Item
1. Financial Statements.
PULMATRIX,
INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(in
thousands, except share and per share data)
|
|
At
June 30,
2020
|
|
|
At
December 31,
2019
|
|
|
|
(unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
27,255
|
|
|
$
|
23,440
|
|
Accounts
receivable
|
|
|
353
|
|
|
|
7,200
|
|
Prepaid
expenses and other current assets
|
|
|
1,448
|
|
|
|
777
|
|
Total
current assets
|
|
|
29,056
|
|
|
|
31,417
|
|
Property
and equipment, net
|
|
|
277
|
|
|
|
270
|
|
Operating
lease right-of-use asset
|
|
|
1,958
|
|
|
|
630
|
|
Long-term
restricted cash
|
|
|
204
|
|
|
|
204
|
|
Goodwill
|
|
|
3,577
|
|
|
|
3,577
|
|
Total
assets
|
|
$
|
35,072
|
|
|
$
|
36,098
|
|
Liabilities
and stockholders’ equity
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
291
|
|
|
$
|
600
|
|
Accrued
expenses
|
|
|
3,445
|
|
|
|
2,514
|
|
Operating
lease liability
|
|
|
861
|
|
|
|
675
|
|
Deferred
revenue
|
|
|
10,039
|
|
|
|
13,411
|
|
Total
current liabilities
|
|
|
14,636
|
|
|
|
17,200
|
|
Operating
lease liability, net of current portion
|
|
|
1,184
|
|
|
|
|
|
Deferred
revenue, net of current portion
|
|
|
5,367
|
|
|
|
7,879
|
|
Total
liabilities
|
|
|
21,187
|
|
|
|
25,079
|
|
Commitments
(Note 8)
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.0001 par value — 500,000 authorized and 0 issued and outstanding at June 30, 2020 and December 31, 2019
|
|
|
—
|
|
|
|
—
|
|
Common
stock, $0.0001 par value — 200,000,000 shares authorized; 25,749,356 and 19,994,560 shares issued and outstanding at
June 30, 2020 and December 31, 2019, respectively.
|
|
|
3
|
|
|
|
2
|
|
Additional
paid-in capital
|
|
|
234,899
|
|
|
|
226,178
|
|
Accumulated
deficit
|
|
|
(221,017
|
)
|
|
|
(215,161
|
)
|
Total
stockholders’ equity
|
|
|
13,885
|
|
|
|
11,019
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
35,072
|
|
|
$
|
36,098
|
|
The
accompanying footnotes are an integral part of these condensed consolidated financial statements.
PULMATRIX,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in
thousands, except share and per share data)
|
|
For the Three Months Ended
June
30,
|
|
|
For
the Six Months Ended
June
30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Revenues
|
|
$
|
3,500
|
|
|
$
|
4,819
|
|
|
$
|
6,262
|
|
|
$
|
4,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
3,184
|
|
|
|
3,164
|
|
|
|
8,471
|
|
|
|
5,340
|
|
General
and administrative
|
|
|
1,490
|
|
|
|
3,128
|
|
|
|
3,702
|
|
|
|
5,115
|
|
Impairment
of goodwill
|
|
|
—
|
|
|
|
6,474
|
|
|
|
—
|
|
|
|
7,268
|
|
Total
operating expenses
|
|
|
4,674
|
|
|
|
12,766
|
|
|
|
12,173
|
|
|
|
17,723
|
|
Loss
from operations
|
|
|
(1,174
|
)
|
|
|
(7,947
|
)
|
|
|
(5,911
|
)
|
|
|
(12,904
|
)
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
13
|
|
|
|
102
|
|
|
|
65
|
|
|
|
106
|
|
Settlement
expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(200
|
)
|
Other
income/(expense), net
|
|
|
(9
|
)
|
|
|
1
|
|
|
|
(10
|
)
|
|
|
(2
|
)
|
Net
loss
|
|
$
|
(1,170
|
)
|
|
$
|
(7,844
|
)
|
|
$
|
(5,856
|
)
|
|
$
|
(13,000
|
)
|
Net
loss per share, basic and diluted
|
|
$
|
(0.05
|
)
|
|
$
|
(0.41
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
(0.99
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares of common stock used to compute basic and diluted net loss per share
|
|
|
24,376,571
|
|
|
|
19,216,172
|
|
|
|
22,423,014
|
|
|
|
13,114,242
|
|
The
accompanying footnotes are an integral part of these condensed consolidated financial statements.
PULMATRIX,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For
the three and six months ended June 30, 2020 and 2019
(in
thousands, except share data)
|
|
Common
Stock
|
|
|
Additional
Paid-In
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
Balance
— December 31, 2019
|
|
|
19,994,560
|
|
|
$
|
2
|
|
|
$
|
226,178
|
|
|
$
|
(215,161
|
)
|
|
$
|
11,019
|
|
Exercise
of pre-funded warrants
|
|
|
300,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Exercise
of common stock options
|
|
|
19,997
|
|
|
|
—
|
|
|
|
21
|
|
|
|
—
|
|
|
|
21
|
|
Exercise
of warrants
|
|
|
206,747
|
|
|
|
—
|
|
|
|
239
|
|
|
|
—
|
|
|
|
239
|
|
Share-based
compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
343
|
|
|
|
—
|
|
|
|
343
|
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,686
|
)
|
|
|
(4,686
|
)
|
Balance
— March 31, 2020
|
|
|
20,521,304
|
|
|
|
2
|
|
|
|
226,781
|
|
|
|
(219,847
|
)
|
|
|
6,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock, net of issuance costs
|
|
|
4,787,553
|
|
|
|
1
|
|
|
|
7,313
|
|
|
|
|
|
|
|
7,314
|
|
Exercise
of common stock options
|
|
|
2,500
|
|
|
|
—
|
|
|
|
3
|
|
|
|
—
|
|
|
|
3
|
|
Exercise
of warrants
|
|
|
437,999
|
|
|
|
—
|
|
|
|
536
|
|
|
|
—
|
|
|
|
536
|
|
Share-based
compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
266
|
|
|
|
—
|
|
|
|
266
|
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,170
|
)
|
|
|
(1,170
|
)
|
Balance
—June 30, 2020
|
|
|
25,749,356
|
|
|
$
|
3
|
|
|
$
|
234,899
|
|
|
$
|
(221,017
|
)
|
|
$
|
13,885
|
|
|
|
Common
Stock
|
|
|
Additional
Paid-In
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
Balance
— December 31, 2018
|
|
|
4,932,723
|
|
|
$
|
—
|
|
|
$
|
206,409
|
|
|
$
|
(194,565
|
)
|
|
$
|
11,844
|
|
Adjustment
for reverse stock split
|
|
|
2,717
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Issuance
of common stock, net of issuance costs
|
|
|
2,394,955
|
|
|
|
1
|
|
|
|
2,978
|
|
|
|
—
|
|
|
|
2,979
|
|
Exercise of
pre-funded warrants
|
|
|
697,500
|
|
|
|
—
|
|
|
|
70
|
|
|
|
—
|
|
|
|
70
|
|
Share-based
compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
459
|
|
|
|
—
|
|
|
|
459
|
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(5,156
|
)
|
|
|
(5,156
|
)
|
Balance
— March 31, 2019
|
|
|
8,027,895
|
|
|
|
1
|
|
|
|
209,916
|
|
|
|
(199,721
|
)
|
|
|
10,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock, net of issuance costs
|
|
|
3,319,553
|
|
|
|
|
|
|
|
14,566
|
|
|
|
—
|
|
|
|
14,566
|
|
Exercise of
pre-funded warrants
|
|
|
8,277,112
|
|
|
|
1
|
|
|
|
82
|
|
|
|
—
|
|
|
|
83
|
|
Share-based
compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
1,091
|
|
|
|
—
|
|
|
|
1,091
|
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(7,844
|
)
|
|
|
(7,844
|
)
|
Balance
—June 30, 2019
|
|
|
19,624,560
|
|
|
$
|
2
|
|
|
$
|
225,655
|
|
|
$
|
(207,565
|
)
|
|
$
|
18,092
|
|
The
accompanying footnotes are an integral part of these condensed consolidated financial statements.
