NOTES
TO FINANCIAL STATEMENTS
Note
1. Organization, Principal Activities, and Basis of Presentation
Lantern
Pharma Inc., and Subsidiary (the “Company”) is a clinical stage biopharmaceutical company, focused on leveraging artificial
intelligence (“A.I.”), machine learning and genomic data to streamline the drug development process and to identify
the patients that will benefit from its targeted oncology therapies. The Company’s portfolio of therapies consists of small
molecule drug candidates that others have tried, but failed, to develop into an approved commercialized drug, as well as new compounds
that it is developing with the assistance of its A.I. platform and its biomarker driven approach. The Company’s A.I. platform,
known as RADR®, uses big data analytics (combining molecular data, drug efficacy data, data from historical studies,
data from scientific literature, phenotypic data from trials and publications, and mechanistic pathway data) and machine learning.
The Company’s data-driven, genomically-targeted and biomarker-driven approach allows it to pursue a transformational
drug development strategy that identifies, rescues or develops, and advances potential small molecule drug candidates.
Lantern
Pharma Inc. was incorporated under the laws of the state of Texas on November 7, 2013, and thereafter reincorporated in the state
of Delaware on January 15, 2020. The Company’s principal operations are located in Texas. The Company formed a wholly owned
subsidiary, Lantern Pharma Limited, in the United Kingdom in July 2017.
Since
inception, the Company has devoted substantially all its activity to advancing research and development, including efforts in
connection with preclinical studies, clinical trials and development of its RADR platform. This now includes four drug candidates
and an ADC program directed towards seven disclosed therapeutic targets:
|
●
|
LP-100 (irofulven),
out-licensed to Allarity Therapeutics (formerly known as Oncology Venture), in a phase II trial for the treatment of
prostate cancer;
|
|
●
|
LP-300 (Tavocept)
in planning stages for phase II trial for the treatment of non-small cell lung cancer;
|
|
●
|
LP-184 in preclinical
studies for treatment of solid tumors including prostate, liver and pancreatic cancers and glioblastoma;
|
|
●
|
LP-284, the stereoisomer
(enantiomer) of LP-184, that has shown promising in-vitro anticancer activity in a range of indications that are distinct
from LP-184; and
|
|
●
|
An Antibody Drug
Conjugate (ADC) program that was initiated in early 2021.
|
The
Company’s fiscal year ends on December 31 of each calendar year. The accompanying interim condensed consolidated financial
statements are unaudited and have been prepared on substantially the same basis as the Company’s annual consolidated financial
statements for the fiscal year ended December 31, 2020. In the opinion of the Company’s management, these interim condensed
consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) considered necessary
for a fair statement of the Company’s financial position, results of operations and cash flows for the periods presented.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
(“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 condensed consolidated financial statements and the reported
amounts of expenses during the reporting periods. Actual results could differ from these estimates.
The
December 31, 2020 year-end condensed consolidated balance sheet data in the accompanying interim condensed consolidated financial
statements was derived from audited consolidated financial statements. These condensed consolidated financial statements and notes
do not include all disclosures required by U.S. generally accepted accounting principles and should be read in conjunction with
the Company’s audited consolidated financial statements as of and for the year ended December 31, 2020 and the notes thereto
included in the Company’s Annual Report on Form 10-K, dated March 10, 2021, on file with the Securities and Exchange Commission.
The
results of operations and cash flows for the interim periods included in these condensed consolidated financial statements are
not necessarily indicative of the results to be expected for any future period or the entire fiscal year.
Any
reference in these notes to applicable guidance refers to Accounting Standards Codification (“ASC”) and Accounting
Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”). To date, the Company has
operated its business as one segment. The Company’s condensed consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary, Lantern Pharma Limited. All intercompany balances and transactions have been eliminated
in consolidation.
