UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
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(Address of principal executive offices) |
(Zip Code) |
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of November 7, 2024, there were
Palisade Bio, Inc.
Table of Contents
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PART I - |
1 |
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Item 1. |
1 |
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1 |
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2 |
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3 |
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5 |
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6 |
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Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
20 |
Item 3. |
29 |
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Item 4. |
29 |
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PART II - |
31 |
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Item 1. |
31 |
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Item 1A. |
31 |
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Item 2. |
50 |
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Item 3. |
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Item 4. |
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Item 5. |
50 |
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Item 6. |
51 |
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57 |
i
PART I
FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Palisade Bio, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands, except share and per share amounts)
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September 30, |
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December 31, |
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2024 |
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2023 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Prepaid expenses and other current assets |
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Total current assets |
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Restricted cash |
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Property and equipment, net |
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Operating lease right-of-use asset |
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Other noncurrent assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued liabilities |
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Accrued compensation and benefits |
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Current portion of operating lease liability |
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Insurance financing debt |
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Total current liabilities |
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Warrant liability |
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Contingent consideration obligation |
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Operating lease liability, net of current portion |
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Total liabilities |
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Stockholders' equity: |
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Series A Convertible Preferred Stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
Palisade Bio, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except share and per share amounts)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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License revenue |
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$ |
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$ |
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$ |
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$ |
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Operating expenses: |
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Research and development |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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( |
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( |
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( |
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( |
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Other (expense) income: |
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Interest expense |
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( |
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( |
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( |
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( |
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Other income, net |
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Total other income, net |
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Net loss |
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$ |
( |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Net loss available to common stockholders |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Basic and diluted weighted average shares used in computing |
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Basic and diluted net loss per common share* |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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(*) Basic and diluted loss per common share and basic and diluted weighted average share used in computing basic and diluted loss per common share for the three and nine months ended September 30, 2023 has been adjusted to reflect the 1-for-15 reverse stock split effected on April 5, 2024.
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
Palisade Bio, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands, except share amounts)
(Unaudited)
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Three Months Ended September 30, 2024 |
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Preferred Stock |
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Common Stock |
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Additional |
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Accumulated |
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Total |
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Shares |
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Amount |
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Shares* |
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Amount* |
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Balance, June 30, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Stock-based compensation expense and related charges |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock to vendors |
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— |
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— |
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— |
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— |
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Issuance of common stock in connection with exercise of warrants |
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— |
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— |
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( |
) |
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— |
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Balance, September 30, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Three Months Ended September 30, 2023 |
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Preferred Stock |
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Common Stock |
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Additional |
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Accumulated |
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Total |
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Shares |
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Amount |
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Shares* |
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Amount* |
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Balance, June 30, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Stock-based compensation expense and related charges |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock for vesting of restricted stock units, net of employee withholding tax liability |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock and warrants in September 2023 Offering, net of issuance costs of $ |
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— |
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— |
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— |
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Adjustment to record the impact of exercise price reset on outstanding warrants related to down round provisions |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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Balance, September 30, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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(*) Adjusted to reflect the 1-for-15 reverse stock split effected on April 5, 2024.
The accompanying notes are an integral part of these condensed consolidated financial statements.
Palisade Bio, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands, except share amounts)
(Unaudited)
|
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Nine Months Ended September 30, 2024 |
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Preferred Stock |
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Common Stock |
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Additional |
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Accumulated |
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Total |
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Shares |
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Amount |
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Shares* |
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Amount* |
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Balance, December 31, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Stock-based compensation expense and related charges |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock to vendors |
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— |
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— |
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— |
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— |
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Issuance of common stock for vesting of restricted stock units, net of employee withholding tax liability |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Issuance of common stock in connection with exercise of warrants |
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— |
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— |
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( |
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— |
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— |
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Issuance of common stock under Employee Stock Purchase Plan |
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— |
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— |
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— |
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— |
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Issuance of common stock in connection with warrant inducement, net of issuance costs of $ |
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— |
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— |
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— |
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Issuance of common stock and warrants in May 2024 Offering, net of issuance costs of $ |
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— |
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— |
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— |
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Reverse stock split fractional share settlement |
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— |
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— |
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( |
) |
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— |
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— |
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— |
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— |
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Balance, September 30, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Nine Months Ended September 30, 2023 |
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Preferred Stock |
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Common Stock |
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Additional |
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Accumulated |
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Total |
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Shares |
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Amount |
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Shares* |
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Amount* |
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Balance, December 31, 2022 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Stock-based compensation expense and related charges |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock for vesting of restricted stock units, net of employee withholding tax liability |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock in connection with exercise of warrants |
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— |
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— |
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— |
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Issuance of common stock and warrants in January 2023 Offering, net of issuance costs of $ |
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— |
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— |
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— |
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Issuance of common stock and warrants in April 2023 Offering, net of issuance costs of $ |
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— |
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— |
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— |
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Issuance of common stock and warrants in September 2023 Offering, net of issuance costs of $ |
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— |
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— |
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— |
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Adjustment to record the impact of exercise price reset on outstanding warrants related to down round provisions |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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Balance, September 30, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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(*) Adjusted to reflect the 1-for-15 reverse stock split effected on April 5, 2024.