PULMATRIX,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in
thousands)
|
|
For
the Six Months Ended
June
30,
|
|
|
|
2020
|
|
|
2019
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(5,856
|
)
|
|
$
|
(13,000
|
)
|
Adjustments
to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
103
|
|
|
|
95
|
|
Amortization
of operating lease right-of-use asset
|
|
|
359
|
|
|
|
286
|
|
Share-based
compensation
|
|
|
609
|
|
|
|
1,550
|
|
Impairment
of goodwill
|
|
|
—
|
|
|
|
7,268
|
|
Loss
on disposal of property and equipment
|
|
|
—
|
|
|
|
(1
|
)
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
6,847
|
|
|
|
—
|
|
Prepaid
expenses and other current assets
|
|
|
(671
|
)
|
|
|
(397
|
)
|
Accounts
payable
|
|
|
(321
|
)
|
|
|
(640
|
)
|
Accrued
expenses
|
|
|
931
|
|
|
|
(454
|
)
|
Operating
lease liability
|
|
|
(317
|
)
|
|
|
(297
|
)
|
Deferred
revenue
|
|
|
(5,884
|
)
|
|
|
17,181
|
|
Net
cash (used in)/provided by operating activities
|
|
|
(4,200
|
)
|
|
|
11,591
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchases
of property and equipment
|
|
|
(98
|
)
|
|
|
(35
|
)
|
Net
cash used in investing activities
|
|
|
(98
|
)
|
|
|
(35
|
)
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of common stock, net of issuance costs
|
|
|
7,314
|
|
|
|
17,545
|
|
Proceeds
from exercise of common stock options
|
|
|
24
|
|
|
|
—
|
|
Proceeds
from exercise of warrants
|
|
|
775
|
|
|
|
—
|
|
Proceeds
from exercise of pre-funded warrants
|
|
|
—
|
|
|
|
153
|
|
Proceeds
from Paycheck Protection Program loan
|
|
|
617
|
|
|
|
—
|
|
Repayment
of Paycheck Protection Program loan
|
|
|
(617
|
)
|
|
|
—
|
|
Net
cash provided by financing activities
|
|
|
8,113
|
|
|
|
17,698
|
|
Net
increase in cash, cash equivalents and restricted cash
|
|
|
3,815
|
|
|
|
29,254
|
|
Cash,
cash equivalents and restricted cash — beginning of period
|
|
|
23,644
|
|
|
|
2,767
|
|
Cash,
cash equivalents and restricted cash — end of period
|
|
$
|
27,459
|
|
|
$
|
32,021
|
|
Supplemental
disclosures of non-cash investing and financing information:
|
|
|
|
|
|
|
|
|
Fixed
asset purchases in accounts payable
|
|
$
|
12
|
|
|
|
—
|
|
Operating
lease right-of-use asset obtained in exchange for operating lease obligation
|
|
$
|
1,687
|
|
|
$
|
1,213
|
|
The
accompanying footnotes are an integral part of these condensed consolidated financial statements.
PULMATRIX,
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
(unaudited)
(in
thousands, except share and per share data)
1.
Organization
Pulmatrix,
Inc. (the “Company”) was incorporated in 2013 as a Nevada corporation and converted to a Delaware corporation in September
2013. On June 15, 2015, the Company completed a merger with Pulmatrix Operating Company, changed its name from Ruthigen, Inc.
to “Pulmatrix, Inc.” and relocated its corporate headquarters to Lexington, Massachusetts. Pulmatrix, Inc. is a clinical
stage biotechnology company focused on the discovery and development of a novel class of inhaled therapeutic products. The Company’s
proprietary dry powder delivery platform, iSPERSE™ (inhaled Small Particles Easily Respirable and Emitted), is engineered
to deliver small, dense particles with highly efficient dispersibility and delivery to the airways, which can be used with an
array of dry powder inhaler technologies and can be formulated with a variety of drug substances. The Company is developing a
pipeline of iSPERSE-based therapeutic candidates targeted at prevention and treatment of a range of respiratory and other diseases
with significant unmet medical needs.
2.
Summary of Significant Accounting Policies and Recent Accounting Standards
Basis
of Presentation
Principles
of Consolidation
The
condensed consolidated financial statements of the Company included herein have been prepared, pursuant to the rules and regulations
of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”)
have been condensed or omitted from this report, as is permitted by such rules and regulations. Accordingly, these condensed consolidated
financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “Annual Report”).
In the opinion of management, all adjustments (including those which are normal and recurring) considered necessary for a fair
presentation of the interim financial information have been included. When preparing financial statements in conformity with GAAP,
the Company must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and
related disclosures at the date of the financial statements. Actual results could differ from those estimates. Additionally, operating
results for the six months ended June 30, 2020, are not necessarily indicative of the results that may be expected for any other
interim period or for the fiscal year ending December 31, 2020. For further information, refer to the financial statements and
footnotes included in the Company’s annual financial statements for the fiscal year ended December 31, 2019, which are included
in the Company’s annual report on Form 10-K filed with the SEC on March 26, 2020.
Use
of Estimates
In
preparing condensed consolidated financial statements in conformity with GAAP, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, as well as the reported amounts of expenses during the reporting period. Due to inherent uncertainty
involved in making estimates, actual results may differ from these estimates. On an ongoing basis, the Company evaluates its estimates
and assumptions. These estimates and assumptions include revenue recognition, valuing equity securities in share-based
payments, estimating the useful lives of depreciable and amortizable assets, interest borrowing rate, valuation allowance against
deferred tax assets, goodwill impairment, and estimating the fair value of long-lived assets to assess whether impairment charges
may apply.
Concentrations
of Credit Risk and Off-Balance Sheet Arrangements
Cash
is a financial instrument that potentially subjects the Company to concentrations of credit risk. For all periods presented, substantially
all of the Company’s cash was deposited in an account at a single financial institution that management believes is creditworthy.
The Company is exposed to credit risk in the event of default by these financial institutions for amounts in excess of the Federal
Deposit Insurance Corporation insured limits. The Company has not incurred any losses to date.
We
have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources that is material to investors.
Cash,
Cash Equivalents and Restricted Cash
Cash
and cash equivalents consist of cash, checking accounts and money market accounts. Restricted
cash consists of two security deposits with a financial institution.
The
following table provides a reconciliation of cash, cash equivalents and restricted cash as reported in the condensed consolidated
balance sheets that sum to the total of the same amounts in the statement of cash flows.
|
|
Six
months ended June 30
|
|
|
|
2020
|
|
|
2019
|
|
Cash
and cash equivalents
|
|
$
|
27,255
|
|
|
$
|
31,817
|
|
Restricted
cash
|
|
|
204
|
|
|
|
204
|
|
Total
cash, cash equivalents and restricted cash
|
|
$
|
27,459
|
|
|
$
|
32,021
|
|
Goodwill
Goodwill
represents the difference between the consideration transferred and the fair value of the net assets acquired, and liabilities
assumed under the acquisition method of accounting for push-down accounting. Goodwill is not amortized but is evaluated for impairment
within the Company’s single reporting unit on an annual basis during the fourth quarter, or more frequently if an event
occurs or circumstances change that would more likely than not reduce the fair value of the Company’s reporting unit below
its carrying amount. When performing the impairment assessment, the accounting standard for testing goodwill for impairment permits
a company to first assess the qualitative factors to determine whether the existence of events and circumstances indicates that
it is more likely than not that the goodwill is impaired. If the Company believes, as a result of the qualitative assessment,
that it is more likely than not that the fair value of goodwill is impaired, the Company then must perform a quantitative analysis
to determine if the carrying value of the reporting entity exceeds its fair value. The impact of the novel coronavirus (“COVID-19”)
pandemic was considered in the Company’s qualitative assessment. Currently, there has not been a significant impact on the
carrying value of the Company, but this factor will continue to be evaluated.
Recently
Adopted Accounting Standards
In
August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing
Arrangement That Is a Service Contract. The new standard will align the requirements for capitalizing implementation costs
for hosting arrangements (services) with costs for internal-use software (assets). As a result, certain implementation costs incurred
in hosting arrangements will be deferred and amortized. The new standard became effective for the Company on January 1,
2020. The Company has adopted ASU 2018-13 and adoption of this ASU has no significant impact on its condensed consolidated financial
statements.
In
August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement. ASU 2018-13 modifies the disclosure requirements
for fair value measurements by removing, modifying, or adding certain disclosures. The amendments in ASU 2018-13 became
effective for fiscal years beginning after December 15, 2019. The Company has adopted ASU 2018-13 and adoption of this ASU has
no significant impact on its condensed consolidated financial statements.
3.
Prepaid Expenses and Other Current Assets
Prepaid
expenses and other current assets consisted of the following:
|
|
At
June 30, 2020
|
|
|
At
December 31, 2019
|
|
Prepaid
insurance
|
|
$
|
569
|
|
|
$
|
202
|
|
Prepaid
clinical trials
|
|
|
633
|
|
|
|
322
|
|
Prepaid
other
|
|
|
209
|
|
|
|
221
|
|
Deferred
operating costs
|
|
|
37
|
|
|
|
32
|
|
Total
prepaid and other current assets
|
|
$
|
1,448
|
|
|
$
|
777
|
|
4.
Accrued Expenses and Other Current Liabilities
Accrued
expenses and other current liabilities consisted of the following:
|
|
At
June 30, 2020
|
|
|
At
December 31, 2019
|
|
Accrued
vacation
|
|
$
|
122
|
|
|
$
|
42
|
|
Accrued
wages and incentive
|
|
|
476
|
|
|
|
527
|
|
Accrued
clinical & consulting
|
|
|
2,700
|
|
|
|
1,820
|
|
Accrued
legal & patent
|
|
|
70
|
|
|
|
85
|
|
Accrued
other expenses
|
|
|
77
|
|
|
|
40
|
|
Total
accrued expenses
|
|
$
|
3,445
|
|
|
$
|
2,514
|
|
5.
