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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
FORM 10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2017
 
OR
o
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 001-33650
 
CALADRIUS BIOSCIENCES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
22-2343568
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
 
110 Allen Road, 2nd Floor, Basking Ridge, New Jersey
07920
(Address of principal executive offices)
(zip code)
 
Registrant’s telephone number, including area code: 908-842-0100

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     x         No     o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).
Yes  x        No     o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer     o
Accelerated filer     o
Non-accelerated filer   o     (Do not check if a smaller reporting company)
Smaller reporting company     x
 
Emerging growth      o

If an emerging growth company, indicate by a 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.o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  o     No  x
9,470,860 Shares, $0.001 Par Value, as of November 6, 2017
 
(Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date)

Index

EXPLANATORY NOTE

Unless stated otherwise, the information contained in these consolidated financial statements gives retroactive effect to a one-for-ten reverse stock split of Caladrius Biosciences, Inc.'s (the "Company’s") common stock effected on July 28, 2016. See Note 1 of the consolidated financial statements for further information.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This quarterly report (this "Quarterly Report") contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, as well as historical information. When used in this Quarterly Report, statements that are not statements of current or historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “plan,” “intend,” “may,” “will,” “expect,” “believe,” “could,” “anticipate,” “estimate,” “continue” or similar expressions or other variations or comparable terminology are intended to identify such forward-looking statements, although some forward-looking statements are expressed differently. We remind readers that forward-looking statements are merely predictions and therefore inherently subject to uncertainties and other factors and involve known and unknown risks that could cause the actual results, performance, levels of activity or our achievements or industry results, to be materially different from any future results, performance, levels of activity or our achievements or industry results expressed or implied by such forward-looking statements. Factors that could cause our actual results to differ materially from anticipated results expressed or implied by forward-looking statements include, among others:

•
potential adverse reactions or changes to business relationships resulting from the announcement or completion of the sale of PCT, LLC to Hitachi Chemical Co., America, Ltd. (as described more fully below, the “Sale”);
•
unexpected costs, charges or expenses relating to or resulting from the Sale;
•
litigation or adverse judgments relating to the Sale;
•
our ability to obtain sufficient capital or strategic business arrangements to fund our operations and expansion plans, including meeting our financial obligations under various licensing and other strategic arrangements, the funding of our clinical trials for product candidates, and the commercialization of the relevant technology;
•
our ability to build and maintain the management and human resources infrastructure necessary to support the growth of our business;
•
whether a market is established for our cell-based products and services and our ability to capture a meaningful share of this market;
•
scientific, regulatory and medical developments beyond our control;
•
our ability to obtain and maintain, as applicable, appropriate governmental licenses, accreditations or certifications or comply with healthcare laws and regulations or any other adverse effect or limitations caused by government regulation of our business;
•
whether any of our current or future patent applications result in issued patents, the scope of those patents and our ability to obtain and maintain other rights to technology required or desirable for the conduct of our business; and our ability to commercialize products without infringing the claims of third party patents;
•
whether any potential strategic or financial benefits of various licensing agreements will be realized;
•
the results of our development activities;
•
our ability to complete our other planned clinical trials (or initiate other trials) in accordance with our estimated timelines due to delays associated with enrolling patients due to the novelty of the treatment, the size of the patient population and the need of patients to meet the inclusion criteria of the trial or otherwise; and
•
other factors discussed in "Risk Factors" in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on March 16, 2017 (our "2016 Form 10-K").

The factors discussed herein, including those risks described in "Item 1A. Risk Factors" and elsewhere in our 2016 Form 10-K and in our other periodic filings with the SEC, which are available for review at www.sec.gov, could cause actual results and developments to be materially different from those expressed or implied by such statements. All forward-looking statements attributable to us are expressly qualified in their entirety by these and other factors. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they were made. Except as required by law, we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.


2
Index

TABLE OF CONTENTS
 
Page No.
 
 
 
Financial Statements:
 
 
 
 
Consolidated Balance Sheets at September 30, 2017 (unaudited) and December 31, 2016
 
 
 
 
Consolidated Statements of Operations for the three and nine months ended September 30, 2017 and 2016 (unaudited)
 
 
 
 
Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2017 and 2016 (unaudited)
 
 
 
 
Consolidated Statements of Equity for the nine months ended September 30, 2017 and 2016 (unaudited)
 
 
 
 
Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016 (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

3
Index

PART I. FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS
Item 1. Consolidated Financial Statements

CALADRIUS BIOSCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

 
September 30,
2017
 
December 31,
2016
ASSETS
(Unaudited)
 
 
Current Assets
 

 
 

Cash and cash equivalents
$
15,077,872

 
$
7,076,651

Restricted cash
5,002,649

 
—

Marketable securities
44,371,615

 
—

Accounts receivable, net of allowances of $0 at September 30, 2017 and December 31, 2016, respectively
401,558

 
138,774

Prepaid and other current assets
920,008

 
1,900,493

Current assets related to discontinued operations
—

 
15,533,043

Total current assets
65,773,702

 
24,648,961

Property, plant and equipment, net
364,118

 
705,438

Other assets
1,417,439

 
1,582,209

Other assets related to discontinued operations
—

 
26,577,834

Total assets
$
67,555,259

 
$
53,514,442

LIABILITIES, REDEEMABLE SECURITIES - NON-CONTROLLING INTERESTS AND EQUITY
 

 
 

Current Liabilities
 

 
 

Accounts payable
$
879,625

 
$
2,226,580

Accrued liabilities
10,135,600

 
2,659,433

Long-term debt, current
—

 
3,126,457

Notes payable, current
359,553

 
563,777

Due to PCT
—

 
1,681,594

Current liabilities related to discontinued operations
—

 
10,925,052

Total current liabilities
11,374,778

 
21,182,893

Notes payable
—

 
159,180

Long-term debt
—

 
2,524,897

Other long-term liabilities
3,200,154

 
389,858

Liabilities related to discontinued operations
—

 
5,791,134

Total liabilities
$
14,574,932

 
$
30,047,962

Commitments and Contingencies


 


Redeemable Securities - Non-Controlling Interests
—

 
19,400,000

EQUITY
 

 
 

Stockholders' Equity
 
 
 

Preferred stock, authorized, 20,000,000 shares
Series B convertible redeemable preferred stock liquidation value, 1 share of common stock, $.01 par value; 825,000 shares designated; issued and outstanding, 10,000 shares at September 30, 2017 and December 31, 2016
100

 
100

Common stock, $.001 par value, authorized 500,000,000 shares; issued and outstanding, 9,427,001 and 8,205,790 shares, at September 30, 2017 and December 31, 2016, respectively
9,427

 
8,206

Additional paid-in capital
433,006,780

 
410,372,049

Treasury stock, at cost; 11,080 shares at September 30, 2017 and December 31, 2016, respectively
(707,637
)
 
(707,637
)
Accumulated deficit
(378,947,243
)
 
(404,788,809
)
Accumulated other comprehensive loss
(28,717
)
 
—

Total Caladrius Biosciences, Inc. stockholders' equity
53,332,710

 
4,883,909

Noncontrolling interests
(352,383
)
 
(817,429
)
Total equity
52,980,327

 
4,066,480

Total liabilities, redeemable securities - non-controlling interests, and equity
$
67,555,259

 
$
53,514,442

See accompanying notes to consolidated financial statements.

4
Index

CALADRIUS BIOSCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Operating Expenses:
 
 
 
 
 
 
 
Research and development
$
3,187,024

 
$
2,958,593

 
$
11,190,939

 
$
13,496,045

General and administrative
2,942,877

 
2,768,927

 
9,081,806

 
10,513,570

Total operating expenses
6,129,901

 
5,727,520

 
20,272,745

 
24,009,615

 
 
 
 
 
 
 
 
Operating loss
(6,129,901
)
 
(5,727,520
)
 
(20,272,745
)
 
(24,009,615
)
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
Other income (expense), net
176,855

 
5,117

 
137,288

 
19,559

Interest expense
(8,687
)
 
(368,364
)
 
(372,099
)
 
(1,601,421
)
 
168,168

 
(363,247
)
 
(234,811
)
 
(1,581,862
)
 
 
 
 
 
 
 
 
Loss from continuing operations before benefit from income taxes and noncontrolling interests
(5,961,733
)
 
(6,090,767
)
 
(20,507,556
)
 
(25,591,477
)
Benefit from income taxes
(2,413,951
)
 
—

 
(8,301,494
)
 
—

Net loss from continuing operations
(3,547,782
)
 
(6,090,767
)
 
(12,206,062
)
 
(25,591,477
)
Discontinued operations - net of taxes
—

 
(1,196,838
)
 
37,329,963

 
(1,628,694
)
Net (loss) income
$
(3,547,782
)
 
$
(7,287,605
)
 
$
25,123,901

 
$
(27,220,171
)
 
 
 
 
 
 
 
 
Less - net loss from continuing operations attributable to noncontrolling interests
(119,342
)
 
(59,423
)
 
(149,509
)
 
(187,126
)
Less - net loss from discontinued operations attributable to noncontrolling interests
—

 
(345,649
)
 
(568,156
)
 
(334,879
)
Net (loss) income attributable to Caladrius Biosciences, Inc. common stockholders
$
(3,428,440
)
 
$
(6,882,533
)
 
$
25,841,566

 
$
(26,698,166
)
 
 
 
 
 
 
 
 
Amounts Attributable to Caladrius Inc. common stockholders:
 
 
 
 
 
 
 
Loss from continuing operations
(3,428,440
)
 
(6,031,344
)
 
(12,056,553
)
 
(25,404,351
)
Income (loss) from discontinued operations - net of taxes
—

 
(851,189
)
 
37,898,119

 
(1,293,815
)
Net income (loss) attributable to Caladrius Inc. common stockholders
$
(3,428,440
)
 
$
(6,882,533
)
 
$
25,841,566

 
$
(26,698,166
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic and diluted income (loss) per share
 
 
 
 
 
 
 
Continuing operations
$
(0.38
)
 
$
(0.95
)
 
$
(1.37
)
 
$
(4.23
)
Discontinued operations
$
—

 
$
(0.13
)
 
$
4.30

 
$
(0.22
)
Caladrius Biosciences, Inc. common stockholders
$
(0.38
)
 
$
(1.09
)
 
$
2.94

 
$
(4.45
)
 
 
 
 
 
 
 
 
Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic and diluted shares
9,093,880

 
6,323,427

 
8,803,784

 
6,001,572


See accompanying notes to consolidated financial statements.

5
Index

CALADRIUS BIOSCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited) 

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Net (loss) income
$
(3,547,782
)
 
$
(7,287,605
)
 
$
25,123,901

 
$
(27,220,171
)
 
 
 
 
 
 
 
 
Other comprehensive loss:
 
 
 
 
 
 
 
Available for sale securities - net unrealized loss
(28,717
)
 
(486
)
 
(28,717
)
 
(486
)
Total other comprehensive loss
(28,717
)
 
(486
)
 
(28,717
)
 
(486
)
 
 
 
 
 
 
 
 
Comprehensive (loss) income
(3,576,499
)
 
(7,288,091
)
 
25,095,184

 
(27,220,657
)
 
 
 
 
 
 
 
 
Comprehensive loss attributable to noncontrolling interests
(119,342
)
 
(405,072
)
 
(717,665
)
 
(522,005
)
 
 
 
 
 
 
 
 
Comprehensive (loss) income attributable to Caladrius Biosciences, Inc. common stockholders
$
(3,457,157
)
 
$
(6,883,019
)
 
$
25,812,849

 
$
(26,698,652
)
 
See accompanying notes to consolidated financial statements.

6
Index

CALADRIUS BIOSCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited) 

 
Series B Convertible
Preferred Stock
 
Common Stock
 
Additional
Paid in
Capital
 
Accumulated
Other
Comprehensive
Income
 
Accumulated
Deficit
 
Treasury
Stock
 
Total
Caladrius Biosciences,
Inc.
Stockholders'
Equity
 
Non-
Controlling
Interest in
Subsidiary
 
Total
Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
 
 
Balance at December 31, 2015
10,000

 
$
100

 
5,673,302

 
$
5,673

 
$
396,547,401

 
$
486

 
$
(372,132,490
)
 
$
(707,637
)
 
$
23,713,533

 
$
(429,709
)
 
$
23,283,824

Net loss
—

 
—

 
—

 
—

 
—

 
—

 
(26,698,166
)
 
—

 
(26,698,166
)
 
(522,005
)
 
(27,220,171
)
Unrealized gain/loss on marketable securities
—

 
—

 
—

 
—

 
—

 
(486
)
 
—

 
—

 
(486
)
 
—

 
(486
)
Share-based compensation
—

 
—

 
104,754

 
105

 
2,275,511

 
—

 
—

 
—

 
2,275,616

 
—

 
2,275,616

Net proceeds from issuance of common stock
—

 
—

 
2,403,865

 
2,404

 
11,648,308

 
—

 
—

 
—

 
11,650,712

 
—

 
11,650,712

Change in Ownership in Subsidiary
—

 
—

 
—

 
—

 
(195,219
)
 
—

 
—

 
—

 
(195,219
)
 
195,219

 
—

Balance at September 30, 2016
10,000

 
$
100

 
8,181,921

 
$
8,182

 
$
410,276,001

 
$
—

 
$
(398,830,656
)
 
$
(707,637
)
 
$
10,745,990

 
$
(756,495
)
 
$
9,989,495

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Series B Convertible
Preferred Stock
 
Common Stock
 
Additional
Paid in
Capital
 
Accumulated
Other
Comprehensive
Income
 
Accumulated
Deficit
 
Treasury
Stock
 
Total
Caladrius Biosciences,
Inc.
Stockholders'
Equity
 
Non-
Controlling
Interest in
Subsidiary
 
Total
Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
 
 
Balance at December 31, 2016
10,000

 
$
100

 
8,205,790

 
$
8,206

 
$
410,372,049

 
$
—

 
$
(404,788,809
)
 
$
(707,637
)
 
$
4,883,909

 
$
(817,429
)
 
$
4,066,480

Net income
—

 
—

 
—

 
—

 
—

 
—

 
25,841,566

 
—

 
25,841,566

 
(717,665
)
 
25,123,901

Unrealized gain/loss on marketable securities
—

 
—

 
—

 
—

 
—

 
(28,717
)
 
—

 
—

 
(28,717
)
 
—

 
(28,717
)
Share-based compensation
—

 
—

 
54,545

 
55

 
2,412,926

 
—

 
—

 
—

 
2,412,981

 
—

 
2,412,981

Net proceeds from issuance of common stock
—

 
—

 
1,162,831

 
1,162

 
5,677,470

 
—

 
—

 
—

 
5,678,632

 
—

 
5,678,632

Proceeds from option exercises
—

 
—

 
3,835

 
4

 
13,572

 
—

 
—

 
—

 
13,576

 
—

 
13,576

Elimination of non-controlling interests associated with PCT sale
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(3,686,526
)
 
(3,686,526
)
Reclassification of redeemable securities
—

 
—

 
—

 
—

 
14,733,908

 
—

 
—

 
—

 
14,733,908

 
4,666,092

 
19,400,000

Change in Ownership in Subsidiary
—

 
—

 
—

 
—


(203,145
)
 
—

 
—

 
—

 
(203,145
)
 
203,145

 
—

Balance at September 30, 2017
10,000

 
$
100

 
9,427,001

 
$
9,427

 
$
433,006,780

 
$
(28,717
)
 
$
(378,947,243
)
 
$
(707,637
)
 
$
53,332,710

 
$
(352,383
)
 
$
52,980,327

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to consolidated financial statements.
 

7
Index

CALADRIUS BIOSCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
Nine Months Ended September 30,
 
2017
 
2016
Cash flows from operating activities:
 

 
 

Net income (loss)
$
25,123,901

 
$
(27,220,171
)
(Income) loss from discontinued operations
(37,329,963
)
 
1,628,694

Share-based compensation
1,881,712

 
2,275,616

Depreciation and amortization
284,005

 
351,226

Loss on disposal of assets
175,793

 
591,307

Accretion on marketable securities
218,755

 
—

Changes in operating assets and liabilities:
 

 
 

Prepaid and other current assets
980,495

 
871,417

Accounts receivable
(262,784
)
 
14,424

Other assets
164,788

 
191,717

Due to/from PCT
(1,681,593
)
 
1,605,550

Accounts payable, accrued liabilities and other liabilities
(5,823,272
)
 
(3,210,626
)
Net cash used in operating activities - continuing operations
(16,268,163
)
 
(22,900,846
)
Net cash (used in) provided by operating activities - discontinued operations
(638,069
)
 
2,608,615

Net cash used in operating activities
(16,906,232
)
 
(20,292,231
)
Cash flows from investing activities:
 

 
 

Purchase of marketable securities
(51,724,691
)
 
—

Sale of marketable securities
7,105,603

 
—

Net proceeds from PCT sale
74,689,814

 
—

Net cash sold in PCT sale
(6,727,263
)
 
—

Acquisition of property, plant and equipment
(118,478
)
 
(1,068,130
)
Net cash provided by (used in) investing activities - continuing operations
23,224,985

 
(1,068,130
)
Net cash used in investing activities - discontinued operations
(188,794
)
 
(1,247,623
)
Net cash provided by (used in) investing activities
23,036,191

 
(2,315,753
)
Cash flows from financing activities:
 

 
 

Proceeds from exercise of options
13,576

 
—

Tax withholding payments on net share settlement equity awards
(357,665
)
 
—

Net proceeds from issuance of common stock
5,678,632

 
11,650,712

Repayment of long-term debt
(5,651,354
)
 
(9,348,646
)
Proceeds from notes payable
400,998

 
368,615

Repayment of notes payable
(764,402
)
 
(715,610
)
PCT dividend to Caladrius
—

 
15,000,000

Net cash (used in) provided by financing activities - continuing operations
(680,215
)
 
16,955,071

Net cash (used in) provided by financing activities - discontinued operations
(74,231
)
 
3,941,244

Net cash (used in) provided by financing activities
(754,446
)
 
20,896,315

Net increase (decrease) in cash, cash equivalents and restricted cash
5,375,513

 
(1,711,669
)
Cash, cash equivalents and restricted cash at beginning of period - continuing operations
7,076,651

 
18,657,971

Cash and cash equivalents at beginning of period - discontinued operations
7,628,357

 
1,660,440

Cash, cash equivalents and restricted cash at end of period
$
20,080,521

 
$
18,606,742

    Less cash and cash equivalents of discontinued operations at end of period
—

 
6,962,677

Cash, cash equivalents and restricted cash of continuing operations at end of period
20,080,521

 
11,644,065

 
 
 
 
Supplemental Disclosure of Cash Flow Information:
 
 
 
Cash paid during the period for:
 
 
 
Interest
$
706,231

 
$
973,729

See accompanying notes to consolidated financial statements.

8
Index

CALADRIUS BIOSCIENCES, INC. AND SUBSIDIARIES
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – The Business
 
Overview
 
Caladrius Biosciences, Inc. (“we,” “us,” "our," “Caladrius” or the “Company”), is a company developing cellular therapeutics to treat certain diseases. We leverage specialized clinical development expertise to select and develop early-stage cell therapy candidates with the intention of developing such candidates to their next significant clinical milestone and, if appropriate, partnering such candidates. Our current lead product candidate, CLBS03, is an autologous polyclonal regulatory T cell ("Treg") clinical phase 2 therapy targeting children aged 8-17 with recent-onset type 1 diabetes mellitus ("T1D").

Immunomodulation (Treg Technology)

We are developing strategically, through the utilization of our core clinical development expertise, a product candidate (CLBS03) that has the potential to be an innovative therapy for T1D. This therapy is based on a proprietary platform technology for immunomodulation. We have selected as an initial target the unmet medical need of patients who are newly diagnosed with T1D, most of whom will be under the age of 18. This program is based on the use of Tregs to treat diseases caused by imbalances in an individual's immune system. This novel approach seeks to restore immune balance by enhancing Treg number and function. Tregs are a natural part of the human immune system and regulate the activity of effector T cells, the cells that are responsible for protecting the body from pathogens and foreign antigens. When Tregs function properly, only harmful foreign materials are attacked by effector T cells. In autoimmune disease, however, it is thought that deficient Treg activity and numbers permit the effector T cells to attack the body's own beneficial cells. In the case of T1D, the beta cells in the pancreas are attacked thereby reducing and/or eliminating over time the patient's ability to produce insulin. Insulin is necessary to regulate sugar metabolism and maintain proper sugar levels in the blood. Inconsistent or unnatural insulin levels can lead to many complications, including blindness, vascular disease and, if no insulin supplement is provided, even death. There are currently no curative treatments for TID, only lifelong insulin therapy, which often does not prevent serious co-morbidities. Two Phase 1 clinical trials of Treg technology in T1D demonstrated safety and tolerance, feasibility of manufacturing, an implied durability of effect as well as an early indication of potential therapeutic effect through the preservation of beta cell function. In the first quarter of 2016, we commenced patient enrollment in the first of two cohorts in The Sanford Project: T-Rex Study, a Phase 2 prospective, randomized, placebo-controlled, double-blind clinical trial (the "TRex Study") to evaluate the safety and efficacy of CLBS03 in adolescents with recent onset TID. In October 2016, we received a satisfactory safety evaluation by our independent Data Safety Monitoring Board based on safety data then available from the first 19 patients enrolled in the trial. A subsequent interim analysis is planned after approximately 50% of patients reach the six-month follow-up milestone, the results of which are expected to be publicly available by the mid to late first quarter of 2018. We entered into a strategic collaboration with Sanford Research to support the execution of this trial. Sanford Research is a U.S.-based non-profit research organization that supports an emerging translational research center focused on finding a cure for T1D. On February 23, 2017, the California Institute for Regenerative Medicine ("CIRM") awarded us funds of up to $12.2 million to support the T-Rex Study. The funding will be based upon the achievement of certain milestones related to the proportion of subjects enrolled in California, as well as manufacturing and development costs incurred in California. We received $5.7 million in initial funding on May 4, 2017. CLBS03 has been granted Fast Track and orphan drug designations from the U.S. Food and Drug Administration ("FDA") as well as Advanced Therapeutic Medicinal Product ("ATMP") classification from the European Medicines Agency ("EMA").

Ischemic Repair (CD34 Cell Technology)
Our CD34 cell technology has led to the development of therapeutic candidates designed to address diseases and conditions caused by ischemia. Ischemia occurs when the supply of oxygenated blood to healthy tissue is restricted. Through the administration of CD34 cells, we seek to promote the development and formation of new blood vessels and thereby increase blood flow to the impacted area. We believe that conditions caused by underlying ischemic injury can be improved through our CD34 cell technology, including critical limb ischemia ("CLI"). Published reports in Circulation Cardiovascular Interventions, Atherosclerosis, Stem Cells and Circulation Journal, provide preliminary evidence that CD34 cell therapy is safe and can exert significant therapeutic effects in patients with CLI, a condition in which blood flow to the legs is severely impaired, causing pain and non-healing ulcers and, ultimately, potentially resulting in the need for amputation. Our Clinical Trial Notification for a pivotal Phase 2 trial investigating our product candidate in CLI CLBS12 was submitted to the Japanese Pharmaceutical and Medical Device Agency ("PMDA") and was cleared to proceed. The protocol design was agreed to with PMDA and, we intend to begin enrolling patients in late 2017 or early 2018. Under our agreement with the PMDA, a successful outcome of this trial would make CLBS12 eligible for early conditional approval in Japan. We are seeking to collaborate on CLBS12 with development and/or manufacturing partners. Furthermore, we submitted grant applications in an effort to seek non-dilutive financing to investigate the CD34 technology for

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additional clinical indications in the United States and on October 2, 2017 we announced the award of a $1.9 million grant from the National Institutes of Health to support a clinical study of CD34 cells in patients with coronary microvascular dysfunction.
We intend to develop this platform if capital becomes available through grants, partnerships or licensing, as well as potentially using reasonable amounts of our own capital.
Additional Out-licensing Opportunities
    
Our broad intellectual property portfolio of cell therapy assets includes notable programs available for out-licensing in order to continue their clinical development. These include additional indications for our Treg product, additional indications for our CD34 cell technology and a platform using tumor cell/dendritic cell technology for immuno-oncology application. The immuno-oncology program has the benefit of promising Phase 2 clinical data and applicability to multiple indications. In 2016, we completed multiple out-licensing agreements for this and other technology platforms in an effort to monetize non-core assets.

Our current long-term strategy focuses on advancing our therapies through development toward the market and assisting patients suffering from life-threatening medical conditions. We believe that we are positioned to realize potentially meaningful value increases within our own proprietary pipeline based on the realization of advancing our product candidates to their next significant development milestone.

Discontinued Operations
On May 18, 2017 (the "Closing Date"), we completed the previously announced sale of our remaining 80.1% membership interest in PCT, LLC, a Caladrius company ("PCT") to Hitachi Chemical Co. America, Ltd. ("Hitachi"), pursuant to the Interest Purchase Agreement (the "Purchase Agreement"), dated as of March 16, 2017, by and among us, PCT and Hitachi (the "2017 Hitachi Transaction"), for $75.0 million in cash, plus an additional cash adjustment based on PCT’s cash and outstanding indebtedness as of the Closing Date ("Additional Consideration") and a potential future milestone payment (see Note 3). The sale of PCT represents a strategic shift that has a major effect on our operations, and therefore, PCT is accounted for as discontinued operations. All periods presented were adjusted to reflect PCT as discontinued operations.

Basis of Presentation

The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying Consolidated Financial Statements of the Company and its subsidiaries, which are unaudited, include all normal and recurring adjustments considered necessary to present fairly the Company’s financial position as of September 30, 2017 and the results of its operations and its cash flows for the periods presented. The unaudited consolidated financial statements herein should be read together with the historical consolidated financial statements of the Company for the years ended December 31, 2016 and 2015 included in our 2016 Form 10-K. Operating results for the nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.
    
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 consolidated financial statements. Estimates also affect the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and other assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. The Company makes critical estimates and assumptions in determining useful lives of our long-lived assets, allowances for doubtful accounts, and stock-based awards values. Accordingly, actual results could differ from those estimates and assumptions.

An accounting policy is considered to be critical if it is important to the Company’s financial condition and results of operations and if it requires management’s most difficult, subjective and complex judgments in its application.
 
Principles of Consolidation
 
The Consolidated Financial Statements include the accounts of Caladrius Biosciences, Inc. and its wholly-owned and partially-owned subsidiaries and affiliates, as well as the operations of our former subsidiaries PCT, LLC, a Caladrius company, NeoStem

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Family Storage, LLC, and PCT Allendale, LLC entities (collectively the "PCT Segment") through May 18, 2017, representing the date which these entities were sold to Hitachi (see Note 3). The PCT Segment is reported in discontinued operations. All intercompany activities have been eliminated in consolidation, except for intercompany activities between Caladrius and the PCT Segment, which are reported without intercompany eliminations in continuing operations and discontinued operations, respectively.

Note 2 – Summary of Significant Accounting Policies
 
In addition to the policies below, our significant accounting policies are described in Note 2 of the Notes to Consolidated Financial Statements included in our 2016 Form 10-K. There were no changes to these policies during the three and nine months ended September 30, 2017.

Concentration of Risks
We are subject to credit risk from our portfolio of cash, cash equivalents, restricted cash, and marketable securities. Under our investment policy, we limit amounts invested in such securities by credit rating, maturity, industry group, investment type and issuer, except for securities issued by the U.S. government. Cash is held at major banks in the United States. Therefore, the Company is not exposed to any significant concentrations of credit risk from these financial instruments. The goals of our investment policy, in order of priority, are as follows: safety and preservation of principal and diversification of risk, liquidity of investments sufficient to meet cash flow requirements, and a competitive after-tax rate of return.

Share-Based Compensation  

The Company expenses all share-based payment awards to employees, directors, consultants, including grants of stock options, warrants, and restricted stock, over the requisite service period based on the grant date fair value of the awards. Consultant awards are remeasured each reporting period through vesting. For awards with performance-based vesting criteria, the Company estimates the probability of achievement of the performance criteria and recognizes compensation expense related to those awards expected to vest. The Company determines the fair value of option awards using the Black-Scholes option-pricing model, which uses both historical and current market data to estimate the fair value. This method incorporates various assumptions such as the risk-free interest rate, expected volatility, expected dividend yield and expected life of the options or warrants. The fair value of the Company’s restricted stock and restricted stock units is based on the closing market price of the Company’s common stock on the date of grant.


Recently Issued Accounting Pronouncement

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU requires that a lessee recognize lease assets and lease liabilities for those leases classified as operating leases. The guidance is effective for interim and annual periods beginning after December 15, 2018, and will be applied at the beginning of the earliest period presented using a modified retrospective approach. This ASU may have a material impact on the Company’s financial statements. The impact on the Company’s results of operations is currently being evaluated. The impact of the ASU is non-cash in nature and will not affect the Company’s cash position.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. This ASU simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, accounting for forfeitures, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The guidance was effective for interim and annual periods beginning after December 15, 2016. The adoption of this new guidance did not have a material effect on the consolidated results of operations, cash flows, and financial position.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 clarifies how companies present and classify certain cash receipts and cash payments in the statement of cash flows where diversity in practice exists. ASU 2016-15 is effective in first quarter of fiscal 2018 and earlier adoption is permitted. The Company is currently evaluating the effect that the updated standard will have on the consolidated financial statements and related disclosures.

In October 2016, the FASB issued ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory. ASU 2016-16 requires the income tax consequences of intra-entity transfers of assets other than inventory to be recognized as current period income tax expense or benefit at the transaction date and removes the option to defer and amortize the consolidated tax consequences of intra-entity transfers. The new standard will be effective on January 1, 2018 and will be adopted using a modified retrospective approach which requires a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. Early adoption

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is permitted at the beginning of a fiscal year. The Company is currently evaluating the effect that the updated standard will have on the consolidated financial statements and related disclosures.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The new standard will be effective on January 1, 2018 and the Company has been early adopted, with all adjustments reflected as of the beginning of the fiscal years reported.

In May 2017, the FASB issued ASU 2017-09, "Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting," to provide clarity and reduce both diversity in practice and cost complexity when applying the guidance in Topic 718 to a change to the terms and conditions of a stock-based payment award. ASU 2017-09 also provides guidance about the types of changes to the terms or conditions of a share-based payment award that require an entity to apply modification accounting in accordance with Topic 718. For all entities, including emerging growth companies, the standard is effective for annual periods beginning after December 15, 2017, and for interim periods therein. Early adoption is permitted. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.


Note 3 – Collaboration and License Agreement

2016 Hitachi Transaction

On March 11, 2016, PCT entered into a global collaboration with Hitachi. This collaboration consists of an equity investment in and a license agreement with PCT.

Under the equity investment agreement, Hitachi purchased a 19.9% membership interest in PCT for $19.4 million of which $15.0 million of proceeds was distributed to Caladrius from PCT and $4.4 million remained at PCT to be used for the continued expansion and improvements at PCT in support of commercial product launch readiness as well as for general corporate purposes.

PCT and Hitachi also entered into an exclusive license agreement for the acceleration of the creation of a global commercial cell therapy development and manufacturing expertise in Asia pursuant to which PCT received $5.6 million from Hitachi in 2016. PCT licensed certain cell therapy technology and know-how (including an exclusive license in Asia) and agreed to provide Hitachi Chemical with certain training and support.  As additional consideration, Hitachi Chemical agreed to pay PCT royalties on contract revenue generated in Asia for a minimum of ten years.

2017 Hitachi Transaction

On May 18, 2017, the Company sold its remaining 80.1% membership interest in PCT to Hitachi pursuant to the Purchase Agreement, dated as of March 16, 2017, by and among Caladrius PCT and Hitachi (the "2017 Hitachi Transaction"). The aggregate purchase price to the Company consisted of (i) $75.0 million in cash, (ii) $4.4 million, representing Additional Consideration based on PCT’s cash and outstanding indebtedness as of the Closing Date, and (iii) a potential future milestone payment of $5.0 million if PCT achieves $125 million in Cumulative Revenue (excluding clinical service reimbursables) (the “Milestone”) for the period from January 1, 2017 through December 31, 2018 (the “Milestone Period”).
Hitachi paid the Company $5.0 million in March 2017 as an advance payment pending shareholder approval of the transaction and other closing conditions. On the Closing Date, the Company received $65.0 million, with an additional $5.0 million of the purchase consideration (the "Escrow Amount") deposited into an escrow account to cover potential indemnification claims against Caladrius. The Escrow Amount is classified as restricted cash on the balance sheet as of September 30, 2017. In June 2018, the escrow agent will disburse to the Company the Escrow Amount less (i) that portion of the Escrow Amount previously paid in satisfaction of claims for indemnification pursuant to the terms of the Purchase Agreement and (ii) that portion of the Escrow Amount that is determined, in the reasonable judgment of Hitachi, to be necessary to satisfy all unsatisfied or disputed claims for indemnification specified in any claim notice delivered to the Company. The Company also received the $4.4 million Additional Consideration payment in July 2017. The Company incurred approximately $6.9 million in transaction costs related to the 2017 Hitachi Transaction, including $4.3 million in retention payments to PCT employees, of which 50% was paid in June 2017, and the other 50% payable on the one year anniversary of the Closing Date.

Concurrent with the signing of the Purchase Agreement, on March 16, 2017, Caladrius entered into a Retention and Incentive Agreement with Robert A. Preti, a former Caladrius director and a co-founder and the President of PCT, (the “Retention Agreement”). The Retention Agreement superseded all prior agreements and understandings between Dr. Preti and Caladrius regarding the subject matter of the Retention Agreement. Among other things, the Retention Agreement provided for:

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•
Simultaneously with the closing of the 2017 Hitachi Transaction, Caladrius paid to Dr. Preti $1.9 million (the “First Retention Payment”).
•
As an incentive to remain employed with PCT and to use commercially reasonable efforts to cause PCT to maximize its overall performance and in particular to achieve the Milestone (but not contingent upon achieving the Milestone), Dr. Preti will receive a lump-sum cash retention and incentive payment equal to $1.9 million for the period from the Closing Date until the date one year after the date of the Closing Date (the “Anniversary Date”), subject to Dr. Preti’s continued employment with PCT through the Anniversary Date (the “Second Retention Payment”).
•
Dr. Preti will be entitled to 5% of the Milestone Payment if it is successfully earned.

Note 4 – Available-for-Sale-Securities
 
The following table is a summary of available-for-sale securities recorded in cash and cash equivalents or marketable securities in our Consolidated Balance Sheets (in thousands):

 
September 30, 2017
 
December 31, 2016
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Estimated Fair Value
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Estimated Fair Value
Certificate of deposits
$
249.0

 
$
—

 
$
—

 
$
249.0

 
$
—

 
$
—

 
$
—

 
$
—

Corporate debt securities
49,345.6

 
—

 
(28.8
)
 
49,316.8

 
—

 
—

 
—

 
—

Money market funds
6,678.6

 
0.1

 
—

 
6,678.7

 
4,426.8

 
—

 
—

 
4,426.8

Total
$
56,273.2

 
$
0.1

 
$
(28.8
)
 
$
56,244.5

 
$
4,426.8

 
$
—

 
$
—

 
$
4,426.8


Estimated fair values of available-for-sale securities are generally based on prices obtained from commercial pricing services. The following table summarizes the classification of the available-for-sale debt securities on our Consolidated Balance Sheets (in thousands):

 
September 30, 2017
 
December 31, 2016
Cash and cash equivalents
$
11,872.9

 
$
4,426.8

Marketable securities
44,371.6

 
—

Total
$
56,244.5

 
$
4,426.8


The following table summarizes our portfolio of available-for-sale debt securities by contractual maturity (in thousands):
 
 
September 30, 2017
 
Amortized Cost
 
Estimated Fair Value
Less than one year
$
56,273.2

 
$
56,244.5

Greater than one year
—

 
—

Total
$
56,273.2

 
$
56,244.5



Note 5 – Loss Per Share
 

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For the three and nine months ended September 30, 2017 and 2016, the Company incurred net losses from continuing operations and therefore no common stock equivalents were utilized in the calculation of diluted loss per share as they are anti-dilutive. At September 30, 2017 and 2016, the Company excluded the following potentially dilutive securities:
 
September 30,
 
2017
 
2016
Stock Options
1,105,790

 
942,129

Warrants
218,978

 
362,650

Restricted Stock Awards
8,000

 
61,456

Restricted Stock Units
10,260

 
—

 
Note 6 – Fair Value Measurements
 
The fair value of financial assets and liabilities that are being measured and reported are defined as the exchange price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market at the measurement date (exit price). The Company is required to classify fair value measurements in one of the following categories:
 
Level 1 inputs are defined as quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
 
Level 2 inputs are defined as inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly.
 
Level 3 inputs are defined as unobservable inputs for the assets or liabilities. Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.
 
The following table sets forth by level within the fair value hierarchy the Company's financial assets that were accounted for at fair value on a recurring basis as of September 30, 2017, and December 31, 2016 (in thousands).

 
 
September 30, 2017
 
December 31, 2016
 
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Marketable securities - available for sale
 
$
—

 
$
44,371.6

 
$
—

 
$
44,371.6

 
$
—

 
$
—

 
$
—

 
$
—

 
 
$
—

 
$
44,371.6

 
$
—

 
$
44,371.6

 
$
—

 
$
—

 
$
—

 
$
—


Note 7 – Accrued Liabilities

Accrued liabilities as of September 30, 2017 and December 31, 2016 were as follows (in thousands):
 
September 30, 2017
 
December 31, 2016
Salaries, employee benefits and related taxes
$
1,169.6

 
$
1,406.3

Retention payments
2,233.0

 
—

Professional fees
367.3

 
224.5

Income tax liability
4,075.6

 
—

CIRM upfront funding - current
1,745.5

 
—

Other
544.7

 
1,028.6

Total
$
10,135.7

 
$
2,659.4


Note 8 – Debt
 

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Notes Payable
 
As of September 30, 2017 and December 31, 2016, the Company had notes payable of approximately $0.4 million and $0.7 million, respectively. The notes relate to certain insurance policies and equipment financings, require monthly payments, and mature within one to three years.
 
Long-Term Debt

On September 26, 2014, the Company entered into a loan and security agreement (the “Loan and Security Agreement”) with Oxford Finance LLC (together with its successors and assigns, the “Lender”) pursuant to which the Lender disbursed $15.0 million (the “Loan”). The debt offering/issuance costs have been recorded as debt issuance costs in other assets in the consolidated balance sheet, and will be amortized to interest expense throughout the life of the Loan using the effective interest rate method.

In March 2016, concurrent with the 2016 Hitachi Transaction (see Note 3), the Company and the Lender entered into an amendment to the Loan and Security Agreement whereby (i) the Company paid $7.0 million to Lender, comprising principal, interest and early termination fees, (ii) the Company's subsidiaries PCT, PCT Allendale, LLC, and NeoStem Family Storage, LLC (collectively the "Removed Borrowers") were removed as borrowers under the Loan, (iii) Lender's security interests in any and all assets of the Removed Borrowers were released, (iv) the interest only period on the remaining outstanding Loan balance was extended until January 1, 2017, and (v) in the event the Company received gross proceeds from the sale or issuance of any equity securities or subordinated debt, or any partnership, licenses, collaboration, dividend, grant or asset sale through March 31, 2017, 20% of such proceeds will be paid to Lender, up to a $3.0 million maximum as additional partial repayment of Loan. On September 14, 2016, concurrent with the Company's September 2016 Registered Direct Offering and Concurrent Private Placement (see Note 10), the Company repaid $3.0 million of such proceeds to the Lender. The outstanding balance was approximately $5.7 million at December 31, 2016.

In May 2017, concurrent with the 2017 Hitachi Transaction (see Note 3), the Company retired the Loan in full, and paid $4.9 million to Lender, comprising principal, interest and early termination fees. The Company was making interest-only payments on the outstanding amount of the Loan on a monthly basis at a rate of 8.50% per annum. During the nine months ended September 30, 2017, the Company recognized $0.4 million of interest expense related to the Loan and Security Agreement. During the three and nine months ended September 30, 2016, the Company recognized $0.2 million and $0.7 million of interest expense, respectively, related to the Loan and Security Agreement.

Note 9 – Redeemable Securities

Under the 2016 Hitachi Transaction (see Note 3), Hitachi had the right, at any time following the tenth anniversary of the 2016 Hitachi Transaction to require Caladrius or PCT to purchase all or some of the equity securities in PCT then held by Hitachi ("Hitachi Put Right") for an amount equal to the lesser of (i) the fair market value of the Hitachi equity holdings and (ii) the original purchase price paid of $19.4 million on March 11, 2016 for its 19.9% ownership interest, plus interest at a rate of 2.0% per annum compounded annually; provided, however, that if Hitachi ownership interests increased subsequent to its initial ownership interest, and it offers to sell its equity holdings in excess of 21% of PCT’s outstanding equity securities, then the Company would be required to purchase all such equity holdings of Hitachi but in no event would the aggregate purchase price of such Hitachi equity holdings exceed $20.5 million plus interest at the rate of 2.0% per annum compounded annually.

As of December 31, 2016, since Hitachi had the right to deliver the equity interests in PCT it held in exchange for cash from Caladrius or PCT, the initial $19.4 million value of the non-controlling interest was considered redeemable equity, requiring it to be treated as mezzanine equity. Redeemable non-controlling interest is required to be initially measured at the initial carrying amount. If the non-controlling interest is not currently redeemable and also not probable of becoming redeemable (e.g., it is not probable a contingency that triggers redemption will be met), the non-controlling interest should be classified in mezzanine equity.

Concurrent with 2017 Hitachi Transaction (see Note 3), the Hitachi Put Right was eliminated, and $14.7 million previously classified as Redeemable Securities was classified to Additional Paid in Capital. In addition, the remaining portion classified as Redeemable Securities of $4.7 million was classified to Non-Controlling Interests, representing Hitachi's ownership interest in PCT at the time of the 2016 Hitachi Transaction, which was subsequently eliminated upon the 2017 Hitachi transaction and included the PCT gain on sale.

Note 10 – Shareholders' Equity

Reverse Stock Split


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On July 28, 2016, the Company implemented the Reverse Stock Split, as authorized at the annual meeting of stockholders on June 22, 2016 and unanimously approved by the Company’s board of directors on July 22, 2016. The Reverse Stock Split became effective on July 27, 2016 at 5:00 pm and the common stock of the Company began trading on The NASDAQ Capital Market on a post-split basis at the open of business on July 28, 2016. As of July 28, 2016, every ten shares of the Company’s issued and outstanding common stock were combined into one share of its common stock, except to the extent that the Reverse Stock Split resulted in any of the Company’s stockholders owning a fractional share, which was rounded up to the next highest whole share. In connection with the Reverse Stock Split, there was no change in the nominal par value per share of $0.001.

All share and per share amounts of common stock, options and warrants in the accompanying financial statements have been restated for all periods to give retroactive effect to the Reverse Stock Split. Accordingly, the consolidated statements of equity reflect the impact of the Reverse Stock Split by reclassifying from “common stock” to “Additional paid-in capital” in an amount equal to the par value of the decreased shares resulting from the Reverse Stock Split.

Equity Issuances

September 2016 Registered Direct Offering and Concurrent Private Placement

On September 14, 2016, the Company entered into a securities purchase agreement (the “RD Purchase Agreement”) with a single institutional investor (the “Purchaser”), pursuant to which the Company issued and sold to the Purchaser, in a registered direct offering, an aggregate of 847,458 shares of the Company’s common stock at a purchase price of $4.72 per share. The gross proceeds to the Company from the registered direct offering of the shares of common stock were $4.0 million.

In concurrent private placements, on September 14, 2016, the Company entered into Securities Purchase Agreements (each a “Private Placement Purchase Agreement” and, collectively, the “Private Placement Purchase Agreements”) with certain accredited investors (the “Investors”) with whom it had a substantive, pre-existing relationship, including certain existing stockholders, for the sale by the Company of an aggregate of 4,449,153 shares of Common Stock, at a purchase price of $4.72 per share. The investments were placed in two tranches: (i) $12.6 million upon an initial closing (the “Initial Closing”), and (ii) $8.4 million, subject to certain conditions, including the enrollment of 70 subjects in the Company’s Phase 2 CLBS03 clinical trial, in a second closing (the “Second Closing”). As of March 31, 2017, $6.0 million of the Initial Closing tranche had not been received from a single investor, who was in breach of his obligations under the Private Placement Purchase Agreement. This investor had also committed to fund $4.0 million in the Second Closing. As a result, the Company terminated the Private Placement Purchase Agreement with this investor in the first quarter of 2017. In 2017, the Company met the conditions of the Second Closing, and received the remaining $4.4 million in proceeds in accordance with the terms of the Second Closing tranche and issued 932,204 shares of common stock.

Aspire Purchase Agreements

In November 2015, the Company entered into a common stock purchase agreement (the "Purchase Agreement") with Aspire Capital Fund, LLC, an Illinois limited liability company (“Aspire Capital”), which provides that, subject to certain terms and conditions, Aspire Capital is committed to purchase up to an aggregate of $30 million of shares (limited to a maximum of approximately 1.1 million shares, unless stockholder approval is obtained or certain minimum sale price levels are reached) of the Company's common stock over a 24-month term. As consideration for entering into the Purchase Agreement, the Company issued 84,270 shares of its common stock to Aspire Capital. During the nine months ended September 30, 2017, the Company issued 210,506 shares of common stock under the Purchase Agreement for gross proceeds of $1.2 million. Overall, as of September 30, 2017, the Company has issued 319,776 shares under the Purchase Agreement for gross proceeds of $1.5 million.

Under the Purchase Agreement, at the Company’s discretion, it may present Aspire Capital with purchase notices from time to time to purchase the Company’s common stock, provided certain price, trading volume and conditions, including NASDAQ's trading requirements, are met. The purchase price for the shares of common stock is based upon one of two formulas set forth in the Purchase Agreement depending on the type of purchase notice the Company submits to Aspire Capital, and is based on market prices of the Company’s common stock (in the case of regular purchases) or a discount of 5% applied to volume weighted average prices (in the case of VWAP purchases), in each case as determined by parameters defined in the Purchase Agreements. We have filed a registration statement with the SEC and a related prospectus supplement that covers the offering of shares of our common stock subject to the Purchase Agreement, and therefore can initiate sales to Aspire Capital at any time, subject to the limitation discussed above.

Stock Options and Warrants

The following table summarizes the activity for stock options and warrants for the nine months ended September 30, 2017:

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Index


 
 
Stock Options
 
Warrants
 
 
Shares
 
Weighted Average Exercise Price
 
Weighted Average Remaining Contractual Term (Years)
 
Aggregate Intrinsic Value (In Thousands)
 
Shares
 
Weighted Average Exercise Price
 
Weighted Average Remaining Contractual Term (Years)
 
Aggregate Intrinsic Value (In Thousands)
Outstanding at December 31, 2016
 
952,790

 
$
39.90

 
7.60
 
$
—

 
388,062

 
$
76.50

 
1.24
 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Changes during the period:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Granted
 
447,757

 
11.70

 
 
 
 
 
—

 
—

 
 
 
 
Exercised
 
(3,835
)
 
4.70

 
 
 
 
 
—

 
—

 
 
 
 
Forfeited
 
(244,413
)
 
18.70

 
 
 
 
 
(1,691
)
 
700.00

 
 
 
 
Expired
 
(46,509
)
 
41.20

 
 
 
 
 
(167,393
)
 
104.50

 
 
 
 
Outstanding at September 30, 2017
 
1,105,790

 
$
33.30

 
5.11
 
$
8.2

 
218,978

 
$
54.80

 
1.15
 
$
—

Vested at September 30, 2017
or expected to vest in the future
 
1,105,336

 
$
33.30

 
5.11
 
$
8.2

 
218,978

 
$
54.80

 
1.15
 
$
—

Vested at September 30, 2017
 
1,097,350

 
$
32.70

 
5.12
 
$
8.2

 
218,978

 
$
54.80

 
1.15
 
$
—



Restricted Stock

During the nine months ended September 30, 2017 and 2016, the Company issued restricted stock for services as follows (in thousands, except share data):

 
 
Nine Months Ended September 30,
  
 
2017
 
2016
Number of restricted stock issued
 
132,726

 
107,719

Value of restricted stock issued
 
$
469.9

 
$
651.7



Note 11 – Share-Based Compensation

Share-based Compensation

We utilize share-based compensation in the form of stock options, warrants, restricted stock, and restricted stock units.  The following table summarizes the components of share-based compensation expense for the three and nine months ended September 30, 2017 and 2016 (in thousands):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Research and development
$
—

 
$
154.0

 
$
208.2

 
$
225.0

General and administrative
62.4

 
485.6

 
1,673.6

 
1,297.6

Discontinued operations
—

 
401.0

 
888.9

 
753.0

Total share-based compensation expense
$
62.4

 
$
1,040.6

 
$
2,770.7

 
$
2,275.6

 
 
 
 
 
 
 
 

The approval of the 2017 Hitachi Transaction (see Note 3) by our stockholders resulted in a change in control under our equity compensation plans (as defined in the 2009 Plan and the 2015 Equity Plan, and, together with the 2009 Plan, the “Equity Compensation Plans”). Accordingly, all outstanding unvested equity awards were accelerated upon the Closing Date, resulting in an acceleration of $1.9 million of equity compensation in the second quarter of 2017. In addition, in connection with the 2017 Hitachi Transaction, the Company agreed to extend the post-termination option exercise period for all PCT employees transitioning to Hitachi from 90 days to the earlier of (i) two years (May 18, 2019) or (ii) the date of the employees' termination from PCT. The post-termination option exercise period modification resulted in an additional expense of $0.3 million, which was recorded entirely during the three months ended June 30, 2017 and recorded in discontinued operations, since there were no future service requirements to receive the extended benefit.

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Total compensation cost related to nonvested awards not yet recognized and the weighted-average periods over which the awards are expected to be recognized at September 30, 2017 were as follows (in thousands):
 
Stock Options
 
Restricted Stock
Unrecognized compensation cost
$
39.7

 
$
4.2

Expected weighted-average period in years of compensation cost to be recognized
0.67

 
0.13


Total fair value of shares vested and the weighted average estimated fair values of shares granted for the nine months ended September 30, 2017 and 2016 were as follows (in thousands):
 
Stock Options
 
Nine Months Ended September 30,
 
2017
 
2016
Total fair value of shares vested
$
5,001.7

 
$
2,189.4

Weighted average estimated fair value of shares granted
$
1.72

 
$
3.25


Valuation Assumptions

The fair value of stock options and warrants at the date of grant was estimated using the Black-Scholes option pricing model. The expected volatility is based upon historical volatility of the Company’s stock. The expected term for the options is based upon observation of actual time elapsed between date of grant and exercise of options for all employees. The expected term for the warrants is based upon the contractual term of the warrants.

Note 12 – Research Funding

California Institute of Regenerative Medicine Grant Award
In February 2017, the California Institute for Regenerative Medicine ("CIRM") awarded us funds of up to $12.2 million to support the T-Rex Study. The funding will be based upon the achievement of certain milestones related to the proportion of subjects enrolled in California, as well as manufacturing and development costs incurred in California. We received $5.7 million in initial funding in May 2017, which will be amortized over the estimated award period through July 2020 as a reduction to the related research and development expenses. As of September 30, 2017, $1.7 million of the funding received is recorded in Accrued Liabilities, representing the amount expected to be recognized over the next 12 months, and $3.2 million of the funding received is recorded in Other Long-Term Liabilities. During the three and nine months ended September 30, 2017, the Company amortized and recognized a $0.4 million and $0.7 million credit to research and development related to CIRM funds received.

Note 13 – Income Taxes
 
As of December 31, 2016, the Company had approximately $232.7 million of federal net operating loss carryforwards ("NOLs") available to offset future taxable income expiring from 2027 through 2036. In accordance with Section 382 of the Internal Revenue code, the usage of the Company’s NOLs could be limited in the event of a change in ownership. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period when those temporary differences become deductible.  If a change of ownership did occur, there would be an annual limitation on the usage of the Company’s losses, which are available through 2036.

In assessing the ability to realize deferred tax assets, including the NOLs, the Company assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize its existing deferred tax assets.  During the quarter ended June 30, 2017, the Company generated a gain from the sale of 80.1% of their ownership in PCT. The gain from the sale of PCT is included in discontinued operations. The Company for the nine months ended September 30, 2017 has generated losses from continuing operations and has forecasted losses for the remainder of the year. Based on generating taxable income for the 2017 year, the Company will utilize net operating losses which were offset by a full valuation allowance. The Company anticipates that they will maintain a valuation allowance on the remaining deferred tax assets at the end of the year.

Deferred tax liabilities were $0 and $1.1 million as of September 30, 2017 and December 31, 2016, respectively, and relate to the taxable temporary differences on the goodwill recognized in the PCT acquisition in 2011. The taxable temporary differences,

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which were tax deductible and were to be amortized over 15 years. The deferred tax liability was reversed during the three months ended June 30, 2017, as a result of the divestiture of PCT.

The Company applies ASC 740-10 for uncertain tax positions. The Company utilizes the two step process to determine the amount of recognized tax benefit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company recognizes interest and penalties associated with certain tax positions as a component of income tax expense.

As of September 30, 2017, management does not believe the Company has any material uncertain tax positions that would require it to measure and reflect the potential lack of sustainability of a position on audit in its financial statements. The Company will continue to evaluate its uncertain tax positions in future periods to determine if measurement and recognition in its financial statements is necessary. The Company does not believe there will be any material changes in its unrecognized tax positions over the next year.

During the nine months ended September 30, 2017, the Company has both continuing and discontinued operations. ASC 740-20-45-7 addresses the income tax accounting treatment when there is a loss from continuing operations and income from discontinuing operations. The Company must consider the gain from discontinued operations for purposes of allocating a tax benefit to the current year loss from continuing operations. The Company has adopted a method in which the income from discontinued operations are recognized as a discrete item in the period in which it occurs and apply the concepts of the annual effective tax rate (AETR) during each period in computing the income tax provision from continuing operations. This method results in a tax expense for discontinued operations and an income tax benefit for the loss generated from continuing operations. The Company is forecasting losses from continuing operations for the remainder of 2017 against which an income tax benefit will be recorded.

The Company completed the audit of its federal tax returns for the years 2012 and 2013 during the fourth quarter of 2016. The audit resulted in an adjustment to the Company's NOL carryforward. For years prior to 2014, the federal statute of limitations is closed for assessing tax. The Company’s state tax returns remain open to examination for a period of three to four years from date of filing. The Company ceased doing business in China in 2012.  After 2012, the Company had no foreign tax filing obligations.  The foreign returns filed for 2012 and prior are subject to examination for five years.


Note 14 – Discontinued Operations
 
PCT Segment

On May 18, 2017, the Company completed the previously announced Sale of its remaining 80.1% membership interest in PCT to Hitachi. Pursuant to the Purchase Agreement, by and among Caladrius, PCT and Hitachi, the aggregate purchase price to the Company consisted of (i) $75.0 million in cash, (ii) a $4.4 million cash adjustment, based on PCT’s cash and outstanding indebtedness as of the Closing Date, and (iii) a potential future milestone payment of $5.0 million if PCT achieves $125 million in Cumulative Revenue (excluding clinical service reimbursables) (the “Milestone”) for the period from January 1, 2017 through December 31, 2018 (the “Milestone Period”). The Company has determined that the fair value of the milestone payment as of the closing date was valued at zero. 
Pursuant to the terms of the Purchase Agreement, Hitachi paid the Company $5.0 million in March 2017 as an advance payment pending shareholder approval of the transaction and other closing conditions included in the Purchase Agreement. On the Closing Date, the Company received $65.0 million, with an additional $5.0 million of the purchase consideration (the "Escrow Amount") deposited into an escrow account to cover potential indemnification claims against Caladrius. In June 2018, the escrow agent will disburse to the Company the Escrow Amount less (i) that portion of the Escrow Amount previously paid in satisfaction of claims for indemnification pursuant to the terms of the Purchase Agreement and (ii) that portion of the Escrow Amount that is determined, in the reasonable judgment of Hitachi, to be necessary to satisfy all unsatisfied or disputed claims for indemnification specified in any claim notice delivered to the Company. The Company also received the additional $4.4 million cash adjustment payment in July 2017. The Company incurred approximately $6.9 million in transaction costs related to the Sale, including $4.3 million in retention payments to PCT employees, of which 50% was paid in June 2017, and the other 50% payable on the one year anniversary of the Closing Date.

The Company recognized the following gain on the date of sale of its 80.1% interest in PCT (in thousands):

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Fair value of consideration received
$
79,425

Transaction and retention costs
(6,919
)
Carrying value of segment non-controlling interest
3,687

 
$
76,193

Less carrying amount of assets and liabilities sold:
 
Cash
$
6,727

Accounts receivable
3,702

Deferred costs
4,685

Prepaid expenses and other current assets
743

Property, plant and equipment, net
14,900

Goodwill
7,013

Intangibles, net
2,090

Other assets
215

Accounts payable
(2,278
)
Accrued liabilities
(2,927
)
Due from Caladrius
450

Unearned revenues
(10,529
)
Notes payable
(342
)
 
$
24,449

 
 
Gain on sale of PCT
$
51,744


The operations and cash flows of the PCT Segment were eliminated from ongoing operations with the sale of the Company's PCT Interest. The operating results of the PCT Segment for the nine months ended September 30, 2017 and three and nine months ended September 30, 2016 were as follows (in thousands):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2017
 
2016
Revenue
$
10,794

 
$
16,039

 
$
29,910

Cost of revenues
(9,482
)
 
(15,321
)
 
(25,122
)
Research and development
(277
)
 
(257
)
 
(610
)
Selling, general, and administrative
(2,168
)
 
(3,251
)
 
(5,587
)
Other expense
(17
)
 
(16
)
 
(72
)
Provision for income taxes
(47
)
 
(11,608
)
 
(147
)
Gain on sale of segment
—

 
51,744

 
—

Income (loss) from discontinued operations
$
(1,197
)
 
$
37,330

 
$
(1,629
)


Note 15 – Commitments and Contingencies
 
Lease Commitments
 
We lease facilities under various operating lease agreements in Basking Ridge, NJ, New York, NY, and Irvine, CA, of which certain leases have escalation clauses and renewal options. We also lease equipment under certain noncancelable operating leases. Our leases expire from time to time through 2021.
A summary of future minimum rental payments required under operating leases that have initial or remaining terms in excess of one year as of September 30, 2017 are as follows (in thousands):  
Years ended
 
Operating Leases
2017
 
$
327.5

2018
 
817.4

2019
 
786.2

2020
 
801.6

2021 and thereafter
 
603.0

Total minimum lease payments
 
$
3,335.7

 
Expense incurred under operating leases was approximately $0.3 million and $1.1 million for the three and nine months ended September 30, 2017, respectively. Expense incurred under operating leases was approximately $0.3 million and $1.0 million for the three and nine months ended September 30, 2016, respectively.
 
Contingencies
 
We have entered into a strategic collaboration with Sanford Research with the goal of developing a therapy for the treatment of T1D. The initial focus of the collaboration will be the execution of a prospective, randomized, placebo-controlled, double-blind clinical trial (The Sanford Project: T-Rex Study) to evaluate the safety and efficacy of the Company’s T regulatory cell product candidate, CLBS03, in adolescents with recent onset T1D. The Phase 2 study has an open and active IND in place and subject enrollment commenced in the first quarter of 2016. We were initially responsible for the supply of all study drug to the first 19 enrolled patients while Sanford assumed all patient and clinical site costs for subjects enrolled in their two centers as well as the expense associated with general clinical monitoring services. For the remaining 92 patients in the study, we will continue to be responsible for the supply of all study drug and the costs of study enrollment for sites outside of the Sanford centers.

Under license agreements with third parties the Company is typically required to pay maintenance fees, make milestone payments and/or pay other fees and expenses and pay royalties upon commercialization of products. The Company also sponsors research at various academic institutions, which research agreements generally provide us with an option to license new technology discovered during the course of the sponsored research.

From time to time, the Company is subject to legal proceedings and claims, either asserted or unasserted, that arise in the ordinary course of business. While the outcome of pending claims cannot be predicted with certainty, the Company does not

20
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believe that the outcome of any pending claims will have a material adverse effect on the Company's financial condition or operating results.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
 
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Cautionary Note Regarding Forward-Looking Statements” herein and under “Risk Factors” in our 2016 Form 10-K. The following discussion should be read in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report and in our 2016 Form 10-K.
 
Overview
 
Caladrius Biosciences, Inc. (“we,” “us,” "our," “Caladrius” or the “Company”), is a company developing cellular therapeutics to treat certain diseases. We leverage specialized clinical development expertise to select and develop early-stage candidates with the intention of developing such candidates to their next significant clinical milestone and,if appropriate, partnering such candidates. Our current lead product candidate, CLBS03, is an autologous polyclonal regulatory T cell ("Treg") clinical phase 2 therapy targeting children aged 8-17 with recent-onset type 1 diabetes mellitus ("T1D").

Immunomodulation (Treg Technology)

We are developing strategically, through the utilization of our core clinical development expertise, a product candidate (CLBS03) that has the potential to be an innovative therapy for T1D. This therapy is based on a proprietary platform technology for immunomodulation. We have selected as an initial target the unmet medical need of patients who are newly diagnosed with T1D, most of whom will be below the age of 18. This program is based on the use of Tregs to treat diseases caused by imbalances in an individual's immune system. This novel approach seeks to restore immune balance by enhancing Treg number and function. Tregs are a natural part of the human immune system and regulate the activity of effector T cells; the cells that are responsible for protecting the body from pathogens and foreign antigens. When Tregs function properly, only harmful foreign materials are attacked by effector T cells. In autoimmune disease, however, it is thought that deficient Treg activity and numbers permit the effector T cells to attack the body's own beneficial cells. In the case of T1D, the beta cells in the pancreas are attacked thereby reducing and/or eliminating over time the patient's ability to produce insulin. Insulin is necessary to regulate sugar metabolism and maintain proper sugar levels in the blood. Inconsistent or unnatural insulin levels can lead to many complications, including blindness, vascular disease and, if no insulin supplement is provided, even death. There are currently no curative treatments for T1D, only lifelong insulin therapy, which often does not prevent serious co-morbidities. Two Phase 1 clinical trials of Treg technology in T1D demonstrated safety and tolerance, feasibility of manufacturing, an implied durability of effect as well as an early indication of potential therapeutic effect through the preservation of beta cell function. In the first quarter of 2016, we commenced patient enrollment in the first of two cohorts in The Sanford Project: T-Rex Study, a Phase 2 prospective, randomized, placebo-controlled, double-blind clinical trial (the "TRex Study") to evaluate the safety and efficacy of CLBS03 in adolescents with recent onset TID. In October 2016, we received a satisfactory safety evaluation by our independent Data Safety Monitoring Board based on safety data then available from the first 19 patients enrolled in the trial. A subsequent interim analysis is planned after approximately 50% of patients reach the six-month follow-up milestone, the results of which are expected to be publicly available by the mid to late first quarter 2018. We entered into a strategic collaboration with Sanford Research to support the execution of this trial. Sanford Research is a U.S.-based non-profit research organization that supports an emerging translational research center focused on finding a cure for T1D. On February 23, 2017, the California Institute for Regenerative Medicine ("CIRM") awarded us funds of up to $12.2 million to support the T-Rex Study. The funding will be based upon the achievement of certain milestones related to the proportion of subjects enrolled in California, as well as manufacturing and development costs incurred in California. We received $5.7 million in initial funding on May 4, 2017. CLBS03 has been granted Fast Track and orphan drug designations from the U.S. Food and Drug Administration ("FDA") as well as Advanced Therapeutic Medicinal Product ("ATMP") classification from the European Medicines Agency ("EMA").

Ischemic Repair (CD34 Cell Technology)
Our CD34 cell technology has led to the development of therapeutic candidates designed to address diseases and conditions caused by ischemia. Ischemia occurs when the supply of oxygenated blood to healthy tissue is restricted. Through the administration of CD34 cells, we seek to promote the development and formation of new blood vessels and thereby increase blood flow to the impacted area. We believe that conditions caused by underlying ischemic injury can be improved through our CD34 cell technology, including critical limb ischemia ("CLI"). Published reports in Circulation Cardiovascular Interventions, Atherosclerosis, Stem

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Cells and Circulation Journal, provide preliminary evidence that CD34 cell therapy is safe and can exert significant therapeutic effects in patients with CLI, a condition in which blood flow to the legs is severely impaired, causing pain and non-healing ulcers and, ultimately, potentially resulting in the need for amputation. Our Clinical Trial Notification for a pivotal Phase 2 trial investigating our product candidate in CLI CLBS12, was submitted to the Japanese Pharmaceutical and Medical Device Agency ("PMDA") and was cleared to proceed. The protocol design was agreed to with PMDA and we hope to begin enrolling patients in late 2017 or early 2018. Under our agreement with PMDA, a successful outcome of this trial would make CLBS12 eligible for early conditional approval in Japan. We are seeking to collaborate on CLBS12 with development and/or manufacturing partners. Furthermore, we submitted grant applications in an effort to seek non-dilutive financing to investigate the CD34 technology for additional clinical indications in the United States and on October 2, 2017 we announced the award of a $1.9 million grant from the National Institutes of Health to support a clinical study of CD34 cells in patients with coronary microvascular dysfunction.
 
Additional Out-licensing Opportunities
    
Our broad intellectual property portfolio of cell therapy assets includes notable programs available for out-licensing in order to continue their clinical development. These include additional indications for our Treg product, additional indications for our CD34 cell technology and a platform using tumor cell/dendritic cell technology for immuno-oncology application. The immuno-oncology program has the benefit of promising Phase 2 clinical data and applicability to multiple indications. This platform is based on our extensive intellectual property portfolio. In 2016, we completed multiple out-licensing agreements for this and other technology platforms in an effort to monetize non-core assets.

Our long-term strategy focuses on advancing our therapies through development toward the market and assisting patients suffering from life-threatening medical conditions. We believe that we are positioned to realize potentially meaningful value increases within our own proprietary pipeline based on the realization of advancing our product candidates to their next significant development milestone.

Discontinued Operations
On May 18, 2017 (the "Closing Date"), the Company completed the previously announced sale of its remaining 80.1% membership interest in PCT, LLC, a Caladrius company ("PCT") to Hitachi Chemical Co. America, Ltd. ("Hitachi"), pursuant to the Interest Purchase Agreement (the "Purchase Agreement"), dated as of March 16, 2017, by and among Caladrius, PCT and Hitachi (the "2017 Hitachi Transaction"), for $75.0 million in cash, plus an additional cash adjustment based on PCT’s cash and outstanding indebtedness as of the Closing Date ("Additional Consideration") and a potential future milestone payment. The sale of PCT represents a strategic shift that has a major effect on the Company’s operations, and therefore, PCT is accounted for as discontinued operations. All periods presented were adjusted to reflect PCT as discontinued operations.

Results of Operations
 
Three and Nine Months Ended September 30, 2017 Compared to Three and Nine Months Ended September 30, 2016
 
Net loss from continuing operations was $3.5 million for the three months ended September 30, 2017, compared to net loss from continuing operations of $6.1 million for the three months ended September 30, 2016. Overall net loss for the three months ended September 30, 2017 was approximately $3.5 million, compared to overall net loss of $7.3 million for the three months ended September 30, 2016. The overall net loss during the three months ended September 30, 2016 included losses from discontinued operations of $1.2 million.

Net loss from continuing operations was $12.2 million for the nine months ended September 30, 2017, compared to net loss from continuing operations of $25.6 million for the nine months ended September 30, 2016. Overall net income for the nine months ended September 30, 2017 was approximately $25.1 million, which included income from discontinued operations of $37.3 million. Overall net loss for the nine months ended September 30, 2016 was approximately $27.2 million, which included losses from discontinued operations of $1.6 million.

Operating Expenses

 For the three months ended September 30, 2017, operating expenses totaled $6.1 million compared to $5.7 million for the three months ended September 30, 2016, representing an increase of $0.4 million, or 7%. Operating expenses were comprised of the following:
 

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Index

•
Research and development expenses were approximately $3.2 million for the three months ended September 30, 2017, compared to $3.0 million for the three months ended September 30, 2016, representing an increase of approximately $0.2 million, or 8%.

◦
Immune Modulation - Immune modulation expenses, primarily related to expenses associated with our Phase 2 study of CLBS03 in T1D, were $2.5 million for the three months ended September 30, 2017, compared to $2.8 million for the three months ended September 30, 2016. The lower expenses are due to lower clinical trial and manufacturing costs in the current year period compared to the prior year period.

◦
Ischemic Repair - Ischemic repair expenses were $0.7 million for the three months ended September 30, 2017, compared to $0.1 million for the three months ended September 30, 2016. The increase is primarily related to initiation-related program expenses associated with our critical limb ischemia development program in Japan.

•
General and administrative expenses were approximately $2.9 million for the three months ended September 30, 2017, compared to $2.8 million for the three months ended September 30, 2016, representing an increase of approximately $0.2 million, or 6%. The increase was due to higher overall corporate development activity expenses, which were partially offset by lower overall equity-based compensation expenses.

 For the nine months ended September 30, 2017, operating expenses totaled $20.3 million compared to $24.0 million for the nine months ended September 30, 2016, representing a decrease of $3.7 million or 16%. Operating expenses were comprised of the following:
 
•
Research and development expenses were approximately $11.2 million for the nine months ended September 30, 2017, compared to $13.5 million for the nine months ended September 30, 2016, representing a decrease of approximately $2.3 million, or 17%.

◦
Immune Modulation - Immune modulation expenses, including expenses associated with our Phase 2 study of CLBS03 in T1D, were $10.4 million for the nine months ended September 30, 2017, compared to $7.5 million for the nine months ended September 30, 2016. The higher expenses are due to higher clinical trial and manufacturing costs in the current year period compared to the prior year period.

◦
Ischemic Repair - Ischemic repair expenses were $1.0 million for the nine months ended September 30, 2017, compared to $2.0 million for the nine months ended September 30, 2016. The decrease is primarily due to wind down expenses associated with the close-out activities of the PreSERVE-AMI Phase 2 study for CLBS10 during the nine months ended September 30, 2016, which were partially offset by initiation-related program expenses associated our critical limb ischemia development program in Japan.

◦
Other - Other research and development expenses during the nine months ended September 30, 2016 included $2.6 million of close-out activities for the Intus Phase 3 clinical trial for the immunotherapy product candidate CLBS20, announced in January 2016, along with $1.2 million of associated one-time restructuring costs for severance and asset impairments.

•
General and administrative expenses were approximately $9.1 million for the nine months ended September 30, 2017 compared to $10.5 million for the nine months ended September 30, 2016, representing a decrease of approximately $1.4 million, or 14%. The decrease was primarily related to operational and compensation-related cost reductions compared to the prior year period, but offset by higher transaction-related expenses associated with the PCT Sale. Equity-based compensation of $1.7 million was also higher during the nine months ended September 30, 2017, compared with $1.3 million for the nine months ended September 30, 2016, reflecting the acceleration of vesting of all options and restricted stock outstanding as of May 18, 2017 (the PCT Closing Date), as the transaction was determined to qualify as a change in control under our employee compensation plan which triggered the vesting.

Historically, to minimize our use of cash, we have used a variety of equity and equity-linked instruments to compensate employees, consultants and other service providers. The use of these instruments has resulted in charges to the results of operations, which have been significant in the past.

Interest Expense

Interest expense was $0.01 million for the three months ended September 30, 2017, compared with $0.4 million for the three months ended September 30, 2016, and $0.4 million for the nine months ended September 30, 2017, compared with $1.6 million

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Index

for the nine months ended September 30, 2016. Interest expense is primarily related to interest expense on the loan from Oxford Finance LLC ("Oxford Finance"). Concurrent with the PCT Sale on May 18, 2017, the Oxford loan was fully repaid and retired.
 
Benefit from Income Taxes
 
The benefit from income taxes was $2.4 million and $8.3 million for the three and nine months ended September 30, 2017, respectively. The Company reports both continuing and discontinued operations. ASC 740-20-45-7 addresses the income tax accounting treatment when there is a loss from continuing operations and income from discontinuing operations. The Company must consider the gain from discontinued operations for purposes of allocating a tax benefit to the current year loss from continuing operations. There are three acceptable methods on how a company can record its tax provision in interim periods. The Company has adopted a method in which the income from discontinued operations are recognized as a discrete item in the period in which it occurs and applies the concepts of the annual effective tax rate (AETR) during each period in computing the income tax provision from continuing operations. This method results in tax expense for discontinued operations and an income tax benefit for the loss generated from continuing operations. The Company is forecasting losses from continuing operations for the remainder of 2017 against which an income tax benefit will be recorded.

Discontinued Operations
 
On May 18, 2017, the Company completed the Sale of its remaining 80.1% membership interest in PCT to Hitachi. Pursuant to the Purchase Agreement, by and among Caladrius, PCT and Hitachi, the aggregate purchase price to the Company consisted of (i) $75.0 million in cash, (ii) a $4.4 million cash adjustment, based on PCT’s cash and outstanding indebtedness as of the Closing Date, and (iii) a potential future milestone payment of $5.0 million, if PCT achieves $125 million in Cumulative Revenue (excluding clinical service reimbursables) (the “Milestone”) for the period from January 1, 2017 through December 31, 2018 (the “Milestone Period”). The Company has determined that the fair value of the milestone payment as of the closing date was valued at zero. 

Pursuant to the terms of the Purchase Agreement, Hitachi paid the Company $5.0 million in March 2017, as an advance payment pending shareholder approval of the transaction and other closing conditions included in the Purchase Agreement. On the Closing Date, the Company received $65.0 million, with an additional $5.0 million of the purchase consideration (the "Escrow Amount") deposited into an escrow account to cover potential indemnification claims against the Company. In June 2018, the escrow agent will disburse to the Company the Escrow Amount less (i) that portion of the Escrow Amount previously paid in satisfaction of claims for indemnification pursuant to the terms of the Purchase Agreement and (ii) that portion of the Escrow Amount that is determined, in the reasonable judgment of Hitachi, to be necessary to satisfy all unsatisfied or disputed claims for indemnification specified in any claim notice delivered to the Company. The Company also received the additional $4.4 million cash adjustment payment in July 2017. The Company incurred approximately $6.9 million in transaction costs related to the Sale, including $4.3 million in retention payments to PCT employees, of which 50% was paid in June 2017, and the other 50% payable on the one year anniversary of the Closing Date.

The Company recognized the following gain on the date of sale of its 80.1% interest in PCT (in thousands):

24
Index

Fair value of consideration received
$
79,425

Transaction and retention costs
(6,919
)
Carrying value of segment non-controlling interest
3,687

 
$
76,193

Less carrying amount of assets and liabilities sold:
 
Cash
$
6,727

Accounts receivable
3,702

Deferred costs
4,685

Prepaid expenses and other current assets
743

Property, plant and equipment, net
14,900

Goodwill
7,013

Intangibles, net
2,090

Other assets
215

Accounts payable
(2,278
)
Accrued liabilities
(2,927
)
Due from Caladrius
450

Unearned revenues
(10,529
)
Notes payable
(342
)
 
$
24,449

 
 
Gain on sale of PCT
$
51,744


The operations and cash flows of the PCT Segment were eliminated from ongoing operations with the sale of the Company's PCT Interest. The operating results of the PCT Segment for the nine months ended September 30, 2017 and three and nine months ended September 30, 2016 were as follows (in thousands):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2017
 
2016
Revenue
$
10,794

 
$
16,039

 
$
29,910

Cost of revenues
(9,482
)
 
(15,321
)
 
(25,122
)
Research and development
(277
)
 
(257
)
 
(610
)
Selling, general, and administrative
(2,168
)
 
(3,251
)
 
(5,587
)
Other expense
(17
)
 
(16
)
 
(72
)
Provision for income taxes
(47
)
 
(11,608
)
 
(147
)
Gain on sale of segment
—

 
51,744

 
—

Income (loss) from discontinued operations
$
(1,197
)
 
$
37,330

 
$
(1,629
)



25
Index

Analysis of Liquidity and Capital Resources
 
At September 30, 2017, we had cash, cash equivalents, restricted cash, and marketable securities of approximately $64.5 million, working capital of approximately $54.4 million, and stockholders’ equity of approximately $53.3 million.
 
During the nine months ended September 30, 2017, we met our immediate cash requirements through cash received from the transaction with Hitachi, proceeds from the issuances of our common stock, and existing cash balances. Additionally, we used equity and equity-linked instruments to pay for services and compensation.
 
Net cash provided by or used in operating, investing and financing activities from continuing operations were as follows (in thousands): 
 
Nine Months Ended September 30,
 
2017
 
2016
Net cash used in operating activities - continuing operations
$
(16,268.2
)
 
$
(22,900.8
)
Net cash provided by (used in) investing activities - continuing operations
23,225.0

 
(1,068.1
)
Net cash (used in) provided by financing activities - continuing operations
(680.2
)
 
16,955.1

 
Operating Activities - Continuing Operations
 
Our cash used in operating activities in the nine months ended September 30, 2017 totaled approximately $16.3 million, which is the sum of (i) our net income of $25.1 million, less income from discontinued operations of $37.3 million, adjusted for non-cash expenses totaling $2.6 million (which includes adjustments for equity-based compensation, depreciation and amortization, loss on disposal of assets, and amortization/accretion of marketable securities), and (ii) changes in operating assets and liabilities using approximately $6.6 million.

Our cash used in operating activities in the nine months ended September 30, 2016 totaled approximately $22.9 million, which is the sum of (i) our net loss of $27.2 million, less loss from discontinued operations of $1.6 million, adjusted for non-cash expenses totaling $3.2 million (which includes adjustments for equity-based compensation, depreciation and amortization, and loss on disposal of assets), and (ii) changes in operating assets and liabilities using approximately $0.5 million.

 Investing Activities - Continuing Operations
 
Our cash provided by investing activities in the nine months ended September 30, 2017 totaled approximately $23.2 million. In 2017, we received $74.7 million in net proceeds in connection with the sale of our 80.1% ownership interest in PCT to Hitachi, less $6.7 million of cash held by our PCT subsidiary on the date of the acquisition. We also invested $44.6 million in marketable securities (net), spent approximately $0.1 million for property and equipment.

Our cash used in investing activities in the nine months ended September 30, 2016 totaled approximately $1.1 million, representing property and equipment purchases.
 
Financing Activities - Continuing Operations

During the nine months ended September 30, 2017, our financing activities consisted of the following: 
•
We paid $5.7 million in principal payments on our long-term debt to Oxford Finance.
•
We raised gross proceeds of approximately $4.4 million through the issuance of approximately 932,204 shares of our common stock under the conditions of the Second Closing (achievement of the enrollment of 70 subjects in our Phase 2 CLBS03 clinical trial), relating to the September 2016 private placement offering.
•
We raised gross proceeds of approximately $1.2 million through the issuance of approximately 210,506 shares of our common stock under the provisions of our Common Stock Purchase Agreement with Aspire.
During the nine months ended September 30, 2016, our financing activities consisted of the following: 
•
Hitachi purchased a 19.9% membership interest in PCT for $19.4 million, of which $15.0 million of proceeds was distributed to Caladrius from PCT and $4.4 million remained at PCT.

26
Index

•
We raised $4.0 million in a registered direct offering through the issuance of 0.8 million shares of common stock, and $6.6 million in concurrent private placement offerings through the issuance of 1.4 million shares of common stock.
•
We raised $1.0 million in a private placement through the issuance of 0.1 million shares of common stock and two-year warrants to purchase up to an aggregate of 0.1 million shares our common stock, at an exercise price of $10.00 per share.
•
Upon execution of the March 2016 Hitachi Transaction, we paid $6.3 million in principal payments on our long term debt to Oxford Finance, and in September 2016, we paid an additional $3.0 million in principal payments on our long term debt to Oxford Finance LLC.

Liquidity and Capital Requirements Outlook

To meet our short and long term liquidity needs, we expect to use existing cash balances and a variety of other means. Other sources of liquidity could include additional potential issuances of debt or equity securities in public or private financings, partnerships and/or collaborations and/or sale of assets. Our history of operating losses and liquidity challenges may make it difficult for us to raise capital on acceptable terms or at all. The demand for the equity and debt of biopharmaceutical companies like ours is dependent upon many factors, including the general state of the financial markets. During times of extreme market volatility, capital may not be available on favorable terms, if at all. Our inability to obtain such additional capital could materially and adversely affect our business operations. We will also continue to seek, as appropriate, grants for scientific and clinical studies from various governmental agencies and foundations. We believe that our cash on hand will enable us to fund the development of CLBS03 and other operating expenses for at least the next 12 months following the issuance of our financial statements.
In 2016, Hitachi purchased a 19.9% membership interest in PCT for $19.4 million, of which $15.0 million of proceeds was distributed to Caladrius from PCT and $4.4 million remained at PCT. In 2017, we received $74.7 million (net) in connection with the sale of our remaining 80.1% ownership interest in PCT to Hitachi, less $6.7 million of cash held by our PCT subsidiary on the date of the acquisition.
In September 2016, we entered into a securities purchase agreement with a single institutional investor pursuant to which we issued in a registered direct offering, an aggregate of 0.8 million shares of our common stock at a purchase price of $4.72 per share. The gross proceeds to us from the registered direct offering of the shares of common stock were $4.0 million. In concurrent private placements, in September 2016, we entered into Private Placement Purchase Agreements with certain accredited investors for the sale of common stock, at a purchase price of $4.72 per share. The investments were placed in two tranches: (i) $6.6 million upon an initial closing (the “Initial Closing”), and (ii) $4.4 million, subject to certain conditions, including the enrollment of 70 subjects in our Phase 2 CLBS03 clinical trial, in a second closing (the “Second Closing”). We received the Initial Closing tranche in 2016 and issued 1.4 million shares of common stock. In 2017, we received $4.4 million in accordance with the terms of the Second Closing tranche and issued 0.9 million shares of common stock.
In March 2016, we entered into a securities purchase agreement with certain investors, pursuant to which we issued and sold in a private placement an aggregate of 141,844 shares of common stock and two-year warrants to purchase up to an aggregate of 141,844 shares of our common stock, at an exercise price of $10.00 per share. The unit purchase price for a share of our common stock and warrants to purchase one share of our common stock was $7.05 per unit, with $1.0 million of gross proceeds received by us.
In November 2015, we entered into a common stock purchase agreement with Aspire Capital (the "Aspire Agreement"), whereby we can sell to Aspire Capital, subject to terms and conditions under the Aspire Agreement as well as NASDAQ rules, the lesser of (i) $30 million of common stock or (ii) the dollar value of approximately 1.1 million shares of common stock based on the market price of the common stock at the time of such sale as determined under the Purchase Agreement. We have issued 319,776 shares under the Aspire Agreement for gross proceeds of $1.5 million.
In September 2014, we entered into a Loan and Security Agreement with Oxford Finance LLC and received $15.0 million in gross proceeds. We had been making interest-only payments on the outstanding amount of the loan on a monthly basis at a rate of 8.50% per annum. In March 2016, upon execution of the March 2016 Hitachi Transaction, we and Oxford Finance LLC entered into an amendment to the Loan and Security Agreement whereby (i) we paid $7.0 million to Oxford Finance LLC, comprised of principal, interest and early termination fees, (ii) our subsidiaries PCT, PCT Allendale, LLC, and NeoStem Family Storage, LLC (collectively the "Removed Borrowers") were removed as borrowers under the Loan, (iii) Oxford Finance LLC's security interests in any and all assets of the Removed Borrowers were released, (iv) the interest only period on the remaining outstanding Loan balance was extended until January 1, 2017. In September 2016, we paid $3.0 million to repay a portion of the outstanding loan with Oxford Finance. In May 2017, upon execution of the May 2017 Hitachi Transaction, we and Oxford Finance LLC entered into an amendment to the Loan and Security Agreement whereby we paid the remaining $5.7 million long-term debt balance to Oxford Finance LLC.

27
Index

While we continue to seek capital through a number of means, there can be no assurance that additional financing will be available on acceptable terms, if at all, and our negotiating position in capital generating efforts may worsen as existing resources are used. Additional equity financing may be dilutive to our stockholders; debt financing, if available, may involve significant cash payment obligations and covenants that restrict our ability to operate as a business; our stock price may not reach levels necessary to induce option or warrant exercises; and asset sales may not be possible on terms we consider acceptable. If we are unable to access capital necessary to meet our long-term liquidity needs, we may have to delay the expansion of our business or raise funds on terms that we currently consider unfavorable.

Seasonality
 
We do not believe that our operations are seasonal in nature.
 
Off-Balance Sheet Arrangements
 
We do not have any off-balance sheet arrangements.
 
Critical Accounting Policies and Estimates

There have been no material changes in our critical accounting policies and estimates during the three months ended September 30, 2017, compared to those reported in our 2016 Form 10-K.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 4.  CONTROLS AND PROCEDURES.  

(a)  Disclosure Controls and Procedures

Disclosure controls and procedures are our controls and other procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that we file under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Due to the inherent limitations of control systems, not all misstatements may be detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. Controls and procedures can only provide reasonable, not absolute, assurance that the above objectives have been met.

As of September 30, 2017, we carried out an evaluation, with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(e) and 15d-15(e) of the Exchange Act. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective, at the reasonable assurance level, in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b)  Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15, that occurred during our last quarter to which this Quarterly Report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

28
Index

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.
There are no material changes to the disclosures previously reported in our 2016 Form 10-K.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors previously reported in our 2016 Form 10-K. See the risk factors set forth in our 2016 Annual Report on Form 10-K under the caption "Item 1 A - Risk Factors."

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

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

Effective September 18, 2017, the Board amended the Company’s Amended and Restated Bylaws (the “Bylaws”) by amending Article I, Sections 1.10 and 1.11.

As amended, Article I, Section 1.10 governs the introduction of business at annual and special meetings of the Company’s stockholders. Article I, Section 1.10(a) sets forth the procedure by which a stockholder may nominate persons for election to the Board and propose business to be considered and acted upon at an annual meeting of the stockholders. The procedure outlines the timeline for providing notice and the information to be contained in such notice, which includes certain details with respect to the proposed director nomination or other business, certain information about the stockholder making the proposal (including such stockholder’s equity interest in the Company and agreements entered into by such stockholder pertaining to the proposed director nomination or other business), and certain representations and certifications made by the proposing stockholder, among other required disclosures. Article I, Section 1.10(b) provides that director nominations and proposals of other business to be considered and acted upon by the stockholders shall not be brought before a special meeting of stockholders unless such special meeting is held in lieu of an annual meeting of stockholders.

As amended, Article I, Section 1.11 governs stockholder action without a meeting. Article I, Section 1.11(a) sets forth the procedure by which a stockholder may request that the Board fix a record date for the purpose of determining the stockholders entitled to take action by written consent.

Pursuant to the Bylaws and Rule 14a-8 under the Exchange Act, to be included in the Company’s proxy statement and proxy card for its 2018 annual meeting of stockholders, stockholder proposals must be submitted to the Company’s Secretary at 420 Lexington Avenue, Suite 350, New York, NY 10170 no later than January 16, 2018. Any such proposal must meet the requirements set forth in the rules and regulations of the SEC and comply with the requirements set forth in the Bylaws in order to be eligible for inclusion in the proxy statement for the 2018 annual meeting.

In addition, stockholders who desire to bring business or nominate an individual for election or re-election as a director outside of Rule 14a-8 under the Exchange Act before the Company’s 2018 annual meeting must comply with the Bylaws, which currently require that such stockholder have provided written notice of such business or nominee to the Company’s Secretary at 420 Lexington Avenue, Suite 350, New York, NY 10170 no earlier than 5:00 pm, December 17, 2017 and no later than 5:00 pm, January 16, 2018, and otherwise comply with the advance notice and other provisions set forth in the Bylaws, which contain additional requirements regarding advance notice of stockholder proposals and director nominations.


29
Index



None.
ITEM 6. EXHIBITS
The Exhibit Index appearing immediately after the signature page to this Form 10-Q is incorporated herein by reference.



30
Index

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
 
 
CALADRIUS BIOSCIENCES, INC.
November 9, 2017
 
By:  /s/ David J. Mazzo, PhD
Name: David J. Mazzo, PhD
Title: President and Chief Executive Officer
(Principal Executive Officer)
November 9, 2017
 
By: /s/ Joseph Talamo
Name: Joseph Talamo
Title: Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)






31
Index

CALADRIUS BIOSCIENCES, INC.
FORM 10Q

Exhibit Index


Amendment to Amended and Restated By-Laws (filed with the Company's Current Report on Form 8-K filed on September 21, 2017 (File No. 001-33650) and incorporated by reference).
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema
101.CAL
XBRL Taxonomy Extension Calculation Linkbase
101.DEF
XBRL Taxonomy Extension Definition Linkbase
101.LAB
XBRL Taxonomy Extension Label Linkbase
101.PRE
XBRL Taxonomy Extension Presentation Linkbase
_______________

*
Filed herewith.
**
Furnished herewith.
             

32
Exhibit
Exhibit 31.1
 
CERTIFICATION
 
I, David J. Mazzo,PhD, certify that:
 
1.  I have reviewed this Quarterly Report on Form 10-Q of Caladrius Biosciences, Inc.;
 
2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.  The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by  this report based on such evaluation; and
 
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
 
a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
 
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


Date: November 9, 2017

/s/ David J. Mazzo, PhD
Name: David J. Mazzo, PhD
Title: Chief Executive Officer (Principal Executive Officer)

Exhibit
Exhibit 31.2
 
CERTIFICATION
 
I, Joseph Talamo, certify that:
 
1.  I have reviewed this Quarterly Report on Form 10-Q of Caladrius Biosciences, Inc.;
 
2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.  The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by  this report based on such evaluation; and
 
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
 
a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
 
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 
Date: November 9, 2017

 
/s/ Joseph Talamo
Name: Joseph Talamo
Title: Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)


Exhibit
Exhibit 32.1
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
In connection with the Quarterly Report on Form 10-Q of Caladrius Biosciences, Inc. (the “Company”) for the quarter ended September 30, 2017 filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David J. Mazzo, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge that:
 

1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended; and

2.
The information contained in the Report fairly presents, in all material respects, the financial condition of the Company as of the dates presented and the results of operations of the Company for the periods presented.
 
Dated:  November 9, 2017
 

 
/s/ David J. Mazzo, PhD
 
David J. Mazzo, PhD
 
Chief Executive Officer (Principal Executive Officer)
 
The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and is not being filed as part of the Form 10-Q or as a separate disclosure document.
 



Exhibit
Exhibit 32.2
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
In connection with the Quarterly Report on Form 10-Q of Caladrius Biosciences, Inc. (the “Company”) for the quarter ended September 30, 2017 filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Joseph Talamo, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge that:
 

1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended; and

2.
The information contained in the Report fairly presents, in all material respects, the financial condition of the Company as of the dates presented and the results of operations of the Company for the periods presented.
 
Dated:  November 9, 2017

 
 
/s/ Joseph Talamo
 
Joseph Talamo
 
Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)
 
The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and is not being filed as part of the Form 10-Q or as a separate disclosure document.