Business Wire | Nov 9, 2020 07:00AM EST

PolarityTE Reports Third Quarter 2020 Results

Nov. 09, 2020

SALT LAKE CITY--(BUSINESS WIRE)--Nov. 09, 2020--PolarityTE, Inc. (Nasdaq: PTE), a biotechnology company developing regenerative tissue products and biomaterials, today reported financial results for the third calendar quarter of 2020. PolarityTE will host a conference call and webcast today, November 9, 2020 at 8:00 a.m. ET.

Highlights

* Total revenues were $3.34 million in Q3:20 compared to $1.40 million in Q3:19 * SkinTE revenues were $1.16 million in Q3:20 compared to $0.84 million in Q3:19 * Contract services revenues were $2.18 million in Q3:20 and includes $1.75 million from COVID-19 testing

Financial Results for the Three Months Ended September 30, 2020

Total revenue for the three months ended September 30, 2020 was $3.34 million, of which $1.16 million was from sales of SkinTE and $2.18 million from PolarityTE's contract service operations, which includes $1.75 million from COVID-19 testing services that the Company started providing at the end of May 2020.

Research and development expenses for the three months ended September 30, 2020 were approximately $2.70 million versus $2.96 million for the three months ended September 30, 2019. Research and development expenses for the three months ended September 30, 2020 included an expense of $0.39 million from stock-based compensation, which is a non-cash charge.

General and administrative expenses for the three months ended September 30, 2020 were $6.26 million versus $16.04 million for the three months ended September 30, 2019. General and administrative expenses for the three months ended September 30, 2020 included stock-based compensation expense of $1.65 million, which is a $3.17 million reduction in stock compensation expense compared to the three months ended September 30, 2019, due to restricted stock and option forfeitures related to the reductions in force taken during 2020. Other Q3 2020 general and administrative reductions from Q3 2019 include a $2.89 million decrease in severance expense, a $1.68 million reduction in legal, accounting, and consulting fees, and a $2.41 million reduction in compensation-related expenses.

Sales and marketing expenses for the three months ended September 30, 2020 were $1.61 million versus $4.99 million for the three months ended September 30, 2019. Sales and marketing expenses for the three months ended September 30, 2020 included a reduction in compensation and benefits costs of $0.81 million and reduction of marketing and consultant spending of $1.45 million compared to the three months ended September 30, 2019.

Net loss for the three months ended September 30, 2020 was $7.08 million compared with a net loss of $22.98 million for the three months ended September 30, 2019.

Cash and Liquidity as of September 30, 2020

As of September 30, 2020, our cash, cash equivalents and short-term investments balance was approximately $23.19 million, compared to cash and cash equivalents and short-term investments of $29.24 million at December 31, 2019.

Cash used in operating activities for the three-month period ended September 30, 2020 was approximately $6.76 million, or approximately $2.25 million per month on average, 43% lower than the $3.95 million monthly average in the three months ended September 30, 2019 and 42% lower than the $3.85 million monthly average in the three months ended June 30, 2020.

Conference Call and Webcast Details

The conference call can be accessed by calling 1-888-599-8688 (U.S. and Canada) or +44 (0)330 336 9104 (International), with confirmation code 496517 and referencing "PolarityTE Third Quarter 2020 Earnings Call." A webcast of the conference call can be accessed by using the link below.

Earnings Call Webcast - CLICK HERE

A replay of the earnings conference call will be available for 30 days, beginning approximately one hour after the conclusion of the call and can be found by visiting PolarityTE's website at https://www.polarityte.com/news-media/events or by clicking on the link above.

About PolarityTE(r)

PolarityTE is focused on transforming the lives of patients by discovering, designing and developing a range of regenerative tissue products and biomaterials for the fields of medicine, biomedical engineering and material sciences. Rather than manufacturing with synthetic and foreign materials within artificially engineered environments, PolarityTE manufactures products from the patient's own tissue and uses the patient's own body to support the regenerative process. From a small piece of healthy autologous tissue, the company creates an easily deployable, dynamic and self-propagating product designed to regenerate the target tissues. PolarityTE's innovative methods are intended to promote and accelerate growth of the patient's tissues to undergo a form of effective regenerative healing. Learn more at www.PolarityTE.com - Welcome to the Shift(r).

Forward Looking Statements

Certain statements contained in this release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. They are generally identified by words such as "believes," "may," "expects," "anticipates," "intend," "plan," "will," "would," "should" and similar expressions. Readers should not place undue reliance on such forward-looking statements, which are based upon the Company's beliefs and assumptions as of the date of this release. The Company's actual results could differ materially due to the impact of the COVID-19 pandemic and FDA regulatory matters, which cannot be predicted, and the risk factors and other items described in more detail in the "Risk Factors" section of the Company's annual report on Form 10-K, quarterly reports on Form 10-Q, and other filings with the SEC (copies of which may be obtained at www.sec.gov). Subsequent events and developments may cause these forward-looking statements to change. The Company specifically disclaims any obligation or intention to update or revise these forward-looking statements as a result of changed events or circumstances that occur after the date of this release, except as required by applicable law. Our actual results could differ materially due to risk factors and other items described in more detail in the "Risk Factors" section of the Company's Annual Reports and other filings with the SEC (copies of which may be obtained at www.sec.gov).

POLARITYTE, the POLARITYTE logo, SKINTE, WHERE SELF REGENERATES SELF and WELCOME TO THE SHIFT are trademarks or registered trademarks of PolarityTE, Inc.

POLARITYTE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands, except share and per share amounts)

September December 30, 31,

2020 2019

ASSETS

Current assets

Cash and cash equivalents $ 23,186 $ 10,218

Short-term investments - 19,022

Accounts receivable, net 3,379 1,731

Inventory 907 252

Prepaid expenses and other current assets 1,596 1,264

Total current assets 29,068 32,487

Property and equipment, net 11,970 14,911

Operating lease right-of-use assets 3,110 4,590

Intangible assets, net 589 731

Goodwill 278 278

Other assets 472 602

TOTAL ASSETS $ 45,487 $ 53,599



LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable and accrued expenses $ 4,818 $ 7,095

Other current liabilities 2,311 2,338

Current portion of long-term notes payable 1,887 528

Deferred revenue 25 98

Total current liabilities 9,041 10,059

Common stock warrant liability 7,233 -

Operating lease liabilities 1,817 2,994

Other long-term liabilities 872 1,630

Long-term notes payable 1,964 -

Total liabilities 20,927 14,683



Commitments and Contingencies (Note 14)



STOCKHOLDERS' EQUITY

Preferred stock - 25,000,000 shares authorized, 0shares issued and outstanding at September 30, - - 2020 and December 31, 2019

Common stock - $.001 par value; 250,000,000shares authorized; 38,912,005 and 27,374,653 39 27 shares issued and outstanding at September 30,2020 and December 31, 2019, respectively

Additional paid-in capital 492,676 474,174

Accumulated other comprehensive income - 72

Accumulated deficit (468,155 ) (435,357 )

Total stockholders' equity 24,560 38,916

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 45,487 $ 53,599

POLARITYTE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in thousands, except share and per share amounts)

For the Three Months Ended For the Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

Net revenues

Products $ 1,156 $ 839 $ 2,528 $ 1,640

Services 2,181 556 4,008 2,546

Total net 3,337 1,395 6,536 4,186 revenues

Cost of sales

Products 210 315 825 930

Services 1,142 330 1,925 1,087

Total cost of 1,352 645 2,750 2,017 sales

Gross profit 1,985 750 3,786 2,169

Operatingcosts and expenses

Research and 2,698 2,956 9,235 13,072 development

General and 6,264 16,044 22,080 48,299 administrative

Sales and 1,606 4,988 7,324 12,922 marketing

Restructuringand other - - 2,536 - charges

Totaloperating 10,568 23,988 41,175 74,293 costs andexpenses

Operating loss (8,583 ) (23,238 ) (37,389 ) (72,124 )

Other income (expenses)

Change in fairvalue ofcommon stock 1,503 - 4,444 - warrantliability

Interest(expense) (58 ) 27 (135 ) 126 income, net

Other income, 57 228 282 650 net

Net loss $ (7,081 ) $ (22,983 ) $ (32,798 ) $ (71,348 )

Net loss pershare, basic $ (0.18 ) $ (0.87 ) $ (0.89 ) $ (2.94 )and diluted

Weightedaverage sharesoutstanding, 38,761,141 26,405,307 36,743,864 24,273,774 basic anddiluted

POLARITYTE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in thousands)

For the Nine Months Ended

September 30,

2020 2019

CASH FLOWS FROM OPERATING ACTIVITIES

Net loss $ (32,798 ) $ (71,348 )

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

Stock based compensation expense 5,963 23,932

Depreciation and amortization 2,337 2,243

Amortization of intangible assets 142 146

Amortization of debt discount 17 40

Change in fair value of common stock warrant (4,444 ) - liability

Change in fair value of contingent consideration - (48 )

Loss on abandonment and disposal of property and 1,566 265 equipment

Other non-cash adjustments (21 ) 3

Changes in operating assets and liabilities:

Accounts receivable (1,648 ) (881 )

Inventory (655 ) (10 )

Prepaid expenses and other current assets (332 ) 126

Operating lease right-of-use assets 1,348 1,214

Other assets 130 25

Accounts payable and accrued expenses (2,349 ) 4,095

Other current liabilities - 155

Deferred revenue (73 ) (36 )

Operating lease liabilities (1,353 ) (1,142 )

Other long-term liabilities - 571

Net cash used in operating activities (32,170 ) (40,650 )

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property and equipment (1,225 ) (2,386 )

Purchase of available-for-sale securities (14,144 ) (29,002 )

Proceeds from maturities of available-for-sale 16,945 14,636 securities

Proceeds from sale of available-for-sale securities 16,171 1,877

Net cash provided by (used in) investing activities 17,747 (14,875 )

CASH FLOWS FROM FINANCING ACTIVITIES

Net proceeds from the sale of common stock and 24,276 27,948 warrants

Proceeds from stock options exercised 31 529

Proceeds from ESPP purchase 40 35

Cash paid for tax withholdings related to net share (114 ) (679 )settlement

Payment of contingent consideration liability - (109 )

Principal payments on financing leases (376 ) (336 )

Proceeds from term note payable and financing 4,630 - arrangements

Principal payments on term note payable and (1,096 ) (263 )financing arrangements

Net cash provided by financing activities 27,391 27,125

Net increase (decrease) in cash and cash 12,968 (28,400 )equivalents

Cash and cash equivalents - beginning of period 10,218 55,673

Cash and cash equivalents - end of period $ 23,186 $ 27,273

Non-cash investing and financing activities:

Unpaid liability for acquisition of property and $ 10 $ 249 equipment

Reclassification of stock-based compensationexpense that was previously classified as a $ - $ 38 liability to paid-in capital

Unpaid tax liability related to net share $ 5 $ - settlement

Allocation of proceeds from sale of common stock $ 11,677 $ - and warrants to warrant liability

Property and equipment acquired through finance $ - $ 2,341 lease

Property and equipment acquired through financing $ - $ 58 arrangement

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CONTACT: Investors: Rich Haerle VP, Investor Relations PolarityTE, Inc. ir@PolarityTE.com (385) 315-0697