development expenses. As of March 31, 2020, $0.9 million of the funding received was recorded in accrued liabilities. During the three months ended March 31, 2020 and March 31, 2019, the Company amortized and recognized $0.7 million and $0.6 million in credits, respectively, to research and development related to CIRM funds received.

Note 11 – Income Taxes
 
In assessing the realizability of deferred tax assets, including the net operating loss carryforwards ("NOLs"), the Company assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize its existing deferred tax assets.  Based on its assessment, the Company has provided a full valuation allowance against its net deferred tax assets as their future utilization remains uncertain at this time.

As of December 31, 2019, the Company had approximately $246 million of federal NOLs available to offset future taxable income expiring from 2030 through 2036. In accordance with Section 382 of the Internal Revenue code, the usage of the Company’s

17

NOLs could be limited in the event of a change in ownership. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period when those temporary differences become deductible. 

The Company performed an analysis and determined that it has had ownership changes of greater than 50% over a 3-year testing period. The last ownership change was determined to be in 2015. Based on a market capitalization of $124.5 million and using an applicable federal rate of 2.5%, the annual limitation would be approximately $3.0 million. Post change losses generated after June 2, 2015 would not be subject to 382 limitations.

The Company applies the FASB’s provisions for uncertain tax positions. The Company utilizes the two-step process to determine the amount of recognized tax benefit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company recognizes interest and penalties associated with certain tax positions as a component of income tax expense.

As of March 31, 2020, management does not believe the Company has any material uncertain tax positions that would require it to measure and reflect the potential lack of sustainability of a position on audit in its financial statements. The Company will continue to evaluate its uncertain tax positions in future periods to determine if measurement and recognition in its financial statements is necessary. The Company does not believe there will be any material changes in its unrecognized tax positions over the next year.

For years prior to 2016, the federal statute of limitations is closed for assessing tax. The Company’s state tax returns remain open to examination for a period of three to four years from date of filing.

Note 12 – Contingencies
 
Contingencies
 
From time to time, the Company is subject to legal proceedings and claims, either asserted or unasserted, that arise in the ordinary course of business. While the outcome of pending claims cannot be predicted with certainty, the Company does not believe that the outcome of any pending claims will have a material adverse effect on the Company's financial condition or operating results.

Note 13 – Subsequent Events
 
Sale of New Jersey Net Operating Losses

In December 2019, the Company received preliminary approval from the New Jersey Economic Development Authority ("NJEDA") to participate in the Technology Business Tax Certificate Transfer Program (the "Program"). The Program permits qualified companies to sell a percentage of their New Jersey net operating losses ("NJ NOLs") to unrelated profitable corporations. On April 21, 2020, the Company received final approval from NJEDA, and it subsequently sold a portion of its NJ NOLs to a qualifying and approved buyer pursuant to the Program for net proceeds of $10.9 million.

Registered Direct Offering

On April 23, 2020, the Company entered into a securities purchase agreement (the “RD Purchase Agreement”) with certain investors (the “Purchasers”). Pursuant to the terms of the RD Purchase Agreement, the Company agreed to sell to the Purchasers an aggregate of 2,162,166 shares of its common stock at a purchase price equal to $2.3125 per share. In a concurrent private placement, the Company issued to the Purchasers warrants to purchase an aggregate of 1,081,083 shares of its common stock. In connection with the registered direct offering and concurrent private placement, the Company received gross proceeds of $5.0 million. Each warrant is exercisable for one share of common stock and features an exercise price equal to $2.25 per share. The warrants are exercisable immediately upon issuance and will expire five and one-half years from the issuance date.


18

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Cautionary Note Regarding Forward-Looking Statements” herein and under “Risk Factors” in our 2019 Form 10-K. The following discussion should be read in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report and in our 2019 Form 10-K.
 
Overview
 
Caladrius Biosciences, Inc. (“we,” “us,” "our," “Caladrius” or the “Company”) is a clinical-stage biopharmaceutical company dedicated to the development and commercialization of cellular therapies designed to reverse disease and/or promote the regeneration of damaged tissue. We are developing first-in-class therapeutic products that are based on the characteristics of naturally occurring CD34+ cells and their ability to stimulate the growth of new microvasculature. Our technology leverages these cells using formulations unique to each medical indication and uses them to enable the body's natural repair mechanisms.

