Item 1.
Financial Statements
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CASSAVA SCIENCES, INC.
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BALANCE SHEETS
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(Unaudited, in thousands, except share and par value data)
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June 30,
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December 31,
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2019
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2018
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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18,534
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$
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19,807
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Other current assets
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49
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233
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Total current assets
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18,583
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20,040
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Operating lease right-of-use assets
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135
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—
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Property and equipment, net
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75
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87
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Other assets
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12
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12
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Total assets
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$
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18,805
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$
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20,139
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities:
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Accounts payable
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$
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594
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$
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294
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Accrued development expense
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179
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156
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Accrued compensation and benefits
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60
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61
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Operating lease liabilities, current
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90
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—
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Other current liabilities
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14
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—
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Total current liabilities
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937
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511
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Operating lease liabilities, non-current
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45
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—
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Total liabilities
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982
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511
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Commitments and contingencies
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Stockholders' equity:
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Preferred stock,
$.001
par value;
10,000,000
shares authorized,
none
issued and
outstanding
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—
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—
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Common stock,
$.001
par value;
120,000,000
shares authorized;
17,219,300
shares issued and
outstanding
at June 30, 2019 and December 31, 2018
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17
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17
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Additional paid-in capital
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184,180
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183,567
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Accumulated deficit
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(166,374)
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(163,956)
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Total stockholders' equity
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17,823
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19,628
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Total liabilities and stockholders' equity
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$
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18,805
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$
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20,139
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See accompanying notes to condensed financial statements.
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CASSAVA SCIENCES, INC.
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STATEMENTS OF OPERATIONS
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(Unaudited, in thousands, except per share data)
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Three months ended
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Six months ended
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June 30,
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June 30,
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2019
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2018
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2019
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2018
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Operating expenses:
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Research and development, net of grant reimbursement
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$
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308
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$
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1,463
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$
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882
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$
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2,532
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General and administrative
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845
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998
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1,722
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2,097
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Total operating expenses
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1,153
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2,461
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2,604
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4,629
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Operating loss
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(1,153)
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(2,461)
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(2,604)
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(4,629)
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Interest income
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94
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9
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186
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16
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Net loss
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$
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(1,059)
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$
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(2,452)
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$
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(2,418)
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$
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(4,613)
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Net loss per share, basic and diluted
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$
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(0.06)
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$
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(0.36)
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$
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(0.14)
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$
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(0.68)
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Shares used in computing net loss per share, basic and diluted
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17,162
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6,838
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17,162
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6,739
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See accompanying notes to condensed financial stateme
nts.
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CASSAVA SCIENCES, INC.
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STATEMENTS OF CASH FLOWS
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(Unaudited, in thousands)
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Six months ended
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June 30,
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2019
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2018
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Cash flows from operating activities:
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Net loss
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$
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(2,418)
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$
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(4,613)
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Adjustments to reconcile net loss to net cash used in operating activities:
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Non-cash stock-based compensation
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673
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1,501
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Depreciation and amortization
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30
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34
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Changes in operating assets and liabilities:
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Other current assets
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184
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154
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Accounts payable
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300
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538
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Accrued development expense
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23
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(399)
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Accrued compensation and benefits
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(1)
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4
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Other current liabilities
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14
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12
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Net cash used in operating activities
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(1,195)
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(2,769)
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Cash flows from investing activities:
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Purchases of property and equipment
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(18)
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—
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Net cash used in investing activities
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(18)
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—
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Cash flows from financing activities:
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Issuance costs from 2018 sale of common stock and warrants
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(60)
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—
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Proceeds from issuance of common stock and warrants, net of issuance costs
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—
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1,898
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Net cash (used in) / provided by financing activities
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(60)
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1,898
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Net decrease in cash and cash equivalents
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(1,273)
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(871)
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Cash and cash equivalents at beginning of period
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19,807
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10,479
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Cash and cash equivalents at end of period
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$
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18,534
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$
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9,608
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See accompanying notes to condensed financial statements.
Cassava Sciences, Inc.
Notes to Condensed Financial Statements
(Unaudited)
Note 1. General and Liquidity
Cassava Sciences
, Inc. (the “Company”) develops proprietary drugs that offer significant improvements to patients and healthcare professionals.
The Company
generally focus
es
its
drug development efforts on disorders of the nervous system.
T
he accompanying unaudited condensed financial statements of
the Company
have been prepared
in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In
the
opinion
of management of the Company
, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. Operating results for the three
and six
months ended
June
3
0
, 201
9
are not necessarily indicative of the results that may be expected for any other interim period or for the year 201
9
.
For further information, refer to the consolidated financial statements and footnotes thereto included in
the Company’s
Annual Report on Form 10-K for the year ended December 31, 201
8
.
Liquidity
The Company has incurred significant net losses and negative cash flows since inception, and as a result has an accumulated deficit of $16
6.4
million at
June
3
0
, 201
9
.
The Company
expect
s
its
cash requirements to be significant in the future. The amount and timing of
the Company’s
future cash requirements will depend on regulatory and market acceptance of
it
s product
candidates
and
the resources
it
devote
s
to researching and developing, formulating, manufacturing, commercializing and supporting
its
products.
The Company
may seek additional funding through public or private financing
in the future
, if such funding is available and on terms acceptable to
the Company
.
There are no assurances that additional financing will be available on favorable terms, or at all.
However, management believes that the current working capital position will be sufficient to meet the Company’s working capital needs for at least the next 12 months.
Note 2. Significant Accounting Policies
Use of Estimates
The Company
make
s
estimates and assumptions in preparing
its
financial statements in conformity with U.S. GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue earned and expenses incurred during the reporting period.
The Company
evaluate
s
its
estimates on an ongoing basis, including those estimates related to agreements, research collaborations and investments. Actual results could differ from these estimates
and assumptions.
Cash and
Cash Equivalents and Concentration of Credit Risk
The Company
invest
s
in
cash and
cash equivalents.
The Company
consider
s
highly-liquid financial instruments with original maturities of three months or less to be cash equivalents.
Highly liquid investments that are considered cash equivalents include money market funds, certificates of deposits, treasury bills and commercial paper. The carrying value of cash equivalents approximates fair value due to the short-term maturity of these securities.
The Company maintains its investments at one financial institution.
Fair Value Measurements
The Company
report
s
its
cash
and cash
equivalents at fair value as Level 1, Level 2 or Level 3 using the following inputs:
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·
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Level 1 includes quoted prices in active markets.
The Company
base
s
the fair value of money market funds and U.S. treasury securities on Level 1 inputs.
