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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
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|
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2024
OR
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☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from XXXXXXXX XX, XXXX to XXXXXXXX XX, XXXX
Commission File Number: 001-35610
ATOSSA THERAPEUTICS, INC.
(Exact Name of Registrant as Specified in its Charter)
|
|
Delaware |
26-4753208 |
( State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer
Identification No.) |
10202 5th Avenue NE, Suite 200 Seattle, Washington |
98125 |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (206) 588-0256
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
Common Stock, $0.18 par value |
|
ATOS |
|
The Nasdaq Capital Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
|
☐ |
|
Accelerated filer |
|
☐ |
Non-accelerated filer |
|
☒ |
|
Smaller reporting company |
|
☒ |
Emerging growth company |
|
☐ |
|
|
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of August 1, 2024, the registrant had 125,757,416 shares of common stock, $0.18 par value per share, outstanding.
ATOSSA THERAPEUTICS, INC.
QUARTERLY REPORT
FORM 10-Q
TABLE OF CONTENTS
PART I—FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
ATOSSA THERAPEUTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share and per share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
Assets |
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
79,526 |
|
|
$ |
88,460 |
|
Restricted cash |
|
|
110 |
|
|
|
110 |
|
Prepaid materials |
|
|
1,095 |
|
|
|
1,487 |
|
Prepaid expenses and other current assets |
|
|
987 |
|
|
|
2,162 |
|
Total current assets |
|
|
81,718 |
|
|
|
92,219 |
|
Investment in equity securities |
|
|
1,710 |
|
|
|
1,710 |
|
Other assets |
|
|
2,430 |
|
|
|
2,323 |
|
Total assets |
|
$ |
85,858 |
|
|
$ |
96,252 |
|
Liabilities and stockholders' equity |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Accounts payable |
|
$ |
1,056 |
|
|
$ |
806 |
|
Accrued expenses |
|
|
1,907 |
|
|
|
973 |
|
Payroll liabilities |
|
|
939 |
|
|
|
1,654 |
|
Other current liabilities |
|
|
1,794 |
|
|
|
1,803 |
|
Total current liabilities |
|
|
5,696 |
|
|
|
5,236 |
|
Total liabilities |
|
|
5,696 |
|
|
|
5,236 |
|
Commitments and contingencies (Note 13) |
|
|
|
|
|
|
Stockholders' equity |
|
|
|
|
|
|
Convertible preferred stock - $0.001 par value; 10,000,000 shares authorized;
582 shares issued and outstanding as of June 30, 2024 and December 31, 2023 |
|
|
— |
|
|
|
— |
|
Common stock - $0.18 par value; 350,000,000 and 175,000,000 shares authorized
as of June 30, 2024 and December 31, 2023, respectively; 125,757,416
and 125,304,064 shares issued and outstanding as of June 30, 2024 and
December 31, 2023, respectively |
|
|
22,874 |
|
|
|
22,792 |
|
Additional paid-in capital |
|
|
256,978 |
|
|
|
255,987 |
|
Treasury stock, at cost; 1,320,046 shares of common stock at June 30, 2024 and
December 31, 2023 |
|
|
(1,475 |
) |
|
|
(1,475 |
) |
Accumulated deficit |
|
|
(198,215 |
) |
|
|
(186,288 |
) |
Total stockholders' equity |
|
|
80,162 |
|
|
|
91,016 |
|
Total liabilities and stockholders' equity |
|
$ |
85,858 |
|
|
$ |
96,252 |
|
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
ATOSSA THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except share and per share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, |
|
|
|
For the Six Months Ended June 30, |
|
|
|
2024 |
|
|
2023 |
|
|
|
2024 |
|
|
2023 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
$ |
3,553 |
|
|
$ |
3,705 |
|
|
|
$ |
7,302 |
|
|
$ |
7,213 |
|
General and administrative |
|
|
3,552 |
|
|
|
4,088 |
|
|
|
|
6,784 |
|
|
|
7,678 |
|
Total operating expenses |
|
|
7,105 |
|
|
|
7,793 |
|
|
|
|
14,086 |
|
|
|
14,891 |
|
Operating loss |
|
|
(7,105 |
) |
|
|
(7,793 |
) |
|
|
|
(14,086 |
) |
|
|
(14,891 |
) |
Impairment charge on investment in equity securities |
|
|
— |
|
|
|
(2,990 |
) |
|
|
|
— |
|
|
|
(2,990 |
) |
Interest income |
|
|
1,073 |
|
|
|
983 |
|
|
|
|
2,211 |
|
|
|
1,833 |
|
Other expense, net |
|
|
(17 |
) |
|
|
(30 |
) |
|
|
|
(52 |
) |
|
|
(63 |
) |
Loss before income taxes |
|
|
(6,049 |
) |
|
|
(9,830 |
) |
|
|
|
(11,927 |
) |
|
|
(16,111 |
) |
Income tax benefit |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
Net loss |
|
|
(6,049 |
) |
|
|
(9,830 |
) |
|
|
|
(11,927 |
) |
|
|
(16,111 |
) |
Net loss per share of common stock - basic and diluted |
|
$ |
(0.05 |
) |
|
$ |
(0.08 |
) |
|
|
$ |
(0.10 |
) |
|
$ |
(0.13 |
) |
Weighted average shares outstanding used to compute
net loss per share - basic and diluted |
|
|
125,732,140 |
|
|
|
126,622,798 |
|
|
|
|
125,525,959 |
|
|
|
126,623,450 |
|
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
ATOSSA THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(amounts in thousands, except share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
Convertible Preferred Stock |
|
|
Common Stock |
|
|
Additional |
|
|
Treasury Stock |
|
|
Accumulated |
|
|
Stockholders |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Paid-in Capital |
|
|
Amount |
|
|
Deficit |
|
|
Equity |
|
Balance at December 31, 2022 |
|
|
582 |
|
|
$ |
— |
|
|
|
126,624,110 |
|
|
$ |
22,792 |
|
|
$ |
251,366 |
|
|
$ |
— |
|
|
$ |
