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 Identification No.) |
| (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 | Trading Symbol(s) | Name of each exchange on which registered | ||
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 | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
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 ☐
As of November 08, 2022, the registrant had shares of common stock, $0.0001 par value per share, outstanding.
Table of Contents
| i |
Forward-Looking Statements
This Quarterly Report on Form 10-Q, or Quarterly Report, and the information incorporated herein by reference, particularly in the sections captioned “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. All statements other than present and historical facts and conditions contained in this Quarterly Report, including statements regarding our future results of operations and financial position, business strategy, plans and our objectives for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “will,” or “would,” or the negative of these terms or other comparable terminology. Actual events or results may differ from those expressed in these forward-looking statements, and these differences may be material and adverse. Forward-looking statements include, but are not limited to, statements about:
| ● | the sufficiency of our existing cash, cash equivalents, and investments to fund our future operating expenses and capital expenditure requirements; | |
| ● | our estimates regarding expenses, future revenue, anticipated capital requirements to fund our future operating expenses, and our need for additional financing; | |
| ● | our financial performance; | |
| ● | our anticipated use of our existing cash, cash equivalents, and investments; | |
| ● | the ability of our clinical trials to demonstrate safety and efficacy of our product candidates, and other positive results; | |
| ● | the progress and focus of our current and future clinical trials, and the timing of reporting of data from those trials; | |
| ● | our continued reliance on third parties to conduct clinical trials of our product candidates, and for the manufacture of our product candidates; | |
| ● | the beneficial characteristics, safety, efficacy, and therapeutic effects of our product candidates; | |
| ● | our ability to advance product candidates into and successfully complete clinical trials; | |
| ● | our ability to further develop and expand our therapy platform, both to use different chemotherapeutic agents and to include new indications; | |
| ● | expectations relating to the timing of the provision of updates on, data readouts for, and completion of our clinical trials; | |
| ● | our ability to obtain and maintain regulatory approval of our product candidates and the timing or likelihood of regulatory filings and approvals, including our expectation to seek special designations, such as orphan drug designation, for our product candidates for various diseases; | |
| ● | existing regulations and regulatory developments in the United States and other jurisdictions; | |
| ● | our plans relating to commercializing our product candidates, if approved, including the geographic areas of focus and our potential and ability to successfully commercialize our product candidates and generate revenue; | |
| ● | the implementation of our strategic plans for our business and product candidates; | |
| ● | the expected potential benefits of strategic collaborations with third parties and our ability to attract collaborators with relevant and complementary expertise; |
| ii |
| ● | our estimates of the number of patients in the United States who suffer from the diseases we target, and enrollment timing and projections for our clinical trials; | |
| ● | our estimates of potential market opportunities and our ability to successfully realize these opportunities; | |
| ● | the success of competing therapies that are or may become available; | |
| ● | developments relating to our competitors and our industry, including competing product candidates and therapies; | |
| ● | our plans relating to the further development and manufacturing of our product candidates, including for additional indications which we may pursue; | |
| ● | our plans and ability to obtain or protect intellectual property rights, including extensions of existing patent terms where available; | |
| ● | the scope of protection we are able to establish and maintain for intellectual property rights, including our therapy platform and product candidates; | |
| ● | our ability to successfully negotiate and enter into agreements with distribution, strategic and corporate partners; | |
| ● | our potential and ability to successfully manufacture and supply our product candidates for clinical trials and for commercial use, if approved; | |
| ● | our ability to retain the continued service of our key personnel and to identify, hire, and then retain additional qualified personnel; and | |
| ● | our expectations regarding the impact of the ongoing COVID-19 pandemic and geopolitical events on our business. |
We have based the forward-looking statements contained in this Quarterly Report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, prospects, business strategy and financial needs. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, assumptions and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report. These risks are not exhaustive. Other sections of this Quarterly Report include additional factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame or at all.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. The forward-looking statements made in this Quarterly Report relate only to events as of the date on which such statements are made. We undertake no obligation to update any forward-looking statements after the date of this Quarterly Report or to conform such statements to actual results or revised expectations, except as required by law. Unless the context otherwise indicates, “RenovoRx,” the “Company,” “we,” “our,” and “us” refer to RenovoRx, Inc., a Delaware corporation.
| iii |
Part I – FINANCIAL INFORMATION
Item 1. Financial Statements
RenovoRx, Inc.
Condensed Balance Sheets
(Unaudited)
(in thousands, except share and per share amounts)
September 30, 2022 | December 31, 2021 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Short-term marketable securities | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Leasehold improvements, net | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Convertible preferred stock, $ par value; shares authorized as of September 30, 2022 and December 31, 2021, respectively; shares issued and outstanding as of September 30, 2022 and December 31, 2021 | ||||||||
| Common stock, $ par value, shares authorized at September 30, 2022 and December 31, 2021; and shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive income | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these condensed interim financial statements.
| 1 |
RenovoRx, Inc.
Condensed Statements of Operations and Comprehensive Loss
(Unaudited)
(in thousands, except share and per share amounts)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | $ | $ | $ | $ | ||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest income (expense), net | ( | ) | ( | ) | ||||||||||||
| Other income, net | ||||||||||||||||
| (Loss) gain on loan extinguishment | ( | ) | ||||||||||||||
| Total other income (expenses), net | ( | ) | ( | ) | ||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other comprehensive income: | ||||||||||||||||
| Unrealized gain on marketable securities | ||||||||||||||||
| Comprehensive income | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share, basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted-average shares of common stock outstanding, basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these condensed interim financial statements.
| 2 |
RenovoRx, Inc.
Condensed Statements of Convertible Preferred Stock and Stockholders’ Equity
(Unaudited)
(in thousands, except share amounts)
| Convertible Preferred Stock | Common Stock | Additional | Accumulated | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Income | Deficit | Equity | |||||||||||||||||||||||||
| Balance—December 31, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | - | |||||||||||||||||||||||||||||||
| Issuance of restricted stock awards | - | |||||||||||||||||||||||||||||||
| Stock-based compensation expense | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance—March 31, 2022 | ( | ) | ||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | - | |||||||||||||||||||||||||||||||
| Stock-based compensation expense | - | - | ||||||||||||||||||||||||||||||
| Other comprehensive loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance—June 30, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | - | |||||||||||||||||||||||||||||||
| Stock-based compensation expense | - | - | ||||||||||||||||||||||||||||||
| Other comprehensive income | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance—September 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| 3 |
RenovoRx, Inc.
Condensed Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(Unaudited)
(in thousands, except share amounts
| Convertible Preferred Stock | Common Stock | Additional | Accumulated Other Comprehensive |
Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Loss | Deficit | Equity | |||||||||||||||||||||||||
| Balance—December 31, 2020 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | - | |||||||||||||||||||||||||||||||
| Stock-based compensation expense | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance—March 31, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | - | |||||||||||||||||||||||||||||||
| Stock-based compensation expense | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance—June 30, 2021 | $ | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Conversion of convertible preferred stock to common stock upon initial public offering | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Conversion of convertible notes and accrued interest to units upon initial public offering | - | |||||||||||||||||||||||||||||||
| Reclassification of derivative liability upon conversion of convertible notes | - | - | ||||||||||||||||||||||||||||||
| Proceeds from initial
public offering, net of underwriters’ commissions, discounts and issuance costs of $ | - | |||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of warrants issued upon initial public offering | - | |||||||||||||||||||||||||||||||
| Reverse stock split adjustment | - | |||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | - | |||||||||||||||||||||||||||||||
| Stock-based compensation expense | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance—September 30, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed interim financial statements.
| 4 |
RenovoRx, Inc.