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·
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Level 2 includes significant observable inputs, such as quoted prices for identical or similar investments, or other inputs that are observable and can be corroborated by observable market data for similar securities.
The Company
use
s
market pricing and other observable market inputs obtained from third-party providers.
It
use
s
the bid price to establish fair value where a bid price is available.
The Company
do
es
not have any investments where the fair value is based on Level 2 inputs.
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·
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Level 3 includes unobservable inputs that are supported by little or no market activity.
The Company
do
es
not have any investments where the fair value is based on Level 3 inputs.
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If a financial instrument uses inputs that fall in different levels of the hierarchy, the instrument will be categorized based upon the lowest level of input that is significant to the fair value calculation. The fair value of all cash and cash equivalents was based on Level 1 inputs at
June
3
0
, 2019 and December 31, 2018.
Awards of and Proceeds from Grants
During the
six
months ended
June
3
0
,
2019, the Company was awarded
a
National Institutes of Health (“
NIH
”)
grant totaling up to
$1.5
million to support
the Company’s
on-going development of new technology to detect Alzheimer’s disease with a simple blood test.
During the three months ended
June
3
0
, 201
9
and 201
8
,
the Company
received reimbursements totaling
$
1.4
million
and
$
0.4
million
pursuant to
previously announced
NIH research grants
, respectively
.
During the six months ended June 30, 2019 and 2018, the Company received reimbursements totaling
$
2.2
million and
$0.
8
million pursuant to NIH research grants, respectively.
The Company records the proceeds from these grants as reductions to its research and development expenses.
Non-cash Stock-based Compensation
The
Company
recognize
s
non-cash expense for the fair value of all stock options and other share-based awards.
The Company
use
s
the Black-Scholes option valuation model
(“Black
-
Scholes”)
to calculate the fair value of stock options, using the single-option award approach and straight-line attribution method.
The Company adopted
ASU No. 2018-07,
Compensation—Stock Compensation (Topic 718)
,
Improvements to Nonemployee Share-Based Payment Accounting
, on January 1, 2019. Accordingly,
f
or
all
options granted,
it
recognize
s
the resulting fair value as expense on a straight-line basis over the vesting period of each respective stock option, generally
four
years.
The Company
ha
s
granted share-based awards that vest upon achievement of certain performance criteria (“Performance Awards”).
The Company
multipl
ies
the number of Performance Awards by the fair market value of
its
common stock on the date of grant to calculate the fair value of each award.
It
estimate
s
an implicit service period for achieving performance criteria for each award.
The Company
recognize
s
the resulting fair value as expense over the implicit service period when
it
conclude
s
that achieving the performance criteria is probable.
It
periodically review
s
and update
s
as appropriate
its
estimates of implicit service periods and conclusions on achieving the performance criteria. Performance Awards vest and common stock is issued upon achievement of the performance criteria.
Net Loss per Share
The Company
compute
s
basic net loss per share on the basis of the weighted-average number of common shares outstanding for the reporting period.
D
iluted net loss per share
is computed
on the basis of the weighted-average number of common shares outstanding plus potential dilutive common shares outstanding using the treasury-stock method. Potential dilutive common shares consist of outstanding common stock options and warrants. There is no difference between the Company’s net loss and comprehensive loss.
The Company
include
d
the following in the calculation of basic and diluted net loss per share (in thousands, except per share data):
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Three months ended
|
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Six months ended
|
|
June 30,
|
|
June 30,
|
|
2019
|
|
2018
|
|
2019
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|
2018
|
Numerator:
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Net loss
|
$
|
(1,059)
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$
|
(2,452)
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$
|
(2,418)
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$
|
(4,613)
|
Denominator:
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Shares used in computing net loss per share, basic and diluted
|
|
17,162
|
|
|
6,838
|
|
|
17,162
|
|
|
6,739
|
Net loss per share, basic and diluted
|
$
|
(0.06)
|
|
$
|
(0.36)
|
|
$
|
(0.14)
|
|
$
|
(0.68)
|
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Dilutive common shares excluded from net loss per share, diluted
|
|
2,960
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|
2,220
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|
2,962
|
|
|
2,190
|
Common stock warrants excluded from net loss per share, diluted
|
|
9,127
|
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|
-
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|
9,127
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-
|
The Company
excluded common stock options and warrants outstanding from the calculation of net loss per share, diluted
,
because the effect of including options and warrants outstanding would have been anti
-
dilutive.
Fair Value of Financial Instruments
Financial instruments include cash and cash equivalents, accounts payable and accrued liabilities. The estimated fair value of
certain
financial instruments
may be
determined using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value; therefore, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange. The effect of using different market assumptions and/or estimation methodologies may be material to the estimated fair value amounts. The carrying amounts of cash and cash equivalents, accounts payable and accrued liabilities are at cost, which approximates fair value due to the short maturity of those instruments.
Income Taxes
The Company
make
s
estimates and judgments in determining the need for a provision for income taxes, including the estimation of
its
taxable income or loss for each full fiscal year.
The Company
ha
s
accumulated significant deferred tax assets that reflect the tax effects of net operating loss and tax credit carryovers and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Realization of certain deferred tax assets is dependent upon future earnings.
The Company is
uncertain about the timing and amount of any future earnings. Accordingly,
it
offset
s
these deferred tax assets with a valuation allowance.
The Company
may in the future determine that certain deferred tax assets will likely be realized, in which case
it
will reduce
its
valuation allowance in the period in which such determination is made. If the valuation allowance is reduced,
the Company
may recognize a benefit from income taxes in
its
s
tatement of
o
perations in that period.
The Company
classif
ies
interest recognized pursuant to
its
deferred tax assets as interest expense, when appropriate.
Recently
A
dopted
A
ccounting
P
ronouncements
The Company has a single non-cancelable operating lease for approximately 6,000 square feet of office space in Austin, T
exas
that expires on December 31, 2020, which is used for the development of novel drugs. Prior to January 1, 2019, the Company accounted for leases in accordance with the provision
s
of ASC Topic 840. Under the previous leasing guidance, the Company expensed lease payments over the term of the lease and did not give recognition to any lease related assets or liabilities on its balance sheet.
On January 1, 2019, the Company adopted
ASU No. 2016-02
, Leases (
ASC
842)
which,
as permitted by ASC
Topic
842, is the date of initial application.
The core principle of
ASC
Topic
842 is that a lessee should recognize the assets and liabilities that arise from leases. For operating leases, a lessee is required to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position. The Company recognized a right-of-use asset and operating lease liability upon
the
adoption of ASU 2016-02 which increase
d
total assets and total liabilities relative to such amounts prior to adoption.
The Company utilized a discount rate of
5.5%
to determine the present value of the future lease payments which represents the Company’s incremental borrowing rate.