Our leadership team has decades of collective biopharmaceutical development experience and world-recognized scientific achievement in the field of cardiovascular disease, among other therapeutic areas. Our goal is to develop and commercialize products that address important unmet medical needs based on a broad and versatile portfolio of candidates. Our current product candidates include CLBS119, an emergent CD34+ stem cell therapy responding to the COVID-19 pandemic and the potentially permanent damage it inflicts on the lungs of many patients, as well as three other developmental treatments for ischemic diseases based on its CD34+ cell therapy platform: CLBS12, recipient of SAKIGAKE designation and eligible for early conditional approval in Japan for the treatment of critical limb ischemia ("CLI") based on the results of an ongoing clinical trial; CLBS16, the subject of a recently completed positive Phase 2 clinical trial in the U.S. for the treatment of coronary microvascular dysfunction ("CMD"); and CLBS14, a Regenerative Medicine Advanced Therapy ("RMAT") designated therapy for which we have finalized with the U.S. Food and Drug Administration (the "FDA") a protocol for a Phase 3 confirmatory trial in subjects with no-option refractory disabling angina ("NORDA").

Ischemic Repair (CD34 Cell Technology)

The CD34+ cell was discovered as a result of the deliberate search for a stem cell capable of stimulating the development and/or repair of blood vessels. All tissues in the body maintain their function by replacing cells over time. In addition to the maintenance function, the body must also be capable of building new blood vessels after injury. A CD34+ cell is a stem cell that has the ability to stimulate new blood vessel formation. No other native cell discovered to date has demonstrated this same capability.

Our proprietary CD34+ cell technology has led to the development of therapeutic product candidates designed to address diseases and conditions caused by ischemia. Ischemia occurs when the supply of oxygenated blood to healthy tissue is restricted. Through the administration of CD34+ cells, we seek to promote the development and formation of new microvasculature and thereby increase blood flow to the impacted area. We believe that a number of conditions caused by underlying ischemic injury can be improved through our CD34+ cell technology, including but not limited to, CLI, CMD, NORDA and COVID-19 induced lung damage.

CLBS119 for Treatment of COVID -19 Induced Lung Damage

COVID-19 appears to damage the vasculature of the lungs and Caladrius believes that repair of that vasculature will prove necessary for patients to achieve a full recovery. Survivors of COVID-19 often remain debilitated even after leaving the hospital due to the damage caused to their lungs, and while many developmental therapies responding to the COVID-19 pandemic are appropriately targeting the SARS-CoV-2 virus itself or the symptoms of the acute phase of the illness, we are aware of no therapy that has demonstrated the ability to repair COVID-19 induced lung damage. With consistent clinical and pre-clinical evidence that CD34+ cells can repair multiple organs, including models of severe lung inflammation, we sought and received FDA authorization for its investigational new drug (“IND”) application for the study of CLBS119, a CD34+ cell therapy for repair of COVID-19 induced lung damage. The planned study will target patients with severe SARS-CoV-2 infection who, after ventilatory support due to respiratory failure, had otherwise recovered but remained debilitated due to persistent pulmonary damage.

CLBS12 for Treatment of Critical Limb Ischemia


19

Our open-label, registration-eligible study of CLBS12 in Japan for the treatment of critical limb ischemia ("CLI"), a disease with no currently available approved therapy and a higher mortality rate than all cancers except that of lung cancer, has shown strong results to date. The initial responses observed in the subjects who have reached an endpoint in this open label study are consistent with a positive therapeutic effect and safety profile as reported by previously published clinical trials in Japan. Although the study's enrollment, which had been targeted for completion this year, has been slowed by the pandemic's impact in Japan, we are encouraged by the patient pre-screening pipeline that has been identified and hope to conclude the trial enrollment rapidly once the coronavirus abates. While the final outcome of the trial will depend on all data from all subjects, data from the concluded Buerger's Disease cohort and the data to date in the no-option CLI cohort remain very encouraging.

