thmo20240331

thmo20240331_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2024

☐	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition from to .

Commission File Number: 333-82900

ThermoGenesis Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware

(State of incorporation)

94-3018487

(I.R.S. Employer Identification No.)

2711 Citrus Road

Rancho Cordova, California 95742

(Address of principal executive offices) (Zip Code)

(916) 858-5100

(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
Common Stock, $.001 par value		THMO		Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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 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 ☐	Non-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 ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at May 13, 2024
Common stock, $.001 par value		7,952,780

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ThermoGenesis Holdings, Inc.

INDEX

		Page Number
PART I	FINANCIAL INFORMATION

ITEM 1.	Financial Statements	1

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	18

ITEM 4.	Controls and Procedures	18

PART II	OTHER INFORMATION

ITEM 1.	Legal Proceedings	20
ITEM 1A.	Risk Factors	20
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20
ITEM 3.	Defaults upon Senior Securities	20
ITEM 4.	Mine Safety Disclosure	20
ITEM 5.	Other Information	20
ITEM 6.	Exhibits	21

Signatures		22

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ThermoGenesis Holdings, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

	March 31, 2024			December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	1,176,000		$	2,000,000
Accounts receivable, net of allowance for credit losses of $4,000 ($4,000 at December 31, 2023)		1,149,000			949,000
Inventories		1,246,000			1,406,000
Prepaid expenses and other current assets		780,000			825,000
Total current assets		4,351,000			5,180,000

Equipment and leasehold improvements, net		2,474,000			2,586,000
Right-of-use operating lease assets, net		50,000			122,000
Right-of-use operating lease assets – related party, net		2,956,000			3,088,000
Other assets		256,000			256,000
Total assets	$	10,087,000		$	11,232,000

LIABILITIES AND STOCKHOLDERS’ EQUITY / (DEFICIT)
Current liabilities:
Accounts payable	$	988,000		$	948,000
Accrued payroll and related expenses		398,000			376,000
Deferred revenue – short-term		921,000			670,000
Convertible promissory note – related party		4,206,000			7,278,000
Interest payable – related party		424,000			634,000
Convertible promissory note, net		-			378,000
Other current liabilities		1,367,000			1,478,000
Total current liabilities		8,304,000			11,762,000

Operating lease obligations – related party – long-term		2,720,000			2,900,000
Deferred revenue – long-term		122,000			127,000
Other noncurrent liabilities		28,000			27,000
Total liabilities		11,174,000			14,816,000

Commitments and contingencies

Stockholders’ equity:
Preferred stock, $0.001 par value; 2,000,000 shares authorized, none outstanding		-			-
Common stock, $0.001 par value; 350,000,000 shares authorized; 7,952,780 issued and outstanding (3,617,886 at December 31, 2023)		8,000			4,000
Additional paid in capital		286,877,000			282,383,000
Accumulated deficit		(286,024,000	)		(284,168,000	)
Accumulated other comprehensive loss		114,000			114,000
Total ThermoGenesis Holdings, Inc. stockholders’ equity / (deficit)		975,000			(1,667,000	)

Noncontrolling interests		(2,062,000	)		(1,917,000	)
Total equity / (deficit)		(1,087,000	)		(3,584,000	)
Total liabilities and equity	$	10,087,000		$	11,232,000

See accompanying notes to the condensed consolidated financial statements.

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ThermoGenesis Holdings, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

	Three Months Ended March 31,
	2024			2023

Net revenues	$	2,737,000		$	2,572,000
Cost of revenues		1,535,000			1,467,000

Gross profit		1,202,000			1,105,000

Expenses:

Selling, general and administrative		1,548,000			1,844,000
Research and development		211,000			306,000

Total operating expenses		1,759,000			2,150,000

Loss from operations		(557,000	)		(1,045,000	)

Other income (expenses):
Interest expense		(1,452,000	)		(3,903,000	)
Loss on retirement of debt		-			(239,000	)
Other income (expenses)		8,000			5,000
Total other expenses		(1,444,000	)		(4,137,000	)

