|
ITEM 1.
|
FINANCIAL STATEMENTS
|
PHIO PHARMACEUTICALS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and
per share data)
(Unaudited)
|
|
|
June 30,
2019
|
|
|
December 31,
2018
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
10,816
|
|
|
$
|
14,879
|
|
|
Restricted cash
|
|
|
50
|
|
|
|
50
|
|
|
Prepaid expenses and other current assets
|
|
|
507
|
|
|
|
221
|
|
|
Total current assets
|
|
|
11,373
|
|
|
|
15,150
|
|
|
Right of use asset
|
|
|
565
|
|
|
|
–
|
|
|
Property and equipment, net
|
|
|
152
|
|
|
|
172
|
|
|
Other assets
|
|
|
18
|
|
|
|
–
|
|
|
Total assets
|
|
$
|
12,108
|
|
|
$
|
15,322
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
736
|
|
|
$
|
550
|
|
|
Accrued expenses
|
|
|
1,098
|
|
|
|
1,194
|
|
|
Lease liability
|
|
|
102
|
|
|
|
–
|
|
|
Total current liabilities
|
|
|
1,936
|
|
|
|
1,744
|
|
|
Lease liability, net of current portion
|
|
|
465
|
|
|
|
–
|
|
|
Total liabilities
|
|
|
2,401
|
|
|
|
1,744
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value, 10,000,000 shares authorized
|
|
|
–
|
|
|
|
–
|
|
|
Common stock, $0.0001 par value, 100,000,000 shares authorized; 25,091,197 and 18,841,814 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively
|
|
|
3
|
|
|
|
2
|
|
|
Additional paid-in capital
|
|
|
99,769
|
|
|
|
99,487
|
|
|
Accumulated deficit
|
|
|
(90,065
|
)
|
|
|
(85,911
|
)
|
|
Total stockholders’ equity
|
|
|
9,707
|
|
|
|
13,578
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
12,108
|
|
|
$
|
15,322
|
|
The accompanying notes are an integral part
of these condensed consolidated financial statements.
PHIO PHARMACEUTICALS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(Amounts in thousands, except share and
per share data)
(Unaudited)
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Revenues
|
|
$
|
–
|
|
|
$
|
58
|
|
|
$
|
21
|
|
|
$
|
81
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
1,146
|
|
|
|
1,183
|
|
|
|
2,235
|
|
|
|
2,544
|
|
|
General and administrative
|
|
|
913
|
|
|
|
774
|
|
|
|
1,991
|
|
|
|
1,675
|
|
|
Total operating expenses
|
|
|
2,059
|
|
|
|
1,957
|
|
|
|
4,226
|
|
|
|
4,219
|
|
|
Operating loss
|
|
|
(2,059
|
)
|
|
|
(1,899
|
)
|
|
|
(4,205
|
)
|
|
|
(4,138
|
)
|
|
Total other income (expense), net
|
|
|
24
|
|
|
|
(2
|
)
|
|
|
51
|
|
|
|
(2
|
)
|
|
Net loss
|
|
$
|
(2,035
|
)
|
|
$
|
(1,901
|
)
|
|
$
|
(4,154
|
)
|
|
$
|
(4,140
|
)
|
|
Net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.08
|
)
|
|
$
|
(0.46
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(1.25
|
)
|
|
Weighted average shares: basic and diluted
|
|
|
24,226,517
|
|
|
|
4,102,423
|
|
|
|
22,333,495
|
|
|
|
3,302,885
|
|
The accompanying notes are an integral
part of these condensed consolidated financial statements.
PHIO PHARMACEUTICALS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF
STOCKHOLDERS’ EQUITY
(Amounts in thousands, except share data)
(Unaudited)
For the Three and Six Months
Ended June 30, 2019
|
|
|
Common Stock
|
|
|
Additional
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Balance at December 31, 2018
|
|
|
18,841,814
|
|
|
$
|
2
|
|
|
$
|
99,487
|
|
|
$
|
(85,911
|
)
|
|
$
|
13,578
|
|
|
Issuance of common stock upon the exercise of pre-funded warrants
|
|
|
4,304,286
|
|
|
|
–
|
|
|
|
43
|
|
|
|
–
|
|
|
|
43
|
|
|
Issuance of restricted stock
|
|
|
243,032
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
Stock-based compensation expense
|
|
|
–
|
|
|
|
–
|
|
|
|
160
|
|
|
|
–
|
|
|
|
160
|
|
|
Net loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(2,119
|
)
|
|
|
(2,119
|
)
|
|
Balance at March 31, 2019
|
|
|
23,389,132
|
|
|
$
|
2
|
|
|
$
|
99,690
|
|
|
$
|
(88,030
|
)
|
|
$
|
11,662
|
|
|
Issuance of common stock upon the exercise of pre-funded warrants
|
|
|
1,700,000
|
|
|
|
1
|
|
|
|
16
|
|
|
|
–
|
|
|
|
17
|
|
|
Issuance of common stock under the employee stock purchase plan
|
|
|
2,065
|
|
|
|
–
|
|
|
|
1
|
|
|
|
–
|
|
|
|
1
|
|
|
Stock-based compensation expense
|
|
|
–
|
|
|
|
–
|
|
|
|
62
|
|
|
|
–
|
|
|
|
62
|
|
|
Net loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(2,035
|
)
|
|
|
(2,035
|
)
|
|
Balance at June 30, 2019
|
|
|
25,091,197
|
|
|
$
|
3
|
|
|
$
|
99,769
|
|
|
$
|
(90,065
|
)
|
|
$
|
9,707
|
|
For the Three and Six Months
Ended June 30, 2018
|
|
|
Common Stock
|
|
|
Additional
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Balance at December 31, 2017
|
|
|
2,429,993
|
|
|
$
|
–
|
|
|
$
|
80,384
|
|
|
$
|
(78,551
|
)
|
|
$
|
1,833
|
|
|
Cash paid in lieu of fractional shares for 1:10 reverse stock split
|
|
|
(31
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
Issuance of common stock under Lincoln Park Capital, LLC purchase agreement
|
|
|
270,000
|
|
|
|
–
|
|
|
|
932
|
|
|
|
–
|
|
|
|
932
|
|
|
Stock-based compensation expense
|
|
|
–
|
|
|
|
–
|
|
|
|
41
|
|
|
|
–
|
|
|
|
41
|
|
|
Net loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(2,239
|
)
|
|
|
(2,239
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2018
|
|
|
2,699,962
|
|
|
$
|
–
|
|
|
$
|
81,357
|
|
|
$
|
(80,790
|
)
|
|
$
|
567
|
|
|
Issuance of common stock and warrants in connection with registered direct offering and private placement, net of offering costs of $690
|
|
|
1,510,604
|
|
|
|
–
|
|
|
|
4,210
|
|
|
|
–
|
|
|
|
4,210
|
|
|
Issuance of common stock under Lincoln Park Capital, LLC purchase agreement
|
|
|
150,000
|
|
|
|
–
|
|
|
|
359
|
|
|
|
–
|
|
|
|
359
|
|
|
Stock-based compensation expense
|
|
|
–
|
|
|
|
–
|
|
|
|
37
|
|
|
|
–
|
|
|
|
37
|
|
|
Net loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(1,901
|
)
|
|
|
(1,901
|
)
|
|
Balance at June 30, 2018
|
|
|
4,360,566
|
|
|
$
|
–
|
|
|
$
|
85,963
|
|
|
$
|
(82,691
|
)
|
|
$
|
3,272
|
|
The accompanying notes are an integral part
of these condensed consolidated financial statements.