Note
2. Liquidity
The
Company incurred a net loss of approximately $2,452,000 and $477,000 during the three months ended March 31, 2021 and March 31,
2020, respectively. As of March 31, 2021, the Company had working capital of approximately $81,820,000, primarily as a result
of proceeds raised in January 2021 of approximately $64,167,000 (see Note 5). The Company has received funding in the form of
periodic capital raises and also plans to apply for grant funding in the future to assist in supporting its capital needs. We
may also explore the possibility of entering into commercial credit facilities as an additional source of liquidity. We believe
that our existing cash as of March 31, 2021, and our anticipated expenditures and capital commitments, will enable us to fund
our operating expenses and capital expenditure requirements for at least 12 months from the date of this quarterly report.
Note
3. Summary of Significant Accounting Policies
Use
of Estimates and Assumptions
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 revenues and expenses during the reporting period. The significant areas of estimation
include determining research and development accruals and the inputs in determining the fair value of equity-based awards and
warrants issued. Actual results could differ from those estimates.
Risks
and Uncertainties
The
Company operates in an industry that is subject to intense competition, government regulation and rapid technological change.
Operations are subject to significant risk and uncertainties including financial, operational, technological, regulatory, and
other risks, including the potential risk of business failure.
The
extent of the impact and effects of the coronavirus (COVID-19) on the operation and financial performance of the Company’s
business will depend on future developments, including the duration and spread of the outbreak, related travel advisories and
restrictions, the recovery time of disrupted research services, the consequential staff shortages, and research and development
delays, or the uncertainty with respect to the accessibility of additional liquidity or capital markets, all of which are highly
uncertain and cannot be predicted. If the Company’s operations are impacted by this outbreak for an extended period, the
Company’s results of operations or liquidity may be materially adversely affected.
Deferred
Offering Costs
In
conjunction with the Company’s public offerings, costs incurred related to the public offerings were capitalized as deferred
equity issuance costs in other non-current assets until the time of completion of the public offerings. Upon completion of the
public offerings, these costs have been offset against proceeds received. Offering costs include direct and incremental costs
related to the offering such as legal fees and related costs associated with the public offerings.
As
of December 31, 2020, the Company recorded deferred offering costs of approximately $101,000 and as of March 31, 2021, there were
no deferred offering costs recorded on the Company’s condensed consolidated balance sheets (see Note 5).
Research
and Development
Research
and development costs are expensed as incurred. These expenses primarily consist of payroll, contractor expenses, research study
expenses, costs for manufacturing and supplies, and technical infrastructure on the cloud for the purposes of developing the Company’s
RADR platform and identifying, developing, and testing drug candidates. Development costs incurred by third parties are expensed
as the work is performed. Costs to acquire technologies, including licenses, that are utilized in research and development and
that have no alternative future use are expensed when incurred.
Prepaid
Expenses and Other Current Assets
Prepaid
expenses and other current assets as of March 31, 2021 totaled approximately $1,111,000 and included approximately $249,000 of
upfront payments for contractor fees, academic research studies and services, and subscriptions, approximately $502,000 of intellectual
property related licensing and other fees, and approximately $360,000 of prepaid annual insurance fees.
New
Accounting Pronouncements, Not Yet Adopted
Current
Expected Credit Loss
In
June 2016 the FASB issued Accounting Standard Update (ASU) 2016-13, Measurement of Credit Losses on Financial Instruments (Topic
326). This introduces new methodology for recognition of credit losses - the current expected credit loss (“CECL”)
method. The CECL method requires the recognition of all losses expected over the life of a financial instrument upon origination
or purchase of the instrument, unless the company elects to recognize such instruments at fair value with changes in profit and
loss. CECL is effective for the Company on January 1, 2023. The Company does not anticipate a material impact from the adoption
of this new standard on its financial statements.
Recently
Adopted Accounting Standards
Income
Taxes
In December 2019, the FASB
issued ASU 2019-12: Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes. This ASU simplifies accounting for income
taxes by removing the exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations
and income or gain for other items, the exception to the requirement to recognize a deferred tax liability for equity method investments
when a foreign subsidiary becomes an equity method investment, the exception to the ability not to recognize a deferred tax liability
for a foreign subsidiary when a foreign equity method investment becomes a subsidiary, and the exception to the general methodology for
calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. This ASU also includes
other requirements related to franchise tax, goodwill as part of a business combination, consolidations, changes in tax laws, and affordable
housing projects. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within that fiscal
year. There was not a material impact on the Company’s condensed consolidated financial statements and disclosures as a result of
the adoption of this new standard.