Net loss	$	(2,001,000	)		(5,182,000	)

Loss attributable to noncontrolling interests		(145,000	)		(96,000	)
Net loss attributable to common stockholders	$	(1,856,000	)	$	(5,086,000	)

COMPREHENSIVE LOSS
Net loss	$	(2,001,000	)	$	(5,182,000	)
Other comprehensive loss:
Foreign currency translation adjustments gain (loss)		-			(6,000	)
Comprehensive loss		(2,001,000	)		(5,188,000	)
Comprehensive loss attributable to non-controlling interests		(145,000	)		(96,000	)
Comprehensive loss attributable to common stockholders		(1,856,000	)	$	(5,092,000	)

Per share data:

Basic and diluted net loss per common share	$	(0.46	)	$	(4.07	)
Weighted average common shares outstanding basic and diluted		4,025,787			1,249,576

See accompanying notes to the condensed consolidated financial statements.

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ThermoGenesis Holdings, Inc.

Condensed Consolidated Statements of Equity / (Deficit)

For the Three Months Ended March 31, 2024 and 2023

(Unaudited)

	Shares		Common Stock		Paid in Capital in Excess of Par		Accumulated Deficit			AOCL*		Non- Controlling Interests			Total Equity
Balance at January 1, 2024		3,617,886	$	4,000	$	282,383,000	$	(284,168,000	)	$	114,000	$	(1,917,000	)	$	(3,584,000	)

Stock-based compensation expense		-		-		10,000		-			-		-			10,000
Related party convertible note price reset		-		3,000		2,786,000		-			-		-			2,789,000
Convertible note price reset		-		-		37,000		-			-		-			37,000
Conversion of note payable to common stock – related party		4,113,158		1,000		1,562,000		-			-		-			1,563,000
Issuance of common stock via at-the- market offering, net		221,736		-		99,000		-			-		-			99,000
Net loss		-		-		-		(1,856,000	)		-		(145,000	)		(2,001,000	)
Balance at March 31, 2024		7,952,780	$	8,000	$	286,877,000	$	(286,024,000	)	$	114,000	$	(2,062,000	)	$	(1,087,000	)

	Shares		Common Stock		Paid in Capital in Excess of Par		Accumulated Deficit			AOCL*			Non- Controlling Interests			Total Equity
Balance at January 1, 2023		1,037,138	$	1,000	$	270,377,000	$	(266,193,000	)	$	111,000		$	(973,000	)	$	3,323,000

Stock-based compensation expense		-		-		10,000		-			-			-			10,000
Related party convertible note price reset		-		-		3,160,000		-			-			-			3,160,000
Convertible note price reset		-		-		43,000		-			-			-			43,000
Conversion of note payable to common stock		215,000		1,000		602,000		-			-			-			603,000
Sale of common stock and warrants, net		125,000		-		2,640,000		-			-			-			2,640,000
Exercise of warrants		158,731		-		421,000		-			-			-			421,000
Foreign currency translation gain		-		-		-		-			(6,000	)		-			(6,000	)
Net loss		-		-		-		(5,086,000	)		-			(96,000	)		(5,182,000	)
Balance at March 31, 2023		1,535,869	$	2,000	$	277,253,000	$	(271,279,000	)	$	105,000		$	(1,069,000	)	$	5,012,000

* Accumulated other comprehensive loss.

See accompanying notes to the condensed consolidated financial statements.

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ThermoGenesis Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended March 31,
	2024			2023
Cash flows from operating activities:
Net loss	$	(2,001,000	)	$	(5,182,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		334,000			267,000
Stock-based compensation expense		10,000			10,000
Amortization of debt discount/premium, net		1,052,000			3,472,000
Loss on retirement of debt		-			239,000
Reserve for excess and slow-moving inventories		27,000			70,000
Net change in operating assets and liabilities:
Accounts receivable		(199,000	)		271,000
Inventories		133,000			58,000
Prepaid expenses and other assets		46,000			778,000
Accounts payable		41,000			748,000
Interest payable - related party		75,000			(1,103,000	)
Accrued payroll and related expenses		22,000			45,000
Deferred revenue – short term		351,000			(53,000	)
Other current liabilities		(211,000	)		53,000
Long-term deferred revenue and other noncurrent liabilities		(185,000	)		(288,000	)

