Calidi Biotherapeutics, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Unaudited results are in U.S. dollars; financial statement amounts below are in millions unless noted. The FLAG business combination closed September 12, 2023 and was accounted for as a reverse recapitalization, with Calidi as the accounting acquirer. Accordingly, 2023 results include FLAG only from closing; historical periods reflect Calidi alone.
Business context
Calidi is a clinical-stage immuno-oncology company developing stem-cell delivery platforms for oncolytic viruses. Its lead programs include CLD-101 for high-grade glioma and CLD-201 for advanced solid tumors. The company has no approved products and has not generated product-sales revenue.
Financial performance and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0.045 |
| Research and development expense | $3.251 | $1.945 | $9.050 | $4.994 |
| General and administrative expense | $3.970 | $5.041 | $10.122 | $13.477 |
| Operating loss | $(7.221) | $(6.986) | $(19.172) | $(18.440) |
| Net loss | $(2.024) | $(5.355) | $(20.987) | $(17.671) |
| Basic and diluted loss per share | $(0.14) | $(0.63) | $(1.98) | $(2.08) |
- Q3 net loss improved year over year, despite higher R&D spending, primarily due to other income that included fair-value changes and grant income. The quarter included $5.208 million of net other income, including $4.473 million from changes in fair value of related-party debt and other liabilities. These items can be noncash and volatile.
- Nine-month net loss increased by $3.316 million year over year. Higher R&D expense was partly offset by lower G&A, including reduced legal-settlement and transaction costs. Nine-month other expense included $2.680 million of Series B financing costs and higher interest expense, partly offset by $2.273 million of CIRM grant income.
- Margins are not meaningful given negligible service revenue and no product sales.
- At September 30, cash was $10.147 million; cash and restricted cash totaled $10.365 million. Current assets were $11.687 million and current liabilities $10.873 million. Accumulated deficit was $91.343 million.
- Nine-month operating cash use was $21.797 million; investing cash use was $0.443 million; financing provided $32.002 million. Cash and restricted cash increased $9.775 million over the period.
- Reported debt carrying value was $5.299 million, including $1.000 million of bank loans and $4.280 million of term notes, net of discount and including accrued interest; the company also reported $2.951 million of warrant liabilities. Debt maturities included $2.250 million in October–December 2023 and $0.750 million in 2024. Subsequent to quarter-end, the company disclosed cash repayments of the $1.0 million line of credit and certain term notes.
Material changes and transactions
- The September 2023 business combination substantially changed the capital structure. At closing, preferred stock, SAFEs and specified convertible notes converted to common stock; common shares outstanding were 35,436,381 at September 30. Calidi stockholders held approximately 76% of the combined company at closing.
- Despite the transaction, redemptions and payments under forward-purchase and non-redemption arrangements reduced cash reaching Calidi. The filing reports approximately $28.2 million paid for redeemed FLAG shares and approximately $12.5 million paid to forward-purchase/non-redemption sellers; Calidi received approximately $1.8 million from non-redemption agreements and $0.7 million from remaining trust funds.
- R&D expense rose 67% in Q3 and 81% for the nine-month period, reflecting increased laboratory and clinical/preclinical activity, staffing and San Diego facility costs. G&A fell 21% in Q3 and 25% for nine months, largely due to lower prior-period transaction and legal-settlement expenses.
- The Forward Purchase Agreement derivative asset was valued at $1.290 million at quarter-end, down from $4.520 million at closing, primarily reflecting the lower share price. The filing cautions that proceeds from sellers are not assured.
- As of September 30, the company had 13.412 million warrants outstanding, generally exercisable at $11.50 per share, and 9.663 million stock options outstanding. Up to 18 million additional earnout shares may be released if specified share-price targets are met.
Outlook, risks and contingencies
- Management states that existing liquidity is insufficient to fund operations for at least 12 months from issuance of the financial statements and concludes that substantial doubt exists about the company’s ability to continue as a going concern. Continued operations depend on obtaining additional funding.
- An equity line of credit of up to $50 million was under negotiation, but no agreement had been reached as of issuance; access to funds is uncertain. Management may pursue equity, debt, collaborations or licensing, each with potential dilution, restrictive terms or rights concessions.
- Management anticipated starting a CLD-101 Phase 1b/2 trial in the first half of 2024 and a CLD-201 Phase 1 trial in the second half of 2024. These are plans, not assured outcomes. The company expects losses and cash outflows to continue and R&D costs to rise.
- Key risks include clinical and regulatory failure, manufacturing and funding needs, market volatility and possible NYSE American delisting. The company also cites economic, supply-chain and geopolitical uncertainties.
- A physician-options lawsuit remains pending. Calidi accrued $0.2 million, which it considers probable and estimable; it describes a reasonably possible settlement-loss range of approximately $0.2 million to $4.9 million and cannot estimate potential litigation costs or timing.
- Manufacturing and supplier commitments totaled approximately $6.6 million, with about $5.1 million incurred by September 30. Other obligations include lease payments, $0.5 million of deferred severance payable in June 2024, and contingent license milestones and royalties whose payment is not considered probable at present.
- The San Diego office lease has a four-year initial term and approximately $4.293 million of operating-lease liabilities at quarter-end. Certain related-party financing arrangements and lease-guaranty payments warrant attention.
Most important facts for investors to verify
- Whether Calidi secured the proposed equity line or other financing, and the resulting dilution, cash proceeds and runway.
- Post-quarter cash balances and repayments of the line of credit and term notes, including remaining maturities, interest rates and related-party terms.
- Actual trial-start timing, enrollment and development progress for CLD-101 and CLD-201, and the funding needed to advance them.
- Whether the Forward Purchase Agreement generates cash for Calidi; its value is uncertain and the reported derivative asset declined materially after closing.
- Potential dilution from warrants, options, earnout shares and future capital raises, alongside the actual share count and warrant terms.
- Developments in the physician litigation, supplier commitments and other contractual obligations, and whether the going-concern uncertainty has been resolved.