Exhibit 99.1
PAINREFORM LTD.
CONDENSED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2022,
UNAUDITED
U.S. DOLLARS IN THOUSANDS
INDEX
Page | |
F-2 | |
F-3 | |
F-4 | |
F-5 | |
F-6 - F-11 |
PAINREFORM LTD.
U.S. dollars in thousands (except share and per share data) |
Note | As of September 30, 2022 | As of December 31, 2021 | ||||||||||
Assets | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 6,922 | $ | 16,537 | ||||||||
Short term deposits | 6,034 | - | ||||||||||
Restricted cash | 24 | 34 | ||||||||||
Prepaid clinical trial expenses and deferred clinical trial costs | 7 | 1,728 | 1,728 | |||||||||
Prepaid expenses and other current assets | 100 | 721 | ||||||||||
Total current assets | 14,808 | 19,020 | ||||||||||
Property and equipment, net | 44 | 53 | ||||||||||
Total assets | $ | 14,852 | $ | 19,073 | ||||||||
Liabilities and shareholders’ equity | ||||||||||||
Current liabilities: | ||||||||||||
Trade payables | $ | 385 | $ | 136 | ||||||||
Employees and related liabilities | 414 | 423 | ||||||||||
Accrued expenses | 395 | 198 | ||||||||||
Total current liabilities | 1,194 | 757 | ||||||||||
Non-current liabilities: | ||||||||||||
Provision for uncertain tax positions | 240 | 234 | ||||||||||
Total liabilities | 1,434 | 991 | ||||||||||
Commitments and contingencies (Note 7) | ||||||||||||
Shareholders’ equity: | ||||||||||||
Ordinary shares, NIS 0.03 par value; Authorized: 26,666,667 shares as of September 30, 2022 and December 31, 2021; Issued and outstanding: 10,634,166 and 10,482,056 shares as of September 30, 2022 and December 31, 2021, respectively. | 94 | 94 | ||||||||||
Additional paid-in capital | 42,677 | 41,715 | ||||||||||
Accumulated deficit | (29,353 | ) | (23,727 | ) | ||||||||
Total shareholders’ equity | 4 | 13,418 | 18,082 | |||||||||
Total liabilities and shareholders’ equity | $ | 14,852 | $ | 19,073 |
The accompanying notes are an integral part of the unaudited condensed financial statements.
F - 2
PAINREFORM LTD.
U.S. dollars in thousands (except share and per share data)
Nine months ended September 30, | ||||||||||||
Note | 2022 | 2021 | ||||||||||
Operating expenses: | ||||||||||||
Research and development expenses | $ | (2,473 | ) | $ | (2,304 | ) | ||||||
General and administrative expenses | (3,140 | ) | (3,163 | ) | ||||||||
Operating loss | (5,613 | ) | (5,467 | ) | ||||||||
Financial expense, net | 6 | (13 | ) | (46 | ) | |||||||
Net loss and comprehensive loss | $ | (5,626 | ) | $ | (5,513 | ) | ||||||
Basic and diluted net loss per share | $ | (0.53 | ) | $ | (0.57 | ) | ||||||
Weighted average number of shares of ordinary share used in computing basic and diluted net loss per share | 10,634,166 | 9,731,501 |
The accompanying notes are an integral part of the unaudited condensed financial statements.
F - 3
PAINREFORM LTD.
U.S. dollars in thousands (except share data)
Ordinary shares | Additional paid-in | Accumulated | Total shareholders’ | |||||||||||||||||
Number | Amount | capital | deficit | Equity | ||||||||||||||||
Balance as of January 1, 2021 | 8,758,037 | $ | 78 | $ | 33,023 | $ | (16,481 | ) | $ | 16,620 | ||||||||||
Shares and warrants issuance - Private Investment in Public Equity ("PIPE"), net | 1,304,346 | 12 | 5,542 | - | 5,554 | |||||||||||||||
Exercise of warrants | 419,673 | 18 | 1,912 | 1,930 | ||||||||||||||||
Share-based compensation to employees and directors | - | - | 582 | - | 582 | |||||||||||||||
Share-based compensation to service providers | - | - | 309 | - | 309 | |||||||||||||||
Net loss and comprehensive loss | - | - | - | (5,513 | ) | (5,513 | ) | |||||||||||||
Balance as of September 30, 2021 | 10,482,056 | $ | 108 | $ | 41,368 | (21,994 | ) | $ | 19,482 |
Ordinary shares | Additional paid-in capital | Accumulated deficit | Total shareholders’ Equity | |||||||||||||||||
Number | Amount | |||||||||||||||||||
Balance as of January 1, 2022 | 10,482,056 | $ | 94 | $ | 41,715 | $ | (23,727 | ) | $ | 18,082 | ||||||||||
Share-based compensation to employees and directors | - | - | 653 | - | 653 | |||||||||||||||
Share-based compensation to service providers | - | - | 309 | - | 309 | |||||||||||||||
Shares issuance to service providers | 152,110 | * | - | - | * | |||||||||||||||
Net loss and comprehensive loss | - | - | - | (5,626 | ) | (5,626 | ) | |||||||||||||
Balance as of September 30, 2022 | 10,634,166 | $ | 94 | $ | 42,677 | $ | (29,353 | ) | $ | 13,418 |
(*) Less than $1.
