Note 1 - Description of Business and Basis of Presentation

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Business Description and Basis of Presentation [Text Block]

1.

     

Description of Business and Basis of Presentation

Organization and Basis of Presentation

Cesca Therapeutics Inc. (“Cesca Therapeutics,” “Cesca,” the “Company”), a Delaware corporation, develops, commercializes and markets a range of automated technologies for CAR-T and other cell-based therapies. The Company was founded in

1986

and is headquartered in Rancho Cordova, CA. ThermoGenesis Corp. (ThermoGenesis), its device subsidiary, provides the AutoXpress

®

and BioArchive

®

platforms for automated clinical bio-banking, PXP

®

platform for point-of-care cell-based therapies and CAR-TXpress™ platform under development for bio-manufacturing for immuno-oncology applications.

On

January 1, 2019,

the Company entered into a reorganization of the business and equity ownership of its majority-owned ThermoGenesis subsidiary. Pursuant to the reorganization, the assets acquired by ThermoGenesis from SynGen Inc. in

July 2017

were contributed to a newly formed Delaware subsidiary of ThermoGenesis named CARTXpress Bio, Inc. (CARTXpress) and the

20%

interest in ThermoGenesis was exchanged for a

20%

interest in CARTXpress. As a result, the Company holds an

80%

equity interest in CARTXpress and the Company has become the owner of

100%

of ThermoGenesis. The purpose of the reorganization is to allow CARTXpress to focus on the development and commercialization of the newly launched CARTXpress cellular manufacturing platform.

The Company reacquired the non-controlling interest shares in ThermoGenesis with a deficit of

$1,711,000

in exchange for

20%

equity interest in the newly created subsidiary, CARTXpress, which approximates

$1,100,000.

  The total amount of

$2,843,000

related to reorganization of subsidiary and related change in non-controlling interest was recorded in the statement of stockholders’ equity. 

Cesca is an affiliate of the Boyalife Group, a China-based industry research alliance encompassing top research institutions for stem cell and regenerative medicine.

Reverse Stock Split

On

June 4, 2019,

the Company effected a

one

(

1

) for

ten

(

10

) reverse stock split of its issued and outstanding common stock. The total number of shares of common stock authorized for issuance by the Company of

350,000,000

shares did

not

change in connection with the reverse stock split. Stockholders approved the reverse stock split at the Company’s annual meeting of stockholders held on

May 30, 2019,

and the specific ratio was determined at a meeting of the Company’s Board of Directors also held on

May 30, 2019.

All historical share amounts disclosed herein have been retroactively recast to reflect the reverse split and subsequent share exchange.

No

fractional shares were issued as a result of the reverse stock split, as fractional shares of common stock were rounded up to the nearest whole share.

Liquidity

and Going Concern

The Company has a Revolving Credit Agreement (Credit Agreement) with Boyalife Asset Holding II, Inc. (Refer to Note

3

). As of

June 30, 2019,

the Company had drawn down

$8,713,000

of the

$10,000,000

available under the Credit Agreement. Future draw-downs

may

be limited for various reasons including default or foreign government policies that restrict or prohibit transferring funds. At the time of this filing, we are currently unable to draw down on the line of credit. This

may

change in the near future but there is

no

assurance that the line of credit will become available at such time when it is needed. Boyalife Asset Holding II, Inc. is a wholly owned subsidiary of Boyalife Group Inc., which is owned and controlled by the Company’s Chief Executive Officer and Chairman of the Board.

On

April 18, 2019,

the Company entered into a Securities Purchase Agreement with an accredited investor pursuant to which the Company agreed to issue and sell to such investor (the

“April

Offering”)

444,445

pre-funded warrants to purchase shares of the Company’s common stock for a purchase price of

$1.70

per pre-funded warrant.  The gross proceeds to the Company, excluding the proceeds, if any, from the exercise of the pre-funded warrants, was approximately

$756,000.

  The

April

Offering closed on

April 26, 2019

and the pre-funded warrants were accounted for as equity by the Company.

Each pre-funded warrant is immediately exercisable for

one

share of common stock at an exercise price of

$0.10

per share and will remain exercisable until exercised in full. A holder of a pre-funded warrant will

not

have the right to exercise any portion of its warrant if the holder, together with its affiliates, would beneficially own in excess of

4.99%

or

9.99%,

as applicable, of the number of shares of the Company’s common stock outstanding immediately after giving effect to such exercise (the “Beneficial Ownership Limitation”); provided, however, that the holder

may

increase or decrease the Beneficial Ownership Limitation, although any increase will

not

be effective until the

61st

day after a notice of increase is delivered to the Company and the holder

may

not

increase the Beneficial Ownership Limitation in excess of

9.99%.

Subject to certain exceptions, in the event the Company sells or issues any shares of common stock or common stock equivalents at a lower price during the period beginning on the closing date of the

April

Offering and ending on the date that is

three

-hundred and

sixty-five

(

365

) days following such date, the Company is required to issue the investor a number of shares of common stock (or additional pre-funded warrants to purchase shares of common stock) equal to the number of shares the investor would have received had the purchase price for such shares been at such lower purchase price.

At

June 30, 2019,

the Company had cash and cash equivalents of

$2,424,000

and working capital of

$3,374,000.

  The Company has incurred recurring operating losses and as of

June 30, 2019

had an accumulated deficit of

$230,603,000.

  These recurring losses raise substantial doubt about the Company’s ability to continue as a going concern within

one

year after the issuance date. The Company anticipates requiring additional capital to grow the device business, to fund other operating expenses and to make interest payments on the line of credit with Boyalife Asset Holding II, Inc.  The Company’s ability to fund its cash needs is subject to various risks, many of which are beyond its control. The Company plans to seek additional funding through bank borrowings or public or private sales of debt or equity securities or strategic partnerships. The Company cannot guarantee that such funding will be available on a timely basis, in needed quantities or on terms favorable to the Company, if at all.

The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern; however, the above conditions raise substantial doubt about the Company’s ability to do so. The condensed consolidated financial statements do

not

include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that

may

result should the Company be unable to continue as a going concern.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Cesca and its wholly-owned subsidiaries, ThermoGenesis and TotipotentRX Cell Therapy, Pvt. Ltd and ThermoGenesis’ majority-owned subsidiary, CARTXpress. All significant intercompany accounts and transactions have been eliminated upon consolidation.

Interim Reporting

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and with the instructions to Form

10

-Q and Article

8

of Regulation S-

X.

  Accordingly, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such Securities and Exchange Commission (SEC) rules and regulations and accounting principles applicable for interim periods.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.  Events subsequent to the balance sheet date have been evaluated for inclusion in the accompanying condensed consolidated financial statements through the date of issuance.  Operating results for the

three

and

six

month periods ended

June 30, 2019

are

not

necessarily indicative of the results that

may

be expected for the year ending

December 31, 2019. 

These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in Cesca’s Annual Report on Form

10

-K for the year ended

December 31, 2018.