Condensed Statements of Cash Flows
(Unaudited)
(in thousands)
| Nine
Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock-based compensation expense | ||||||||
| Amortization on leasehold improvement | ||||||||
| Loss on change in fair value of derivative liability | ( | ) | ||||||
| Gain on loan extinguishment from PPP loan | ( | ) | ||||||
| Loss on loan extinguishment from convertible notes | ||||||||
| Amortization of debt discount and issuance costs | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Investing activities: | ||||||||
| Purchases of marketable securities | ( | ) | ||||||
| Proceeds from maturities of marketable securities | ||||||||
| Expenditure for leasehold improvements | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing activities: | ||||||||
| Net proceeds from issuance of common stock upon initial public offering | ||||||||
| Proceeds from exercise of warrants | ||||||||
| Proceeds from convertible notes | ||||||||
| Proceeds from exercise of stock options | ||||||||
| Net cash provided by financing activities | ||||||||
| (Decrease) increase in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Derivative liability | $ | $ | ||||||
| Conversion of convertible preferred stock upon initial public offering | $ | $ | ||||||
| Conversion of convertible notes upon initial public offering | $ | $ | ||||||
The accompanying notes are an integral part of these condensed interim financial statements.
| 5 |
RenovoRx, Inc.
Notes to the Unaudited Condensed Interim Financial Statements
1. Business and Principal Activities
Description of Business
RenovoRx, Inc. (the “Company”) was incorporated in the state of Delaware in December 2012 and operates from its headquarters in Los Altos, California. The Company is a clinical-stage biopharmaceutical company focused on developing therapies for the local treatment of solid tumors and conducting a Phase III pancreatic cancer clinical trial for its lead product candidate RenovoGem™. The Company’s therapy platform, RenovoRx Trans-Arterial Micro-Perfusion, or RenovoTAMP®, utilizes approved chemotherapeutics with validated mechanisms of action and well-established safety and side effect profiles, with the goal of increasing their efficacy, improving their safety, and widening their therapeutic window.
Initial Public Offering
On
August 25, 2021, the Company’s Registration Statement on Form S-1 (File No. 333-258071) relating to its initial public offering
(“IPO”) was declared effective, and its shares of common stock began trading on the Nasdaq Capital Market on August 26, 2021.
In connection with the IPO, the Company issued and sold an aggregate of units at a price of $ per unit. Each unit consisted
of (a) one share of common stock and (b) one warrant to purchase one share of common stock at an exercise price equal to $
The
Company received aggregate gross proceeds of $
Reverse Stock Split
On
August 5, 2021, the Company effected a
Liquidity and Capital Resources
From
the Company’s inception through September 30, 2022, it has raised an aggregate of $
| 6 |
The
Company has incurred significant losses and negative cash flows from operations since its inception. For the nine months ended September
30, 2022, the Company reported a net loss of $
The
Company has filed an omnibus shelf registration statement on Form S-3 that provides for the aggregate offerings of
up to $
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern and has reviewed the relevant conditions and events surrounding its ability to continue as a going concern including among others: historical losses, projected future results, negative cash flows from operations, including the effects of the ongoing novel coronavirus (“COVID-19”) pandemic, cash requirements for the upcoming year, funding capacity, net working capital, total stockholders’ equity and future access to capital. Based upon this review and the Company’s current financial condition, the Company has concluded that substantial doubt exists as to the Company’s ability to continue as a going concern.
2. Summary of Significant Accounting Policies
Basis of Presentation and Unaudited Condensed Interim Financial Information
The accompanying unaudited condensed interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the SEC for interim reporting. As permitted under those rules and regulations, certain footnotes or other financial information normally included in unaudited condensed interim financial statements prepared in accordance with GAAP have been condensed or omitted. The unaudited condensed interim financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal, recurring adjustments that are necessary to present fairly the Company’s results for the interim periods presented. The condensed balance sheet as of December 31, 2021, is derived from the Company’s audited financial statements. The results of operations for the nine months ended September 30, 2022, are not necessarily indicative of the results to be expected for the year ending December 31, 2022, or for any other future annual or interim period.
The accompanying unaudited condensed interim financial statements should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2021, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 30, 2022.
Summary of Significant Accounting Policies
There have been no material changes to the significant accounting policies during the nine months ended September 30, 2022 from those previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
Short-Term Marketable Securities
The Company purchased short-term marketable securities during the second quarter of 2022.
| 7 |
All marketable securities and short-term investments are classified as available-for-sale and consist of U.S. Treasury bills. Short-term investments consist of securities with contractual maturities of greater than 90 days from the original date of purchase. Securities with contractual maturities greater than one year are classified as short-term investments on the condensed balance sheets, as the Company has the ability, if necessary, to liquidate these securities to meet its liquidity needs in the next 12 months. These securities are carried at estimated fair value, which is based on quoted market prices or observable market inputs of almost identical assets, with unrealized gains and losses included in accumulated other comprehensive income (loss). The amortized cost of securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion are included in interest income or expense. The cost of securities sold is based on specific identification. The Company’s investments are subject to a periodic impairment review for other-than-temporary declines in fair value. The Company’s review includes the consideration of the cause of the impairment, including the creditworthiness of the security issuers, the number of securities in an unrealized loss position, the severity and duration of the unrealized losses, and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in the market value. When the Company determines that the decline in fair value of an investment is below its accounting basis and this decline is other-than-temporary, it reduces the carrying value of the security it holds and records a loss in the amount of such decline.
Emerging Growth Company and Smaller Reporting Company Status
The Company is an emerging growth company (“EGC”) as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and may take advantage of reduced reporting requirements that are otherwise applicable to public companies. Section 107 of the JOBS Act exempts emerging growth companies from complying with new or revised financial accounting standards until private companies are required to comply with those standards. The Company has elected to use the extended transition period for complying with new or revised accounting standards.
We are also a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, like emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position or results of operations upon adoption.
Recent Accounting Pronouncement
There were no new accounting pronouncements issued or adopted since the issuance of the Company’s 2021 Annual Report on Form 10-K that had, or are expected to have, a material impact to its unaudited condensed balance sheets, unaudited condensed statement of operations or unaudited condensed statement of cash flows.
| 8 |
3. Fair Value Measurements
As
of September 30, 2022 and December 31, 2021, the Company held $
The following tables summarize the Company’s financial assets and liabilities, measured at fair value on a recurring basis by level within the fair value hierarchy, as of September 30, 2022 and December 31, 2021 (in thousands):
| Fair Value Measurements at September 30, 2022 using: | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Cash equivalents: | ||||||||||||||||
| Money market funds | $ | $ | $ | $ | ||||||||||||
| Available-for-sale securities: | ||||||||||||||||
| U.S. Treasury bills | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Fair Value Measurements at December 31, 2021 using: | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Cash equivalents: | ||||||||||||||||
| Money market funds | $ | $ | $ | $ | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
There were no transfers between Level 1, Level 2 or Level 3 during the periods presented. The Company had no other financial assets or liabilities that were required to be measured at fair value on a recurring basis.
4. Short-Term Marketable Securities
The tables summarize the Company’s short-term marketable securities as of September 30, 2022. There were no short-term marketable securities as of December 31, 2021 (in thousands):
Amortized Cost Basis | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
| U.S. Treasury bills | $ | $ | $ | $ | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
5. Accrued Expenses
The components of accrued expenses as of September 30, 2022 and December 31, 2021 are as follows (in thousands):
September 30, 2022 | December 31, 2021 | |||||||
| Clinical trial | $ | $ | ||||||
| Employee benefits | ||||||||
| Other | ||||||||
| Total accrued expenses | $ | $ | ||||||
6. Commitments and Contingencies
Legal Proceedings
From time to time, the Company may become involved in legal proceedings arising in the ordinary course of business.
The Company was not subject to any material legal proceedings during the nine months ended September 30, 2022 and no material legal proceedings are subsequently outstanding or pending.
| 9 |
Guarantees and Indemnification
In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. As permitted under Delaware law and in accordance with its bylaws, the Company indemnifies its officers and directors for certain events or occurrences while the officer or director is or was serving in such capacity. The Company is also party to indemnification agreements with its officers and directors. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential amount of future payments that the Company could be required to make under these provisions is not determinable. The Company has never incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. The Company is not currently aware of any indemnification claims. Accordingly, the Company has not recorded any liabilities for these indemnification rights and agreements as of September 30, 2022.
