0001651407--12-312020Q3false70000007000000Checkpoint Therapeutics, Inc.YesYes4700476460883303P12M0001651407us-gaap:ResearchAndDevelopmentExpenseMember2019-01-012019-12-310001651407ckpt:FortressBiotechIncMember2020-06-042020-06-040001651407us-gaap:RetainedEarningsMember2020-09-300001651407us-gaap:AdditionalPaidInCapitalMember2020-09-300001651407ckpt:CommonStockIssuableMember2020-09-300001651407us-gaap:RetainedEarningsMember2020-06-300001651407us-gaap:AdditionalPaidInCapitalMember2020-06-300001651407ckpt:CommonStockIssuableMember2020-06-3000016514072020-06-300001651407us-gaap:RetainedEarningsMember2019-12-310001651407us-gaap:AdditionalPaidInCapitalMember2019-12-310001651407ckpt:CommonStockIssuableMember2019-12-310001651407us-gaap:RetainedEarningsMember2019-09-300001651407us-gaap:AdditionalPaidInCapitalMember2019-09-300001651407ckpt:CommonStockIssuableMember2019-09-300001651407us-gaap:RetainedEarningsMember2019-06-300001651407us-gaap:AdditionalPaidInCapitalMember2019-06-300001651407ckpt:CommonStockIssuableMember2019-06-3000016514072019-06-300001651407us-gaap:RetainedEarningsMember2018-12-310001651407us-gaap:AdditionalPaidInCapitalMember2018-12-310001651407ckpt:CommonStockIssuableMember2018-12-310001651407us-gaap:CommonStockMember2020-06-300001651407us-gaap:CommonClassAMember2020-06-300001651407us-gaap:CommonStockMember2019-12-310001651407us-gaap:CommonStockMember2019-09-300001651407us-gaap:CommonClassAMember2019-09-300001651407us-gaap:CommonStockMember2019-06-300001651407us-gaap:CommonClassAMember2019-06-300001651407us-gaap:CommonStockMember2018-12-310001651407us-gaap:CommonClassAMember2018-12-310001651407us-gaap:CommonStockMember2020-09-300001651407ckpt:UnderwrittenPublicOfferingMember2020-09-300001651407us-gaap:EmployeeStockOptionMember2019-01-012019-12-310001651407us-gaap:EmployeeStockOptionMember2020-09-300001651407us-gaap:EmployeeStockOptionMember2019-12-310001651407us-gaap:EmployeeStockOptionMember2020-01-012020-09-300001651407ckpt:TwoThousandFifteenIncentivePlanMember2020-09-300001651407ckpt:TwoThousandFifteenIncentivePlanMember2020-07-012020-09-300001651407us-gaap:WarrantMember2019-01-012019-12-310001651407us-gaap:RestrictedStockMember2020-09-300001651407us-gaap:PerformanceSharesMember2020-09-300001651407us-gaap:RestrictedStockMember2019-12-310001651407us-gaap:RestrictedStockMember2020-01-012020-09-300001651407ckpt:JubilantBiosysLtdMember2020-07-012020-09-300001651407ckpt:CollaborationAgreementWithTgtxMember2020-07-012020-09-300001651407ckpt:JubilantBiosysLtdMember2020-01-012020-09-300001651407ckpt:CollaborationAgreementWithTgtxMember2020-01-012020-09-300001651407ckpt:JubilantBiosysLtdMember2019-07-012019-09-300001651407ckpt:CollaborationAgreementWithTgtxMember2019-07-012019-09-300001651407ckpt:JubilantBiosysLtdMember2019-01-012019-09-300001651407ckpt:CollaborationAgreementWithTgtxMember2019-01-012019-09-300001651407ckpt:NonvestedRestrictedStockMember2020-09-300001651407ckpt:NonvestedRestrictedStockMember2020-01-012020-09-300001651407us-gaap:ResearchAndDevelopmentExpenseMember2020-07-012020-09-300001651407us-gaap:GeneralAndAdministrativeExpenseMember2020-07-012020-09-300001651407us-gaap:ResearchAndDevelopmentExpenseMember2020-01-012020-09-300001651407us-gaap:GeneralAndAdministrativeExpenseMember2020-01-012020-09-300001651407us-gaap:ResearchAndDevelopmentExpenseMember2019-07-012019-09-300001651407us-gaap:GeneralAndAdministrativeExpenseMember2019-07-012019-09-300001651407us-gaap:ResearchAndDevelopmentExpenseMember2019-01-012019-09-300001651407us-gaap:GeneralAndAdministrativeExpenseMember2019-01-012019-09-300001651407ckpt:FoundersAgreementMemberckpt:FortressBiotechIncMember2015-03-170001651407ckpt:EquityIncentiveGrantsMemberckpt:CaribeBioadvisorsLLCMember2020-07-012020-09-300001651407ckpt:ManagementServicesAgreementMember2020-07-012020-09-300001651407ckpt:CaribeBioadvisorsLLCMember2020-07-012020-09-300001651407ckpt:EquityIncentiveGrantsMemberckpt:CaribeBioadvisorsLLCMember2020-01-012020-09-300001651407ckpt:ManagementServicesAgreementMember2020-01-012020-09-300001651407ckpt:CaribeBioadvisorsLLCMember2020-01-012020-09-300001651407ckpt:EquityIncentiveGrantsMemberckpt:CaribeBioadvisorsLLCMember2019-07-012019-09-300001651407ckpt:ManagementServicesAgreementMember2019-07-012019-09-300001651407ckpt:CaribeBioadvisorsLLCMember2019-07-012019-09-300001651407ckpt:EquityIncentiveGrantsMemberckpt:CaribeBioadvisorsLLCMember2019-01-012019-09-300001651407ckpt:ManagementServicesAgreementMember2019-01-012019-09-300001651407ckpt:CaribeBioadvisorsLLCMember2019-01-012019-09-300001651407us-gaap:CommonClassAMember2020-09-300001651407ckpt:ClassACommonStockMember2020-09-300001651407us-gaap:CommonClassAMember2019-12-310001651407ckpt:ClassACommonStockMember2020-06-040001651407us-gaap:WarrantMember2020-09-300001651407us-gaap:WarrantMember2019-12-3100016514072019-09-3000016514072018-12-310001651407us-gaap:WarrantMember2020-01-012020-09-300001651407us-gaap:StockOptionMember2020-01-012020-09-300001651407us-gaap:RestrictedStockMember2020-01-012020-09-300001651407us-gaap:WarrantMember2019-01-012019-09-300001651407us-gaap:StockOptionMember2019-01-012019-09-300001651407us-gaap:RestrictedStockMember2019-01-012019-09-3000016514072019-12-310001651407us-gaap:CommonStockMember2020-11-030001651407us-gaap:CommonClassAMember2020-11-030001651407ckpt:FortressBiotechIncMember2020-07-012020-09-300001651407ckpt:FortressBiotechIncMember2020-01-012020-09-300001651407us-gaap:RetainedEarningsMember2020-07-012020-09-300001651407us-gaap:AdditionalPaidInCapitalMember2020-07-012020-09-300001651407ckpt:CommonStockIssuableMember2020-07-012020-09-3000016514072020-07-012020-09-300001651407us-gaap:RetainedEarningsMember2020-01-012020-09-300001651407us-gaap:AdditionalPaidInCapitalMember2020-01-012020-09-300001651407ckpt:CommonStockIssuableMember2020-01-012020-09-300001651407us-gaap:RetainedEarningsMember2019-07-012019-09-300001651407us-gaap:AdditionalPaidInCapitalMember2019-07-012019-09-300001651407ckpt:CommonStockIssuableMember2019-07-012019-09-3000016514072019-07-012019-09-300001651407us-gaap:RetainedEarningsMember2019-01-012019-09-300001651407us-gaap:AdditionalPaidInCapitalMember2019-01-012019-09-300001651407ckpt:CommonStockIssuableMember2019-01-012019-09-300001651407us-gaap:CommonStockMember2020-07-012020-09-300001651407us-gaap:CommonClassAMember2020-07-012020-09-300001651407us-gaap:CommonStockMember2020-01-012020-09-300001651407us-gaap:CommonClassAMember2020-01-012020-09-300001651407us-gaap:CommonStockMember2019-07-012019-09-300001651407us-gaap:CommonClassAMember2019-07-012019-09-300001651407us-gaap:CommonStockMember2019-01-012019-09-300001651407us-gaap:CommonClassAMember2019-01-012019-09-3000016514072020-09-3000016514072017-11-300001651407us-gaap:WarrantMember2020-01-012020-09-300001651407ckpt:SublicenseAgreementWithTGTXMemberckpt:ClinicalDevelopmentMilestoneMember2020-09-300001651407ckpt:JubilantBiosysLtdMemberckpt:SaleMillstoneMember2020-09-300001651407ckpt:JubilantBiosysLtdMemberckpt:FiveRegulatoryApprovalsAndFirstCommercialSalesMember2020-09-300001651407ckpt:JubilantBiosysLtdMemberckpt:ClinicalDevelopmentAndRegulatoryMilestonesMember2020-09-300001651407ckpt:DanaFarberCancerInstituteMemberckpt:FirstCommercialSaleMilestoneMember2020-09-300001651407ckpt:DanaFarberCancerInstituteMemberckpt:CommercialSalesInSpecifiedTerritoriesMember2020-09-300001651407ckpt:DanaFarberCancerInstituteMemberckpt:AdditionalSalesMilestoneMember2020-09-300001651407ckpt:CollaborationAgreementWithTgtxMemberckpt:FiveRegulatoryApprovalsAndFirstCommercialSalesMember2020-09-300001651407ckpt:CollaborationAgreementWithTgtxMemberckpt:CommercialSalesInSpecifiedTerritoriesMember2020-09-300001651407ckpt:CollaborationAgreementWithTgtxMemberckpt:ClinicalDevelopmentMilestoneMember2020-09-300001651407ckpt:CollaborationAgreementWithTgtxMemberckpt:ClinicalDevelopmentAndRegulatoryMilestonesMember2020-09-300001651407ckpt:JubilantBiosysLtdMember2020-09-300001651407ckpt:CollaborationAgreementWithTgtxMember2015-03-012015-03-310001651407ckpt:UnderwrittenPublicOfferingMember2020-09-012020-09-300001651407ckpt:UnderwrittenPublicOfferingMember2020-01-012020-09-300001651407ckpt:CollaborationAgreementWithTgtxMember2019-06-012019-06-300001651407ckpt:CollaborationAgreementWithTgtxMemberckpt:PdL1Member2020-09-300001651407ckpt:AdimabLLCMemberckpt:RegulatoryApprovalsToCommercializeProductsMember2020-09-300001651407ckpt:AdimabLLCMemberckpt:ClinicalDevelopmentMilestoneMember2020-09-300001651407ckpt:JubilantBiosysLtdMemberckpt:SaleMillstoneMember2016-05-310001651407ckpt:JubilantBiosysLtdMemberckpt:RegulatoryApprovalsToCommercializeProductsMember2016-05-310001651407ckpt:JubilantBiosysLtdMemberckpt:ClinicalDevelopmentMilestoneMember2016-05-310001651407ckpt:NeupharmaMemberckpt:RegulatoryApprovalsToCommercializeProductsMember2015-03-310001651407ckpt:NeupharmaMemberckpt:ClinicalDevelopmentMilestoneMember2015-03-310001651407ckpt:NeupharmaMemberckpt:AdditionalSalesMilestoneMember2015-03-310001651407ckpt:DanaFarberCancerInstituteMemberckpt:FirstCommercialSaleMilestoneMember2015-03-310001651407ckpt:DanaFarberCancerInstituteMemberckpt:AdditionalSalesMilestoneMember2015-03-310001651407ckpt:DanaFarberCancerInstituteMember2015-03-012015-03-3100016514072020-01-012020-09-3000016514072019-01-012019-09-300001651407ckpt:ManagementServicesAgreementMember2015-03-170001651407ckpt:FortressBiotechIncMember2020-09-300001651407ckpt:FortressBiotechIncMember2020-01-0100016514072015-03-1700016514072020-06-040001651407ckpt:AgentMember2020-09-300001651407ckpt:ManagementServicesAgreementMember2015-03-012015-03-170001651407ckpt:CaribeBioadvisorsLLCMember2016-12-012016-12-310001651407ckpt:FoundersAgreementMemberckpt:FortressBiotechIncMember2015-03-012015-03-17iso4217:USDxbrli:purexbrli:sharesckpt:itemiso4217:USDxbrli:shares

