Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing elsewhere in this Form 10-K. Some of the information
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contained in this discussion and analysis or set forth elsewhere in this Form 10-K, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Form 10-K, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Investors and others should note that we routinely use the Investor Relations section of our website to announce material information to investors and the marketplace. While not all of the information that we post on the Investor Relations section of our website is of a material nature, some information could be deemed to be material. Accordingly, we encourage investors, the media, and others interested in us to review the information that it shares on the Investors section of our website, www.acurxpharma.com.
Overview
Acurx Pharmaceuticals, Inc., (the “Company”), a Delaware corporation, formerly Acurx Pharmaceuticals, LLC (the “Company”) is a 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. Centers for Disease Control and Prevention (“CDC”) and the U.S. Food and Drug Administration (“FDA”). Priority pathogens are those which require new antibiotics to address the worldwide crisis of antimicrobial resistance (“AMR”) as identified by the WHO, CDC and FDA. The CDC estimates that, in the U.S., antibiotic-resistant pathogens infect one individual every 11 seconds and result in one death every 15 minutes. According to the WHO Fact Sheet (November 2023) Antimicrobial Resistance (AMR) is one of the top global public health and development threats. It is estimated that bacterial AMR was directly responsible for 1.27 million global deaths in 2019 and contributed to 4.95 million deaths. Furthermore, the world faces an antibiotics pipeline and access crisis. There is an inadequate research and development pipeline in the face of rising levels of resistance, and urgent need for additional measures to ensure equitable access to new and existing vaccines, diagnostics and medicines.
Our approach is to develop a new class of antibiotic candidates that block the DNA polymerase IIIC (“pol IIIC”). We believe we are developing the first pol IIIC inhibitor to enter clinical trials and have clinically validated the bacterial target by demonstrating the efficacy of our lead antibiotic candidate in a Phase 2a clinical trial. pol IIIC is the primary catalyst for DNA replication of several Gram-positive bacterial cells. Our research and development pipeline includes clinical stage and early stage antibiotic candidates that target Gram-positive bacteria for oral and/or parenteral treatment of infections caused by Clostridium difficile (“C. difficile”), Enterococcus (including vancomycin-resistant strains (“VRE”)), Staphylococcus (including methicillin-resistant strains), and Streptococcus (including antibiotic resistant strains).
Pol IIIC is required for the replication of DNA in certain Gram-positive bacterial species. By blocking this enzyme, our antibiotic candidates are believed to be bactericidal and inhibit proliferation of several common Gram-positive bacterial pathogens, including both sensitive and resistant C. difficile , methicillin-resistant Staphylococcus aureus (“MRSA”), vancomycin-resistant Enterococcus, penicillin-resistant Streptococcus pneumonia (“PRSP”) and other resistant bacteria.
We intend to “de-risk” this new class of antibiotics through our drug development activities and potentially partner with a fully-integrated pharmaceutical company for late-stage clinical trials and commercialization.
Our lead antibiotic candidate, ibezapolstat (formerly named ACX- 362E), has a novel mechanism of action that targets the pol IIIC enzyme, a previously unexploited scientific target. Phase 2a clinical efficacy of our lead antibiotic validate the pol IIIC bacterial target. On December 3, 2021, we commenced enrollment in a Phase 2b 64-patient, randomized (1-to-1), non-inferiority, double-blind, trial of oral ibezapolstat compared to oral vancomycin, a standard of care to treat C. difficile infections (“CDI”).
Prior to that, we completed our Phase 2a clinical trial of ibezapolstat to treat patients with CDI and reported the top-line data in November 2020. The Phase 2a clinical trial was terminated early based upon the recommendation of our Scientific Advisory Board (the “SAB”). The SAB reviewed the study data presented by management, including adverse
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events and efficacy outcomes, and discussed its clinical impressions. The SAB unanimously supported the early termination of the Phase 2a trial after 10 patients were enrolled in the trial instead of 20 patients as originally planned. The early termination was further based on the evidence of meeting the treatment goals of eliminating the infection with an acceptable adverse event profile.
The SAB noted that 10 out of 10 patients enrolled in the Phase 2a trial reached the Clinical Cure endpoint, defined in the study protocol as the resolution of diarrhea in the 24-hour period immediately before the end of treatment that is maintained for 48 hours after end of treatment. Such cure was sustained, meaning that the patients showed no sign of infection recurrence, for 30 days thereafter. This constitutes a 100% response rate for the primary and secondary endpoints of the trial. All 10 patients enrolled in the Phase 2a trial met the study’s primary and secondary efficacy endpoints, namely, Clinical Cure at end of treatment and Sustained Clinical Cure of no recurrence of CDI at the 28-day follow-up visit. No treatment-related serious adverse events (“SAEs”) were reported by the investigators who enrolled patients in the trial. We believe these results represent the first-ever clinical data showing pol IIIC has potential as a therapeutically relevant antibacterial target. Our Phase 2b clinical trial commenced enrollment on December 3, 2021.
Currently available antibiotics used to treat CDI infections utilize other mechanisms of action. We believe ibezapolstat is the first antibiotic candidate to work by blocking the DNA pol IIIC enzyme in C. difficile . This enzyme is necessary for replication of the DNA of certain Gram-positive bacteria, like C. difficile .
We also have an early stage pipeline of antibiotic product candidates with the same previously unexploited mechanism of action which has established proof of concept in animal studies. This pipeline includes ACX-375C, a potential oral and parenteral treatment targeting Gram-positive bacteria, including MRSA, VRE and PRSP.
As of December 31, 2024, we had cash of approximately $3.7 million.
Recent Developments
2025 March Registered Direct Offering
On March 6, 2025, we, entered into a Securities Purchase Agreement (the “March Purchase Agreement”) with an institutional investor named therein (the “March Investor”), pursuant to which we agreed to issue and sell, in a registered direct offering by us directly to the March Investor (the “March Registered Offering”) (i) 2,150,000 shares of common stock, par value $0.001 per share (the “Common Stock”), at a purchase price of $0.40 per share and (ii) pre-funded common stock purchase warrants (the “March Pre-Funded Warrants”) to purchase up to 595,000 shares of Common Stock (the “March Pre-Funded Warrant Shares”) at a purchase price of $0.3999 per March Pre-Funded Warrant for aggregate gross proceeds of approximately $1.1 million, before deducting the placement agent fees and related offering expenses. We intend to use the net proceeds from the offering for working capital and other general corporate purposes.
The March Purchase Agreement contains customary representations and warranties and agreements of us and the March Investor and customary indemnification rights and obligations of the parties. Pursuant to the terms of the March Purchase Agreement, we have agreed to certain restrictions on the issuance and sale of its Common Stock or Common Stock Equivalents (as defined in the March Purchase Agreement) during the 30-day period following the closing of the Registered Offering (the “Lock-up Period”). Additionally, we agreed not to enter into a variable rate transaction for a period of one year following the closing of the March Registered Offering, provided, however, that following the Lock-up Period, (i) we may enter into and/or issue shares of Common Stock in an “at-the-market” facility with Wainwright (as defined below) as sales agent, and (ii) we may enter into, or effect a transaction under, an equity line of credit.
The Shares, the March Pre-Funded Warrants and March Pre-Funded Warrant Shares were offered by us pursuant to a registration statement on Form S-3 (File No. 333-265956), which was filed with the Securities and Exchange Commission (the “Commission”) on July 1, 2022 and was declared effective by the Commission on July 11, 2022 (the “Registration Statement”).
In a concurrent private placement (the “March Private Placement” and together with the March Registered Offering, the “March Offering”), we agreed to issue to the Investor series F common warrants (the “Series F Warrants”) to
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purchase up to an aggregate of 8,235,000 shares of Common Stock. The Series F Warrants will have an exercise price of $0.40 per share and will be exercisable commencing on the effective date of stockholder approval of the issuance of the shares of Common Stock issuable upon exercise of the Series F Warrants (the “Stockholder Approval”) and will expire twenty-four months following the date of Stockholder Approval. We will be obligated to obtain Stockholder Approval at the Company's annual meeting of stockholders on or prior to the date that is 150 days following the closing date (the “Stockholder Meeting Deadline”). If Stockholder Approval is not obtained on or prior to the Stockholder Meeting Deadline, we are required to cause an additional stockholder meeting to be held every 60 days after the Stockholder Meeting Deadline until Stockholder Approval is obtained or the Series F Warrants are no longer outstanding. The Series F Warrants and the shares of our Common Stock issuable upon the exercise of the Series F Warrants are not being registered under the Securities Act of 1933, as amended (the “Securities Act”), were not offered pursuant to the Registration Statement and were offered pursuant to the exemption provided in Section 4(a)(2) under the Securities Act, and Rule 506(b) promulgated thereunder.
The March Offering closed on March 10, 2025.
Nasdaq Minimum Bid Price Requirement
On February 24, 2025, we received a letter from The Nasdaq Stock Market notifying us that for the preceding 31 consecutive business days our common stock did not maintain a minimum closing bid price of $1.00 per share as required by Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”). The notice has no immediate effect on the listing or trading of our common stock, and the common stock will continue to trade on The Nasdaq Capital Market under the symbol “ACXP” at this time.
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have a grace period of 180 calendar days, or until August 25, 2025, to regain compliance with Nasdaq Listing Rule 5550(a)(2). Compliance can be achieved automatically and without further action if the closing bid price of our common stock is at or above $1.00 for a minimum of 10 consecutive business days at any time during the 180-day compliance period, in which case Nasdaq will notify us of our compliance and the matter will be closed.
If, however, we do not achieve compliance with the Minimum Bid Price Requirement by August 25, 2025, we may be eligible for additional time to comply. In order to be eligible for such additional time, we will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the Minimum Bid Price Requirement, and must notify Nasdaq in writing of our intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary. However, if it appears to Nasdaq that we will not be able to cure the deficiency, or if we are otherwise not eligible, Nasdaq will provide notice that our common stock will be subject to delisting. We would then be entitled to appeal that determination to a Nasdaq hearings panel.
We intend to actively monitor the bid price of our common stock and will consider available options to regain compliance with the Minimum Bid Price Requirement. However, there can be no assurance that we will be able to regain compliance with the Minimum Bid Price Requirement or that Nasdaq will grant us a further extension of time to regain compliance, if applicable.
2025 January Registered Direct Offering
On January 6, 2025, we entered into a Securities Purchase Agreement (the “January Purchase Agreement”) with certain institutional investors named therein (the “January Investors”), and with each of David P. Luci, our President and Chief Executive Officer, Robert J. DeLuccia, our Executive Chairman, Carl V. Sailer, Jack H. Dean, James Donohue, and Joseph Scodari, each a member of our board of directors (collectively, the “January Affiliate Investors”), pursuant to which we agreed to issue and sell, in a registered direct offering by us directly to the January Investors and to the January Affiliate Investors (the “January Registered Offering”), an aggregate of 2,463,058 shares of common stock (consisting of an aggregate of 2,295,570 shares purchased by the January Investors and an aggregate of 167,488 shares purchased by the January Affiliate Investors), at an offering price of $1.015 per share, for aggregate gross proceeds from
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the January Registered Offering of approximately $2.5 million, before deducting the placement agent fees and related offering expenses.
The January Purchase Agreement contains customary representations and warranties and agreements of the Company and the Investors (and of the January Affiliate Investors) and customary indemnification rights and obligations of the parties. Pursuant to the terms of the January Purchase Agreement, we agreed to certain restrictions on the issuance and sale of its Common Stock or Common Stock Equivalents (as defined in the January Purchase Agreement) during the 30-day period following the closing of the January Registered Offering. Additionally, we agreed not to enter into a variable rate transaction for a period of one year following the closing of the January Registered Offering.
The shares were offered by us pursuant to the Registration Statement, which was filed with the Commission on July 1, 2022 and was declared effective by the Commission on July 11, 2022.
