Oruka Therapeutics, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS ARCA BIOPHARMA, INC. BALANCE SHEETS (Unaudited) June 30, December 31, 2020 2019 (in thousands, except share and per share amounts) ASSETS Current assets: Cash and cash equivalents $ 11,041 $ 8,363 Other current assets 532 117 Total current assets 11,573 8,480 Right-of-use asset - operating 24 22 Property and equipment, net 12 10 Other assets 24 24 Total assets $ 11,633 $ 8,536 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 576 $ 418 Accrued compensation and employee benefits 152 129 Accrued expenses and other liabilities 600 379 Total current liabilities 1,328 926 Commitments and contingencies Stockholders’ equity: Common stock, $0.001 par value; 100 million shares authorized at June 30, 2020 and December 31, 2019; 2,267,570 and 1,594,070 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively 2 2 Additional paid-in capital 157,341 152,024 Accumulated deficit (147,038 ) (144,416 ) Total stockholders’ equity 10,305 7,610 Total liabilities and stockholders’ equity $ 11,633 $ 8,536 See accompanying Notes to Financial Statements 3 ARCA BIOPHARMA, INC. STATEMENTS OF OPERATIONS (unaudited) Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 (in thousands, except share and per share amounts) Costs and expenses: Research and development $ 372 $ 440 $ 737 $ 1,102 General and administrative 938 1,068 1,913 2,187 Total costs and expenses 1,310 1,508 2,650 3,289 Loss from operations (1,310 ) (1,508 ) (2,650 ) (3,289 ) Interest and other income 2 48 26 86 Interest expense (3 ) (3 ) (7 ) (6 ) Loss before income taxes (1,311 ) (1,463 ) (2,631 ) (3,209 ) Income tax benefit 9 27 9 109 Net loss $ (1,302 ) $ (1,436 ) $ (2,622 ) $ (3,100 ) Net loss per share: Basic and diluted $ (0.73 ) $ (1.14 ) $ (1.55 ) $ (2.87 ) Weighted average shares outstanding: Basic and diluted 1,793,900 1,263,768 1,693,985 1,080,885 See accompanying Notes to Financial Statements 4 ARCA BIOPHARMA, INC. STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited) Stockholders’ Equity Additional Common stock Paid-In Accumulated Shares Amount Capital Deficit Total (in thousands, except share amounts) Balance, December 31, 2018 773,558 $ 1 $ 144,965 $ (138,934 ) $ 6,032 Issuance of common stock for cash, net of offering costs 325,304 — 2,900 — 2,900 Share-based compensation — — 50 — 50 Adjustment for fractional shares (49 ) — — — — Net loss — — — (1,664 ) (1,664 ) Balance, March 31, 2019 1,098,813 1 147,915 (140,598 ) 7,318 Issuance of common stock for cash, net of offering costs 356,743 — 3,262 — 3,262 Share-based compensation — — 45 — 45 Net loss — — — (1,436 ) (1,436 ) Balance, June 30, 2019 1,455,556 1 151,222 (142,034 ) 9,189 Issuance of common stock for cash, net of offering costs 138,514 1 736 — 737 Share-based compensation — — 29 — 29 Net loss — — — (1,156 ) (1,156 ) Balance, September 30, 2019 1,594,070 2 151,987 (143,190 ) 8,799 Share-based compensation — — 27 — 27 Other — — 10 — 10 Net loss — — — (1,226 ) (1,226 ) Balance, December 31, 2019 1,594,070 2 152,024 (144,416 ) 7,610 Share-based compensation — — 16 — 16 Net loss — — — (1,320 ) (1,320 ) Balance, March 31, 2020 1,594,070 2 152,040 (145,736 ) 6,306 Issuance of common stock and exercise of prefunded warrants for cash, net of offering costs 673,500 — 5,297 — 5,297 Share-based compensation — — 4 — 4 Net loss — — — (1,302 ) (1,302 ) Balance, June 30, 2020 2,267,570 $ 2 $ 157,341 $ (147,038 ) $ 10,305 See accompanying Notes to Financial Statements 5 ARCA BIOPHARMA, INC. STATEMENTS OF CASH FLOWS (unaudited) Six Months Ended June 30, 2020 2019 (in thousands) Cash flows from operating activities: Net loss $ (2,622 ) $ (3,100 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 4 11 Amortization of right-of-use asset - operating 47 32 Share-based compensation 20 95 Change in operating assets and liabilities: Other current assets 95 161 Accounts payable (103 ) (13 ) Accrued compensation and employee benefits 23 (36 ) Accrued expenses and other liabilities (192 ) 94 Net cash used in operating activities (2,728 ) (2,756 ) Cash flows from investing activities: Purchases of property and equipment (6 ) — Net cash used in investing activities (6 ) — Cash flows from financing activities: Proceeds from the issuance of common stock 6,061 6,517 Common stock offering costs (514 ) (287 ) Repayment of principal on vendor finance agreement (135 ) (116 ) Net cash provided by financing activities 5,412 6,114 Net increase in cash and cash equivalents 2,678 3,358 Cash and cash equivalents, beginning of period 8,363 6,608 Cash and cash equivalents, end of period $ 11,041 $ 9,966 Supplemental cash flow information: Interest paid $ 4 $ 3 Income tax refund received $ 9 $ 109 Supplemental disclosure of noncash investing and financing transactions: Vendor finance agreement $ 273 $ 233 Common stock offering costs accrued but not yet paid $ 250 $ 68 Leased assets obtained in exchange for operating lease liabilities, upon extension and adoption $ 49 $ 60 See accompanying Notes to Financial Statements 6 ARCA BIOPHARMA, INC. NOTES TO FINANCIAL STATEMENTS (unaudited) (1) The Company and Summary of Significant Accounting Policies Description of Business ARCA biopharma, Inc. (the Company or ARCA), a Delaware corporation, is headquartered in Westminster, Colorado. The Company is a clinical-stage biopharmaceutical company applying a precision medicine approach to the development and commercialization of genetically targeted therapies for cardiovascular diseases. The Company’s lead product candidates are AB201 (rNAPc2) as a potential treatment for diseases caused by ribonucleic acid, or RNA, viruses, initially focusing on COVID-19, the disease syndrome caused by SARS-CoV-2 virus, and Gencaro™ (bucindolol hydrochloride) for the treatment of atrial fibrillation (AF) in patients with chronic heart failure (HF). AB201 is a protein therapeutic the Company plans to put into clinical development for the treatment of severe COVID-19 associated coagulopathy disease. Based on its unique mechanism of action, its development history and the accumulating clinical evidence from the SARS‑CoV-2 pandemic, the Company believes AB201 has potential to be a beneficial therapy for patients with this viral disease. Pending U.S. Food and Drug Administration, or FDA, guidance, the Company plans to initiate a Phase 2 clinical trial of AB201 as a potential treatment for patients hospitalized with COVID-19 in the fourth quarter of 2020. The Company has put initiation of the PRECISION-AF clinical trial of Gencaro on hold due to the ongoing COVID-19 pandemic and prioritizing the development of AB201. The Company estimates that, subject to obtaining additional financing, enrollment in PRECISION-AF could start in 2021; however, this estimate is subject to change due to the uncertainties of the ongoing COVID-19 pandemic and the availability of patients for non-COVID-19 related trials. The Company’s other product candidate, AB171, is a thiol-substituted isosorbide mononitrate, which ARCA plans to develop as a genetically-targeted treatment for HF and peripheral arterial disease. In March 2020, the World Health Organization declared the outbreak of COVID-19, a novel strain of Coronavirus, a global pandemic. This outbreak is causing major disruptions to businesses and markets worldwide as the virus spreads. The Company does not expect a material financial effect as a result of the pandemic. However, if the pandemic continues to be a severe worldwide crisis, it could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. Liquidity and Going Concern The Company devotes substantially all of its efforts towards obtaining regulatory approval and raising capital necessary to fund its operations and it is subject to a number of risks associated with clinical research and development, including dependence on key individuals, the development of and regulatory approval of commercially viable products, the need to raise adequate additional financing necessary to fund the development and commercialization of its products, and competition from larger companies. The Company has not generated revenue to date and has incurred substantial losses and negative cash flows from operations since its inception. The Company has historically funded its operations through issuances of common and preferred stock. The Company believes that its current cash and cash equivalents as of June 30, 2020, together with the net proceeds of $24.1 million raised from July 1, 2020 through July 31, 2020 from sales of its common stock, will be sufficient to fund its operations at the current cost structure plus projected costs for the AB201 clinical development program, through the end of the fourth quarter of 2021 . However, changing circumstances may cause us to consume capital significantly faster or slower than currently anticipated. The Company has based these estimates on assumptions that may prove to be wrong, and the Company could exhaust its available financial resources sooner than the Company currently anticipates. The Company will have to raise additional capital for clinical trials of our product candidates, AB201 and Gencaro. These financial statements have been prepared with the assumption that the Company will continue as a going concern and will be able to realize its assets and discharge its liabilities in the normal course of business and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the inability of the Company to continue as a going concern. The Company may not be able to raise sufficient capital on acceptable terms, or at all, to continue development of AB201 or Gencaro or to otherwise continue operations and may not be able to execute any strategic transaction. 