UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
For the transition period from ________ to _________
Commission
file number
(Exact name of registrant as specified in charter)
(State or jurisdiction of Incorporation or organization) |
I.R.S. Employer Identification No. |
(Address of principal executive offices) | (Zip code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
The
|
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.
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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
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 definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
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 by Rule 12b-2 of the Exchange Act). Yes ☐ No
Number of common shares outstanding as of May 8, 2024 was .
TABLE OF CONTENTS
2 |
THARIMMUNE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2024 | December 31, 2023 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash | $ | $ | ||||||
Prepaid expenses and other current assets | ||||||||
Total current assets | ||||||||
Total assets | $ | $ | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | $ | ||||||
Accrued expenses | ||||||||
Insurance premium financing liability | ||||||||
Total current liabilities | ||||||||
Total liabilities | ||||||||
Commitments and contingencies (see Note 5) | ||||||||
Stockholders’ equity | ||||||||
Preferred stock, $ | par value, shares authorized, shares issued and outstanding as of March 31, 2024 and December 31, 2023||||||||
Common stock, $ | par value, shares authorized, shares and shares issued and shares and shares outstanding as of March 31, 2024 and December 31, 2023, respectively||||||||
Additional paid-in capital | ||||||||
Accumulated deficit | ( | ) | ( | ) | ||||
Treasury stock, at cost, | shares held in treasury as of March 31, 2024 and December 31, 2023( | ) | ( | ) | ||||
Total stockholders’ equity | ||||||||
Total liabilities and stockholders’ equity | $ | $ |
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-1 |
THARIMMUNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three Months Ended March 31, | ||||||||
2024 | 2023 | |||||||
Operating expenses | ||||||||
Research and development | $ | $ | ||||||
General and administrative | ||||||||
Total operating expenses | ||||||||
Loss from operations | ( | ) | ( | ) | ||||
Other income (expense) | ||||||||
Interest expense | ( | ) | ( | ) | ||||
Interest income | ||||||||
Total other income (expense), net | ||||||||
Net loss | $ | ( | ) | $ | ( | ) | ||
Net loss per share: | ||||||||
Basic and diluted | $ | ) | $ | ) | ||||
Weighted average number of common shares outstanding: | ||||||||
Basic and diluted |
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-2 |
THARIMMUNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023 (UNAUDITED)
Common Stock | Additional Paid-in |
Accumulated | Treasury Stock | |||||||||||||||||||||||||
Shares | Amount | Capital | Deficit | Shares | Amount | Total | ||||||||||||||||||||||
For the three months ended March 31, 2023 | ||||||||||||||||||||||||||||
Balance, December 31, 2022 | $ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||
Net loss | - | ( |
) | - | ( |
) | ||||||||||||||||||||||
Stock based compensation | - | - | ||||||||||||||||||||||||||
Balance, March 31, 2023 | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||
For the three months ended March 31, 2024 | ||||||||||||||||||||||||||||
Balance, December 31, 2023 | $ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||
Stock issuance pursuant to services agreement | - | |||||||||||||||||||||||||||
Net loss | - | ( |
) | - | ( |
) | ||||||||||||||||||||||
Stock based compensation | - | - | ||||||||||||||||||||||||||
Balance, March 31, 2024 | $ | $ | $ | ( |
) | $ | ( |
) | $ |
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-3 |
THARIMMUNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Three Months Ended March 31, | ||||||||
2024 | 2023 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | ( | ) | $ | ( | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Stock based compensation | ||||||||
Stock issuance pursuant to services agreement | ||||||||
Increase in operating assets: | ||||||||
Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
Increase (decrease) in operating liabilities: | ||||||||
Accounts payable | ( | ) | ||||||
Accrued expenses | ( | ) | ||||||
Net cash used in operating activities | ( | ) | ( | ) | ||||
Net cash provided by (used in) investing activities | ||||||||
Cash flows from financing activities: | ||||||||
Payment of deferred offering costs | ( | ) | ||||||
Proceeds from insurance premium financing liability | ||||||||
Repayment of insurance premium financing liability | ( | ) | ( | ) | ||||
Net cash provided by financing activities | ||||||||
Net decrease in cash | ( | ) | ( | ) | ||||
Cash, beginning of period | ||||||||
Cash, end of period | $ | $ | ||||||
Supplemental disclosure of non-cash financing activities: | ||||||||
Unpaid deferred financing costs | $ | $ |
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-4 |
THARIMMUNE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 – Description of Business and Liquidity
Nature of Operations
Tharimmune, Inc. (formerly, Hillstream BioPharma, Inc.) (“Tharimmune” or the “Company”) was incorporated on March 28, 2017, as a Delaware C-corporation. At March 31, 2024, Tharimmune had one wholly-owned subsidiary: HB Pharma Corp. (“HB”).
