UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2020
or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________________ to ______________
Commission file number: 001-38244
GENPREX, INC.
(Exact name of registrant as specified in its charter)
Delaware |
90 - 0772347 |
(State or other jurisdiction of |
(I.R.S. Employer |
incorporation or organization) |
Identification No.) |
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1601 Trinity Street, Bldg. B, #3.312.09, Austin, TX |
78712 |
(Address of principal executive offices) |
(Zip Code) |
(512) 537-7997
(Registrant’s telephone number, including area code)
1601 Trinity Street, Bldg. B, Suite 3.322, Austin, TX 78712
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
Common Stock, par value $0.001 per share |
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GNPX |
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The Nasdaq Capital Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of November 6, 2020, the registrant had 39,618,722 shares of common stock, par value $0.001 per share, outstanding.
GENPREX, INC.
TABLE OF CONTENTS
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PART I |
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5 |
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ITEM 1. |
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5 |
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Condensed Balance Sheets as of September 30, 2020 (unaudited) and December 31, 2019 |
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Condensed Statements of Changes in Stockholders' Equity for the Three, Six, and Nine Months Ended September 30, 2020 and 2019 (unaudited) | 7 | |||
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Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019 (unaudited) |
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ITEM 2. |
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 28 | ||
ITEM 4. |
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PART II |
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29 |
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ITEM 1. |
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ITEM 1A. |
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ITEM 2. |
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ITEM 3. | DEFAULTS UPON SENIOR SECURITIES | 29 | ||
ITEM 4. | MINE SAFETY DISCLOSURES | 29 | ||
ITEM 5. |
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29 |
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ITEM 6. |
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31 |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA
This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements may be identified by such forward-looking terminology as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. Our forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our company, are not guarantees of future results or performance and involve substantial risks and uncertainty. We may not actually achieve the plans, intentions or expectations disclosed in these forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in these forward-looking statements. Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including the risks and uncertainties inherent in our statements regarding:
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our business strategies; |
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the timing of regulatory submissions; |
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our ability to obtain and maintain regulatory approval of our existing product candidates and any other product candidates we may develop, and the labeling under any approval we may obtain; |
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the timing and costs of clinical trials and the timing and costs of other expenses; |
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the ultimate impact of the current coronavirus pandemic, or any other health epidemic, on our business, our clinical trials, our research programs, healthcare systems or the global economy as a whole; |
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market acceptance of our products; |
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our intellectual property; |
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our reliance on third party organizations; |
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our competitive position; |
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our industry environment; |
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our anticipated financial and operating results, including anticipated sources of revenues; |
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assumptions regarding the size of the available market, benefits of our products, product pricing, timing of product launches; |
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management’s expectation with respect to future acquisitions; |
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our goals, intensions, plans and expectations, including the introduction of new products and markets; and |
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our cash needs and financing plans. |
All of our forward-looking statements are as of the date of this Quarterly Report on Form 10-Q only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of, or any material adverse change in, one or more of the risk factors or risks and uncertainties referred to in this Quarterly Report on Form 10-Q or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the U.S. Securities and Exchange Commission (the “SEC”) could materially and adversely affect our business, prospects, financial condition and results of operations. Except as required by law, we do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections or other circumstances affecting such forward-looking statements occurring after the date of this Quarterly Report on Form 10-Q, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. Any public statements or disclosures by us following this Quarterly Report on Form 10-Q that modify or impact any of the forward-looking statements contained in this Quarterly Report on Form 10-Q will be deemed to modify or supersede such statements in this Quarterly Report on Form 10-Q.
This Quarterly Report on Form 10-Q may include market data and certain industry data and forecasts, which we may obtain from internal company surveys, market research, consultant surveys, publicly available information, reports of governmental agencies and industry publications, articles and surveys. Industry surveys, publications, consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. While we believe that such studies and publications are reliable, we have not independently verified market and industry data from third-party sources.
References to Genprex
Throughout this Quarterly Report on Form 10-Q, the “Company,” “Genprex,” “we,” “us,” and “our” refers to Genprex, Inc. and “our board of directors” refers to the board of directors of Genprex, Inc.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Genprex, Inc.
September 30, |
December 31, |
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2020 |
2019 |
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Assets | (unaudited) | |||||||
Current assets: |
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Cash |
$ | 21,058,386 | $ | 2,002,492 | ||||
Accounts receivable |
85 | 655 | ||||||
Prepaid expenses and other |
966,108 | 171,716 | ||||||
Supplies | 686,324 | 801,780 | ||||||
Total current assets |
22,710,903 | 2,976,643 | ||||||
Property and equipment, net |
42,340 | 44,654 | ||||||
Other assets: |
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Security deposits |
10,741 | 21,732 | ||||||
Intellectual property, net |
587,712 | 491,200 | ||||||
Total other assets |
598,453 | 512,932 | ||||||
Total assets |
$ | 23,351,696 | $ | 3,534,229 | ||||
Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable and accrued expenses |
$ | 321,424 | $ | 436,258 | ||||
Other current liabilities |
54,231 | 74,426 | ||||||
Total current liabilities |
375,655 | 510,684 | ||||||
Investment unit |
— | — | ||||||
Commitments and contingencies |
— | — | ||||||
Stockholders’ equity: |
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Preferred stock $0.001 par value: 10,000,000 shares authorized; no shares issued and outstanding | — | — | ||||||
Common stock $0.001 par value: 200,000,000 shares authorized; 39,463,722 and 19,263,841 shares issued and outstanding, respectively |
39,464 | 19,264 | ||||||
Additional paid-in capital |
76,130,492 | 43,483,740 | ||||||
Accumulated deficit |
(53,193,915 | ) | (40,479,459 | ) | ||||
Total stockholders’ equity |
22,976,041 | 3,023,545 | ||||||
Total liabilities and stockholders’ equity |
$ | 23,351,696 | $ | 3,534,229 |
See accompanying notes to the unaudited condensed financial statements.
Genprex, Inc.
Condensed Statements of Operations (unaudited)
Three Months Ended |
Nine Months Ended |
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September 30, |
September 30, |
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2020 |
2019 |
2020 |
2019 |
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Revenues |
$ | — | $ | — | $ | — | $ | — | ||||||||
Cost and expenses: |
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Depreciation |
5,714 | 3,437 | 16,843 | 9,486 | ||||||||||||
Research and development |
1,350,016 | 467,344 | 4,983,530 | 1,477,427 | ||||||||||||
General and administrative |
1,421,863 | 1,909,982 | 7,731,550 | 6,768,506 | ||||||||||||
Total costs and expenses |
2,777,593 | 2,380,763 | 12,731,923 | 8,255,419 | ||||||||||||
Operating loss |
(2,777,593 | ) | (2,380,763 | ) | (12,731,923 | ) | (8,255,419 | ) | ||||||||
Interest income |
2,650 | 5,051 | 17,467 | 25,620 | ||||||||||||
Net loss | $ | (2,774,943 | ) | $ | (2,375,712 | ) | $ | (12,714,456 | ) | $ | (8,229,799 | ) | ||||
Net loss per share—basic and diluted | $ | (0.07 | ) | $ | (0.15 | ) | $ | (0.37 | ) | $ | (0.53 | ) | ||||
Weighted average number of common shares— basic and diluted |
39,055,159 | 15,831,822 | 34,139,991 | 15,598,644 |
See accompanying notes to the unaudited condensed financial statements.
Genprex, Inc.
Condensed Statements of Changes in Stockholders' Equity (unaudited)
Common Stock |
Preferred Stock |
Additional |
Accumulated |
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Amount |
Shares |
Amount |
Paid-In Capital |
Deficit |
Total |
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Balance at December 31, 2018 |
15,239,148 | $ | 15,240 | — | $ | — | $ | 38,690,586 | $ | (29,824,691 | ) | $ | 8,881,135 | |||||||||||||||
Issuance of stock for cash |
200,000 | 200 | — | — | (200 | ) | — | — | ||||||||||||||||||||
Issuance of stock for services |
121,617 | 122 | — | — | 192,274 | — | 192,396 | |||||||||||||||||||||
Share based compensation |
— | — | — | — | 330,626 | — | 330,626 | |||||||||||||||||||||
Net loss |
— | — | — | — | — | (2,158,846 | ) | (2,158,846 | ) | |||||||||||||||||||
Balance at March 31, 2019 |
15,560,765 | $ | 15,562 | — | $ | — | $ | 39,213,286 | $ | (31,983,537 | ) | $ | 7,245,311 | |||||||||||||||
Issuance of stock for cash |
150,000 | 150 | — | — | (150 | ) | — | — | ||||||||||||||||||||
Issuance of stock for services |
92,090 | 91 | — | — | 159,010 | — | 159,101 | |||||||||||||||||||||
Share based compensation |
— | — | — | — | 1,615,896 | — | 1,615,896 | |||||||||||||||||||||
Net loss |
— | — | — | — | — | (3,695,240 | ) | (3,695,240 | ) | |||||||||||||||||||
Balance at June 30, 2019 |
15,802,855 | $ | 15,803 | — | $ | — | $ | 40,988,042 | $ | (35,678,777 | ) | $ | 5,325,068 | |||||||||||||||
Issuance of stock for services |
40,000 | 40 | — | — | 40,895 | — | 40,935 | |||||||||||||||||||||
Share based compensation |
— | — | — | — | 540,808 | — | 540,808 | |||||||||||||||||||||
Net loss |
— | — | — | — | — | (2,375,712 | ) | (2,375,712 | ) | |||||||||||||||||||
Balance at September 30, 2019 |
15,842,855 | $ | 15,843 | — | $ | — | $ | 41,569,745 | $ | (38,054,489 | ) | $ | 3,531,099 | |||||||||||||||
Balance at December 31, 2019 |
19,263,841 | $ | 19,264 | — | $ | — | $ | 43,483,740 | $ | (40,479,459 | ) | $ | 3,023,545 | |||||||||||||||
Issuance of stock for cash |
13,581,000 | 13,581 | — | — | 25,718,059 | — | 25,731,640 | |||||||||||||||||||||
Issuance of stock for services |
5,000 | 5 | — | — | 1,545 | — | 1,550 | |||||||||||||||||||||
Share based compensation |
— | — | — | — | 752,444 | — | 752,444 | |||||||||||||||||||||
Net loss |
— | — | — | — | — | (5,566,220 | ) | (5,566,220 | ) | |||||||||||||||||||
Balance at March 31, 2020 |
32,849,841 | $ | 32,850 | — | $ | — | $ | 69,955,788 | $ | (46,045,679 | ) | $ | 23,942,959 | |||||||||||||||
Issuance of stock for cash |
5,774,388 | 5,775 | — | — | 2,563,567 | — | 2,569,342 | |||||||||||||||||||||
Issuance of stock for services |
5,000 | 5 | — | — | 10,879 | — | 10,884 | |||||||||||||||||||||
Share based compensation |
— | — | — | — | 2,359,621 | — | 2,359,621 | |||||||||||||||||||||
Net loss |
— | — | — | — | — | (4,373,293 | ) | (4,373,293 | ) | |||||||||||||||||||
Balance at June 30, 2020 |
38,629,229 | $ | 38,630 | — | $ | — | $ | 74,889,855 | $ | (50,418,972 | ) | $ | 24,509,513 | |||||||||||||||
Issuance of stock for cash |
829,493 | 829 | — | — | 792,702 | — | 793,531 | |||||||||||||||||||||
Issuance of stock for services |
5,000 | 5 | — | — | 15,345 | — | 15,350 | |||||||||||||||||||||
Share based compensation |
— | — | — | — | 432,590 | — | 432,590 | |||||||||||||||||||||
Net loss |
— | — | — | — | — | (2,774,943 | ) | (2,774,943 | ) | |||||||||||||||||||
Balance at September 30, 2020 |
39,463,722 | $ | 39,464 | — | $ | — | $ | 76,130,492 | $ | (53,193,915 | ) | $ | 22,976,041 |
See accompanying notes to the unaudited condensed financial statements.
Genprex, Inc.
Condensed Statements of Cash Flows (unaudited)
Nine Months Ended September 30, |
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2020 |
2019 |
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Cash flows from operating activities: |
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Net loss |
$ | (12,714,456 | ) | $ | (8,229,799 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation |
16,843 | 9,486 | ||||||
Share based compensation |
3,572,439 | 2,879,762 | ||||||
Changes in operating assets and liabilities: |
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Accounts receivable |
570 | 9,297 | ||||||
Prepaid expenses and other |
(794,392 | ) | (27,862 | ) | ||||
Deposits |
10,991 | 6,353 | ||||||
Accounts payable and accrued expenses |
(114,834 | ) | 189,907 | |||||
Other current liabilities |
(20,195 | ) | (34,497 | ) | ||||
Net cash used in operating activities |
(10,043,034 | ) | (5,197,353 | ) | ||||
Cash flows from investing activities: |
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Additions to property and equipment |
(14,529 | ) | (8,879 | ) | ||||
Additions to intellectual property |
(96,512 | ) | (44,473 | ) | ||||
Reductions in (Additions to) research and development supplies | 115,456 | (801,780 | ) | |||||
Net cash provided by (used in) investing activities |
4,415 | (855,132 | ) | |||||
Cash flows from financing activities: |
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Proceeds from issuances of stock | 29,094,513 | — | ||||||
Net cash provided by financing activities |
29,094,513 | — | ||||||
Net increase (decrease) in cash |
19,055,894 | (6,052,485 | ) | |||||
Cash, beginning of period |
2,002,492 | 8,600,918 | ||||||
Cash, end of period |
$ | 21,058,386 | $ | 2,548,433 | ||||
Supplemental Disclosure of Cash Flow Information |
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Cash paid for interest |
$ | — | $ | — | ||||
Cash paid for taxes |
$ | — | $ | — |
See accompanying notes to the unaudited condensed financial statements.
GENPREX, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1 - Description of Business and Basis of Presentation
Genprex™ (“we” or the “Company”) is a clinical stage gene therapy company focused on developing life-changing treatments for cancer and diabetes. Our lead cancer drug candidate, REQORSA™ Immunogene therapy drug (formerly referred to as GPX-001), is being developed to treat non-small cell lung cancer (”NSCLC”). REQORSA consists of a tumor suppressor gene called TUSC2, which has both tumor killing (via apoptosis) and immunomodulatory effects. We utilize our novel proprietary Oncoprex® Nanoparticle Delivery System™ to deliver TUSC2 to cancer cells. The TUSC2 gene is one of a series of genes whose therapeutic use is covered by an exclusive worldwide license from The University of Texas MD Anderson Cancer Center (“MD Anderson”). We are planning to initiate our Acclaim-1 and Acclaim-2 clinical trials in the first half of 2021. Acclaim-1 is a Phase 1/2 clinical trial using a combination of REQORSA with AstraZeneca PLC’s Tagrisso® in patients with late stage NSCLC with mutated epidermal growth factor receptors (“EGFRs”) whose disease progressed after treatment with Tagrisso. In January 2020, we received Food and Drug Administration (“FDA”) Fast Track Designation for the Acclaim-1 patient population. Acclaim-2 is a Phase 1/2 clinical trial using a combination of REQORSA with Merck & Co.’s Keytruda® in NSCLC patients who are low expressors (1% to 49%) of the protein programmed death-ligand 1 (“PD-L1”).
In diabetes, we are developing a gene therapy that is exclusively licensed from the University of Pittsburgh of the Commonwealth System of Higher Education and, according to researchers, has the potential to cure type 1 and type 2 diabetes. This potential treatment works by transforming alpha cells in the pancreas into functional beta-like cells, which can produce insulin but are distinct enough from beta cells to evade the body’s immune system. Our diabetes product is currently being evaluated in pre-clinical studies.
Oncology Platform Technologies
Utilizing our Oncoprex Nanoparticle Delivery System, we are developing cancer treatments that are designed to administer cancer fighting genes. We encapsulate the genes into the Oncoprex nanoscale hollow spheres, administer them intravenously, where they are then taken up by tumor cells and express proteins that are missing or found in low quantities in the tumor cells. With our lead drug candidate, REQORSA, there is a multimodal mechanism of action whereby REQORSA, which encapsulates the TUSC2 gene, interrupts cell signaling pathways that cause replication and proliferation of cancer cells, re-establishes pathways for apoptosis, or programmed cell death, in cancer cells, and modulates the immune response against cancer cells. REQORSA has also been shown to block mechanisms that create drug resistance.
Epidemiology: Non-Small Cell Lung Cancer
We are initially targeting NSCLC with REQORSA. According to the World Health Organization in 2018, lung cancer was the leading cause of cancer deaths worldwide, causing more deaths than colorectal, breast, liver or stomach cancers. In the same year, there were more than 2 million new lung cancer cases and 1.7 million deaths from lung cancer worldwide. In the United States, according to the American Cancer Society, it is estimated that in 2020 there will be more than 228,000 new cases of lung cancer and more than 135,000 deaths from lung cancer. The American Society of Clinical Oncology reports that NSCLC represents 84 percent of all lung cancers and has a 24 percent five-year survival rate. However, according to the National Cancer Institute, 57 percent of lung cancer diagnoses are distant, or have metastasized, and the five-year relative survival rate for Stage IV (metastatic) NSCLC is approximately 5 percent. With limited benefit from current therapies, we believe there is a significant unmet medical need for new treatments for NSCLC in the United States and globally, and we believe REQORSA may be suitable for a majority of NSCLC patients.
Acclaim-1
In January 2020, we received Fast Track Designation from the FDA for use of REQORSA in combination with AstraZeneca’s EGFR inhibitor Tagrisso for the treatment of NSCLC patients with EFGR mutations whose tumors progressed after treatment with Tagrisso. According to the FLAURA study sponsored by AstraZeneca, the median length of time that patients are treated with Tagrisso before their tumors progress is approximately 18 months. Tagrisso is now considered a new standard of care for NSCLC patients with an EGFR mutation. Given the poor prognosis for these patients and our FDA Fast Track Designation, we are prioritizing this drug combination and patient population and plan to initiate the Phase 1/2 clinical trial in the first half of 2021. The Acclaim-1 trial is a Phase 1/2 clinical trial in Stage 4 NSCLC patients who are EGFR mutant and whose disease has progressed after treatment with Tagrisso. The trial consists of a combination of REQORSA and Tagrisso, and we plan to conduct the trial in approximately 10 U.S. sites with about 100 patients (9-18 patients in the Phase 1 component and 82 patients in the Phase 2 component). An interim analysis will be performed after 53 events (i.e., death or progression of disease).
Acclaim-2
In 2019, preclinical data was presented by MD Anderson collaborators relating to the combination of TUSC2, the active agent in REQORSA, with Keytruda showing that TUSC2 combined with the checkpoint blockade mechanism of action of Keytruda was more effective than Keytruda alone in increasing the survival of mice with human immune cells (humanized mice) that had metastatic lung cancer. MD Anderson also presented preclinical data in 2019 for the combination of TUSC2, Keytruda and chemotherapy for the treatment of some of the most resistant metastatic lung cancers. This study found that the addition of TUSC2 demonstrates synergy with Keytruda and chemotherapy, and thus, may improve on first-line standard of care for lung cancer. In May 2020, we entered into a worldwide, exclusive license agreement with The Board of Regents of the University of Texas System on behalf of MD Anderson for the use of TUSC2 in combination with immunotherapies, including Keytruda. We plan to initiate the Acclaim-2 trial in the first half of 2021, which is a Phase 1/2 clinical trial combining REQORSA with Keytruda in patients whose disease has progressed on Keytruda in NSCLC patients who are low expressors (1% to 49%) of PD-L1.
We believe that our Oncoprex Nanoparticle Delivery System could allow delivery of a number of cancer-fighting genes, alone or in combination with other cancer therapies, to combat multiple types of cancer. We believe that REQORSA’s combination of pan-kinase inhibition, direct induction of apoptosis, anti-cancer immune modulation and complementary action with targeted drugs and immunotherapies is unique, and positions REQORSA to provide treatment for patients with NSCLC and possibly other cancers, who are not benefitting from current therapies.
Diabetes Gene Therapy
Diabetes is a chronic, metabolic disease characterized by elevated levels of blood glucose (or blood sugar), which leads over time to serious damage to the heart, blood vessels, eyes, kidneys and nerves. The most common is type 2 diabetes, which usually occurs in adults, and which arises when the body becomes resistant to insulin or does not make enough insulin. In the past three decades, the prevalence of type 2 diabetes has risen dramatically. Type 1 diabetes, also known as juvenile diabetes or insulin-dependent diabetes, is a chronic condition in which the pancreas produces little or no insulin by itself. According to the International Diabetes Federation in 2019, about 463 million people worldwide had diabetes and 4.2 million deaths were attributed to diabetes. Both the number of cases and the prevalence of diabetes have been steadily increasing over the past few decades.
Our diabetes gene therapy, also referred to as GPX-002, was developed by lead researcher Dr. George Gittes, at the Rangos Research Center at UPMC Children’s Hospital of Pittsburgh. This potential treatment works by transforming alpha cells in the pancreas into functional beta-like cells, which can produce insulin but are distinct enough from beta cells to evade the body’s immune system. The therapy utilizes a procedure in which an adeno-associated virus vector delivers Pdx1 and MafA genes to the pancreas.
The diabetes gene therapy has been tested in vivo in mice and nonhuman primates. In studies in non-obese diabetic mice, the gene therapy approach restored normal blood glucose levels for an extended period of time, typically around four months. According to Dr. Gittes, the duration of restored blood glucose levels in mice could translate to decades in humans. If successful, this gene therapy could eliminate the need for insulin replacement therapy for diabetic patients.
Capital Requirements, Liquidity and Going Concern Considerations
Our condensed financial statements are prepared using the generally accepted accounting principles (“GAAP”) applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, as shown in the accompanying condensed financial statements, we have sustained substantial losses from operations since inception and have no current source of revenue. In addition, we have used, rather than provided, cash in our operations. We expect to continue to incur significant expenditures to further clinical trials for the commercial development of our product candidates.
Management recognizes that we must obtain additional capital resources to successfully commercialize our product candidates. To date, we have received funding in the form of equity and debt, and we plan to seek additional funding in the future. However, no assurances can be given that we will be successful in raising additional capital. If we are not able to timely and successfully raise additional capital, the timing of our clinical trials, financial condition and results of operations will continue to be materially and adversely affected. These condensed financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities.
Note 2 - Summary of Significant Accounting Policies
The Company’s condensed financial statements have been prepared in accordance with GAAP. However, they do not include all the information and footnotes required by GAAP for complete financial statements. In our opinion, the unaudited condensed financial statements include all adjustments (consisting of normal recurring accruals) necessary to make the unaudited condensed financial statements not misleading. Operating results for the nine months ended September 30, 2020 and 2019 are not necessarily indicative of the final results that may be expected for the year ending December 31, 2020. For more complete financial information, these unaudited condensed financial statements should be read in conjunction with the Company's audited financial statements for the year ended December 31, 2019 filed with the Company's Annual Report on Form 10-K filed with the SEC on March 30, 2020. A summary of our significant accounting policies consistently applied in the preparation of the accompanying condensed financial statements follows.
Capital Stock
In connection with the Company’s initial public offering ("IPO") in April 2018, all of the Company’s preferred stock and non-voting common stock were converted into shares of the Company’s common stock. The Company’s common stock was then forward-split at a ratio of 6.6841954-to-1. Furthermore, prior to the closing of the IPO, the Company’s Certificate of Incorporation was amended and restated to provide the Company with the authority to issue up to 210,000,000 shares of stock consisting of 200,000,000 shares of common stock at a par value of $0.001 per share and 10,000,000 shares of preferred stock at a par value of $0.001 per share.
Use of Estimates
The preparation of our condensed financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Cash
We consider all highly liquid short-term investments with an initial maturity of three months or less to be cash equivalents. Any amounts of cash in financial institutions which exceed FDIC insured limits expose us to cash concentration risk. We had no cash equivalents, and had $20,811,895 and $1,761,278 in excess of FDIC insured limits of $250,000 at September 30, 2020 and December 31, 2019, respectively.
Fair Value of Financial Instruments
The carrying amounts reported in the balance sheet for cash, accounts receivable, accounts payable and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments.
Accounting Standard Codification ("ASC") 820, Fair Value Measurements and Disclosures, defines fair value, provides a consistent framework for measuring fair value under GAAP and expands fair value financial statement disclosure requirements. ASC 820’s valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. ASC 820 classifies these inputs into the following hierarchy:
Level 1: Quoted prices for identical instruments in active markets.
Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3: Instruments with primarily unobservable value drivers.
Property and Equipment
Furniture and equipment are stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, which range from three to five years. Routine maintenance and repairs are charged to expense as incurred and major renovations or improvements are capitalized.
Research and Development Costs
Research and development expenditures consist of costs incurred to conduct research and development activities. These include payments to collaborative research partners, manufacturing partners, and clinical strategy partners, wages and associated employee benefits, facilities and overhead costs. These expenditures relate to our preclinical, Phase 1, and Phase 2 clinical trials and are expensed as incurred. Purchased materials to be used in future research are capitalized and included in research and development supplies. Supplies purchased and capitalized for future use were $686,324 and $801,780 at September 30, 2020 and December 31, 2019, respectively.
Awards
In 2010, we were awarded $4.5 million from the State of Texas Emerging Technology Fund (“TETF”). The award was received in two tranches of $2.25 million each during 2010 and 2011. The award proceeds were used to further the development and future commercialization of REQORSA, our lead product candidate for NSCLC. In consideration of the award, we provided the TETF with an “Investment Unit,” consisting of (i) a Promissory Note (“Note”) and (ii) a right to purchase our equity shares (“Warrant”). The funds received for this award were assigned to the Investment Unit, and classified separately from equity as “mezzanine” in the balance sheet.
In 2010, we also were awarded approximately $244,500 from the U.S. Treasury Department for our QTDP Program Nanoparticle Therapy for Lung Cancer. The award was received during 2011 for our historical activities, and required no prospective expenditures. We accounted for these funds received as revenue at that time.
Intellectual Property
Intellectual property consists of legal and related costs associated with patents and other proprietary technology and rights developed, acquired, licensed by, or maintained by us that we believe contribute to a probable economic benefit toward such patents and activities. These costs incurred in connection with obtaining and maintaining intellectual property protection, such as patent applications and patent maintenance, are capitalized. Intellectual property is stated at cost, to be amortized on a straight-line basis over the estimated useful lives of the assets.
Accounting for Stock-Based Compensation
We use the fair value-based method of accounting for stock-based compensation for options granted to employees, independent consultants and contractors. We measure options granted at fair value determined as of the grant date, and recognize the expense over the periods in which the related services are rendered based on the terms and conditions of the award. Generally, where the award only has a service condition, the requisite service period is the same as the vesting period.
Financial Instruments
We have elected the Fair Value Option to account for the Investment Unit at fair value as a combined hybrid financial instrument containing a Warrant and a Note (see Note 4 - Investment Unit). Prior to its exercise, the Warrant component was not classified within equity, as the exercise price of the Warrant was affected by the market price of our stock in a future qualifying financing transaction and was not considered to be indexed to our own stock. The Note is not classified within liabilities, as our management can determine the timing of the repayment obligation, if any. As a result, the Warrant and Note that comprised the Investment Unit were aggregated and classified within the mezzanine section of the balance sheet.
Due to the contingent terms of the financial instruments, changes in the fair value of the Investment Unit were calculated and realized in earnings. In August 2019, the remaining articles of the Investment Unit were terminated. There were no changes in the fair value of the Investment Unit at September 30, 2020.
Long-Lived Assets
We review long-lived assets and certain identifiable intangibles held and used for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In evaluating the fair value and future benefits of its intangible assets, management performs an analysis of the anticipated undiscounted future net cash flow of the individual assets over the remaining amortization period. We recognize an impairment loss if the carrying value of the asset exceeds the expected future cash flows. During the nine months ended September 30, 2020 and the year ended December 31, 2019, there were no deemed impairments of our long-lived assets.
Recent Accounting Developments
Accounting pronouncements issued but not effective until after September 30, 2020 are not expected to have a significant effect on our financial condition, results of operations, or cash flows.
Note 3 - Intellectual Property
On February 11, 2020, we entered into an exclusive license agreement with the University of Pittsburgh for patented gene therapy technologies relating to the potential treatment of type 1 and type 2 diabetes.
On May 4, 2020, the Company entered into an exclusive worldwide license agreement with The Board of Regents of the University of Texas System on behalf of MD Anderson relating to a portfolio of 16 patent applications and related technology for the treatment of cancer using the Company’s lead drug candidate and immunotherapies.
We have exclusive license agreements on 34 issued patents and 16 patent applications worldwide for technologies developed by researchers at the National Cancer Institute, MD Anderson, the University of Texas Southwestern Medical Center, and the University of Pittsburgh. These patents comprise various therapeutic, diagnostic, technical and processing claims. These license rights will be amortized on a straight-line basis over the estimated period of useful lives of the underlying patents or the license agreements.
Note 4 - Investment Unit
The TETF was created as an incentive for economic development of the Texas economy by providing financial support that leverages private investment for the creation of high-quality technology jobs in Texas. The award received required us to comply with certain performance conditions to ensure the monies the Company received were used for development activities in the State of Texas, and to maintain our corporate nexus in Texas. Further, in connection with the award, the Company issued the Investment Unit to the TETF. On September 25, 2017 and again on August 16, 2019, the Company entered into termination agreements with the Texas Treasury Safekeeping Trust Company, the entity managing and controlling TETF interests, which terminated Article II and all remaining Articles of the Investment Unit, respectively, so that the entirety of the Investment Unit was effectively terminated. As further described below, the Investment Unit consisted of a Note and a Warrant.
Promissory Note
The Note was an obligation to repay the $4.5 million principal amount, with interest accrued at 8% per annum, but only if an event of default occurred prior to August 13, 2020. If no event of default occurred prior to August 13, 2020, the Note and all related interest would be cancelled. The Note was cancelled on August 16, 2019.
Consistent with the stated objectives of the TETF, an event of default that would trigger the repayment obligation under the Note was the failure to maintain our principal place of business or our principal executive offices headquartered in the State of Texas (referred to as the “Texas Residency Requirement”) until August 13, 2020.
Warrant
The Warrant was an obligation to issue (a Right to Purchase by the TETF) shares of the same class of stock to be issued in a “First Qualifying Financing Transaction,” at 80% of the per share transaction value (effectively a 20% discount). Alternatively, the TETF could exercise its right to purchase other shares at any time prior to the occurrence of a First Qualifying Financing Transaction for $0.001 per share.
The Warrant included a provision that required changes in the strike price, driven by the pricing of the “First Qualifying Financing Transaction.” As a result, the Warrant embedded in the Investment Unit was accounted for as a derivative financial instrument and classified outside of equity under ASC 815-40-15, as the settlement adjustment from the future transaction did not permit the strike price to be considered fixed.
On March 12, 2014, the TETF exercised the Warrant for $0.001 per share, and we issued to the TETF an aggregate of 184,797 shares of our Series B preferred stock. These shares were subsequently forward-split and converted into an aggregate of 1,235,219 shares of our common stock in connection with our IPO.
Accounting for the Investment Unit
We accounted for the Investment Unit as a hybrid financial instrument under Financial Accounting Standards Board Statement 155, and measured the Investment Unit at the amount of proceeds received from the TETF award. The First Qualifying Financing Transaction occurred during December 2013, resulting in an adjustment to the fair value of the Investment Unit in the amount of approximately $2.5 million. The TETF exercised the Warrant for $0.001 per share. We received a notice of exercise from the TETF during March 2014, and issued 184,797 shares of Series B preferred stock, which were converted to 1,235,219 shares of our common stock upon completion of our IPO. Upon exercise by the TETF of the Warrant, the remaining component within the Investment Unit was the Note. The Investment Unit was valued at zero, because our obligation to repay the Note arose from an event of default (a failure to maintain the Texas Residency Requirement), which was an event which rested entirely within our control.
Note 5 - Equity
Registered Direct Offerings
On November 22, 2019, the Company completed a registered direct offering (“2019 RDO”), whereby the Company sold to investors an aggregate of 3,167,986 shares of the Company’s common stock at $0.40 per share and warrants to purchase up to 3,167,986 shares of the Company’s common stock at an exercise price of $0.46 per share. The warrants were first exercisable on May 22, 2020. The Company received net proceeds of approximately $1,093,000 after commissions and expenses. Additionally, the placement agent was issued warrants to purchase common stock equal to 7% of the aggregate number of shares of common stock issued and issuable pursuant to the 2019 RDO (including shares underlying any warrants), or 443,518 shares of common stock at an exercise price of 125% of the 2019 RDO price per share, or $0.50 per share.
In connection with the closing of the 2019 RDO, the Company further adjusted the warrants to purchase up to 2,283,740 shares of the Company's common stock, which had been issued as part of the Company's May 9, 2018 private placement and adjusted in August 2018 to (i) reduce the exercise price for each share from $4.25 per share to $0.46 per share, (ii) extend the date upon which such warrants could be exercised to May 22, 2020, and (iii) extend the termination date of such warrants by six months and one day.
On January 21, 2020, the Company completed a registered direct offering, in which the Company sold to an accredited investor 961,000 shares of the Company’s common stock at $0.24 per share. The Company received net proceeds of approximately $200,000 after commissions and expenses.
On January 23, 2020, the Company completed a registered direct offering, in which the Company sold to investors an aggregate of 7,620,000 shares of the Company’s common stock at $1.05 per share. The Company received net proceeds of approximately $7.2 million after commissions and expenses.
On February 19, 2020, the Company amended its Registration Statement on Form S-3 to increase the maximum offering size by approximately $3,000,000. On February 21, 2020, the Company completed a registered direct offering under the amended S-3 Registration Statement, in which the Company sold to investors an aggregate of 5,000,000 shares of the Company’s common stock at $3.50 per share. The Company received net proceeds of approximately $16 million after commissions and expenses.
Stock Issuances
During the nine months ended September 30, 2020, we issued (i) 13,581,000 shares of common stock in our registered direct offerings for proceeds of $25,731,640, (ii) 5,511,599 shares of common stock upon the exercise of warrants for cash proceeds of $2,537,731, (iii) 115,552 shares of common stock upon the cashless exercise of warrants, (iv) 976,730 shares of common stock upon the exercise of options for cash proceeds of $825,027, and (v) 15,000 shares of common stock for services provided to us, valued at $27,900.
During the year ended December 31, 2019, we issued (i) 3,167,986 shares of common stock in the 2019 RDO for proceeds of $1,267,194, (ii) 506,707 shares of common stock for services provided to us, valued at $469,588, and (iii) 350,000 shares of common stock held in abeyance for an investor in our May 9, 2018 private placement.
Preferred Stock
In connection with the Company’s IPO, all preferred stock included in Series A through Series G preferred stock, totaling 1,394,953 shares at March 31, 2018 were converted to an aggregate of 9,324,177 shares of the Company's common stock in association with the forward-split (See Note 2 - Capital Stock). Upon the completion of the IPO, the Company became authorized to issue 10,000,000 shares of preferred stock with a par value of $0.001 per share, none of which are outstanding at September 30, 2020.
