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Item 2. Management’s Discussion and Analysis

2022-08-12 compared with 2022-05-10 · 75 added, 29 removed, 159 unchanged (40% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

for the fiscal year ended December 31, 2021 included in the Annual Report on Form 10-K (the “2021 Annual Report”) and filed with the Securities and Exchange Commission (the “SEC”) on March 16, 2022.

This discussion, particularly information with respect to our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations, includes forward-looking statements that involve risks and uncertainties as described under the heading "Special Note Regarding Forward-Looking Statements"

in this Quarterly Report on Form 10-Q.

You should review the disclosure under the heading "Risk Factors"

in this Quarterly Report on Form 10-Q for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and the related notes and the discussion under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the fiscal year ended December 31, 2021 included in the Annual Report on Form 10-K (the “2021 Annual Report”) and filed with the Securities and Exchange Commission (the “SEC”) on March 16, 2022.

This discussion, particularly information with respect to our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations, includes forward-looking statements that involve risks and uncertainties as described under the heading “Special Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q.

You should review the disclosure under the heading “Risk Factors” in this Quarterly Report on Form 10-Q for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements.

Acurx Pharmaceuticals, Inc., (the “Company”), a Delaware corporation, formerly Acurx Pharmaceuticals, LLC (the “Company”) is a publicly-held, clinical stage biopharmaceutical company developing a new class of antibiotics for infections caused by bacteria listed as priority pathogens by the World Health Organization (“WHO”), the U.S.

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Recent Developments

Referring Physician Program and Trial Site Expansion

In July 2022, we launched an innovative patient enrollment acceleration program (“Referring Physician Program”) to optimize patient enrollment in our ongoing Phase 2b clinical trial of ibezapolstat in patients with CDI.

Our newly instituted Referring Physician Program involves principal investigators and study coordinators of our clinical trial sites reaching out to potential Referring Physicians (“RPs”) within an approximately twenty-five mile radius of our clinical trial sites.

In each case, our scientific team has identified all of these potential RPs as high-prescribing physicians of the most commonly used antibiotics for treatment of C.

difficile Infection over a recent twelve-month period.

According to the physician prescribing data available to us from an industry-standard source, identified RPs in the aggregate of just fourteen of our currently activated clinical trial sites treated a total of over 30,000 patients in a recent one-year period, suggesting that a substantial number of subjects could potentially be available for referral to one of these fourteen clinical trial sites if the patients qualify.

The first tranche of this program has been activated with four of our clinical trial sites and is planned to be followed up later this year with a second tranche of twelve to twenty clinical trial sites as we expand our participating sites from sixteen up to thirty.

We believe the Referring Physician Program, which has a number of other supportive elements, will enhance the rate of enrollment potentially mitigating or partially mitigating the countervailing enrollment disruption caused by the COVID-19 pandemic.

Additionally, in July 2022, we increased the target number of clinical trial sites participating in our Phase 2b clinical trial from a targeted twenty-four clinical trial sites up to thirty clinical trial sites.

With sixteen clinical trial sites active and eight more clinical trial sites currently onboarding, our scientific team will target six additional clinical trial sites to participate in the Phase 2b clinical trial.

Registered Direct Offering

On July 25, 2022, we entered into securities purchase agreements (the “Purchase Agreements”) with David P.

Luci, our President and Chief Executive Officer, Robert J.

DeLuccia, our Executive Chairman, Carl V.

Sailer, a member of our board of directors (collectively, the “Affiliate Investors”), and a single U.S.

institutional investor (the “Investor”) pursuant to which we issued

and sold in a registered direct offering an aggregate of 1,159,211 shares of our common stock, par value $0.001 per share and pre-funded warrants to purchase an aggregate of 130,769 shares of our common stock.

The Affiliate Investors purchased an aggregate of 59,211 shares of common stock at a purchase price of $3.80 per share.

The Investor purchased an aggregate of 1,100,000 shares of common stock at a purchase price of $3.25 per share and an aggregate of 130,769 pre-funded warrants at a purchase price of $3.2499 per pre-funded warrant.

The pre-funded warrants sold to the Investor have an exercise price of $0.0001, were immediately exercisable and may be exercised at any time until fully exercised.

The gross proceeds to us from the registered direct offering were $4.2 million and net proceeds after deducting the placement agents’ fees and other offering expenses payable by us were approximately $3.7 million.

The securities were offered by the Company pursuant to an effective shelf registration statement on Form S-3 (File No.

333-265956) previously filed with the SEC on July 1, 2022, and which was declared effective by the SEC on July 11, 2022.

In a concurrent private placement, we issued to the Affiliate Investors and the Investor, series A warrants to purchase 1,289,980 shares of our common stock and series B warrants to purchase 1,289,980 shares of our common stock, all of which are deemed equity classified.

We issued an aggregate of 59,211 series A warrants and an aggregate of 59,211 series B warrants to the Affiliate Investors with an exercise price per share of $3.55.

Additionally, we issued an aggregate of 1,230,769 series A warrants and an aggregate of 1,230,769 series B warrants to the Investor with an exercise price per share of $3.25.

The series A warrants will be exercisable commencing on January 27, 2023 and will expire on January 27, 2028.

The series B warrants will be exercisable commencing on January 27, 2023 and will expire on January 27, 2024.

The registered direct offering and concurrent private placement closed on July 27, 2022.

On July 25, 2022, we entered into a co-placement agent agreement (the “Placement Agent Agreement”), with A.G.P./Alliance Global Partners (“AGP”) and Maxim Group LLC (“Maxim”, and together with AGP, the “Placement Agents”) in connection with the registered direct offering pursuant to which we paid the Placement Agents a cash fee of $287,874 and issued to the Placement Agents an aggregate of 63,018 warrants to purchase shares of common stock (which is 5% of the aggregate number of shares of common stock and pre-funded warrants sold in the registered direct offering to the Investor and 2.5% of the aggregate number of shares of common stock sold to the Affiliate Investors).

The warrants will have an exercise price of $3.60 per share (representing 110% of the weighted average public offering price of the aggregate number of shares of common stock sold in the registered direct offering to the Investor and Affiliate Investors), will be exercisable beginning January 27, 2023, and will expire on July 27, 2027.

Initial Public Offering

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Vaccines for COVID-19 continue to be administered in the United States and other countries around the world, but the extent and rate of vaccine adoption, the long-term efficacy of these vaccines and other factors remain uncertain.

Authorities throughout the world have implemented measures to contain or mitigate the spread of the virus, including physical distancing, travel bans and restrictions, closure of non-essential businesses, quarantines, work-from-home directives, mask requirements, shelter-in-place orders and vaccination programs.

While the rollout of vaccines has begun, the timing of vaccinations, herd immunity, and the lifting of shelter-in-place and similar restrictions and movement restrictions are unknown.

The impact of COVID-19 and its variants has been and remains unpredictable.

directives, mask requirements, shelter-in-place orders and vaccination programs.

The impact of COVID-19 and its variants, including direct and indirect economic effects as a result of inflation, supply chain disruptions and labor shortages, have been and remain unpredictable.

Since the start of the COVID-19 pandemic, we continued to enroll patients in our Phase 2a and Phase 2b clinical trial of our lead antibiotic candidate, ibezapolstat, although enrollment rates decreased significantly compared to expectations.

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Other significant costs include facility-related costs, legal fees relating to intellectual property and corporate matters, professional fees for accounting and consulting services and insurance costs.

We anticipate that our general and administrative expenses will increase in the future to support our continued research and development activities, precommercialization and, if any product candidates receive marketing approval, commercialization activities.

We anticipate that our general and administrative expenses will increase in the future to support our continued research and development activities, pre-commercialization and, if any product candidates receive marketing approval, commercialization activities.

We also anticipate increased expenses related to audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums and investor relations costs associated with operating as a public company.

Results of Operations

Three Months Ended March 31, 2022 Compared to the Three Months Ended March 31, 2021

The following table presents a summary of the changes in our results of operations for the three months ended March 31, 2022 compared with the three months ended March 31, 2021:

Three Months Ended June 30, 2022 Compared to the Three Months Ended June 30, 2021

The following table presents a summary of the changes in our results of operations for the three months ended June 30, 2022 compared with the three months ended June 30, 2021:

Three Months Ended

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Total Operating Expenses

Gain on PPP Loan Forgiveness

Research and Development Expenses

Research and development expenses were $0.8 million for the three months ended March 31, 2022 and $0.1 million for the three months ended March 31, 2021, an increase of $0.7 due to Phase 2b clinical trial related costs and increased consulting costs.

Research and development expenses were $0.9 million for the three months ended June 30, 2022 and $0.1 million for the three months ended June 30, 2021, an increase of $0.8 due to Phase 2b clinical trial related costs and increased consulting costs.

General and Administrative Expenses

General and administrative expenses were $1.9 million for the three months ended March 31, 2022 and $1.4 million for the three months ended March 31, 2021, an increase of $0.5 million.

The increase was primarily due to a $0.4 million increase in professional fees, legal and insurance costs and a $0.1 million increase in compensation costs.

Net loss was $2.7 million for the three months ended March 31, 2022, and $1.5 million for the three months ended March 31, 2021, an increase of $1.1 million, due to the reasons stated above.

General and administrative expenses were $1.7 million for the three months ended June 30, 2022 and $3.9 million for the three months ended June 30, 2021, a decrease of $2.2 million.

The decrease was primarily due to a $1.1 million decrease in professional fees and $1.3 million decrease in share-based compensation costs offset by $0.1 million increase in insurance costs.

Net loss was $2.6 million for the three months ended June 30, 2022, and $4.0 million for the three months ended June 30, 2021, a decrease of $1.4 million, due to the reasons stated above.

Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

The following table presents a summary of the changes in our results of operations for the six months ended June 30, 2022 compared with the six months ended June 30, 2021:

Six Months Ended

Increase (Decrease)

(in thousands)

Research and Development Expenses

General and Administrative Expenses

Total Operating Expenses

Gain on PPP Loan Forgiveness

Research and Development Expenses

Research and development expenses were $1.7 million for the six months ended June 30, 2022, and $0.2 million for the six months ended June 30, 2021, an increase of $1.5 million due to Phase 2b clinical trial related costs and increased consulting costs.

General and Administrative Expenses

General and administrative expenses were $3.6 million for the six months ended June 30, 2022 and $5.4 million for the six months ended June 30, 2021, a decrease of $1.8 million.

The decrease was primarily due to a $1 million decrease in professional fees, and a $1.3 million decrease in share-based compensation costs, offset by $0.4 million increase in legal and insurance costs.

Net loss was $5.3 million for the six months ended June 30, 2022, and $5.5 million for the six months ended June 30, 2021, a decrease of $0.2 million, due to the reasons stated above.

Liquidity and Capital Resources

Since inception, we have generated no revenue from operations and we have incurred cumulative losses of approximately $29.2 million as of March 31, 2022.

Since inception, we have generated no revenue from operations and we have incurred cumulative losses of approximately $31.8 million as of June 30, 2022.

We have funded our operations primarily from equity issuances.

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Based upon our lack of revenue expected for the foreseeable future, and because of numerous risks and uncertainties associated with the research, development and future commercialization of our product candidates, we are unable to estimate with certainty the amounts of increased capital outlays and operating expenditures associated with our anticipated clinical trials and development activities.

As of March 31, 2022, we had working capital of $10.7 million, consisting primarily of $11.1 million of cash, offset by $0.6 million of accounts payable and accrued expenses.

As of June 30, 2022, we had working capital of $8.7 million, consisting primarily of $9.1 million of cash and $0.1 million of prepaid expenses, offset by $0.5 million of accounts payable and accrued expenses.

The following table sets forth selected cash flow information for the periods indicated:

For the three months ended

For the six months ended

(in thousands)

Net cash used in operating activities

Net cash provided by financing activities

Net decrease in cash

Net (decrease)/increase in cash

Net Cash Used in Operating Activities

Net cash used in operating activities was $1.9 million for the three months ended March 31, 2022.

Net cash used in operating activities was $3.9 million for the six months ended June 30, 2022.

The net loss was greater than the net cash used in operating activities by $1.4 million, primarily attributable to share-based compensation and share-based vendor payments of $1.7 million, offset by a decrease in accrued expenses of $0.4 million.

Net cash used in operating activities was $0.5 million for the three months ended March 31, 2021.

The net loss was greater than the net cash used in operating activities by $0.9 million, primarily attributable to executive compensation settled in membership interests of $0.9 million, share-based compensation and shared-based vendor payments of $0.3 million, offset by an increase in prepaid expenses and other assets of $0.3 million.

Net Cash Used in Financing Activities

There was no cash provided from financing activities for the three months ended March 31, 2022 and 2021, respectively.

Net cash used in operating activities was $0.9 million for the six months ended June 30, 2021.

The net loss was greater than the net cash used in operating activities by $4.6 million, primarily attributable to share-based compensation of $3.4 million and an increase in accounts payable of $1.5 million, offset by an increase in prepaid expense of $0.3 million

Net Cash Provided by Financing Activities

There was no cash provided from financing activities for the six months ended June 30, 2022.

Net cash provided by financing activities was $14.8 million for the six months ended June 30, 2021, which was attributable to the net proceeds from the Company’s IPO.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S.

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S.

generally accepted accounting principles.

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While our significant accounting policies are described in more detail in Note 2, “Summary of significant accounting policies”, we believe the following accounting policies and estimates to be most critical to the preparation of our financial statements.

The Company estimates an annual effective tax rate of 0% as the Company incurred net losses for the three months ended March 31, 2022 resulting in an estimated net loss for both financial statement and tax purposes.

The Company estimates an annual effective tax rate of 0% as the Company incurred net losses for the six months ended June 30, 2022 resulting in an estimated net loss for both financial statement and tax purposes.

Therefore, no current federal or state income tax expense has been recorded in the financial statements.

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These amounts are deferred and expensed in the period the service is provided.

The Company incurred research and development expenses in the amount of $818,888 and $91,908 for the three months ended March 31, 2022 and 2021, respectively.

The Company incurred research and development expenses in the amount of $1,730,580 and $186,981 for the six months ended June 30, 2022 and 2021, respectively.

Share-Based Compensation

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Recent Accounting Pronouncements

The Financial Accounting Standards Board has issued certain accounting pronouncements as of March 31, 2022 that will become effective in subsequent periods;

The Financial Accounting Standards Board has issued certain accounting pronouncements as of June 30, 2022 that will become effective in subsequent periods;

however, we do not believe that any of those pronouncements would have significantly affected our financial accounting measurements or disclosures had they been in effect, or that they will have a significant impact on us at the time they become effective.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis