UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 000-22245

SEELOS THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Nevada	87-0449967
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

300 Park Avenue, 2nd Floor, New York, NY 10022

(Address of Principal Executive Offices) (Zip Code)

(646) 293-2100

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act

Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per share	SEEL	The Nasdaq Stock Market 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. 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 (§ 232.405 of this chapter) 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 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 ☐ 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 ☒

As of July 29, 2021, 102,315,208 shares of the common stock, par value $0.001, of the registrant were outstanding.

Table of Contents

	PART I.

		PAGE
ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)	1

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	22

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	32

ITEM 4.	CONTROLS AND PROCEDURES	32


	PART II.

ITEM 1.	LEGAL PROCEEDINGS	32

ITEM 1A.	RISK FACTORS	33

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	63

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	63

ITEM 4	MINE SAFETY DISCLOSURES	63

ITEM 5.	OTHER INFORMATION	63

ITEM 6.	EXHIBITS	64

SIGNATURES		68

PART I.

ITEM 1. FINANCIAL STATEMENTS

Seelos Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

(Unaudited)

		June 30,		December 31,
		2021		2020
Assets
Current assets
Cash	$	87,200	$	15,662
Prepaid expenses and other current assets		3,046		1,832
Total current assets		90,246		17,494
Operating lease right-of-use asset		63		-
Total assets	$	90,309	$	17,494


Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	1,038	$	1,887
Accrued expenses		2,569		1,924
Licenses payable		3,200		125
Convertible debt		4		2,431
Warrant liabilities, at fair value		733		1,062
Operating lease liability		51		-
Total current liabilities		7,595		7,429


Licenses payable, long-term		-		200
Operating lease liability, long-term		12		-
Note payable		-		147
Convertible debt, long-term		4		7,146
Total liabilities		7,611		14,922


Commitments and contingencies (note 10)		-		-

Stockholders’ equity
Preferred stock, $0.001 par value, 10,000,000 shares authorized, no shares issued or outstanding as of June 30, 2021 and December 31, 2020		-		-
Common stock, $0.001 par value, 240,000,000 and 120,000,000 shares authorized, 102,271,544 and 54,535,891 issued and outstanding as of June 30, 2021 and December 31, 2020, respectively		102		54
Additional paid-in-capital		185,732		77,680
Accumulated deficit		(103,136)		(75,162)
Total stockholders’ equity		82,698		2,572
Total liabilities and stockholders’ equity	$	90,309	$	17,494

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Seelos Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Loss

For the Three and Six Months Ended June 30, 2021 and 2020

(In thousands, except share and per share data)

(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020
Operating expense
Research and development	$	4,308	$	1,444	$	18,420	$	5,137
General and administrative		2,465		1,876		4,965		3,692
Total operating expense		6,773		3,320		23,385		8,829
Loss from operations		(6,773)		(3,320)		(23,385)		(8,829)
Other income (expense)
Interest income		29		7		48		34
Interest expense		(583)		(3)		(1,573)		(7)
Net loss on extinguishment of debt		(2,387)		-		(2,387)		-
Gain on forgiveness of debt		149		-		149		-
Change in fair value of warrant liabilities		707		(413)		(826)		241
Total other income (expense)		(2,085)		(409)		(4,589)		268
Net loss and comprehensive loss	$	(8,858)	$	(3,729)	$	(27,974)	$	(8,561)


Net loss per share basic and diluted	$	(0.10)	$	(0.08)	$	(0.36)	$	(0.22)



Weighted-average common shares outstanding basic and diluted		87,995,447		44,157,059		78,576,716		39,136,126

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Seelos Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

For the Three Months Ended June 30, 2021 and 2020

(In thousands, except share data)

(Unaudited)

					Additional				Total
	Common Stock				Paid-In		Accumulated		Stockholders'
	(Shares)		(Amount)		Capital		Deficit		Equity
Balance as of March 31, 2021	78,283,021	$	78	$	118,960	$	(94,278)	$	24,760
Stock-based compensation expense	-		-		1,037		-		1,037
Issuance of common stock, options exercised	13,806		-		-		-		-
Extinguishment of beneficial conversion feature	-		-		(1,519)		-		(1,519)
Issuance of common stock for settlement of debt	406,250		1		1,376		-		1,377
Issuance of common stock for conversion of debt	25,401		-		40		-		40

Warrants exercised for cash	1,285,000		1		1,384		-		1,385
Issuance of common stock, net of issuance costs	22,258,066		22		64,454		-		64,476
Net loss	-		-		-		(8,858)		(8,858)
Balance as of June 30, 2021	102,271,544	$	102	$	185,732	$	(103,136)	$	82,698

					Additional				Total
	Common Stock				Paid-In		Accumulated		Stockholders'
	(Shares)		(Amount)		Capital		Deficit		Equity
Balance as of March 31, 2020	44,005,044	$	44	$	67,614	$	(60,893)	$	6,765
Stock-based compensation expense	-		-		341		-		341
Issuance of common stock for prepaid services	400,000		-		330		-		330
Net loss	-		-		-		(3,729)		(3,729)
Balance as of June 30, 2020	44,405,044	$	44	$	68,285	$	(64,622)	$	3,707

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Seelos Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

For the Six Months Ended June 30, 2021 and 2020

(In thousands, except share data)

(Unaudited)

					Additional				Total
	Common Stock				Paid-In		Accumulated		Stockholders'
	(Shares)		(Amount)		Capital		Deficit		Equity
Balance as of December 31, 2020	54,535,891	$	54	$	77,680	$	(75,162)	$	2,572
Stock-based compensation expense	-		-		1,742		-		1,742
Issuance of common stock, options exercised	43,805		-		65		-		65
Extinguishment of beneficial conversion feature	-		-		(1,519)		-		(1,519)
Issuance of common stock for settlement of debt	406,250		1		1,376		-		1,377
Issuance of common stock for conversion of debt	25,401		-		40		-		40
Issuance of common stock, ESPP	40,518		-		30		-		30
Warrants exercised for cash	7,431,125		7		8,401		-		8,408
Issuance of common stock, net of issuance costs	39,788,554		40		97,917		-		97,957
Net loss	-		-		-		(27,974)		(27,974)
Balance as of June 30, 2021	102,271,544	$	102	$	185,732	$	(103,136)	$	82,698

					Additional				Total
	Common Stock				Paid-In		Accumulated		Stockholders'
	(Shares)		(Amount)		Capital		Deficit		Equity
Balance as of December 31, 2019	27,028,533	$	27	$	56,027	$	(56,061)	$	(7)
Stock-based compensation expense	-		-		652		-		652
Issuance of common stock for prepaid services	400,000		-		330		-		330
Issuance of common stock for license acquired	1,809,845		2		2,441		-		2,443
Issuance of common stock, net of issuance costs	15,166,666		15		8,835		-		8,850
Net loss	-		-		-		(8,561)		(8,561)
Balance as of June 30, 2020	44,405,044	$	44	$	68,285	$	(64,622)	$	3,707

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Seelos Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the Six Months Ended June 30, 2021 and 2020

(In thousands)

(Unaudited)


		Six Months Ended
		June 30,
		2021		2020
Cash flows from operating activities
Net loss	$	(27,974)	$	(8,561)
Adjustments to reconcile net loss to net cash used in operating activities
Stock-based compensation expense		1,742		652
Shares issued for services		-		124
Research and development expenses - license acquired		-		192
Change in fair value of warrant liability		826		(241)
Gain on forgiveness of note payable		(147)		-
Net loss on extinguishment of convertible debt		2,387		-
Amortization of debt discount		1,564		-
Changes in operating assets and liabilities
Prepaid expenses and other current assets		(1,214)		(864)
Accounts payable		(849)		(166)
Accrued expenses		644		(690)
Licenses payable		2,875		(3,850)
Net cash used in operating activities		(20,146)		(13,404)
Cash flows provided by financing activities
Payment of convertible note		(13,620)		-
Proceeds from issuance of common stock, net of issuance costs		97,957		-
Proceeds from issuance of common stock and warrants, pursuant to Securities Purchase Agreement, net of issuance costs		-		8,850
Proceeds from exercise of warrants		7,252		-
Proceeds from exercise of options		65		-
Proceeds from sales of common stock under ESPP		30		-
Proceeds from note payable		-		147
Net cash provided by financing activities		91,684		8,997
Net increase (decrease) in cash		71,538		(4,407)
Cash, beginning of period		15,662		10,261
Cash, end of period	$	87,200	$	5,854


Supplemental disclosure of cash flow information:
Cash paid for interest	$	8	$	8
Cash paid for income taxes	$	-	$	-
Non-cash investing and financing activities:
Reclass of warrant liabilities related to Series A warrants exercised for cash	$	1,155	$	-
Right-of-use assets obtained in exchange for operating lease liabilities	$	75	$	-
Issuance of common stock for convertible notes	$	40	$	-
Issuance of common stock for settlement of debt	$	1,377	$	-
Extinguishment of beneficial conversion feature	$	1,519	$	-
Issuance of common stock for license payable	$	-	$	2,443

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Seelos Therapeutics, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization and Description of Business

Seelos Therapeutics, Inc. and its subsidiaries (the “Company”) is a clinical-stage biopharmaceutical company focused on achieving efficient development of products that address significant unmet needs in Central Nervous System (“CNS”) disorders and other rare disorders. The Company’s lead programs are SLS-002 for the potential treatment of acute suicidal ideation and behavior in patients with major depressive disorder (“ASIB in MDD”) and SLS-005 for the potential treatment of Amyotrophic Lateral Sclerosis (“ALS”). SLS-005 for the potential treatment of Sanfilippo syndrome currently requires additional natural history data, which is being explored. Additionally, the Company is developing several preclinical programs, most of which have well-defined mechanisms of action, including: SLS-004, SLS-006, SLS-007 for the potential treatment of Parkinson’s Disease (“PD”) and SLS-008, which is being developed for the potential treatment of an undisclosed indication, but may also be targeted at chronic inflammation in asthma and orphan indications such as pediatric esophagitis.

2. Liquidity

The Company has generated limited revenues, has incurred operating losses since inception, and expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. As of June 30, 2021, the Company had $87.2 million in cash and an accumulated deficit of $103.1 million. The Company has historically funded its operations through the issuance of convertible notes (see Note 6), the sale of common stock (see Note 4) and exercises of warrants (see Note 7).

On May 24, 2021, the Company completed an underwritten public offering, pursuant to which the Company sold 22,258,066 shares of its common stock, at a price to the public of $3.10 per share, which included the exercise in full by the underwriter of its option to purchase up to 2,903,226 additional shares of common stock. The net proceeds to the Company from the offering were approximately $64.5 million, after deducting underwriting discounts and commissions and other estimated offering expenses payable by the Company. The Company used $7.3 million of the net proceeds from the offering for the partial repayment of certain outstanding convertible promissory notes.

On January 28, 2021, the Company completed an underwritten public offering, pursuant to which the Company sold 17,530,488 shares of its common stock, at a price to the public of $2.05 per share, which included the exercise in full by the underwriter of its option to purchase up to 2,286,585 additional shares of common stock. The net proceeds to the Company from the offering were approximately $33.5 million, after deducting underwriting discounts, commissions and other offering costs. The Company used $3.8 million of the net proceeds from the offering for the partial repayment of certain outstanding convertible promissory notes.

The Company currently has an effective shelf registration statement on Form S-3 filed with the Securities and Exchange Commission (the “SEC”). The Company may use the shelf registration statement on Form S-3 to offer from time to time any combination of debt securities, common and preferred stock and warrants. As of June 30, 2021, the Company had approximately $95.1 million available under its Form S-3 shelf registration statement. The Company also has the ability to raise funds through other means, such as through the filing of a registration statement on Form S-1 or in private placements. The rules and regulations of the SEC or any other regulatory agencies may restrict the Company’s ability to conduct certain types of financing activities or may affect the timing of and amounts it can raise by undertaking such activities.

The Company evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year beyond the filing of this Quarterly Report on Form 10-Q. Based on such evaluation and the Company’s current plans, which are subject to change, management believes that the Company’s existing cash and cash equivalents as of June 30, 2021 are sufficient to satisfy its operating cash needs for the year after the filing of this Quarterly Report on Form 10-Q.

The Company’s future liquidity and capital funding requirements will depend on numerous factors, including:

•

its ability to raise additional funds to finance its operations;

•

its ability to maintain compliance with the listing requirements of the Nasdaq Capital Market;

•

the outcome, costs and timing of clinical trial results for the Company’s current or future product candidates;

•

potential litigation expenses;

•

the emergence and effect of competing or complementary products or product candidates;

•

its ability to maintain, expand and defend the scope of its intellectual property portfolio, including the amount and timing of any payments the Company may be required to make, or that it may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights;

•

its ability to retain its current employees and the need and ability to hire additional management and scientific and medical personnel;

•

the terms and timing of any collaborative, licensing or other arrangements that it has or may establish;

•

the trading price of its common stock;

•

its ability to secure a development partner for its product candidate in the United States for the treatment of erectile dysfunction (the “CVR Product Candidate”) in order to overcome deficiencies raised in the 2018 complete response letter issued by the U.S. Food and Drug Administration (the “FDA”) related to the CVR Product Candidate; and

•

its ability to increase the number of authorized shares outstanding to facilitate future financing events.

The Company may determine to raise additional funds through one or more of the following: issuance of additional debt or equity and/or the completion of a licensing or other commercial transaction for one or more of the Company’s product candidates. As noted above, management believes that the Company’s existing cash and cash equivalents as of June 30, 2021 are sufficient to satisfy its operating cash needs for the year after the filing of this Quarterly Report on Form 10-Q. However, if the Company is unable to maintain sufficient financial resources, its business, financial condition and results of operations will be materially and adversely affected. This could affect future development and business activities and potential future clinical studies and/or other future ventures. There can be no assurance that the Company will be able to obtain the needed financing on acceptable terms or at all. Additionally, equity or convertible debt financings will likely have a dilutive effect on the holdings of the Company’s existing stockholders. Debt financing may involve agreements that include covenants limiting or restricting the Company’s ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, and may be secured by all or a portion of the Company’s assets.

3. Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto as of and for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K (“Annual Report”) filed with the SEC on March 11, 2021. The accompanying financial statements have been prepared by the Company in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. In the opinion of management, the accompanying unaudited condensed consolidated financial statements for the periods presented reflect all adjustments, consisting of only normal, recurring adjustments, necessary to fairly state the Company’s financial position, results of operations and cash flows. The December 31, 2020 condensed consolidated balance sheet was derived from audited financial statements, but it does not include all U.S. GAAP disclosures. The unaudited condensed consolidated financial statements for the interim periods are not necessarily indicative of results for the full year. The preparation of these unaudited condensed consolidated financial statements requires the Company to make estimates and judgments that affect the amounts reported in the financial statements and the accompanying notes. The Company’s actual results may differ from these estimates under different assumptions or conditions.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. The most significant estimates in the Company’s financial statements relate to the valuation of warrants, valuation of common stock and the valuation of stock options. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.

Fair Value Measurements

The Company follows the accounting guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), for its fair value measurements of financial assets and liabilities measured at fair value on a recurring basis. Under this accounting guidance, fair value is defined as 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 at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.

The accounting guidance requires fair value measurements be classified and disclosed in one of the following three categories:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Observable inputs other than Level 1 prices, for similar assets or liabilities that are directly or indirectly observable in the marketplace.

Level 3: Unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values (in thousands):

		Fair Value Measurements
		as of June 30, 2021
		(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Cash	$	87,200	$	-	$	-	$	87,200
Liabilities:
Warrant liabilities, at fair value	$	-	$	-	$	733	$	733

		Fair Value Measurements
		as of December 31, 2020
		(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Cash	$	15,662	$	-	$	-	$	15,662
Liabilities:
Warrant liabilities, at fair value	$	-	$	-	$	1,062	$	1,062

There were no transfers between fair value measurement levels during the six months ended June 30, 2021.

The Company’s warrant liabilities were classified within Level 3 of the fair value hierarchy because their fair values were estimated by utilizing valuation models and significant unobservable inputs. The common stock warrant liabilities were recorded at fair value using the Black-Scholes option pricing model.

The following assumptions were used in determining the fair value of the warrant liabilities valued using the Black-Scholes option pricing model as of June 30, 2021:

		Six Months Ended
		June 30, 2021
Risk-free interest rate		0.37%
Volatility		119.55%
Dividend yield		-%
Expected term (in years)		2.57
Weighted-average fair value	$	2.43

The following table is a reconciliation for the common stock warrant liabilities measured at fair value using Level 3 unobservable inputs (in thousands):

		Warrant liabilities
Balance as of December 31, 2020	$	1,062
Warrant liability reclassified to stockholders' equity		(1,155)
Change in fair value measurement of warrant liability		826
Balance as of June 30, 2021	$	733

Stock-based Compensation

The Company expenses stock-based compensation to employees, non-employees and board members over the requisite service period for the entire award, except for performance condition awards where vesting is subject to the Company achieving certain performance criteria, based on the estimated grant-date fair value of the awards and forfeitures rates. Compensation costs for performance condition awards will be recognized when the achievement of the performance criteria is probable. The Company accounts for forfeitures as they occur. Stock-based awards with graded-vesting schedules are recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model, and the assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. All stock-based compensation costs are recorded in general and administrative or research and development costs in the statements of operations based upon the underlying individual’s role at the Company.

Leases

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) asset, operating lease liability, current and operating lease liability, long-term in the Company’s condensed consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liability represents its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of the lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the transition date and commencement date in determining the present value of lease payments. This is the rate the Company would have to pay if it borrowed on a collateralized basis over a similar term to each lease. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The Company’s 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.

Net Loss Per Share

Basic loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during each period. Diluted loss per share includes the effect, if any, from the potential exercise or conversion of securities, such as convertible debt, warrants, performance-based restricted stock unit awards and stock options that would result in the issuance of incremental shares of common stock. In computing the basic and diluted net loss per share applicable to common stockholders, the weighted average number of shares remains the same for both calculations due to the fact that when a net loss exists, dilutive shares are not included in the calculation as the impact is anti-dilutive.

The following potentially dilutive securities outstanding for the three and six months ended June 30, 2021 and 2020 have been excluded from the computation of diluted weighted average shares outstanding, as they would be anti-dilutive (in thousands):

	Three and Six Months
	Ended June 30,
	2021	2020
Outstanding stock options	7,199	4,925
Restricted stock units	2,400	67
Outstanding warrants	2,635	3,584
Convertible debt	17	-
	12,251	8,576

Amounts in the table reflect the common stock equivalents of the noted instruments.

Recent Accounting Pronouncements

In December 2019, the FASB issued Accounting Standards Update (“ASU”) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The Company adopted ASU 2019-12 effective January 1, 2021. The adoption of ASU 2019-12 did not have a material effect on the Company’s financial statements.

In August 2020, the FASB issued ASU 2020-06: Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This standard simplifies the accounting for convertible debt instruments by removing the separation models for convertible debt with a cash conversion feature, as well as convertible instruments with a beneficial conversion feature. As a result, entities will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. The elimination of these models will reduce non-cash interest expense for entities that have issued a convertible instrument that was within the scope of those models before the adoption of ASU 2020-06. Additionally, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share, and precludes the use of the treasury stock method for certain debt instruments. The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020, and an entity should adopt the provisions at the beginning of its annual fiscal year. The Company is evaluating the impact of ASU 2020-06 on its consolidated financial statements and related disclosures.

4. Common Stock Offerings

Securities Purchase Agreements

December 2020 Convertible Note and Private Placement

In December 2020, the Company sold 1,112,219 shares of common stock in conjunction with the issuance of convertible notes at a discount for aggregate net proceeds of $10.9 million (see Note 6).

2020 Registered Direct Offering and Concurrent Private Placement

On September 4, 2020, the Company entered into a Securities Purchase Agreement with certain institutional investors (the “2020 Securities Purchase Agreement”) pursuant to which the Company issued and sold an aggregate of 8,865,000 shares of common stock in a registered direct offering, resulting in total net proceeds of $6.4 million, after deducting the placement agent’s fees and other offering expenses. The shares were offered by the Company pursuant to the Company’s shelf registration statement on Form S-3 filed with the SEC on November 2, 2017, as amended. The Company also issued to the investors warrants to purchase up to 6,648,750 shares of common stock in a concurrent private placement (the "September 2020 Warrants"). The September 2020 Warrants have an exercise price of $0.84 per share of common stock, became exercisable beginning on March 9, 2021 and will expire on March 9, 2026.

The combined purchase price for one share and one warrant to purchase 0.75 of a share of common stock in the offerings was $0.79. The closing of the offerings occurred on September 9, 2020.

Consulting Agreement

On May 11, 2020, the Company entered into a consulting agreement (the “Consulting Agreement”) with an advisory firm, pursuant to which the advisory firm agreed to provide the Company with certain management consulting, business and advisory services. The Company agreed to issue the advisory firm 300,000 unregistered shares of the Company’s common stock, which shares were issued on May 11, 2020, plus $80,000 in cash.

On June 9, 2020, the Company and the advisory firm entered into an amendment to the Consulting Agreement (the “Amendment”). Pursuant to the Amendment, the advisory firm agreed to provide the Company with additional services and, in consideration, the Company agreed to issue the advisory firm an additional 200,000 unregistered shares of the Company’s common stock (the “Additional Shares”), plus $20,000 in cash. The Additional Shares were issued to the advisory firm on June 9, 2020 and were subject to certain vesting restrictions.

Through September 30, 2020, the Company has recognized approximately $431,000 of consulting expense under this Consulting Agreement. On July 9, 2020, the Company cancelled the Consulting Agreement with an effective date of August 9, 2020. The Company also canceled 100,000 shares that did not vest due to the cancellation of the Consulting Agreement.

Public Offerings

On May 24, 2021, the Company completed an underwritten public offering, pursuant to which the Company sold 22,258,066 shares of its common stock, at a price to the public of $3.10 per share, which included the exercise in full by the underwriter of its option to purchase up to 2,903,226 additional shares of common stock. The net proceeds to the Company from the offering were approximately $64.5 million, after deducting underwriting discounts, commissions and other offering expenses. The Company used $7.3 million of the net proceeds from the offering for the partial repayment of certain outstanding convertible promissory notes.

On January 28, 2021, the Company completed an underwritten public offering, pursuant to which the Company sold 17,530,488 shares of its common stock, at a price to the public of $2.05 per share, which included the exercise in full by the underwriter of its option to purchase up to 2,286,585 additional shares of common stock. The net proceeds to the Company from the offering were approximately $33.5 million, after deducting underwriting discounts, commissions and other offering expenses. The Company used $3.8 million of the net proceeds from the offering for the partial repayment of certain outstanding convertible promissory notes.

On March 16, 2020, the Company completed an underwritten public offering pursuant to which it sold 7,500,000 shares of its common stock at a price to the public of $0.60 per share. The net proceeds to the Company from this offering were approximately $4.0 million, after deducting underwriting discounts and commissions and other offering expenses payable by the Company.

On February 13, 2020, the Company completed an underwritten public offering, pursuant to which it sold 6,666,667 shares of its common stock at a price to the public of $0.75 per share. On February 19, 2020, the Company sold an additional 999,999 shares of its common stock at a price to the public of $0.75 per share pursuant to the full exercise of the underwriters’ option to cover over-allotments. The net proceeds to the Company from this offering were approximately $4.8 million, after deducting underwriting discounts and commissions and other offering expenses payable by the Company.

Stock Purchase Agreement with Vyera

On January 2, 2020, the Company entered into a stock purchase agreement (the “Stock Purchase Agreement”) with Vyera, pursuant to which the Company issued to Vyera 1,809,845 registered shares of the Company's common stock (the “Shares”). The Company entered into the Stock Purchase Agreement in accordance with an asset purchase agreement with Vyera (the “Vyera Agreement”), as amended by the amendment entered into on October 15, 2019 (see Note 5). As partial consideration for the assets of Vyera, the Company agreed to issue the Shares pursuant to the Stock Purchase Agreement.

Pre-Merger Financing

On January 24, 2019, Apricus Biosciences, Inc., a Nevada corporation (“Apricus”), completed a business combination with Seelos Therapeutics, Inc., a Delaware corporation (“STI”), in accordance with the terms of the Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) entered into on July 30, 2018. Pursuant to the Merger Agreement, (i) a subsidiary of Apricus merged with and into STI, with STI (renamed as “Seelos Corporation”) continuing as a wholly owned subsidiary of Apricus and the surviving corporation of the merger and (ii) Apricus was renamed as “Seelos Therapeutics, Inc.” (the “Merger”).

On January 24, 2019, STI and Apricus closed a private placement transaction with certain accredited investors (the “Investors”), whereby, among other things, STI issued to investors shares of STI’s common stock immediately prior to the Merger in a private placement transaction (the “Financing”), pursuant to a Securities Purchase Agreement, made and entered into as of October 16, 2018, by and among STI, Apricus and the investors, as amended (the “Purchase Agreement”).

Pursuant to the Purchase Agreement, STI (i) issued and sold to the Investors an aggregate of 2,374,672 shares of STI’s common stock which converted pursuant to the exchange ratio in the Merger into the right to receive 1,829,407 shares of the Company’s common stock and (ii) issued warrants representing the right to acquire 1,463,519 shares of common stock at a price per share of $4.15, subject to adjustment as provided therein (the “Series A Warrants”), most recently adjusted to a price per share of $0.2957 per share, and additional warrants initially representing the right to acquire no shares of common stock at a price per share of $0.001, subject to adjustment as provided therein (the “Series B Warrants” together with the Series A Warrants, the “Investor Warrants”), for aggregate gross proceeds of $18.0 million, or $16.5 million net of financing fees. The terms of the Investor Warrants included certain provisions that could result in adjustments to both the number of warrants issued and the exercise price of each warrant, which resulted in the warrants being classified as a liability upon issuance (see Note 7). The Investor Warrants were recorded at fair value of $21.5 million upon issuance and given that the liability exceeded the proceeds received, a loss of $5.0 million was recognized.

On March 7, 2019, the Company entered into Amendment Agreements (collectively, the “Amendment Agreements”) with each Investor amending: (i) the Purchase Agreement, (ii) the Series A Warrants, and (iii) the Series B Warrants. The Amendment Agreements, among other things, fixed the aggregate number of shares of common stock issued and issuable pursuant to the Series A Warrants at 3,629,023 (none of which were exercised as of March 7, 2019). The terms of the Investor Warrants continue to include certain provisions that could result in a future adjustment to the exercise price of the Investor Warrants and accordingly, they continue to be classified as a liability after the Amendment Agreements.

At June 30, 2021, 0.3 million Series A Warrants remain unexercised. All Series B Warrants were exercised during the year ended December 31, 2019.

5. License Agreements

Acquisition of License from Ligand Pharmaceuticals Incorporated

On September 21, 2016, the Company entered into a License Agreement (the “License Agreement”) with Ligand Pharmaceuticals Incorporated (“Ligand”), Neurogen Corporation and CyDex Pharmaceuticals, Inc. (collectively, the “Licensors”), pursuant to which, among other things, the Licensors granted to the Company an exclusive, perpetual, irrevocable, worldwide, royalty-bearing, nontransferable right and license under (i) patents related to a product known as Aplindore, which is now known as SLS-006, acetaminophen (as it may have been or may be modified for use in a product to be administered by any method in any form including, without limitation injection and intravenously, the sole active pharmaceutical ingredient of which is acetaminophen), which is now known as SLS-012, an H3 receptor antagonist, which is now known as SLS-010, and either or both of the Licensors’ two proprietary CRTh2 antagonists, which are now known collectively as SLS-008 (collectively, the “Licensed Products”), and (ii) copyrights, trade secrets, moral rights and all other intellectual and proprietary rights related thereto. The Company is obligated to use commercially reasonable efforts to (a) develop the Licensed Products, (b) obtain regulatory approval for the Licensed Products in the European Union (either in its entirety or including at least one of France, Germany or, if at the time the United Kingdom is a member of the European Union, the United Kingdom), the United Kingdom, if at the time the United Kingdom is not a member of the European Union, Japan or the People’s Republic of China (each, a “Major Market”) or the United States, and (c) commercialize the Licensed Products in each country where regulatory approval is obtained. The Company has the exclusive right and sole responsibility and decision-making authority to research and develop any Licensed Products and to conduct all clinical trials and non-clinical studies the Company believes appropriate to obtain regulatory approvals for commercialization of the Licensed Products. The Company also has the exclusive right and sole responsibility and decision-making authority to commercialize any of the Licensed Products.

In connection with the closing of the Merger, the Company issued 801,253 shares of common stock to Ligand and recognized research and development expense totaling approximately $2.2 million during the three months ended March 31, 2019 for this License Agreement.

The Company also agreed to pay to Ligand certain one-time, non-refundable regulatory milestone payments in connection with the Licensed Products, other than in connection with Aplindore for the indication of PD or Restless Leg Syndrome, consisting of (i) $750,000 upon submission of an application with the FDA or equivalent foreign body for a particular Licensed Product, (ii) $3.0 million upon FDA approval of an application for a particular Licensed Product, (iii) $1.125 million upon regulatory approval in a Major Market for a particular Licensed Product, and (iv) $1.125 million upon regulatory approval in a second Major Market for a particular Licensed Product.

The Company also agreed to pay to Ligand certain one-time, non-refundable regulatory milestone payments in connection with the Licensed Products in connection with Aplindore for the indication of PD or Restless Leg Syndrome, consisting of (i) $100,000 upon submission of an application with the FDA or equivalent foreign body for such a particular Licensed Product, (ii) $350,000 upon FDA approval of an application for such a particular Licensed Product, (iii) $125,000 upon regulatory approval in a Major Market for such a particular Licensed Product, and (iv) $125,000 upon regulatory approval in a second Major Market for such a particular Licensed Product.

The Company agreed to pay to Ligand certain one-time, non-refundable commercial milestone payments in connection with the Licensed Products, consisting of (i) $10.0 million upon the achievement of $1.0 billion of cumulative worldwide net sales of Licensed Products based upon Aplindore, (ii) $10.0 million upon the achievement of $1.0 billion of cumulative worldwide net sales of Licensed Products based upon an H3 receptor antagonist, (iii) $10.0 million upon the achievement of $1.0 billion of cumulative worldwide net sales of Licensed Products based upon acetaminophen (as it may have been or may be modified for use in a product to be administered by any method in any form including, without limitation injection and intravenously, the sole active pharmaceutical ingredient of which is acetaminophen), (iv) $10.0 million upon the achievement of $1.0 billion of cumulative worldwide net sales of Licensed Products based upon CRTh2 antagonists, (v) $20.0 million upon the achievement of $2.0 billion of cumulative worldwide net sales of Licensed Products based upon Aplindore, (vi) $20.0 million upon the achievement of $2.0 billion of cumulative worldwide net sales of Licensed Products based upon an H3 receptor antagonist, (vii) $20.0 million upon the achievement of $2.0 billion of cumulative worldwide net sales of Licensed Products based upon acetaminophen (as it may have been or may be modified for use in a product to be administered by any method in any form including, without limitation injection and intravenously, the sole active pharmaceutical ingredient of which is acetaminophen), and (viii) $20.0 million upon the achievement of $2.0 billion of cumulative worldwide net sales of Licensed Products based upon CRTh2 antagonists.

The Company will also pay to Ligand middle single-digit royalties on aggregate annual net sales of Licensed Products other than in connection with Aplindore for the indication of PD or Restless Leg Syndrome in a country where such Licensed Products are covered under a licensed patent and a tiered incremental royalty in the upper single digit to lower double digit range on aggregate annual net sales of Licensed Products in connection with Aplindore for the indication of PD or Restless Leg Syndrome in a country where such Licensed Products are covered under a licensed patent. Additionally, the Company will pay to Ligand low single digit royalties on aggregate annual net sales of Licensed Products other than in connection with Aplindore for the indication of PD or Restless Leg Syndrome in a country where such Licensed Products are not covered under a licensed patent and a tiered incremental royalty in the lower single digit to middle single digit range on aggregate annual net sales of Licensed Products in connection with Aplindore for the indication of PD or Restless Leg Syndrome in a country where such Licensed Products are not covered under a licensed patent.

The potential regulatory and commercial milestones are not yet considered probable, and no milestone payments have been accrued at June 30, 2021.

Acquisition of Assets from Vyera

On March 6, 2018, the Company entered into the Vyera Agreement with Vyera, pursuant to which the Company acquired the assets (the “Vyera Assets”) and liabilities (the “Vyera Assumed Liabilities”), of Vyera related to TUR-002 (intranasal ketamine), which is now known as SLS-002. The Company is obligated to use commercially reasonable efforts to seek regulatory approval in the United States for and commercialize SLS-002.

As consideration for the Vyera Assets, the Company paid to Vyera a non-refundable cash payment of $150,000 on May 21, 2018. As further consideration for the Vyera Assets, upon public announcement of the entry by Apricus and STI into the Merger Agreement, the Company paid to Vyera a non-refundable cash payment of $150,000. As further consideration for the Vyera Assets, the Company issued to Vyera 191,529 shares of common stock and paid Vyera a non-refundable cash payment of $1,000,000 on January 29, 2019.

Pursuant to the amendment to the Asset Purchase Agreement entered into by the Company and Vyera on October 15, 2019, the Company issued Vyera 1,809,845 registered shares of the Company’s common stock on January 2, 2020 and made cash payments to Vyera in the amounts of $750,000, $750,000, $1.0 million and $1.0 million in October 2019, January 2020, April 2020 and July 2020, respectively.

On February 15, 2021, the Company entered into an amendment to the Vyera Agreement. Pursuant to the amendment, the Company agreed to make cash payments to Vyera in the amount of $3.0 million in each of February 2021, June 2021 and September 2021 in exchange for a lower royalty percentage on potential net sales of SLS-002.

In the event that the Company sells, directly or indirectly, all or substantially all of the Vyera Assets to a third party, then the Company must pay Vyera an amount equal to 4% of the net proceeds actually received by the Company as an upfront payment in such sale.

The Company agreed to pay to Vyera certain one-time, non-refundable milestone payments consisting of (i) $10.0 million upon approval by the FDA of a new drug application (an “NDA”), with respect to SLS-002, (ii) $5.0 million upon approval by the European Medicines Agency (the “EMA”) of the foreign equivalent to an NDA with respect to SLS-002 in a Major Market, (iii) $2.5 million upon approval by the EMA of the foreign equivalent to an NDA with respect to SLS-002 in a second Major Market, (iv) $5.0 million upon the achievement of $250.0 million in net sales of SLS-002, (v) $10.0 million upon the achievement of $500.0 million in net sales of SLS-002, (vi) $15.0 million upon the achievement of $1.0 billion in net sales of SLS-002, (vii) $20.0 million upon the achievement of $1.5 billion in net sales of SLS-002, and (vii) $25.0 million upon the achievement of $2.0 billion in net sales of SLS-002. The Company will also pay to Vyera a royalty percentage in the mid-single digits on aggregate annual net sales of SLS-002.

The potential regulatory and commercial milestones are not yet considered probable, and no milestone payments have been accrued at June 30, 2021.

Acquisition of License from Stuart Weg, MD

On August 29, 2019, the Company entered into an amended and restated exclusive license agreement with Stuart Weg, M.D. (the “Weg License Agreement”), pursuant to which the Company was granted an exclusive worldwide license to certain intellectual property and regulatory materials related to SLS-002. Under the terms of the Weg License Agreement, the Company paid an upfront license fee of $75,000 upon execution of the agreement. The Company agreed to pay additional consideration to Dr. Weg as follows: (i) $0.1 million on January 2, 2020, (ii) $0.125 million on January 2, 2021, and (iii) in the event the FDA has not approved an NDA for a product containing ketamine in any dosage on or before December 31, 2021, $0.2 million on January 2, 2022. The Company paid the required $0.1 million on January 2, 2020 and $0.125 million on January 2, 2021. As further consideration, the Company agreed to pay Dr. Weg certain milestone payments consisting of (i) $0.1 million and shares of common stock equal to $0.15 million divided by the closing sales price of the Company’s common stock upon the issuance of the first patent directed to an anxiety indication, (ii) $0.5 million after the locking of the database and unblinding the data for the statistically significant readout of a Phase III trial of an intranasal racemic ketamine product that has been conducted for the submission under an NDA or equivalent seeking regulatory approval in the United States, the United Kingdom, France, Germany, Italy, Spain, China or Japan, or seeking regulatory approval from the EMA in the EU, for such product (the “Milestone Product”), (iii) $3.0 million upon FDA approval of an NDA for the Milestone Product, (iv) $2.0 million upon regulatory approval by the EMA for the Milestone Product, and (v) $1.5 million upon regulatory approval in Japan for the Milestone Product; provided, however, that the maximum amount to be paid by the Company under milestones (i)-(v) will be $6.6 million. The Company will also pay to Dr. Weg a royalty percentage equal to 2.25% on the sale of each product containing ketamine in any dosage.

The potential regulatory and commercial milestones are not yet considered probable, and no milestone payments have been accrued at June 30, 2021.

Acquisition of Assets from Bioblast Pharma Ltd. (“Bioblast”)

On February 15, 2019, the Company entered into an Asset Purchase Agreement (the “Bioblast Asset Purchase Agreement”) with Bioblast. Pursuant to the Bioblast Asset Purchase Agreement, the Company acquired all of the assets of Bioblast relating to a therapeutic platform known as Trehalose (the “Bioblast Asset Purchase”). The Company paid to Bioblast $1.5 million in February 2019 and an additional $2.0 million in February 2020. Accordingly, the Company recognized a $3.5 million charge to research and development expense during the three months ended March 31, 2019. Under the terms of the Bioblast Asset Purchase Agreement, the Company agreed to pay additional consideration to Bioblast upon the achievement of certain milestones in the future, as follows: (i) within 15 days following the completion of the Company’s first Phase II(b) clinical trial of Trehalose satisfying certain criteria, the Company will pay to Bioblast $8.5 million; and (ii) within 15 days following the approval for commercialization by the FDA or the Health Products and Food Branch of Health Canada of the first NDA or New Drug Submission, respectively, of Trehalose filed by the Company or its affiliates, the Company will pay to Bioblast $8.5 million. In addition, the Company agreed to pay Bioblast a cash royalty equal to 1% of the net sales of Trehalose. Under the terms of the Bioblast Asset Purchase, the Company assumed a collaborative agreement with Team Sanfilippo Foundation (“TSF”), a nonprofit medical research foundation founded by parents of children with Sanfilippo syndrome. TSF, upon approval by the FDA, planned to begin an open label, Phase II(b) clinical trial in up to 20 patients with Sanfilippo syndrome, which is now known under the study name SLS-005. The Company will provide the clinical supply of Trehalose. The terms of the Bioblast Asset Purchase Agreement entitle the Company access to all clinical data from this trial. On July 15, 2019, TSF and the Company amended the agreement whereby the Company agreed to assume responsibility for the Phase II(b)/III clinical trial and TSF agreed to provide a grant of up to $1.5 million towards the funding of the trial.

The potential regulatory and commercial milestones are not yet considered probable, and no milestone payments have been accrued at June 30, 2021.

Acquisition of License from The Regents of the University of California

On March 7, 2019, the Company entered into an exclusive license agreement (the “UC Regents License Agreement”) with The Regents of the University of California (“The UC Regents”) pursuant to which the Company was granted an exclusive license to intellectual property owned by The UC Regents pertaining to a technology that was created by researchers at the University of California, Los Angeles (UCLA). Such technology relates to a family of rationally-designed peptide inhibitors that target the aggregation of alpha-synuclein (α-synuclein). The Company plans to study this initial approach in PD and will further evaluate the potential clinical approach in other disorders affecting the CNS. This program is now known as SLS-007. Upon entry into the UC Regents License Agreement, the Company paid to The UC Regents $0.1 million and recognized a $0.1 million charge to research and development expense during the three months ended March 31, 2019. Under the terms of the UC Regents License Agreement, the Company agreed to pay additional consideration upon the achievement of certain milestones in the future, as follows: (i) within 90 days following the completion of dosing of the first patient in a Phase I clinical trial, the Company will pay $50,000; (ii) within 90 days following dosing of the first patient in a Phase II clinical trial, the Company will pay $0.1 million; (iii) within 90 days following dosing of the first patient in a Phase III clinical trial, the Company will pay $0.3 million; (iv) within 90 days following the first commercial sales in the U.S., the Company will pay $1.0 million; (v) within 90 days following the first commercial sales in any European market, the Company will pay $1.0 million; and (vi) within 90 days following $250 million in cumulative worldwide net sales of a licensed product, the Company will pay $2.5 million. The Company is also obligated to pay a single digit royalty on sales of the product, if any. In addition, if the Company fails to achieve certain milestones within a specified timeframe, The UC Regents may terminate the agreement or reduce the Company’s license to a nonexclusive license.

The potential regulatory and commercial milestones are not yet considered probable, and no milestone payments have been accrued at June 30, 2021.

Acquisition of License from Duke University

On June 27, 2019, the Company entered into an exclusive license agreement (the “Duke License Agreement”) with Duke University pursuant to which the Company was granted an exclusive license to a gene therapy program targeting the regulation of the synuclein alpha (“SNCA”) gene, which encodes alpha-synuclein expression. The Company plans to study this initial approach in PD and will further evaluate the potential clinical approach in other disorders affecting the CNS. This program is now known as SLS-004. Upon entry into the Duke License Agreement, the Company paid to Duke University $0.1 million and recognized $0.1 million charge to research and development expense during the three months ended June 30, 2019. The Company agreed to pay additional consideration to Duke University upon the achievement of certain milestones in the future, as follows: (i) within 30 days following filing of an IND following the completion of preclinical studies including comprehensive validation of the platform, the Company will pay $0.1 million; (ii) within 30 days following dosing of the first patient in a Phase I clinical trial, the Company will pay $0.2 million; (iii) within 30 days following dosing of the first patient in a Phase II clinical trial, the Company will pay $0.5 million; (iv) within 30 days following dosing of the first patient in a Phase III clinical trial, the Company will pay $1.0 million; and (v) within 30 days following an NDA approval, the Company will pay $2.0 million. The Company is also obligated to pay a single digit royalty on sales of the product, if any. In addition, if the Company fails to achieve certain milestones within a specified timeframe, Duke University may terminate the agreement.

The potential regulatory and commercial milestones are not yet considered probable, and no milestone payments have been accrued at June 30, 2021.

6. Debt

December 2020 Convertible Note and Private Placement

On December 11, 2020, the Company entered into a Securities Purchase Agreement (the “Lind Securities Purchase Agreement”) with Lind Global Asset Management II, LLC (“Lind”) pursuant to which, among other things, on December 11, 2020, the Company issued and sold to the Investor, in a private placement transaction, in exchange for the payment by Lind of $10,000,000, (1) a convertible promissory note (the “Note”) in an aggregate principal amount of $12,000,000 (the “Principal Amount”), which will bear no interest and mature on December 11, 2022 (the “Maturity Date”), and (2) 975,000 shares of the Company’s common stock. At any time following June 11, 2021, and from time to time before the Maturity Date, the Investor had the option to convert any portion of the then-outstanding Principal Amount of the Note into shares of common stock at a price per share of $1.60, subject to adjustment for stock splits, reverse stock splits, stock dividends and similar transactions (the “Conversion Price”). Prior to June 11, 2021, the Company had the right to prepay up to sixty-six and two-thirds percent (66 2/3%) of the then-outstanding Principal Amount of the Note with no penalty. Subject to certain exceptions, the Company was required to direct proceeds from any subsequent debt financings (including subordinated debt, convertible debt or mandatorily redeemable preferred stock but other than purchase money debt or capital lease obligations or other indebtedness incurred in the ordinary course of business) to repay the Note, unless waived by the Investor in advance. The Note began amortizing in June 2021 and was to amortize in eighteen monthly installments equal to the quotient of (i) the then-outstanding Principal Amount of the Note, divided by (ii) the number of months remaining until the Maturity Date. All amortization payments were to be payable solely in cash, plus a 2% premium. On June 14, 2021, the Company and Lind entered into an Acknowledgment and Termination Agreement, pursuant to which the Company agreed to issue to Lind an aggregate of 406,250 additional shares of its common stock (the “Lind Shares”) and pay Lind the remaining principal amount of $790,804 (the “Final Payment”) in full satisfaction the Company’s remaining obligations to Lind under the Note. The Company issued the Lind Shares and made the Final Payment to Lind, and the Lind Securities Purchase Agreement and the Note terminated, effective June 15, 2021. The Company recorded a loss on extinguishment of debt of $1.4 million for the issuance of the 406,250 shares during the three and six months ended June 30, 2021.

On December 17, 2020, the Company entered into three separate securities purchase agreements with certain accredited investors on substantially the same terms as the Lind Securities Purchase Agreement (the “December 17 SPAs”), pursuant to which the Company sold, in private placement transactions, in exchange for the payment by the accredited investors of an aggregate of $1,138,023, (1) convertible promissory notes (the “December 17 Notes”) in an aggregate principal amount of $1,365,628, which will bear no interest and mature on December 17, 2022, and (2) an aggregate of 110,956 shares of its common stock. On December 18, 2020, the Company entered into an additional securities purchase agreement with an accredited investor on substantially the same terms as the Lind Securities Purchase Agreement (the “December 18 SPA” and, together with the December 17 SPAs, the "Subsequent Securities Purchase Agreements"), pursuant to which the Company sold, in a private placement transaction, in exchange for the payment by the accredited investor of $269,373, (1) a convertible promissory note in an aggregate principal amount of $323,247, which will bear no interest and mature on December 18, 2022 (the “December 18 Note” and, together with the December 17 Notes, the “Subsequent Notes”), and (2) 26,263 shares of the Company’s common stock. The Subsequent Securities Purchase Agreements have substantially the same terms as the Lind Securities Purchase Agreement, and the Subsequent Notes have substantially the same terms as the Note.

The Company received aggregate net proceeds of $10.9 million from the convertible note offerings, net of $0.5 million of issuance costs. The total gross proceeds were allocated to the convertible notes and common stock issued under the agreements based on their relative fair values. The Company recognized a beneficial conversion feature discount on the convertible notes of approximately $0.1 million. Due to the principal payments made during the year, the Company remeasured the beneficial conversion feature discount at each payment date and recorded a loss on extinguishment of debt of approximately $1.0 million during the three and six months ended June 30, 2021 as well as a reduction in additional paid-in capital of $1.5 million as of June 30, 2021.

During the six months ended June 30, 2021, the Company paid approximately $13.7 million in principal payments on the outstanding convertible notes and approximately $27,000 of the convertible notes remain outstanding as of June 30, 2021.

The components of our convertible notes are as follows (in thousands):

		June 30,		December 31,
		2021		2020
Convertible notes due 2022	$	13,689	$	13,689
Unamortized debt discount / debt issuance costs		(20)		(4,112)
Less principal payments		(13,661)		-
Less current portion of long-term debt		(4)		(2,431)
Convertible debt, long-term, net of discount and issuance costs	$	4	$	7,146

The discounts on the convertible notes are being amortized to interest expense, using the effective interest method over the term of the convertible notes. Interest expense recognized related to the discount was approximately $575,000 and $1.6 million for the three and six months ended June 30, 2021, respectively.

PPP Loan

On May 4, 2020, the Company qualified for and received a loan pursuant to the Paycheck Protection Program, a program implemented by the U.S. Small Business Administration under the Coronavirus Aid, Relief, and Economic Security Act, from a qualified lender (the “PPP Lender”), for an aggregate principal amount of approximately $147,000 (the “PPP Loan”). The PPP Loan bears interest at a fixed rate of 1.0% per annum, with the first six months of interest deferred, has a term of two years, and is unsecured and guaranteed by the U.S. Small Business Administration. The principal amount of the PPP Loan is subject to forgiveness under the Paycheck Protection Program upon the Company’s request to the extent that the PPP Loan proceeds are used to pay expenses permitted by the Paycheck Protection Program, including payroll costs, covered rent and mortgage obligations and covered utility payments incurred by the Company. The Company applied for and received full forgiveness of the PPP Loan with respect to these covered expenses and recorded a gain on forgiveness of debt during the three and six months ended June 30, 2021.

7. Stockholders’ Equity

Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock, par value $0.001. No shares of preferred stock were outstanding as of June 30, 2021 or December 31, 2020.

Common Stock

The Company has authorized 240,000,000 and 120,000,000 shares of common stock as of June 30, 2021 and December 31, 2020. Each share of common stock is entitled to one voting right. Common stock owners are entitled to dividends when funds are legally available and declared by the Board of Directors.

Warrants

September 2020 Warrants

The September 2020 Warrants were initially exercisable for 6,648,750 shares of common stock at an exercise price per share equal to $0.84. The September 2020 Warrants became exercisable beginning on March 9, 2021 and will expire on March 9, 2026.

During the six months ended June 30, 2021, September 2020 Warrants were exercised for 5.6 million shares of common stock for approximately $4.7 million. As of June 30, 2021, September 2020 Warrants exercisable for 960,000 shares of common stock remain outstanding at an exercise price of $0.84 per share.

August 2019 Warrants

On August 23, 2019, the Company entered into a securities purchase agreement with certain institutional investors pursuant to which the Company issued and sold an aggregate of 4,475,000 shares of common stock in a registered direct offering and issued warrants to purchase up to 2,237,500 shares of common stock in a concurrent private placement (the “August 2019 Warrants”). The August 2019 Warrants were initially exercisable for 2,237,500 shares of common stock at an exercise price per share equal to $1.78. The August 2019 Warrants became exercisable beginning on February 27, 2020 and will expire on August 28, 2023.

During the six months ended June 30, 2021, August 2019 Warrants for 1.3 million shares of common stock were exercised for approximately $2.4 million. As of June 30, 2021, August 2019 Warrants exercisable for 900,000 shares of common stock remain outstanding at an exercise price of $1.78 per share.

Series A Warrants

The Series A Warrants were initially exercisable for 1,463,519 shares of common stock at an exercise price per share equal to $4.15, which was adjusted several times pursuant to the terms thereof to 3,629,023 shares of common stock at an exercise price per share equal to $0.2957 per share. The most recent adjustment to the exercise price (from $0.60 to $0.2957 per share) occurred during the three months ended September 30, 2020 as a result of the announcement of the offerings pursuant to the 2020 Securities Purchase Agreement. The Series A Warrants were immediately exercisable upon issuance and will expire on January 31, 2024.

During the six months ended June 30, 2021 and 2020, Series A Warrants for 0.5 million and 0 shares of common stock, respectively, were exercised for approximately $0.1 million and $0, respectively. As of June 30, 2021, Series A Warrants exercisable for

SEC Form 10-Q filed by Seelos Therapeutics, Inc.