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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

 

FORM 10-Q

 

 

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended SEPTEMBER 30, 2023

 

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: 001-40738

 

RENOVORX, INC.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware   27-1448452

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

     
4546 El Camino Real, Suite B1    
Los Altos, California   94022
(Address of principal executive offices)   (Zip Code)

 

(650) 284-4433

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, par value $0.0001 per share   RNXT   Nasdaq Capital Market

 

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. Yes ☒ No ☐

 

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). Yes ☒ No ☐

 

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 ☐
Non-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 ☐ No

 

As of November 8, 2023, the registrant had 10,693,580 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 

 
 

 

Table of Contents

 

PART I. FINANCIAL INFORMATION 1
   
Item 1. Financial Statements (unaudited) 1
   
Condensed Balance Sheets as of September 30, 2023, and December 31, 2022 1
   
Condensed Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2023, and 2022 2
   
Condensed Statements of Convertible Preferred Stock and Stockholders’ Equity for the three and nine months ended September 30, 2023, and 2022 3
   
Condensed Statements of Cash Flows for the nine months ended September 30, 2023, and 2022 5
   
Notes to the Unaudited Condensed Interim Financial Statements 6
   
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations 14
   
Item 3. Quantitative and Qualitative Disclosures About Market Risk 24
   
Item 4. Controls and Procedures 25
   
PART II. OTHER INFORMATION 26
   
Item 1. Legal Proceedings 26
   
Item 1A. Risk Factors 26
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 67
   
Item 3. Defaults Upon Senior Securities 67
   
Item 4. Mine Safety Disclosures 67
   
Item 5. Other Information 67
   
Item 6. Exhibits 68
   
SIGNATURES 69

 

 
 

 

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 and our ability to operate as a going concern;
     
  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;
     
  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;
     
  our expectations regarding the impact of the ongoing COVID-19 pandemic and geopolitical events on our business; and
     
  our ability to comply with the continued listing standards of The Nasdaq Stock Market LLC (“Nasdaq”) or the continued listing of our securities on Nasdaq.

 

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.

 

 
 

 

Part I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

RenovoRx, Inc.

Condensed Balance Sheets

(Unaudited)

(in thousands, except share and per share amounts)

 

  

September 30,

2023

  

December 31,

2022

 
         
Assets          
Current assets:          
Cash and cash equivalents  $3,226   $4,391 
Short-term marketable securities   -    2,049 
Prepaid expenses and other current assets   252    825 
Deferred offering costs   41    - 
Total assets  $3,519   $7,265 
           
Liabilities and Stockholders’ Equity          
Current liabilities:          
Accounts payable  $350   $534 
Accrued expenses   1,255    568 
Total current liabilities   1,605    1,102 
Common warrant liability   1,908    - 
Total liabilities   3,513    1,102 
Commitments and contingencies   -     -  
Stockholders’ equity:          
Convertible preferred stock, $0.0001 par value; 15,000,000 shares authorized as of September 30, 2023, and December 31, 2022, respectively; no shares issued and outstanding at September 30, 2023, and December 31, 2022   -    - 
Common stock, $0.0001 par value, 250,000,000 shares authorized at September 30, 2023, and December 31, 2022; 10,693,080 and 9,097,701 shares issued and outstanding as of September 30, 2023, and December 31, 2022, respectively   1    1 
Additional paid-in capital   38,183    37,318 
Accumulated other comprehensive income   -    17 
Accumulated deficit   (38,178)   (31,173)
Total stockholders’ equity   6    6,163 
Total liabilities and stockholders’ equity  $3,519   $7,265 

 

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)

 

   2023   2022   2023   2022 
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2023   2022   2023   2022 
Operating expenses:                    
Research and development  $1,629   $846   $4,892   $3,525 
General and administrative   1,354    1,315    4,727    4,255 
Total operating expenses   2,983    2,161    9,619    7,780 
Loss from operations   (2,983)   (2,161)   (9,619)   (7,780)
Other income/(expenses), net:                    
Interest and dividend income   43    22    97    43 
Other income, net   -    3    -    4 
Change in fair value of common warrant liability   1,519    -    3,092    - 
Transaction costs allocated to common warrant liability   -    -    (575)   - 
Total other income/(expenses), net   1,562    25    2,614    47 
Net loss   (1,421)   (2,136)   (7,005)   (7,733)
Other comprehensive loss:                    
Unrealized gain on marketable securities   -    17    -    13 
Comprehensive loss  $(1,421)  $(2,119)  $(7,005)  $(7,720)
Net loss per share, basic and diluted  $(0.13)  $(0.24)  $(0.69)  $(0.86)
                     
Weighted-average shares of common stock outstanding, basic and diluted   10,693,080    9,067,509    10,154,914    9,039,308 

 

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)

 

   Shares   Amount   Shares   Amount   Capital   Income   Deficit   Equity 
   Convertible
Preferred Stock
   Common Stock  

Additional

Paid- In

  

Accumulated Other

Comprehensive

   Accumulated  

Total

Stockholders’