Tharimmune is a clinical-stage biotechnology company developing therapeutic candidates in rare, inflammatory, and oncologic conditions with high unmet need. On November 3, 2023, the Company entered into a patent license agreement (the “Avior License Agreement”) with Avior Inc. d/b/a Avior Bio, LLC (“Avior”) pursuant to which it received an exclusive sublicensable right and license to Licensed Patent Rights and Licensed Technology to, among other things, Develop, have Developed, make, have made, use, sell, import, export and commercialize TH104 and TH103) and to practice the Licensed Technology in connection with the foregoing, throughout the world (each as defined in the Avior License Agreement. In February 2023, the U.S. Food and Drug Administration (“FDA”) approved an investigational new drug (“IND”) application for TH104. TH104 has a dual mechanism of action by affecting multiple receptors, known to suppress chronic, debilitating pruritis or “uncontrollable itching.” With respect to TH104, the Company intends to first seek approval for the treatment of moderate to severe chronic pruritis in patients with primary biliary cholangitis (“PBC”), an orphan rare form of liver disease with no known cure in which more than 70% of patients suffer from debilitating chronic pruritis, and with respect to TH103, it intends to develop the product candidate and potentially file an IND.
The Company is also developing an early-stage pipeline of novel therapeutic candidates targeting validated high value immuno-oncology (“IO”) targets including human epidermal growth factor (“EGF”) receptor 2 (“HER2”), human EGF receptor 3 (“HER3”) and programmed cell death protein 1 (“PD-1”). The Company is developing antibodies including bispecific antibodies, antibody drug conjugates (“ADCs”) and small molecular weight bovine-derived Picobodies™ or antibody “knob” domains which have the potential to target and bind more tightly to “undruggable” epitopes better than full sized antibodies. The Company is advancing TH3215, a bispecific against both HER2 and HER3 antibody which targets a novel “bridging epitope” encompassing multiple domains of the HER2 extracellular domain (“ECD”) as well as ligand-dependent and independent blocking of the ECD of HER3 into IND-enabling studies in 2024. In addition, the Company anticipates that TH0059, a HER2/HER3 bispecific ADC (“bsADC”), and TH1940, a PD-1 Picobody, will progress to enter IND-enabling studies in 2024.
The Company has deprioritized its previous preclinical candidate, HSB-1216, due to a strategic reprioritization of its vision to focus on therapeutics in high unmet need cancers focused on novel epitopes of certain antitumor drug targets.
Name Change
On September 21, 2023, Hillstream BioPharma, Inc. filed a Certificate of Amendment (the “Amendment”) to its Certificate of Incorporation, as amended (the “Certificate of Incorporation”), with the Secretary of State of the State of Delaware pursuant to which it changed its name to Tharimmune, Inc. effective as of September 25, 2023. The name change became effective with The Nasdaq Capital Market on September 25, 2023 and the Company’s common stock has since traded on The Nasdaq Capital Market under the new name and new ticker symbol, “THAR.”
F-5 |
Liquidity and Going Concern
The
accompanying condensed consolidated financial statements have been prepared on the basis that the Company will continue as a going concern,
which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. During
the three months ended March 31, 2024, the Company incurred operating losses in the amount of approximately $
Based on the Company’s limited operating history, recurring negative cash flows from operations, current plans and available resources, the Company will need substantial additional funding to support future operating activities. The Company has concluded that the prevailing conditions and ongoing liquidity risks faced raise substantial doubt about the Company’s ability to continue as a going concern for at least one year following the date these consolidated financial statements are issued. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
The Company may seek to raise additional funding through the sale of additional equity or debt securities, enter into strategic partnerships, grants, or other arrangements or a combination of the foregoing to support its future operations, however, there can be no assurance that the Company will be able to obtain additional capital on terms acceptable to the Company, on a timely basis or at all. The failure to obtain sufficient additional funding could adversely affect the Company’s ability to achieve its business objectives and product development timelines and may result in the Company delaying or terminating clinical trial activities which could have a material adverse effect on the Company’s results of operations.