Note
4: Commitments and Contingencies
General.
The
Company has entered into, and expects to enter into from time to time in the future, license agreements, strategic alliance agreements,
assignment agreements, research service agreements, and similar agreements related to the advancement of its product candidates
and research and development efforts. Significant agreements are described in detail below (collectively, the “License,
Strategic Alliance, and Research Agreements”). During the three months ended March 31, 2021 and March 31, 2020, the Company
expensed a total of approximately $658,000 and $28,000, respectively, under the License, Strategic Alliance, and Research Agreements
described below. These expense amounts are included under research and development expenses in the accompanying condensed consolidated
statements of operations.
During
the three months ended March 31, 2021 and March 31, 2020, the Company made payments of approximately $1,033,000 and $87,000, respectively,
under the License, Strategic Alliance, and Research Agreements.
Approximately
$240,000 and $23,000 are accrued and payable under the License, Strategic Alliance, and Research Agreements at March 31, 2021
and March 31, 2020, respectively, which amounts are included in the accompanying condensed consolidated balance sheets.
Approximately $607,000 and
$58,000 are included in prepaid expenses and other current assets under the License, Strategic Alliance, and Research Agreements at March
31, 2021 and March 31, 2020, respectively, which amounts are included in the accompanying condensed consolidated balance sheets.
BioNumerik
Pharmaceuticals
In
January 2018, the Company entered into an Assignment Agreement (the “Assignment Agreement”) with BioNumerik Pharmaceuticals,
Inc. (“BioNumerik”), pursuant to which the Company acquired rights to domestic and international patents, trademarks
and related technology and data relating to LP-300 (Tavocept) for human therapeutic treatment indications. The Assignment Agreement
replaced a License Agreement that was entered into between the Company and BioNumerik in May 2016. The Company made upfront payments
totaling $25,000 in connection with entry into the Assignment Agreement.
In
the event the Company develops and commercializes LP-300 internally, the Company is required to pay to the BioNumerik-related
payment recipients designated in the Assignment Agreement a percentage royalty in the low double digits on cumulative net revenue
up to $100 million, with incremental increases in the percentage royalty for net cumulative revenue between $100 million and $250
million, $250 million and $500 million, and $500 million and $1 billion, with a percentage royalty payment that could exceed $200
million for net cumulative revenue in excess of $1 billion. The Company has the right to first recover certain designated portions
of patent costs and development and regulatory costs before the payment of royalties described above.
If
the Company enters into a third party transaction for LP-300, the Company is required to pay the BioNumerik-related payment recipients
a specified percentage of any upfront, milestone, and royalty amounts received by the Company from the transaction, after first
recovering specified direct costs incurred by the Company for the development of LP-300 that are not otherwise reimbursed from
such third party transaction.
In
addition, the Assignment Agreement provides that the Company will use commercially diligent efforts to develop LP-300 and make
specified regulatory filings and pay specified development and regulatory costs related to LP-300. The Assignment Agreement also
provides that the Company will provide TriviumVet DAC (“TriviumVet”) with (i) specified data and information generated
by the Company with respect to LP-300, and (ii) an exclusive license to use specified LP-300-related patent rights, trademark
rights and related intellectual property to support LP-300 development in non-human (animal) treatment indications.
The
Company is also required to pay all patent costs on covered patents related to LP-300. These patent costs are included in general
and administrative expenses in the accompanying condensed consolidated statements of operations. These patent costs are fully
recoverable at the time of any net revenue from LP-300, with up to 50% of net revenue amounts to be applied towards repayment
of patent costs until such costs are fully recovered.