Common Stock
Registered
Direct Offering
On
April 20, 2020, the Company sold 4,787,553 shares at $1.671 per share, pursuant to a securities purchase agreement, dated as of
April 16, 2020, by and among the Company and certain institutional investors, for gross proceeds of approximately $8,000 prior
to deducting fees and expenses of approximately $686. In a concurrent private placement, the Company issued warrants to purchase
an aggregate of up to 4,787,553 shares of its common stock to investors with an exercise price of $1.55 per share and an expiration
date of April 20, 2022. In addition, the Company issued warrants to purchase up to 311,191 shares of its common stock to the designees
of the placement agent with an exercise price of $2.0888 per share and an expiration date of April 20, 2022. The investor and
placement agent warrants have a fair value of approximately $0.64 and $0.54 per share, respectively.
Exercise
of Warrants
During
the three months ended June 30, 2020 and 2019, the Company issued 437,999 and 8,277,112 shares of common stock, respectively,
upon exercise of warrants to purchase 524,353 and 8,277,112 shares of common stock, respectively. The Company collected proceeds
of $536 and $83 upon the exercise of these warrants during the three months ended June 30, 2020 and 2019, respectively.
During
the six months ended June 30, 2020 and 2019, the Company issued 944,746 and 8,974,612 shares of common stock, respectively, upon
exercise of warrants to purchase 1,147,184 and 8,974,612 shares of common stock, respectively. The Company collected proceeds
of $775 and $153 upon the exercise of these warrants during the six months ended June 30, 2020 and 2019, respectively.
Exercise
of Stock Options
During
the three and six months ended June 30, 2020, stock options to buy 2,500 and 22,497 shares were exercised, respectively, and the
Company collected proceeds of $3 and $24, respectively.
6.
Warrants
A
rollforward of the common stock warrants outstanding at June 30, 2020 is as follows.
|
|
Number
of Warrants
|
|
|
Weighted
Average Exercise Price
|
|
|
Weighted
Average Remaining Contractual Term (Years)
|
|
|
Aggregate
Intrinsic Value
|
|
Outstanding
December 31, 2019
|
|
|
18,953,195
|
|
|
$
|
3.55
|
|
|
|
4.17
|
|
|
$
|
—
|
|
Warrants
issued
|
|
|
5,098,744
|
|
|
$
|
1.58
|
|
|
|
|
|
|
|
|
|
Warrants
exercised
|
|
|
(847,184
|
)
|
|
$
|
(1.09
|
)
|
|
|
|
|
|
|
|
|
Pre-funded
warrants exercised
|
|
|
(300,000
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
Warrants
expired
|
|
|
(2,515
|
)
|
|
$
|
(83.50
|
)
|
|
|
|
|
|
|
|
|
Outstanding
June 30, 2020
|
|
|
22,902,240
|
|
|
$
|
3.23
|
|
|
|
3.20
|
|
|
$
|
5,711
|
|
The
following represents a summary of the warrants outstanding at each of the dates identified:
|
|
|
|
|
|
|
|
|
Number
of Shares Underlying Warrants
|
|
|
|
|
|
|
|
|
|
|
For
the Period Ended June 30,
|
|
Issue
Date
|
|
Classification
|
|
Exercise
Price
|
|
|
Expiration
Date
|
|
2020
|
|
|
2019
|
|
April
20, 2020
|
|
Equity
|
|
$
|
1.55
|
|
|
April
20, 2022
|
|
|
4,787,553
|
|
|
|
—
|
|
April 20, 2020
|
|
Equity
|
|
$
|
2.0888
|
|
|
April
20, 2022
|
|
|
311,191
|
|
|
|
—
|
|
April 8, 2019
|
|
Equity
|
|
$
|
0.01
|
|
|
—
|
|
|
—
|
|
|
|
670,000
|
|
April 8, 2019
|
|
Equity
|
|
$
|
1.35
|
|
|
April
8, 2024
|
|
|
11,692,518
|
|
|
|
12,266,665
|
|
April 8, 2019
|
|
Equity
|
|
$
|
1.6875
|
|
|
April
3, 2024
|
|
|
797,334
|
|
|
|
797,334
|
|
February 12,
2019
|
|
Equity
|
|
$
|
1.8313
|
|
|
February
7, 2024
|
|
|
110,922
|
|
|
|
110,922
|
|
February 12,
2019
|
|
Equity
|
|
$
|
1.34
|
|
|
August
12, 2024
|
|
|
1,433,447
|
|
|
|
1,706,484
|
|
February 04,
2019
|
|
Equity
|
|
$
|
2.125
|
|
|
January
30, 2024
|
|
|
34,605
|
|
|
|
34,605
|
|
January 31,
2019
|
|
Equity
|
|
$
|
2.125
|
|
|
January
26, 2024
|
|
|
10,151
|
|
|
|
10,151
|
|
December 3,
2018
|
|
Equity
|
|
$
|
3.90
|
|
|
June
3, 2024
|
|
|
937,500
|
|
|
|
937,500
|
|
April 3, 2018
|
|
Equity
|
|
$
|
7.50
|
|
|
April
3, 2023
|
|
|
2,350,011
|
|
|
|
2,350,011
|
|
April 4, 2018
|
|
Equity
|
|
$
|
7.50
|
|
|
April
4, 2023
|
|
|
115,000
|
|
|
|
115,000
|
|
August 31, 2015
|
|
Equity
|
|
$
|
118.00
|
|
|
August
31, 2020
|
|
|
3,000
|
|
|
|
3,000
|
|
June 15, 2015
|
|
Equity
|
|
$
|
75.50
|
|
|
Five
years after milestone achievement
|
|
|
319,008
|
|
|
|
319,008
|
|
June
15, 2015
|
|
Equity
|
|
$
|
83.50
|
|
|
June
16, 2020
|
|
|
—
|
|
|
|
2,515
|
|
Total
Outstanding
|
|
|
|
|
|
|
|
|
|
|
22,902,240
|
|
|
|
19,323,195
|
|
7.
Share-Based Compensation
The
Company sponsors the Pulmatrix, Inc. 2013 Employee, Director and Consultant Equity Incentive Plan (the “2013 Plan). As of
June 30, 2020, the 2013 Plan provides for the grant of up to 4,060,000 shares of common stock, of which 1,011,381 shares remain
available for future grant.
In
addition, the Company has two legacy plans: The Pulmatrix Operating’s 2013 Employee, Director and Consultant Equity Incentive
Plan (the “Original 2013 Plan”) and Pulmatrix Operating’s 2003 Employee, Director, and Consultant Stock Plan
(the “2003 Plan”). As of June 30, 2020, a total of 8,627 shares of common stock may be delivered under options outstanding
under the Original 2013 Plan and the 2003 Plan, however no additional awards may be granted under the Original 2013 Plan or the
2003 Plan.
Stock
Options
During
the three months ended June 30, 2020, the Company granted 105,000 options to employees and directors. The awards vest over
four years, expire ten years from the grant date and on the date of the grant have a fair value of $117.
During
the six months ended June 30, 2020, the Company granted 2,249,104 options to employees, directors, and consultants.
The awards vest over four years, expire ten years from the grant date and on the date of grant have a fair value of $2,615.
During
the three and six months ended June 30, 2019, the Company granted 651,600 options to employees and directors. The awards
vest over four years, expire ten years from the grant date and on the date of the grant have a fair value of $456.
The
following table summarizes stock option activity for the six months ended June 30, 2020:
|
|
Number
of Options
|
|
|
Weighted-
Average Exercise Price
|
|
|
Weighted-
Average Remaining Contractual Term (Years)
|
|
|
Aggregate
Intrinsic Value
|
|
Outstanding
— December 31, 2019
|
|
|
900,003
|
|
|
$
|
11.63
|
|
|
|
8.52
|
|
|
$
|
—
|
|
Granted
|
|
|
2,249,104
|
|
|
$
|
1.53
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(22,497
|
)
|
|
$
|
1.06
|
|
|
|
|
|
|
|
|
|
Forfeited
or expired
|
|
|
(146,178
|
)
|
|
$
|
27.27
|
|
|
|
|
|
|
|
|
|
Outstanding
— June 30, 2020
|
|
|
2,980,432
|
|
|
$
|
3.32
|
|
|
|
9.21
|
|
|
$
|
727
|
|
Exercisable
— June 30, 2020
|
|
|
637,993
|
|
|
$
|
9.55
|
|
|
|
8.50
|
|
|
$
|
134
|
|
The
estimated fair values of employee stock options granted during the three months and six months ended June 30, 2020 and 2019, were
determined on the date of grant using the Black-Scholes option-pricing model with the following assumptions:
|
|
Three
Months Ended June 30,
|
|
|
Six
Months Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Expected
option life (years)
|
|
|
6.03
|
|
|
|
6.02
|
|
|
|
5.92
|
|
|
|
6.02
|
|
Risk-free
interest rate
|
|
|
0.45
|
%
|
|
|
2.22
|
%
|
|
|
1.62
|
%
|
|
|
2.22
|
%
|
Expected
volatility
|
|
|
94.40
|
%
|
|
|
74.14
|
%
|
|
|
93.90
|
%
|
|
|
74.14
|
%
|
Expected
dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
The
risk-free interest rate was obtained from U.S. Treasury rates for the applicable periods. The Company’s expected volatility
was based upon the average of the historical volatility for industry peers and its own volatility. The expected life of
the Company’s options was determined using the simplified method as a result of limited historical data regarding the Company’s
activity. The dividend yield considers that the Company has not historically paid dividends and does not expect to pay dividends
in the foreseeable future.