(156,194 |
) |
|
$ |
117,964 |
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,573 |
|
|
|
— |
|
|
|
— |
|
|
|
1,573 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(6,281 |
) |
|
|
(6,281 |
) |
Balance at March 31, 2023 |
|
|
582 |
|
|
$ |
— |
|
|
|
126,624,110 |
|
|
$ |
22,792 |
|
|
$ |
252,939 |
|
|
$ |
— |
|
|
$ |
(162,475 |
) |
|
$ |
113,256 |
|
Common stock repurchased |
|
|
— |
|
|
|
— |
|
|
|
(119,382 |
) |
|
|
— |
|
|
|
— |
|
|
|
(152 |
) |
|
|
— |
|
|
|
(152 |
) |
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,603 |
|
|
|
— |
|
|
|
— |
|
|
|
1,603 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(9,830 |
) |
|
|
(9,830 |
) |
Balance at June 30, 2023 |
|
|
582 |
|
|
$ |
— |
|
|
|
126,504,728 |
|
|
$ |
22,792 |
|
|
$ |
254,542 |
|
|
$ |
(152 |
) |
|
$ |
(172,305 |
) |
|
$ |
104,877 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
Convertible Preferred Stock |
|
|
Common Stock |
|
|
Additional |
|
|
Treasury Stock |
|
|
Accumulated |
|
|
Stockholders' |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Paid-in Capital |
|
|
Amount |
|
|
Deficit |
|
|
Equity |
|
Balance at December 31, 2023 |
|
|
582 |
|
|
$ |
— |
|
|
|
125,304,064 |
|
|
$ |
22,792 |
|
|
$ |
255,987 |
|
|
$ |
(1,475 |
) |
|
$ |
(186,288 |
) |
|
$ |
91,016 |
|
Issuance of common stock upon warrant exercise |
|
|
— |
|
|
|
— |
|
|
|
203,750 |
|
|
|
37 |
|
|
|
167 |
|
|
|
— |
|
|
|
— |
|
|
|
204 |
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
417 |
|
|
|
— |
|
|
|
— |
|
|
|
417 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5,878 |
) |
|
|
(5,878 |
) |
Balance at March 31, 2024 |
|
|
582 |
|
|
$ |
— |
|
|
|
125,507,814 |
|
|
$ |
22,829 |
|
|
$ |
256,571 |
|
|
$ |
(1,475 |
) |
|
$ |
(192,166 |
) |
|
$ |
85,759 |
|
Issuance of common stock upon warrant exercise |
|
|
— |
|
|
|
— |
|
|
|
100,000 |
|
|
|
18 |
|
|
|
82 |
|
|
|
— |
|
|
|
— |
|
|
|
100 |
|
Issuance of common stock upon option exercise |
|
|
— |
|
|
|
— |
|
|
|
268,998 |
|
|
|
48 |
|
|
|
180 |
|
|
|
— |
|
|
|
— |
|
|
|
228 |
|
Shares withheld related to cashless exercise of options and taxes |
|
|
— |
|
|
|
— |
|
|
|
(119,396 |
) |
|
|
(21 |
) |
|
|
(207 |
) |
|
|
— |
|
|
|
— |
|
|
|
(228 |
) |
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
352 |
|
|
|
— |
|
|
|
— |
|
|
|
352 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(6,049 |
) |
|
|
(6,049 |
) |
Balance at June 30, 2024 |
|
|
582 |
|
|
$ |
— |
|
|
|
125,757,416 |
|
|
$ |
22,874 |
|
|
$ |
256,978 |
|
|
$ |
(1,475 |
) |
|
$ |
(198,215 |
) |
|
$ |
80,162 |
|
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
ATOSSA THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30, |
|
|
|
2024 |
|
|
2023 |
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
Net loss |
|
$ |
(11,927 |
) |
|
$ |
(16,111 |
) |
Adjustments to reconcile net loss to net cash used in operating activities |
|
|
|
|
|
|
Stock-based compensation |
|
|
769 |
|
|
|
3,176 |
|
Impairment charge on investment in equity securities |
|
|
— |
|
|
|
2,990 |
|
Depreciation |
|
|
9 |
|
|
|
6 |
|
Loss on disposal of assets |
|
|
4 |
|
|
|
— |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Prepaid materials |
|
|
392 |
|
|
|
785 |
|
Prepaid expenses and other current assets |
|
|
1,175 |
|
|
|
(91 |
) |
Other assets |
|
|
(111 |
) |
|
|
— |
|
Accounts payable |
|
|
250 |
|
|
|
(1,943 |
) |
Accrued expenses |
|
|
934 |
|
|
|
(256 |
) |
Payroll liabilities |
|
|
(715 |
) |
|
|
(70 |
) |
Other current liabilities |
|
|
(9 |
) |
|
|
27 |
|
Net cash used in operating activities |
|
|
(9,229 |
) |
|
|
(11,487 |
) |
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(9 |
) |
|
|
(13 |
) |
Net cash used in investing activities |
|
|
(9 |
) |
|
|
(13 |
) |
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
Proceeds from exercise of warrants |
|
|
304 |
|
|
|
— |
|
Net cash provided by financing activities |
|
|
304 |
|
|
|
— |
|
|
|
|
|
|
|
|
NET DECREASE IN CASH, CASH EQUIVALENTS AND
RESTRICTED CASH |
|
|
(8,934 |
) |
|
|
(11,500 |
) |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING
BALANCE |
|
|
88,570 |
|
|
|
111,000 |
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, ENDING
BALANCE |
|
$ |
79,636 |
|
|
$ |
99,500 |
|
|
|
|
|
|
|
|
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND
RESTRICTED CASH |
|
|
|
|
|
|
Cash and cash equivalents |
|
|
79,526 |
|
|
$ |
99,390 |
|
Restricted cash |
|
|
110 |
|
|
|
110 |
|
Total cash, cash equivalents and restricted cash |
|
$ |
79,636 |
|
|
$ |
99,500 |
|
NON CASH INVESTING AND FINANCING ACTIVITIES |
|
|
|
|
|
|
Unsettled trades for repurchase of common stock |
|
$ |
— |
|
|
$ |
152 |
|
Common stock issued upon cashless exercise of stock options |
|
$ |
228 |
|
|
$ |
— |
|
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
ATOSSA THERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except for share and per share data or as otherwise indicated)
(Unaudited)
NOTE 1: NATURE OF OPERATIONS
Atossa Therapeutics, Inc. (the Company) was incorporated on April 30, 2009, in the State of Delaware to develop and market medical devices, laboratory tests and therapeutics to address breast health conditions. The Company is focused on developing proprietary innovative medicines in areas of significant unmet medical need in oncology, with a focus on breast cancer and other breast conditions.