In
addition to the recovery of patent costs, the Company has the right to recover the $25,000 upfront payments made in connection
with entry into the Assignment Agreement, which payments are recoverable prior to making any royalty or third party transaction
sharing payments. The Company also has the right to recover previously incurred LP-300 development and regulatory costs, with
up to a mid-single digit percentage of net revenue amounts to be applied towards repayment of development and regulatory costs
until such costs are fully recovered.
AF
Chemicals
In
January 2015, the Company entered into a Technology License Agreement to exclusively license domestic and international patent
rights from AF Chemicals, LLC (“AF Chemicals”) for the treatment of cancer in humans for the compounds LP-100 (Irofulven)
and LP-184. In February 2016, the Company and AF Chemicals entered into an Addendum (the “Addendum”) providing for
additions and amendments to the Technology License Agreement. In December 2020, the Company and AF Chemicals entered into a Second
Addendum (the “Second Addendum”) providing for further additions and amendments to the Technology License Agreement.
The Technology License Agreement, Addendum and Second Addendum are collectively referred to as the “AFC License Agreement”.
Pursuant
to the Second Addendum, the Company made specified payments to AF Chemicals within 10 days after signing and prior to March 31,
2021. The Second Addendum also provides that, from December 30, 2020 until January 15, 2025, the Company will have no obligation
to pay annual licensing fees, development diligence extension payments, or patent maintenance fee payments to AFC under the AFC
License Agreement.
As
part of the Second Addendum, the Company has agreed to apply for specified orphan drug designations for LP-184 in the US and EU.
The Second Addendum also amends and clarifies other provisions of the Technology License Agreement, and provides the Company with
the ability to recover a portion of initial payments made under the Second Addendum from sublicense fees or royalty payments that
may be made to AFC by the Company or third parties prior to January 15, 2025.
Pursuant
to the AFC License Agreement the Company made annual licensing fee payments to AF Chemicals during three months ended March 31,
2020 relating to LP-184. Such amounts are included in research and development expenses in the accompanying condensed consolidated
statements of operations. In addition, the Company is obligated to make milestone payments to AF Chemicals at the time of an Investigational
New Drug Application (“IND”) filing relating to LP-184 and also upon reaching additional specified milestones in connection
with the development and potential marketing approval of LP-184 in the United States, specified countries in Europe, and other
countries.
The
AFC License Agreement also provides that the Company will pay AF Chemicals a royalty of at least a very small single digit percentage
of specified net sales of LP-184 and other analogs. In addition, the AFC License Agreement contains specified time requirements
for the Company to file an IND, enroll patients in clinical trials, and file a potential NDA with respect to LP-184, with the
ability for the Company to pay AF Chemicals additional amounts ranging up to an amount in the low hundreds of thousands of dollars
for each one, two, three and four year extension to such development time requirements, with additional extensions beyond four
years to be negotiated by the Company and AF Chemicals.
Pursuant
to the Second Addendum, no additional payments of annual licensing fees or development diligence extension payments are required
to be made by the Company until January 15, 2025, at which time these obligations will resume. The Company will also be obligated
to make annual licensing fee payments to AF Chemicals relating to LP-100 beginning January 15, 2025, as described below under
Allarity Therapeutics.
In
the event of a sublicense of the LP-184 rights, the Company is obligated to pay AF Chemicals (a) a low double digit percentage
of the gross income and fees received by the Company with respect to the United States in connection with such sublicense, and
(b) a lower double digit percentage of the gross income and fees received by the Company with respect to Europe and Japan in connection
with such sublicense.
Allarity
Therapeutics (formerly known as Oncology Venture)
In
May 2015, the Company licensed various rights to LP-100 to Oncology Venture (now known as Allarity Therapeutics) pursuant to a
Drug License and Development Agreement. In February 2016, the Company and Allarity Therapeutics entered into an addendum and an
amendment providing for additions and amendments to the Drug License and Development Agreement. In connection with the Drug License
and Development Agreement, as amended (collectively, the “Allarity License and Development Agreement”), Allarity Therapeutics
agreed to directly pay to AF Chemicals on behalf of the Company certain amounts to satisfy the Company’s milestone obligations
to AF Chemicals with respect to LP-100 under the AFC License Agreement. Amounts paid by Allarity Therapeutics to AF Chemicals
on behalf of the Company are then deducted from amounts owed by Allarity Therapeutics to the Company.