Operating Leases
2021 Omnibus Equity Incentive Plan
On July 19, 2021, the Company’s Board of Directors adopted the RenovoRx, Inc. 2021 Omnibus Equity Incentive Plan (the “2021 Plan”). The 2021 Plan, which became effective immediately prior to the closing of the IPO, initially reserved shares of common stock, which included shares of common shares reserved but unissued under the Amended and Restated 2013 Equity Incentive Plan (the “2013 Plan”). The Company’s 2013 Plan was terminated immediately prior to the closing of the IPO; however, shares subject to awards granted under the 2013 Plan will continue to be governed by the 2013 Plan. In accordance with the terms of the 2021 Plan, on January 1, 2022, the number of shares reserved and available for issuance increased by shares.
| Number of Stock Options | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Life | Aggregate Intrinsic Value | |||||||||||||
| Outstanding as of December 31, 2021 | $ | $ | ||||||||||||||
| Granted | $ | - | $ | - | ||||||||||||
| Exercised | ( | ) | $ | - | $ | - | ||||||||||
| Forfeited | ( | ) | $ | - | $ | - | ||||||||||
| Expired | - | $ | - | - | $ | - | ||||||||||
| Outstanding as of September 30, 2022 | $ | $ | ||||||||||||||
| Exercisable as of September 30, 2022 | $ | $ | ||||||||||||||
| Vested and expected to vest as of September 30, 2022 | $ | $ | ||||||||||||||
As of September 30, 2022, there was $ million of unrecognized stock-based compensation expense related to options granted but not yet amortized, which will be recognized over a weighted-average period of approximately years.
| 10 |
| Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Expected Volatility | % | % – | % | |||||
| Expected term (years) | ||||||||
| Risk-free interest rate | % | % – | % | |||||
| Dividend rate | % | % | ||||||
During the three months ended September 30, 2022, and 2021, the Company recognized $ and $, respectively, in stock-based compensation expense from stock option grants and restricted stock awards. During the nine months ended September 30, 2022, and 2021, the Company recognized $ and $, respectively, in stock-based compensation expense from stock option grants and restricted stock awards. The compensation expense is allocated on a departmental basis, based on the classification of the option holder. No income tax benefits have been recognized in the condensed statements of operations and comprehensive loss for stock-based compensation arrangements.
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Research and development | $ | $ | $ | $ | ||||||||||||
| General and administrative | ||||||||||||||||
| Total stock-based compensation expense | $ | $ | $ | $ | ||||||||||||
Common Stock Warrants
In
August 2021, in connection with the IPO, the Company issued warrants to purchase
The following is a summary of the common stock warrant activity during the nine months ended September 30, 2022.
| Shares Issuable Upon Exercise of Outstanding Warrants | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Life | Aggregate Intrinsic Value (In thousands) | |||||||||||||
| Outstanding as of December 31, 2021 | $ | $ | ||||||||||||||
| Issued | $ | - | - | $ | - | |||||||||||
| Exercised | $ | - | - | $ | - | |||||||||||
| Expired | $ | - | - | $ | - | |||||||||||
| Outstanding as of September 30, 2022 | $ | $ | ||||||||||||||
8. Income Taxes
The Company had no income tax expense for the three and nine months ended September 30, 2022 and 2021. During the three and nine months ended September 30, 2022 and 2021, the Company had a net operating loss (“NOL”) for each period that generated deferred tax assets for NOL carryforwards. Deferred income tax assets and liabilities are recognized for temporary differences between the financial statements and income tax carrying values using tax rates in effect for the years such differences are expected to reverse. Due to uncertainties surrounding our ability to generate future taxable income and consequently realize such deferred income tax assets, the Company has determined that it is more likely than not that these deferred tax assets will not be realized. Accordingly, the Company has established a full valuation allowance against its deferred tax assets as of September 30, 2022.
| 11 |
The
Company’s policy is to recognize any interest and penalties related to unrecognized tax benefits as a component of income tax expense.
For the three and nine months ended September 30, 2022 and 2021, the Company had
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Numerator: | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Denominator: | ||||||||||||||||
| Weighted average shares used in computing net loss per share – basic and diluted | ||||||||||||||||
| Net loss per share – basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
For the three and nine months ended September 30, 2022 and 2021, the Company had a net loss and as such, all potentially dilutive securities were excluded from the calculation of diluted net loss per share as the inclusion would be anti-dilutive.
| As of September 30, | ||||||||
| 2022 | 2021 | |||||||
| Options to purchase common stock | ||||||||
| Total | ||||||||
10. Related Party Transactions
In
January 2018, the Company entered into a consulting agreement with one of the Company’s co-founders, Dr. Ramtin Agah, pursuant
to which Dr. Agah provides consulting services as the Company’s Chief Medical Officer by overseeing Company-sponsored clinical
trials. The agreement, which was amended on September 1, 2019, and November 11, 2021, respectively, continues in force for as long as
Dr. Agah is providing consulting services and may be terminated by either party on 30 days’ notice. Dr. Agah was awarded (i) options
to purchase shares of the Company’s common stock in May 2017, which have vested, (ii) options to purchase shares
of the Company’s common stock in July 2018, which have vested, (iii) options to purchase shares of the Company’s common
stock in June 2021, which vest ratably over 24 months from the vesting commencement date of May 14, 2021, (iv) options to purchase
shares of the Company’s common stock in September 2021, which vest ratably over 48 months from the vesting commencement date of
August 26, 2021, and (v) options to purchase shares of the Company’s common stock in March 2022, which vest ratably over
48 months from the vesting commencement date of August 26, 2021. In December 2018, Dr. Agah’s agreement was amended to provide
that he would receive cash compensation of $
| 12 |
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
Unless the context otherwise requires, all references in this section to the “Company,” “we,” “us,” or “our” refer to RenovoRx, Inc. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited interim condensed financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, our management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2021, included in our Annual Report on Form 10-K that was filed with the SEC on March 30, 2022 (the “Annual Report”), and our final prospectus, dated August 25, 2021, filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (the “Securities Act”).
This discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, that reflect our plans, estimates, and beliefs that involve risks and uncertainties, including those described in the section titled “Forward Looking Statements.” Our actual results and the timing of selected events could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those set forth under the section titled “Risk Factors” included elsewhere in this Quarterly Report and in the Annual Report.
Overview
We are a clinical-stage biopharmaceutical company focused on developing therapies for the local treatment of solid tumors.
We are currently conducting a Phase III registrational trial for our lead product candidate RenovoGem™. Our therapy platform, RenovoRx Trans-Arterial Micro-Perfusion, or RenovoTAMP™®, utilizes approved chemotherapeutics with validated mechanisms of action and well-established safety and side effect profiles, with the goal of increasing their efficacy, improving their safety, and widening their therapeutic window by combining such chemotherapeutics with our proprietary drug delivery system. RenovoTAMP combines our patented Food and Drug Administration, (“FDA”) cleared delivery system, RenovoCath®, with small molecule chemotherapeutic agents that can be forced across the vessel wall using pressure, targeting these anti-cancer drugs locally to the solid tumors. While we anticipate investigating other chemotherapeutic agents for intra-arterial delivery via RenovoTAMP, our clinical work to date has focused on gemcitabine, which is a generic small molecule drug. Our first product candidate, RenovoGem, is a drug/device combination consisting of intra-arterial gemcitabine and RenovoCath. FDA has determined that RenovoGem will be regulated as, and if approved we expect will be reimbursed as, a new oncology drug product. We have secured FDA Orphan Drug Designation for RenovoGem in two indications: pancreatic cancer and cholangiocarcinoma (bile duct cancer, or CCA). We have completed our RR1 Phase I/II and RR2 observational registry studies, with 20 and 25 patients respectively, in locally advanced pancreatic cancer, or LAPC. These studies demonstrated a median overall survival of 27.9 months from diagnosis in patients pre-treated with radiation followed by treatment with RenovoGem. Based on previous large randomized clinical trials, the expected survival of LAPC patients is 12 - 15 months in patients receiving only intravenous (IV) systemic chemotherapy or IV chemotherapy plus radiation (which are both considered standard of care). Unlike the randomized trials that established these standard-of-care results, our RR1 and RR2 clinical trials did not prospectively control the standard of care therapy received prior to administration of RenovoGem. Based on an FDA safety review of our Phase I/II study, FDA allowed us to proceed to evaluate RenovoGem within our Phase III registrational clinical trial.
