It’s going from bad to worse for Biostage Inc (OTCMKTS:BSTG). A week after being delisted from the NASDAQ for having a low share price, the company announced plans to axe 17 employees; this represents 71% of its total workforce. The company said the staff reductions would help it stem its cash burn rate.
The layoffs come after Dallas-based First Pecos, LLC backed out of a binding memorandum of understanding announced in June to buy 9.7 million shares for $0.315 each, for gross proceeds of $3.1 million.
First Pecos terminated the agreement over alleged breaches by Biostage and has demanded it pay a $500,000 termination fee. Biostage meanwhile believes it “was not in breach of the agreement at any time, and that First Pecos’s notice was unjustified and without any legal merit or factual basis.”
The company estimates that it will incur one-time charges related to the layoffs of approximately $153,000. The expenses related to employee severance, benefits, and related costs will be incurred during the fourth quarter of 2017.
In addition to the layoffs, the Holliston, Massachusetts-based company said it was exploring other cost-cutting measures.
Jim McGorry, CEO, commented, “The recently announced failure to fund by First Pecos of a binding financing agreement leaves the Company in a weakened financial position. After months of good faith negotiations by Biostage, we sincerely believed we had a solid path forward for our technology and shareholders. We believe the fact pattern of constant funding delays and increasing demands demonstrates First Pecos had a different agenda.”
McGorry went on to say that the company is moving quickly to address its cash burn rate to extend its operational runway. This, of course, means a significant reduction in headcount. To assuage investor concern, he noted that Biostage is moving forward with a core group of scientists and engineers who understand, and developed, the company’s technology. The recently streamlined operations are, he says, designed to “preserve and consolidate our Cellframe technology and data as we evaluate our strategic and financial alternatives.”
McGorry continued, “Importantly, our technology is more advanced now than ever, and our preclinical data continues to show consistent, positive results. As this dynamic situation continues to unfold, we will continue to act in the best interest of our shareholders and collaborators. There is no way around it; we are in a difficult situation.”
Biostage’s share price has been beaten up of late. The last time it traded above $1.00 was in December 2016; since then, it’s been all downhill. Most recently, on October 6, the company announced that it had received written notification from the NASDAQ indicating that it was delisting Biostage’s common stock from NASDAQ Capital Market, effective with the open of business on October 6, 2017.
The company’s share price began trading on the OTCQB market on October 6 under the symbol BSTG.
Biostage is currently trading at $0.10 per share, an 88% decrease since the start of the year.
“Biostage Conducts Reduction In Force, Evaluating Strategic Alternatives,” Biostage Inc., October 12, 2017.
“Biostage Announces Agreement to Conduct $3.1 Million Private Placement at Market,” Biostage Inc, June 27, 2017.
“Biostage to Move to OTCQB Marketplace,” Biostage Inc, October 6, 2017.