Table of Contents

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 September 30, 2020

OR

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 001-38128

CHECKPOINT THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware

 

47-2568632

(State or other jurisdiction of incorporation or organization)

 

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

2 Gansevoort Street, 9th Floor, New York NY 10014

(Address of principal executive offices and zip code)

(781) 652-4500

(Registrant's telephone number, including area code)

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

Title of each class

    

Trading Symbol(s)

    

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

 

CKPT

 

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, a smaller reporting company, or an emerging growth company. See definition 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 registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES         NO     

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

Class of Common Stock

    

Outstanding Shares as of November 3, 2020

Class A Common Stock, $0.0001 par value

 

7,000,000

Common Stock, $0.0001 par value

 

60,883,303

Table of Contents

CHECKPOINT THERAPEUTICS, INC.

Form 10-Q

For the Quarter Ended September 30, 2020

Table of Contents

 

 

Page
No.

PART I. FINANCIAL INFORMATION

 

Item 1.

Financial Statements

1

Condensed Balance Sheets as of September 30, 2020 (unaudited) and December 31, 2019

1

Condensed Statements of Operations for the three and nine months ended September 30, 2020 and 2019 (unaudited)

2

Condensed Statements of Stockholders' Equity for the three and nine months ended September 30, 2020 and 2019 (unaudited)

3

Condensed Statements of Cash Flows for the nine months ended September 30, 2020 and 2019 (unaudited)

5

Notes to Condensed Financial Statements (unaudited)

6

Item 2.

Management’s Discussion and Analysis of the Results of Operations

19

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

22

Item 4.

Controls and Procedures

22

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

23

Item 1A.

Risk Factors

23

Item 2.

Recent Sales of Unregistered Securities

58

Item 6.

Exhibits

59

Signatures

60

Table of Contents

Item 1. Financial Statements.

Checkpoint Therapeutics, Inc.

Condensed Balance Sheets

(in thousands, except share and per share amounts)

    

September 30, 2020

    

December 31, 2019

(Unaudited)

  

ASSETS

  

Current Assets:

  

Cash and cash equivalents

$

42,029

$

26,077

Prepaid expenses and other assets

 

588

863

Other receivables - related party

 

28

26

Total current assets

 

42,645

26,966

Total Assets

$

42,645

$

26,966

 

  

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

  

Current Liabilities:

 

  

Accounts payable and accrued expenses

$

5,665

$

7,257

Accounts payable and accrued expenses - related party

 

755

862

Total current liabilities

 

6,420

8,119

Total Liabilities

 

6,420

8,119

 

  

Commitments and Contingencies

 

  

 

  

Stockholders’ Equity

 

  

Common Stock ($0.0001 par value), 95,000,000 shares authorized

 

  

Class A common shares, 7,000,000 shares issued and outstanding as of September 30, 2020 and December 31, 2019

 

1

1

Common shares, 60,883,303 and 47,004,764 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

 

6

5

Common stock issuable, 0 and 1,459,305 shares as of September 30, 2020 and December 31, 2019, respectively

 

2,510

Additional paid-in capital

 

169,185

136,442

Accumulated deficit

 

(132,967)

(120,111)

Total Stockholders’ Equity

 

36,225

18,847

Total Liabilities and Stockholders’ Equity

$

42,645

$

26,966

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

1

Table of Contents

Checkpoint Therapeutics, Inc.

Condensed Statements of Operations

(in thousands, except share and per share amounts)

(Unaudited)

For the three months ended September 30, 

For the nine months ended September 30, 

    

2020

    

2019

    

2020

    

2019

Revenue - related party

$

28

$

280

$

1,042

$

1,683

 

 

Operating expenses:

 

 

Research and development

 

2,543

3,894

 

8,207

12,595

General and administrative

 

2,429

1,620

 

5,794

5,081

Total operating expenses

 

4,972

5,514

 

14,001

17,676

Loss from operations

 

(4,944)

(5,234)

 

(12,959)

(15,993)

 

 

Other income

 

 

Interest income

 

14

28

 

103

105

Total other income

 

14

28

 

103

105

Net Loss

$

(4,930)

$

(5,206)

$

(12,856)

$

(15,888)

 

 

Loss per Share:

 

 

Basic and diluted net loss per common share outstanding

$

(0.09)

$

(0.15)

$

(0.24)

$

(0.48)

 

 

Basic and diluted weighted average number of common shares outstanding

 

56,405,734

34,561,844

 

53,040,215

33,178,567

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

2

Table of Contents

Checkpoint Therapeutics, Inc.

Condensed Statements of Stockholders’ Equity

(in thousands, except share amounts)

(Unaudited)

For the Three Months Ended September 30, 2020

Common

Additional

Total

Class A Common Shares

Common Shares

Shares

Paid-in

Accumulated

Stockholders’

    

Shares

    

Amount

    

Shares

    

Amount

    

Issuable

    

Capital

    

Deficit

    

Equity

Balances at June 30, 2020

7,000,000

  

$

1

50,980,004

$

5

$

0

$

143,005

$

(128,037)

$

14,974

Issuance of common shares, net of offering costs - At-the-market offering

2,311,062

5,813

5,813

Issuance of common shares, net of offering costs - Public offering

7,321,429

1

18,911

18,912

Issuance of common shares - Founders Agreement

  

240,808

  

 

731

 

731

Stock-based compensation expense

30,000

725

725

Net loss

  

  

 

 

(4,930)

(4,930)

Balances at September 30, 2020

7,000,000

  

$

1

60,883,303

$

6

$

0

$

169,185

$

(132,967)

$

36,225

For the Nine Months Ended September 30, 2020

Common

Additional

Total

Class A Common Shares

Common Shares

Shares

 Paid-in

Accumulated

Stockholders’

    

Shares

    

Amount

    

Shares

    

Amount

    

Issuable

    

Capital

    

Deficit

    

Equity

Balances at December 31, 2019

7,000,000

  

$

1

47,004,764

$

5

$

2,510

$

136,442

$

(120,111)

$

18,847

Issuance of common shares, net of offering costs - At-the-market offering

  

3,614,344

  

 

8,417

 

8,417

Issuance of common shares, net of offering costs - Public offering

  

7,321,429

  

1

 

18,911

 

18,912

Issuance of common shares - Founders Agreement

1,732,684

(2,510)

3,307

797

Stock-based compensation expense

  

1,107,340

  

 

2,095

 

2,095

Exercise of warrants

  

102,742

  

 

13

 

13

Net loss

  

  

 

 

(12,856)

(12,856)

Balances at September 30, 2020

7,000,000

  

$

1

60,883,303

$

6

$

0

$

169,185

$

(132,967)

$

36,225

3

Table of Contents

Checkpoint Therapeutics, Inc.

Condensed Statements of Stockholders’ Equity

(in thousands, except share amounts)

(Unaudited)

For the Three Months Ended September 30, 2019

Common

Additional

Total

Class A Common Shares

Common Shares

 Shares

 Paid-in

Accumulated

Stockholders’

    

Shares

    

Amount

    

Shares

    

Amount

    

Issuable

    

Capital

    

Deficit

    

Equity

Balances at June 30, 2019

7,000,000

  

$

1

29,960,034

$

3

$

$

113,284

$

(106,079)

$

7,209

Issuance of common shares, net of offering costs - At-the-market offering

1,142,298

3,341

3,341

Stock-based compensation expense

  

9,000

  

 

833

 

833

Issuance of common shares - Founders Agreement

28,555

92

92

Exercise of warrants

  

26,146

  

 

 

Net loss

  

  

 

 

(5,206)

(5,206)

Balances at September 30, 2019

7,000,000

  

$

1

31,166,033

$

3

$

$

117,550

$

(111,285)

$

6,269

For the Nine Months Ended September 30, 2019

Common

Additional

Total

Class A Common Shares

Common Shares

 Shares

 Paid-in

Accumulated

Stockholders’

    

Shares

    

Amount

    

Shares

    

Amount

    

Issuable

    

Capital

    

Deficit

    

Equity

Balances at December 31, 2018

7,000,000

  

$

1

27,076,154

$

3

$

1,748

$

105,451

$

(95,397)

$

11,806

Issuance of common shares, net of offering costs - At-the-market offering

2,230,524

7,709

7,709

Stock-based compensation expense

  

769,652

  

 

2,444

 

2,444

Issuance of common shares - Founders Agreement

  

1,016,178

  

 

(1,748)

1,946

 

198

Exercise of warrants

  

73,525

  

 

 

Net loss

  

  

 

 

(15,888)

(15,888)

Balances at September 30, 2019

7,000,000

  

$

1

31,166,033

$

3

$

$

117,550

$

(111,285)

$

6,269

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

4

Table of Contents

Checkpoint Therapeutics, Inc.