CLBS16 for Treatment of Coronary Microvascular Dysfunction

In 2017, with the assistance of a $1.9 million grant from the National Institutes of Health (Award Number R44HL135889), we initiated our program for CLBS16 for the treatment of coronary microvascular dysfunction ("CMD"), a disease that potentially afflicts annually millions of patients with no current treatment options. That study, titled ESCaPE-CMD, was a Phase 2 proof-of-concept study that enrolled patients at the Mayo Clinic in Rochester, MN and Cedars-Sinai Medical Center in Los Angeles, CA. In June 2019, we announced the completion of enrollment in this study. Results of the first 17 of 20 patients enrolled in this trial who reached 6-month follow-up were presented as a rapid fire oral presentation on November 16, 2019 at the annual meeting of the American Heart Association in Philadelphia, PA by one of the principal investigators, Dr. Noel Bairey Merz, FACC, FAHA, FESC, the director of the Barbra Streisand Women's Heart Center at Cedars-Sinai in Los Angeles, CA. That data set showed a positive therapeutic effect with a statistically significant improvement in angina frequency, coronary flow reserve, Canadian Cardiovascular Society Angina Class and Seattle Questionnaire score, as well as an acceptable safety profile. The full data from that study will be presented at the SCAI 2020 Scientific Sessions Virtual Conference on May 14, 2020 and we now expect to initiate the next CMD trial, a Phase 2b study, in the fall of 2020.

CLBS14 for Treatment of No Option Refractory Disabling Angina (NORDA)

We acquired the rights to data and regulatory filings for a CD34+ cell therapy program for refractory angina that had been advanced to Phase 3 by a previous sponsor.

Based on the clinical evidence from the completed studies that a single administration of CLBS14 reduces mortality, improves angina and increases exercise capacity in patients with otherwise untreatable angina, this product received Regenerative Medicine Advanced Therapy (“RMAT”) designation from the FDA. We, working closely with the FDA, have finalized the design of a confirmatory Phase 3 trial which, in combination with previously filed Phase 1, 2 and 3 data, will be considered for the registration of CLBS14. Notably, this study design includes a 6-month primary endpoint and, with the benefit of the RMAT designation, the biologics license application ("BLA"), once submitted, should receive a 6-month review. We have substantially completed the preparatory work for initiation of this trial. We will not, however, commence enrollment of patients until sufficient capital is acquired and dedicated to this program such that we have confidence that we can fund the trial uninterrupted through completion.

Additional Out-licensing Opportunities

Our broad intellectual property portfolio of cell therapy assets includes notable programs available for out-licensing in order to continue their clinical development. Our current long-term strategy focuses on advancing our therapies through development with the ultimate objective of obtaining market authorizations and entering commercialization, either alone or with partners, to provide treatment options to patients suffering from life-threatening medical conditions. We believe that we are well-positioned to realize potentially meaningful value increases within our own proprietary pipeline if we are successful in advancing our product candidates to their next significant development milestones.

Results of Operations
 
Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019
 
Overall, net losses were $4.0 million for the three months ended March 31, 2020, compared to $4.4 million for the three months ended March 31, 2019.
    
Operating Expenses

For the three months ended March 31, 2020, operating expenses totaled $4.1 million compared to $4.6 million for the three months ended March 31, 2019, representing a decrease of $0.5 million, or 12%. Operating expenses were comprised of the following:

20

 
•
Research and development expenses were approximately $1.5 million for the three months ended March 31, 2020, compared to $2.0 million for the three months ended March 31, 2019, representing a decrease of approximately $0.5 million, or 26%. Research and development in both periods focused on the advancement of our ischemic repair platform and related to:

◦
ongoing registration-eligible study expenses for CLBS12 in critical limb ischemia in Japan, whereby we continue to focus spending on our patient enrollment, and anticipate completing enrollment by mid-2020;

◦
ongoing proof-of-concept study expenses for CLBS16 in coronary microvascular dysfunction, whereby study enrollment was completed in the second quarter of 2019, preliminary top-line results were reported in November 2019 and full results expected in the first half of 2020; and

◦
expenses associated with the preparation of our confirmatory Phase 3 study of CLBS14 in NORDA in the first quarter of 2019. In late 2019, we projected that the Phase 3 study would cost approximately $70 million in external expenses over the next several years to complete, and as a result, we elected to postpone the initiation of the study until we have confidence that we can access sufficient capital to allow us to complete the study uninterrupted.