PHIO PHARMACEUTICALS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Amounts in thousands)
(Unaudited)
|
|
|
Six Months Ended
June 30,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(4,154
|
)
|
|
$
|
(4,140
|
)
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
36
|
|
|
|
41
|
|
|
Non-cash lease expense
|
|
|
55
|
|
|
|
–
|
|
|
Non-cash stock-based compensation
|
|
|
222
|
|
|
|
78
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other assets
|
|
|
(304
|
)
|
|
|
(240
|
)
|
|
Accounts payable
|
|
|
186
|
|
|
|
31
|
|
|
Accrued expenses
|
|
|
(96
|
)
|
|
|
463
|
|
|
Lease liability
|
|
|
(53
|
)
|
|
|
–
|
|
|
Net cash used in operating activities
|
|
|
(4,108
|
)
|
|
|
(3,767
|
)
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Cash paid for purchase of property and equipment
|
|
|
(16
|
)
|
|
|
–
|
|
|
Net cash used in investing activities
|
|
|
(16
|
)
|
|
|
–
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Net proceeds from the issuance of common stock and/or warrants
|
|
|
–
|
|
|
|
5,501
|
|
|
Proceeds from the exercise of pre-funded warrants
|
|
|
60
|
|
|
|
–
|
|
|
Proceeds from the issuance of common stock in connection with the employee stock purchase plan
|
|
|
1
|
|
|
|
–
|
|
|
Net cash provided by financing activities
|
|
|
61
|
|
|
|
5,501
|
|
|
Net (decrease) increase in cash and restricted cash
|
|
|
(4,063
|
)
|
|
|
1,734
|
|
|
Cash and restricted cash at the beginning of period
|
|
|
14,929
|
|
|
|
3,631
|
|
|
Cash and restricted cash at the end of period
|
|
$
|
10,866
|
|
|
$
|
5,365
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
Right of use asset
|
|
$
|
620
|
|
|
$
|
–
|
|
The accompanying notes are an integral part
of these condensed consolidated financial statements.
PHIO PHARMACEUTICALS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
1. Nature of Operations
Phio
Pharmaceuticals Corp. (“
Phio
,” “
we
,” “
our
” or
the “
Company
”) is a biotechnology company developing the next generation of immuno-oncology therapeutics
based on its self-delivering RNAi (“
sd-rxRNA®
”) therapeutic platform. The Company's efforts are
focused on silencing tumor-induced suppression of the immune system through its proprietary sd-rxRNA platform with utility
in immune cells and/or the tumor micro-environment. The Company’s
goal is to
maximize the power of our sd-rxRNA therapeutic compounds by weaponizing therapeutic immune effector cells to overcome tumor
immune escape, providing patients with a powerful new treatment option that goes beyond current treatment modalities.
2. Significant Accounting Policies
Basis of Presentation
The
accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with accounting principles
generally accepted in the United States of America (“
GAAP
”). Certain information and footnote disclosures included
in the Company’s annual financial statements have been condensed or omitted. The year-end condensed balance sheet data was
derived from audited financial statements, but does not include all disclosures required by GAAP. In the opinion of management,
all adjustments (including normal recurring accruals) considered necessary for a fair presentation of the condensed consolidated
financial statements have been included. Interim results are not necessarily indicative of results for a full year.
Principles of Consolidation
The consolidated financial statements include
the accounts of Phio and its wholly-owned subsidiary, MirImmune, LLC. All material intercompany accounts have been eliminated in
consolidation.
Uses of Estimates in Preparation of Financial Statements
The preparation of financial statements
in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ materially from these estimates.
Restricted Cash
Restricted cash consists of certificates
of deposit held by financial institutions as collateral for the Company’s corporate credit cards.
Leases
The Company follows the provisions
of the Financial Accounting Standards Board (“
FASB
”) Accounting Standards
Codification (“
ASC
”) Topic 842, “
Leases
” (“
ASC 842
”). At the
inception of a contract, the Company determines whether the contract is or contains a lease based on all relevant facts and
circumstances. For contracts that contain a lease, the Company identifies the lease and non-lease components, determines the
consideration in the contract and recognizes the classification of the lease as operating or financing. At the commencement
date of the lease, the Company recognizes a liability to make lease payments and an asset representing the right to use the
underlying asset during the lease term. The Company has elected not to recognize leases with a term less than one year on the
balance sheet.