 
   Shares   Amount   Shares   Amount   Capital   Income   Deficit   Equity 
Balance — December 31, 2022   -   $-    9,097,701   $1   $37,318   $17   $(31,173)  $6,163 
Issuance of common stock upon exercise of stock options   -    -    3,547    -    6    -    -    6 
Issuance of restricted stock awards   -    -    30,000    -    117    -    -    117 
Stock-based compensation expense   -    -    -    -    244    -    -    244 
Other comprehensive loss   -    -    -    -    -    (17)   -    (17)
Net loss   -    -    -    -    -    -    (3,257)   (3,257)
Balance — March 31, 2023   -    -    9,131,248    1    37,685    -    (34,430)   3,256 
Issuance of common stock upon the registered direct offering   -    -    1,000,000    -    -    -    -    - 
Issuance and exercise of pre-funded common warrants upon the registered direct offering   -    -    557,632    -    -    -    -    - 
Issuance of common stock upon exercise of stock options   -    -    4,200    -    2    -    -    2 
Stock-based compensation expense   -    -    -    -    257    -    -    257 
Net loss   -    -    -    -    -    -    (2,327)   (2,327)
Balance — June 30, 2023   -   -    10,693,080   1   37,944   -   (36,757)  1,188 
Stock-based compensation expense   -    -    -    -    239    -    -    239 
Net loss   -    -    -    -    -    -    (1,421)   (1,421)
Balance — September 30, 2023   -   $-    10,693,080   $1   $38,183   $-   $(38,178)  $6 

 

The accompanying notes are an integral part of these condensed interim financial statements.

 

3
 

 

RenovoRx, Inc.

Condensed Statements of Convertible Preferred Stock and Stockholders’ Equity

(Unaudited)

(in thousands, except share amounts)

 

   Convertible
Preferred Stock
   Common Stock  

Additional

Paid-In

   Accumulated Other Comprehensive   Accumulated   Total Stockholders’ 
   Shares   Amount   Shares   Amount   Capital   Loss   Deficit   Equity 
Balance — December 31, 2021   -   $-    8,933,989   $1   $36,632   $-   $(21,284)  $15,349 
Issuance of common stock upon exercise of stock options   -    -    91,816    -    26    -    -    26 
Issuance of restricted stock awards   -    -    3,500        14    -    -    14 
Stock-based compensation expense   -    -    -    -    154    -    -    154 
Net loss   -    -    -    -    -    -    (3,003)   (3,003)
Balance — March 31, 2022   -    -    9,029,305    1    36,826    -    (24,287)   12,540 
Issuance of common stock upon exercise of stock options   -    -    37,558    -    9    -    -    9 
Stock-based compensation expense   -    -    -    -    169    -    -    169 
Other comprehensive loss   -    -    -    -    -    (4)   -    (4)
Net loss   -    -    -    -    -    -    (2,594)   (2,594)
Balance — June 30, 2022   -   -    9,066,863   1   37,004   (4)  (26,881)  10,120 
Issuance of common stock upon exercise of stock options   -    -    5,400    -    4    -    -    4 
Stock-based compensation expense   -    -    -    -    143    -    -    143 
Other comprehensive loss   -    -    -    -    -    17    -    17 
Net loss   -    -    -    -    -    -    (2,136)   (2,136)
Balance — September 30, 2022   -   $-    9,072,263   $1   $37,151   $13   $(29,017)  $8,148 

 

The accompanying notes are an integral part of these condensed interim financial statements.

 

4
 

 

RenovoRx, Inc.

Condensed Statements of Cash Flows

(Unaudited)

(in thousands)

 

   2023   2022 
   Nine Months Ended
September 30,
 
   2023   2022 
Operating activities:          
Net loss  $(7,005)  $(7,733)
Adjustments to reconcile net loss to net cash used in operating activities:          
Stock-based compensation expense   857    480 
Amortization on leasehold improvement   -    6 
Unrealized gain on change in fair value of common warrants classified as a liability   (3,485)   - 
Loss on financing common stock and common warrants   393    - 
Changes in operating assets and liabilities:          
Prepaid expenses and other current assets   573    (47)
Deferred offering costs   (41)   - 
Accounts payable   (184)   13 
Accrued expenses   687    151 
Net cash used in operating activities   (8,205)   (7,130)
           
Investing activities:          
Purchases of marketable securities   -    (8,000)
Proceeds from maturities of marketable securities   -    2,992 
Proceeds from sale of investments   2,032    - 
Net cash provided by (used in) investing activities   2,032    (5,008)
           
Financing activities:          
Proceeds from common stock and pre-funded common warrants   5,000    - 
Proceeds from exercise of stock options   8    39 
Net cash provided by financing activities   5,008    39 
Decrease in cash and cash equivalents   (1,165)   (12,099)
Cash and cash equivalents, beginning of period   4,391    15,192 
Cash and cash equivalents, end of period  $3,226   $3,093 
           
Supplemental of non-cash financing activities:          
Fair value of common warrant classified as a liability  $1,908    - 

 

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 developing proprietary targeted combination therapies for high unmet medical need with a goal to improve therapeutic outcomes for cancer patients undergoing treatment. The Company’s proprietary Trans-Arterial Micro-Perfusion (TAMP™) therapy platform is designed to ensure precise therapeutic delivery to directly target the tumor while potentially minimizing a therapy’s toxicities versus systemic (intravenous (IV) therapy). The Company’s unique approach is under a clinical trial investigation for targeted treatment with the potential for increased safety, tolerance, and improved efficacy. The Company’s Phase III lead product candidate, RenovoGem™, a novel oncology drug-device combination product, is being investigated under a US Investigational New Drug (“IND”) that is regulated by Food and Drug Administration Code of Federal Regulation (“FDA 21 CFR 312’) pathway. RenovoGem is currently being evaluated for the treatment of locally advanced pancreatic cancer (“LAPC”) by the Center for Drug Evaluation and Research (the drug division of the FDA).

 

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 1,850,000 units at a price of $9.00 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 $10.80 per share, which is exercisable for a period of five years after the issuance date. The underwriters exercised their over-allotment option to purchase 277,500 common stock warrants on August 30, 2021. In connection with the IPO, the underwriters were issued a five-year warrant, exercisable on or after February 25, 2022, to purchase up to 198,875 shares of the Company’s common stock at an exercise price of $10.80.

 

The Company received aggregate gross proceeds of $16.7 million from the IPO, paid underwriting discounts and commissions of $1.3 million and incurred other expenses of $0.8 million, resulting in net offering proceeds of $14.6 million. Immediately prior to the closing of the IPO, all shares of convertible preferred stock then outstanding were converted into 3,535,469 shares of common stock after giving effect to the reverse stock split. In addition, all of the outstanding 2020 and 2021 Convertible Notes, representing principal and accrued but unpaid interest of $5.3 million, converted at a 20% and 12.5% discount to the IPO price, respectively, into an aggregate of 708,820 units. Each unit consisted 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.

 

Reverse Stock Split

 

On August 5, 2021, the Company effected a 1-for-5 reverse stock split of its issued and outstanding preferred stock and common stock. The number of authorized shares and the par values of the common stock and convertible preferred stock were not adjusted as a result of the reverse stock split. Adjustments corresponding to the reverse stock split were made to the ratio at which the Company’s convertible preferred stock converted into the Company’s common stock. Accordingly, all share and per share amounts related to the common stock, stock options, warrants and restricted stock awards for all periods presented in the accompanying financial statements and notes thereto have been retroactively adjusted.

 

Liquidity and Capital Resources

 

Since inception, and through September 30, 2023, the Company has raised estimated gross proceeds of $39.8 million through private placements of convertible preferred stock, convertible debt securities, the issuance of securities in the IPO, and the exercise of warrants and common stock options. As of September 30, 2023, the Company had cash and cash equivalents of $3.2 million.

 

6
 

 

The Company has incurred significant losses and negative cash flows from operations since its inception. For the nine months ended September 30, 2023, the Company reported a net loss of $7.0 million and an accumulated deficit of $38.2 million. It does not anticipate generating positive cash flows from operations in the foreseeable future. The Company expects to continue incurring significant losses until it obtains regulatory approval for RenovoGem™, its first product candidate. However, regulatory approval is not guaranteed and may never be obtained.

 

To address its capital needs, the Company believes it will be able to raise additional capital through debt financings, private or public equity financings, license agreements, collaborative agreements or other arrangements with other companies, or other financing sources. Nevertheless, there is no assurance that such financing will be available or will be at terms acceptable to the Company. The inability to raise capital as and when needed could negatively impact the Company’s liquidity, financial condition and its ability to pursue its business strategy. The Company will need to generate significant revenue to achieve profitability, and it may never do so.

 

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.

 

On March 30, 2023, the Company entered into a securities purchase agreement (“Securities Purchase Agreement”) with a certain institutional investor (“Purchaser”). Pursuant to the Securities Purchase Agreement, the Company agreed to sell in a registered direct offering (the “Registered Direct Offering”) 1,000,000 shares (“Shares”) of the Company’s common stock, par value $0.0001 (“Common Stock”), and purchase contracts issued as pre-funded warrants (“Pre-Funded Warrants”) to purchase up to 557,632 shares of Common Stock, which Pre-Funded Warrants were issued to the extent that the Purchaser determined, in its sole discretion, that such Purchaser would beneficially own in excess of 4.99% (or at the Purchaser’s election, 9.99%). The Pre-Funded Warrants have an exercise price of $0.0001 per share and are immediately exercisable and can be exercised at any time after their original issuance until such Pre-Funded Warrants are exercised in full. Each Share was sold at an offering price of $3.21, and each Pre-Funded Warrant was sold at an offering price of $3.2099 (equal to the purchase price per Share minus the exercise price of the Pre-Funded Warrant). Additionally, in a concurrent private placement (together with the Registered Direct Offering, the “March 2023 Offering”), the Company issued to Purchaser unregistered warrants to purchase up to 1,947,040 shares of its Common Stock (the “Common Warrants”). Each Common Warrant has an exercise price of $3.21 per share, is exercisable at any time after their original issuance, and expires five and a half years from the original issuance date. The aggregate gross proceeds from the March 2023 Offering were approximately $5 million before deducting placement fees and other offering expenses.

 

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 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 and operating plans as of September 30, 2023, the Company has concluded that substantial doubt exists as to the Company’s ability to operate as a going concern.

 

7
 

 

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 Securities and Exchange Commission or (“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, 2022, is derived from the Company’s audited financial statements. The results of operations for the three and nine months ended September 30, 2023, are not necessarily indicative of the results to be expected for the year ending December 31, 2023, or for any other future annual or interim period. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and as amended by Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).

 

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, 2022, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 31, 2023.

 

Summary of Significant Accounting Policies

 

There have been no material changes to the significant accounting policies during the nine months ended September 30, 2023 from those previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

 

In April 2023, the Company completed a financing under its March 2023 Offering issuing common stock, pre-funded common warrants and common warrants. The Company has applied the following accounting policies as it relates to such offering.

 

Pre-Funded Common Warrants and Common Warrants

 

The Company evaluated the Pre-Funded Common Warrants and Common Warrants issued in connection with the March 2023 registered direct financing in accordance with ASC 815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity, and concluded that the Pre-Funded Common Warrants qualify for equity classification, while a provision in the Common Warrants precluded it from being accounted for as components of equity. As the Common Warrants met the definition of a derivative instrument, the Company recorded the Common Warrants as a liability on the condensed balance sheets and measured at fair value at inception and at each reporting date in accordance with ASC 820, Fair Value Measurement, with changes in fair value recognized in the Condensed Statements of Operations and Comprehensive Loss in the period of change. As the initial fair value of the Common Warrants exceeded the total proceeds of the March 2023 Offering, no value was recorded for the Common Stock and Pre-funded Common Warrants.

 

Direct Offering Costs

 

Direct offering costs consist principally of placement fees and other expenses, including other professional expenses incurred. The aggregate direct offering costs incurred from the March 2023 Offering were approximately $575,000 and were allocated solely to the Common Warrants and subsequently expensed in the accompanying Condensed Statements of Operations and Comprehensive Loss.

 

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.

 

8
 

 

The Company is also a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act. If the Company is a smaller reporting company at the time the Company cease to be an emerging growth company, the Company may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company the Company may choose to present only the two most recent fiscal years of audited financial statements in its 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 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

 

Recently Adopted Accounting Pronouncement

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326). The guidance represents a significant change in the accounting for credit losses model by requiring immediate recognition of management’s estimates of current expected credit losses (CECL). Under the prior model, losses were recognized only as they were incurred. The Company has determined that it has met the criteria of a smaller reporting company (“SRC”) as of November 15, 2019. As such, ASU 2019-10, Financial Instruments —Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) —Effective Dates amended the effective date for the Company to be for reporting periods beginning after December 15, 2022. The Company adopted ASU 2016-13 on January 1, 2023 and the adoption had no significant impact to the Company’s financial statements.

 

Recently Accounting Pronouncement Not Yet Adopted

 

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) (ASU 2020-06): Accounting for Convertible Instruments and Contracts in an Entity, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The updated guidance is effective on a prospective basis for annual reporting periods beginning after December 15, 2023 and for interim periods within those periods. Early adoption is permitted. The Company has not yet determined the impact that this new standard will have on its financial position and results of operations.

 

3. Fair Value Measurements

 

As of September 30, 2023, and December 31, 2022, the Company held $0.1 million and $4.3 million, respectively, in a money market account.

 

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, 2023, and December 31, 2022 (in thousands):

 

   Fair Value Measurements at September 30, 2023 using: 
Assets  Level 1   Level 2   Level 3   Total 
Cash equivalents:                    
Schwab U.S. Treasury Money Fund – Ultra Shares  $2,712   $     -   $     -   $2,712 
Money market funds   108    -    -    108 
   $2,820   $-   $-   $2,820 

 

Liabilities  Level 1   Level 2   Level 3   Total 
Common warrant liability  $     -   $     -   $1,908   $1,908 
   $-   $-   $1,908   $1,908 

 

9
 

 

   Fair Value Measurements at December 31, 2022 using: 
   Level 1   Level 2   Level 3   Total 
Cash equivalents:                    
Money market funds  $4,300   $     -   $     -   $4,300 
Available-for-sale securities:                    
U.S. Treasury bills   2,049    -    -    2,049 
   $6,349   $-   $-   $6,349 

 

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.

 

Assumptions Used in Determining Fair Value of Warrants

 

With the Common Warrants, in the event of certain fundamental transactions involving the Company, the warrant holders may require the Company to make a payment based on a Black-Scholes valuation, using specified inputs. Therefore, the Common Warrants were accounted for as liabilities.

 

The Company recorded the fair value of the Common Warrants upon issuance using the Black-Scholes valuation model. It is also required to revalue the Common Warrants at each reporting date, with any changes in fair value recorded on our statement of operations. The valuation of the Common Warrants is considered under Level 3 of the fair value hierarchy and influenced by the fair value of the underlying Common Stock of the Company.

 

A summary of the Black Scholes pricing model assumptions used to record the fair value of the Common Warrants is as follows:

 

   September 30, 2023  
Expected volatility  110% – 117 %
Expected term (years)  1.015.01  
Risk-free interest rate  4.60% – 5.46 %
Dividend rate   

 

Changes om Level 3 Liabilities Measured at Fair Value on a Recurring Basis

 

The following table reflects the change in the Company’s Level 3 common warrant liability for the nine months ended September 30, 2023 (in thousands):

 

      
Fair value as of December 31, 2022  $- 
Common warrants issued in connection with private placement   5,393 
Change in fair value   (3,485)
Fair value as of September 30, 2023  $1,908 

 

4. Short-Term Marketable Securities

 

There were no short-term marketable securities as of September 30, 2023. The tables summarize the Company’s short-term marketable securities as of December 31, 2022 (in thousands):

  

  

Amortized

Cost Basis

  

Gross

Unrealized

Gains

  

Gross

Unrealized

Losses

   Fair Value 
U.S. Treasury bills  $       2,032   $       17   $        -   $2,049 
   $2,032   $17   $-   $2,049 

 

10
 

 

5. Accrued Expenses

 

The components of accrued expenses as of September 30, 2023, and December 31, 2022 are as follows (in thousands):

 

  

September 30,

2023

  

December 31,

2022

 
Clinical trial  $519   $88 
Employee benefits   525    475 
Other   211    5 
Total accrued expenses  $1,255   $568 

 

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, 2023, and no material legal proceedings are subsequently outstanding or pending.

 

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, 2023.

 

Operating Leases

 

The Company leases its headquarters in Los Altos, California under a month-to-month operating lease agreement. Rent expenses were $18,000 for both the three months ended September 30, 2023, and 2022. Rent expenses were $55,000 and $54,000 for the nine months ended September 30, 2023, and 2022, respectively.

 

7. Equity Incentive Plan - Stock-Based Compensation Expense and Common Warrants

 

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 2,185,832 shares of common stock, which included 10,832 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, 2023, the number of shares reserved and available for issuance increased by 272,931 shares.

 

11
 

 

A summary of the stock option activity for the nine months ended September 30, 2023 is as follows:

    

   Number of
Stock
Options
   Weighted-
Average
Exercise Price
   Weighted-
Average
Remaining
Contractual
Life
   Aggregate
Intrinsic
Value
 
Outstanding as of December 31, 2022   1,399,252   $2.40    7.79   $928 
Granted   420,351   $3.10    -   $- 
Exercised   (7,747)  $0.97    -   $- 
Forfeited   (51,255)  $3.12    -   $- 
Expired   -   $-    -   $- 
Outstanding as of September 30, 2023   1,760,601   $2.55    7.59   $346 
Exercisable as of September 30, 2023   985,350   $2.13    6.42   $346 
Vested and expected to vest as of September 30, 2023   1,760,601   $2.55    7.59   $346 

 

As of September 30, 2023, there was $1.8 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 2.95 years.

 

For the nine months ended September 30, 2023, and 2022, the Company utilized the Black-Scholes option-pricing model for estimating the fair value of the stock option granted. The Company estimated the fair value of each option grant on the grant date using the Black-Scholes option pricing model with the following weighted-average assumptions: 

    Nine Months Ended September 30, 
    2023    2022 
Expected volatility   99.49% – 106.69 %   101.54% – 102.96 %
Expected term (years)   6.0210.0      5.276.08   
Risk-free interest rate   3.40% – 4.28%   1.93% – 1.95 %
Dividend rate   %   %

 

During the three months ended September 30, 2023, and 2022, the Company recognized $239,000 and $143,000, respectively, in stock-based compensation expense from stock option grants. During the nine months ended September 30, 2023, and 2022, the Company recognized $857,000 and $480,000, respectively, in stock-based compensation expense from stock option grants. 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.

 

The following table summarizes the components of stock-based compensation expense recognized in the Company’s Condensed Statements of Operations and Comprehensive Loss during the three and nine months ended September 30, 2023, and 2022 (in thousands):

  

   2023   2022   2023   2022 
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2023   2022   2023   2022 
Research and development  $46   $27   $155   $109 
General and administrative   193    116    702    371 
Total stock-based compensation expense  $239   $143   $857   $480 

 

Restricted Stock

 

In March 2023, the Board approved the issuance of 30,000 shares of restricted stock to an entity as consideration for a commercial contract, vested immediately, in a private placement. The shares were issued outside the 2021 Plan and the Company recognized $117,000 of stock-based compensation expense for the restricted stock.

 

12
 

 

Common Warrants

 

In August 2021, in connection with the IPO, the Company issued warrants to purchase 3,035,195 shares of the Company’s common stock. Warrants to purchase 198,875 shares of the Company’s common stock expire on August 25, 2026 and warrants to purchase 2,588,120 shares of the Company’s common stock expire on August 31, 2026.

 

On April 3, 2023, in connection with the March 2023 Offering, the Company issued 557,632 Pre-Funded Warrants and 1,947,040 Common Warrants to purchase the Company’s Common Stock. The Pre-Funded Warrants were exercised in June 2023 and the Common Warrants expire on October 3, 2028.

 

The following is a summary of the common stock warrant activity during the nine months ended September 30, 2023.

 

   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, 2022   2,786,995   $10.80    3.67   $30,100 
Issued   2,504,672   $3.21    5.00   $- 
Exercised   (557,632)  $3.21    -   $- 
Expired   -   $-    -   $- 
Outstanding as of September 30, 2023   4,734,035   $7.68    3.51   $36,350 

 

8. Income Taxes

 

The Company had no income tax expense for the three and nine months ended September 30, 2023, and 2022. During the three and nine months ended September 30, 2023, and 2022, 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, 2023.

 

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, 2023, and 2022, the Company had no accrued interest or penalties related to uncertain tax positions.

 

9. Net Loss Per Share

 

Basic and diluted net loss per common share was calculated as follows (in thousands except per share amounts):

  

   2023   2022   2023   2022 
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2023   2022   2023   2022 
Numerator:                    
Net loss  $(1,421)  $(2,136)  $(7,005)  $(7,733)
                     
Denominator:                    
Weighted average shares used in computing net loss per share – basic and diluted   10,693,080    9,067,509    10,154,914    9,039,308 
Net loss per share – basic and diluted  $(0.13)  $(0.24)  $(0.69)  $(0.86)

 

For the three and nine months ended September 30, 2023, and 2022, the Company had a net loss and as such, all outstanding shares of potentially dilutive securities were excluded from the calculation of diluted net loss per share as the inclusion would be anti-dilutive.

 

Potentially dilutive securities not included in the computation of diluted net loss per share because to do so would be antidilutive are as follows (in common stock equivalent shares):

  

   2023   2022 
   As of September 30, 
   2023   2022 
Options to purchase common stock   453,346    484,518 
Total   453,346    484,518 

 

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. In connection with his services, Dr. Agah was awarded various equity awards as the Company has previously disclosed. In December 2018, Dr. Agah’s agreement was amended to provide that he would receive cash compensation of $4,000 per month for certain proctoring services, and in September 2019, his compensation was increased to $10,000 per month to compensate for additional services he was providing. In November 2021, we entered into a third amendment to the Consulting Agreement with Dr. Agah which provides for a monthly consulting fee of $21,667.67, based on Dr. Agah spending no less than 24 hours per week on Company matters. Dr. Agah’s monthly consulting fee was increased to $25,000, effective January 1, 2023. The Company may, in its discretion, proportionally adjust the monthly consulting fee if Dr. Agah’s time commitment decreases. The amendment also provides for Dr. Agah’s eligibility for an annual target cash incentive bonus equal to 35% of his annualized base consulting fee. In November 2021, we entered into a Change in Control and Severance Agreement with Dr. Agah. For the three months ending September 30, 2023, and 2022, consulting fees paid to Dr. Agah were $76,000 and $72,000, respectively. For the nine months ending September 30, 2023, and 2022, consulting fees paid to Dr. Agah were $319,000 and $217,000, respectively. In addition, the Board approved a discretionary bonus of $91,000, paid in February 2023, to Dr. Agah in recognition of the Company’s and individual performance during the year ended December 31, 2022.

 

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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, 2022, included in our Annual Report on Form 10-K that was filed with the SEC on March 31, 2023 (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 developing proprietary targeted combination therapies for high unmet medical need with a goal to improve therapeutic outcomes for cancer patients undergoing treatment. Our proprietary TAMP therapy platform is designed to ensure precise therapeutic delivery to directly target the tumor while potentially minimizing a therapy’s toxicities versus systemic (intravenous (IV) therapy). Our unique approach to targeted treatment is under a clinical trial investigation with the potential for increased safety, tolerance, and improved efficacy. Our Phase III clinical lead product candidate, RenovoGem, a novel oncology drug-device combination product, is being investigated under a US IND that is regulated by FDA 21 CFR 312 pathway. RenovoGem is currently being evaluated for the treatment of LAPC by the Center for Drug Evaluation and Research (the drug division of FDA.) RenovoGem is currently in a Phase III clinical trial (TIGeR-PaC) for the treatment of LAPC and is not available for commercial sale. The first of two interim analyses was completed in March 2023, and the Data Monitoring Committee recommended a continuation of the study. The study is prespecified to provide a primary endpoint of a 6-month overall survival benefit and secondary endpoints including reduced adverse events versus standard of care. RenovoGem will also be evaluated as a potential therapy in bile duct cancer, with a Phase III clinical trial expected to be launched in late 2023 with other potential future pipeline indication opportunities including non-small cell lung cancer, uterine tumors, glioblastoma, and sarcoma. RenovoGem received FDA Orphan Drug Designation for pancreatic cancer and bile duct cancer which provides 7 years of market exclusivity upon a New Drug Application (“NDA”) approval. Additionally, a recent collaboration began with Imugene further validates TAMP and will expand use of RenovoRx’s delivery platform beyond chemotherapy to immunotherapy. We are committed to developing transformative therapies for improved quality of life and extended life in cancer patients.

 

Pursuing the development of our therapy platform requires that we raise additional capital, and we currently have enough capital to operate into February 2024. Failure to obtain additional capital on acceptable terms, or at all, would result in a material and adverse impact on our operations. As a result, there is substantial doubt about our ability to operate as a going concern.

 

Systemic (IV gemcitabine and nab-paclitaxel) chemotherapy is currently the standard of care for pancreatic cancer treatment. However, the standard of care is known to cause debilitating side effects for patients diagnosed with this disease. Unlike other tumors with extensive blood supply, pancreatic tumors have poor blood supply so systemic chemotherapy may not reach the tumor. Thus, the standard of care may be less effective in treating this type of cancer because the blood vessels are critical for transporting systemic administration of chemotherapy to the tumor.

 

Our Phase III TIGeR-PaC clinical trial is an ongoing randomized multi-center study using RenovoRx’s innovative therapy platform, TAMP, to evaluate RenovoRx’s first product candidate, RenovoGem. The study is evaluating trans-arterial delivery, a form of intra-arterial administration, of an FDA-approved chemotherapy, gemcitabine, to treat LAPC following stereotactic body radiation therapy (“SBRT”). The study is comparing treatment of gemcitabine with TAMP versus systemic IV administration of gemcitabine and nab-paclitaxel. The study has a primary endpoint of overall survival and several secondary endpoints, including quality of life for patients diagnosed with LAPC. The study is designed to randomize 114 patients (57 in each arm) with all patients receiving upfront induction systemic chemotherapy and SBRT. Final analysis will be conducted after 86 protocol-specified events have occurred in the SBRT population with two interim analyses. The first analysis at 30% of the specified events was completed in March 2023 and the second analysis will be performed at 60% of the specified events (deaths) is expected to occur in late-2024.

 

In December 2021, we amended the protocol for the TIGeR-PaC Phase III clinical trial to only allow for 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. In August 2023, we received comments from the FDA on the Modified SAP, which we responded to in September 2023. Based on the FDA’s feedback, we plan to submit the revised SAP and a protocol amendment to reflect the changes in the statistical analysis for the study. We have not discussed the protocol amendment or the Modified SAP with the FDA, and we cannot provide any assurance that the FDA will not raise any objections or disagree with our protocol amendments, including our proposed SAP or how we interpret the data. The first planned interim analysis was triggered when 30%, or 26 of 86, of the total number of deaths occurred (and announced in March 2023), and the second interim analysis at 60%, or 52 of 86, of the total number of deaths have occurred and is estimated to be late-2024. 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 October 26, 2023, the Phase III TIGeR-PaC trial has randomized 59 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.

 

14
 

 

We are also planning to evaluate RenovoGem in a second indication in a Phase 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 III eCCA clinical trial to FDA, and after receiving feedback, we are finalizing the protocol and also including incorporating a recently approved drug, durvalumab into the study protocol with guidance from the Steering Committee. We have also secured FDA Orphan Drug Designation for RenovoGem for the treatment of cholangiocarcinoma, which would provide us with seven years of orphan exclusivity to market RenovoGem for our eCCA indication upon NDA approval, provided we are the first sponsor to obtain FDA approval for intra-arterial gemcitabine for the eCCA indication.

 

We intend to explore applications of our TAMP platform in additional indications, locally advanced lung cancer, locally advanced uterine cancer, and glioblastoma. We have completed and presented data on a lung cancer application in preclinical studies, and additional preclinical experiments in lung cancer may be conducted.