•
General and administrative expenses were approximately $2.6 million for both the three months ended March 31, 2020 and the three months ended March 31, 2019. Our general and administrative expenses focus on general corporate-related activities.

Historically, to minimize our use of cash, we have used a variety of equity and equity-linked instruments to compensate employees, consultants and other service providers. The use of these instruments has resulted in charges to the results of operations, which have been significant in the past.

Other Income

Total other income is primarily comprised of investment income on cash, cash equivalents and marketable securities.


21

Analysis of Liquidity and Capital Resources
 
At March 31, 2020, we had cash and cash equivalents of approximately $20.7 million, working capital of approximately $16.6 million, and stockholders’ equity of approximately $17.2 million.
 
During the three months ended March 31, 2020, we met our immediate cash requirements through existing cash balances. Additionally, we used equity and equity-linked instruments to pay for services and compensation.

Net cash provided by or used in operating, investing and financing activities were as follows (in thousands): 
 
Three Months Ended March 31,
 
2020
 
2019
Net cash used in operating activities
$
(4,241
)
 
$
(5,486
)
Net cash provided by investing activities
11,102

 
8,741

Net cash (used in) provided by financing activities
(148
)
 
870

 
Operating Activities
 
Our cash used in operating activities during the three months ended March 31, 2020 was $4.2 million, which is comprised of (i) our net loss of $4.0 million, adjusted for non-cash expenses totaling $0.6 million (which includes adjustments for equity-based compensation, depreciation and amortization, and amortization/accretion of marketable securities), and (ii) changes in operating assets and liabilities using approximately $0.9 million.

Our cash used in operating activities during the three months ended March 31, 2019 was $5.5 million, which is comprised of (i) our net loss of $4.4 million, adjusted for non-cash expenses totaling $0.6 million (which includes adjustments for equity-based compensation, depreciation and amortization, and amortization/accretion of marketable securities), and (ii) changes in operating assets and liabilities using approximately $1.8 million.

 Investing Activities
 
Our cash provided by investing activities during the three months ended March 31, 2020 totaled $11.1 million and was primarily due to net proceeds from the sale of marketable securities.

Our cash used in investing activities during the three months ended March 31, 2019 totaled approximately $8.7 million and was due to net sales of marketable securities (net of purchases of marketable securities).
 
Financing Activities

Our cash used in financing activities during the three months ended March 31, 2020 consisted of tax withholding-related payments on net share settlement equity awards to employees.

Our cash provided by financing activities during the three months ended March 31, 2019 consisted of proceeds of $1.0 million through the issuance of 250,000 shares of our common stock under the provisions of our common stock purchase agreement with Lincoln Park Capital, which was partially offset by tax withholding-related payments on net share settlement equity awards to employees.

Liquidity and Capital Requirements Outlook

To meet our short and long-term liquidity needs, we expect to use existing cash balances and a variety of other means. Other sources of liquidity could include additional potential issuances of debt or equity securities in public or private financings, partnerships and/or collaborations and/or sale of assets. Our history of operating losses and liquidity challenges may make it difficult for us to raise capital on acceptable terms or at all. The demand for the equity and debt of biopharmaceutical companies like ours is dependent upon many factors, including the general state of the financial markets. During times of extreme market volatility, capital may not be available on favorable terms, if at all. Our inability to obtain such additional capital could materially and adversely affect our business operations. We will also continue to seek, as appropriate, grants for scientific and clinical studies from various governmental agencies and foundations, and other sources of non-dilutive funding. We believe that our cash on hand will enable us to fund operating expenses for at least the next 12 months following the issuance of our financial statements

22

considering the assumption that any initiation of a CLBS14 Phase 3 study is contingent on our acquisition of additional capital to fund such a study.

In December 2019, we received preliminary approval from the New Jersey Economic Development Authority ("NJEDA") to participate in the Technology Business Tax Certificate Transfer Program (the "Program"). The Program permits qualified companies to sell a percentage of their New Jersey net operating losses ("NJ NOLs") to unrelated profitable corporations. On April 21, 2020, the Company received final approval from NJEDA, and it subsequently sold a portion of its NJ NOLs to a qualifying and approved buyer pursuant to the Program for net proceeds of $10.9 million.