Net cash used in operating activities		(505,000	)		(615,000	)

Cash flows from investing activities:
Capital expenditures		(20,000	)		(771,000	)

Net cash used in investing activities		(20,000	)		(771,000	)

Cash flows from financing activities:
Proceeds from sale of common stock, net		99,000			2,640,000
Payment on convertible promissory note		(398,000	)
Proceeds from exercise of warrants and pre-funded warrants		-			421,000

Net cash provided by financing activities		(299,000	)		3,061,000

Net increase (decrease) in cash and cash equivalents		(824,000	)		1,675,000

Cash and cash equivalents at beginning of period		2,000,000			4,177,000
Cash and cash equivalents at end of period	$	1,176,000		$	5,852,000

Supplemental disclosures of cash flow information:
Cash paid for interest	$	102,000		$	140,000
Cash paid for related party interest	$	317,000		$	1,492,000
Fair value of January 2023 amended convertible note issued in connection with the extinguishment of original convertible note		-		$	1,239,000
Convertible note price reset	$	37,000		$	43,000
Related party convertible note price reset	$	2,789,000		$	3,160,000
Promissory note converted to common stock		-		$	603,000
Related party promissory note converted to common stock	$	1,563,000			-

See accompanying notes to the condensed consolidated financial statements.

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ThermoGenesis Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.	Description of Business

Overview

ThermoGenesis Holdings, Inc. (“ThermoGenesis Holdings,” the “Company,” “we,” “our,” “us”) develops and commercializes a range of automated technologies for cell-banking, cell-processing, and cell-based therapeutics. Since the 1990’s, ThermoGenesis Holdings has been a pioneer in, and a leading provider of automated systems that isolate, purify and cryogenically store units of hematopoietic stem and progenitor cells for the cord blood banking industry. The Company was founded in 1986 and is incorporated in the State of Delaware and headquartered in Rancho Cordova, CA. Our common stock is traded on the Nasdaq Capital Market exchange under the ticker symbol “THMO”.

Medical Device Products for Automated Cell Processing

The Company provides the AutoXpress® and BioArchive® platforms for automated clinical bio-banking, PXP® platform for point-of-care cell-based therapies and X-Series® products for cell processing services. All product lines are reporting as a single reporting segment in the financial statements.

CDMO Business

The Company is expanding its business to include contract development and manufacturing services for cell and cell-based gene therapies. The Company is in the process of building out its capabilities to become a world-class Contract Development and Manufacturing Organization (“CDMO”) for cell and cell-based gene therapies. The Company opened a new facility in the Sacramento metro area, containing a total of twelve, class-7, ReadyStart cGMP Suites available for lease by early-stage life science and cell gene therapy companies. The ReadyStart Suites are located in a 35,500+ square foot cGMP facility that will meet the highest scientific, quality, and regulatory requirements. The CDMO facility was completed in October of 2023.

2.	Going Concern

The Company has incurred historical losses from operations and expects to continue to incur operating losses in the near future. The Company will need to raise additional capital to grow its business, fund operating expenses and make interest payments. The Company’s ability to fund its liquidity needs is subject to various risks, many of which are beyond its control. The Company will seek additional funding through debt borrowings, sales of debt or equity securities or strategic partnerships. The Company cannot guarantee that such funding will be available on a timely basis, in needed quantities or on terms favorable to the Company, if at all. These factors and other indicators raise substantial doubt about the Company’s ability to continue as a going concern within one year from the filing date of this report.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

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3.	Summary of Significant Accounting Polices

There have been no material changes in the Company’s significant accounting policies to those disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such Securities and Exchange Commission (“SEC”) rules and regulations and accounting principles applicable for interim periods. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Events subsequent to the balance sheet date have been evaluated for inclusion in the accompanying condensed consolidated financial statements through the date of issuance.

Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the Company’s fiscal year ending December 31, 2024. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in ThermoGenesis Holdings’ Annual Report on Form 10-K for the year ended December 31, 2023.

Principles of Consolidation

The consolidated financial statements include the accounts of ThermoGenesis Holdings and its wholly-owned subsidiaries, ThermoGenesis Corp. and TotipotentRX Cell Therapy, Pvt. Ltd and ThermoGenesis Corp’s majority-owned subsidiary, CARTXpress Bio, Inc. (“CARTXpress Bio”). All significant intercompany accounts and transactions have been eliminated upon consolidation.

The 20% ownership interest of CARTXpress Bio that is not owned by ThermoGenesis Holdings is accounted for as a non-controlling interest as the Company has an 80% ownership interest in CARTXpress Bio. Earnings or losses attributable to other stockholders of a consolidated affiliated company are classified separately as "non-controlling interest" in the Company's consolidated statements of operations. Net loss attributable to non-controlling interests reflects only its share of the after-tax earnings or losses of an affiliated company. The Company's condensed consolidated balance sheets reflect non-controlling interests within the equity section.

Recently Issued Accounting Standards

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which is intended to enhance the transparency and decision usefulness of income tax disclosures. Notably, the ASU requires entities to disclose specific categories in the effective tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold, as well as disclosures of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 on a prospective basis. Retrospective application to each period presented in the financial statements is permitted. We are currently evaluating the impact of this standard on our consolidated financial statements.

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In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which requires all public entities, including those that have a single reportable segment, to provide enhanced disclosures primarily about significant segment expenses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The new guidance is required to be applied on a retrospective basis, with all required disclosures to be made for all prior periods presented in the financial statements. The segment expense categories and amounts disclosed in prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. We are currently evaluating the impact of this standard on our consolidated financial statements.

In October 2023, the FASB issued ASU 2023-06, “Disclosure Improvements—Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.” This ASU modifies the disclosure or presentation requirements of a variety of Topics in the Codification by aligning them with the SEC’s regulations. The amendments to the various Topics should be applied prospectively, and the effective date for the Company for each amendment will be determined based on the effective date of the SEC’s removal of the related disclosure from Regulation S-X or Regulation S-K. If the SEC has not removed the applicable requirement by June 30, 2027, then the related amendment in ASU 2023-06 will be removed from the Codification and will not become effective. Early adoption of this ASU is prohibited. We are currently evaluating the new ASU to determine if it will have an impact on the disclosures or presentation in our consolidated financial statements.

4.	Related Party Transactions

Convertible Promissory Note and Revolving Credit Agreement

In March 2017, ThermoGenesis Holdings entered into a Credit Agreement with Boyalife Group (USA), Inc. (the “Lender”), which is owned and controlled by the Company’s Chief Executive Officer and Chairman of our Board of Directors. The Credit Agreement, as amended, grants the Company the right to borrow up to $10,000,000 (the “Loan”) at any time prior to the maturity date. On January 5, 2024, the Company entered into Amendment No. 3 (the "Note Amendment”) to its Second Amended and Restated Convertible Promissory Note with Boyalife Group Inc. (the "Note”), and Amendment No. 4 (the "Credit Agreement Amendment”) to its First Amended and Restated Revolving Credit Agreement with Boyalife Group Inc. (the "Credit Agreement”). The Note Amendment extended the maturity date of the Note from December 31, 2023 to December 31, 2024 (the “Maturity Date”), and provided that beginning January 1, 2024, accrued and unpaid interest of approximately $634,000 was due and payable on or before July 1 and December 31 of each year. Accrued and unpaid interest as of December 31, 2023, (the "December 2023 Capitalized Amount”) is to be paid in equal monthly installments of approximately $106,000 over the first six months of 2024. Any unpaid portion of the December 2023 Capitalized Amount shall bear interest at an annual rate of twenty-two percent (22%), and accrued and unpaid interest on the December 2023 Capitalized Amount shall be due and payable on July 1, 2024. The Credit Agreement Amendment updated the defined term "Termination Date” in the Credit Agreement to December 31, 2024.

The Company performed a debt extinguishment vs. modification analysis on the Note Amendment and determined that it would be considered an extinguishment, due to an increase of more than 10% to the value of the embedded conversion option. However, no gain or loss was recorded in the condensed consolidated statements of operations for the quarter ended March 31, 2024 as it was determined that the fair value of the Note Amendment and accrued interest was $7,912,000 both before and after the extension.

On March 15, 2024, the Company received a conversion notice from the Lender to convert $1,278,000 of the outstanding principal and $285,000 of the 2024 outstanding accrued interest for a total of $1,563,000. As of March 31, 2024, the outstanding principal and accrued interest of the Note was approximately $6,424,000.

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The Credit Agreement Amendment and the Note Amendment, provide that the principal and all accrued and unpaid interest under the Loan will be due and payable on the Maturity Date of December 31, 2024. The Loan bears interest at 22% per annum, simple interest. The Company has five business days after the Lender demands payment to pay the interest due before the Loan is considered in default. The Loan can be prepaid in whole or in part by the Company at any time without penalty.

The following summarizes the Note:

Maturity

Date

Stated

Interest

Rate

Conversion

Price

Face

Value

Debt

Discount

Carrying

Value

March 31, 2024

12/31/24

0.38

6,000,000

(1,794,000

)

4,206,000

December 31, 2023

12/31/23

0.79

7,278,000

The Note includes a down-round anti-dilution provision that lowers its conversion price if the Company sells shares of common stock or issues convertible debt at a lower price per share. In 2024, the down-round provision was triggered, as noted below:

For the three months ended March 31, 2024, when the conversion price of the Note was $0.79 per share, under an At The Market Offering Agreement with H.C. Wainwright & Co., LLC (“Wainwright”), pursuant to which the Company can offer and sell, from time to time, shares of its common stock, $0.001 par value, the Company sold shares of its common stock through multiple transactions with an average selling price of $0.45, resulting in a triggering event lowering the conversion price of the Note to $0.38. The triggering event created an incremental value of approximately $2,789,000 which was treated as a discount to the carrying amount of the Note and will be amortized over its remaining term.

A Black-Scholes pricing model was utilized to determine the change in the before and after incremental value of the conversion option at each triggering event, with the following inputs:

	January 2024
Conversion price before	$	0.79
Conversion price after	$	0.38
Term (years)		0.94
Volatility		122.7	%
Dividend rate		0	%
Risk free rate		4.38	%

The Company amortized $995,000 and $3,604,000 of debt discount related to triggering events for the Note to interest expense for the three months ended March 31, 2024 and 2023, respectively. In addition to the amortization, the Company also recorded interest expense related to the Note of $392,000 and $389,000 for the three months ended March 31, 2024 and 2023 respectively. The interest payable balance for the Note was $424,000 and $634,000 as of March 31, 2024 and December 31, 2023, respectively.

5.	Related Party Lease

Z3 Investment

On March 24, 2022, the Company entered into a five-year Lease Agreement with Z3 Investment LLC, an affiliate of the Company’s Chairman and CEO, and COO, beginning April 1, 2022, for approximately 35,000 square feet of laboratory and office space in Rancho Cordova, California. Under the terms of the agreement, monthly rent is $108,000 per month (with a 4% annual increase). Additionally, the Company will pay all operating expenses as they become due estimated to be approximately $20,000 per month and will be expensed in the period incurred. The Company has the option to renew the lease for up to ten years after the commencement of the initial five-year term.

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Operating Lease

Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets. To determine the present value of lease payments not yet paid, we use the Company’s cost of capital based on existing debt instruments. We recognize the expense for this lease on a straight-line basis over the lease term.