Condensed Statements of Cash Flows

(in thousands)

(Unaudited)

For the nine months ended September 30, 

    

2020

    

2019

Cash Flows from Operating Activities:

  

Net loss

$

(12,856)

$

(15,888)

Adjustments to reconcile net loss to net cash used in operating activities:

 

Stock-based compensation expense

 

2,095

2,444

Issuance of common shares - Founders Agreement

 

797

198

Changes in operating assets and liabilities:

 

Prepaid expenses and other assets

 

275

632

Other receivables - related party

 

(2)

1,252

Accounts payable and accrued expenses

 

(1,926)

(5,282)

Net cash used in operating activities

 

(11,617)

(16,644)

 

Cash Flows from Financing Activities:

 

Issuance of common shares - Public offering

 

20,500

Offering costs for the issuance of common stock - Public offering

 

(1,361)

Proceeds from issuance of common stock - At-the-market offering

 

8,684

7,904

Offering costs for the issuance of common stock - At-the-market offering

 

(267)

(195)

Proceeds from the exercise or warrants

13

Net cash provided by financing activities

27,569

7,709

 

Net increase in cash and cash equivalents

 

15,952

(8,935)

Cash and cash equivalents at beginning of period

 

26,077

21,995

Cash and cash equivalents at end of period

$

42,029

$

13,060

 

Supplemental disclosure of noncash investing and financing activities:

 

Issuance of common shares - Founders Agreement

$

2,510

$

1,748

Issuance of common shares - Public offering (offering costs incurred but not paid)

$

296

$

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

5

Table of Contents

Checkpoint Therapeutics, Inc.

Notes to Condensed Financial Statements

(Unaudited)

Note 1 - Organization and Description of Business Operations

Checkpoint Therapeutics, Inc. (the “Company” or “Checkpoint”) was incorporated in Delaware on November 10, 2014. Checkpoint is a clinical-stage immunotherapy and targeted oncology company focused on the acquisition, development and commercialization of novel treatments for patients with solid tumor cancers. The Company may acquire rights to these technologies by licensing the rights or otherwise acquiring an ownership interest in the technologies, funding their research and development and eventually either out-licensing or bringing the technologies to market. The Company may also enter into collaboration agreements with third and related parties including sponsored research agreements to develop these technologies for liquid tumors while retaining the rights in solid tumors.

The Company is a majority-controlled subsidiary of Fortress Biotech, Inc. (“Fortress”).

The Company's common stock is listed on the NASDAQ Capital Market and trades under the symbol “CKPT.”

Liquidity and Capital Resources

The Company has incurred substantial operating losses since its inception and expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. As of September 30, 2020, the Company had an accumulated deficit of $133.0 million.

In September 2020, the Company completed an underwritten public offering in which it sold 7,321,429 shares of its common stock at a price of $2.80 per share for gross proceeds of approximately $20.5 million. Total net proceeds from the offering were approximately $18.9 million, net of underwriting discounts and offering expenses of approximately $1.6 million. The shares were sold under a Registration Statement (No. 333-221493) on Form S-3, filed with the Securities and Exchange Commission (“SEC”).

During the nine months ended September 30, 2020, the Company sold a total of 3,614,344 shares of common stock under an At-the-Market Issuance Sales Agreement for aggregate total gross proceeds of approximately $8.7 million at an average selling price of $2.40 per share, resulting in net proceeds of approximately $8.4 million after deducting commissions and other transaction costs.

The Company expects to continue to use the proceeds from previous financing transactions primarily for general corporate purposes, which may include financing the Company's growth, developing new or existing product candidates, and funding capital expenditures, acquisitions and investments. The Company currently anticipates that its cash and cash equivalents balances at September 30, 2020 will be sufficient to fund its anticipated operating cash requirements for at least one year from the filing date of this Quarterly Report on Form 10-Q.

The Company will be required to expend significant funds in order to advance the development of its product candidates. The Company's estimate as to how long it expects its existing cash to be able to continue to fund its operations is based on assumptions that may prove to be wrong, and it could use its available capital resources sooner than it currently expects. Further, changing circumstances, some of which may be beyond its control, could cause the Company to consume capital faster than it currently anticipates, and it may need to seek additional funds sooner than planned. Accordingly, the Company will be required to obtain further funding through equity offerings, debt financings, collaborations and licensing arrangements or other sources. Further financing may not be available to it on acceptable terms, or at all. The Company's failure to raise capital as and when needed would have a negative impact on its financial condition and its ability to pursue its business strategy and may be forced to curtail or cease operations. In addition to the foregoing, based on the Company's current assessment, the Company does not expect any material impact on its long-term development timeline and its liquidity due to the worldwide spread of the coronavirus (“COVID-19”). However, the Company is continuing to assess the effect on its operations by monitoring the spread of COVID-19, as well as the effect of the COVID-19 pandemic on the Company's clients, vendors, and business partners, and the actions implemented to combat the virus throughout the world.

6

Table of Contents

Checkpoint Therapeutics, Inc.

Notes to Condensed Financial Statements

(Unaudited)

Note 2 - Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the Exchange Act. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, the unaudited interim condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. They may not include all of the information and notes required by GAAP for complete financial statements. Therefore, these financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2019, which were included in the Company's Form 10-K, and filed with the SEC on March 11, 2020. The results of operations for any interim periods are not necessarily indicative of the results that may be expected for the entire fiscal year or any other interim period.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.

Other Receivables - Related Party

Other receivables consist of amounts due to the Company from TG Therapeutics, Inc. (“TGTX”), a related party, and are recorded at the invoiced amount.

Research and Development Costs

Research and development costs are expensed as incurred. Advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made. Upfront and milestone payments due to third parties that perform research and development services on the Company's behalf will be expensed as services are rendered or when the milestone is achieved.

Research and development costs primarily consist of personnel related expenses, including salaries, benefits, travel, and other related expenses, stock-based compensation, payments made to third parties for license and milestone costs related to in-licensed products and technology, payments made to third party contract research organizations for preclinical and clinical studies, investigative sites for clinical trials, consultants, the cost of acquiring and manufacturing clinical trial materials, costs associated with regulatory filings, laboratory costs and other supplies.

In accordance with Accounting Standards Codification (“ASC”) 730-10-25-1, Research and Development, costs incurred in obtaining technology licenses are charged to research and development expense if the technology licensed has not reached commercial feasibility and has no alternative future use. Such licenses purchased by the Company require substantial completion of research and development, regulatory and marketing approval efforts in order to reach commercial feasibility and have no alternative future use.

7

Table of Contents

Checkpoint Therapeutics, Inc.

Notes to Condensed Financial Statements

(Unaudited)

Annual Equity Fee

Under the Founders Agreement with Checkpoint dated March 17, 2015, and amended and restated on July 11, 2016 (the “Founders Agreement”), Fortress is entitled to an annual equity fee on January 1 of each year equal to  2.5% of fully diluted outstanding equity, payable in Checkpoint common shares (“Annual Equity Fee”). The Annual Equity Fee was part of the consideration payable for formation of the Company, identification of certain assets, including the license contributed to Checkpoint by Fortress (see Note 4).

The Company records the Annual Equity Fee in connection with the Founders Agreement with Fortress as contingent consideration. Contingent consideration is recorded when probable and reasonably estimable. The Company's future share prices and shares outstanding cannot be estimated prior to the issuance of the Annual Equity Fee due to the nature of its assets and the Company's stage of development. Due to these uncertainties, the Company has concluded that it is unable to reasonably estimate the contingent consideration until shares are actually issued on January 1 of each year.

Pursuant to the Founders Agreement, the Company issued 1,459,305 shares of common stock to Fortress on June 4, 2020 for the Annual Equity Fee, representing 2.5% of the fully-diluted outstanding equity of Checkpoint on January 1, 2020. The Company did not have enough unreserved authorized shares under its Certificate of Incorporation on January 1, 2020 to issue the shares for the Annual Equity Fee, therefore, in December 2019, Fortress and Checkpoint mutually agreed to defer the issuance until such time as the Checkpoint Charter has been amended in order to increase the number of authorized shares that may be issued thereunder. At the Company's 2020 Annual Meeting of Stockholders held on June 4, 2020, its stockholders approved an amendment to its certificate of incorporation to increase the number of authorized shares of common stock available to issue. Because the number of outstanding shares issuable to Fortress was determinable on January 1, 2020 prior to the issuance of the December 31, 2019 financial statements, the Company recorded approximately $2.5 million in research and development expense and a credit to Common shares issuable - Founders Agreement during the year ended December 31, 2019.

Stock-Based Compensation Expenses

The Company expenses stock-based compensation over the requisite service period based on the estimated grant-date fair value of the awards and forfeiture rates. The Company accounts for forfeitures as they occur.

The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model. 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 Condensed Statements of Operations based upon the underlying individual's role at the Company.

Fair Value Measurement

The Company follows the accounting guidance in 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.

8

Table of Contents

Checkpoint Therapeutics, Inc.

Notes to Condensed Financial Statements

(Unaudited)

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.

Certain of the Company’s financial instruments are not measured at fair value on a recurring basis but are recorded at amounts that approximate their fair value due to their liquid or short-term nature, such as accounts payable and accrued expenses.

Revenue from Contracts with Customers

The Company recognizes revenue under ASC 606, “Revenue from Contracts with Customers.” The core principle of the new revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:

Step 1: Identify the contract with the customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when the company satisfies a performance obligation

In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met:

The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct).
The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).

If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct.

The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties (for example, some sales taxes). The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. When determining the transaction price, an entity must consider the effects of all of the following:

Variable consideration
Constraining estimates of variable consideration

9

Table of Contents

Checkpoint Therapeutics, Inc.

Notes to Condensed Financial Statements

(Unaudited)

The existence of a significant financing component in the contract
Noncash consideration
Consideration payable to a customer

Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

The transaction price is allocated to each performance obligation on a relative standalone selling price basis. The transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate.

Revenue for a sales-based or usage-based royalty promised in exchange for a license of intellectual property is recognized only when (or as) the later of the following events occurs:

a.The subsequent sale or usage occurs.
b.The performance obligation to which some or all of the sales-based or usage-based royalty has been allocated has been satisfied (or partially satisfied).

Incremental contract costs are expensed when incurred when the amortization period of the asset that would have been recognized is one year or less; otherwise, incremental contract costs are recognized as an asset and amortized over time as services are provided to a customer.

Coronavirus Aid, Relief and Economic Security Act ("CARES Act")

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was signed into law on March 27, 2020. The CARES Act, among other things, includes tax provisions relating to refundable payroll tax credits, deferment of employer's social security payments, net operating loss utilization and carryback periods and modifications to the net interest deduction limitations. At this time, the Company does not believe that the CARES Act will have a material impact on its income tax provision for 2020. The Company will continue to evaluate the impact of the CARES Act on its financial position, results of operations and cash flows.

10

Table of Contents

Checkpoint Therapeutics, Inc.

Notes to Condensed Financial Statements

(Unaudited)

Net Loss per Share

Net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Since dividends are declared, paid and set aside among the holders of shares of common stock and Class A common stock pro-rata on an as-if-converted basis, the two-class method of computing net loss per share is not required. Diluted net loss per share does not reflect the effect of shares of common stock to be issued upon the exercise of stock options and warrants, as their inclusion would be anti-dilutive. The following table summarizes potentially dilutive securities outstanding at September 30, 2020 and 2019, that were excluded from the computation of diluted net loss per share, as they would be anti-dilutive:

September 30, 

    

2020

    

2019

Warrants (Note 6)

 

3,224,455

4,207,447

Stock options (Note 6)

 

220,000

110,000

Unvested restricted stock (Note 6)

 

4,013,199

3,402,151

Total

 

7,457,654

7,719,598

Recently Issued Accounting Standards

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments – Credit Losses” as amended by ASU 2019-10. The ASU sets forth a “current expected credit loss” (CECL) model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. In November 2019, the FASB issued ASU 2019-10, “Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) Effective Dates”, which deferred the effective dates for the Company, as a smaller reporting company, until fiscal year 2023. The Company is currently assessing the impact of the adoption of this ASU on its financial statements.

In December 2019, the FASB issued 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. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company will adopt the new guidance in the first quarter of 2021 and the adoption of this guidance is not expected to have a material impact on the condensed financial statements.

In August 2020, the FASB issued ASU No. 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”, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption will be permitted. The Company is currently evaluating the impact of this standard on its condensed financial statements.

11

Table of Contents

Checkpoint Therapeutics, Inc.

Notes to Condensed Financial Statements

(Unaudited)

Recently Adopted Accounting Standards

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820), - Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement,” which makes a number of changes meant to add, modify or remove certain disclosure requirements associated with the movement amongst or hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted upon issuance of the update. The Company adopted ASU No. 2018-13 as of January 1, 2020. The adoption of this update did not have a material impact on the Company’s condensed financial statements.

Note 3 – License Agreements

Dana-Farber Cancer Institute

In March 2015, the Company entered into an exclusive license agreement with Dana-Farber Cancer Institute (“Dana Farber”) to develop a portfolio of fully human immuno-oncology targeted antibodies. Dana-Farber is eligible to receive payments of up to an aggregate of approximately $21.5 million for each licensed product upon the Company’s successful achievement of certain clinical development, regulatory and first commercial sale milestones. In addition, Dana-Farber is eligible to receive up to an aggregate of $60.0 million upon the Company’s successful achievement of certain sales milestones based on aggregate net sales, in addition to royalty payments based on a tiered low to mid-single digit percentage of net sales. Following the second anniversary of the effective date of the license agreement, Dana-Farber receives an annual license maintenance fee of $50,000, which is creditable against milestone payments or royalties due to Dana-Farber. The portfolio of antibodies licensed from Dana-Farber include antibodies targeting PD-L1, GITR and CAIX.

In connection with the license agreement with Dana-Farber, the Company entered into a collaboration agreement with TGTX, which was amended and restated in June 2019, to develop and commercialize the anti-PD-L1 and anti-GITR antibody research programs in the field of hematological malignancies, while the Company retains the right to develop and commercialize these antibodies in solid tumors. Michael Weiss, Chairman of the Board of Directors of Checkpoint and Fortress’ Executive Vice Chairman, Strategic Development, is also the Executive Chairman, President and Chief Executive Officer and a stockholder of TGTX. Under the terms of the original collaboration agreement, TGTX paid the Company $0.5 million, representing an upfront licensing fee. Upon the signing of the amended and restated collaboration agreement in June 2019, TGTX paid the Company an additional $1.0 million upfront licensing fee. The Company is eligible to receive substantive potential milestone payments for the anti-PD-L1 program of up to an aggregate of approximately $27.6 million upon TGTX’s successful achievement of certain clinical development, regulatory and first commercial sale milestones. This is comprised of up to approximately $8.4 million upon TGTX’s successful completion of clinical development milestones, and up to approximately $19.2 million upon regulatory filings and first commercial sales in specified territories. The Company is also eligible to receive substantive potential milestone payments for the anti-GITR antibody program of up to an aggregate of approximately $21.5 million upon TGTX’s successful achievement of certain clinical development, regulatory and first commercial sale milestones. This is comprised of up to approximately $7.0 million upon TGTX’s successful completion of clinical development milestones, and up to approximately $14.5 million upon first commercial sales in specified territories. In addition, the Company is eligible to receive up to an aggregate of $60.0 million upon  TGTX’s successful achievement of certain sales milestones based on aggregate net sales for both programs, in addition to royalty payments based on a tiered low double-digit percentage of net sales. Following the second anniversary of the effective date of the agreement, the Company receives an annual license maintenance fee, which is creditable against milestone payments or royalties due to the Company. TGTX also pays the Company for its out-of-pocket costs of material used by TGTX for their development activities. For the three months ended September 30, 2020 and 2019, the Company recognized approximately $7,000 and $267,000, respectively, in revenue from its collaboration agreement in the Condensed Statements of Operations. For the nine months ended September 30, 2020 and 2019, the Company recognized approximately $1.0  million, which included a milestone of $925,000 upon the 12th patient dosed in a phase 1 clinical trial for the anti-PD-L1 antibody cosibelimab (formerly referred to as CK-301) during March 2020 and $1.6 million, respectively, in revenue related to the collaboration agreement in the Condensed Statements of Operations.

12

Table of Contents

Checkpoint Therapeutics, Inc.

Notes to Condensed Financial Statements

(Unaudited)

Adimab, LLC

In October 2015, Fortress entered into a collaboration agreement with Adimab , LLC (“Adimab”) to discover and optimize antibodies using their proprietary core technology platform. Under this agreement, Adimab optimized cosibelimab, the Company’s anti-PD-L1 antibody which it originally licensed from Dana-Farber. In January 2019, Fortress transferred the rights to the optimized antibody to the Company, and Checkpoint entered into a collaboration agreement directly with Adimab on the same day. Under the terms of the agreement, Adimab is eligible to receive payments up to an aggregate of approximately $7.1 million upon the Company’s successful achievement of certain clinical development and regulatory milestones, of which $4.8 million are due upon various filings for regulatory approvals to commercialize the product. In addition, Adimab is eligible to receive royalty payments based on a tiered low single digit percentage of net sales.

NeuPharma, Inc.

In March 2015, Fortress entered into an exclusive license agreement with NeuPharma, Inc. (“NeuPharma”) to develop and commercialize novel irreversible, 3rd generation EGFR inhibitors, including CK-101, on a worldwide basis other than certain Asian countries. On the same date, Fortress assigned all of its right and interest in the EGFR inhibitors to the Company. Under the terms of the license agreement NeuPharma is eligible to receive payments of up to an aggregate of approximately $40.0 million upon the Company’s successful achievement of certain clinical development and regulatory milestones in up to three indications, of which $22.5 million are due upon various regulatory approvals to commercialize the products. In addition, NeuPharma is eligible to receive payments of up to an aggregate of $40.0 million upon the Company’s successful achievement of certain sales milestones based on aggregate net sales, in addition to royalty payments based on a tiered mid to high-single digit percentage of net sales.

Jubilant Biosys Limited

In May 2016, the Company entered into a license agreement with Jubilant Biosys Limited (“Jubilant”), whereby the Company obtained an exclusive, worldwide license to Jubilant’s family of patents covering compounds that inhibit BET proteins such as BRD4, including CK-103. Under the terms of the license agreement Jubilant is eligible to receive payments up to an aggregate of approximately $89.0 million upon the Company’s successful achievement of certain clinical development and regulatory milestones, of which $59.5 million are due upon various regulatory approvals to commercialize the products. In addition, Jubilant is eligible to receive payments up to an aggregate of $89.0 million upon the Company’s successful achievement of certain sales milestones based on aggregate net sales, in addition to royalty payments based on a tiered low to mid-single digit percentage of net sales.

In connection with the license agreement with Jubilant, the Company entered into a sublicense agreement with TGTX, a related party, to develop and commercialize the compounds licensed in the field of hematological malignancies, while the Company retains the right to develop and commercialize these compounds in the field of solid tumors. Under the terms of the sublicense agreement the Company is eligible to receive substantive potential milestone payments up to an aggregate of approximately $87.2 million upon TGTX’s successful achievement of clinical development and regulatory milestones. This is comprised of up to approximately $25.5 million upon TGTX’s successful completion of three clinical development milestones for two licensed products, and up to approximately $61.7 million upon the achievement of five regulatory approvals and first commercial sales in specified territories for two licensed products. In addition, the Company is eligible to receive potential milestone payments up to an aggregate of $89.0 million upon TGTX’s successful achievement of certain sales milestones based on aggregate net sales by TGTX, for two licensed products, in addition to royalty payments based on a mid-single digit percentage of net sales by TGTX. TGTX also pays the Company 50% of IND enabling costs and patent expenses. For the three months ended September 30, 2020 and 2019, the Company recognized approximately $21,000 and $13,000, respectively, in revenue related to the sublicense agreement in the Condensed Statements of Operations. For the nine months ended September 30, 2020 and 2019, the Company recognized approximately $67,000 and $37,000, respectively, in revenue related to the sublicense agreement in the Condensed Statements of Operations.

13

Table of Contents

Checkpoint Therapeutics, Inc.

Notes to Condensed Financial Statements

(Unaudited)

The collaborations with TGTX each contain single material performance obligations under Topic 606, which is the granting of a license that is functional intellectual property. The Company’s performance obligation was satisfied at the point in time when TGTX had the ability to use and benefit from the right to use the intellectual property. The performance obligations of the original agreements were satisfied prior to the adoption of Topic 606. The performance obligation of the amendment to the collaboration agreement was satisfied in June 2019.

The milestone payments are based on successful achievement of clinical development, regulatory, and sales milestones. Because these payments are contingent on the occurrence of a future event, they represent variable consideration and are constrained and included in the transaction price only when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. The sales-based royalty payments are recognized as revenue when the subsequent sales occur. The Company also receives variable consideration for certain research and development, out-of-pocket material costs and patent maintenance related activities that are dependent upon the Company’s actual expenditures under the collaborations and are constrained and included in the transaction price only when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Revenue is recognized approximately when the amounts become due because it relates to an already satisfied performance obligation. For the nine months ended September 30, 2020, the Company recognized the achievement of a clinical development milestone under its collaboration agreement with TGTX based upon their dosing of a 12th patient in a phase 1 clinical trial of cosibelimab.

