Quarterly report pursuant to Section 13 or 15(d)

NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Policies)

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NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Policies)
6 Months Ended
Jun. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Reverse Stock Split

Reverse Stock Split

 

As described in Note 1 to the consolidated financial statements included in the Company’s 2022 Annual Report on Form 10-K/A, on June 30, 2022, the Company filed a Certificate of Amendment to the Company’s Restated Certificate of Incorporation with the Secretary of State of the State of Delaware (the “Certificate of Amendment”), to effectuate a reverse stock split of the Company’s outstanding common stock, par value $0.01 per share (“Common Stock”), at an exchange ratio of 25-to-1 (the “Reverse Stock Split”). The Reverse Stock Split was effective on July 1, 2022. The number of authorized shares of Common Stock immediately after the Reverse Stock Split (“New Common Stock”) remained at 200,000,000 shares. All share and per share information has been retroactively adjusted to give effect to the Reverse Stock Split for all periods presented, unless otherwise indicated.

 

Uses and Sources of Liquidity

Uses and Sources of Liquidity

 

The unaudited interim condensed consolidated financial statements have been prepared on the going concern basis, which assumes the Company will have sufficient cash to pay its operating expenses, as and when they become payable, for a period of at least 12 months from the date the financial report is issued.

 

As of June 30, 2023, the Company had cash, cash equivalents, restricted cash and short-term investments of $37.1 million. For the six months ended June 30, 2023, the Company had cash outflows from operations of $22.0 million. The Company has not generated significant revenues and has not achieved profitable operations. There is no assurance that profitable operations will ever be achieved, and, if achieved, could be sustained on a continuing basis. In addition, development activities, clinical and nonclinical testing, and commercialization of the Company’s product candidates will require significant additional financing.

 

 

The Company is subject to a number of risks similar to other life science companies, including, but not limited to, risks related to the successful discovery and development of product candidates, obtaining the necessary regulatory approval to market the Company’s product candidates, raising additional capital to continue to fund the Company’s operations, development of competing drugs and therapies and protection of proprietary technology. As a result of these and other risks and the related uncertainties, there can be no assurance of the Company’s future success.

 

Subsequent to June 30, 2023, as described in Note 12, the Company raised $25.0 million, with net proceeds of $23.0 million, after offering costs through the issuance of common stock and warrants.

 

The Company believes that its current cash and cash equivalents, restricted cash and short-term investments are sufficient resources to fund operations through at least the next 12 months from the date of this quarterly report on Form 10-Q. The Company may need to secure additional funding to carry out all of its planned research and development and commercialization activities. If the Company is unable to obtain additional financing or generate license or product revenue, the lack of liquidity and sufficient capital resources could have a material adverse effect on its future prospects.

 

Use of Estimates

Use of Estimates

 

The preparation of unaudited interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and disclosure of contingent assets and liabilities at the date of the unaudited interim condensed consolidated financial statements and the reported amounts of revenue and expenses during the reported period. Actual results could differ from these estimates and assumptions.

 

Other receivables

Other receivables

 

Other receivables include employee retention credits (“ERC”), sublease rent receivables and other miscellaneous receivables. As of June 30, 2023 and December 31, 2022, the Company had ERC receivables of $2.1 million and nil, respectively.

 

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

 

There have been no new, anticipated or material changes to the significant accounting policies disclosed in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2022.

 

Correction of Error

Correction of Error

 

During the fourth quarter of 2022, the Company identified errors in the accounting for certain common stock warrants that were issued in 2021. The common stock warrants were not indexed to the Company’s own stock and therefore should have been classified as liabilities at their estimated fair value instead of additional paid-in capital. Although the errors were immaterial to prior periods, the 2021 financial statements were restated in accordance with Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements”, due to the significance of the out-of-period correction to the 2021 period. There was no impact to the Company’s consolidated statements of operations and comprehensive loss for 2021. The correction of the error resulted in the Company adjusting its quarterly information presented for the three and six months ended June 30, 2022. The matter was correctly presented in the fiscal year end December 31, 2022 consolidated financial statements included in the Company’s 2022 Annual Report on Form 10-K/A.

 

The following tables present the effects of the correction of the prior period error to the condensed consolidated statement of operations and comprehensive loss (in thousands, except for per share data):

                   
    For the three months ended June 30, 2022  
Condensed Consolidated Statement of Operations and Comprehensive Loss   As Reported     Adjustment     As Revised  
                   
Change in fair value of warrant liabilities   $     $ 4,198     $ 4,198  
Net loss   $ (8,295 )   $ 4,198     $ (4,097 )
Net loss attributable to Common Shareholders   $ (12,077 )   $ 4,198     $ (7,879 )
Basic and diluted loss per common share   $ (2.08 )   $ 0.72     $ (1.36 )
Comprehensive loss   $ (12,081 )   $ 4,198     $ (7,883 )

 

 

                   
    For the six months ended June 30, 2022  
Condensed Consolidated Statement of Operations and Comprehensive Loss   As Reported     Adjustment     As Revised  
                   
Change in fair value of warrant liabilities   $     $ 2,945     $ 2,945  
Net loss   $ (29,086 )   $ 2,945     $ (26,141 )
Net loss attributable to Common Shareholders   $ (32,868 )   $ 2,945     $ (29,923 )
Basic and diluted loss per common share   $ (5.67 )   $ 0.51     $ (5.16 )
Comprehensive loss   $ (32,875 )   $ 2,945     $ (29,930 )

 

The following tables present the effects of the correction of the prior period error to the condensed consolidated cash flow statement (in thousands):

 

    For the six months ended June 30, 2022  
Condensed Consolidated Cash Flow Statement   As Reported     Adjustment     As Revised  
                   
Net loss   $ (29,086 )   $ 2,945     $ (26,141 )
Adjustments to reconcile net loss to cash used in operating activities:                        
Change in fair value of warrant liabilities   $     $ (2,945 )   $ (2,945 )
Net cash provided by operating activities   $ (22,700 )   $     $ (22,700 )

 

The following tables present the effects of the correction of the prior period error to the condensed consolidated statement of stockholders’ equity (in thousands):

 

    As of June 30, 2022  
Condensed Consolidated Statement of Stockholders’ Equity   As Reported     Adjustment     As Revised  
                   
Additional paid-in capital, December 31, 2021   $ 705,570     $ (9,007 )   $ 696,563  
Total stockholders’ equity, December 31, 2021   $ 51,375     $ (9,007 )   $ 42,368  
Additional paid-in capital, March 31, 2022   $ 706,433     $ (9,007 )   $ 697,426  
Additional paid-in capital, March 31, 2022   $ 31,443     $ (10,260 )   $ 21,183  
Net loss   $ (29,086 )   $ 2,945     $ (26,141 )
Additional paid-in capital, June 30, 2022   $ 703,379     $ (9,007 )   $ 694,372  
Total stockholders’ equity, June 30, 2022   $ 20,086     $ (6,062 )   $ 14,024  

 

Net Loss Per Share

Net Loss Per Share

 

Basic and diluted net loss per share is computed by dividing net loss attributable to common shareholders by the weighted-average number of shares of common stock. The Company does not include the potential impact of dilutive securities in diluted net loss per share, as the impact of these items is anti-dilutive. Potential dilutive securities result from outstanding restricted stock, stock options, and stock purchase warrants.

 

The following table sets forth the potential securities that could potentially dilute basic income/(loss) per share in the future that were not included in the computation of diluted net loss per share because to do so would have been anti-dilutive for the periods presented:

 

   

For the three and six months ended June 30,

 
    2023     2022  
             
Stock options     230,723       265,411  
Restricted stock     2,566,303       61,108  
Warrants     9,397,879       1,788,000  
Total     12,194,905       2,114,519  

 

New Accounting Pronouncements

New Accounting Pronouncements

 

No new accounting pronouncement issued or effective had, or is expected to have, a material impact on the Company’s condensed consolidated financial statements.