Calidi Biotherapeutics, Inc 10-Q for FY2024 Q1
Calidi Biotherapeutics, Inc. (CLDI)
About this 10-Q
Calidi Biotherapeutics, Inc filed this 10-Q on May 14, 2024, covering the quarter ended March 31, 2024 (FY2024 Q1).
Headline figures
Quarter ended March 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $7.23M
- compared with a net loss of $6.46M a year earlier
- Diluted EPS
- -$0.20
- compared with -$0.75 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR
THE QUARTERLY PERIOD ENDED
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission
File Number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) |
Name of each exchange on which registered | ||
| American LLC |
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.
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).
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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☒ | Smaller reporting company | |||
| Emerging growth company |
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.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of May 10, 2024, the registrant had shares of common stock, $0.0001 par value, outstanding, excluding 18,000,000 non-voting common stock held in escrow.
Calidi Biotherapeutics, Inc.
FORM 10-Q
TABLE OF CONTENTS
| 2 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CALIDI BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except for par value data)
March 31, 2024 | December 31, 2023 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| NONCURRENT ASSETS | ||||||||
| Machinery and equipment, net | ||||||||
| Operating lease right-of-use assets, net | ||||||||
| Other noncurrent assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | $ | ||||||
| Related party accounts payable | ||||||||
| Accounts payable | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Related party accrued expenses and other current liabilities | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Term notes payable, net of discount, including accrued interest | ||||||||
| Related party term notes payable, net of discount, including accrued interest | ||||||||
| Term notes payable, net of discount, including accrued interest | ||||||||
| Convertible notes payable, including accrued interest | ||||||||
| Related party bridge loan payable, including accrued interest | ||||||||
| Related party other current liability | ||||||||
| Finance lease liability, current | ||||||||
| Operating lease right-of-use liability, current | ||||||||
| Total current liabilities | ||||||||
| NONCURRENT LIABILITIES | ||||||||
| Operating lease right-of-use liability, noncurrent | ||||||||
| Finance lease liability, noncurrent | ||||||||
| Convertible notes payable, including accrued interest | ||||||||
| Warrant liability | ||||||||
| Related party warrant liability | ||||||||
| Related party term notes payable, net of discount, including accrued interest | ||||||||
| Other noncurrent liabilities | ||||||||
| Related party other noncurrent liabilities | ||||||||
| Other noncurrent liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments and contingencies (Note 11) | ||||||||
| STOCKHOLDERS’ DEFICIT | ||||||||
| Common stock, $ par value, shares authorized; and shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive income (loss), net of tax | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
CALIDI BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
| 2024 | 2023 | |||||||
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| OPERATING EXPENSES | ||||||||
| Research and development | $ | ( | ) | $ | ( | ) | ||
| General and administrative | ( | ) | ( | ) | ||||
| Total operating expense | ( | ) | ( | ) | ||||
| Loss from operations | ( | ) | ( | ) | ||||
| OTHER INCOME (EXPENSES), NET | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Interest expense – related party | ( | ) | ( | ) | ||||
| Interest expense | ( | ) | ( | ) | ||||
| Change in fair value of debt, other liabilities, and derivatives | ( | ) | ( | ) | ||||
| Change in fair value of debt, other liabilities, and derivatives – related party | ( | ) | ( | ) | ||||
| Change in fair value of debt, other liabilities, and derivatives | ( | ) | ( | ) | ||||
| Grant income | ||||||||
| Other expense, net | ( | ) | ( | ) | ||||
| Total other expenses, net | ( | ) | ( | ) | ||||
| LOSS BEFORE INCOME TAXES | ( | ) | ( | ) | ||||
| Income tax provision | ( | ) | ( | ) | ||||
| NET LOSS | $ | ( | ) | $ | ( | ) | ||
| Net loss per share; basic and diluted | $ | ) | $ | ) | ||||
| Weighted average common shares outstanding; basic and diluted | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
CALIDI BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
| 2024 | 2023 | |||||||
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive income, net of tax: | ||||||||
| Foreign currency translation adjustment | ||||||||
| COMPREHENSIVE LOSS | $ | ( | ) | $ | ( | ) | ||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 5 |
CALIDI BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
(Unaudited)
(In thousands, except share amounts)
Founders Convertible Preferred Stock |
Series A-1 Convertible Preferred Stock |
Series A-2 Convertible Preferred Stock |
Common Stock | Additional Paid-In |
Accumulated Other Comprehensive |
Accumulated | Total Stockholders’ |
|||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital |
Income (Loss) |
Deficit |
Deficit |
|||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||||||||||||||
| Issuance of common stock in lieu of cash for services | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in lieu of cash for SEPA commitment fee | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock to Calidi stockholders as result of Merger | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of warrants for legal settlement | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Financing fees | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||||||||||||||||
Founders Convertible Preferred Stock |
Series A-1 Convertible Preferred Stock |
Series A-2 Convertible Preferred Stock |
Common Stock | Additional Paid-In |
Accumulated Other Comprehensive |
Accumulated | Total Stockholders’ |
|||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital |
Income (Loss) |
Deficit |
Deficit |
|||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022(1) | $ | $ | $ | $ | |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||||||||||||||
| Balance | $ | $ | $ | $ | |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||||||||||||||
| Issuance of common stock with term notes as interest paid in kind and other | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||||||||||||||
| Balance | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| (1) |
| 6 |
CALIDI BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| 2024 | 2023 | |||||||
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation expense | ||||||||
| Amortization of right of use assets | ||||||||
| Amortization of debt discount and financing costs | ||||||||
| Stock-based compensation | ||||||||
| Change in fair value of debt, other liabilities and derivatives | ||||||||
| Other | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Accounts payable | ||||||||
| Accrued expenses and other current liabilities | ( | ) | ||||||
| Operating lease right of use liability | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchases of machinery and equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from exercise of stock options | ||||||||
| Related party proceeds from issuance of loan payable | ||||||||
| Proceeds from simple agreements for future equity (SAFE) | ||||||||
| Proceeds from issuance of convertible notes payable | ||||||||
| Proceeds from issuance of term notes payable | ||||||||
| Related party proceeds from issuance of term notes payable | ||||||||
| Repayment of financing lease obligations | ( | ) | ( | ) | ||||
| Payment of interest on loan payable | ( | ) | ||||||
| Payment of financing costs | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate changes on cash | ||||||||
| NET INCREASE (DECREASE) IN CASH AND RESTRICTED CASH | ( | ) | ||||||
| CASH AND RESTRICTED CASH BALANCE: | ||||||||
| At beginning of the period | ||||||||
| At end of the period | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING AND INVESTING ACTIVITIES | ||||||||
| Issuance of common stock in lieu of cash for services | $ | $ | ||||||
| Issuance of common stock in lieu of cash for SEPA commitment fee | $ | $ | ||||||
| Issuance of Warrants for legal settlement | $ | $ | ||||||
| Issuance of Convertible Note for legal settlement | $ | $ | ||||||
| Financing fees | $ | $ | ||||||
| Discount on convertible note payable | $ | $ | ||||||
| Issuance of common stock with term notes as interest paid in kind and other | $ | $ | ||||||
| Purchase of equipment included in accounts payable and accrued liabilities | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 7 |
CALIDI BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Organization and Nature of Operations
On September 12, 2023, First Light Acquisition Group, Inc., a Delaware corporation (“FLAG”) consummated a series of transactions that resulted in the merger of FLAG Merger Sub Inc., a Nevada corporation and a wholly-owned subsidiary of FLAG and Calidi Biotherapeutics. Inc., a Nevada corporation (“Calidi”). Following the consummation of the Business Combination, FLAG was renamed “Calidi Biotherapeutics, Inc.” and Calidi was renamed “Calidi Biotherapeutics (Nevada), Inc. and became a wholly owned subsidiary of the Company (“Calidi”). Unless the context otherwise requires, the “Company” refers to Calidi Biotherapeutics, Inc., a Delaware corporation (f/k/a First Light Acquisition Group, Inc., a Delaware corporation) and its consolidated subsidiaries.
The Company was founded in 2014 and is a clinical stage immuno-oncology company that is developing proprietary allogeneic stem cell-based platforms to potentiate and deliver oncolytic viruses (vaccinia virus and adenovirus) and potentially other molecules to cancer patients. The Company is developing a pipeline of off-the-shelf allogeneic cell product candidates that are designed to: (i) protect oncolytic viruses from complement inactivation and innate immune cell inactivation by the body’s immune system; (ii) support oncolytic viral amplification in the allogeneic cells, and (iii) modify the tumor microenvironment to facilitate tumor cell targeting and viral amplification at the tumor sites for an extended period of time, potentially leading to an improved cancer therapy. The Company’s most advanced product candidates are discussed below.
CLD-101 (NeuroNova™ Platform) for newly diagnosed High Grade Glioma (“HGG”) (also referred to as “NNV1” as to the indication) is composed of an immortalized neural stem cell line loaded with an engineered oncolytic adeno virus for the treatment of HGG. NNV1 is a licensed program from Northwestern University (“Northwestern”) which the Company obtained the rights for commercialization in June 2021 (see Note 11). A phase I clinical trial for NNV1 in patients with newly diagnosed high-grade gliomas was completed by Northwestern in June 2021.
CLD-101 for recurrent HGG (also referred to as “NNV2” as to the recurrent HGG indication) is a licensed program under development for patents covering cancer therapies using the same CLD-101 (NeuroNova™ Platform) for recurrent HGG. The Company licensed this product candidate in July 2021 pursuant to an agreement with City of Hope for the commercial development of NNV2 (see Note 11).
CLD-201 (SuperNova™) for advanced solid tumors (also referred to as “SNV1”), composed of allogeneic adipose-derived mesenchymal stem cells (AD-MSC) loaded with the tumor selective oncolytic vaccinia virus the Company refers to as “CAL1”. SNV1 is an internally developed product candidate for which the Company’s primary indications are for the treatment of advanced solid tumors, including head and neck cancer, triple-negative breast cancer and advanced soft tissue sarcoma.
The Company is also developing engineered oncolytic vaccinia virus constructs as well as allogeneic cell-based platforms with improved systemic anti-tumor immunity in the exploratory stages of development.
The Company’s operations to date have focused on organization and staffing, business planning, raising capital, licensing, acquiring and developing technology, establishing intellectual property portfolio, identifying potential product candidates and undertaking preclinical studies, process development and procuring manufacturing for preclinical and clinical trials. The Company’s product candidates are subject to long development cycles and the Company may be unsuccessful in its efforts to develop, obtain regulatory approval for or market its product candidates.
The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, possible failure of preclinical studies or clinical trials, the need to obtain marketing approval for its product candidates, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, the need to successfully commercialize and gain market acceptance of any of the Company’s products that are approved and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing, and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure, and extensive compliance-reporting capabilities. Even if the Company’s drug development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.
| 8 |
Liquidity and Going Concern
The unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities in the normal course of business, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or amounts and classification of liabilities that may result from the outcome of this uncertainty.
The
Company has experienced recurring losses from operations and negative cash flows from operating activities, has a significant accumulated
deficit and expects to continue to incur net losses into the foreseeable future. The Company had an accumulated deficit of $
On
December 10, 2023, the Company entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, Ltd., a Cayman
Island exempt limited partnership (“Yorkville”). Pursuant to the SEPA, the Company will have the right, but not the obligation,
to sell to Yorkville up to $
Management estimates that based on the Company’s liquidity resources, there is substantial doubt about the Company’s ability to continue as a going concern within 12 months from the date of issuance of the financial statements. The accompanying financial statements have been prepared on the basis of the Company continuing to operate in the normal course of business and does not reflect any adjustments to the assets and liabilities related to the substantial doubt of its ability to continue as a going concern.
Management’s ability to continue as a going concern is dependent upon its ability to raise additional funding. Management’s plans to raise additional capital through public or private equity or debt financings to fulfill its operating and capital requirements for at least 12 months from the date of the issuance of the financial statements. However, the Company may not be able to secure such financing in a timely manner or on favorable terms, if at all. Furthermore, if the Company issues equity securities to raise additional funds, its existing stockholders may experience dilution, and the new equity securities may have rights, preferences and privileges senior to those of the Company’s existing stockholders.
| 9 |
Risks and Uncertainties
Changes in economic conditions, including rising interest rates, public health issues, lower consumer confidence, volatile equity capital markets, ongoing supply chain disruptions and the impacts of geopolitical conflicts, may affect the Company’s operations.
2. Summary of Significant Accounting Policies
Unaudited Interim Financial Information
The accompanying unaudited condensed consolidated financial statements as of March 31, 2024, and for the three months ended March 31, 2024 and 2023, have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial reporting. Accordingly, these unaudited condensed consolidated financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, these unaudited condensed consolidated financial statements contain all adjustments necessary, all of which are of a normal and recurring nature, to state fairly the Company’s financial position, results of operations and cash flows. Interim results are not necessarily indicative of results for a full year or future periods. These unaudited condensed consolidated financial statements should be read in conjunction with Calidi’s audited consolidated financial statements for the year ended December 31, 2023 in the Company’s Form 10-K, which was filed with the Commission on March 15, 2024.
Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the FASB.
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements of the Company include the accounts of its wholly owned subsidiary, Calidi Biotherapeutics (Nevada), Inc., a company incorporated in the state of Nevada and Calidi Biotherapeutics, Inc., StemVac GmbH (“StemVac”), a company organized under the laws of Germany, and Calidi Biotherapeutics Australia Pty Ltd (“Calidi Australia”), a wholly owned Australian subsidiary. StemVac’s primary operating activities include process development and other research and development activities for the SNV1 program performed for the Company under a cost-plus intercompany development agreement funded by the Company. Calidi Australia’s principal purpose is for conducting a part of the SNV1 clinical trials in Australia.
Variable interest entities (“VIEs”) are legal entities that either have an insufficient amount of equity at risk for the entity to finance its activities without additional subordinated financial support or, as a group, the holders of equity investment at risk lack the ability to direct the entity’s activities that most significantly impact economic performance through voting or similar rights, or do not have the obligation to absorb the expected losses or the right to receive expected residual returns of the entity.
For all VIEs in which the Company is involved, it assesses whether it is the primary beneficiary on an ongoing basis. In circumstances where the Company has both the power to direct the activities that most significantly impact the VIEs performance and the obligation to absorb losses or the right to receive the benefits of the VIE that could be significant, the Company would conclude that it is the primary beneficiary of the VIE, and the Company consolidates the VIE. In situations where the Company is not deemed to be the primary beneficiary of the VIE, it does not consolidate the VIE and only recognizes the Company’s interests in the VIE.
Calidi Cure LLC (“Calidi Cure”), a Delaware limited liability company formed in June 2023, is a special purpose vehicle entity that is solely managed and operated by Allan J. Camaisa, Chief Executive Officer and Chairman of the Board of Directors of the Company. Calidi Cure was created for the sole purpose of supporting the Series B Convertible Preferred Stock financing arrangement for Calidi, has no other operations, and will be dissolved as soon as practicable following the closing of the business combination between the Company and FLAG . As such, the level of equity in Calidi Cure is not sufficient to permit the entity to finance its activities without additional subordinated financial support provided by other parties. Accordingly, it was determined that Calidi Cure is a VIE and the Company is the primary beneficiary. As such, the Company has consolidated Calidi Cure into its unaudited condensed consolidated financial statements presented herein.
| 10 |
The accompanying unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial condition and results of operations. All material intercompany accounts and transactions have been eliminated in consolidation.
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 contingent assets and liabilities, at the date of the unaudited condensed consolidated financial statements, and the reported amounts during the reporting period. On an ongoing basis, management evaluates estimates which are subject to significant judgment, including, but not limited to, valuation methods used, assumptions requiring the use of judgment to prepare financial projections, timing of potential commercialization of acquired in-process intangible assets, applicable discount rates, comparable companies or transactions, liquidity events, assumptions related to the going concern assessments, allocation of direct and indirect expenses, useful lives associated with long- lived assets, key assumptions in operating and financing leases including incremental borrowing rates, loss contingencies, valuation allowances related to deferred income taxes, assumptions used to value common stock, debt and debt-like instruments, warrants, and stock-based awards and other equity instruments. Actual results may differ materially from those estimates.
