What changed in this filing

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Item 1. Financial Statements

2021-11-10 compared with 2021-08-11 · 285 added, 188 removed, 408 unchanged (54% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

September 30,

Current assets:

13 unchanged sentences

8,639,000  

Right of use asset

21 unchanged sentences

443,893  

Noncurrent operating lease liability

8 unchanged sentences

1,000,000,000 shares authorized;

101,903,979 and 64,015,441 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

101,903,979 and 64,015,441 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

101,904  

16 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Operating expenses:

Research and development

General and administrative

Loss from operations

Other income:

Interest income

Loss from operations before income tax benefit

Income tax benefit

Deemed dividend arising from warrant exchange

Net loss attributable to common stockholders

Per share information:

Net loss per share of common stock, basic and diluted

Weighted average shares outstanding, basic and diluted

See accompanying notes to unaudited interim consolidated financial statements.

Diffusion Pharmaceuticals Inc.

Consolidated Statement of Changes in Stockholders' Equity

Three and Six Months Ended June 30, 2021

Stockholders' Equity

Stockholders'

Balance at April 1, 2021

$ 2,105,815  

2 unchanged sentences

$ 6,845,203  

Intangible asset impairment charge  

8,639,000  

Stock-based compensation expense

8,639,000  

General and administrative

1,930,082  

2,112,375  

( 3,777,973 )

Balance at June 30, 2021

5,510,365  

3 unchanged sentences

67,302  

Stockholders' Equity

Stockholders'

Balance at January 1, 2021

( 105,909,384

Sale of common stock and warrants, net of issuance costs

Issuance of common stock upon exercise of warrants

Stock-based compensation expense

Balance at June 30, 2021

( 114,331,276

See accompanying notes to unaudited interim consolidated financial statements.

Diffusion Pharmaceuticals Inc.

Consolidated Statement of Changes in Stockholders' Equity

Three and Six Months Ended June 30, 2020

Stockholders' Equity

Stockholders'

Balance at April 1, 2020

78,233  

Loss from operations

12,693,997  

2 unchanged sentences

11,887,876  

Sale of common stock and warrants, net of issuance costs

Other income:

Interest income

( 50,710 )  

1 unchanged sentence

( 146,354 )  

Loss from operations before income tax benefit

( 12,643,287 )  

Issuance of common stock upon exercise of warrants

( 5,244,887 )  

( 21,065,179 )  

( 11,798,630 )

Income tax benefit

( 443,893 )  

( 805,676 )  

Stock-based compensation expense

( 443,893 )  

( 1,675,381 )

$ ( 12,199,394 )  

$ ( 4,439,211 )  

$ ( 20,621,286 )  

$ ( 10,123,249 )

Balance at June 30, 2020

Deemed dividend arising from warrant exchange

( 1,950,378 )

Net loss attributable to common stockholders

$ ( 12,199,394 )  

1 unchanged sentence

$ ( 20,621,286 )  

$ ( 12,073,627 )

Per share information:

Net loss per share of common stock, basic and diluted

$ ( 0.12 )  

$ ( 0.07 )  

$ ( 0.22 )  

Weighted average shares outstanding, basic and diluted

101,903,979  

64,011,342  

98,810,420  

50,216,239  

See accompanying notes to unaudited interim consolidated financial statements.

Diffusion Pharmaceuticals Inc.

Consolidated Statement of Changes in Stockholders' Equity

Three and Nine Months Ended September 30, 2020

Stockholders' Equity

Stockholders'

Balance at July 1, 2020

Issuance of common stock upon exercise of warrants

Stock-based compensation expense

Balance at September 30, 2020

( 101,847,327

Stockholders' Equity

Stockholders'

Balance at January 1, 2020

2 unchanged sentences

Stock-based compensation expense

June 30, 2020

September 30, 2020

( 101,847,327

See accompanying notes to unaudited interim consolidated financial statements.

Diffusion Pharmaceuticals Inc.

Consolidated Statement of Changes in Stockholders' Equity

Three and Nine Months Ended September 30, 2021

Stockholders' Equity

Stockholders'

Balance at July 1, 2021

( 114,331,276

Stock-based compensation expense

Balance at September 30, 2021

( 126,530,670

Stockholders' Equity

Stockholders'

Balance at January 1, 2021

( 105,909,384

Sale of common stock and warrants, net of issuance costs

Issuance of common stock upon exercise of warrants

Stock-based compensation expense

Balance at September 30, 2021

( 126,530,670

See accompanying notes to unaudited interim consolidated financial statements.

Diffusion Pharmaceuticals Inc.

Consolidated Statements of Cash Flows

Six Months Ended June 30,

Nine Months Ended September 30,

Operating activities:

2 unchanged sentences

Deferred income taxes

Intangible asset impairment charge

Changes in operating assets and liabilities:

10 unchanged sentences

Cash and cash equivalents at end of period

Supplemental disclosure of non-cash investing and financing activities:

Offering costs in accounts payable

See accompanying notes to unaudited interim consolidated financial statements.

2 unchanged sentences

Organization and Description of Business

Diffusion Pharmaceuticals Inc., a Delaware corporation, is an innovative biopharmaceutical company developing novel therapies that enhance the body’s ability to deliver oxygen to the areas where it is needed most.

Diffusion Pharmaceuticals Inc., a Delaware corporation, is a biopharmaceutical company developing novel therapies that enhance the body’s ability to deliver oxygen to the areas where it is needed most.

The Company’s lead product candidate, TSC, is being developed to enhance the diffusion of oxygen to tissues with low oxygen levels, also known as hypoxia, a serious complication of many of medicine’s most intractable and difficult-to-treat conditions.

In addition to TSC, the Company's product candidate DFN- 529, a novel, allosteric PI3K/Akt/mTOR pathway inhibitor, is in early-stage development.

The Company has not generated any revenues from product sales and has funded operations primarily from the proceeds of public and private offerings of equity, convertible debt and convertible preferred stock.

9 unchanged sentences

The length of time and cost of developing and commercializing these product candidates and/or failure of them at any stage of the drug approval process will materially affect the Company’s financial condition and future operations.

The Company expects that its existing cash and cash equivalents as of June 30, 2021 will enable it to fund its operating expenses and capital expenditure requirements, including expected costs related to the planned Oxygenation Trials and the Planned Hypoxia-related Indication Trial(s), through 2023.

The Company expects that its existing cash and cash equivalents as of September 

30, 2021 will enable it to fund its operating expenses and capital expenditure requirements through 2023.

Basis of Presentation and Summary of Significant Accounting Policies

5 unchanged sentences

In the opinion of management, the accompanying unaudited interim consolidated financial statements of the Company include all normal and recurring adjustments (which consist primarily of accruals, estimates and assumptions that impact the unaudited interim consolidated financial statements) considered necessary to present fairly the Company’s financial position as of 

30, 2021, results of operations for the three and six months ended June 

30, 2021 and 2020 and cash flows for the six months ended June 

September 

30, 2021, results of operations for the three and nine months ended September 

30, 2021 and 2020 and cash flows for the nine months ended September 

30, 2021 and 2020.

Operating results for the six months ended 

Operating results for the nine months ended 

September 

30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 

4 unchanged sentences

The preparation of unaudited interim consolidated 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 assets and liabilities at the date the financial statements and reported amounts of expense during the reporting period.

The COVID- 19 pandemic had no material impact on the Company's estimates and assumptions used in the preparation of the unaudited interim consolidated financial statements for the three and six months ended June 

However, the full extent to which the ongoing COVID- 19 pandemic will directly or indirectly impact the Company's business, results of operations and financial condition, including sales, expenses, reserves and allowances, clinical trials, research and development costs and employee-related amounts, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID- 19, governmental and business responses to the pandemic, further actions taken to contain or treat COVID- 19, the ongoing economic impact on local, regional, national and international markets, and the speed of the anticipated economic recovery.

5 unchanged sentences

Intangible Asset

The Company's DFN- 529 (formerly RES- 529 ) intangible asset is assessed for impairment annually on October 1 of the Company’s fiscal year or more frequently if impairment indicators exist.

There was no impairment to the Company’s DFN- 529 intangible asset recognized during the three or six months ended June 

30, 2021 and 2020.

In the third quarter of 2021, the Board of Directors decided to no longer dedicate financial resources to the Company's DFN- 529 (formerly RES- 529 ) intangible asset and any future internal development efforts were abandoned.

In connection with this decision, the Company concluded that DFN- 529 was impaired in its entirety and as such, the Company recognized a non-cash impairment charge of $ 8.6 million during the third quarter of 2021.

The abandonment also resulted in an income tax benefit of $ 0.4 million due to the tax effect of the reduction in the deferred tax liability associated with the asset.

DIFFUSION PHARMACEUTICALS INC.

5 unchanged sentences

The following potentially dilutive securities outstanding have been excluded from the computation of diluted weighted average shares outstanding, as they would be anti-dilutive as of the dates indicated below:

As of June 30,

As of September 30,

Common stock warrants

19 unchanged sentences

Accrued expenses and other current liabilities consisted of the following as of the dates indicated below:

June 30, 2021

September 30, 2021

December 31, 2020

Accrued payroll and payroll related expenses

773,917  

653,899  

Accrued professional fees

59,126  

31,809  

Accrued clinical studies expenses

1,081,453  

1,055,398  

Other accrued expenses

88,485  

35,364  

$ 2,002,981  

$ 1,776,470  

DIFFUSION PHARMACEUTICALS INC.

2 unchanged sentences

February 2021 Common Stock Offering

In February 2021, the Company completed the February 2021 Offering in which it offered and sold 33,658,538 shares of its common stock in an underwritten, public offering for a purchase price to the public of $ 1.025 per share, inclusive of shares offered and sold pursuant to the exercise-in-full by the underwriter of its 30 -day option to purchase additional shares.

3 unchanged sentences

Common Stock Warrants

As of June 

As of September 

30, 2021, the Company had the following warrants outstanding to acquire shares of its common stock:

11 unchanged sentences

Common stock warrants issued related to the May 2020 Offering

May 2025

Common stock warrants issued related to May 2020 Investor Warrant Exercise

2 unchanged sentences

February 2026

During the six months ended June 30, 2021, 53,570 warrants expired and 4,230,000 warrants were exercised for aggregate proceeds of approximately $ 2.2 million.

During the nine months ended September 

30, 2021, 53,570 warrants expired and 4,230,000 warrants were exercised for aggregate proceeds of approximately $ 2.2 million.

Stock-Based Compensation

2 unchanged sentences

Accordingly, 2,560,618 shares were added to the reserve as of January 1, 2021, which shares may be issued in connection with the grant of stock-based awards, including stock options, restricted stock, restricted stock units, stock appreciation rights and other types of awards as deemed appropriate, in each case, in accordance with the terms of the 2015 Equity Plan.

As of June 30, 2021, there were 1,181,629 shares available for future issuance under the 2015 Equity Plan.

As of September 

30, 2021, there were 407,333 shares available for future issuance under the 2015 Equity Plan.

DIFFUSION PHARMACEUTICALS INC.

2 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Research and development

13 unchanged sentences

$ 584,297  

The following table summarizes the activity related to all stock option grants for the six months ended June 

The following table summarizes the activity related to all stock option grants for the nine months ended September 

exercise price

6 unchanged sentences

( 172,904 )  

Outstanding at June 30, 2021

Outstanding at September 30, 2021

3,799,815  

1 unchanged sentence

$ 33,791  

Exercisable at June 30, 2021

Exercisable at September 30, 2021

1,839,079  

1 unchanged sentence

$ 30,113  

Vested and expected to vest at June 30, 2021

Vested and expected to vest at September 30, 2021

3,542,971  

1 unchanged sentence

$ 33,791  

The weighted average grant date fair value of stock option awards granted during the six months ended June 

The weighted average grant date fair value of stock option awards granted during the nine months ended September 

30, 2021 was $ 0.87 .

The total fair value of options vested during the three months ended June 30, 2021 and 2020 was $ 0.1 million and $ 0.1 million, respectively.

The total fair value of options vested during the six months June 30, 2021 and 2020 was $ 0.3 million and $ 0.3 million, respectively.

The total fair value of options vested during the three months ended September 

30, 2021 and 2020 was $ 0.3 million and $ 0.3 million, respectively.

The total fair value of options vested during the nine months ended September 

30, 2021 and 2020 was $ 0.6 million and $ 0.6 million, respectively.

No options were exercised during any of the periods presented.

At June 

At September 

30, 2021, there was $ 1.2 million of unrecognized compensation expense that will be recognized over a weighted-average period of 1.80 years.

During the six months ended June 30, 2021, the Company granted 385,267 performance-based stock options with an exercise price of $ 1.11 per share, subject to vesting based on the satisfaction of specified performance criteria.

During the nine months ended September 30, 2021, the Company granted 385,267 performance-based stock options with an exercise price of $ 1.11 per share, subject to vesting based on the satisfaction of specified performance criteria.

Compensation expense for the performance-based awards is recorded over the estimated service period for each milestone when the performance conditions are deemed probable of achievement.

The Company recorded stock-based compensation expense of approximately $ 0.1 million and $ 0.2 million during the three and six months ended June 30, 2021, for service-based awards and performance conditions deemed probable of achievement and/or achieved.

The Company recorded stock-based compensation expense of approximately $ 0.1 million nine months ended September 

30, 2021, for service-based awards and performance conditions deemed probable of achievement and/or achieved.

For performance-based awards containing performance conditions which were not deemed probable of achievement at September 

30, 2021, no stock compensation expense was recognized and any previously recognized expense related to those awards originally deemed probable was reversed.

DIFFUSION PHARMACEUTICALS INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Options granted were valued using the Black-Scholes option-pricing model and the weighted average assumptions used to value the options granted during the six months ended June 

Options granted were valued using the Black-Scholes option-pricing model and the weighted average assumptions used to value the options granted during the nine months ended September 

30, 2021 and 2020 were as follows:

4 unchanged sentences

Dividend yield

Restricted Stock Awards

As of the six months ended June 

30, 2021, the Company has granted an aggregate of 153,000 restricted stock awards to members of the board of directors of the Company.

The shares begin to vest 18 months after the respective grant date.

The Company recognized approximately $ 5,000 and $ 4,000 in expense related to these awards during the three months ended June 30, 2021 and 2020, respectively.

The Company recognized approximately $ 10,000 and $ 8,000 in expense related to these awards during the six months ended June 

Restricted Stock Unit Awards

The Company issues restricted stocks ("RSU") to newly elected, non-executive members of the board of directors that vest in six, tri-monthly installments beginning 18 months after the respective grant date.

The fair value of an RSU is equal to the fair market value price of the Company’s common stock on the date of grant.

RSU expense is recorded on a straight-line basis over the service period.

The following table summarizes activity related to RSU stock-based payment awards:

Number of shares

Weighted-average grant date fair value

Unvested balance at January 1, 2021

153,000  

$ 0.65  

138,800  

$ 0.72  

Unvested balance at September 30, 2021

291,800  

$ 0.69  

The Company recognized approximately $ 16,000 and $ 4,000 in expense related to these awards during the three months ended September 30, 2021 and 2020, respectively.

The Company recognized approximately $ 27,000 and $ 12,000 in expense related to these awards during the nine months ended September 

30, 2021 and 2020, respectively.

At June 

30, 2021, there was approximately $ 72,000 of unrecognized compensation cost that will be recognized over a weighted average period of 1.96 years.

At September 

30, 2021, there was approximately $ 0.1 million of unrecognized compensation cost that will be recognized over a weighted average period of 2.35 years.

Commitments and Contingencies

Office Space Rental

The Company has a non-cancelable operating lease for office and laboratory space in Charlottesville, Virginia, which began in April 2017, and as of June 

The Company has a non-cancelable operating lease for office and laboratory space in Charlottesville, Virginia, which began in April 2017, and as of September 

30, 2021, has a remaining lease term of approximately 0.6 years.

1 unchanged sentence

The original term of the lease ends in the second quarter of 2022 and the Company has an option to extend for another five ( 5 ) years.

This option to extend was not recognized as part of the Company's measurement of the right-of-use asset and operating lease liability as of June 

Rent expense related to the Company's operating lease for the three months ended June 

This option to extend was not recognized as part of the Company's measurement of the right-of-use asset and operating lease liability as of September 

The Company also entered into two month-to-month leases for office space during the nine months ended September 30, 2021.

The Company adopted the short-term lease election as afforded by ASC 842 and did not recognize a right-of-use asset and operating lease liability related to these short-term leases.

DIFFUSION PHARMACEUTICALS INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Rent expense related to the Company's operating leases for the three months ended September 

30, 2021 and 2020 was approximately $ 48,000 and $ 30,000 , respectively.

Rent expense for the six months ended June 

30, 2021 and 2020 was approximately $ 60,000 .

Future minimum rental payments under the Company's non-cancelable operating lease at June 

Rent expense for the nine months ended September 

30, 2021 and 2020 was approximately $ 0.1 million and $ 91,000 , respectively.

Future minimum rental payments under the Company's non-cancelable operating lease at September 

30, 2021 were as follows:

Rental Commitments

$ 29,801  

7 unchanged sentences

The Company could also enter into additional collaborative research, contract research, manufacturing, and supplier agreements in the future, which may require upfront payments and long-term commitments of cash.

DIFFUSION PHARMACEUTICALS INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Defined Contribution Retirement Plan

2 unchanged sentences

The Company provides a safe harbor match with a maximum amount of 4 % of the participant’s compensation.

The Company made matching contributions under the 401 (k) Plan of approximately $ 24,000 and $ 14,000 for the three months ended June 30, 2021 and 2020, respectively and matched approximately $ 40,000 and $ 31,000 during the six months ended June 30, 2021 and 2020, respectively.

The Company made matching contributions under the 401 (k) Plan of approximately $ 29,000 and $ 11,000 for the three months ended September 30, 

2021 and 2020, respectively and matched approximately $ 60,000 and $ 42,000 during the nine months ended September 30, 

2021 and 2020, respectively.

Legal Proceedings

On August 7, 2014, a complaint was filed in the Superior Court of Los Angeles County, California by Paul Feller, the former Chief Executive Officer of the Company's legal predecessor under the caption Paul Feller v.

On August 7, 2014, a complaint was filed in the Superior Court of Los Angeles County, California by Paul Feller, the former Chief Executive Officer of the Company’s legal predecessor under the caption Paul Feller v.

RestorGenex Corporation, Pro Sports & Entertainment, Inc., ProElite, Inc.

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On April 1, 2015, the plaintiff filed a petition in opposition to the Company’s petition to compel arbitration and a motion to stay the action.

After a hearing for the petition and motion on April 14, 2015, the Court granted the Company’s petition to compel arbitration and a motion to stay the action.

After a related hearing on April 14, 2015, the court granted the Company’s petition to compel arbitration and a motion to stay the action.

On January 8, 2016, the plaintiff filed an arbitration demand with the American Arbitration Association.

On November 19, 2018 at an Order to Show Cause Re Dismissal Hearing, the Court found sufficient grounds not to dismiss the case, and an arbitration hearing was scheduled for November 2020.

In August 2020, due to the ongoing COVID- 19 pandemic and related restrictions on gatherings in the State of California, the arbitration hearing was postponed to August 16, 2021.

The Company believes this matter is without merit and intends to defend the arbitration vigorously.

However, at this stage, the Company is unable to predict its outcome and the possible loss or range of loss, if any, associated with its resolution or any potential effect the matter may have on the Company’s financial position.

On November 19, 2018 at an Order to Show Cause Re Dismissal Hearing, the court found sufficient grounds not to dismiss the case and an arbitration hearing was scheduled, originally for November 2020 

but later postponed due to the COVID- 19 pandemic and related restrictions on gatherings in the State of California.

In addition, following the November 2018 hearing, an automatic stay was placed on the arbitration in connection with the plaintiff filing for personal bankruptcy protection.

On October 22, 2021, following a determination by the bankruptcy trustee not to pursue the claims and release them back to the plaintiff, the parties entered into a stipulation to abandon arbitration and return the matter to state court.

A case management conference has been scheduled by the court for February 23, 2022 to set a trial date.

The Company believes the claims in this matter are without merit and intends to defend itself vigorously.

However, at this stage, the Company is unable to predict the outcome and possible loss or range of loss, if any, associated with its resolution or any potential effect the matter may have on the Company’s financial position.

Depending on the outcome or resolution of this matter, it could have a material effect on the Company’s financial position, results of operations and cash flows.

DIFFUSION PHARMACEUTICALS INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Subsequent Events

Lease Termination

On November 8, 2021, we entered into a Deed of Lease Termination Agreement with the Carlton Landlord providing for the early termination of the Carlton Lease related to our prior corporate headquarters.

The Carlton Lease was previously scheduled to expire on April 30, 2022 and, as of September 30, 2021, our aggregate amount of future minimum rental payments thereunder was approximately $ 69,536 .

In connection with the termination, we will make a one -time payment to the Carlton Landlord of approximately $ 14,000 , after deducting anticipated returns of deposits in accordance with the Carlton Lease.

In lieu of the fixed office and laboratory space previously available to us under the Carlton Lease, we have recently entered into short term agreements to utilize membership-based co-working space in both Charlottesville, Virginia and Philadelphia, Pennsylvania.

Nasdaq Bid Price Deficiency Notice

As previously disclosed, on May 6, 2021, the Company received a written notice from the staff of the Listing Qualifications Department of Nasdaq relating to the minimum bid price requirement contained in Nasdaq Listing Rule 5550 (a)( 2 ).

This notice indicated that the Company was not in compliance with such rule because the bid price for the Company’s common stock had closed below $1.00 per share for the previous 30 consecutive business days.

In accordance with Nasdaq Listing Rule 5810 (c)( 3 )(A), the Company was provided 180 calendar days, or until November 2, 2021, to regain compliance with the Rule.

On November 3, 2021, the Company received an additional notice from the staff providing that, although the Company had not regained compliance with the bid price rule by November 2, 2021, in accordance with Nasdaq Listing Rule 5810 (c)( 3 )(A), the Staff has determined that the Company is eligible for an additional 180 calendar days from the date of such notice, or until May 2, 2022, to regain compliance.

To regain compliance, the bid price for the Company’s common stock must close at $1.00 per share or more for a minimum of 10 consecutive business days.

The Notice has no effect on the listing or trading of the Company’s common stock at this time, and the Company is currently evaluating its alternatives to resolve this listing deficiency, including, if necessary and subject to the approval of its board of directors and stockholders, implementing a reverse stock split.

MANAGEMENT ’

13 unchanged sentences

Risk Factors ”

in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021.

in our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2021 and June 30, 2021.

These risks could cause our actual results to differ materially from any future performance suggested below.

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Enhancing Oxygen, Fueling Life

We are an innovative biopharmaceutical company developing novel therapies that enhance the body’s ability to deliver oxygen to the areas where it is needed most.

We are a biopharmaceutical company developing novel therapies that enhance the body’s ability to deliver oxygen to the areas where it is needed most.

Our lead product candidate, TSC, is being developed to enhance the diffusion of oxygen to tissues with low oxygen levels, also known as hypoxia, a serious complication of many of medicine’s most intractable and difficult-to-treat conditions.

In addition to TSC, our product candidate DFN-529, a novel, allosteric PI3K/Akt/mTOR pathway inhibitor, is in early-stage development.

TSC Second Quarter Development Update

In May 2021, we announced final results of our COVID Trial, which we initiated in 2020 due to a belief in the potential of TSC to improve low tissue oxygen levels, a common complication of COVID-19.

The study’s primary objective was to evaluate the safety and tolerability of TSC administered on a more frequent dosing regimen not previously tested in a clinical trial setting, and the secondary and exploratory endpoints for the trial included time to improvement in World Health Organization ordinal scale by day 7 and through day 29, time on oxygen supplementation, and hospital length of stay.

Although the study was not designed or powered to evaluate efficacy, the study’s external safety monitoring committee observed that patients receiving the 1.5 mg/kg dose had improved outcomes in these secondary and exploratory endpoints compared to those receiving lower doses.

In June 2021, the Company reported a positive trend in oxygenation from the TCOM Trial.

The TCOM Trial was designed to evaluate the effect of TSC versus placebo on peripheral tissue oxygenation in healthy normal volunteers.

Topline results based upon analyses of primary endpoint data indicated, as compared to placebo, a positive dose-response trend in TCOM readings after TSC administration that persisted through the measurement period with no evidence of hyperoxygenation.

TSC was also safe and well-tolerated at all doses tested.

The TCOM Trial was a randomized, double-blind, placebo controlled, pharmacokinetic and pharmacodynamic study of TSC that enrolled and dosed 30 healthy volunteers.

Trial participants were randomized into one of six subgroups, each of which received a single intravenous dose of placebo or one of five different doses of TSC ranging from 0.5 mg/kg to 2.5 mg/kg.

All trial participants received supplemental oxygen during equivalent, one-hour monitoring periods before and after TSC or placebo was administered while subjects were continuously monitored with TCOM sensors applied to their lower extremity.

The primary endpoint evaluated the relative change in TCOM readings from baseline after TSC administration compared to placebo.

TSC Development Plans for 2021 and 2022

We remain focused on our over-arching clinical development plan announced in November 2020 designed to accomplish two principal strategic objectives:

(1) Optimize the clinical dose and dosing frequency for TSC;

and (2) Evaluate TSC in clinical models designed to establish proof of concept for improvement in oxygenation.

As part of this plan, we are currently focused on the execution of our three, short-term Oxygenation Trials to explore the relationship between TSC dose and change in oxygenation.

These studies are being conducted in the U.S.

during 2021in and will be funded with cash-on-hand.

The positive trend observed in the TCOM Trial is being used to guide dose selection in the additional Oxygenation Trials planned for the latter part of 2021 -- the Altitude Trial, followed by 

the ILD-DLCO Trial.

TSC Development Update

Our Lead Indication:

Using TSC to Treat Hypoxic Solid Tumors

Solid tumors comprise approximately 90% of all adult cancers and, according to the American Cancer Society, roughly 1.9 million new cancer cases will be diagnosed in the U.S.

during 2021. 

It is also well-documented in the scientific literature that the prevalence of hypoxic regions across numerous primary solid tumor types directly contributes to treatment resistance whether it be radiotherapy, chemotherapy, and immunotherapy, increasing the metastatic potential of these tumors and the probability of unsuccessful treatment.

We believe TSC’s novel mechanism of action lends itself to treating this unmet medical need, so we are designing our Hypoxic Solid Tumor Program to support the use of TSC as a treatment of hypoxic solid tumors.

This program is being designed based on previously obtained data that we believe support the potential benefits of TSC as a treatment for hypoxic solid tumors, including preclinical evidence supporting TSC’s enhancement of radiotherapy and clinical evidence of TSC's effects in unresectable glioblastoma multiforme tumors from our previous Phase 2 study evaluating TSC in patients with GBM treated with standard of care radiation and chemotherapy.

Additionally, with the outcome of the TCOM Trial, originally reported in June 2021, we believe we now have direct evidence of TSC's ability to enhance oxygenation in humans, including additional dosing information that will be integral to designing a clinical study to treat hypoxic solid tumors. 

Our plan is to use the information obtained to date on TSC to submit a briefing document related to our development plan for discussion with the FDA during the first quarter of 2022. 

In addition to questions about clinical trial design and chemistry, manufacturing, and controls, we anticipate the submission will include the information required to obtain FDA feedback on potential accelerated pathways to approval for TSC.

In addition, the results of the Altitude Trial and ILD-DLCO Trial, which we anticipate reporting during the first half of 2022 as further described below under the heading, “Our Oxygenation Trials,”

will also be used to further guide the design of the program. 

We believe receiving FDA feedback on the proposed regulatory pathway underlying our Hypoxic Solid Tumor Program will enhance the probability of successfully developing and, if approved, commercializing TSC for use as a treatment for hypoxic solid tumors.

Accordingly, the start of the first study in our Hypoxic Solid Tumor Program, which we currently expect to be a Phase 2 clinical trial, will be subject to the timing of FDA feedback and the availability of clinical drug supply. 

Our Oxygenation Trials

TSC's Effects on Peripheral Tissue Oxygenation

In June 2021, we reported a positive trend in oxygenation from our TCOM Trial, which evaluated the effect of TSC versus placebo on peripheral tissue oxygenation in healthy normal volunteers using transcutaneous oxygen monitoring.

Analysis of the primary endpoint data indicated a positive dose-response trend in TCOM readings with TSC as compared to placebo that persisted through the measurement period, and the trends observed in the primary endpoint data indicated an improvement in peripheral oxygenation with TSC with no evidence of hyperoxygenation.

In September 2021, we issued a letter to our stockholders including a further discussion of the results of the TCOM Trial, as well as certain additional facts and figures from our supplemental analysis of the study data.

Effects of TSC on transcutaneous oxygen pressure (tcpO2).

The graph was created by subtracting the median placebo response from the dose and time matched median TSC response.

For example, the chart above was created by subtracting the median response observed in the TCOM Trial's placebo group from the median response observed in each TSC dosage group at each of the measurement times during the one-hour period following dosing.

As you can see in the chart, these data indicate peripheral tissue oxygenation increased relative to the placebo group following TSC administration and persisted through the one-hour measurement period, particularly at the two highest doses tested (2.0 mg/kg and 2.5 mg/kg).

We believe the results of the TCOM Trial provide clinical evidence that TSC facilitates the passive diffusion of oxygen from areas of high concentration to areas of low concentration without causing hyperoxygenation and, accordingly, represent a positive and meaningful step towards the accomplishment of the overall strategic objectives of our Oxygenation Trials set forth in November 2020.

Moreover, the doses at which the largest effects of TSC were observed in the TCOM study are higher than the doses tested in any of the recent clinical trials of TSC, and these data obtained from the TCOM Trial is being used to guide the design of our remaining Oxygenation Trials –

the Altitude Trial and the ILD-DLCO Trial.

We believe the two remaining Oxygenation Trials, the Altitude Trial and the ILD-DLCO Trial, remain integral to our overall development plan for TSC, as they are intended to provide further information regarding TSC’s mechanism of action and dose response characteristics, as well as support for what we view as the broad therapeutic potential of TSC to treat a variety of conditions complicated by hypoxia. 

As described below, the Altitude Trial is designed to provide specific information on TSC’s effects on oxygen consumption and the ILD-DLCO Trial is designed to evaluate the effects of TSC on the uptake of oxygen through the lungs.  Accordingly, we intend to continue to execute the Altitude Trial and the ILD-DLCO Trial to develop this additional data in parallel with designing our Hypoxic Solid Tumor Program.

Altitude Trial:

s Effects Under Induced Hypoxic Conditions

This trial will be a double-blind, randomized, placebo-controlled study which will evaluate the effects of TSC on maximal oxygen consumption, or VO2, and partial pressure of blood oxygen, or PaO2, in normal healthy volunteers subjected to incremental levels of physical exertion while exposed to hypoxic and hypobaric conditions (i.e., simulated altitude).

The study is designed to evaluate the effect of TSC on oxygen availability and consumption compared to placebo. We anticipate initiating and completing the Altitude Trial in the fourth quarter of 2021, with topline results available within one to two months of study completion.

This trial will be a double-blind, randomized, placebo-controlled study which will evaluate the effects of TSC on maximal oxygen consumption, or VO2, and partial pressure of blood oxygen, or PaO2, in normal healthy volunteers subjected to incremental levels of physical exertion while exposed to hypoxic and hypobaric conditions (i.e., simulated altitude).

The trial will evaluate the difference in effect of TSC on oxygen availability and consumption compared to placebo.

We expect to dose the first patient in the Altitude Trial in the coming days, to complete dosing of patients in the study in late December 2021 or early January 2022, and anticipate reporting topline results from the study within two months of completion.

ILD-DLCO Trial:

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DLCO will act as a surrogate measure of oxygen transfer efficiency, or uptake, from the alveoli of the lungs, through the plasma, and onto hemoglobin within red blood cells.

The study will be statistically powered to evaluate the difference in effect of TSC on improvement in DLCO, as well as distance covered in a standard six-minute walk test.

We now anticipate initiating the ILD-DLCO Trial in the late fourth quarter of 2021 and completing the trial in the first quarter of 2022, with topline results available within one to two months of study completion.

Planned Phase 2 Hypoxia-related Indication Trial

We expect to announce in the fourth quarter of 2021 the initial indication in which TSC will be studied to support the planned pathway for regulatory approval and to initiate the Planned Phase 2 Hypoxia-related Indication Trial during the first half of 2022, funded with cash-on-hand.

The study will evaluate the difference in effect of TSC on improvement in DLCO, as well as distance covered in a standard six-minute walk test.

We anticipate initiating the ILD-DLCO Trial in the late fourth quarter of 2021 and completing the study in the first quarter of 2022, with topline results reported within two months of study completion.

Further, during the third quarter of 2021, we received clearance of our IND for TSC from the Pulmonary, Allergy, and Critical Care division of the FDA, an important step as we prepare to initiate the ILD-DLCO Trial.

This also represents the fourth division with which we have an open IND for TSC –

joining the Cardiology and Nephrology, Neurology, and Oncology divisions –

which we believe underscores TSC’s broad therapeutic potential to treat a variety of conditions complicated by hypoxia.

The information we expect to obtain from the Altitude Trial and ILD-DLCO Trial during the first half of 2022 —

particularly when combined with the information we have acquired over the last year from the TCOM Trial and our COVID-19 Trial —

will continue to refine and enhance our understanding of TSC’s mechanism of action, dose-response effects, and, more specifically, effects on oxygen consumption and uptake of oxygen through the lungs. 

In addition to providing insights regarding additional, non-oncology indications in which the TSC platform may have potential, the results of the Altitude Trial and ILD-DLCO Trial will also inform our design of our Hypoxic Solid Tumor Program studies. 

TSC Supply Chain Update

As broadly reported by companies across industrial sectors, supply chain disruptions, shortages, and other issues have been widespread during 2021, and we have also recently been subject to delays and interruptions in our TSC drug supply.

As previously reported in our Annual Report , TSC is currently manufactured by our primary CMO partner at a facility that now manufactures COVID-19 vaccines under the Defense Production Act.

In response these delays and interruptions, we are in the process of evaluating opportunities to increase the robustness of our drug supply and overall supply chain to be more responsive to our needs.

We are actively managing this process and believe we are taking the necessary steps to ensure the availability of high-quality drug supply to support the next steps in TSC’s development.

However, TSC is a freeze-dried, injectable product requiring a sophisticated manufacturing process.

As a result, any change to all or a portion of our manufacturing process, together with uncertainty regarding the general availability of manufacturing materials as a result of more general global supply chain shortages and disruptions, could affect the cost and timing of the available clinical study drug supply of TSC.

Organizational Update

During the second quarter, we enhanced our operating team with the addition of new employees in the areas of administration, quality assurance, clinical operations, and finance.

In addition, in connection with our annual meeting of stockholders in June 2021, Jane Hollingsworth was elected as the new Chair of our board of directors and Diana Lanchoney, M.D.

and Eric Francois were newly elected to our board of directors.

We believe the totality of these organizational additions has already had a significant, positive impact on our ability to develop, implement and execute on our corporate strategy and development plans and position us well to build shareholder value through our next stage of growth.

Enhancing Our Organization, Embracing Remote Work

During the third quarter, we continued to enhance our operating team with the addition of new employees in a variety of functions across our organization, including clinical operations, CMC, finance, and, more recently, medical writing.

As part of our growth strategy, we have embraced the remote work culture that became prevalent at many organizations during the COVID-19 pandemic.

We believe our people are critical to our ability to efficiently and successfully execute our stated strategy, and this remote operating paradigm allows us to enhance our available pool of talented human resources while also conserving financial resources.

For example, in November 2021, we negotiated and entered into an agreement providing for the early termination of our lease of the Carlton Avenue facility in Charlottesville, Virginia. We also believe in the power of collaboration.

In turn, and in lieu of the fixed office and laboratory space previously available to us under that agreement, we have recently entered into short term agreements to utilize membership-based co-working space in both Charlottesville, Virginia and Philadelphia, Pennsylvania.

We believe these arrangements will permit our team combine the advantages of remote and in-person work in environments intended to foster creativity and innovation.

Financial Summary

As of June 30, 2021, we had cash and cash equivalents of $43.3 million.

As of September 30, 2021, we had cash and cash equivalents of $40.3 million.

We have incurred operating losses since inception, have not generated any product revenue and have not achieved profitable operations.

We incurred net losses of $3.8 million and $8.4 million for the three and six months ended June 30, 2021, respectively.

Our accumulated deficit as of June 30, 2021 was $114.3 million, and we expect to continue to incur substantial losses in future periods.

We incurred net losses of $12.2 million and $20.6 million for the three and nine months ended September 30, 2021, respectively.

Our accumulated deficit as of September 30, 2021 was $126.5 million, and we expect to continue to incur substantial losses in future periods.

We anticipate that our operating expenses will increase substantially as we continue to advance the development of TSC, including any costs related to:

our ongoing and planned clinical trials, including the Oxygenation Trials and our Planned Hypoxia-related Indication Trial(s);

our ongoing and planned clinical trials, including the remaining Oxygenation Trials and our Hypoxic Solid Tumor Program;

any additional studies we may undertake, including other preclinical and clinical studies to support the filing of any NDA with the FDA;

near-term investments intended to improve the quality and robustness of our supplier relationships and overall supply chain;

other research, development, and manufacturing activities designed to develop and optimize formulation, manufacturing processes, dosage, dose forms, and other characteristics prior to regulatory approval;

the maintenance, expansion, and protection our global intellectual property portfolio;

the hiring of additional clinical, manufacturing, scientific, sales, or other personnel;

research and development related to other product candidates that may be complementary or synergistic with TSC, including DFN-529 or any other product candidates we may acquire or in-license in the future;

investments in operational, financial, and management information systems.

We intend to use our existing cash and cash equivalents for working capital and to fund the research and development of TSC, including the Altitude Trial and the ILD-DLCO Trial.

We expect that our cash and cash equivalents as of June 30, 2021 will enable us to fund our operating expenses and capital expenditure requirements, including expected costs related to the planned Oxygenation Trials and our Planned Hypoxia-related Indication Trial(s) through 2023.

We intend to use our existing cash and cash equivalents for working capital and to fund the research and development of TSC.

We expect that our cash and cash equivalents as of September 30, 2021 will enable us to fund our operating expenses and capital expenditure requirements through 2023.

Financial Operations Overview

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R&D costs are charged to expense as incurred.

Intangible Asset Impairment Charge

In the third quarter of 2021, the Company made a determination to no longer dedicate resources to the Company’s DFN-529 intangible asset and any future development efforts were abandoned. 

In connection with this decision, the Company concluded that DFN-529 was impaired in its entirety.

General and Administrative Expense

G&A expenses consist principally of salaries and related costs for executive and other personnel, including stock-based compensation, other employee benefit costs, expenses associated with investment bank and other financial advisory services, and travel expenses.

Other G&A expenses include facility-related costs, communication expenses and professional fees for legal, patent prosecution and maintenance, consulting, accounting, and other professional services.

Other G&A expenses include, facility-related costs, communication expenses and professional fees for legal, patent prosecution and maintenance, consulting, accounting, and other professional services.

Interest Income

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Income Tax Benefit

We recognize income tax benefit to utilize indefinite deferred tax liabilities as a source of income against indefinite lived portions of our deferred tax assets.

The Company recorded an income tax benefit of $0.4 million during the three and nine months ended September 30, 2021, respectively.

The income tax benefit was due to the tax effect of the reduction in the deferred tax liability associated with the basis difference from the IPR&D indefinite lived intangible asset.

The Company maintains a full valuation allowance against its deferred tax assets due to the Company’s history of losses as of September 30, 2021.

Our NOLs and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities.

NOL and tax credit carryforwards may become subject to an annual limitation in the event of a greater than 50.0% cumulative change in the ownership interest of significant stockholders over a three year period, as defined under Sections 382 and 383 of the Internal Revenue Code as well as similar state provisions.

These limitations may, in certain cases, limit the amount of income tax benefit that can be utilized annually to offset taxable income or tax liabilities in future periods.

The amount of the annual limitation is determined based on the Company’s value immediately prior to the ownership change, and subsequent ownership changes may further affect the limitation in future years.

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In addition, the cumulative benefit of our NOLs was remeasured, resulting in tax expense recognized during the year ended December 31, 2019.

We have not yet performed an analysis to determine whether or not ownership changes that have occurred in the year ended December 31, 2020 or during the three or six months ended June 30, 2021 give rise to any further limitations.

Results of Operations for Three Months Ended June  

30, 2021 Compared to Three Months Ended June  

The following table sets forth our results of operations for the three months ended June 30, 2021 and 2020.

Three Months Ended June 30, 2021

We have not yet performed an analysis to determine whether or not ownership changes that have occurred in the year ended December 31, 2020 or during the three or nine months ended September 30, 2021 give rise to any further limitations.

Results of Operations for Three Months Ended September  

30, 2021 Compared to Three Months Ended September 30, 2020

The following table sets forth our results of operations for the three months ended September 30, 2021 and 2020.

Three Months Ended September 30,

Operating expenses:

Research and development

Intangible asset impairment charge

General and administrative

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Income tax benefit

We recognized approximately $2.0 million in R&D expenses during the three months ended June 30, 2021 compared to approximately $2.2 million during the three months ended June 30, 2020.

This decrease was attributable to $0.7 million related to the wind-down of our trial evaluating TSC in the treatment of glioblastoma multiforme brain cancer.

Additionally, costs related to our COVID Trial decreased by $0.2 million during the three months ended June 30, 2021.

These decreases were offset by increases of $0.3 million in salaries and wages, increases of $0.2 million for costs related to our TCOM trial, which was initiated and completed in March 2021, and increases of $0.2 million in other research and development expenses.

G&A expenses were $1.8 million during the three months ended June 30, 2021 compared to $1.5 million during the three months ended June 30, 2020.

The increase in G&A expenses was primarily due to a $0.3 million increase in salaries, wages and stock-based compensation expenses, including additional amounts related to increased headcount and costs associated with the separation of former executives which will not recur in future years.

Additionally, insurance and other general and administrative expenses increased by $0.1 million during the period.

These increases were offset by a decrease of $0.1 million in professional service fees.

We recognized an income tax benefit of $0.5 million during the three months ended June 30, 2020 to reflect the utilization of indefinite deferred tax liabilities as a source of income against indefinite lived portions of our deferred tax assets.

We recognized $2.1 million in R&D expenses during the three months ended September 30, 2021 compared to $3.1 million during the three months ended September 30, 2020.

This decrease was due to lower project spending due to the completion and/or wind-down of our clinical studies evaluating TSC in Covid-19, GBM, and stroke.

We recognized a non-recurring $8.6 million non-cash impairment charge related to the write down of our DFN-529 IPR&D asset.

G&A expenses were $1.9 million during the three months ended September 30, 2021 compared to $2.1 million during the three months ended September 30, 2020.

The decrease in G&A expenses was primarily due to a $0.5 million decrease in salaries related to executive separation payments recorded in the prior year period as well as a $0.2 million decrease in outside legal and professional fees.

This decrease was partially offset by an increase in salaries and other costs associated with the hiring of new employees to support our R&D efforts as well as an increase in insurance costs.

We recognized an income tax benefit of $0.4 million due to the tax effect of the reduction in the deferred tax liability associated with the basis differences from the DFN-529 IPR&D intangible asset that was written down in the third quarter of 2021.

We recognized an income tax benefit of $0.8 million during the three months ended September 30, 2020 to reflect the utilization of indefinite deferred tax liabilities as a source of income against indefinite lived portions of our deferred tax assets.

Prior to 2021, we recognized the full income tax benefit allowed by the 2017 Tax Act to utilize indefinite deferred tax liabilities as a source of income against indefinite lived portions of our deferred tax assets.

No additional benefit was recognized during the three months ended June 30, 2021 as the benefit was fully realized in prior periods.

Results of Operations for Six Months Ended June  

30, 2021 Compared to Six Months Ended June  

The following table sets forth our results of operations for the six months ended June 30, 2021 and 2020.

Six Months Ended June 30,

Results of Operations for Nine Months Ended September  

30, 2021 Compared to Nine Months Ended September 30, 2020

The following table sets forth our results of operations for the nine months ended September 30, 2021 and 2020.

Nine Months Ended

September 30,

Operating expenses:

Research and development

Intangible asset impairment charge

General and administrative

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Income tax benefit

We recognized $4.9 million in R&D expenses during the six months ended June 30, 2021 compared to $3.7 million during the six months ended June 30, 2020.

A significant portion of this increase was attributable to $0.8 million of costs related to our TCOM trial, which was initiated and completed in March 2021, and $0.5 million of costs incurred related to our COVID Trial, which was initiated in September 2020 and completed in February 2021.

Manufacturing costs also increased by $0.6 million to support these trials.

Additionally, salaries and wages increased by $0.5 million.

These increases were offset by decreases of $0.8 million and $0.3 million related to the wind-down of our trials evaluating TSC in the treatment of glioblastma multiforme brain cancer and stroke, respectively.

G&A expenses were $3.6 million during the six months ended June 30, 2021 compared to $2.9 million during the six months ended June 30, 2020.

The increase in G&A expense was primarily due to a $0.6 million increase in salaries, wages and stock-based compensation expense, including additional amounts related to increased headcount and costs associated with the separation of former executives which will not recur in future years.

Additionally, insurance and other general and administrative expenses increased by $0.1 million during the period.

We recognized an income tax benefit of $0.9 million during the six months ended 2020, to reflect the utilization of indefinite deferred tax liabilities as a source of income against indefinite lived portions of our deferred tax assets.

We recognized $7.0 million in R&D expenses during the nine months ended September 30, 2021 compared to $6.8 million during the nine months ended September 30, 2020.

This increase was primarily attributable to a $1.2 million increase in expense related to drug manufacturing as described in part above under the heading “TSC Supply Chain Update.” and a $0.6 million increase in salary and related expenses due to increases in headcount.

These increases were offset by lower project spending due to the completion and/or wind-down of our clinical studies evaluating TSC in Covid-19, GBM, and stroke.

We recognized a nonrecurring $8.6 million non-cash impairment charge related to the write down of our DFN-529 IPR&D asset.

G&A expenses were $5.5 million during the nine months ended September 30, 2021 compared to $5.0 million during the nine months ended September 30, 2020.

The increase in G&A expense was primarily due to a $1.0 million increase in salaries and other costs associated with the hiring of new employees.

These amounts were slightly offset by $0.5 million in salaries related to executive separation payments recorded in the prior year period.

We recognized an income tax benefit of $0.4 million due to the tax effect of the reduction in the deferred tax liability associated with the basis differences from the DFN 529 IPR&D intangible asset that was written down in the third quarter of 2021.

We recognized an income tax benefit of $1.7 million during the nine months ended 2020 to reflect the utilization of indefinite deferred tax liabilities as a source of income against indefinite lived portions of our deferred tax assets.

No additional benefit was recognized during the six months ended June 30, 2021 as the benefit was fully realized in prior periods.

Liquidity and Capital Resources

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To date, we have funded our operations primarily through the sale and issuance of preferred stock, common stock and convertible promissory notes.

As of June 30, 2021, we had $43.3 million in cash and cash equivalents, working capital of $41.8 million and an accumulated deficit of $114.3 million.

As of September 30, 2021, we had $40.3 million in cash and cash equivalents, working capital of $38.0 million and an accumulated deficit of $126.5 million.

We expect to continue to incur net losses for the foreseeable future.

We intend to use our existing cash and cash equivalents to fund our working capital and research and development of our product candidates.

The following table sets forth our cash flows for the six months ended June 30, 2021 and 2020:

Six Months Ended June 30,

The following table sets forth our cash flows for the nine months ended September 30, 2021 and 2020:

Nine Months Ended September

Net cash (used in) provided by:

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Operating Activities

Net cash used in operating activities of $8.5 million during the six months ended June 30, 2021 was primarily attributable to our net loss of $8.4 million and our net change in operating assets and liabilities of $0.6 million.

This amount was offset by $0.5 million in stock-based compensation expense and depreciation expense.

The net change in our operating assets and liabilities is primarily attributable to a decrease in our accrued expenses and other current liabilities due to the timing of our payments to our vendors and employees as well as an increase in our prepaid expenses, deposits and other current assets.

Net cash used in operating activities of $6.6 million during the six months ended June 30, 2020 was primarily attributable to our net loss of $5.7 million, our deferred income taxes of $0.9 million and our net change in operating assets and liabilities of $0.5 million.

These amounts were offset by $0.3 million in stock-based compensation expense, and $0.1 million in depreciation expense.

The net change in our operating assets and liabilities is primarily attributable to an increase in our prepaid expenses, deposits and other current assets, which was slightly offset by an increase in accounts payable.

Net cash used in operating activities of $11.5 million during the nine months ended September 30, 2021 was primarily attributable to our net loss of $20.6 million and a change in our deferred income taxes of $0.4 million.

These amounts were partially offset by a $8.6 million non cash impairment charge in connection with the write down of our DFN-529 IPR&D asset, $0.6 million in stock-based compensation expense, and a net change in our operating assets and liabilities of $0.2 million.

Net cash used in operating activities of $10.2 million during the nine months ended September 30, 2020 was primarily attributable to our net loss of $10.1 million and our change in deferred income taxes of $1.7 million.

These amounts were partially offset by a net change in operating assets and liabilities of $1.4 million, $0.6 million in stock-based compensation expense, and $0.1 million in depreciation expense.

The net change in our operating assets and liabilities was primarily attributable to an increase in accounts payable and accrued expenses and was slightly offset by an increase in our prepaid expenses, deposits and other current assets.

Financing Activities

Net cash provided by financing activities was $33.3 million during the six months ended June 30, 2021, which was attributable to net proceeds of $31.1 million received from the sale of our common stock and $2.2 million in proceeds received from the exercise of common stock warrants.

Net cash provided by financing activities was $18.0 million during the six months ended June 30, 2020, which was attributable to the $10.8 million in gross proceeds received upon the sale of our common stock and warrants plus $8.0 million in gross proceeds received from the exercise of common stock warrants.

Net cash provided by financing activities was $33.3 million during the nine months ended September 30, 2021, which was attributable to net proceeds of $31.1 million received from the sale of our common stock in connection with the February 2021 Offering and $2.2 million in proceeds received from the exercise of previously issued common stock warrants.

Net cash provided by financing activities of $17.9 million during the nine months ended September 30, 2020, was primarily attributable to $10.8 million in gross proceeds received in connection with the May 2020 Offering and $8.0 million in gross proceeds received in connection with the exercise of previously outstanding warrants to purchase common stock.

These cash inflows were offset in part by the payment of $1.0 million in financing costs.

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We expect to continue to incur substantial expenses and generate significant operating losses as we continue to pursue our business strategy of developing TSC.

Our operations have consumed substantial amounts of cash since inception and we expect to continue to spend substantial amounts of cash to advance the clinical development of TSC, DFN-529, and our other product candidates.

As of the date of this Quarterly Report, most of our cash resources for clinical development are dedicated to our Oxygenation Trials and our Planned Hypoxia-related Indication Trial.

Our operations have consumed substantial amounts of cash since inception and we expect to continue to spend substantial amounts of cash to advance the clinical development of the TSC platform, as well as associated investments into our manufacturing, regulatory, and other related capabilities.

As of the date of this Quarterly Report, most our cash resources for clinical development are dedicated to our remaining Oxygenation Trials and our Hypoxic Solid Tumor Program, near-term investments intended to improve the quality and robustness of our supplier relationships and overall supply chain, and general operating expenses.

While we believe we have adequate cash resources to continue operations through 2023, we anticipate that we will need additional funding in order to complete development of TSC which, if available, could be obtained through additional capital raising transactions, entry into strategic partnerships or collaborations, or alternative financing arrangements.

As of June 30, 2021, we did not have any credit facilities in place under which we could borrow funds or any other sources of committed capital.

As of September 30, 2021, we did not have any credit facilities in place under which we could borrow funds or any other sources of committed capital.

In the future, we may seek to raise additional funds through various sources.

However, we can give no assurances that we will be able to secure additional sources of funds to support our operations, or if such funds are available to us, that such additional financing will be sufficient to meet our needs or be on terms acceptable to us.

This risk may increase if economic and market conditions deteriorate.

This risk may increase if economic and market conditions deteriorate, including as a result of unanticipated market shocks, such as the COVID-19 pandemic and ongoing global supply chain disruptions, or inflationary pressure.

If we are unable to obtain additional financing when needed, we may need to terminate, significantly modify, or delay the development of TSC or our product candidates, or we may need to obtain funds through collaborations or otherwise on terms that may require us to relinquish rights to our technologies or product candidates that we might otherwise seek to develop or commercialize independently.

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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 1. Financial Statements