☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
March 31, 2022
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation (§and post such files). ☒ Yes ☐ Nofiler”,filer,” “smaller reporting company,” and “emerging growth company” in RuleLarge accelerated filer ☐ Accelerated filer ☒☐ ☐ (do not check if smaller reporting company)☒ Smaller reporting company ☐☒ Emerging growth company ☒☐
☐
39,332,721.
Page No. | ||||||
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Item 1. | Financial Statements | 1 | ||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |||||
Item 3. | ||||||
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Item | ||||||
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Item 1. | Legal Proceedings | 27 | ||||
Item 1A. | Risk Factors | 27 | ||||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |||||
Item 3. | ||||||
Item 4. | ||||||
Item 5. | ||||||
Item 6. | ||||||
September 30, 2017 | December 31, 2016 | |||||||
(unaudited) | (audited) | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 4,297,503 | $ | 3,806,984 | ||||
Marketable securitiesavailable-for-sale | 48,254,552 | 31,354,170 | ||||||
Prepaid expenses and other current assets | 1,259,521 | 1,017,645 | ||||||
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Total current assets | 53,811,576 | 36,178,799 | ||||||
Property and equipment, net | 1,148,138 | 1,281,152 | ||||||
Other assets | 164,519 | 164,519 | ||||||
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Total assets | $ | 55,124,233 | $ | 37,624,470 | ||||
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Liabilities and stockholders’ equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,235,480 | $ | 1,549,845 | ||||
Accrued liabilities | 1,694,232 | 2,868,352 | ||||||
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Total current liabilities | 2,929,712 | 4,418,197 | ||||||
Deferred rent | 704,240 | 994,439 | ||||||
Warrant liabilities | 16,024,207 | 12,698,980 | ||||||
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Total liabilities | 19,658,159 | 18,111,616 | ||||||
Commitments and contingencies | — | — | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.0001 par value, 25,000,000 shares authorized and none outstanding at September 30, 2017 and December 31, 2016 | — | — | ||||||
Common stock, $0.0001 par value, 200,000,000 shares and 100,000,000 shares authorized at September 30, 2017 and December 31, 2016, respectively; 73,656,006 shares and 41,656,006 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively | 7,366 | 4,166 | ||||||
Additionalpaid-in capital | 192,360,418 | 165,678,164 | ||||||
Accumulated other comprehensive loss | (23,750 | ) | (51,666 | ) | ||||
Accumulated deficit | (156,877,960 | ) | (146,117,810 | ) | ||||
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Total stockholders’ equity | 35,466,074 | 19,512,854 | ||||||
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Total liabilities and stockholders’ equity | $ | 55,124,233 | $ | 37,624,470 | ||||
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March 31, 2022 | December 31, 2021 | |||||||
(unaudited) | (audited) | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 9,637 | $ | 16,654 | ||||
Marketable securities | 32,644 | 37,631 | ||||||
Prepaid expenses | 6,541 | 4,439 | ||||||
Other current assets | 3,450 | 4,140 | ||||||
Total current assets | 52,272 | 62,864 | ||||||
Property and equipment, net | 696 | 741 | ||||||
Operating lease right-of-use | 2,471 | 2,544 | ||||||
Other assets | 601 | 613 | ||||||
Total assets | $ | 56,040 | $ | 66,762 | ||||
Liabilities and stockholders’ equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 8,267 | $ | 2,389 | ||||
Accrued and other current | 7,786 | 9,128 | ||||||
Current portion of lease liabilities | 661 | 657 | ||||||
Total current liabilities | 16,714 | 12,174 | ||||||
Warrant liabilities | 6,742 | 2,530 | ||||||
Long-term portion of lease liabilities | 2,513 | 2,609 | ||||||
Other liabilities | 73 | 73 | ||||||
Total liabilities | 26,042 | 17,386 | ||||||
Commitments and contingencies | 0— | 0— | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.0001 par value, 25,000,000 shares authorized and NaN outstanding at March 31, 2022 and December 31, 2021 | 0— | — | ||||||
Common stock, $0.0001 par value, 125,000,000 shares authorized, 39,332,721 shares issued and outstanding at March 31, 2022 and December 31, 2021 | 4 | 4 | ||||||
Additional paid-in capital | 310,927 | 310,008 | ||||||
Accumulated other comprehensive loss | (224 | ) | (84 | ) | ||||
Accumulated deficit | (280,709 | ) | (260,552 | ) | ||||
Total stockholders’ equity | 29,998 | 49,376 | ||||||
Total liabilities and stockholders’ equity | $ | 56,040 | $ | 66,762 | ||||
Unaudited
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Operating expenses | ||||||||||||||||
Research and development | $ | 4,934,788 | $ | 5,948,026 | $ | 12,893,655 | $ | 17,650,395 | ||||||||
General and administrative | 1,800,400 | 1,943,484 | 6,265,668 | 9,173,714 | ||||||||||||
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Total operating expenses | 6,735,188 | 7,891,510 | 19,159,323 | 26,824,109 | ||||||||||||
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Loss from operations | (6,735,188 | ) | (7,891,510 | ) | (19,159,323 | ) | (26,824,109 | ) | ||||||||
Other income (expense): | ||||||||||||||||
Interest income | 123,960 | 54,620 | 245,979 | 126,370 | ||||||||||||
Other expense | (905,014 | ) | (1,569,341 | ) | (905,014 | ) | (1,569,341 | ) | ||||||||
Change in fair value of warrant liabilities | 5,941,144 | (1,124,353 | ) | 9,058,208 | (865,688 | ) | ||||||||||
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Total other income (expense) | 5,160,090 | (2,639,074 | ) | 8,399,173 | (2,308,659 | ) | ||||||||||
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Net loss | $ | (1,575,098 | ) | $ | (10,530,584 | ) | $ | (10,760,150 | ) | $ | (29,132,768 | ) | ||||
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Per share information: | ||||||||||||||||
Net loss per share of common stock, basic and diluted | $ | (0.02 | ) | $ | (0.28 | ) | $ | (0.22 | ) | $ | (0.94 | ) | ||||
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Basic and diluted weighted average shares outstanding | 64,960,354 | 37,446,087 | 49,509,486 | 30,833,362 | ||||||||||||
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Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Operating expenses: | ||||||||
Research and development | $ | 12,725 | $ | 8,021 | ||||
General and administrative | 3,254 | 2,765 | ||||||
Total operating expenses | 15,979 | 10,786 | ||||||
Loss from operations | (15,979 | ) | (10,786 | ) | ||||
Other (expense) income: | ||||||||
Interest income | 34 | 24 | ||||||
Change in fair value of warrant liabilities | (4,212 | ) | 5,567 | |||||
Total other (expense) income | (4,178 | ) | 5,591 | |||||
Net loss | $ | (20,157 | ) | $ | (5,195 | ) | ||
Per share information: | ||||||||
Net loss per share of common stock, basic and diluted | $ | (0.51 | ) | $ | (0.18 | ) | ||
Basic and diluted weighted average shares outstanding | 39,332,721 | 28,963,594 | ||||||
Unaudited
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net loss | $ | (1,575,098 | ) | $ | (10,530,584 | ) | $ | (10,760,150 | ) | $ | (29,132,768 | ) | ||||
Other comprehensive gain: | ||||||||||||||||
Unrealized (loss) gain onavailable-for-sale securities | (4,451 | ) | (41,972 | ) | 27,916 | (8,667 | ) | |||||||||
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Comprehensive loss | $ | (1,579,549 | ) | $ | (10,572,556 | ) | $ | (10,732,234 | ) | $ | (29,141,435 | ) | ||||
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Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Net loss | $ | (20,157 | ) | $ | (5,195 | ) | ||
Other comprehensive loss: | ||||||||
Unrealized loss on available-for-sale | (140 | ) | (8 | ) | ||||
Comprehensive loss | $ | (20,297 | ) | $ | (5,203 | ) | ||
Unaudited
Common Stock | Additional | Accumulated Other Comprehensive | Accumulated | Stockholders’ | ||||||||||||||||||||
Shares | Amount | Paid-In Capital | Loss | Deficit | Equity | |||||||||||||||||||
Balance, December 31, 2021 | 39,332,721 | $ | 4 | $ | 310,008 | $ | (84 | ) | $ | (260,552 | ) | $ | 49,376 | |||||||||||
S tock -based compensation | — | — | 919 | — | — | 919 | ||||||||||||||||||
Unrealized loss on marketable securities | — | — | — | (140 | ) | — | (140 | ) | ||||||||||||||||
Net loss | — | — | — | — | (20,157 | ) | (20,157 | ) | ||||||||||||||||
Balance, March 31, 2022 | 39,332,721 | $ | 4 | $ | 310,927 | $ | (224 | ) | $ | (280,709 | ) | $ | 29,998 | |||||||||||
Common Stock | Additional | Accumulated Other Comprehensive | Accumulated | Stockholders’ | ||||||||||||||||||||
Shares | Amount | Paid-In Capital | Loss | Deficit | Equity | |||||||||||||||||||
Balance, December 31, 2020 | 27,810,161 | $ | 3 | $ | 252,908 | $ | (21 | ) | $ | (240,270 | ) | $ | 12,620 | |||||||||||
Issuance of securities in registered offering | 11,500,000 | 1 | 57,499 | — | — | 57,500 | ||||||||||||||||||
Financing cost of sale of securities | — | — | (3,703 | ) | — | — | (3,703 | ) | ||||||||||||||||
Issuance of common stock for exercise of warrants | 22,560 | — | 110 | — | — | 110 | ||||||||||||||||||
S tock -based compensation | — | — | 581 | — | — | 581 | ||||||||||||||||||
Unrealized loss on marketable securities | — | — | — | (8 | ) | — | (8 | ) | ||||||||||||||||
Net loss | — | — | — | — | (5,195 | ) | (5,195 | ) | ||||||||||||||||
Balance, March 31, 2021 | 39,332,721 | $ | 4 | $ | 307,395 | $ | (29 | ) | $ | (245,465 | ) | $ | 61,905 | |||||||||||
Nine Months Ended September 30, | ||||||||
2017 | 2016 | |||||||
Cash flows from operating activities | ||||||||
Net loss | $ | (10,760,150 | ) | $ | (29,132,768 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation | 133,014 | 385,015 | ||||||
Stock-based compensation expense | 1,087,179 | 1,886,033 | ||||||
Issuance costs allocated to warrants | 905,014 | 1,569,341 | ||||||
Issuance of common stock in exchange for services | — | 93,930 | ||||||
Change in fair value of warrant liabilities | (9,058,208 | ) | 865,688 | |||||
(Decrease) increase in deferred rent | (290,199 | ) | 22,320 | |||||
