Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
|
|
(State or other jurisdiction of incorporation)
|
(I.R.S. Employer Identification No.)
|
|
|
(Address of Principal Executive Offices)
|
(Zip Code)
|
Title of each class
|
Trading
Symbol(s)
|
Name of each exchange
on which registered
|
|
|
|
Large Accelerated Filer
|
☐ |
Accelerated Filer
|
☐ |
|
☒ |
Smaller reporting company
|
|
Emerging growth company
|
PART I — FINANCIAL INFORMATION | PAGE |
|
ITEM 1.
|
Unaudited Condensed Consolidated Financial Statements (unaudited)
|
|
|
3
|
|
|
4
|
|
|
5
|
|
|
6
|
|
|
|
|
|
9
|
|
ITEM 2.
|
17
|
|
ITEM 3.
|
24
|
|
ITEM 4.
|
25
|
|
PART II — OTHER INFORMATION | ||
ITEM 1.
|
25
|
|
ITEM 1A.
|
25
|
|
ITEM 2.
|
25
|
|
ITEM 3.
|
25
|
|
ITEM 4.
|
25
|
|
ITEM 5.
|
25
|
|
ITEM 6.
|
25
|
|
27
|
|
September 30,
2023 |
December 31,
2022 |
||||||
|
(in thousands)
|
|||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
||||
Prepaid expenses and other current assets
|
|
|
||||||
Total current assets
|
|
|
||||||
Other assets
|
|
|
||||||
Total assets
|
$
|
|
$
|
|
||||
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
|
$
|
|
||||
Accrued expenses and other
|
|
|
||||||
Accrued dividends payable
|
|
|
||||||
Total current liabilities
|
|
|
||||||
Convertible notes payable and accrued interest, net of discounts – related party (Note 3)
|
|
|
||||||
Derivative liabilities (Note 4) |
|
|
||||||
Borrowing and accrued interest under convertible line of credit, net of debt discount – related party (Note 9)
|
||||||||
Other liabilities
|
|
|
||||||
Total liabilities
|
|
|
||||||
Commitments and contingencies (Note 10)
|
||||||||
Series C super dividend redeemable convertible preferred stock;
|
|
|
||||||
Stockholders’ equity (deficit):
|
||||||||
Undesignated stock, $
|
|
|
||||||
Series A 12% convertible preferred stock;
|
|
|
||||||
Common stock, $
|
|
|
||||||
Additional paid-in capital
|
|
|
||||||
Accumulated deficit
|
(
|
)
|
(
|
)
|
||||
Total stockholders’ equity (deficit)
|
(
|
)
|
(
|
)
|
||||
Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)
|
$
|
|
$
|
|
|
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
||||||||||||||
|
2023
|
2022
|
2023
|
2022
|
||||||||||||
|
(in thousands, except per share
data)
|
(in thousands, except per share
data)
|
||||||||||||||
Operating expenses:
|
||||||||||||||||
Research and development
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
General and administrative
|
|
|
|
|
||||||||||||
Total operating expenses
|
|
|
|
|
||||||||||||
Total operating loss
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Other income (expense):
|
||||||||||||||||
Interest income
|
|
|
|
|
||||||||||||
Interest expense
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Change in fair value of derivative
|
(
|
)
|
(
|
)
|
(
|
)
|
|
|||||||||
Total other income (expense)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
||||
Preferred stock dividends
|
|
|
(
|
)
|
(
|
)
|
||||||||||
Warrant modification |
( |
) | ( |
) | ||||||||||||
Net loss applicable to common stockholders
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
||||
Net loss per common share — basic and diluted
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
||||
Weighted average common shares outstanding — basic and diluted
|
|
|
|
|
|
Nine Months Ended
September 30, |
|||||||
|
2023
|
2022
|
||||||
|
(in thousands)
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Adjustments to reconcile net loss to net cash flows from operating activities:
|
||||||||
Stock-based compensation expense
|
|
|
||||||
Amortization of right to use lease asset
|
|
|
||||||
Non-cash interest expense
|
|
|
||||||
Change in fair value of derivative liabilities
|
|
(
|
)
|
|||||
Changes in operating assets and liabilities:
|
||||||||
Prepaid expenses and other assets
|
|
|
||||||
Accounts payable, accrued expenses and other liabilities
|
(
|
)
|
|
|||||
Accrued interest on convertible debt - related party
|
||||||||
Net cash from operating activities
|
(
|
)
|
(
|
)
|
||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Proceeds from exercise of common stock purchase warrants
|
||||||||
Net proceeds from convertible line of credit – related party
|
||||||||
Net cash flows from financing activities
|
|
|
||||||