As previously disclosed, in December 2021 we amended the protocol for this clinical trial to only allow for stereotactic body radiation therapy (SBRT) during the induction phase of the study (prior to randomization). We had previously permitted both SBRT and intensity-modulated radiation therapy (IMRT). Patients receiving IMRT must complete 25 radiation treatments in combination with oral chemotherapy during the induction phase of the study, which takes between 35 and 56 days to complete. In comparison, patients receiving SBRT during the induction phase are only required to complete 5 treatments, over 5 consecutive days, and do not receive oral chemotherapy. The decision to modify the study population was based on the observation in the Phase III TIGeR-PaC study that IMRT patients had a higher dropout rate during the induction phase of the study due to the high frequency of hospital visits and side effects from the required concurrent chemotherapy. As part of the pre-randomization, induction phase change made to the protocol, we initiated a review of the statistical considerations for the study and in June 2022, submitted a modified Statistical Analysis Plan (the “Modified SAP”) to FDA. As part of the Modified SAP, we now plan to (i) analyze only patients receiving SBRT, consistent with the protocol change made in December 2021, (ii) include a second interim analysis, (iii) change the total number of SBRT patients randomized in the study to 114 (a reduction from the original 200 patients) with a total of 86 deaths from SBRT patients, including all deaths from SBRT patients enrolled in the study before the submission of the Modified SAP, and (iv) repower the study from 90% to 80%, which is commonly used in clinical trials. We believe these changes will shorten the timeframe needed to complete the study and also significantly decrease our costs. We have not discussed the protocol amendment or the Modified SAP with the FDA, and we cannot provide any assurance that the FDA will agree with these modifications. The first planned interim analysis is triggered when 30%, or 26 of 86, of the total number of deaths have occurred, and the second interim analysis at 60%, or 52 of 86, of the total number of deaths have occurred. Given that the timing of the interim analysis is predicated on a specific number of deaths, it is difficult to predict the exact timing of the interim analysis or when we will be able to complete the study. As of November 14, 2022, the Phase III TIGeR-PaC trial has randomized 37 SBRT patients out of 114 total needed under the Modified SAP. At this rate, we anticipate that all patients will be enrolled and randomized in 2024, with the final study readout in 2025. We plan to submit a protocol amendment to FDA in the fourth quarter of 2022 to reflect the changes in the Modified SAP.
| 13 |
We are also planning to evaluate RenovoGem in a second indication in a Phase II/III trial in extrahepatic (or outside the liver) cholangiocarcinoma (or eCCA), cancer that occurs in the bile ducts that lead out of the liver and join with the gallbladder. After significant input from key opinion leaders across the spectrum of relevant medical specialties and feedback from the FDA, we submitted the protocol for a Phase II/III eCCA clinical trial to FDA. If FDA does not object to our study protocol, we anticipate launching the eCCA trial and enrolling the first patient in the fourth quarter of 2022 or the first quarter of 2023. In addition, we may evaluate RenovoGem in other indications, potentially including locally advanced lung cancer, locally advanced uterine tumors, and glioblastoma (an aggressive type of cancer that can occur in the brain or spinal cord). To date, we are focused on developing drug/device candidates with gemcitabine, but in the future, we may develop other product candidates with other chemotherapeutic agents for intra-arterial delivery via our RenovoTAMP therapy platform.
Since our inception, we have devoted substantially all of our efforts to developing our cancer therapy platform and product candidates, raising capital and organizing and staffing our Company. To date, we have financed our operations primarily through issuance of convertible preferred stock with net proceeds of $11.8 million, convertible notes with net proceeds of $5.0 million, and a loan of $140,000 pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), which was forgiven in February 2021. In August 2021, we completed our IPO with aggregate gross proceeds of $16.7 million. We paid underwriting discounts and commissions of $1.3 million, and incurred expenses of $0.8 million in connection with the offering. As a result, the net offering proceeds to us, after deducting underwriting discounts and commissions and offering expenses, were $14.6 million.
We have incurred significant operating losses and generated negative cash flows from operations since our inception. As of September 30, 2022, we had cash and cash equivalents and short-term marketable securities of $8.1 million. For the three and nine months ended September 30, 2022, we reported net losses of $2.1 million and $7.7 million, respectively. As of September 30, 2022, we had an accumulated deficit of $29.0 million. We expect to continue to incur significant expenses, increasing operating losses and negative cash flows from operations in 2022 and for the foreseeable future. We do not expect to generate revenues from product sales unless and until we successfully complete development and obtain regulatory approval for one or more product candidates. We expect that our expenses will increase substantially in connection with our ongoing research and development activities, particularly as we:
| ● | Advance clinical development of RenovoGem and our platform technology by continuing to enroll patients in our ongoing Phase III TIGeR-PaC clinical trial, expanding the number of clinical trials including our planned clinical trial in eCCA, and advancing RenovoGem through preclinical and clinical development in additional indications; | |
| ● | Hire additional research, development, engineering, and general and administrative personnel; | |
| ● | Maintain, expand, enforce, defend, and protect our intellectual property portfolio; and | |
| ● | Expand our operational, financial and management systems and increase personnel, including personnel to support our clinical development, manufacturing and commercialization efforts and our operations as a public company. |
| 14 |
In addition to the variables described above, if and when any of our product candidates successfully complete development, we will incur substantial additional costs associated with establishing a sales, marketing, medical affairs and distribution infrastructure to commercialize products for which we may obtain marketing approval, regulatory filings, marketing approval, and post-marketing requirements, in addition to other commercial costs. We cannot reasonably estimate these costs at this time.
As a result, we will need significant additional funding to support our continuing operations. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through equity issuances, debt financings and collaborations, licenses or other similar arrangements. We currently have no credit facility or committed sources of capital. To the extent that we raise additional capital through the future sale of equity or debt, the ownership interests of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders. If we raise additional funds through the issuance of debt securities, these securities could contain covenants that would restrict our operations. We may require additional capital beyond our currently anticipated amounts and additional capital may not be available on reasonable terms, or at all. If we raise additional funds through collaboration arrangements or other strategic transactions in the future, we may have to relinquish valuable rights to our technologies or future revenue streams or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate development or future commercialization efforts.
Impact of COVID-19
In December 2019, a novel strain of coronavirus, which causes the disease known as COVID-19, was reported to have surfaced in Wuhan, China. Since then, COVID-19, including recent variants, has spread globally. In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. The ongoing COVID-19 global and national health emergency has caused significant disruption in the international and U.S. economies and financial markets. The continued spread of COVID-19, and its variants, has caused illness, quarantines, cancellation of events and travel, business and school shutdowns, reduction in business activity and financial transactions, labor shortages, supply chain interruptions and overall economic and financial market instability.
In response to public health directives and orders and to help minimize the risk of the virus to employees, we have taken precautionary measures, including implementing hybrid work policies for certain employees. The ongoing COVID-19 global pandemic also has negatively affected, and we expect will continue to negatively affect, our clinical studies. For example, we have faced challenges in conducting our clinical trials, including recruiting subjects and accommodating patient visits. Additionally, our service providers and their operations may be disrupted, temporarily closed or experience worker or supply shortages, which could result in additional disruptions or delays in shipments of purchased materials or the continued development of our product candidates. To date, we have not suffered material supply chain disruptions.
We are not able to estimate the duration of the pandemic and the potential impact on our business. As the COVID-19 global pandemic continues to evolve, it could result in significant long-term disruption of global financial markets, including a period of a rising rate of inflation, reducing our ability to raise additional capital when needed and on acceptable terms, if at all, which could negatively affect our liquidity. The extent to which the COVID-19 pandemic impacts our clinical development and regulatory efforts will depend on future developments that are highly uncertain and cannot be predicted with confidence, such as the duration of the continued outbreak, new travel restrictions, quarantines and social distancing requirements in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the virus. We will continue to monitor the COVID-19 situation closely.
| 15 |
Components of Our Results of Operations
Revenue
We have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products for several years, if at all. If our development efforts for our current or future product candidates are successful and result in marketing approval or collaboration or license agreements with third parties, we may generate revenue in the future from a combination of product sales or payments from collaboration or license agreements.