Other Risks and Uncertainties
There can be no assurance that the Company’s products, if approved, will be accepted in the marketplace, nor can there be any assurance that any future products can be developed or manufactured at an acceptable cost and with appropriate performance characteristics, or that such products will be successfully marketed, if at all. The Company is subject to risks common to biopharmaceutical companies including, but not limited to, the development of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, product liability, uncertainty of market acceptance of products and the need to obtain additional financing. The Company is dependent on third party suppliers. The Company’s products require approval or clearance from the FDA prior to commencing commercial sales in the United States. Approvals or clearances are also required in foreign jurisdictions in which the Company may license or sell its products. There can be no assurance that the Company’s products will receive all of the required approvals or clearances.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
These accompanying unaudited condensed consolidated interim financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. These condensed consolidated financial statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) necessary for a fair statement of the balance sheet, operating results, and cash flows for the periods presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2024 or any other future period. Certain information and footnote disclosure normally included in the annual financial statements prepared in accordance with U.S. GAAP have been omitted in accordance with the SEC’s rules and regulations for interim reporting. The Company’s financial position, results of operations, and cash flows are presented in U.S. Dollars. These condensed consolidated financial statements and related notes should be read in conjunction with the audited financial statements and related notes thereto for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 23, 2024. The Company operates in one segment.
F-6 |
Reverse Stock Split
On
November 17, 2023, the Company effectuated a reverse split of shares of its common stock at a ratio of
Principles of Consolidation
The condensed consolidated financial statements include the accounts of Tharimmune and its wholly-owned subsidiaries, HB and Farrington Therapeutics LLC. All significant intercompany balances and transactions have been eliminated in consolidation. On February 27, 2023, the Company filed a Certificate of Cancellation with the Delaware Secretary of State with respect to Farrington Therapeutics LLC.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Management bases its estimates on historical experience and on assumptions believed to be reasonable under the circumstances. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes, and management must select an amount that falls within that range of reasonable estimates. Areas of the condensed consolidated financial statements where estimates may have the most significant effect include research and development expense recognition, valuation of common shares and share-based compensation, allowances of deferred tax assets, valuation of debt related instruments, and cash flow assumptions regarding going concern considerations. Although management believes the estimates that have been used are reasonable, actual results could vary from the estimates that were used.
Concentration of Credit Risk
The
Company maintains cash balances with various financial institutions. Account balances at these institutions are insured by the Federal
Deposit Insurance Corporation up to $
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. Cash equivalents, if any, are stated at cost and consist primarily of money market accounts.
Research and Development
Research and development costs are expensed as incurred. Research and development expenses include personnel costs associated with research and development activities, including third-party contractors to perform research, conduct clinical trials, and manufacture drug supplies and materials. The Company accrues for costs incurred by external service providers, including contract research organizations and clinical investigators, based on its estimates of service performed and costs incurred. These estimates include the level of services performed by third parties, patient enrollment in clinical trials, administrative costs incurred by third parties, and other indicators of the services completed.
F-7 |
The Company recognizes compensation costs resulting from the issuance of stock-based awards to employees, non-employees, and directors as an expense in the condensed consolidated statements of operations over the requisite service period based on a measurement of fair value for each stock-based award. The fair value of each option grant to employees, non-employees, and directors is estimated as of the date of grant using the Black-Scholes option-pricing model, net of actual forfeitures. The fair value is amortized as compensation cost on the straight-line basis over the requisite service period of the awards, which is generally the vesting period.
The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. Prior to January 12, 2022, the Company was a private company and the Company’s common stock has only been publicly traded since that date. As a result, the Company has lacked company-specific historical and implied volatility information. Therefore, it has estimated its expected stock volatility based on the historical data regarding the volatility of a publicly traded set of peer companies. The expected term of stock options granted was between five and seven years. The risk-free interest rate was determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award.
