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Item 2. Management’s Discussion and Analysis

2024-08-14 compared with 2024-05-09 · 127 added, 57 removed, 172 unchanged (52% of the section changed)

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This management’s discussion and analysis

of financial condition as of March 31, 2024 and results of operations for the three months ended March 31, 2024 and 2023 should be read

in conjunction with the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023,

which was filed with the Securities and Exchange Commission (the “ SEC ”) on April 1, 2024 (the “2023 Form 10-K”).

of financial condition as of June 30, 2024 and results of operations for the three and six months ended June 30, 2024 and 2023 should

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

2023, which was filed with the Securities and Exchange Commission (the “ SEC ”) on April 1, 2024 (the “2023 Form

This report contains forward-looking statements

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Food and Drug Administration.

first two patients enrolled in our first cohort have completed treatment with PH-762 with no reported adverse events.

The trial is currently

open for the continued enrollment of patients and expects to complete enrollment of patients in the second quarter of 2025.

May 2024, a safety monitoring committee reviewed data from the first dose cohort treated and recommended the escalation to the next dose

concentration.

The trial is open for the continued enrollment of patients and expects to complete enrollment of patients in the second

quarter of 2025.

AgonOx Collaboration

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positive” tumor infiltrating lymphocytes (“ DP TIL ”) with PH-762 increased their tumor killing activity by two-fold.

In February 2021, we

entered into a clinical co-development collaboration agreement (the “ Clinical Co-Development Agreement ”) with AgonOx

to develop a T cell-based therapy using PH-762 and AgonOx’s DP TIL.

Under the Clinical Co-Development Agreement, we had agreed to

In February 2021, we entered

into a clinical co-development collaboration agreement (the “ Clinical Co-Development Agreement ”) with AgonOx to develop

a T cell-based therapy using PH-762 and AgonOx’s DP TIL.

Under the Clinical Co-Development Agreement, we and AgonOx were working

to develop a T cell-based therapy using the our lead product candidate, PH-762, and AgonOx’s DP TIL technology.

We had agreed to

reimburse AgonOx up to $4 million in expenses incurred to conduct a Phase 1 clinical trial of PH-762 treated DP TIL in patients with advanced

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sales-based royalty payments from AgonOx’s licensing of its DP TIL technology.

On May 8, 2024, we terminated

the Clinical Co-Development Agreement with AgonOx, effective immediately.

Effective as of the date of the termination, the Clinical Co-Development

Agreement and our continuing obligations and those of AgonOx thereunder will be terminated in their entirety.

We will no longer be required

to provide financial support for the development costs incurred under the Clinical Co-Development Agreement or be entitled to certain

future development milestones and low single-digit sales-based royalty payments from AgonOx’s licensing of its DP TIL technology.

We will pay to AgonOx all payment obligations that have accrued prior to the termination of the Clinical Co-Development Agreement.

intend to pay to AgonOx future fees to be incurred for patients that were treated in the Phase 1 clinical trial as of the date of termination.

We estimate that such payments to be made to AgonOx will amount to approximately $388,000, which primarily relate to our accrued obligations

under the Clinical Co-Development Agreement as of March 31, 2024, as well as future fees to be incurred for patients that were treated

in the Phase 1 clinical trial and other miscellaneous costs as of the date of termination.

Pursuant to the terms of the Clinical Co-Development

Agreement, we and AgonOx shall meet and discuss the orderly wind-down of the Phase 1 clinical trial.

Each of us and AgonOx shall be responsible

for its own costs and expenses incurred in connection with the wind-down of the Phase 1 clinical trial.

Other Information

included elsewhere in this Quarterly Report for further information.

In May 2024, we terminated

the Clinical Co-Development Agreement with AgonOx, which such termination was effective immediately.

Effective as of the date of termination,

the Clinical Co-Development Agreement and our continuing obligations and those of AgonOx thereunder were terminated in their entirety.

We are no longer required to provide financial support for the development of costs incurred under the Clinical Co-Development Agreement,

and we are no longer entitled to future development milestones or royalty payments from AgonOx’s licensing of its DP TIL technology.

We will pay to AgonOx all payment obligations that accrued prior to the termination of the Clinical Co-Development Agreement.

payments to be made to AgonOx as of June 30, 2024 total $344,000, which primarily relate to accrued obligations for patient fees and other

miscellaneous costs as of the date of termination.

Pursuant to the terms of the Clinical Co-Development Agreement, we and AgonOx are coordinating the orderly wind-down of the Phase 1 clinical trial.

Each of us and AgonOx shall be responsible for its own costs and

expenses incurred in connection with the wind-down of the Phase 1 clinical trial.

Prior to the termination of

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operations for the periods indicated, in thousands:

Three Months Ended

Three Months Ended June 30,

Six Months Ended June 30,

Operating expenses

Operating loss

Comparison of the Three Months Ended March 31, 2024 and 2023

Comparison of the Three and Six Months Ended June 30, 2024 and 2023

Operating Expenses

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Three Months Ended

Six Months Ended

Research and development

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Research and development expenses

for the three months ended March 31, 2024 decreased 46% as compared with the three months ended March 31, 2023.

for the three months ended June 30, 2024 decreased 37% as compared with the three months ended June 30, 2023.

The decrease in research

and development expenses was primarily driven by our cost rationalization measures in transitioning from a research company to a product

development company resulting in a decrease of $305,000 of expense due to the wind-down of preclinical studies, $170,000 in salary-related

costs, including stock-based compensation expense, and $108,000 in lab supplies associated with the reduction in headcount, in addition

to a decrease in clinical consulting fees of $225,000 incurred in connection with our IND filing for PH-762 in the prior period and a

decrease of $131,000 in manufacturing fees for PH-762.

General and Administrative

development company resulting in a decrease of $246,000 in salary-related costs, including stock-based compensation expense, and $74,000

in lab supplies associated with the reduction in headcount, in addition to a decrease in clinical consulting fees of $110,000 incurred

in connection with our IND filing for PH-762 in the prior period.

Research and development expenses

for the six months ended June 30, 2024 decreased 43% as compared with the six months ended June 30, 2023.

The decrease in research and

development expenses was primarily driven by our cost rationalization measures in transitioning from a research company to a product development

company resulting in a decrease of $321,000 of expense due to the wind-down of preclinical studies, $470,000 in salary-related costs,

including stock-based compensation expense, and $182,000 in lab supplies associated with the reduction in headcount, in addition to a

decrease in clinical consulting fees of $335,000 incurred in connection with our IND filing for PH-762 in the prior period and a decrease

of $176,000 in manufacturing fees for PH-762.

We anticipate our research

and development expenses will remain relatively consistent for the remainder of 2024.

General and Administrative Expenses

General and administrative

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legal and patent-related activities, audit, tax and consulting services, as well as other general corporate expenses.

General and administrative

expenses for the three months ended March 31, 2024 decreased 28% as compared with the three months ended March 31, 2023.

in general and administrative expenses was primarily due to decreases in consulting expenses of $102,000 and legal expenses of $211,000

as compared to the prior year period.

General and administrative expenses

for the three months ended June 30, 2024 decreased 10% as compared with the three months ended June 30, 2023.

The decrease in general

and administrative expenses was primarily due to decreases in salary-related expenses for our President & CEO of $78,000 and in professional

fees of $60,000 related to consulting expenses as compared to the prior year period.

General and administrative expenses

for the six months ended June 30, 2024 decreased 20% as compared with the six months ended June 30, 2023.

The decrease in general and

administrative expenses was primarily due to decreases in salary-related expenses for our President & CEO of $120,000 and in professional

fees for a total of $364,000 related to consulting, legal and patent expenses as compared to the prior year period.

We anticipate our general and

administrative expenses will remain relatively consistent for the remainder of 2024.

Liquidity and Capital Resources

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the foreseeable future.

At March 31, 2024, we had cash of $6,475,000 as compared with $8,490,000 at December 31, 2023.

At June 30, 2024, we had cash of $4,698,000 as compared with $8,490,000 at December 31, 2023.

On May 16, 2024, we entered into

a purchase agreement (the “ Purchase Agreement ”) with Triton Funds LP (“ Triton ”), pursuant to which

we agreed to sell, and Triton agreed to purchase, upon our request in one or more transactions, up to 95,833 shares of our common stock

at a purchase of $6.48 per share (the “ Purchase Price ”), for aggregate gross proceeds of up to $621,000.

2024, we terminated the Purchase Agreement with Triton effective immediately.

No shares of common stock were sold by us pursuant to the

Purchase Agreement prior to termination.

In July 2024, we entered into

inducement letter agreements (the “ July 2024 Inducement Letter Agreements ”) with certain holders of certain of our

existing warrants to purchase up to an aggregate of 545,286 shares of the Company’s common stock.

The existing warrants were originally

issued in February 2020 through December 2023, having exercise prices between $324.00 and $9.72 per share.

Pursuant to the July 2024 Inducement

Letter Agreements, these warrants were exercised for cash at a reduced exercise of $5.45 per share in consideration of our agreement to

issue new unregistered five and one-half year term Series C warrants to purchase up to 583,098 shares of common stock at an exercise price

of $5.45 and new unregistered eighteen month term Series D warrants to purchase up to 507,474 shares of common stock at an exercise price

of $5.45, both issued and sold at a price of $0.125 per warrant share (the “ July 2024 Financing ”).

The net proceeds

to us from the July 2024 Financing are approximately $2,600,000, after deducting placement agent fees and offering expenses.

We have limited cash resources,

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our cash flows for the periods indicated, in thousands:

Three Months Ended

Six Months Ended

Net cash used in operating activities

Net cash used in financing activities

Net cash used in investing activities

Net cash used in (provided by) financing activities

Net decrease in cash, cash equivalents and restricted cash

Net Cash Flow from Operating Activities

Net cash used in operating

activities for the three months ended March 31, 2024 decreased 26% as compared to the three months ended March 31, 2023, primarily due

to a decrease in net loss of $1,448,000, a decrease in non-cash related items of $89,000 primarily related to reduced stock-based compensation

expense, and a decrease in the changes in operating assets and liabilities of $662,000 primarily as a result of liabilities owed to support

our IND filing for PH-762 and manufacturing fees related to the fill/finish of PH-762 drug product in the prior year period.

Net cash used in operating activities

was $3,788,000 for the six months ended June 30, 2024 as compared with $5,479,000 for the six months ended June 30, 2023.

was primarily due to a decrease in net loss of $2,151,000, a decrease in non-cash related items of $214,000 primarily related to reduced

stock-based compensation expense, and a decrease in the changes in operating assets and liabilities of $246,000 primarily as a result

of liabilities owed for the completion of preclinical studies in the prior year period.

Net Cash Flow from Investing Activities

There were no net cash flows

from investing activities for the three months ended March 31, 2024 and 2023.

were no investing activities for the six months ended June 30, 2024 as compared with $5,000 for the six months ended June 30, 2023.

decrease in net cash used in investing activities was primarily due to laboratory and computer equipment purchases for our facility during

the prior year period .

Net Cash Flow from Financing Activities

Net cash used in financing

activities for the three months ended March 31, 2024 decreased 89% as compared to the three months ended March 31, 2023, primarily due

to the amount of payments made for taxes on the net share settlements of RSUs.

Net cash used in financing activities

was $4,000 for the six months ended June 30, 2024 as compared with net cash provided by financing activities of $5,010,000 for the six

months ended June 30, 2023.

The decrease was primarily due to the completion of our financing activities during the prior year period.

Contractual Obligations

Details of our obligations

under the Clinical Co-Development Agreement with our former collaboration partner AgonOx can be found in Note 2 of

the condensed consolidated financial statements.

Outside of the above, there have been no material changes to the contractual obligations

as disclosed in our 2023 Form 10-K.

under the Clinical Co-Development Agreement with our former collaboration partner AgonOx can be found in Note 2 of the condensed consolidated

financial statements.

Outside of the above, there have been no material changes to the contractual obligations as disclosed in our 2023

Funding Requirements

June 30, 2024, we had cash and cash equivalents of $4,698,000 and received estimated net proceeds of $2,600,000 from our July 2024

We expect that our cash and cash equivalents will enable us to fund our current operating

plan into Q2 2025.

Due to the difficulty and uncertainty associated with the design and implementation of preclinical studies and clinical

trials, we will continue to assess our cash and cash equivalents and future funding requirements.

However, there is no assurance that

additional funding will be achieved and that we will succeed in our future operations.

We expect to continue to incur substantial additional

operating losses for at least the next several years as we continue to develop our product candidates and seek marketing approval and,

subject to obtaining such approval, the eventual commercialization of our product candidates.

If we obtain marketing approval for any

of our product candidates, we will incur significant sales, marketing and manufacturing expenses.

We also expect to continue to incur

significant costs to comply with corporate governance, internal controls and similar requirements associated with operating as a public

reporting company.

cash requirements could differ from management’s projections due to many factors including additional investments in research and

development programs, clinical trial expenses for PH-762 , competing technological and market

developments, general and administrative expenses, and the costs of any strategic acquisitions and/or development of complementary business

opportunities.

We expect to seek additional funding to sustain our future operations and while we have successfully raised capital in

the past, the ability to raise capital in future periods is not assured.

We do not know if additional capital will be available when

needed or on terms favorable to us or our stockholders.

Collaboration, licensing or other agreements may not be available on favorable

terms, or at all.

If we seek to sell our equity securities, we do not know whether and to what extent we will be able to do so, or on

If available, additional equity financing may be dilutive to stockholders, debt financing may involve restrictive covenants

or other unfavorable terms and dilute our existing stockholders’ equity, and funding through collaboration, licensing or other

commercial agreements may be on unfavorable terms, including requiring us to relinquish rights to certain of our technologies or products.

If adequate financing is not available if and when needed, we may delay, reduce the scope of, or eliminate research or development programs,

if any, postpone or cancel the pursuit of product candidates, or otherwise significantly curtail our operations to reduce our cash requirements

and extend our capital.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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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 2. Management’s Discussion and Analysis