NOTE 2: LIQUIDITY AND CAPITAL RESOURCES
The Company has incurred net losses and negative operating cash flows since inception. For the six months ended June 30, 2024, the Company recorded a net loss of $11.9 million and used $9.2 million of cash in operating activities. As of June 30, 2024, the Company had $79.5 million in cash and cash equivalents and working capital of $76.0 million. The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs, and it believes it will need to continue to raise substantial additional capital to accomplish its business plan over the next several years. Management believes its currently available cash and cash equivalents will be sufficient to finance the Company’s operations for at least one year from the date these Condensed Consolidated Financial Statements are issued. The Company plans to continue to fund its losses from operations and capital funding needs through a combination of public or private equity offerings, debt financings or other sources, including potential corporate collaborations, licenses and other similar arrangements. There can be no assurance as to the availability or terms upon which such financing and capital might be available in the future. If the Company is unable to secure additional funding, it may be forced to curtail or suspend its business plans.
NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all information and notes required by GAAP for complete financial statements. However, except as disclosed herein, there has been no material changes in the information disclosed in the Notes to Consolidated Financial Statements included in the Annual Report on Form 10-K of the Company for the year ended December 31, 2023. The year-end Condensed Consolidated Balance Sheet presented in this report was derived from audited consolidated financial statements but does not include all annual disclosures required by GAAP. All amounts in the Condensed Consolidated Financial Statements and the notes thereto have been presented in thousands, except for par value, share and per share data or as otherwise indicated.
In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included and have been prepared on the same basis as the annual consolidated financial statements. Operating results for the six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.
Reclassification
Certain reclassifications have been made to prior period financial information to conform to the current year presentation.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management 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 and the reported amounts of expenses during the reporting period. Significant estimates and assumptions reflected in these financial statements include the valuation of the investment in non-marketable equity securities, stock-based compensation expense, and prepaid or accrued clinical trial balances at the end of any reporting period. Actual results could differ materially from the Company’s estimates.
Segments
The Company operates as a single segment. Operating segments are identified as the components of an enterprise of which separate discrete financial information is available for evaluation by the chief operating decision maker in making decisions regarding resource allocation and in assessing performance. To date, the Company's chief operating decision maker has made such decisions and assessed performance at the Company-level as a single segment.
Cash and Cash Equivalents
Cash and cash equivalents include unrestricted cash and all highly liquid instruments with original maturities of three months or less at the date of purchase. Cash equivalents consist primarily of amounts invested in money market accounts.
Restricted Cash
The Company’s restricted cash balance as of June 30, 2024 and December 31, 2023 consisted entirely of cash pledged as security for the Company’s issued commercial credit cards.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of deposits of cash and cash equivalents, including those deposited in money market deposit accounts. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any material losses in such accounts and believes it is not exposed to significant risk. The Company has invested its excess cash primarily in money market funds.
Prepaid Materials
The Company capitalizes its purchase of certain raw materials, active pharmaceutical ingredients and related supplies for use in the manufacturing of drug products for use in our preclinical and clinical development programs, as it has determined that these materials have alternative future use. The Company can use these raw materials and related supplies in multiple clinical drug products, and therefore have future use independent of the development status of any particular drug program until it is utilized in the manufacturing process. The Company expenses the cost of materials when used. The Company periodically reviews these capitalized materials for continued alternative future use and write down the asset to its net realizable value in the period in which an impairment is identified. Prepaid materials not expected to be used within 12 months of the balance sheet date are presented in Other assets on the Condensed Consolidated Balance Sheets.
Investments in Equity Securities
The Company has one investment in non-marketable equity securities. This investment does not have a readily determinable fair value, so the Company has elected to measure the investment at cost less any impairment, adjusted to fair value if there are observable price changes in orderly transactions for an identical or similar investment of the same issuer, in accordance with Accounting Standards Codification (ASC) 321, Investments – Equity Securities. At each reporting period, the Company performs an assessment to determine if it still qualifies for this measurement alternative.
At each reporting period, the Company makes a qualitative assessment considering impairment indicators to evaluate whether the investment is impaired. If a qualitative assessment indicates the investment is impaired, the Company estimates the investment's fair value. If the fair value is less than the investment's carrying value, an impairment charge is recorded in the Condensed Consolidated Statements of Operations equal to the difference between the carrying value and fair value and a new basis in the investment is established. Refer to Note 4.
Other Assets
Other assets consist of property and equipment, noncurrent prepaid materials and clinical deposits.
Fair Value Measurements
The Company has certain financial assets and liabilities recorded at fair value which have been classified as Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements.
The fair value hierarchy is broken down into the three input levels summarized below:
•Level 1: Quoted market prices in active markets for identical assets or liabilities;
•Level 2: Other observable market-based inputs or unobservable inputs that are corroborated by market data; and
•Level 3: Unobservable inputs that cannot be corroborated by market data that reflects the reporting entity's own assumptions.