Operating Expenses
Research and Development
Research and development expenses consist of costs related to the research and development of our platform technology. Clinical trial costs are a significant component of research and development expenses and include costs associated with third-party contractors and consultants. We outsource a substantial portion of our clinical trial activities, utilizing the service of third-party clinical trial sites and contract research organizations to assist us with the execution of our clinical trials. In addition, we have FDA 510(k) clearance for the RenovoCath delivery device, which comprises part of the RenovoGem product. Accordingly, we are able to charge our clinical trial sites for the RenovoCath delivery device. To date, payments from clinical trial sites in consideration for RenovoCath delivery devices have been adequate to cover our direct manufacturing costs. Any payments we receive from clinical trial sites as consideration for use of RenovoCath delivery devices offset our research and development expenses. We expect our research and development expenses to increase for the foreseeable future as we continue the development of our product candidates and enroll subjects in our ongoing Phase III clinical trial, initiate new clinical trials and pursue regulatory approval of our product candidates. It is difficult to predict with any certainty the duration and costs of completing our current or future clinical trials of our product candidates or if, when or to what extent we will achieve regulatory approval and generate revenue from the commercialization and sale of our product candidates. The duration, costs and timing of clinical trials and other development of our product candidates will depend on a variety of factors, including uncertainties in clinical trial enrollment, timing and extent of future clinical trials, development of new product candidates and significant and changing government regulation. We may never succeed in achieving regulatory approval for any of our product candidates.
Our research and development expenses include:
| ● | expenses incurred under agreements with clinical trial sites, contract research organizations, and consultants that are involved in conducting our clinical trials; | |
| ● | costs of acquiring and developing clinical trial materials; | |
| ● | personnel costs, including salaries, benefits, bonuses, and stock-based compensation for employees engaged in preclinical and clinical research and development; | |
| ● | costs related to compliance with regulatory requirements; | |
| ● | third-party vendor costs related to manufacturing materials and testing; | |
| ● | costs related to preclinical studies and pilot testing; | |
| ● | travel expenses; and | |
| ● | allocated general and administrative expenses which includes facilities and other indirect administrative expenses to support research and development activities. |
| 16 |
Research and development costs are expensed as incurred. Costs for certain development activities, such as clinical trials and preclinical studies, are recognized based on evaluation of progress to completion of specific tasks using data such as subject enrollment, clinical site activations or information provided to us by third party vendors.
Due to the ongoing impact of the COVID-19 pandemic and work-from-home policies and other operational limitations mandated by federal, state, and local governments as a result of the pandemic, certain of our research and development activities have been delayed and may be further delayed until we and our vendors return to pre-pandemic capacity.
General and Administrative
General and administrative expenses consist of salaries, benefits, and stock-based compensation for personnel in executive, finance and administrative functions, professional services and associated costs related to accounting, tax, audit, legal, intellectual property and other matters, consulting costs, conferences, travel and allocated expenses for rent, insurance and other general overhead costs. We expect to continue to incur additional expenses as a result of operating as a public company, including costs to comply with the rules and regulations of the Securities and Exchange Commission, or SEC, and Nasdaq listing standards and increased expenses in the areas of insurance, professional services and investor relations. As a result, we expect our general and administrative expenses to increase in the foreseeable future. General and administrative expenses are expensed as incurred.
Other Income (Expenses), Net
Interest Income (Expense) Net
Interest income, net during the three and nine months ended September 30, 2022, relates to interest earned from cash deposited in our money market account and our available-for-sale securities.
Interest expense, net during the three and nine months ended September 30, 2021 consisted of charges relating to the amortization of the debt discount and debt issuance costs as well as interest on amounts outstanding on our 2020 and 2021 Convertible Notes.
Other Income (Expense), Net
Other expense, net during the three and nine months ended September 30, 2021, represents the mark-to-market adjustment on the derivative liability resulting from the 2020 and 2021 Convertible Notes. Upon the completion of our IPO in August 2021, the 2020 and 2021 Convertible Notes were converted into units consisting of (a) one share of common stock and (b) one five-year warrant to purchase one share of common stock at an exercise price equal to $10.80 per share.
Gain on Loan Extinguishment
The gain on loan extinguishment during the nine months ended September 30, 2021 represents the loan extinguishment from the forgiveness and cancellation of our loan pursuant to the Paycheck Protection Program (“PPP”) as well as the loss from the conversion and settlement of our 2020 and 2021 Convertible Notes.
Income Tax Expense
We account for income taxes using the asset and liability method. Under this method, deferred income tax assets and liabilities are recorded based on the estimated future tax effects of differences between the financial statement and income tax basis of existing assets and liabilities. Deferred income tax assets and liabilities are recorded net and classified as noncurrent on the balance sheets. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.
| 17 |
We are subject to income taxes in the federal and state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. In accordance with the authoritative guidance on accounting for uncertainty in income taxes, we recognize tax liabilities for uncertain tax positions when it is more likely than not that a tax position will not be sustained upon examination and settlement with various taxing authorities. Liabilities for uncertain tax positions are measured based upon the largest amount of benefit that is more-likely-than-not (greater than 50%) of being realized upon settlement. Our policy is to recognize interest and/or penalties related to income tax matters in income tax expense.
On March 27, 2020, the CARES Act was enacted. The CARES Act includes several significant provisions for corporations, including the usage of net operating losses, interest deductions and payroll benefits. Corporate taxpayers may carryback net operating losses, or NOLs, originating during 2018 through 2020 for up to five years.
Results of Operations
The following table summarizes the significant components of our results of operations for the periods presented (in thousands):
| Three
Months Ended September 30, | Nine
Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Statements of Operations Data: | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | $ | 846 | $ | 767 | $ | 3,525 | $ | 1,938 | ||||||||
| General and administrative | 1,315 | 628 | 4,255 | 1,377 | ||||||||||||
| Total operating expenses | 2,161 | 1,395 | 7,780 | 3,315 | ||||||||||||
| Loss from operations | (2,161 | ) | (1,395 | ) | (7,780 | ) | (3,315 | ) | ||||||||
| Other income (expense), net | ||||||||||||||||
| Interest income (expense), net | 22 | (208 | ) | 43 | (835 | ) | ||||||||||
| Other income (expense), net | 3 | 170 | 4 | 119 | ||||||||||||
| (Loss) gain on loan extinguishment | - | (78 | ) | - | 62 | |||||||||||
| Total other income (expense), net | 25 | (116 | ) | 47 | (654 | ) | ||||||||||
| Net loss | $ | (2,136 | ) | $ | (1,511 | ) | $ | (7,733 | ) | $ | (3,969 | ) | ||||
Comparison of the Three Months Ended September 30, 2022 and 2021
The following table summarizes the significant components of our results of operations for the periods presented (in thousands, except percentages):
| Three
Months Ended September 30, | Increase / (Decrease) | |||||||||||||||
| 2022 | 2021 | $ | % | |||||||||||||
| (unaudited) | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | $ | 846 | $ | 767 | $ | 79 | 10 | % | ||||||||
| General and administrative | 1,315 | 628 | 687 | 109 | % | |||||||||||
| Total operating expenses | 2,216 | 1,395 | 766 | 55 | % | |||||||||||
| Loss from operations | (2,216 | ) | (1,395 | ) | (766 | ) | (55 | )% | ||||||||
| Other income (expense), net | ||||||||||||||||
| Interest income (expense), net | 22 | (208 | ) | 230 | 111 | % | ||||||||||
| Other income (expense), net | 3 | 170 | (167 | ) | (98 | )% | ||||||||||
| Loss on loan extinguishment | - | (78 | ) | 78 | 100 | % | ||||||||||
| Total other income (expense), net | 25 | (116 | ) | 141 | 122 | % | ||||||||||
| Net loss | $ | (2,136 | ) | $ | (1,511 | ) | $ | (625 | ) | (41 | )% | |||||
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Research and Development
Research and development expenses were $0.8 million for the three months ended September 30, 2022 and 2021, respectively. Clinical consulting to support the ongoing Phase III trial increased $0.2 million which was offset by a decrease in our Phase III trial costs of $0.4 million primarily due to scaling down the European Phase III trial. Preclinical research and development and regulatory expenses increased by $0.2 million for the three months ended September 30, 2022, compared to the prior year quarter, and represent costs associated with establishing a secondary manufacturer for RenovoCath delivery devices of $0.1 million, and regulatory and quality assurance consulting expense of $0.1 million. Payments received from clinical trial sites for the use of the RenovoCath devices have been adequate to cover our direct costs of manufacturing the delivery devices and offset research and development expenses. Allocated general and administrative support costs for personnel, facility and office supply costs increased by $0.1 million compared to the prior year quarter. We expect research and development expenses to increase during the year.