As
of June 30, 2020, there was $2,711 of unrecognized stock-based compensation expense related to unvested stock options granted
under the Company’s stock award plans. This expense is expected to be recognized over a weighted-average period of approximately
3.0 years.
The
following table presents total stock-based compensation expense for the three and six months ended June 30, 2020 and 2019:
|
|
Three
Months Ended June 30,
|
|
|
Six
Months Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Research
and development
|
|
$
|
49
|
|
|
$
|
18
|
|
|
$
|
96
|
|
|
$
|
67
|
|
General
and administrative
|
|
|
217
|
|
|
|
1,073
|
|
|
|
513
|
|
|
|
1,483
|
|
Total
share-based compensation expense
|
|
$
|
266
|
|
|
$
|
1,091
|
|
|
$
|
609
|
|
|
$
|
1,550
|
|
8.
Commitments and Contingencies
Research
and Development Activities
The
Company contracts with various other organizations to conduct research and development activities. As of June 30, 2020, the
Company had aggregate commitments to pay approximately $4,701 remaining on these contracts. The scope of the services under
contracts for research and development activities may be modified and the contracts, subject to certain conditions, may generally
be cancelled by the Company upon written notice. In some instances, the contracts, subject to certain conditions, may be
cancelled by the third party.
Operating
Leases
The
Company has limited leasing activities as a lessee and are primarily related to its corporate headquarters located at 99 Hayden
Avenue, Suite 390, Lexington, Massachusetts. The Company currently leases approximately 22 thousand square feet of office
and lab space in Lexington, Massachusetts under a lease that expires on December 31, 2020. On April 23, 2020, an extension to
the Company’s operating lease for office and lab space was signed between the Company and 99 Hayden LLC. The extension to
the original lease executed on May 31, 2007, has a base rent of $1,194 which is adjusted annually by 3%, and will expire on June
30, 2022. The lease provides for base rent, and the Company is responsible for real estate taxes, maintenance, and other operating
expenses applicable to the leased premises.
Operating
lease liabilities and corresponding right-of-use assets are recorded based on the present value of lease payments over the expected
remaining lease term. Certain adjustments to the right-of-use asset may be required for items such as prepaid rent. The interest
rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing
rates, which are the rates incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments
in a similar economic environment. To estimate the Company’s specific incremental borrowing rates over
the respective lease terms, a comparable market yield curve consistent with the Company’s credit quality was used. As of
June 30, 2020, the weighted average incremental borrowing rate and the weighted average remaining lease term for the operating
leases held by the Company were 5.23% and 2 years, respectively.
The
components of lease expense for the Company as of June 30, 2020 were as follows:
|
|
For
the three months ended
|
|
|
For
the six months ended
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Lease
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
lease cost
|
|
$
|
228
|
|
|
$
|
164
|
|
|
$
|
391
|
|
|
$
|
327
|
|
Variable
lease cost
|
|
|
99
|
|
|
|
90
|
|
|
|
218
|
|
|
|
187
|
|
Total
lease cost
|
|
$
|
327
|
|
|
$
|
254
|
|
|
$
|
609
|
|
|
$
|
514
|
|
Maturities
of lease liabilities due under these lease agreements as of June 30, 2020 are as follows:
|
|
Operating
Leases
|
|
Maturity
of lease liabilities:
|
|
|
|
2020
(excluding the six months ended June 30, 2020)
|
|
$
|
349
|
|
2021
|
|
|
1,194
|
|
2022
(lease expiration on June 30, 2022)
|
|
|
615
|
|
Total
lease payments
|
|
|
2,158
|
|
Less
imputed interest
|
|
|
(114
|
)
|
Total
operating lease liabilities
|
|
$
|
2,044
|
|
SBA
Loan
On
April 10, 2020, the Company received a loan of $617 through the Paycheck Protection Program. Administered through the U.S. Small
Business Administration, the loan was made possible through the Coronavirus Aid, Relief and Economic Security Act. On April 28,
2020, the Company repaid the loan in full.
9.
Net Loss Per Share
The
Company computes basic and diluted net loss per share using a methodology that gives effect to the impact of outstanding participating
securities (the “two-class method”). As the three and six months ended June 30, 2020 and 2019, respectively, resulted
in net losses attributable to common stockholders, there is no income allocation required under the two-class method or
dilution attributed to weighted average shares outstanding in the calculation of diluted net loss per share.
The
following potentially dilutive securities outstanding prior to the use of the treasury stock method have been excluded from the
computation of diluted weighted-average shares outstanding, as they would be anti-dilutive.
|
|
As
of June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Options
to purchase common stock
|
|
|
2,980,432
|
|
|
|
1,427,045
|
|
Warrants
to purchase common stock
|
|
|
22,902,240
|
|
|
|
18,653,195
|
|
Total
|
|
|
25,882,672
|
|
|
|
20,080,240
|
|
10.
Subsequent Events
On
July 10, 2020, the joint steering committee established by the Company and Cipla Technologies, LLC, with whom the Company
entered into a development and commercialization agreement on April 15, 2019 for the development and commercialization of Pulmazole,
terminated the Company’s Phase 2 clinical study of Pulmazole.
On
July 9, 2020, the Company entered into letter agreements with certain existing accredited investors to exercise certain
existing and outstanding warrants (“Existing Warrants”) to purchase up to an aggregate of 10,085,741 shares of
the Company’s common stock at the existing exercise price per share of $1.35. The Existing Warrants were issued in an
underwritten public offering pursuant to a registration statement on Form S-1 (File No. 333-230395) and an additional
registration statement on Form S-1 filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended (File No.
333-230714) that was consummated in April 2019. In consideration for the exercise of the Existing Warrants for cash, we
agreed to issue the exercising holders new unregistered warrants to purchase up to an aggregate of 10,085,741 shares of
common stock at an exercise price of $1.80 per share and with an exercise period of five years from the closing date. The
gross proceeds to the Company from the exercise are expected to be approximately $13,616, prior to deducting placement
agent fees and offering expenses. In addition, we agreed to issue placement agents 655,573 unregistered warrants at an
exercise price of $2.25 and with an exercise period of five years from the closing date.
On
July 8, 2020, 270,000 warrants issued in April 2019 were exercised. The Company collected $365 and issued 270,000 shares of common
stock.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The
information set forth below should be read in conjunction with the condensed consolidated financial statements and the notes thereto
included elsewhere in this Quarterly Report on Form 10-Q as well as the audited financial statements and the notes thereto contained
in our current report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 26, 2020.
Unless stated otherwise, references in this Quarterly Report on Form 10-Q to “us,” “we,” “our,”
or our “Company” and similar terms refer to Pulmatrix, Inc., a Delaware corporation and its subsidiaries.
Forward-Looking
Statements
This
Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical fact contained
herein, including statements regarding our business plans or strategies, projected or anticipated benefits or other consequences
of our plans or strategies, projected or anticipated benefits from acquisitions to be made by us, or projections involving anticipated
revenues, earnings or other aspects of our operating results, are forward-looking statements. Words such as “anticipates,”
“assumes,” “believes,” “can,” “could,” “estimates,” “expects,”
“forecasts,” “guides,” “intends,” “is confident that,” “may,” “plans,”
“seeks,” “projects,” “targets,” and “would,” and their opposites and similar expressions,
as well as statements in future tense, are intended to identify forward-looking statements. Forward-looking statements should
not be read as a guarantee of future performance or results and may not be accurate indications of when such performance or results
will actually be achieved. Forward-looking statements are based on information we have when those statements are made or our management’s
good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual
performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important
factors that could cause such differences include, but are not limited to:
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the
impact of the novel coronavirus (“COVID-19”) on the Company’s ongoing and planned clinical trials;
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the
geographic, social and economic impact of COVID-19 on the Company’s ongoing and planned clinical trials;
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our
history of recurring losses and negative cash flows from operating activities, significant future commitments and the uncertainty
regarding the adequacy of our liquidity to pursue or complete our business objectives;
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our
inability to carry out research, development and commercialization plans;
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our
inability to renegotiate our development and commercialization agreement with Cipla Technologies, LLC with respect to Pulmazole;
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our
inability to manufacture our product candidates on a commercial scale on our own or in collaborations with third parties;
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our
inability to complete preclinical testing and clinical trials as anticipated;
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our
collaborators’ inability to successfully carry out their contractual duties;
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the
termination of strategically important license agreements;
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our
ability to adequately protect and enforce rights to intellectual property, or defend against claims of infringement by others;
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difficulties
in obtaining financing on commercially reasonable terms, or at all;
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intense
competition in our industry, with competitors having substantially greater financial, technological, research and development,
regulatory and clinical, manufacturing, marketing and sales, distribution, personnel and resources than we do;
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entry
of new competitors and products and potential technological obsolescence of our products;
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adverse
market and economic conditions;
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loss
of one or more key executives or scientists; and
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difficulties
in securing regulatory approval to market our product candidates.