Common Stock
Upon the completion of the IPO, all of the Company’s non-voting common stock automatically converted into voting common stock on a one-for-one basis. Immediately following the completion of the IPO, the Company became authorized to issue 200,000,000 shares of common stock with a par value of $0.001 per share, all of which are voting common stock. There were 39,463,722 shares of common stock outstanding at September 30, 2020.
Common Stock Purchase Warrants
Common stock purchase warrant activity for the period and year ended September 30, 2020 and December 31, 2019, respectively, is as follows:
Number of |
Weighted Avg. |
|||||||
Warrants |
Exercise Price |
|||||||
Outstanding at January 1, 2019 |
3,864,552 | $ | 2.36 | |||||
Issued |
3,611,504 | 0.46 | ||||||
Cancelled or expired |
— | — | ||||||
Exercised |
— | — | ||||||
Outstanding at December 31, 2019 |
7,476,056 | $ | 1.45 | |||||
Issued |
550,000 | 2.41 | ||||||
Cancelled or expired |
24,158 | 0.50 | ||||||
Exercised |
5,627,151 | 0.46 | ||||||
Outstanding at September 30, 2020 |
2,374,747 | $ | 4.01 | |||||
Vested or expected to vest at September 30, 2020 | — | — | ||||||
Exercisable at September 30, 2020 | 2,124,747 | $ | 4.18 |
In the nine-month period ended September 30, 2020, (i) investors and placement agents of the Company's May 2018 private placement and 2019 RDO exercised warrants to purchase 5,511,599 shares of common stock for cash proceeds of $2,537,731, (ii) the Company issued 115,552 shares of common stock and cancelled 24,158 shares of common stock to placement agents of the 2019 RDO for the exercise of warrants via cashless exercise, and (iii) the Company issued warrants to purchase up to 550,000 shares of common stock to service providers including 500,000 shares of common stock to Cancer Revolution, LLC at an exercise price of $2.27 per share and 50,000 shares of common stock to Capital City Technical Consulting, Inc. at an exercise price of $3.81 per share. During the nine-month period ended September 30, 2020, we recorded share-based compensation of $450,000 associated with Company milestone-based vesting of the Cancer Revolution, LLC warrants. We expect to record $124,000 of share-based compensation for time-based vesting over the next three years and another $300,000 of share-based compensation based on performance-based vesting.
In the year ended December 31, 2019, we (i) issued warrants to purchase 3,167,986 shares of our common stock at an exercise price of $0.46 per share to the investors in the 2019 RDO, (ii) issued warrants to purchase 443,518 shares of our common stock at an exercise price of $0.50 per share to the placement agent in the 2019 RDO, and (iii) reduced the purchase price of the warrants issued to investors in the May 9, 2018 private placement to purchase 2,283,740 shares of our common stock from $4.25 per share to $0.46 per share.
On January 29, 2018, the Company entered into an agreement with FundAthena, Inc. whereby the Company agreed to grant warrants to purchase 6,000 shares of common stock at an exercise price of $5.00 per share in consideration of services valued at $30,000 provided to the Company. At September 30, 2020, the Company has not issued these warrants.
2018 Equity Incentive Plan
The Company’s board of directors and stockholders have approved and adopted the Company’s 2018 Equity Incentive Plan (“2018 Plan”), which became effective on the completion of the IPO on April 3, 2018. The 2018 Plan provides for the grant of incentive stock options (“ISOs”), nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance-based stock awards, other forms of equity compensation and performance cash awards. ISOs may be granted only to employees. All other awards may be granted to employees, including officers, and to the Company’s non-employee directors and consultants.
A total of 4,160,000 shares of common stock are authorized under the 2018 Plan, which includes 554,963 shares of common stock reserved for issuance under our 2009 Equity Incentive Plan that were added to the 2018 Plan. No grants have been made under the 2009 Plan since our IPO, and no further grants will be made under the 2009 Plan. Any shares subject to outstanding stock options under the 2009 Plan that would otherwise be returned to the 2009 Plan will instead be added to the shares initially reserved under the 2018 Plan.
In addition, the number of shares of common stock reserved for issuance under the 2018 Plan is automatically increased on January 1 of each calendar year, beginning on January 1, 2019 by 5% of the total number of shares of the Company’s common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by the administrator of the 2018 Plan. On January 1, 2019 and 2020, the number of shares of common stock reserved for issuance under the 2018 Plan was increased by an aggregate of 761,957 and 963,192 shares, respectively.
2018 Employee Stock Purchase Plan
The Company’s board of directors and stockholders approved and adopted the Company’s 2018 Employee Stock Purchase Plan (“ESPP”), which became effective on the completion of the IPO on April 3, 2018. The ESPP will not become effective until the Board determines to make this benefit available to our employees. The ESPP authorizes the issuance of 208,500 shares of the Company’s common stock pursuant to purchase rights granted to our eligible employees. The number of shares of common stock reserved for issuance under the ESPP is automatically increased on January 1 of each calendar year, beginning on January 1, 2019, by 2% of the total number of shares of the Company's common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by the administrator of the ESPP. The administrator of the ESPP, which is our board of directors, determined not to increase the number of shares reserved for issuance under the ESPP on January 1, 2019 or January 1, 2020.
Stock Options
As of September 30, 2020, the Company had outstanding stock options to purchase 6,982,885 shares of common stock that have been granted to various executives, employees, directors, and independent contractors. These options can vest immediately or over periods ranging from 12 to 48 months, are exercisable for a period of up to ten years, and enable the holders to purchase shares of our common stock at exercise prices ranging from $0.001 to $9.80 per share. The per-share fair values of these options range from $0.001 to $7.93, based on Black-Scholes-Merton pricing models with the following assumptions:
Expected term: |
10 years |
|
Risk-free rate: |
0.13% – 2.63% |
|
Volatility: |
75.98% – 82.03% |
|
Dividend yield: |
0% |
In the nine-month period ending September 30, 2020, the Company (i) granted stock options to purchase an aggregate of 2,141,529 shares of the Company's common stock with exercise prices ranging from $1.28 to $3.80 per share to employees, board members, and consultants, (ii) cancelled options to purchase 164,837 shares of common stock at an exercise price of $9.80 per share due to separation of a former executive, and (iii) issued 976,730 shares of the Company's common stock upon the exercise of options held by former board members and a former executive with exercise prices ranging from $0.015 to $2.15 per share.
In the year ending December 31, 2019, the Company granted stock options to purchase an aggregate of 1,744,300 shares of common stock with exercise prices ranging from $0.30 to $1.62 per share to employees and consultants and cancelled options to purchase 297,058 shares of common stock due to the inactivity of service providers.
Stock option activity for the nine months and year ended September 30, 2020 and December 31, 2019, respectively, is as follows:
Number of |
Weighted Avg. |
|||||||
Shares |
Exercise Price |
|||||||
Outstanding at January 1, 2019 |
4,535,681 | $ | 3.31 | |||||
Options granted |
1,744,300 | 1.48 | ||||||
Options exercised |
— | — | ||||||
Options expired |
(297,058 | ) | — | |||||
Outstanding at December 31, 2019 |
5,982,923 | $ | 2.66 | |||||
Options granted |
2,141,529 | 2.78 | ||||||
Options exercised |
(976,730 | ) | 0.84 | |||||
Options expired or cancelled |
(164,837 | ) | 9.80 | |||||
Outstanding at September 30, 2020 |
6,982,885 | $ | 2.78 | |||||
Vested or expected to vest at September 30, 2020 | 218,260 | $ | 2.70 | |||||
Exercisable at September 30, 2020 | 4,857,491 | $ | 3.00 |
Share-Based Compensation
For the nine months ended September 30, 2020, the Company's total share-based compensation was approximately $3.6 million, nearly all of which represents the vesting of options and warrants issued to service providers, executives, employees, and board members. The Company’s total compensation cost related to non-vested time-based stock option awards granted to executives, employees, and board members and not yet recognized was approximately $4.5 million for the quarter ended September 30, 2020. The Company expects to record this stock-based compensation expense over the next three years using a graded vesting method. As of September 30, 2020, the weighted average term over which these expenses are expected to be recognized are 2.26 years.
As of September 30, 2020, there are no performance-based stock option awards outstanding.
Note 6 - Related Party Transactions
Introgen Research Institute
Introgen Research Institute (“IRI”) is a Texas-based technology company, currently affiliated with Rodney Varner, our Chief Executive Officer. In April 2009, prior to Mr. Varner becoming an officer and director of our Company in August 2012, we entered into an Assignment and Collaboration Agreement with IRI, providing us with the exclusive right to commercialize a portfolio of intellectual property. This agreement was amended in 2011 to include additional sublicensing of additional intellectual property made available to IRI from MD Anderson.
Viet Ly
The Company entered into a consulting agreement with Viet Ly on April 19, 2018. The Company agreed to pay Mr. Ly $175,000 initially, with compensation variable from time-to-time as determined by the Company, for strategic consulting services. The Company paid Mr. Ly an aggregate of $28,500 during the quarter ended September 30, 2020 for strategic services. In addition, in April 2020, the Company issued Cancer Revolution LLC, an entity owned by Mr. Ly, a warrant to purchase up to 500,000 shares of common stock at the fair market value of the common stock on the date of issuance that vests based on the achievement of Company milestones.
Note 7 - Commitments and Contingencies
Leases
On April 16, 2018, the Company executed a service agreement with CIC Innovation Communities, LLC to establish and lease offices at the Cambridge Innovation Center in Cambridge, Massachusetts. On April 1, 2020, the Company provided notice of cancellation of our lease in the Cambridge Innovation Center in Cambridge, Massachusetts, effective April 30, 2020.
On April 16, 2018, the Company executed a space utilization agreement with the Board of Regents of the University of Texas System to establish and lease offices at the Dell Medical School in Austin, Texas. The lease ran through October 31, 2020 and the Company pays $462 per month to occupy this location. See Subsequent Event Note 9.
Commitments
MD Anderson Cancer Center
We have entered into a clinical study agreement with MD Anderson in Houston, Texas, to administer a Phase 1/2 clinical trial, combining FUS1-nanoparticles and Tarceva in Stage IV lung cancer patients. FUS1 is sometimes referred to as TUSC2 and has recently been branded as REQORSA. The trial was expected to run through the end of 2018 with a projected total cost of approximately $2 million. Payments are due and payable when invoiced throughout the clinical trial period. The agreement may be terminated at any time. With Tagrisso now considered a new standard of care in the U.S. for NSCLC in patients with an EGFR mutation and our receipt of FDA Fast Track Designation for use of REQORSA combined with Tagrisso, we are prioritizing this program in lieu of the combination trial of REQORSA and Tarceva.
In May 2020, the Company entered into a license agreement with The Board of Regents of the University of Texas System, on behalf of MD Anderson. In consideration of the license, the Company will make certain agreed upon payments to MD Anderson, including an up-front license fee, annual maintenance fees, an aggregate of $4,150,000 in milestone payments over the term of the agreement, and single digit royalty payments (until such time that $3 billion per year in worldwide sales of licensed products using the licensed intellectual property is achieved and low double digits thereafter), minimum annual royalties for sales of licensed products using the licensed intellectual property, as well as reimbursement of patent expenses. The agreement expires on the last to occur of: (a) the expiration of all patents subject to the license agreement, or (b) thirty years after execution, subject to earlier termination rights by the Company and MD Anderson, including MD Anderson's right to terminate the agreement upon the occurrence of certain events, including the Company's failure to meet certain commercial diligence milestones.
In July 2018, the Company entered into a two-year sponsored research agreement with MD Anderson to sponsor preclinical studies focused on the combination of TUSC2 with an immunotherapy with a projected total cost of approximately $2 million. In March, 2020, the term of this agreement was extended to May 22, 2022. Payments are due and payable when invoiced throughout the clinical trial period. The agreement may be terminated at any time.
In 2009, we agreed to assume certain contractual and other obligations of IRI in consideration of the sublicense rights, expertise, and assistance associated with the assignment of certain technologies and intellectual property. We also agreed to pay royalties of 1% on sales of resulting licensed products, for a period of 21 years following the termination of the last of the MD Anderson License Agreement and Sublicense Agreement, to IRI and we assumed patent prosecution costs and an annual minimum royalty of $20,000 payable to the National Institutes of Health.
National Institutes of Health
Our $191,393 payment obligation to the National Institutes of Health (“NIH”) represented a current obligation, of which $15,393 of 2016 patent prosecution costs were paid in the fourth quarter of 2016 and $176,000 was included in Accounts Payable at December 31, 2016 (consisting of accrued annual royalties of $140,000 and patent costs of $36,000). During the first quarter of 2017, we modified the terms of our accrued royalty obligation to NIH. Under the modified agreement, NIH agreed to extinguish $120,000 of the accrued royalties payable to it in consideration of payment by us of (i) accrued patent costs of $36,000, (ii) a royalty payment of $20,000, and (iii) a contingent payment of $240,000, increasing by $20,000 per year starting in 2018, to be paid upon our receipt of FDA approval. The payments for the patent costs of $36,000 and royalties of $20,000 were paid during the second quarter of 2017.
As a result of our modified agreement with the NIH, we have recognized the exchange of the $120,000 fixed obligation for the $240,000 contingent obligation as a $120,000 reduction to intellectual property expense (classified within general and administrative expense) during the first quarter of 2017. The $240,000 contingent obligation which increases annually by $20,000 and is $280,000 as of December 31, 2019 will be recognized when we obtain regulatory approval (the event that triggers the payment obligation).
University of Pittsburgh
As part of our License Agreement with the University of Pittsburgh in February 2020, we agreed to (i) an initial licensing fee of $25,000, (ii) annual maintenance fees of $25,000 for the first three years and $40,000 for each subsequent year following the first anniversary of the agreement, (iii) royalties between 1.5% to 3% of net sales of licensed technologies, (iv) an annual minimal royalty payment of $250,000 per year beginning in the year of the first commercial sale of licensed technology, (v) a share of non-royalty sublicense income of 20%, and (vi) milestone payments of an aggregate of $3,975,000. The agreement expires upon the later of (i) 20 years after the first commercial sale of the licensed technology thereunder and (ii) expiration of the last valid claim under the patent rights, subject to earlier termination pursuant to the terms of the agreement.
Contingencies
From time to time we may become subject to threatened and/or asserted claims arising in the ordinary course of our business. Management is not aware of any matters, either individually or in the aggregate, that are reasonably likely to have a material impact on our financial condition, results of operations or liquidity.
Note 8 - Significant Events
In March 2020, the outbreak of COVID-19 caused by a novel strain of the coronavirus was recognized as a pandemic by the World Health Organization. The pandemic has become increasingly widespread in the United States, including markets in which the Company operates or may operate in the future. The COVID-19 pandemic has had a notable impact on general economic conditions, including, but not limited to, the temporary closures of many businesses, “shelter in place” orders and other governmental regulations, reduced consumer spending due to both job losses and other effects attributable to the COVID-19, in addition to many other unknowns. To date, the Company has not experienced any material impact on its financial results or operations as a result of the COVID-19 pandemic. The extent to which the COVID-19 pandemic could impact the Company's operations or financial results is uncertain. The Company continues to monitor the impact of the COVID-19 pandemic closely.
Note 9 - Subsequent Events
Share Issuance
On October 1, 2020, the Company issued 5,000 shares of common stock to a service provider in consideration of services to be provided through December 31, 2020.
Leases
On October 15, 2020, the Company amended the agreement with the Board of Regents of the University of Texas System to extend the lease of offices at the Dell Medical School in Austin, Texas through April 30, 2021.
New Hires, Promotion, and Option Issuances
On October 22, 2020, the Company granted stock options to purchase an aggregate of 285,000 shares of common stock at an exercise price of $3.36 per share, the fair market value of the common stock on the date of grant, in connection with the new hire of two employees, including the Company's Senior Vice President, Intellectual Property and Licensing and the promotion of a current employee to Vice President, Manufacturing.
Option Exercises
The Company issued 150,000 shares of common stock for $216,560 in cash to former board members and a former executive upon the exercise of options from October 1, 2020 through November 5, 2020.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed financial statements and related notes included in this Quarterly Report on Form 10-Q and our audited financial statements and notes thereto as of and for the year ended December 31, 2019 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on form 10-K filed with the SEC on March 30, 2020 (the "Annual Report").
Forward-Looking Statements
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) contains certain forward-looking statements. Historical results may not indicate future performance. Our forward-looking statements reflect our current views about future events, are based on assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated by these statements. Factors that may cause differences between actual results and those contemplated by forward-looking statements include, but are not limited to, those discussed in “Risk Factors” as set forth in the Annual Report and in our other filings with the SEC. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, including any changes that might result from any facts, events, or circumstances after the date hereof that may bear upon forward-looking statements. Furthermore, we cannot guarantee future results, events, levels of activity, performance, or achievements.
Overview
We are a clinical stage gene therapy company focused on developing life-changing treatments for cancer and diabetes. Our lead cancer drug candidate, REQORSA™ Immunogene therapy drug (formerly referred to as GPX-001), is being developed to treat non-small cell lung cancer (”NSCLC”). REQORSA consists of a tumor suppressor gene called TUSC2, which has both tumor killing (via apoptosis) and immunomodulatory effects. We utilize our novel proprietary Oncoprex® Nanoparticle Delivery System™ to deliver TUSC2 to cancer cells. The TUSC2 gene is one of a series of genes whose therapeutic use is covered by an exclusive worldwide license from The University of Texas MD Anderson Cancer Center (“MD Anderson”). We are planning to initiate our Acclaim-1 and Acclaim-2 clinical trials in the first half of 2021. Acclaim-1 is a Phase 1/2 clinical trial using a combination of REQORSA with AstraZeneca PLC’s Tagrisso® in patients with late stage NSCLC with mutated epidermal growth factor receptors (“EGFRs”) whose disease progressed after treatment with Tagrisso. In January 2020, we received Food and Drug Administration (“FDA”) Fast Track Designation for the Acclaim-1 patient population. Acclaim-2 is a Phase 1/2 clinical trial using a combination of REQORSA with Merck & Co.’s Keytruda® in NSCLC patients who are low expressors (1% to 49%) of the protein programmed death-ligand 1 (“PD-L1”).