The following summarizes the Company’s operating lease:

	March 31, 2024			December 31, 2023
Right-of-use operating lease assets – related party, net	$	2,956,000		$	3,088,000
Current lease liability (included in other current liabilities)		641,000			595,000
Non-current lease liability – related party		2,720,000			2,900,000

Weighted average remaining lease term		3.5			3.8
Discount rate		22	%		22	%

Maturities of lease liabilities by year for our operating lease are as follows:

2024 (Remaining)	$	983,000
2025		1,359,000
2026		1,428,000
2027		1,133,000
Thereafter		-
Total lease payments	$	4,903,000
Less: imputed interest		(1,542,000	)
Present value of operating lease liabilities	$	3,361,000

Statement of Cash Flows

Cash paid for amounts included in the measurement of operating lease liabilities was $324,000 and $311,000 for the three months ended March 31, 2024 and 2023, respectively.

6.	Convertible Promissory Note

July 2019 Note

On July 23, 2019, the Company entered into a private placement with Orbrex (USA) Co. Limited (“Orbrex”), pursuant to which the Company issued and sold to Orbrex an unsecured convertible promissory note in the original principal amount of $1,000,000 (the “July 2019 Note”). The July 2019 Note, as amended, bared an interest rate of twenty-four percent (24%) per annum which was payable quarterly in arrears. On January 31, 2023, the Company entered into Amendment No. 3 to the July 2019 Note which extended the maturity date from January 31, 2023 to July 31, 2023 and changed the fixed conversion price to $2.87 per share. On the July 2023 maturity date, the Company entered into an Amendment No. 4 to the July 2019 Note, which extended the maturity date of the July 2019 Note to January 31, 2024 and changed the fixed conversion price to $1.07 per share.

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The Company performed a debt extinguishment vs. modification analysis on the Amendment No. 3 to the July 2019 Note and determined that the extension would be considered an extinguishment, due to an increase of more than 10% to the value of the embedded conversion option. The Company determined that the fair value of the July 2019 Note after the amendment was $1,239,000 representing a $239,000 increase in its fair value. The increase will be recorded as a premium to the July 2019 Note and amortized over the remaining term.

During the three months ended March 31, 2023, the holder of the July 2019 Note converted $603,000 of the Note for 215,000 shares. The July 2019 Note matured on January 31, 2024, at which time the Company paid the outstanding balance of $398,000.

The following summarizes the July 2019 Note:

Maturity

Date

Stated

Interest Rate

Conversion

Price

Face

Value

Debt

Discount

Carrying

Value

December 31, 2023

1/31/24

0.79

397,000

(19,000

)

378,000

The Note includes a down-round anti-dilution provision that lowers its conversion price if the Company sells shares of common stock or issues convertible debt at a lower price per share. In 2024, the anti-dilution provision was triggered, as noted below:

In January 2024, through multiple transactions under the At The Market Agreement with Wainwright, the Company sold shares of its common stock with an average selling price of $0.45, resulting in a triggering event lowering the conversion price of the Note to $0.38. The triggering event created an incremental value of approximately $37,000 which was treated as a discount to the carrying amount of the Note and will be amortized over its remaining term.

A Black-Scholes pricing model was utilized to determine the change in the before and after incremental value of the conversion option at each triggering event, with the following inputs:

	January 2024
Conversion price before	$	0.79
Conversion price after	$	0.38
Term (years)		0.02
Volatility		83.9	%
Dividend rate		0	%
Risk free rate		4.38	%

The Company recorded amortization expense related to triggering events for the July 2019 Note of $72,000 and $41,000 for the three months ended March 31, 2024 and 2023, respectively. Additionally, an amortization expense of $15,000 and $174,000 related to a debt premium for the July 2019 Note was recorded for the three months ended March 31, 2024 and 2023. Interest expense related to the July 2019 Note was $8,000 and $42,000 for the three months ended March 31, 2024 and 2023. When the July 2019 Note matured on January 31, 2024, the Company paid approximately $102,000 for the accrued interest payable.

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7.	Stockholders’ Equity

Common Stock

On March 15, 2023, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an accredited investor (the “Investor”) pursuant to which the Company agreed to issue and sell to the Investor in a private placement (the “Offering”) (i) 125,000 shares of its common stock, $0.001 par value (the “Common Shares”), (ii) 946,429 pre-funded warrants to purchase Common Shares at a purchase price of $2.80, and (iii) warrants to purchase up to an aggregate 1,071,429 Common Shares were issued (the “Underlying Shares”). The warrants have an exercise price of $2.65 per share and are exercisable immediately upon issuance and expire five and one-half years following the issuance for a total net proceeds of approximately $2,600,000, excluding legal and transaction fees of $360,000. The Offering closed on March 20, 2023.