The
amounts to be paid to AF Chemicals with respect to LP-100 under the AFC License Agreement are in many ways similar to the amounts
to be paid with respect to LP-184 as described above under “AF Chemicals”. In the event any such amounts relating
to LP-100 are not paid to AF Chemicals by Allarity Therapeutics, the Company is obligated to pay such unpaid amounts. In addition
to the payments to be made by Allarity Therapeutics, the Company is obligated to make annual licensing fee payments to AF Chemicals
relating to LP-100.
In addition, the AFC License
Agreement contains specified time requirements for the Company to enroll patients in clinical trials, and file a potential NDA with respect
to LP-100. Extension fees may be paid by the Company to AF Chemicals from time to time related to these requirements.
Califia Pharma
In December 2020, the Company
entered into an Evaluation and Limited Use Agreement (the “Evaluation Agreement”) with Califia Pharma, Inc. (“Califia”).
The Evaluation Agreement provides for the Company and Califia to collaborate on the in vitro and in vivo testing and evaluation of novel
Califia payloads conjugated to a Lantern targeting entity. The Evaluation Agreement also provides the Company with the right to negotiate
with Califia for exclusive license rights to use LP-184 and related analogs as the payload with an affinity drug conjugate or small molecule
drug conjugate targeting entity supplied by Lantern. The Company also has the right under the Evaluation Agreement to negotiate for non-exclusive
license rights to use a Lantern targeting entity with a payload and linker combination selected from novel specified Califia payloads
and linkers.
Patheon
API Services
In
July 2020, the Company entered into an agreement with Patheon API Services, Inc. (“Patheon”) for the manufacture and
supply of cGMP material to support the Company’s planned Phase II clinical trial for its product candidate LP-300. In addition
to producing LP-300 API (active pharmaceutical ingredient) under cGMP (current Good Manufacturing Practices) conditions, Patheon
is transferring previously validated manufacturing processes and analytical methods for LP-300 and is producing non-GMP material
that can be used to support non-clinical studies for LP-300. The agreement provides for payments in stages as specified process
and manufacturing milestones are achieved. Patheon, a part of Thermo Fisher Scientific, has previously developed and/or manufactured
more than 700 pharmaceuticals for biopharma clients and has more than 55 locations around the world, providing access to a fully
integrated global network of facilities. The Company expects to pay additional amounts to Patheon in future periods in accordance
with specified process and manufacturing milestones under the Patheon agreement.
Southwest
Research Institute
As
part of the Company’s research and development activities, the Company has engaged Southwest Research Institute (“SwRI”)
from time to time to assist with compound synthesis and manufacturing related activities for the Company’s product candidates.
In September 2020, the Company entered into an agreement with SwRI for the non-GMP synthesis of LP-184 material and related analytical
development to assist with preclinical studies. The Company expects to pay additional amounts to SwRI in future periods as synthesis
and analytical work is conducted by SwRI under the agreement.
The
Research Institute of Fox Chase Cancer Center
In
September 2020, the Company entered into a research agreement with the Research Institute of Fox Chase Cancer Center (“FCCC”)
as part of the Company’s research and development activities, with a focus on advancing the targeted use of LP-184 in molecularly-defined
sub-types of pancreatic cancer. The Company expects to pay additional amounts to FCCC in future periods in accordance with the
payment schedule specified under the FCCC agreement.
Piramal
Pharma Solutions
In
January 2021, the Company entered into an agreement with Piramal Pharma Solutions (“Piramal”) for the fill and finish
manufacture of LP-300 drug product at Piramal’s Lexington, Kentucky site in support of future Phase II clinical testing.
Piramal will complete activities to support the cGMP manufacturing of LP-300, conduct a transfer project, manufacture a cGMP clinical
batch, and perform stability studies on the cGMP batch of LP-300 drug product. The Company expects to pay additional amounts to
Piramal in future periods in accordance with the payment schedule specified under the Piramal agreement.