NET DECREASE IN CASH AND CASH EQUIVALENTS
|
|
(
|
)
|
|||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
|
|
||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD
|
$
|
|
$
|
|
||||
NONCASH FINANCING ACTIVITIES:
|
||||||||
Payment of preferred stock dividends in common stock
|
$ | $ | ||||||
Reclassification of accrued bonus to additional paid in capital
|
|
|
||||||
Common stock purchase warrants issued in connection with related party line of credit
|
||||||||
Warrant modification
|
||||||||
Noncash right to use lease asset
|
|
Series C Super
Dividend Redeemable Convertible Preferred Stock |
|||||||
|
Number of
Shares |
Amount
|
||||||
Balance at December 31, 2021
|
|
$
|
|
|||||
Balance at September 30, 2022
|
|
$
|
|
|||||
Balance at December 31, 2022
|
|
$
|
|
|||||
Balance at September 30, 2023
|
|
$
|
|
|
Series A 12%
Convertible Preferred Stock |
Common Stock
|
||||||||||||||||||||||||||
|
Number
of Shares |
Amount
|
Number
of Shares |
Amount
|
Additional
Paid-In
Capital |
Retained
Deficit |
Total
Stockholders’ Equity (Deficit) |
|||||||||||||||||||||
Balance at June 30, 2022
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
||||||||||||||
Series A 12% convertible preferred stock dividend
|
|
|
||||||||||||||||||||||||||
Series C super dividend redeemable convertible preferred stock dividend
|
(
|
)
|
|
|||||||||||||||||||||||||
Issuance of common stock purchase warrants
from related party line of credit
|
||||||||||||||||||||||||||||
Stock-based compensation expense
|
|
|
||||||||||||||||||||||||||
Net loss
|
(
|
)
|
(
|
)
|
||||||||||||||||||||||||
Balance at September 30, 2022
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
||||||||||||||
Balance at June 30, 2023
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
||||||||||||||
Series A 12% convertible preferred stock dividend
|
|
|
||||||||||||||||||||||||||
Series C super dividend redeemable convertible preferred
stock dividend |
(
|
)
|
|
|||||||||||||||||||||||||
Issuance of common stock from exercise of warrants |
||||||||||||||||||||||||||||
Warrant modification |
( |
) | ||||||||||||||||||||||||||
Stock-based compensation expense
|
|
|
||||||||||||||||||||||||||
Net loss
|
(
|
)
|
(
|
)
|
||||||||||||||||||||||||
Balance at September 30, 2023
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
|
Series A 12%
Convertible Preferred Stock |
Common Stock
|
||||||||||||||||||||||||||
|
Number
of Shares |
Amount
|
Number
of Shares |
Amount
|
Additional
Paid-In
Capital |
Retained
Deficit |
Total
Stockholders’ Equity (Deficit) |
|||||||||||||||||||||
Balance at December 31, 2021
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||||||||
Series A 12% convertible preferred stock dividend
|
|
|
(
|
)
|
||||||||||||||||||||||||
Series C super dividend redeemable convertible preferred
stock dividend
|
|
|
(
|
)
|
||||||||||||||||||||||||
Issuance of common stock from conversion of Series A convertible preferred stock
|
( |
) | ( |
) | ||||||||||||||||||||||||
Issuance of common stock purchase warrants from
related party line of credit
|
||||||||||||||||||||||||||||
Stock-based compensation expense
|
|
|
|
|||||||||||||||||||||||||
Net loss
|
(
|
)
|
(
|
)
|
||||||||||||||||||||||||
Balance at September 30, 2022
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
||||||||||||||
Balance at December 31, 2022
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
||||||||||||||
Series A 12% convertible preferred stock dividend
|
|
|
(
|
)
|
||||||||||||||||||||||||
Series C super dividend redeemable convertible preferred stock dividend
|
|
|
(
|
)
|
||||||||||||||||||||||||
Issuance of common stock from exercise of warrants
|
||||||||||||||||||||||||||||
Warrant modification
|
( |
) | ||||||||||||||||||||||||||
Common stock purchase warrants issued in connection with related party line of credit
|
||||||||||||||||||||||||||||
Stock-based compensation expense
|
|
|
|
|||||||||||||||||||||||||
Net loss
|
(
|
)
|
(
|
)
|
||||||||||||||||||||||||
Balance at September 30, 2023
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
|
September 30,
2023 |
December 31,
2022 |
||||||
|
(in thousands)
|
|||||||
Legal and accounting fees
|
$
|
|
$
|
|
||||
Accrued compensation
|
|
|
||||||
Lease liability
|
|
|
||||||
Accrued research and development costs and other
|
|
|
||||||
Total
|
$
|
|
$
|
|
September 30,
2023
|
December 31,
2022
|
|||||||
Derivative Liability – Contingent Interest April Note
|
$
|
|
$
|
|
||||
Derivative Liability – Contingent Interest September Note | $ | $ | ||||||
Derivative Liability – Contingent Interest December Note | $ | $ |
|
September 30,
2023
|
December 31,
2022
|
||||||
Stock Price
|
$
|
|
$
|
|
||||
Conversion Price of conversion feature
|
$
|
|
$
|
|
||||
Term
|
|
|
||||||
Risk Free Interest Rate
|
|
%
|
|
%
|
||||
Credit Adjusted Discount Rate
|
|
%
|
|
%
|
||||
Volatility
|
|
%
|
|
%
|
||||
Dividend Rate
|
|
% |
|
% |
Balance – December 31, 2022
|
$
|
|
||
Fair Value Adjustment
|
|
|||
Balance – September 30, 2023
|
$
|
|
||
Balance – December 31, 2021 |
$ |
|||
Fair Value Adjustment | ( |
) | ||
Balance – September 30, 2022
|
$ |
September 30,
2023
|
December 31,
2022
|
|||||||
Stock Price
|
$
|
|
$
|
|
||||
Conversion Price of conversion feature
|
$
|
|
$
|
|
||||
Term
|
|
|
||||||
Risk Free Interest Rate
|
|
%
|
|
%
|
||||
Credit Adjusted Discount Rate
|
|
%
|
|
%
|
||||
Volatility
|
|
%
|
|
%
|
||||
Dividend Rate
|
|
% |
|
% |
Balance – December 31, 2022
|
$ | |||
Fair Value Adjustment
|
||||
Balance – September 30, 2023
|
$ | |||
Balance – December 31, 2021
|
||||
Fair Value Adjustment | ( |
) | ||
Balance – September 30, 2022 | $ |
September 30,
2023
|
December 31,
2022
|
|||||||
Stock Price
|
$
|
|
$
|
|
||||
Conversion Price of conversion feature
|
$
|
|
$
|
|
||||
Term
|
|
|
||||||
Risk Free Interest Rate
|
|
%
|
|
%
|
||||
Credit Adjusted Discount Rate
|
|
%
|
|
%
|
||||
Volatility
|
|
%
|
|
%
|
||||
Dividend Rate
|
|
% |
|
% |
Balance – December 31, 2022
|
$
|
|
||
Fair Value Adjustment
|
|
|||
Balance – September 30, 2023
|
$
|
|
||
Balance – December 31, 2021 |
$ | |||
Fair Value Adjustment
|
(
|
)
|
||
Balance – September 30, 2022
|
$
|
|
|
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
||||||||||||||
|
2023
|
2022
|
2023
|
2022
|
||||||||||||
|
in thousands
|
|||||||||||||||
Research and development
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
General and administrative
|
|
|
|
|
||||||||||||
Total stock-based compensation expense
|
$
|
|
$
|
|
$
|
|
$
|
|
|
Shares
|
Weighted
Average Exercise Price |
||||||
Outstanding, December 31, 2022
|
|
$
|
|
|||||
Granted
|
|
|
||||||
Exercised
|
|
|||||||
Options forfeited/cancelled
|
(
|
)
|
|
|||||
Outstanding, September 30, 2023
|
|
$
|
|
|
Nine
Months Ended
September 30, |
Nine
Months Ended September 30, |
||||||
|
2023
|
2022
|
||||||
Risk-free interest rate
|
|
%
|
|
%
|
||||
Expected life of the options
|
|
|
||||||
Expected volatility of the underlying stock
|
|
%
|
|
%
|
||||
Expected dividend rate
|
|
% |
|
% |
|
Shares
|
Weighted Average
Exercise Price |
||||||
Outstanding, December 31, 2022
|
|
$
|
|
|||||
Granted
|
|
|
||||||
Exercised
|
(
|
)
|
|
|||||
Forfeited/cancelled
|
(
|
)
|
|
|||||
Outstanding, September 30, 2023
|
|
$
|
|
|
September 30,
2023
|
September 30,
2022
|
||||||
(shares) |
(shares) |
|||||||
Warrants to purchase shares of common stock
|
|
|
||||||
Options to purchase shares of common stock
|
|
|
||||||
Shares of common stock issuable upon conversion of convertible notes payable – related party
|
|
|
||||||
Shares of common stock issuable upon conversion of convertible line of credit – related party |
||||||||
Shares of common stock issuable upon conversion of preferred stock
|
|
|
||||||
|
|
|
2023
|
|
|||
2024
|
|
|||
2025 | ||||
Total
|
|
|||
Less imputed interest
|
|
|||
Present value of lease liability
|
$
|
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
• |
our early stage of development,
|
• |
we have incurred significant operating losses since our inception and cannot assure you that we will generate revenue or profit,
|
• |
our dependence on additional outside capital,
|
• |
we may be unable to enter into strategic partnerships for the development, commercialization, manufacturing and distribution of our proposed product candidates,
|
• |
uncertainties related to any litigation,
|
• |
uncertainties related to our technology and clinical trials, including expected dates of availability of clinical data,
|
• |
we may be unable to demonstrate the efficacy and safety of our developmental product candidates in human trials,