In connection with the Offering, the Company entered into a Warrant Amendment Agreement (the "Warrant Amendment Agreement”), dated March 15, 2023, with the Investor, whereby the Company agreed to amend existing warrants, held by the Investor, to purchase up to an aggregate of 158,731 shares of common stock under the Warrant Amendment Agreement that were previously issued in October 2022. These warrants had an exercise price of $6.30 per share and pursuant to the Warrant Amendment Agreement, have been amended to reduce the exercise price to $2.65 per share effective upon the closing of the Offering. During the quarter ended March 31, 2023, 158,731 common warrants were exercised. The Company received approximately $421,000 from the exercises of the warrants.

The warrant repricing resulted in an immediate and incremental increase of approximately $50,000 in the estimated fair value of the common warrants issued in the Company’s October 2022 public offering. The common warrants were valued on the date of the warrant repricing using the Black-Scholes option pricing model based on the following assumptions:

	March 2023
Conversion price before	$	6.30
Conversion price after	$	2.65
Term (years)		4.9
Volatility		123	%
Dividend rate		0	%
Risk free rate		4.20	%

On November 22, 2023, the Company entered into an At The Market Offering Agreement (the "Offering Agreement”) with Wainwright with respect to an at-the-market offering program under which the Company may offer and sell, from time to time, shares of its common stock, $0.001 par value having an aggregate offering price of up to $1,288,000 through Wainwright as its sales agent. The shares of Common Stock to be offered and sold under the Offering Agreement, will be offered and sold pursuant to the Company’s shelf registration statement. For the quarter ended March 31, 2024, the Company sold a total of 221,736 shares of common stock under the Offering Agreement at an average selling price of $0.45 per share, resulting in net proceeds of approximately $99,000.

Nasdaq’s listing standards provide that a company may be delisted if the bid price of its stock drops below $1.00 for a period of 30 consecutive business days. On January 8, 2024, we received written notice from the Nasdaq Listing Qualifications Department notifying the Company that it was not in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market, due to the bid price of the Company’s common stock closing below the minimum $1.00 per share for the thirty (30) consecutive business days prior to the date of the Notification Letter. In accordance with listing rules, the Company was afforded 180 days, or until July 8, 2024, to regain compliance.

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Net Loss Per Share

Net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding. For the purpose of calculating basic net loss per share, the additional shares of common stock that are issuable upon exercise of the pre-funded warrants have been included since the shares are issuable for a negligible consideration and have no vesting or other contingencies associated with them. All pre-funded warrants previously issued have been exercised and none are outstanding. The calculation of the basic and diluted earnings per share is the same for all periods presented, as the effect of the potential common stock equivalents noted below is anti-dilutive due to the Company’s net loss position for all periods presented. Anti-dilutive securities consisted of the following at March 31:

	2024		2023
Common stock equivalents of convertible promissory note and accrued interest		16,906,190		2,946,525
Warrants		1,238,869		1,253,387
Stock options		6,097		6,400
Total		18,151,156		4,206,312

Warrants

A summary of warrant activity for the three months ended March 31, 2024 is as follows:

	Number of Shares		Weighted-Average Exercise Price Per Share		Weighted- Average Remaining Contract Term
Balance at December 31, 2023		1,238,869	$	3.14		4.57
Warrants granted		-
Pre-funded warrants granted		-
Warrants exercised		-
Exercisable and Outstanding at March 31, 2024		1,238,869	$	3.14		4.32

8.	Revenue

The following table presents net sales by geographic areas for the three months ended March 31:

	2024		2023
United States	$	2,064,000	$	1,372,000
Singapore		56,000		404,000
Other		617,000

SEC Form 10-Q filed by ThermoGenesis Holdings Inc.