INTENSITY THERAPEUTICS, INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements generally relate to future events or our future financial or operating performance and may include statements concerning, among other things, our business strategy (including anticipated trends and developments in, and management plans for, our business and the markets in which we operate), financial results, operations, and the markets and communities in which we, our clients, and partners operate, results of operations, revenues, operating expenses, and capital expenditures, sales and marketing initiatives and competition. In some cases, you can identify forward-looking statements because they contain words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “suggests,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. These statements are not guarantees of future performance; they reflect our current views with respect to future events and are based on assumptions and are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from expectations or results projected or implied by forward-looking statements. We discuss many of these risks in our Final Prospectus on Form 424(b)(4) dated June 29, 2023, in greater detail under the heading “Risk Factors” and in other filings we make from time to time with the Securities and Exchange Commission (“SEC”). Also, these forward-looking statements represent our estimates and assumptions only as of the date of this Quarterly Report on Form 10-Q, which are inherently subject to change and involve risks and uncertainties. Unless required by federal securities laws, we assume no obligation to update any of these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated, to reflect circumstances or events that occur after the statements are made. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors. Such factors include, but are not limited to, the following: ● the initiation, timing, progress and results of future preclinical studies and clinical trials, and our research and development programs; ● our need to raise additional funding before we can expect to generate any revenues from product sales; ● our plans to develop and commercialize our product candidates; ● the timing or likelihood of regulatory filings and approvals; ● the ability of our research to generate and advance additional product candidates; ● the implementation of our business model, strategic plans for our business, product candidates and technology; ● our commercialization, marketing and manufacturing capabilities and strategy; ● the rate and degree of market acceptance and clinical utility of our system; ● our competitive position; ● our intellectual property position; ● developments and projections relating to our competitors and our industry; ● our ability to maintain and establish collaborations or obtain additional funding; and ● our estimates regarding expenses, future revenue, capital requirements and needs for additional financing. You should read this Quarterly Report on Form 10-Q and the documents that we reference in this report and have filed with the SEC, including our Final Prospectus on Form 424(b)(4) dated June 29, 2023, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. References to “Notes” are notes included in our unaudited Financial Statements appearing elsewhere in this Quarterly Report on Form 10-Q. Unless otherwise indicated, the terms “Intensity,” “Company,” “we,” “us,” or “our” refer to Intensity Therapeutics, Inc. 19 Overview Intensity Therapeutics, Inc. is a clinical-stage biotechnology company committed to applying scientific leadership in the field of localized cancer reduction leading to anti-cancer immune activation. Our approach involves the direct injection into tumors of a unique product created from our DfuseRx℠ discovery platform. The concept of intratumoral treatment (IT) has been an objective of clinicians since the first discovery of chemotherapeutic agents. Keeping the drug in the tumor and sparing the body of toxicity. The challenge with IT treatment approaches is that a tumor’s lipophilic, high fat and pressurized microenvironment is incompatible with and does not absorb water-based products. We believe that intratumoral drug delivery is a chemistry challenge and that prior or current IT treatments have formulated their product without consideration of the compatibility of water and tumors. Another issue with IT or local delivery has been that metastatic cancer is mostly a whole body disease. Local treatments need a systemic component to be effective for a survival benefit. Accordingly, there remains a continued unmet need for the development of direct IT therapies for solid tumors that provide high local killing efficacy coupled with nontoxic systemic anti-cancer effects. We believe we have created such a product candidate with the necessary chemistry to overcome this local delivery challenge and a mechanism of action that induces a systemic effect. Clinical and nonclinical evidence shows that our drug candidate’s mechanism of tumor killing also leads to immune activation in certain cancers. Our platform creates patented anti-cancer product candidates comprising active anti-cancer agents and amphiphilic molecules. Amphiphilic molecules have two distinct components: one part is soluble in water and the other is soluble in fat