UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended September 30, 2021


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

For the transition period from __________to__________

Commission File No. 001-39801

XOMA Corporation

(Exact name of registrant as specified in its charter)


Delaware		52-2154066
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

2200 Powell Street, Suite 310
Emeryville, California		94608
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (510) 204-7200

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


Title of each class:	Trading symbol(s):	Name of each exchange on which registered:
Common Stock, $0.0075 par value	XOMA	The Nasdaq Global Market
8.625% Series A Cumulative Perpetual Preferred Stock, par value $0.05	XOMAP	The Nasdaq Global Market
Depositary Shares (each representing 1/1000^th interest in a share of 8.375% Series B Cumulative Perpetual Preferred Stock, par value $0.05)	XOMAO	The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 1, 2021, the registrant had 11,311,231 shares of common stock, $0.0075 par value per share, outstanding.

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

XOMA CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)


	September 30,		December 31,
	2021		2020
	(unaudited)		(Note 1)
ASSETS
Current assets:
Cash	$	68,757	$	84,222
Restricted cash		3,417		1,611
Short-term equity securities		1,211		—
Trade and other receivables, net		518		263
Income tax receivable		—		1,526
Prepaid expenses and other current assets		969		443
Total current assets		74,872		88,065
Long-term restricted cash		—		531
Property and equipment, net		15		21
Operating lease right-of-use assets		240		359
Long-term royalty receivables		55,075		34,575
Long-term equity securities		—		1,693
Other assets		301		41
Total assets	$	130,503	$	125,285

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	598	$	456
Accrued and other liabilities		1,325		642
Contingent consideration under royalty purchase agreements		75		75
Operating lease liabilities		191		179
Unearned revenue recognized under units-of-revenue method		1,541		1,452
Contingent liabilities		1,410		1,410
Current portion of long-term debt		—		8,088
Preferred stock dividend accrual		1,368		—
Total current liabilities		6,508		12,302
Unearned revenue recognized under units-of-revenue method – long-term		12,306		13,516
Long-term debt		—		12,764
Long-term operating lease liabilities		85		229
Other liabilities – long-term		20		50
Total liabilities		18,919		38,861

Commitments and Contingencies (Note 10)

Stockholders’ equity:
Preferred Stock, $0.05 par value, 1,000,000 shares authorized:
8.625% Series A cumulative, perpetual preferred stock, 984,000 shares issued and outstanding at September 30, 2021 and December 31, 2020		49		49
8.375% Series B cumulative, perpetual preferred stock, 1,600 and zero shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		—		—
Convertible preferred stock, 5,003 shares issued and outstanding at September 30, 2021 and December 31, 2020		—		—
Common stock, $0.0075 par value, 277,333,332 shares authorized, 11,311,231 and 11,228,792 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		85		84
Additional paid-in capital		1,306,582		1,267,377
Accumulated deficit		(1,195,132)		(1,181,086)
Total stockholders’ equity		111,584		86,424
Total liabilities and stockholders’ equity	$	130,503	$	125,285

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

(Note 1) The consolidated balance sheet as of December 31, 2020, has been derived from the audited consolidated financial statements as of that date included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Table of Contents

XOMA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

(in thousands, except per share amounts)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Revenues:
Revenue from contracts with customers	$	550	$	200	$	1,094	$	753
Revenue recognized under units-of-revenue method		390		357		1,121		1,051
Total revenues		940		557		2,215		1,804

Operating expenses:
Research and development		30		34		129		134
General and administrative		4,255		3,212		14,922		13,126
Total operating expenses		4,285		3,246		15,051		13,260

Loss from operations		(3,345)		(2,689)		(12,836)		(11,456)

Other (expense) income, net:
Interest expense		—		(434)		(461)		(1,484)
Loss on extinguishment of debt		—		—		(300)		—
Other (expense) income, net		(1,091)		2,046		(449)		2,046
Loss before income tax		(4,436)		(1,077)		(14,046)		(10,894)
Income tax benefit		—		—		—		1,526
Net loss and comprehensive loss	$	(4,436)	$	(1,077)	$	(14,046)	$	(9,368)
Less: accumulated dividends on Series A and Series B preferred stock		(1,368)		—		(3,192)		—
Net loss available to common stockholders, basic and diluted	$	(5,804)	$	(1,077)	$	(17,238)	$	(9,368)
Basic and diluted net loss per share available to common stockholders	$	(0.51)	$	(0.10)	$	(1.53)	$	(0.89)
Weighted average shares used in computing basic and diluted net loss per share available to common stockholders		11,311		11,019		11,279		10,537

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

XOMA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

(in thousands)


	Series A			Series B			Convertible						Additional				Total
	Preferred Stock			Preferred Stock			Preferred Stock			Common Stock			Paid-In		Accumulated		Stockholders’
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Capital		Deficit		Equity
Balance, December 31, 2020	984	$	49	—		—	5	$	—	11,229	$	84	$	1,267,377	$	(1,181,086)	$	86,424
Exercise of stock options	—		—	—		—	—		—	24		—		388		—		388
Exercise of common stock warrants	—		—	—		—	—		—	5		—		—		—		—
Issuance of common stock related to 401(k) contribution	—		—	—		—	—		—	2		—		90		—		90
Stock-based compensation expense	—		—	—		—	—		—	—		—		2,898		—		2,898
Preferred stock dividends	—		—	—		—	—		—	—		—		(707)		—		(707)
Net loss and comprehensive loss	—		—	—		—	—		—	—		—		—		(7,373)		(7,373)
Balance, March 31, 2021	984	$	49	—	$	—	5	$	—	11,260	$	84	$	1,270,046	$	(1,188,459)	$	81,720
Exercise of stock options	—		—	—		—	—		—	49		1		593		—		594
Issuance of common stock related to ESPP	—		—	—		—	—		—	1		—		17		—		17
Stock-based compensation expense	—		—	—		—	—		—	—		—		768		—		768
Issuance of preferred stock	—		—	2		—	—		—	—		—		37,140		—		37,140
Preferred stock dividends	—		—	—		—	—		—	—		—		(1,424)		—		(1,424)
Net loss and comprehensive loss	—		—	—		—	—		—	—		—		—		(2,237)		(2,237)
Balance, June 30, 2021	984	$	49	2	$	—	5	$	—	11,310	$	85	$	1,307,140	$	(1,190,696)	$	116,578
Exercise of stock options	—		—	—		—	—		—	1		—		31		—		31
Stock-based compensation expense	—		—	—		—	—		—	—		—		779		—		779
Preferred stock dividends	—		—	—		—	—		—	—		—		(1,368)		—		(1,368)
Net loss and comprehensive loss	—		—	—		—	—		—	—		—		—		(4,436)		(4,436)
Balance, September 30, 2021	984	$	49	2	$	—	5	$	—	11,311	$	85	$	1,306,582	$	(1,195,132)	$	111,584

Table of Contents

XOMA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

(in thousands)


	Series A			Series B			Convertible						Additional				Total
	Preferred Stock			Preferred Stock			Preferred Stock			Common Stock			Paid-In		Accumulated		Stockholders’
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Capital		Deficit		Equity
Balance, December 31, 2019	—	$	—	—	$	—	6	$	—	9,759	$	73	$	1,238,299	$	(1,194,384)	$	43,988
Issuance of common stock related to 401(k) contribution	—		—	—		—	—		—	3		—		88		—		88
Stock-based compensation expense	—		—	—		—	—		—	—		—		1,788		—		1,788
Disgorgement of stockholder's short-swing profits	—		—	—		—	—		—	—		—		13		—		13
Net loss and comprehensive loss	—		—	—		—	—		—	—		—		—		(4,758)		(4,758)
Balance, March 31, 2020	—	$	—	—	$	—	6	$	—	9,762	$	73	$	1,240,188	$	(1,199,142)	$	41,119
Exercise of stock options	—		—	—		—	—		—	2		—		10		—		10
Issuance of common stock related to ESPP	—		—	—		—	—		—	1		—		26		—		26
Issuance of common stock related to Series Y preferred stock conversion	—		—	—		—	(1)		—	1,253		10		(10)		—		—
Stock-based compensation expense	—		—	—		—	—		—	—		—		773		—		773
Net loss and comprehensive loss	—		—	—		—	—		—	—		—		—		(3,533)		(3,533)
Balance, June 30, 2020	—	$	—	—	$	—	5	$	—	11,018	$	83	$	1,240,987	$	(1,202,675)	$	38,395
Exercise of stock options	—		—	—		—	—		—	4		—		16		—		16
Stock-based compensation expense	—		—	—		—	—		—	—		—		708		—		708
Net loss and comprehensive loss	—		—	—		—	—		—	—		—		—		(1,077)		(1,077)
Balance, September 30, 2020		$			$		5	$	—	11,022	$	83	$	1,241,711	$	(1,203,752)	$	38,042

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

Table of Contents

XOMA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)


	Nine Months Ended September 30,
	2021		2020
Cash flows from operating activities:
Net loss	$	(14,046)	$	(9,368)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		4,445		3,269
Common stock contribution to 401(k)		90		88
Depreciation and amortization		6		19
Amortization of debt issuance costs, debt discount and final payment on debt		200		546
Provision for bad debt		—		1,409
Non-cash lease expense		119		112
Loss on extinguishment of debt		300		—
Change in fair value of equity securities		482		(1,891)
Changes in assets and liabilities:
Trade and other receivables, net		(255)		1,302
Income tax receivable		1,526		(1,526)
Prepaid expenses and other assets		(526)		(319)
Accounts payable and accrued liabilities		955		(464)
Operating lease liabilities		(133)		(120)
Unearned revenue recognized under units-of-revenue method		(1,121)		(1,052)
Other liabilities		(6)		409
Net cash used in operating activities		(7,964)		(7,586)

Cash flows from investing activities:
Payments related to purchase of royalty rights		(20,500)		—
Purchase of property and equipment		—		(9)
Net cash used in investing activities		(20,500)		(9)

Cash flows from financing activities:
Proceeds from issuance of preferred stock		40,000		—
Proceeds from issuance of common stock		17		26
Payment of preferred and common stock issuance costs		(3,248)		(231)
Proceeds from exercise of options		1,492		42
Principal payments – debt		(4,250)		(3,188)
Payment for extinguishment of debt		(17,103)		—
Payment for debt modification fee		(24)		—
Payment for preferred stock dividends		(2,131)		—
Principal payments – finance lease		—		(14)
Proceeds from disgorgement of stockholder's short-swing profits		—		13
Taxes paid related to net share settlement of equity awards		(479)		(16)
Net cash provided by (used in) financing activities		14,274		(3,368)

Net decrease in cash and restricted cash		(14,190)		(10,963)
Cash and restricted cash at the beginning of the period		86,364		56,688
Cash and restricted cash at the end of the period	$	72,174	$	45,725

Supplemental Cash Flow Information:
Cash paid for interest	$	311	$	546
Non-cash investing and financing activities:
Preferred stock dividend accrual	$	1,368	$	—
Interest added to principal balance on long-term debt	$	—	$	317
Accrued cost related to issuance of capital stock	$	137	$	—

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


		Page
PART I	FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements	1

	Condensed Consolidated Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020	1

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)	2

	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)	3

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020 (unaudited)	5

	Notes to Condensed Consolidated Financial Statements (unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45

Item 4.	Controls and Procedures	46

PART II	OTHER INFORMATION	46

Item 1.	Legal Proceedings	46

Item 1A.	Risk Factors	46

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	77

Item 3.	Defaults Upon Senior Securities	77

Item 4.	Mine Safety Disclosure	78

Item 5.	Other Information	78

Item 6.	Exhibits	79

Signatures		81