Net amortization of premium paid on marketable securities | 547,266 | 374,168 | ||||||
Changes in operating assets and liabilities: | ||||||||
(Increase) decrease in prepaid expenses and other current andnon-current assets | (241,876 | ) | 8,099 | |||||
(Decrease) increase in accounts payable and accrued liabilities | (1,488,485 | ) | 2,653,063 | |||||
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Net cash used in operating activities | (19,166,445 | ) | (21,275,111 | ) | ||||
Cash flows from investing activities | ||||||||
Purchases of marketable securities | (45,656,691 | ) | (32,786,486 | ) | ||||
Proceeds from maturities of marketable securities | 28,236,959 | 22,804,030 | ||||||
Purchases of property and equipment | — | (113,192 | ) | |||||
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Net cash provided by investing activities | (17,419,732 | ) | (10,095,648 | ) | ||||
Cash flows from financing activities | ||||||||
Proceeds from issuance of securities | 40,000,000 | 35,000,000 | ||||||
Payment of financing costs of securities sold | (2,923,304 | ) | (2,952,889 | ) | ||||
Proceeds from exercise of warrants | — | 16,000 | ||||||
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Net cash provided by investing activities | 37,076,696 | 32,063,111 | ||||||
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Net increase in cash and cash equivalents | 490,519 | 692,352 | ||||||
Cash and cash equivalents at beginning of period | 3,806,984 | 9,972,781 | ||||||
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Cash and cash equivalents at end of period | $ | 4,297,503 | $ | 10,665,133 | ||||
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Supplemental disclosures of cash flow information: | ||||||||
Issuance of warrants to purchase common stock | $ | 12,383,435 | $ | 18,601,228 |
Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Cash flows from operating activities | ||||||||
Net loss | $ | (20,157 | ) | $ | (5,195 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation | 38 | 31 | ||||||
S tock -based compensation expense | 919 | 581 | ||||||
Change in fair value of warrant liabilities | 4,212 | (5,567 | ) | |||||
Net amortization of premium on marketable securities | 97 | 150 | ||||||
Changes in operating assets and liabilities: | ||||||||
Increase in prepaid expenses and other current and non-current assets | (1,412 | ) | (936 | ) | ||||
Increase in accounts payable, accrued and other current liabilities | 4,536 | 1,877 | ||||||
Net cash used in operating activities | (11,767 | ) | (9,059 | ) | ||||
Cash flows from investing activities | ||||||||
Proceeds from maturities of marketable securities | 4,750 | 4,913 | ||||||
Net cash provided by investing activities | 4,750 | 4,913 | ||||||
Cash flows from financing activities | ||||||||
Proceeds from issuance of securities | — | 57,500 | ||||||
Payment of financing costs of securities sold | — | (3,703 | ) | |||||
Proceeds from the exercise of warrants | — | 110 | ||||||
Net cash provided by financing activities | — | 53,907 | ||||||
Net (decrease) increase in cash and cash equivalents | (7,017 | ) | 49,761 | |||||
Cash and cash equivalents at beginning of period | 16,654 | 15,485 | ||||||
Cash and cash equivalents at end of period | $ | 9,637 | $ | 65,246 | ||||
September 30, 2017
As such, under the requirements of Accounting Standard Codification (“ASC”)
administrative activities. The contract
25, 2022.
capital and the effects of the novel coronavirus, or
Cashrisks and Cash Equivalents
The Company considers all highly liquid investments with maturities at the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents include bank demand deposits, marketable securities with maturities of three months or less at purchase, and money market funds that invest primarily in certificates of deposit, commercial paper and U.S. government and U.S. government agency obligations. Cash equivalents are reported at fair value.
uncertainties.
Fair Value
The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 820,Fair Value Measurements and Disclosures, establishes a hierarchy of inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality.
The three levels of the fair value hierarchy are described below:
Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2—Valuations based on quoted prices for similar assets or liabilities in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3—Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value measurement and unobservable.
To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The Company had no liabilities classified as Level 1 or Level 2. The carrying amounts reported in the accompanying financial statements for accounts payable and accrued expenses approximate their respective fair values due to their short-term maturities. The fair value of the warrant liabilities is discussed in Note 4, “Fair Value Measurements.”
Share-based Compensation
The Company accounts for stock-based compensation in accordance with ASC 718,Compensation—Stock Compensation,which requires the measurement and recognition of compensation expense for all stock-based payment awards made to employees andnon-employee directors, including employee stock options. Compensation expense based on the grant date fair value is generally amortized over the requisite service period of the award on a straight-line basis.
The fair value of options is calculated using the Black-Scholes option pricing model to determine the fair value of stock options on the date of grant based on key assumptions such as stock price, expected volatility and expected term. The Company’s estimates of these assumptions are primarily based on historical data, peer company data and judgment regarding future trends and factors.
Grants
The Company recognizes a receivable and the related reduction in its research and development expenses when the actual reimbursable costs have been incurred and there is reasonable assurance that the Company has complied with the conditions of the grants and the amounts will be received. For the three and nine months ended September 30, 2017, the Company recognized a reduction to its research and development expense in the amount of $249,886 and $805,980, respectively. There were no similar grants recognized for the three and nine month periods ended September 30, 2016. The receivable for grants as of September 30, 2017 for costs incurred through September 30, 2017 was $351,763. The Company has $2,424,050 of approved grant award funding remaining as of September 30, 2017.
Net Loss Per Share
Basic net loss per share is calculated by dividing net loss by the weighted average shares outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share is calculated by adjusting weighted average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury-stock method. For purposes of the dilutive net loss per share calculation, stock options and warrants are considered to be common stock equivalents but are excluded from the calculation of diluted net loss per share, as their effect would be anti-dilutive given the Company’s net loss; therefore, basic and diluted net loss per share were the same for all periods presented.
Comprehensive Loss
Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions, and other events and circumstances fromnon-owner sources, and currently consists of net loss and changes in unrealized gains and losses onavailable-for-sale securities.
Recent Accounting Pronouncements
In January 2016, the FASB issued a new Accounting Standards Update,Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU2016-01”). ASU2016-01 amends the guidance in U.S. GAAP on the classification and measurement of financial instruments. Although the ASU retains many current requirements, it significantly revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated with the fair value of financial instruments. The new standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2017, with early adoption permitted for certain changes. The Company does not anticipate any impact from the adoption of ASU2016-01.
In February 2016, the FASB issued a new Accounting Standards Update,Leases (“ASU2016-02”). ASU2016-02 is aimed at making leasing activities more transparent and comparable and requires most leases be recognized by lessees on the balance sheets as aright-of-use asset and corresponding lease liability, regardless of whether they are classified as finance or operating leases. The new standard is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, with early adoption permitted. The Company is currently evaluating the impact of the new pronouncement on the Company’s financial statements and related disclosures. The Company anticipates the adoption of ASU2016-02 to result in the recognition of additional assets and corresponding liabilities related to leases on its balance sheet and to not have a material impact on its results of operations or cash flows.
In March 2016, the FASB issued a new Accounting Standards Update,Improvements to Employee Share-Based Payment Accounting (“ASU2016-09”). ASU2016-09 requires all income tax effects of awards to be recognized in the income statement when the awards vest or are settled, thus eliminating additionalpaid-in-capital pools. ASU2016-09 also changed the threshold to qualify for equity classification from the minimum tax statutory withholding to the maximum tax statutory withholding in the applicable jurisdictions. In addition, companies are required to elect whether to account for forfeitures as they occur or to estimate the number of awards expected to be forfeited and adjust the estimate when it is likely to change, which is the method currently required. The new standard was effective for the annual reporting period beginning January 1, 2017. The Company adopted this guidance as of January 1, 2017. The Company has elected to recognize forfeitures of share-based payment awards as they occur. The prior year windfall benefits that were required to be recognized were not material. These changes were applied on a modified retrospective basis. There was no material impact and cumulative adjustment to accumulated deficit as of January 1, 2017 as a result of the adoption of this standard.