General and Administrative
General and administrative expenses were $1.3 million for the three months ended September 30, 2022, an increase of $0.7 million, compared to $0.6 million for the prior year quarter. This increase was due to higher employee and related benefits costs of $0.2 million, an increase in legal fees of $0.1 million, reflecting the increased costs of public company compliance requirements, and a $0.2 million increase in professional and consulting services expenses relating to post-IPO support, in each case, as compared to the prior year quarter. The increase also includes directors and officers liability insurance expense of $0.2 million, partially offset by an increase of $0.1 million in the allocation of general and administrative expenses to research and development. We expect general and administrative expenses to increase during the fiscal year as we continue to grow.
Interest Income (Expense), Net
Interest income for the three months ended September 30, 2022, was $22,000, compared to $0.2 million expense in the prior year quarter. The decrease in interest expense is due to the conversion of the 2020 and 2021 Convertible Notes into common shares in connection with the IPO. We do not expect to incur additional interest expenses this year.
Other Income (Expense), Net
Other income (expense), net for the three months ended September 30, 2022, was $3,000, compared to $0.2 million income in the prior year quarter. The decrease in other income primarily represents the mark-to-market adjustment on the derivative liability resulting from the conversion of the 2020 and 2021 Convertible Notes into common shares in connection with the IPO in August 2021.
Loss on Loan Extinguishment
The loss on loan extinguishment, represents the unamortized debt discount on our 2020 and 2021 Convertible Notes, of $78,000 during the three months ended September 30, 2021 resulted from the conversion of the 2020 and 2021 Convertible Notes upon the completion of our IPO in August 2021.
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Comparison of the Nine Months Ended September 30, 2022 and 2021
The following table summarizes the significant components of our results of operations for the periods presented (in thousands, except percentages):
| Nine
Months Ended September 30, | Increase / (Decrease) | |||||||||||||||
| 2022 | 2021 | $ | % | |||||||||||||
| (unaudited) | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | $ | 3,525 | $ | 1,938 | $ | 1,587 | 82 | % | ||||||||
| General and administrative | 4,255 | 1,377 | 2,878 | 209 | % | |||||||||||
| Total operating expenses | 7,780 | 3,315 | 4,465 | 135 | % | |||||||||||
| Loss from operations | (7,780 | ) | (3,315 | ) | (4,465 | ) | (135 | )% | ||||||||
| Other income (expense), net | ||||||||||||||||
| Interest income (expense), net | 43 | (835 | ) | 878 | 105 | % | ||||||||||
| Other income (expense), net | 4 | 119 | (115 | ) | (97 | )% | ||||||||||
| Gain on loan extinguishment | - | 62 | (62 | ) | (100 | )% | ||||||||||
| Total other expense, net | 47 | (654 | ) | 701 | 107 | % | ||||||||||
| Net loss | $ | (7,733 | ) | $ | (3,969 | ) | $ | (3,764 | ) | (95 | )% | |||||
Research and Development
Research and development expenses were $3.5 million for the nine months ended September 30, 2022, an increase of $1.6 million, compared to $1.9 million for the prior year period. This increase was primarily due to clinical consulting to support the ongoing Phase III trial of $0.7 million and employee and related benefits of $0.1 million, offset by a decrease in clinical development expenses of $0.5 million due to a lower patient enrollment during 2022 and the scaling down of our European Phase III trial. Preclinical research and development and regulatory expenses increased by $0.8 million for the nine months ended September 30, 2022, compared to the prior year period, and represent costs associated with establishing a secondary manufacturer for RenovoCath delivery devices of $0.4 million, contracted research and supplies expense of $0.3 million and marketing and trade shows of $0.1 million. Payments for use of RenovoCath delivery devices were $0.1 million for the nine months ended September 30, 2022, which represent the cash payment made by clinical trial sites for the devices used in the Phase III clinical trial, decreased by $0.1 million during 2022. To date, payments received from clinical trial sites for the devices have been adequate to cover our direct costs of manufacturing the RenovoCath delivery devices and offset research and development expenses. Allocated general and administrative support costs for personnel, facility and office supply costs increased by $0.3 million, compared to the prior year period. We expect research and development expenses to increase during the year.
General and Administrative
General and administrative expenses were $4.3 million for the nine months ended September 30, 2022, an increase of $2.9 million, compared to $1.4 million for the prior year period. This increase was due to higher employee and related benefits costs of $0.7 million, an increase in legal fees of $0.3 million, reflecting the increased costs of public company compliance requirements, and a $1.1 million increase in professional and consulting services expenses relating to post-IPO support as compared to the prior year period. The increase also includes directors and officers liability insurance expense of $0.9 million and $0.2 million in Delaware franchise tax expense, partially offset by an increase of $0.3 million in the allocation of general and administrative expenses to research and development. We expect general and administrative expenses to increase during the fiscal year.
Interest Income (Expense), Net
Interest income for the nine months ended September 30, 2022, was $43,000 compared to $0.8 million in expense the prior year period. The decrease in interest expense is due to the conversion of the 2021 Convertible Notes into common shares in connection with the IPO. We do not expect to incur additional interest expenses this year.
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Other Income (Expense), Net
Other income, net for the nine months ended September 30, 2021 was $0.1 million and represents the mark-to-market adjustment on the derivative liabilities resulting from the 2020 and 2021 Convertible Notes.
Gain on Loan Extinguishment
The gain on loan extinguishment for the nine months ended September 30, 2022 was nil compared to $62,000 in the prior year period and represented the forgiveness and cancelation of our PPP loan of $140,000 offset by the loss on the automatic conversion of the 2020 and 2021 Convertible Notes upon completion of our IPO in August 2021. We do not expect to incur any loan extinguishment costs this year.
Liquidity and Capital Resources
For the three and nine months ended September 30, 2022, we incurred a net loss of $2.1 million and $7.7 million, respectively. As of September 30, 2022, we had an accumulated deficit of $29.0 million. We expect to incur additional losses and increase operating expenses in future periods. Since our inception, our primary sources of liquidity have been the sale and issuance of convertible preferred stock, convertible notes and common stock, including in our IPO, and from the exercise of warrants.
As of September 30, 2022 and December 31, 2021, we had $8.1 million and $15.2 million in cash and cash equivalents and short-term marketable securities, respectively. During the nine months ended September 30, 2022, we used $7.1 million of cash in operations. Our primary requirements for liquidity have been to fund our clinical trial activity and general corporate and working capital needs. In August 2021, we completed our IPO and received aggregate gross proceeds of $16.7 million. We paid underwriting discounts and commissions of $1.3 million, and we also incurred expenses of $0.8 million in connection with the offering. As a result, the net offering proceeds to us, after deducting underwriting discounts and commissions and offering expenses, were $14.6 million. In February 2021, we received notification and confirmation from Silicon Valley Bank that our PPP loan of $140,000 was forgiven in its entirety and automatically cancelled by the U.S. Small Business Administration.
Based on our operating plans, we do not expect that our current cash and cash equivalents as of November 14, 2022, will be sufficient to fund our operating, investing and financing cash flow needs for at least the next twelve months, assuming our programs advance as currently contemplated. Based upon this review and the Company’s current financial condition, the Company has concluded that substantial doubt exists as to the Company’s ability to continue as a going concern. We believe we will be able to raise additional capital through debt financing, private or public equity financings, license agreements, collaborative agreements or other arrangements with other companies, or other sources of financing. There can be no assurance that such financing will be available or will be at terms acceptable to us. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our clinical trials or other operations. If any of these events occur, our ability to achieve our operational goals would be adversely affected. Our future capital requirements and the adequacy of available funds will depend on many factors, including those described in the section titled “Risk Factors.” Depending on the severity and direct impact of these factors on us, we may be unable to secure additional financing to meet our operating requirements on commercially acceptable terms favorable to us, or at all.
The Company has filed an omnibus shelf registration statement on Form S-3 that provides for the aggregate offerings of up to $50.0 million of the Company’s securities subject to various limitations, including limited sales in any twelve-month period while the Company is subject to the “baby-shelf” rules. The Company has also filed a registration statement on Form S-1 to register the cash exercise of the Company’s outstanding IPO, underwriter and private warrants. Cash exercise of the outstanding warrants is only expected to occur when the trading price of the Company’s common stock is in excess of the $10.80 per share exercise price of the outstanding warrants.