Reclassification
Certain prior year financial statement amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on our previously reported results of operations or accumulated deficit.
Cash and Restricted Cash
The Company considers all highly liquid investments purchased with an original maturity date of ninety days or less to be cash equivalents. Cash and cash equivalents include cash in readily available checking, money market accounts and brokerage accounts.
The Company classifies cash that has contractual or legal restrictions imposed by third parties as restricted cash, which is restricted as to withdrawal or use except for the specified purpose under a contract. The Company classifies restricted cash as either part of prepaids and other current assets, or as part of other noncurrent assets, depending on the term and nature of the underlying contract with a financial institution, which requires the Company to hold a fixed amount of funds in a restricted money market account as collateral to the financial institution for the Company’s corporate credit card program with that financial institution.
The following table provides a reconciliation of cash and restricted cash reported within the balance sheet dates that comprise the total of the same such amounts shown in the unaudited condensed consolidated statements of cash flows (in thousands):
Schedule of Cash and Cash Equivalents
March 31, 2024 | December 31, 2023 | |||||||
| Cash | $ | $ | ||||||
| Restricted cash included within prepaid expenses and other current assets | ||||||||
| Restricted cash included within other noncurrent assets | ||||||||
| Total cash and restricted cash as shown in the unaudited condensed consolidated statements of cash flows | $ | $ | ||||||
| 11 |
Machinery and Equipment
Machinery
and equipment are stated at cost, less accumulated depreciation, and includes assets purchased under financing leases. Depreciation is
computed using the straight-line method over the estimated useful lives of the assets, generally over a period of
Leases
The Company accounts for leases in accordance with ASC 842, Leases. The Company determines if an arrangement is a lease at inception. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the unaudited condensed consolidated statements of operations. When determining whether a lease is a finance lease or an operating lease, ASC 842 does not specifically define criteria to determine “major part of remaining economic life of the underlying asset” and “substantially all of the fair value of the underlying asset.” For lease classification determination, the Company continues to use: (i) greater than or equal to 75% to determine whether the lease term is a major part of the remaining economic life of the underlying asset; and (ii) greater than or equal to 90% to determine whether the present value of the sum of lease payments is substantially all of the fair value of the underlying asset. The Company accounts for the lease and non-lease components as a single lease component.
For operating leases, the Company recognizes right-of-use (“ROU”) assets and lease liabilities for leases with terms greater than 12 months in the unaudited condensed consolidated balance sheet, while leases with terms of 12 months or less are not capitalized. ROU assets represent the right to use an underlying asset during the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company uses the implicit rate when it is readily determinable. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company discloses the amortization of ROU assets and operating lease payments as a net amount, “Amortization of right-of-use assets and liabilities”, on the unaudited condensed consolidated statements of cash flows.
Finance leases are included in machinery and equipment, and in finance lease liabilities, current and noncurrent, in the unaudited condensed consolidated balance sheets.
See Note 11 for the San Diego Office lease which commenced on March 1, 2023, and was accounted for as an operating lease in accordance with ASC 842.
Impairment of Long-lived Assets
The Company assesses the impairment of long-lived assets, which consist primarily of right-of-use assets for operating leases and machinery and equipment, whenever events or changes in circumstances indicate that such assets might be impaired and the carrying value may not be recoverable. If events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable and the expected undiscounted future cash flows attributable to the asset are less than the carrying amount of the asset, an impairment loss equal to the excess of the assets carrying value over its fair value is recorded in the Company’s consolidated statements of operations.
| 12 |
Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging. Warrants that meet the definition of a derivative financial instrument and the equity scope exception in ASC 815-10-15-74(a) are classified as equity and are not subject to remeasurement provided that the Company continues to meet the criteria for equity classification. Warrants that are classified as liabilities are accounted for at fair value and remeasured at each reporting date until exercise, expiration, or modification that results in equity classification. Any change in the fair value of the warrants is recognized as change in fair value of warrant liabilities in the unaudited condensed consolidated statements of operations. The classification of warrants, including whether warrants should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. The fair value of liability-classified warrants is determined using the Black-Scholes options pricing model (“Black-Scholes model”) which includes Level 3 inputs.
Fair Value Measurements
The Company follows ASC 820, Fair Value Measurement, which among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Accordingly, fair value is a market-based measurement determined based on assumptions that market participants would use in pricing an asset or liability. The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
ASC 820 establishes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are as follows:
| Level 1: | Quoted prices in active markets for identical assets and liabilities; | |
| Level 2: | Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted market prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and | |
| Level 3: | Unobservable inputs in which there is little or no market data and that are significant to the fair value of the assets or liabilities, which require the reporting entity to develop its own assumptions. |
When quoted market prices are available in active markets, the fair value of assets and liabilities is estimated within Level 1 of the valuation hierarchy. If quoted prices are not available, then fair values are estimated by using pricing models, quoted prices of assets and liabilities with similar characteristics, or discounted cash flows, within Level 2 of the valuation hierarchy. In cases where Level 1 or Level 2 inputs are not available, the fair values are estimated by using inputs within Level 3 of the hierarchy. See Note 3 for fair value measurements.
Forward Purchase Agreement
On August 28, 2023, and August 29, 2023, FLAG and the Company entered into forward purchase agreements (each a “Forward Purchase Agreement”, and together, the “Forward Purchase Agreement”) with each of Meteora Strategic Capital, LLC (“MSC”), Meteora Capital Partners, LP (“MCP”), Meteora Select Trading Opportunities Master, LP (“MSTO”), Great Point Capital LLC (“Great Point”), Funicular Funds, LP (“Funicular Funds”) and Marybeth Wootton (“Wootton”) (with each of MSC, MCP, MSTO, Great Point, Funicular, and Wootton, individually a “Seller”, and together, the “Sellers”) for an OTC Equity Prepaid Forward Transaction. For purposes of the Forward Purchase Agreement, FLAG is referred to as the “Counterparty” prior to the consummation of the business combination), while the Company is referred to as the “Counterparty” after the consummation of the business combination. Capitalized terms used herein but not otherwise defined shall have the meanings ascribed to such terms in the Forward Purchase Agreement.
| 13 |
Pursuant to the terms of the Forward Purchase Agreements, each Sellers intends to purchase up to a number of shares of Class A Common Stock, par value $ per share, of FLAG (“FLAG Class A Common Stock”) in the aggregate amount equal to up to , concurrently with the Closing pursuant to each Seller’s respective FPA Funding Amount PIPE Subscription Agreement, less, the number of FLAG Class A Common Stock purchased by each Seller separately from third parties through a broker in the open market (“Recycled Shares”).
The
Forward Purchase Agreements provide that Sellers will be paid directly an aggregate cash amount (the “Prepayment Amount”)
equal to the product of (i) the Number of Shares as set forth in each Pricing Date Notice and (ii) the redemption price per share as
defined in Section 9.2(a) of FLAG’s Amended and Restated Certificate of Incorporation, as amended (the “Initial Price”)
less (iii) an amount in USD equal to
The Counterparty will pay to Seller the Prepayment Amount required under the respective Forward Purchase Agreement directly from the Counterparty’s Trust Account maintained by Continental Stock Transfer and Trust Company holding the net proceeds of the sale of the units in the Counterparty’s initial public offering and the sale of private warrants (the “Trust Account”) no later than the earlier of (a) one business day after the Closing Date and (b) the date any assets from the Trust Account are disbursed in connection with the Business Combination, except that to the extent the Prepayment Amount payable to a Seller is to be paid from the purchase of Additional Shares by such Seller pursuant to the terms of its FPA Funding Amount PIPE Subscription Agreement, such amount will be netted against such proceeds, with such Seller being able to reduce the purchase price for the Additional Shares by the Prepayment Amount.
Following
the Closing, the reset price (the “Reset Price”) will initially be $
From time to time and on any date following the Trade Date (any such date, an “OET Date”), Seller may, in its discretion, terminate its Forward Purchase Agreement in whole or in part by providing written notice to the Counterparty (the “OET Notice”), by the later of (a) the fifth Local Business Day following the OET Date and (b) no later than the next Payment Date following the OET Date (which shall specify the quantity by which the Number of Shares shall be reduced (such quantity, the “Terminated Shares”)); provided that “Terminated Shares” includes only such quantity of Shares by which the Number of Shares is to be reduced and included in an OET Notice and does not include any other Share sales, Shortfall Sale Shares or sales of Shares that are designated as Shortfall Sales (which designation can be made only up to the amount of Shortfall Sale Proceeds), any Share Consideration sales or any other Shares, whether or not sold, which shares will not be included in any OET Notice when calculating the number of Terminated Shares. The effect of an OET Notice shall be to reduce the Number of Shares by the number of Terminated Shares specified in such OET Notice with effect as of the related OET Date. As of each OET Date, the Counterparty shall be entitled to an amount from the Seller, and the Seller shall pay to the Counterparty an amount, equal to the product of (x) the number of Terminated Shares and (y) the Reset Price in respect of such OET Date, except that no such amount will be due to Counterparty upon any Shortfall Sale. The payment date may be changed within a quarter at the mutual agreement of the parties.
From time to time and on any date following the Trade Date (any such date, a “Shortfall Sale Date”) Seller may, in its absolute discretion, at any sales price, sell Shortfall Sale Shares, and in connection with such sales, Seller shall provide written notice to Counterparty (the “Shortfall Sale Notice”) no later than the later of (a) the fifth Local Business Day following the Shortfall Sales Date and (b) the first Payment Date after the Shortfall Sales Date, specifying the quantity of the Shortfall Sale Shares and the allocation of the Shortfall Sale Proceeds. Seller shall not have any Early Termination Obligation in connection with any Shortfall Sales. The Counterparty covenants and agrees for a period of at least sixty (60) Local Business Days (commencing on the Prepayment Date or if an earlier Registration Request is submitted by Seller on the Registration Statement Effective Date) not to issue, sell or offer or agree to sell any Shares, or securities or debt that is convertible, exercisable or exchangeable into Shares, including under any existing or future equity line of credit, until the Shortfall Sales equal the Prepayment Shortfall.
| 14 |
Unless
and until the proceeds from Shortfall Sales equal
(A) Pay in cash an amount equal to the Shortfall Variance; or
(B)
Issue and deliver to Seller such number of additional Shares that are equal to (1) the Shortfall Variance, divided by (2)
The
valuation date will be the earliest to occur of (a)
On
the Cash Settlement Payment Date, which is the
Seller has agreed to waive any redemption rights under FLAG’s Amended and Restated Certificate of Incorporation, as amended, with respect to any FLAG Class A Common Stock purchased through the FPA Funding Amount PIPE Subscription Agreement and any Recycled Shares in connection with the Business Combination, that would require redemption by FLAG of the Class A Common Stock. The Forward Purchase Agreement has been structured, and all activity in connection with such agreement has been undertaken, to comply with the requirements of all tender offer regulations applicable to the Business Combination under the Securities Exchange Act of 1934, as amended.
During
the
On March 8, 2024, the Company and one of the sellers mutually terminated and cancelled shares per the Forward Purchase Agreement described above.
| 15 |
Convertible Instruments
The Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815 – Derivatives and Hedging. Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as freestanding derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.
The Company reviews the terms of convertible instruments issued to determine whether there are embedded derivative instruments, including embedded conversion options, which are required to be bifurcated and accounted for separately as derivative financial instruments. In circumstances where the host instrument contains more than one embedded derivative instrument, including the conversion option, that is required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.
Bifurcated embedded derivatives are initially recorded at fair value and are then revalued at each reporting date with changes in the fair value reported as nonoperating income or expense. When the convertible instruments contain embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds received are first allocated to the fair value of all the bifurcated derivative instruments. The remaining proceeds, if any, are then allocated to the host instruments themselves, usually resulting in those instruments being recorded at a discount from their face value. The discount from the face value of the convertible debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to interest expense.
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC 815 Derivatives and Hedging. The Company values its derivatives using the Black-Scholes option-pricing model or other acceptable valuation models, as applicable, with the assistance of valuation specialists. Derivative instruments accounted for as liabilities are valued at inception and subsequent valuation dates for each reporting period the derivative instrument remains outstanding. The classification of derivative instruments, including whether such instruments should be recorded as liabilities, is reassessed at each reporting period.
The Company evaluates equity or liability classification for common stock warrants in accordance with ASC 480, Distinguishing Liabilities from Equity, and ASC 815 and accounts for common stock warrants as liabilities if the warrant requires net cash settlement or gives the holder the option of net cash settlement or it otherwise does not meet other equity classification criteria. The Company accounts for common stock warrants as equity if the contract requires physical settlement or net physical settlement or if the Company has the option of physical settlement or net physical settlement and the warrants meet the requirements to be classified as equity. Common stock warrants classified as liabilities are initially recorded at fair value and remeasured at fair value at each subsequent reporting period with the offset adjustments recorded in change in fair value of warrant liability within the unaudited condensed consolidated statements of operations. Common stock warrants classified as equity are initially measured at fair value on the grant date and are not subsequently remeasured.
As
of March 31, 2024 and December 31, 2023, the Forward Purchase Agreement discussed above was accounted for as a derivative asset under
ASC 815 – Derivatives and Hedging. The fair value of the Forward Purchase Agreement at the closing of the Business Combination
was estimated to be a $
Debt Issuance Costs
Debt issuance costs incurred to obtain debt financings are deferred and are amortized over the term of the debt using the effective interest method for all debt financings in which the fair value option has not been elected. Debt issuance costs on debt financings in which the fair value option is not elected are recorded as a reduction to the carrying value of the debt and are amortized to interest expense or interest expense — related party, as applicable, in the unaudited condensed consolidated statements of operations.
For any debt financing in which the Company has elected the fair value option, any debt issuance costs associated with the debt financing are immediately recognized in interest expense in the consolidated statements of operations and are not deferred (see Note 7).
| 16 |
Government Grants
On
October 27, 2022, the California Institute for Regenerative Medicine (“CIRM”) approved the Company’s application for
a CIRM grant for the Company’s continued development of the SNV1 program. CIRM awarded the Company approximately $
Proceeds from the CIRM grant are recognized over the period necessary to match the related research and development expenses when it is probable that the Company has complied with the CIRM conditions and will receive the proceeds pursuant to the milestones defined in the grant as reimbursement of those expenditures. The CIRM grant proceeds, if any, received in advance of having incurred the related research and development expenses are recorded in accrued expenses and other current liabilities and recognized as grant income included in other income and expenses, net, on the Company’s consolidated statements of operations when the related research and developments expenses are incurred.
During
the three months ended March 31, 2024 and 2023, the Company recognized approximately $
Research and Development Expenses
Research and development expenses are expensed as incurred. Research and development expenses consist of costs incurred to discover, research and develop drug candidates, including compensation-related expenses for research and development personnel, including stock-based compensation expense, preclinical and clinical activities, costs of manufacturing, overhead expenses including facilities and laboratory expenses, materials and supplies, amounts paid to consultants and outside service providers, and depreciation and amortization.
Upfront and annual license payments related to acquired technologies or technology licenses which have not yet reached technological feasibility and have no alternative future use are also included in research and development expense in the period in which they are incurred.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related costs, including stock-based compensation expense, for personnel in executive, finance and accounting, business development, operations and administrative functions. General and administrative expenses also include fees for legal, patent prosecution, legal settlements, consulting, charge off of deferred financing costs for aborted or terminated financing offerings, accounting and audit services as well as insurance, outside service providers, direct and allocated facility-related costs and depreciation and amortization.