In June 2016, the FASB issued a new Accounting Standards Update,Financial Instruments-Credit Losses (“ASU2016-13”).ASU2016-13 amends the guidance for measuring and recording credit losses on financial assets measured at amortized cost by replacing the “incurred loss” model with an “expected loss” model. Accordingly, these financial assets will be presented at the net amount expected to be collected. This new standard also requires that credit losses related toavailable-for-sale debt securities be recorded through an allowance for such losses rather than reducing the carrying amount under the current, other-than-temporary-impairment model. The new standard is effective for interim and annual periods beginning after December 15, 2019. The Company is currently evaluating the impact that this new standard will have on its financial statements and related disclosures.
In August 2016, the FASB issued ASUNo. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU2016-15”), which amended the existing accounting standards for the statement of cash flows by providing guidance on eight classification issues related to the statement of cash flows. ASU2016-15 will be effective in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, and early adoption is permitted. The amendments should be applied retrospectively to all periods presented. For issues that are impracticable to apply retrospectively, the amendments may be applied prospectively as of the earliest date practicable. The Company does not anticipate a significant impact from the adoption of ASU2016-15.
3.
2021. There were 0 marketable securities that had been in an unrealized loss position for more than 12 months as of March 31, 2022 or
Marketable Securities | Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | ||||||||||||
Current: | ||||||||||||||||
Corporate debt | $ | 48,278,302 | $ | 3,337 | $ | (27,087 | ) | $ | 48,254,552 |
following (in thousands):
Marketable Securities | Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | ||||||||||||
Current: | ||||||||||||||||
Corporate debt | $ | 32,868 | $ | 0 | $ | (224 | ) | $ | 32,644 |
Marketable Securities | Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | ||||||||||||
Current: | ||||||||||||||||
Corporate debt | $ | 31,405,836 | $ | 24 | $ | (51,690 | ) | $ | 31,354,170 |
following (in thousands):
Marketable Securities | Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | ||||||||||||
Current: | ||||||||||||||||
Corporate debt | $ | 37,715 | $ | 0 | $ | (84 | ) | $ | 37,631 |
The duration periods Investments classified as short-term have maturities ofavailable-for-sale debt less than one year, and investments classified as long-term are those that have maturities of greater than one year and management does not intend to liquidate within the next twelve months. All of the Company’s marketable securities ashave an effective maturity of September 30, 2017 were as follows:
Amortized Cost | Fair Value | |||||||
Duration of one year or less | $ | 42,461,619 | $ | 42,444,975 | ||||
Duration of more than one year | 5,816,683 | 5,809,577 | ||||||
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Total | $ | 48,278,302 | $ | 48,254,552 | ||||
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less than two years.
202
Fair Value Measurements at September 30, 2017 | ||||||||||||
Quoted Prices in Active Markets using Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||
Cash equivalents | $ | 4,147,033 | $ | — | $ | — | ||||||
Marketable securities | 48,254,552 | — | — | |||||||||
Warrant liabilities | — | — | 16,024,207 | |||||||||
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Total | $ | 52,401,585 | $ | — | $ | 16,024,207 | ||||||
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Fair Value Measurements at December 31, 2016 | ||||||||||||
Quoted Prices in Active Markets using Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||
Cash equivalents | $ | 3,411,058 | $ | — | $ | — | ||||||
Marketable securities | 31,354,170 | — | — | |||||||||
Warrant liabilities | — | — | 12,698,980 | |||||||||
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Total | $ | 34,765,228 | $ | — | $ | 12,698,980 | ||||||
|
|
|
|
|
|
The Company issued a warrant to the representative2021 (in thousands):
Fair Value Measurement as of March 31, 2022 | ||||||||||||
Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||
Cash equivalents | $ | 6,276 | $ | — | $ | — | ||||||
Marketable securities | 32,644 | — | — | |||||||||
Warrant liabilities | — | — | 6,742 | |||||||||
Total | $ | 38,920 | $ | — | $ | 6,742 | ||||||
Fair Value Measurement as of December 31, 2021 | ||||||||||||
Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||
Cash equivalents | $ | 7,734 | $ | — | $ | — | ||||||
Marketable securities | 37,631 | — | — | |||||||||
Warrant liabilities | — | — | 2,530 | |||||||||
Total | $ | 45,365 | $ | — | $ | 2,530 | ||||||
As of | As of | |||||||
September 30, 2017 | December 31, 2016 | |||||||
Expected volatility | 79.8 | % | 79.9 | % | ||||
Remaining contractual term (in years) | 3.83 | 4.58 | ||||||
Risk-free interest rate | 1.77 | % | 1.93 | % | ||||
Expected dividend yield | — | % | — | % |
As of March 31, 2022 | As of December 31, 2021 | |||||||
Expected volatility | 80.2 | % | 56.5 | % | ||||
Remaining contractual term (in years) | 0.33 | 0.58 | ||||||
Risk-free interest rate | 0.52 | % | 0.19 | % | ||||
Expected dividend yield | — | % | — | % |
As of | At Issuance on | |||||||
September 30, 2017 | July 25, 2017 | |||||||
Expected volatility | 81.7 | % | 82.0 | % | ||||
Remaining contractual term (in years) | 4.83 | 5.00 | ||||||
Risk-free interest rate | 1.92 | % | 1.90 | % | ||||
Expected dividend yield | — | % | — | % |
As of March 31, 202 2 | As of December 31, 202 1 | |||||||
Expected volatility | 71.3 | % | 61.9 | % | ||||
Remaining contractual term (in years) | 1.17 | 1.42 | ||||||
Risk-free interest rate | 1.63 | % | 0.56 | % | ||||
Expected dividend yield | — | % | — | % |
Warrant liabilities
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Balance at beginning of period | $ | 9,581,916 | $ | 185,659 | $ | 12,698,980 | $ | 444,324 | ||||||||
Issuance of warrants | 12,383,435 | 18,601,228 | 12,383,435 | 18,601,228 | ||||||||||||
Increase (decrease) in fair value | (5,941,144 | ) | 1,124,353 | (9,058,208 | ) | 865,688 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Balance at end of period | $ | 16,024,207 | $ | 19,911,240 | $ | 16,024,207 | $ | 19,911,240 | ||||||||
|
|
|
|
|
|
|
|
2021 (in thousands):
Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Balance at beginning of period | $ | 2,530 | $ | 29,404 | ||||
Decrease in fair value (1) | 4,212 | (5,567 | ) | |||||
Balance at end of period | $ | 6,742 | $ | 23,837 | ||||
(1) | The change in fair values of the warrant liabilities is recorded in other income in the consolidated statement of operations. |
September 30, 2017 | December 31, 2016 | |||||||
Accrued compensation costs | $ | 903,506 | $ | 1,597,414 | ||||
Accrued research and development service fees | 405,292 | 504,193 | ||||||
Accrued professional fees | 93,574 | 299,912 | ||||||
Accrued facilities operation expenses | 273,800 | 236,296 | ||||||
Accrued licensing fees | — | 180,000 | ||||||
Other accrued liabilities | 18,060 | 50,537 | ||||||
|
|
|
| |||||
Total accrued liabilities | $ | 1,694,232 | $ | 2,868,352 | ||||
|
|
|
|
6. Note Warrants
The Company issued convertible notes from June 2013 through June 2014. In connection with the issuance of the convertible notes, purchasers of the convertible notes also received warrants (“Note Warrants”) which included an exercise price “cap” that was analogous to “down round protection”. This precluded the Company from classifying the warrants in equity. Upon the closing of the initial public offering and based on the terms of the Note Warrants, the Company determined the total number of shares of the Company’s common stock underlying the Note Warrants to be 3,321,416 at an exercise price of $3.00 per share. There were 3,315,878 shares of common stock underlying the outstanding Note Warrantsfollowing as of September 30, 2017March 31, 2022 and December 31, 2016. The Note Warrants expire between June 2018 and June 2019.