Note 4 – Related Party Agreements

Founders Agreement and Management Services Agreement with Fortress

Effective March 17, 2015, the Company entered into a Founders Agreement with Fortress, which was amended and restated on July 11, 2016. The Founders Agreement provides, that in exchange for the time and capital expended in the formation of Checkpoint and the identification of specific assets the acquisition of which resulted in the formation of a viable emerging growth life science company, the Company assumed $2.8 million in debt that Fortress accumulated under a promissory note through National Securities Corporation for expenses and costs of forming Checkpoint, and the Company shall also: (i) issue annually to Fortress, on the anniversary date of the Founders Agreement, shares of common stock equal to two and one-half percent (2.5)% of the fully-diluted outstanding equity of Checkpoint at the time of issuance; (ii) pay an equity fee in shares of common stock, payable within five (5) business days of the closing of any equity or debt financing for Checkpoint or any of its respective subsidiaries that occurs after the effective date of the Founders Agreement and ending on the date when Fortress no longer has majority voting control in Checkpoint’s voting equity, equal to two and one-half percent (2.5)% of the gross amount of any such equity or debt financing; and (iii) pay a cash fee equal to four and one half percent (4.5)% of Checkpoint’s annual net sales, payable on an annual basis, within ninety (90) days of the end of each calendar year. In the event of a change in control (as it is defined in the Founders Agreement), Checkpoint will pay a one-time change in control fee equal to five times (5x) the product of (i) monthly net sales for the twelve (12) months immediately preceding the change in control and (ii) four and one-half percent (4.5)%.The Founders Agreement has a term of fifteen years, after which it automatically renews for one-year periods unless Fortress gives the Company notice of termination. The Founders Agreement will also automatically terminate upon a change of control.

In October 2017, the Founders Agreement was further amended to change the issuance date of the Annual Equity Fee from the anniversary date of the Founders Agreement to January 1 of each year beginning in 2018.

14

Table of Contents

Checkpoint Therapeutics, Inc.

Notes to Condensed Financial Statements

(Unaudited)

Effective March 17, 2015, the Company entered into a Management Services Agreement (the “MSA”) with Fortress. Pursuant to the terms of the MSA, for a period of five (5) years, Fortress will render advisory and consulting services to the Company. Services provided under the MSA may include, without limitation, (i) advice and assistance concerning any and all aspects of Checkpoint’s operations, clinical trials, financial planning and strategic transactions and financings and (ii) conducting relations on behalf of the Company with accountants, attorneys, financial advisors and other professionals (collectively, the “Services”). The Company is obligated to utilize clinical research services, medical education, communication and marketing services and investor relations/public relation services of companies or individuals designated by Fortress, provided those services are offered at market prices. However, the Company is not obligated to take or act upon any advice rendered from Fortress and Fortress shall not be liable for any of the Company’s actions or inactions based upon their advice. Fortress and its affiliates, including all members of its Board of Directors, have been contractually exempt from fiduciary duties to the Company relating to corporate opportunities. In consideration for the Services, the Company will pay Fortress an annual consulting fee of $0.5 million (the “Annual Consulting Fee”), payable in advance in equal quarterly installments on the first business day of each calendar quarter in each year, provided, however, that such Annual Consulting Fee shall be increased to $1.0 million for each calendar year in which the Company has net assets in excess of $100 million at the beginning of the calendar year. For the three months ended September 30, 2020 and 2019, the Company recognized $125,000 in expense on its Condensed Statements of Operations related to the MSA. For the nine months ended September 30, 2020 and 2019, the Company recognized $375,000 in expense in its Condensed Statements of Operations related to the MSA.

Caribe BioAdvisors, LLC

In December 2016, the Company entered into an advisory agreement effective January 1, 2017 with Caribe BioAdvisors, LLC (“Caribe”), owned by Michael Weiss, to provide the advisory services of Mr. Weiss as Chairman of the Board. Pursuant to the agreement, Caribe will be paid an annual cash fee of $60,000, in addition to any and all annual equity incentive grants paid to members of the board. For the three months ended September 30, 2020 and 2019, the Company recognized approximately $28,000 in expense in its Condensed Statements of Operations related to the advisory agreement, including approximately $13,000 in expense related to annual equity incentive grants. For the nine months ended September 30, 2020 and 2019, the Company recognized approximately $84,000 and $76,000, respectively, in expense in its Condensed Statements of Operations related to the advisory agreement, including approximately $39,000 and $31,000, respectively, in expense related to annual equity incentive grants.

Note 5 – Commitments and Contingencies

Leases

The Company is not a party to any leases for office space or equipment.

License Agreements

The Company has undertaken to make contingent milestone payments to the licensors of its portfolio of product candidates. In addition, the Company would pay royalties to such licensors based on a percentage of net sales of each product candidate following regulatory marketing approval (See Note 3).

Litigation

The Company recognizes a liability for a contingency when it is probable that liability has been incurred and when the amount of loss can be reasonably estimated. When a range of probable loss can be estimated, the Company accrues the most likely amount of such loss, and if such amount is not determinable, then the Company accrues the minimum of the range of probable loss. As of September 30, 2020, and December 31, 2019, there was no litigation against the Company.

15

Table of Contents

Checkpoint Therapeutics, Inc.

Notes to Condensed Financial Statements

(Unaudited)

Note 6 – Stockholders’ Equity

Common Stock

At the Company’s 2020 Annual Meeting of Stockholders held on June 4, 2020, its stockholders approved an amendment to its certificate of incorporation to increase the number of authorized shares of common stock available to issue by 35,000,000 to 95,000,000 with a par value of $0.0001 per share, of which 7,000,000 shares are designated as “Class A common stock.” The amendment was filed with the Secretary of State of the State of Delaware on June 4, 2020.

As of September 30, 2020, and December 31, 2019, there were 7,000,000 shares of Class A common stock issued and outstanding to Fortress. Dividends are to be distributed pro-rata to the Class A and common stockholders. The holders of common stock are entitled to one vote per share of common stock held. The Class A common stockholders are entitled to a number of votes per share equal to 1.1 times a fraction, the numerator of which is the sum of the shares of outstanding common stock and the denominator of which is the number of shares of Class A common stock. Accordingly, the holder of shares of Class A common stock will be able to control or significantly influence all matters requiring approval by our stockholders, including the election of directors and the approval of mergers or other business combination transactions. Each share of Class A common stock is convertible, at the option of the holder thereof, into one (1) fully paid and non-assessable share of common stock subject to adjustment for stock splits and combinations.

In November 2017, the Company filed a shelf registration statement on Form S-3 (the “S-3”), which was declared effective in December 2017. Under the S-3, the Company may sell up to a total of $100 million of its securities. In connection with the S-3, the Company entered into an At-the-Market Issuance Sales Agreement (the “ATM”) with Cantor Fitzgerald & Co., Ladenburg Thalmann & Co. Inc. and H.C. Wainwright & Co., LLC (each an “Agent” and collectively, the “Agents”), relating to the sale of shares of common stock. Under the ATM, the Company pays the Agents a commission rate of up to 3.0% of the gross proceeds from the sale of any shares of common stock.

In September 2020, the Company completed an underwritten public offering in which it sold 7,321,429 shares of its common stock at a price of $2.80 per share for gross proceeds of approximately $20.5 million. Total net proceeds from the offering were approximately $18.9 million, net of underwriting discounts and offering expenses of approximately $1.6 million. The shares were sold under the S-3.

During the nine months ended September 30, 2020, the Company sold a total of 3,614,344 shares of common stock under an At-the-Market Issuance Sales Agreement for aggregate total gross proceeds of approximately $8.7 million at an average selling price of $2.40 per share, resulting in net proceeds of approximately $8.4 million after deducting commissions and other transaction costs.

Pursuant to the Founders Agreement, the Company issued to Fortress 2.5% of the aggregate number of shares of common stock issued in the offering noted above. Accordingly, the Company issued 273,379 shares of common stock to Fortress and recorded expense of approximately $797,000 related to these stock grants, which is included in general and administrative expenses in the Company’s Condensed Statements of Operations for the nine months ended September 30, 2020.

Pursuant to the Founders Agreement, the Company issued 1,459,305 shares of common stock to Fortress on June 4, 2020 for the Annual Equity Fee, representing 2.5% of the fully-diluted outstanding equity of Checkpoint on January 1, 2020.  The Company did not have enough unreserved authorized shares under its Certificate of Incorporation on January 1, 2020 to issue the shares for the Annual Equity Fee, therefore, in December 2019, Fortress and Checkpoint mutually agreed to defer the issuance until such time as the Checkpoint Charter has been amended in order to increase the number of authorized shares that may be issued thereunder.

The S-3 is currently the Company’s only active shelf registration statement. Subsequent to the offerings noted above, approximately $12.3 million of securities remain available for sale under the S-3. The Company may offer the securities under the S-3 from time to time in response to market conditions or other circumstances if it believes such a plan of financing is in the best interests of its stockholders. The Company believes that the S-3 provides it with the flexibility to raise additional capital to finance its operations as needed.

16

Table of Contents

Checkpoint Therapeutics, Inc.

Notes to Condensed Financial Statements

(Unaudited)

Equity Incentive Plan

The Company has in effect the Amended and Restated 2015 Incentive Plan (“2015 Incentive Plan”). The 2015 Incentive Plan was adopted in March 2015 by our stockholders. Under the 2015 Incentive Plan, the compensation committee of the Company’s board of directors is authorized to grant stock-based awards to directors, officers, employees and consultants. An amendment to the 2015 Incentive Plan was approved by stockholders in June 2020 to increase the shares available for issuance to 9,000,000 shares. The plan expires 10 years from the effective date of the amendment and limits the term of each option to no more than 10 years from the date of grant.

As of September 30, 2020, 4,298,465 shares are available for issuance under the 2015 Incentive Plan.

Restricted Stock

Certain employees, directors and consultants have been awarded restricted stock. The restricted stock vesting consists of milestone and time-based vesting. The following table summarizes restricted stock award activity for the nine months ended September 30, 2020:

Weighted Average 

Number of

Grant Date Fair

    

Shares

    

Value  

Non-vested at December 31, 2019

3,303,839

$

4.29

Granted

1,107,340

2.39

Vested

(397,980)

4.31

Non-vested at September 30, 2020

4,013,199

$

3.77

As of September 30, 2020, there was $3.5 million of total unrecognized compensation cost related to non-vested restricted stock, which is expected to be recognized over a weighted-average period of 2.0 years. This amount does not include, as of September 30, 2020, 333,334 shares of restricted stock outstanding which are performance-based and vest upon achievement of certain corporate milestones. The expense is recognized over the vesting period of the award. Stock-based compensation for milestone awards will be measured and recorded if and when it is probable that the milestone will be achieved.

Stock Options

The following table summarizes stock option award activity for the nine months ended September 30, 2020:

Weighted Average 

Remaining

Weighted Average 

 Contractual Life

    

Stock Options 

    

Exercise Price

    

(in years)

Outstanding as of December 31, 2019

160,000

$

3.64

8.56

Granted

60,000

2.04

Outstanding as of September 30, 2020

220,000

$

3.20

8.29

Upon the exercise of stock options, the Company will issue new shares of its common stock. As of September 30, 2020, no outstanding stock options were vested and exercisable.

17

Table of Contents

Checkpoint Therapeutics, Inc.

Notes to Condensed Financial Statements

(Unaudited)

Warrants

A summary of warrant activities for the nine months ended September 30, 2020 is presented below:

Weighted Average 

Remaining

Weighted Average 

Contractual Life

    

Warrants 

    

Exercise Price 

    

(in years)

Outstanding as of December 31, 2019

4,207,447

$

6.81

1.25

Exercised

(102,742)

0.13

Expired

(880,250)

7.00

Outstanding as of September 30, 2020

3,224,455

$

6.97

0.19

Upon the exercise of warrants, the Company will issue new shares of its common stock. During the nine months ended September 30, 2020, the Company issued 102,742 common shares and received $13,000.

Stock-Based Compensation

The following table summarizes stock-based compensation expense for the three and nine  months ended September 30, 2020 and 2019 ($ in thousands):

For the three months ended September 30, 

For the nine months ended September 30, 

    

2020

    

2019

    

2020

    

2019

Research and development

$

157

$

179

$

462

$

559

General and administrative

 

568

654

 

1,633

1,885

Total stock-based compensation expense

$

725

$

833

$

2,095

$

2,444

Note 7 - Accounts Payable and Accrued Expenses

At September 30, 2020 and December 31, 2019, accounts payable and accrued expenses consisted of the following ($ in thousands):

September 30, 

December 31, 

    

2020

    

2019

Accounts payable

$

2,467

$

3,079

Accrued compensation

 

326

  

414

Research and development

 

2,289

  

3,496

Other

 

583

  

268

Total accounts payable and accrued expenses

$

5,665

$

7,257

18

Table of Contents

Item 2. Financial Information.

Management’s Discussion and Analysis of the Results of Operations

Forward-Looking Statements

Statements in the following discussion and throughout this report that are not historical in nature are “forward-looking statements.” You can identify forward-looking statements by the use of words such as “expect,” “anticipate,” “estimate,” “may,” “will,” “should,” “intend,” “believe,” and similar expressions, although not all forward-looking statements contain these identifying words. Although we believe the expectations reflected in these forward-looking statements are reasonable, such statements are inherently subject to significant risks and uncertainties and we can give no assurances that our expectations will prove to be correct. Actual results could differ materially from those described in this report because of numerous factors, many of which are beyond our control. These factors include, without limitation, those described under Item 1A “Risk Factors.” Additionally, many of these risks and uncertainties are currently elevated by and may or will continue to be elevated by the COVID-19 pandemic. We undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this report or to reflect actual outcomes.

Overview

We are a clinical-stage immunotherapy and targeted oncology company focused on the acquisition, development and commercialization of novel treatments for patients with solid tumor cancers. We are evaluating our lead antibody product candidate, cosibelimab, a potential best-in-class anti-PD-L1 antibody licensed from the Dana-Farber Cancer Institute, in an ongoing global, open-label, multicohort Phase 1 clinical trial in checkpoint therapy-naïve patients with selected recurrent or metastatic cancers, including ongoing cohorts in locally advanced and metastatic cutaneous squamous cell carcinoma intended to support one or more applications for marketing approval. In addition, we are evaluating our lead small-molecule, targeted anti-cancer agent, CK-101, a third-generation EGFR inhibitor, as a potential new treatment for patients with EGFR mutation-positive non-small cell lung cancer.

We have also entered into various collaboration agreements with TGTX, a related party, to develop and commercialize certain assets in connection with our licenses in the field of hematological malignancies, while we retain the right to develop and commercialize these assets in solid tumors.

In September 2020, we announced updated interim results from the ongoing global, open-label, multicohort Phase 1 clinical trial of our anti-PD-L1 antibody, cosibelimab, in patients with advanced cancers, including the registration-enabling cohort of patients with metastatic cutaneous squamous cell carcinoma. The interim results were presented in an e-poster at the European Society for Medical Oncology ("ESMO") Virtual Congress 2020.

To date, we have not received approval for the sale of any product candidate in any market and, therefore, have not generated any product sales from any product candidates. In addition, we have incurred substantial operating losses since our inception, and expect to continue to incur significant operating losses for the foreseeable future and may never become profitable. As of September 30, 2020, we have an accumulated deficit of $133.0 million.

We are a majority-controlled subsidiary of Fortress.

Checkpoint Therapeutics, Inc. was incorporated in Delaware on November 10, 2014 and commenced principal operations in March 2015. Our executive offices are located at 2 Gansevoort Street, 9th Floor, New York, NY 10014. Our telephone number is (781) 652-4500 and our email address is ir@checkpointtx.com.

19

Table of Contents

Results of Operations

Comparison of the Three Months Ended September 30, 2020 and 2019

Revenue

For the three months ended September 30, 2020, revenue was approximately $28,000 compared to approximately $280,000 for the three months ended September 30, 2019, a decrease of $252,000.   Revenue for the three months ended September 30, 2019 included $238,000 from TGTX for the purchase of clinical material of cosibelimab.

Research and Development Expenses

Research and development expenses primarily consist of personnel related expenses, including salaries, benefits, travel, and other related expenses, stock-based compensation, payments made to third parties for license and milestone costs related to in-licensed products and technology, payments made to third-party contract research organizations (“CROs”) for preclinical and clinical studies, investigative sites for clinical trials, consultants, the cost of acquiring and manufacturing clinical trial materials, costs associated with regulatory filings and patents, laboratory costs and other supplies.

For the three months ended September 30, 2020, research and development expenses were approximately $2.5 million, compared to $3.9 million for the three months ended September 30, 2019, a decrease of $1.4 million. The current period research and development expenses primarily consisted of $2.0 million related to clinical costs for our product candidates and $0.2 million related to stock compensation expense. The prior period research and development expenses primarily consisted of $2.3 million related to clinical costs for our product candidates, $1.1 million related to manufacturing costs of our product candidates, and $0.2 million related to stock compensation expense.

We anticipate our research and development expenses to increase modestly for the remainder of 2020.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related expenses, including stock-based compensation, for executives and other administrative personnel, recruitment expenses, professional fees and other corporate expenses, including investor relations, legal activities, and facilities-related expenses.

For the three months ended September 30, 2020, general and administrative expenses were approximately $2.4 million, compared to $1.6 million for the three months ended September 30, 2019, an increase of $0.8 million. The current period general and administrative expenses primarily consisted of stock compensation expense of $0.6  million, $0.7 million related to our issuance of shares to Fortress pursuant to the Founders Agreement in connection with the sale of shares of our common stock, $0.3 million for salary expense, $0.3 million related to legal and accounting fees and $0.1 million related to investor relation fees. The prior period general and administrative expenses primarily consisted of stock compensation expense of $0.7 million, $0.3 million related to salary expenses, $0.2 million related to legal and accounting fees and $0.1 million related to our issuance of shares to Fortress pursuant to the Founders Agreement in connection with the sale of shares of our common stock.

We anticipate our general and administrative expenses will remain relatively consistent for the remainder of 2020.

Comparison of the Nine Months Ended September 30, 2020 and 2019

Revenue

For the nine months ended September 30, 2020, revenue was approximately $1.0 million compared to approximately $1.7 million for the nine months ended September 30, 2019, a decrease of $0.7 million. Revenue for the current period primarily consisted of $1.0 million from TGTX related to the collaboration agreement, including a milestone of $925,000 upon the 12th patient dosed in a phase 1 clinical trial for cosibelimab during March 2020. Revenue for the nine months ended September 30, 2019 consisted period primarily consisted of $1.6 million from TGTX related to the collaboration agreement, including a $1.0 million upfront licensing fee due upon the signing of an amendment to the agreement and approximately $0.6 million for the purchase of clinical material of cosibelimab.

20

Table of Contents

Research and Development Expenses

For the nine months ended September 30, 2020, research and development expenses were approximately $8.2 million, compared to $12.6 million for the nine months ended September 30, 2019, a decrease of $4.4 million. The current period’s research and development expenses primarily consisted of $6.0 million related to clinical costs for our product candidates, $0.9 million related to the manufacturing costs of our product candidates, and $0.5 million related to stock compensation expense. The prior period’s research and development expenses primarily consisted of $6.8 million related to clinical costs for our product candidates, $4.0 million related to manufacturing costs of our product candidates, and $0.6 million related to stock compensation expense.

General and Administrative Expenses

For the nine months ended September 30, 2020, general and administrative expenses were approximately $5.8 million, compared to $5.1 million for the nine months ended September 30, 2019, an increase of $0.7 million. The current period’s general and administrative expenses primarily consisted of stock compensation expense of $1.6 million, $0.8 million related to salary expenses, $0.8 million related to our issuance of shares to Fortress pursuant to the Founders Agreement in connection with the sale of shares of our common stock, $0.7 million related to legal and accounting fees and $0.5 million related to investor relation fees. The prior period’s general and administrative expenses primarily consisted of stock compensation expense of $1.9 million, $0.8 million related to salary expenses, $0.8 million related to legal and accounting fees and $0.2 million related to our issuance of shares to Fortress pursuant to the Founders Agreement in connection with the sale of shares of our common stock.

Liquidity and Capital Resources

We have incurred substantial operating losses since our inception and expect to continue to incur significant operating losses for the foreseeable future and may never become profitable. As of September 30, 2020, we had an accumulated deficit of $133.0 million.

Our major sources of cash have been proceeds from the sale of equity securities. We expect to use these proceeds primarily for general corporate purposes, which may include financing our growth, developing new or existing product candidates, and funding capital expenditures, acquisitions and investments. We currently anticipate that our cash and cash equivalent balances at September 30, 2020 are sufficient to fund our anticipated operating cash requirements for at least one year from the filing date of this Quarterly Report on Form 10-Q.

In addition to the foregoing, based on the Company’s current assessment, the Company does not expect any material impact on its long-term development timeline and its liquidity due to the worldwide spread of COVID-19. However, the Company is continuing to assess the effect on its operations by monitoring the spread of COVID-19, as well as the effect of the COVID-19 pandemic on the Company’s clients, vendors, and business partners, and the actions implemented to combat the virus throughout the world.

Cash Flows for the Nine Months Ended September 30, 2020 and 2019

Operating Activities

Net cash used in operating activities was approximately $11.6 million for the nine months ended September 30, 2020, compared to approximately $16.6 million for the nine months ended September 30, 2019. The decrease in net cash used in operating activities was primarily related to a decrease in manufacturing of cosibelimab clinical supply in the current period.

Investing Activities

There were no investing activities for the nine months ended September 30, 2020 and 2019.