The carrying amounts reflected in the accompanying Condensed Consolidated Balance Sheets for cash and cash equivalents, restricted cash, and accounts payable approximate their fair values due to their short-term nature. Refer to Note 9.
Research and Development
Research and development (R&D) costs are generally expensed as incurred. R&D expenses include, for example, manufacturing expenses for the Company's drugs under development, expenses associated with preclinical studies, clinical trials and associated salaries, bonuses, stock-based compensation and benefits. The Company has entered into various research and development contracts with research institutions, clinical research organizations (CROs), clinical manufacturing organizations (CMOs) and other third parties. Payments for these activities are based on the terms of the individual agreements, which may differ from the timing of costs incurred. The Company records accruals for estimated costs incurred for ongoing research and development activities as reflected in the Condensed Consolidated Balance Sheets as accrued expenses. Payments made in advance of incurring costs are reflected in the Condensed Consolidated Balance Sheets as prepaid expenses. When evaluating the adequacy of the accrued expenses and prepaid expenses, the Company analyzes progress of the services, including the phase or completion of events, invoices received and contracted costs.
R&D expenses also include an allocation of the CEO's salary and related benefits, including bonus and non-cash stock-based compensation expense, based on an estimate of his total hours spent on R&D activities. The Company's CEO is involved in the development of the Company's drug candidates and oversight of the related clinical trial activities and also acts as the Company's chief medical officer.
Stock-based Compensation
The Company measures and recognizes compensation expense for all stock-based awards made to employees, officers, non-employee directors, and other key persons providing services to the Company, currently limited to stock options. Stock-based compensation is measured using the estimated grant date fair value and is recognized as an expense over the requisite service period, generally the vesting period. The Company has made a policy election to recognize forfeitures when they occur.
The fair value of each stock option grant is estimated using the Black-Scholes option-pricing model, which requires assumptions regarding the expected volatility of the price of the Company's common stock, the expected life of the options, an expectation regarding future dividends on the Company’s common stock, and a risk-free interest rate. The Company’s expected common stock price volatility assumption is based upon the historical volatility of its stock price. The Company has elected the simplified method for the expected life assumption for stock option grants, which averages the contractual term of the options of 10 years with the vesting term, typically one to four years, as the Company does not have sufficient option exercise experience. The dividend yield assumption of zero is based upon the fact that the Company has never paid cash dividends and presently has no intention of paying cash dividends in the future. The risk-free interest rate assumption is based upon prevailing short-term interest rates over the expected life of the options as of the grant date.
Income Taxes
The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered or settled. Realization of deferred tax assets is dependent upon future taxable income. A valuation allowance is recognized if it is more likely than not that some portion or all of a deferred tax asset will not be realized based on the weight of available evidence, including expected future earnings. The Company recognizes an uncertain tax position in its financial statements when it concludes that a tax position is more likely than not to be sustained upon examination based solely on its technical merits. Only after a tax position passes the first step of recognition will measurement be required. Under the measurement step, the tax benefit is measured as the largest amount of benefit that is more likely than not to be realized upon effective settlement. This is determined on a cumulative probability basis. The full impact of any change in recognition or measurement is reflected in the period in which such change occurs. The Company records any interest or penalties related to income taxes in income tax benefit in the Condensed Consolidated Statements of Operations.
Variable Interest Entities
The Company reviews agreements it enters into with third-party entities, pursuant to which the Company may have a variable interest in the entity, in order to determine if the entity is a variable interest entity (VIE). If the entity is a VIE, the Company assesses whether or not it is the primary beneficiary of that entity. In determining whether the Company is the primary beneficiary of an entity, the Company applies a qualitative approach that determines whether it has both (i) the power to direct the economically significant activities of the entity and (ii) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to that entity. If the Company determines it is the primary beneficiary of a VIE, it consolidates that VIE into the Company’s Condensed Consolidated Financial Statements. The Company’s determination about whether it should consolidate such VIEs is made continuously as changes to existing relationships or future transactions may result in a consolidation or deconsolidation event. The Company currently does not consolidate any VIEs.
Recently Issued Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This standard requires disclosure of significant segment expenses and other segment items by reportable segment. This ASU becomes effective for annual periods beginning in 2024 and interim periods in 2025. The Company is assessing the potential impact of this ASU.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This standard enhances disclosures related to income taxes, including the rate reconciliation and information on income taxes paid. This ASU becomes effective on January 1, 2025. The Company is currently assessing the potential impact of this ASU.
The Company does not expect adoption of any other recently issued accounting pronouncements to have a material impact on its financial statements.
NOTE 4: INVESTMENT IN EQUITY SECURITIES
The Company holds an investment in Dynamic Cell Therapies, Inc. (DCT), a U.S. private company that is in the pre-clinical stage of developing novel Chimeric Antigen Receptor (CAR) T-cell therapies based on technology licensed from a leading U.S. cancer treatment and research institution. The Company determined that DCT is a VIE however, the Company does not consolidate DCT because it does not have the power to direct economically significant activities. The Company has no obligation to provide any future funding to DCT and its maximum exposure to loss is its investment value, which is recorded in the Condensed Consolidated Balance Sheets as an Investment in equity securities.
In 2023, the Company considered adverse changes in the general market condition of the industry in which DCT operates and continued concerns about DCT's ability to continue as a going concern. Based on these impairment indicators, the Company performed a quantitative fair value measurement in the second quarter of 2023.
The assumptions and estimates used to estimate the fair value of the investment include the following information from DCT:
•Unaudited financial statements;
•Projected technological developments of DCT;
•Then-current fundraising transactions;
•Then-current ability of DCT to raise additional financing when needed;
•Changes in the economic environment which may have a material impact on the operating results of DCT; and
•Timing of a deemed liquidation event occurring.