7.2021 (in thousands):
March 31, 2022 | December 31, 2021 | |||||||
Accrued research and development service fees | $ | 5,962 | $ | 5,641 | ||||
Accrued professional fees | 936 | 819 | ||||||
Accrued compensation costs | 599 | 2,215 | ||||||
Accrued facilities operation expenses | 111 | 307 | ||||||
Other accrued expenses | 28 | 146 | ||||||
Total accrued liabilities | $ | 7,636 | $ | 9,128 | ||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net loss | $ | (1,575,098 | ) | $ | (10,530,584 | ) | $ | (10,760,150 | ) | $ | (29,132,768 | ) | ||||
Weighted average shares of common stock outstanding | 64,960,354 | 37,446,087 | 49,509,486 | 30,833,362 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net loss per share of common stock—basic and diluted | $ | (0.02 | ) | $ | (0.28 | ) | $ | (0.22 | ) | $ | (0.94 | ) | ||||
|
|
|
|
|
|
|
|
stockholders (in thousands, except share and per share data):
Three Months Ended March 31, | ||||||||
202 2 | 202 1 | |||||||
Net loss | $ | (20,157 | ) | $ | (5,195 | ) | ||
Weighted average shares of common stock outstanding | 39,332,721 | 28,963,594 | ||||||
Net loss per share of common stock—basic and diluted | $ | (0.51 | ) | $ | (0.18 | ) | ||
September 30, | ||||||||
2017 | 2016 | |||||||
Options to purchase common stock | 6,016,984 | 4,677,371 | ||||||
Warrants to purchase common stock | 36,270,103 | 27,336,507 | ||||||
|
|
|
| |||||
Total | 42,287,087 | 32,013,878 | ||||||
|
|
|
|
8.anti-dilutive:
March 31, | ||||||||
2022 | 2021 | |||||||
Options to purchase common stock | 4,171,919 | 1,925,197 | ||||||
Warrants to purchase common stock | 10,925,166 | 12,327,590 | ||||||
Total | 15,097,085 | 14,252,787 | ||||||
Description | March 31, 2022 | December 31, 2021 | ||||||
Operating lease liabilities: | ||||||||
Current portion of lease liabilities | $ | 661 | $ | 657 | ||||
Long-term portion of lease liabilities | $ | 2,513 | $ | 2,609 |
Amount | ||||
October 1, 2017 – December 31, 2017 | $ | 156,989 | ||
Year ending December 31, 2018 | 640,514 | |||
Year ending December 31, 2019 | 653,324 | |||
Year ending December 31, 2020 | 666,391 | |||
Year ending December 31, 2021 | 679,719 | |||
Year ending December 31, 2022 | 693,313 | |||
Thereafter | 3,680,190 | |||
|
| |||
$ | 7,170,440 | |||
|
|
Rent expense is recognizedrenewable at the end of the lease term at our option. For the purposes of determining the remaining lease term in contemplation of available extensions, the Company did not consider either renewal to be probable at this time. In determining the present value of lease payments, the Company estimated its incremental borrowing rate, or discount rate, based on the straight-line method overinformation available at the adoption date of Topic 842. The discount rate used to determine the operating lease liability was 9.93%.
Amount | ||||
April 1, 2022 - December 31, 2022 | $ | 520 | ||
Year ending December 31: | ||||
2023 | 707 | |||
2024 | 721 | |||
2025 | 736 | |||
2026 | 750 | |||
Thereafter | 702 | |||
Total lease payments | 4,136 | |||
Less: Present value adjustment | (962 | ) | ||
Operating lease liabilities | 3,174 | |||
March 31, | ||||||||
2022 | 2021 | |||||||
Operating lease cost (1) | $ | 153 | $ | 153 | ||||
Variable lease costs (2) | 40 | 30 | ||||||
Total lease cost | $ | 193 | $ | 183 | ||||
(1) | Operating lease payments included in the measurement of the Company’s lease liabilities are comprised of fixed payments according to the terms of the Company’s leases. |
(2) | Variable lease payments consist of the Company’s utility costs billed by and paid to its landlord. Variable lease payments are presented as operating expenses in the Company’s Consolidated Statement of Operations in the same line item as expense arising from fixed lease payments and in net cash used in operating activities in the Company’s Statement of Cash Flows. |
9.of 2021, 2020 and 2019, and are required to pay $200,000 each year thereafter until the licenses terminate. Depending on the success of its programs, the Company may also incur regulatory milestone payments up to a total of $5.0 million and royalties of up to 5% on net sales from products to Rockefeller. We are allowed to grant sublicenses to third parties without prior approval, subject to certain conditions and the payment of a certain percentage of all payments we receive from sublicensees. There were 0 milestone, royalty or sublicense payments made during the three months ended March 31, 2022 or 2021. The Company has made total milestone payments under the
stock.
On July 25, 2017, the The Company sold 32,000,000completed a concurrent private placement to Pfizer Inc. (“Pfizer”) of 674,156 shares of common stock and an accompanying warrant to purchase an additional 505,617 shares of its common stock at an exercise price of $4.90 per share (the “Pfizer Warrant”) at a price of $4.45 for one share of common stock and warrantsan accompanying warrant to purchase an additional 16,000,0000.75 shares of its common stock, resulting in an underwrittenfollow-on offering for gross proceeds of $40.0 million. The Company received net proceeds to the Company of approximately $37.1 million after underwriting discounts, commissions and offering expenses payable by$3.0 million. No warrants were exercised during the Company.
quarter ended March 31, 2022. Warrants to purchase 22,560 shares of common stock were exercised during the quarter ended March 31, 2021.
Private Placement
On June 12, 2015,
The placement agents in the PIPE received warrants to purchase a total of 189,126 shares of common stock at an exercise price of $4.65 per share which expire on June 11, 2020 (the “Placement Agent Warrants”). The PIPE Warrants and Placement Agent Warrants have beenPfizer Warrant should be classified as stockholders’ equity in the Company’s consolidated balance sheet.
Initial Public Offering
In August 2014, the Company completed an initial public offering (“IPO”), raising net proceeds of $35.0 million after underwriting discounts, commissions and offering expenses payable by us, through the issuance and sale of our units, which consisted of one share of common stock, one Class A Warrant to purchase one share of common stock at an exercise price of $4.80 per share and one Class B Warrant to purchaseone-half share of common stock at an exercise price of $4.00 per full share (“Units”). As of November 2, 2015, the date of expiration of the Class B Warrants, holders of the Class B Warrants had exercised 4,812,328 Class B Warrants, resulting in the issuance of 2,406,164 shares of the Company’s common stock and the receipt by the Company of approximately $9.6 million in gross proceeds. The Class A Warrants expired on February 1, 2017. As none of the Class A Warrants were exercised prior to expiration, the Class A Warrants have terminated and are no longer exercisable.
Representative’s Warrant
The Maxim Group, LLC, the representative of the underwriter in the IPO, received the Representative’s Warrant to purchase 3% of the total number of shares of common stock sold in the IPO, including those shares sold upon the exercise of the over-allotment option, for a total of 206,410 shares of common stock underlying the Representative’s Warrant. The Representative’s Warrant is exercisable at an exercise price of $7.50 per share and expires on July 28, 2019. The Company classified the Representative’s Warrant as a liability since it did not meet the requirements to be included in equity. The fair value of the Representative’s warrant isre-measured at each reporting period and changes in fair value are recognized in the consolidated statement of operations (see Note 4, “Fair Value Measurements”).
Sales Agreement
In January 2016, the Company entered into a Sales Agreement with Cowen and Company, LLC (“Cowen”) to sell shares of the Company’s common stock, with aggregate gross sales proceeds of up to $30 million, through an “at the market” equity offering program under which Cowen was to act as sales agent. On July 21, 2016, the Company terminated the Sales Agreement. The Company did not sell any shares under the program.
September 30, 2017 | December 31, 2016 | |||||||
Options to purchase common stock | 6,016,984 | 4,691,746 | ||||||
Warrants to purchase common stock | 36,270,103 | 27,214,775 | ||||||
|
|
|
| |||||
42,287,087 | 31,906,521 | |||||||
|
|
|
|
2021:
March 31, 2022 | December 31, 2021 | |||||||
Outstanding options to purchase common stock | 4,171,919 | 2,899,694 | ||||||
Outstanding warrants to purchase common stock | 10,925,166 | 10,926,594 | ||||||
For future issuance under the 2014 Omnibus Incentive Plan | 378,715 | 77,631 | ||||||
For future issuance under the 2021 Employment Inducement Plan | 1,000,000 | 1,000,000 | ||||||
16,475,800 | 14,903,919 | |||||||
September 30, 2017 | December 31, 2016 | |||||||
Note Warrants | 3,315,878 | 3,315,878 | ||||||
Class A Warrants (1) | — | 6,880,333 | ||||||
PIPE Warrants | 2,364,066 | 2,364,066 | ||||||
2016 Warrants | 14,000,000 | 14,000,000 | ||||||
2017 Warrants | 16,000,000 | — | ||||||
Representative’s Warrant | 206,410 | 206,410 | ||||||
Placement Agent Warrants | 189,126 | 189,126 | ||||||
Other warrants (2) | 194,623 | 258,962 | ||||||
|
|
|
| |||||
Warrants to purchase common stock | 36,270,103 | 27,214,775 | ||||||
|
|
|
| |||||
Weighted-average exercise price per share | $ | 2.74 | $ | 3.97 | ||||
|
|
|
|
March 31, 2022 | December 31, 2021 | |||||||
2020 Warrants | 8,819,904 | 8,819,904 | ||||||
2017 Warrants | 1,599,645 | 1,599,645 | ||||||
Pfizer Warrant | 505,617 | 505,617 | ||||||
Other warrants (1) | 0 | 1,428 | ||||||
Warrants to purchase common stock | 10,925,166 | 10,926,594 | ||||||
Weighted-average exercise price per share | $ | 6.45 | $ | 6.47 | ||||
(1) |
Other warrants are comprised of warrants issued prior to the Company’s |
| ||||||||
| ||||||||
| ||||||||
| ||||||||
11.March 31, 2022:
Exercise Prices | Shares Underlying Outstanding Warrants | Expiration Date | ||||
$4.90 | 9,325,521 | May 27, 2023 | ||||
$15.50 | 1,599,645 | July 25, 2022 | ||||
10,925,166 | ||||||
Plan as of January 1, 2022.
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in years) | Aggregate Intrinsic Value | |||||||||||||
Options outstanding at December 31, 2016 | 4,691,746 | $ | 4.62 | |||||||||||||
Granted | 1,502,500 | 1.73 | ||||||||||||||
Expired | (93,300 | ) | 4.78 | |||||||||||||
Forfeited | (83,963 | ) | 2.52 | |||||||||||||
|
| |||||||||||||||
Options outstanding at September 30, 2017 | 6,016,984 | 3.92 | 5.98 | $ | — | |||||||||||
|
|
|
| |||||||||||||
Vested and exercisable at September 30, 2017 | 4,215,454 | 4.51 | 4.86 | $ | — | |||||||||||
|
|
|
|
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in years) | Aggregate Intrinsic Value | |||||||||||||
Options outstanding at December 31, 2021 | 2,899,694 | $ | 9.12 | |||||||||||||
Granted | 1,320,000 | 3.33 | ||||||||||||||
Exercised | 0 | 0 | ||||||||||||||
Expired | (9,525 | ) | 12.38 | |||||||||||||
Forfeited | (38,250 | ) | 5.02 | |||||||||||||
Options outstanding at March 31, 2022 | 4,171,919 | 7.32 | 8.57 | $ | 461,675 | |||||||||||
Vested and exercisable at March 31, 2022 | 1,735,474 | 11.44 | 6.90 | $ | 28,209 | |||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Risk free interest rate | — | 1.37 | % | 2.08 | % | 1.21 | % | |||||||||
Expected dividend yield | — | — | — | — | ||||||||||||
Expected term (in years) | — | 6.01 | 6.00 | 4.99 | ||||||||||||
Expected volatility | — | 76.5 | % | 79.1 | % | 79.5 | % |
Expected volatility—The Company estimatedoptions granted during the expected volatility based on an average of the volatility of similar companies with publicly-traded equity securities. The companies were selected based on their enterprise value, risk profiles, position within the industry, and with historical information sufficient to meet the expected term of the associated award.
Expected term—The Company based expected term for grants to employees and non-employee directors on the midpoint of the vesting period and the contractual term of each respective option grant. Other grants to non-employees are based on the remaining contractual term.
period:
Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Risk free interest rate | 1.94 | % | 0.72 | % | ||||
Expected dividend yield | 0 | 0 | ||||||
Expected term (in years) | 6.06 | 6.06 | ||||||
Expected volatility | 91.2 | % | 96.3 | % |
12. Significant Agreements
On March 25, 2016,
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
25, 2022. improving clinical outcomes compared to antibiotics alone. The development of DLAs involves a novel clinical and regulatory strategy, using superiority design clinical trials with the goal of delivering significantly improved clinical outcomes for patients with serious, antibiotic-resistant bacterial infections, including biofilm-associated infections. We believe 20162021 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form15, 2017.Forward-Looking StatementsThe information in this Quarterly Report on Form10-Q contains forward-looking statements and information 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”), which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, our beliefs regarding lysins, future operations, future financial position, the sufficiency of our cash and cash equivalents and marketable securities, future revenues, projected costs, prospects and plans and objectives of management. The words “anticipates”, “believes”, “estimates”, “expects”, “intends”, “targets”, “may”, “plans”, “projects”, “potential”, “will”, “would”, “could” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. All such forward-looking statements involve significant risks and uncertainties, including, but not limited to, statements regarding:a.the success, cost, timing and potential indications of our product development activities and clinical trials;b.our ability to advance into and through clinical development and ultimately obtain FDA approval for our product candidates;c.our future marketing and sales programs;d.the rate and degree of market acceptance of our product candidates and our expectations regarding the size of the commercial markets for our product candidates;e.our research and development plans and ability to bring forward additional product candidates into preclinical and clinical development;f.the effect of competition and proprietary rights of third parties;g.the availability of and our ability to obtain additional financing;h.the effects of existing and future federal, state and foreign regulations;i.the seeking of joint development, licensing or distribution and collaboration and marketing arrangements with third parties; andj.the period of time for which our existing cash and cash equivalents will enable us to fund our operations.As more fully described under the heading “Risk Factors” contained elsewhere in this Quarterly Report on Form10-Q, many important factors affect our ability to achieve our stated objectives and to develop and commercialize any product candidates. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks and uncertainties set forth in our filings with the SEC. You should read this Quarterly Report on Form10-Q with the understanding that our actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.discoveringthe discovery and developing therapeutic proteindevelopment of direct lytic agents (“DLAs”), including lysins and antibody productsamurin peptides, as new medical modalities for the treatment of life-threatening, infectious diseases, including those caused by drug-resistant pathogens, particularly those treated in hospital settings. Drug-resistant infections account for two million illnessesantibiotic-resistant infections. We believe DLAs are fundamentally different than antibiotics and offer a potential paradigm shift in the United Statestreatment of antibiotic-resistant infections. According to one of the most recent and 700,000comprehensive reports on the global burden of bacterial antimicrobial resistance (“AMR”), there were an estimated 4.95 million deaths worldwide each year. We intendassociated with bacterial AMR in 2019, including 1.27 million deaths directly attributable to address drug-resistant infections using product candidates from our lysinbacterial AMR. The six leading pathogens for deaths associated with resistance ( monoclonal antibody platforms that target conserved regions of either bacteria or viruses. derived from naturally occurring bacteriophage, which are viruses that infect bacteria. When recombinantly produced and thenwhen applied to bacteria lysins cleave a key component of the target bacteria’s peptidoglycan cell wall, which resultsresulting in rapid bacterial cell death. Lysins kill bacteria faster thanIn addition to the speed of action and potent cidality, we believe lysins are differentiated by their other hallmark features, which include the demonstrated ability to eradicate biofilms and synergistically boost the efficacy of conventional antibiotics in animal models. Amurin peptides are a new class of DLAs, discovered in our laboratories, which typically requiredisrupt the outer membrane of gram-negative bacteria, resulting in rapid bacterial cell division death, offering a distinct mechanism of action from lysins. Amurins have shown a potent, broad spectrum ofmetabolismsomeorderaddition to kill or stopantibiotics with the growthgoal of bacteria.thatthis approach affords potential clinical benefits to patients as well as the properties of our lysins will make them suitable for targeting antibiotic-resistant organisms, such asStaphylococcus aureus (“Staph aureus”) which causes serious infections such as bacteremia, endocarditis, pneumonia and osteomyelitis. In addition, our lysins have demonstrated thepotential ability to clear biofilms in animal models,mitigate against further development of antibiotic resistance.we believe they may be useful for the treatment of biofilm-related infections in prosthetic joints, indwelling devices and catheters. Beyondto date, have funded our lysin programs, we are exploring therapies using monoclonal antibodies (“mAbs”) designed to bind to viral targets. Our approach to antibody therapy employs a combination of multiple mAbs to either achieve greater efficacy or provide broader coverage across pathogenic strains.In August 2014, we completedoperations primarily through our initial public offering (“IPO”), raisingour$35.0approximately $53.8 million after underwriting discounts and commissions and offering expenses payable by us,us.issuancegovernment the right to terminate the contract at any time for its convenience. As a government contractor, we are subject to complex and salewide-ranging federal and agency-specific regulations and contractual requirements. The costs of compliance with these requirements may be significant. Failure to comply with government contracting requirements could result in termination of our units, which consistedcontract or the imposition of one sharepenalties.
development expenses
CF-301:
CF-301 is a parenteral, potent, bactericidal lysin targetingStaph aureus bacteria, making it a highly specific therapeuticDLA product candidate, exebacase, was granted Breakthrough Therapy designation for the treatment of MRSA bloodstream infections (bacteremia), including right-sided endocarditis, when used in addition to
Other programs
Our lead antibody-based program isCF-404, which is a combination of three mAbs targeting the conserved regions of the influenza virus.CF-404 cross-reacts with all human seasonal strains of influenza, making it a highly specific therapeutic candidateSOC antibiotics alone for the treatment of
Our discovery pipelinesimulated Phase 3 analysis population of lysins includes internally discovered lysins targeting gram-positive84 U.S. patients with documented
moving this program towards clinical studies as soon as possible.