 

We are using gemcitabine in our initial anti-cancer product candidate, RenovoGem. However, multiple small molecule therapeutics are compatible with our TAMP platform. We intend to opportunistically develop additional anti-cancer product candidates using small molecule therapeutics in combination with our 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 (“PPP”) 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, 2023, we had cash and cash equivalents of $3.2 million. For the three and nine months ended September 30, 2023, we reported net losses of $1.4 million and $7.0 million, respectively. As of September 30, 2023, we had an accumulated deficit of $38.2 million. We expect to continue to incur significant expenses, increasing operating losses and negative cash flows from operations in 2023 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 in connection with our ongoing research and development activities.

 

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.

 

Due to our recurring operating losses and the expectation that we will continue to incur net losses in the future, we will be required to raise additional capital to complete the development and commercialization of our product candidates. We have historically financed our operations primarily through private sales of our equity, debt financing and the sale of common stock and warrants in our initial public offering, or IPO. To raise additional capital, we may seek to sell additional equity and/or debt securities, obtain a credit facility or other loan or enter into collaborations, licenses or other similar arrangements, which we may not be able to do on favorable terms, or at all. For example, we have filed an omnibus shelf registration statement on Form S-3 that provides for aggregate offerings of up to $50 million of the Company’s securities subject to various limitations, including limited sales in any twelve-month period while we are subject to the “baby-shelf” rules. On April 3, 2023, we completed a registered direct offering under our shelf registration statement on Form S-3 for the purchase and sale of 1,557,632 shares of common stock (or pre-funded common stock warrants) at a purchase price of $3.21 per share of common stock (or pre-funded common stock warrants) to a certain institutional investor (the “Registered Direct Offering”). Additionally, in a concurrent private placement, we issued to the investor unregistered warrants to purchase up to 1,947,040 shares of common stock (together with the Registered Direct Offering, the “March 2023 Offering”). The aggregate gross proceeds from the March 2023 Offering were approximately $5 million before deducting placement fees and other offering expenses.

 

15
 

 

We also have filed a registration statement on Form S-1 to register the cash exercise of our outstanding warrants, with such cash exercise only expected to occur when the trading price of our common stock is in excess of the $10.80 per share exercise price of our outstanding warrants. Our ability to obtain additional financing will be subject to a number of factors, including market conditions, fluctuations in interest rates, our operating performance and investor sentiment. If we are unable to raise additional capital when required or on acceptable terms, we may have to significantly delay, scale back or discontinue the development and/or commercialization of our product candidates, restrict or cease our operations or obtain funds by entering into agreements on unfavorable terms. Failure to obtain additional capital on acceptable terms, or at all, would result in a material and adverse impact on our operations. As a result, there is substantial doubt about our ability to operate as a going concern.

 

On August 21, 2023, we received a notice from Nasdaq notifying us that, as of August 18, 2023, the Company was not in compliance with the minimum stockholders’ equity requirement for continued listing on The Nasdaq Capital Market, under Listing Rule 5550(b)(1), because the Company’s stockholders’ equity of $1,188,000 as reported in the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2023 was below the required minimum of $2.5 million (the “Equity Requirement”), and because, as of June 30, 2023, the Company did not meet the alternative compliance standards, relating to the market value of listed securities of $35 million or net income from continuing operations of $500,000 in the most recently completed fiscal year.

 

In accordance with the Nasdaq Listing Rules 5810(c)(2)(C), we were provided 45 calendar days from August 21, 2023, or until October 5, 2023, to submit a plan to regain compliance with the Equity Requirement (the “Compliance Plan”). We submitted the Compliance Plan to Nasdaq on October 5, 2023. On October 31, 2023, the Company received formal notice that the Listing Qualifications Staff (the “Staff”) had granted the Company’s request for continued listing on Nasdaq pursuant to an extension, ultimately through February 19, 2024, to evidence full compliance with all applicable criteria for continued listing on The Nasdaq Capital Market, including the $2.5 million stockholders’ equity requirement set forth in Nasdaq Listing Rule 5550(b)(2).

 

The Company is diligently working to provide timely evidence compliance with the terms of the Staff’s decision; however, there can be no assurance that the Company will be able to do so. In the event the Company does not evidence full compliance with the Nasdaq listing criteria by February 19, 2024, the Staff must issue a delist determination, which would be stayed upon the Company’s timely request for a hearing before the Nasdaq Hearings Panel (the “Panel”). The Company’s request for a hearing would stay any further action by the Staff at least pending a hearing, the subsequent issuance of a decision by the Panel, and the expiration of any additional extension the Panel may grant to the Company as a result of the hearing.

 

Our financial statements as of September 30, 2023 have been prepared on a going concern basis and do not include any adjustments that may result from the outcome of this uncertainty. Based on our operating plans, we do not expect that our current cash and cash equivalents as of September 30, 2023, will be sufficient to fund our operating, investing and financing cash flow needs, assuming our programs advance as currently contemplated.

 

As a result, we will require 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 private or public equity financings, 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 private or public equity financings or debt financings when needed, we may be required to delay, limit, reduce development or future commercialization efforts, and we may be unable to continue as a going concern. If we are unable to continue as a going concern, we might have to liquidate our assets and the value we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements, and our shareholders may lose their entire investment in our common stock.

 

Impact of COVID-19

 

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.

 

Although the public health emergency declaration related to COVID-19 ended on May 11, 2023, the extent of COVID-19’s effect on our operational and financial performance will depend in large part on future developments, which cannot be predicted and are out of our control. 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.

 

16
 

 

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.

 

17
 

 

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.

 

General and Administrative

 

General and administrative expenses consist of salaries, benefits, and stock-based compensation for personnel in executive, finance and administrative functions. They also include professional services costs related to accounting, tax, audit, legal, intellectual property, and other matters, as well as consulting expenses, conferences, travel costs, and allocated expenses for rent, insurance, and general overhead. Operating as a public company entails additional expenses, including compliance costs with the SEC rules and regulations, Nasdaq listing standards, and increased expenditures in insurance, professional services, and investor relations. As a result, we anticipate a rise in general and administrative expenses in the foreseeable future. General and administrative expenses are expensed as incurred.

 

Other Income, Net

 

Interest and Dividend Income

 

We earn interest income from the cash deposited in our short-term marketable securities and money market accounts. We earn dividend income from a money fund that invests exclusively in securities backed by the U.S. government.

  

Change in Fair Value of Common Warrant Liability

 

The gain or loss reported from the change in fair value of the common warrant liability.

 

Transaction Costs Allocated to Common Warrant Liability

 

Direct offering costs incurred in our March 2023 Offering and consists principally of agency placement fees and other expenses, including other professional expenses.

 

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 against our deferred income tax assets when their realization is more likely than not.

 

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.

 

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Results of Operations

 

The following table summarizes our results of operations for the periods indicated (in thousands):

 

  

Three Months Ended

September 30,

  

Nine Months Ended

September 30,

 
   2023   2022   2023   2022 
Statements of Operations Data:                    
Operating expenses:                    
Research and development  $1,629   $846   $4,892   $3,525 
General and administrative   1,354    1,315    4,727    4,255 
Total operating expenses   2,983    2,161    9,619    7,780 
Loss from operations   (2,983)   (2,161)   (9,619)   (7,780)
Other income/(expense), net                    
Interest and dividend income   43    22    97    43 
Other income, net   -    3    -    4 
Change in fair value of common warrant liability   1,519    -    3,092    - 
Transaction costs allocated to warrant liability   -    -    (575)   - 
Total other income/(expense), net   1,562    25    2,614    47 
Net loss  $(1,421)  $(2,136)  $(7,005)  $(7,733)

 

Comparison of the Three Months Ended September 30, 2023, and 2022

 

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) 
   2023   2022   $   % 
   (unaudited)         
Operating expenses:                    
Research and development  $1,629   $846   $783    93%
General and administrative   1,354    1,315    39    3%
Total operating expenses   2,983    2,161    822    38%
Loss from operations   (2,983)   (2,161)   (822)   (38)%
Other income/(expense), net                    
Interest and dividend income   43    22    21    95%
Other income (expense), net   -    3    (3)   (100)%
Change in fair value of common warrant liability   1519    -    1,519    n/a 
Transaction costs allocated to warrant liabilities   -    -    -    n/a 
Total other income/(expense), net   1,562    25    1,537    6,148%
Net loss  $(1,421)  $(2,136)  $715    33%

 

Research and Development

 

Research and development expenses were $1.6 million for the three months ended September 30, 2023, an increase of $0.8 million compared to $0.8 million in the same period last year. This increase was primarily due to our ongoing Phase III clinical trial cost of $0.4 million, an increase in employee and related benefits costs of $0.3 million, partially offset by a decrease in costs associated with a secondary manufacturer of $0.1 million. We expect the secondary manufacturer device company to commence production later this year. Allocated general and administrative support costs for personnel, facility and office supply expenses increased by $0.2 million compared to the same period last year. We anticipate research and development expenses to increase as we continue advancing our lead programs throughout the year.

 

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General and Administrative

 

General and administrative expenses were $1.3 million for the three months ended September 30, 2023, remaining flat compared to the same period last year. Higher employee and related benefits costs due to increased headcount of $0.3 million were partially offset by $0.1 million decrease in directors’ and officers’ liability insurance expense including allocated general and administrative costs of $0.2 million compared to the same period last year. We anticipate general and administrative expenses to continue increasing throughout the year as we progress with our lead program.

 

Other Income/(Expense), Net

 

Other income/(expense), net was $1.6 million for the three months ended September 30, 2023, compared to nil in the same prior period. The increase was primarily due to a $1.5 million change in the fair value of the common warrant liability due to a decrease in our common stock price during the period.

 

Comparison of the Nine Months Ended September 30, 2023, and 2022

 

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) 
   2023   2022   $   % 
   (unaudited)         
Operating expenses:                    
Research and development  $4,892   $3,525   $1,367    39%
General and administrative   4,727    4,255    472    11%
Total operating expenses   9,619    7,780    1,839    24%
Loss from operations   (9,619)   (7,780)   (1,839)   (24)%
Other income/(expense), net                    
Interest income and dividend income   97    43    54    126%
Other income, net   -    4    (4)   (100)%
Change in fair value of common warrant liability   3,092    -    3,092    n/a 
Transaction costs allocated to warrant liabilities   (575)   -    (575)   n/a 
Total other/(expense), net   2,614    47    2,567    5,462%
Net loss  $(7,005)  $(7,733)  $728    9%

 

Research and Development

 

Research and development expenses totaled $4.9 million for the nine months ended September 30, 2023, an increase of $1.4 million, compared to $3.5 million for the prior year period. This increase is due to our ongoing Phase III clinical trial cost of $0.8 million, an increase of employee and related benefits costs of $0.4 million, partially offset by a decrease in costs associated with a secondary manufacturer of $0.4 million. We expect the secondary manufacturer device company to commence production later this year. Allocated general and administrative support costs for personnel, facility and office supply expenses increased by $0.5 million compared to the same period last year. We anticipate research and development expenses to increase as we continue advancing our lead programs throughout the year.

 

General and Administrative