The impairment of the Company's investment in equity securities required the estimation of fair value using unobservable inputs (a Level 3 fair value measurement). The Company used the dynamic options approach, which requires assumptions regarding the expected average volatility of comparable companies, the expected term of the investment, and the risk-free interest rate over the expected term of the investment. The expected stock price volatility assumption was based upon the average historic volatility of comparable public clinical stage immunotherapy or CAR-T companies. The expected term of the Company's investment was 3.5 years and the risk-free interest rate used was based upon prevailing short-term interest rates over the expected term of the investment. The dynamic options approach was weighted at a 50% outcome probability. An adjusted book value approach was also considered and also weighted at a 50% probability due to DCT's limited cash on hand, the status of current fundraising efforts and the estimated timing of a deemed liquidation event occurring. The Company recorded an impairment charge of $3.0 million for the three and six months ended June 30, 2023. No impairment charge was recorded during the three and six months ended June 30, 2024.
NOTE 5: PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
As of June 30, |
|
|
December 31, |
|
|
|
2024 |
|
|
2023 |
|
Prepaid clinical trial deposits |
|
$ |
233 |
|
|
$ |
805 |
|
Prepaid insurance |
|
|
353 |
|
|
|
794 |
|
Prepaid professional services |
|
|
226 |
|
|
|
501 |
|
Other |
|
|
175 |
|
|
|
62 |
|
Total prepaid expenses and other current assets |
|
$ |
987 |
|
|
$ |
2,162 |
|
NOTE 6: ACCRUED EXPENSES
Accrued expenses consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
As of June 30, |
|
|
December 31, |
|
|
|
2024 |
|
|
2023 |
|
Accrued clinical trial costs |
|
$ |
1,426 |
|
|
$ |
608 |
|
Accrued professional services and other |
|
|
481 |
|
|
|
365 |
|
Total accrued expenses |
|
$ |
1,907 |
|
|
$ |
973 |
|
NOTE 7: PAYROLL LIABILITIES
Payroll liabilities consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
As of June 30, |
|
|
December 31, |
|
|
|
2024 |
|
|
2023 |
|
Accrued bonuses |
|
$ |
564 |
|
|
$ |
1,134 |
|
Accrued vacation |
|
|
244 |
|
|
|
236 |
|
Accrued payroll and benefits |
|
|
131 |
|
|
|
284 |
|
Total payroll liabilities |
|
$ |
939 |
|
|
$ |
1,654 |
|
NOTE 8: RESEARCH AND DEVELOPMENT REBATE LIABILITY
In 2017, the Company formed a wholly owned subsidiary in Australia called Atossa Genetics AUS Pty Ltd. The purpose of this subsidiary is to perform R&D activities, including some of the Company's clinical trials. Australia offers R&D cash rebates on qualified R&D activities incurred in the country. The Australian R&D tax incentive program is a self-assessment program, and as such, the Australian Taxation Office (ATO) has the right to review the Company’s program and related expenditures for a period of four years following the tax return filing date. If a review were to occur, a qualified program and related expenditures could be disqualified by the ATO with interest and penalties. Based on the Company's evaluation of the ATO's taxpayer alert in December 2023, the Company believes that it is not reasonably assured that the full tax position would be sustained under audit. Accordingly, as of June 30, 2024 and December 31, 2023, a liability of $1.8 million was included in Other current liabilities in the Condensed Consolidated Balance Sheets.
NOTE 9: FAIR VALUE OF FINANCIAL INSTRUMENTS
The following tables present the Company’s fair value hierarchy for all its financial assets and liabilities, by major security type, measured at fair value on a recurring basis (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2024 |
|
Estimated Fair Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Money market fund |
|
$ |
78,689 |
|
|
$ |
78,689 |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2023 |
|
Estimated Fair Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Money market fund |
|
$ |
88,029 |
|
|
$ |
88,029 |
|
|
$ |
— |
|
|
$ |
— |
|
NOTE 10: STOCKHOLDERS’ EQUITY
Common Stock
On June 27, 2024, the Company’s stockholders approved an amendment of the Company’s Amended and Restated Certificate of Incorporation to increase the number of authorized shares of the Company’s common stock, par value $0.18 per share, from 175,000,000 to 350,000,000. As of June 30, 2024, the Company is authorized to issue 350,000,000 shares of common stock, par value $0.18 per share.
Share Repurchases
On June 27, 2023, the Board of Directors (the Board) authorized a program to repurchase shares of common stock, par value $0.18 per share, up to an aggregate market value of $10.0 million. On December 18, 2023, the Board authorized an extension of the program through December 31, 2024. The Board may suspend, modify, or terminate the share repurchase program at any time. During the three and six months ended June 30, 2024, no shares were repurchased. During the three and six months ended June 30, 2023, 119,382 shares were purchased for a cost of $0.2 million.
Preferred Stock
The Company is authorized to issue a total of 10,000,000 shares of preferred stock, par value $0.001 per share. The Company has designated 750,000 shares of Series A junior participating preferred stock, par value $0.001 per share, 4,000 shares of Series A
convertible preferred stock, par value $0.001 per share, 25,000 shares of Series B convertible preferred stock, par value $0.001 per share, and 20,000 shares of Series C convertible preferred stock, par value $0.001 per share, through the filings of certificates of designation with the Delaware Secretary of State. No shares of Series A junior participating preferred stock, Series A convertible preferred stock, or Series C convertible preferred stock, were outstanding as of June 30, 2024 and December 31, 2023.
Series B Convertible Preferred Stock
Conversion. Each share of Series B convertible preferred stock is convertible at the Company’s option at any time, or at the option of the holder at any time, into the number of shares of the Company’s common stock determined by dividing the $1,000 stated value per share of the Series B convertible preferred stock by a conversion price of $3.52 per share. In addition, the conversion price per share is subject to adjustment for stock dividends, distributions, subdivisions, combinations, or reclassifications. Subject to limited exceptions, a holder of the Series B convertible preferred stock will not have the right to convert any portion of the Series B convertible preferred stock to the extent that, after giving effect to the conversion, the holder, together with its affiliates, would beneficially own in excess of 9.99% of the number of shares of the Company's common stock outstanding immediately after giving effect to its conversion.