or oils. When certain amphiphilic compounds are mixed with therapeutic agents, such as chemotherapies, the agents can also become soluble in both fat and water. Our product candidates include novel formulations consisting of potent anti-cancer drugs mixed together with these amphiphilic agents. Our lead product candidate, INT230-6, consists of two proven anti-cancer cytotoxic agents, cisplatin and vinblastine sulfate, mixed with the amphiphilic molecule (SHAO) — all in one vial. The anti-cancer agents, cisplatin and vinblastine sulfate, used in our product candidate are both generic. These agents are available to purchase in bulk supply commercially. In 2017, we initiated a Phase 1/2 dose escalation study using INT230-6 in the United States under an investigational new drug application (“IND”) authorized by the FDA and in Canada following receipt of a no objection letter from Health Canada. The study, IT-01, explored the safety and efficacy of INT230-6 in patients with refractory or metastatic cancers. We completed enrollment of study IT-01 in June 2022 and locked the IT-01 database in February 2023. Our first clinical trial dosed 110 patients. This clinical trial used our lead product candidate INT230-6 alone; in combination with Merck’s Keytruda (pembrolizumab) for patients with advanced solid malignancies including pancreatic, bile duct, squamous cell, and non-MSI high colon cancers; and in combination with Bristol Myers Squibb’s Yervoy (ipilimumab) for patients with breast cancer, liver cancer, and advanced sarcoma. Our second clinical trial (the INVINCIBLE Study or IT-02) tested INT230-6 in early stage breast cancer for patients not suitable for presurgical chemotherapy. The study enrolled 91 subjects; enrollment is now complete. This clinical trial was a Phase 2 randomized, window of opportunity for patients who were ineligible or chose not to have presurgical chemotherapy. The key endpoint was whether INT230-6 could reduce patient’s cancer by 50% to 100% defined as a major pathological response compared to no treatment (the current standard of care) or a saline injection and stimulate a systemic anti-cancer immune response prior to surgery. Substantial reduction of cancer presurgically in aggressive forms of cancer has been shown to correlate with delaying disease recurrence. Other endpoints of the INVINCIBLE study were to understand the percentage of necrosis that can be achieved in tumors especially tumors larger than 2 cm in longest diameter and whether an anti-cancer immune response could be induced. Since our inception in 2012, our operations have included business planning, hiring personnel, raising capital, building our intellectual property portfolio, and performing both research and development on our product candidates. We have incurred net losses since inception and expect to incur net losses in the future as we continue our research and development activities. To date, we have funded our operations primarily through approximately $50.7 million from the net proceeds of sales of our common stock, preferred stock and convertible notes. As of June 30, 2023, we had approximately $136,000 of cash and cash equivalents, and received approximately $17.8 million in cash, net of costs, on July 5, 2023 from the proceeds of our Initial Public Offering (“IPO”) plus approximately $2.7 million in cash, net of costs, on July 7, 2023 from the proceeds from the underwriters’ full exercise of its overallotment option of IPO shares. These two cash receipts total approximately $20.5 million. Since our inception, we have incurred significant operating losses. We incurred net losses of $3.7 million and $1.9 million for the three months ended June 30, 2023 and 2022, respectively, and losses of $5.0 million and $4.3 million for the six months ended June 30, 2023 and 2022, respectively. As of June 30, 2023, we had an accumulated deficit of approximately $43.7 million. We expect to incur significant expenses and operating losses for the next several years. See “Funding Requirements” below. We expect our expenses to increase as we continue to: ● Initiate Phase 3 programs in sarcoma and/or breast cancer; ● Complete our current Phase 2 programs; ● Advance our preclinical research and bring new product into clinical development; ● Incur manufacturing costs for additional GMP batches of our product candidates and enhancer molecules; ● Seek regulatory approvals for any of our product candidates that successfully complete clinical trials; ● Hire additional personnel; 20 ● Expand our operational, financial, and management systems; ● Invest in measures to protect our existing and new intellectual property; and ● Establish a sales, marketing, medical affairs, and distribution infrastructure to commercialize any product candidates for which we may obtain marketing approval and intend to commercialize. Our ability to ultimately generate revenue to achieve profitability will depend heavily on the development, approval, and subsequent commercialization of our product candidates. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations. As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financing, or other capital sources, which may include collaborations with other companies or other strategic transactions. We may not be able to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we would have to significantly delay, reduce, or eliminate the development and commercialization of one or more of our product candidates. Components of Results of Operations Revenue To date, we have not generated any revenue from product sales and we do not expect any revenue from the sale of product in the foreseeable future. We have not generated any revenue from licensing of our technology or product candidates yet either. If our development efforts for any of our product candidates are successful and result in regulatory approval, then we may generate revenue in the future from product sales or licensing. We cannot predict if, when, or to what extent we will generate revenue from the commercialization, licensing or sale of any of our product candidates. We may never succeed in obtaining regulatory approval for any of our product candidates. Research and Development Costs Salaries and Payroll Taxes Salaries and payroll taxes include Company employees involved in our pre-clinical research and clinical trials. This includes medical officers, project management, manufacturing staff and research scientists. The payroll taxes include all government required payments such as social security and unemployment taxes. Fringe Benefits We offer a partially funded health insurance and dental insurance plan. We maintain a defined contribution plan for all employees age 21 and older who have completed one year of service. This 401K plan makes a matching contribution equal to 100% of an employee’s contribution, up to 3% of an employee’s eligible earnings. Research Costs Research costs include: ● Pre-clinical research ● Manufacture of new enhancer compounds, ● Manufacture and labelling of GMP product candidate ● Product candidate stability testing of GMP batches ● Costs due to clinical trials for patient care ● Other clinical trial costs such as shipping, storage, and analytical testing Scientific Consulting Scientific consulting is costs related to non-employees involved in research. This category includes: statistical analysis, clinical trial operations, development of product manufacturing techniques, and internet research related to oncology and chemistry issues that may impact our preclinical or clinical research. Stock-Based Compensation Stock-based compensation is the expense related to stock options granted to our employees and warrants granted to our independent consultants who work in the research aspects. 21 General and Administrative Costs Salaries and Payroll Taxes Salaries and payroll taxes includes Company employees who are involved in fund raising, management, and our financial administration. The payroll taxes include all government required payments such as social security and unemployment taxes. Fringe Benefits We offer a partially funded health insurance and dental insurance plan. We maintain a defined contribution plan for all employees age 21 and older who have completed one year of service. This 401K plan makes a matching contribution equal to 100% of an employee’s contribution, up to 3% of an employee’s eligible earnings. Legal Legal costs relate primarily to our corporate administration. All legal costs relate to expenses for outside corporate law firms. Patent and Trademark Patent and Trademark are the legal costs and filing costs to establish and maintain patents in 38 countries. Insurance Insurance includes: directors and officers insurance, workers compensation insurance, product liability insurance, business insurance, employee and cyber liability insurance. Facilities and Rent Facilities and rent is the cost of maintaining our office facility in Westport, Connecticut through June 30, 2023. In July 2023, we signed a lease to move into 2,686 square feet of office space at 1 Enterprise Drive, Suite 430, Shelton, Connecticut to improve recruiting of staff and to reduce costs. The initial base rent payments are zero for the first six months, $2,910 for the next six months, and gradually increase to $3,275 per month for the last twelve months of the lease. The Company has an option to cancel this lease after 36 months. Additional monthly variable charges for electricity and common charges per month will be incurred. Investor Relations Investor relations are costs paid to outside consultants to develop the materials to present to prospective investors, and to arrange meetings with potential investors. Accounting Services Accounting services include the cost of our independent auditors for our annual audit, quarterly reviews, and services related to the filing of our registration statement on Form S-1, which was declared effective on June 29, 2023. This category also includes costs related to the preparation of income tax returns, and the cost of maintaining our accounting system. Accounting services on our IPO were not included in this category. The costs related to the IPO were recorded as a reduction of proceeds of the offering and are part of additional paid in capital. Other Other general and administrative costs include such items as office supplies, computer related costs, public relations costs, recruiting costs and conferences. Stock-Based Compensation Stock-based compensation is the expense related to stock options granted to our employees and warrants granted to our independent consultants who work in the general and administrative aspects. Other income and expenses We earned interest income on our cash balances. We incurred interest expense on our convertible notes. Accrued interest was converted into common stock upon completion of our IPO. 22 We received Federal Research and Development tax credits that are recoverable through a refund of Social Security taxes paid by the Company. Results of Operations The following table summarizes our results of operations for the six months and three months ended June 30, 2023 and 2022 (in thousands): Six Months Ended June 30, Increase Three Months Ended June 30 Increase 2023 2022 (Decrease) 2023 2022 (Decrease) Operating expenses: Research and development costs $ 1,633 $ 3,080 $ (1,447 ) $ 859 $ 1,385 $ (526 ) General and administrative costs 843 1,229 (386 ) 363 545 (182 ) Total operating costs 2,476 4,309 (1,833 ) 1,222 1,930 (708 ) Loss from operations (2,476 ) (4,309 ) 1,833 (1,222 ) (1,930 ) 708 Other income (expense) (2,561 ) 12 (2,573 ) (2,479 ) 2 (2,481 ) Net loss $ (5,037 ) $ (4,297 ) $ (740 ) $ (3,701 ) $ (1,928 ) $ (1,773 ) Loss per share, basic and diluted common $ (1.45 ) $ (1.26 ) $ (1.05 ) $ (0.57 ) Weighted average number of common stock, basic and diluted 3,463,635 3,410,103 3,516,579 3,410,103 Six Months Ended June 30, Increase Three Months Ended June 30, Increase 2023 2022 (Decrease) 2023 2022 (Decrease) Research and development costs by expense type: Salaries and payroll taxes $ 280 $ 668 $ (388 ) $ 125 $ 271 $ (146 ) Benefits 49 105 (56 ) 24 50 (26 ) Stock based compensation 465 314 151 230 155 75 Clinical trial costs 839 1,993 (1,154 ) 480 909 (429 ) $ 1,633 $ 3,080 $ (1,447 ) $ 859 $ 1,385 $ (526 ) 23 Six Months Ended June 30, Three Months Ended June 30, 2023 2022 Increase/ Decrease 2023 2022 Increase/ Decrease General and administrative costs: Salaries and payroll taxes $ 170 $ 157 $ 13 $ 81 $ 77 $ 4 Fringe benefits 8 11 (3 ) 4 5 (1 ) Legal 141 259 (118 ) 44 133 (89 ) Patent and trademark 33 25 8 14 - 14 Insurance 34 41 (7 ) 19 19 - Facilities and rent 67 72 (5 ) 28 37 (9 ) Investor relations 67 100 (33 ) 33 34 (1 ) Accounting services 88 176 (88 ) 16 76 (60 ) Consulting services 35 121 (86 ) 22 58 (36 ) Other 41 80 (39 ) 20 37 (17 ) Stock-based compensation 159 187 (28 ) 82 69 13 $ 843 $ 1,229 $ (386 ) $ 363 $ 545 $ (182 ) Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022 Research and Development expenses decreased by 47.0% as studies IT-01 and IT-02 completed their enrollments in June 2022 and August 2022 respectively. During the six months ended June 30, 2023, we engaged clinical and regulatory consultants to replace positions occupied by full time staff required during the recruiting phases of the trials. Dr. Walters moved to a consulting role with reduced hours and costs. Our IT-03 Phase 3 study continued to move forward in design and protocol drafting in 2022. Our IT-01 study continued to generate data; however, costs to close out the study were incurred in lieu of patient related treatment expenses. General and Administrative expenses decreased from approximately $1.2 million to approximately $0.8 million. The decrease in General and Administrative and Accounting services was due to the preparations for an IPO in the six months ended June 30, 2022. The accounting and legal costs related to the IPO in 2023 were charged directly to the equity section of the balance sheet as a reduction of additional paid in capital. Other income (expense) is primarily the approximately $2.3 million loss related to the discount given to convertible note holders when their convertible notes and accrued interest converted to shares of common stock at discounts of 30 or 35%, Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022 Research and Development expense decreased by 38.0% since Study IT-01 and Study IT-02 no longer have patient care costs and the drafting of results is nearly complete. Phase 3 IT-03 in sarcoma and phase 2/3 IT-04 in presurgical breast cancer will continue to incur planning, multiple regulatory filing, manufacturing, study initiation and trial preparation costs in 2023. General and Administrative expenses decreased from approximately $545,000 to $363,000 primarily due to 2022 having the costs of delaying the IPO. The accounting services and legal costs related to the IPO in 2023 were charged directly to the equity section of the balance sheet as a reduction of additional paid in capital. 24 Liquidity and Capital Resources Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses. We expect to continue to incur significant expenses and operating losses for the foreseeable future as we advance the clinical development of our product candidates. We expect that our research and development and general and administrative costs will continue to increase significantly, including in connection with conducting clinical trials for our product candidates, developing our manufacturing capabilities and building and qualifying our manufacturing facility to support clinical trials and commercialization and providing general and administrative support for our operations, including the cost associated with operating as a public company. As a result, we will need additional capital to fund our operations, which we may obtain from additional equity or debt financings, collaborations, licensing arrangements or other sources. We do not currently have any approved products and have never generated any revenue from product sales. We have financed our operations primarily through an initial investment from our founder, the issuance and sale of convertible debt notes, the issuance and sale of private equity financings, and an IPO that began trading on the Nasdaq Capital Market (“Nasdaq”) under the symbol “INTS” on June 30, 2023. As of June 30, 2023, our cash and cash equivalents were approximately $136,000, and the net IPO cash proceeds received on July 5, 2023 was approximately $17.8 million. On July 7, 2023, we received an additional $2.7 million (approximately) in net cash proceeds from the sale of the underwriters’ full exercise of its overallotment option, which occurred after the IPO. The total net cash proceeds received following the closing of the IPO, therefore, was approximately $20.5 million. Based on these subsequent cash receipts, we project to have sufficient cash to fund our current operating plan until July 2025. The following table summarizes the net cash provided by (used for) operating activities, investing activities and financing activities for the periods indicated (in thousands): Six Months Ended June 30, 2023 2022 Net cash (used in) operating activities $ (1,139 ) $ (2,817 ) Net cash (used in) financing activities (37 ) - Net (decrease) in cash and cash equivalents $ (1,176 ) $ (2,817 ) Operating Activities Net cash used in operating activities for the six months ended June 30, 2023 was a deficit of approximately $1.1 million. This is primarily attributable to the loss of $5.0 million and the addback of $2.3 million for the non-cash loss on the conversion of convertible notes into shares of common stock and the addback of $0.6 million for the non-cash stock based compensation. Net cash used in operating activities for the six months ended June 30, 2022 was predominantly the approximately $4.3 million loss that was offset by approximately $0.5 million of non-cash stock based compensation. Investing Activities There was no cash provided by or used in investing activities in any of the periods listed above. Financing Activities Net cash provided by financing activities for the six months ended June 30, 2023 consisted of the receipt of approximately $0.2 million in convertible notes which was offset by approximately $0.2 million in stock issuance costs related to the IPO. There was no net cash provided by financing activities for the six months ended June 30, 2022. The cash proceeds from the IPO will be recorded in the fiscal period subsequent to June 30, 2023. Seasonality Our business experiences limited seasonality. 25 Contractual Obligations, Commitments and Contingencies As of June 30, 2023, we had no contractual obligations for leases. Our office lease in Wesport, Connecticut terminated on June 30, 2023. On July 7, 2023, we signed a lease for 2,686 square feet of office space in Shelton, Connecticut. The lease term is 66 months, but we have an option to terminate this lease after 36 months. JOBS Act Accounting Election We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company”, we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our IPO or until we are no longer an “emerging growth company,” whichever is earlier. Critical Accounting Policies and Estimates Our management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. The preparation of our financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. These items are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates on historical experience, known trends and events, and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may materially differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in the notes to our financial statements included elsewhere in this report, we believe that the following accounting policies are those most significant to the judgments and estimates used in the preparation of our consolidated financial statements. Accrued Research and Development Expenses Research and development costs are expensed as incurred. We record the estimated patient care costs as services are provided but not yet invoiced and include these costs in the accrued expenses in the balance sheet and within research other expense in the statement or operations. Equity-Based Compensation We recognize compensation costs related to stock option grants to employees and board members and warrant grants to nonemployees based on the estimated fair value of the awards on the date of grant. We estimate the grant date fair value and the resulting stock-based compensation expense using the Black-Scholes option-pricing model. The grant date fair value of the stock-based awards is recognized on a straight-line basis over the requisite service periods, which are generally the vesting period of the respective awards. Forfeitures are accounted for as they occur. We historically have been a private company and lack company-specific historical and implied volatility information for our shares. Therefore, we estimate our expected share price volatility based on the historical volatility of publicly traded peer companies and expect to continue to do so until such time as we have adequate historical data regarding the volatility of our own traded share price. 26 Item 3. Quantitative and Qualitative Disclosures About Market Risk. Not applicable.