In diabetes, we are developing a gene therapy that is exclusively licensed from the University of Pittsburgh of the Commonwealth System of Higher Education and, according to researchers, has the potential to cure type 1 and type 2 diabetes. This potential treatment works by transforming alpha cells in the pancreas into functional beta-like cells, which can produce insulin but are distinct enough from beta cells to evade the body’s immune system. Our diabetes product is currently being evaluated in pre-clinical studies.
Oncology Platform Technologies
Utilizing our Oncoprex Nanoparticle Delivery System, we are developing cancer treatments that are designed to administer cancer fighting genes. We encapsulate the genes into the Oncoprex nanoscale hollow spheres, administer them intravenously, where they are then taken up by tumor cells and express proteins that are missing or found in low quantities in the tumor cells. With our lead drug candidate, REQORSA, there is a multimodal mechanism of action whereby REQORSA, which encapsulates the TUSC2 gene, interrupts cell signaling pathways that cause replication and proliferation of cancer cells, re-establishes pathways for apoptosis, or programmed cell death, in cancer cells, and modulates the immune response against cancer cells. REQORSA has also been shown to block mechanisms that create drug resistance.
Epidemiology: Non-Small Cell Lung Cancer
We are initially targeting NSCLC with REQORSA. According to the World Health Organization in 2018, lung cancer was the leading cause of cancer deaths worldwide, causing more deaths than colorectal, breast, liver or stomach cancers. In the same year, there were more than 2 million new lung cancer cases and 1.7 million deaths from lung cancer worldwide. In the United States, according to the American Cancer Society, it is estimated that in 2020 there will be more than 228,000 new cases of lung cancer and more than 135,000 deaths from lung cancer. The American Society of Clinical Oncology reports that NSCLC represents 84 percent of all lung cancers and has a 24 percent five-year survival rate. However, according to the National Cancer Institute, 57 percent of lung cancer diagnoses are distant, or have metastasized, and the five-year relative survival rate for Stage IV (metastatic) NSCLC is approximately 5 percent. With limited benefit from current therapies, we believe there is a significant unmet medical need for new treatments for NSCLC in the United States and globally, and we believe REQORSA may be suitable for a majority of NSCLC patients.
Acclaim-1
In January 2020, we received Fast Track Designation from the FDA for use of REQORSA in combination with AstraZeneca’s EGFR inhibitor Tagrisso for the treatment of NSCLC patients with EFGR mutations whose tumors progressed after treatment with Tagrisso. According to the FLAURA study sponsored by AstraZeneca, the median length of time that patients are treated with Tagrisso before their tumors progress is approximately 18 months. Tagrisso is now considered a new standard of care for NSCLC patients with an EGFR mutation. Given the poor prognosis for these patients and our FDA Fast Track Designation, we are prioritizing this drug combination and patient population and plan to initiate the Phase 1/2 clinical trial in the first half of 2021. The Acclaim-1 trial is a Phase 1/2 clinical trial in Stage 4 NSCLC patients who are EGFR mutant and whose disease has progressed after treatment with Tagrisso. The trial consists of a combination of REQORSA and Tagrisso, and we plan to conduct the trial in approximately 10 U.S. sites with about 100 patients (9-18 patients in the Phase 1 component and 82 patients in the Phase 2 component). An interim analysis will be performed after 53 events (i.e., death or progression of disease).
Acclaim-2
In 2019, preclinical data was presented by MD Anderson collaborators relating to the combination of TUSC2, the active agent in REQORSA, with Keytruda showing that TUSC2 combined with the checkpoint blockade mechanism of action of Keytruda was more effective than Keytruda alone in increasing the survival of mice with human immune cells (humanized mice) that had metastatic lung cancer. MD Anderson also presented preclinical data in 2019 for the combination of TUSC2, Keytruda and chemotherapy for the treatment of some of the most resistant metastatic lung cancers. This study found that the addition of TUSC2 demonstrates synergy with Keytruda and chemotherapy, and thus, may improve on first-line standard of care for lung cancer. In May 2020, we entered into a worldwide, exclusive license agreement with The Board of Regents of the University of Texas System on behalf of MD Anderson for the use of TUSC2 in combination with immunotherapies, including Keytruda. We plan to initiate the Acclaim-2 trial in the first half of 2021, which is a Phase 1/2 clinical trial combining REQORSA with Keytruda in patients whose disease has progressed on Keytruda in NSCLC patients who are low expressors (1% to 49%) of PD-L1.
We believe that our Oncoprex Nanoparticle Delivery System could allow delivery of a number of cancer-fighting genes, alone or in combination with other cancer therapies, to combat multiple types of cancer. We believe that REQORSA’s combination of pan-kinase inhibition, direct induction of apoptosis, anti-cancer immune modulation and complementary action with targeted drugs and immunotherapies is unique, and positions REQORSA to provide treatment for patients with NSCLC and possibly other cancers, who are not benefitting from current therapies.
Diabetes Gene Therapy
Diabetes is a chronic, metabolic disease characterized by elevated levels of blood glucose (or blood sugar), which leads over time to serious damage to the heart, blood vessels, eyes, kidneys and nerves. The most common is type 2 diabetes, which usually occurs in adults, and which arises when the body becomes resistant to insulin or does not make enough insulin. In the past three decades, the prevalence of type 2 diabetes has risen dramatically. Type 1 diabetes, also known as juvenile diabetes or insulin-dependent diabetes, is a chronic condition in which the pancreas produces little or no insulin by itself. According to the International Diabetes Federation in 2019, about 463 million people worldwide had diabetes and 4.2 million deaths were attributed to diabetes. Both the number of cases and the prevalence of diabetes have been steadily increasing over the past few decades.
Our diabetes gene therapy, also referred to as GPX-002, was developed by lead researcher Dr. George Gittes, at the Rangos Research Center at UPMC Children’s Hospital of Pittsburgh. This potential treatment works by transforming alpha cells in the pancreas into functional beta-like cells, which can produce insulin but are distinct enough from beta cells to evade the body’s immune system. The therapy utilizes a procedure in which an adeno-associated virus vector delivers Pdx1 and MafA genes to the pancreas.
The diabetes gene therapy has been tested in vivo in mice and nonhuman primates. In studies in non-obese diabetic mice, the gene therapy approach restored normal blood glucose levels for an extended period of time, typically around four months. According to Dr. Gittes, the duration of restored blood glucose levels in mice could translate to decades in humans. If successful, this gene therapy could eliminate the need for insulin replacement therapy for diabetic patients.
JOBS Act
On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. Although we are an emerging growth company, we have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies. We have implemented all new accounting pronouncements that are in effect and may affect our condensed financial statements, and we do not believe that there are any other new accounting pronouncements that have been issued that would have a material impact on our financial position or results of operations.
Notwithstanding the foregoing, subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we intend to rely on certain exemptions, including, without limitation, the exemption from the requirements (i) to provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended, and (ii) to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an “emerging growth company” until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of our initial public offering; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our financial statements appearing in this Quarterly Report on Form 10-Q.
Critical Accounting Policies and Significant Judgments and Estimates
Our condensed financial statements have been prepared in accordance with generally accepted accounting principles in the U.S. ("GAAP”). The preparation of these condensed financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed financial statements, and the reported amounts of expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We believe that the following accounting policies are the most critical to aid in fully understanding and evaluating our reported financial results, and they require our most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain.
Research and Development Costs
We record accrued expenses for costs invoiced from research and development activities conducted on our behalf by third-party service providers, which include the conduct of preclinical studies and clinical trials and use of contract research and manufacturing activities. We record the costs of research and development activities based upon the amount of services provided, and we include these costs in accrued liabilities in the balance sheets and within research and development expense in the statements of operations. These costs are a significant component of our research and development expenses. Purchased materials to be used in future research are capitalized and included in research and development supplies.
We estimate the amount of work completed through discussions with internal personnel and external service providers as to the progress or stage of completion of the services and the agreed-upon fee to be paid for such services. We make significant judgments and estimates in determining the accrued balance in each reporting period. As actual costs become known, we adjust our accrued estimates. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed, the number of patients enrolled and the rate of patient enrollment in any of our clinical trials may vary from our estimates and could result in our reporting amounts that are too high or too low in any particular period. Our accrued expenses are dependent, in part, upon the receipt of timely and accurate reporting from contract research organizations ("CROs") and other third-party service providers. To date, there have been no material differences from our accrued expenses to actual expenses.
Income Taxes
Deferred tax assets or liabilities are recorded for temporary differences between financial statement and tax basis of assets and liabilities, using applicable rates in effect for the year in which the differences are expected to reverse. A valuation allowance is recorded if it is more likely than not that a deferred tax asset will not be realized. We have provided a full valuation allowance on our deferred tax assets, which primarily consist of cumulative net operating losses from April 1, 2009 (inception) to September 30, 2020. Due to our history of operating losses since inception and losses expected to be incurred in the foreseeable future, a full valuation allowance was considered necessary.
Impairment of Long-Lived Assets
Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be realizable or at a minimum annually during the fourth quarter of the year. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset are compared to the asset’s carrying value to determine if an impairment of such asset is necessary. The effect of any impairment would be to expense the difference between the fair value of such asset and its carrying value.
Components of our Results of Operations and Financial Condition
Operating expenses
We classify our operating expenses into three categories: research and development, general and administrative and depreciation.
Research and development. Research and development expenses consist primarily of:
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costs incurred to conduct research, such as the discovery and development of our current and potential product candidates; |
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• | costs related to production and storage of clinical supplies, including fees paid to contract manufacturers, manufacturing consultants, and cold-storage facilities; | |
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fees paid to clinical consultants, clinical trial sites and vendors, including CROs in conjunction with implementing and monitoring our clinical trials and acquiring and evaluating clinical trial data, including all related fees, such as patient screening fees, laboratory work, and statistical compilation and analysis; |
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costs related to compliance with drug development regulatory requirements; and |
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• | costs related to staffing and personnel associated with research and development activities, including wages, taxes, benefits, leases, overheads, supplies, and share-based compensation. |
We recognize all research and development costs as they are incurred. Clinical trial costs, contract manufacturing and other development costs incurred by third parties are expensed as the contracted work is performed.
We expect our research and development expenses to increase in the future as we advance our current and potential product candidates into and through clinical trials, as we pursue regulatory approval of our current and potential product candidates in the United States and Europe, and as we expand our research programs to include new therapies and new therapy combinations. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming. The actual probability of success for our current and potential product candidates may be affected by a variety of factors including the quality of our current and potential product candidates, early clinical data, investment in our clinical program, competition, manufacturing capability and commercial viability. We may never succeed in achieving regulatory approval for any of our current and potential product candidates. As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of our current and potential product candidates, if at all.
General and administrative. General and administrative expense consists of personnel related costs, which include salaries, as well as the costs of professional services, such as accounting and legal, travel, facilities, information technology and other administrative expenses. We expect our general and administrative expense to increase in future periods due to the anticipated growth of our business and related infrastructure as well as accounting, insurance, investor relations, and other costs associated with being a public company.
Depreciation. Depreciation expense consists of depreciation from our fixed assets consisting of our property, equipment, and furniture. We depreciate our assets over their estimated useful life. We estimate furniture and computer and office equipment to have a 5-year life.
Results of Operations
Comparison of the Three and Nine Months Ended September 30, 2020 and 2019
The following summarizes our results of operations for the three and nine months ended September 30, 2020 and 2019.
Research and Development Expense
Research and development ("R&D") expense for the three months ended September 30, 2020 was $1,350,016 as compared to 467,344 for the three months ended September 30, 2019. The increase of $882,672, or 189%, is due to increased activities in support of our upcoming Acclaim-1 and Acclaim-2 clinical trials including the hiring of new employees to develop and execute on clinical strategy and additional manufacturing activities.
R&D expense for the nine months ended September 30, 2020 was $4,983,530 as compared to $1,477,427 for the nine months ended September 30, 2019. The increase of $3,506,103, or 237%, is due to the hiring of new employees and consultants to develop strategy for and execute on the launch of our Acclaim-1 and Acclaim-2 clinical trials, major advancements in our manufacturing programs providing drug product for our Acclaim-1 and Acclaim-2 clinical trials, and research of novel therapeutic approaches for the treatment of cancer using REQORSA and immunotherapies. These R&D activities will continue throughout 2020 and thereafter and will continue to include costs related to the launch and conduct of the Acclaim-1 and Acclaim-2 clinical trials, the development and execution on related manufacturing strategies and processes required to support these, and potentially other, clinical programs, and additional preclinical research.
General and Administrative Expense
General and administrative ("G&A") expense for the three months ended September 30, 2020 was $1,421,863 as compared to $1,909,982 for the three months ended September 30, 2019. The decrease of $488,119, or 26%, is primarily due to reclassification of expenses associated with R&D personnel to more accurately reflect expenses associated with their job function. Additionally, as a result of travel restrictions and social distancing guidelines put in place as a result of the COVID-19 pandemic, we realized cost savings during the three months ended September 30, 2020 due to reduced office and travel expenses.
G&A expense for the nine months ended September 30, 2020 was $7,731,550 as compared to $6,768,506 for the nine months ended September 30, 2019. The increase of $963,044, or 14%, is primarily due to an increase in financing costs and legal fees associated with our fundraising activities in early 2020 as well as greater than normal share-based compensation expense associated with the accelerated vesting of options for a former executive pursuant to his separation agreement.
Interest Income. Interest income was $2,650 and $5,051 for the three months ended September 30, 2020 and 2019, respectively, a decrease of $2,401, or 48%. Interest income was $17,467 and $25,620 for the nine months ended September 30, 2020 and 2019, respectively, a decrease of $8,153, or 32%. The decreases associated with interest income for the three and nine months ended September 30, 2020 were due to changes in the cash balances associated with money market instruments.
Interest Expense. There was no interest expense for the three and nine months ended September 30, 2020 and 2019 because we satisfied all debt obligations and repaid all short-term loans prior to 2019. As of September 30, 2020, we had no outstanding debt.
Depreciation Expense. Depreciation expense was $5,714 and $3,437 for the three months ended September 30, 2020 and 2019, respectively, an increase of $2,277, or 66%. Depreciation expense was $16,843 and $9,486 for the nine months ended September 30, 2020 and 2019, respectively, an increase of $7,357, or 78%. The increase in depreciation expense during the three and nine months ended September 30, 2020, was driven by increased purchase of equipment for use by employees and manufacturing partners for research activities.
Liquidity and Capital Resources
From inception through September 30, 2020, we have never generated revenue from product sales and have incurred net losses in each year. As of September 30, 2020, we had an accumulated deficit of approximately $53 million. We have funded our operations primarily through the sale and issuance of capital stock. During 2019, we sold 3,167,986 shares of common stock and warrants to purchase 3,167,986 shares of common stock for total gross proceeds of $1,267,194 pursuant to a registered direct offering. During the nine months ended September 30, 2020, we sold an aggregate of 13,581,000 shares of common stock for total gross proceeds of $25,731,640 pursuant to registered direct offerings and issued 6,603,881 shares of common stock with gross proceeds of $3,362,758 from warrant and option exercises.
As of September 30, 2020, we had $21,058,386 in cash.
We do not expect to generate revenue from product sales unless and until we successfully complete development of, obtain regulatory approval for and begin to commercialize one or more of our current and potential product candidates, or other product candidates to which we may acquire rights, which we expect will take a number of years and which is subject to significant uncertainty. Accordingly, we anticipate that we will need to raise additional capital to fund our future operations, which include conducting our Acclaim-1 and Acclaim-2 clinical trials planned to be launched in 2021. Until such time as we can generate substantial revenue from product sales, if ever, we expect to finance our operating activities through a combination of equity offerings and debt financings and we may seek to raise additional capital through strategic collaborations. However, we may be unable to raise additional funds or enter into such arrangements when needed on favorable terms, or at all, which would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our development programs or commercialization efforts or grant to others rights to develop or market product candidates that we would otherwise prefer to develop and market ourselves. Failure to receive additional funding could cause us to curtail or cease our operations. Furthermore, even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital due to favorable market conditions or strategic considerations.
Based on our current cash, we estimate that we will be able to fund our expenditure requirements for our current operations and planned clinical trial activities into mid 2022. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently plan due to incorrect assumptions or due to a decision to expand our activities beyond those currently planned.
The following table sets forth the primary sources and uses of cash during the nine months ended September 30, 2020 and 2019:
Nine Months Ended September 30, |
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2020 |
2019 |
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Net cash used in operating activities |
$ | (10,043,034 | ) | $ | (5,197,353 | ) | ||
Net cash provided by (used in) investing activities |
4,415 | (855,132 | ) | |||||
Net cash provided by financing activities |
29,094,513 | — | ||||||
Net increase (decrease) in cash |
$ | 19,055,894 | $ | (6,052,485 | ) |
Cash used in operating activities
Net cash used in operating activities was $10,043,034 and $5,197,353 for the nine months ended September 30, 2020 and 2019, respectively. The $4,845,681, or 93%, increase in net cash used in operating activities during the nine months ended September 30, 2020 was due to an increase in financing costs and legal fees associated with our fundraising activities during the first three months of 2020 and significant increases to our headcount and service providers in preparation for the launch of our Acclaim-1 and Acclaim-2 clinical trials planned for 2021.
Cash provided by (used in) investing activities
Net cash provided by investing activities was $4,415 for the nine months ended September 30, 2020 and net cash used by investing activities was $855,132 for the nine months ended September 30, 2019. This difference of $859,547, was primarily due to a major investment in manufacturing materials during the nine months ended September 30, 2019 that are currently being used to manufacture REQORSA for our planned clinical trials. Investments in property and equipment and intellectual property increased slightly for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.
Cash provided by financing activities
Net cash provided by financing activities was $29,094,513 and $0 during the nine months ended September 30, 2020 and 2019, respectively. The $29,094,513 increase in net cash provided by financing activities was due to our selling common stock in capital raising activities during the first nine months of 2020.
Off-Balance Sheet Arrangements
As of September 30, 2020, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2020. The term “disclosure controls and procedures” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of September 30, 2020, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were not effective due to the material weakness in our internal control over financial reporting due to the lack of segregation of duties.
In response to the material weakness described above, during the nine months ended September 30, 2020, we began evaluating and implementing new internal controls over financial reporting and disclosure controls and procedures. Although management is still evaluating the design of new controls and procedures, we believe that our improved processes and procedures will assist us in remediating our material weakness. Once placed in operation for a sufficient period of time, we will subject these controls and procedures to appropriate tests in order to determine whether they are operating effectively. Management, with oversight from the Audit Committee of our board of directors, is committed to the remediation of our material weakness as expeditiously as possible.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations of Disclosure Controls and Internal Control over Financial Reporting
Because of their inherent limitations, our disclosure controls and procedures and our internal control over financial reporting may not prevent material errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The effectiveness of our disclosure controls and procedures and our internal control over financial reporting is subject to risks, including that the controls may become inadequate because of changes in conditions or that the degree of compliance with our policies or procedures may deteriorate.
From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.
The Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the three months ended September 30, 2020, we issued and sold the following unregistered securities:
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On July 1, 2020 we issued an aggregate of 5,000 shares of our common stock to a consultant in consideration of services. |
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2) | On August 10, 2020, we granted a warrant to purchase up to 50,000 shares of our common stock to a consultant in consideration of services. |
The foregoing issuance of securities was not registered under the Securities Act or the securities laws of any state, and the securities were offered and issued in reliance on the exemption from registration under the Securities Act afforded by Section 4(a)(2).
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
None.
The exhibits listed on the Index to Exhibits following the signature page are filed as part of this Quarterly Report on Form 10-Q.
INDEX TO EXHIBITS
Exhibit Number |
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Description of Exhibit |
4.1* | Warrant Agreement, dated as of August 10, 2020, by and between Genprex, Inc. and Capital City Technical Consulting, Inc. | |
31.1* |
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31.2* |
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32.1* |
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101.INS* |
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XBRL Instance document. |
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101.SCH* |
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XBRL Taxonomy Extension Schema Document. |
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101.CAL* |
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XBRL Taxonomy Extension Calculation Linkbase Document. |
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101.DEF* |
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XBRL Taxonomy Extension Definition Linkbase Document. |
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101.LAB* |
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XBRL Taxonomy Extension Label Linkbase Document. |
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101.PRE* |
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XBRL Taxonomy Extension Presentation Document. |
* Filed herewith.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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GENPREX, INC. |
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Date: November 12, 2020 |
By: |
/s/ J. Rodney Varner |
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J. Rodney Varner |
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Chief Executive Officer |
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(Principal Executive Officer) |
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By: |
/s/ Ryan M. Confer |
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Ryan M. Confer |
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Chief Financial Officer |
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(Principal Financial and Accounting Officer) |
Exhibit 4.1
THE PURCHASE RIGHTS EVIDENCED BY THIS WARRANT AGREEMENT AND THE SHARES OF CAPITAL STOCK ISSUABLE UPON EXERCISE OF SUCH PURCHASE RIGHTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY STATE SECURITIES LAWS. SUCH SECURITIES CANNOT BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF WITHOUT REGISTRATION OF SUCH SECURITIES UNDER ALL APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR COMPLIANCE WITH AN APPLICABLE EXEMPTION THEREFROM.
GENPREX, INC.
WARRANT AGREEMENT
August 10, 2020
No. 2020W-2
THIS CERTIFIES THAT, for value received, Capital City Technical Consulting, Inc. or its successors and permitted assigns pursuant to the terms hereof (the “Warrantholder”), is entitled to purchase from Genprex, Inc., a Delaware corporation (the “Company”), subject to the terms set forth below, fifty thousand (50,000) fully paid and non-assessable shares (subject to adjustment as provided herein) (the “Warrant Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a purchase price of $[3.81] in cash per Warrant Share (the “Exercise Price”), subject to the provisions and upon the terms and conditions hereinafter set forth. The term “Warrant Agreement” as used herein shall refer to this Warrant Agreement, as the same may be amended or amended and restated.
1. |
Exercise Period. Subject to the terms and conditions of this Warrant Agreement, the purchase rights evidenced by this Warrant Agreement may be exercised as follows: |
a. |
With respect to 16,667 Warrant Shares, in whole or in part, at any time and from time to time after August 10, 2021, provided certain Consulting Agreement dated June 2, 2020, by and between the Company and the Warrantholder (as amended by that Amendment No. 1 dated as of August 3, 2020, by and between the Company and the Warrantholder, the “Consulting Agreement”) has not expired or terminated, for any reason or no reason, before that date, and before the earliest to occur of (i) 5:00 p.m. (Central Time) on the fifth year following the termination of the Consulting Agreement for any reason or no reason, (ii) the consummation of an Extraordinary Transaction (as defined herein) and (iii) 5:00 p.m. (Central Time) on the ten-year anniversary of the date of this Warrant Agreement (the earliest to occur of (i), (ii) and (iii), the “Expiration Date”); |
b. |
With respect to an additional 16,667 Warrant Shares, in whole or in part, at any time and from time to time after August 10, 2022, provided the Consulting Agreement has not expired or terminated, for any reason or no reason, before that date, and before the Expiration Date; and |
c. |
With respect to an additional 16,666 Warrant Shares, in whole or in part, at any time and from time to time after August 10, 2023, provided the Consulting Agreement has not terminated, for any reason or no reason, before that date, and before the Expiration Date. |
2. |
Exercise. |
a. |
Cash Exercise. The purchase rights evidenced by this Warrant Agreement may be exercised by the Warrantholder, in whole or in part, by the surrender of this Warrant Agreement (with a duly completed and executed notice of exercise in the form attached hereto as Exhibit A (the “Notice of Exercise”)) at the principal office of the Company, accompanied by the payment to the Company, in cash, by wire transfer or by certified check payable to the Company, of an amount equal to the product of (i) the Exercise Price times (ii) the number of Warrant Shares as to which the purchase rights evidenced by this Warrant Agreement are being exercised (which number of Warrant Shares shall be stated in the duly executed Notice of Exercise). Upon receipt by the Company at such office of this Warrant Agreement and a duly executed Notice of Exercise in proper form for exercise, together with the aggregate Exercise Price due to the Company, the Warrantholder shall be deemed to have become, and shall be treated for all purposes as, the record holder of the number of the Warrant Shares as to which the purchase rights set forth in this Warrant Agreement have been so exercised (and such Warrant Shares shall be deemed, to the fullest extent permitted by law, to have been issued) immediately prior to the close of business on the date upon which the purchase rights evidenced by this Warrant Agreement are exercised as aforesaid. |
b. |
Cashless Exercise. In lieu of exercising the purchase rights evidenced by this Warrant Agreement by payment in cash by wire transfer or certified check pursuant to Section 2(a) above, the Warrantholder may elect to receive the number of Warrant Shares equal to the value of the purchase rights evidenced by this Warrant Agreement (or the portion thereof being exercised), by surrender of this Warrant Agreement to the Company, together with a duly completed and executed Notice of Exercise, in which event the Company shall issue to the Warrantholder Warrant Shares in accordance with the following formula: |
X = Y(A-B)/A
where
X = The number of Warrant Shares to be issued to the Warrantholder;
Y = The number of Warrant Shares for which the purchase rights evidenced by this Warrant Agreement are being exercised;
A = The Fair Market Value of one share of the Company’s common stock (a “Share”); and
B = The Exercise Price.
For purposes of this Section 2, the “Fair Market Value” of a Share is defined as follows:
i. |
if the Company’s Common Stock is traded on a securities exchange, the value shall be deemed to be the average of the closing prices of the Shares on such exchange for the five (5) trading day period prior to the date the Notice of Exercise is submitted in connection with the exercise of the purchase rights evidenced by this Warrant Agreement; |
ii. |
if the Company’s Common Stock is actively traded over-the-counter, the value shall be deemed to be the average of the closing bid prices of the Shares for the five (5) trading day period prior to the date the Notice of Exercise is submitted in connection with the exercise of the purchase rights evidenced by this Warrant Agreement; or |
iii. |
if there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Company’s Board of Directors. |
c. |
Certificates; Partial Exercise. In the event of any exercise of the purchase rights evidenced by this Warrant Agreement pursuant to this Section 2, the Company will use commercially reasonable efforts to execute and deliver a certificate or certificates evidencing the Warrant Shares so purchased to the Warrantholder within five (5) Business Days (as defined below) after the Company’s receipt of the Notice of Exercise and payment as described in this Section 2. If the purchase rights evidenced by this Warrant Agreement are exercised in part only, unless the purchase rights evidenced by this Warrant Agreement have been fully exercised or expired, the Company shall use commercially reasonable efforts to deliver within such five (5) Business Day period to the Warrantholder a new Warrant Agreement evidencing the rights of the Warrantholder to purchase the balance of the Warrant Shares purchasable hereunder. For purposes of this Warrant Agreement, “Business Day” means any day, except a Saturday, Sunday or legal holiday, on which banking institutions in New York, New York, are required to be open. |
d. |
Fractions of a Warrant Share. The Company shall not be required to issue any fraction of a Warrant Share in connection with the exercise of the purchase rights evidenced by this Warrant Agreement pursuant to this Section 2. At its option, the Company may pay to the Warrantholder, in lieu of any fraction of a Warrant Share resulting from the exercise of the purchase rights evidenced by this Warrant Agreement, an amount of cash equal to the product of (a) the applicable fraction of a Warrant Share multiplied by (b) the Fair Market Value of a share of Common Stock. |
3. |
Exercise in Connection with an Extraordinary Transaction. |
a. |
Definitions. For purposes of this Section 3, “Extraordinary Transaction” shall mean (i) a merger or consolidation in which the Company is a constituent corporation and the shares of Common Stock are converted, exchanged or cancelled, (ii) a conversion, reorganization or reclassification of the capital stock of the Company in which the shares of Common Stock are converted, exchanged or cancelled (other than a merger or consolidation provided in clause (i) hereof), (iii) a transaction or series of related transactions which constitute(s) a sale, lease or exchange of all or substantially all of the property and assets of the Company, including its goodwill and its corporate franchises, or (iv) a transaction or series of related transactions which constitute(s) a dissolution or liquidation of the Company. |
b. |
Early Termination. If there shall occur any Extraordinary Transaction, then, to the extent not previously exercised, the purchase rights evidenced by this Warrant Agreement shall expire and terminate upon the consummation of such Extraordinary Transaction. |
c. |
Conditional Exercise. Notwithstanding any other provision of this Warrant Agreement, if an exercise of all or any portion of the purchase rights evidenced by this Warrant Agreement is to be made in connection with an Extraordinary Transaction, the exercise of all or any portion of the purchase rights evidenced by this Warrant Agreement may, at the election of the Warrantholder, be conditioned upon the consummation of such Extraordinary Transaction, in which case, such exercise shall not be deemed to be effective until immediately prior to the consummation of such Extraordinary Transaction. |
4. |
Stock Fully Paid; Reservation of Warrant Shares. The Company covenants and agrees that all Warrant Shares from time to time issuable upon exercise of the purchase rights evidenced by this Warrant Agreement have been duly authorized and, when issued upon such exercise, shall be validly issued, fully paid and non-assessable, and free from all taxes, liens and charges with respect to the issuance thereof. The Company hereby covenants and agrees that the Company will, at all times through the Expiration Date, reserve and keep available out of its aggregate authorized but unissued shares of Common Stock, the number of Warrant Shares deliverable upon the exercise of the purchase rights evidenced by this Warrant Agreement. |
5. |
Adjustment. The number of Warrant Shares purchasable upon the exercise of the purchase rights evidenced by this Warrant Agreement shall be subject to adjustment from time to time upon the occurrence of certain events, as follows: |
a. |
In case the outstanding shares of Common Stock shall be subdivided into a greater number of shares or combined into a smaller number of shares, the number of Warrant Shares to be received by the Warrantholder upon exercise of the purchase rights evidenced by this Warrant Agreement shall be appropriately adjusted such that the proportion of the number of Warrant Shares issuable upon exercise of the purchase rights evidenced by this Warrant Agreement to the total number of outstanding shares of Common Stock immediately prior to such subdivision or combination is equal to the proportion of the number of Warrant Shares issuable upon exercise of the purchase rights evidenced by this Warrant Agreement to the total number of outstanding shares of Common Stock immediately after such subdivision or combination, and the Exercise Price shall be proportionately adjusted such that the aggregate Exercise Price of all the purchase rights then evidenced by this Warrant Agreement shall remain unchanged. |
b. |
In the case the Company shall hereafter declare a dividend or distribution to all holders of the outstanding shares of Common Stock in shares of Common Stock, the number of Warrant Shares issuable upon exercise of the purchase rights evidenced by this Warrant Agreement shall be increased by dividing such number by a fraction, (i) the numerator of which shall be the number of shares of Common Stock outstanding at the close of business on such record date, and (ii) the denominator of which shall be the sum of (x) the number of shares of Common Stock outstanding at the close of business on such record date and (y) the total number of shares of Common Stock constituting such dividend or distribution. If any dividend or distribution of the type described in this Section 5(b) is declared but not so paid or made, the number of Warrant Shares issuable upon exercise of the purchase rights evidenced by this Warrant Agreement shall again be adjusted to the number of Warrant Shares that would be issuable upon exercise of the purchase rights evidenced by this Warrant Agreement if such dividend or distribution had not been declared. |
c. |
The Company will not, by amendment of its certificate of incorporation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at times in good faith assist in the carrying out of all the provisions of this Section 5 and in the taking of all such lawful action as may be necessary or appropriate in order to protect the rights of the Warrantholder under this Section 5 against impairment. |
6. |
Notices of Record Dates and Adjustments. |
a. |
If at any time prior to the full exercise or expiration of the purchase rights evidenced by this Warrant Agreement, (i) an Extraordinary Transaction shall occur or (ii) the Company shall make or issue, or fix a record date for the determination of holders of shares of Common Stock entitled to receive, a dividend or other distribution payable in any securities of the Company other than shares of Common Stock (including, but not limited to, any other class of capital stock or debt securities), then in each such event, the Company shall give written notice of such event at least fifteen (15) days prior to the date fixed as a record date or the date of closing the transfer books for the determination of the stockholders entitled to such dividend, distribution, conversion or exchange of securities or subscription rights, or entitled to vote on such proposed dissolution, liquidation, winding up, sale or Extraordinary Transaction. Such notice shall specify such record date or the date of the closing of the transfer books, as the case may be. |
b. |
Whenever an adjustment is required pursuant to Section 5, the Company shall, within thirty (30) days after such adjustment, deliver a certificate signed by its chief executive officer or chief financial officer to the Warrantholder setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated and number of Warrant Shares (or other securities) purchasable upon exercise of the purchase rights evidenced by this Warrant Agreement after giving effect to such adjustment. |
7. |
Legend. Each certificate evidencing Warrant Shares issued upon exercise of this Warrant Agreement shall bear the following legend substantially in the form set forth below: |
“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. SUCH SECURITIES CANNOT BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF WITHOUT REGISTRATION OF SUCH SECURITIES UNDER ALL APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR COMPLIANCE WITH AN APPLICABLE EXEMPTION THEREFROM.”
8. |
Rights as Stockholder. Notwithstanding any other provision of this Warrant Agreement, prior to the proper exercise of the purchase rights evidenced by this Warrant Agreement by the Warrantholder in accordance with the terms of this Warrant Agreement, no Warrantholder, as such, shall be entitled to vote or receive dividends or distributions or be deemed the holder of Warrant Shares, nor shall anything contained herein be construed to confer upon the Warrantholder, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof (or by written consent in lieu of any such meeting), or to receive notice of meetings, or to receive dividends or distributions or otherwise. Upon the proper exercise of the purchase rights evidenced by this Warrant Agreement in accordance with the terms of this Warrant Agreement, the Warrantholder shall for all purposes be deemed to have become the holder of record of the Warrant Shares represented thereby on, and such certificate shall be dated as of, the date upon which the purchase rights evidenced by this Warrant Agreement are exercised with respect to such Warrant Shares in accordance with the terms hereof. |
9. |
Modification and Waiver. The Company may change, waive, discharge, terminate or amend any provision of this Warrant Agreement with the consent of Warrantholder. |
10. |
Termination. The purchase rights evidenced by this Warrant Agreement shall terminate on the Expiration Date. Notwithstanding the foregoing, the purchase rights evidenced by this Warrant Agreement will terminate on any earlier date when all of the purchase rights evidenced by this Warrant Agreement have been exercised or pursuant to Section 3(b). |
11. |
Notices. Any notice required to be given or delivered to the Warrantholder or the Company shall be sent by certified or registered mail, postage prepaid, or by overnight courier, to such Warrantholder at its address indicated on the signature page of this Agreement or as shown on the books and records of the Company or to the Company at the address indicated on the signature page of this Warrant Agreement. All such notices shall be effective on the day following the date such notice is deposited in the mails or with such overnight courier, as the case may be, in each case addressed as aforesaid, unless otherwise provided herein. |
12. |
Restrictions on Assignment; Transfer of Shares. |
a. |
This Warrant Agreement, the purchase rights evidenced by this Warrant Agreement and the Warrant Shares issued upon the exercise of the purchase rights evidenced by this Warrant Agreement (collectively, the “Securities”) shall not be assigned, sold, pledged, transferred or otherwise disposed of except in compliance with the Securities Act of 1933, as amended, and applicable state securities laws. None of the Securities shall be transferred unless and until: (i) the Company has received the opinion of counsel for the Warrantholder that the Securities may be transferred pursuant to an exemption from registration under the Securities Act and applicable state securities laws, the availability of which is established to the reasonable satisfaction of the Company, or (ii) a registration statement relating to the offer and sale of the Securities has been filed by the Company and declared effective by the Commission and compliance with applicable state securities law has been established. |
b. |
In addition to the requirements set forth in Section 12(a), in order to make any permitted assignment, the Warrantholder must deliver to the Company the assignment form attached hereto duly executed and completed, together with this Warrant Agreement and payment of all transfer taxes, if any, and upon compliance with the requirements of Section 12(a), payable in connection therewith. The Company shall within ten (10) business days after receipt of such assignment form and payment, if any, transfer this Warrant Agreement on the books of the Company and shall execute and deliver a new Warrant Agreement or Warrant Agreements of like tenor to the appropriate assignee(s) expressly evidencing the right to purchase the aggregate number of Warrant Shares purchasable hereunder or such portion of such number as shall be contemplated by any such assignment. |
13. |
Binding Effect on Successors. To the fullest extent permitted by law, and except as otherwise provided in this Warrant Agreement, this Warrant Agreement shall be binding upon any entity succeeding the Company by merger, consolidation or acquisition of all or substantially all of the Company’s assets, and all of the covenants and agreements of the Company shall inure to the benefit of the successors and permitted assigns of the Warrantholder. This Warrant Agreement shall be binding upon and inure to the benefit of the Company and the Warrantholder and their respective successors and permitted assigns. |
14. |
Lost Warrant Agreement. The Company covenants to the Warrantholder that upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Warrant Agreement and, in the case of any such loss, theft or destruction, upon receipt of the Warrantholder’s unsecured indemnification agreement, or in the case of any such mutilation upon surrender and cancellation of this Warrant Agreement, the Company will make and deliver a new Warrant Agreement in lieu of the lost, stolen, destroyed or mutilated Warrant Agreement. |
15. |
Governing Law. This Warrant Agreement shall be governed in all respects by and construed in accordance with the laws of the State of Delaware (without regard to any conflict of laws principle that would apply the law of another jurisdiction), whether as to its validity, construction, capacity, performance or otherwise. |
16. |
Consent to Jurisdiction. ANY LEGAL ACTION, SUIT OR PROCEEDING ARISING OUT OF OR BASED UPON THIS WARRANT AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY MAY BE INSTITUTED IN THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA OR THE COURTS OF THE STATE OF TEXAS, IN EACH CASE, LOCATED IN THE CITY OF AUSTIN, TEXAS, AND TO THE FULLEST EXTENT PERMITTED BY LAW, EACH PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS. TO THE FULLEST EXTENT PERMITTED BY LAW, IN ANY SUCH ACTION, SUIT OR PROCEEDING, SERVICE OF PROCESS, SUMMONS, NOTICE OR OTHER DOCUMENT BY MAIL TO SUCH PARTY’S ADDRESS SET FORTH HEREIN SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY SUCH ACTION, SUIT OR PROCEEDING BROUGHT IN ANY SUCH COURT. TO THE FULLEST EXTENT PERMITTED BY LAW, THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY ACTION, SUIT OR PROCEEDING IN SUCH COURTS AND IRREVOCABLY WAIVE AND AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION, SUIT OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. |
17. |
Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS WARRANT AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS WARRANT AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY TO THIS WARRANT AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (ii) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 17. |
[Signature Page Follows]
IN WITNESS WHEREOF, this Warrant Agreement is executed as of the date first written above.
COMPANY:
GENPREX, INC.
Name: Rodney Varner
Title: Chief Executive Officer
Address:
Dell Medical Center, Health Discovery Building
1601 Trinity Street, Bldg. B, Suite 3.312.09
Austin, TX 78712
ACCEPTED AND AGREED:
WARRANTHOLDER:
CAPITAL CITY TECHNICAL CONSULTING, INC.
By:
Name:
Title:
Address:
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER OF GENPREX, INC. PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, J. Rodney Varner, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of Genprex, Inc., a Delaware corporation (the “registrant”); |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
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Date: November 12, 2020 |
By: |
/s/ J. Rodney Varner |
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J. Rodney Varner |
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Chief Executive Officer |
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(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER OF GENPREX, INC. PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Ryan M. Confer, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of Genprex, Inc., a Delaware corporation (the “registrant”); |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: November 12, 2020 |
By: |
/s/ Ryan M. Confer |
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Ryan M. Confer Chief Financial Officer (Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATIONS OF CEO AND CFO PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Genprex, Inc. (the “Company”) for the quarter ended September 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned, J. Rodney Varner, Chief Executive Officer of the Company, and Ryan M. Confer, Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:
(1) |
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: November 12, 2020 |
By: |
/s/ J. Rodney Varner |
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J. Rodney Varner |
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Chief Executive Officer |
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(Principal Executive Officer) | |||
By: | /s/ Ryan M. Confer | ||
Ryan M. Confer | |||
Chief Financial Officer | |||
(Principal Financial and Accounting Officer) |
This certification accompanies the Report, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Report), irrespective of any general incorporation language contained in such filing.
Document And Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Nov. 06, 2020 |
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Document Information [Line Items] | ||
Entity Registrant Name | Genprex, Inc. | |
Entity Central Index Key | 0001595248 | |
Trading Symbol | gnpx | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Current Reporting Status | Yes | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Small Business | true | |
Entity Interactive Data Current | Yes | |
Entity Common Stock, Shares Outstanding (in shares) | 39,618,722 | |
Entity Shell Company | false | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2020 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Title of 12(b) Security | Common Stock, par value $0.001 per share |
Condensed Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares |
Sep. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized (in shares) | 10,000,000 | 10,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 200,000,000 | 200,000,000 |
Common stock, shares issued (in shares) | 39,463,722 | 19,263,841 |
Common stock, shares outstanding (in shares) | 39,463,722 | 19,263,841 |
Condensed Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
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Revenues | ||||
Cost and expenses: | ||||
Depreciation | 5,714 | 3,437 | 16,843 | 9,486 |
Research and development | 1,350,016 | 467,344 | 4,983,530 | 1,477,427 |
General and administrative | 1,421,863 | 1,909,982 | 7,731,550 | 6,768,506 |
Total costs and expenses | 2,777,593 | 2,380,763 | 12,731,923 | 8,255,419 |
Operating loss | (2,777,593) | (2,380,763) | (12,731,923) | (8,255,419) |
Interest income | 2,650 | 5,051 | 17,467 | 25,620 |
Net loss | $ (2,774,943) | $ (2,375,712) | $ (12,714,456) | $ (8,229,799) |
Net loss per share—basic and diluted (in dollars per share) | $ (0.07) | $ (0.15) | $ (0.37) | $ (0.53) |
Weighted average number of common shares— basic and diluted (in shares) | 39,055,159 | 15,831,822 | 34,139,991 | 15,598,644 |
Note 1 - Description of Business and Basis of Presentation |
9 Months Ended |
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Sep. 30, 2020 | |
Notes to Financial Statements | |
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block] | Note 1 - Description of Business and Basis of PresentationGenprex™ (“we” or the “Company”) is a clinical stage gene therapy company focused on developing life-changing treatments for cancer and diabetes. Our lead cancer drug candidate, REQORSA™ Immunogene therapy drug (formerly referred to as GPX- 001 ), is being developed to treat non-small cell lung cancer (”NSCLC”). REQORSA consists of a tumor suppressor gene called TUSC2, which has both tumor killing (via apoptosis) and immunomodulatory effects. We utilize our novel proprietary Oncoprex® Nanoparticle Delivery System™ to deliver TUSC2 to cancer cells. The TUSC2 gene is one of a series of genes whose therapeutic use is covered by an exclusive worldwide license from The University of Texas MD Anderson Cancer Center (“MD Anderson”). We are planning to initiate our Acclaim-1 and Acclaim-2 clinical trials in the first half of 2021. Acclaim-1 is a Phase 1/2 clinical trial using a combination of REQORSA with AstraZeneca PLC's Tagrisso® in patients with late stage NSCLC with mutated epidermal growth factor receptors (“EGFRs”) whose disease progressed after treatment with Tagrisso. In January 2020, we received Food and Drug Administration (“FDA”) Fast Track Designation for the Acclaim-1 patient population. Acclaim-2 is a Phase 1/2 clinical trial using a combination of REQORSA with Merck & Co.'s Keytruda® in NSCLC patients who are low expressors (1% to 49% ) of the protein programmed death-ligand 1 (“PD-L1” ).In diabetes, we are developing a gene therapy that is exclusively licensed from the University of Pittsburgh of the Commonwealth System of Higher Education and, according to researchers, has the potential to cure type 1 and type 2 diabetes. This potential treatment works by transforming alpha cells in the pancreas into functional beta-like cells, which can produce insulin but are distinct enough from beta cells to evade the body's immune system. Our diabetes product is currently being evaluated in pre-clinical studies. Oncology Platform Technologies Utilizing our Oncoprex Nanoparticle Delivery System, we are developing cancer treatments that are designed to administer cancer fighting genes. We encapsulate the genes into the Oncoprex nanoscale hollow spheres, administer them intravenously, where they are then taken up by tumor cells and express proteins that are missing or found in low quantities in the tumor cells. With our lead drug candidate, REQORSA, there is a multimodal mechanism of action whereby REQORSA, which encapsulates the TUSC2 gene, interrupts cell signaling pathways that cause replication and proliferation of cancer cells, re-establishes pathways for apoptosis, or programmed cell death, in cancer cells, and modulates the immune response against cancer cells. REQORSA has also been shown to block mechanisms that create drug resistance.Epidemiology: Non-Small Cell Lung Cancer We are initially targeting NSCLC with REQORSA. According to the World Health Organization in 2018, lung cancer was the leading cause of cancer deaths worldwide, causing more deaths than colorectal, breast, liver or stomach cancers. In the same year, there were more than 2 million new lung cancer cases and 1.7 million deaths from lung cancer worldwide. In the United States, according to the American Cancer Society, it is estimated that in 2020 there will be more than 228,000 new cases of lung cancer and more than 135,000 deaths from lung cancer. The American Society of Clinical Oncology reports that NSCLC represents 84 percent of all lung cancers and has a 24 percent five -year survival rate. However, according to the National Cancer Institute, 57 percent of lung cancer diagnoses are distant, or have metastasized, and the five -year relative survival rate for Stage IV (metastatic) NSCLC is approximately 5 percent. With limited benefit from current therapies, we believe there is a significant unmet medical need for new treatments for NSCLC in the United States and globally, and we believe REQORSA may be suitable for a majority of NSCLC patients.Acclaim- 1 In January 2020, we received Fast Track Designation from the FDA for use of REQORSA in combination with AstraZeneca's EGFR inhibitor Tagrisso for the treatment of NSCLC patients with EFGR mutations whose tumors progressed after treatment with Tagrisso. According to the FLAURA study sponsored by AstraZeneca, the median length of time that patients are treated with Tagrisso before their tumors progress is approximately 18 months. Tagrisso is now considered a new standard of care for NSCLC patients with an EGFR mutation. Given the poor prognosis for these patients and our FDA Fast Track Designation, we are prioritizing this drug combination and patient population and plan to initiate the Phase 1/2 clinical trial in the first half of 2021. The Acclaim-1 trial is a Phase 1/2 clinical trial in Stage 4 NSCLC patients who are EGFR mutant and whose disease has progressed after treatment with Tagrisso. The trial consists of a combination of REQORSA and Tagrisso, and we plan to conduct the trial in approximately 10 U.S. sites with about 100 patients (9 -18 patients in the Phase 1 component and 82 patients in the Phase 2 component). An interim analysis will be performed after 53 events (i.e., death or progression of disease). Acclaim- 2 In 2019, preclinical data was presented by MD Anderson collaborators relating to the combination of TUSC2, the active agent in REQORSA, with Keytruda showing that TUSC2 combined with the checkpoint blockade mechanism of action of Keytruda was more effective than Keytruda alone in increasing the survival of mice with human immune cells (humanized mice) that had metastatic lung cancer. MD Anderson also presented preclinical data in 2019 for the combination of TUSC2, Keytruda and chemotherapy for the treatment of some of the most resistant metastatic lung cancers. This study found that the addition of TUSC2 demonstrates synergy with Keytruda and chemotherapy, and thus, may improve on first -line standard of care for lung cancer. In May 2020, we entered into a worldwide, exclusive license agreement with The Board of Regents of the University of Texas System on behalf of MD Anderson for the use of TUSC2 in combination with immunotherapies, including Keytruda. We plan to initiate the Acclaim-2 trial in the first half of 2021, which is a Phase 1/2 clinical trial combining REQORSA with Keytruda in patients whose disease has progressed on Keytruda in NSCLC patients who are low expressors (1% to 49% ) of PD-L1. We believe that our Oncoprex Nanoparticle Delivery System could allow delivery of a number of cancer-fighting genes, alone or in combination with other cancer therapies, to combat multiple types of cancer. We believe that REQORSA's combination of pan-kinase inhibition, direct induction of apoptosis, anti-cancer immune modulation and complementary action with targeted drugs and immunotherapies is unique, and positions REQORSA to provide treatment for patients with NSCLC and possibly other cancers, who are not benefitting from current therapies.Diabetes Gene Therapy Diabetes is a chronic, metabolic disease characterized by elevated levels of blood glucose (or blood sugar), which leads over time to serious damage to the heart, blood vessels, eyes, kidneys and nerves. The most common is type 2 diabetes, which usually occurs in adults, and which arises when the body becomes resistant to insulin or does not make enough insulin. In the past three decades, the prevalence of type 2 diabetes has risen dramatically. Type 1 diabetes, also known as juvenile diabetes or insulin-dependent diabetes, is a chronic condition in which the pancreas produces little or no insulin by itself. According to the International Diabetes Federation in 2019, about 463 million people worldwide had diabetes and 4.2 million deaths were attributed to diabetes. Both the number of cases and the prevalence of diabetes have been steadily increasing over the past few decades.Our diabetes gene therapy, also referred to as GPX- 002, was developed by lead researcher Dr. George Gittes, at the Rangos Research Center at UPMC Children's Hospital of Pittsburgh. This potential treatment works by transforming alpha cells in the pancreas into functional beta-like cells, which can produce insulin but are distinct enough from beta cells to evade the body's immune system. The therapy utilizes a procedure in which an adeno-associated virus vector delivers Pdx1 and MafA genes to the pancreas.The diabetes gene therapy has been tested in vivo in mice and nonhuman primates. In studies in non-obese diabetic mice, the gene therapy approach restored normal blood glucose levels for an extended period of time, typically around four months. According to Dr. Gittes, the duration of restored blood glucose levels in mice could translate to decades in humans. If successful, this gene therapy could eliminate the need for insulin replacement therapy for diabetic patients.Capital Requirements, Liquidity and Going Concern Considerations Our condensed financial statements are prepared using the generally accepted accounting principles (“GAAP”) applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, as shown in the accompanying condensed financial statements, we have sustained substantial losses from operations since inception and have no current source of revenue. In addition, we have used, rather than provided, cash in our operations. We expect to continue to incur significant expenditures to further clinical trials for the commercial development of our product candidates.Management recognizes that we must obtain additional capital resources to successfully commercialize our product candidates. To date, we have received funding in the form of equity and debt, and we plan to seek additional funding in the future. However, no assurances can be given that we will be successful in raising additional capital. If we are not able to timely and successfully raise additional capital, the timing of our clinical trials, financial condition and results of operations will continue to be materially and adversely affected. These condensed financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities. |
Note 2 - Summary of Significant Accounting Policies |
9 Months Ended |
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Sep. 30, 2020 | |
Notes to Financial Statements | |
Significant Accounting Policies [Text Block] | Note 2 - Summary of Significant Accounting PoliciesThe Company's condensed financial statements have been prepared in accordance with GAAP. However, they do not include all the information and footnotes required by GAAP for complete financial statements. In our opinion, the unaudited condensed financial statements include all adjustments (consisting of normal recurring accruals) necessary to make the unaudited condensed financial statements not misleading. Operating results for the nine months ended September 30, 2020 and 2019 not necessarily indicative of the final results that may be expected for the year ending December 31, 2020 December 31, 2019 10 -K filed with the SEC on March 30, 2020. A summary of our significant accounting policies consistently applied in the preparation of the accompanying condensed financial statements follows.Capital Stock In connection with the Company's initial public offering ("IPO") in April 2018, all of the Company's preferred stock and non-voting common stock were converted into shares of the Company's common stock. The Company's common stock was then forward-split at a ratio of 6.6841954 -to-1. Furthermore, prior to the closing of the IPO, the Company's Certificate of Incorporation was amended and restated to provide the Company with the authority to issue up to 210,000,000 shares of stock consisting of 200,000,000 shares of common stock at a par value of $0.001 per share and 10,000,000 shares of preferred stock at a par value of $0.001 per share. Use of Estimates The preparation of our condensed financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Cash We consider all highly liquid short-term investments with an initial maturity of three months or less to be cash equivalents. Any amounts of cash in financial institutions which exceed FDIC insured limits expose us to cash concentration risk. We had no cash equivalents, and had $20,811,895 1,761,278 $250,000 at September 30, 2020 December 31, 2019 Fair Value of Financial Instruments The carrying amounts reported in the balance sheet for cash, accounts receivable, accounts payable and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments. Accounting Standard Codification ("ASC") 820, Fair Value Measurements and Disclosures, defines fair value, provides a consistent framework for measuring fair value under GAAP and expands fair value financial statement disclosure requirements. ASC 820's valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. ASC 820 classifies these inputs into the following hierarchy:Level 1: Quoted prices for identical instruments in active markets.Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.Level 3: Instruments with primarily unobservable value drivers.Property and Equipment Furniture and equipment are stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, which range from three to five years. Routine maintenance and repairs are charged to expense as incurred and major renovations or improvements are capitalized.Research and Development Costs Research and development expenditures consist of costs incurred to conduct research and development activities. These include payments to collaborative research partners, manufacturing partners, and clinical strategy partners, wages and associated employee benefits, facilities and overhead costs. These expenditures relate to our preclinical, Phase 1, and Phase 2 clinical trials and are expensed as incurred. Purchased materials to be used in future research are capitalized and included in research and development supplies. Supplies purchased and capitalized for future use were $686,324 801,780 September 30, 2020 December 31, 2019 Awards In 2010, we were awarded $4.5 million from the State of Texas Emerging Technology Fund (“TETF”). The award was received in two tranches of $2.25 2010 and 2011. The award proceeds were used to further the development and future commercialization of REQORSA, our lead product candidate for NSCLC. In consideration of the award, we provided the TETF with an “Investment Unit,” consisting of (i) a Promissory Note (“Note”) and (ii) a right to purchase our equity shares (“Warrant”). The funds received for this award were assigned to the Investment Unit, and classified separately from equity as “mezzanine” in the balance sheet. In 2010, we also were awarded approximately $244,500 from the U.S. Treasury Department for our QTDP Program Nanoparticle Therapy for Lung Cancer. The award was received during 2011 for our historical activities, and required no prospective expenditures. We accounted for these funds received as revenue at that time.Intellectual Property Intellectual property consists of legal and related costs associated with patents and other proprietary technology and rights developed, acquired, licensed by, or maintained by us that we believe contribute to a probable economic benefit toward such patents and activities. These costs incurred in connection with obtaining and maintaining intellectual property protection, such as patent applications and patent maintenance, are capitalized. Intellectual property is stated at cost, to be amortized on a straight-line basis over the estimated useful lives of the assets. Accounting for Stock-Based Compensation We use the fair value-based method of accounting for stock-based compensation for options granted to employees, independent consultants and contractors. We measure options granted at fair value determined as of the grant date, and recognize the expense over the periods in which the related services are rendered based on the terms and conditions of the award. Generally, where the award only has a service condition, the requisite service period is the same as the vesting period. Financial Instruments We have elected the Fair Value Option to account for the Investment Unit at fair value as a combined hybrid financial instrument containing a Warrant and a Note (see Note 4 - Investment Unit). Prior to its exercise, the Warrant component was not classified within equity, as the exercise price of the Warrant was affected by the market price of our stock in a future qualifying financing transaction and was not considered to be indexed to our own stock. The Note is not classified within liabilities, as our management can determine the timing of the repayment obligation, if any. As a result, the Warrant and Note that comprised the Investment Unit were aggregated and classified within the mezzanine section of the balance sheet. Due to the contingent terms of the financial instruments, changes in the fair value of the Investment Unit were calculated and realized in earnings. In August 2019, the remaining articles of the Investment Unit were terminated. There were no changes in the fair value of the Investment Unit at September 30, 2020 Long-Lived Assets We review long-lived assets and certain identifiable intangibles held and used for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In evaluating the fair value and future benefits of its intangible assets, management performs an analysis of the anticipated undiscounted future net cash flow of the individual assets over the remaining amortization period. We recognize an impairment loss if the carrying value of the asset exceeds the expected future cash flows. During the nine months ended September 30, 2020 December 31, 2019 no Recent Accounting Developments Accounting pronouncements issued but not effective until after September 30, 2020 not expected to have a significant effect on our financial condition, results of operations, or cash flows. |
Note 3 - Intellectual Property |
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Notes to Financial Statements | |
Intangible Assets Disclosure [Text Block] | Note 3 - Intellectual PropertyOn February 11, 2020, we entered into an exclusive license agreement with the University of Pittsburgh for patented gene therapy technologies relating to the potential treatment of type 1 and type 2 diabetes. On May 4, 2020, the Company entered into an exclusive worldwide license agreement with The Board of Regents of the University of Texas System on behalf of MD Anderson relating to a portfolio of 16 patent applications and related technology for the treatment of cancer using the Company's lead drug candidate and immunotherapies. We have exclusive license agreements on 34 issued patents and 16 patent applications worldwide for technologies developed by researchers at the National Cancer Institute, MD Anderson, the University of Texas Southwestern Medical Center, and the University of Pittsburgh. These patents comprise various therapeutic, diagnostic, technical and processing claims. These license rights will be amortized on a straight-line basis over the estimated period of useful lives of the underlying patents or the license agreements. |
Note 4 - Investment Unit |
9 Months Ended |
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Notes to Financial Statements | |
Investment Unit [Text Block] | Note 4 - Investment UnitThe TETF was created as an incentive for economic development of the Texas economy by providing financial support that leverages private investment for the creation of high-quality technology jobs in Texas. The award received required us to comply with certain performance conditions to ensure the monies the Company received were used for development activities in the State of Texas, and to maintain our corporate nexus in Texas. Further, in connection with the award, the Company issued the Investment Unit to the TETF. On September 25, 2017 and again on August 16, 2019, the Company entered into termination agreements with the Texas Treasury Safekeeping Trust Company, the entity managing and controlling TETF interests, which terminated Article II and all remaining Articles of the Investment Unit, respectively, so that the entirety of the Investment Unit was effectively terminated. As further described below, the Investment Unit consisted of a Note and a Warrant.Promissory Note The Note was an obligation to repay the $4.5 million principal amount, with interest accrued at 8% per annum, but only if an event of default occurred prior to August 13, 2020. If no event of default occurred prior to August 13, 2020, the Note and all related interest would be cancelled. The Note was cancelled on August 16, 2019. Consistent with the stated objectives of the TETF, an event of default that would trigger the repayment obligation under the Note was the failure to maintain our principal place of business or our principal executive offices headquartered in the State of Texas (referred to as the “Texas Residency Requirement”) until August 13, 2020. Warrant The Warrant was an obligation to issue (a Right to Purchase by the TETF) shares of the same class of stock to be issued in a “First Qualifying Financing Transaction,” at 80% of the per share transaction value (effectively a 20% discount). Alternatively, the TETF could exercise its right to purchase other shares at any time prior to the occurrence of a First Qualifying Financing Transaction for $0.001 per share.The Warrant included a provision that required changes in the strike price, driven by the pricing of the “First Qualifying Financing Transaction.” As a result, the Warrant embedded in the Investment Unit was accounted for as a derivative financial instrument and classified outside of equity under ASC 815 -40 -15, as the settlement adjustment from the future transaction did not permit the strike price to be considered fixed.On March 12, 2014, the TETF exercised the Warrant for $0.001 per share, and we issued to the TETF an aggregate of 184,797 shares of our Series B preferred stock. These shares were subsequently forward-split and converted into an aggregate of 1,235,219 shares of our common stock in connection with our IPO. Accounting for the Investment Unit We accounted for the Investment Unit as a hybrid financial instrument under Financial Accounting Standards Board Statement 155, and measured the Investment Unit at the amount of proceeds received from the TETF award. The First Qualifying Financing Transaction occurred during December 2013, resulting in an adjustment to the fair value of the Investment Unit in the amount of approximately $2.5 million. The TETF exercised the Warrant for $0.001 per share. We received a notice of exercise from the TETF during March 2014, and issued 184,797 shares of Series B preferred stock, which were converted to 1,235,219 shares of our common stock upon completion of our IPO. Upon exercise by the TETF of the Warrant, the remaining component within the Investment Unit was the Note. The Investment Unit was valued at zero, because our obligation to repay the Note arose from an event of default (a failure to maintain the Texas Residency Requirement), which was an event which rested entirely within our control. |
Note 5 - Equity |
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Stockholders' Equity Note Disclosure [Text Block] | Note 5 - EquityRegistered Direct Offerings On November 22, 2019, the Company completed a registered direct offering (“2019 RDO”), whereby the Company sold to investors an aggregate of 3,167,986 shares of the Company's common stock at $0.40 per share and warrants to purchase up to 3,167,986 shares of the Company's common stock at an exercise price of $0.46 per share. The warrants were first exercisable on May 22, 2020. The Company received net proceeds of approximately $1,093,000 after commissions and expenses. Additionally, the placement agent was issued warrants to purchase common stock equal to 7% of the aggregate number of shares of common stock issued and issuable pursuant to the 2019 RDO (including shares underlying any warrants), or 443,518 shares of common stock at an exercise price of 125% of the 2019 RDO price per share, or $0.50 per share.In connection with the closing of the 2019 RDO, the Company further adjusted the warrants to purchase up to 2,283,740 shares of the Company's common stock, which had been issued as part of the Company's May 9, 2018 private placement and adjusted in August 2018 to (i) reduce the exercise price for each share from $4.25 per share to $0.46 per share, (ii) extend the date upon which such warrants could be exercised to May 22, 2020, and (iii) extend the termination date of such warrants by six months and one day.On January 21, 2020, the Company completed a registered direct offering, in which the Company sold to an accredited investor 961,000 shares of the Company's common stock at $0.24 per share. The Company received net proceeds of approximately $200,000 after commissions and expenses.On January 23, 2020, the Company completed a registered direct offering, in which the Company sold to investors an aggregate of 7,620,000 shares of the Company's common stock at $1.05 per share. The Company received net proceeds of approximately $7.2 million after commissions and expenses.On February 19, 2020, the Company amended its Registration Statement on Form S-3 to increase the maximum offering size by approximately $3,000,000. On February 21, 2020, the Company completed a registered direct offering under the amended S-3 Registration Statement, in which the Company sold to investors an aggregate of 5,000,000 shares of the Company's common stock at $3.50 per share. The Company received net proceeds of approximately $16 million after commissions and expenses. Stock Issuances During the nine months ended September 30, 2020 13,581,000 shares of common stock in our registered direct offerings for proceeds of $25,731,640, (ii) 5,511,599 shares of common stock upon the exercise of warrants for cash proceeds of $2,537,731, (iii) 115,552 shares of common stock upon the cashless exercise of warrants, (iv) 976,730 shares of common stock upon the exercise of options for cash proceeds of $825,027, and (v) 15,000 shares of common stock for services provided to us, valued at $27,900. During the year ended December 31, 2019 3,167,986 shares of common stock in the 2019 RDO for proceeds of $1,267,194, (ii) 506,707 shares of common stock for services provided to us, valued at $469,588, and (iii) 350,000 shares of common stock held in abeyance for an investor in our May 9, 2018 private placement.Preferred Stock In connection with the Company's IPO, all preferred stock included in Series A through Series G preferred stock, totaling 1,394,953 shares at March 31, 2018 were converted to an aggregate of 9,324,177 shares of the Company's common stock in association with the forward-split (See Note 2 - Capital Stock). Upon the completion of the IPO, the Company became authorized to issue 10,000,000 shares of preferred stock with a par value of $0.001 per share, none of which are outstanding at September 30, 2020 Common Stock Upon the completion of the IPO, all of the Company's non-voting common stock automatically converted into voting common stock on a one -for-one basis. Immediately following the completion of the IPO, the Company became authorized to issue 200,000,000 shares of common stock with a par value of $0.001 per share, all of which are voting common stock. There were 39,463,722 September 30, 2020 Common Stock Purchase Warrants Common stock purchase warrant activity for the period and year ended September 30, 2020 December 31, 2019
In the nine September 30, 2020 May 2018 private placement and 2019 RDO exercised warrants to purchase 5,511,599 shares of common stock for cash proceeds of $2,537,731, (ii) the Company issued 115,552 shares of common stock and cancelled 24,158 shares of common stock to placement agents of the 2019 RDO for the exercise of warrants via cashless exercise, and (iii) the Company issued warrants to purchase up to 550,000 shares of common stock to service providers including 500,000 shares of common stock to Cancer Revolution, LLC at an exercise price of $2.27 per share and 50,000 shares of common stock to Capital City Technical Consulting, Inc. at an exercise price of $3.81 per share. During the nine -month period ended September 30, 2020, we recorded share-based compensation of $450,000 associated with Company milestone-based vesting of the Cancer Revolution, LLC warrants. We expect to record $124,000 of share-based compensation for time-based vesting over the next three years and another $300,000 of share-based compensation based on performance-based vesting. In the year ended December 31, 2019 3,167,986 shares of our common stock at an exercise price of $0.46 per share to the investors in the 2019 RDO, (ii) issued warrants to purchase 443,518 shares of our common stock at an exercise price of $0.50 per share to the placement agent in the 2019 RDO, and (iii) reduced the purchase price of the warrants issued to investors in the May 9, 2018 private placement to purchase 2,283,740 shares of our common stock from $4.25 per share to $0.46 per share.On January 29, 2018, the Company entered into an agreement with FundAthena, Inc. whereby the Company agreed to grant warrants to purchase 6,000 shares of common stock at an exercise price of $5.00 per share in consideration of services valued at $30,000 provided to the Company. At September 30, 2020 not issued these warrants.2018 Equity Incentive PlanThe Company's board of directors and stockholders have approved and adopted the Company's 2018 Equity Incentive Plan (“2018 Plan”), which became effective on the completion of the IPO on April 3, 2018. The 2018 Plan provides for the grant of incentive stock options (“ISOs”), nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance-based stock awards, other forms of equity compensation and performance cash awards. ISOs may be granted only to employees. All other awards may be granted to employees, including officers, and to the Company's non-employee directors and consultants.A total of 4,160,000 shares of common stock are authorized under the 2018 Plan, which includes 554,963 shares of common stock reserved for issuance under our 2009 Equity Incentive Plan that were added to the 2018 Plan. No grants have been made under the 2009 Plan since our IPO, and no further grants will be made under the 2009 Plan. Any shares subject to outstanding stock options under the 2009 Plan that would otherwise be returned to the 2009 Plan will instead be added to the shares initially reserved under the 2018 Plan.In addition, the number of shares of common stock reserved for issuance under the 2018 Plan is automatically increased on January 1 of each calendar year, beginning on January 1, 2019 by 5% of the total number of shares of the Company's common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by the administrator of the 2018 Plan. On January 1, 2019 and 2020, the number of shares of common stock reserved for issuance under the 2018 Plan was increased by an aggregate of 761,957 and 963,192 shares, respectively.2018 Employee Stock Purchase PlanThe Company's board of directors and stockholders approved and adopted the Company's 2018 Employee Stock Purchase Plan (“ESPP”), which became effective on the completion of the IPO on April 3, 2018. The ESPP will not become effective until the Board determines to make this benefit available to our employees. The ESPP authorizes the issuance of 208,500 shares of the Company's common stock pursuant to purchase rights granted to our eligible employees. The number of shares of common stock reserved for issuance under the ESPP is automatically increased on January 1 of each calendar year, beginning on January 1, 2019, by 2% of the total number of shares of the Company's common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by the administrator of the ESPP. The administrator of the ESPP, which is our board of directors, determined not to increase the number of shares reserved for issuance under the ESPP on January 1, 2019 or January 1, 2020 Stock Options As of September 30, 2020 6,982,885 12 to 48 months, are exercisable for a period of up to ten years, and enable the holders to purchase shares of our common stock at exercise prices ranging from $0.001 to $9.80 per share. The per-share fair values of these options range from $0.001 to $7.93, based on Black-Scholes-Merton pricing models with the following assumptions:
In the nine September 30, 2020 2,141,529 $1.28 to $3.80 per share to employees, board members, and consultants, (ii) cancelled options to purchase 164,837 shares of common stock at an exercise price of $9.80 per share due to separation of a former executive, and (iii) issued 976,730 shares of the Company's common stock upon the exercise of options held by former board members and a former executive with exercise prices ranging from $0.015 to $2.15 per share.In the year ending December 31, 2019, the Company granted stock options to purchase an aggregate of 1,744,300 shares of common stock with exercise prices ranging from $0.30 to $1.62 per share to employees and consultants and cancelled options to purchase 297,058 shares of common stock due to the inactivity of service providers. The weighted average remaining contractual term for the outstanding options at September 30, 2020 December 31, 2019 7.73 and 7.45 years, respectively. Stock option activity for the nine September 30, 2020 December 31, 2019
Share-Based Compensation For the nine months ended September 30, 2020 $3.6 million, nearly all of which represents the vesting of options and warrants issued to service providers, executives, employees, and board members. The Company's total compensation cost related to non-vested time-based stock option awards granted to executives, employees, and board members and not yet recognized was approximately $4.5 million for the quarter ended September 30, 2020 three years using a graded vesting method. As of September 30, 2020 2.26 years. As of September 30, 2020 no performance-based stock option awards outstanding. |
Note 6 - Related Party Transactions |
9 Months Ended |
---|---|
Sep. 30, 2020 | |
Notes to Financial Statements | |
Related Party Transactions Disclosure [Text Block] | Note 6 - Related Party TransactionsIntrogen Research Institute Introgen Research Institute (“IRI”) is a Texas-based technology company, currently affiliated with Rodney Varner, our Chief Executive Officer. In April 2009, prior to Mr. Varner becoming an officer and director of our Company in August 2012, we entered into an Assignment and Collaboration Agreement with IRI, providing us with the exclusive right to commercialize a portfolio of intellectual property. This agreement was amended in 2011 to include additional sublicensing of additional intellectual property made available to IRI from MD Anderson.Viet Ly The Company entered into a consulting agreement with Viet Ly on April 19, 2018. The Company agreed to pay Mr. Ly $175,000 initially, with compensation variable from time-to-time as determined by the Company, for strategic consulting services. The Company paid Mr. Ly an aggregate of $28,500 during the quarter ended September 30, 2020 for strategic services. In addition, in April 2020, the Company issued Cancer Revolution LLC, an entity owned by Mr. Ly, a warrant to purchase up to 500,000 shares of common stock at the fair market value of the common stock on the date of issuance that vests based on the achievement of Company milestones. |
Note 7 - Commitments and Contingencies |
9 Months Ended |
---|---|
Sep. 30, 2020 | |
Notes to Financial Statements | |
Commitments and Contingencies Disclosure [Text Block] | Note 7 - Commitments and ContingenciesLeases On April 16, 2018, the Company executed a service agreement with CIC Innovation Communities, LLC to establish and lease offices at the Cambridge Innovation Center in Cambridge, Massachusetts. On April 1, 2020, the Company provided notice of cancellation of our lease in the Cambridge Innovation Center in Cambridge, Massachusetts, effective April 30, 2020. On April 16, 2018, the Company executed a space utilization agreement with the Board of Regents of the University of Texas System to establish and lease offices at the Dell Medical School in Austin, Texas. The lease ran through October 31, 2020 and the Company pays $462 per month to occupy this location. See Subsequent Event Note 9. Commitments MD Anderson Cancer Center We have entered into a clinical study agreement with MD Anderson in Houston, Texas, to administer a Phase 1/2 clinical trial, combining FUS1 -nanoparticles and Tarceva in Stage IV lung cancer patients. FUS1 is sometimes referred to as TUSC2 and has recently been branded as REQORSA. The trial was expected to run through the end of 2018 with a projected total cost of approximately $2 million. Payments are due and payable when invoiced throughout the clinical trial period. The agreement may be terminated at any time. With Tagrisso now considered a new standard of care in the U.S. for NSCLC in patients with an EGFR mutation and our receipt of FDA Fast Track Designation for use of REQORSA combined with Tagrisso, we are prioritizing this program in lieu of the combination trial of REQORSA and Tarceva.In May 2020, the Company entered into a license agreement with The Board of Regents of the University of Texas System, on behalf of MD Anderson. In consideration of the license, the Company will make certain agreed upon payments to MD Anderson, including an up-front license fee, annual maintenance fees, an aggregate of $4,150,000 in milestone payments over the term of the agreement, and single digit royalty payments (until such time that $3 billion per year in worldwide sales of licensed products using the licensed intellectual property is achieved and low double digits thereafter), minimum annual royalties for sales of licensed products using the licensed intellectual property, as well as reimbursement of patent expenses. The agreement expires on the last to occur of: (a) the expiration of all patents subject to the license agreement, or (b) thirty years after execution, subject to earlier termination rights by the Company and MD Anderson, including MD Anderson's right to terminate the agreement upon the occurrence of certain events, including the Company's failure to meet certain commercial diligence milestones.In July 2018, the Company entered into a two -year sponsored research agreement with MD Anderson to sponsor preclinical studies focused on the combination of TUSC2 with an immunotherapy with a projected total cost of approximately $2 million. In March, 2020, the term of this agreement was extended to May 22, 2022. Payments are due and payable when invoiced throughout the clinical trial period. The agreement may be terminated at any time.In 2009, we agreed to assume certain contractual and other obligations of IRI in consideration of the sublicense rights, expertise, and assistance associated with the assignment of certain technologies and intellectual property. We also agreed to pay royalties of 1% on sales of resulting licensed products, for a period of 21 years following the termination of the last of the MD Anderson License Agreement and Sublicense Agreement, to IRI and we assumed patent prosecution costs and an annual minimum royalty of $20,000 payable to the National Institutes of Health.National Institutes of Health Our $191,393 payment obligation to the National Institutes of Health (“NIH”) represented a current obligation, of which $15,393 of 2016 patent prosecution costs were paid in the fourth quarter of 2016 and $176,000 was included in Accounts Payable at December 31, 2016 ( consisting of accrued annual royalties of $140,000 and patent costs of $36,000 ). During the first quarter of 2017, we modified the terms of our accrued royalty obligation to NIH. Under the modified agreement, NIH agreed to extinguish $120,000 of the accrued royalties payable to it in consideration of payment by us of (i) accrued patent costs of $36,000, (ii) a royalty payment of $20,000, and (iii) a contingent payment of $240,000, increasing by $20,000 per year starting in 2018, to be paid upon our receipt of FDA approval. The payments for the patent costs of $36,000 and royalties of $20,000 were paid during the second quarter of 2017. As a result of our modified agreement with the NIH, we have recognized the exchange of the $120,000 fixed obligation for the $240,000 contingent obligation as a $120,000 reduction to intellectual property expense (classified within general and administrative expense) during the first quarter of 2017. The $240,000 contingent obligation which increases annually by $20,000 and is $280,000 as of December 31, 2019 will be recognized when we obtain regulatory approval (the event that triggers the payment obligation).University of Pittsburgh As part of our License Agreement with the University of Pittsburgh in February 2020, we agreed to (i) an initial licensing fee of $25,000, (ii) annual maintenance fees of $25,000 for the first three years and $40,000 for each subsequent year following the first anniversary of the agreement, (iii) royalties between 1.5% to 3% of net sales of licensed technologies, (iv) an annual minimal royalty payment of $250,000 per year beginning in the year of the first commercial sale of licensed technology, (v) a share of non-royalty sublicense income of 20%, and (vi) milestone payments of an aggregate of $3,975,000. The agreement expires upon the later of (i) 20 years after the first commercial sale of the licensed technology thereunder and (ii) expiration of the last valid claim under the patent rights, subject to earlier termination pursuant to the terms of the agreement.Contingencies From time to time we may become subject to threatened and/or asserted claims arising in the ordinary course of our business. Management is not aware of any matters, either individually or in the aggregate, that are reasonably likely to have a material impact on our financial condition, results of operations or liquidity. |
Note 8 - Significant Events |
9 Months Ended |
---|---|
Sep. 30, 2020 | |
Notes to Financial Statements | |
Effect of Covid 19 Pandemic [Text Block] | Note 8 - Significant EventsIn March 2020, the outbreak of COVID-19 caused by a novel strain of the coronavirus was recognized as a pandemic by the World Health Organization. The pandemic has become increasingly widespread in the United States, including markets in which the Company operates or may operate in the future. The COVID-19 pandemic has had a notable impact on general economic conditions, including, but not limited to, the temporary closures of many businesses, “shelter in place” orders and other governmental regulations, reduced consumer spending due to both job losses and other effects attributable to the COVID-19, in addition to many other unknowns. To date, the Company has not experienced any material impact on its financial results or operations as a result of the COVID-19 pandemic. The extent to which the COVID-19 pandemic could impact the Company's operations or financial results is uncertain. The Company continues to monitor the impact of the COVID-19 pandemic closely. |
Note 9 - Subsequent Events |
9 Months Ended |
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Sep. 30, 2020 | |
Notes to Financial Statements | |
Subsequent Events [Text Block] | Note 9 - Subsequent EventsShare Issuance On October 1, 2020, the Company issued 5,000 shares of common stock to a service provider in consideration of services to be provided through December 31, 2020. Leases On October 15, 2020, the Company amended the agreement with the Board of Regents of the University of Texas System to extend the lease of offices at the Dell Medical School in Austin, Texas through April 30, 2021. New Hires, Promotion, and Option Issuances On October 22, 2020, the Company granted stock options to purchase an aggregate of 285,000 shares of common stock at an exercise price of $3.36 per share, the fair market value of the common stock on the date of grant, in connection with the new hire of two employees, including the Company's Senior Vice President, Intellectual Property and Licensing and the promotion of a current employee to Vice President, Manufacturing.Option Exercises The Company issued 150,000 shares of common stock for $216,560 in cash to former board members and a former executive upon the exercise of options from October 1, 2020 through November 5, 2020. |
Significant Accounting Policies (Policies) |
9 Months Ended |
---|---|
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Stockholders' Equity, Policy [Policy Text Block] | Capital Stock In connection with the Company's initial public offering ("IPO") in April 2018, all of the Company's preferred stock and non-voting common stock were converted into shares of the Company's common stock. The Company's common stock was then forward-split at a ratio of 6.6841954 -to-1. Furthermore, prior to the closing of the IPO, the Company's Certificate of Incorporation was amended and restated to provide the Company with the authority to issue up to 210,000,000 shares of stock consisting of 200,000,000 shares of common stock at a par value of $0.001 per share and 10,000,000 shares of preferred stock at a par value of $0.001 per share. |
Use of Estimates, Policy [Policy Text Block] | Use of Estimates The preparation of our condensed financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. |
Cash and Cash Equivalents, Policy [Policy Text Block] | Cash We consider all highly liquid short-term investments with an initial maturity of three months or less to be cash equivalents. Any amounts of cash in financial institutions which exceed FDIC insured limits expose us to cash concentration risk. We had no cash equivalents, and had $20,811,895 1,761,278 $250,000 at September 30, 2020 December 31, 2019 |
Fair Value of Financial Instruments, Policy [Policy Text Block] | Fair Value of Financial Instruments The carrying amounts reported in the balance sheet for cash, accounts receivable, accounts payable and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments. Accounting Standard Codification ("ASC") 820, Fair Value Measurements and Disclosures, defines fair value, provides a consistent framework for measuring fair value under GAAP and expands fair value financial statement disclosure requirements. ASC 820's valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. ASC 820 classifies these inputs into the following hierarchy:Level 1: Quoted prices for identical instruments in active markets.Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.Level 3: Instruments with primarily unobservable value drivers. |
Property, Plant and Equipment, Policy [Policy Text Block] | Property and Equipment Furniture and equipment are stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, which range from three to five years. Routine maintenance and repairs are charged to expense as incurred and major renovations or improvements are capitalized. |
Research and Development Expense, Policy [Policy Text Block] | Research and Development Costs Research and development expenditures consist of costs incurred to conduct research and development activities. These include payments to collaborative research partners, manufacturing partners, and clinical strategy partners, wages and associated employee benefits, facilities and overhead costs. These expenditures relate to our preclinical, Phase 1, and Phase 2 clinical trials and are expensed as incurred. Purchased materials to be used in future research are capitalized and included in research and development supplies. Supplies purchased and capitalized for future use were $686,324 801,780 September 30, 2020 December 31, 2019 |
Awards [Policy Text Block] | Awards In 2010, we were awarded $4.5 million from the State of Texas Emerging Technology Fund (“TETF”). The award was received in two tranches of $2.25 2010 and 2011. The award proceeds were used to further the development and future commercialization of REQORSA, our lead product candidate for NSCLC. In consideration of the award, we provided the TETF with an “Investment Unit,” consisting of (i) a Promissory Note (“Note”) and (ii) a right to purchase our equity shares (“Warrant”). The funds received for this award were assigned to the Investment Unit, and classified separately from equity as “mezzanine” in the balance sheet. In 2010, we also were awarded approximately $244,500 from the U.S. Treasury Department for our QTDP Program Nanoparticle Therapy for Lung Cancer. The award was received during 2011 for our historical activities, and required no prospective expenditures. We accounted for these funds received as revenue at that time. |
Intangible Assets, Finite-Lived, Policy [Policy Text Block] | Intellectual Property Intellectual property consists of legal and related costs associated with patents and other proprietary technology and rights developed, acquired, licensed by, or maintained by us that we believe contribute to a probable economic benefit toward such patents and activities. These costs incurred in connection with obtaining and maintaining intellectual property protection, such as patent applications and patent maintenance, are capitalized. Intellectual property is stated at cost, to be amortized on a straight-line basis over the estimated useful lives of the assets. |
Share-based Payment Arrangement [Policy Text Block] | Accounting for Stock-Based Compensation We use the fair value-based method of accounting for stock-based compensation for options granted to employees, independent consultants and contractors. We measure options granted at fair value determined as of the grant date, and recognize the expense over the periods in which the related services are rendered based on the terms and conditions of the award. Generally, where the award only has a service condition, the requisite service period is the same as the vesting period. |
Financial Instruments Measurement [Policy Text Block] | Financial Instruments We have elected the Fair Value Option to account for the Investment Unit at fair value as a combined hybrid financial instrument containing a Warrant and a Note (see Note 4 - Investment Unit). Prior to its exercise, the Warrant component was not classified within equity, as the exercise price of the Warrant was affected by the market price of our stock in a future qualifying financing transaction and was not considered to be indexed to our own stock. The Note is not classified within liabilities, as our management can determine the timing of the repayment obligation, if any. As a result, the Warrant and Note that comprised the Investment Unit were aggregated and classified within the mezzanine section of the balance sheet. Due to the contingent terms of the financial instruments, changes in the fair value of the Investment Unit were calculated and realized in earnings. In August 2019, the remaining articles of the Investment Unit were terminated. There were no changes in the fair value of the Investment Unit at September 30, 2020 |
Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block] | Long-Lived Assets We review long-lived assets and certain identifiable intangibles held and used for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In evaluating the fair value and future benefits of its intangible assets, management performs an analysis of the anticipated undiscounted future net cash flow of the individual assets over the remaining amortization period. We recognize an impairment loss if the carrying value of the asset exceeds the expected future cash flows. During the nine months ended September 30, 2020 December 31, 2019 no |
New Accounting Pronouncements, Policy [Policy Text Block] | Recent Accounting Developments Accounting pronouncements issued but not effective until after September 30, 2020 not expected to have a significant effect on our financial condition, results of operations, or cash flows. |
Note 5 - Equity (Tables) |
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Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block] |
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Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block] |
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Share-based Payment Arrangement, Option, Activity [Table Text Block] |
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Note 4 - Investment Unit (Details Textual) - USD ($) |
1 Months Ended | 3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|---|
Apr. 03, 2018 |
Mar. 12, 2014 |
Dec. 31, 2013 |
Mar. 31, 2018 |
Sep. 30, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share) | $ 4.01 | $ 1.45 | $ 2.36 | ||||
Stock Issued During Period, Shares, New Issues (in shares) | 5,511,599 | ||||||
Fair Value Adjustment of Warrants | $ 2,500,000 | $ 0 | |||||
Conversion of Preferred Stock to Common Stock [Member] | |||||||
Conversion of Stock, Shares Issued (in shares) | 1,235,219 | 9,324,177 | |||||
Series B Preferred Stock [Member] | |||||||
Stock Issued During Period, Shares, New Issues (in shares) | 184,797 | ||||||
Warrant Issued to TETF [Member] | |||||||
Class of Warrant or Right, Purchase Percentage | 80.00% | ||||||
Warrant Discount Rate | 20.00% | ||||||
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share) | $ 0.001 | $ 0.001 | |||||
Promissory Note [Member] | |||||||
Contingent Debt | $ 4,500,000 | ||||||
Contingent Debt, Interest Rate | 8.00% |
Note 5 - Equity - Common Stock Purchase Warrant Activity (Details) - $ / shares |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2020 |
Dec. 31, 2019 |
|
Outstanding, number of warrants (in shares) | 7,476,056 | 3,864,552 |
Outstanding, weighted average exercise price (in dollars per share) | $ 1.45 | $ 2.36 |
Issued, number of warrants (in shares) | 550,000 | 3,611,504 |
Issued, weighted average exercise price (in dollars per share) | $ 2.41 | $ 0.46 |
Cancelled or expired, number of warrants (in shares) | 24,158 | |
Cancelled or expired, weighted average exercise price (in dollars per share) | $ 0.50 | |
Exercised, number of warrants (in shares) | 5,627,151 | |
Exercised, weighted average exercise price (in dollars per share) | $ 0.46 | |
Outstanding, number of warrants (in shares) | 2,374,747 | 7,476,056 |
Outstanding, weighted average exercise price (in dollars per share) | $ 4.01 | $ 1.45 |
Exercisable at September 30, 2020 (in shares) | 2,124,747 | |
Exercisable at September 30, 2020 (in dollars per share) | $ 4.18 |
Note 5 - Equity - Assumptions (Details) |
9 Months Ended |
---|---|
Sep. 30, 2020 | |
Expected term: (Year) | 10 years |
Dividend yield: | 0.00% |
Minimum [Member] | |
Risk-free rate: | 0.13% |
Volatility: | 75.98% |
Maximum [Member] | |
Risk-free rate: | 2.63% |
Volatility: | 82.03% |
Note 6 - Related Party Transactions (Details Textual) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Sep. 30, 2020 |
Apr. 30, 2020 |
Apr. 19, 2018 |
|
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares) | 115,552 | ||
Warrants Issued to Cancer Revolution LLC, an entity owned by Viet Ly [Member] | |||
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares) | 500,000 | ||
Viet Ly [Member] | |||
Related Party, Initial Annual Consulting Compensation to be Paid | $ 175,000 | ||
Related Party, Consulting Compensation, Aggregate Amount | $ 28,500 |
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