7 The Company’s liquidity, and its ability to raise additional capital or complete any strategic transaction, depends on a number of factors, including, but not limited to, the following: • the costs and timing for the potential additional clinical trials in order to gain possible regulatory approval for AB201, Gencaro or any other product candidate; • the market price of the Company’s stock and the availability and cost of additional equity capital from existing and potential new investors; • the Company’s ability to retain the listing of its common stock on the Nasdaq Capital Market; • general economic and industry conditions affecting the availability and cost of capital, including as a result of the COVID-19 pandemic; • the Company’s ability to control costs associated with its operations; • the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; and • the terms and conditions of the Company’s existing collaborative and licensing agreements. The sale of additional equity or convertible debt securities would likely result in substantial additional dilution to the Company’s stockholders. If the Company raises additional funds through the incurrence of indebtedness, the obligations related to such indebtedness would be senior to rights of holders of the Company’s capital stock and could contain covenants that would restrict the Company’s operations. The Company also cannot predict what consideration might be available, if any, to the Company or its stockholders, in connection with any strategic transaction. Should strategic alternatives or additional capital not be available to the Company, or not be available on acceptable terms, the Company may be unable to realize value from its assets and discharge its liabilities in the normal course of business which may, among other alternatives, cause the Company to further delay, substantially reduce or discontinue operational activities to conserve its cash resources. Basis of Presentation The accompanying unaudited financial statements of the Company were prepared in accordance with generally accepted accounting principles for interim financial information and instructions to Form 10-Q and pursuant to Regulation S-X. Accordingly, these financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (GAAP) for complete financial statements. In the opinion of management, these financial statements include all normal and recurring adjustments considered necessary for a fair presentation of these interim financial statements. The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of results expected for the full year ending December 31, 2020. The Company has generated no revenue to date and its activities have consisted of seeking regulatory approval, research and development, exploring strategic alternatives for further developing and commercializing AB201 and Gencaro, and raising capital. These unaudited financial statements should be read in conjunction with the audited financial statements and footnotes thereto for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission. Amounts presented are rounded to the nearest thousand, where indicated, except per share data and par values. Concentrations of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents. The Company has no off-balance-sheet concentrations of credit risk, such as foreign exchange contracts, option contracts, or foreign currency hedging arrangements. The Company maintains cash and cash equivalent balances in the form of bank demand deposits and money market fund accounts with financial institutions that management believes are creditworthy. Such balances may at times exceed the insured amount. Comprehensive Loss Comprehensive loss is defined as the change in equity during a period from transactions and other events and/or circumstances from non-owner sources. If the Company had comprehensive gains (losses), they would be reflected in the statement of operations and comprehensive loss and as a separate component in the statement of stockholders’ equity. There were no elements of comprehensive loss during the three and six months ended June 30, 2020 and 2019. 8 Leases The Company determines if an arrangement is a lease at inception. Operating leases are included in right-of-use (ROU) asset – operating and lease obligations are included in accrued expenses and other liabilities on the Company’s June 30, 2020 and December 31, 2019 balance sheets. ROU lease assets represent the Company’s right to use an underlying asset for the lease term and lease obligations represent the Company’s obligation to make lease payments arising from the lease. Operating ROU lease assets are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company’s lease does not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Accrued Outsourcing Expenses As part of the process of preparing its financial statements, the Company is required to estimate accrued outsourcing expenses. This process involves identifying services that third parties have performed on the Company’s behalf and estimating the level of service performed and the associated cost incurred for these services as of the balance sheet date. Examples of estimated accrued outsourcing expenses include contract service fees, such as fees payable to contract manufacturers in connection with the production of materials related to the Company’s drug product, and service fees from clinical research organizations. The Company develops estimates of liabilities using its judgment based upon the facts and circumstances known at the time. Recent Accounting Pronouncements The Company reviewed recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact to the financial statements. (2) Net Loss Per Share The Company calculates basic earnings per share by dividing net loss by the weighted average common shares outstanding during the period. Diluted earnings per share is computed by dividing net loss by the weighted average number of common shares outstanding during the period increased to include, if dilutive, the number of additional common shares that would have been outstanding if the potential common shares had been issued. The Company’s potentially dilutive shares include stock options and warrants for common stock . Because the Company reported a net loss for the three and six months ended June 30, 2020 and 2019, all potentially dilutive shares of common stock have been excluded from the computation of the dilutive net loss per share for all periods presented. Such potentially dilutive shares of common stock consist of the following: June 30, 2020 2019 Potentially dilutive securities, excluded: Outstanding stock options 30,890 32,833 Warrants to purchase common stock 133,401 135,862 164,291 168,695 9 (3) Fair Value Disclosures There were no marketable securities as of June 30, 2020 or December 31, 2019. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). Inputs used to measure fair value are classified into the following hierarchy: • Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities. The Company’s Level 1 assets consist of money market investments. The Company does not have any Level 1 liabilities. • Level 2—Unadjusted quoted prices in active markets for similar assets or liabilities; unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs other than quoted prices that are observable for the asset or liability. The Company does not have any Level 2 assets or liabilities. • Level 3—Unobservable inputs for the asset or liability. The Company does not have any Level 3 assets or liabilities. As of June 30, 2020 and December 31, 2019, the Company had $11.0 million and $8.3 million, respectively, of cash equivalents consisting of money market funds. The Company has the ability to liquidate these investments without restriction. The Company determines fair value for these money market funds with Level 1 inputs through quoted market prices. There were no transfers of assets between fair value hierarchy levels during the six-month periods ended June 30, 2020 and year ended December 31, 2019. Fair Value of Other Financial Instruments The carrying amount of other financial instruments, including accounts payable and a vendor finance agreement, which are included in accounts payable and accrued expenses and other liabilities, approximated fair value due to their short maturities. (4) Property and Equipment Property and equipment consist of the following (in thousands): Estimated Life June 30, 2020 December 31, 2019 Computer equipment 3 years $ 29 $ 54 Lab equipment 5 years 146 142 Furniture and fixtures 5 years 61 61 Computer software 3 years 61 61 Leasehold improvements Lesser of useful life or life of the lease 59 59 356 377 Accumulated depreciation and amortization (344 ) (367 ) Property and equipment, net $ 12 $ 10 For the six months ended June 30, 2020 and 2019, depreciation and amortization expense was $4,000 and $11,000, respectively. (5) Related Party Arrangements Transactions with the Company’s President and Chief Executive Officer The Company has entered into unrestricted research grants with its President and Chief Executive Officer’s academic research laboratory at the University of Colorado. Funding of any unrestricted research grants is contingent upon the Company’s financial condition, and can be deferred or terminated at the Company’s discretion. Total expense under these arrangements for the six months ended June 30, 2020 and 2019 was $141,000 and $141,000 respectively. 10 (6) Commitments and Contingencies The Company has or is subject to the following commitments and contingencies. Employment Agreements The Company maintains employment agreements with several key executive employees. The agreements may be terminated at any time by the Company with or without cause upon written notice to the employee, and entitle the employee to wages in lieu of notice for periods not exceeding one calendar year from the date of termination without cause or by the employee for good reason. Certain of these agreements also provide for payments to be made under certain conditions related to a change in control of the Company. Operating Lease On August 1, 2013 the Company entered into a lease agreement for approximately 5,300 square feet of office facilities in Westminster, Colorado which has served as the Company’s primary business office since October 1, 2013. In March 2016, October 2019 and February 2020 the lease was amended to extend the lease term. Effective February 24, 2020, the lease was renewed for an additional six month term beginning April 1, 2020 and expiring on September 30, 2020 (the February 2020 Amendment). Under the February 2020 Amendment, the Company has no further rights to extend or renew this lease agreement. The lease includes real estate taxes and insurance, which is not a lease component and is not included in the lease obligation. In addition, common area maintenance charges are based on actual costs incurred and are a non-lease component that is not included in the lease obligation. Below is a summary of the future undiscounted minimum lease payments committed for the Company’s facility in Westminster, Colorado as of June 30, 2020 (in thousands): Remainder of 2020 $ 25 Total future minimum lease payments $ 25 Rent expense, which is included in general and administrative expense, for the six months ended June 30, 2020 and 2019 was $48,000 and $34,000, respectively. As of June 30, 2020 and December 31, 2019, the lease liability was $25,000 and $25,000, respectively, and is included in accrued expenses and other liabilities. Cash paid for amounts included in the measurement of lease liabilities and the operating cash flows from operating leases for the six months ended June 30, 2020 and 2019 were $51,000 and $45,000, respectively. The weighted-average remaining lease term for the operating lease as of June 30, 2020 is 0.3 years. The weighted-average discount rate for the operating lease is 7.5%. Cardiovascular Pharmacology and Engineering Consultants, LLC ARCA has licensed worldwide rights to all preclinical and clinical data from development of bucindolol through the BEST trial from Cardiovascular Pharmacology and Engineering Consultants, LLC (CPEC), who has licensed rights to this data from Bristol Myers Squib (BMS). CPEC is a licensing subsidiary of Indevus Pharmaceuticals Inc. (a wholly owned subsidiary of Endo Pharmaceuticals), holding ownership rights to certain clinical trial data of Gencaro. Under the terms of its license agreement with CPEC, the Company will incur milestone and royalty obligations upon the occurrence of certain events. If the FDA grants marketing approval for Gencaro, the license agreement states that the Company will owe CPEC a milestone payment of $8.0 million within six months after FDA approval. The license agreement states that a milestone payment of up to $5.0 million in the aggregate shall be paid upon regulatory marketing approval in Europe and Japan. The license agreement also states that the Company’s royalty obligation ranges from 12.5% to 25% of revenue from the related product based on achievement of specified product sales levels, including a 5% royalty that CPEC is obligated to pay under its original license agreement for Gencaro. The agreement states that the Company has the right to buy down the royalties to a range of 12.5% to 17% by making a payment to CPEC within six months of regulatory approval. In October 2017, the Company entered into an agreement with CPEC’s minority owner, Aeolus Pharmaceuticals, Inc. (Aeolus) pursuant to which the Company acquired Aeolus’ minority membership interest in CPEC. The transaction effectively bought out Aeolus’ royalty interest thereby reducing or eliminating the stated milestone and royalty obligations that could be payable by the Company, if Gencaro receives regulatory approval and is commercialized. As a result of this transaction, the Company, together with Endo Pharmaceuticals, Inc., indirectly hold the remaining licensee rights of CPEC to certain Gencaro clinical data, discussed above. The acquisition cost of this interest did not have a material impact on the Company’s financial statements. 11 (7) Equity Financings and Warrants Registered Direct Financing On June 3, 2020, the Company closed a registered direct offering with certain institutional and accredited investors of 348,000 shares of the Company’s common stock, at a purchase price of $9.00 per share, and pre-funded warrants to purchase 325,500 shares of common stock at a purchase price of $8.999 per warrant. All warrants were exercised by the closing date. No pre-funded warrants are outstanding as of June 30, 2020. The net proceeds were approximately $5.3 million, after deducting placement agent fees and other offering expenses. The Company paid JonesTrading a placement agent fee equal to 8.0% of the aggregate gross proceeds and agreed to provide JonesTrading with customary indemnification and contribution rights. At the Market Equity Financing On January 11, 2017, the Company entered into a Capital on Demand TM Sales Agreement (the Sales Agreement) with JonesTrading Institutional Services LLC, as agent (JonesTrading), pursuant to which the Company may offer and sell, from time to time through JonesTrading, shares of the Company’s common stock, par value $0.001 per share (the Common Stock), having an aggregate offering price of up to $7.3 million. On August 21, 2017, January 25, 2019, March 11, 2019, May 9, 2019, May 20, 2019, June 28, 2019, July 2, 2020 and July 14, 2020, the Company amended its Capital on Demand Sales Agreement. The amendments, among other things, increased the maximum aggregate offering value of shares of the Company’s common stock which the Company may issue and sell from time to time under the Sales Agreement from $7.3 million to $32.4 million (the Shares). Under the amended Sales Agreement, JonesTrading may sell the Shares by any method permitted by law and deemed to be an “at the market offering” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, including sales made directly on or through the Nasdaq Capital