The impact of adopting ASC 842 on
a
ssets and liabilities recorded
as of
January 1, 2019 were as follows
(in thousands)
:
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Assets
|
|
Operating lease right-of-use asset
|
$ 180
|
|
|
Liabilities
|
|
Operating lease liabilities, current
|
90
|
Operating lease liabilities, non-current
|
$ 90
|
|
|
The Company recorded a reduction of the non-current portion of the lease liability and an offsetting reduction in the right-of-use assets of
$2
2
,500
and
$45,000
during the three
and six
months ended
June
3
0
, 2019
, respectively
. There was no change to the statement of operations or statement of cash flows during the three
and six
months ended
June
3
0
, 2019 as a result of the adoption of
ASC
Topic 842.
See additional information regarding leases in Note 5 – Commitments.
Note
3
. Stockholders’ Equity and Stock-Based Compensation Expense
Stockholders’
E
quity
A
ctivity
during the
Six
M
onth
s
E
nded
June
3
0
,
201
9
and 2018
During the
six
months ended
June
3
0
, 201
9
and 2018
,
the Company’s
common stock outstanding and stockholders’ equity changed as follows:
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Stockholders' equity
(in thousands)
|
Balance at December 31, 2017
|
6,595,509
|
|
$
|
9,699
|
Non-cash stock-based compensation for:
|
|
|
|
|
Stock options for employees
|
—
|
|
|
789
|
Stock options for non-employees
|
—
|
|
|
13
|
Issuance of common stock and warrants, net of issuance costs
|
300,000
|
|
|
1,959
|
Net loss
|
—
|
|
|
(2,160)
|
Balance at March 31, 2018
|
6,895,509
|
|
$
|
10,300
|
|
|
|
|
|
Non-cash stock-based compensation for:
|
|
|
|
|
Stock options for employees
|
—
|
|
|
679
|
Stock options for non-employees
|
—
|
|
|
19
|
Net loss
|
—
|
|
|
(2,452)
|
Balance at June 30, 2018
|
6,895,509
|
|
$
|
8,546
|
|
|
|
|
|
Balance at December 31, 2018
|
17,219,300
|
|
$
|
19,628
|
Non-cash stock-based compensation for:
|
|
|
|
|
Stock options for employees
|
—
|
|
|
342
|
Stock options for non-employees
|
—
|
|
|
2
|
Issuance costs from sale 2018 sale of common stock and warrants
|
—
|
|
|
(60)
|
Net loss
|
—
|
|
|
(1,359)
|
Balance at March 31, 2019
|
17,219,300
|
|
$
|
18,553
|
|
|
|
|
|
Non-cash stock-based compensation for:
|
|
|
|
|
Stock options for employees
|
—
|
|
|
328
|
Stock options for non-employees
|
—
|
|
|
1
|
Net loss
|
—
|
|
|
(1,059)
|
Balance at June 30, 2019
|
17,219,300
|
|
$
|
17,823
|
|
|
|
|
|
At
-
the
-
Market Common Stock Issuance
On February 8, 2018,
the Company
entered into a Capital on Demand™ Sales Agreement
(
the
“
ATM Agreement
”)
with JonesTrading. In accordance with the terms of the
ATM Agreement
, the Company was able to offer and sell shares of
its
common stock, from time to time in one or more public offerings of
its
common stock, with JonesTrading acting as agent, in transactions pursuant to a shelf registration statement that was declared effective by
the U.S. Securities and Exchange Commission (
the
“
SEC
”)
on July 31, 2017. On August 16, 2018,
the Company
suspended sales of
its
common stock under
its
ATM Agreement.
There were
no
common stock sales under the ATM
Agreement
during the
six
months ended
June
3
0
, 2019. During the
six
months ended
June
3
0
, 2018, the Company sold a total of
300,000
shares of
its
common stock under the ATM Agreement, in the open market at an average gross selling price of
$6.70
per share for net proceeds of
$1.9
million. The Company expensed approximately
$0.1
million of cost for the offering, excluding JonesTrading commissions.
Stock
O
ption and Performance Award
A
ctivity in 201
9
During the
six
months ended
June
3
0
, 201
9
, stock options and unvested
P
erformance
A
wards outstanding under
the Company’s 2018
Plan
(defined below)
changed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
Performance Awards
|
Outstanding as of December 31, 2018
|
|
2,964,973
|
|
|
138,055
|
Options granted
|
|
50,000
|
|
|
—
|
Options exercised
|
|
—
|
|
|
—
|
Options forfeited/canceled
|
|
(24,512)
|
|
|
—
|
Outstanding as of June 30, 2019
|
|
2,990,461
|
|
|
138,055
|
The weighted average exercise price of options outstanding at
June
3
0
, 201
9
was
$
13.89
. As outstanding options vest over the current remaining vesting period of
2.
5
years,
the Company
expect
s
to recognize non-cash expense of
$
2.
2
million. If and when outstanding Performance Awards vest,
the Company
would recognize non-cash expense of
$2.
3
million over the implicit service period.
Stock-based Compensation Expense in 201
9
During the three
and six
months
ended
June
3
0
, 201
9
and 201
8
,
the Company’s
non-cash stock-
bas
ed compensation expenses were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
June 30,
|
|
June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Research and development
|
$
|
135
|
|
$
|
316
|
|
$
|
272
|
|
$
|
668
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
194
|
|
|
382
|
|
|
401
|
|
|
833
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-cash stock-based compensation expense
|
$
|
329
|
|
$
|
698
|
|
$
|
673
|
|
$
|
1,501
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 Equity Incentive Plan
On January 31, 2018, the Company’s Board of Directors approved the Company’s 2018 Omnibus Incentive Plan (the “2018 Plan”). The Company’s Board of Directors or a designated
c
ommittee of the Board
of Directors
is responsible for administration of the 2018 Plan and determine
s
the terms and conditions of each option granted, consistent with the terms of the 2018 Plan. The Company’s employees, directors, and consultants are eligible to receive awards under the 2018 Plan, including grants of stock options and performance awards. Share-based awards generally expire
ten
years from the date of grant. The 2018 Plan provides for issuance of up to
1,000,000
shares of common stock, par value
$0.001
per share under the 2018 Plan, subject to adjustment as provided in the 2018 Plan.
When stock options or performance awards are exercised net of the exercise price and taxes, the number of shares of stock issued is reduced by the number of shares equal to the amount of taxes owed by the award recipient and that number of shares are cancelled. The Company then uses its cash to pay tax authorities the amount of statutory taxes owed by and on behalf of the award recipient.