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Sources of Liquidity
Since our inception, we have not generated any revenue from product sales, and we have incurred significant operating losses and negative cash flows from our operations. We do not have any products that have achieved regulatory marketing approval and we do not expect to generate revenue from sales of any product candidates for several years, if ever.
We have financed our operations primarily through the issuance and sale of convertible preferred stock and convertible debt. Through the date of this report, we have raised an aggregate of $35.0 million of gross proceeds from private placements of our equity and convertible debt securities, the issuance of securities in our IPO and the exercise of warrants and common stock options. This amount also includes a loan under the PPP, which was forgiven in February 2021.
Cash Flows
Our primary uses of cash are to fund our operations including research and development and general and administrative expenses. We will continue to incur operating losses in the future and expect that our research and development and general and administrative expenses will continue to increase as we continue our research and development efforts with respect to clinical development of our product candidates, further develop our therapy platform and ensure that we are complying with the requirements of being a public company. The cash used to fund operating expenses is impacted by the timing of when we pay expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.
The following table summarizes our cash flows for the period indicated (in thousands):
| Nine
Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Net cash provided by (used in): | ||||||||
| Operating activities | $ | (7,130 | ) | $ | (3,358 | ) | ||
| Investing activities | (5,008 | ) | (15 | ) | ||||
| Financing activities | 39 | 19,303 | ||||||
| Decrease in cash and cash equivalents | $ | (12,099 | ) | $ | (15,930 | ) | ||
Net Cash Used in Operating Activities
Cash used in operating activities for the nine months ended September 30, 2022 reflected a net loss of $7.7 million and a net change in our operating assets and liabilities of $0.1 million, offset by non-cash charges of $0.5 million, consisting primarily of stock-based compensation expense. Cash used in operating activities for the nine months ended September 30, 2021 reflected a net loss of $4.0 million and a net change in our operating assets and liabilities of $0.1 million, offset by non-cash charges of $0.5 million consisting primarily of amortization of a debt discount and gain/loss on loan/convertible debt extinguishments.
Cash Used in Investing Activities
Cash used in investing activities for the nine months ended September 30, 2022 consisted of purchases U.S. Treasury bills, which are classified as available-for-sale securities. Cash used in investing activities for the nine months ended September 30, 2021 consisted of capital expenditures made for leasehold improvements to our office space.
Cash Provided by Financing Activities
Net cash provided by financing activities for the nine months ended September 30, 2022 consisted of proceeds from the exercise of stock options. Net cash provided by financing activities for the nine months ended September 30, 2021 was $19.3 million, consisting of net proceeds of $14.6 million from the issuance of common stock in our IPO, $2.0 million from the issuance of convertible notes and $2.8 million from exercise of warrants and stock options.
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Contractual Obligations and Other Commitments
As of the date of this report, we have a contractual obligation with a secondary manufacturer to produce our RenovoCath drug medical device.
Critical Accounting Policies and Significant Judgments and Estimates
The accompanying Management’s Discussion and Analysis of Financial Condition and Results of Operations section is based upon our unaudited condensed interim financial statements and the related disclosures, which have been prepared in accordance with accounting principles generally accepted in the United States or GAAP. The preparation of these unaudited condensed interim financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts in our unaudited condensed interim financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. Our critical accounting policies and estimates are detailed in our Annual Report on Form 10-K for the year ended December 31, 2021.
There have been no significant changes to our critical accounting policies or significant judgments and estimates for the three and nine months ended September 30, 2022, from those previously disclosed in our Annual Report.
During the three months ended September 30, 2022, we purchased short-term marketable securities. The accounting policy for the purchased of these marketable securities is classified as available-for-sale.
Short-Term Marketable Securities
All marketable securities and short-term investments are classified as available-for-sale and consist of U.S. Treasury bills. Short-term investments consist of securities with contractual maturities of greater than 90 days from the original date of purchase. Securities with contractual maturities greater than one year are classified as short-term investments on the condensed balance sheets, as we have the ability, if necessary, to liquidate these securities to meet its liquidity needs in the next 12 months. These securities are carried at estimated fair value, which is based on quoted market prices or observable market inputs of almost identical assets, with unrealized gains and losses included in accumulated other comprehensive income (loss). The amortized cost of securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion are included in interest income or expense. The cost of securities sold is based on specific identification. Our investments are subject to a periodic impairment review for other-than-temporary declines in fair value. The review includes the consideration of the cause of the impairment including the creditworthiness of the security issuers, the number of securities in an unrealized loss position, the severity and duration of the unrealized losses and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in the market value. When we determine that the decline in fair value of an investment is below its accounting basis and this decline is other-than-temporary, we reduce the carrying value of the security and record a loss in the amount of such decline.
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Emerging Growth Company and Smaller Reporting Company Status
We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act (“JOBS Act”). Under the JOBS Act, companies have extended transition periods available for complying with new or revised accounting standards. We have elected this exemption to delay adopting new or revised accounting standards. We will remain an emerging growth company until the earlier of (1) December 31, 2026, (2) the last day of the fiscal year in which we have total annual gross revenues of at least $1.07 billion, (3) the date on which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, or (4) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. An emerging growth company may take advantage of specified reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. As an emerging growth company,
| ● | we may present only two years of audited financial statements, plus unaudited interim condensed financial statements for any interim period, and related Management’s Discussion and Analysis of Financial Condition and Results of Operations; | |
| ● | we may avail ourselves of the exemption from the requirement to obtain an attestation and report from our auditors on the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act; | |
| ● | we may provide reduced disclosure about our executive compensation arrangements; and | |
| ● | we do not require stockholder non-binding advisory votes on executive compensation or golden parachute arrangements. |
We have elected to take advantage of certain reduced disclosure obligations in this Quarterly Report on Form 10-Q and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to you may differ from what other public reporting companies provide.
We are also a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act. We may continue to be a smaller reporting company if, on the last business day of the second quarter of our calendar year, either (1) the market value of our stock held by nonaffiliates is less than $250.0 million or (2) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700.0 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, like emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
Recently Issued and Adopted Accounting Pronouncements
There were no new accounting pronouncements that were issued or became effective since the issuance of our 2021 Annual Report on Form 10-K that had, or are expected to have, a material impact on our unaudited condensed balance sheets, unaudited condensed statement of operations or unaudited condensed statement of cash flows.
Off-Balance Sheet Arrangements
During the periods presented, we did not have, nor do we currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
The disclosures in this section are not required because we qualify as a smaller reporting company under federal securities laws.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the fiscal quarter ended September 30, 2022. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer, have concluded that, during the period covered by this Quarterly Report, our disclosure controls and procedures were not effective due to our previously identified material weakness in internal control over financial reporting. Notwithstanding the identified material weaknesses, management, including our Chief Executive Officer and Chief Financial Officer, believes the financial statements included in this Quarterly Report are fairly presented, in all material respects, in accordance with U.S. GAAP.
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated, communicated and discussed with our management, including our Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that controls and procedures, no matter how well designed and operated, can only provide reasonable, not absolute, assurance the desired control objectives will be met. In reaching a reasonable level of assurance, management has weighed the cost of contemplated controls against their intended benefits. The design of any system of controls is based on management’s assumptions about the likelihood of future events. We cannot assure you that our controls will achieve their stated goals under all possible conditions. Changes in future conditions may render our controls inadequate or may cause our degree of compliance with them to deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Previously Identified Material Weakness and Plans to Remediate
In preparation for our IPO, we identified a material weakness in our internal control over financial reporting related to our control environment. Specifically, we have determined that we have not maintained adequate formal accounting policies, processes and controls related to complex and non-recurring transactions as a result of a lack of finance and accounting staff with the appropriate GAAP technical expertise needed to identify, evaluate and account for complex and non-routine transactions. We also determined that we have not maintained sufficient staffing or written policies and procedures for accounting and financial reporting, which contributed to the lack of a formalized process or controls for management’s timely review and approval of financial information. More specifically, we have determined that our financial statement close process includes significant control gaps mainly driven by the small size of our accounting and finance staff and, as a result, a significant lack of appropriate segregation of duties. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or unaudited interim condensed financial statements will not be prevented or detected and corrected on a timely basis.