Market, on any other existing trading market for the Common Stock or to or through a market maker. In addition, under the amended Sales Agreement, JonesTrading may sell the Shares by any other method permitted by law, including in negotiated transactions. The Company may instruct JonesTrading not to sell Shares if the sales cannot be effected at or above the price designated by the Company from time to time. The Company is not obligated to make any sales of the Shares under the amended Sales Agreement. The offering of Shares pursuant to the amended Sales Agreement will terminate upon the earlier of (a) the sale of all of the Shares subject to the amended Sales Agreement or (b) the termination of the amended Sales Agreement by JonesTrading or the Company, as permitted therein. The Company paid JonesTrading a commission rate equal to 3.0% of the aggregate gross proceeds from each sale of Shares and agreed to provide JonesTrading with customary indemnification and contribution rights. The Company will also reimburse JonesTrading for certain specified expenses in connection with entering into and amending the Sales Agreement. Under the amended Sales Agreement, the Company sold an aggregate of 820,561 shares of Common Stock, for net proceeds of approximately $6.9 million, during the year ended December 31, 2019, including initial expenses for executing the “at the market offering” and commissions to the placement agent. There were no sales sold under this offering in the six months ended June 30, 2020. In July 2020, the Company sold an aggregate of 2,214,301 shares of Common Stock, for net proceeds of approximately $14.4 million under the Sales Agreement. This sales agreement terminated in July 2020. On July 22, 2020, the Company entered into a new Capital on Demand TM Sales Agreement (the 2020 Sales Agreement) with JonesTrading, pursuant to which the Company may offer and sell, from time to time through JonesTrading, shares of the Company’s Common Stock, having an aggregate offering price of up to $54.0 million. As of July 31, 2020, the Company had sold an aggregate of 1,423,413 shares of its Common Stock pursuant to the terms of the 2020 Sales Agreement for net proceeds of approximately $9.7 million, after deducting expenses for executing the “at the market offering” and commissions paid to the placement agent. As of July 31, 2020, the Company has $43.9 million available for this offering under its prospectus to the Company’s registration statement on Form S-3 (No. 333-238067). Warrants Warrants to purchase shares of common stock were previously granted as part of various financing and business agreements. All outstanding warrants were recorded in additional paid-in capital at their estimated fair market value at the date of grant using a Black-Scholes option-pricing model. 12 As of June 30, 2020 , these warrants, by year of expiration, are summarized below: Year of Expiration Number of Warrants Weighted Average Exercise Price 2022 133,401 $ 109.80 (8) Share-based Compensation For the three and six month periods ended June 30, 2020 and 2019, the Company recognized the following non-cash, share-based compensation expense in the statements of operations (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Research and development $ 4 $ 22 $ 13 $ 45 General and administrative — 23 7 50 Total $ 4 $ 45 $ 20 $ 95 Stock option transactions for the six month period ended June 30, 2020 under the Company’s stock incentive plans were as follows: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Options outstanding at December 31, 2019 31,136 $ 84.50 6.26 Granted — — Exercised — — Forfeited and cancelled (246 ) 591.88 Options outstanding at June 30, 2020 30,890 $ 80.46 5.81 Options exercisable at June 30, 2020 30,684 $ 81.17 5.81 Options vested and expected to vest 30,890 $ 80.46 5.81 (9) Income Taxes In accordance with GAAP, a valuation allowance should be provided if it is more likely than not that some or all of the Company’s deferred tax assets will not be realized. The Company’s ability to realize the benefit of its deferred tax assets will depend on the generation of future taxable income. Due to the uncertainty of future profitable operations and taxable income, the Company has recorded a full valuation allowance against its net deferred tax assets. The Company believes its tax filing positions and deductions related to tax periods subject to examination will be sustained upon audit and, therefore, has no reserve for uncertain tax positions. Income tax benefit of $9,000 for the three and six months ended June 30, 2020 was related to realization of alternative minimum tax carryforwards. Income tax benefit of $27,000 and $109,000 for the three and six months ended June 30, 2019 primarily was related to the reduction in the recorded valuation allowance as a result of the realization of research and experimentation credit carryforwards under the Protecting Americans from Tax Hikes Act of 2015 (PATH Act). As of December 31, 2019, the Company had realized the full amount available under the PATH Act. (10) Subsequent Event In July 2020, the Company amended its Sales Agreement and issued additional Common Stock, as discussed in Note 7. 13 I TEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the Private Securities Litigation Reform Act of 1995. Examples of these statements include, but are not limited to, statements regarding the following: potential future development plans for AB201 and Gencaro, including the potential for AB201 to treat COVID-19, including our ability to secure sufficient financing to support our anticipated clinical trials of AB201 and Gencaro, the likelihood that any Phase 3 clinical trial results for Gencaro to satisfy the requirements of our Special Protocol Assessment agreement, the expected features and characteristics of Gencaro, including the potential for genetic variations to predict individual patient response to Gencaro or AB171, Gencaro’s potential to treat atrial fibrillation, or AF, future vaccines and/or treatment options for patients with COVID-19, future treatment options for patients with AF, the potential for Gencaro to be the first genetically-targeted AF prevention treatment, statements regarding potential Phase 3 development plans for Gencaro, including the timing and results thereof, the expected features and characteristics of AB171 as a potential genetically-targeted treatment for peripheral arterial disease, or PAD, and for heart failure, or HF, the potential timeline for development of AB171, including any Investigational New Drug, or IND, application submission related thereto, and the ability of ARCA’s financial resources to support its operations through the end of the fourth quarter of 2021, the sufficiency of our current capital to reach certain of our corporate objectives, our ability to obtain additional funding when needed or enter into a strategic or other transaction, including our ability to raise sufficient capital to fund any clinical trials for AB201 and Gencaro and our other operations, the extent to which our issued and pending patents may protect our products and technology, the potential of such product candidates to lead to the development of safe or effective therapies, our ability to enter into collaborations, our ability to maintain listing of our common stock on a national exchange, our future operating expenses, our future losses, our future expenditures, and the sufficiency of our cash resources to maintain operations. Actual results and performance could differ materially from those projected in the forward-looking statements as a result of many factors discussed herein and elsewhere. These and other factors are identified and described in more detail in ARCA’s filings with the U.S. Securities and Exchange Commission, or the SEC, including without limitation our annual report on Form 10-K for the year ended December 31, 2019, and subsequent filings. Forward-looking statements may be identified by words including “will,” “plan,” “anticipate,” “believe,” “intend,” “estimates,” “expect,” “should,” “may,” “potential” and similar expressions. We disclaim any intent or obligation to update these forward-looking statements. The terms “ARCA,” “the Company,” “we,” “us,” “our” and similar terms refer to ARCA biopharma, Inc. Overview We are a clinical-stage biopharmaceutical company applying a precision medicine approach to the development and commercialization of genetically targeted therapies for cardiovascular diseases. Precision medicine refers to the tailoring of medical treatment to the individual characteristics