The accompanying notes are an integral part of the unaudited condensed financial statements.
F - 4
PAINREFORM LTD.
U.S. dollars in thousands
Nine months ended September 30, | ||||||||
2022 | 2021 | |||||||
Cash flows from operating activities | ||||||||
Net loss | $ | (5,626 | ) | $ | (5,513 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation | 9 | 4 | ||||||
Share-based compensation to employees and directors | 653 | 582 | ||||||
Share-based compensation to service providers | 309 | 309 | ||||||
Change in: | ||||||||
Other current assets | 621 | 161 | ||||||
Trade payables | 249 | (550 | ) | |||||
Other accounts payable | 194 | 225 |
Net cash used in operating activities | (3,591 | ) | (4,782 | ) | ||||
Cash flows from investing activities | ||||||||
Purchase of short term deposit | (6,034 | ) | ||||||
Purchase of property and equipment | - | (22 | ) | |||||
Net cash used in investing activities | (6,034 | ) | (22 | ) | ||||
Cash flows from financing activities | ||||||||
Proceeds from Exercise of warrants | 1,930 | |||||||
Proceeds from issuance of ordinary shares under Private Investment in Public Equity | - | 6,000 | ||||||
Issuance costs | - | (446 | ) | |||||
Net cash provided by financing activities | - | 7,484 | ||||||
Change in cash, cash equivalents and restricted cash | (9,625 | ) | 2,680 | |||||
Cash, cash equivalents and restricted cash at the beginning of the period | 16,571 | 15,690 | ||||||
Cash, cash equivalents and restricted cash at the end of the period | $ | 6,946 | $ | 18,370 |
The below table reconciles cash, cash equivalents and restricted cash as reported in the balance sheets to the total of the same amounts shown in the statements of cash flows:
As of September 30, | ||||||||
2022 | 2021 | |||||||
Cash and cash equivalents | $ | 6,922 | $ | 18,337 | ||||
Restricted cash | 24 | 33 | ||||||
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows | $ | 6,946 | $ | 18,370 |
The accompanying notes are an integral part of the unaudited condensed financial statements.
F - 5
PAINREFORM LTD.
U.S. dollars in thousands, except share and per share data
NOTE 1: GENERAL
a. | PainReform Ltd. (the "Company") was incorporated under the laws of the State of Israel in November 2007. The Company is a clinical stage specialty pharmaceutical company focused on the reformulation of established therapeutics. The Company’s proprietary extended release drug-delivery system is designed to provide an extended period of post-surgical pain relief without the need for repeated dose administration while reducing the potential need for the use of opiates. |
b. | As a result of issues in the manufacturing process, the Company has decided to postpone the commencement of its planned Phase 3 clinical trial. The Company is currently investigating these manufacturing issues and cannot predict the costs that may be incurred or the timeline for commencing the Phase 3 trial. |
c. | Liquidity |
Since its inception, the Company has devoted substantially all of its efforts to research and development, clinical trials, and capital raising activities. The Company is still in its development and clinical stage and has not yet generated revenues.