Note 4. Income Taxes
The Company did not provide for income taxes during the
six
months ended
June
3
0
, 2019, because it has projected a net loss for the full year 2019. There was also no provision for income taxes for the
six
months ended
June
3
0
, 2018.
Note
5
.
Commitments
The Company
conduct
s
its
product research and development programs through a combination of internal and collaborative programs that include, among others, arrangements with universities, contract research organizations and clinical research sites.
The Company
ha
s
contractual arrangements with these organizations that are cancelable.
The Company’s
obligations under these contracts are largely based on services performed.
The Company
ha
s
a non-cancelable operating lease for approximately
6,000
square feet of office space in Austin, Texas that expires
o
n
December
31,
2020
. Minimum lease payments
as of
June
3
0
, 2019
were
as follows (in thousands):
|
|
|
|
|
|
|
|
For the year ending December 31,
|
|
|
|
2019
|
|
|
$ 47
|
2020
|
|
|
99
|
Total future minimum lease payments
|
|
|
$ 146
|
Lease: imputed interest
|
|
|
(11)
|
Total
|
|
|
$ 135
|
|
|
|
|
Building rent expense for the three months ended June 30, 2019 and 2018 totaled
$24,000
and
$22,000
, respectively.
Building rent
expense
for the
six
months ended
June
3
0
, 2019 and 2018 totaled
$
48
,000
and
$
45
,000
, respectively.
These amounts were equal to
the Company’s
operating cash outflow from operating leases.
6. Collaboration Agreements
Durect Corporation
The Company
had
formerly
entered into a
Development and License Agreement
(the “License Agreement”)
with Durect Corporation
around
certain
controlled-release technology. On March 20, 2019, the Company gave notice of termination
to Durect Corporation for such License Agreement
. This and other actions effectively ended the Company’s development of
any product
candidates
related to
such
technology
. There were
no
payments made to Durect
Corporation
during the
six
months ended
June
3
0
, 2019 and 2018.
Note 7.
Recently Issued Accounting Pronouncements
In August 2018, the FASB issued ASU
No. 2018-13,
Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement
(“ASU
2018-13”),
which is designed to improve the effectiveness of disclosures by removing, modifying and adding disclosures related to fair value measurements. ASU
2018-13
is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the impact of ASU 2018-13 on its consolidated financial statements.
Item 2.
Management’s Discu
ssion and Analysis of Financial Condition and Results of Operations
This discussion and analysis should be read in conjunction with
Cassava Sciences, Inc.’s (the “Company,”, “we,” “us,” or “
our
”)
financial statements and accompanying notes included elsewhere in this Quarterly Report on Form 10-Q. Operating results are not necessarily indicative of results that may occur in future periods.
This Quarterly Report on Form 10-Q contains certain statements that are considered forward-looking statements within the meaning of the Private Securities Reform Act of 1995. We intend that such statements be protected by the safe harbor created thereby. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some
cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “should,” “will” and “would” or the negatives of these terms or other comparable terminology.
The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. Forward-looking statements involve risks and uncertainties and our actual results and the timing of events may differ significantly from the results discussed in the forward-looking statements. Examples of such forward-looking statements include, but are not limited to statements about:
|
·
|
|
Our ability to initiate, conduct or complete clinical studies with PTI-125 or PTI-125Dx, our product candidates targeted at Alzheimer’s disease and other neurodegenerative diseases, including our anticipated timeline for
reporting results of a Phase
2
a
study and
initiating a Phase
2
b study of PTI-125
;
|
|
·
|
|
any potential benefits of our product candidates, such as PTI-125 or PTI-125Dx, including the potential ability of PTI-125 to prevent or reverse amyloid-related damage or PTI-125Dx to diagnose Alzheimer’s disease
;
|
|
·
|
|
discussions with potential strategic partners for the development and commercialization of our product candidates
;
|
|
·
|
|
the utility of protection, or the sufficiency, of our intellectual property;
|
|
·
|
|
potential competitors or competitive products;
|
|
·
|
|
expected future sources of revenue and capital and increasing cash needs;
|
|
·
|
|
market acceptance of our potential
product
candidates;
|
|
·
|
|
expectations regarding trade secrets, technological innovations, licensing agreements and outsourcing of certain business functions;
|
|
·
|
|
expenses increasing or fluctuations in our financial or operating results;
|
|
·
|
|
operating losses and anticipated operating and capital expenditures;
|
|
·
|
|
expectations regarding the issuance of shares of common stock to employees pursuant to equity compensation awards
,
net of employment taxes;
|
|
·
|
|
our ability to maintain compliance with the ongoing listing requirements for the Nasdaq Capital Market;
|
|
·
|
|
anticipated hiring and development of our internal systems and infrastructure;
|
|
·
|
|
the sufficiency of our current resources to fund our operations over the next 12 months; and
|
|
·
|
|
assumptions and estimates used for our disclosures regarding stock-based compensation.
|
Such forward-looking statements
and our business
involve risks and uncertainties, including, but not limited to
the following
:
|
·
|
|
We are in the early stages of clinical drug development and have a limited operating history in our business targeting Alzheimer’s disease and no products approved for commercial sale.
|
|
·
|
|
We have incurred significant net losses in each period since our inception and anticipate that we will continue to incur net losses for the foreseeable future
.
|
|
·
|
|
Research and d
evelopment of biopharmaceutical products is a highly uncertain undertaking and involves a substantial degree of risk
and our
business is heavily dependent on the successful development of our product candidates
.
|
|
·
|
|
We will need to obtain substantial additional financing to complete the development and any commercialization of our product candidates
.
|
|
·
|
|
We may not be successful in our efforts to continue to develop product candidates or commercially successful products.
|
|
·
|
|
We may not be successful in our efforts to expand indications for product candidates.
|
|
·
|
|
We are concentrating a substantial portion of our research and development efforts on the diagnosis and treatment of Alzheimer’s disease, an area of research that has recorded many clinical failures.
|
|
·
|
|
We may encounter substantial delays in our clinical trials or may not be able to conduct or complete our clinical trials on the timelines we expect, if at all.
|
|
·
|
|
Our clinical trials may fail to demonstrate evidence of the safety and efficacy of our product candidates, which would prevent, delay, or limit the scope of regulatory approval and the commercialization of our product candidates.
|
|
·
|
|
We may be unable to protect our intellectual property rights or trade secrets
.
|
|
·
|
|
We may be subject to third-party claims of intellectual property infringement
.
|
|
·
|
|
We may not succeed in our maintenance or pursuit of licensing rights or third-party intellectual property necessary for the development of our product candidates
.
|
|
·
|
|
Enacted or future legislation or regulatory actions may adversely affect our product pricing, or limit the reimbursement we may receive for our products
.
|
|
·
|
|
A significant breakdown, security breach or interruption affecting our internal computer systems, or those used by our third-party research collaborators, may compromise the confidentiality of our financial or proprietary information, result in material disruptions of our products and operations and adversely affect our reputation.
|
|
·
|
|
We may be unsuccessful at hiring and retaining qualified personnel
.
|
|
·
|
|
We may not be successful in transitioning our business operations from our prior focus on analgesic drug development to a new focus on
neurodegeneration
drug development
, including
for
drugs targeting
Alzheimer’s disease
.
|
Please also refer to the section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 201
8
, as such risk factors may be amended, updated or modified periodically in our reports filed with the SEC for further information on these and other risks affecting us.