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For
a more detailed discussion of these and other factors that may affect our business and that could cause the actual results to
differ materially from those projected in these forward-looking statements, see the risk factors and uncertainties set forth in
Part II, Item 1A of this Quarterly Report. Any one or more of these uncertainties, risks and other influences could materially
affect our results of operations and whether forward-looking statements made by us ultimately prove to be accurate. We undertake
no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise,
except as required by law.
Overview
Business
We
are a clinical stage biotechnology company focused on the discovery and development of novel inhaled therapeutic products intended
to prevent and treat respiratory and other diseases with significant unmet medical needs.
We
design and develop inhaled therapeutic products based on our proprietary dry powder delivery technology, iSPERSE (inhaled Small
Particles Easily Respirable and Emitted), which enables delivery of small or large molecule drugs to the lungs by inhalation for
local or systemic applications. The iSPERSE powders are engineered to be small, dense particles with highly efficient dispersibility
and delivery to airways. iSPERSE powders can be used with an array of dry powder inhaler technologies and can be formulated with
a broad range of drug substances including small molecules and biologics. We believe the iSPERSE dry powder technology offers
enhanced drug loading and delivery efficiency that outperforms traditional lactose-blend inhaled dry powder therapies. We believe
the advantages of using the iSPERSE technology include reduced total inhaled powder mass, enhanced dosing efficiency, reduced
cost of goods and improved safety and tolerability profiles. We are developing iSPERSE-based therapeutic candidates targeted at
the prevention and treatment of a range of diseases, including allergic bronchopulmonary aspergillosis (“ABPA”) in
patients with asthma and in patients with cystic fibrosis (“CF”), and lung cancer. We are also exploring iSPERSE based
therapeutics in neurological diseases.
Our
goal is to develop breakthrough therapeutic products that are safe, convenient and more efficient than the existing therapeutic
products for respiratory and other diseases where iSPERSE properties are advantageous. In support of this goal, we are focusing
on developing inhaled anti-fungal therapies to prevent and treat pulmonary infections and allergic/hypersensitivity responses
to fungus in patients with asthma and CF as well as other rare/orphan indications. We intend to capitalize on our iSPERSE technology
platform and our expertise in inhaled therapeutics to identify new product candidates for the prevention and treatment of diseases
with significant unmet medical needs and to build our product pipeline beyond our existing candidates. In order to advance our
clinical trials for our therapeutic candidates for respiratory and neurological diseases, and leverage the iSPERSE platform to
enable delivery of partnered compounds, we intend to form strategic alliances with third parties, including pharmaceutical, biotechnology
companies or academic or private research institutes.
We
expect to continue to incur significant expenses and increasing operating losses for at least the next several years based on
our drug development plans. We expect our expenses and capital requirements will increase substantially in connection with our
ongoing activities, as we:
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initiate
and expand clinical trials for Pulmazole, PUR1800 and other product candidates under development;
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seek
regulatory approval for our product candidates;
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hire
personnel to support our product development, commercialization and administrative efforts; and
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advance
the research and development related activities for inhaled therapeutic products in our pipeline.
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We
do not have any products approved for sale and have not generated any revenue from product sales. We will not generate product
sales unless and until we successfully complete clinical developments and obtain regulatory approvals for our product candidates.
Additionally, we currently utilize third-party contract research organizations (“CROs”) to carry out our clinical
development activities and third-party contract manufacturing organizations (“CMOs”) to carry out our clinical manufacturing
activities as we do not yet have a commercial organization. If we obtain regulatory approval for any of our product candidates,
we expect to incur significant expenses related to developing our internal commercialization capability to support product sales,
marketing and distribution. Accordingly, we anticipate that we will seek to fund our operations through public or private equity
or debt financings, licensing agreements, collaborations with third parties, non-dilutive grants or other sources, potentially
including collaborative commercial arrangements. Likewise, we intend to seek to limit our commercialization costs by partnering
with other companies with complementary capabilities or larger infrastructure including sales and marketing.
Because
of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of
increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate product
sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis,
we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
Recent
Developments
COVID-19
Developments
In
December 2019, a novel strain of coronavirus, COVID-19, was reported to have surfaced in Wuhan, China and has reached multiple
other countries, resulting in government-imposed quarantines, travel restrictions and other public health safety measures in China
and such other countries. On March 12, 2020, the World Health Organization (“WHO”) declared COVID-19 to be a global
pandemic, and the COVID-19 pandemic has resulted in significant financial market volatility and uncertainty in recent weeks. A
continuation or worsening of the levels of market disruption and volatility seen in the recent past could have an adverse effect
on our ability to access capital, on our business, results of operations and financial condition, and on the market price of our
common stock.
Moreover,
the COVID-19 pandemic has begun to have indeterminable adverse effects on general commercial activity and the world economy,
and the Company’s business and results of operations could be adversely affected to the extent that COVID-19 or any other
epidemic harms the global economy generally.
The
COVID-19 pandemic directly impacted the Pulmazole Phase
2 clinical study by both causing certain trial sites to suspend enrolling patients or us voluntarily suspending enrollment
at other sites, as described in more detail below. We do not yet know the full extent of potential delays or impact on our business,
our relationships with our business partners, our clinical trials or the global economy as a whole. However, any one
or a combination of these events could have an adverse effect on the operation of and results from our clinical trials and on
our other business operations.
Pulmazole
In
July of 2019, we initiated a Phase 2 clinical investigation for Pulmazole, our inhaled formulation of itraconazole, an
anti-fungal drug commercially available as an oral drug that we are developing to treat and prevent pulmonary fungal infections.
To date, five subjects have completed the 28-day dosing regimen, receiving either 10 mg, 20 mg, or 35 mg of Pulmazole or placebo
in a randomized, double-blind treatment assignment. In the first quarter of 2020, we initiated the process of establishing additional
study sites and amending the study protocol.
Due to delays in patient enrollment in the Phase 2 clinical study,
exacerbated by the ongoing COVID-19 pandemic, Cipla Technologies, LLC (“Cipla”), with whom we entered into a development
and commercialization agreement on April 15, 2019 for the development and commercialization of Pulmazole, informed us that it desired
to amend the current agreement. In connection with our renegotiation of this agreement, on July 10, 2020, the joint steering committee
established by us and Cipla terminated the Phase 2 study in order to facilitate the commencement of a newly designed Phase 2b study
that would supersede the prior Phase 2 study. The Phase 2b study design is anticipated to include up to 4 months of dosing and
efficacy endpoints, whereas the terminated Phase 2 study was of 28-day duration with safety and tolerability as its primary endpoint.
The longer dosing regimen of the Phase 2b study is supported by the recently completed 6-month inhalation toxicology study in dogs.
We anticipate that the study will start (site activation) during Q3 2021 and that top line data is anticipated to be available
18 months subsequent to the study start, provided that the Covid-19 pandemic, or other events that
cannot reasonably be predicted or are outside of our control, do not significantly impact regulatory approvals or study operations.
While we have not yet entered into a definitive amendment with Cipla, we anticipate that, among other possible amendments, that
we could bear a greater share of our employee overhead costs and the costs for consultants needed to run the Phase 2b study, which
we currently share equally with Cipla. Additionally, we would bear the risk of any cost overruns related to employee overhead or
consulting costs. We anticipate all other program expenses, such as clinical and Chemistry, Manufacturing and Controls (“CMC”)
costs, would continue to be shared equally between us and Cipla as per the current agreement.
In
addition, we anticipate that we would grant Cipla the exclusive right to develop and commercialize Pulmazole, at Cipla’s
sole expense, in India, South Africa, Sri Lanka, Nepal, Iran, Yemen, Myanmar and Algeria, and that we would forego any royalty
payments from the sale of Pulmazole in those countries (under our current agreement with Cipla we are entitled to one-half of
worldwide net sales of Pulmazole).
If
Cipla does not agree to initiate a new Phase 2b study or we and Cipla cannot agree on how the costs of the Phase 2b study should
be allocated among us and Cipla, and Cipla does not continue funding its share of costs for our current Phase 2 clinical study,
including its agreed upon shutdown, we may be forced to suspend the continued development of Pulmazole. Furthermore, our failure
to successfully renegotiate the development and commercialization agreement with Cipla may result in the initiation of arbitration
proceedings between us and Cipla. Any arbitration proceedings between and us and Cipla may have a negative impact on our business,
including the diversion of management attention from our other product candidates or result in rulings from the arbitration panel
that are adverse to our interests or the continued development of Pulmazole.
PUR
1800
Separately,
we plan to initiate a Phase 1b study of PUR1800 in stable moderate-severe COPD patients in the second half of 2020. The COVID-19
pandemic could delay this date or impact enrollment generally to the extent we cannot secure sites to enroll patients, patients
remain or become subject to government “stay at home” mandates, patients feel like they cannot safely visit trial
sites or patients drop out due to COVID-19 related issues.
Sensory
Cloud Agreement
On
April 9, 2020, we entered into a Collaboration and License Agreement (the “Agreement”) with Sensory Cloud, Inc. (“Sensory
Cloud”). Under the terms of the Agreement, we have granted Sensory Cloud an exclusive, worldwide, royalty bearing
license to PUR 003 and PUR 006, the Company’s proprietary aerosol salt solution for delivery or administration to or through
the nasal passages also known as NasoCalm, as well as related patents and know-how, for use in the field (the “Sensory Licensed
Product”).
Under
the terms of the Agreement, Sensory Cloud may develop other over-the-counter (“OTC”) Sensory Licensed Products that
contain other active pharmaceutical ingredients or therapeutic agents and combine the Sensory Licensed Product with one or more
of Sensory Cloud’s proprietary delivery devices. In addition, we have granted Sensory Cloud an exclusive right of first
refusal to any new OTC products in the field that may be developed by us.
In
July 2020, we announced that Sensory Cloud plans to commence
commercial sales of FEND in September 2020. FEND is the Sensory Cloud brand name for NasoCalm, an OTC nasal hygiene product that
is comprised of sodium chloride and calcium chloride salts. NasoCALM was designed to provide, among other potential benefits,
an ability to suppress the exhalation of droplets of airway lining fluid, which can transmit airborne infection.
Pulmatrix’s
development data and additional data generated by Sensory Cloud utilizing its Nimbus delivery device were recently published in
the Quarterly Reviews of Biophysics Discovery, demonstrating a reduction in airborne particles in exhaled air over time following
FEND administration. Taken together, these data demonstrate that FEND provides potential hygienic benefit which may augment current
social distancing and hygiene measures for addressing COVID-19 and other airborne pathogens.
The
Company shall be entitled to royalties on net sales of Sensory Licensed Product in each country in which there is a valid claim
of a patent within the licensed intellectual property covering the Sensory Licensed Product. Our rights to receive such royalties
commence upon the first commercial sale of a Sensory Licensed Product in any such country and terminates upon the expiration of
the last valid claim in such territory. The royalty rates are as follows: (1) 7% of net sales during calendar year 2020, (2) 14%
of net sales during calendar year 2021, and (3) 17% of net sales during calendar year 2022 and each calendar year thereafter during
the royalty term. In addition, the Company shall be entitled to receive a milestone payment of $1.0 million following the achievement
of aggregate net sales of all Sensory Licensed Products of $20.0 million.
The
Agreement shall terminate at such time that we would no longer be entitled to royalties because there are no longer any valid
claims of a patent within the licensed intellectual property covering any Sensory Licensed Product. Upon there being no more such
royalty payments owed by Sensory Cloud for a Sensory Licensed Product, the licenses granted by us to Sensory Cloud shall become
fully-paid up, royalty free, perpetual, irrevocable and non-exclusive licenses to such Sensory Licensed Product. The Agreement
may also be terminated earlier by Sensory Cloud for convenience and by Sensory Cloud or us for material breach or upon the bankruptcy
or insolvency of the other party.
Leases
On
April 23, 2020, an extension to the our operating lease for office and lab space of approximately 22 thousand square
feet was signed between the Company and 99 Hayden LLC. The 5th amendment to the original lease executed on May
31, 2007 has a base rent of $1.2 million which is adjusted annually by 3%, and will expire on June 30, 2022.
Financial
Overview
Revenues
To
date, we have not generated any product sales. The 2020 revenue was generated by the completion of a feasibility study with Nocion
Therapeutics and by the collaboration agreement and license agreement with Cipla and Johnson & Johnson Enterprise Innovation,
Inc. (“JJEI”, and such agreement with JJEI, the “JJEI License Agreement”), respectively, with respect
to the collaboration on the Pulmazole program and licensing our PUR1800 kinase inhibitor, respectively. For more discussion on
the collaboration agreements, please see Note 6 of the consolidated financial statements in our annual report on
Form 10-K filed with the SEC on March 26, 2020 and “—Recent Developments—Pulmazole” under this Item
2.
Research
and Development Expenses
Research
and development expenses consist primarily of costs incurred for the research and development of our preclinical and clinical
candidates, and include:
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employee-related
expenses, including salaries, benefits and share-based compensation expense;
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expenses
incurred under agreements with CROs or CMOs, and consultants that conduct our clinical trials and preclinical activities;
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the
cost of acquiring, developing and manufacturing clinical trial materials and lab supplies;
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facility,
depreciation and other expenses, which include direct and allocated expenses for rent, maintenance of our facility, insurance
and other supplies;
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costs
associated with preclinical activities and clinical regulatory operations; and
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consulting
and professional fees associated with research and development activities
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We
expense research and development costs to operations as incurred. We recognize costs for certain development activities, such
as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment,
clinical site activations or information provided to us by our vendors.
Research
and development activities are central to our business model. We utilize a combination of internal and external efforts to advance
product development from early stage work to clinical trial manufacturing and clinical trial support. External efforts include
work with consultants and substantial work at CROs and CMOs. We support an internal research and development team and facility
for our pipeline programs. To move these programs forward along our development timelines, a large portion, approximately (78%
of staff) are research and development employees. In addition, we maintain a 12,000 square foot research and development facility
which includes capital equipment for the manufacture and characterization of our iSPERSE™ powders for our pipeline
programs. As we identify opportunities for iSPERSE™ in respiratory indications, we anticipate additional head
count, capital, and development costs will be incurred to support these programs.
Because
of the numerous risks and uncertainties associated with product development, however, we cannot determine with certainty the duration
and completion costs of these or other current or future preclinical studies and clinical trials. The duration, costs and timing
of clinical trials and development of our product candidates will depend on a variety of factors, including the uncertainties
of future clinical and preclinical studies, uncertainties in clinical trial enrollment rates and significant and changing government
regulation. In addition, the probability of success for each product candidate will depend on numerous factors, including competition,
manufacturing capability and commercial viability.
General
and Administrative Expenses
General
and administrative expenses consist principally of salaries and related costs such as share-based compensation for personnel and
consultants in executive, finance, business development, intellectual property, corporate communications and human resource
functions, facility costs not otherwise included in research and development expenses, patent filing fees and professional legal
fees. Other general and administrative expenses include expenses related to a publicly-traded company, travel expenses, professional
fees for consulting, auditing and tax services.
We
anticipate that our general and administrative expenses will increase in the future as they relate to audit, legal, regulatory,
and tax-related services associated with maintaining compliance with exchange listing and Securities and Exchange Commission requirements,
director and officer liability insurance, investor relations costs and other costs associated with being a public company. Additionally,
if and when we believe a regulatory approval of a product candidate appears likely, we anticipate an increase in staffing and
related expenses as a result of our preparation for commercial operations, especially as it relates to the sales and marketing
of our product candidates.
Critical
Accounting Policies
This
management’s discussion and analysis of our financial condition and results of operations is based on our financial statements,
which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial
statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and
the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates
and judgments, including those related to accrued expenses and share-based compensation. We base our estimates on historical
experience, known trends and events, and various other factors that are believed 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.
While
our significant accounting policies are described in more detail in the notes to our condensed consolidated financial statements
appearing elsewhere in this Form 10-Q and in our audited financial statements included in our current report on Form 10-K filed
with the SEC on March 26, 2020, we believe the following accounting policies to be most critical to the judgments and estimates
used in the preparation of our financial statements.
Revenue
Recognition
Effective
January 1, 2019, we adopted ASU No. 2014-09 (Topic 606) “Revenue from Contracts with Customers.” The adoption
of Topic 606 did not have any material impact on our consolidated financial statements. We only apply the
five-step model to contracts when it is probable that we will collect the consideration it is entitled to in exchange for
the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope
of ASC 606, we assesses the goods or services promised within each contract and determines those that are performance obligations
and assesses whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction
price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
Amounts
received prior to revenue recognition are recorded as deferred revenue. Amounts expected to be recognized as revenue within the
12 months following the balance sheet date are classified as current portion of deferred revenue in the accompanying consolidated
balance sheets. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified
as deferred revenue, net of current portion.
Our
principal sources of revenue during the reporting period were income that resulted through our collaborative arrangements and
license agreements that related to the development and commercialization of Pulmazole and from reimbursement of clinical study
costs. In all instances, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement
exists, delivery has occurred or services have been rendered, and collectability of the resulting receivable is reasonably assured.
During
the three months and six months ended June 30, 2020, our principal source of revenue was income that resulted from the Cipla Agreement
and the JJEI License Agreement.
Milestone
Payments
At
the inception of each arrangement that includes research or development milestone payments, we evaluates whether the milestones
are considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely
amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included
in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory
approvals, are not considered probable of being achieved until those approvals are received. We evaluate factors such as
the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the particular milestone in
making this assessment. There is considerable judgment involved in determining whether it is probable that a significant revenue
reversal would not occur. At the end of each subsequent reporting period, we reevaluate the probability of achievement
of all milestones subject to constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments
are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment. As of June
30, 2020, we have an active arrangement that contains a research or development milestone.
Royalties.
For
arrangements that include sales-based royalties, including milestone payments upon first commercial sales and milestone payments
based on a level of sales, which are the result of a customer-vendor relationship and for which the license is deemed to be the
predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur,
or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied or partially
satisfied. To date, we have not recognized any royalty revenue resulting from any of its licensing arrangements.
Use
of Estimates
In
preparing financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements,
as well as the reported amounts of expenses during the reporting period. Due to inherent uncertainty involved in making estimates,
actual results may differ from these estimates. On an ongoing basis, the Company evaluates its estimates and assumptions. These
estimates and assumptions include valuing equity securities in share-based payments, estimating fair value of equity instruments
recorded as derivative liabilities, estimating the useful lives of depreciable and amortizable assets, valuation allowance against
deferred tax assets, goodwill impairment, interest borrowing rate, and estimating the fair value of long-lived assets to assess
whether impairment charges may apply.
Research
and Development Costs
Research
and development costs are expensed as incurred and include: salaries, benefits, bonus, share-based compensation, license fees,
milestone payments due under license agreements, costs paid to third-party contractors to perform research, conduct clinical trials,
and develop drug materials and delivery devices; and associated overhead and facilities costs. Clinical trial costs are a significant
component of research and development expenses and include costs associated with third-party contractors, CROs and CMOs. Invoicing
from third-party contractors for services performed can lag several months. We accrue the costs of services rendered in connection
with third-party contractor activities based on our estimate of fees and costs associated with the contract that were rendered
during the period and they are expensed as incurred. Research and development costs that are paid in advance of performance are
capitalized as prepaid expenses and amortized over the service period as the services are provided. As of June 30, 2020, we
have an active arrangement with JJEI that contains a research or development milestone. For more discussion on the milestones
related to the JJEI License Agreement, please see Note 6 of the consolidated financial statements in the Company’s
annual report on Form 10-K filed with the SEC on March 26, 2020.
Goodwill
Goodwill
represents the difference between the consideration transferred and the fair value of the net assets acquired, and liabilities
assumed under the acquisition method of accounting for push-down accounting. Goodwill is not amortized but is evaluated for impairment
within our single reporting unit on an annual basis during the fourth quarter, or more frequently if an event occurs or circumstances
change that would more likely than not reduce the fair value of our reporting unit below our carrying amount. When performing
the impairment assessment, the accounting standard for testing goodwill for impairment permits a company to first assess the qualitative
factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the goodwill
is impaired. If we believe, as a result of the qualitative assessment, that it is more likely than not that the fair value
of goodwill is impaired we then must perform a quantitative analysis to determine if the carrying value of the reporting
entity exceeds its fair value. The impact of the COVID-19 pandemic was considered in our qualitative assessment. Currently,
there has not been a significant impact on our carrying value, but this factor will continue to be evaluated.
Based
on the qualitative assessment for the six months ended June 30, 2020, there was no impairment necessary. Given our common
stock value decline during the six months ended June 30, 2019, and based on the quantitative assessment, we determined that goodwill
was impaired as of June 30, 2019, and a charge of $7,268 was recorded.
Results
of Operations
Three
Months Ended June 30, 2020 Compared with Three Months Ended June 30, 2019
The
following table sets forth our results of operations for each of the periods set forth below (in thousands):
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For
the Three Months Ended
June
30,
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|
|
|
|
2020
|
|
|
2019
|
|
|
Change
|
|
Revenues
|
|
$
|
3,500
|
|
|
$
|
4,819
|
|
|
$
|
(1,319
|
)
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
3,184
|
|
|
|
3,164
|
|
|
|
20
|
|
General
and administrative
|
|
|
1,490
|
|
|
|
3,128
|
|
|
|
(1,638
|
)
|
Impairment
of goodwill
|
|
|
—
|
|
|
|
6,474
|
|
|
|
(6,474
|
)
|
Total
operating expenses
|
|
|
4,674
|
|
|
|
12,766
|
|
|
|
(8,092
|
)
|
Loss
from operations
|
|
|
(1,174
|
)
|
|
|
(7,947
|
)
|
|
|
6,773
|
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
13
|
|
|
|
102
|
|
|
|
(89
|
)
|
Other
income (expense), net
|
|
|
(9
|
)
|
|
|
1
|
|
|
|
(10
|
)
|
Net
loss
|
|
$
|
(1,170
|
)
|
|
$
|
(7,844
|
)
|
|
$
|
6,674
|
|
Revenue
— Revenue of $3.5 million was recorded for the three months ended June 30, 2020 as compared to $4.8 million for
the three months ended June 30, 2019, a decrease of $1.3 million. The decrease results from a reduction in revenue of $3.0 million
recorded as a result of the Cipla Agreement, partially offset by an increase in revenue of $1.7 million as a result of the JJEI
License agreement. For the three months ended June 30, 2019, $4.8 million was recorded in revenue which was the result of
the Cipla Agreement.
Research
and development expenses — Research and development expenses were $3.2 million for the three months ended
June 30, 2020 and 2019 which includes pre-clinical toxicology costs for the PUR1800 program, clinical study costs
incurred for the Phase 2 Pulmazole clinical trial and employment related costs in support of our programs.
General
and administrative expenses — General and administrative expenses were $1.5 million for the three months ended June
30, 2020 compared to $3.1 million for the three months ended June 30, 2019, a decrease of $1.6 million. The decrease was primarily
due to decreased employment costs of $1.1 million because of lower share-based compensation expense, $0.3 million of
a milestone payment and $0.2 million in legal and patent expense.
Impairment
of goodwill — There was no impairment charge for the three months ended June 30, 2020. For the three months ended
June 30, 2019, due to the decline in the Company’s common stock value, we recorded approximately $6.5 million for impairment.
Six
months ended June 30, 2020 Compared with Six Months Ended June 30, 2019
The
following table sets forth our results of operations for each of the periods set forth below (in thousands):
|
|
For
the Six Months Ended
June
30,
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
Change
|
|
Revenues
|
|
$
|
6,262
|
|
|
$
|
4,819
|
|
|
$
|
1,443
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
8,471
|
|
|
|
5,340
|
|
|
|
3,131
|
|
General
and administrative
|
|
|
3,702
|
|
|
|
5,115
|
|
|
|
(1,413
|
)
|
Impairment
of goodwill
|
|
|
—
|
|
|
|
7,268
|
|
|
|
(7,268
|
)
|
Total
operating expenses
|
|
|
12,173
|
|
|
|
17,723
|
|
|
|
(5,550
|
)
|
Loss
from operations
|
|
|
(5,911
|
)
|
|
|
(12,904
|
)
|
|
|
6,993
|
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
65
|
|
|
|
106
|
|
|
|
(41
|
)
|
Settlement
expense
|
|
|
—
|
|
|
|
(200
|
)
|
|
|
200
|
|
Other
income (expense), net
|
|
|
(10
|
)
|
|
|
(2
|
)
|
|
|
(8
|
)
|
Net
loss
|
|
$
|
(5,856
|
)
|
|
$
|
(13,000
|
)
|
|
$
|
7,144
|
|
Revenue
— Revenue of $6.3 million was recorded for the six months ended June 30, 2020 as compared to $4.8 million
for the three months ended June 30, 2019, an increase of $1.4 million. The increase resulted from an increase in revenue recorded
of $2.4 million as a result of the JJEI License Agreement partially offset by a decrease in revenue recorded of $1.0 million as
a result of the Cipla Agreement. For the six months ended June 30, 2019, $4.8 million was recorded in revenue which was the
result of the Cipla Agreement.
Research
and development expenses — Research and development expenses were $8.5 million for the six months ended June
30, 2020 compared to $5.3 million for the six months ended June 30, 2019, an increase of $3.1 million. The increase was primarily
due to increased spend of $2.9 million on the PUR1800 project due primarily to manufacturing and clinical study costs, $0.8 million
on employment costs in support of our programs, and $0.2 in allocated fixed expenses which was partially offset by a decrease
of $0.8 million on the Phase 2 Pulmazole clinical trial.
General
and administrative expenses — General and administrative expenses were $3.7 million for the six months ended June
30, 2020 compared to $5.1 million for the six months ended June 30, 2019, a decrease of $1.4 million. The decrease was primarily
due to decreased employment costs of $1.0 million because of lower share-based compensation expense, $0.3 million of a milestone
payment and $0.1 million in legal and patent expense.
Impairment
of goodwill — There was no impairment charge for the six months ended June 30, 2020. For the six months ended June
30, 2019, due to the decline in the Company’s common stock value, we recorded approximately $7.3 million for impairment.
Liquidity
and Capital Resources
Through
June 30, 2020, we have incurred an accumulated deficit of $221.0 million, primarily due to expenses incurred through a combination
of research and development activities related to our various product candidates and general and administrative expenses supporting
those activities. We have financed our operations since inception primarily through the sale of preferred and common stock, the
issuance of convertible promissory notes, term loans and collaboration and license agreements. Our total cash and cash equivalents
as of June 30, 2020 was $27.3 million.
We
anticipate that we will continue to incur losses, and that such losses will increase over the next several years due to development
costs associated with our iSPERSE™ pipeline programs. We expect that our research and development and general
and administrative expenses will continue to increase and, as a result, we will need additional capital to fund our operations,
which we may raise through a combination of equity offerings, debt financings, other third-party funding and other collaborations
and strategic alliances.
We
expect that our existing cash and cash equivalents at June 30, 2020 and anticipated interest income will enable us to fund our
operating expenses and capital expenditure requirements for at least the next 12 months following the date of this Quarterly Report
on Form 10-Q. We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and
we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated
with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our
operating capital requirements.
The
ultimate impact of the COVID-19 pandemic on the Company’s operations is unknown and will depend on future developments,
which are highly uncertain and cannot be predicted with confidence. These include but are not limited to including the duration
of the COVID-19 pandemic, new information which may emerge concerning the severity of the COVID-19 pandemic, and any additional
preventative and protective actions that regulators, or the board or management of the Company, may determine are needed.
The
COVID-19 pandemic has created significant economic uncertainty and volatility in the credit and capital markets. The Company may
not be able to raise sufficient additional capital and may tailor our drug candidate development program based on the amount of
funding we are able to raise in the future. Nevertheless, there is no assurance that these initiatives will be successful.
In
addition, as previously discussed, on July 10, 2020, the joint steering committee established by us and Cipla terminated our Phase
2 clinical study of Pulmazole in connection with our renegotiation of the Cipla Agreement. There can be no assurance that we will
be able to renegotiate the Cipla Agreement on favorable terms, or at all.
Our
future funding requirements will depend on many factors, including, but not limited to:
|
●
|
the
impact of the COVID-19 on the Company’s ongoing and planned clinical trials;
|
|
|
|
|
●
|
the
geographic, social and economic impact of COVID-19 on the Company’s ongoing and planned clinical trials;
|
|
|
|
|
●
|
our
ability to renegotiate the Cipla Agreement;
|
|
|
|
|
●
|
whether
our current and/or future corporate partnerships are successful in generating revenue
for us;
|
|
|
|
|
●
|
the
initiation, progress, timing, costs and results of clinical studies for existing and new pipeline programs based on iSPERSE™;
|
|
|
|
|
●
|
the
outcome, timing and cost of regulatory approvals by the FDA and European regulatory authorities, including the potential for
these agencies to require that we perform studies in addition to those that we currently have planned;
|
|
|
|
|
●
|
the
cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;
|
|
|
|
|
●
|
our
need to expand our research and development activities;
|
|
|
|
|
●
|
our
need and ability to hire additional personnel;
|
|
|
|
|
●
|
our
need to implement additional infrastructure and internal systems;
|
|
|
|
|
●
|
the
cost of establishing and maintaining a commercial-scale manufacturing line; and
|
|
|
|
|
●
|
the
cost of establishing sales, marketing and distribution capabilities for any products for which we may receive regulatory approval.
|
If
we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our
business, financial condition and results of operations could be materially adversely affected.
The
following table sets forth the major sources and uses of cash for each of the periods set forth below (in thousands):
|
|
Six
months ended
June
30,
|
|
|
|
2020
|
|
|
2019
|
|
Net
cash (used in)/ provided by operating activities
|
|
$
|
(4,200
|
)
|
|
$
|
11,591
|
|
Net
cash used in investing activities
|
|
|
(98
|
)
|
|
|
(35
|
)
|
Net
cash provided by financing activities
|
|
|
8,113
|
|
|
|
17,698
|
|
Net
increase in cash and cash equivalents
|
|
$
|
3,815
|
|
|
$
|
29,254
|
|
Cash
Flows from Operating Activities
Net
cash used in operating activities for the six months ended June 30, 2020 was $4.2 million which was primarily the result of a
net loss of $5.9 million offset by $1.1 million of net non-cash adjustments and 0.6 million in cash inflows associated
with changes in operating assets and liabilities. Our non-cash adjustments were primarily comprised of $0.6 million of share-based
compensation expense, $0.1 million of depreciation expense and $0.4 million of amortization of operating lease right-of-use
asset. The net cash inflows associated with changes in operating assets and liabilities was primarily due to increases of
$6.9 million in accounts receivable and $0.9 million in accrued expenses partially offset by decreases of $5.9 million in deferred
revenue, $.7 million in prepaid expenses and other current assets and $0.3 million in accounts payable and $0.3 million of
operating lease liability.
Net
cash provided by operating activities for the six months ended June 30, 2019 was $11.6 million, which was primarily the result
of a net loss of $13.0 million, offset by $9.2 million of net non-cash adjustments and $15.4 million in cash inflows
associated with changes in operating assets and liabilities. Our non-cash adjustments were primarily comprised of $7.3 million
of goodwill impairment, $1.5 million of share-based compensation expense, $0.3 million of amortization of operating lease right-of-use
asset and $0.1 million of depreciation and expense. The net cash inflows associated with changes in operating assets and liabilities
were primarily due to an increase of $17.2 million of deferred revenue partially offset by decreases in accounts payable
of $0.6 million, in accrued expenses of $0.5 million, in prepaid expenses and other current assets of $0.4 million and $0.3
million in operating lease liability.
Cash
Flows from Investing Activities
Net
cash used in investing activities for the six months ended June 30, 2020 and 2019 were entirely due to the purchases of property
and equipment.
Cash
Flows from Financing Activities
Net
cash provided by financing activities for the six months ended June 30, 2020 was $8.1 million as compared to $17.7 million for
the six months ended June 30, 2019. Net cash provided for the six months ended June 30, 2020 resulted from the issuance of common
stock, net of issuance costs, of $7.3 million which was as a result of a registered direct offering to certain investors and $0.8
million from warrant and stock option exercises. Net cash provided by financing activities for the six months ended June 30, 2019
resulted from the issuance of common stock of $17.5 million and pre-funded warrant exercises of $0.2 million.
Financings
Subsequent
to the period ending June 30, 2020, on July 9, 2020, the Company entered into letter agreements with certain existing accredited
investors to exercise certain existing and outstanding warrants (“Existing Warrants”) to purchase up to an aggregate
of 10,085,741 shares of the Company’s common stock at the existing exercise price per share of $1.35. The Existing Warrants
were issued in an underwritten public offering pursuant to a registration statement on Form S-1 (File No. 333-230395) and an additional
registration statement on Form S-1 filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended (File No. 333-230714)
that was consummated in April 2019. In consideration for the exercise of the Existing Warrants for cash, the exercising holders
will receive new unregistered warrants to purchase up to an aggregate of 10,085,741 shares of common stock at an exercise price
of $1.80 per share and with an exercise period of five years from the initial closing date. The gross proceeds to the Company
from the exercise are expected to be approximately $13.6 million, prior to deducting placement agent fees and offering
expenses. In addition, we agree to issue placement agent designees 655,573 unregistered warrants at an
exercise price of $2.25 and with an exercise period of five years from the closing date.
On
April 16, 2020, we entered into a Securities Purchase Agreement with certain institutional investors (the “Purchasers”),
pursuant to which on April 20, 2020, we issued and sold in a registered direct offering (the “Offering”) an aggregate
of 4,787,553 shares of our common stock at an offering price of $1.671 per share, for gross proceeds of approximately $8.0 million
before the deduction of placement agent fees and offering expenses. In a concurrent private placement, we issued to the Purchasers,
for each share of common stock purchased in the Offering, a warrant (“Common Warrants”) to purchase one share of common
stock. The Common Warrants have an exercise price of $1.55 per share and are exercisable to purchase an aggregate of up to 4,787,553
shares of common stock. In addition, we issued to the placement agent for the Offering warrants to purchase 311,191 shares of
common stock at an exercise price of $2.0888 per share. Both the Common Warrants and the placement agent warrants are exercisable
immediately upon issuance and terminate on April 20, 2022.
Off-Balance
Sheet Arrangements
We
have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources that is material to investors.