of patients, using genomic, non-genomic biomarker and other information that extends beyond routine diagnostic categorization. We believe that when implemented correctly precision medicine can enhance therapeutic response, improve patient outcomes, and reduce healthcare costs. Our lead product candidates are AB201 (rNAPc2) as a potential treatment for diseases caused by ribonucleic acid, or RNA, viruses, initially focusing on COVID-19, the disease syndrome caused by SARS-CoV-2 virus, and Gencaro™ (bucindolol hydrochloride) for the treatment of atrial fibrillation, or AF, in patients with chronic heart failure, or HF. AB201 (rNAPc2) for COVID-19 associated coagulopathy AB201, also known as Recombinant Nematode Anticoagulant Protein c2, or rNAPc2, is a protein therapeutic we plan to put into clinical development for the treatment of severe COVID-19 disease. Based on its unique mechanism of action, its development history and the accumulating clinical evidence from the SARS-CoV-2 pandemic, we believe AB201 has potential to be a beneficial therapy for patients with this viral disease. Pending U.S. Food and Drug Administration, or FDA, guidance, we plan to initiate a Phase 2 clinical trial of AB201 as a potential treatment for patients hospitalized with COVID-19 in the fourth quarter of 2020. We believe that AB201 is the most potent and long-acting inhibitor of tissue factor, or TF. TF is a cellular receptor widely distributed in mammalian tissues and involved in many essential biological processes. TF is responsible for initiation of the primary coagulation pathway, the mechanism by which blood clotting occurs in the body in response to injury. Recent research has also shown that various TF pathways are involved in the immune system inflammatory response to viral infections and in the process of viral dissemination during infection. As the SARS-CoV-2 pandemic has progressed, serious complications relating to over-activation of the coagulation and immune systems have increasingly been observed in patients hospitalized with severe disease. We believe this evidence implicates the various TF pathways, and provides a strong rationale to test AB201 as a potential therapeutic for COVID-19. AB201 has not yet been tested in any pre-clinical COVID‑19 models or in any patients diagnosed with COVID-19. 14 AB2 01 was originally developed for potential use as an anticoagulant, due to its inhibition of the TF-initiated coagulation process. It was evaluated for the prevention of thrombosis in a Phase 1 and Phase 2 clinical program involving over 700 subjects, and d emonstrated both safety and efficacy in these studies. AB201 has also been investigated as a potential therapeutic for severe viral infections other than COVID-19. Research had shown that viral infections can provoke dysregulated activation of the TF pathw ay, resulting in abnormal systemic coagulation and related inflammation, leading to organ failure and mortality. For this reason, AB201 was tested as a therapeutic in non-human primates, or NHPs, in studies against lethal doses of the Ebola and Marburg vir uses, where it showed evidence of efficacy in the form of mortality reduction, decreases in inflammatory biomarkers and evidence of reduced disseminated intravascular coagulation (DIC). SARS-CoV-2 is a new coronavirus identified in late 2019 and belongs to a family of enveloped RNA viruses that include Middle East Respiratory Syndrome (MERS) and Severe Acute Respiratory Syndrome (SARS-CoV), both of which caused serious human infections of the respiratory system. The disease caused by the SARS-CoV-2 virus has been designated COVID-19. Since this outbreak was first reported in late 2019, the virus has infected over 18 million people and has caused over 0.6 million reported deaths (as of August 4, 2020). COVID-19 is associated with a high incidence of coagulation-related adverse events, including stroke, myocardial infarction, or MI, (i.e., heart attack), pulmonary emboli, and DIC, a condition in which small blood clots develop throughout the bloodstream, blocking small vessels. This syndrome is so frequently observed in COVID-19 that it has received the name of COVID-19 Associated Coagulopathy, or CAC. A commonly used biomarker for assessing coagulation activation and the presence of CAC is a D-dimer test, which is elevated in approximately 50% of hospitalized COVID-19 patients and is associated with adverse clinical outcomes. Researchers believe that this and other evidence points to dysregulation of TF pathways in COVID-19 patients and the resulting development of CAC. AB201 has shown potential in addressing the coagulation disorder caused by severe viral infections. In the preliminary studies in NHPs against lethal doses of the Ebola and Marburg virus, AB201 lowered D-dimer levels, reduced mortality and showed other anti-inflammatory effects. More recent research supports our belief that AB201 has the unique ability to inhibit the activity of TF in multiple processes that contribute to severe viral disease. Taken together, this evidence suggests that AB201 may have therapeutic benefits for patients with severe COVID-19 disease, as manifested by the presence of CAC. As a therapeutic aimed at a host response disease syndrome, we believe AB201 potentially could be used in combination with other antiviral drugs. We believe its potential efficacy is not linked to a specific viral genome and may not be diminished by genetic drift or the development of new strains of the SARS-CoV-2 virus. As a therapeutic addressing a disease syndrome, AB201 may have broad spectrum potential against multiple pathogens that have disease elements in common with COVID‑19, such as other coronaviruses and other RNA viruses. Therefore, we believe that AB201 has therapeutic potential for future viral outbreaks beyond the current pandemic, even after a safe and effective vaccine has been successfully developed for SARS-CoV-2. AB201 is a single-chain, 85 amino acid, recombinant protein administered subcutaneously, that has previously been evaluated under three FDA Investigational New Drug, or IND, applications in nine Phase 1 and Phase 2 clinical trials in the United States and Europe. This clinical program primarily examined the safety, dosing and anticoagulation effects of AB201 in treating thrombosis in patients with acute coronary syndromes, who had undergone surgical procedures and needed prophylactic anticoagulation, or who were undergoing percutaneous coronary interventions. In these trials, involving more than 700 human subjects with over 600 exposed to drug, AB201 was well-tolerated with a well-demonstrated safety profile. AB201 is manufactured in an engineered yeast strain by an established methodology following current Good Manufacturing Practices, or cGMP, and we believe this process can be readily scaled to commercial quantities. FDA granted AB201 Orphan Drug Designation status in 2014 for the treatment of viral hemorrhagic fever post-exposure to Ebola virus, but clinical trials were not conducted. Pending FDA guidance, we plan to initiate clinical testing of AB201 as a potential treatment for COVID-19 in the fourth quarter of 2020. To enable this timeline, we anticipate filing an IND application with the FDA in the third quarter of this year. We plan to initially evaluate AB201 for the treatment of patients hospitalized with COVID-19 who have evidence of CAC, as indicated by elevated D-dimer levels. We plan to collaborate with an experienced clinical research network to conduct the initial COVID-19 trial. We plan to finance the development of AB201 through public or private equity or debt funding and, potentially, governmental sources. Our AB201 development plans, including the timeline, will depend on FDA guidance and our ability to finance the development, which are currently uncertain. If we are successful in developing AB201, we will hold exclusive commercial rights to the compound. This includes pending and existing patents, 12 years market exclusivity as a reference biological product under FDA law in the United States, and data exclusivity in the European Union (EU). As we launch the development of AB201, we plan to pursue strategic co-development and partnering opportunities for its further development and commercialization. Gencaro™ (bucindolol hydrochloride) for Atrial Fibrillation Gencaro™ (bucindolol hydrochloride), is a pharmacogenetically-targeted beta-adrenergic receptor antagonist with mild vasodilator properties that we are developing as a fourth-generation beta-blocker based on its pharmacogenetic targeting. We believe