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Product development | $ | 3,448,758 | $ | 2,861,354 | $ | 7,108,977 | $ | 8,258,838 | ||||||||
Personnel related | 713,249 | 1,187,808 | 2,589,001 | 3,519,578 | ||||||||||||
Professional fees | 292,034 | 927,601 | 1,561,682 | 2,273,013 | ||||||||||||
Laboratory costs | 157,300 | 540,627 | 703,077 | 1,715,252 | ||||||||||||
External research and licensing costs | 191,518 | 310,957 | 578,898 | 1,430,655 | ||||||||||||
Share-based compensation | 131,929 | 119,679 | 352,020 | 453,059 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total research and development expense | $ | 4,934,788 | $ | 5,948,026 | $ | 12,893,655 | $ | 17,650,395 | ||||||||
|
|
|
|
|
|
|
|
2021 (in thousands):
Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Product development | $ | 10,559 | $ | 5,710 | ||||
Personnel related | 2,391 | 1,828 | ||||||
Professional fees | 1,025 | 904 | ||||||
Laboratory costs | 559 | 322 | ||||||
Stock-based compensation | 263 | 151 | ||||||
External research and licensing costs | 42 | 31 | ||||||
Expenses reimbursed by grants | (2,114 | ) | (925 | ) | ||||
Total research and development expense | $ | 12,725 | $ | 8,021 | ||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
CF-301 | $ | 4,005,599 | $ | 2,372,939 | $ | 7,867,044 | $ | 5,286,207 | ||||||||
CF-404 | 5,820 | 1,452,342 | 771,226 | 5,467,506 | ||||||||||||
Other research and development | 78,191 | 815,258 | 1,314,364 | 2,924,045 | ||||||||||||
Personnel related and share-based compensation | 845,178 | 1,307,487 | 2,941,021 | 3,972,637 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total research and development expense | $ | 4,934,788 | $ | 5,948,026 | $ | 12,893,655 | $ | 17,650,395 | ||||||||
|
|
|
|
|
|
|
|
Although our research and development expenses decreased in both the three and nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016, we2021 (in thousands):
Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Exebacase | $ | 10,388 | $ | 5,333 | ||||
CF-370 | 951 | 546 | ||||||
Other research and development | 846 | 1,088 | ||||||
Personnel related and stock-based compensation | 2,654 | 1,979 | ||||||
Expenses reimbursed by grants | (2,114 | ) | (925 | ) | ||||
Total research and development expense | $ | 12,725 | $ | 8,021 | ||||
exebacase.
Interest
and Expenses
The changes in the fair value of our warrant liabilities are derived using the Black-Scholes option pricing model. The key inputs into the model are the current per-share value and the expected volatility of the Company’s common stock. Significant changes in these inputs will directly increase or decrease the estimated fair value of the Company’s warrant liabilities, resulting in a non-cash gain or charge in each reporting period.
We adopted
Other than the adoption of the new guidance discussed above,ended March 31, 2022, there have been no material changes to our critical accounting policies estimates and significant judgments and estimates from the information provided in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on
Three Months Ended September 30, | Dollar Change | Nine Months Ended September 30, | Dollar Change | |||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Research and development | $ | 4,934,788 | $ | 5,948,026 | $ | (1,013,238 | ) | $ | 12,893,655 | $ | 17,650,395 | $ | (4,756,740 | ) | ||||||||||
General and administrative | $ | 1,800,400 | $ | 1,943,484 | $ | (143,084 | ) | $ | 6,265,668 | $ | 9,173,714 | $ | (2,908,046 | ) | ||||||||||
Other income (expense) | $ | 5,160,090 | $ | (2,639,074 | ) | $ | 7,799,164 | $ | 8,399,173 | $ | (2,308,659 | ) | $ | 10,707,832 |
Comparison of three months ended September 30, 2017 and 2016
indicated (in thousands).
Three Months Ended March 31, | ||||||||||||
2022 | 2021 | Dollar Change | ||||||||||
Operating expenses: | ||||||||||||
Research and development | $ | 12,725 | $ | 8,021 | $ | 4,704 | ||||||
General and administrative | $ | 3,254 | $ | 2,765 | $ | 489 | ||||||
Other (expense) income | $ | (4,178 | ) | $ | 5,591 | $ | (9,769 | ) |
our other preclinical programs.
expenses.
(Expense) Income
Comparison
Asshelf registration statement on Form
On July 25, 2017, we sold 32,000,000completed an underwritten public offering of 11,500,000 shares of our common stock, and warrantsincluding shares sold pursuant to purchase an additional 16,000,000 sharesthe fully exercised overallotment option granted to the underwriters in connection with the offering, at a public offering price of our$5.00 per share of common stock, at an exercise price of $1.55 per shareresulting in an underwrittenfollow-on offering, generatingestimated net proceeds of approximately $36.9$53.8 million after underwriting discounts and commissions and offering expenses payable by us.
The terms of any future offerings under the shelf registration statement will be established at the time of such offering and will be described in a prospectus supplement filed with the SEC prior to the completion of any such offering.
Flows
Nine Months Ended September 30, | ||||||||
2017 | 2016 | |||||||
Net cash provided by (used in): | ||||||||
Operating activities | $ | (19,166,445 | ) | $ | (21,275,111 | ) | ||
Investing activities | $ | (17,419,732 | ) | $ | (10,095,648 | ) | ||
Financing activities | $ | 37,076,696 | $ | 32,063,111 |
Operating Activities
2021 (in thousands):
Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Net cash (used in) provided by: | ||||||||
Operating activities | $ | (11,767 | ) | $ | (9,059 | ) | ||
Investing activities | $ | 4,750 | $ | 4,913 | ||||
Financing activities | $ | — | $ | 53,907 |
Investing Activities
Net cash used in operating activities for the three months ended March 31, 2022 increased by $2.7 million compared to the same period in 2021, due primarily to increased payments to our contract research organizations in support of our Phase 3 DISRUPT trial of exebacase and to our contract manufacturing organizations for completion of the exebacase process transfer and ongoing analytical and process validation activities in the first quarter of 2022.
Financing Activities
warrants.
We believe that our existing cash and cash equivalents and marketable securities, together with interest thereon, will be sufficientability to fund our operations into the second quarter of 2019. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect.continue as a going concern. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, and the extent to which we may enter into collaborations with third parties for development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the development of our current product candidates. We plan to continue to fund our operations through public or private debt and equity financings, but there can be no assurances that such financing will be available to us on satisfactory terms, or at all. We plan to continue to supplement our financings with
arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Contractual Obligations
The following table summarizes our contractual obligations at September 30, 2017 taking into account the reduction of our operating lease commitments at our Yonkers, New York facilityofficers insurance premiums, audit and the effect our future obligations are expected to have on our liquiditylegal fees, investor relations and cash flows in future periods:
Payments due by period | ||||||||||||||||||||
Contractual obligations | Total | Less than 1 year | 1 - 3 years | 4 - 5 years | More than 5 years | |||||||||||||||
Operating lease commitments(1) | $ | 7,170,440 | $ | 637,374 | $ | 1,313,246 | $ | 1,366,302 | $ | 3,853,518 | ||||||||||
License and sponsored research agreements(2) | 2,126,374 | 626,876 | 899,497 | 400,000 | 200,000 | |||||||||||||||
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Total contractual obligations | $ | 9,296,814 | $ | 1,264,250 | $ | 2,212,743 | $ | 1,766,302 | $ | 4,053,518 | ||||||||||
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We enter into contracts in the normal course of business with contract research organizations, or CROs,external communications fees, expenses for clinical trials, clinical supply manufacturing, non-clinical and preclinical studies and for other services and products for operating purposes. These contracts generally provide for termination on notice, and therefore are cancelable contracts and not included in the table of contractual obligations.
The contractual obligations table also does not include any potential contingent payments upon the achievement by us of specified clinical, regulatory and commercial events, as applicable, or royalty payments we may be required to make under license agreements we have entered into with The Rockefeller University and Trellis Bioscience LLC. The occurrence and timing of these events are difficult to predict and subject to significant uncertainty. Since we are unable to reliably estimate the timing and amounts of such milestone and royalty payments, or whether they will occur at all, these contingent payments have been excluded from the table above. See our Annual Report on Form 10-K filed by uscompliance with the Sarbanes-Oxley Act and rules implemented by the SEC on March 15, 2017 for additional information.
and Nasdaq and various other costs and expenses.
Off-Balance Sheet Arrangements
We did not have duringcontinue to monitor the periods presented,impact of inflationary pressures on purchases and we are currently not party to, anyoff-balance sheet arrangements.
new contractual commitments.
March 31, 2022.
The following discussion of risk factors contains forward-looking statements. These risk factors may be important to understanding any statement in this Form10-Q or elsewhere. The following information should be read in conjunction with our financial statements and related notes in Part I, Item 1, “Financial Statements” and Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form10-Q.
could raise substantial doubt regarding our ability to continue as a going concern. We believe that our cash, cash equivalents and marketable securities balance of $52.6 million as of September 30, 2017 will be sufficient to fund our projected operations into the second quarter of 2019. Depending on the level of cash used in or generated from operations, additional capital may be required to sustain operations. We have incurred significant losses since our inception and have never generated revenue or profit, and it is possible we will never generate revenue or profit. Meaningful revenuesBased on our current operating plans, and without additional funding, we believe we will likely not be available until and unless any future product candidateshave sufficient funds to meet our obligations within the next twelve months from the issuance of our consolidated financial statements that are approved by the FDA or comparable regulatory agenciesincluded elsewhere in other countries and successfully marketed, either by us or a partner, an outcome which may not occur. There is no assurance that other financing will be available when needed to allow usthis Quarterly Report on Form
For example, the trading prices for our and other biopharmaceutical companies’ stock have been highly volatile as a result of the
Our short operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.
We were incorporated in 2008 and commenced active research operations in 2010. Our operations to date have been limited to organizing and staffing our company, business planning, raising capital and acquiring and developingCF-301,CF-404 and other potential product candidates. We have not yet demonstrated our ability to successfully complete Phase 2 or Phase 3 clinical trials, obtain marketing approval, manufacture a commercial scale product, or arrange for a third-party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history.
In addition, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will need to transition from a company with a product development focus to a company capable of supporting commercial activities. We may not be successful in such a transition.
In addition, disruptions caused by the
We
Ourcandidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials mayand could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign regulatory authorities. During the conduct of clinical trials, patients report changes in their health, including illnesses, injuries, and discomforts, to their study doctor. Often, it is not possible to determine whether or not the product candidate being studied caused these conditions. It is possible that as we test our product candidates in larger, longer and more extensive clinical trials, or as use of these product candidates becomes more widespread if they receive regulatory approval, illnesses, injuries, discomforts and other adverse events that were observed in previous trials, as well as conditions that did not occur or went undetected in previous trials, will be suspended at any time forreported by patients. Many times, side effects are only detectable after investigational products are tested in large-scale clinical trials or, in some cases, after they are made available to patients on a number of reasons.commercial scale following approval. For example, it is possible that exposure toCF-301 exebacase could result in adverse clinical events such as localized inflammation in the region surrounding blood vessels, or having a hypersensitivity reaction, such as serum sickness or anaphylaxis. A
Delays
We may experience delays in clinical trials offor our product candidates. Our plannedIf we experience delays or difficulties enrolling in our clinical trials, might not begin on time, might need toour research and development efforts and business, financial condition, and results of operations could be redesigned, might notmaterially adversely affected.
Patient enrollment a significant factor in the timing of clinical trials, is affected bydepends on many factors, including including:
revenue. In addition, some of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.
exebacase.
Accordingly, if our CROs fail to comply with these regulations or recruit a sufficient number of patients, we may have to repeat clinical trials, which would delay the regulatory approval process.
do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements, or for other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for or successfully commercializeCF-301,CF-404 exebacase or any other product candidate that we seek to develop. As a result, our financial results and the commercial prospects forCF-301,CF-404 exebacase or any other product candidate that we seek to develop would be harmed, our costs could increase and our ability to generate revenues could be delayed or ended.
As a company, we have never obtained regulatory approval for, or commercialized, a drug or biologic. Itbiologic that is possibleintended to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug or biologic may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed in early clinical development. For drugs or biologics that have been designated as Breakthrough Therapies, interaction and communication between the FDA and the sponsor can help to identify the most efficient path for clinical development. Drugs or biologics designated as Breakthrough Therapies by the FDA are also eligible for rolling review of the associated marketing application, meaning that the agency may review portions of the marketing application before the sponsor submits the complete application, as well as priority review, if the relevant criteria are met.
Even if the FDA approvesCF-301,CF-404 or any other product candidate, adverse effects discovered after approval could adversely affect our markets.
If we obtain regulatory approval forCF-301,CF-404 or any other product candidate that we develop, and we or others later discover that our products cause adverse effects, a number of potentially significant negative consequences could result, including:
Any of these events could prevent us from maintaining market acceptance of the affected product candidate and could substantially increase the costs of, or prevent altogether, the commercializationcommercial supplies of our product candidates.
There are underlying In addition to the risks associated with the manufacture of our product candidates, which could include cost overruns, new impurities, difficulties in process or formulation development, scaling up or reproducing manufacturing processes and lack of timely availability of raw materials.
materials, if these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may be delayed in obtaining, or may ultimately not be able to obtain, regulatory approval for commercialization of exebacase or any other product candidates.
We rely, and expect to continue to rely, on third-party manufacturers for the production of our product candidates for preclinical studies and clinical trials under the guidance of members of our organization. For example, we employ the services of Fujifilm Diosynth Biotechnologies UK LTD (“Fujifilm UK”) to supply the active pharmaceutical ingredient forCF-301 and Fujifilm Diosynth Biotechnologies U.S.A., Inc., to supply the active pharmaceutical ingredient forCF-404. exebacase. We have not yet manufactured supplies for late phase human clinical trials, scaled upvalidated the process for manufacture of such supplies, validated themanufacturing processes or contractually secured our commercial supplies.
We employ the services of other vendors to produceCF-301 in its final vialed drug product form. We do not currently have contractslong-term supply agreements. Furthermore, the raw materials for our product candidates are sourced, in some cases, from a single-source supplier. If we were to experience an unexpected loss of supply of any of our product candidates or any of our future product candidates for any reason, whether as a result of manufacturing, supply or storage issues or otherwise, we could experience delays, disruptions, suspensions or terminations of, or be required to restart or repeat, any pending or ongoing clinical trials. For example, on January 21, 2021, the President of the United States signed an executive order entitled “Executive Order on a Sustainable Public Health Supply Chain” (the “Executive Order”) which “directs immediate actions to secure supplies necessary for responding to the
any of our product candidates for which we obtain marketing approval. We intendmay be unable to pursuemaintain or establish required agreements with third-party manufacturers regarding commercial supply at an appropriate future time. We intendor to locate second fill finishdo so on acceptable terms. Even if we are able to establish agreements with third-party manufacturers, to supply other world regions such as reliance on third-party manufacturers entails additional risks, including:
Late stage process development activities, including manufacturing process scale up and validationfailure of the bulk drug substance, pose inherent risks that may be greater for biological products than for small molecules. The process will undergo scale up from the current clinical process and then be repeated under protocol successfully three times for validation.
In addition, regulatory requirements could pose barriersthird-party to the manufacture of our active pharmaceutical ingredient and finished drug product for our product candidates. Our third-party manufacturers are required to comply with current good manufacturing practices (“cGMPs”). As a result, the manufacturing facilities and processes used by Fujifilm UK and any of our future manufacturers must pass inspection by the FDA as part of our BLA review and before approval of the applicable product candidate. Similar regulations apply to manufacturers of our products for use or sale in foreign countries. If our manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA and any applicable foreign(or similar regulatory authority, we will not be ableauthorities);
exebacase. We may still experience delays to the manufacturing timeline.
In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, the “Affordable Care Act”),ACA became law in the United States. The goal of the Affordable Care ActACA is to reduce the cost of health care and substantially change the way health care is financed by both governmental and private insurers. The Affordable Care Act,ACA, among other things, increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extended the rebate program to individuals enrolled in Medicaid managed care organizations, established annual fees on manufacturers of certain branded prescription drugs, required manufacturers to participate in a discount program for certain outpatient drugs under Medicare Part D and promoted programs that increase the federal government’s comparative effectiveness research, which will impact existing government healthcare programs and will result in the development of new programs. An expansion in the government’s role in the United States healthcare industry may further lower rates of reimbursement for pharmaceutical products.
The current presidential administration
financial condition.
More recently, on March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021, which eliminates the statutory cap on the Medicaid drug rebate, currently set at 100% of a drug’s average manufacturer price, beginning January 1, 2024.
Even if we obtain FDA approval ofCF-301,CF-404 or any other product candidate, we may never obtain approval or commercialize our products outside of the United States, which would limit our ability to realize their full market potential.
In order to marketCF-301,CF-404 or any other products outside of the United States, we must comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy. Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not mean that regulatory approval will be obtained in any other country. Approval procedures vary among countries and can involve additional product testing and validation and additional administrative review periods. Seeking foreign regulatory approvals could result in significant delays, difficulties and costs for us and require additional preclinical studies or clinical trials which would be costly and time consuming. Regulatory requirements can vary widely from country to country and satisfying these and other regulatory requirements is costly, time consuming, uncertain and subject to unanticipated delays. In addition, our failure to obtain regulatory approval in the United States or any foreign country may delay or have negative effects on the process for regulatory approval in other countries. We do not have any product candidates approved for sale in the United States or any foreign country and we do not have experience as a company in obtaining regulatory approval in international markets.
Compliance Matters
CF-301,CF-404
We face extensive
oversight.
Similar risks exist in foreign jurisdictions.
post-approval.
identify at least two existing regulations to be repealed, unless prohibited by law. These requirements are referred torecent years as the“two-for-one” provisions. This Executive Order includes a budget neutrality provision that requires the total incremental cost of all new regulations in the 2017 fiscal year, including repealed regulations, to be no greater than zero, except in limited circumstances. For fiscal years 2018 and beyond, the Executive Order requires agencies to identify regulations to offset any incremental cost of a new regulation and approximate the total costs or savings associated with each new regulation or repealed regulation. In interim guidance issued by the Office of Information and Regulatory Affairs within OMB on February 2, 2017, the administration indicates that the“two-for-one” provisions may apply not only to agency regulations, but also to significant agency guidance documents. Further, on February 24, 2017, the President issued an Executive Order requiring each agency to designate a regulatory reform officer and create a regulatory reform task force to evaluate existing regulations and make recommendations regarding their repeal, replacement, or modification.result. In addition, from timegovernment funding of other government agencies that fund research and development activities is subject to time, the federal government implements hiringpolitical process, which is inherently fluid and regulatory freezes,unpredictable.
business.