Lease liabilities and the
corresponding right of use assets are recorded based on the present value of lease payments to be made over the lease term.
The discount rate used to calculate the present value is the rate implicit in the lease, or if not readily determinable, the
Company’s incremental borrowing rate. The Company’s incremental borrowing rate is the rate of interest that the
Company would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a
similar economic environment. Certain adjustments to the right of use asset may be required for items such as initial direct
costs or incentives received. Lease payments on operating leases are recognized on a straight-line basis over the expected
term of the lease. Lease payments on financing leases are recognized using the effective interest method.
Derivative Financial Instruments
The Company follows the provisions of
the FASB ASC Topic 815, “
Derivatives and Hedging
”. Financial instruments that meet the definition of a derivative
are classified as an asset or liability and measured at fair value on the issuance date and are revalued on each subsequent balance
sheet date. The changes in fair value are recognized as current period income or loss. Financial instruments that do not meet
the definition of a derivative are classified as equity and measured at fair value and recorded as additional paid in capital
in stockholders’ equity at the date of issuance. No further adjustments to their valuation are made.
Fair Value of Financial Instruments
The carrying amounts reported in the balance
sheet for restricted cash, accounts payable and accrued expenses approximate their fair values due to their short-term nature.
Research and Development Expenses
Research
and development costs relate to compensation and benefits for research and development personnel, facility-related expenses, supplies,
external services, costs to acquire technology licenses, expenses associated with preclinical and clinical development activities
and other operating costs. Research and development expenses are charged to expense as incurred. Payments made by the Company in
advance for research and development services not yet provided and/or for materials not yet received are recorded as prepaid expenses
and expensed when the service has been performed or when the goods have been received. Accrued liabilities are recorded related
to those expenses for which vendors have not yet billed the Company with respect to services provided and/or materials that it
has received.
The
Company contracts with third parties to perform various preclinical and clinical activities on its behalf for the
continued development of its product candidates. Accruals and expenses are recorded during the period incurred based on such
estimates and assumptions as expected cost, passage of time, the achievement of milestones and other information available to
us and are assessed on a quarterly basis. Actual results may differ from these estimates and could have a material impact on
the Company’s reported results. The Company’s historical accrual estimates have not been materially different
from its actual costs.
Stock-based Compensation
The Company follows the provisions of the
FASB ASC Topic 718, “
Compensation — Stock Compensation
” (“
ASC 718
”), which requires
the measurement and recognition of compensation expense for all stock-based payment awards. Stock compensation expense is based
on the grant date fair value estimated in accordance with the provisions of ASC 718 and is recognized as an expense over the requisite
service period.
Comprehensive Loss
The Company’s comprehensive loss
is equal to its net loss for all periods presented.
Net Loss per Share
The
Company accounts for and discloses net loss per share in accordance with the FASB ASC Topic 260, “
Earnings per Share
.”
Basic and diluted net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding.
Diluted earnings per share is computed by dividing the Company’s net loss by the weighted average number of common shares
outstanding and the impact of all dilutive potential common shares.
3. Recent Accounting Pronouncements
In February 2016, the FASB issued Accounting
Standards Update (“
ASU
”) 2016-02, “
Leases (Topic 842)
” (“
Topic 842
”),
which requires lessees to recognize a right-of-use asset and lease liability on the balance sheet for most leases that do not meet
the definition of a short-term lease and to disclose key information about leasing arrangements. Leases will continue to be classified
as either operating or financing. The Company adopted Topic 842 on January 1, 2019 using the modified retrospective approach and
elected to apply the transition method that allows companies to continue applying guidance under the lease standard in effect at
that time in the comparative period financial statements and recognize a cumulative-effect adjustment to the balance sheet on the
date of adoption. The Company has also elected the package of practical expedients to not reassess its prior conclusions about
lease identification, lease classification and indirect costs and to not separate lease and non-lease components.
Upon adoption of Topic 842 on January 1,
2019, the Company recorded a right of use asset of $28,000 and an operating lease liability of $28,000. Comparative periods have
not been restated. For additional information regarding how the Company is accounting for leases under Topic 842, refer to Note
4.
In November 2018, the FASB issued ASU
2018-18, “
Collaborative Arrangements (Topic 808)
” (“
Topic 808
”), which clarifies the interaction
between Topic 808 and ASC Topic 606, “
Revenue from Customers
.” The update provides guidance on whether certain
transactions between collaborative arrangement participants should be accounted for with revenue under ASC Topic 606 and provide
more comparability in the presentation of revenue for certain transactions between collaborative arrangement participants. This
will be effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting
period. The Company does not expect the adoption of Topic 808 to have a material impact on its financial statements.
4. Leases
The Company adopted Topic 842 on January
1, 2019 using the modified retrospective approach and elected to apply the transition method that allows companies to continue
applying guidance under the lease standard in effect at that time in the comparative period financial statements and recognize
a cumulative-effect adjustment to the balance sheet on the date of adoption. The Company has also elected the package of practical
expedients to not reassess its prior conclusions about lease identification, lease classification and indirect costs and to not
separate lease and non-lease components. With the adoption of Topic 842, the Company’s balance sheet now contains line items
for right of use asset, current lease liability and noncurrent lease liability.
The Company determined that it held an
operating lease for its office and laboratory space as of January 1, 2019. The Company held no other lease agreements. The Company
leases 7,581 square feet of office and laboratory space for its corporate headquarters and primary research facility in Marlborough,
Massachusetts. On January 1, 2019, the Company recorded a right of use asset and corresponding lease liability of $28,000.
On January 22, 2019, the Company amended
the lease for its office and laboratory space to extend the term by five years, such that the lease will expire on March 31, 2024.
With the amendment, the Company also has the option to terminate the lease after two or three years by providing advance written
notice. Due to the extension of the lease agreement, the Company increased the right of use asset and corresponding lease liability
by $592,000.