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Palisade Bio, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
|
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Nine Months Ended September 30, |
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|||||
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2024 |
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2023 |
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Net loss |
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$ |
( |
) |
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$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation |
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Non-cash operating lease expense |
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Recurring fair value measurements of liabilities |
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( |
) |
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Issuance of common stock to vendors |
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Loss on disposal of property and equipment |
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Stock-based compensation and related charges |
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Other |
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( |
) |
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Changes in operating assets and liabilities: |
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Prepaid and other current assets and other noncurrent assets |
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Accounts payable and accrued liabilities |
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( |
) |
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Accrued compensation and benefits |
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( |
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Operating lease liabilities |
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( |
) |
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( |
) |
Net cash used in operating activities |
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( |
) |
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( |
) |
Cash flows from investing activities: |
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Purchases of property and equipment |
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( |
) |
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Net cash used in investing activities |
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( |
) |
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Cash flows from financing activities: |
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Payments on insurance financing debt |
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( |
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( |
) |
Proceeds from issuance of common stock and warrants |
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Proceeds from the exercise of warrants |
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Payment of warrant inducement issuance costs |
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( |
) |
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Payment of equity issuance costs |
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( |
) |
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( |
) |
Proceeds from issuance of common stock under Employee Stock Purchase Plan |
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Shares withheld for payment of employee withholding tax liability |
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( |
) |
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Net cash provided by financing activities |
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Net (decrease) increase in cash, cash equivalents and restricted cash |
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( |
) |
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Cash, cash equivalents and restricted cash, beginning of year |
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Cash, cash equivalents and restricted cash, end of period |
|
$ |
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$ |
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||
Reconciliation of cash, cash equivalents and restricted cash to the balance sheets: |
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Cash and cash equivalents |
|
$ |
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$ |
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||
Restricted cash |
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Total cash, cash equivalents and restricted cash |
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$ |
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$ |
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||
Supplemental disclosures of cash flow information: |
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Interest paid |
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$ |
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$ |
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||
Supplemental disclosures of non-cash investing and financing activities: |
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Warrant inducement and equity issuance costs included in accounts payable and accrued liabilities |
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$ |
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$ |
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||
Non-cash impact of exercise price reset on outstanding warrants related to down round provisions |
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||
Fair value of warrants issued to solicitation agent |
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Fair value of warrants issued to placement agent |
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Deferred equity issuance costs recognized as a reduction in additional paid-in capital from financing activities |
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Insurance financing debt included in prepaid and other current assets and other noncurrent assets |
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Incremental fair value of modified warrants (Note 5) |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
PALISADE BIO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Organization, Business and Financial Condition
As used in this Quarterly Report on Form 10-Q, unless the context indicates or otherwise requires, “Palisade,” “Palisade Bio,” the "Company,” “we,” “us,” and “our” or similar designations in this report refer to Palisade Bio, Inc., a Delaware Corporation, and its subsidiaries. Any reference to “common shares” or “common stock,” refers to the Company's $
Description of Business
The Company is a clinical-stage biopharmaceutical company focused on developing and advancing novel therapeutics for patients living with autoimmune, inflammatory, and fibrotic diseases. The Company's lead product candidate, PALI-2108, is being developed as a treatment for patients living with inflammatory bowel disease, or IBD, including ulcerative colitis and Crohn's disease.
Liquidity and Going Concern
The Company has a limited operating history, and the sales and income potential of the Company’s business and market are unproven. The Company has experienced losses and negative cash flows from operations since its inception. As of September 30, 2024, the Company had an accumulated deficit of $
Based on the Company’s current working capital, anticipated operating expenses, and anticipated net operating losses, there is substantial doubt about the Company's ability to continue as a going concern for a period of one year following the date that these condensed consolidated financial statements are issued. The condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business. The condensed consolidated financial statements do not include any adjustments for the recovery and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
2. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
In management’s opinion, the accompanying interim condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly the Company's financial position, results of operations and cash flows. The interim results of operations are not necessarily indicative of the results that may occur for the full year. Certain information and note disclosures normally included in the consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to instructions, rules and regulations prescribed by the U.S. Securities and Exchange Commission (“SEC”). The Company believes that the disclosures provided herein
6
are adequate to make the information presented not misleading when these condensed consolidated financial statements are read in conjunction with the consolidated financial statements and notes included in the Company’s financial statements filed in the Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 26, 2024, and any Quarterly Reports on Form 10-Q filed thereafter.
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, LBS and Suzhou Neuralstem Biopharmaceutical Co., Ltd. All the entities are consolidated in the Company's condensed consolidated financial statements and all intercompany activity and transactions, if any, have been eliminated.
Reverse Stock Split
On April 5, 2024, the Company effected a
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates, judgments, and assumptions that impact the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the balance sheet, and the reported amounts of expenses during the reporting period. The most significant estimates in the Company’s condensed consolidated financial statements relate to accrued research and development expenses and its contingent consideration obligation. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may materially differ from these estimates and assumptions.
Significant Accounting Policies
The Company’s significant accounting policies used in the preparation of these condensed consolidated financial statements for the three and nine months ended September 30, 2024 are consistent with those discussed in Note 2 to the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 26, 2024.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation. During the fourth quarter of 2023, the Company reclassified the fair value of the contingent consideration milestone payment obligation associated with the Giiant License Agreement (as defined below), including transaction related costs, in the amount of $
Comprehensive Loss
Comprehensive income (loss) is defined as a change in equity during a period from transactions and other events and circumstances from non-owner sources. The Company’s comprehensive loss was the same as its reported net loss for all periods presented.
Recently Issued or Adopted Accounting Pronouncements
No new accounting pronouncements issued or adopted during the three and nine months ended September 30, 2024 that had or are expected to have a material impact on the Company’s condensed consolidated financial statements or disclosures.
7
3. Balance Sheet Details
Prepaid expenses and other current assets consisted of the following (in thousands):
|
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September 30, |
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December 31, |
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||
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2024 |
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2023 |
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Prepaid insurance |
|
$ |
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$ |
|
||
Other receivables |
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Prepaid subscriptions and fees |
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Prepaid software licenses |
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Deposits |
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Deferred equity issuance costs |
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Prepaid other |
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||
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$ |
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$ |
|
Deferred equity issuance costs consist of the legal, accounting and other direct and incremental costs incurred by the Company related to its equity offerings, if not yet finalized as of the balance sheet date, or shelf registration statement. These costs will be netted against additional paid-in capital as a cost of the future equity issuances to which they relate. During the nine months ended September 30, 2024, the Company netted previously deferred equity issuance costs of approximately $
Other noncurrent assets consisted of the following (in thousands):
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|
September 30, |
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|
December 31, |
|
||
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|
2024 |
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2023 |
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Prepaid insurance, less current portion |
|
$ |
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|
$ |
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||
Other noncurrent assets |
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||
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|
$ |
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$ |
|
Accrued liabilities consisted of the following (in thousands):
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September 30, |
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December 31, |
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||
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2024 |
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2023 |
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Accrued accounts payable |
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$ |
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$ |
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Accrued clinical trial expenses |
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Accrued CMC expenses |
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Accrued director stipends |
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Accrued severance and benefits (Note 9) |
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Accrued joint development expenses (Note 7) |
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Current portion of contingent consideration obligation (Note 4) |
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Accrued other |
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||
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$ |
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$ |
|
8
4. Fair Value Measurements
The Company’s financial instruments consist principally of cash and cash equivalents, restricted cash, other current receivables, accounts payable, accrued liabilities, insurance financing debt, liability-classified warrants and a contingent consideration obligation. The carrying amounts of financial instruments such restricted cash, other current receivables, accounts payable, and accrued liabilities approximate their related fair values due to the short-term nature of these instruments. The carrying value of the Company’s insurance financing debt as of September 30, 2024 and December 31, 2023 approximates its fair value due to the market rate of interest, which is based on level 2 inputs. The Company’s liability-classified common stock warrants and its contingent consideration obligation are carried at fair value based on level 3 inputs. None of the Company’s non-financial assets or liabilities are recorded at fair value on a nonrecurring basis.
Cash and Cash Equivalents
The Company invests its excess cash in money market funds that are classified as level 1 in the fair value hierarchy, due to their short-term maturity, and measured the fair value based on quoted prices in active markets for identical assets. The fair value of the Company's cash and cash equivalents invested in money market funds was $
Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of cash and cash equivalents. The Company maintains deposits in federally insured financial institutions and in money market accounts, and at times balances may exceed federally insured limits. Management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held nor has the Company experienced any losses in these accounts.
Contingent Consideration Obligation
On September 1, 2023, the Company and Giiant Pharma, Inc. ("Giiant") entered into a research collaboration and license agreement (“Giiant License Agreement”). Pursuant to the Giiant License Agreement, the Company incurred a contingent consideration obligation related to future milestone payments. The Company has an obligation to make contingent consideration payments to Giiant, in either cash or shares of the Company’s common stock solely at the Company’s election, upon the achievement of development milestones (as set forth in the Giiant License Agreement). Because the contingent consideration may be settled in shares of the Company's common stock, the Company has determined it should be accounted for under Accounting Standards Codification ("ASC") 480, and accordingly has recognized it as a liability measured at its estimated fair value. On August 2, 2024, the Company and Giiant entered into an amendment to the Giiant License Agreement, which among other things, reduced the milestone payments due to Giiant upon the achievement certain development milestones (see Note 7, Collaborations and License Agreements, for further details).
At the end of each reporting period, the Company re-measures the contingent consideration obligation to its estimated fair value and any resulting change is recognized in research and development expenses in the condensed consolidated statements of operations. The fair value of the contingent consideration obligation is determined using a probability-based model that estimates the likelihood of success in achieving each of the defined milestones that is then discounted to present value using the Company's incremental borrowing rate. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in fair value measurement accounting. The significant assumptions used in the calculation of the fair value as of September 30, 2024 included a discount rate of
The following table summarizes the activity of the Company's Level 3 contingent consideration obligation, which is fair valued on a recurring basis (in thousands):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
Contingent Consideration Obligation |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Fair value at beginning of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Initial fair value at the original issuance date |
|
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|
||||
Change in fair value during the period |
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|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Fair value at end of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
9
As of December 31, 2023, approximately $
Liability-Classified Warrants
The Company has issued warrants that are accounted for as liabilities based upon the guidance of with ASC 480 and ASC 815. Estimating fair values of liability-classified financial instruments requires the development of estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. Changes in fair value of the liability-classified warrants, if any, are recognized as a component of other income, net in the condensed consolidated statement of operations.
As of September 30, 2024, the fair value of the Company's liability-classified warrants outstanding was determined to be insignificant using a Black-Scholes option pricing model valuation model due to the low market price of the Company's stock at the date of valuation relative to the exercise price of the underlying warrants outstanding.
The following table summarizes the activity of the Company’s Level 3 liability-classified warrants during the three and nine months ended September 30, 2024 and 2023 (in thousands):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
Warrant Liabilities |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Fair value at beginning of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Change in fair value during the period |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Fair value at end of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
5. Stockholders’ Equity
Classes of Stock
Common Stock
As of September 30, 2024, the Company was authorized to issue
On April 5, 2024, the Company effected the Reverse Stock Split. Accordingly, each of the Company’s stockholders received one share of the Company's common stock for every
As a result of the Reverse Stock Split, on April 5, 2024, the number of issued and outstanding shares of the Company's common stock was adjusted from
10
Preferred Stock
As of September 30, 2024, the Company was authorized to issue
Recent Equity Offerings
May 2024 Offering
On May 1, 2024, the Company entered into a securities purchase agreement with an institutional investor, pursuant to which the Company sold in a private placement, (i)
The Company issued warrants to the placement agent in the May 2024 Offering to purchase an aggregate
The May 2024 Offering closed on May 6, 2024 for net cash proceeds to the Company of approximately $
Other Recent Equity Offerings
On September 11, 2023, the Company completed a registered direct offering of common stock pursuant to an effective shelf registration statement on Form S-3 (the "September 2023 Offering"). Gross cash proceeds from the September 2023 Offering were $
On April 3, 2023, the Company completed a registered direct offering and concurrent private placement of common stock and warrants to purchase common stock (the "April 2023 Offering"). Gross cash proceeds from the April 2023 Offering were $
On January 4, 2023, the Company completed a registered direct offering and concurrent private placement of common stock and warrants to purchase common stock (the "January 2023 Offering"). Gross cash proceeds from the January 2023 Offering were $
Common Stock Warrants and Warrant Exercises
February 2024 Warrant Inducement
On J