the 15 pharmacology of Gencaro is unique and has the potential for enhanced efficacy in patient s with a specific genetic characteristic for the beta-1 adrenergic receptor, termed the beta-1 389 arginine homozygous genotype. The beta-1 389 arginine homozygous genotype is present in approximately 50% of the North American and European general populati ons, and it can be detected by a genetic test currently performed in a centralized laboratory or in the future potentially at the point of care during a patient visit. We are developing Gencaro to treat cardiovascular disease, focusing on atrial fibrillation, or AF, in patients with chronic heart failure, or HF. HF is a chronic condition in which the heart is unable to pump enough blood to meet the body’s needs. AF is a disruption of the heart’s normal rhythm or rate, which commonly occurs in patients with HF. In HF patients, the presence of AF leads to worsening symptoms, and increased risk of hospitalization and death. Current treatment options for AF in HF patients are limited, and can be invasive, costly and dangerous. Gencaro was the subject of a Phase 3 HF development program that identified a key genetic biomarker that enhanced the drug’s efficacy. Patients with a particular genotype had enhanced improvements in mortality, hospitalization and the prevention of arrhythmias. We believe that this genotype, is detectable using standard DNA testing technology, can serve as a diagnostic marker for predicting enhanced therapeutic response to Gencaro. Our current clinical development of Gencaro is focused on AF in HF patients who have a left ventricular ejection fraction, or LVEF, of 40% and higher and the specific genotype we believe responds best to Gencaro. There are currently no drug therapies approved to treat AF or HF in this population, which encompasses more than half of all HF in the United States and Europe. We believe that, if approved, there are additional indication expansion opportunities for Gencaro in other HF populations and cardiac arrhythmias, as well as the potential for new formulation developments to extend marketing exclusivity. In May 2019, we published the results of our Phase 2B clinical trial that examined Gencaro for the prevention of AF in HF patients, in the Journal of the American College of Cardiology: Heart Failure. In this trial, known as GENETIC-AF, we compared Gencaro against TOPROL‑XL (metoprolol succinate), a beta-blocker that is commonly prescribed for HF patients with AF. GENETIC-AF enrolled 267 HF patients with LVEF values ranging from 12% to 55% who had recently experienced AF and had the specific genotype we believe responds best to Gencaro. Our analysis of the results identified what we believe is a targeted patient population for Phase 3 development; one showing greater response to Gencaro compared to TOPROL-XL for multiple clinical assessments, including the primary endpoint of time to AF recurrence, maintenance of normal sinus rhythm, cumulative AF burden, and AF-related clinical interventions and complications. In July 2019, we reached an agreement with the U.S. Food and Drug Administration, or FDA, known as a Special Protocol Assessment, or SPA, for the requirements of the Gencaro Phase 3 clinical trial. Based on the SPA agreement, our planned Phase 3 clinical trial, if successful at a statistical threshold of at least p ≤ 0.01, may support a New Drug Application, or NDA, for the marketing approval of Gencaro. PRECISION‑AF, the clinical trial specified by the SPA, is anticipated to enroll approximately 400 HF patients with LVEF values ranging from 40% to 55% who have recently experienced AF and have the specific genotype we believe responds best to Gencaro. The clinical trial design is similar to GENETIC-AF, including the active comparator, TOPROL‑XL, and the primary endpoint of time to AF recurrence during a 6-month follow-up period. Secondary objectives will examine other important endpoints, such as AF burden and AF treatment-related interventions. We believe that patients with HF and AF represent a major unmet medical need, and this need is most pronounced in patients with LVEF values of 40% and above. This LVEF range constitutes more than half of all chronic HF in the United States and Europe, and there are currently no approved or guideline recommended therapies for these patients to treat either their AF or HF. AF is a very common complication in these patients, with estimates of AF incidence ranging from 40% to 60%. Beta-blockers approved for HF are commonly used off-label to treat AF and HF in these patients, but they are only moderately effective in preventing AF and none are approved for patients with LVEF ≥ 40%. Other anti-arrhythmic drugs approved for the treatment of AF have adverse side effects and in HF patients are either contraindicated or have label warnings for use due to an increased risk of mortality. Interventional procedures for AF, such as catheter ablation and electrical cardioversion, are invasive, expensive, and often temporary; typically requiring the continued use of beta blockers post-intervention to manage both AF and HF. 16 We believe that Gencaro, if approved, may be a safe and mor e effective therapy for the treatment of HF patients with AF. We believe there are several potentially important attributes that would differentiate Gencaro from existing therapies, including: • More effective rhythm control compared to the current standard of care; • Reduction in the need for catheter ablation, electrical cardioversion, or toxic anti-arrhythmic drugs; • Effective rate control with lower risk of treatment-limiting bradycardia; • Foundational beta-blocker benefits for HF and unique evidence of efficacy in HF patients with AF; • The only drug therapy approved and shown effective for AF in HF patients with LVEF ≥ 40%. We have exclusive development and commercial rights for Gencaro in all indications. We have an international patent portfolio for Gencaro in the United States, the European Union, or EU, and other major markets, as well as new chemical entity status, which we believe will give us a strong intellectual property position to at least approximately 2031 in the United States and approximately ten years from approval in the EU. Additional issued and pending patents have the potential for longer exclusivity in these and other markets. We have developed a laboratory platform to perform the genetic test that was approved by FDA for use in the Phase 2B clinical trial. We retain all rights to this test platform which we expect to use in future clinical trials, and which we believe could be used for commercialization. To support the continued development of AB201 and Gencaro, we will need additional financing to fund the planned clinical trials of AB201 and the PRECISION-AF clinical trial, and our general and administrative costs through the trials’ projected completion. Considering the substantial time and costs associated with the development of AB201 and Gencaro and the risk that we may be unable to raise a significant amount of capital on acceptable terms, we are also pursuing co-development and commercialization partnering opportunities with large pharmaceutical and/or specialty pharmaceutical companies and may pursue a strategic combination or other strategic transactions. If we are delayed in obtaining financing or are unable to complete a strategic transaction, we may discontinue our development activities on AB201 or Gencaro or discontinue our operations . We believe our cash and cash equivalents balance as of June 30, 2020, together with the net proceeds of $24.1 million raised from July 1, 2020 through July 31, 2020 from sales of our common stock, will be sufficient to fund our operations at our current cost structure plus projected costs for the AB201 clinical development program, through the end of the fourth quarter of 2021. However, changing circumstances may cause us to consume capital significantly faster or slower than currently anticipated. We have based these estimates on assumptions that may prove to be wrong, and we could exhaust our available financial resources sooner than we currently anticipate. We will have to raise additional capital for clinical trials of our product candidates, AB201 and Gencaro. In March 2020, the World Health Organization declared the outbreak of COVID-19, a novel strain of Coronavirus, a global pandemic. This outbreak is causing major disruptions to businesses and markets worldwide as the virus spreads. We do not expect a material financial effect as a result of the pandemic. However, if the pandemic