The Company has incurred losses of $5,626 and $5,513 for the nine months periods ended on September 30, 2022, and 2021, respectively and has negative cash outflow from operating activities. The Company expects to continue to incur losses and negative cash flows from operations until its product reaches profitability. As of September 30, 2022, the Company’s accumulated deficit was $29,353. The Company has funded its operations to date primarily through equity financing and has cash on hand (including short term deposits) of $12,956 as of September 30, 2022. Additional funding will be required to complete the Company’s research and development and clinical trials, to attain regulatory approvals, to begin the commercialization efforts of the Company’s product and to achieve a level of sales adequate to support the Company’s current and planned cost structure. The Company monitors its cash flow projections on a current basis and based on the Company's current operating plan, the Company believes that its existing capital resources will be sufficient to fund operations for at least twelve months after the date the financial statements are issued.
d. | In late 2019, a novel strain of COVID-19, was reported in Wuhan, China. While initially the outbreak was largely concentrated in China, it rapidly spread across the globe, including in Israel and the United States. The extent to which the COVID-19 pandemic impacts the Company’s operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and severity of the outbreak, and the actions that may be required to contain the COVID-19 or treat its impact. Through the financial report approval date, November 14, 2022, the Company has not experienced a significant impact on its operations due to the COVID-19 pandemic. |
e. | In April 2022, the Company's board of directors increased the number of reserved ordinary shares under the 2019 Plan by an additional amount of 1,000,000 ordinary shares. (Note 4b) |
f. | In April 2022, the Company issued 152,110 shares to a consultant pursuant to an agreement signed in August 2020. Since August 2020, the Company has recognized $857 ($309 for the nine months ended September 30, 2022) as share-based compensation expense related to the shares issued to the consultant. |
F - 6
PAINREFORM LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
U.S. dollars in thousands, except share and per share data
NOTE 2: UNAUDITED CONDENSED FINANCIAL STATEMENTS
The unaudited condensed financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and, on the same basis as the audited financial statements included in the Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2021 (the “2021 Form 20-F”).
Certain information and disclosures normally included in annual financial statements have been omitted in this interim period report pursuant to the rules and regulations of the Securities and Exchange Commission. Because the unaudited condensed financial statements do not include all of the information and disclosures required by U.S. GAAP for annual financial statements, they should be read in conjunction with the audited financial statements and notes included in the 2021 Form 20-F.
The year-end balance sheet data were derived from the audited financial statements as of December 31, 2021, but not all disclosures required by generally accepted accounting principles in the United States (“U.S. GAAP”) are included.
In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair statement of the Company’s financial position as of September 30, 2022 and its results of operations and cash flows for the nine months ended September 30, 2022 and 2021 have been included. Operating results for the nine months ended September 30, 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2022 or any other interim period or for any other future year.
NOTE 3: SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies that have been applied in the preparation of the unaudited condensed financial statements are identical to those that were applied in preparation of the Company’s most recent annual financial statements in connection with its Annual Report on Form 20-F, except for the following:
- | In August 2020, the FASB issued guidance ASU 2020-06 that is expected to reduce complexity and improve comparability of financial reporting associated with accounting for convertible instruments and contracts in an entity’s own equity. This guidance is effective for the Company from January 1, 2022 and did not have a material impact on the Company’s financial statements and disclosures. |
F - 7
PAINREFORM LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
U.S. dollars in thousands, except share and per share data
NOTE 4: SHAREHOLDERS’ EQUITY
a. | Warrants and warrants units |
The following table summarizes the warrants outstanding as of September 30, 2022:
Type | Issuance Date | Number of warrants | Exercise price | Exercisable through |
August 2019 warrants | August 22, 2019 | 205,268 | $6.72 (*) | August 22, 2024 |
December 2019 warrants | December 9, 2019 | 148,106 | $6.72 (*) | December 8, 2024 |
Warrants to underwriters | September 3, 2020 | 125,000 | $10.00 | September 1, 2025 |
Warrants to underwriters | October 5, 2020 | 375,000 | $8.80 | September 3, 2025 |
IPO warrants | September 3, 2020 | 2,812,170 | $8.80 | September 3, 2025 |
PIPE warrants | March 11, 2021 | 232,500 | $4.60 | September 10, 2026 |
Warrants to PIPE placement agent | March 11,2021 | 52,173 | $5.06 | March 8, 2026 |
TOTAL | 3,950,217 |
(*) Each warrant is exercisable into one IPO unit consisting of one share and one IPO warrant with an exercise price of $8.80.