|
• |
we may be unable to improve upon, protect and/or enforce our intellectual property,
|
• |
we are subject to extensive and costly regulation by the U.S. Food and Drug Administration (FDA) and by foreign regulatory authorities, which must approve our product candidates in development and could restrict the sales and marketing
and pricing of such products,
|
• |
competition and stock price volatility in the biotechnology industry,
|
• |
limited trading volume for our stock, concentration of ownership of our stock, and other risks detailed herein and from time to time in our SEC reports,
|
• |
the impact resulting from the outbreak of COVID-19, which has delayed and may continue to delay our clinical trial and development efforts, as well as the impact that COVID-19 has on the volatility of the capital market and our ability
to access the capital market and,
|
• |
other risks detailed herein and from time to time in our SEC reports, including our Annual Report on Form 10-K filed with the SEC for the fiscal year ended December 31, 2022, and our subsequent SEC filings.
|
Our product pipeline is shown below:
|
||
Indication
|
Drug
|
Status
|
Prevention of esophageal
|
||
varices
|
||
in
|
||
NASH cirrhosis
|
||
Phase 1 interaction trial:
|
belapectin
|
IND submitted January 2013. Results from the Phase 1 interaction trial were reported
|
NASH-CX trial and
|
|
in 2014, with final results reported in January 2015. The Phase 2 NASH FX trial was
|
NASH-FX trial
|
conducted in patients with advanced fibrosis but not cirrhosis. Its principal purpose
|
|
was to evaluate various imaging modalities. The NASH FX trial top line data was
|
||
reported in September 2016 and published in Alimentary Pharmacology and
|
||
Therapeutics in 2016.
|
||
The Phase 2 NASH CX trial was conducted in patients with compensated cirrhosis
|
||
and portal hypertension. The NASH CX trial top line data was reported in December
|
||
2017 and was published in Gastroenterology in 2020.
|
||
NASH NAVIGATE
|
Following FDA feedback, the NAVIGATE trial is an adaptive Phase 2b/3 trial for the
|
|
prevention of esophageal varices in NASH patients with compensated cirrhosis and
|
||
clinical signs of portal hypertension. A Phase 2b interim efficacy analysis will be
|
||
incorporated to confirm previous Phase 2 data, select an optimal dose and reaffirm
|
||
the risk/benefit of belapectin. The Phase 3 end of study analysis will evaluate the
|
||
development of esophageal varices as the same primary outcome of efficacy and a
|
||
composite clinical endpoint including progression to varices requiring treatment as a
|
||
key secondary outcome of efficacy ( www.clinicaltrials.gov NCT04365868).
|
||
The final patient was randomized in February 2023.
|
||
Phase 1 study: hepatic
|
A hepatic impairment study has been completed in subjects with normal hepatic
|
|
insufficiency
|
function and subjects with varying degrees of hepatic impairment
|
|
(www.clinicaltrials.gov NCT04332432) and began enrolling patients in the second
|
||
quarter of 2020. The study completed enrollment in February 2022.
|
||
Cancer Immunotherapy
|
||
Melanoma, Head, Neck
|
belapectin
|
Investigator IND study was completed. A Phase 1B study began in Q-1 2016.
|
Squamous Cell
|
Early data was reported in February 2017 and additional data were reported in
|
|
Carcinoma (HNSCC)
|
September 2018. Data from an extension trial was reported in July 2021 for
|
|
additional melanoma and HNSCC patients which provided a rational basis for
|
||
additional trials which the Company is exploring. In the third quarter of 2022, the
|
||
Company announced its IND application for belapectin in combination with a
|
||
checkpoint inhibitor for the treatment of HNSCC was filed and a Study May Proceed
|
||
letter was received from FDA. The Company is reviewing options for financing this
|
||
trial which will determine when such trial could commence.
|
Three Months Ended
|
Nine Months Ended
|
2023 as Compared to 2022
|
||||||||||||||||||||||||||||||
September 30,
|
September 30,
|
Three Months
|
Nine Months
|
|||||||||||||||||||||||||||||
2023
|
2022
|
2023
|
2022
|
$ Change
|
% Change
|
$ Change
|
% Change
|
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