We are in the process of implementing a number of measures to address the material weakness that has been identified including: (i) engaging additional accounting and financial reporting personnel with U.S. GAAP and SEC reporting experience, (ii) developing, communicating and implementing an accounting policy manual for our accounting and financial reporting personnel for recurring transactions and period-end closing processes, and (iii) establishing effective monitoring and oversight controls for complex and non-recurring transactions to ensure the accuracy and completeness of our financial statements and related disclosures.
These additional resources and procedures are designed to enable us to broaden the scope and quality of our internal review of underlying information related to financial reporting and to formalize and enhance our internal control procedures. With the oversight of senior management and our Audit Committee, we have begun taking steps and plan to take additional measures to remediate the underlying causes of the material weaknesses.
We intend to complete the implementation of our remediation plan during 2022. Although we believe that our remediation plan will improve our internal control over financial reporting, additional time may be required to fully implement it and to make conclusions regarding the effectiveness of our internal control over financial reporting. Our management will closely monitor and modify, as appropriate, the remediation plan to eliminate the identified material weakness.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
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Part II – OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We are not currently a party to any material legal proceedings. Regardless of the outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity, reputational harm and other factors.
Item 1A. Risk Factors
An investment in our securities involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this Quarterly Report on Form 10-Q, including our unaudited interim condensed financial statements and the related notes and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in our other public filings in evaluating our business. The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations, growth prospects or stock price. In such an event, the market price of our common stock could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations and the market price of our common stock.
Risk Factors Summary
Investing in shares of our common stock involves a high degree of risk because our business is subject to numerous risks and uncertainties, including those outside of our control, that could cause our actual results to be harmed. The principal factors and uncertainties that make investing in shares of our common stock risky and impact our ability to execute on our business strategy include risks regarding the following, among others:
| ● | We are a clinical stage biopharmaceutical company, have a limited operating history and have no drug/device combination products approved for commercial sale, which makes it difficult to evaluate our current business and predict our future success and viability. | |
| ● | We have incurred significant net losses in each period since inception, and we expect to continue to incur net losses for the foreseeable future. | |
| ● | We will need to raise substantial additional capital to develop and commercialize RenovoGem, and our failure to obtain funding when needed may force us to delay, reduce or eliminate our product development programs or collaboration efforts. As a result, there is substantial doubt about our ability to operate as a going concern. | |
| ● | Our product candidates’ commercial viability remains subject to current and future preclinical studies, clinical trials, regulatory approvals, and the risks generally inherent in the development of a pharmaceutical product candidate. If we are unable to successfully advance or develop our product candidates, our business will be materially harmed. | |
| ● | If we do not achieve our projected development goals in the timeframes we announce and expect, our stock price may decline. | |
| ● | Our product candidates may exhibit undesirable side effects when used alone or in combination with other approved pharmaceutical products or investigational new drugs, which may delay or preclude further development or regulatory approval or limit their use if approved. | |
| ● | If the results of preclinical studies or clinical trials for our product candidates, including those that are subject to existing or future license or collaboration agreements, are unfavorable or delayed, we could be delayed or precluded from the further development or commercialization of our product candidates, which could materially harm our business. | |
| ● | If we are unable to satisfy regulatory requirements, we may not be able to commercialize our product candidates. | |
| ● | If our product candidates are unable to compete effectively with marketed drugs targeting similar indications as our product candidates, our commercial opportunity will be reduced or eliminated. |
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| ● | We may delay or terminate the development of our product candidates at any time if we believe the perceived market or commercial opportunity does not justify further investment, which could materially harm our business. | |
| ● | Our future success depends on our ability to retain our key personnel and to attract, retain, and motivate qualified personnel, especially in light of an acute workforce shortage and hyper-competitive compensation environment. | |
| ● | If we are unable to protect our intellectual property effectively, we may be unable to prevent third parties from using our technologies, which would impair our competitive advantage. | |
| ● | The patents issued to us may not be broad enough to provide any meaningful protection, one or more of our competitors may develop more effective technologies, designs, or methods without infringing our intellectual property rights and one or more of our competitors may design around our proprietary technologies. | |
| ● | The market price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for our investors. |
In addition, we face other risks and uncertainties that may materially affect our business prospects, financial condition, and results of operations. You should consider the risks discussed in “Risk Factors” and in our other public filings before investing in our securities.
Risks Related to Our Business, Financial Condition and Capital Requirements
We are a clinical stage biopharmaceutical company, have a limited operating history and have no drug/device combination products approved for commercial sale, which makes it difficult to evaluate our current business and predict our future success and viability.
We are a clinical stage biopharmaceutical company with a limited operating history upon which you can evaluate our business and prospects. While RenovoCath, a drug delivery medical device, has been separately cleared by the FDA for the isolation of blood flow and delivery of fluids, including diagnostic and/or therapeutic agents, to selected sites in the peripheral vascular system, and for temporary vessel occlusion in applications including arteriography, preoperative occlusion, and chemotherapeutic drug infusion, we are focused on developing and commercializing drug product candidates in combination with our delivery platform technology. We have no drug/device combination products approved for commercial sale and have not generated any revenue from product sales. We are developing a novel therapy platform, which is an unproven and highly uncertain undertaking and involves a substantial degree of risk. Our first product candidate, RenovoGem, is a drug/device combination product consisting of intra-arterial gemcitabine and RenovoCath. The FDA has determined that RenovoGem will be regulated as, and if approved we expect will be reimbursed as, a new oncology drug product. To date, we have not obtained marketing approval for any drug/device combination product candidates, manufactured a commercial scale product or arranged for a third-party to do so on our behalf, or conducted sales and marketing activities necessary for successful product commercialization. Our limited operating history as a company makes any assessment of our future success and viability subject to significant uncertainty. As a result, it may be more difficult for investors to accurately predict our likelihood of success and viability than it could be if we had a longer operating history.
We will encounter expenses, difficulties, complications, delays, and other known and unknown factors and risks frequently experienced by clinical stage biopharmaceutical companies in rapidly evolving fields. We also may need to transition from a company with a research and clinical development focus to a company capable of supporting commercial activities. We have not yet demonstrated an ability to successfully overcome such risks and difficulties, or to make such a transition. If we do not adequately address these risks and difficulties or successfully make such a transition, our business will suffer.
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We have incurred significant net losses in each period since inception, and we expect to continue to incur net losses for the foreseeable future.
We are a clinical stage company and have incurred significant losses since our formation. As of September 30, 2022, we have an accumulated total deficit of approximately $29.0 million. For the nine months ended September 30, 2022, we had a net loss of approximately $7.7 million. For the fiscal years ended December 31, 2021 and 2020, we had net losses of approximately $6.3 million and $3.8 million, respectively. To date, we have experienced negative cash flow from the development of our product candidate, RenovoGem, our platform technology, RenovoTAMP, and our RenovoCath delivery system. We have not generated any revenue from operations, and we expect to incur substantial net losses for the foreseeable future as we seek to further develop and commercialize RenovoGem and expand our pipeline of product candidates. Because of the numerous risks and uncertainties associated with developing and commercializing RenovoGem, we are unable to predict the extent of any future losses or when we will attain profitability, if ever. Investors in our common stock must carefully consider the substantial challenges, risks and uncertainties inherent in the attempted development and commercialization of RenovoGem. We may never successfully commercialize RenovoGem, and our business may not be successful.
Our product candidates will require substantial additional development time and resources before we will be able to receive regulatory approvals, if any, and, if approved, to begin generating revenue from product sales. As a result, we expect that will be several years, if ever, before we receive approval to commercialize a product and generate revenue from product sales. Even if we succeed in receiving marketing approval for and commercializing one or more of our product candidates, we expect that we will continue to incur substantial expenses and increasing operating losses in the foreseeable future. The amount of our future net losses will depend, in part, on the level of our future expenditure and revenue. Moreover, our net losses may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of our results of operations may not be a good indication of our future performance. If we are unable to generate significant revenue from RenovoGem or attain profitability, we will not be able to sustain operations.
We anticipate that our expenses will increase substantially if and as we:
| ● | continue our research and discovery activities; | |
| ● |