F - 8
PAINREFORM LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
U.S. dollars in thousands, except share and per share data
NOTE 4: SHAREHOLDERS’ EQUITY (Cont.)
b. | Share-based compensation: |
Share options outstanding and exercisable to employees and directors under the 2008 Plan as of September 30, 2022 and December 31, 2021 were as follows:
Weighted | ||||||||||||
Weighted | average | |||||||||||
average | remaining | |||||||||||
Number of | exercise | contractual | ||||||||||
options | price | life | ||||||||||
Options outstanding as of December 31, 2021 | 153,882 | $ | 0.24 | 2.25 | ||||||||
Options granted | - | - | - | |||||||||
Options exercised | - | - | - | |||||||||
Options forfeited | - | - | - | |||||||||
Options outstanding as of September 30, 2022 | 153,882 | $ | 0.24 | 1.50 | ||||||||
Options exercisable as of September 30, 2022 | 153,882 | $ | 0.24 | 1.50 |
Share options outstanding and exercisable to employees and directors under the 2019 Share Option Plan (the “2019 Plan”) as of September 30, 2022 and December 31, 2021, were as follows:
Weighted | ||||||||||||
Weighted | average | |||||||||||
average | remaining | |||||||||||
Number of | exercise | contractual | ||||||||||
options | price | life | ||||||||||
Options outstanding as of December 31, 2021 | 971,476 | $ | 4.51 | 8.72 | ||||||||
Options granted | 164,455 | 1.06 | 9.54 | |||||||||
Options exercised | - | - | - | |||||||||
Options forfeited | - | - | - | |||||||||
Options outstanding as of September 30, 2022 | 1,135,931 | $ | 4.01 | 8.84 | ||||||||
Options exercisable as of September 30, 2022 | 560,831 | $ | 4.11 | 7.72 |
In April 2022, the Company’s board of directors approved the grant of options to purchase 164,455 ordinary shares of the Company to employees. The options were granted under the Company's 2019 plan. The fair value of share options granted was estimated using the Black Scholes option-pricing model, which requires a number of assumptions, of which the most significant are the expected share price, volatility, and the expected option term. The options vest over a four-year period, 4/16 of the options shall vest following the lapse of a period of twelve months commencing at the date of grant. The remaining 12/16 of the options shall vest on quarterly basis, so that 1/16 of the options shall vest on the expiry of each quarter. The weighted average grant date fair value per option was $0.89.
F - 9
PAINREFORM LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
U.S. dollars in thousands, except share and per share data
NOTE 4: SHAREHOLDERS’ EQUITY (Cont.)
The following table summarizes information about share options that were granted in 2022 as part of the 2019 plan:
2022 | ||||
Share price at grant day (USD) | $ | 1.22 | ||
Expected life (years) | 6.12 | |||
Risk-free interest rates | 2.69 | % | ||
Expected volatility | 79.30 | % | ||
Dividend yield | - | |||
Exercise price | 1.06 | |||
Weighted average grant date fair value per option | $ | 0.89 |
NOTE 5: LOSS PER SHARE
Basic loss per share is computed by dividing the loss for the period applicable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.
For the periods ended September 30, 2022 and 2021, all outstanding share options and warrants have been excluded from the calculation of the diluted net loss per share as all such securities are anti-dilutive for all periods presented.
NOTE 6: FINANCIAL EXPENSES, NET
Nine months ended September 30, | ||||||||
2022 | 2021 | |||||||
Bank fees | (9 | ) | (6 | ) | ||||
Income from deposits | 65 | - | ||||||
Exchange rate differences | (69 | ) | (40 | ) | ||||
Total financial expenses, net | $ | (13 | ) | $ | (46 | ) |
F - 10
PAINREFORM LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
U.S. dollars in thousands, except share and per share data
NOTE 7: COMMITMENTS AND CONTINGENCIES
On November 13, 2020, the Company entered into a Master Clinical Research Organization Agreement (the "First Agreement"), and on December 3, 2020, the Company entered into a Master Clinical Trial Agreement (the "Second Agreement") both with Lotus Clinical Research as the Company's clinical research organization for the Company's planned Phase 3 trial of PRF-110, which was expected to commence in the fourth quarter of 2022, but has been postponed due to issues in the manufacturing process ( note 9) .
Under the First Agreement, the Company paid the first milestone of $581 on December 28, 2020, and paid an additional milestone of $581 during the first nine months of 2021. In addition, the Company paid a non-refundable deposit of $710 under the Second Agreement in January 2021.
As of September 30, 2022, the Company accounted for these amounts of net $1,728 as prepaid clinical trial expense and deferred clinical trial costs after recognition of $144 clinical trials expenses in 2021.
NOTE 8: FINANCIAL INSTRUMENTS
The carrying amount of cash equivalents, restricted cash, trade payables and accrued expenses approximate their fair value due to their short-term characteristics.
NOTE 9: SUBSEQUENT EVENTS
As a result of issues in the manufacturing process, the Company has decided to postpone the commencement of its planned Phase 3 clinical trial. See note 1b.
F - 11