On April 23, 2020, the Company entered into a securities purchase agreement (the “RD Purchase Agreement”) with certain investors (the “Purchasers”). Pursuant to the terms of the RD Purchase Agreement, the Company agreed to sell to the Purchasers an aggregate of 2,162,166 shares of its common stock at a purchase price equal to $2.3125 per share. In a concurrent private placement, the Company issued to the Purchasers warrants to purchase an aggregate of 1,081,083 shares of its common stock. In connection with the registered direct offering and concurrent private placement, the Company received gross proceeds of $5.0 million. Each warrant is exercisable for one share of common stock and features an exercise price equal to $2.25 per share. The warrants are exercisable immediately upon issuance and will expire five and one-half years from the issuance date.

In March 2019, we and Lincoln Park Capital Fund, LLC (“Lincoln Park”) entered into a purchase agreement (the “Purchase Agreement”) and a registration rights agreement (the “Registration Rights Agreement”), pursuant to which we have the right to sell to Lincoln Park shares of our common stock having an aggregate value of up to $26 million, subject to certain limitations and conditions set forth in the Purchase Agreement (the “Offering”). As consideration for entering into the Purchase Agreement, we issued to Lincoln Park an additional 181,510 shares of common stock as commitment shares. Pursuant to the Purchase Agreement, Lincoln Park purchased 250,000 shares of common stock, at a price of $4.00 per share, for a total gross purchase price of $1.0 million (the “Initial Purchase”) upon commencement. Thereafter, as often as every business day from and after one business day following the date of the Initial Purchase and over the 36-month term of the Purchase Agreement, we have the right, from time to time, at our sole discretion and subject to certain conditions, to direct Lincoln Park to purchase up to 100,000 shares of common stock, with such amount increasing as the closing sale price of the common stock increases; provided Lincoln Park’s obligation under any single such purchase will not exceed $2,500,000, unless we and Lincoln Park mutually agree to increase the maximum amount of such single purchase (each, a “Regular Purchase”). If we direct Lincoln Park to purchase the maximum number of shares of common stock it then may sell in a Regular Purchase, then in addition to such Regular Purchase, and subject to certain conditions and limitations in the Purchase Agreement, we may direct Lincoln Park in an “accelerated purchase” to purchase an additional amount of common stock that may not exceed the lesser of (i) 300%  the number of shares purchased pursuant to the corresponding Regular Purchase or (ii) 30% of the total number of shares of our common stock traded during a specified period on the applicable purchase date as set forth in the Purchase Agreement. Under certain circumstances and in accordance with the Purchase Agreement, we may direct Lincoln Park to purchase shares in multiple accelerated purchases on the same trading day. As of March 31, 2020, the Company had not made any sales of common stock to Lincoln Park under the Purchase Agreement other than the Initial Purchase.

In February 2018, we entered into a common stock sales agreement (the "Sales Agreement") with H.C. Wainwright & Co., LLC ("HCW"), as sales agent, in connection with an “at the market offering” under which we from time to time may offer and sell shares of our common stock, which was further amended in August 2018, having an aggregate offering price of up to $25 million. In March 2019, subsequent to the filing of our 2018 Form 10-K, the aggregate market value of our outstanding common stock held by non-affiliates was approximately $52.8 million. Pursuant to General Instruction I.B.6 of Form S-3, since the aggregate market value of our outstanding common stock held by non-affiliates was below $75.0 million at the time of our 2018 Form 10-K filing, the aggregate amount of securities that we were permitted to offer and sell at such time was reduced to $17.6 million (or a maximum of 4.8 million shares), which was equal to one-third of the aggregate market value of our common stock held by non-affiliates at such time. Subject to the terms and conditions of the Sales Agreement, HCW will use its commercially reasonable efforts consistent with its normal trading and sales practices to sell the shares from time to time, based upon our instructions, including any price, time or size limits specified by us. We have provided HCW with customary indemnification rights, and HCW will be entitled to a commission at a fixed commission rate equal to 3.0% of the gross proceeds per share sold. We have no obligation to sell any of the shares and may at any time suspend sales under the Sales Agreement or terminate the Sales Agreement. The Sales Agreement will terminate upon the sale of all of the shares under the Sales Agreement unless terminated earlier by either party as permitted under the Sales Agreement. As of March 31, 2020, we issued 260,349 shares of common stock under the Sales Agreement for net proceeds of $1.3 million.