We caution you not to place undue reliance on forward-looking statements because our future results may differ materially from those expressed or implied by them. We do not intend to update any forward-looking statement, whether written or oral, relating to the matters discussed in this prospectus, except as required by law.
Overview
Cassava Sciences, Inc. is a clinical-stage drug development company. Our expertise is to develop new product candidates and guide
such candidates
through various regulatory and development pathways in preparation for their potential commercialization. Since our inception, we have generally focused our drug development efforts on disorders of the central nervous system. We are currently conducting a Phase
2
clinical program for patients with Alzheimer’s disease. By necessity, the conduct of drug development is complex, lengthy, expensive and risky. The U.S. Food and Drug Administration (the “FDA”) has not yet established the safety or efficacy of our product candidates.
Our overall strategy is to leverage our unique
scientific/
clinical platform to develop a first-in-class program for
treating
neurodegeneration. Our goal is to address Alzheimer’s disease and other neurodegenerative diseases, particularly those with a strong neuroinflammation component, with PTI-125, our drug product candidate
to treat Alzheimer’s disease,
and
PTI-125Dx, our
diagnostic product candidate to detect Alzheimer’s disease.
We seek to develop and gain regulatory approval for PTI-125 for the treatment of Alzheimer’s disease and PTI-125Dx for the diagnosis of Alzheimer’s disease. The following is a summary of our clinical-stage biopharmaceutical assets:
PTI-125
– PTI-125 is the name of our product candidate for the treatment of Alzheimer’s disease. This proprietary small molecule drug represents an entirely new
approach
to treat Alzheimer’s disease. PTI-125 benefits from a strong scientific rationale, peer-reviewed publications in prestigious academic journals and multiple peer-
reviewed research grant awards from the National Institutes of Health (“NIH”), the primary agency of the U.S. government for biomedical research.
In 2018, we initiated a Phase
2
clinical program
for
patients with Alzheimer’s disease using PTI-125.
On April 15, 2019, we announced completion of patient enrollment for a Phase
2
a study for PTI-125.
We expect to announce top-line results of our Phase
2
a study in
the second half of
2019.
We also expect to initiate a Phase
2
b study in approximately
the third quarter of
2019.
Our Phase
2
clinical program with PTI-125 is substantially funded by research grant awards from NIH. PTI-125 was discovered and designed in-house and was characterized by our academic collaborators during research activities that were conducted from approximately 2008 to date. We own exclusive, worldwide rights to PTI-125, without royalty obligations to any third party.
PTI-125Dx
– We are developing PTI-125Dx as a blood-based biomarker/diagnostic to detect Alzheimer
’
s disease. The goal of PTI-125Dx is to make the detection of Alzheimer’s disease as simple as getting a blood test. This clinical-stage program is substantially funded by research grant awards from NIH. PTI-125Dx was discovered and designed in-house and was characterized by our academic collaborators during research activities that were conducted from approximately 2008 to date. We own exclusive, worldwide rights to PTI-125Dx, without royalty obligations to any third party.
Our scientific approach is different.
For over 100 years, scientists have ascribed various neurodegenerative diseases to pathological proteins that misfold. Misfolded proteins are also altered or they aggregate, such as amyloid and tau in the case of Alzheimer’s disease. Destruction of neuronal synapses, accelerated nerve cell death, and dysfunction of the brain support cells, are all widely believed to be a direct consequence of misfolded proteins.
Historically, the drug industry has attempted to treat Alzheimer’s disease by developing drugs that block the synthesis of, or remove or dis-aggregate, beta amyloid and, more recently, tau. Essentially, the prevailing doctrine said that amyloid must be cleared out of the brain. This scientific approach – known as the amyloid hypothesis - has been repeatedly tested by our competitors in late stage clinical trials using a variety of antibody backbones, epitopes, target conformations, biomarkers and in various stages of disease. Such studies have all failed to yield therapeutic benefit for patients with Alzheimer’s disease. More recently, experimental efforts have been proposed to ramp up the brain’s immune system in people with Alzheimer’s disease to remove amyloid or tau, an approach known as immunotherapy. Current attempts to use immunotherapy to treat Alzheimer’s disease may yet work, but for over 20 years this approach has also consistently failed due to lack of efficacy and/or for safety reasons. For example, older adults
who receive active
immunotherapy
treatment
often show
reduced responsiveness of the immune system, and patients who do improve sometimes develop a life-threatening brain inflammation called aseptic meningitis. More generally, even when active or passive immunization against amyloid beta has reduced the brain’s amyloid load, such effects resulted in no therapeutic benefit to patients with Alzheimer’s disease.
Since drug innovation is a trial-and-error process, clinical failures represent important learning opportunities. In the case of
Alzheimer’s disease, we believe the biopharmaceutical industry’s track record of persistent
failure
reflects a need to consider more recent and innovative approaches regarding the neurobiology of Alzheimer’s disease. We believe such scientific approaches may broaden the range of possible
treatment
approaches.
Over the last ten years, we have developed a new and promising scientific approach for the treatment and diagnosis of neurodegeneration, particularly Alzheimer’s disease.
Importantly, we do not seek to clear amyloid out of the brain. Our approach is to stabilize a critical protein in the brain.
“Proteopathy” refers to a disease in which a protein becomes structurally abnormal, assembles and aggregates, and therefore loses its
normal
function and disrupts or injures the function of surrounding cells, tissues and organs. Through years of basic research, we have identified a structurally altered protein in the brain. We believe our experimental evidence demonstrates that this proteopathy plays a critical role in the development of neurodegenerative diseases, including the neurodegeneration observed in Alzheimer’s disease. Using scientific insight and advanced tools in biochemistry, bioinformatics and imaging, we have elucidated this protein dysfunction. We have engineered a family of high-affinity small molecules to target the structurally altered protein and restore the protein to its normal
shape and function. This family of small molecules, including PTI-125, was designed in-house and characterized by our academic collaborators.
The target of PTI-125 is an altered form of a scaffolding protein called filamin A (“FLNA”). Altered FLNA causes a cascade of toxic effects in the brain. Altered FLNA is a proteopathy, which means that this protein is no longer capable of executing a stable, beneficial and protective role and instead becomes harmful and destructive to the brain. By reversing the alteration of FLNA, its pathology ceases to adversely affect surrounding cells in the brain. In animal models of disease, restoring normal FLNA resulted in a multitude of therapeutic effects, including normalizing neurotransmission, decreasing neuroinflammation and restoring memory and cognition. By restoring function to multiple receptors and exerting powerful anti-inflammatory effects, we believe our approach has potential to slow the progression of neurodegeneration in humans. Thus, we have designed product candidates, such as PTI-125, with the goal of slowing or, potentially, even reversing the deterioration of brain cells. We believe the ability to simultaneously improve many vital functions in the brain represents a new, different and crucial approach to address neurodegeneration.
Importantly, since PTI-125 has a unique mechanism of action, we believe its potential therapeutic effects may be additive or synergistic with that of other therapeutic candidates aimed at the treatment of neurodegeneration.
Our mission is to detect and treat Alzheimer’s disease.
Our lead therapeutic product candidate, called PTI-125, is initially aimed at Alzheimer’s disease. PTI-125 is a small molecule drug with a novel mechanism of action. This drug candidate has demonstrated both cognitive improvement and slowing of disease progression in animal models of disease. PTI-125 is in Phase
2
clinical stage of development, with substantial support from the
National Institute on Aging
(“NIA”), a division of NIH.
The target of PTI-125 is an altered form of filamin A (“FLNA”). FLNA is a scaffold protein that is widely found throughout the body. The function of a scaffold protein is to bring multiple other proteins together for them to interact. However, an altered, and highly toxic, form of FLNA is found in the Alzheimer’s brain. Altered FLNA contributes to Alzheimer’s disease by disrupting the normal function of neurons, leading to neurodegeneration and brain inflammation. Our product candidate, PTI-125, is aimed at countering the altered and toxic form of FLNA in the brain, thus restoring the normal function of this critical protein.
PTI-125 binds to altered FLNA with very high affinity. In doing so, PTI-125 restores the normal shape of FLNA and the normal function of three brain receptors: the alpha-7 nicotinic acetylcholine receptor; the
N-methyl-D-aspartate
(“NMDA”) receptor; and the insulin receptor. These receptors have pivotal roles in brain cell survival, cognition and memory. In animal models, treatment with PTI-125 resulted in dramatic improvements in brain health, such as reduced amyloid and tau deposits, improved insulin receptor signaling and improved learning and memory. In addition, PTI-125 has another beneficial treatment effect of significantly reducing inflammatory cytokines in the brain. In animal models of disease, treatment with PTI-125 abolished IL-6 production and suppressed TNF-alpha and IL-1beta levels by 86% and 80%, respectively, illustrating a powerful anti-neuroinflammatory effect.
Our science is published in peer-reviewed academic journals. In addition, our research has been supported by NIH under multiple research grant awards. Each grant was awarded following an in-depth, competitive, peer-reviewed evaluation of our approach for scientific and technical merit by a panel of outside experts in the field. Strong, long-term support from NIH has allowed us to advance our two product candidates for neurodegeneration, PTI-125 and PTI-125Dx, into clinical development.
Our science is based on stabilizing a critical protein in the brain.
Our scientific approach is to treat neurodegeneration by targeting an altered form of a scaffolding protein called filamin A (“FLNA”). Scaffolding proteins are essential for cell function because they participate in virtually every process within the cell. If their function is impaired, the consequences can be devastating. Technological advances in medicine and improvements in lifestyle are making our lives longer. But with age, genetic mutations and other factors conspire against healthy cells, resulting in altered proteins. Sometimes a cell can rid itself of altered proteins. However, when disease changes the shape and function of critical proteins, multiple downstream processes are impaired. There are many clinical conditions in which proteins become structurally altered and impair the normal
function of cells, tissues and organs, leading to disease. Conversely, restoring altered proteins back to health – which is called proteostasis – is a well-accepted therapeutic strategy in clinical medicine.
Accumulation of altered proteins is common in age-related brain disorders. The most common is Alzheimer’s disease.
Altered proteins observed in the aging brain include hyperphosphorylated tau and beta amyloid, both hallmarks of Alzheimer’s disease.
Our scientists and outside collaborators have demonstrated that an altered, and highly toxic, form of the scaffolding protein FLNA exists in the Alzheimer’s brain. Critically, altered FLNA enables the toxicity of both beta amyloid and tau proteins. This toxic cascade impairs brain health, leading to worsening symptoms of Alzheimer’s disease over time. In addition to impairing brain cell function, altered FLNA enables persistent inflammation in the Alzheimer’s brain. We have shown that altered FLNA also promotes neuroinflammation via toll-like receptor 4 (“TLR4”), an immune receptor that causes release of pro-inflammatory cytokines. Our therapeutic approach is designed to counteract these brain pathologies by restoring altered FLNA protein back to its normal, non-diseased conformation with PTI-125. Treatment with PTI-125 has been shown to restore the normal function of three brain receptors critical to brain cell survival, cognition and memory, i.e., the alpha-7 nicotinic acetylcholine receptor; the NMDA receptor; and the insulin receptor. Treatment with PTI-125 has also been shown to dramatically reduce inflammatory cytokine levels in brains of mice with Alzheimer’s disease mutations, thus reducing the neuroinflammation that also characterizes Alzheimer’s disease.
Financial Overview
We have yet to generate any revenues from product sales. We have an accumulated deficit of $
16
6.4
million at
June
3
0
, 201
9
. These losses have resulted principally from costs incurred in connection with research and development activities, salaries and other personnel-related costs and general corporate expenses. Research and development activities include costs of preclinical and clinical trials as well as clinical supplies associated with our drug candidates. Salaries and other personnel-related costs include non-cash stock-based compensation associated with options and other equity awards granted to employees and non-employees. Our operating results may fluctuate substantially from period to period as a result of the timing of preclinical activities, enrollment rates of clinical trials for our drug candidates and our need for clinical supplies.
We expect to continue to use significant cash resources in our operations for the next several years. Our cash requirements for operating activities and capital expenditures may increase substantially in the future as we:
|
·
|
|
conduct preclinical and clinical trials for our drug candidates;
|
|
·
|
|
seek regulatory approvals for our drug candidates;
|
|
·
|
|
develop, formulate, manufacture and commercialize our drug candidates;
|
|
·
|
|
implement additional internal systems and develop new infrastructure;
|
|
·
|
|
acquire or in-license additional products or technologies, or expand the use of our technology;
|
|
·
|
|
maintain, defend and expand the scope of our intellectual property; and
|
|
·
|
|
hire additional personnel.
|
Product revenue will depend on our ability to receive regulatory approvals for, and successfully market, our
product
candidates. If our development efforts result in regulatory approval and successful commercialization of our
product
candidates, we will generate revenue from direct sales of our
products
and/or, if we license our
products
to future collaborators, from the receipt of license fees and royalties from sales of licensed products. We conduct our research and development programs through a combination of internal and collaborative programs. We rely on arrangements with universities, our collaborators, contract research organizations and clinical research sites for a significant portion of our product development efforts.
We focus substantially all of our research and development efforts in the area of neurology. The following table summarizes expenses
which have been reduced for reimbursements received for NIH grants
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
June 30,
|
|
June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Research and development expenses - gross
|
$
|
1,746
|
|
$
|
1,899
|
|
$
|
3,120
|
|
$
|
3,342
|
Less: Reimbursement from NIH grants
|
|
1,438
|
|
|
436
|
|
|
2,238
|
|
|
810
|
Research and development expenses - net
|
$
|
308
|
|
$
|
1,463
|
|
$
|
882
|
|
$
|
2,532
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development expenses include compensation, contractor fees and supplies as well as allocated common costs. Contractor fees and supplies generally include expenses for preclinical studies and clinical trials and costs for formulation and manufacturing activities. Other common costs include the allocation of common costs such as facilities. During the three months ended
June
3
0
, 2019 and 2018, we
received $
1.4
million and $
0.4
million from research grants from NIH
, respectively
.
During the six months ended June 30, 2019 and 2018, we
received $
2.2
million and $
0.
8
million from research grants from NIH, respectively.
These reimbursements were recorded as a reduction to our research and development expenses.
Our technology has been applied across certain of our drug candidates. Data, know-how, personnel, clinical results, research results and other matters related to the research and development of any one of our drug candidates also relate to, and further the development of, our other drug candidates. As a result, costs allocated to a specific drug candidate may not necessarily reflect the actual costs surrounding research and development of that drug candidate due to cross application of the foregoing
.
Estimating the dates of completion of clinical development, and the costs to complete development, of our drug candidates would be highly speculative, subjective and potentially misleading. Pharmaceutical products take a significant amount of time to research, develop and commercialize. The clinical trial portion of the development of a new drug alone usually spans several years. We expect to reassess our future research and development plans based on our review of data we receive from our current research and development activities. The cost and pace of our future research and development activities are linked and subject to change
.
Critical Accounting Policies
The preparation of our financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and interest income in our financial statements and accompanying notes. We evaluate our estimates on an ongoing basis, including those estimates related to agreements, research collaborations and investments. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The following items in our financial statements require significant estimates and judgments:
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Stock-based compensation
. We recognize non-cash expense for the fair value of all stock options and other share-based awards. We use the Black-Scholes option valuation model to calculate the fair value of stock options, using the single-option award approach and straight-line attribution method.
The Company adopted
ASU No. 2018-07,
Compensation—Stock Compensation (Topic 718)
,
Improvements to Nonemployee Share-Based Payment Accounting
, on January 1, 2019. Accordingly,
f
or
all
options granted, we recognize the resulting fair value as expense on a straight-line basis over the vesting period of each respective stock option, generally four years.
|
We have granted share-based awards that vest upon achievement of certain performance criteria, or Performance Awards. We multiply the number of Performance Awards by the fair market value of our common stock on the date of grant to calculate the fair value of each award. We estimate an implicit service period for achieving performance criteria for each award. We recognize the resulting fair value as expense over the implicit service period when we conclude that achieving the performance criteria is probable. We
periodically review and update as appropriate our estimates of implicit service periods and conclusions on achieving the performance criteria. Performance Awards vest and common stock is issued upon achievement of the performance criteria.
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Income Taxes.
We make estimates and judgments in determining the need for a provision for income taxes, including the estimation of our taxable income or loss for each full fiscal year.
We have accumulated significant deferred tax assets that reflect the tax effects of net operating loss and tax credit carryovers and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Realization of deferred tax assets is dependent upon future earnings, if any. We are uncertain as to the timing and amount of any future earnings. Accordingly, we offset these deferred tax assets with a valuation allowance. We may in the future determine that our deferred tax assets will likely be realized, in which case we will reduce our valuation allowance in the quarter in which such determination is made. If the valuation allowance is reduced, we may recognize a benefit from income taxes in our statement of operations in that period.
We classify
interest recognized in connection with our tax positions as interest expense, when appropriate.
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Results of Operations – Three
and Six
Months ended
June
3
0
,
201
9
and 201
8
Research and Development Expense
Research and development expense consists primarily of costs of drug development work associated with our drug candidates, including:
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P
re
-
clinical testing,
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clinical supplies and related formulation and design costs, and
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compensation and other personnel-related expenses.
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Research and development expenses
were $0.
3
million and $1.
5
million during the three months ended
June
3
0
, 201
9
and 201
8
, respectively. The
decrease was
due primarily to a
n
increase in grant funding received from NIH
compared to the prior year period
a
s
well as a decrease in non-cash stock
-
based compensation expense
s
.
Receipts from NIH grants are
recorded as a reduction in research and development expenses.
During the three months ended June 30, 2019 and 2018, we
received $
1.4
million and $
0.4 million from research grants from NIH, respectively.
Research and development expenses included non-cash stock-
bas
ed compensation expenses were
$
0.
1
million and $0.
3
million
during the three months ended
June
3
0
, 201
9
and 201
8
, respectively.
Research and development expenses
were $
0.
9
million and $
2.5
million during the six months ended June 30, 2019 and 2018, respectively. The
6
5
% decrease was due primarily to a
n
increase in grant funding received from NIH as well as a decrease in non-cash stock-based compensation expenses. Receipts from NIH grants are recorded as a reduction in research and development expenses.
During the six months ended June 30, 2019 and 2018, we
received $
2.2
million and $
0.8 million from research grants from NIH, respectively.
Research and development expenses included non-cash stock-
bas
ed compensation expenses were
$0.
3
million and $0.
7
million
during the six months ended June 30, 2019 and 2018, respectively.
Our research and development expenses may fluctuate from period to period due to the timing and scope of our development activities and the results of clinical trials and pre
-
clinical studies.
General and Administrative Expense
General and administrative expenses consist of personnel costs, allocated expenses and other expenses for outside professional services, including legal, human resources, audit and accounting services. Personnel costs consist of salaries, bonus, benefits and stock-based compensation.
Allocated expenses consist primarily of facility costs.
We incur expenses associated with operating as a public company, including expenses related to compliance with the rules and regulations of the
U.S. Securities and Exchange Commission (the “
SEC
”)
and Nasdaq Stock Market LLC (“Nasdaq”), additional insurance expenses, additional audit expenses, investor relations activities, Sarbanes-Oxley compliance expenses and other administrative expenses and professional services.
General and administrative expenses were $0.
8
million and $1.
0
million during the three months ended
June
3
0
, 201
9
and 201
8
, respectively. The
15
%
decrease was due primarily to a decrease
in
non-cash
stock
-
based
compensation related expense
partially offset
by an
in
crease in
compensation cost
s from the hiring of a
c
hief
f
inancial
o
fficer in October 2018
.
General and administrative expenses included non-cash stock-
bas
ed compensation expenses of $0.
2
million and $0.
4
million during the three months ended
June
3
0
, 201
9
and 201
8
, respectively
.
General and administrative expenses were $
1.7
million and $
2.1
million during the six months ended June 30, 2019 and 2018, respectively. The
18
% decrease was due primarily to a decrease in non-cash stock
-
based compensation related expense partially offset by an increase in compensation costs from the hiring of a chief financial officer in October 2018. General and administrative expenses included non-cash stock-based compensation expenses of $0.
4
million and $0.
8
million during the
six
months ended June 30, 2019 and 2018, respectively.
We expect our general and administrative expenses during the remainder of 201
9
to
decrease
as compared to 201
8
activities
due to decreases in non-cash stock-based compensation expense
.
Interest Income
Interest and other income, net, was $
9
4
,000
and $
9
,000 during
the three months ended
June
3
0
, 2019
and
2018
, respectively
.
Interest and other income, net, was $
186
,000
and $
16
,000 during
the six months ended June 30, 2019 and 2018, respectively.
The increase was due primarily to higher cash balances from our August 2018 stock offering as well as an increase in interest rates. We expect interest income to increase in 2019 compared to 2018 due to our higher cash and cash equivalent balances as well as a higher interest rate environment.
Liquidity and Capital Resources
Since inception, we have financed our operations primarily through public and private stock offerings, payments received under collaboration agreements and interest earned on our investments. We intend to continue to use our capital resources to fund research and development activities, capital expenditures, working capital requirements and other general corporate purposes. As of
June
3
0
, 201
9
, cash and cash equivalents were $
1
8
.
5
million.
At
-
the
-
Market Common Stock Issuance
On February 8, 2018, we entered into a Capital on Demand™ Sales Agreement
(
the
“
ATM Agreement
”)
with JonesTrading. In accordance with the terms of the
ATM Agreement
,
we
w
ere
able to offer and sell shares of our common stock, from time to time in one or more public offerings of our common stock, with JonesTrading acting as agent, in transactions pursuant to a shelf registration statement that was declared effective by the SEC on July 31, 2017. On August 16, 2018, we suspended sales of our common stock under our ATM Agreement.
There were no common stock sales under the ATM
Agreement
during the
six
months ended
June
3
0
, 2019. During the
six
months ended
June
3
0
, 2018,
we
sold a total of 300,000 shares of our common stock under the ATM Agreement, in the open market at an average gross selling price of $6.70 per share for net proceeds of $1.9 million.
We
expensed approximately $0.1 million of cost for the offering, excluding JonesTrading commissions.
Net cash used in operating activities was $
1.2
million for the
six
months ended
June
3
0
, 201
9
,
resulting primarily from the net loss reported of $
2.4
million partially offset by non-cash stock
-
based compensation expense of $
0.
7
million and
changes in
operating
assets and
liabilities of $0.
5
million
.
Net cash used in operating activities was $
2.8
million for the
six
months ended
June
3
0
, 2018
,
resulting primarily from the net loss reported of $
4.6
million partially offset by non-cash stock
-
based compensation expense of $
1.5
million
and changes in operating assets and liabilities of $0.3 million
.
Net cash used in investing activities was $18
,000
for the
six
months ended
June
3
0
, 2019
, resulting primarily from
the purchase of equipment. There was no
cash
from
investing activities during the
six
months ended
June
3
0
, 201
8
.
Net cash used in
financing activities during the
six
months ended
June
3
0
, 2019
was $0.1 million
, resulting primarily from the
issuance costs incurred during the period
.
Net cash provided by financing activities during the
six
months ended
June
3
0
, 201
8
was $1
.9
million. Cash provided in 2018 was related to sale common stock, net of issuance costs
,
under
our ATM facility
.
Realization of our other deferred tax assets is dependent on future earnings, if any. We are uncertain about the timing and amount of any future earnings. Accordingly, we offset these net deferred tax assets with a
full
valuation allowance.
Section 382 of the Internal Revenue Code of 1986, as amended, as well as similar state provisions
may restrict our
ability to use our
net operating loss credit carryforwards
due to ownership change limitations occurring in the past or that could occur in the future. These ownership changes may also limit the amount of net operating loss credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. Any limitation may result in the expiration of a portion of the net operating loss carryforwards before utilization and any net operating loss carryforwards that expire prior to utilization as a result of such limitations will be removed from deferred tax assets with a corresponding reduction of the Company’s valuation allowance. Due to the existence of a valuation allowance, it is not expected that such limitations, if any, will have an impact on the Company’s results of operations or financial position.
We have a non-cancelable operating
lease for approximately 6,000 square
feet of office space in Austin, Texas that expires
o
n December
31,
2020.
Future m
inimum lease payments
total $
4
7
,000
for the
six
months ending December 31, 2019
and
$99,000 for
the full year
ending December 31,
2020
.
We have an accumulated deficit of $
16
6
.
4
million
as of
June
3
0
, 201
9
. We expect our cash requirements to be significant in the future. The amount and timing of our future cash requirements will depend on regulatory and market acceptance of our drug candidates, the resources we devote to researching and developing, formulating, manufacturing, commercializing and supporting our products and other corporate needs. We believe that our current resources
will
be sufficient to fund our operations for at least the next 12 months. We may seek additional future funding through public or private financing
in the future
, if such funding is available and on terms acceptable to us.
However, t
here are no assurances that additional financing will be available on favorable terms, or at all.
Off-balanc
e Sheet Arrangements
As of
June
3
0
, 201
9
, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts. Therefore, we are not materially exposed to financing, liquidity, market or credit risk that could arise if we had engaged in these relationships. We do not have relationships or transactions with persons or entities that derive benefits from their non-independent relationship with us or our related parties.