Additionally, the lease agreements did
not contain information to determine the rate implicit in the lease. The Company calculated its incremental borrowing rate based
on what the Company would have to pay to borrow on a collateralized basis over the lease term for an amount equal to the remaining
lease payments. At June 30, 2019, the weighted average incremental borrowing rate and the weighted average remaining lease term
for the Company’s operating lease was 4.58% and 4.37 years, respectively.
As of June 30, 2019, the right
of use asset and liability arising from the Company’s operating lease was $565,000 and $567,000, respectively. During the
three months ended June 30, 2019, cash paid for the amounts included in the measurement of liabilities was $31,000 and the Company
recorded operating lease expense of $33,000, which was included in operating expense. During the six months ended June 30, 2019,
cash paid for the amounts included in the measurement of liabilities was $59,000 and the Company recorded operating lease expense
of $61,000.
Future lease payments for non-cancellable
operating leases as of June 30, 2019 were as follows, in thousands:
|
2019 (remaining)
|
|
$
|
63
|
|
|
2020
|
|
|
128
|
|
|
2021
|
|
|
132
|
|
|
2022
|
|
|
135
|
|
|
2023
|
|
|
139
|
|
|
Thereafter
|
|
|
35
|
|
|
Total undiscounted lease payments
|
|
|
632
|
|
|
Less: Interest expense
|
|
|
(65
|
)
|
|
Total operating lease liabilities
|
|
$
|
567
|
|
5. Stockholders’ Equity
Lincoln Park Capital Fund, LLC –
On August 8, 2017, the Company entered into a purchase agreement (the “
Purchase Agreement
”) and a registration
rights agreement with Lincoln Park Capital Fund, LLC (“
LPC
”), pursuant to which the Company has the right to
sell to LPC shares of the Company’s common stock, subject to certain limitations and conditions set forth in the Purchase
Agreement.
No shares of common stock were sold to LPC
under the Purchase Agreement during the three or six months ended June 30, 2019. During the three months ended June 30, 2018,
the Company sold 150,000 shares of common stock to LPC for net proceeds of approximately $359,000. During the six months ended
June 30, 2018, the Company sold 420,000 shares of common stock to LPC for net proceeds of approximately $1,291,000.
Warrants —
The following table
summarizes the Company’s outstanding equity-classified warrants at June 30, 2019:
|
Summary of Warrants
|
|
Exercise prices
|
|
|
Number of Shares
Underlying Warrants
|
|
|
Expiration
|
|
June 2015 Warrants
|
|
$
|
52.00
|
|
|
|
130,007
|
|
|
June 2, 2020
|
|
December 2016 Warrants
|
|
$
|
9.00
|
|
|
|
1,277,793
|
|
|
December 21, 2021
|
|
April 2018 Warrants
|
|
$
|
3.15
|
|
|
|
1,132,953
|
|
|
May 31, 2023
|
|
Placement Agent Warrants
|
|
$
|
4.0546
|
|
|
|
75,530
|
|
|
April 9, 2023
|
|
Pre-Funded Warrants
|
|
$
|
0.01
|
|
|
|
1,164,286
|
|
|
No expiration
|
|
October 2018 Warrants
|
|
$
|
0.70
|
|
|
|
21,428,572
|
|
|
October 3, 2025
|
|
Underwriter Warrants
|
|
$
|
0.875
|
|
|
|
1,607,143
|
|
|
October 1, 2023
|
|
Total warrants outstanding
|
|
|
|
26,816,284
|
|
|
|
During the three months ended June 30,
2019, the Company received proceeds of $17,000 from the exercise of Pre-Funded Warrants for a total of 1,700,000 shares of common
stock. During the six months ended June 30, 2019, the Company received proceeds of $60,000 from the exercise of Pre-Funded Warrants
for a total of 6,004,286 shares of common stock. There were no warrant exercises during the three or six months ended June 30,
2018.
6. Net Loss per Share
The following table sets forth the potential
common shares excluded from the calculation of net loss per share because their inclusion would be anti-dilutive:
|
|
|
June 30,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
Options to purchase common stock
|
|
|
154,402
|
|
|
|
53,180
|
|
|
Restricted stock units
|
|
|
615,491
|
|
|
|
–
|
|
|
Warrants to purchase common stock
|
|
|
26,816,284
|
|
|
|
2,616,283
|
|
|
Total
|
|
|
27,586,177
|
|
|
|
2,669,463
|
|
7. Stock-based Compensation
Stock Options
The Company uses the Black-Scholes option-pricing
model to determine the fair value of all its option grants. For valuing options granted during the three and six months ended June
30, 2019 and 2018, the following assumptions were used:
|
|
|
For the Three Months Ended
June 30,
|
|
|
For the Six Months Ended
June 30,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Risk-free interest rate
|
|
|
1.85%
|
|
|
|
2.93%
|
|
|
|
1.85 – 2.58%
|
|
|
|
2.70 – 2.93
%
|
|
|
Expected volatility
|
|
|
97.67%
|
|
|
|
95.77%
|
|
|
|
97.67 – 98.87%
|
|
|
|
91.28 – 95.77
%
|
|
|
Weighted average expected volatility
|
|
|
97.67%
|
|
|
|
95.77%
|
|
|
|
98.47%
|
|
|
|
92.84%
|
|
|
Expected lives (in years)
|
|
|
5.31
|
|
|
|
5.50
|
|
|
|
5.31
|
|
|
|
5.50 – 10.00
|
|
|
Expected dividend yield
|
|
|
0.00%
|
|
|
|
0.00%
|
|
|
|
0.00%
|
|
|
|
0.00%
|
|
The weighted average fair value of
options granted during the three months ended June 30, 2019 and 2018 was $0.33 and $1.72, respectively. The weighted average fair
value of options granted during the six months ended June 30, 2019 and 2018 was $0.30 and $2.80, respectively.
The risk-free interest rate used for each
grant is based upon the yield on zero-coupon U.S. Treasury securities with a term similar to the expected life of the related option.
The Company’s expected stock price volatility assumption is based upon the Company’s own implied volatility. The expected
life assumption for option grants is based upon the simplified method provided for under ASC 718. The dividend yield assumption
is based upon the fact that the Company has never paid cash dividends and presently has no intention of paying cash dividends.