continues to be a severe worldwide crisis, it could have a material adverse effect on our business, results of operations, financial condition and cash flows. In 2017, we entered into a sales agreement, with an agent to sell, from time to time, our common stock having an aggregate offering price of up to $10.2 million, in an “at the market offering.” In 2020, we further amended the sales agreement to increase the maximum aggregate value of shares which we may issue and sell from time to time under this sales agreement to $32.4 million. This sales agreement terminated in July 2020. Under this sales agreement, we had sold an aggregate of 3,302,159 shares of our common stock pursuant to the terms of such sales agreement, as amended, for aggregate gross proceeds of approximately $32.3 million. Net proceeds received in this offering were approximately $30.8 million, after deducting expenses for executing the “at the market offering” and commissions paid to the placement agent. In July 2020, we entered into a new sales agreement, with an agent to sell, from time to time, our common stock having an aggregate offering price of up to $54.0 million, in an “at the market offering.” As of July 31, 2020, we had sold an aggregate of 1,423,413 shares of our common stock pursuant to the terms of such sales agreement for aggregate gross proceeds of approximately $10.1 million. Net proceeds received in this offering were approximately $9.7 million, after deducting expenses for executing the “at the market offering” and commissions paid to the placement agent. As of July 31, 2020, we have $43.9 million available for this offering under its prospectus to our registration statement on Form S‑3 (No. 333-238067). 17 The Proposed Phase 3 AF Clinical Trial (PRECISION-AF) Our planned Phase 3 development program of Gencaro is based on the results from GENETIC-AF and a prospectively designed DNA substudy of adrenergic receptor polymorphisms in the BEST trial, a previous Phase 3 study of bucindolol in 2,708 HF patients that showed potential evidence of enhanced efficacy in treating AF and in reducing mortality and hospitalizations in HF patients with the beta-1 389 arginine homozygous genotype. The PRECISION-AF Phase 3 clinical trial is designed as a double-blind, active-controlled, multicenter, international, adaptive study comparing Gencaro with TOPROL-XL for the prevention of recurrent AF/atrial flutter, or AF/AFL, or all-cause mortality, or ACM, in HF patients. The study is expected to enroll approximately 400 patients at investigative sites in the United States, Europe and Australia. Eligible patients will have LVEF ≥ 40% and ≤ 55%, a recent AF event, and the beta-1 389 arginine homozygous genotype which we believe responds best to Gencaro. The planned trial will use a significance criterion for the primary endpoint of p ≤ 0.05; however, the proposed sample size has greater than 90% power for a p-value ≤ 0.01, the regulatory threshold specified in the SPA agreement to allow for approval based on a single Phase 3 clinical trial. The trial will include an interim analysis after a portion of total patients have been enrolled that is designed to assess safety, validate initial study assumptions and maintain adequate statistical power for the primary endpoint. We have put initiation of the PRECISION-AF trial on hold due to the ongoing COVID-19 pandemic and prioritizing the development of AB201. We estimate that enrollment in PRECISION-AF could start in 2021; however, this estimate is subject to change due to the uncertainties of the ongoing COVID-19 pandemic and the availability of patients for non-COVID-19 related trials. Any future development of Gencaro, including initiating any Phase 3 clinical trial, is dependent on obtaining significant additional financing. AB171 AB171 is a thiol-containing derivative of isosorbide mononitrate. Pre-clinical data indicate that AB171 may have antioxidant properties and may be favorably differentiated from other nitrates for prevention of myocardial remodeling, anti-atherosclerotic effects and the loss of effectiveness when used as a sustained therapy. We believe the unique pharmacology of AB171, coupled with targeting to genetically identified enhanced response subpopulations, has the potential to translate to better long-term responses than currently available treatments. We have identified what we believe to be a pharmacogenetic target for AB171 that is the basis for our patents, and which may enable genetically targeted cardiovascular development programs in two cardiovascular indications: HF and PAD. The European Patent Office has issued a patent to us on methods of treating cardiovascular disease and conditions with a thiol-substituted isosorbide mononitrate based on genetic targeting. The European patent has been validated in ten countries in the EMA: We also have related patent applications pending in the United States Patent Office and Canadian Intellectual Property Office. Subject to availability of capital, we may initiate non-clinical studies to support a potential IND submission and initiation of clinical development in 2021 for AB171 as a potential genetically targeted treatment for HF and PAD. Results of Operations Research and Development Expenses Research and development, or R&D, expense is comprised primarily of personnel costs, clinical development, manufacturing process development, and regulatory activities and costs. Our R&D expense continues to be almost entirely generated by our activities relating to the development of Gencaro. R&D expense for the three months ended June 30, 2020 was $0.4 million compared to $0.4 million for the corresponding period of 2019, a decrease of $68,000. R&D expense for the six months ended June 30, 2020 was $0.7 million compared to $1.1 million for the corresponding period of 2019, a decrease of approximately $0.4 million R&D personnel costs decreased approximately $0.1 million for the three months ended June 30, 2020, as compared to the corresponding period of 2019. R&D personnel costs decreased approximately $0.3 million for the six months ended June 30, 2020, as compared to the corresponding period of 2019. The remaining decrease is primarily a result of lower outside services and consulting costs. We plan to initiate clinical testing of AB201 as a potential treatment for COVID‑19 in the second half of 2020. R&D expense in 2020 is expected to be higher than 2019, if we initiate our AB201 clinical trial. If we are unable to initiate our AB201 clinical trial, then R&D expense is expected to be consistent with 2019. General and Administrative Expenses General and administrative, or G&A, expenses primarily consist of personnel costs, consulting and professional fees, insurance, facilities and depreciation expenses, and various other administrative costs. 18 G&A expenses were $ 0.9 million and $1.1 million for the thr ee months ended June 30 , 2020 and 201 9 , respectively . The $ 0.1 million de crease was primarily a result of lower personnel costs and lower outside services and consulting costs in 20 20 . G&A expenses were $1.9 million and $2.2 million for the six months ended June 30, 2020 and 2019, respectively. The $0.3 million decrease was primarily a result of lower personnel costs and lower outside services and consulting costs in 2020. G&A expenses in 2020 are expected to be consistent with those in 2019 as we maintain administrative activities to support our ongoing operations. Interest and Other Income Interest and other income was $2,000 and $48,000 in the three months ended June 30, 2020 and 2019, respectively. Interest and other income was $26,000 and $86,000 in the six months ended June 30, 2020 and 2019, respectively. Interest Expense Interest expense was $3,000 and $3,000 for the three months ended June 30, 2020 and 2019, respectively. Interest expense was $7,000 and $6,000 for the six months ended June 30, 2020 and 2019, respectively. Based on our current capital structure, interest expense for the remainder of 2020 is expected to be negligible. Income Tax Benefit Income tax benefit for the three and six months ended June 30, 2020 was $9,000. Income tax benefit was $27,000 and $109,000 for the three and six months ended June 30, 2019, respectively. The income tax benefit in 2019 was primarily related to the reduction in the recorded valuation allowance as a result of the realization of research and experimentation credit carryforwards under the Protecting Americans from Tax Hikes Act of 2015, or PATH Act. In 2019, the benefit was fully monetized and we do not expect additional significant income tax benefit in 2020. Liquidity and Capital Resources Cash and Cash Equivalents June 30, December 31, 2020 2019 (in thousands) Cash and cash equivalents $ 11,041 $ 8,363 As of June 30, 2020, we had total cash and cash equivalents of $11.0 million, as compared to $8.4 million as of December 31, 2019. The net increase of $2.7 million primarily reflects the net proceeds of $5.5 million from the issuance of common stock, offset by $2.7 million of cash used in operating activities during the six months ended June 30, 2020. In July 2020, we sold 3.6 million shares of common stock for net proceeds of $24.1 million. Cash Flows from Operating, Investing and Financing Activities Six Months Ended June 30, 2020 2019 (in thousands) Net cash (used in) provided by: Operating activities $ (2,728 ) $ (2,756 ) Investing activities (6 ) — Financing activities 5,412 6,114 Net increase in cash and cash equivalents $ 2,678 $ 3,358 Net cash used in operating activities for the six months ended June 30, 2020 decreased $28,000 compared with the same period in 2019. This was primarily due to higher outflows related to changes in operating assets and liabilities, offset by a lower net loss in 2020, as discussed in Results of Operations above. 