Our relationships with customers and third-party payors will
other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from government funded healthcare programs, such as Medicare and Medicaid, additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of
We expect
We expect
held unenforceable, in whole or in part, which could limit our ability to prevent others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and products. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized and such patents may not be able to claim the benefits of any patent term extension laws or regulations. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
We may be subject to claims by third parties asserting that we or our employees have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.
Many of our employees were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we use customarynon-disclosure agreements and try to ensure that our employees do not use the proprietary information orknow-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee’s former employer. Litigation may be necessary to defend against these claims.
In addition, while we typically require our employees and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own, or such agreements may be inadequately drafted at times thereby not ensuring assignment to us of all potential intellectual property rights. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to management.
We have not yet registered our trademarks in all of our potential markets, and failure to secure those registrations could adversely affect our business.
Our future trademark applications may not be allowed for registration, and our registered trademarks may not be maintained or enforced. During trademark registration proceedings, we may receive rejections from the Patent and Trademark Office or other applicable foreign intellectual property offices. Although we are given an opportunity to respond to those rejections, we may be unable to overcome such rejections, or have to expend additional resources to secure registrations, such as commencing cancellation proceedings against third-party trademark registrations to remove them as obstacles to our trademark applications. In addition, in the U.S. Patent and Trademark Office and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive such proceedings. If we do not secure registrations for our trademarks, we may encounter more difficulty in enforcing them against third parties than we otherwise would.
In addition, we have not yet proposed a proprietary name for our product candidates in any jurisdiction. Any proprietary name we propose to use with our product candidates in the United States must be approved by the FDA, regardless of whether we have registered it, or applied to register it, as a trademark. The FDA typically conducts a review of proposed product names, including an evaluation of potential for confusion with other product names. If the FDA objects to any of our proposed proprietary product names, we may be required to expend significant additional resources in an effort to identify a suitable proprietary product name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA.
Risks Related to Our Securities
The price of our common stock may be volatile and you could lose all or part of your investment.
There has been significant volatility in the market price and trading volume of equity and derivative securities, which is unrelated to the financial performance of the companies issuing the securities. In addition, equity markets have experienced significant price and volume fluctuations that have affected the market prices for the securities of biotechnology and also newly public companies for a number of reasons, including reasons that may be unrelated to the business or operating performance of the companies. These broad market fluctuations may negatively affect the market price of our common stock.
Prior to our initial public offering, there was no public market for our common stock. The trading price of our securities is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control, including limited trading volume. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this Quarterly Report, these factors include:
In addition, the stock market in general, and the Nasdaq Capital Market and biotechnology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance. In the past, securities class action litigation has often been instituted against companies following periods of volatility in the market price of a company’s securities. This type of litigation, if instituted, could result in substantial costs and a diversion of management’s attention and resources, which would harm our business, operating results or financial condition.
We are required to meet the Nasdaq Capital Market’s continued listing requirements and other Nasdaq rules, or we may risk delisting. Delisting could negatively affect the price of our common stock, which could make it more difficult for us to sell securities in a future financing or for you to sell our common stock.
We are required to meet the continued listing requirements of the Nasdaq Capital Market and other Nasdaq rules, including those regarding director independence and independent committee requirements, minimum stockholders’ equity, minimum share price and certain other corporate governance requirements. In particular, we are required to maintain a minimum bid price for our listed common stock of $1.00 per share. If we do not meet these continued listing requirements, our common stock could be delisted. Delisting from the Nasdaq Capital Market would cause us to pursue eligibility for trading of these securities on other markets or exchanges, or on the “pink sheets.” In such case, our stockholders’ ability to trade, or obtain quotations of the market value of our common stock would be severely limited because of lower trading volumes and transaction delays. These factors could contribute to lower prices and larger spreads in the bid and ask prices of these securities. There can be no assurance that our securities, if delisted from the Nasdaq Capital Market in the future, would be listed on a national securities exchange, a national quotation service, theover-the-counter markets or the pink sheets. Delisting from the Nasdaq Capital Market, or even the issuance of a notice of potential delisting, would also result in negative publicity, make it more difficult for us to raise additional capital, adversely affect the market liquidity of our securities, decrease securities analysts’ coverage of us or diminish investor, supplier and employee confidence.
We may issue additional shares of common stock, warrants or other securities to finance our growth.
Future sales of our common stock or warrants may cause the market price of our securities to decline.
Sales of substantial amounts of shares of our common stock or warrants in the public market, or the perception that these sales may occur, could adversely affect the price of our securities and impair our ability to raise capital through the sale of additional equity securities. We have approximately 73.7 million shares of common stock outstanding as of November 9, 2017, of which approximately 71.4 million shares of our outstanding common stock are freely tradable, or may become freely tradable, without restriction, in the public market unless held by our “affiliates,” as defined under Rule 144 of the Securities Act of 1933, as amended (the “Securities Act”). Additionally, we have warrants to purchase approximately 36.3 million shares of our common stock outstanding as of November 9, 2017. Approximately 35.9 million shares of common stock underlying these warrants will be freely tradable upon exercise unless held by our affiliates.
We have registered 6,932,507 shares of our common stock as of September 30, 2017 that we may issue under our employee benefit plans. These shares can be freely sold in the public market upon issuance, unless pursuant to their terms these stock awards have transfer restrictions attached to them. Additionally, pursuant to the 2014 Omnibus Incentive Plan (the “2014 Plan”), our management is authorized to grant stock options and other equity linked award to our employees, directors and consultants. The number of shares available for future grant under our 2014 Plan will automatically increase on January 1st each year, from January 1, 2015 through January 1, 2024, by an amount equal to four percent of all shares of our capital stock outstanding as of December 31st of the preceding calendar year, subject to the ability of our board of directors to take action to reduce the size of such increase in any given year. Unless our board of directors elects not to increase the number of shares underlying our 2014 Plan each year, our stockholders may experience additional dilution, which could cause our stock price to decline.
Our executive officers and directors hold a significant concentration of our common stock, which could limit the ability of our other stockholders to influence the direction of our Company.
As calculated by the SEC rules of beneficial ownership, the current executive officers and directors of our Company own 5.9% of our outstanding common stock as of November 9, 2017. Accordingly, they collectively have the ability to significantly influence or determine the election of all of our directors or the outcome of most corporate actions requiring stockholder approval such as: (i) a merger or a sale of our Company, (ii) a sale of all or substantially all of our assets and (iii) amendments to our certificate of incorporation or bylaws. This concentration of voting power and control could have a significant effect in delaying, deferring or preventing an action that might otherwise be beneficial to our other stockholders and be disadvantageous to our stockholders with interests different from those individuals. These individuals also have significant control over our business as officers and directors of our Company. There is a risk that they may exercise this ability in a manner that advances their best interests and not necessarily those of our other stockholders.
We completed an initial public offering on August 1, 2014.
If we do not develop and implement all required accounting practices and policies, we may be unable to provide the financial information required of a U.S. publicly traded company in a timely and reliable manner.
Prior to the IPO, we did not adopt all of the financial reporting and disclosure procedures and controls required of a U.S. publicly traded company because we were a privately held company. The implementation of all required accounting practices and policies and the hiring of additional financial staff have increased our operating costs and requires significant time and resources from our management and employees. If we fail to maintain effective internal controls and procedures and disclosure procedures and controls, we may be unable to provide financial information and required SEC reports that a U.S. publicly traded company is required to provide in a timely and reliable fashion. Any such delays or deficiencies could penalize us, including by limiting our ability to obtain financing, either in the public capital markets or from private sources and hurt our reputation and could thereby impede our ability to implement our strategy.
We are an “emerging growth company,” and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act, and may remain an emerging growth company for up to five years. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include:
We have taken advantage of certain reduced reporting burdens. We cannot predict whether investors will find our securities less attractive if we rely on these exemptions. If some investors find our securities less attractive as a result, there may be a less active trading market for our common stock, and the prices for our securities may be more volatile.
We have no present intention to pay cash dividends and, even if we change that policy, we may be restricted from paying cash dividends on our common stock.
We do not intend to pay cash dividends for the foreseeable future. We currently expect to retain all future earnings, if any, for use in the development, operation and expansion of our business. Any determination to pay cash dividends in the future will depend upon, among other things, our results of operations, plans for expansion, tax considerations, available net profits and reserves, limitations under law, financial condition, capital requirements and other factors that our board of directors considers to be relevant.
Provisions in our corporate charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.
Provisions in our corporate charter and our bylaws may discourage, delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future for our securities, thereby depressing the market prices of our securities. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, these provisions:
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
Risks Related to Cybersecurity
Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.
In the ordinary course of our business, we store sensitive data, including intellectual property, proprietary business information and personally identifiable information, in our data centers and on our networks. The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance, or other disruptions. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, disrupt our operations, and damage our reputation.
We maintain cyber risk insurance, but this insurance may not be sufficient to cover all of our losses from any future breaches of our systems.
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ContraFect Corporation | ||||||||
Date: | May 16, 2022 | By: | /s/ | |||||
President and Chief Executive Officer | ||||||||
Date: | May 16, 2022 | By: | /s/ Michael Messinger | |||||
Michael Messinger | ||||||||
Chief Financial Officer (Principal Financial |
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