U.S. 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: March 31, 2024

☐	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 1-36598

CELLECTAR BIOSCIENCES, INC.

(Exact name of registrant as specified in its charter)


DELAWARE	04-3321804
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)

100 Campus Drive

Florham Park, New Jersey 07932

(Address of principal executive offices, including zip code)

(608) 441-8120

(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(s)	Name of each exchange on which registered
Common stock, par value $0.00001	CLRB	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 (§ 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, 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 ☒

Number of shares outstanding of the issuer’s common stock as of the latest practicable date: 35,848,924 shares of common stock, $0.00001 par value per share, as of May 8, 2024.

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CELLECTAR BIOSCIENCES, INC.

FORM 10-Q INDEX


	Forward-Looking Statements	3

PART I. FINANCIAL INFORMATION		5

Item 1.	Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 4.	Controls and Procedures	29

PART II. OTHER INFORMATION		31

Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 6.	Exhibits	32

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FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q of Cellectar Biosciences, Inc. (the “Company”, “Cellectar”, “we”, “us”, “our”) contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. Examples of our forward-looking statements include:

●

our current views with respect to our business strategy, business plan and research and development activities;

●

the progress of our product development programs, including clinical testing and the timing of commencement and results thereof;

●

our projected operating results, including research and development expenses;

●

our ability to continue development plans for iopofosine I 131 (also known as CLR 131 or simply iopofosine), CLR 1900 series, CLR 2000 series and CLR 12120;

●

our ability to continue development plans for our Phospholipid Drug Conjugates (PDC)™;

●

our ability to maintain orphan drug designation in the U.S. for iopofosine as a therapeutic for the treatment of multiple myeloma, neuroblastoma, osteosarcoma, rhabdomyosarcoma, Ewing’s sarcoma and lymphoplasmacytic lymphoma, and the expected benefits of orphan drug status;

●

any disruptions at our sole supplier of iopofosine;

●

our ability to obtain additional funding via the sale of equity and/or debt securities, a strategic transaction or otherwise;

●

our ability to advance our technologies into product candidates;

●

our enhancement and consumption of current resources along with ability to obtain additional funding;

●

our current view regarding general economic and market conditions, including our competitive strengths;

●

uncertainty and economic instability resulting from conflicts, military actions, terrorist attacks, natural disasters, public health crises, including the occurrence of a contagious disease or illness such as the COVID-19 pandemic, cyber-attacks and general instability;

●

the future impacts of legislative and regulatory developments in the United States on the pricing and reimbursement of our product candidates;

●

our ability to meet the continued listing standards of Nasdaq;

●

assumptions underlying any of the foregoing; and

●

any other statements that address events or developments that we intend or believe will or may occur in the future.

In some cases, you can identify forward-looking statements by terminology, such as “expects,” “anticipates,” “intends,” “estimates,” “plans,” “believes,” “seeks,” “may,” “should,” “could”, “would” or the negative of such terms or other similar expressions. Accordingly, these statements involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed in them. Forward-looking statements also involve risks and uncertainties, many of which are beyond our control. Any forward-looking statements are qualified in their entirety by reference to the factors discussed throughout this quarterly report.

You should read this report completely and with the understanding that our actual future results may be materially different from what we expect. You should assume that the information appearing in this report is accurate as of the date hereof only. Because the risk factors referred to herein could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us or on our behalf, you should not place undue reliance on any forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking

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statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

This quarterly report on Form 10-Q contains trademarks and service marks of Cellectar Biosciences, Inc. Unless otherwise provided in this quarterly report on Form 10-Q, trademarks identified by ™ are trademarks of Cellectar Biosciences, Inc. All other trademarks are the property of their respective owners.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CELLECTAR BIOSCIENCES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	March 31,		December 31,
	2024		2023
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	40,031,181	$	9,564,988
Prepaid expenses and other current assets		1,337,184		888,225
Total current assets		41,368,365		10,453,213
Fixed assets, net		1,023,447		1,090,304
Right-of-use asset, net		486,847		502,283
Long-term assets		23,566		23,566
Other assets		6,214		6,214
TOTAL ASSETS	$	42,908,439	$	12,075,580