19 N et cash used in investing activities for the six months ended June 30 , 2020 was $ 6 ,000 for the purchase of property and equipment . There was no net cash (used in) provided by investing activities for the six months ended June 30 , 2019 . Net cash provided by financing activities was $5.4 million for the six months ended June 30, 2020 representing $5.5 million in net proceeds from sales of our common stock in our registered direct equity offering in the period, less $0.1 million of payments on a vendor finance arrangement. Net cash provided by financing activities was $6.1 million for the six months ended June 30, 2019 representing $6.2 million in net proceeds from sales of our common stock in our “at the market” equity offering in the period, less $0.1 million of payments on a vendor finance arrangement. Sources and Uses of Capital Our primary sources of liquidity to date have been capital raised from issuances of shares of our preferred and common stock. The primary uses of our capital resources to date have been to fund operating activities, including research, clinical development and drug manufacturing expenses, license payments, and spending on capital items. In 2017, we entered into a sales agreement, with an agent to sell, from time to time, our common stock having an aggregate offering price of up to $10.2 million, in an “at the market offering.” In 2020, we further amended the sales agreement to increase the maximum aggregate value of shares which we may issue and sell from time to time under this sales agreement to $32.4 million. This sales agreement terminated in July 2020. Under this sales agreement, we had sold an aggregate of 3,302,159 shares of our common stock pursuant to the terms of such sales agreement, as amended, for aggregate gross proceeds of approximately $32.3 million. Net proceeds received in this offering were approximately $30.8 million, after deducting expenses for executing the “at the market offering” and commissions paid to the placement agent. On July 22, 2020, we entered into a new sales agreement, with an agent to sell, from time to time, our common stock having an aggregate offering price of up to $54.0 million, in an “at the market offering.” As of July 31, 2020, we had sold an aggregate of 1,423,413 shares of our common stock pursuant to the terms of such sales agreement for aggregate gross proceeds of approximately $10.1 million. Net proceeds received in this offering were approximately $9.7 million, after deducting expenses for executing the “at the market offering” and commissions paid to the placement agent. As of July 31, 2020, we have $43.9 million available for this offering under its prospectus to our registration statement on Form S‑3 (No. 333-238067). Our ability to execute our Gencaro development program in accordance with our projected time line depends on a number of factors, including, but not limited to, the following: • the costs and timing for the potential additional clinical trials, including PRECISION‑AF, in order to gain possible regulatory approval for Gencaro or any other product candidate; • the market price of our stock and the availability and cost of additional equity capital from existing and potential new investors; • our ability to retain the listing of our common stock on the Nasdaq Capital Market; • our ability to control costs associated with its operations; • general economic and industry conditions affecting the availability and cost of capital, including as a result of the COVID-19 pandemic; • the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; and • the terms and conditions of our existing collaborative and licensing agreements. We believe our cash and cash equivalents balance as of June 30, 2020, together with the net proceeds of $24.1 million raised from July 1, 2020 through July 31, 2020 from sales of our common stock, will be sufficient to fund our operations at our current cost structure plus projected costs for the AB201 clinical development program, through the end of the fourth quarter of 2021 . However, changing circumstances may cause us to consume capital significantly faster or slower than currently anticipated. We have based these estimates on assumptions that may prove to be wrong, and we could exhaust our available financial resources sooner than we currently anticipate. We will have to raise additional capital for clinical trials of our product candidates, AB201 and Gencaro. These financial statements have been prepared with the assumption that we will continue as a going concern and will be able to realize its assets and discharge its liabilities in the normal course of business and do not include any adjustments to reflect the possible future 20 effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the inability of us to continue as a going concern. We may not be able to raise sufficient capital on acceptable terms, or at all, to continue development of AB201 or Gencaro or to otherwise continue operations and may not be able to execute any strategic transaction . Critical Accounting Policies and Estimates A critical accounting policy is one that is both important to the portrayal of our financial condition and results of operation and requires our management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our significant accounting policies are described in Note 1 of “Notes to Financial Statements” included within our 2019 Annual Report on Form 10-K filed with the SEC. Following is a discussion of the accounting policies that we believe involve the most difficult, subjective or complex judgments and estimates. Accrued Outsourcing Expenses As part of the process of preparing our financial statements, we are required to estimate accrued outsourcing expenses. This process involves identifying services that third parties have performed on our behalf and estimating the level of service performed and the associated cost incurred for these services as of the balance sheet date. Examples of estimated accrued outsourcing expenses include contract service fees, such as fees payable to contract manufacturers in connection with the production of materials related to our drug product, and service fees from clinical research organizations. We develop estimates of liabilities using our judgment based upon the facts and circumstances known at the time. Off-Balance Sheet Arrangements We have not participated in any transactions with unconsolidated entities, such as special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. Indemnifications In the ordinary course of business, we enter into contractual arrangements under which we may agree to indemnify certain parties from any losses incurred relating to the services they perform on our behalf or for losses arising from certain events as defined within the particular contract. Such indemnification obligations may not be subject to maximum loss clauses. We have entered into indemnity agreements with each of our directors, officers and certain employees. Such indemnity agreements contain provisions, which are in some respects broader than the specific indemnification provisions contained in Delaware law. We also maintain an insurance policy for our directors and executive officers insuring against certain liabilities arising in their capacities as such. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable.