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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended March 31, 2021

 

OR

 

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

 

For the transition period from               to              

 

Commission File Number: 001-38022

 

 

MATINAS BIOPHARMA HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   No. 46-3011414
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

 

1545 Route 206 South, Suite 302

Bedminster, New Jersey 07921

(Address of principal executive offices) (Zip Code)

 

908-484-8805

(Registrant’s telephone number, including area code)

 

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

 

Title of Each Class   Trading Symbol   Name of Each Exchange on Which Registered
Common Stock   MTNB   NYSE American

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 

Yes ☒ No ☐

 

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

 

Large accelerated filer   Accelerated filer
         
Non-accelerated Filer   Smaller reporting company
         
      Emerging growth company

 

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

 

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

 

As of May 4, 2021, there were 204,283,972 shares of the registrant’s common stock, $0.0001 par value, outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

None.

 

 

 

 

 

 

MATINAS BIOPHARMA HOLDINGS, INC.

Form 10-Q

Quarter Ended March 31, 2021

 

Table of Contents

 

    Page
     
PART - I FINANCIAL INFORMATION  
   
Item 1. FINANCIAL STATEMENTS 1
     
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 14
     
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 21
     
Item 4. CONTROLS AND PROCEDURES 21
     
PART - II OTHER INFORMATION  
   
Item 1. LEGAL PROCEEDINGS 22
     
Item 1A. RISK FACTORS 22
     
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 22
     
Item 3. DEFAULTS UNDER SENIOR SECURITIES 22
     
Item 4. MINE SAFETY DISCLOSURES 22
     
Item 5. OTHER INFORMATION 22
     
Item 6. EXHIBITS 22

 

i

 

 

Matinas BioPharma Holdings, Inc.

Condensed Consolidated Balance Sheets

 

    March 31, 2021     December 31, 2020  
    (Unaudited)     (Audited)  
ASSETS:                
Current assets:                
Cash and cash equivalents   $ 23,382,743     $ 12,432,481  
Marketable securities     37,283,697       46,246,573  
Restricted cash – security deposits     136,000       136,000  
Prepaid expenses and other current assets     2,333,225       2,739,791  
Total current assets     63,135,665       61,554,845  
                 
Non-current assets:                
Leasehold improvements and equipment - net     1,465,303       1,523,950  
Operating lease right-of-use assets - net     3,149,744       3,276,639  
Finance lease right-of-use assets - net     45,992       58,007  
In-process research and development     3,017,377       3,017,377  
Goodwill     1,336,488       1,336,488  
Restricted cash - security deposit     200,000       200,000  
Total non-current assets     9,214,904       9,412,461  
Total assets   $ 72,350,569     $ 70,967,306  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY:                
                 
Current liabilities:                
Accounts payable   $ 421,645     $ 349,941  
Accrued expenses     1,405,745       2,795,329  
Operating lease liabilities - current     364,566       391,498  
Financing lease liabilities - current     29,396       30,853  
Total current liabilities     2,221,352       3,567,621  
                 
Non-current liabilities:                
Deferred tax liability     341,265       341,265  
Operating lease liabilities - net of current portion     3,214,714       3,304,063  
Financing lease liabilities - net of current portion     17,134       23,660  
Total non-current liabilities     3,573,113       3,668,988  
Total liabilities     5,794,465       7,236,609  
                 
Stockholders’ equity:                
Series B Convertible preferred stock, stated value $1,000 per share, 8,000 shares authorized as of March 31, 2021 and December 31, 2020; 4,218 and 4,361 shares issued and outstanding as of March 31, 2021 and December 31, 2020; (liquidation preference - $4,218,000 at March 31, 2021)     3,673,176       3,797,705  
                 
Common stock par value $0.0001 per share, 500,000,000 shares authorized at March 31, 2021 and December 31, 2020; 204,283,972 and 200,113,431 issued and outstanding as of March 31, 2021 and December 31, 2020, respectively     20,427       20,010  
Additional paid-in capital     175,189,608       167,192,003  
Accumulated deficit     (112,463,513 )     (107,507,193 )
Accumulated other comprehensive income     136,406       228,172  
Total stockholders’ equity     66,556,104       63,730,697  
Total liabilities and stockholders’ equity   $ 72,350,569     $ 70,967,306  

 

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

 

1

 

 

Matinas BioPharma Holdings, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

Unaudited

 

    2021     2020  
   

Three Months Ended

March 31,

 
    2021     2020  
Revenue:                
Research and development   $ 33,333     $ -  
Costs and Expenses:                
Research and development     3,241,432       4,086,883  
General and administrative     3,145,010       2,259,631  
                 
Total costs and expenses     6,386,442       6,346,514  
                 
Loss from operations     (6,353,109 )     (6,346,514 )
Sale of New Jersey net operating loss & tax credits     1,328,470       1,073,289  
Other income, net     68,319       227,327  
                 
Net loss   $ (4,956,320 )   $ (5,045,898 )
                 
Preferred stock series B accumulated dividends     (210,900 )     (170,700 )
Net loss attributable to common shareholders   $ (5,167,220 )   $ (5,216,598 )
Net loss attributable to common shareholders per share - basic and diluted   $ (0.03 )   $ (0.03 )
Weighted average common shares outstanding:                
Basic and diluted     203,871,820       191,671,153  
Other comprehensive (loss)/income, net of tax                
Unrealized (loss)/gain on securities available-for-sale     (91,766 )     523,246  
Other comprehensive (loss)/income, net of tax     (91,766 )     523,246  
Comprehensive loss attributable to shareholders   $ (5,048,086 )   $ (4,522,652 )

 

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

 

2

 

 

Matinas BioPharma Holdings, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

Unaudited

 

    Shares     Amount     Shares     Amount     Capital     Deficit     Income     Equity  
   

Redeemable Convertible

Preferred Stock B

    Common Stock    

 

Additional

Paid - in

    Accumulated    

Accumulated Other

Comprehensive

   

 

Total

Stockholders’

 
    Shares     Amount     Shares     Amount     Capital     Deficit     Income     Equity  
Balance, December 31, 2020     4,361     $ 3,797,705       200,113,431     $ 20,010     $ 167,192,003     $ (107,507,193 )   $ 228,172     $ 63,730,697  
Stock-based compensation     -       -       -       -       1,073,057       -       -       1,073,057  
Issuance of common stock as compensation for services     -       -       7,560       1       7,937       -       -       7,938  
Issuance of common stock in exchange for preferred stock     (143 )     (124,529 )     286,000       29       124,500       -       -       -  
Issuance of common stock in public offering, net of stock issuance costs ($172,592)     -       -       3,023,147       302       5,580,169       -       -       5,580,471  
Issuance of common stock in exchange for Options     -       -       852,777       85       1,211,942       -       -       1,212,027  
Issuance of common stock from the exercise of Warrants     -       -       1,057       -       -       -       -       -  
Other comprehensive income     -       -       -       -       -       -       (91,766 )     (91,766 )
Net loss     -       -       -       -       -       (4,956,320 )     -       (4,956,320 )
Balance, March 31, 2021     4,218     $ 3,673,176       204,283,972     $ 20,427     $ 175,189,608     $ (112,463,513 )   $ 136,406     $ 66,556,104

 

 

 

   

Redeemable Convertible

Preferred Stock B

    Common Stock    

 

Additional

Paid - in

    Accumulated    

Accumulated Other

Comprehensive

   

 

Total

Stockholders’

 
    Shares     Amount     Shares     Amount     Capital     Deficit     (Loss) Income     Equity  
Balance, December 31, 2019     4,577     $ 3,985,805       163,156,984     $ 16,315     $ 113,427,897     $ (84,377,555 )   $ (880 )   $ 33,051,582  
Stock-based compensation     -       -       -       -       1,367,651       -       -       1,367,651  
Issuance of common stock as compensation for services     -       -       226,450       23       172,232       -       -       172,255  
Issuance of common stock in exchange for preferred stock     (25 )     (21,771 )     50,000       5       21,766       -       -       -  
Issuance of common stock in public offering, net of stock issuance costs ($3,308,790)     -       -       32,260,000       3,226       46,690,984       -       -       46,694,210  
Issuance of common stock in exchange for Options     -       -       56,517       6       42,494       -       -       42,500  
Issuance of common stock from the exercise of Warrants     -       -       1,452,987       144       797,437       -       -       797,581  
Other comprehensive income     -       -       -       -       -       -       523,246       523,246  
Net loss     -       -       -       -       -       (5,045,898 )     -       (5,045,898 )
Balance, March 31, 2020     4,552     $ 3,964,034       197,202,938     $ 19,719     $ 162,520,461     $ (89,423,453 )   $ 522,366     $ 77,603,127  

 

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

 

3

 

 

Matinas BioPharma Holdings, Inc.

Condensed Consolidated Statements of Cash Flow

Unaudited

 

    2021     2020  
    Three Months Ended March 31,  
    2021     2020  
Cash flows from operating activities:                
Net loss   $ (4,956,320 )   $ (5,045,898 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation and amortization     58,647       57,622  
Stock based compensation expense     1,101,214       1,447,178  
Amortization of operating lease right-of-use assets     126,896       117,909  
Amortization of finance lease right-of-use assets     12,014       22,922  
Amortization of bond discount     54,251       -  
Changes in operating assets and liabilities:                
Operating lease liabilities     (116,281 )     (99,214 )
Prepaid expenses and other current assets     386,346       (680,642 )
Accounts payable     71,704       274,016  
Accrued expenses and other liabilities     (1,389,584 )     (758,439 )
Net cash used in operating activities     (4,651,113 )     (4,664,546 )
                 
Cash flows from investing activities:                
Purchase of marketable securities     (4,083,141 )     (61,211,960 )
Proceeds from sales of marketable securities     12,900,000       6,250,000  
Purchases of leasehold improvements and equipment     -       (5,749 )
Net cash provided by/(used in) investing activities     8,816,859       (54,967,709 )
                 
Cash flows from financing activities:                
Net proceeds from public offering of common stock     5,580,472       46,619,210  
Proceeds from exercise of warrants     -       797,581  
Proceeds from exercise of options     1,212,027       42,500  
Payments of capital lease liability - principal     (7,983 )     (19,947 )
Net cash provided by financing activities     6,784,516       47,439,344  
                 
Net increase/(decrease) in cash, cash equivalents and restricted cash     10,950,262       (12,192,911 )
Cash, cash equivalents and restricted cash at beginning of period     12,768,481       22,756,438  
                 
Cash, cash equivalents and restricted cash at end of period   $ 23,718,743     $ 10,563,527  
                 
Supplemental non-cash financing and investing activities:                
Unrealized (loss)/gains on securities for sale   $ (91,766 )   $ 523,246  
Preferred stock conversion into common stock - Series B   $ 124,529     $ 21,771  
Unearned restricted stock grants   $ 48,301     $ 151,253  
Cashless exercise of warrants   $ -     $ 165,008  
Deferred financing costs included in accrued expenses and other liabilities   $ -     $ 75,000  

 

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

 

4

 

 

MATINAS BIOPHARMA HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(Tabular dollars and shares in thousands, except per share data)

 

Note 1 – Description of Business

 

Matinas BioPharma Holdings Inc. (“Holdings”) is a Delaware corporation formed in 2013. Holdings is the parent company of Matinas BioPharma, Inc. (“BioPharma”), and Matinas BioPharma Nanotechnologies, Inc. (“Nanotechnologies,” formerly known as Aquarius Biotechnologies, Inc.), its operating subsidiaries (“Nanotechnologies”, and together with “Holdings” and “BioPharma”, “the Company” or “we” or “our” or “us”). The Company is a clinical-stage biopharmaceutical company with a focus on identifying and developing novel pharmaceutical products.

 

Note 2 – Liquidity and Plan of Operations

 

The Company has experienced net losses and negative cash flows from operations each period since its inception. Through March 31, 2021, the Company had an accumulated deficit of approximately $112.5 million. The Company’s net loss was approximately $5.0 million for each of the three-month periods ended March 31, 2021 and 2020, respectively.

 

The Company has been engaged in developing LYPDISO (formerly MAT9001) as well as its lipid nanocrystal (“LNC”) platform delivery technology and a pipeline of associated product candidates, including MAT2203 and MAT2501, since 2011. To date, the Company has not obtained regulatory approval for any of its product candidates nor generated any revenue from product sales, and the Company expects to incur significant expenses to complete development of its product candidates. The Company may never be able to obtain regulatory approval for the marketing of any of its product candidates in any indication in the United States or internationally and there can be no assurance that the Company will generate revenues or ever achieve profitability.

 

Assuming the Company obtains Food and Drug Administration (“FDA”) approval for one or more of its product candidates, the Company expects that its expenses will continue to increase once the Company reaches commercial launch. The Company also expects that its research and development expenses will continue to increase as it moves forward with additional clinical studies for its current product candidates and development of additional product candidates. As a result, the Company expects to continue to incur substantial losses for the foreseeable future, and that these losses will be increasing.

 

To continue to fund operations, during January 2021, the Company sold 3,023,147 shares of common stock under its At-The-Market Sales Agreement with BTIG, LLC, generating net proceeds of approximately $5.6 million (See Note 11 – Stockholders’ Equity).

 

As of March 31, 2021, the Company had cash and cash equivalents of approximately $23.4 million, marketable securities of approximately $37.3 million and restricted cash of approximately $0.3 million. The Company believes the cash and cash equivalents and marketable securities on hand are sufficient to fund planned operations into 2024.

 

Note 3 – Summary of Significant Accounting Policies

 

Basis of presentation and principles of consolidation

 

The accompanying unaudited condensed consolidated financial statements include the consolidated accounts of Holdings and its wholly owned subsidiaries, BioPharma, and Nanotechnologies. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and reflect the operations of the Company and its wholly owned subsidiaries. All intercompany transactions have been eliminated in consolidation.

 

The Company’s significant accounting policies are described in Note 3 within the Company’s Notes to Consolidated Financial Statements included in the Company’s 2020 Form 10-K.

 

5

 

 

COVID-19

 

In March 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, and has and may continue to cause economic downturns.

 

The Company has been actively monitoring the COVID-19 pandemic and its impact globally. The financial results for the three months ended March 31, 2021 were not significantly impacted by COVID-19. However, the Company cannot predict the impact of the progression of the COVID-19 pandemic on future results or the Company’s ability to raise capital due to a variety of factors, including but not limited to the continued good health of Company employees, the ability of suppliers to continue to operate and deliver, the ability of the Company to maintain operations, any further government and/or public actions taken in response to the pandemic and ultimately the length of the pandemic.

 

Note 4 – Cash, Cash Equivalents, Restricted Cash and Marketable Securities

 

The Company considers all highly liquid financial instruments with original maturities of three months or less when purchased to be cash and cash equivalents and all investments with maturities of greater than three months from date of purchase are classified as marketable securities. Cash and cash equivalents consisted of cash in bank checking and savings accounts, money market funds and short-term U.S. treasury bonds that mature within three months of settlement date.

 

Cash, Cash Equivalents and Restricted Cash

 

The Company presents restricted cash with cash and cash equivalents in the Consolidated Statements of Cash Flows. Restricted cash represents funds the Company is required to set aside to cover building operating leases and other purposes.

 

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Condensed Consolidated Balance Sheets to the total of the amounts in the Condensed Consolidated Statements of Cash Flows as of March 31, 2021, December 31, 2020, March 31, 2020 and December 31, 2019:

 

    2021     2020     2020     2019  
    March 31,
2021
    December 31,
2020
    March 31,
2020
    December 31,
2019
 
Cash and cash equivalents   $ 23,383     $ 12,432     $ 10,078     $ 22,170  
Restricted cash included in current/long term assets     336       336       486       586  
Cash, cash equivalents and restricted cash in the statement of cash flows   $ 23,719     $ 12,768     $ 10,564     $ 22,756  

 

Marketable Securities

 

The Company has classified its investments in marketable securities as available-for-sale and as a current asset. The Company’s investments in marketable securities are carried at fair value, with unrealized gains and losses included as a separate component of stockholders’ equity. Unrealized losses and gains are classified as other comprehensive (loss)/income and costs are determined on a specific identification basis. Realized gains and losses from our marketable securities are recorded in other income, net. For the three months ended March 31, 2021 and 2020, the Company recorded unrealized (losses)/gains of approximately ($92) thousand and $523 thousand, respectively. As of March 31, 2021 and December 31, 2020, the Company had net accumulated unrealized gains of approximately $136 thousand and approximately $228 thousand, respectively.

 

The following tables summarizes the Company’s marketable securities as of March 31, 2021:

 

    Amortized     Unrealized     Unrealized        
    Cost     Gain     (Loss)     Fair Value  
U.S. Treasury Bonds   $ 17,570     $ 81     $     $ 17,651  
U.S. Government Notes     14,234       54       (1 )     14,287  
Corporate Debt Securities     4,068             (1 )     4,067  
State and Municipal Bonds     1,275       4             1,279  
Total marketable securities   $ 37,147     $ 139     $ (2 )   $ 37,284  

 

6

 

 

Maturities of debt securities classified as available-for-sale were as follows at March 31, 2021:

 

          Net Carrying  
    Fair Value     Amount  
Due within one year   $ 28,820     $ 28,967  
Due after one year through five years     8,464       8,470  
    $ 37,284     $ 37,437  

 

The following tables summarizes the Company’s marketable securities for the year ended December 31, 2020 consisted of the following:

 

    Amortized Cost     Unrealized Gain     Unrealized (Loss)     Fair Value  
U.S. Treasury Bonds   $ 18,293     $ 136     $     $ 18,429  
U.S. Government Notes     22,148       82             22,230  
Corporate Debt Securities     4,303       3             4,306  
State and Municipal Bonds     1,275       7             1,282  
Total marketable securities   $ 46,019     $ 228     $     $ 46,247  

 

Maturities of debt securities classified as available-for-sale were as follows at December 31, 2020:

 

    Fair Value     Net Carrying Amount  
Due within one year   $ 31,438     $ 31,602  
Due after one year through five years     14,809       14,845  
    $ 46,247     $ 46,447  

 

Note 5 - Fair Value Measurements

 

The Company uses the fair value hierarchy to measure the value of its financial instruments. The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable inputs reflect a reporting entity’s pricing based upon its own market assumptions. The basis for fair value measurements for each level within the hierarchy is described below:

 

Level 1 – Quoted prices for identical assets or liabilities in active markets.
   
Level 2 – Quoted prices for identical or similar assets and liabilities in markets that are not active; or other model-derived valuations whose inputs are directly or indirectly observable or whose significant value drivers are observable.
   
Level 3 – Valuations derived from valuation techniques in which one or more significant inputs to the valuation model are unobservable and for which assumptions are used based on management estimates.

 

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.

 

The carrying amounts of certain cash and cash equivalents, current portion of restricted cash, marketable securities, prepaid expenses and other current assets, accounts payable, current portion of lease liability and accrued expenses approximate fair value due to the short-term nature of these instruments.

 

7

 

 

A summary of the assets and liabilities carried at fair value in accordance with the hierarchy defined above is as follows:

 

          Fair Value Hierarchy  
March 31, 2021   Total     (Level 1)     (Level 2)     (Level 3)  
Assets                                
Marketable Securities:                                
U.S. Treasury Bonds   $ 17,651     $ 17,651     $     $  
U.S. Government Notes     14,287             14,287        
Corporate Debt Securities     4,067             4,067        
State and Municipal Bonds     1,279             1,279        
Total   $ 37,284     $ 17,651     $ 19,633     $  

 

          Fair Value Hierarchy  
December 31, 2020   Total     (Level 1)     (Level 2)     (Level 3)  
Assets                                
Marketable Securities:                                
U.S. Treasury Bonds   $ 18,429     $ 18,429     $     $  
U.S. Government Notes     22,230             22,230        
Corporate Debt Securities     4,306             4,306        
State and Municipal Bonds     1,282             1,282        
Total   $ 46,247     $ 18,429     $ 27,818     $  

 

U.S. treasury bonds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices for identical assets in active markets. Marketable securities consisting of U.S. government notes, corporate debt securities and state and municipal bonds are classified as Level 2 and are valued using quoted market prices in markets that are not active.

 

Note 6 – Leasehold Improvements and Equipment

 

Leasehold improvements and equipment, summarized by major category, consist of the following as of March 31, 2021 and December 31, 2020:

 

   

March 31, 2021

    December 31, 2020  
Lab equipment   $ 1,443     $ 1,443  
Leasehold improvements     878       878  
Total     2,321       2,321  
Less: accumulated depreciation and amortization     856       797  
Leasehold improvements and equipment, net   $ 1,465     $ 1,524  

 

Depreciation and amortization expense for the three months ended March 31, 2021 and 2020 was approximately $59 thousand and $58 thousand, respectively.

 

Note 7 – Accrued Expenses and Other Liabilities

 

Accrued Expenses, summarized by major category, as of March 31, 2021 and December 31, 2020 consist of the following:

 

    March 31, 2021     December 31, 2020  
Payroll and incentives   $ 303     $ 1,094  
General and administrative expenses     234       280  
Research and development expenses     683       778  
Deferred revenue and other deferred liabilities *     186       643  
Total   $ 1,406     $ 2,795  

 

* At December 31, 2020, approximately $577 thousand is the remaining balance of the CFF Agreement’s deferred liability and approximately $67 thousand is deferred revenue related to the Genentech Agreement. At March 31, 2021, approximately $153 thousand is the remaining balance of the CFF Agreement’s deferred liability and approximately $33 thousand is deferred revenue related to the Genentech Agreement. (See Note 9 – Collaboration Agreements, Licenses and Other Research and Development Agreements).