Foreign Currency Translation Adjustments and Other Comprehensive Income or Loss
StemVac, the Company’s wholly owned subsidiary, is located and operates in Germany and its functional currency is the Euro. Calidi Australia, the Company’s wholly owned subsidiary, is located and operates in Australia and its functional currency is the Australian Dollar (“AUD”). Accordingly, StemVac’s and Calidi Australia’s assets and liabilities are translated using respective published exchange rates in effect at the unaudited condensed consolidated balance sheet date. Expenses and cash flows are translated using respective approximate weighted average exchange rates for the reporting period. Resulting foreign currency translation adjustments are recorded as other comprehensive income or loss, net of tax, in the unaudited condensed consolidated statements of comprehensive income or loss and included as a component of accumulated other comprehensive income or loss on the unaudited condensed consolidated balance sheets. For the three months ended March 31, 2024 and 2023, comprehensive loss includes such foreign currency translation adjustments and was insignificant for all periods presented.
| 17 |
Foreign Currency Transaction Gains and Losses
For transactions denominated in currencies other than the U.S. dollar, the Company recognizes foreign currency transaction gains and losses in the unaudited condensed consolidated statements of operations and classifies the gain or loss based on the nature of the item that generated it. The Company’s foreign currency transaction gains and losses are principally generated by intercompany transfers to StemVac denominated in Euros to pay for the research and development activities performed by StemVac under an intercompany development agreement with the Company. Furthermore, the Company’s foreign currency transaction gains and losses include intercompany transfers to Calidi Australia denominated in AUD to pay for the research and development activities performed by Calidi Australia. These foreign currency remeasurement gains and losses are included in other income and expenses, net, and were insignificant for all periods presented.
Stock-Based Compensation
The Company recognizes compensation expense related to employee option grants and restricted stock grants, if any, in accordance with ASC 718, Compensation — Stock Compensation (“ASC 718”).
The Company measures all stock options and other stock-based awards granted based on the fair value of the award on the date of the grant and recognizes compensation expense for those awards over the requisite service period, which is generally the vesting period of the respective award. The Company has elected to recognize forfeitures as they occur. The reversal of compensation cost previously recognized for an award that is forfeited because of a failure to satisfy a service condition is recognized in the period of the forfeiture. Generally and unless otherwise specified, the Company’s grants stock options with service-based only vesting conditions and records the expense for these awards using the straight-line method over the requisite service period.
The Company classifies stock-based compensation expense in its consolidated statements of operations in the same manner in which the award recipient’s payroll costs are classified or in which the award recipients’ service payments are classified.
The Company estimated the fair value of common stock through the date of the FLAG Merger using an appropriate valuation methodology, in accordance with the framework of the American Institute of Certified Public Accountants’ Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation. Each valuation methodology includes estimates and assumptions that require the Company’s judgment. These estimates and assumptions include a number of objective and subjective factors, including external market conditions, guideline public company information, the prices at which the Company sold convertible preferred stock and common stock to third parties in arms’ length transactions, the rights and preferences of securities senior to the Company’s common stock at the time, and the likelihood of achieving a liquidity event such as an initial public offering or sale. Significant changes to the assumptions used in the valuations could result in materially different fair values of stock options at each valuation date, as applicable. Following the FLAG Merger, the Company used the public price of its common stock.
The fair value of each stock option grant is estimated using the Black-Scholes option-pricing model. The Company estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies within the biotechnology industry with characteristics similar to the Company. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options provided under Staff Accounting Bulletin, Topic 14, or SAB Topic 14, as necessary. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is zero, based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.
| 18 |
Earnings per share attributable to common stockholders is calculated using the two-class method, which is an earnings allocation formula that determines earnings per share for the holders of the Company’s common shares and participating securities. Although the Company’s historical Convertible Preferred Stock contained participating rights in any dividend declared and paid by the Company and were therefore participating securities, the Convertible Preferred Stock had no stated dividends and the Company has never paid any cash dividends and does not plan to pay any dividends in the foreseeable future. Net loss attributable to common stockholders and participating securities is allocated to each share on an if-converted basis as if all of the earnings for the period had been distributed. However, the participating securities do not include a contractual obligation to share in the losses of the Company and are not included in the calculation of net loss per share in the periods that have a net loss. In addition, common stock equivalent shares (whether or not participating) are excluded from the computation of diluted earnings per share in periods in which they have an anti-dilutive effect on net loss per common share.
Diluted net loss per share is computed using the more dilutive of (a) the two-class method or (b) the if-converted method and treasury stock method, as applicable. Contingently convertible instruments were not included for purposes of calculating the number of diluted shares outstanding as the number of dilutive shares is based on a conversion contingency associated with the completion of a future financing event that had not occurred, and the contingency was not resolved, in the reporting periods presented herein. In periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. Diluted net loss per share is equivalent to basic net loss per share for the periods presented herein because common stock equivalent shares from the Convertible Preferred Stock, convertible notes, stock option awards and outstanding warrants to purchase common stock (see Note 8) were antidilutive.
Schedule of Computation of Diluted Net Loss per Common Share including Antidilutive
| 2024 | 2023 (4) | |||||||
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 (4) | |||||||
| Earnout Shares | ||||||||
| Warrants for common stock | ||||||||
| Employee stock options | ||||||||
| Convertible notes payable | ||||||||
| Restricted stock units | ||||||||
| Founders convertible preferred stock | ||||||||
| Series A1 convertible preferred stock | ||||||||
| Series A2 convertible preferred stock | ||||||||
| Contingently issuable warrant(1) | ||||||||
| Contingently convertible SAFE agreements(2) | ||||||||
| Contingently convertible notes payable(3) | ||||||||
| Total common stock equivalents | ||||||||
| (1) |
| 19 |
| (2) | |
| (3) | |
| (4) |
Segments
The Company’s executive management team, as a group, represents the entity’s chief operating decision makers. To date, the Company’s executive management team has viewed the Company’s operations as one segment that includes the research, development and commercialization efforts of cell-based platforms to potentiate oncolytic virus therapies. As a result, the financial information disclosed materially represents all of the financial information related to the Company’s sole operating segment. Substantially all of the Company’s consolidated operating activities, including its long-lived assets, are located within the U.S. and considering the Company’s limited revenue operating stage, the Company currently has no concentration exposure to products or customers.
Recently Adopted Accounting Pronouncements
In June 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”) which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. ASU 2022-03 is effective for public business entities for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2023. On January 1, 2024, the Company adopted ASU 2022-03 and the standard did not have any impact on its unaudited condensed consolidated financial statements and related disclosures as the Company carries no such financial instruments.
Recently Issued Accounting Pronouncements Not Yet Adopted
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2023-07.
| 20 |
In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (Topic 740). The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. The Company is currently evaluating the impact of adopting ASU 2023-09.
3. Fair Value Measurements
The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis, inclusive of related party components, as of March 31, 2024 and December 31, 2023 (in thousands):
Schedule of Assets and Liabilities that are Measured at Fair Value on a Recurring Basis
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| March 31, 2024 (unaudited) | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: | ||||||||||||||||
| Restricted cash held in a money market account | $ | $ | $ | $ | ||||||||||||
| Forward Purchase Agreement Derivative Asset included in other noncurrent assets | ||||||||||||||||
| Total assets, at fair value | $ | $ | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||||
| Public Warrants | $ | $ | $ | $ | ||||||||||||
| Private warrants | ||||||||||||||||
| Total warrant liabilities, at fair value | $ | $ | $ | $ | ||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| December 31, 2023 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: | ||||||||||||||||
| Restricted cash held in a money market account | $ | $ | $ | $ | ||||||||||||
| Forward Purchase Agreement Derivative Asset included in other noncurrent assets | ||||||||||||||||
| Total assets, at fair value | $ | $ | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||||
| Public Warrants | $ | $ | $ | $ | ||||||||||||
| Private warrants | ||||||||||||||||
| Total warrant liabilities, at fair value | $ | $ | $ | $ | ||||||||||||
The Company’s financial instruments consist of cash, prepaid expenses and other current assets, accounts payable, accrued expenses, and other current liabilities. The carrying value of these financial instruments is generally considered to approximate their fair values because of the short-term nature of those instruments.
The following table presents the changes in fair value of valued instruments for the three months ended March 31, 2024 (in thousands):
Schedule of Changes in Fair Value of Level 3 Valued Instruments
| Forward Purchase Agreement Derivative Asset, at fair value | Public Warrants, at fair value | Private warrants, at fair value | ||||||||||
| Balance at January 1, 2024 | $ | ( | ) | $ | | $ | | |||||
| Proceeds from issuance | ||||||||||||
| Change in fair value | ||||||||||||
| Balance at March 31, 2024 | $ | ( | ) | $ | $ | |||||||
| 21 |
The following table presents the changes in fair value of valued instruments for the three months ended March 31, 2023 (in thousands):
| Contingently issuable warrants, at fair value | Contingently convertible notes payable, including accrued interest, at fair value | SAFEs, at fair value | ||||||||||
| Balance at January 1, 2023 | $ | $ | | $ | ||||||||
| Balance | $ | $ | | $ | ||||||||
| Proceeds from issuance | ||||||||||||
| Change in fair value | ||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | |||||||||
| Balance | $ | $ | $ | |||||||||
4. Selected Balance Sheet Components
Deferred Financing Costs
As
of March 31, 2024 and December 31, 2023, there were approximately $
Accrued Expenses and Other Current Liabilities
As of March 31, 2024 and December 31, 2023, accrued expenses and other current liabilities were comprised of the following (in thousands):
Schedule of Accrued Expenses and Other Current Liabilities
March 31, 2024 | December 31, 2023 | |||||||
| Accrued compensation(1) | $ | $ | ||||||
| Accrued vendor and other expenses | ||||||||
| Accrued expenses and other current liabilities | $ | $ | ||||||
| (1) |
See Note 11 for additional commitments.
| 22 |
Prepaid Expenses and Other Current Assets
As of March 31, 2024 and December 31, 2023, prepaid expenses and other current assets were comprised of the following (in thousands):
Schedule of Prepaid Expenses and Other Current Assets
March 31, 2024 | December 31, 2023 | |||||||
| Prepaid expenses | $ | $ | ||||||
| Prepaid insurance | ||||||||
| CIRM receivable | ||||||||
| Other | ||||||||
| Prepaid expenses and other current assets | $ | $ | ||||||
5. Machinery and Equipment, net
As of March 31, 2024 and December 31, 2023, machinery and equipment, net, was comprised of the following (in thousands):
Schedule of Machinery and Equipment, Net
| March 31, 2024 | December 31, 2023 | |||||||
| Machinery and equipment | $ | $ | ||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Machinery and equipment, net | $ | $ | ||||||
Depreciation
expense amounted to approximately $
6. Related Party Transactions
The Company has funded its operations to date primarily through private sales of convertible preferred stock, contingently convertible and convertible promissory notes, SAFEs and common stock. These investments have included various related parties, including from AJC Capital and certain directors as further discussed below.
The following table presents the various significant related party transactions and investments in the Company for the periods presented (in thousands):
Schedule of Related Party Transactions
| Related Party | Description of investment or transaction | March 31, 2024 | December 31, 2023 | |||||||
| AJC Capital, Director A, Director E, and executive officer’s family office | ||||||||||
| AJC Capital, Director D, and relative of Officer A | ||||||||||
| Relative of Officer A | ||||||||||
| Director D | ||||||||||
| Director A | ||||||||||
| AJC Capital | ||||||||||
| Director A | ||||||||||
| Director A | ||||||||||
| AJC Capital and Director A | ||||||||||
| AJC Capital and Director A | ||||||||||
| (1) |
| 23 |
| (2) |
| (3) |
| (4) |
| (5) |
| (6) |
| (7) |
| (8) |
7. Debt
The Company’s outstanding debt obligations as of March 31, 2024 and December 31, 2023, including related party components, are as follows (in thousands):
Schedule of Outstanding Debt Obligations
| March 31, 2024 | ||||||||||||||||||||
Unpaid Balance | Fair Value Measurements | Discount | Accrued Interest | Net Carrying Value | ||||||||||||||||
| Convertible notes payable | $ | $ | $ | ( | ) | $ | $ | |||||||||||||
| Term notes payable | ( | ) | ||||||||||||||||||
| Bridge loan payable | ||||||||||||||||||||
| Total debt | $ | $ | $ | ( | ) | $ | $ | |||||||||||||
| Less: current portion of long-term debt | ( | ) | ||||||||||||||||||
| Long-term debt, net of current portion | $ | |||||||||||||||||||
| December 31, 2023 | ||||||||||||||||||||
Unpaid Balance | Fair Value Measurements | Discount | Accrued Interest | Net Carrying Value | ||||||||||||||||
| Term notes payable | $ | $ | $ | ( | ) | $ | $ | |||||||||||||
| Total debt | $ | $ | $ | ( | ) | $ | $ | |||||||||||||
| Less: current portion of long-term debt | ( | ) | ||||||||||||||||||
| Long-term debt, net of current portion | $ | |||||||||||||||||||
| 24 |
Scheduled maturities of outstanding debt, net of discounts as of March 31, 2024 are as follows (in thousands):
Schedule of Maturities of Outstanding Debt
| Year Ending December 31: | ||||
| 2024 (April — December) | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 and thereafter | ||||
| Plus: accrued interest | ||||
| Less: Discount | ( | ) | ||
| Total debt | $ |
The
following discussion includes a description of the Company’s outstanding debt as of March 31, 2024 and December 31, 2023. The weighted
average interest rate related to the Company’s outstanding debt was approximately
Term Notes Payable
2021 Term Notes Payable
In January 2021, Calidi entered
into a note agreement with a related party investor and director to borrow up to $
In connection with the closing
of the FLAG Merger on September 12, 2023, the 2021 Term Note plus accrued interest was amended, with an extended maturity date of January
1, 2025. For this holder, a related party, Calidi agreed to accrue an interest rate of
As of March 31, 2024 and December 31, 2023, the interest rate of the 2021 Term Notes was
2022 Term Notes Payable
In
November and December 2022, the Company issued $
On
September 12, 2023, with regard to the 2022 Term Notes, approximately $
On
October 3, 2023, the Company settled in cash $
On
November 8, 2023, the Company settled in cash $
On
March 1, 2024, the maturity date of $
As
of March 31, 2024 and December 31, 2023, the interest rate of the 2022 Term Notes was
On
April 12, 2024, the maturity date of $
2023 Term Notes Payable
From
January through September 2023, the Company issued $
On
September 12, 2023, approximately $
On
October 3, 2023, the Company settled in cash $
As
of March 31, 2024 and December 31, 2023, the interest rate of the 2023 Term Notes was
On
April 12, 2024, the maturity date of $
| 25 |
2024 Bridge Loan
On
January 19, 2024, the Company received approximately $
As
of March 31, 2024, the total carrying value of the 2024 Bridge Loan, including accrued interest and net of debt discount, was $
Convertible Promissory Notes
On
January 26, 2024, the Company entered into a convertible promissory note purchase agreement (the “2024 Purchase Agreement”)
with an Accredited Investor (the “Investor”) for a loan in the principal amount of $
As
of March 31, 2024, the total carrying value of the Convertible Note, including accrued interest and net of debt discount, was $
On April 18, 2024, pursuant to
the April Public Offering (see Note 12), the Company’s $
Convertible Promissory Notes and Unasserted Claim Settlement
On
March 8, 2024, the Company entered into settlement agreement (“Settlement Agreement”) with an investor who previously enter
into a series of related agreements including (i) an agreement with Calidi Cure to fund the purchase of Calidi Series B Preferred Stock;
(ii) a Non-Redemption Agreement with the Company; (iii) an OTC Equity Prepaid Forward Purchase Agreement with the Company; and (iv) a
Subscription Agreement with the Company (items (i) through (iv) collectively “the Supplemental Funding Agreements”) for the
purpose of satisfying the “Minimum Cash Condition” required under the Business Combination agreement between First Light
Acquisition Group, Inc., and Calidi Biotherapeutics, Inc., a Nevada corporation among others. Pursuant to the Settlement Agreement, (i)
the investor purchased a $
As
of March 31, 2024, the total carrying value of the Convertible Note, including accrued interest and net of debt discount, was $
On
April 14, 2024, the $
| 26 |
On
April 19, 2024, the $
8. Convertible Preferred Stock, Common Stock and Stockholders’ Deficit
Preferred Stock
Pursuant to the Second Amended and Restated Certificate of Incorporation filed on September 19, 2023 (“the Amended Articles”), the Company is authorized to issue a total of shares of preferred stock, par value $ per share. As of March 31, 2024, there were shares of preferred stock outstanding.
Convertible Preferred Stock
In connection with the closing of the FLAG Merger on September 12, 2023, all Convertible Preferred Stock, including the Series B Convertible Preferred stock classified as a liability which were completed as to the Series B financing, were converted to common stock pursuant to the conversion provisions and are no longer outstanding as of December 31, 2023.
| 27 |
Common Stock
Pursuant to the Second Amended and Restated Certificate of Incorporation, the Company is authorized to issue shares of common stock, par value $ per share, of which shares are designated as Voting Common Stock (“Common Stock”) and are designated as Non-Voting Common Stock (the “Non-Voting Common Stock”). As of March 31, 2024 and December 31, 2023, there were and shares of common stock issued and outstanding, respectively, and shares of non-voting common stock outstanding. Since inception to date, no dividends have been declared or paid. Issuance costs related to common stock issuances during all periods presented were immaterial.
During
the three months ended March 31, 2024, the Company issued
shares of common stock in lieu of cash for certain marketing services (see Note 11),
shares of common stock in lieu of cash for payment of a commitment fee related to the Company’s SEPA agreement (see Note 11),
and
During the three months ended March 31, 2023, The Company issued shares of common stock from exercises of stock options (see Note 9), and shares of common stock in lieu of cash interest in conjunction with certain term note agreements.
As of March 31, 2024, common stock reserved for future issuance consisted of the following:
Schedule of Common Stock Reserved
| Common stock warrants outstanding | ||||
| Common stock options issued and outstanding | ||||
| Restricted stock units vested and unreleased | ||||
| Shares available for future issuance under the 2023 Equity Incentive Plan | ||||
| Shares reserved under the 2023 Employee Stock Purchase Plan | ||||
| Common stock reserved for future issuance |
There are and shares of the Company’s common stock issued and outstanding as of March 31, 2024 and December 31, 2023, respectively.
Warrants
As
of March 31, 2024, there were
Public Warrants
In
connection with the closing of the FLAG Merger on September 12, 2023, the Company assumed
The Company may redeem the outstanding Public Warrants for $ per warrant upon at least days’ prior written notice of redemption given after the warrants become exercisable, if the reported last sale price of the common stock equals or exceeds $ per share (as adjusted for stock dividends, sub-divisions, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing after the warrants become exercisable and ending on the third trading day before the Company sends the notice of redemption to the warrant holders. Upon issuance of a redemption notice by the Company, the warrant holders may, at any time after the redemption notice, exercise the public warrants on a cashless basis.
| 28 |
The Company accounts for the Public Warrants in accordance with the guidance contained in ASC 815-40. Such guidance provides that because the warrants do not meet the criteria for equity treatment thereunder, each warrant must be recorded as a liability.
The accounting treatment of derivative financial instruments in accordance with ASC 815, Derivatives and Hedging, requires that the Company record a derivative liability upon the closing of the FLAG Merger. Accordingly, the Company classifies each warrant as a liability at its fair value and the warrants were allocated a portion of the proceeds from the issuance of the Units equal to its fair value. This liability is subject to re-measurement at each balance sheet date. With each such re-measurement, the warrant liability will be adjusted to fair value, with the change in fair value recognized in the Company’s statement of operations. The Company will reassess the classification at each balance sheet date. If the classification changes as a result of events during the period, the warrants will be reclassified as of the date of the event that causes the reclassification.
As of March 31, 2024, all Public Warrants remain outstanding.
Private Warrants
In
connection with the closing of the FLAG Merger on September 12, 2023, the Company assumed
As of March 31, 2024, all Private Warrants remain outstanding.
Warrants to Purchase Restricted Shares
On
February 21, 2024, in connection with a settlement agreement (see Note 11), the Company issued an additional
As of March 31, 2024, all warrants to purchase Restricted Shares remain outstanding.
The following table summarizes the Company’s aggregate warrant activity for the three months March 31, 2024.
Schedule of Warrant Activity
Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | ||||||||||
| Outstanding at January 1, 2024 | $ | |||||||||||
| Issued | ||||||||||||
| Exercised | ||||||||||||
| Cancelled | ||||||||||||
| Outstanding at March 31, 2024 | $ | |||||||||||
| 29 |
Equity Incentive Plans
Prior to January 1, 2019, the Company adopted the 2016 Stock Plan (the “2016 Plan”) under which the Company was authorized to grant stock options, restricted stock, a stock appreciation right, or a restricted stock unit award. In June 2019, the Company adopted the 2019 Equity Incentive Plan (the “2019 Plan”) to replace the 2016 Plan. Other than the change of plan name and incorporation state, all the terms of the 2016 Plan were carried over into the 2019 Plan. In adopting the 2019 Plan, the Company terminated the 2016 Plan and may no longer grant any additional stock options or sell any stock under restricted stock purchase agreements under the 2016 Plan; however, stock options issued under the 2016 Plan will continue to be in effect in accordance with their terms and the terms of the 2019 Plan, which are substantially the same terms as the 2016 Plan, until the exercise or expiration of the individual options awards. In connection with the Business Combination, the Company assumed the options granted under the 2019 Plan. Upon completion of the Business Combination on September 12, 2023, the Company adopted the 2023 Equity Incentive Plan (the “2023 Plan”). Since the 2019 Plan was not assumed by the Company, the Company may no longer grant any additional stock options or sell any stock under restricted stock purchase agreements under the 2019 Plan; however, stock options issued under the 2019 Plan will continue to be in effect in accordance with their terms and the terms of the 2023 Plan until the exercise or expiration of the individual options awards.
The 2019 Plan reserved the right for the Board of Directors as the administrator of the plan (the “Administrator”) to issue up to shares pursuant to (pre-Business Combination) equity awards, which was increased to up to (pre-Business Combination) in May 2022, including stock options (“Options”), restricted stock awards (“Restricted Stock”), dividend equivalents awards, stock payment awards, restricted stock units (“RSUs”) and/or stock appreciation rights (“SARs”, together with Options, Restricted Stock and RSUs, “Awards”), according to its discretion. Awards may be granted under the 2019 Plan to our employees, directors, and consultants. As of March 31, 2024, the Administrator has not issued any Restricted Stock, RSUs, dividend equivalents awards, stock payment awards or SARs. Stock options remain as the sole outstanding type of award under the 2019 Plans.
Under the 2019 Plan, awards may vest and thereby become exercisable or have restrictions on forfeiture lapse on the date of grant or in periodic installments or upon the attainment of performance goals, or upon the occurrence of specified events depending on the Administrator’s discretion. The Administrator has broad authority to determine the terms and conditions of any Award granted pursuant to the 2019 Plan including, but not limited to, the exercise price, grant price, or purchase price, any reload provision, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers thereof as the Administrator, in its sole discretion may determine.
No Awards may be granted under the 2019 Plan with a term of more than ten years and no Awards granted may be exercised after the expiration of ten years from the date of grant.
The 2023 Plan reserved the right for the Compensation Committee or by the Board of Directors acting as the Compensation Committee, as the administrator of the plan (the “Administrator”) to issue up to equity awards, including stock options (“Options”), restricted stock awards (“Restricted Stock”), dividend equivalents awards, stock payment awards, restricted stock units (“RSUs”) and/or stock appreciation rights (“SARs”, together with Options, Restricted Stock and RSUs, “Awards”), according to its discretion. Awards may be granted under the 2023 Plan to our employees, directors, and consultants. As of March 31, 2024, the Administrator has issued RSUs and stock options under the 2023 Plan.
Under the 2023 Plan, Awards may vest and thereby become exercisable or have restrictions on forfeiture lapse on the date of grant or in periodic installments or upon the attainment of performance goals, or upon the occurrence of specified events depending on the Administrator’s discretion. The Administrator has broad authority to determine the terms and conditions of any Award granted pursuant to the 2023 Plan including, but not limited to, the exercise price, grant price, or purchase price, any reload provision, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers thereof as the Administrator, in its sole discretion may determine.
No Awards may be granted under the 2023 Plan with a term of more than ten years and no Awards granted may be exercised after the expiration of ten years from the date of grant.
On
September 12, 2023, upon closing of the FLAG Merger, the number of equity awards issued and available for grant were retrospectively
adjusted pursuant to the conversion ratio of approximately
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2023 Employee Stock Purchase Plan (“ESPP”)
On
August 28, 2023, the Company approved the 2023 Employee Stock Purchase Plan, hereinafter the 2023 ESPP, which became effective on the
consummation of the FLAG Merger. Under the 2023 ESPP, eligible employees may purchase a limited number of shares of common
stock at a discount of up to
Stock Options
Options granted under the 2019 Plan and 2023 Plan may be either “incentive stock options” within the meaning of Section 422(b) of the Internal Revenue Code of 1986, as amended (the “Code”), or “non-qualified” stock options that do not qualify incentive stock options. Incentive stock options may be granted only to the Company’s employees and employees of domestic subsidiaries, as applicable.
The exercise price of an option may be payable in cash or in common stock, or in a combination of cash and common stock, or other legal consideration for the issuance of stock as the Board or Administrator may approve.
Generally,
Option awards activity
Summary of Stock Option Activity
Number of Options Outstanding | Weighted Average Exercise Price | Weighted- Average Remaining Contractual Life (Years) | Aggregate Intrinsic Value | |||||||||||||
| Outstanding at January 1, 2024 | $ | $ | ||||||||||||||
| Options granted | ||||||||||||||||
| Options exercised | ||||||||||||||||
| Options forfeited or cancelled | ( | ) | ||||||||||||||
| Outstanding at March 31, 2024 | $ | $ | ||||||||||||||
| Exercisable at March 31, 2024 | $ | $ | ||||||||||||||
| 31 |
Restricted stock units
Summary of Restricted Stock Unit Activity
Number of Units Outstanding | Weighted Average Grant-Date Fair Value | |||||||
| Balance at January 1, 2024 | $ | |||||||
| Granted | $ | |||||||
| Vested | $ | |||||||
| Balance at March 31, 2024 | $ | |||||||
| Vested and unreleased | $ | |||||||
| Outstanding at March 31, 2024 | $ | |||||||
Schedule of Stock-Based Compensation Expense
| 2024 | 2023 | |||||||
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Research and development | $ | $ | ||||||
| General and administrative | ||||||||
| Total stock-based compensation expense | $ | $ | ||||||
On
January 18, 2023, the Board approved a repricing of approximately million stock options previously granted at an exercise price of
$ per share to the then current fair value of $ per share pursuant to an updated valuation report. The three
months ended March 31, 2024 and 2023 includes a noncash compensation charge of approximately $
As of March 31, 2024, the total unamortized stock-based compensation expense related to stock options was approximately $ million expected to be amortized over an estimated weighted average life of years. The weighted-average estimated fair value of stock options with service-conditions granted during the three months ended March 31, 2024 and 2023 was $ and $ per share, respectively, using the Black-Scholes option pricing model with the following weighted-average assumptions:
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Expected volatility | % | % | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected option life (in years) | ||||||||
| Expected dividend yield | % | % | ||||||
The Company does not recognize deferred income taxes for incentive stock option compensation expense and records a tax deduction only when a disqualified disposition has occurred.
In connection with the closing of the FLAG Merger on September 12, 2023, all stock options underlying of the 2019 Plan were assumed by New Calidi at the appropriate conversion ratio and the legacy Calidi 2019 Plan was terminated.
| 32 |
10. Income Taxes
The provision for income taxes for interim periods is determined using an estimated annual effective tax rate. The effective tax rate may be subject to fluctuations during the year as new information is obtained, which may affect the assumptions used to estimate the annual effective tax rate, including factors such as valuation allowances against deferred tax assets, the recognition or de-recognition of tax benefits related to uncertain tax positions, if any, and changes in or the interpretation of tax laws in jurisdictions where the Company conducts business.
For the three months ended March 31, 2024 and 2023, the Company did not record any federal or state income tax provision or benefit due to net losses incurred for all periods presented. The Company’s net deferred tax assets generated mainly from net operating losses are fully offset by a valuation allowance as the Company believes it is not more likely than not that the benefit will be realized. StemVac’s income tax provision in Germany for all periods presented was insignificant.
11. Commitments and Contingencies
Operating and financing leases
On
October 10, 2022, the Company entered into an Office Lease Agreement (the “San Diego Lease”) of a building containing
To
secure and execute the San Diego Lease, Mr. Allan Camaisa provided a personal Guaranty of Lease of up to $
The
San Diego Lease has an initial term of
Beginning
on the Commencement Date, the Company pays base monthly rent in the amount of $
In addition to base monthly rent and management fees, the Company will pay in monthly installments its share of (a) all costs and expenses, other than certain excluded expenses, incurred by the lessor in each calendar year in connection with operating, maintaining, repairing (including replacements if repairs are not feasible or would not be effective) and managing the Premises and the building in which the Premises are located (“Expenses”), and (b) all real estate taxes and assessments on the Premises and the building in which the Premises are located, all personal property taxes for property that is owned by Landlord and used in connection with the operation, maintenance and repair of the Premises (“Taxes”).
Upon
execution of the San Diego Lease, the Company provided the lessor a payment of $
On
April 1, 2022, StemVac entered into an office lease which includes laboratory space which expires on March 31, 2027, with monthly payments
of
Operating
lease expense recognized in accordance with ASC 842 during the three months ended March 31, 2024 and 2023 was approximately $
| 33 |
The Company is also party to certain financing leases for machinery and equipment (see Note 5).
The following table presents supplemental cash flow information related to operating and financing leases for the periods presented (in thousands):
Schedule of Supplemental Cash Flow Information Related to Operating and Financing Leases
| Three months Ended March 31, | ||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | 2024 | 2023 | ||||||
| Operating cash flows from operating leases | $ | $ | ||||||
| Operating cash flows from financing leases | ||||||||
| Financing cash flows from financing leases | ||||||||
| Right-of-use assets obtained in exchange for new lease liabilities: | ||||||||
| Operating lease | $ | $ | ||||||
The following table presents supplemental balance sheet information related to operating and financing leases as of March 31, 2024 (in thousands, except lease term and discount rate):
Schedule of Supplemental Balance Sheet Information Related to Operating and Financing Leases
| 2024 | 2023 | |||||||
| Three months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Operating leases | ||||||||
| Right-of-use assets, net | $ | $ | ||||||
| Right-of-use lease liabilities, current | $ | $ | ||||||
| Right-of-use lease liabilities, noncurrent | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
| Financing Leases | ||||||||
| Machinery and equipment, gross | $ | $ | ||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Machinery and equipment, net | $ | $ | ||||||
| Current liabilities | $ | $ | ||||||
| Noncurrent liabilities | ||||||||
| Total financing lease liabilities | $ | $ | ||||||
| Weighted average remaining lease term | ||||||||
| Operating leases | ||||||||
| Financing leases | ||||||||
| Weighted average discount rate | ||||||||
| Operating leases | % | % | ||||||
| Financing leases | % | % | ||||||
The following table presents future minimum lease commitments as of March 31, 2024 (in thousands):
Schedule of Future Minimum Lease Commitments
| Operating Leases | Financing Leases | |||||||
| Year Ending December 31, | ||||||||
| 2024 (April – December) | $ | $ | ||||||
| 2025 | ||||||||
| 2026 | ||||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 and thereafter | ||||||||
| Total minimum lease payments | ||||||||
| Less: amounts representing interest | ( | ) | ( | ) | ||||
| Present value of net minimum lease payments | $ | $ | ||||||
| 34 |
Litigation — General
The Company is subject to various claims and contingencies in the ordinary course of its business, including those related to litigation, business transactions, employee-related matters, and other matters. At each reporting date, The Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, The Company will record a liability for the loss. If the loss is not probable or the amount of the loss cannot be reasonably estimated, The Company discloses the claim if the likelihood of a potential loss is reasonably possible, and the amount involved could be material. The Company expenses the costs related to legal proceedings as incurred. See other legal matters discussed below. Other than the matters discussed below, The Company is not currently party to any material legal proceedings.
Legal proceedings
Terminated Physician Agreement Matter
On July 19, 2016, the Company entered into a Partnership Agreement between certain physicians (the “Physicians”, as one of the “partners”) and Calidi for the Physicians to provide certain services to Calidi. In connection with the Partnership Agreement, Calidi granted the Physicians stock options as consideration for those services pursuant to Calidi’s Equity Incentive Plan (the “Plan”). The Partnership Agreement was deemed terminated on March 21, 2018. Pursuant to the terms of the stock option agreements and the Plan, the Physicians had three months from the termination date to exercise their vested stock options before those options would automatically expire and cancel unexercised, while all unvested stock options are forfeited immediately on the termination date. The Physicians did not elect to exercise any of their vested options thereby resulting in full cancellation of those options in accordance with the Plan.
On March 14, 2022, the Physicians filed a lawsuit against Calidi in San Diego Superior Court, seeking, among other claims, declaratory relief and claiming that the stock options granted to them pursuant to the Partnership Agreement, have not expired and remain exercisable by the Physicians. The Physicians are claiming in vested stock options to be valid and exercisable, even though the Physicians have not provided any services to Calidi since the March 2018 termination date.
On
December 6, 2022, Calidi and the Physicians participated in mediation in San Diego, California. In order to attempt to settle all claims
and avoid a costly trial, Calidi offered the Physicians shares of Calidi common stock valued at $ per share and options
to purchase common stock at an exercise price of $ per share in full settlement of the claims. As of December 31, 2022, the Company
estimated this offer of settlement to be valued at approximately $
On February 5, 2024, the Company entered into a settlement agreement and mutual release (the “Settlement Agreement”) with Dr. Elliot Lander, Saralee Berman, as Trustee of the Mark Howard Berman and Saralee Turrell Berman Living Trust, successor in interest to the Estate of Dr. Mark Berman, and Cell Surgical Network, Inc. (the “physicians”) in connection with the dispute outlined above.
| 35 |
Pursuant
to the Settlement Agreement, as consideration for a full release and discharge of claims, and dismissal of claims by the parties, the
Company agreed to provide to the physicians the following: (a) the issuance of restricted shares of common stock (the “Restricted
Shares”) and (b) the issuance of
Former Chief Accounting Officer and Interim Chief Financial Officer
On
November 15, 2023,
On May 1, 2024, Mr. Kalajian filed a complaint in the Superior Court of the State of California, County of San Diego against the Company alleging intentional conversion and violation of Section 158 of the Delaware General Corporations Code due to the Company’s failure to remove a restrictive legend from shares of the Company’s Common Stock. Mr. Kalajian is seeking compensatory damages to be proven at trial, punitive damages and attorney’s fees, and an order requiring removal of the restrictive legend from his share certificates. The Company intends to vigorously defend itself.
Unasserted Claim Settlement
On
March 8, 2024, the Company entered into a convertible promissory note purchase agreement with an accredited investor (the “Investor”)
for a loan in the principal amount of $
On
April 19, 2024, the $
Employment Contracts
The Company has entered into employment and severance benefit contracts with certain executive officers and other employees. Under the provisions of the contracts, the Company may be required to incur severance obligations for matters relating to changes in control, as defined, and certain terminations of those executives and employees. As of March 31, 2024 and 2023, the Company had not accrued any such benefits except for the severance accrual for Mr. Ng discussed below.
| 36 |
Manufacturing and other supplier contracts
The
Company has entered into certain manufacturing and other supplier agreements with vendors principally for manufacturing drug product
for clinical trials and continued development of the CLD-101 and CLD-201 programs, amounting to approximately $
License Agreements with Northwestern University
On June 7, 2021, the Company entered into a License Agreement with Northwestern University (“Northwestern”) (the “Northwestern Agreement”) for the exclusive commercialization rights to the investigational new drug (“IND”) and data generated from Northwestern’s phase 1 clinical trial treating brain tumor patients with an engineered oncolytic adenovirus delivered by neural stem cells (“NSC-CRAd-S-pk7”). Under the Northwestern Agreement, among other rights, Northwestern granted to the Company a worldwide, twelve-year exclusivity for the commercial development of NSC-CRAd-S-pk7 or other oncolytic viruses for therapeutic and preventive uses in oncology and a right of reference to Northwestern’s IND application which relates to the treatment of newly diagnosed HGG.
Pursuant
to the Northwestern Agreement, the Company agreed to a best-efforts commitment to fund up to $
On October 14, 2021, the Company entered into a Material License Agreement with Northwestern to license the NSC-CRAd-S-pk7 oncolytic virus materials which the Company intends to use to continue advancing its research, development and commercialization efforts of the NNV1 and NNV2 programs.
As of the date of issuance of these unaudited condensed consolidated financial statements, it is not probable that the Company will make these payments, if any at all. The Company will record the contingent payments if and when they become payable, in accordance with the applicable guidance.
License Agreement with City of Hope and the University of Chicago
On July 22, 2021, the Company entered into an Exclusive License Agreement with City of Hope (“COH”) and the University of Chicago (the “City of Hope Agreement”) for patents covering cancer therapies using an oncolytic adenovirus loaded into allogeneic neural stem cells for treatment of HGG. Pursuant to the City of Hope Agreement, COH transferred its IND to the Company for the commercial development of a licensed product, as defined in the City of Hope Agreement. This agreement grants to the Company commercial exclusivity in using neural stem cells with the adenovirus known as CRAd-S-pk7 for oncolytic virotherapy.
The
City of Hope Agreement provides for the Company to pay royalties in low single digit percentage of net sales generated for any product of
the licensed patents for specific periods, and to pay up to $
As of the date of the issuance of these unaudited condensed consolidated financial statements, it is not probable that the Company will make these payments. The Company will record the contingent payments if and when they become payable, in accordance with the applicable guidance.
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Indemnification
In the normal course of business, the Company may provide indemnification of varying scope under the Company’s agreements with other companies or consultants, typically the Company’s clinical research organizations, investigators, clinical sites, suppliers and others. Pursuant to these agreements, the Company will generally agree to indemnify, hold harmless, and reimburse the indemnified parties for losses and expenses suffered or incurred by the indemnified parties arising from claims of third parties. Indemnification provisions could also cover third party infringement claims with respect to patent rights, copyrights, or other intellectual property pertaining to the Company. The Company’s office and laboratory facility leases also will generally contain indemnification obligations, including obligations for indemnification of the lessor for environmental law matters and injuries to persons or property of others, arising from the Company’s use or occupancy of the leased property. The term of these indemnification agreements will generally continue in effect after the termination or expiration of the particular research, development, services, lease, or other agreement to which they relate. The potential future payments the Company could be required to make under these indemnification agreements will generally not be subject to any specified maximum amounts. Historically, the Company has not been subject to any claims or demands for indemnification. The Company also maintains various liability insurance policies that limit the Company’s financial exposure. As a result, the Company’s management believes that the fair value of these indemnification agreements is minimal. Accordingly, the Company has not recorded any liabilities for these agreements as of March 31, 2024.
Separation Agreement with Chief Operating Officer and President
On
June 23, 2023, the Company entered into a Separation and Release Agreement (“Separation Agreement”) with George Ng, Chief Operating
Officer and President, effective on that date. In accordance with the provisions of the Separation Agreement, the Company will pay Mr. Ng
in the amount of $
Mr. Ng will continue to serve as a director on the Company’s board and an advisor with continued vesting of Mr. Ng’s previously granted stock options pursuant to the terms of the Company’s equity incentive plan.
Settlement, deferral or payment of deferred compensation of certain executives and a director
On
August 31, 2023, Mr. Camaisa and Mr. Leftwich entered into certain amendments with respect to their deferred compensation arrangements
in connection with the FLAG Merger. Mr. Camaisa agreed to settle approximately $
On
September 12, 2023, Mr. Kalajian was issued shares of common stock in exchange for settlement of $
Standby Equity Purchase Agreement
On
December 10, 2023, the Company entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, Ltd., a Cayman
Island exempt limited partnership (“Yorkville”). Pursuant to the SEPA, the Company will have the right, but not the obligation,
to sell to Yorkville up to $ million of its shares of Common Stock, par value $ per share, at the Company’s request any
time during the 36 months following the execution of the SEPA. The maximum advance under the SEPA is the lower of
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As
consideration for Yorkville’s commitment to purchase the Common Stock at the Company’s direction upon the terms and subject
to the conditions set forth in the SEPA, upon execution of the SEPA, the Company paid a structuring fee of $
Consulting Agreement
In February 2024, the Company entered into a consulting agreement whereby the consultant agreed to provide the Company with marketing and distribution services to communicate information. As compensation, the Company issued shares of common stock to the consultant on March 25, 2024 (see Note 8), and the Company agreed to issue an additional shares of common stock 6 months from the effective date of the consulting agreement.
12. Subsequent Events
Extension of Term Notes
On
April 12, 2024, the maturity date of $
On
April 12, 2024, the maturity date of $
Repayment of Convertible Promissory Note
On
April 14, 2024, the $
On
April 19, 2024, the $
April Public Offering
On
April 18, 2024, the Company closed on a public offering of the Company’s securities pursuant to that certain securities purchase
agreement dated April 16, 2024 entered into by and among the Company and certain purchasers. In connection with the public offering,
the Company sold an aggregate of
Reverse Stock Split
Pursuant
to the April Public Offering, the Company agreed to hold an annual or special meeting of stockholders on or prior to the seventy-fifth
(75th) calendar day following April 18, 2024 for the purpose of obtaining approval as may be required by the applicable rules and regulations
of the NYSE American (or any successor entity) from the shareholders of the Company to consummate a reverse stock split of the Company’s
Common Stock (“Stockholder Approval”), with the recommendation of the Company’s Board of Directors that such proposal
is approved, and the Company shall solicit proxies from its stockholders in connection therewith in the same manner as all other management
proposals in such proxy statement and all management-appointed proxyholders shall vote their proxies in favor of such proposal. If the
Company does not obtain Stockholder Approval at the first meeting, the Company will be required to call a meeting within every forty-five
(45) day period thereafter to seek Stockholder Approval until the earlier of the date on which Shareholder Approval is obtained or the
Pre-Funded Warrants or the Series A Common Warrants, Series B Common Warrants, Series B-1 Common Warrants, Series C Common Warrants and
Series C-1 Common Warrants (collectively “Common Warrants”) are no longer outstanding. The Board has set the record date
of April 26, 2024 for the special meeting to be held on June 6, 2024 (the “Special Meeting”). The Special Meeting will held
for purposes of seeking stockholder approval for an amendment to our Second Amended and Restated Certificate of Incorporation, at the
discretion of the Board of Directors of the Company (the “Board”),to effect a reverse stock split with respect to the Company’s
issued and outstanding Voting Common Stock and Non-Voting Common Stock, at a ratio between
Conversion of Convertible Promissory Note
On
April 18, 2024, pursuant to the April Public Offering, the Company’s $
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with (i) our unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q for the period ended March 31, 2024 (this “Quarterly Report”). This information should also be read in conjunction with our audited consolidated financial statements and related notes included in our Form 10-K for the fiscal year ended December 31, 2023 (“Form 10-K”) filed with the Securities and Exchange Commission, or SEC. References to “Note” or “Notes” are to the notes included in our unaudited condensed consolidated financial statements appearing elsewhere in this Quarterly Report.
Company Overview
We are a clinical-stage immuno-oncology company that is developing innovative stem cell-based and enveloped platforms for the delivery and potentiation of oncolytic virotherapies to treat cancer. Our pipeline includes off-the-shelf product candidates designed to protect oncolytic viruses from being quickly inactivated by the patient’s immune system and target tumor sites. Once approved by the FDA, this improved delivery, both localized and systemic, and increased potency will enable us to develop treatments that target various types of cancer at different stages of progression. Our goal is to create therapies that work on any tumor, regardless of its genetic profile (universal treatments). In addition to direct targeting and killing cancer cells, our oncolytic virotherapies have shown signs of changing the tumor immune environment to induce strong anti-tumor immunity that could lead to better cancer treatment and prevent tumor recurrence.
CLD-101 (NeuroNova™ Platform) for Newly Diagnosed High Grade Glioma (“HGG”) (also referred to as “NNV1” as to the indication). CLD-101 is our product candidate utilizing our NeuroNova™ Platform targeting HGG. Prior to our licensing agreement with Northwestern University, an open-label, investigator sponsored, Phase 1, dose- escalation clinical trial for NNV1 in patients with newly diagnosed high-grade gliomas was completed. This clinical trial demonstrated that single administration of CLD-101 was well tolerated in patients with newly diagnosed HGG. A Phase 1b clinical trial will commence for NNV1 in collaboration with Northwestern University during the third quarter of 2024. This trial will explore the final dosing regimen for NNV1, including the feasibility of repeated dosing in newly diagnosed HGG. Extensive biomarker analysis will be performed on tumor biopsies and blood samples to determine viral distribution, specific tumor targeting and induction of anti-tumor immunity.
CLD-101 for Recurrent HGG (also referred to as “NNV2” as to the recurrent HGG indication). A phase 1 study evaluating the safety and feasibility of administering repeated doses of CLD-101 intracerebrally to patients with recurrent high-grade gliomas began treatment in May 2023. The study is being run by our partner, City of Hope, and started enrolling cohort 4 in January 2024. Clinical data from patients with recurrent HGG treated with repeated doses of CLD-101 is planned to support the start of a trial of repeated doses in newly diagnosed HGG.
CLD-201 (SuperNova™) for Advanced Solid Tumors (triple-negative breast cancer (“TNBC”), head & neck squamous cell carcinoma (HNSCC), and advanced soft tissue sarcoma (also referred to as “SNV1”). SNV1 is our first internally developed pre-clinical product candidate utilizing our SuperNova™ Delivery Platform. Based on our pre-clinical studies, we believe SNV1 has therapeutic potential for the treatment of multiple solid tumors such as head and neck cancer, triple-negative breast cancer and melanoma. We have held a pre-IND meeting with FDA to discuss the filing of our IND application for the clinical development of CLD-201. We anticipate commencing a Phase 1 clinical trial for SNV1 during the second half of 2024.
CLD-301 (AAA) for Multiple Indications. We are also currently engaged in early discovery research involving Adult Allogeneic Adipose-derived (“AAA”) stem cells for various indications and therapies. These AAA stem cells are theoretically multipotent, differentiating along the adipocyte, chondrocyte, myocyte, neuronal, and osteoblast lineages, and may have the ability to serve in other capacities, such as providing hematopoietic support and gene transfer with potential applications for repair and regeneration of acute and chronically damaged tissues. Pre-clinical studies involving toxicity and efficacy will be needed before an IND application may be filed with the FDA.
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CLD-400 (RTNova) for Lung cancer and Metastatic Solid Tumors, Our pre-clinical program involving enveloped oncolytic viruses (discovery phase), builds upon our experience of using cells to protect, potentiate and deliver virotherapies. CLD-400 program is derived from research from prior pre-clinical CLD-202 program. RTNova consists of an engineered vaccinia virus enveloped by a cell membrane, that is potentially capable of targeting lung cancer and advanced metastatic disease due to its remarkable ability to survive in the bloodstream. Metastatic solid tumors involve cancer cells that break away from where they first formed (primary cancer) and travel through the blood or lymph system to form new tumors, known as metastatic tumors, in other parts of the body. In preclinical models, RTNova has shown early signs of its capability to target multiple distant and diverse tumors and transform their microenvironments leading to their elimination. In addition, the program has shown potential synergistic effects with other immunotherapies, including cell therapies, to attack and eliminate disseminated solid tumors.
Since inception, our operations have focused on organizing and staffing our company, business planning, raising capital, acquiring and developing our technology, establishing our intellectual property portfolio, identifying potential product candidates and undertaking preclinical studies and manufacturing. We do not have any products approved for sale and have not generated any revenue from product sales. We have funded our operations primarily through private sales of common stock, convertible preferred stock, contingently convertible and convertible promissory notes, term debt, lines of credit, Simple Agreements for Future Equity (“SAFE”) and various bank loans. These investments have included and have been made by various related parties, including our largest investor and Chief Executive Officer and Chairman of the Board of Directors.
Since inception, we have incurred significant operating losses. Our net loss was $7.2 million for the three months ended March 31, 2024. As of March 31, 2024, we had an accumulated deficit of $106.8 million. We expect to continue to incur significant and increasing expenses and operating losses for the foreseeable future, as we advance our current and future product candidates through preclinical and clinical development, manufacture drug product and drug supply, seek regulatory approval for our current and future product candidates, maintain and expand our intellectual property portfolio, hire additional research and development and business personnel and operate as a public company.
Changes in economic conditions, including rising interest rates, public health issues, including the recent COVID-19 pandemic, lower consumer confidence, volatile equity capital markets and ongoing supply chain disruptions and the impacts of geopolitical conflicts, may also affect our business.
We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates. In addition, if we obtain regulatory approval for our product candidates and do not enter into a third-party commercialization partnership, we expect to incur significant expenses related to developing our commercialization capability to support product sales, marketing, manufacturing and distribution activities.
As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity offerings and debt financings or other sources, such as potential collaboration agreements, strategic alliances and licensing arrangements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on acceptable terms, or at all. Our inability to raise capital or enter into such agreements as, and when needed, could have a material adverse effect on our business, results of operations and financial condition.
Based on our operating plan, we believe we do not have sufficient cash on hand to support current operations for at least one year from the date of issuance of our unaudited condensed consolidated financial statements as of, and for the three months ended March 31, 2024. We have concluded that this circumstance raises substantial doubt about our ability to continue as a going concern. See Note 1 to our unaudited condensed consolidated financial statements. In addition, we will be required to raise additional capital through the issuance of our equity securities to support our operations which will have an ownership and economic dilutive effect to our current shareholders who purchased their shares of common stock at prices above our current trading price, and such capital raising may adversely affect the price of our common stock. Further, the sale of or the perception of a sale of a substantial number of our common stock by certain selling securityholders pursuant to another registration statement filed with the SEC will adversely affect the price of our common stock due to our limited trading volume and adversely affect the share price that we may obtain in future financings and may adversely affect our ability to conduct and complete future financings.
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For additional discussion on our liquidity and the Closing of the FLAG Merger, see the section below and further disclosures in the section titled “Liquidity and Capital Resources” included herein.
The FLAG Merger and Related Transactions
On September 12, 2023, FLAG consummated a series of transactions that resulted in the merger of FLAG Merger Sub Inc., a Nevada corporation and a wholly-owned subsidiary of FLAG (“Merger Sub”) and Calidi pursuant to the Agreement and Plan of Merger, as amended, dated as of January 9, 2023. Pursuant to the terms of the Merger Agreement, the business combination was effected through the merger of Merger Sub with and into Calidi, with Calidi surviving such merger as a wholly-owned subsidiary of FLAG. Historical common share amounts of Calidi have been retroactively restated based on the conversion ratio of approximately 0.42 (the “Conversion Ratio”). Following the consummation of the business combination, FLAG was renamed “Calidi Biotherapeutics, Inc.”
As a result of the Business Combination, all outstanding stock of Calidi were cancelled in exchange for the right to receive newly issued shares of Common Stock (also referred to as “New Calidi Common Stock”), par value $0.0001 per share, and all outstanding options to purchase Calidi stock were assumed by Calidi. The total consideration received by Calidi Security Holders at the Closing of the transactions contemplated by the Merger Agreement is the newly issued shares of Common Stock and securities convertible or exchangeable for newly issued shares of Common Stock with an aggregate value equal $250.0 million, plus an adjustment of $23.8 million pursuant to the net debt adjustment provisions of the Merger Agreement by reason of the Series B Financing. As a result, the Calidi Security Holders received an aggregate of 27,375,600 shares of Common Stock as Merger Consideration.
As additional consideration, each Calidi stockholder was entitled to earn, on a pro rata basis, up to 18,000,000 Escalation Shares. During the Escalation Period, Calidi Stockholders may be entitled to receive up to 18,000,000 Escalation Shares with incremental releases of 4,500,000 shares upon the achievement of each share price hurdle if the trading price of Common Stock is $12.00, $14.00, $16.00 and $18.00, respectively, for a period of any 20 days within any 30-consecutive-day trading period. The Escalation Shares have been placed in escrow and are outstanding from and after the Closing, subject to cancellation if the applicable price targets are not achieved. While in escrow, the shares will be non-voting.
Holders of FLAG Class A Common Stock who did not redeem their shares obtained their pro rata portion of an additional 85,849 Non-Redeeming Continuation Shares issued at Closing. At the Closing, Calidi Security Holders own approximately 76% of the outstanding shares of New Calidi Common Stock.
See the section below titled “Liquidity and Capital Resources” included herein for additional disclosures.
Components of Operating Results
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research and development activities, including our product candidate discovery efforts, preclinical studies and clinical trials under our research programs, which include:
| ● | personnel and related expenses, including salaries, benefits and stock-based compensation expense for our research and development personnel; | |
| ● | costs of funding research performed by third parties that conduct research and development and preclinical and clinical activities on our behalf; | |
| ● | costs of manufacturing drug product and drug supply related to our current or future product candidates; | |
| ● | costs of conducting preclinical studies and clinical trials of our product candidates; |
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| ● | consulting and professional fees related to research and development activities, including equity-based compensation to non-employees; | |
| ● | costs of maintaining our laboratory, including purchasing laboratory supplies and non-capital equipment used in our preclinical studies; | |
| ● | costs related to compliance with clinical regulatory requirements; | |
| ● | facility costs and other allocated expenses, which include expenses for rent and maintenance of facilities, insurance, depreciation and other supplies; and | |
| ● | fees for maintaining licenses and other amounts due under our third-party licensing agreements. |
Research and development costs are expensed as incurred. Costs for certain activities are recognized based on an evaluation of the progress to completion of specific tasks using data such as information provided to us by our vendors and analyzing the progress of our preclinical and clinical studies or other services performed. Significant judgment and estimates are made in determining the accrued expense balances at the end of any reporting period.
We track external research and development costs on a program-by-program basis beginning, with respect to each program, upon our internal nomination of a candidate in that program for further preclinical and clinical development. External costs include fees paid to consultants, contractors and vendors, including contract manufacturing organizations (“CMOs”), and clinical research organizations (“CROs”), in connection with our preclinical, clinical and manufacturing activities and license milestone payments related to candidate development.
The successful development of our product candidates is highly uncertain. We cannot reasonably estimate or know the nature, timing, and estimated costs of the efforts that will be necessary to complete development of our current or future product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from the sale of our product candidates, if they are approved. This is due to the numerous risks and uncertainties associated with developing product candidates, including the uncertainty of:
| ● | the scope, rate of progress, and expenses of our ongoing research activities as well as any preclinical studies and clinical trials and other research and development activities; | |
| ● | establishing an appropriate safety profile; | |
| ● | successful enrollment in and completion of clinical trials; | |
| ● | whether our product candidates show safety and efficacy in our clinical trials; | |
| ● | receipt of marketing approvals from applicable regulatory authorities; | |
| ● | establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers; | |
| ● | obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates; | |
| ● | commercializing product candidates, if and when approved, whether alone or in collaboration with others; and | |
| ● | continued acceptable safety profile of the products following any regulatory approval. |
A change in the outcome of any of these variables with respect to the development of our current and future product candidates would significantly change the costs and timing associated with the development of those product candidates.
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Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect research and development costs to increase significantly for the foreseeable future as we commence clinical trials and continue the development of our current and future product candidates. However, we do not believe that it is possible at this time to accurately project expenses through commercialization. There are numerous factors associated with the successful commercialization of any of our product candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. Additionally, future commercial and regulatory factors beyond our control will impact our clinical development programs and plans.
General and Administrative Expenses
General and administrative expenses include salaries and other compensation-related costs, including stock-based compensation, for personnel in executive, finance and accounting, business development, operations and administrative roles. Other significant costs include professional service and consulting fees including legal fees relating to intellectual property and corporate matters, accounting fees, recruiting costs and costs for consultants utilized to supplement our personnel, insurance costs, travel costs, facility and office-related costs not included in research and development expenses and depreciation and amortization.
We anticipate that our general and administrative expenses will increase in the future as our business expands to support expected growth in research and development activities, including our future clinical programs. These increases will likely include increased costs related to the hiring of additional personnel and fees to outside service providers, among other expenses. We also anticipate increased expenses associated with being a public company, including costs for audit, legal, regulatory and tax-related services related to compliance with the rules and regulations of the SEC, and listing standards applicable to companies listed on a national securities exchange, director and officer insurance premiums, and investor relations costs. In addition, if we obtain regulatory approval for any of our product candidates and do not enter into a third-party commercialization collaboration, we expect to incur significant expenses related to building a sales and marketing team to support product sales, marketing and distribution activities.
Other Income or Expenses, Net
Other income or expenses, net, primarily includes the changes in fair value of debt instruments, warrants, and derivatives. The changes in the fair value of these instruments are recorded in change in fair value of debt, other liabilities, and derivatives – related party and change in fair value of debt, other liabilities, and derivatives – related party, included as a component of other income or expenses, net, in the unaudited condensed consolidated statements of operations.
At the closing of the FLAG Merger, all convertible instruments outstanding were converted into Calidi Common Stock immediately prior the closing of the FLAG Merger and are no longer outstanding as of the Closing date.
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Interest expense primarily consists of amortization of discounts on convertible and term notes, including from related parties, and other interest expense incurred from financing leases and other obligations.
Other income also includes grant income generated from a grant awarded to us by the California Institute for Regenerative Medicine (“CIRM”) in December 2022. Proceeds from the CIRM grant are recognized over the period necessary to match the related research and development expenses when it is probable that we have complied with the CIRM conditions and will receive the proceeds pursuant to the milestones defined in the grant as reimbursement of those expenditures. Any CIRM grant proceeds received in advance of having incurred the related research and development expenses are recorded in accrued expenses and other current liabilities and recognized as other income on our consolidated statements of operations when the related research and developments expenses are incurred.
Income Taxes
Since inception, we have incurred net operating losses primarily for U.S. federal and state income tax purposes and have not reflected any benefit of such net operating loss carryforwards for any periods presented in this Form 10-Q. The income tax provision in the periods presented is entirely attributable to amounts recorded from StemVac operations, our wholly-owned German subsidiary that provides research and development services to us under a cost-plus development agreement.
Results of Operations
Comparison of Three Months Ended March 31, 2024 and 2023
The following table summarizes our results of operations for the three months ended March 31, 2024 and 2023 (in thousands):
Three Months Ended March 31, | Change | |||||||||||||||
| 2024 | 2023 | $ | % | |||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | $ | (2,743 | ) | $ | (2,622 | ) | $ | (121 | ) | 5 | % | |||||
| General and administrative | (4,009 | ) | (2,792 | ) | (1,217 | ) | 44 | % | ||||||||
| Total operating expenses | (6,752 | ) | (5,414 | ) | (1,338 | ) | 25 | % | ||||||||
| Loss from operations | (6,752 | ) | (5,414 | ) | (1,338 | ) | 25 | % | ||||||||
| Other income (expense), net | ||||||||||||||||
| Total other income (expenses), net | (469 | ) | (1,044 | ) | 575 | (55 | )% | |||||||||
| Loss before income taxes | (7,221 | ) | (6,458 | ) | (763 | ) | 12 | % | ||||||||
| Income tax provision | (4 | ) | (4 | ) | — | 0 | % | |||||||||
| Net loss | $ | (7,225 | ) | $ | (6,462 | ) | $ | (763 | ) | 12 | % | |||||
Research and Development Expenses
Research and development expenses for the three months ended March 31, 2024 and 2023 were $2.7 million and $2.6 million, respectively. The increase of $0.1 million was primarily attributable to an increase in consulting services and regulatory costs of $0.1 million, and an increase in salary and benefits due to higher headcount of $0.1 million, partially offset by a decrease in laboratory spending of $0.1 million.
General and Administrative Expenses
General and administrative expenses for the year ended three months ended March 31, 2024 and 2023 were $4.0 million and $2.8 million, respectively. The increase of $1.2 million was primarily due to increases in legal fees of $0.8 million, insurance costs of $0.4 million, director and consulting costs of $0.2 million, and dues and subscriptions of $0.1 million, partially offset by a decrease in salaries and benefits of $0.3 million.
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Other Income (Expense), Net
Other income (expense), net for the three months ended March 31, 2024 and 2023 were $0.5 million and $1.0 million other expense, respectively. The decrease of $0.5 million primarily relates the decrease in grant income from the CIRM of $0.7 million, and the increase in interest expense and other expenses of $0.1 million, partially offset by the net change in fair value in Simple Agreement for Future Equity (SAFEs), Forward Purchase Agreement Derivative Asset, Private warrants, and Contingently Convertible and Convertible Notes Payable of $1.3 million.
Liquidity and Capital Resources
Sources of Liquidity
Since inception, we have funded our operations primarily through private sales of common stock, convertible preferred stock, contingently convertible and convertible promissory notes, term debt, lines of credit, SAFEs and various loans. These investments have also been made by and included various related parties, including our largest investor and Chief Executive Officer and Chairman of the Board of Directors.
As of March 31, 2024, we had a cash balance of $1.2 million and restricted cash of $0.2 million. Our debt and liability obligations as of March 31, 2024 include $9.6 million in accounts payable and accrued expenses and other current liabilities, $2.5 million in related party term notes payable, $4.5 million in convertible notes payable, $0.7 million in warrant liabilities, $0.6 million in term notes payable, and $0.2 million in related party bridge loans payable.
On April 18, 2024, we closed on a public offering of our securities pursuant to that certain securities purchase agreement dated April 16, 2024 entered into by and among Calidi and certain purchasers. In connection with the public offering we sold an aggregate of 13,232,500 Common Stock Units and 1,965,000 PFW Units at an effective combined purchase price of $0.40 per Common Stock Unit or PFW Unit for aggregate gross proceeds of approximately $6.1 million before deducting placement agent fees and offering expenses payable by Calidi. The securities offered and sold in the public offering were registered pursuant to registration statement on Form S-1, as amended, filed with the SEC and declared effective on April 15, 2024.
Please see Note 12 to our unaudited condensed consolidated financial statements for financing activities and changes in our debt and liability obligations that affected our liquidity subsequent to March 31, 2024.
2024 Bridge Loan
On January 19, 2024, Calidi received approximately $0.2 million in aggregate proceeds from the issuance of certain bridge loans (the “2024 Bridge Loan”), which mature one year from the issuance date and bear simple interest of 12% per annum. As consideration for the 2024 Term Loans, Calidi agreed to issue an aggregate of 8,929 shares of restricted common stock to the Lender.
As of March 31, 2024, the total carrying value of the 2024 Bridge Loan, including accrued interest and net of debt discount, was $0.2 million.
Convertible Promissory Notes
On January 26, 2024, Calidi entered into a convertible promissory note purchase agreement (the “2024 Purchase Agreement”) with an Accredited Investor (the “Investor”) for a loan in the principal amount of $1.0 million (the “2024 Convertible Note Loan”). In connection with the Convertible Note Loan, Calidi issued a one-year convertible promissory note evidencing the aggregate principal amount of $1.0 million under the Loan, which accrues at a 12.0% simple interest rate per annum (the “2024 Convertible Note”).
The 2024 Convertible Note also provides the Investor a voluntary right to convert all, but not less than all, the Principal Amount and accrued interest into shares of the Calidi’s common stock at a conversion rate equal to a 10% discount to the 10-day VWAP as determined immediately before January 26, 2024. In addition, upon such voluntary conversion by the Investor, the Investor will be entitled to a warrant for 50% of the number of shares of Calidi’s common stock issued upon the Note conversion at an exercise equal to 120% of the Conversion Price (the “2024 Note Warrant”). In the event Calidi consummates a public offering prior to the maturity date of the 2024 Convertible Note, the 2024 Convertible Note and accrued interest will be subject to a mandatory conversion into the equity securities of Calidi issued and sold to investors in such public offering, equal to the price per share of the equity security sold to other purchasers and subject to similar terms and conditions of such public offering, except that such equity securities received under a mandatory conversion will be restricted securities.
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As of March 31, 2024, the total carrying value of the Convertible Note, including accrued interest and net of debt discount, was $1.0 million.
Convertible Promissory Notes and Unasserted Claim Settlement
On March 8, 2024, Calidi entered into settlement agreement (“Settlement Agreement”) with an investor who previously enter into a series of related agreements including (i) an agreement with Calidi Cure to fund the purchase of Calidi Series B Preferred Stock; (ii) a Non-Redemption Agreement with Calidi; (iii) an OTC Equity Prepaid Forward Purchase Agreement with Calidi; and (iv) a Subscription Agreement with Calidi (items (i) through (iv) collectively “the Supplemental Funding Agreements”) for the purpose of satisfying the “Minimum Cash Condition” required under the Business Combination agreement between First Light Acquisition Group, Inc., and Calidi Biotherapeutics, Inc., a Nevada corporation among others. Pursuant to the Settlement Agreement, (i) the investor purchased a $2.0 million convertible note from Calidi for cash and (ii) Calidi issued to the investor a $1.5 million convertible note in consideration for the settlement of all claims related to the Supplemental Funding Agreements. The $2.0 million convertible note and $1.5 million convertible note are collectively herein referred to as the “Convertible Notes”. The Convertible Notes bear semiannual interest at 10.0% per annum and each mature on March 8, 2028, unless due earlier due to an event of a default. After the earlier of 180 days or the effective date of a registration statement registering Calidi’s common stock underlying the Convertible Notes, Calidi may prepay the Convertible Notes, including any interest earned thereon, without penalty. The Convertible Notes provide the Investor a right to convert in whole or in part , the Principal Amount (as defined in the Convertible Notes) and accrued interest earned thereon into shares of Calidi’s common stock at an initial note conversion price equal to 94.0% of the 10-day VWAP ending the business day preceding execution of the Convertible Notes, subject to a reset note conversion price equal to 94.0% of 10-day VWAP ending on the thirtieth (30th) day after the effective date of the registration statement registering the common stock underlying the Convertible Notes. In the event Calidi completes a financing (i) of at least $8 million in an offering registered with the SEC; or (ii) of at least $2 million with a non-affiliated purchaser at an effective price of at least 150.0% of the initial note conversion price, then the Convertible Notes will be subject to mandatory conversion at the lower of the initial note conversion price and reset note conversion price.
As of March 31, 2024, the total carrying value of the Convertible Note, including accrued interest and net of debt discount, was $3.4 million.
On April 14, 2024, the $1.5 million convertible note agreement was amended to include a mandatory prepayment of the entire convertible note upon the closing of a public offering of Calidi’s securities registered with the Securities and Exchange Commission in which Holder participates in an amount equal to the principal amount of the convertible note. All other terms and conditions remained substantially unchanged. See Note 12 for further details over subsequent events.
On April 19, 2024, the $1.5 million convertible note was paid in full upon the closing of a public offering by Calidi, in which the Holder participated in an amount equal to the principal amount of the convertible note. As of that date, the convertible note was no longer outstanding. See Note 12 for further details over subsequent events.
Standby Equity Purchase Agreement
On December 10, 2023, we entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, Ltd., a Cayman Island exempt limited partnership (“Yorkville”). Pursuant to the SEPA, we will have the right, but not the obligation, to sell to Yorkville up to $25.0 million of its shares of Common Stock, par value $0.0001 per share, at our request any time during the 36 months following the execution of the SEPA. Subject to certain conditions set forth in the SEPA, including payment of an additional commitment fee, we will have the right to increase the commitment amount under the SEPA by an additional $25.0 million.
Public and Private warrants
In connection with the closing of the FLAG Merger on September 12, 2023, Calidi assumed 11,500,000 public warrants to purchase common stock with an exercise price of $11.50 per share. The Public Warrants became exercisable 30 days after the Closing. Each whole share of the warrant is exercisable for one share of Calidi ‘s common stock. Calidi may redeem the outstanding Public Warrants for $0.01 per warrant, if the reported last sale price of the common stock equals or exceeds $18.00 per share (as adjusted for stock dividends, sub-divisions, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing after the warrants become exercisable and ending on the third trading day before Calidi sends the notice of redemption to the warrant holders. Upon issuance of a redemption notice by Calidi, the warrant holders may, at any time after the redemption notice, exercise the Public Warrants on a cashless basis.
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Calidi further assumed 1,912,514 private warrants to purchase common stock with an exercise price of $11.50 per share. The private warrants in general, will not be transferable, assignable or salable until 30 days after the Closing (excluding permitted transferees) and they will not be redeemable under certain redemption scenarios. Otherwise, the private warrants have terms and provisions that are identical to those of the public warrants, including the exercise price, exercisability and exercise period.
On February 21, 2024, in connection with a settlement agreement, Calidi issued an additional 400,000 private warrants to purchase Restricted Shares which (i) has an exercise price equal to $1.32; and (ii) are exercisable for 5 years after the date of issuance of the warrants, subject to the terms set forth in such warrant.
As of March 31, 2024, all 11,500,000 Public Warrants, 1,912,514 Private Warrants, and 400,000 warrants to purchase Restricted Shares were outstanding, respectively.
2021 Term Notes Payable
As of March 31, 2024 and December 31, 2023, the interest rate of the 2021 Term Notes was 24% and the total carrying value, including accrued interest was approximately $0.6 million.
2022 Term Notes Payable
As of March 31, 2024 and December 31, 2023, the interest rate of the 2022 Term Notes was 24% per annum for a total principal of $0.2 million, and 16% and 15% per annum for a total principal of $0.2 million, respectively. As of March 31, 2024 and December 31, 2023, the total carrying value, including accrued interest, was $0.4 million.
On April 12, 2024, the maturity date of $0.2 million of the 2022 Term Note was extended to January 1, 2025. All other terms and conditions remained substantially unchanged.
2023 Term Notes Payable
As of March 31, 2024 and December 31, 2023, the interest rate of the 2023 Term Notes was 24% per annum for a total principal of $1.1 million and 14% per annum for a total principal of $0.6 million. As of December March 31, 2024 and December 31, 2023, the total carrying value, including accrued interest and net of debt discount, was $2.0 million and $1.9 million, respectively.
On April 12, 2024, the maturity date of $0.3 million of the 2023 Term Note was extended to January 1, 2025. Approximately $0.2 million of the amended 2023 Term Note will accrue interest at 18% per annum commencing on April 12, 2024, while the interest rate of the other $0.1 million of the amended 2023 Term Note will remain unchanged. All other terms and conditions remained substantially unchanged.
Commitments and Contingencies
On October 10, 2022, Calidi entered into an Office Lease Agreement (the “San Diego Lease”) that will serve as Calidi’s new principal executive and administrative offices and laboratory facility. To secure and execute the San Diego Lease, Mr. Allan Camaisa provided a personal Guaranty of Lease of up to $0.9 million (the “Guaranty”) to the lessor for Calidi’s future performance under the San Diego Lease agreement. As consideration for the Guaranty, Calidi agreed to pay Mr. Camaisa 10% of the Guaranty amount for the first year of the San Diego Lease, and 5% per annum of the Guaranty amount thereafter through the life of the lease, with all amounts accrued and payable at the termination of the San Diego Lease or release of Mr. Camaisa from the Guaranty by the lessor, whichever occurs first. The San Diego Lease has an initial term of 4 years.
We further entered into separate license agreements with Northwestern University and City of Hope and the University of Chicago, wherein Calidi may be liable to make certain contingent payments pursuant to the terms and conditions of the license agreements. As of March 31, 2024, we do not believe it probable that we will make these payments.
Other commitments and contingencies include (i) various operating and financing leases for equipment, office facilities, and other property containing future minimum lease payments totaling $4.9 million, (ii) certain manufacturing and other supplier agreements with vendors principally for manufacturing drug products for clinical trials and continuing the development of the CLD-101 and CLD-201 programs totaling $0.4 million, (iii) litigation costs of $0.2 million, and (iv) severance costs due on June 23, 2024 totaling $0.5 million. In accordance with the provisions of the Separation Agreement, the severance costs of $0.5 million will accrue interest at the rate of 8.0% per annum in the event that this amount is not paid when due, and the principal plus accrued interest shall be paid no later than two years after the effective date of the severance agreement.
Forward Purchase Agreement
On August 28, 2023, and August 29, 2023, FLAG and Calidi entered into forward purchase agreements (each a “Forward Purchase Agreement”, and together, the “Forward Purchase Agreement”) with each of Meteora Strategic Capital, LLC, Meteora Capital Partners, LP, Meteora Select Trading Opportunities Master, LP, Great Point Capital LLC, Funicular Funds, LP and Marybeth Wootton (with each individually a “Seller”, and together, the “Sellers”) for an OTC Equity Prepaid Forward Transaction.
On March 8, 2024, Calidi and one of the sellers mutually terminated and cancelled 340,000 shares per the Forward Purchase Agreement described above.
Please see Note 2 to our unaudited condensed consolidated financial statements for additional details.
Related Party Transactions
Please see Note 6 to our unaudited condensed consolidated financial statements for more information on our related party transactions.
Financing Transactions Subsequent to March 31, 2024
Extension of Term Notes
On April 12, 2024, the maturity date of $0.2 million of the 2022 Term Note was extended to January 1, 2025. All other terms and conditions remained substantially unchanged.
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On April 12, 2024, the maturity date of $0.3 million of the 2023 Term Note was extended to January 1, 2025. Approximately $0.2 million of the amended 2023 Term Note will accrue interest at 18% per annum commencing on April 12, 2024, while the interest rate of the other $0.1 million of the amended 2023 Term Note will remain unchanged. All other terms and conditions remained substantially unchanged.
Repayment of Convertible Promissory Note
On April 14, 2024, the $1.5 million convertible note agreement was amended to include a mandatory prepayment of the entire convertible note upon the closing of a public offering of Calidi’s securities registered with the Securities and Exchange Commission in which Holder participates in an amount equal to the principal amount of the convertible note. All other terms and conditions remained substantially unchanged.
On April 19, 2024, we paid the $1.5 million convertible note in full upon the closing of a public offering by Calidi, in which the Holder participated in an amount equal to the principal amount of the convertible note. As of that date, the convertible note was no longer outstanding.
April Public Offering
On April 18, 2024, we closed on a public offering of our securities pursuant to that certain securities purchase agreement dated April 16, 2024 entered into by and among Calidi and certain purchasers. In connection with the public offering we sold an aggregate of 13,232,500 Common Stock Units and 1,965,000 PFW Units at an effective combined purchase price of $0.40 per Common Stock Unit or PFW Unit for aggregate gross proceeds of approximately $6.1 million before deducting placement agent fees and offering expenses payable by Calidi. The securities offered and sold in the public offering were registered pursuant to registration statement on Form S-1, as amended, filed with the SEC and declared effective on April 15, 2024.
Reverse Stock Split
Pursuant to the April Purchase Agreement, we agreed to hold an annual or special meeting of stockholders on or prior to the seventy-fifth (75th) calendar day following April 18, 2024 for the purpose of obtaining approval as may be required by the applicable rules and regulations of the NYSE American (or any successor entity) from the shareholders of Calidi to consummate a reverse stock split of Calidi’s Common Stock (“Stockholder Approval”), with the recommendation of the Calidi’s Board of Directors that such proposal is approved, and Calidi shall solicit proxies from its stockholders in connection therewith in the same manner as all other management proposals in such proxy statement and all management-appointed proxyholders shall vote their proxies in favor of such proposal. If Calidi does not obtain Stockholder Approval at the first meeting, Calidi will be required to call a meeting within every forty-five (45) day period thereafter to seek Stockholder Approval until the earlier of the date on which Shareholder Approval is obtained or the Pre-Funded Warrants or the Series A Common Warrants, Series B Common Warrants, Series B-1 Common Warrants, Series C Common Warrants and Series C-1 Common Warrants (collectively “Common Warrants”) are no longer outstanding. The Board has set the record date of April 26, 2024 for the special meeting to be held on June 6, 2024 (the “Special Meeting”). The Special Meeting will held for purposes of seeking stockholder approval for an amendment to our Second Amended and Restated Certificate of Incorporation, at the discretion of the Board of Directors of Calidi (the “Board”),to effect a reverse stock split with respect to Calidi’s issued and outstanding Voting Common Stock and Non-Voting Common Stock, at a ratio between 1-for-10 and 1-for-50 (the “Range”), with the ratio within such Range to be determined at the discretion of the Board (the “Reverse Stock Split Proposal”), and approval on other matters relating to potential issuances of securities of over 20% of the issued and outstanding shares of Voting Common Stock in compliance with NYSE American Rule 713(a), as more fully described in the preliminary proxy statement on Schedule 14A filed with the SEC on April 29, 2024.
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Cash Flow Summary for the three months ended March 31, 2024 and 2023
The following table shows a summary of our cash flows for the three months ended March 31, 2024 and 2023 (in thousands):
Three Months Ended March 31, | Change | |||||||||||||||
| 2024 | 2023 | $ | % | |||||||||||||
| Net cash (used in) provided by: | ||||||||||||||||
| Operating activities | $ | (3,831 | ) | $ | (3,107 | ) | $ | (724 | ) | 23 | % | |||||
| Investing activities | (5 | ) | (137 | ) | 132 | (96 | )% | |||||||||
| Financing activities | 3,013 | 3,791 | (778 | ) | (201 | )% | ||||||||||
| Effect of exchange rate on cash | 17 | — | 17 | n/a | ||||||||||||
| Net increase (decrease) in cash and restricted cash | $ | (806 | ) | $ | 547 | $ | (1,353 | ) | (247 | )% | ||||||
Operating activities
Net cash used in operating activities was $3.8 million for the three months ended March 31, 2024, primarily resulting from our net loss of $7.2 million. Our net loss was reduced by certain non-cash items that included $1.9 million from the change in our operating assets and liabilities, $0.9 million in stock-based compensation, $0.3 million in amortization of right of use assets, $0.2 million in change in fair value of debt, other liabilities and derivatives, and $0.1 million in depreciation expense.
Net cash used in operating activities was $3.1 million for the three months ended March 31, 2023, primarily resulting from our net loss of $6.5 million. Our net loss was reduced by certain non-cash items that included $1.5 million from the change in fair value of debt and other liabilities, $1.4 million in stock-based compensation, $0.2 million in amortization of debt discount and financing costs, $0.1 million in amortization of right of use assets, and $0.1 million in depreciation expense.
Investing activities
Net cash used in investing activities was $5,000 for the three months ended March 31, 2024, which primarily related to the purchase of certain machinery and equipment.
Net cash used in investing activities was $0.1 million for the three months ended March 31, 2023, which primarily related to the purchase of machinery and equipment.
Financing activities
Net cash provided by financing activities was $3.0 million for the three months ended March 31, 2024, which primarily related to proceeds from issuance of convertible notes payable of $3.0 million, and related party proceeds from issuance of a bridge loan payable of $0.2 million, partially offset by payment of financing costs of $0.2 million.
Net cash provided by financing activities was $3.8 million for the three months ended March 31, 2023, which primarily related to proceeds from issuance of term notes payable of $2.5 million, which included $1.6 million from related parties, proceeds from Simple Agreement for Future Equity (SAFEs) of $1.4 million, partially offset by repayment of financing lease obligations and payment of deferred financing costs of $0.1 million.
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Funding Requirements
We expect our expenses to increase in connection with our ongoing activities, particularly as we continue our research and development, initiate clinical trials, and seek marketing approval for our current and any of our future product candidates. In addition, if we obtain marketing approval for any of our current or our future product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution, which costs we may seek to offset through entry into collaboration agreements with third parties. Furthermore, we expect to continue to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on acceptable terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.
Based on our current operating plan, available cash and additional access to capital discussed above under the “Liquidity and Capital Resources” section, we believe we do not have sufficient cash on hand to support current operations for at least one year from the date of issuance of the unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2024 appearing elsewhere in this Form 10-Q. Based on our existing cash and cash equivalents as of May 10, 2024, we believe we have insufficient cash to continue operations through June, 2024, unless we raise additional short-term capital. To finance our operations, we will need to raise substantial additional capital, which cannot be assured. We have concluded that this circumstance raises substantial doubt about our ability to continue as a going concern for at least one year from the date that our aforementioned unaudited condensed consolidated financial statements were issued. See Note 1 to our unaudited condensed consolidated financial statements appearing elsewhere in this Form 10-Q for additional information on our assessment.
Our future capital requirements will depend on a number of factors, including:
| ● | the costs of conducting preclinical studies and clinical trials; | |
| ● | the costs of manufacturing; | |
| ● | the scope, progress, results and costs of discovery, preclinical and clinical development, laboratory testing, and clinical trials for product candidates we may develop, if any; | |
| ● | the costs, timing, and outcome of regulatory review of our product candidates; | |
| ● | our ability to establish and maintain collaborations on favorable terms, if at all; | |
| ● | the achievement of milestones or occurrence of other developments that trigger payments under any license or collaboration agreements we might have at such time; | |
| ● | the costs and timing of future commercialization activities, including product sales, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing approval; | |
| ● | the amount of revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval; | |
| ● | the costs of preparing, filing and prosecuting patent applications, obtaining, maintaining and enforcing our intellectual property rights, and defending intellectual property-related claims; | |
| ● | our headcount growth and associated costs as we expand our business operations and research and development activities; | |
| ● | the continuing impacts of the recent COVID-19 pandemic and geopolitical conflicts; and | |
| ● | the costs of operating as a public company. |
Our existing cash will not be sufficient to complete development of CLD-101 and CLD-201. Accordingly, we will be required to obtain further funding to achieve our business objectives.
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Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of public or private equity offerings and debt financings or other sources, such as potential collaboration agreements, strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interests may be diluted, and the terms of these securities may include liquidation or other preferences that could adversely affect your rights as a common stockholder. Additional debt financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely impact our ability to conduct our business. If we raise funds through potential collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Critical Accounting Estimates
The discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. The preparation of our condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. We review our estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.
Our significant accounting policies and estimates are described in Note 2 to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. The accounting estimates that are most critical to a full understanding and evaluation of our reported financial results are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. There were no material changes to our critical accounting estimates during the three months ended March 31, 2024.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules.
We enter into agreements in the normal course of business with vendors for preclinical and clinical studies, preclinical and clinical supply and manufacturing services, professional consultants for expert advice, and other vendors for other services for operating purposes. These contracts do not contain any minimum purchase commitments and are cancelable at any time by us, generally upon 30 days prior written notice, and therefore we believe that our non-cancelable obligations under these agreements are not material.
In addition, we have entered into license and royalty agreements for intellectual property with certain parties. Such arrangements require ongoing payments, including payments upon achieving certain development, regulatory and commercial milestones, receipt of sublicense income, as well as royalties on commercial sales. Payments under these arrangements are expensed as incurred and are recorded as research and development expenses. We paid amounts under such agreements at the time of execution and pay annual fees. We have not paid any royalties under these agreements to date. We have not included the annual license fee payments contractual obligations because the license agreements are cancelable by us and therefore, we believe that our non-cancelable obligations under these agreements are not material. We have not included potential royalties or milestone obligations because they are contingent upon the occurrence of future events and the timing and likelihood of such potential obligations are not known with certainty. For further information regarding these agreements and amounts that could become payable in the future under these agreements, please see the section entitled “Business — License Agreements” within our prospectus, dated October 6, 2023, filed with the SEC.
Quantitative and Qualitative Disclosures about Market Risk
We are not currently exposed to significant market risk related to changes in interest rates because we do not have any cash equivalents or interest-bearing investments at this time. Our debt typically contains a fixed interest rate or is issued to certain lenders, including related party lenders, with other equity instruments, such as warrants, in lieu of a stated cash interest rate. However, for debt that we have issued that is variable and fluctuates with changes in interest rates, an immediate one percentage point change in market interest rates would not have a material impact on our financial position or results of operations.
We are not currently exposed to significant market risk related to changes in foreign currency exchange rates; however, we have employees and are contracted with and may continue to contract with foreign vendors that are located in Europe, particularly in Germany, where we operate through our wholly-owned subsidiary, StemVac GmbH. In October 2022, we also formed Calidi Biotherapeutics Australia Pty Ltd, a wholly-owned subsidiary in Australia, for purposes of operating in that country for a portion of our planned clinical trial activities for our SNV1 program. Our operations may be subject to fluctuations in foreign currency exchange rates in the future.
Inflation generally affects us by increasing our cost of labor. We do not believe that inflation had a material effect on our business, financial condition or results of operations during the three months ended March 31, 2024 and 2023.
Emerging Growth Company and Smaller Reporting Company Status
We are an “emerging growth company,” (“EGC”), under the Jumpstart Our Business Startups Act of 2012, (the “JOBS Act”). Section 107 of the JOBS Act provides that an EGC can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Thus, an EGC can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of the delayed adoption of new or revised accounting standards and, therefore, we will be subject to the same requirements to adopt new or revised accounting standards as private entities.
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As an EGC, we may also take advantage of certain exemptions and reduced reporting requirements under the JOBS Act. Subject to certain conditions, as an EGC:
| ● | we are presenting only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations; | |
| ● | we will avail ourselves of the exemption from providing an auditor’s attestation report on our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; | |
| ● | we will avail ourselves of the exemption from complying with any requirement that may be adopted by the Public Company Accounting Oversight Board (“PCAOB”), regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis; | |
| ● | we are providing reduced disclosure about our executive compensation arrangements; and | |
| ● | we will not require nonbinding advisory votes on executive compensation or stockholder approval of any golden parachute payments. |
We will remain an EGC until the earliest of (i) December 31, 2026, (ii) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more, (iii) the date on which we have issued more than $1 billion in non-convertible debt during the previous rolling three-year period, or (iv) the date on which we are deemed to be a large accelerated filer under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”).
We are also a “smaller reporting company,” and may continue to be a smaller reporting company after this offering if either (i) the market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million.
If we are a smaller reporting company at the time we cease to be an EGC, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to EGCs, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
Recent Accounting Pronouncements
Other than as disclosed in Note 2 to our unaudited condensed consolidated financial statements appearing elsewhere in this Form 10-Q, we do not expect that any recently issued accounting standards will have a material impact on our financial statements or will otherwise apply to our operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
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ITEM 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under 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 by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives. Our disclosure controls and procedures have been designed to provide reasonable assurance of achieving their objectives.
Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2024.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the quarter ended March 31, 2024 that materially affected, or were reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
Legal proceedings
We are subject to litigation and contingencies in the ordinary course of its business, including those related to its business, business transactions, employee-related matters, and other matters. See Item 3-Legal Proceedings to our Form 10-K for the year ended December 31, 2023. Other than the matters discussed below, we are not currently party to any other material legal proceedings that occurred during the first quarter ended March 31, 2024.
Former Chief Accounting Officer and Interim Chief Financial Officer
On May 1, 2024, Tony Kalajian, the Company’s prior chief accounting officer and interim chief financial officer, filed a complaint in the Superior Court of the State of California, County of San Diego against the Company alleging intentional conversion and violation of Section 158 of the Delaware General Corporations Code due to the Company’s failure to remove a restrictive legend from 139,423 shares of the Company’s Common Stock. Mr. Kalajian is seeking compensatory damages to be proven at trial, punitive damages and attorney’s fees, and an order requiring removal of the restrictive legend from his share certificates. The Company intends to vigorously defend itself.
Item 1A. Risk Factors
Investing in our common stock is highly speculative and involves risks. You should carefully consider the additional risk factors below as well as the risk factors described in Part I, Item 1A, “Risk Factors” in our Form 10-K and any updates to those risk factors or new risk factors contained in any registration statements that we filed or file with the SEC. Certain factors may have a material adverse effect on our business, financial condition, and results of operations. You should carefully consider the following risks, together with all of the other information contained in this report and Form 10-K, in the sections titled “Cautionary Note Regarding Forward-Looking Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q. Any of the following risks could have an adverse effect on our business, financial condition, operating results, or prospects and could cause the trading price of our common stock to decline, which would cause you to lose all or part of your investment. Our business, financial condition, operating results, or prospects could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material.
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We have insufficient cash to continue our operations for the next 12 months and our continued operations are dependent on us raising capital and these conditions give rise to substantial doubt over the Company’s ability to continue as a going concern.
As of March 31, 2024, we had approximately $1.2 million in cash and restricted cash of $0.2 million, an accumulated deficit of approximately $106.8 million, and a working capital deficit of approximately $13.0 million. We believe that our existing cash and cash equivalents as of March 31, 2024, and our anticipated expenditures and commitments for the next twelve months, will not enable us to fund our operating expenses and capital expenditure requirements for the twelve months from March 31, 2024. Based on our existing cash and cash equivalents as of May 10, 2024, we believe we have insufficient cash to continue operations through June, 2024, unless we raise additional short-term capital. These conditions give rise to substantial doubt over the Company’s ability to continue as a going concern. We will need to raise additional capital to support our operations and execute our business plan. We will be required to pursue sources of additional capital through various means, including debt or equity financings. Newly issued securities may include preferences, superior voting rights, and the issuance of warrants or other convertible securities that will have additional dilutive effects. Further, the sale of or the perception of the sale of a substantial number of our common stock by selling securityholders pursuant to a registration statement filed with the SEC will adversely affect the price of our common stock due to our limited trading volume. In addition, the sale of a substantial number of our common stock by such selling securityholders will adversely affect the share price that we may obtain in future financings and may adversely affect our ability to conduct and complete future financings. We cannot assure that additional funds will be available when needed from any source or, if available, will be available on terms that are acceptable to us and may cause existing shareholders both book value and ownership dilution. Further, we may incur substantial costs in pursuing future capital and/or financing, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which will adversely impact our financial condition and results of operations. Our ability to obtain needed financing may be impaired by such factors as the weakness of capital markets, and the fact that we have not been profitable, which could impact the availability and cost of future financings. If the amount of capital we are able to raise from financing activities is not sufficient to satisfy our capital needs, we may have to reduce our operations accordingly.
Sales and issuances of our common stock or other securities would result in dilution of the percentage ownership of our stockholder and could cause our share price to fall.
If we sell additional shares of our common stock, convertible securities or other equity securities, existing stockholders may be materially diluted by subsequent sales and new investors could gain rights, preferences, and privileges senior to existing holders of our common stock. In addition, the resale, or perceived potential resale, of a substantial number of shares of our common stock in the public market could adversely affect the market price for our common stock We will need to raise capital in order to fund our business objectives. In addition, pursuant to our obligations under certain registration rights agreements, we have (1) registered on another registration statement filed with the SEC 20,393,816 shares of common stock, 1,912,154 warrants to purchase our common stock, and 1,912,154 shares of common stock issuable upon exercise of the private warrants; (2) agreed to also register on another registration statement shares of common stock issuable upon conversion of two outstanding convertible promissory notes issued on March 8, 2024 for the principal amount of $1.5 million and $2.0 million (“$2 Million Note”), respectively issued on pursuant to a Settlement Agreement and Release of All Claims Agreement dated on March 8, 2024; (3) agreed to register 200,000 shares of our common stock and 400,000 shares of common stock underlying warrants in connection with a settlement agreement with certain physicians related to stock options; and (4) registered a number of common stock underlying certain Series A, B and C warrants issued in connection with our public offering that closed on April 18, 2024.
Until such time that it is no longer effective, the registration statement registering such securities will permit the resale of these shares. In addition, securityholders may also sell their shares pursuant to an exemption available under the securities laws. The sale of new securities or the resale, or perceived potential resale, of a substantial number of shares of our common stock in the public market could adversely affect the market price for our common stock and make it more difficult for other shareholders to sell their holdings at times and prices that they determine are appropriate.
Certain of our outstanding securities are subject to mandatory conversion and/or exercise price reset. Our stockholders are subject to significant dilution upon the occurrence of certain events which could result in a decrease in our stock price.
As of May 3, 2024 we had approximately 114.7 million shares of our common stock reserved or designated for future issuance upon the exercise of outstanding options and warrants, and conversion of outstanding convertible debt. Included in the shares of common stock designated for future issuance discussed above are approximately 78.0 million shares issuable under the Common Warrants at a current exercise price of $0.60, and 12.8 million shares issuable under warrants to be issued in connection with a mandatory conversion of $1.0 million note (“Conversion Note”), that are subject reset of exercise price. The exercise price of the Common Warrants and the Conversion Warrants is subject to adjustment upon the effectiveness of a reverse stock split. Upon a reverse stock split, the exercise price shall be reduced, and only reduced, to the lesser of (i) the then exercise price and (ii) 90% of the lowest VWAP for the reset exercise price. In addition, the $2 Million Note also provide the investor a right to convert the note into shares of our common stock at an initial note conversion price equal to 94% of the 10-day VWAP ending the business day preceding execution of the Convertible Notes subject to a reset note conversion price equal to 94% of 10-day VWAP ending one hundred eighty (180) days after the issuance date.
In the event of future price resets, the number of shares of our common stock that are subject to such warrants and notes will increase so that the aggregate purchase price payable applicable to the exercise of the warrants after the reset of the exercise price is the same as the aggregate purchase price payable immediately prior to the reset. Any future resets to the exercise price of the Common Warrants, Conversion Warrants and $2 Million Note will have a further dilutive effect on our existing stockholders and could result in a decrease in our stock price. In addition, future sales of substantial amounts of our common stock into the public and the issuance of the shares reserved for future issuance, in payment of our term debt, and/or in exchange for outstanding warrants will be dilutive to our existing stockholders and could result in a decrease in our stock price.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities
Consulting Agreement
Effective February 24, 2024, we entered into a consulting agreement whereby the consultant agreed to provide us marketing and distribution services to communicate information us. As compensation, we issued 50,000 shares of common stock to the consultant on March 25, 2024, and agreed to issue an additional 50,000 shares of common stock 6 months from the effective date of the consulting agreement.
The securities described above were issued in reliance upon an exemption from registration pursuant to Section 4(a)(2) of the Securities Act or Rule 506 of Regulation D promulgated under the Securities Act. Each investor acquired such securities for investment purposes without a view to distribution and had access to information concerning us and our business prospects, as required by the Securities Act. In addition, there was no general solicitation or advertising for the purchase of our securities. Our securities were sold only to accredited investors, as defined in the Securities Act with whom we had a direct personal preexisting relationship, and after a thorough discussion. Each certificate contained a restrictive legend as required by the Securities Act. Finally, our stock transfer agent has been instructed not to transfer any of such securities, unless such securities are registered for resale or there is an exemption with respect to their transfer.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
| 56 |
Item 6. Exhibits.
EXHIBIT INDEX
| * | Filed herewith |
| ** | Furnished herewith. |
| 57 |
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.
| Calidi Biotherapeutics, Inc. | ||
| Date: May 14, 2024 | By: | /s/ Allan Camaisa |
| Name: | Allan Camaisa | |
| Title: |
Chairman and Chief Executive Officer (Principal Executive Officer) | |
| Date: May 14, 2024 | By: | /s/ Andrew Jackson |
| Name: | Andrew Jackson | |
| Title: |
Chief Financial Officer (Principal Financial and Accounting Officer) | |
| 58 |
Exhibit 31.1
CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Allan J. Camaisa, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Calidi Biotherapeutics, Inc. (the “Registrant”). |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
| 4. | The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and |
| d. | Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
| 5. | The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
Date: May 14, 2024
| By: | /s/ Allan J. Camaisa | |
| Name: | Allan J. Camaisa | |
| Title: | Chief
Executive Officer (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATIONS OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Andrew Jackson, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Biotherapeutics, Inc. (the “Registrant”). |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
| 4. | The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and |
| d. | Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
| 5. | The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
Date: May 14, 2024
| By: | /s/ Andrew Jackson | |
| Name: | Andrew Jackson | |
| Title: | Chief
Financial Officer (Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Calidi Biotherapeutics, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. |
Date: May 14, 2024
| By: | /s/ Allan J. Camaisa | |
| Name: | Allan J. Camaisa | |
| Title: | Chief
Executive Officer (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Calidi Biotherapeutics, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. |
Date: May 14, 2024
| By: | /s/ Andrew Jackson | |
| Name: | Andrew Jackson | |
| Title: | Chief
Financial Officer (Principal Financial Officer) |