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued liabilities	$	7,393,950	$	9,178,645
Warrant liability		8,800,000		3,700,000
Lease liability		73,994		58,979
Total current liabilities		16,267,944		12,937,624
Long-term lease liability, net of current portion		474,349		494,003
TOTAL LIABILITIES		16,742,293		13,431,627
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS’ EQUITY (DEFICIT):
Series D preferred stock, 111.11 shares authorized, issued and outstanding as of March 31, 2024 and December 31, 2023		1,382,023		1,382,023
Series E-2 preferred stock, 1,225.00 shares authorized; 237.50 and 319.76 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively		3,474,286		4,677,632
Series E-3 preferred stock, 2,205.00 shares authorized; 630.00 and 0 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively		12,222,000		—
Common stock, $0.00001 par value; 170,000,000 shares authorized; 33,164,466 and 20,744,110 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively		332		207
Additional paid-in capital		248,151,681		210,066,630
Accumulated deficit		(239,064,176)		(217,482,539)
Total stockholders’ equity (deficit)		26,166,146		(1,356,047)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	42,908,439	$	12,075,580

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

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CELLECTAR BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended March 31,
	2024		2023
COSTS AND EXPENSES:
Research and development	$	7,377,940	$	6,654,094
General and administrative		4,623,546		2,051,207
Total costs and expenses		12,001,486		8,705,301

LOSS FROM OPERATIONS		(12,001,486)		(8,705,301)

OTHER (LOSS) INCOME:
Loss on valuation of warrants		(9,900,000)		—
Interest income, net		319,849		124,034
Total other (loss) income, net		(9,580,151)		124,034
NET LOSS	$	(21,581,637)	$	(8,581,267)
BASIC AND DILUTED NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS PER COMMON SHARE	$	(0.74)	$	(0.76)
SHARES USED IN COMPUTING BASIC AND DILUTED NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS PER COMMON SHARE		29,346,679		11,261,217

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

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CELLECTAR BIOSCIENCES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)


											Total
	Preferred Stock			Common Stock			Additional		Accumulated		Stockholders’
	Shares	Amount		Shares	Par Amount		Paid‑In Capital		Deficit		Equity (Deficit)
BALANCE AT DECEMBER 31, 2022	111.11	$	1,382,023	9,385,272	$	94	$	193,624,445	$	(179,499,043)	$	15,507,519
Stock-based compensation	—		—	—		—		408,206		—		408,206
Conversion of pre-funded warrants into common shares	—		—	355,235		3		—		—		3
Net loss	—		—	—		—		—		(8,581,267)		(8,581,267)
BALANCE AT MARCH 31, 2023	111.11	$	1,382,023	9,740,507	$	97	$	194,032,651	$	(188,080,310)	$	7,334,461

BALANCE AT DECEMBER 31, 2023	430.87	$	6,059,655	20,744,110	$	207	$	210,066,630	$	(217,482,539)	$	(1,356,047)
Stock-based compensation	—		—	—		—		454,363		—		454,363
Exercise of pre-funded warrants into common stock	—		—	1,079,132		11		(11)		—		—
Exercise of warrants for preferred stock, net of issuance costs (Note 2)	2,205.00		42,777,000	—		—		—		—		42,777,000
Conversion of Series E-3 preferred stock into common stock	(1,575.00)		(30,555,000)	9,890,099		100		30,554,900		—		—
Exercise of warrants for common stock	—		—	547,177		5		1,072,462		—		1,072,467
Conversion of Series E-2 preferred stock into common stock	(82.26)		(1,203,346)	903,956		9		1,203,337		—		—
Settlement of warrants to equity (Note 2)	—		—	—		—		4,800,000		—		4,800,000
Retired shares	—		—	(8)		—		—		—
Net loss	—		—	—		—		—		(21,581,637)		(21,581,637)
BALANCE AT MARCH 31, 2024	978.61		17,078,309	33,164,466		332		248,151,681		(239,064,176)		26,166,146

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

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CELLECTAR BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Three Months Ended
	March 31,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(21,581,637)	$	(8,581,267)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		88,490		42,557
Stock-based compensation expense		454,363		408,206
Loss on revaluation of warrants		9,900,000		—
Noncash lease expense		15,436		13,829
Changes in:
Prepaid expenses and other current assets		(448,959)		(488,719)
Lease liability		(4,639)		(4,378)
Accounts payable and accrued liabilities		(1,784,695)		1,426,102
Cash used in operating activities		(13,361,641)		(7,183,670)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets		(21,633)		—
Cash used in investing activities		(21,633)		—
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of warrants, net of issuance costs (Note 2)		43,849,467		3
Cash provided by financing activities		43,849,467		3
NET DECREASE IN CASH AND CASH EQUIVALENTS		30,466,193		(7,183,667)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		9,564,988		19,866,358
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	40,031,181	$	12,682,691
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Settlement of warrants to equity	$	4,800,000		—
Conversion of preferred stock to common stock	$	31,758,346		—

