What changed in this filing

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Item 1. Financial Statements

2020-11-10 compared with 2020-08-12 · 282 added, 243 removed, 835 unchanged (39% of the section changed)

4 unchanged sentences

per share data)

September 30,

Current assets:

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Common stock, $0.0001 par value, 100,000,000 shares authorized;

5,780,226 and 669,433 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively

5,780,533 and 669,433 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively

Additional paid-in capital

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Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Operating expenses:

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Operating loss

Total other income (expense), net

Total other (expense) income, net

Net loss per share:

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(Amounts in thousands, except share data)

For the Three

and Six Months Ended June 30, 2020

For the Three and Nine Months Ended September 30, 2020

Additional Paid-in

Balance at December 31, 2019

Issuance of common stock under employee stock purchase

Cash in lieu of fractional shares for 1:55 reverse

Issuance of common stock and warrants in connection

with registered direct and private placement offerings, net of offering costs of $273

Issuance of common stock, pre-funded warrants and

warrants in connection with underwritten public offering, net of offering costs of $906

Issuance of common stock under employee stock purchase plan

Cash in lieu of fractional shares for 1:55 reverse stock split

Issuance of common stock and warrants in connection with registered direct and private placement offerings, net of offering costs of $273

Issuance of common stock, pre-funded warrants and warrants in connection with underwritten public offering, net of offering costs of $906

Issuance of common stock upon the exercise of warrants

Issuance of common stock upon vesting of restricted

Issuance of common stock upon vesting of restricted stock units

Stock-based compensation expense

Balance at March 31, 2020

Issuance of common stock and warrants in connection

with registered direct and private placement offerings, net of offering costs of $473

Issuance of common stock and warrants in connection with registered direct and private placement offerings, net of offering costs of $473

Issuance of common stock upon the exercise of warrants

Issuance of common stock upon vesting of restricted

Issuance of common stock upon vesting of restricted stock units

Stock-based compensation expense

Balance at June 30, 2020

For the Three

and Six Months Ended June 30, 2019

Offering costs related to the exercise of warrants

Issuance of common stock upon vesting of restricted stock units

Stock-based compensation expense

Balance at September 30, 2020

For the Three and Nine Months Ended September 30, 2019

Additional Paid-in

Balance at December 31, 2018

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Issuance of common stock upon the exercise of warrants

Issuance of common stock under the employee stock

purchase plan

Issuance of common stock under the employee stock purchase plan

Stock-based compensation expense

Balance at June 30, 2019

Issuance of common stock under Lincoln Park Capital, LLC purchase agreement, net of offering costs of $52

Issuance of common stock upon vesting of restricted stock units

Stock-based compensation expense

Balance at September 30, 2019

The accompanying notes are an integral part

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(Amounts in thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

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Net proceeds from the exercise of warrants

Financing costs from the issuance of common stock under Lincoln Park Capital, LLC purchase agreement

Proceeds from the issuance of common stock in connection with the employee stock plan

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Right of use asset obtained in exchange for operating lease liability

Acquisition of property and equipment included in accrued expenses and other current liabilities

The accompanying notes are an integral part

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Phio ,”

Company ”) is a biotechnology company developing the next generation of immuno-oncology therapeutics based

on its self-delivering RNAi (“

or the “

Company ”)

is a biotechnology company developing the next generation of immuno-oncology therapeutics based on its self-delivering RNAi (“

INTASYL™

”) therapeutic platform.

The Company's efforts are

focused on silencing tumor-induced suppression of the immune system through its proprietary INTASYL platform

with utility in immune cells and the tumor micro-environment.

The Company’s goal

is to develop powerful INTASYL therapeutic compounds that can weaponize immune effector cells to overcome tumor immune

escape, thereby potentially providing patients a powerful new treatment option that goes beyond current treatment

therapeutic platform.

The Company's efforts are focused on silencing tumor-induced suppression of the immune system through

its proprietary INTASYL platform with utility in immune cells and the tumor micro-environment.

The Company’s goal is to develop powerful INTASYL therapeutic compounds that can weaponize

immune effector cells to overcome tumor immune escape, thereby potentially providing patients a powerful new treatment option that

goes beyond current treatment modalities.

Significant Accounting Policies

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not yet experienced any significant impacts or interruptions to our financial condition or operations as a result of the coronavirus

pandemic at this time, but have begun to see impacts and delays with third party service providers that are presumably related

to the pandemic.

Without a sustained improvement of the current situation, we may experience significant and longer lasting impacts

to certain of our development activities outsourced to third-party service providers beginning in the second half of 2020.

measures to contain the outbreak continue or are extended, it may have a more significant effect on our operations and those of

third parties on which we rely, including reducing the availability of supplies that we purchase, closures of or delays in businesses

that we rely on to provide services and conduct preclinical and clinical activities for our product candidates and disrupting the

supplies and services we rely on for the development of our product candidates.

pandemic at this time, but have begun to see our third party suppliers and service providers on which we rely becoming impacted,

presumably as a result of the pandemic.

Without a significant and sustained improvement of the current situation, we may experience

significant and longer lasting impacts to certain of our development activities outsourced to third-party service providers.

the measures to contain the outbreak continue or are extended, it may have a more significant effect on our operations and those

of third parties on which we rely, including reducing the availability of supplies that we purchase, closures of or delays in businesses

that we rely on to provide services and to conduct preclinical and clinical activities for our product candidates and disrupting

the supplies and services we rely on for the development of our product candidates.

Additionally, a long lasting pandemic may adversely

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on its condensed consolidated financial statements.

As there continues to be updates to the implementation of the provisions under

the CARES Act, the Company will continue to assess the potential impacts on our business, results of operations and financial statements.

As there continues to be updates to the provisions under the CARES Act, the

Company will continue to assess the potential impacts on our business, results of operations and financial statements.

Uses of Estimates in Preparation of Financial Statements

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Fair Value of Financial Instruments

carrying amounts reported in the balance sheet for restricted cash, prepaid expenses, accounts payable and accrued expenses approximate

their fair values due to their short-term nature.

The carrying amounts reported in the balance

sheet for restricted cash, prepaid expenses, accounts payable and accrued expenses approximate their fair values due to their short-term

Research and Development Expenses

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or other funding will be available to us on acceptable terms, or at all.

Moreover, the global coronavirus pandemic has led to

significant uncertainty and increased volatility in the capital markets.

While the potential economic impact brought by, and the

duration of, the coronavirus pandemic is difficult to assess or predict, if these conditions in the capital markets continue for

an extended period of time it may reduce our ability to access capital, which could negatively impact our short-term and long-term

liquidity and our ability to complete our planned preclinical and clinical studies on a timely basis, or at all.

impact of the coronavirus pandemic on our liquidity is highly uncertain and subject to change.

While we anticipate that we

may experience an impact to our research and development activities, we do not yet know the full extent of potential delays or

the impact on our business, financial condition, or our preclinical and clinical trial activities.

There may be developments outside

of our control that require us to adjust our operating plans and given the nature of the situation, cannot reasonably estimate

the impact of the coronavirus on our financial condition, results of operations or cash flows in the future.

If we fail to obtain

additional funding when needed, we would be forced to scale back or terminate our operations or seek to merge with or to be acquired

by another company.

While we believe that the coronavirus pandemic has not had a significant impact on our financial condition

and results of operations at this time, the extent to which the coronavirus pandemic impacts our results will depend on future

developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity

of the coronavirus pandemic and the actions to contain the coronavirus or treat its impact, among others.

The Company believes

that its existing cash, should be sufficient to fund operations for at least the next 12 months from the date of the release of

these financial statements.

Moreover, the global coronavirus pandemic has led to significant

uncertainty and increased volatility in the capital markets.

While the potential economic impact brought by, and the duration of,

the coronavirus pandemic is difficult to assess or predict, if these conditions in the capital markets continue for an extended

period of time it may reduce our ability to access capital, which could negatively impact our short-term and long-term liquidity

and our ability to complete our planned preclinical and clinical studies on a timely basis, or at all.

The ultimate impact of the

coronavirus pandemic on our liquidity is highly uncertain and subject to change.

While we anticipate that we may experience

a continued impact to our research and development activities, we do not yet know the full extent of potential delays or the impact

on our business, financial condition, or our preclinical and clinical trial activities.

There may be developments outside of our

control that require us to adjust our operating plans and given the nature of the situation, we cannot reasonably estimate the

impact of the coronavirus on our financial condition, results of operations or cash flows in the future.

If we fail to obtain additional

funding when needed, we would be forced to scale back or terminate our operations or seek to merge with or to be acquired by another

While we believe that the coronavirus pandemic

has not had a significant impact on our financial condition and results of operations at this time, the extent to which the coronavirus

pandemic impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including

new information which may emerge concerning the severity of the coronavirus pandemic and the actions to contain the coronavirus

or treat its impact, among others.

The Company believes that its existing cash, should be sufficient to fund operations for at

least the next 12 months from the date of the release of these financial statements.

Recent Accounting Pronouncements

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collaborative arrangement participants.

This ASU is effective for annual reporting periods beginning after December 15, 2019,

including interim periods within that reporting period.

This guidance is required to be applied retrospectively to the date of

adoption of ASC Topic 606.

This ASU is effective for annual reporting periods beginning after December 15, 2019, including

interim periods within that reporting period.

This guidance is required to be applied retrospectively to the date of adoption of

ASC Topic 606.

The Company adopted ASC Topic 606 in the first quarter of 2018 and adopted

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represents substantially all of our significant lease obligations.

The amounts reported in the condensed consolidated balance sheet

The amounts reported in the condensed consolidated balance sheets

for operating leases in which the Company is the lessee and other supplemental balance sheet information is set forth as follows,

in thousands, except lease term and discount rate:

June 30, 2020

September 30, 2020

December 31, 2019

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Weighted average discount rate

lease cost included in operating expense was $33,000 and $33,000 for the three months ended June 30, 2020 and 2019, respectively.

For the six months ended June 30, 2020 and 2019, operating lease cost included in operating expense was $66,000 and $61,000, respectively.

Short-term lease costs were not material for the three and six months ended June 30, 2020 and 2019.

Operating lease cost included in operating

expense was $33,000 and $33,000 for the three months ended September 30, 2020 and 2019, respectively.

For the nine months ended

September 30, 2020 and 2019, operating lease cost included in operating expense was $99,000 and $94,000, respectively.

lease costs were not material for the three and nine months ended September 30, 2020 and 2019.

Cash paid for the amounts included in the

measurement of the operating lease liability on the Company’s condensed consolidated balance sheet and included in lease

liability within changes of operating assets and liabilities in the operating activities of our condensed consolidated statement

of cash flow was $32,200 and $31,000 for the three months ended June 30, 2020 and 2019, respectively, and $63,400 and $59,000 for

the six months ended June 30, 2020 and 2019, respectively.

Future lease payments for our

non-cancellable operating leases and a reconciliation to the carrying amount of the operating lease liability presented in

the condensed consolidated balance sheet as of June 30, 2020 is as follows, in thousands:

measurement of the operating lease liability on the Company’s condensed consolidated balance sheets and included within

changes in the lease liability in the operating activities of our condensed consolidated statement of cash flows was $32,200 and

$31,000 for the three months ended September 30, 2020 and 2019, respectively, and $95,600 and $90,000 for the nine months ended

September 30, 2020 and 2019, respectively.

Future lease payments for our non-cancellable

operating leases and a reconciliation to the carrying amount of the operating lease liability presented in the condensed consolidated

balance sheet as of September 30, 2020 is as follows, in thousands:

2020 (remaining)

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Under the Flexibility Act, the definition of a covered period for which a borrower must

spend the PPP loan proceeds in order to be eligible for PPP loan forgiveness was extended from an eight (8) week covered period

to the earlier of the date that is twenty-four (24) weeks from the date the loan was funded or December 31, 2020.

Additionally,

m onthly principal, interest and other fee payments are deferred until the date on which the

determination of PPP loan forgiveness is remitted to the lender, or ten (10) months after the end of the borrower’s loan

forgiveness covered period .

The Company carefully assessed the

requirements for application under the PPP and believes that the loan is necessary to support its operations.

intends to apply for loan forgiveness, but as loan forgiveness has not yet been determined the Company followed the guidance

under the FASB ASC Topic 470, “

ASC 470 ”) in assessing the accounting for the

PPP loan proceeds.

Per ASC 470, the Company recorded a liability on the balance sheet for the full amount of PPP loan

proceeds received and will accrue interest over the term of the loan.

As the Company has twenty-four weeks from May 11, 2020,

or the date the loan was funded, for spending the loan proceeds and at least ten months to apply for loan forgiveness, the

PPP proceeds have been classified as long-term on the balance sheet.

spend the PPP loan proceeds in order to be eligible for PPP loan forgiveness is the earlier of the date that is 24-weeks (or eight-weeks

at the borrower’s option) from the date the loan was funded or December 31, 2020.

Additionally, m onthly

principal and interest payments are deferred until the date on which the determination of PPP loan forgiveness is remitted to the

lender, or 10 months after the end of the loan forgiveness covered period .

Payment terms if the PPP loan is not forgiven

are not known at this time.

The Company carefully assessed the requirements

for application under the PPP and believes that the loan is necessary to support its operations.

The Company intends to apply

for loan forgiveness, but as loan forgiveness has not yet been determined the Company followed the guidance under the FASB ASC

Topic 470, “

ASC 470 ”) in assessing the accounting for the PPP loan proceeds.

ASC 470, the Company recorded a liability on the balance sheet for the full amount of PPP loan proceeds received and will accrue

interest over the term of the loan.

As of September 30, 2020, the PPP loan proceeds have been classified as long-term debt on

the balance sheet.

Stockholders’

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the Company’s control that could require cash settlement of the warrants, including the warrants issued by the Company during

the six months ended June 30, 2020, the Company’s outstanding warrants are outside the scope of ASC 480.

the nine months ended September 30, 2020, the Company’s outstanding warrants are outside the scope of ASC 480.

Company then applies and follows the applicable accounting guidance in ASC 815.

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Based on this determination, the Company’s warrants issued in the February 2020 Registered

Offering, February 2020 Underwritten Offering, April 2020 Offering, as well as all of the Company’s remaining

outstanding warrants, are classified within stockholders’

Offering, February 2020 Underwritten Offering, April 2020 Offering, as well as all of the Company’s remaining outstanding

warrants, are classified within stockholders’

The following table summarizes the Company’s

outstanding equity-classified warrants at June 30, 2020:

outstanding equity-classified warrants at September 30, 2020:

Balance December 31,

Balance September 30,

June 2015 Warrants

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April 2020 Warrants

April 2020 Placement Agent

During the three months ended June 30, 2020,

April 2020 Placement Agent Warrants

There were no warrants exercised during

the three months ended September 30, 2020 and 2019.

During the nine months ended September 30,

2020, the Company received net proceeds of $3,856,000 from the exercise of warrants.

During the three months ended June 30, 2019, the

Company received net proceeds of $17,000 from the exercise of warrants.

During the six months ended June 30, 2020,

During the nine months ended September 30,

2019, the Company received net proceeds of $60,000 from the exercise of warrants.

During the six months ended June 30, 2019, the Company

received net proceeds of $60,000 from the exercise of warrants.

Of the warrants exercised during the three

and six months ended June 30, 2020, 428,266 of the Company’s April 2020 Warrants were exercised via a cashless exercise transaction

Of the warrants exercised during the nine

months ended September 30, 2020, 428,266 of the Company’s April 2020 Warrants were exercised via a cashless exercise transaction

and as a result a total of 225,796 shares of common stock were issued.

There were no cashless exercises of warrants in the same

periods in the prior year.

There were no cashless exercises of warrants in the three

months ended September 30, 2020 or the three and nine months ended September 30, 2019.

Net Loss per Share

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common shares excluded from the calculation of net loss per share because their inclusion would be anti-dilutive:

September 30,

Options to purchase common stock

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RSUs are generally subject to graded vesting and the satisfaction of service requirements.

Upon vesting, each outstanding RSU

will be exchanged for one share of the Company’s common stock.

Employee RSU recipients may elect to net share settle upon

vesting, in which case the Company pays the employee’s income taxes due upon vesting and withholds a number of shares of

The fair value of the RSUs awarded are based upon the Company’s closing stock price at the grant date and are

expensed over the requisite service period.

Upon vesting, each outstanding RSU will

be exchanged for one share of the Company’s common stock.

Employee RSU recipients may elect to net share settle upon vesting,

in which case the Company pays the employee’s income taxes due upon vesting and withholds a number of shares of equal value.

The fair value of the RSUs awarded are based upon the Company’s closing stock price at the grant date and are expensed over

the requisite service period.

The following table summarizes the activity

of the Company’s RSUs for the six months ended June 30, 2020:

of the Company’s RSUs for the nine months ended September 30, 2020:

Grant Date Fair Value

Unvested units at December 31, 2019

Unvested units at June 30, 2020

Unvested units at September 30, 2020

Stock-based compensation expense related

to RSUs for the three months ended June 30, 2020 and 2019 was $19,000 and $44,000, respectively.

Stock-based compensation expense

related to RSUs for the six months ended June 30, 2020 and 2019 was $48,000 and $79,000, respectively.

to RSUs for the three months ended September 30, 2020 and 2019 was $21,000 and $31,000, respectively.

Stock-based compensation

expense related to RSUs for the nine months ended September 30, 2020 and 2019 was $69,000 and $110,000, respectively.

Stock Options

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The following table summarizes the activity

of the Company’s stock options for the six months ended June 30, 2020:

of the Company’s stock options for the nine months ended September 30, 2020:

Balance at December 31, 2019

Balance at June 30, 2020

Exercisable at June 30, 2020

Balance at September 30, 2020

Exercisable at September 30, 2020

Stock-based compensation expense related

to stock options for the three months ended June 30, 2020 and 2019 was $11,000 and $18,000, respectively.

to stock options for the three months ended September 30, 2020 and 2019 was $16,000 and $16,000, respectively.

Stock-based compensation

expense related to stock options for the six months ended June 30, 2020 and 2019 was $25,000 and $37,000, respectively.

expense related to stock options for the nine months ended September 30, 2020 and 2019 was $41,000 and $53,000, respectively.

Restricted Stock

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based on the Company’s closing stock price on the date of grant and was expensed over the vesting period.

During the six

months ended June 30, 2019, the Company granted 4,419 shares of restricted stock in lieu of Compensation to Dr.

Cauwenbergh and

recorded $106,000 in stock-based compensation related to the restricted stock.

During the nine

months ended September 30, 2019, the Company granted 4,419 shares of restricted stock in lieu of Compensation to Dr.

and recorded $106,000 in stock-based compensation related to the restricted stock.

Compensation Expense Related to Equity Awards

The following table sets forth total stock-based

compensation expense for the three and six months ended June 30, 2020 and 2019, in thousands:

compensation expense for the three and nine months ended September 30, 2020 and 2019, in thousands:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Research and development

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This management’s discussion and analysis of financial

condition as of June 30, 2020 and results of operations for the three and six months ended June 30, 2020 and 2019 should be read

in conjunction with the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019, which

was filed with the Securities and Exchange Commission (the “

condition as of September 30, 2020 and results of operations for the three and nine months ended September 30, 2020 and 2019 should

be read in conjunction with the financial statements included in our Annual Report on Form 10-K for the year ended December 31,

2019, which was filed with the Securities and Exchange Commission (the “

SEC ”) on March 26, 2020.

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and the following reasons:

Efficient uptake of INTASYL to immune cells obviating the need for facilitated delivery (mechanical or formulation);

Efficient uptake of INTASYL by target cells

obviating the need for facilitated delivery (mechanical or formulation);

Does not require permanent genetic modification;

Can target multiple genes (i.e.

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a product platform based on our INTASYL technology that allows easy, precise, rapid, and selective non-genetically modified programming

of ACT cells ( ex vivo , during manufacturing) and of the TME ( in vivo , by local application), resulting in improved

immunotherapy.

of ACT cells ( ex vivo , during manufacturing) and of the TME ( in vivo , by local application), resulting in reduced

immune inhibition and in improved immunotherapy.

Adoptive Cell Transfer

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during the expansion process and without the need for genetic engineering and without additional needed complex manufacturing steps.

By merely adding INTASYL to the cell culture media used during the cell expansion, we can reduce or eliminate the expression of

genes that make the immune cells less effective.

By adding INTASYL to the cell culture media used during the cell expansion, we can reduce or eliminate the expression of genes

that make the immune cells less effective.

For example, with our INTASYL compounds, we can reduce the expression of immunosuppressive

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In various types of immune cells tested to date, INTASYL treatment results in potent

silencing through close to 100% transfection efficiency and while maintaining nearly full cell viability.

After expanding these

cells and enhancing them with INTASYL ex vivo , they are returned to the patient for treatment.

silencing with close to 100% transfection efficiency and while maintaining nearly full cell viability.

After expanding these cells

and enhancing them with INTASYL ex vivo , they are returned to the patient for treatment.

Our lead product

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the application of INTASYL technology in immunotherapy of cancer.

second ACT product candidate PH-894, an INTASYL compound that targets BRD4, is a regulator of gene expression impacting cell differentiation.

In previous studies, PH-894 has been shown to improve T cell function and persistence by differentiating T cells into a more active

state (stem-cell like memory phenotype).

Data, completed in partnership with the Karolinska Institutet, demonstrated that the

application of PH-894, was shown to silence BRD4 in human T cells during expansion for ACT, which has the potential to confer

superior anti-tumor activity, for example by improving T cell persistence.

With this data, we expanded our collaboration with

the Karolinska Institutet to build upon these findings and develop INTASYL compounds for additional targets and cell types toward

clinical application in areas of the Karolinska Institutet’s ongoing clinical research.

We are also developing

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to kill cancer cells.

Our third recently

announced product candidate is PH-894, an INTASYL compound that targets BRD4, a regulator of gene expression impacting cell differentiation.

In previous studies, PH-894 has been shown to improve T cell function and persistence by differentiating T cells into a more active

state (effector memory phenotype).

Data, completed in partnership with the Karolinska Institutet, demonstrated that the application

of PH-894, was shown to silence BRD4 in human T cells during expansion for ACT, which has the potential to confer superior anti-tumor

With this data, as well as results with several compounds in both T cells and NK cells, we announced the expansion of

our collaboration with the Karolinska Institutet in November 2019 to build upon these findings and develop INTASYL compounds for

additional targets and cell types toward clinical application in areas of the Karolinska Institutet’s ongoing clinical research.

In March 2020,

2020, we entered into a collaboration and option agreement with Medigene AG and the Helmholtz Zentrum M ünchen

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platforms to be able to achieve an adequate therapeutic effect in solid tumors.

We are also investigating

other relevant compounds for TME targets, such as PH-790, an INTASYL compound targeting PD-L1.

PD-L1 is a protein formed by cancer

cells that activate the PD-1 “off switch”

We are also investigating other relevant compounds for TME targets, such as PH-790, an INTASYL compound targeting PD-L1.

PD-L1 is a protein formed by cancer cells that activate the PD-1 “off switch”

on immune cells.

Our approach with PH-790 is to block the formation of the

PD-L1 protein, which may prevent cancer cells from inactivating T cells and attack the cancer, and will be evaluated alongside

Our approach with PH-790

is to block the formation of the PD-L1 protein, which may prevent cancer cells from inactivating T cells and attack the cancer,

and will be evaluated alongside PH-762.

Previously, a series of preclinical in vivo studies in tumor models showed dose-dependent

attenuated tumor growth for the INTASYL compounds compared to control groups.

Recent data presented

at the 35 th Annual Meeting of Society for Immunotherapy of Cancer in November 2020 demonstrated that the antitumoral

efficacy of our individual pipeline products, PH-762, PH-790 and PH-804, can be further improved by combining them in a single

drug treatment.

This data showed that the combination of our INTASYL compounds inhibited tumor growth without having a negative

impact on the tolerability of the treatment.

Based on our positive

preclinical data, the Company is preparing for its first in-human clinical study with PH-762 using intra-tumoral administration

for patients with advanced melanoma.

The rationale for the study and its design were recently presented at a key opinion leader

event held by the Company in June 2020 with Dr.

Caroline Robert of the Gustave Roussy Cancer Center in Paris, France who will be

our lead principal investigator for the trial.

Impact of COVID-19 on our Business

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Health and Safety

first signs of the outbreak, we have taken proactive measures intended to protect the health and safety of our employees.

have implemented safety measures following the guidance provided by the WHO and the Centers for Disease Control (the

CDC ”) such as working remotely for employee personnel who do not need to be physically present in our

premises, social distancing protocols, suspending travel, and extensively and frequently disinfecting our workspaces.

expect to continue following these safety measures and may take further actions as we require, as government authorities

require or recommend, or as we determine to be in the best interests of our employees, partners and suppliers.

From the first

signs of the outbreak, we have taken proactive measures intended to protect the health and safety of our employees.

We have implemented

safety measures following the guidance provided by the WHO and the Centers for Disease Control (the “

CDC ”) such

as working remotely for employee personnel who do not need to be physically present in our premises, social distancing protocols,

suspending travel, and extensively and frequently disinfecting our workspaces.

We expect to continue following these safety measures

and may take further actions as we require, as government authorities require or recommend, or as we determine to be in the best

interests of our employees, partners and suppliers.

The coronavirus

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Safety measures are in place for the health and safety of our employees, including formal policies related

to wearing a face mask, staggered scheduling and socially distancing, in line with the guidelines provided by government authorities.

While these measures may be modified or extended, we expect that our activities, including our internal research and development

functions, will continue to remain largely operational.

to health checks, wearing a face mask, staggered scheduling and socially distancing, in line with the guidelines provided by government

While these measures may be modified or extended, we expect that our activities, including our internal research and

development functions, will continue to remain largely operational.

We have experienced

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and clinical studies.

We have not yet experienced any significant impacts or interruptions to our supply chain or third-party vendors

as a result of the coronavirus pandemic, but are starting to see some of the third-parties on which we rely becoming impacted.

If the measures to contain the outbreak are continued or extended, it may affect our operations and those of our service providers.

Without a swift improvement of the current situation, we may experience significant impacts to certain of our development activities

outsourced to third-party service providers beginning in the second half of 2020.

For example, our development activities may get

delayed due to the availability and restrictions on shipment of critical materials that are needed for these development activities.

Thus far, we have been able to engage with third-party service providers in areas with limited or no impact (e.g.

countries with

limited or no restrictions), but with the global spread of the virus and associated restrictions, this is no longer possible.

service providers, for example those performing required preclinical research studies, are now facing impacts to their operations,

including restrictions on the availability of critical materials that are needed for this type of research.

If the measures to

contain the outbreak are extended or further expanded, it could reduce or delay the availability of supplies and services that

we purchase and outsource.

This may in turn slow or delay our research and development activities, and/or result in higher costs.

We anticipate a decline in the

commencement of future clinical trials, at least in the short-term, as many Institutional Review Boards (the

IRB ”) are currently focused on reviewing and approving clinical trial protocols related to COVID-19.

Additionally, due to the implementation of restrictive measures such as stay-at-home orders by government authorities in the

United States and global economies to try and contain the spread of coronavirus, we anticipate a significant decline, at

least in the short-term, in the enrollment of patients in clinical trials outside of those related to COVID-19.

Presumably as a result of the coronavirus pandemic, we have begun to see some of our third-party suppliers

and service providers on which we rely becoming impacted.

If the impact on their operations continue or extend, it may affect our

We previously had been able to engage with third-party service providers in areas with limited or no impact (e.g.

with limited or no restrictions), but with the global spread of the virus and associated restrictions, this has been no longer

Our service providers, for example those performing required preclinical research studies, are now facing impacts to

their operations, including restrictions on the availability of critical materials that are needed for this type of research.

a significant and sustained improvement of the current situation, we may experience significant impacts to certain of our development

activities outsourced to third-party service providers, however, the ultimate impact on our third-party service providers is highly

uncertain and subject to change.

If the measures to contain the outbreak are extended or further expanded, it could reduce or delay

the availability of supplies and services that we purchase and outsource.

This may in turn slow or delay our preclinical and clinical

research and development activities, and/or result in higher costs.

We anticipate a continued decline in the

commencement of new clinical trials, at least in the short-term, as many Institutional Review Boards (the “

are currently focused on reviewing and approving clinical trial protocols related to COVID-19.

Additionally, due to the implementation

of restrictive measures such as stay-at-home orders by government authorities in the United States and global economies to try

and contain the spread of coronavirus, we anticipate a continued negative impacts, at least in the short-term, in the enrollment

and participation of patients in clinical trials outside of those related to COVID-19.

The required studies and steps needed to

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PPP loan, we have taken other proactive steps to control costs in response to the coronavirus pandemic and these actions include

the reduction of the salaries of our senior management team by 10% through the remainder of 2020, or as market conditions improve.

We believe these savings will help mitigate the financial impact of the coronavirus pandemic on our financial condition and reduce

or eliminate the need to furlough or lay-off our employees, which could be counterproductive and result in delays to our research

and development activities.

the reduction of the salaries of our senior management team by 10% through the remainder of 2020.

We believe these savings will

help mitigate the financial impact of the coronavirus pandemic.

Additionally, while the potential economic

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of our operations for the periods indicated, in thousands:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended

September 30,

Nine Months Ended

September 30,

Operating expenses

Operating loss

Comparison of the Three and Six Months Ended June 30, 2020

Comparison of the Three and Nine Months Ended September 30,

2020 and 2019

Operating Expenses

1 unchanged sentence

operating expenses, for the periods indicated, in thousands:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Research and development

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activities and other operating costs.

and development expenses for the three months ended June 30, 2020 decreased 32% as compared with the three months ended June 30,

2019, primarily due to a decrease in the use of an outside interim temporary labor consultant and a reduction in patent-related

expenses as compared to the prior year period.

and development expenses for the six months ended June 30, 2020 decreased 11% as compared with the six months ended June 30, 2019,

primarily due to decreases in lab supply purchases, the use of an outside interim temporary labor consultant and a reduction in

patent-related expenses as compared to the prior year period.

and development expenses for the three months ended September 30, 2020 increased 21% as compared with the three months ended September

30, 2019, primarily due to an increase in the use of third-party service providers to conduct preclinical research studies to

support the development of the Company's pipeline programs as compared to the prior year period offset by a decrease in the use

of an outside interim temporary labor consultant in the prior year period.

and development expenses for the nine months ended September 30, 2020 decreased 1% as compared with the nine months ended September

30, 2019, primarily due to decreases in lab supply purchases, in the use of an outside interim temporary labor consultant and

decreased patent-related expenses as compared to the prior year period offset by increases in the use of third-party service providers

to conduct preclinical research studies to support the development of the Company's pipeline programs.

General and Administrative Expenses

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professional fees for legal, audit, tax and consulting services, as well as other general corporate expenses.

and administrative expenses for the three months ended June 30, 2020 decreased 3% as compared with the three months ended June

30, 2019, primarily due to a decrease in stock-based compensation expense as compared with the same period in the prior year.

and administrative expenses for the six months ended June 30, 2020 increased 2% as compared with the six months ended June 30,

2019, primarily due to an increase in legal fees offset by a decrease in recruiting

fees to support employee hiring activities as compared to the same period in the prior year.

and administrative expenses for the three months ended September 30, 2020 decreased 2% as compared with the three months ended

September 30, 2019, primarily due to a decrease in recruiting fees to support employee

hiring activities as compared to the same period in the prior year.

and administrative expenses for the nine months ended September 30, 2020 increased 1% as compared with the nine months ended September

30, 2019, primarily due to increases in the Company’s D&O insurance premiums and the use of business development

consultants offset by a decrease in recruiting fees to support employee hiring activities as compared to the same period in the

Liquidity and Capital Resources

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April 2020 Offering.

Net proceeds to the Company from the April 2020 Offering were $3,527,000 after deducting

placement agent fees and offering expenses paid by the Company.

We had cash of $18,864,000 as of June 30, 2020, compared with $6,934,000 as of December 31, 2019.

We have reported recurring

losses from operations since inception and expect that we will continue to have negative cash flows from our operations for the

foreseeable future.

Historically, the Company’s primary source of funding has been the sale of its securities.

In the future,

we will be dependent on obtaining funding from third parties, such as proceeds from the issuance of debt, sale of equity, or strategic

opportunities, in order to maintain our operations.

There is no guarantee that debt, additional equity or other funding will be

available to us on acceptable terms, or at all.

Moreover, the global coronavirus pandemic has led to significant uncertainty and

increased volatility in the capital markets.

If these conditions in the capital markets continue for an extended period of time

it may impact our ability to raise capital.

If we fail to obtain additional funding when needed, we would be forced to scale back

or terminate our operations or to seek to merge with or to be acquired by another company.

We believe that our existing cash should

be sufficient to fund operations for at least the next twelve months from the date of the release of these financial statements.

Net proceeds to the Company from the April 2020 Offering were $3,527,000 after deducting placement agent fees

and offering expenses paid by the Company.

We had cash of $16,868,000 as of September

30, 2020, compared with $6,934,000 as of December 31, 2019.

We have reported recurring losses from operations since inception and

expect that we will continue to have negative cash flows from our operations for the foreseeable future.

Historically, the Company’s

primary source of funding has been the sale of its securities.

In the future, we will be dependent on obtaining funding from third

parties, such as proceeds from the issuance of debt, sale of equity, or strategic opportunities, in order to maintain our operations.

There is no guarantee that debt, additional equity or other funding will be available to us on acceptable terms, or at all.

the global coronavirus pandemic has led to significant uncertainty and increased volatility in the capital markets.

If these conditions

in the capital markets continue for an extended period of time it may impact our ability to raise capital.

If we fail to obtain

additional funding when needed, we would be forced to scale back or terminate our operations or to seek to merge with or to be

acquired by another company.

We believe that our existing cash should be sufficient to fund operations for at least the next twelve

months from the date of the release of these financial statements.

The following table summarizes our cash

flows for the periods indicated, in thousands:

Six Months Ended

Nine Months Ended

September 30,

Net cash used in operating activities

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Net cash used in operating activities was

$4,208,000 for the six months ended June 30, 2020, as compared with $4,108,000 for the six months ended June 30, 2019.

in net cashflows from operating activities was primarily due to an increase in cash used for working capital as compared to the

same period in the prior year.

$6,179,000 for the nine months ended September 30, 2020, as compared with $6,099,000 for the nine months ended September 30, 2019.

The increase in cash used in operating activities was primarily due to an increase in net loss as compared to the same period in

the prior year.

Net Cash Flow from Investing Activities

Net cash used in investing activities was

$10,000 for the six months ended June 30, 2020, as compared with $16,000 for the six months ended June 30, 2019.

The decrease in

net cash flows from investing activities was primarily related to the amount of laboratory and computer equipment purchases year

$18,000 for the nine months ended September 30, 2020, as compared with $77,000 for the nine months ended September 30, 2019.

decrease in net cash flows from investing activities was primarily related to the amount of laboratory and computer equipment purchases

year over year.

Net Cash Flow from Financing Activities

Net cash provided by financing activities

was $16,148,000 for the six months ended June 30, 2020, as compared with $61,000 for the six months ended June 30, 2019.

in net cashflows from financing activities was primarily due to net proceeds received by the Company from the issuance of securities

and warrant exercises during the six months ended June 30, 2020 as compared to the same period in the prior year.

Net cash provided by financing

activities was $16,131,000 for the nine months ended September 30, 2020, as compared with $6,000 for the nine months ended

September 30, 2019.

The increase in net cash flows from financing activities was primarily due to net proceeds received by

the Company from the issuance of securities and warrant exercises during the nine months ended September 30, 2020 as compared

to the same period in the prior year.

Off-Balance Sheet Arrangements

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

What changed 10-Q

Item 1. Financial Statements