 

8

 

 

Note 8 – Leases

 

The Company has various lease agreements with terms up to 10 years, including leases of office space, a laboratory and manufacturing facility, and various equipment. Some leases include purchase, termination or extension options for one or more years. These options are included in the lease term when it is reasonably certain that the option will be exercised.

 

Operating lease obligations

 

On November 1, 2013, the Company entered into a 7-year lease for office space in Bedminster, New Jersey which commenced in June 2014 at a monthly rent of approximately $13,000, increasing to approximately $14,000 per month toward the end of the term, which is May 2021. The Company was obligated to provide an initial security deposit of $300,000 to obtain the office lease space. As of December 31, 2020, the total deposit had been returned to the Company.

 

On September 23, 2020, the Company entered into an amendment to the Bedminster lease. Pursuant to the amendment, the Company will lease an additional 3,034 rentable square feet (“Expansion Premises”). The amendment becomes effective upon the date on which the landlord delivers to the Company the Expansion Premises, which is expected to occur in the second quarter of 2021, and extends the term of the lease for seven years from such date. There is no renewal option, no security deposit, no residual value or significant restrictions or covenants other than those customary in such arrangements. Except as expressly provided, all other terms, covenants, conditions and agreements as set forth in the lease will remain unchanged and in full force and effect. The total lease commitment over the seven-year extension period is approximately $1.8 million.

 

The assets and liabilities from operating and finance leases are recognized at the lease commencement date based on the present value of remaining lease payments over the lease term using the Company’s incremental borrowing rates or implicit rates, when readily determinable. Short-term leases, which have an initial term of 12 months or less, are not recorded on the balance sheet.

 

The Company’s operating leases do not provide an implicit rate that can readily be determined. Therefore, the Company uses a discount rate based on its incremental borrowing rate, which is determined using the average of borrowing rates explicitly stated in the Company’s finance leases.

 

The Company incurred lease expense for its operating leases of approximately $203 thousand for the three months ended March 31, 2021 and 2020. The Company incurred amortization expense on its operating lease right-of-use assets of approximately $127 thousand and $118 thousand for the three months ended March 31, 2021 and 2020, respectively.

 

The Company incurred interest expense on its finance leases of approximately $1 thousand and $2 thousand for the three months ended March 31, 2021 and 2020, respectively. The Company incurred amortization expense on its finance lease right-of-use assets of approximately $12 thousand and $23 thousand for the three months ended March 31, 2021 and 2020, respectively.

 

9

 

 

The following table presents information about the amount and timing of liabilities arising from the Company’s operating leases, excluding the Expansion Premises of the amended Bedminster lease which the Company has not taken control of as of March 31, 2021, and finance leases as of March 31, 2021:

 

Maturity of Lease Liabilities  

Operating Lease

Liabilities

    Finance Lease Liabilities  
Remainder of 2021   $ 492     $ 25  
2022     645       19  
2023     677       2  
2024     710       -  
2025     745       -  
Thereafter     1,458       -  
Total undiscounted operating lease payments   $ 4,727     $ 46  
Less: Imputed interest     1,148       -  
Present value of operating lease liabilities   $ 3,579     $ 46  
                 
Weighted average remaining lease term in years     6.5       1.5  
Weighted average discount rate     8.4 %     8.1 %

 

The following table presents information about the amount and timing of liabilities arising from the Company’s operating leases, excluding the Expansion Premises of the amended Bedminster lease which the Company had not taken control of as of December 31, 2020, and finance leases as of December 31, 2020:

 

Maturity of Lease Liabilities  

Operating Lease

Liabilities

    Finance Lease Liabilities  
2021   $ 685     $ 34  
2022     645       19  
2023     677       2  
2024     710       -  
2025     745       -  
Thereafter     1,458       -  
Total undiscounted operating lease payments   $ 4,920     $ 55  
Less: Imputed interest     1,224       -  
Present value of operating lease liabilities   $ 3,696     $ 55  
                 
Weighted average remaining lease term in years     6.7       1.7  
Weighted average discount rate     8.4 %     8.1 %

 

Note 9 - Collaboration Agreements, Licenses and Other Research and Development Agreements

 

Cystic Fibrosis Foundation Therapeutics Development Award

 

On November 19, 2020, the Company entered into an award agreement (the “CFF Agreement”) with Cystic Fibrosis Foundation (“CFF”), pursuant to which it received a Therapeutics Development Award of up to $4.2 million (the “Award”) (of which $484,249 was received during 2020) to support the preclinical development (the “Development Program”) of the Company’s MAT2501 product candidate, a lipid nanocrystal oral formulation of the broad-spectrum aminoglycoside amikacin, for the treatment of pulmonary non-tubercular mycobacteria infections and other pulmonary diseases.

 

The first payment under the CFF Agreement, in the amount of $650 thousand, became due upon execution of the CFF Agreement. The Company invoiced the CFF in November 2020 and payment was subsequently received in February 2021. At December 31, 2020, the related receivable of $650 thousand was included in prepaid expenses and other current assets and the related deferred liability balance of $577 thousand was included in accrued expense and other current liabilities. During the three months ended March 31, 2021, the Company recognized $424 as credits to research and development expenses related to the CFF award. At March 31, 2021, the remaining deferred liability balance is approximately $153 thousand. The remainder of the Award will be paid to the Company incrementally in installments upon the achievement of certain milestones related to the development program and progress of the Development Program, as set forth in the CFF Agreement.

 

10

 

 

Genentech Feasibility Study Agreement

 

On December 12, 2019, the Company entered into a feasibility study agreement (the “Genentech Agreement”) with Genentech, Inc. (“Genentech”). This feasibility study agreement involves the development of oral formulations using the Company’s LNC platform delivery technology, which enables the development of a wide range of difficult-to-deliver molecules. Under the terms of the Genentech Agreement, Genentech shall pay the Company a total of $100 thousand for developing oral formulations of three molecules, or approximately $33 thousand per molecule, which will be recognized upon the Company fulfilling its obligations for each molecule under the Genentech Agreement. On December 13, 2019, per Genentech’s request, the Company billed Genentech for the total $100 thousand and recorded the upfront consideration as deferred revenue, which is recorded in accrued expenses on the consolidated balance sheets, and will recognize it over the term of the contract performance obligation period. During the year ended December 31, 2020, the Company fulfilled its obligations for the first of three molecules. During the three months ended March 31, 2021, the Company fulfilled its obligations for the second of three molecules and recognized approximately $33 thousand of Genentech revenue.

 

Note 10 – Income Taxes

 

Sale of net operating losses (NOLs) & tax credits

 

The Company recognized approximately $1.3 million and approximately $1.1 million for the three months ended March 31, 2021 and 2020 in connection with the sale of certain State of New Jersey Net Operating Losses (“NOL”) and Research and Development (“R&D”) tax credits to a third party under the New Jersey Technology Business Tax Certificate Transfer Program. During the three months ended March 31, 2021, the Company fulfilled its obligation related to the NOL and R&D sale but did not received the payment as of March 31, 2021. At March 31, 2021, the related receivable of approximately $1.3 million is included in prepaid expenses and other current assets.

 

Note 11 – Stockholders’ Equity

 

Common Stock

 

For the three months ended March 31, 2021, the Company sold 3,023,147 shares of its common stock under its At-The-Market Sales Agreement with BTIG, LLC, at an average price of $1.90, generating gross proceeds of approximately $5.8 million and net proceeds of approximately $5.6 million.

 

On January 14, 2020, the Company closed on an underwritten public offering of 32.3 million shares of its common stock at a purchase price of $1.55 per share. The Company generated gross proceeds of approximately $50.0 million and net proceeds of approximately $46.7 million, after deducting underwriting discounts and commissions and other estimated offering expenses.

 

Preferred Stock

 

Series B Preferred Stock

 

In connection with a public offering of Series B Preferred Stock, on June 19, 2018, the Company filed the Series B Certificate of Designation with the Secretary of the State of Delaware to designate the preferences, rights and limitations of the Series B Preferred Stock. Pursuant to the Series B Certificate of Designation, the Company designated 8,000 shares of the Company’s previously undesignated preferred shares as Series B Preferred Stock. As of March 31, 2021 and December 31, 2020, there were 4,218 shares 4,361 shares, respectively, of Series B Preferred Stock outstanding.

 

11

 

 

Warrants

 

The Company has issued two types of warrants: (i) investor warrants and (ii) placement agent warrants. All warrants are exercisable immediately upon issuance and have a five-year term. The warrants may be exercised at any time in whole or in part upon payment of the applicable exercise price until expiration. No fractional shares will be issued upon the exercise of the warrants. The exercise price and the number of shares purchasable upon the exercise of the investor warrants are subject to adjustment upon the occurrence of certain events, which include stock dividends, stock splits, combinations and reclassifications of the Company’s capital stock or other similar changes to the equity structure of the Company.

 

As of March 31, 2021, the Company had outstanding warrants to purchase an aggregate of 1,325,810 shares of common stock at exercise prices ranging from $0.50 to $0.75 per share. A summary of warrants outstanding as of March 31, 2021 and December 31, 2020 is presented below, all of which are fully vested:

 

    Shares  
Outstanding at December 31, 2019     5,397  
Issued     -  
Exercised     (2,576 )
Tendered     -  
Expired     (1,493 )
Outstanding at December 31, 2020     1,328 *
Issued     -  
Exercised     (2 )**
Tendered     -  
Expired     -  
Outstanding at March 31, 2021     1,326 ***

 

* Weighted average exercise price for outstanding warrants is $0.55.
** Converted into approximately 1 thousand shares of commons stock.
*** Weighted average exercise price for outstanding warrants is $0.54.

 

Basic and diluted net loss per common share

 

During the three months ended March 31, 2021 and 2020, diluted earnings per common share is the same as basic earnings per common share because, as the Company incurred a net loss during each period presented, the potentially dilutive securities from the assumed exercise of all outstanding stock options, warrants and conversion of preferred stock, would have an anti-dilutive effect. The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share attributable to common shareholders because including them would have been anti-dilutive as of March 31, 2021 and 2020:

 

    As of March 31,  
    2021     2020  
Stock options     22,890       20,562  
Preferred Stock and accrued dividend upon conversion     10,123       9,104  
Warrants     1,326       3,371  
Total     34,339       33,037  

 

12

 

 

Note 12 – Accumulated Other Comprehensive Income

 

The following table summarizes the changes in accumulated other comprehensive income by components during the three months ended March 31, 2021 and 2020:

 

    Net Unrealized (Losses)/Gains on Available-for-Sale Securities     Accumulated Other Comprehensive
Income
 
Balance, December 31, 2020   $ 228     $ 228  
Net unrealized loss on securities available-for-sale     (92 )     (92 )
Net current period other comprehensive loss     (92 )     (92 )
Balance, March 31, 2021   $ 136     $ 136  
                 
Balance, December 31, 2019   $ (1 )   $ (1 )
Net unrealized gain on securities available-for-sale     523       523  
Net current period other comprehensive income     523       523  
Balance, March 31, 2020   $ 522     $ 522  

 

All components of accumulated other comprehensive income are net of tax.

 

Note 13 – Stock-based Compensation

 

The Company’s Amended and Restated 2013 Equity Compensation Plan (the “Plan”) provides for the granting of incentive stock options, nonqualified stock options, restricted stock units, performance units, and stock purchase rights. There were no significant modifications to the Plan during the three months ended March 31, 2021 and 2020.

 

With the approval of the Board of Directors and a majority of shareholders, effective May 8, 2014, the Plan was amended and restated. The amendment provides for an automatic increase in the number of shares of common stock available for issuance under the Plan each January, commencing January 1, 2015, in an amount up to four percent (4%) of the total number of shares of common stock outstanding on the preceding December 31st.

 

The following table contains information about the Company’s stock plan at March 31, 2021:

 

    Awards
Reserved for
Issuance
    Awards
Issued &
Exercised
    Awards
Available
for Grant
 
2013 Equity Compensation Plan     36,952 *     27,127 **     9,825  

 

* Increased by 8,005 thousand on January 1, 2021 representing 4% of the total number of shares of common stock outstanding on December 31, 2020.
** Includes both stock grants and option grants

 

The Company recognized stock-based compensation expense (options and restricted share grants) in its condensed consolidated statements of operations as follows:

 

    Three Months Ended March 31,  
    2021     2020  
Research and Development   $ 485     $ 822  
General and Administrative     616       625  
Total   $ 1,101     $ 1,447  

 

As of March 31, 2021, total compensation costs related to unvested awards not yet recognized was approximately $10.3 million and the weighted-average periods over which the awards are expected to be recognized was 3.0 years.

 

Stock Options

 

The following table summarizes the activity for Company’ stock options for the three months ended March 31, 2021:

 

    Stock Options  
Outstanding at January 1, 2021     22,551  
Granted     4,557  
Exercised     (853 )
Forfeited     (2,681 )
Cancelled     -  
Expired     (684 )
Outstanding at March 31, 2021     22,890  

 

Restricted Stock Awards

 

During the three months ended March 31, 2021 and 2020, the Company granted restricted stock awards for 8 thousand and 226 thousand shares of common stock, respectively. These awards are typically granted to members of the Board of Directors as payment in lieu of cash fees or as payment to a vendor pursuant to a consulting agreement. The Company values restricted stock awards at the fair market value on the date of grant. The Company recorded the value of these restricted awards as general and administrative expense of approximately $20 thousand and $80 thousand in the condensed consolidated statement of operations for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, there was approximately $48 thousand of total unrecognized compensation costs related to 100,000 non-vested restricted stock grants which are expected to be recognized over a weighted-average period of 0.6 years.

 

13

 

 

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and the related notes and the other financial information included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Quarterly Report on Form 10-Q, in our Annual Report on Form 10-K for the year ended December 31, 2020 and in other reports we file with the Securities and Exchange Commission, particularly those under “Risk Factors.” Dollars in tabular format are presented in thousands, except per share data, or otherwise indicated.

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This report on Form 10-Q contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, together with any statements related in any way to the COVID-19 pandemic including its impact on the Company, and which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. In addition, the extent to which the COVID-19 pandemic will continue to impact our business and financial results going forward will be dependent on future developments such as the length and severity of the crisis, the potential resurgence of the crisis, future government actions in response to the crisis and the overall impact of the COVID-19 pandemic on the global economy and capital markets, among many other factors, all of which remain highly uncertain and unpredictable. All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “can,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “seek,” “estimate,” “continue,” “plan,” “point to,” “project,” “predict,” “could,” “intend,” “target,” “potential” and other similar words and expressions of the future.

 

There are a number of important factors that could cause the actual results to differ materially from those expressed in any forward-looking statement made by us. These factors include, but are not limited to:

 

our ability to raise additional capital to fund our operations and to develop our product candidates;
   
our anticipated timing for preclinical development, regulatory submissions, commencement and completion of clinical trials and product approvals;
   
our history of operating losses in each year since inception and the expectation that we will continue to incur operating losses for the foreseeable future;
   
our dependence on product candidates, including LYPDISO ™ (formerly MAT9001), MAT2203 and MAT2501, which are still in an early development stage;
   
our ability to successfully partner for the development of LYPDISO;
   
our reliance on our proprietary lipid nanocrystal (LNC) platform delivery technology, which is licensed to us by Rutgers University;
   
our ability to manufacture GMP batches of our product candidates, including LYPDISO, MAT2203 and MAT2501, which are required for preclinical and clinical trials and, subsequently, if regulatory approval is obtained for any of our products, our ability to manufacture commercial quantities;
   
our ability to complete required clinical trials for our lead product candidate and other product candidates and obtain approval from the FDA or other regulatory agents in different jurisdictions;

 

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our dependence on third parties, including third parties to manufacture our intermediates and final product formulations and third-party contract research organizations to conduct our clinical trials;
   
our ability to maintain or protect the validity of our patents and other intellectual property;
   
our ability to retain and recruit key personnel;
   
our ability to internally develop new inventions and intellectual property;
   
interpretations of current laws and the passages of future laws;
   
our lack of a sales and marketing organization and our ability to commercialize products, if we obtain regulatory approval, whether alone or through potential future collaborators;
   
our ability to successfully commercialize, and our expectations regarding future therapeutic and commercial potential with respect to, our product candidates;
   
the accuracy of our estimates regarding expenses, ongoing losses, future revenue, capital requirements and our needs for or ability to obtain additional financing; and
   
developments and projections relating to our competitors or our industry;
   
our operations, business and financial results have been and could continue to be adversely impacted by the current public health pandemic related to COVID-19, and

 

the factors listed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020, elsewhere in this report and other reports that we file with the Securities and Exchange Commission.

 

All forward-looking statements are expressly qualified in their entirety by this cautionary notice. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this report or the date of the document incorporated by reference into this report. We have no obligation, and expressly disclaim any obligation, to update, revise or correct any of the forward- looking statements, whether as a result of new information, future events or otherwise. We have expressed our expectations, beliefs and projections in good faith, and we believe they have a reasonable basis. However, we cannot assure you that our expectations, beliefs or projections will result or be achieved or accomplished.

 

Overview

 

We are focused on creating value through improving the intracellular delivery of critical therapeutics through our paradigm-changing lipid nanocrystal (LNC) drug delivery platform and its application to overcome current challenges in safely and effectively delivering small molecules, nucleic acids, gene therapies, proteins/peptides, and vaccines. We are also focused on creating value through finding a partner to continue the development of LYPDISO, our proprietary, next-generation prescription omega-3 drug, which we believe is differentiated from all other prescription omega-3 products and positioned to potentially demonstrate superior cardioprotective effects.

 

Key elements of our strategy include:

 

Advancing our clinical stage assets based on our LNC platform delivery technology and continuing to expand utilization of this promising technology into areas of innovative medicine.

 

Delivering efficacy data for MAT2203 in the EnACT study for the treatment of cryptococcal meningitis, which would highlight the safety and efficacy of this promising drug, while highlighting the ability of our LNC platform technology to deliver potent medicines across the blood-brain barrier following oral administration.

 

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Progressing the development of MAT2501 through extensive preclinical toxicology and efficacy studies in NTM infections and completing a single ascending dose pharmacokinetic study in healthy volunteers later in 2021, all with the financial support of the Cystic Fibrosis Foundation.
   
Expanding the application of our LNC platform delivery technology through collaborations with sophisticated and well-resourced biotech and pharmaceutical companies in areas of innovative medicine.

 

We have incurred losses for each period from our inception. For the three months ended March 31, 2021 and 2020, our net loss was approximately $5 million, respectively. We expect to incur significant expenses and operating losses over the next several years. Accordingly, we will need additional financing to support our continuing operations. We will seek to fund our operations through public or private equity offerings, debt financings, government or other third-party funding, collaborations and licensing arrangements. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would impact our going concern and would have a negative impact on our financial condition and our ability to pursue our business strategy and continue as a going concern. We will need to generate significant revenues to achieve profitability, and we may never do so.

 

Financial Operations Overview

 

Revenue

 

During the three months ended March 31, 2021, we generated contract research revenue of approximately $33 thousand resulting from the feasibility study agreement with Genentech Inc. and no revenue during the three months ended March 31, 2020. Our ability to generate product revenue, which we do not expect to occur until 2023 at the earliest, if ever, will depend heavily on the successful development and eventual commercialization of our early-stage product candidates.

 

Research and Development Expenses

 

Research and development expenses consist of costs incurred for the development of product candidates LYPDISO, MAT2203, MAT2501 and advancement of our LNC delivery technology platform, which include:

 

the cost of conducting pre-clinical work;
   
the cost of acquiring, developing and manufacturing pre-clinical and human clinical trial materials;
   
costs for consultants and contractors associated with Chemistry and Manufacturing Controls (CMC), pre-clinical and clinical activities and regulatory operations;
   
expenses incurred under agreements with contract research organizations, or CROs, including the NIH, that conduct our pre-clinical or clinical trials; and
   
employee-related expenses, including salaries and stock-based compensation expense for those employees involved in the research and development process.

 

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The table below summarizes our direct research and development expenses for our product candidates and development platform for the three months ended March 31, 2021 and 2020. Our direct research and development expenses consist principally of external costs, such as fees paid to contractors, consultants, analytical laboratories and CROs and/or the NIH, in connection with our development work. We typically use our employee and infrastructure resources for manufacturing clinical trial materials, conducting product analysis, study protocol development and overseeing outside vendors. Included in “Internal Staffing, Overhead and Other” below is the cost of laboratory space, supplies, research and development (R&D) employee costs (including stock-based compensation), travel and medical education.

 

   

Three months ended

March 31,

 
    2021     2020  
Direct research and development expenses:                
Manufacturing process development   $ 489     $ 305  
Preclinical trials     9       151  
Clinical development     771       1,493  
Regulatory     42       19  
Internal staffing, overhead and other     1,930       2,119  
Total research and development   $ 3,241     $ 4,087  

 

Research and development activities are central to our business model. We expect our research and development expenses to increase because product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage human trials. In addition, we will look to strategically expand the use of our drug platform technology through additional development work. During 2021, we will be focused on advancing our lead product candidate, MAT2203, to efficacy data in the treatment of CM, accelerating the preclinical development of MAT2501 and also expanding application of our LNC platform delivery technology through collaborations with third parties. We have also initiated a process to identify a suitable partner to continue the development of LYPDISO following the announcement of topline date from the ENHANCE-IT study in February 2021.

 

General and Administrative Expenses

 

General and administrative expenses consist principally of salaries and related costs for personnel in executive and finance functions. Other general and administrative expenses include facility costs, insurance, investor relations expenses, professional fees for legal, patent review, consulting and accounting/audit services.

 

We anticipate that our general and administrative expenses will increase during 2021 due to the increased expenses related to employee compensation and insurance costs.

 

Sale of Net Operating Losses (NOLs) & Tax Credits

 

Income obtained from selling unused net operating losses (NOLs) and unused research tax credits under the New Jersey Technology Business Tax Certificate Program was approximately $1.3 million and $1.1 million for the three months ended March 31, 2021 and 2020, respectively.

 

Other Income, net

 

Other income, net is largely comprised of interest income/(expense), dividends and franchise taxes.

 

Application of Critical Accounting Policies and Accounting Estimates

 

A critical accounting policy is one that is both important to the portrayal of our financial condition and results of operation and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

 

For a description of our significant accounting policies, refer to “Note 3 – Summary of Significant Accounting Policies” in our 2020 Form 10-K. Of these policies, the following are considered critical to an understanding of our Unaudited Condensed Consolidated Financial Statements as they require the application of the most difficult, subjective and complex judgments; (i) Stock-based compensation, (ii) Fair value measurements, (iii) Research and development costs, (iv) Goodwill and other intangible assets, and (v) Basic and diluted net loss per common share.

 

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Recent Accounting Pronouncements

 

Refer to “Note 3 – Summary of Significant Accounting Policies” in the Notes to Unaudited Condensed Consolidated Financial Statements for a discussion of recently adopted accounting pronouncements and their expected impact on our financial positions and results of operations.

 

Current Operating Trends

 

Our current R&D efforts are focused on advancing our lead LNC product candidates, MAT2203, through clinical development toward an initial indication for the treatment of CM, accelerating preclinical development of MAT2501 with the assistance of the CFF, and expanding application of our LNC platform delivery technology through collaborations with third parties. Our R&D expenses consist of manufacturing work and the cost of active pharmaceutical ingredients and excipients used in such work, fees paid to consultants for work related to clinical trial design and regulatory activities, fees paid to providers for conducting various clinical studies as well as for the analysis of the results of such studies, and for other medical research addressing the potential efficacy and safety of our drugs. We believe that significant investment in product development is a competitive necessity, and we plan to continue these investments in order to be in a position to realize the potential of our product candidates and proprietary technologies.

 

We expect that all of our R&D expenses in the near-term future will be incurred in support of our current and future preclinical and clinical development programs rather than technology development. These expenditures are subject to numerous uncertainties relating to timing and cost to completion. We test compounds in numerous preclinical studies for safety, toxicology and efficacy. At the appropriate time, subject to the approval of regulatory authorities, we expect to conduct early-stage clinical trials for each drug candidate. We anticipate funding these trials ourselves, and possibly with the assistance of federal grants, contracts or other agreements. As we obtain results from trials, we may elect to discontinue or delay clinical trials for certain products in order to focus our resources on more promising products. Completion of clinical trials may take several years, and the length of time generally varies substantially according to the type, complexity, novelty and intended use of a product candidate.

 

The commencement and completion of clinical trials for our products may be delayed by many factors, including lack of efficacy during clinical trials, unforeseen safety issues, slower than expected participant recruitment, lack of funding or government delays. In addition, we may encounter regulatory delays or rejections as a result of many factors, including results that do not support the intended safety or efficacy of our product candidates, perceived defects in the design of clinical trials and changes in regulatory policy during the period of product development. As a result of these risks and uncertainties, we are unable to accurately estimate the specific timing and costs of our clinical development programs or the timing of material cash inflows, if any, from our product candidates. Our business, financial condition and results of operations may be materially adversely affected by any delays in, or termination of, our clinical trials or a determination by the FDA that the results of our trials are inadequate to justify regulatory approval, insofar as cash in-flows from the relevant drug or program would be delayed or would not occur.

 

Results of Operations

 

The following tables summarizes our revenues and operating expenses for the comparative periods presented:

 

    Three Months Ended March 31,  
    2021     2020  
Revenues   $ 33     $

-

 
                 
Expenses:                
Research and development   $ 3,241     $ 4,087  
General and administrative     3,145       2,260  
Operating Expenses   $ 6,386     $ 6,347  
                 
Sale of net operating losses (NOLs)   $ 1,328     $ 1,073  

 

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Revenues. During the three months ended March 31, 2021 we generated revenue of approximately $33 thousand and $0 during the same period in 2020. The amount earned consists of contract research revenue resulting from the feasibility study agreement with Genentech Inc.

 

Research and Development expenses. Research and Development (R&D) expense for the three months ended March 31, 2021 and 2020 was approximately $3.2 million and $4.1 million, respectively. The decrease in R&D expenses was primarily due to the completion of the LYPDISO clinical trial in January 2021.

 

General and Administrative expenses. General and administrative expense for the three months ended March 31, 2021 and 2020 was approximately $3.1 million and $2.3 million, respectively, compared to the prior year. The increase in general and administrative expense was primarily due to higher compensation expense related to the exercise of stock options during the three months ended March 31, 2021.

 

Liquidity and capital resources

 

Sources of Liquidity

 

We have funded our operations since inception through private placements and public offerings of our equity securities. As of March 31, 2021, we have raised a total of approximately $156.7 million in gross proceeds and $143.9 million, net, from sales of our equity securities.

 

As of March 31, 2021, we had cash, cash equivalents and marketable securities totaling approximately $60.7 million.

 

2020 At-The-Market Sales Agreement

 

On July 2, 2020, we entered into an At-The-Market Sales Agreement (the “Sales Agreement”) with BTIG, LLC (“BTIG”), pursuant to which we may offer and sell, from time to time, through BTIG, as sales agent and/or principal, shares of our common stock having an aggregate offering price of up to $50,000,000, subject to certain limitations on the amount of common stock that may be offered and sold by us set forth in the Sales Agreement. BTIG will be paid a 3% commission on the gross proceeds from each sale. We may terminate the Sales Agreement at any time; BTIG may terminate the Sales Agreement in certain limited circumstances. As of December 31, 2020, we did not sell any shares of our common stock under the ATM Sales Agreement. For the three months ended March 31, 2021, the Company sold 3,023,147 shares of its common stock under its ATM Sales Agreement with BTIG, LLC, at an average price of $1.90, generating gross proceeds of approximately $5.8 million and net proceeds of approximately $5.6 million.

 

2020 Common Stock Offering

 

On January 14, 2020, we closed an underwritten public offering of our common stock. The offering resulted in the sale of approximately 32.3 million shares to the public at a price of $1.55 per share. We generated net proceeds of approximately $46.7 million. We granted the underwriters a 30-day option (the “option”) to purchase approximately 4.8 million additional shares of common stock subject to the same terms and conditions. No additional shares of our common stock were sold pursuant to this option.

 

Cash Flows

 

The following table sets forth the primary sources and uses of cash, cash equivalents and restricted cash for each of the periods set forth below:

 

    Three Months Ended March 31,  
    2021     2020  
Cash used in operating activities   $ (4,651 )   $ (4,664 )
Cash provided by/(used in) investing activities     8,817       (54,968 )
Cash provided by financing activities`     6,785       47,439  
Net increase/(decrease) in cash and cash equivalents and restricted cash   $ 10,951     $ (12,193 )

 

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Operating Activities

 

Net cash used in operating activities was approximately $4.7 million for the three-month periods ended March 31, 2021 and 2020, respectively. For each period, a net loss of approximately $5.0 million was partially offset by working capital adjustments due to the timing of receipts and payments in the ordinary course of business. We expect that there will be an increase in cash used in operations during the remainder of 2021 due to higher research and development expenses as we continue to move our product candidates and delivery platform forward in their development cycles.

 

Investing Activities

 

Approximately $8.8 million provided by and approximately $55.0 million of cash used in investing activities for the three-month periods ended March 31, 2021 and 2020, respectively. The increase of approximately $63.8 million was primarily due to the approximately $6.7 million increase in proceeds received from maturities of our marketable securities and the decrease of approximately $57.1 million in purchases of marketable securities as compared to March 31, 2020.

 

Financing Activities

 

Net cash provided by financing activities was approximately $6.8 million and approximately $47.4 million for the three-months periods ended March 31, 2021 and 2020, respectively. The decrease of approximately $40.6 million in cash provided by financing activities was primarily due to the approximately $5.6 million of net proceeds from the January 2021 ATM sales of our common stock compared to the approximately $46.6 million of net proceeds from the March 2020 public offering of common stock and a decrease of approximately $0.8 million from the exercising of warrants, offset by an increase of approximately $1.2 million from the exercising of stock options.

 

Funding Requirements and Other Liquidity Matters

 

We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. We anticipate that our expenses will increase substantially if and as we:

 

conduct further preclinical and clinical studies of MAT2203, our lead product candidate, even if such studies are primarily financed with non-dilutive funding from NIH;
   
support the conduct of further clinical studies of MAT2501, even if such studies are primarily financed with non-dilutive funding from the CFF;
   
seek to discover and develop additional product candidates;
   
seek regulatory approvals for any product candidates that successfully complete clinical trials;
   
require the manufacture of larger quantities of product candidates for clinical development and potentially commercialization;
   
maintain, expand and protect our intellectual property portfolio;
   
hire additional clinical, quality control and scientific personnel; and
   
add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts and personnel and infrastructure necessary to help us comply with our obligations as a public company.

 

We expect that our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditures requirements into 2024.

 

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Until such time, if ever, that we can generate product revenues sufficient to achieve profitability, we expect to finance our cash needs through a combination of private and public equity offerings, debt financings, government or other third-party funding, collaborations and licensing arrangements. We do not have any committed external source of funds other than limited grant funding from the CFF and NIH. To the extent that we raise additional capital through the sale of common stock, convertible securities or other equity securities, the ownership interest of our stockholders may be materially diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights of our common stockholders. Debt financing and preferred equity financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely impact our ability to conduct our business. Securing additional financing could require a substantial amount of time and attention from our management and may divert a disproportionate amount of their attention away from day-to-day activities, which may adversely affect our management’s ability to oversee the development of our product candidates.

 

If we raise additional funds through collaborations, strategic alliances or marketing, distribution, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

 

Contractual Obligations and Commitments

 

There have been no material changes from the disclosures relating to our contractual obligations reported in our Annual Report on Form 10-K for the year ended December 31, 2020.

 

Off-Balance Sheet Arrangements

 

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules, such as relationships with unconsolidated entities or financial partnerships, which are often referred to as structured finance or special purpose entities, established for the purpose of facilitating financing transactions that are not required to be reflected on our balance sheets.

 

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Our exposure to market risk is limited to our cash, cash equivalents and marketable securities. As of March 31, 2021, we had $60.7 million in cash, cash equivalents and marketable securities. Such interest-earning instruments carry a degree of interest rate risk. The primary objectives of our investment activities are to preserve principal, provide liquidity and maximize income without significantly increasing risk. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates. However, because of the short-term nature of the instruments in our portfolio, a sudden change in market interest rates would not be expected to have a material impact on our financial condition and/or results of operation. We do not have any foreign currency or other derivative financial instruments.

 

Item 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures.

 

Disclosure Controls and Procedures:

 

As of March 31, 2020, under the supervision and with the participation of our principal executive officer and principal financial officer we have evaluated, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2020.

 

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Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in the reports that we filed or submitted under the Exchange Act is recorded, processed, summarized and reported within time periods specified by the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

 

Changes in Internal Control Over Financial Reporting

 

During the quarter ended March 31, 2021, we completed the implementation of a new enterprise resource planning (ERP) system. Upon completion of the implementation process, the new ERP system replaced a legacy software application and became our primary accounting and financial reporting system. As a result of the conversion to the new ERP system, various changes have been made to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) to incorporate modifications in our accounting procedures and business processes. There were no other changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART - II OTHER INFORMATION

 

Item 1. LEGAL PROCEEDSINGS

 

None.

 

Item 1A. RISK FACTORS

 

There were no material changes from the risk factors set forth under Part I, Item 1A., “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. You should carefully consider the risk factors contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 in addition to the other information set forth in this report which could materially affect our business, financial condition or future results. The risks and uncertainties described in this report and in our Annual Report on Form 10-K for the year ended December 31, 2020, as well as other reports and statements that we file with the SEC, are not the only risks and uncertainties facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also have a material adverse effect on our financial position, results of operations or cash flows.

 

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

 

None.

 

Item 3. DEFAULTS UNDER SENIOR SECURITIES

 

None.

 

Item 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

Item 5. OTHER INFORMATION

 

Not applicable.

 

Item 6. EXHIBITS

 

See the Exhibit Index following the signature page to this Quarterly Report on Form 10-Q for a list of exhibits filed or furnished with this report, which Exhibit Index is incorporated herein by reference.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  MATINAS BIOPHARMA HOLDINGS, INC.
   
  BY:
   
  /s/ Jerome D. Jabbour
Dated: May 10, 2021 Jerome D. Jabbour
  Chief Executive Officer (Principal Executive Officer)
   
  /s/ Keith A. Kucinski
Dated: May 10, 2021 Keith A. Kucinski
  Chief Financial Officer
  (Principal Financial and Accounting Officer)

 

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EXHIBIT INDEX

 

*31.1 Certification of Chief Executive Officer
*31.2 Certification of Chief Financial Officer
**32.1 Section 1350 Certifications
*101.1 XBRL Instance Document.
*101.2 XBRL Taxonomy Extension Schema Document.
*101.3 XBRL Taxonomy Extension Calculation Linkbase Document.
*101.4 XBRL Taxonomy Extension Definition Linkbase Document.
*101.5 XBRL Taxonomy Extension Label Linkbase Document.
*101.6 XBRL Taxonomy Extension Presentation Linkbase Document.
* Filed herewith.

 

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