The following table summarizes the activity
of the Company’s stock options for the six months ended June 30, 2019:
|
|
|
Number
of Shares
|
|
|
Weighted-
Average
Exercise
Price
Per Share
|
|
|
Aggregate
Intrinsic
Value
|
|
|
Balance
at December 31, 2018
|
|
|
141,677
|
|
|
$
|
66.29
|
|
|
|
|
|
|
Granted
|
|
|
15,000
|
|
|
|
0.40
|
|
|
|
|
|
|
Exercised
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
Cancelled
|
|
|
(2,275
|
)
|
|
|
283.39
|
|
|
|
|
|
|
Balance at June 30, 2019
|
|
|
154,402
|
|
|
$
|
56.69
|
|
|
$
|
–
|
|
|
Exercisable at June 30, 2019
|
|
|
44,104
|
|
|
$
|
193.45
|
|
|
$
|
–
|
|
Stock-based compensation
expense related to stock options for the three months ended June 30, 2019 and 2018 was $18,000 and $37,000, respectively. Stock-based
compensation expense related to stock options for the six months ended June 30, 2019 and 2018 was $37,000 and $78,000, respectively.
Restricted Stock Units
In addition to options to purchase shares
of common stock, the Company may also grant restricted stock units (“
RSUs
”). RSUs are generally subject to graded
vesting and the satisfaction of service requirements, similar to our stock options. Upon vesting, each outstanding RSU will be
exchanged for one share of the Company’s common stock. The fair value of the RSUs awarded are based on the Company’s
closing stock price at the grant date and are expensed over the requisite service period.
The following table summarizes the activity
of the Company’s RSUs for the six months ended June 30, 2019:
|
|
|
|
Number
of Shares
|
|
|
Weighted-
Average
Grant Date Fair Value
|
|
|
Unvested
units at December 31, 2018
|
|
|
|
137,500
|
|
|
$
|
1.79
|
|
|
Granted
|
|
|
|
477,991
|
|
|
|
0.41
|
|
|
Vested
|
|
|
|
–
|
|
|
|
–
|
|
|
Forfeited
|
|
|
|
–
|
|
|
|
–
|
|
|
Unvested units at June 30, 2019
|
|
|
|
615,491
|
|
|
$
|
0.72
|
|
Stock-based compensation expense related
to RSUs for the three and six months ended June 30, 2019 was $44,000 and $79,000, respectively. There was no stock-based compensation
expense related to RSUs recorded in the same prior year periods.
Restricted Stock
On August 31, 2018, and through subsequent
amendments on December 19, 2018 and February 14, 2019, Geert Cauwenbergh, Dr. Med. Sc., the Company’s former Chief Executive
Officer, elected the right to receive, in lieu of cash, for the period from September 15, 2018 to February 28, 2019, up to 50%
of his base salary and cash bonuses, if any, (collectively, the “
Compensation
”) payable in the form of unvested,
restricted shares of the Company’s common stock. Such restricted shares were received in the form of a series of grants made
on each Company payroll date in lieu of cash payment of the Compensation. All shares issued in lieu of Compensation vested in full
on June 1, 2019.
The fair value of the restricted stock
was based on the Company’s closing stock price on the date of grant and was expensed over the vesting period. During the
six months ended June 30, 2019, the Company granted 243,032 shares of restricted stock in lieu of Compensation to Dr. Cauwenbergh.
Stock-based compensation expense related to restricted stock for the six months ended June 30, 2019 was $106,000. There were no
restricted stock issuances under this election during the three months ended June 30, 2019 or during the same prior year periods.
Compensation Expense Related to Equity Awards
The following table sets forth total stock-based
compensation expense for the three and six months ended June 30, 2019 and 2018, in thousands:
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Research and development
|
|
$
|
12
|
|
|
$
|
11
|
|
|
$
|
19
|
|
|
$
|
20
|
|
|
General and administrative
|
|
|
50
|
|
|
|
26
|
|
|
|
203
|
|
|
|
58
|
|
|
Total stock-based compensation
|
|
$
|
62
|
|
|
$
|
37
|
|
|
$
|
222
|
|
|
$
|
78
|
|
8. Subsequent Events
On August 7, 2019, the
Company entered into a purchase agreement (the “
2019 Purchase Agreement
”) with LPC, pursuant to which the
Company has the right to sell to LPC up to $10,000,000 in shares of the Company’s common stock, subject to certain
limitations and conditions set forth therein, over the 30-month term of the 2019 Purchase Agreement. Pursuant to
the 2019 Purchase Agreement, the Company issued 500,000 shares of common stock to LPC as a commitment fee.
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
In this document, “we,” “our,” “ours,”
“us,” “Phio” and the “Company” refers to Phio Pharmaceuticals Corp. and our subsidiary, MirImmune,
LLC and the ongoing business operations of Phio Pharmaceuticals Corp. and MirImmune, LLC, whether conducted through Phio Pharmaceuticals
Corp. or MirImmune, LLC.
This management’s discussion and analysis of financial
condition as of June 30, 2019 and results of operations for the three and six months ended June 30, 2019 and 2018 should be read
in conjunction with the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018, which
was filed with the Securities and Exchange Commission (the “SEC”) on March 27, 2019.
This report contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as
“intends,” “believes,” “anticipates,” “indicates,” “plans,” “expects,”
“suggests,” “may,” “should,” “potential,” “designed to,” “will”
and similar references, although not all forward-looking statements contain these words. Forward-looking statements are neither
historical facts nor assurances of future performance. These statements are based only on our current beliefs, expectations and
assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the
economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties,
risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results
and financial condition may differ materially from those indicated in the forward-looking statements as a result of a number of
important factors, including those identified in our Annual Report on Form 10-K for the year ended December 31, 2018 under the
heading “Risk Factors” and in other filings the Company periodically makes with the SEC. Therefore, you should not
rely on any of these forward-looking statements. Forward-looking statements contained in this Quarterly Report on Form 10-Q speak
as of the date hereof and the Company does not undertake to update any of these forward-looking statements to reflect a change
in its views or events or circumstances that occur after the date of this report.
Overview
Phio Pharmaceuticals
Corp. is a biotechnology company developing the next generation of immuno-oncology therapeutics based on our self-delivering RNAi
(“
sd-rxRNA
®
”) therapeutic platform. The Company's efforts are focused on silencing tumor-induced
suppression of the immune system through our proprietary sd-rxRNA platform with utility in immune cells and/or the tumor micro-environment.
Our goal is to maximize the power of our sd-rxRNA therapeutic compounds by weaponizing immune effector cells to overcome tumor
immune escape providing patients a powerful new treatment option that goes beyond current treatment modalities.
Our development efforts are based on our
broadly patented sd-rxRNA technology platform. Our sd-rxRNA compounds do not require a delivery vehicle to penetrate into tissues
and cells and are designed to “silence” or down-regulate, the expression of a specific gene which is over-expressed
in cancer. We believe that our sd-rxRNA platform uniquely positions the Company in the field of immuno-oncology because of this
and the following reasons:
|
|
·
|
Efficient uptake of sd-rxRNA to immune cells obviating the need for facilitated delivery (mechanical or formulation);
|
|
|
·
|
Can target multiple genes (i.e. multiple immunosuppression pathways) in a single therapeutic entity;
|
|
|
·
|
Gene silencing by sd-rxRNA has been shown to have a sustained, or long-term, effect
in vivo
;
|
|
|
·
|
Favorable clinical safety profile of sd-rxRNA with local administration; and
|
|
|
·
|
Can be readily manufactured under current good manufacturing practices.
|
The self-delivering
nature of our compounds makes sd-rxRNA ideally suited for use with adoptive cell transfer (“
ACT
”) treatments
and direct therapeutic use. ACT consists of the infusion of immune cells with antitumor properties. These cells can be derived
from unmodified (i.e. naturally occurring) immune cells, immune cells isolated from resected tumors, or genetically engineered
immune cells recognizing tumor neoantigens/neoepitopes cells.
Currently, ACT
therapies for the treatment of solid tumors face several hurdles. Multiple inhibitory mechanisms restrain immune cells used in
ACT from effectively eradicating tumors, including immune checkpoints, reduced cell fitness and cell persistence. Furthermore,
the immunosuppressive tumor micro-environment (the “
TME
”) can pose a formidable barrier to immune cell infiltration
and function.
Phio has developed
a platform based on our sd-rxRNA technology that allows easy, precise, rapid, and selective non-genetically modified
programming of ACT cells (
ex-vivo
, during manufacturing) and of the TME (
in vivo
, by local application), resulting
in improved cell-based immunotherapy.
Adoptive Cell
Transfer
In
ACT, immune cells are isolated from patients, donors or retrieved from allogeneic immune cell banks. The immune cells are then
expanded and modified before being returned and used to treat the same patient. We believe our sd-rxRNA compounds are
ideally suited to be used in combination with ACT, in order to make these immune cells more effective.
ACT includes a number of different types
of immunotherapy treatments. These treatments use immune cells, that are grown in a lab to large numbers, followed by administering
them to the body to fight the cancer cells. Sometimes, immune cells that naturally recognize a tumor are used, while other times
immune cells are modified or “engineered” to make them recognize and kill the cancer cells. There are several types
of ACT, including: a.) non-engineered cell therapy in which immune cells are grown from the patient’s tumor or blood, such
as tumor infiltrating lymphocytes (“
TILs
”), or from donor blood or tissue such as natural killer (“
NK
”)
cells, dendritic cells (“
DC
”) and macrophages, and b.) engineered immune cells that are genetically
modified to recognize specific tumor proteins and to remain in an activated state (such as TCRs, CAR T-cells, or CAR-NK cells).
Our approach to immunotherapy builds on
well-established methodologies of ACT and involves the treatment of immune cells with our sd-rxRNA compounds during the expansion
and modification phase. Because our sd-rxRNA compounds do not require a delivery vehicle to penetrate into the cells, we are able
to enhance these cells (for example, by inhibiting the expression of immune checkpoint genes) by merely adding our sd-rxRNA compounds
during the expansion process and without the need for genetic engineering. After enhancing these cells
ex vivo
, they
are returned to the patient for treatment.
We have a number of collaborations with
leading academic centers and corporate institutions. Corporate collaborators include, but are not limited to, Medigene AG, Iovance
Biotherapeutics, Inc. and Glycostem Therapeutics BV. Data developed in-house and with our collaborators has shown that PH-762,
our lead pipeline compound, can elicit PD-1 checkpoint blockade by silencing PD-1 receptor expression resulting in enhanced T cell
activation and tumor cytotoxicity. We have also shown that PH-804, our second pipeline compound, can silence the expression of
TIGIT in NK cells and T cells, overcoming their exhaustion and thereby becoming “weaponized.”
We expect to enter
the clinic with PH-762 in ACT therapy for solid tumors, such as in melanoma, in the first half of 2020. The Company also expects
to enter the clinic with PH-804 in ACT in the second half of 2020.
Tumor Micro-Environment
We are exploring the use of our sd-rxRNA
directly towards TME targets. Impacting the tumor cells and/or the TME through a direct use of sd-rxRNA, locally administered directly
into the tumor, could potentially become an important form of (neo)adjuvant therapy. We believe that this will also show that our
contributions with our sd-rxRNA compounds in immuno-oncology are not limited to use with a cell therapy platform. Additionally,
the Company has shown in a clinical setting that its sd-rxRNA compounds are safe and well-tolerated following local administration.
Our collaborative research agreement with
Gustave Roussy, a leading comprehensive cancer center in France, concentrates on determining the feasibility of our sd-rxRNA platform
to target the TME via intra-tumoral injection. Our recent
in-vivo
study with Gustave Roussy demonstrated that
sd-rxRNA compound delivered via intra-tumoral injection showed silencing of gene expression with our sd-rxRNA compounds with an
80—85% reduction of the target gene expression in a mouse model of melanoma.
The Company expects to enter the clinic
with PH-762 for intratumoral injection in the second half of 2020.
Critical Accounting Policies and Estimates
The
discussion and analysis of our financial condition and results of operations is based upon our financial statements, which have
been prepared in accordance with
GAAP
. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and
related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and base our estimates
on historical experience and various other assumptions that are believed to be reasonable under the circumstances. Actual results
may differ from these estimates under different assumptions or conditions and could have a material impact on our reported results.
Other than our accounting policy for leases in connection with the adoption of Topic 842 on January 1, 2019, as described below,
there have been no significant changes to our critical accounting policies since the beginning of this fiscal year. Our critical
accounting policies are described in the “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” section of our Annual Report on Form 10-K for the year ended December 31, 2018, which we filed with the SEC on
March 27, 2019.
Leases
The Company follows the provisions of
the FASB ASC 842. At the inception of a contract, the Company determines whether the contract is or contains a lease based on
all relevant facts and circumstances. For contracts that contain a lease, the Company identifies the lease and non-lease
components, determines the consideration in the contract and recognizes the classification of the lease as operating or
financing. At the commencement date of the lease, the Company recognizes a liability to make lease payments and an asset
representing the right to use the underlying asset during the lease term. The Company has elected not to recognize leases
with a term less than one year on the balance sheet.
Lease liabilities and the corresponding
right of use assets are recorded based on the present value of lease payments to be made over the lease term. The discount rate
used to calculate the present value is the rate implicit in the lease, or if not readily determinable, the Company’s incremental
borrowing rate. The Company’s incremental borrowing rate is the rate of interest that we would have to pay to borrow on a
collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Certain adjustments
to the right of use asset may be required for items such as initial direct costs or incentives received. Lease payments on operating
leases are recognized on a straight-line basis over the expected term of the lease. Lease payments on financing leases are recognized
using the effective interest method.
Results of Operations
The following data summarizes the results
of our operations for the periods indicated, in thousands:
|
|
|
Three Months Ended June 30,
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|
Description
|
|
2019
|
|
|
2018
|
|
|
Dollar
Change
|
|
|
2019
|
|
|
2018
|
|
|
Dollar
Change
|
|
|
Revenues
|
|
$
|
–
|
|
|
$
|
58
|
|
|
$
|
(58
|
)
|
|
$
|
21
|
|
|
$
|
81
|
|
|
$
|
(60
|
)
|
|
Operating expenses
|
|
|
(2,059
|
)
|
|
|
(1,957
|
)
|
|
|
(102
|
)
|
|
|
(4,226
|
)
|
|
|
(4,219
|
)
|
|
|
(7
|
)
|
|
Operating loss
|
|
|
(2,059
|
)
|
|
|
(1,899
|
)
|
|
|
(160
|
)
|
|
|
(4,205
|
)
|
|
|
(4,138
|
)
|
|
|
(67
|
)
|
|
Net loss
|
|
|
(2,035
|
)
|
|
|
(1,901
|
)
|
|
|
(134
|
)
|
|
|
(4,154
|
)
|
|
|
(4,140
|
)
|
|
|
(14
|
)
|
Comparison of the Three and Six Months Ended June 30, 2019
and 2018
Revenues
The following table summarizes our total
revenues, for the periods indicated, in thousands:
|
|
|
|
Three Months Ended June
30,
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|
Description
|
|
|
2019
|
|
|
2018
|
|
|
Dollar
Change
|
|
|
2019
|
|
|
2018
|
|
|
Dollar Change
|
|
|
Revenues
|
|
|
$
|
–
|
|
|
$
|
58
|
|
|
$
|
(58
|
)
|
|
$
|
21
|
|
|
$
|
81
|
|
|
$
|
(60
|
)
|
Revenues for the six months ended June
30, 2019 and three and six months ended June 30, 2018 related to the work performed by the Company as a sub-awardee under the government
grant issued to our collaborator BioAxone Biosciences, Inc. from the National Institute of Neurological Disorders and Stroke. Work
performed by the Company as a sub-awardee under the grant has been completed. The grant provided funding for the development of
a novel sd-rxRNA compound, BA-434, that targets PTEN for the treatment of spinal cord injury.
Operating Expenses
The following table summarizes our total
operating expenses, for the periods indicated, in thousands:
|
|
|
Three Months Ended June 30,
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|
Description
|
|
2019
|
|
|
2018
|
|
|
Dollar
Change
|
|
|
2019
|
|
|
2018
|
|
|
Dollar
Change
|
|
|
Research and development
|
|
$
|
1,146
|
|
|
$
|
1,183
|
|
|
$
|
(37
|
)
|
|
$
|
2,235
|
|
|
$
|
2,544
|
|
|
$
|
(309
|
)
|
|
General and administrative
|
|
|
913
|
|
|
|
774
|
|
|
|
139
|
|
|
|
1,991
|
|
|
|
1,675
|
|
|
|
316
|
|
|
Total operating expenses
|
|
$
|
2,059
|
|
|
$
|
1,957
|
|
|
$
|
102
|
|
|
$
|
4,226
|
|
|
$
|
4,219
|
|
|
$
|
7
|
|
Research and Development Expenses
Research
and development expenses relate to compensation and benefits for research and development personnel, facility-related expenses,
supplies, external services, costs to acquire technology licenses, expenses associated with preclinical and clinical development
activities and other operating costs.
Research
and development expenses for the three months ended June 30, 2019 decreased 3% as compared with the three months ended June 30,
2018, primarily due to a reduction in licensing fees.
Research
and development expenses for the six months ended June 30, 2019 decreased 12% as compared with the six months ended June 30, 2018,
primarily due to a reduction in headcount and payroll-related expenses, decreased clinical trial-related fees with the completion
of the Company’s dermatology and ophthalmology clinical trials, as well as the completion of the Company’s drug manufacture
of PH-762 in the prior year period.
General and Administrative Expenses
General
and administrative expenses relate to compensation and benefits for general and administrative personnel, facility-related expenses,
professional fees for legal, audit, tax and consulting services, as well as other general corporate expenses.
General and
administrative expenses for the three months ended June 30, 2019 increased 18% as compared with the three months ended June 30,
2018, primarily due to an increase in legal fees.
General
and administrative expenses for the six months ended June 30, 2019 increased 19% as compared with the six months ended June 30,
2018, primarily due to an increase in legal fees and an increase in stock-based compensation expense related to the restricted
stock issued to the Company’s former Chief Executive Officer in lieu of cash compensation.
Liquidity and Capital Resources
On August 8, 2017, the Company entered
into a purchase agreement (the “
Purchase Agreement
”) and a registration rights agreement with Lincoln Park Capital
Fund, LLC (“
LPC
”), pursuant to which the Company has the right to sell to LPC up to $15,000,000 in shares of
the Company’s common stock, subject to certain limitations and conditions set forth therein, over the 30-month term of the
Purchase Agreement. To date, the Company has sold a total of 495,000 shares of common stock to LPC under the Purchase Agreement
for net proceeds of $1,602,000. The Company has approximately $13,300,000 remaining under the Purchase Agreement with LPC.
On
April 11, 2018, the Company closed a registered direct offering of 1,510,604 shares of the Company’s common stock at a purchase
price of $3.15 per share and in a concurrent private placement, sold warrants to purchase a total of 1,132,953 shares of common
stock at a purchase price of $0.125 per underlying warrant share and with an exercise price of $3.15 per share (the “
April
2018 Offering
”). Net proceeds to the Company from the April 2018 Offering were $4,210,000 after deducting placement agent
fees and offering expenses paid by the Company.
On
October 3, 2018, the Company closed an underwritten public offering of 3,725,714 shares of the Company’s common stock and
pre-funded warrants (the “
Pre-Funded Warrants
”) to purchase an aggregate of 17,702,858 shares of common stock
(the “
October 2018 Offering
”). The Pre-Funded Warrants are immediately exercisable at a price per share of $0.01
and do not expire. Each share of common stock or Pre-Funded Warrant, as applicable, was sold as a unit with a warrant to purchase
one share of common stock at an exercise price of $0.70 per share. The combined public offering price was $0.70 per common stock
unit or $0.69 per Pre-Funded Warrant unit. Net proceeds from the October 2018 Offering were $13,193,000 after deducting underwriting
discounts and commissions and offering expenses paid by the Company.
On August 7,
2019, the Company entered into a purchase agreement (the “
2019 Purchase Agreement
”) with LPC, pursuant to which
the Company has the right to sell to LPC up to 10,000,000 in shares of the Company’s common stock, subject to certain limitations
and conditions set forth therein, over the 30-month term of the 2019 Purchase Agreement.
We had cash of $10,816,000 as of June 30,
2019, compared to $14,879,000 as of December 31, 2018. We have reported recurring losses from operations since inception
and expect that we will continue to have negative cash flows from our operations for the foreseeable future. Historically,
the Company’s primary source of funding has been the sale of its securities. In the future, we will be dependent on
obtaining funding from third parties, such as proceeds from the issuance of debt, sale of equity, or strategic opportunities,
in order to maintain our operations. There is no guarantee that debt, additional equity or other funding will be available to
us on acceptable terms, or at all. If we fail to obtain additional funding when needed, we would be forced to scale back or
terminate our operations or to seek to merge with or to be acquired by another company. We believe that our existing cash
should be sufficient to fund our operations for at least the next 12 months.
The following table summarizes our cash
flows for the periods indicated, in thousands:
|
|
|
Six Months Ended
June 30,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
Net cash used in operating activities
|
|
$
|
(4,108
|
)
|
|
$
|
(3,767
|
)
|
|
Net cash used in investing activities
|
|
|
(16
|
)
|
|
|
–
|
|
|
Net cash provided by financing activities
|
|
|
61
|
|
|
|
5,501
|
|
|
Net (decrease) increase in cash and restricted cash
|
|
$
|
(4,063
|
)
|
|
$
|
1,734
|
|
Net Cash Flow from Operating Activities
Net cash used in operating activities was
$4,108,000 for the six months ended June 30, 2019, as compared to $3,767,000 for the six months ended June 30, 2018. The increase
in cash used in operating activities of $341,000 was primarily attributable to an increase in total changes in operating assets
and liabilities primarily due to payments made by the Company for its acquisition of MirImmune Inc. in the prior year period as
compared with the payment of its PH-782 drug manufacture during 2019.
Net Cash Flow from Investing Activities
Net cash used in investing activities
for the six months ended June 30, 2019 was $16,000. There were no net cash flows related to investing activities for the six
months ended June 30, 2018. The increase in net cash flow used in investing activities was primarily related to the
purchase of office and lab equipment.
Net Cash Flow from Financing Activities
Net cash provided by financing activities
was $61,000 for the six months ended June 30, 2019, as compared to $5,501,000 for the six months ended June 30, 2018. The decrease
in cash provided by financing activities was due to proceeds received by the Company from the exercise of Pre-Funded Warrants
as compared to the proceeds received by the Company from the April 2018 Offering and the issuance of common stock to LPC under
the Purchase Agreement during the same prior year period.
Off-Balance Sheet Arrangements
In
connection with certain license agreements, we are required to indemnify the licensor for certain damages arising in connection
with the intellectual property rights licensed under the agreement. In addition, we are a party to a number of agreements entered
into in the ordinary course of business that contain typical provisions that obligate us to indemnify the other parties to such
agreements upon the occurrence of certain events. These indemnification obligations are considered off-balance sheet arrangements
in accordance with Accounting Standards Codification Topic 460, “
Guarantor’s Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of Others
.” To date, we have not encountered material costs
as a result of such obligations and have not accrued any liabilities related to such obligations in our financial statements. See
Note 5 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018,
which was filed with the SEC on March 27, 2019, for further discussion of these indemnification agreements.