Forward-Looking Statements
The following section of this Annual Report on Form 10-K entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" contains statements that are not statements of historical fact and are forward-looking statements within the meaning of federal securities laws. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties.
In some cases, you can identify forward-looking statements by terms such as
"believe," "may," "estimate," "continue," "anticipate," "intend," "should,"
"could," "would," "target," "seek," "aim," "believe," "predicts," "think,"
"objectives," "optimistic," "new," "goal," "strategy," "potential," "is likely,"
"will," "expect," "plan" "project," "permit" and similar expressions intended to
identify forward-looking statements. These statements reflect our current views
with respect to future events, are based on assumptions and are subject to risks
and uncertainties. Given these uncertainties, you should not place undue
reliance on these forward-looking statements. We discuss many of these risks in
greater detail in Item 1A."Risk Factors" of this Annual Report on Form 10-
Overview
We are a clinical-stage biotechnology company that intends to use cell therapy to treat cancer, injuries, and birth defects in the esophagus.
We believe our technology is likely to be used to treat esophageal cancer, esophageal injuries, and birth defects in the esophagus. Additional product candidates in our pipeline may treat bronchial cancer, intestinal cancer and colon cancer.
Our first esophageal product candidate, our esophageal implant was used in the first successful regeneration of the esophagus in a patient with esophageal cancer. This successful first-in-human experience, plus the research we have performed on over 50 pigs, led the FDA to approve our 10-patient combined phase 1 and phase 2 clinical trial. This combination trial will measure both safety and efficacy in the patient population.
We were incorporated and commenced operations on
We have also formed a subsidiary in
Since our incorporation, we have devoted substantially all of our resources to
developing our programs, building our intellectual property portfolio, business
planning, raising capital and providing general and administrative support for
these operations. To date, we have financed our operations with proceeds from
the sales of common stock and preferred stock. In
Our product candidates are currently in development and have not yet received regulatory approval for sale anywhere in the world.
We have incurred substantial operating losses since our inception, and as of
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We will need to raise additional funds to fund our operations. In the event we do not raise additional capital from outside sources before or during the second quarter of 2023, we may be forced to curtail or cease our operations. Cash requirements and cash resource needs will vary significantly depending upon the timing of the financial and other resource needs that will be required to complete ongoing development, pre-clinical and clinical testing of product candidates, as well as regulatory efforts and collaborative arrangements necessary for our products that are currently under development. We are currently seeking and will continue to seek financings from other existing and/or new investors to raise necessary funds through a combination of public or private equity offerings. We may also pursue debt financings, other financing mechanisms, research grants, or strategic collaborations and licensing arrangements. We may not be able to obtain additional financing on favorable terms, if at all.
Our operations will be adversely affected if we are unable to raise or obtain needed funding and may materially affect our ability to continue as a going concern. Our consolidated financial statements have been prepared assuming that we will continue as a going concern and therefore, the consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amount and classifications of liabilities that may result from the outcome of this uncertainty.
2022 Financing Activities
During the year ended
? InMay 2022 , we sold 854,771 shares of common stock and warrants to purchase 427,390 shares of common stock for the aggregate purchase price of approximately$5.1 million and a purchase price per unit of$5.92 . Each unit consisted of one share of common stock and a warrant to purchase one half of one share of common stock, subject to adjustment as provided in the warrants. The warrants have an exercise price of$8.88 per share, subject to adjustments as provided under the terms thereof, and were immediately exercisable. The warrants are exercisable until five years (5) from the warrant issuance date. InMay 2022 , we also issued options to acquire 38,564 shares of common stock to satisfy sales commissions in the approximate amount of$155,660 incurred in relation to this private placement. ? InJune 2022 , the Company issued 4,000 shares of Series E Convertible Preferred Stock at a price of$1,000 per share to satisfy certain indemnification obligations in the amount of$4.0 million , in lieu of paying cash. The Company issued an aggregate of 180 shares of Series E Convertible Preferred Stock relating to accrued dividends during the year endedDecember 31, 2022 . 2021 Financing Activities
During the year ended
? OnMay 4, 2020 , we obtained a loan from Bank of America in the aggregate amount of approximately$0.4 million , pursuant to the Paycheck Protection Program, established as part of the CARES Act. Such loan was evidenced by a promissory note datedMay 4, 2020 issued by us whereas certain amounts of the loan where eligible for forgiveness if used for qualifying expenses. OnDecember 18, 2020 , we submitted the loan forgiveness application for the entire borrowings of approximately$0.4 million to the lender and were notified onJanuary 7, 2021 that the application was submitted to theSmall Business Administration , or SBA, for review. OnMay 23, 2021 , we were notified by the lender that the SBA determined that the application for our loan forgiveness was approved, and the SBA remitted the forgiven amount to the lender. We have accounted for this loan forgiveness as a gain on extinguishment of approximately$0.4 million (See Note 3 in the Consolidated Financial Statements included in Item 15 of this Annual Report on Form 10-K for further discussion). ? During the year endedDecember 31, 2021 , we issued a total of 1,300,000 shares of our common stock at a purchase price of$2.00 per share and warrants to purchase 650,000 shares of common stock at an exercise price of$2.00 per share to a group of investors for aggregate gross and net proceeds of approximately$2.6 million . ? During the year endedDecember 31, 2021 , we issued 72,464 shares of our common stock to our Chief Executive Officer at a purchase price of$3.45 per share and warrants to purchase 36,232 shares of common stock at an exercise price of$3.45 per share for aggregate gross and net proceeds of approximately$250 thousand .
Small Business Innovation Research Grant
On
On
For the years ended
The Phase II portion of the award expired effective
46 Management
Effective as of
On
As of
Components of Operating Loss
Research and Development Expense. Research and development expense consists of salaries and related expenses, including share-based compensation, for personnel and contracted consultants and various materials and other costs to develop our new products, primarily: synthetic scaffolds, including investigation and development of materials and investigation and optimization of cellularization, autoseeders, and 3-D bioreactors, as well as studies of cells and cell behavior. Other research and development expenses include the costs of outside service providers and material costs for prototype and test units and outside laboratories and testing facilities performing cell growth and materials experiments, as well as the costs of all other preclinical research and testing including animal studies and expenses related to potential patents. We expense research and development costs as incurred.
General and Administrative Expense. General and administrative expense consists primarily of salaries and other related expenses, including share-based compensation, for personnel in executive, accounting, information technology and human resources roles. Other costs include professional fees for legal and accounting services, insurance, investor relations and facility costs.
Forgiveness of Notes Payable. On
Grant Income. Grant income reflects income earned under the SBIR grant. Grant income is recognized based on timing of when qualified research and development costs are incurred.
Changes in Fair Value of Warrant Liability. Changes in fair value of warrant
liability represent the change in the fair value of outstanding common stock
warrants that were classified as liability awards during the years ended
Critical Accounting Estimates
Management's discussion and analysis of our financial condition and results of
operations is based on our consolidated financial statements, which have been
prepared in accordance with Generally Accepted Accounting Principles in
Share-based Compensation
We account for our share-based compensation in accordance with the fair value recognition provisions of current authoritative guidance. Share-based awards, including stock options, are measured at fair value as of the grant date and recognized as expense over the requisite vesting period (generally the service period), which we recognize on a straight-line basis. Expense on share-based awards for which vesting is performance or milestone based is recognized on a straight-line basis from the date when we determine the achievement of the milestone is probable to the vesting/milestone achievement date. We estimate the fair value of options granted using the Black-Scholes option valuation model. Significant judgment is required in determining the proper assumptions used in these models. The assumptions used include the risk-free interest rate, expected term, expected volatility and expected dividend yield. We base our assumptions on historical data when available or, when not available, on a peer group of companies. However, these assumptions consist of estimates of future market conditions, which are inherently uncertain and subject to our judgment, and therefore any changes in assumptions could significantly impact the future grant date fair value of share-based awards.
Total share-based compensation expense for each of the years ended
Warrant Liability
Most of the warrants to purchase shares of our common stock have been classified
on our consolidated balance sheets as equity. We classify warrants as a
liability in our consolidated balance sheets if the warrant is a free-standing
financial instrument that may require us to transfer cash consideration upon
exercise and that cash transfer event would be out of our control. Such a
"liability warrant" is initially recorded at fair value on the date of grant
using the Black-Scholes model, net of issuance costs, and it is subsequently
re-measured to fair value at each subsequent balance sheet date. Changes in fair
value of the warrant are recognized as a component of other income (expense) in
the consolidated statements of operations. We continued to adjust the liability
for changes in fair value until the expiration of the warrant liability in
47 Results of Operations
The following table summarizes the results of our operations for the years ended
For the Year Ended Change 2022 vs. 2021 2022 2021 Change % Operating expenses Research and development$ 1,742 $ 1,592 $ 150 9 % General and administrative 4,411 7,044 (2,633 ) (37 )% Total operating expenses 6,153 8,636 (2,483 ) (29 )% Other income (expense) Forgiveness of notes payable - 408 (408 ) (100 )% Sublease income 87 - 87 100 % Grant income - 165 (165 ) (100 )% Change in fair value of warrant liability 2 15 (13 ) (87 )% Other income (expense), net (9 ) 70 (79 ) (113 )% Total other income (expense), net 80 658 (578 ) (88 )% Net loss$ (6,073 ) $ (7,978 ) $ 1,905 (24 )%
Year Ended
Research and Development Expense
Research and development expense increased approximately
General and Administrative Expense
General and administrative expense decreased approximately
Forgiveness of notes payable
On
Sublease income
On
Grant income
For the year ended
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Change in Fair Value of Warrant Liability
For the year ended
Other income (expense), net
During the year ended
Liquidity and Capital Resources
Sources of Liquidity. We have incurred operating losses since inception and as
of
Operating Activities. Net cash used in operating activities of approximately
Net cash used in operating activities of approximately
Investing Activities. Net cash used in investing activities for the years ended
Financing Activities. Net cash generated from financing activities was
approximately
We continue to pursue our esophageal program, including advancing to operate as a clinical stage company. Given our current limited cash resources, we intend to closely monitor our cash expenses as such cash resources are expected to only allow us to meet our operating needs into the second quarter of 2023.
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.
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Off-Balance Sheet Arrangements
We did not have, during the periods presented, and we do not currently have, any
off-balance sheet arrangements, as defined under applicable
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