21

Table of Contents

Financing Activities

Net cash provided by financing activities was $27.6 million for the nine months ended September 30, 2020. Cash provided by financing activities related to net proceeds of $19.1 million from the issuance of common stock as part of our underwritten public offering in September 2020 and net proceeds of $8.4 million from the issuance of common stock as part of our At-the-Market Issuance Sales Agreement (the “ATM”) offerings. Net cash provided by financing activities for the nine months ended September 30, 2019 related to net proceeds of $7.7 million from the issuance of common stock as part of our ATM offering.

Off-Balance Sheet Arrangements

We are not party to any off-balance sheet transactions. We have no guarantees or obligations other than those which arise out of normal business operations.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

N/A.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Principal Financial Officer, to allow timely decisions regarding required disclosure.

The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

With respect to the quarter ended September 30, 2020, under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures. Based upon this evaluation, our Chief Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures are effective. Management does not expect that our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of internal control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been or will be detected.

Changes in Internal Control over Financial Reporting:

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended September 30, 2020 which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

22

Table of Contents

Part II. Other Information

Item 1. Legal Proceedings.

We are not involved in any litigation that we believe could have a material adverse effect on our financial position or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of our executive officers, threatened against or affecting our company or our officers or directors in their capacities as such.

Item 1A. Risk Factors

The following information sets forth risk factors that could cause our actual results to differ materially from those contained in forward-looking statements we have made in this report and those we may make from time to time. You should carefully consider the risks described below, in addition to the other information contained in this report and our other public filings, before making an investment decision. Our business, financial condition or results of operations could be harmed by any of these risks. The risks and uncertainties described below are not the only ones we face. Additional risks not presently known to us or other factors not perceived by us to present significant risks to our business at this time also may impair our business operations. Additionally, many of these risks and uncertainties are currently elevated by and may or will continue to be elevated by the COVID-19 pandemic.

Risks Related to Our Business and Industry

Major public health issues, and specifically the pandemic caused by the spread of COVID-19, could have an adverse impact on our financial condition and results of operations and other aspects of our business.

In December 2019, a novel strain of coronavirus, COVID-19, was first detected in Wuhan, China, and has since spread around the world. On March 11, 2020, the World Health Organization declared that the rapidly spreading COVID-19 outbreak had evolved into a pandemic. In response to the pandemic, many governments around the world are implementing a variety of measures to reduce the spread of COVID-19, including travel restrictions and bans, instructions to residents to practice social distancing, quarantine advisories, shelter-in-place orders and required closures of non-essential businesses.

The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, and created significant volatility and disruption of financial markets. Although COVID-19 has not had a material adverse effect on our business to date, no assurance can be given that it will not in the future if the situation persists or worsens. The extent to which the coronavirus impacts our business and operating results will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning the coronavirus and the actions to contain the coronavirus or treat its impact, among others.

Should the coronavirus continue to spread, our business operations could be delayed or interrupted. For instance, our clinical trials may be affected by the pandemic. Site initiation, participant recruitment and enrollment, participant dosing, distribution of clinical trial materials, study monitoring and data analysis may be paused or delayed due to changes in hospital or university policies, federal, state or local regulations, prioritization of hospital resources toward pandemic efforts, or other reasons related to the pandemic. If the coronavirus continues to spread, some participants and clinical investigators may not be able to comply with clinical trial protocols. For example, quarantines or other travel limitations (whether voluntary or required) may impede participant movement, affect sponsor access to study sites, or interrupt healthcare services, and we may be unable to conduct our clinical trials. Infections and deaths related to the pandemic may disrupt the United States’ and other countries’ healthcare and healthcare regulatory systems. Such disruptions could divert healthcare resources away from, or materially delay FDA or other regulatory review and/or approval with respect to, our clinical trials. It is unknown how long these disruptions could continue, were they to occur. Any elongation or de-prioritization of our clinical trials or delay in regulatory review resulting from such disruptions could materially affect the development and study of our product candidates.

23

Table of Contents

We currently rely on third parties, such as contract laboratories, contract research organizations, medical institutions and clinical investigators to conduct these studies and clinical trials. If these third parties themselves are adversely impacted by restrictions resulting from the coronavirus outbreak we will likely experience delays and/or realize additional costs. We also rely on third parties for the manufacture of our product candidates for preclinical and clinical testing. Disruptions to the global supply chain could impact our or our third-party manufacturers’ ability to obtain raw materials or other products necessary to manufacture and distribute our product candidates. As a result, our efforts to obtain regulatory approvals for, and to commercialize, our product candidates may be delayed or disrupted.

The Company’s employees have been and are currently being affected by the COVID-19 pandemic. Our office and management personnel are mostly working remotely and the Company may need to enact further precautionary measures to help minimize the risk of our employees being exposed to the coronavirus. If these conditions worsen, or last for an extended period of time, the Company’s ability to manage its business may be impaired, and operational risks, cybersecurity risks and other risks the Company faced even prior to the pandemic may be elevated.

The potential economic impact brought by and the duration of the pandemic may be difficult to assess or predict, however it has already caused, and is likely to result in further, significant disruption of global financial markets, which may reduce our ability to access capital either at all or on favorable terms. In addition, a recession, depression or other sustained adverse market event resulting from the spread of the coronavirus could materially and adversely affect our business and the value of our common stock.

The ultimate impact of the current pandemic, or any other health epidemic, is highly uncertain and will depend on future developments that cannot be predicted with confidence, such as the duration of the outbreak, the severity of COVID-19, and the effectiveness of actions to contain and treat for COVID-19. Although, as of the date of this Quarterly Report on Form 10-Q, we do not expect any material impact on our long-term activity, we do not yet know the full extent of potential delays or impacts on our business, our clinical trials, our research programs, healthcare systems or the global economy as a whole, which could have a material adverse effect on our business, financial condition and results of operations and cash flows.

We currently have no drug products for sale. We are completely dependent on the success of our product candidates, and we cannot give any assurances that any of our product candidates will receive regulatory approval or be successfully commercialized.

To date, we have invested a significant portion of our efforts and financial resources in the acquisition and development of our product candidates. As an early stage company, we have limited experience and have not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields, particularly in the biopharmaceutical area. Our future success is substantially dependent on our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize such product candidates. Our product candidates are currently in preclinical development or in clinical trials. Our business depends entirely on the successful development and commercialization of our product candidates, which may never occur. We currently have no drug products for sale, currently generate no revenues from sales of any drug products, and may never be able to develop or commercialize a marketable drug.

The successful development, and any commercialization of our technologies and any product candidates that may occur, would require us to successfully perform a variety of functions, including:

developing our technology platform;
identifying, developing, formulating, manufacturing and commercializing product candidates;
entering into successful licensing and other arrangements with product development partners;
achieving clinical endpoints to support preparation of approval applications;
participating in regulatory approval processes, including ultimately gaining approval to market a drug product, which may not occur;

24

Table of Contents

obtaining sufficient quantities of our product candidates from our third-party manufacturers to meet clinical trial needs and, if approved, to meet commercial demand at launch and thereafter;
establishing and maintaining agreements with wholesalers, distributors and group purchasing organizations on commercially reasonable terms;
conducting sales and marketing activities including hiring, training, deploying and supporting a sales force and creating market demand for our product candidates through our own marketing and sales activities, and any other arrangements to promote our product candidates that we may establish;
maintaining patent protection and regulatory exclusivity for our product candidates; and
obtaining market acceptance for our product candidates.

Each of these requirements will require substantial time, effort, and financial resources.

We intend to use data from our ongoing Phase 1 clinical trial of cosibelimab, conducted outside the United States (“U.S.”), to support one or more U.S. biologics license application (“BLA”) submissions in checkpoint therapy-naïve patients with selected recurrent or metastatic cancers, including cutaneous squamous cell carcinoma (“CSCC”). In January 2020, we announced that we had discussed with the Food and Drug Administration (“FDA”) this strategy in CSCC. We believe, based on published FDA guidance documents, public statements of companies with comparable product candidates, public statements by the director of the FDA’s Oncology Center of Excellence, and recent interactions with the FDA, that exclusively foreign clinical data from a single study may be acceptable to support marketing approval(s) under FDA regulations.

Our operations have been limited to organizing our company, acquiring, developing and securing our proprietary technology and identifying and obtaining preclinical data or clinical data for various product candidates. These operations provide a limited basis for you to assess our ability to continue to develop our technology, identify product candidates, develop and commercialize any product candidates we are able to identify and enter into successful collaborative arrangements with other companies, as well as for you to assess the advisability of investing in our securities.

Each of our product candidates will require additional preclinical or clinical development, management of preclinical, clinical and manufacturing activities, regulatory approval in the jurisdictions in which we plan to market the product, obtaining manufacturing supply, building of a commercial organization, and significant marketing efforts before we generate any revenues from product sales, which may not occur. We are not permitted to market or promote any of our product candidates in the U.S. or any other jurisdiction before we receive regulatory approval from the FDA or any comparable foreign regulatory authority, respectively, and we may never receive such regulatory approval for any of our product candidates.

Preclinical development is highly speculative and has a high risk of failure.

Three of our five current product candidates are in preclinical development, and, thus, have never been used in humans. Preclinical development is highly speculative and carries a high risk of failure. We can provide no assurances that preclinical toxicology and/or other preclinical activity of our product candidates will support moving any of these product candidates into clinical development. If we are unsuccessful in our preclinical development efforts for any of these product candidates and/or they fail to reach clinical development, it would have a material adverse effect on our business and financial condition.

Delays in clinical testing could result in increased costs to us and delay our ability to generate revenue.

Although we are planning for certain clinical trials relating to our product candidates, there can be no assurance that the FDA, or any comparable foreign regulatory authority, will accept our proposed trial designs. We may experience delays in our clinical trials and we do not know whether current or planned clinical trials will begin on time, need to be redesigned, enroll patients on time or be completed on schedule, if at all. Clinical trials can be delayed for a variety of reasons, including delays related to:

obtaining regulatory approval to commence a trial;

25

Table of Contents

reaching agreement on acceptable terms with prospective CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;
obtaining institutional review board (“IRB”), or ethics committee, as applicable, approval at each site;
recruiting a sufficient number of suitable patients to participate in a trial;
clinical sites deviating from trial protocol or dropping out of a trial;
having patients complete a trial or return for post-treatment follow-up;
developing and validating companion diagnostics on a timely basis, if required;
obtaining resolution for any clinical holds that arise from the FDA or any comparable foreign regulatory authority;
adding new clinical trial sites; or
availability of raw materials or manufacturing sufficient quantities of product candidate for use in clinical trials.

Patient enrollment, a significant factor in the timing of clinical trials, is affected by many factors including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, competing clinical trials and clinicians’ and patients’ perceptions as to the potential advantages of the drug being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating. Furthermore, we intend to rely on CROs and clinical trial sites to ensure the proper and timely conduct of our clinical trials and we intend to have agreements governing their committed activities, however, we will have limited influence over their actual performance.

We could encounter delays if a clinical trial is suspended or terminated by us, by the IRBs or ethics committees of the institutions in which such trials are being conducted, by the Data Safety Monitoring Board, for such trial or by the FDA or other regulatory authorities. Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug candidate, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

If we experience delays in the completion of, or termination of, any clinical trial of our product candidates, the commercial prospects of our product candidates will be harmed, and our ability to generate product revenues from any of these product candidates will be delayed, or such revenues may not be generated at all. In addition, any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may harm our business, financial condition and prospects significantly. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.

26

Table of Contents

We may not receive regulatory approval for our product candidates, or their approval may be delayed, which would have a material adverse effect on our business and financial condition.

Our product candidates and the activities associated with their development and commercialization, including their design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA, by other regulatory agencies in the United States, by the European Medicines Agency and by any comparable foreign regulatory authority outside the United States. Failure to obtain marketing approval for one or more of our product candidates or any future product candidate will prevent us from commercializing the product candidate. We have not received approval to market any of our product candidates from regulatory authorities in any jurisdiction. We have only limited experience in filing and supporting the applications necessary to gain marketing approvals and expect to rely on third-party CROs and other third-party vendors to assist us in this process. Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the product candidate’s safety and efficacy. Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, regulatory authorities. One or more of our product candidates or any future product candidate may not be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use. If any of our product candidates or any future product candidate receives marketing approval, the accompanying label may limit the approved use of our drug by severity of disease, patient group, or include contraindications, interactions, or warnings, which could limit sales of the product.

The process of obtaining marketing approval, both in the United States and abroad, is expensive, may take many years if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved. Changes in marketing approval policies during the development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application. Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data is insufficient for approval and require additional preclinical studies or clinical trials. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate. Any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.

Under the FDA’s accelerated approval regulations, which only apply to certain drug products, the FDA may grant marketing approval for a new drug product on the basis of adequate and well-controlled clinical trials establishing that the drug product has an effect on a surrogate endpoint that is reasonably likely, based on epidemiologic, therapeutic, pathophysiologic, or other evidence, to predict clinical benefit or on the basis of an effect on a clinical endpoint other than survival or irreversible morbidity. While we may undertake development programs for one or more of our product candidates that we believe, if successful, could support a submission for marketing approval under the accelerated approval regulations, we may ultimately fail to meet the criteria to do so, which may cause delays in the approval or rejection of an application.

If we experience delays in obtaining approval or if we fail to obtain approval of one or more of our product candidates or any future product candidate, the commercial prospects for our product candidates may be harmed and our ability to generate revenue will be materially impaired.

In addition, even if we were to obtain approval, regulatory authorities may approve any of our product candidates or any future product candidate for fewer or more limited indications than we request, may not approve the price we intend to charge for our products, may grant approval contingent on the performance of costly post-marketing studies, including clinical trials, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. The regulatory authority may also require the label to contain warnings, contraindications, or precautions that limit the commercialization of that product. Any of these scenarios could compromise the commercial prospects for one or more of our product candidates or any future product candidate.

In all interactions with regulatory authorities, the company is exposed to liability risks under the Foreign Corrupt Practices Act or similar anti-bribery laws.

27

Table of Contents

If any of our product candidates are approved and our contract manufacturer fails to produce the product in the volumes that we require on a timely basis, or fails to comply with stringent regulations applicable to pharmaceutical drug manufacturers, we may face delays in the commercialization of our product candidates or be unable to meet market demand, and may lose potential revenues.

The manufacture of pharmaceutical products requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls, and the use of specialized processing equipment. We intend to enter into development and supply agreements with contract manufacturers for the completion of pre-commercialization manufacturing development activities and the manufacture of commercial supplies for each of our product candidates. Any termination or disruption of our relationships with our contract manufacturers may materially harm our business and financial condition, and frustrate any commercialization efforts for each respective product candidate.

All of our contract manufacturers must comply with strictly enforced federal, state and foreign regulations, including current Good Manufacturing Practice (“cGMP”) requirements enforced by the FDA through its establishment inspection program. We are required by law to establish adequate oversight and control over raw materials, components and finished products furnished by our third-party suppliers and contract manufacturers, but we have little control over their compliance with these regulations. Any failure to comply with applicable regulations may result in fines and civil penalties, suspension of production, restrictions on imports and exports, suspension or delay in product approval, product seizure or recall, or withdrawal of product approval, and would limit the availability of our product and customer confidence in our product. Any manufacturing defect or error discovered after products have been produced and distributed could result in even more significant consequences, including costly recall procedures, re-stocking costs, potential for breach of contract claims, damage to our reputation and potential for product liability claims.

If the contract manufacturers upon whom we rely to manufacture one or more of our product candidates, and any future product candidate we may in-license, fails to deliver the required commercial quantities on a timely basis at commercially reasonable prices, we would likely be unable to meet demand for our products and we would lose potential revenues.

If serious adverse or unacceptable side effects are identified during the development of one or more of our product candidates or any future product candidate, we may need to abandon or limit our development of some of our product candidates.

If one or more of our product candidates or any future product candidate are associated with undesirable side effects or adverse events in clinical trials or have characteristics that are unexpected, we may need to abandon their development or limit development to more narrow uses or subpopulations in which the adverse events, undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. In our industry, many compounds that initially showed promise in early stage testing have later been found to cause serious adverse events that prevented further development of the compound. In the event that our clinical trials reveal a high or unacceptable severity and prevalence of adverse events, our trials could be suspended or terminated and the FDA or comparable foreign regulatory authorities could order us to cease further development or deny approval of one or more of our product candidates or any future product candidate for any or all targeted indications. The FDA could also issue a letter requesting additional data or information prior to making a final decision regarding whether or not to approve a product candidate. The number of requests for additional data or information issued by the FDA in recent years has increased, and resulted in substantial delays in the approval of several new drugs. Adverse events or undesirable side effects caused by one or more of our product candidates or any future product candidate could also result in the inclusion of unfavorable information in our product labeling, denial of regulatory approval by the FDA or other regulatory authorities for any or all targeted indications, and in turn prevent us from commercializing and generating revenues from the sale of that product candidate. Adverse events or drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial and could result in potential product liability claims.

Additionally, if one or more of our product candidates or any future product candidate receives marketing approval and we or others later identify undesirable side effects caused by this product, a number of potentially significant negative consequences could result, including:

regulatory authorities may require the addition of unfavorable labeling statements, including specific warnings, black box warnings, adverse reactions, precautions, and/or contraindications;
regulatory authorities may suspend or withdraw their approval of the product, and/or require it to be removed from the market;

28

Table of Contents

we may be required to change the way the product is administered, conduct additional clinical trials or change the labeling of the product; or
our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of any of our product candidates or any future product candidate or could substantially increase our commercialization costs and expenses, which in turn could delay or prevent us from generating significant revenues, or any revenues, from its sale.

Even if one or more of our product candidates receives regulatory approval, it and any other products we may market will remain subject to substantial regulatory scrutiny.

If one or more of our product candidates that we may license or acquire is approved, the approved product candidate will be subject to ongoing requirements and review by the FDA and other regulatory authorities. These requirements include labeling, packaging, storage, advertising, promotion, record-keeping and submission of safety and other post-market information and reports, registration and listing requirements, cGMP requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping of the drug, and requirements regarding company presentations and interactions with health care professionals.

The FDA, or any other regulatory authority, may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of the product. The FDA and other applicable regulatory authorities closely regulate the post-approval marketing and promotion of drugs to ensure drugs are marketed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA and other applicable regulatory authorities impose stringent restrictions on manufacturers’ communications regarding off-label use and if we do not market our products for only their approved indications, we may be subject to enforcement action for off-label marketing. Violations of the Federal Food, Drug and Cosmetic Act relating to the promotion of prescription drugs may lead to investigations, civil claims, and/or criminal charges alleging violations of federal and state health care fraud and abuse laws, as well as state consumer protection laws.

In addition, later discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield various results, including:

restrictions on such products, operations, manufacturers or manufacturing processes;
restrictions on the labeling or marketing of a product;
restrictions on product distribution or use;
requirements to conduct post-marketing studies or clinical trials;
warning letters, untitled letters, import alerts, and/or inspection observations;
withdrawal of the products from the market;
refusal to approve pending applications or supplements to approved applications that we submit;
recall of products;
fines, restitution or disgorgement of profits;
suspension or withdrawal of marketing or regulatory approvals;
suspension of any ongoing clinical trials;

29

Table of Contents

refusal to permit the import or export of our products;
product seizure; or
injunctions, consent decrees, and/or the imposition of civil or criminal penalties.

The FDA’s policies, or the policies of any other applicable regulatory authority, may change and/or additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates, or negatively affect those products for which we may have already received regulatory approval, if any. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may be subject to the various actions listed above, including losing any marketing approval that we may have obtained.

We will need to obtain FDA approval of any proposed product brand names, and any failure or delay associated with such approval may adversely impact our business.

A pharmaceutical product cannot be marketed in the U.S. or other countries until we have completed a rigorous and extensive regulatory review process, including approval of a brand name. Any brand names we intend to use for our product candidates will require approval from the FDA regardless of whether we have secured a formal trademark registration from the United States Patent and Trademark Office (“USPTO”). The FDA typically conducts a review of proposed product brand names, including an evaluation of the potential for confusion with other product names. The FDA may also object to a product brand name if it believes the name inappropriately implies medical claims. If the FDA objects to any of our proposed product brand names, we may be required to adopt an alternative brand name for our product candidates. If we adopt an alternative brand name, we would lose the benefit of our existing trademark applications for such product candidate and may be required to expend significant additional resources in an effort to identify a suitable product brand name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA. We may be unable to build a successful brand identity for a new trademark in a timely manner or at all, which would limit our ability to commercialize our product candidates.

Our current and future relationships with customers and third-party payors in the United States and elsewhere may be subject, directly or indirectly, to applicable anti-kickback, fraud and abuse, false claims, transparency, health information privacy and security and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm, administrative burdens and diminished profits and future earnings.

Healthcare providers, physicians and third-party payors in the United States and elsewhere will play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our future arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations, including, without limitation, the federal Anti-Kickback Statute and the federal False Claims Act, which may constrain the business or financial arrangements and relationships through which we sell, market and distribute any product candidates for which we obtain marketing approval. In addition, we may be subject to transparency laws and patient privacy regulation by U.S. federal and state governments and by governments in foreign jurisdictions in which we conduct our business. The applicable federal, state and foreign healthcare laws and regulations that may affect our ability to operate include:

the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federal and state healthcare programs, such as Medicare and Medicaid;
federal civil and criminal false claims laws and civil monetary penalty laws, including the federal False Claims Act, which impose criminal and civil penalties, including civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, including the Medicare and Medicaid programs, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government; the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;

30

Table of Contents