While we continue to seek capital through a number of means, there can be no assurance that additional financing will be available on acceptable terms, if at all, and our negotiating position in capital generating efforts may worsen as existing resources are used. Additional equity financing may be dilutive to our stockholders; debt financing, if available, may involve significant cash payment obligations and covenants that restrict our ability to operate as a business; our stock price may not reach levels

23

necessary to induce option or warrant exercises; and asset sales may not be possible on terms we consider acceptable. If we are unable to access capital necessary to meet our long-term liquidity needs, we may have to delay the expansion of our business or raise funds on terms that we currently consider unfavorable.

Seasonality
 
We do not believe that our operations are seasonal in nature.
 
Off-Balance Sheet Arrangements
 
We do not have any off-balance sheet arrangements.
 
Critical Accounting Policies and Estimates

There have been no material changes in our critical accounting policies and estimates during the three months ended March 31, 2020, compared to those reported in our 2019 Form 10-K.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4.  CONTROLS AND PROCEDURES

(a)  Disclosure Controls and Procedures

Disclosure controls and procedures are the controls and other procedures we have designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that we file under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well-designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Due to the inherent limitations of control systems, not all misstatements may be detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. Controls and procedures can only provide reasonable, not absolute, assurance that the above objectives have been met.

As of March 31, 2020, we carried out an evaluation, with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(e) and 15d-15(e) of the Exchange Act. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective, at the reasonable assurance level, in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b)  Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15, that occurred during our last quarter to which this Quarterly Report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


24

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There are no material changes to the disclosures previously reported in our 2019 Form 10-K.

ITEM 1A. RISK FACTORS

Other than as set forth below, there have been no material changes to the risk factors previously reported in our 2019 Form 10-K. See the risk factors set forth in our 2019 Annual Report on Form 10-K under the caption "Item 1 A - Risk Factors."

Pandemics such as the coronavirus (COVID-19) could have an adverse impact on our developmental programs and our financial condition.

In December 2019, a novel strain of coronavirus (COVID-19) was first identified in Wuhan, Hubei Province, China, which virus has since spread throughout the world and has become a formal pandemic. Any outbreak of contagious diseases, including the coronavirus, or other adverse public health developments, has had, and could continue to have, a material and adverse effect on our business operations. These have caused, and could continue to cause, disruptions or restrictions on our ability to travel, pursue partnerships and other business transactions, conduct clinical trials, make shipments of biologic materials, as well as be impacted by the closure, temporary or otherwise, of the facilities of suppliers and clinical trial sites. Disruption of suppliers, clinical trial sites or access to patients would likely impact, and in some cases has impacted, our clinical trial enrollment progress and rates as well as our ability to access capital through the financial markets. The extent to which the COVID-19, or any other contagious disease, may impact our results will depend on future developments, which developments are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity and duration of COVID-19 and the actions to contain the coronavirus or treat its impact, among others.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The Exhibit Index appearing immediately after the signature page to this Form 10-Q is incorporated herein by reference.


25

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
 
 
 
 
CALADRIUS BIOSCIENCES, INC.
May 7, 2020
 
By:  /s/ David J. Mazzo, PhD      
Name: David J. Mazzo, PhD
Title: President and Chief Executive Officer
(Principal Executive Officer)
May 7, 2020
 
By: /s/ Joseph Talamo                    
Name: Joseph Talamo
Title: Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)






26

CALADRIUS BIOSCIENCES, INC.
FORM 10-Q

Exhibit Index

*
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
**
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
**
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS
 
XBRL Instance Document
101.SCH
 
XBRL Taxonomy Extension Schema
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase
101.LAB
 
XBRL Taxonomy Extension Label Linkbase
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase
_______________

*
Filed herewith.
**
Furnished herewith.
             

27