Other
Research and Service Provider Agreements
In
addition to the agreements described above, the Company has entered into other research and service provider agreements for the
advancement of its product candidates and research and development efforts. The Company expects to pay additional amounts in future
periods in connection with existing and future research and service provider agreements.
EU
Grant
In
September 2018, Lantern Pharma Limited, a wholly owned subsidiary of Lantern Pharma Inc., was awarded a grant by the UK government
in the form of state aid under the Commission Regulations (EU) No. 651/2014 of 17 June 2014 (the “General Block Exemption”),
Article 25 Aid for research and development projects, state aid notification no. SA.40154. The grant was awarded to conduct research
and development activities for the prostate cancer biomarker analysis of the LP-184 drug candidate. Following the Company’s
research and development activities in Northern Ireland, the grant will reimburse the Company 50% of its research and development
expenses not exceeding GBP 24,215 of vouched and approved expenditures within specific categories. The grant contains some reporting
and consent requirements. The grant will remain in force for a period of five years. No payments to the Company have been made
under the grant as of March 31, 2021 and December 31, 2020. No revenue has been recognized from this grant through March 31, 2021.
Operating
Lease
The
Company leased office space in Dallas, Texas under month-to-month lease arrangements during the three months ended March 31, 2021.
In August 2020, in connection with the Company’s employees working remotely due to COVID-19, the Company reduced its monthly
lease commitment and costs to minimal levels.
In
August 2019, the Company entered into a leasing agreement for office space in New Jersey. Monthly rent was approximately $2,000,
plus electrical utilities. The lease expired on July 31, 2020 and was not renewed.
Note
5. Shareholders’ Equity
Common
Stock
During the three months ended
March 31, 2020, the Company issued 50,460 shares of common stock, relating to the exercise of stock options. The shares were issued at
a purchase price of $1.03 per share for total proceeds of $52,000.
On
January 20, 2021, the Company closed a public offering of 4,928,571 shares of its common stock at a public offering price of $14.00
per share, which amount included 642,856 shares sold upon full exercise of the underwriter’s over-allotment option. Total
gross proceeds from the offering were approximately $69,000,000, and net proceeds from the offering were approximately $64,167,000,
after deducting underwriting discounts and commissions of approximately $4,554,000 and other offering expenses of approximately
$279,000, including $101,000 of deferring offering costs previously recorded.
During the three months ended
March 31, 2021, the Company issued 11,782 shares of common stock, relating to the exercise of stock options. The shares were issued at
a purchase price of $1.03 per share for total proceeds of approximately $12,000.
During
the three months ended March 31, 2021, the Company issued 19,367 shares of common stock relating to the cash exercise of warrants
for total proceeds of approximately $61,000. The Company also issued 800 shares of common stock relating to the cashless exercise
of a warrant to purchase 957 shares. All of such warrants were exercisable at an exercise price of $3.13 per share of common stock.
As
of March 31, 2021 and December 31, 2020, the Company had 25,000,000 authorized shares of Common Stock, of which 11,181,447 and
6,220,927 shares were issued and outstanding, respectively.
Warrants
The Company had warrants to
purchase 305,294 shares of common stock outstanding and exercisable as of March 31, 2021 at a weighted average exercise price of $6.71
per share, and with expiration dates ranging from December 31, 2021 to June 10, 2025. The Company had warrants to purchase 262,003 shares
of Series A Preferred Stock outstanding and exercisable as of March 31, 2020 at a weighted average exercise price of $3.13 per share,
and with expiration dates ranging from December 31, 2020 to July 25, 2024.
Options
The
Company recorded stock-based compensation of approximately $246,000 and $18,000 related to stock options during the three months
ended March 31, 2021 and March 31, 2020, respectively. These amounts are allocated between general and administrative and research
and development expenses in the accompanying condensed consolidated statements of operations.
A
summary of stock option activity under the Lantern Pharma Inc. 2018 Equity Incentive Plan, as amended and restated (the “Plan”)
during the three months ended March 31, 2021 is presented below:
|
|
|
Options Outstanding
|
|
|
|
|
Number of
Shares
|
|
|
|
Weighted-
Average
Exercise Price Per Share
|
|
Outstanding December 31, 2020
|
|
|
835,608
|
|
|
$
|
6.41
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
(11,782
|
)
|
|
|
1.03
|
|
Cancelled or expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding March 31, 2021
|
|
|
823,826
|
|
|
$
|
6.49
|
|
Options
were exercisable for 621,120 shares of Common Stock at March 31, 2021.
During the three months ended
March 31, 2020, no options were granted, options were exercised to purchase 50,460 shares of common stock, and options relating to 43,166
shares of common stock expired or were canceled.
Note
6. Notes and Loan Payable
In
January 2020, the Company entered into a financing arrangement for commercial insurance with First Insurance Funding. The total
amount financed was approximately $66,000 with an annual interest rate of 6.64%, to be paid over a period of ten months. In June
2020, the insurance policy was canceled, and the remaining loan balance was repaid.
On
May 1, 2020 (the “Origination Date”), the Company received $108,500 in aggregate loan proceeds (the “PPP Loan”)
from JPMorgan Chase Bank (the “Lender”) pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief,
and Economic Security (CARES) Act. The PPP Loan is evidenced by a loan application and payment agreement (the “PPP Loan
Agreement”) by and between the Company and the Lender. Subject to the terms of the PPP Loan Agreement, the PPP Loan bears
interest at a fixed rate of one percent (1.0%) per annum. Payments of principal and interest are deferred for the first six months
following the Origination Date, and the PPP Loan will mature two years after the Origination Date. The guidance under the Paycheck
Protection Program was later updated so that payments of principal and interest were extended past the current fiscal year and
maturity was extended past two years. The Company applied for forgiveness of the loan, and in April 2021 the Company received
notice that the Small Business Administration (SBA) had authorized full forgiveness of the PPP Loan.
Note
7. Loss Per Share of Common Shares
Basic
loss per share is derived by dividing net loss applicable to common stockholders by the weighted average number of shares of common
stock outstanding during each period. Diluted loss per share includes the effect, if any, from the potential exercise or conversion
of securities, such as warrants and stock options, which would result in the issuance of incremental shares of common stock unless
such effect is anti-dilutive. In calculating the basic and diluted net loss per share applicable to common stockholders, the weighted
average number of shares remained the same for both calculations due to the fact that when a net loss exists, dilutive shares
are not included in the calculation. Potentially dilutive securities outstanding that have been excluded from diluted loss per
share due to being anti-dilutive include the following:
|
|
Outstanding
at
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Warrants to purchase Common Stock
|
|
|
305,294
|
|
|
|
-
|
|
Warrants to purchase Series A Preferred stock
|
|
|
-
|
|
|
|
262,003
|
|
Stock options
|
|
|
823,826
|
|
|
|
513,865
|
|
Series A preferred stock
|
|
|
-
|
|
|
|
2,438,866
|
|
|
|
|
1,129,120
|
|
|
|
3,214,734
|
|
Note 8. Subsequent Events
In May 2021, the Company
entered into a Collaboration Agreement with Actuate Therapeutics, Inc. (“Actuate”), a clinical stage biopharmaceutical
company focused on the development of compounds for use in the treatment of cancer, and inflammatory diseases leading to fibrosis.
Pursuant to the agreement, the Company and Actuate will collaborate on utilization of the Company’s RADR® platform to
develop novel biomarker derived signatures for use with one of Actuate’s product candidates. As part of the collaboration, the
Company will receive shares of Actuate stock, subject to meeting certain conditions of the collaboration, as well as the potential
to receive additional Actuate stock if results from the collaboration are utilized in future development efforts. The
Company’s director Mr. Kreis is also a director of Actuate. Affiliates of Mr. Kreis hold substantial beneficial ownership
interests in both the Company and Actuate.
In April 2021, the Company entered into a location-flexible
office lease agreement with a 24 month term. Rent is approximately $12,900 per month.