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

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CELLECTAR BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. NATURE OF BUSINESS AND ORGANIZATION

Cellectar Biosciences, Inc. (the Company) is a late-stage clinical biopharmaceutical company focused on the discovery, development and commercialization of drugs for the treatment of cancer, leveraging the Company’s proprietary phospholipid drug conjugate™ (PDC™) delivery platform that specifically targets cancer cells and delivers improved efficacy and better safety as a result of fewer off-target effects.

The Company has incurred losses since inception in devoting substantially all its efforts toward research and development and has an accumulated deficit of approximately $239,064,000 as of March 31, 2024. During the three months ended March 31, 2024, the Company generated a net loss of approximately $21,582,000 and the Company expects that it will continue to generate operating losses for the foreseeable future. The Company believes its cash balance as of March 31, 2024, is adequate to fund its basic budgeted operations into the fourth quarter of 2024.

The Company’s ability to execute its current operating plan depends on its ability to obtain additional funding via the sale of equity and/or debt securities, a strategic transaction or source of capital. The Company plans to continue actively pursuing financing alternatives, however, there can be no assurance that it will obtain the necessary funding, raising substantial doubt about the Company’s ability to continue as a going concern within one year of the date these financial statements are issued. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The accompanying Condensed Consolidated Balance Sheet as of December 31, 2023 has been derived from the Company’s audited financial statements. The accompanying Condensed Consolidated Balance Sheet as of March 31, 2024, and the Condensed Consolidated Statements of Operations, Cash Flows, and the Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2024 and 2023, and the related interim information contained within the Notes to the 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, rules and regulations of the Securities and Exchange Commission (SEC) for interim financial information. Accordingly, they do not include all the information and the notes required by U.S. GAAP for complete financial statements. In the opinion of management, the unaudited interim condensed consolidated financial statements reflect all adjustments which are of a nature necessary for the fair presentation of the Company’s consolidated financial position as of March 31, 2024 and consolidated results of its operations, cash flows, and stockholders’ equity for the three months ended March 31, 2024 and 2023. The results for the three months ended March 31, 2024, are not necessarily indicative of future results.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s Form 10-K for the fiscal year ended December 31, 2023, which was filed with the SEC on March 27, 2024.

Principles of Consolidation — The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates — The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of expenses during the reporting period. Significant estimates include the assumptions used in the accrual for potential liabilities, the valuation of the warrant liability, the valuation of debt and equity instruments, the valuation of stock options issued for services, and deferred tax valuation allowances. Actual results could differ from those estimates.

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Fixed Assets — Property and equipment are stated at cost. Depreciation on property and equipment is provided using the straight-line method over the estimated useful lives of the assets (3 to 10 years). Leasehold improvements are depreciated over 64 months (their estimated useful life), which represented the full term of the lease at the time the leasehold improvements were capitalized. The Company’s only long-lived assets are property, equipment and Right-of-Use (ROU) assets. Periodically, and at a minimum annually, the Company evaluates long-lived assets for potential impairment. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. Such analyses necessarily involve judgement. The Company did not experience any events or changes in circumstances that indicate the carrying amount of the assets may not be recoverable as of March 31, 2024. There were no fixed asset impairment charges recorded during the three months ended March 31, 2024.

Right-of-Use (ROU) Asset and Lease Liabilities -The Company accounts for all material leases in accordance with FASB Accounting Standards Codification (ASC) Topic 842, Leases. ROU assets are amortized over their estimated useful life, which represents the full term of the lease. See Note 8.

Stock-Based Compensation — The Company uses the Black-Scholes option-pricing model to calculate the grant-date fair value of stock option awards. The resulting compensation expense, net of expected forfeitures for awards that are not performance-based is recognized on a straight-line basis over the service period of the award, which 2024 and 2023 ranged from twelve months to three years.

Research and Development — Research and development costs are expensed as incurred. The Company recognizes revenue and cost reimbursements from government grants when it is probable that the Company will comply with the conditions attached to the grant arrangement and the grant proceeds will be received. Government grants are recognized on a systematic basis over the periods in which the Company recognizes the related costs for which the government grant is intended to compensate. Specifically, when government grants are related to reimbursements for cost of revenues or operating expenses, the government grants are recognized as a reduction of the related expense in the Condensed Consolidated Statements of Operations. The Company records government grants receivable in the Condensed Consolidated Balance Sheets in prepaid expenses and other current assets.

Income Taxes — Income taxes are accounted for using the liability method of accounting. Under this method, deferred tax assets and liabilities are determined based on temporary differences between the financial statement basis and tax basis of assets and liabilities and net operating loss and credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when it is more-likely-than-not that some portion of the deferred tax assets will not be realized. Management has provided a full valuation allowance against the Company’s gross deferred tax assets. Tax positions taken or expected to be taken in the course of preparing tax returns are required to be evaluated to determine whether the tax positions are more-likely-than-not to be sustained by the applicable tax authority. Tax positions deemed not to meet a more-likely-than-not threshold would be recorded as tax expense in the current year. There are no uncertain tax positions that require accrual to or disclosure in the financial statements as of March 31, 2024 and December 31, 2023.

Fair Value of Financial Instruments — The guidance under ASC 825, Financial Instruments, requires disclosure of the fair value of certain financial instruments. Financial instruments in the accompanying financial statements consist of cash equivalents, prepaid expenses and other assets, accounts payable, warrant liabilities and long-term obligations. The carrying amount of cash equivalents, prepaid expenses, other current assets and accounts payable approximate their fair value as a result of their short-term nature (see Notes 2 and 3).

Warrants — The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity and ASC 815, Derivatives and Hedging. The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock and whether the warrant holders could potentially require net cash settlement in a fundamental transaction outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding (see Note 2). If the warrants are liability-classified, valuation changes, as well as the cost to issue the warrants, are included in Other (Loss) Income in the financial statements (see Note 3). If the instruments are initially classified as liabilities and subsequently meet the requirements for equity classification, the Company reclassifies the fair value to equity.

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Preferred Stock — The Company accounts for preferred stock based upon their specific terms and the authoritative guidance in ASC 480 and ASC 815, including whether they are freestanding instruments, whether any redemption or conversion aspects exist and how they are required to be settled (particularly if there is a cash settlement aspect), whether they contain characteristics that are predominantly debt-like or equity-like, whether they have embedded derivatives, and if they have redemption features. Based upon analysis of these criteria, the preferred stock will be classified as either debt, temporary (or “mezzanine”) equity, or permanent equity. The resultant classification is then evaluated quarterly to determine whether any change to the classification is required.

Concentration of Credit Risk — Financial instruments that subject the Company to credit risk consist of cash and cash equivalents on deposit with financial institutions. The Company’s excess cash as of March 31, 2024 and December 31, 2023 is on deposit in interest-bearing accounts with well-established financial institutions. At times, such amounts may exceed the FDIC insurance limits. As of March 31, 2024, and December 31, 2023, uninsured cash balances totaled approximately $39,587,000 and $9,123,000, respectively.

Government Assistance — Reimbursements of eligible expenditures pursuant to government assistance programs are recorded as reductions of operating costs when there is reasonable assurance that the Company will comply with the conditions attached to the grant arrangement and when the reimbursement has been claimed. The determination of the amount of the claim, and accordingly the receivable amount, requires management to make calculations based on its interpretation of eligible expenditures in accordance with the terms of the programs. The reimbursement claims submitted by the Company are subject to review by the relevant government agencies. The Company currently has a cancer treatment research award through the National Cancer Institute (NCI) totaling approximately $2.0 million over a period of approximately three years. In September 2022, the Company was awarded $1.98 million in additional grant funding to expand the Company’s ongoing Phase 1 study of iopofosine I 131 in children and adolescents with inoperable relapsed or refractory high-grade gliomas (HGGs). The grant was awarded by the NCI based upon the initial signals of efficacy in the Phase 1 study, which is an international, open-label, dose escalation, safety study. The funding allows for an expansion from Part 1a into the Part 1b portion of the ongoing Phase 1 pediatric study.

During the three months ended March 31, 2024, the Company received approximately $324,000 in NCI grant funding under the grants described above, all of which was reported as a reduction of research and development (R&D) expenses. During the twelve months ended December 31, 2023, the Company received approximately $1,759,000 in NCI grant funding under the grants described above, all of which was reported as a reduction of research and development (R&D) expenses.

Recently Adopted Accounting Pronouncements — In December 2023, the FASB issued Accounting Standards Update (ASU) No. 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. Public business entities are required to adopt this standard for annual fiscal periods beginning after December 15, 2024, and early adoption is permitted. The Company is evaluating the impact the adoption of this guidance will have on its consolidated financial statements and related disclosures.

The Company evaluates all ASUs issued by the FASB for consideration of their applicability to the financial statements. The Company has assessed all ASUs issued but not yet adopted and concluded that those not disclosed are not relevant to the Company or are not expected to have a material impact.

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2. STOCKHOLDERS’ EQUITY

September 2023 Private Placement

On September 8, 2023, in a private placement with certain institutional investors, the Company issued 1,225 shares of Series E-1 preferred stock, along with Tranche A warrants to purchase 2,205 shares of Series E-3 preferred stock and Tranche B warrants to purchase 1,715 shares of Series E-4 preferred stock. Shares of Series E preferred stock were issued at a fixed price of $20,000 per share, resulting in gross proceeds of $24.5 million and net proceeds of approximately $22.2 million after placement agent fees and other customary expenses.

The conversion prices for the preferred stock are as follows: for the Series E-1 or E-2 preferred stock, $1.82 per share of common stock, or a total of 13,461,538 shares of common stock; for the Series E-3 preferred stock, $3.185 per share of common stock, or a total of 13,846,154 shares of common stock; and for the Series E-4 preferred stock, $4.7775 per share of common stock, or a total of 7,179,487 shares of common stock, in each case subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization. The warrants are exercisable as follows:

●

Tranche A warrants, for an aggregate exercise price of $44.1 million, exercisable for Series E-3 preferred stock until the earlier of September 6, 2026, or 10 trading days after the Company's announcement of positive topline data from the Waldenstrom's macroglobulinemia CLOVER WaM pivotal trial; and,

●

Tranche B warrants, for an aggregate exercise price of $34.3 million, exercisable for Series E-4 preferred stock until the earlier of September 6, 2028, or 10 days following the Company’s public announcement of its receipt of written approval from the FDA of its New Drug Application for iopofosine I 131.

As of December 31, 2023, the Tranche A and Tranche B warrants did not qualify as derivatives; however, they did not meet the requirements necessary to be considered indexable in the Company’s stock. As a result, and in accordance with the guidance in FASB ASC 815, the warrants were deemed to be liabilities. As of March 31, 2024, after the settlement of the Tranche A warrants, the Tranche B warrants do not qualify as derivatives and meet the requirements necessary to be considered indexable in the Company’s stock. However, due to a cash settlement feature that requires cash settlement in event of a fundamental transaction that is outside the Company’s control, resulting in a form of settlement inconsistent with that which would be received by other security holders, the warrants do not qualify under the equity classification guidance. As a result, and in accordance with the guidance in ASC 815, the Tranche B warrants continue to be deemed liabilities. All such liabilities are required to be presented at fair value, with changes reflected in financial results for the period. See Note 3 for the related valuation.

When issued, the Series E-1 preferred stock had a redemption feature; therefore, it was classified as mezzanine equity as of September 30, 2023. The Series E-1 preferred stock also had a liquidation preference, which was calculated as an amount per share equal to the greater of (i) two times (2X) the Original Per Share Price, together with any declared, unpaid dividends, or (ii) such amount per share as would have been payable had all shares of Series E-1 preferred stock been converted into Common Stock immediately prior to such Liquidation. While the Series E-1 preferred was outstanding, this resulted in both the Tranche A and Tranche B warrants being considered puttable by virtue of the liquidation preference impacting the disposition of these warrants in the event of a liquidation. In accordance with the guidance in ASC 480, a puttable warrant is deemed to be a liability. These features only applied to the Series E-1 preferred stock when it was outstanding; upon stockholder approval of the transaction, which was obtained by the Company at a special meeting of stockholders held on October 25, 2023, the Series E-1 preferred stock immediately converted into either Series E-2 preferred stock and/or common stock, dependent upon the beneficial ownership position of the holder.

The net proceeds from the September 2023 Private Placement were allocated first to the fair value of the Tranche A and Tranche B warrants, which had a fair value upon issuance of $4,700,000, with the remainder, or $17,920,000, allocated to the Series E-1 preferred stock. Upon stockholder approval of the transaction, the entire amount that had been assigned to mezzanine equity was reclassified to Series E-2 preferred stock and is a component of permanent equity, as is reflected in the financial statements. As a result of the stockholder approval, Series E-1 preferred stock was fully extinguished in accordance with the terms of the financing. The outstanding shares of Series E-2 preferred stock were classified as permanent equity upon issuance.

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Series E-2 preferred stock is convertible to common stock at the request of the holder, subject to the holder not exceeding certain beneficial ownership percentages as stipulated in the financing agreement. Subsequent to the issuance of the Series E-2 preferred stock and prior to December 31, 2023, preferred holders converted 905.24 shares of preferred stock into 9,947,684 shares of common stock at the stated rate of $1.82 per common share, resulting in 319.76 shares of Series E-2 preferred stock outstanding as of December 31, 2023.

During the quarter ended March 31, 2024, 82.26 shares of Series E-2 preferred stock were converted into 903,956 shares of common stock. There remain 237.50 shares of Series E-2 preferred stock outstanding as of March 31, 2024.

In January 2024, the Company released topline data from its pivotal, Phase 2b CLOVER WaM trial. In accordance with the terms of the Tranche A warrant, the warants’ expiration accelerated to 10 trading days after the topline data release. Warrant holders exercised the Tranche A warrants in their entirety, resulting in the Company issuing 2,205.00 shares of Series E-3 preferred stock, which are convertible to common stock at the stated rate of $3.185 per share, and receiving gross proceeds of $44.1 million and net proceeds of $42.8 million (see Note 3).

During the quarter ended March 31, 2024, investors who held 1,575.00 shares of Series E-3 preferred stock converted them into 9,890,099 shares of common stock. There remain 630.00 shares of Series E-3 preferred stock outstanding as of March 31, 2024.

October 2022 Public Offering and Private Placement

On October 25, 2022, the Company completed a registered direct offering of 3,275,153 shares of the Company’s common stock at $2.085 per share and warrants to purchase up to an aggregate of 3,275,153 shares of common stock in a concurrent private placement priced at-the-market under Nasdaq rules. In a separate concurrent private placement transaction, the Company offered and sold pre-funded warrants to purchase an aggregate of 1,875,945 shares of common stock and warrants to purchase an aggregate of 1,875,945 shares of common stock. The warrants are immediately exercisable at an exercise price of $1.96 per share and will expire on the fifth anniversary of the closing date. Each pre-funded warrant had a purchase price of $2.08499, is immediately exercisable at an exercise price of $0.00001 per share and will not expire until exercised in full. The registered direct offering and private placements resulted in total gross proceeds of approximately $10.7 million with net proceeds to the Company of approximately $9.6 million after deducting estimated offering expenses. During the three months ended March 31, 2024, and 2023, 1,079,132 and 0 pre-funded warrants were converted into 1,079,132 shares of common stock, respectively.

In accordance with the concept of ASC 820 regarding the October 2022 public offering, the Company allocated the value of the proceeds to the common stock, common warrants, and pre-funded warrants utilizing a relative fair value basis. Using the Nasdaq closing trading price for Cellectar stock on October 20, 2022, the Company computed the fair value of the shares sold. This valuation did not impact the total gross increase to Stockholders’ Equity of $10.7 million, but is an internal, proportionate calculation allocating gross proceeds of approximately $4.0 million to common stock, $4.4 million to common warrants and $2.3 million to pre-funded warrants.

During the quarter ended March 31, 2024 and 2023, 547,177 and 0 warrants issued in October 2022 were exercised, respectively. Net proceeds in the quarter ended March 31, 2024 were approximately $1.1 million.

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Common Stock Warrants

The following table summarizes information regarding outstanding warrants to purchase common stock as of March 31, 2024:


	Number of Shares
	Issuable Upon
	Exercise of
	Outstanding	Exercise
Offering	Warrants	Price		Expiration Date
2023 Tranche B Warrants	7,179,492	$	4.7775	September 8, 2028	⁽¹⁾
2022 Common Warrants	4,201,044	$	1.96	October 25, 2027
June 2020 Series H Warrants	720,796	$	12.075	June 5, 2025
May 2019 Series F Warrants	195,700	$	24.00	May 20, 2024
May 2019 Series G Warrants	201,800	$	24.00	May 20, 2024
October 2017 Series D Warrants	31,085	$	178.00	October 14, 2024
Total	12,529,916

(1)	These warrants are described under the caption “September 2023 Private Placement” above.

3. FAIR VALUE

In accordance with the Fair Value Measurements and Disclosures Topic of ASC 820, the Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded, and the reliability of the assumptions used to determine fair value:

●

Level 1: Input prices quoted in an active market for identical financial assets or liabilities.

●

Level 2: Inputs other than prices quoted in Level 1, such as prices quoted for similar financial assets and liabilities in active markets, prices for identical assets, and liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data.

●

Level 3: Input prices quoted that are significant to the fair value of the financial assets or liabilities which are not observable or supported by an active market.

To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The carrying value of cash and cash equivalents approximates fair value as maturities are less than three months. The carrying amounts reported for other current financial assets and liabilities approximate fair value because of their short-term nature.

As part of the September 2023 financing (see Note 2) the Company issued Tranche A and Tranche B warrants to purchase shares of preferred stock which, on an as-converted basis, represented an aggregate of 21,025,641 shares of common stock. The fair value of the Tranche A and B warrants was determined using a probability-weighted expected return method (PWERM) with a scenario-based Monte Carlo simulation and Black-Scholes model. The PWERM is a scenario-based methodology that estimates the fair value of the Company’s different classes of equity based upon an analysis of future values for the Company, assuming various outcomes. Under both models, assumptions and estimates are used to value the preferred stock warrants. The Company assesses these assumptions and estimates on a quarterly basis as additional information that impacts the assumptions is obtained. The quantitative elements associated with the inputs impacting the fair value measurement of the Tranche A and B warrants include the value per share of the underlying common stock, the timing, form and overall value of the expected exits for the stockholders, the risk-free interest rate, the expected dividend yield and the expected volatility of the Company’s shares. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve for time periods approximately equal to the remaining contractual term of the warrants. The Company estimated a 0% dividend yield based on the expected dividend yield and the fact that the Company has never paid or declared cash dividends. Expected volatility was determined based upon the historical volatility of the Company’s common stock.

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The Tranche A and B warrants are classified within the Level 3 hierarchy because of the nature of these inputs and the valuation technique utilized. The warrant liability of $8,800,000 and $3,700,000 presented on the accompanying condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023, respectively, consisted entirely of the estimated value of the 2023 Warrants.

The following table summarizes the modified option-pricing assumptions used on December 31, 2023, and March 31, 2024:


	December 31		March 31
Volatility	82.0-83.0	%	84.0-85.0	%
Risk-free interest rate	3.80-5.40	%	4.26	%
Expected life (years)	0.3-4.7		1.0-4.4
Dividend	0	%	0	%

At the time the Tranche A warrants were exercised, their fair value, calculated as the difference between the common stock conversion rate in the Series E-3 preferred stock and the trading price of the stock when the warrants were exercised, was determined to be $4,800,000, and was recorded as an expense and liability. Due to the settlement of the Tranche A warrants relieving the Company of any further related obligation, the liability was reclassified to equity in accordance with ASC 815.

The Tranche B warrants continue to be classified in the Level 3 hierarchy due to a cash settlement feature in the agreement. The following table summarizes the changes in the fair value of the Tranche A and B warrants, which are classified within the Level 3 fair value hierarchy, from December 31, 2023, through March 31, 2024:


	Level 3
December 31, 2023, warrant fair value	$	3,700,000
Loss from change in Tranche A warrant fair value		4,800,000
Settlement of Tranche A warrants to equity		(4,800,000)
Loss from change in Tranche B warrant fair value		5,100,000
March 31, 2024, warrant fair value	$	8,800,000

4. STOCK-BASED COMPENSATION

Accounting for Stock-Based Compensation

2021 Stock Incentive Plan

The Company maintains the 2021 Stock Incentive Plan (the “2021 Plan”). The Company utilizes stock-based compensation incentives as a component of its employee and non-employee director and officer compensation philosophy. A committee of the Board of Directors determines the terms of the awards granted and may grant various forms of equity-based incentive compensation. Currently, these incentives consist principally of stock options and restricted shares. All outstanding awards under the 2015 Stock Incentive Plan (the “2015 Plan”) remained in effect according to the terms of the 2015 Plan. Any shares that are currently available under the 2015 Plan and any shares underlying 2015 Plan awards which are forfeited, cancelled, reacquired by the Company or otherwise terminated are added to the shares available for grant under the 2021 Plan.

Under the current stock option award program, all options become exercisable between one and three years after issuance and expire after ten years. The fair value of each stock option award is estimated on the grant date using the Black-Scholes option-pricing model. Volatility is based on the Company’s historical common stock volatility. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time. The expected term of stock options granted is based on an estimate of when options will be exercised in the future. Forfeitures are recorded as they occur. No dividends have been recorded historically.

At the annual meeting of stockholders held on June 23, 2023, the Company’s stockholders approved an increase in the number of shares of common stock available for issuance under the 2021 Stock Incentive Plan by 1,100,000 to 2,368,000.

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The following table summarizes amounts charged to expense for stock-based compensation related to employee and director stock option grants:


	Three Months Ended
	March 31,
	2024		2023

Employee and director stock option grants:
Research and development	$	68,776	$	66,195
General and administrative		385,587		342,011
Total stock-based compensation	$	454,363	$	408,206

In December 2023, the Company granted 2,776,000 contingent, non-statutory stock option awards at an exercise price of $2.65 per share to employees and directors, and in March 2024 the Company granted 200,000 contingent, non-statutory stock option awards at an exercise price of $3.63 and $3.35 per share to our employees. Each of these grants is contingent on approval of an increase in the shares available in the 2021 Stock Incentive Plan that is to be voted on by the stockholders at the annual meeting of stockholders expected to be held in June 2024. Until such time that the contingent non-statutory stock option awards are approved by stockholders, no expense will be recognized by the Company.

Assumptions Used in Determining Fair Value

Valuation and amortization method. The fair value of each stock award is estimated on the grant date using the Black-Scholes option-pricing model. The estimated fair value of employee stock options is amortized to expense using the straight-line method over the required service period which is generally the vesting period. The estimated fair value of the non-employee options is amortized to expense over the period during which a non-employee is required to provide services for the award (usually the vesting period).

Volatility. The Company estimates volatility based on the Company’s historical volatility since its common stock is publicly traded.

Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant commensurate with the expected term assumption.

Expected term. The expected term of stock options granted is based on an estimate of when options will be exercised in the future. The Company applies the simplified method of estimating the expected term of the options, as described in the SEC’s Staff Accounting Bulletins 107 and 110, as the historical experience is not indicative of the expected behavior in the future. The expected term, calculated under the simplified method, is applied to groups of stock options that have similar contractual terms. Using this method, the expected term is determined using the average of the vesting period and the contractual life of the stock options granted. The Company applied the simplified method to non-employees who have a truncation of term based on termination of service and utilizes the contractual life of the stock options granted for those non-employee grants which do not have a truncation of service.

Forfeitures. The Company records stock-based compensation expense only for those awards that are expected to vest and accounts for forfeitures as they occur.

Dividends. The Company has not historically recorded dividends related to stock options.

Exercise prices for all grants made during the three months ended March 31, 2024 and March 31, 2023, were equal to the market value of the Company’s common stock on the date of grant.

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5. INCOME TAXES

The Company accounts for income taxes in accordance with the liability method of accounting. Deferred tax assets or liabilities are computed based on the difference between the financial statement and income tax basis of assets and liabilities, and net operating loss carryforwards (“NOLs”), using the enacted tax rates. Deferred income tax expense or benefit is based on changes in the asset or liability from period to period. The Company did not record a provision or benefit for federal, state or foreign income taxes for the three months ended March 31, 2024 or 2023 because the Company has experienced losses on a tax basis since inception. Because of the continuing losses and uncertainty associated with the utilization of the NOLs in the future, management has provided a full allowance against the value of its gross deferred tax assets.

The Company also accounts for the uncertainty in income taxes related to the recognition and measurement of a tax position taken or expected to be taken in an income tax return. The Company follows the applicable accounting guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition related to the uncertainty in income tax positions. No uncertain tax positions have been identified.

6. NET LOSS PER SHARE

Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock and pre-funded warrants outstanding during the period. The pre-funded warrants are considered common shares outstanding for the purposes of the basic net loss per share calculation due to the nominal cash consideration and lack of other contingencies for issuance of the underlying common shares. Diluted net loss attributable to common stockholders per share is computed by dividing net loss attributable to common stockholders, as adjusted, by the sum of the weighted average number of shares of common stock and the dilutive potential common stock equivalents then outstanding. Potential common stock equivalents consist of stock options, warrants, and convertible preferred shares. Since there is a net loss attributable to common stockholders for the three months ended March 31, 2024 and March 31, 2023, the inclusion of common stock equivalents in the computation for those periods would be antidilutive. Accordingly, basic and diluted net loss per share is the same for all periods presented.

The following potentially dilutive securities have been excluded from the computation of diluted net loss per share since their inclusion would be antidilutive:


		Three Months Ended

SEC Form 10-Q filed by Cellectar Biosciences Inc.