During the three and six months ended June 30, 2024 and 2023, there were no conversions of Series B convertible preferred stock.
Fundamental Transactions. In the event the Company effects certain mergers, consolidations, sales of substantially all of its assets, tender or exchange offers, reclassifications, or share exchanges in which its common stock is effectively converted into or exchanged for other securities, cash or property, the Company consummates a business combination in which another person acquires 50% of the outstanding shares of its common stock, or any person or group becomes the beneficial owner of 50% of the aggregate ordinary voting power represented by its issued and outstanding common stock, then, upon any subsequent conversion of the Series B convertible preferred stock, the holders of the Series B convertible preferred stock will have the right to receive any shares of the acquiring corporation or other consideration it would have been entitled to receive if it had been a holder of the number of shares of common stock then issuable upon conversion in full of the Series B convertible preferred stock.
Dividends. Holders of Series B convertible preferred stock shall be entitled to receive dividends (on an as-if-converted-to-common-stock basis) in the same form as dividends actually paid on shares of the common stock when, as and if such dividends are paid on shares of common stock. The Company’s preferred stock contractually entitles the holders of such securities to participate in dividends but do not contractually require the holders of such securities to participate in losses of the Company.
Voting Rights. Except as otherwise provided in the certificate of designation or as otherwise required by law, the Series B convertible preferred stock has no voting rights.
Liquidation Preference. Upon the Company’s liquidation, dissolution or winding-up, whether voluntary or involuntary, holders of Series B convertible preferred stock will be entitled to receive out of the Company’s assets, whether capital or surplus, the same amount that a holder of common stock would receive if the Series B convertible preferred stock were fully converted (disregarding for such purpose any conversion limitations under the certificate of designation) to common stock, which amounts shall be paid pari passu with all holders of common stock.
Redemption Rights. The Company is not obligated to redeem or repurchase any shares of Series B convertible preferred stock. Shares of Series B convertible preferred stock are not otherwise entitled to any redemption rights, or mandatory sinking fund or analogous provisions.
2021 and 2020 Warrants
The warrants were issued to institutional and accredited investors as a part of the financing transactions, which closed on December 11, 2020, December 21, 2020, December 28, 2020, January 8, 2021, and March 23, 2021. The terms and conditions of the warrants are as follows:
Exercisability. Each warrant is exercisable at any time and will expire between 4 and 4.5 years from the date of issuance. The warrants are exercisable, at the option of each holder, in whole or in part by delivering to the Company a duly executed exercise notice and payment in full for the number of shares of the Company’s common stock purchased upon such exercise, except in the case of a cashless exercise as discussed below. The number of shares of common stock issuable upon exercise of the warrants is subject to adjustment in certain circumstances, including a stock split or, stock dividend on, or a subdivision, combination or recapitalization of the common stock. Upon the merger, consolidation, sale of substantially all of the Company’s assets, or other similar transaction, the holders of warrants shall, at the option of the Company, be required to exercise the warrants immediately prior to the closing of the transaction, or such warrants shall automatically expire. Upon such exercise, the holders of warrants shall participate on the same basis as the holders of common stock in connection with the transaction.
Cashless Exercise. If at any time there is no effective registration statement registering, or the prospectus contained therein is not available for issuance of, the shares issuable upon exercise of the warrant, the holder may exercise the warrant on a cashless basis. When exercised on a cashless basis, a portion of the warrant is cancelled in payment of the purchase price payable in respect of the number of shares of the Company’s common stock purchasable upon such exercise.
Exercise Price. Each warrant represents the right to purchase one share of common stock. In addition, the exercise price per share is subject to adjustment for stock dividends, distributions, subdivisions, combinations or reclassifications, and for certain dilutive issuances. Subject to limited exceptions, a holder of warrants will not have the right to exercise any portion of the warrant to the extent that, after giving effect to the exercise, the holder, together with its affiliates, and any other person acting as a group together with the holder or any of its affiliates, would beneficially own in excess of 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to its exercise. The holder, upon notice to the Company, may increase or decrease the beneficial ownership limitation provisions of the warrant, provided that in no event shall the limitation exceed 9.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the exercise of the warrant.
Transferability. Subject to applicable laws and restrictions, a holder may transfer a warrant upon surrender of the warrant to us with a completed and signed assignment in the form attached to the warrant. The transferring holder will be responsible for any tax liability that may arise as a result of the transfer.
Exchange Listing. The Company does not intend to apply to list the warrants on any securities exchange or recognized trading system.
Rights as Stockholder. Except as set forth in the warrant, the holder of a warrant, solely in such holder’s capacity as a holder of a warrant, will not be entitled to vote, to receive dividends or to any of the other rights of the Company's stockholders. The Company’s warrants contractually entitle the holders of such securities to participate in dividends but do not contractually require the holders of such securities to participate in losses of the Company.
Warrants Outstanding
As of June 30, 2024, the following warrants to purchase shares of the Company’s common stock were outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
Warrants to
Purchase Shares |
|
|
Exercise Price Per Warrant |
|
|
Expiration Date |
December 2020 warrants |
|
|
6,185,750 |
|
|
$ |
1.00 |
|
|
December 11, 2024-June 21, 2025 |
January 2021 warrants |
|
|
4,500,000 |
|
|
$ |
1.055 |
|
|
July 8, 2025 |
March 2021 warrants |
|
|
10,525,000 |
|
|
$ |
2.88 |
|
|
September 22, 2025 |
|
|
|
21,210,750 |
|
|
|
|
|
|
Warrant Activity
During the six months ended June 30, 2024, the Company received approximately $0.3 million from the exercises of warrants resulting in the issuance of 303,750 shares of common stock. There were no warrant exercises during the six months ended June 30, 2023.
NOTE 11: NET LOSS PER SHARE
Basic net loss per share of common stock is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding. Diluted net loss per share of common stock is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock that would have been outstanding during the period assuming the issuance of shares of common stock for all potentially dilutive shares of common stock outstanding.
Potentially dilutive shares of common stock consist of outstanding stock options, convertible preferred stock and common stock warrants. Because the inclusion of potential shares of common stock would be anti-dilutive for all periods presented, they have been excluded from the calculation.
The following table sets forth the weighted average number of common shares excluded from the calculation of diluted net loss per share, because including them would be anti-dilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
Options to purchase common stock |
|
|
|
16,910,002 |
|
|
|
17,827,915 |
|
|
|
17,110,496 |
|
|
|
16,294,085 |
|
Series B convertible preferred stock |
|
|
|
165,338 |
|
|
|
165,338 |
|
|
|
165,338 |
|
|
|
165,338 |
|
Warrants to purchase common stock |
|
|
|
21,217,343 |
|
|
|
21,514,500 |
|
|
|
21,358,065 |
|
|
|
21,514,500 |
|
|
|
|
|
38,292,683 |
|
|
|
39,507,753 |
|
|
|
38,633,899 |
|
|
|
37,973,923 |
|
NOTE 12: INCOME TAXES
Deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
As a result of the Company’s cumulative losses, management has concluded that a full valuation allowance against the Company’s net deferred tax assets is appropriate. Therefore, no income tax provision was recorded for the three and six months ended June 30, 2024 and 2023.
NOTE 13: COMMITMENTS AND CONTINGENCIES
Litigation and Contingencies
On August 18, 2023, Intas Pharmaceuticals LTD. filed a Petition for Post Grant Review (PGR) with the U.S. Patent and Trademark Office (the PGR Petition), seeking to invalidate one of the Company's issued patents (U.S. Patent No. 11,572,334) titled “Methods for Making and Using Endoxifen” (the Patent) on the grounds of anticipation and obviousness. The Company is actively contesting the PGR Petition and believes that the Patent was properly granted and is valid and enforceable. However, there can be no assurance that the Company will prevail in contesting the PGR Petition.
The Company is subject to other legal proceedings and claims that arise in the ordinary course of its business. The Company believes that these matters do not have a material effect, individually or in the aggregate, on its financial position, results of operations, or cash flows.
Contractual Obligations
Contractual obligations represent the Company’s future cash commitments and liabilities under agreements with third party clinical trial service providers. Apart from contracts with one third party clinical trial service provider, such agreements are cancellable upon written notice by the Company. The non-cancellable contracts expire upon completion of the clinical trial and release of the final report, or the contracts may be terminated by the clinical trial service provider, by the FDA or another governmental agency. As of June 30, 2024, the Company's estimated non-cancellable commitment was $7.6 million.
NOTE 14: STOCK BASED COMPENSATION
On May 15, 2020, the stockholders of the Company approved the 2020 Stock Incentive Plan (the 2020 Plan) to provide for the grants of equity-based awards to employees, officers, non-employee directors and other key persons providing services to the Company. On June 27, 2024, the stockholders of the Company approved an amendment and restatement of the 2020 Plan which increased the shares available for issuance by 12,000,000 shares, to a total of 30,000,000 shares available for grant. The 2020 Plan was also extended through June 27, 2034. As of June 30, 2024, 13,013,925 shares were available for future grants under the 2020 Plan.
The Company recognized stock-based compensation expense in the Condensed Consolidated Statements of Operations as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
Research and development |
|
$ |
120 |
|
|
$ |
447 |
|
|
$ |
236 |
|
|
$ |
965 |
|
General and administrative |
|
232 |
|
|
|
1,156 |
|
|
$ |
533 |
|
|
|
2,211 |
|
Total stock-based compensation expense |
|
|
352 |
|
|
$ |
1,603 |
|
|
$ |
769 |
|
|
$ |
3,176 |
|
The following table shows a summary of all stock option activity for the six months ended June 30, 2024:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Underlying
Shares |
|
|
Weighted-
Average
Exercise Price
Per Share |
|
|
Weighted-
Average
Contractual
Life
Remaining
in Years |
|
|
Aggregate
Intrinsic Value |
|
Outstanding as of January 1, 2024 |
|
|
17,506,345 |
|
|
$ |
1.79 |
|
|
|
|
|
$ |
554,525 |
|
Granted |
|
|
4,208,334 |
|
|
|
1.06 |
|
|
|
|
|
|
|
Forfeited |
|
|
(696,504 |
) |
|
|
2.04 |
|
|
|
|
|
|
|
Exercised |
|
|
(268,998 |
) |
|
|
0.85 |
|
|
|
|
|
|
|
Expired |
|
|
(4,328 |
) |
|
|
255.47 |
|
|
|
|
|
|
|
Outstanding as of June 30, 2024 |
|
|
20,744,849 |
|
|
$ |
1.59 |
|
|
|
7.44 |
|
|
$ |
2,389,459 |
|
Exercisable as of June 30, 2024 |
|
|
15,230,527 |
|
|
$ |
1.80 |
|
|
|
6.62 |
|
|
$ |
1,246,913 |
|
Vested and expected to vest |
|
|
20,744,849 |
|
|
$ |
1.59 |
|
|
|
7.44 |
|
|
$ |
2,389,459 |
|
During the six months ended June 30, 2023, the Company granted 6,691,100 options.
The weighted average grant date fair value of options granted during the three and six months ended June 30, 2024 was $0.83 and $0.84.
As of June 30, 2024, the unrecognized compensation cost associated with unvested options was $4.2 million. This expense is expected to be recognized over a weighted-average period of 1.73 years.
NOTE 15: DEFINED CONTRIBUTION PLAN
The Company has a defined contribution plan to which employees of the Company may defer contributions for income tax purposes. Participants are eligible to receive employer matching contributions up to 6% of deferrals. Employees may also be eligible for a discretionary match over 6%. Defined contribution plan employer matching contributions for the three and six months ended June 30, 2024 were $37 thousand and $114 thousand, respectively, and $50 thousand and $106 thousand, respectively, for the same periods in 2023.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with the Condensed Consolidated Financial Statements and the related notes included elsewhere in this report. This discussion contains forward-looking statements, which are based on assumptions about the future of our business. Actual results, outcomes and the timing of results or outcomes could differ materially from those contained in the forward-looking statements. Please read “Forward-Looking Statements” included below for additional information regarding forward-looking statements.
Forward-Looking Statements
All statements made in this Quarterly Report on Form 10-Q (this report) that are not statements of historical fact, including statements regarding guidance, industry prospects or future results of operations or financial position, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act) and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). We have made these statements in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are subject to certain risks and uncertainties which could cause actual results, outcomes and the timing of results or outcomes to differ materially from those projected or anticipated. Although we believe our assumptions underlying our forward-looking statements are reasonable as of the date of this report, we cannot assure you that the forward-looking statements set out in this report will prove to be accurate. We may identify these forward-looking statements by the use of forward-looking words such as “expect,” “potential,” “continue,” “may,” “will,” “should,” “could,” “would,” “seek,” “intend,” “plan,” “estimate,” “anticipate,” “believe,” “design,” “predict,” “future,” or the negative versions of these words or other similar expressions. Forward-looking statements contained in this report include, but are not limited to, statements about:
•the impact of general macroeconomic conditions, including the impact of inflation, high interest rates, general economic slowdown or a recession, foreign exchange rate volatility, financial institution instability, changes in monetary policy and increasing geopolitical instability, including the conflict in Ukraine, the conflict in the Middle East and rising tensions between China and Taiwan, on our business, our ability to access capital markets, our operating costs and our supply chain;
•the effects of natural disasters, pandemics, severe weather conditions and other events beyond our control;
•whether we can obtain approval from the U.S. Food and Drug Administration (FDA), and foreign regulatory bodies, to continue our clinical trials, including our planned (Z)-endoxifen trials, and to sell, market and distribute our therapeutics under development;
•our ability to identify and partner with organizations to commercialize any of our products once they are approved for marketing;
•our ability to successfully initiate and complete clinical trials of our products under development, including our proprietary (Z)-endoxifen (an active metabolite of Tamoxifen);
•the success, costs and timing of our development activities, such as clinical trials, including whether our studies using our (Z)-endoxifen therapies will enroll a sufficient number of subjects in a timely fashion or be completed in a timely fashion or at all;
•whether we will successfully complete our clinical trial of oral (Z)-endoxifen in women with mammographic breast density and our trials of (Z)- endoxifen in women with breast cancer, and whether the studies will meet their objectives;
•our ability to contract with third-party suppliers, manufacturers and service providers, including clinical research organizations, and their ability to perform adequately;
•our ability to successfully develop and commercialize new therapeutics currently in development, or new therapeutics that we might identify in the future, and within the time frames we currently expect;
•our ability to successfully defend litigation and other similar complaints that may be brought in the future, in a timely manner and within the coverage, scope and limits of our insurance policies;
•our ability to establish and maintain intellectual property rights covering our products;
•our increased risk of theft or misappropriation of our intellectual property and other proprietary technology outside of the U.S.;
•our expectations regarding, and our ability to satisfy, federal, state and foreign regulatory requirements, including evolving legal standards and regulations, including those concerning data protection, consumer privacy, sustainability and evolving labor standards;
•our ability to comply with the continued listing requirements of the Nasdaq Capital Market (the Nasdaq);
•the accuracy of our estimates of the size and characteristics of the markets that our products and services may address;
•whether final study results will vary from preliminary study results that we may announce;
•our expectations as to future financial performance, expense levels and capital sources;
•our ability to attract and retain key personnel;
•our ability to execute our share repurchase program as planned; and
•our ability to raise capital.
These and other forward-looking statements made in this report are presented as of the date of the filing of this report. We have discussed certain important factors, risks and uncertainties in the cautionary statements included in this report, particularly in the sections titled “ITEM 1A. RISK FACTORS,” “ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS,” and elsewhere in this report, that we believe could cause our actual results, events or outcomes, or the timing of these results or outcomes, to differ materially from our anticipated results, events or outcomes, or the anticipated timing of these results or outcomes. Our forward-looking statements do not reflect the potential impact of any new information, future events or circumstances that may affect our business after the date of this report. Except as required by law, we expressly disclaim any intent to update any forward-looking statements after the date on which the statement is made, whether as a result of new information, future events or future circumstances or otherwise.
Company Overview
We are a clinical-stage biopharmaceutical company developing proprietary innovative medicines in areas of significant unmet medical need in oncology, with a focus on women’s breast cancer and other breast conditions. Our lead drug candidate under development is oral (Z)-endoxifen, which we are developing for both the prevention and treatment of breast cancer and other therapeutics areas.
We have been granted three U.S. patents and one international patent covering our proprietary (Z)-endoxifen, and we have numerous applications pending in the U.S. and in other major countries. We have patent protection covering our proprietary (Z)-endoxifen through November 17, 2038.
Our business strategy is to advance our programs through clinical studies, including potentially with partners, and opportunistically add programs in areas of high unmet medical need through acquisition, minority investment, collaboration or internal development.
Summary of Our Leading Programs
The following is a summary of the status of our major clinical development programs as of the date of this report:
(Z)-endoxifen. (Z)-endoxifen is an active metabolite of tamoxifen, which is an FDA-approved drug to treat and prevent breast cancer in high-risk women. It is also referred to as a Selective Estrogen Receptor Modulator (SERM). We are developing a proprietary form of (Z)-endoxifen which is administered orally for the potential treatment of breast cancer and reduction of breast density. We have completed four Phase 1 clinical studies (including a study in men) and two Phase 2 clinical studies with our pro