In a concurrent private placement (the “January Private Placement” and together with the January Registered Offering, the “January Offering”), we agreed to issue to the January Investors and to the January Affiliate Investors Series E warrants to purchase up to an aggregate of 2,463,058 shares of common stock (consisting of Series E warrants to purchase up to 2,295,570 shares of common stock issued to the January Investors and Series E warrants to purchase up to 167,488 shares of common stock issued to the January Affiliate Investors) at an exercise price of $0.90 per share. Each Series E warrant became immediately exercisable upon the issuance date and will expire five years from the initial exercise date. The Series E warrants and the shares of our common stock issuable upon the exercise of the Series E warrants were offered pursuant to the exemption from registration provided in Section 4(a)(2) under the Securities Act, and Rule 506(b) promulgated thereunder. The January Offering closed on January 7, 2025. As of the date of this prospectus supplement, none of the Series E warrants have been exercised and all of such Series E warrants remain outstanding.
The January Offering closed on January 7, 2025.
Ibezapolstat Phase 2 Clinical Results
On November 2, 2023, we announced top-line results from the Phase 2b segment of our Phase 2 clinical trial of ibezapolstat in patients with CDI. In the Phase 2b segment of the clinical trial, the observed Clinical Cure rate in the per protocol population was 15 of 16 patients (94%) in the ibezapolstat arm and 14 out of 14 patients (100%) in the vancomycin arm, respectively. In the Phase 2a segment of the clinical trial that evaluated ibezapolstat in patients with CDI, the observed Clinical Cure rate in the per protocol population was 10 out of 10 patients (100%). In a post hoc analysis conducted with the data available at the time of discontinuation of the trial, the overall observed Clinical Cure rate for ibezapolstat in the combined Phase 2a and Phase 2b segments of the clinical trial in patients with CDI was 96% (25 out of 26 patients), based on 10 out of 10 patients (100%) in the Phase 2a segment in the per protocol population, plus 15 out of 16 (94%) patients in the Phase 2b segment We believe that, based on the post hoc pooled Phase 2 ibezapolstat Clinical Cure rate of 96% and the historical vancomycin cure rate of approximately 81% (Vancocin® Prescribing Information, January 2021), Phase 3 trials conducted in accordance with the applicable FDA Guidance for Industry (October 2022) would be able to demonstrate the non-inferiority of ibezapolstat to vancomycin, though there can be no assurance that these early-stage, Phase 2 data will predict results in Phase 3 clinical trials.
Further analysis of the secondary and exploratory endpoints from the Phase 2b segment showed the following:
● 15 of 15 (100%) of the ibezapolstat-treated patients who achieved Clinical Cure (“CC”) at end of treatment (“EOT”) remained free of C. difficile Infection (“CDI”) recurrence through one month after EOT, for a Sustained Clinical Cure (“SCC”) rate of 100%. In the Phase 2a segment, 10 of 10 (100%) of the ibezapolstat-treated patients who had achieved CC at EOT remained free of CDI recurrence through one month after EOT, for an SCC rate of 100%;
● 2 of 14 patients treated with standard of care, vancomycin, experienced recurrent infection within one month after EOT for a SCC of 86%;
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For extended clinical cure, data also showed that 100% (5 of 5) of ibezapolstat-treated patients who agreed to observation for up to three months following CC at EOT experienced no recurrence of infection;
● Additional microbiology and microbiome analysis of patients in the Phase 2b segment data showed that ibezapolstat outperformed vancomycin showing eradication of fecal C. difficile at Day 3 of treatment in 15 of 16 treated patients (94%), versus vancomycin which had eradication of C. difficile in 10 of 14 treated patients (71%); and
● Ibezapolstat, but not vancomycin, consistently preserved and allowed regrowth of key gut bacterial species believed to confer health benefits including to prevent recurrence of CDI.
Ibezapolstat was well-tolerated in the Phase 2 clinical trial. In the Phase 2b segment, there were three patients each experiencing one mild adverse event assessed by the blinded investigator to be drug-related. All three events were gastrointestinal in nature and resolved without treatment. In the Phase 2a segment, there were seven adverse events reported in four patients, with only one (nausea) likely related to ibezapolstat. One severe adverse event occurred (an exacerbation of a migraine headache) but was considered to be unrelated to ibezapolstat. There were no drug-related treatment withdrawals or no drug-related serious adverse events, or other safety findings of concern in either segment of the Phase 2 clinical trial.
We convened an End-of-Phase 2 Meeting with the FDA on April 17, 2024 and announced on May 15, 2024 that we had a successful meeting, including confirmation of Phase 3 readiness for ibezapolstat for the treatment of C. difficile infection. Agreement with the FDA was reached on key elements to move forward with our international Phase 3 clinical trial program. Agreement was also reached with the FDA on the complete non-clinical and clinical development plan for filing of a New Drug Application (“NDA”) for marketing approval. Planning continues to advance ibezapolstat into international Phase 3 clinical trials for treatment of C. difficile infection (“CDI”).
In July 2024, we announced that a new patent has been granted by the United States Patent and Trademark Office (“USPTO”). This patent relates to ibezapolstat and its use to treat C. difficile infection while reducing the recurrence of the infection, as well as improving the health of the gut microbiome. This is the latest in the series of granted patents and pending patent applications that we have filed to protect our proprietary technologies in the field of antimicrobials.
Following our successful End-of-Phase 2 Meeting with the FDA in August 2024, which confirmed our Phase 3 clinical trial readiness, and per the FDA regulatory requirements, in August 2024, we submitted our request to the FDA for a meeting to review our manufacturing processes and specifications for drug substance and final project and packaging (typically referred to as Chemistry, Manufacturing and Controls (“CMC”)) for our Phase 3 clinical trials. In December 2024, we received written positive feedback from FDA regarding acceptability of our CMC plan and data package proposed to support the Phase 3 clinical program. In January 2025, we received positive written responses from the EMA under its Scientific Advice Procedure that the clinical, non-clinical and CMC information package submitted supports advancement of the ibezapolstat Phase 3 program. The responses also included guidance on ibezapolstat’s regulatory pathway for a Marketing Authorization Application in the EU for ibezapolstat in CDI.
2023 At-the-Market Offering
On November 15, 2023, we entered into a Sales Agreement and established the “ATM Program”, pursuant to which we may offer and sell, from time to time through A.G.P/Alliance Global Partners, as sales agent, shares of its common stock having an aggregate offering price of up to $17.0 million. Under the Sales Agreement, the sales agent is entitled to compensation of 3% of the gross offering proceeds of all Shares sold through it pursuant to the Sales Agreement.
As of the year ended December 31, 2024, we sold a total of 2,830,328 shares of its common stock under the ATM Program at a weighted-average price of $3.26 per share, raising $9.2 million of gross proceeds and net proceeds of $8.8 million, after deducting commissions to the sales agents and other ATM Program related expenses. There remained approximately $7.8 million available for future sales of shares of common stock under the Sales Agreement. As of January 6, 2025, we suspended the ATM Program.
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Components of our Results of Operations
Revenue
We have not generated any revenue since our inception and do not expect to generate any revenue from the sale of products in the near future, if at all.
Research and Development Expenses
To date, our research and development expenses have related primarily to development of ibezapolstat, preclinical studies and other preclinical activities related to our portfolio. Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.
Research and development expenses include:
● external research and development expenses incurred under agreements with contract research organizations, or CROs, and consultants to conduct our preclinical, toxicology and other preclinical studies;
● laboratory supplies;
● costs related to manufacturing product candidates, including fees paid to third-party manufacturers and raw material suppliers;
● license fees and research funding; and
● facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent, maintenance of facilities, insurance, equipment and other supplies.
Clinical trial costs are a significant component of research and development expenses and include costs associated with third-party contractors. We outsource a substantial portion of our clinical trial activities, utilizing external entities such as CROs, independent clinical investigators and other third-party service providers to assist us with the execution of our clinical trials.
We plan to substantially increase our research and development expenses for the foreseeable future as we continue the development of our product candidates and seek to discover and develop new product candidates. Due to the inherently unpredictable nature of preclinical and clinical development, we cannot determine with certainty the timing of the initiation, duration or costs of future clinical trials and preclinical studies of product candidates. Clinical and preclinical development timelines, the probability of success and the amount of development costs can differ materially from expectations. We anticipate that we will make determinations as to which product candidates and development programs to pursue and how much funding to direct to each product candidate or program on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments and our ongoing assessments as to each product candidate’s commercial potential. In addition, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.
Our future clinical development costs may vary significantly based on factors such as:
● per-patient trial costs;
● the number of trials required for regulatory approval;
● the number of sites included in the trials;
● the countries in which the trials are conducted;
● the length of time required to enroll eligible patients;
● the number of patients that participate in the trials;
● the number of doses that patients receive;
● the drop-out or discontinuation rates of patients;
● potential additional safety monitoring requested by regulatory agencies;
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● the duration of patient participation in the trials and follow-up;
● the phase of development of the product candidate; and
● the efficacy and safety profile of the product candidate.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and employee-related costs, including stock-based compensation, for personnel in our executive, finance and other administrative functions. 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, 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
Years Ended December 31, 2024 and 2023
The following table summarizes our results of operations for the years ended December 31, 2024 and 2023:
Years Ended
December 31,
Percentage
2024
2023
Change
(in thousands)
OPERATING EXPENSES:
Research and Development
$
5,404
$
6,044
(11)
%
General and Administrative
8,699
8,534
2
%
TOTAL OPERATING EXPENSES
14,103
14,578
(3)
%
Net Loss
$
(14,103)
$
(14,578)
(3)
%
Research and Development Expenses. Research and development expenses were $5.4 million for the year ended December 31, 2024, and $6.0 million for the year ended December 31, 2023, a decrease of $0.6 million due to decrease in consulting fees of $1.6 million, offset by increase in manufacturing cost of $1.0 million.
General and Administrative Expenses. General and administrative expenses were $8.7 million for the year ended December 31, 2024, and $8.5 million for the year ended December 31, 2023. General and administrative expenses increased by approximately $0.2 million primarily due to $0.3 million increase in legal fees, and $0.7 million increase in professional fees, offset by $0.6 million decrease in share based compensation costs and $0.2 million decrease in insurance costs.
Net Loss. Net loss was $14.1 million for the year ended December 31, 2024, compared to $14.6 million for the year ended December 31, 2023, a decrease of $0.5 million, primarily 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 $67.3 million as of December 31, 2024. We have funded our operations primarily from equity issuances. We received net cash proceeds of approximately $12.9 million from equity financings closed between March 2018 and October 2020. On June 29, 2021, we completed our IPO resulting in net proceeds of approximately $14.8 million after deducting underwriter discounts of $1.4 million and offering costs of approximately $1.1 million. On July 27, 2022, we completed a registered direct offering and concurrent private placement resulting in net proceeds of approximately $3.7 million after deducting the placement agents commission of $0.3 million and offering costs of $0.2 million. On May 18,
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2023, we completed a registered direct offering and a concurrent private placement resulting proceeds of approximately $3.5 million after deducting the placement agents fee of $0.2 million and offering costs of $0.2 million. On November 15, 2023, we entered into a Sales Agreement and established the ATM Program, pursuant to which we may offer and sell, from time to time, through A.G.P./Alliance Global Partners, as sales agent, shares of our common stock having an aggregate offering price of up to $17.0 million. Under the ATM Program, we raised net proceeds of approximately $8.8 million after deducting sales agent commission and other related expenses of $0.4 million.
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 December 31, 2024, we had working capital of $0.6 million, consisting primarily of $3.7 million of cash, $0.1 million of other receivable and prepaid expenses, offset by $3.2 million of accounts payable and accrued expenses.
Sources of Liquidity
To date, we have financed our operations principally through private placements of equity issuances, the IPO, registered direct offerings and the ATM Program.
Class A Membership Financings
We have funded our operations primarily from equity issuances. We received net cash proceeds of approximately $12.9 million from equity financings closed between March 2018 and October 2020 starting with investments from the co-founders. All of our equity financings were consummated at a price ranging from $1.00 per Class A Membership Interest (March 2018) to $3.25 per Class A Membership Interest (July 2020 and October 2020). Warrant coverage was provided in all but our most-recent financing and the warrant coverage in our early-stage financings ranged from 25% warrant coverage to 50% warrant coverage, in each case, with a conversion price equal to the issue price in each offering.
Paycheck Protection Program Loan
In May 2020, we received a PPP Loan under the CARES ACT, as administered by the SBA in the amount of $66,503. We did not provide any collateral or guarantees in connection with the PPP Loan, nor did we pay any facility charge to obtain the PPP Loan. The PPP Loan carried an annual interest rate of 0.98% and was scheduled to mature two (2) years from issuance. On April 13, 2021, the SBA authorized the full forgiveness of the PPP Loan. Upon forgiveness of the PPP Loan, we reduced the liability and recorded a gain on the forgiveness of the PPP Loan in the statement of operations.
Initial Public Offering
In June 2021, we completed the IPO and issued and sold an aggregate 2,875,000 shares of common stock, which included 375,000 shares of our common stock issued pursuant to the underwriters’ option to purchase additional shares, at a public offering price of $6.00 per share, for net cash proceeds of $14.8 million after deducting underwriting discounts and commissions and other offering costs.
Registered Direct Offerings
In July 2022, we completed a registered direct offering and a concurrent private placement, issuing 1,159,211 shares of common stock and 130,769 pre-funded warrants and Series A warrants to purchase 1,289,980 shares of common stock and Series B warrants to purchase 1,289,980 shares of common stock for gross proceeds of approximately $4.2 million.
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On May 18, 2023, we completed a registered direct offering and a concurrent private placement, issuing 601,851 shares of common stock, 731,482 pre-funded warrants, Series C warrants to purchase 1,333,333 shares of common stock and Series D warrants to purchase 1,333,333 shares of common stock for gross proceeds of approximately $4.0 million.
On January 7, 2025, we completed a registered direct offering and a concurrent private placement, issuing 2,463,058 shares of common stock and Series E warrants to purchase 2,463,058 shares of common stock for gross proceeds of approximately $2.5 million.
On March 10, 2025, we completed a registered direct offering and a concurrent private placement, issuing 2,150,000 share of common stock, 595,000 pre-funded warrants and Series F warrants to purchase 8,235,000 shares of common stock for gross proceeds of approximately $1.1 million.
2023 At-the-Market Offering
On November 15, 2023, we entered into a Sales Agreement and established the ATM Program, pursuant to which we may offer and sell, from time to time through A.G.P./Alliance Global Partners, as sales agent, shares of our common stock having an aggregate offering price of up to $17.0 million. Under the sales agreement, the sales agent is entitled to compensation of 3% of the gross offering proceeds of all Shares sold through it pursuant to the Sales Agreement.
As of the year ended December 31, 2024, we sold a total of 2,830,328 shares of its common stock under the ATM Program at a weighted-average price of $3.26 per share, raising $9.2 million of gross proceeds and net proceeds of $8.8 million, after deducting commissions to the sales agents and other ATM Program related expenses. There remained approximately $7.8 million available for future sales of shares of common stock under the Sales Agreement. On January 6, 2025, we suspended the ATM program.
Cash Flows
The following table sets forth a summary of the net cash flow activity for the years ended December 31, 2024 and 2023:
Years Ended
December 31,
2024
2023
(in thousands)
Net cash (used in)/provided by:
Operating activities
$
(10,383)
$
(9,801)
Financing activities
6,616
8,163
Net decrease in cash
$
(3,767)
$
(1,638)
Operating Activities
Net cash used in operating activities was $10.4 million for the year ended December 31, 2024, primarily attributable to the net loss of $14.1 million, offset by share-based compensation of $2.6 million, share based payments to vendors of $0.8 million and an increase of $0.2 million in accounts payable and accrued expenses.
Net cash used in operating activities was $9.8 million for the year ended December 31, 2023, primarily attributable to the net loss of $14.6 million, offset by share-based compensation of $3.2 million, share-based payments to vendors of $0.6 million and an increase of $1.0 million in accounts payable and accrued expenses.
Investing Activities
Net cash provided by investing activities were none for the years ended December 31, 2024 and 2023.
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Financing Activities
Net cash provided from financing activities was $6.6 million for the year ended December 31, 2024, which was attributable to the ATM Program of $6.4 million and $0.2 million of proceeds from the exercise of warrants.
Net cash provided by financing activities was $8.2 million for the year ended December 31, 2023, which was attributable to the net proceeds from the 2023 registered direct offering of $3.5 million, net proceeds from the ATM Program of $2.4 million and $2.2 million of proceeds from the exercise of warrants.
Funding Requirements
We believe that our existing cash will not be sufficient to meet our anticipated cash requirements for at least 12 months from the issuance of our financial statements for the year ended December 31, 2024. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect.
Our future capital requirements will depend on many factors, including:
● the timing, progress, and results of our ongoing and planned clinical trials of our product candidates;
● our ability to manufacture sufficient clinical supply of our product candidates and the costs thereof;
● discussions with regulatory agencies regarding the design and conduct of our clinical trials and the costs, timing and outcome of regulatory review of our product candidates;
● the cost and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval;
● the costs of any other product candidates or technologies we pursue;
● our ability to establish and maintain strategic partnerships, licensing or other arrangements and the financial terms of such agreements;
● the revenue, if any, received from commercial sales of any product candidates for which we receive marketing approval; and
● the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims.
Until such time, if ever, as we can generate substantial product revenues to support our capital requirements, we expect to finance our cash needs through a combination of public or private equity offerings, debt financings, collaborations and licensing arrangements or other capital sources. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, or other similar arrangements with third parties, we may need to relinquish valuable rights to our product candidates, future revenue streams or research programs or may have to grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. If we are unable to raise additional funds through equity or debt financings as and when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.
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Recent Accounting Pronouncements
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures which requires public entities to disclose significant segment expenses regularly provided to the chief operating decision-maker. Public entities with a single reporting segment have to provide all disclosures required by ASC 280, including the significant segment expense disclosures. For public business entities, the guidance is effective for annual periods beginning after December 15, 2024. The adoption of ASU 2023-07 did not have a significant impact on our financial accounting measurements or disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which expands the disclosures required for income taxes. This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendment should be applied on a prospective basis while retrospective application is permitted. The Company is currently evaluating the effect of this pronouncement on its disclosures.
Critical Accounting Policies and Significant Judgments and Estimates
Use of Estimates
The preparation of financial statements in conformity 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 expenses during the reporting period. Actual results could differ from those estimates.
Research and Development
We expense research and development costs as incurred. At times, we may make cash advances for future research and development services. These amounts are deferred and expensed in the period the services are provided.
Costs for certain research and development activities, such as the provision of services for clinical trial activity, are estimated based on an evaluation of the progress to completion of specific tasks which may use data such as subject enrollment, clinical site activations or information provided to us by our vendors with respect to their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the financial statements as prepaid or accrued research and development expense, as the case may be. The estimates are adjusted to reflect the best information available at the time of the financial statement issuance. Although we do not expect its estimates to be materially different from amounts actually incurred, our estimate of the status and timing of services performed relative to the actual status and timing of services performed may vary.
Share-Based Compensation
We account for the cost of services performed by employees, officers and directors received in exchange for an award of Company membership interests, common stock or stock options, based on the grant-date fair value of the award. We recognize compensation expense based on the requisite service period.
Compensation expense associated with stock option awards is recognized over the requisite service period based on the fair value of the option at the grant date determined based on the Black-Scholes option pricing model. Option valuation models require the input of highly subjective assumptions including the expected price volatility. Our employee stock options have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value computation using the Black-Scholes option pricing model. Because there is no public market for our stock options and very little historical experience with our stock, similar public companies were used for the comparison of volatility and the dividend yield. The risk-free rate of return was derived from U.S. Treasury notes with comparable maturities. We will continue to analyze the expected stock price volatility and will adjust our Black-Scholes option pricing assumptions as appropriate. Any changes in the foregoing
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Black-Scholes assumptions, or if we were to elect to utilize an alternative method for valuing stock options granted to employees, officers and directors, could potentially impact our stock-based compensation expense and our results of operations.
Share-Based Payments to Vendors
We account for the cost of services performed by vendors in exchange for an award of our membership interests, common stock, or stock options, based on the grant-date fair value of the award or the fair value of the services rendered; whichever is more readily determinable. We also use Black-Scholes option pricing model for the purpose of estimating the fair value of options and warrants. Changes in our Black-Scholes assumptions, or if we were to utilize an alternative method for valuing options or warrants issued to our vendors, could impact our expense and our results of operations.