Fair Value Measurements
The Company applies Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement (“ASC 820”), which establishes a framework for measuring fair value and clarifies the definition of fair value within that framework. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity’s own assumptions based on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability and are to be developed based on the best information available in the circumstances.
The carrying value of the Company’s cash, prepaid expenses, accounts payable, and accrued expenses approximate fair value because of the short-term maturity of these consolidated financial instruments.
The valuation hierarchy is composed of three levels. The classification within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The levels within the valuation hierarchy are described below:
Level 1 Inputs: Observable inputs such as quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. | |
Level 2 Inputs: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for assets or liabilities recently traded in active markets, with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals, as well as quoted prices for identical or similar assets or liabilities in markets that are not active. | |
Level 3 Inputs: Unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities, that reflect the reporting entity’s own assumptions. |
F-8 |
Deferred Offering Costs
Deferred offering costs consists primarily of legal, accounting, underwriters’ fees, printing, and filing fees that are incurred prior to an offering of the Company’s common stock and are initially capitalized and then subsequently reclassified to additional paid-in capital upon completion of the offering. If an offering is not completed, any associated offering costs will be expensed immediately upon termination of the offering.
Insurance Premium Financing Liability
In
January 2023, the Company entered into an insurance premium financing agreement for $
In
January 2024, the Company entered into an insurance premium financing agreement for $
Retirement Plan
The
Company has a 401(k) defined contribution plan which covers all employees that meet the plan’s eligibility requirements. Eligible
employees may contribute a percentage of their salary subject to certain limitations. The Company makes a discretionary match which is
currently equal to 3% of employee contributions. Total company contributions to the plan were $
Income Taxes
The Company accounts for income taxes using the asset-and-liability method in accordance with FASB ASC Topic 740, Income Taxes (“ASC 740”). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.
Deferred income taxes are recognized for the tax effect of temporary differences between the financial statement carrying amount of assets and liabilities and the amounts used for income tax purposes and for certain changes in valuation allowances. Valuation allowances are recorded to reduce certain deferred tax assets when, in management’s estimation, it is more-likely-than-not that a tax benefit will not be realized. A full valuation allowance has been recognized for all periods since it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized in future periods.
The Company follows the guidance in FASB ASC Subtopic 740-10 in assessing uncertain tax positions. The standard applies to all tax positions and clarifies the recognition of tax benefits in the financial statements by providing for a two-step approach of recognition and measurement. The first step involves assessing whether the tax position is more-likely-than-not to be sustained upon examination based upon its technical merits. The second step involves measurement of the amount to be recognized. Tax positions that meet the more-likely-than-not threshold are measured at the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate finalization with the taxing authority. The Company recognizes the impact of an uncertain income tax position in the financial statements if it believes that the position is more-likely-than-not to be sustained by the relevant taxing authority. The Company will recognize interest and penalties related to tax positions in income tax expense. At March 31, 2024 and December 31, 2023, the Company had no unrecognized uncertain income tax positions, and therefore no amounts have been recognized in the condensed consolidated financial statements.
F-9 |
The Company reports loss per share in accordance with FASB ASC Subtopic 260-10, Earnings Per Share, which provides for calculation of basic and diluted earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income or loss available to common stockholders by the weighted average common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. The calculation of diluted net earnings (loss) per share gives effect to common stock equivalents; however, potential common shares are excluded if their effect is anti-dilutive.
Potentially
dilutive securities not included in the computation of loss per share for the three months ended March 31, 2024 and 2023 included options
to purchase
Recently Adopted Accounting Pronouncements
The Company has evaluated all recent accounting pronouncements that were required to be adopted and believes that other than the following, none of them will have a material effect on the Company’s financial position, results of operations, or cash flows.
The FASB issued Accounting Standards Update (“ASU”) 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), to reduce complexity in applying U.S. GAAP to certain financial instruments with characteristics of liabilities and equity. The guidance in ASU 2020-06 simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock. The guidance in ASC Subtopic 470-20 applies to convertible instruments for which the embedded conversion features are not required to be bifurcated from the host contract and accounted for as derivatives. In addition, the amendments revise the scope exception from derivative accounting in ASC Subtopic 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification. These amendments are expected to result in more freestanding financial instruments qualifying for equity classification (and, therefore, not accounted for as derivatives), as well as fewer embedded features requiring separate accounting from the host contract. The amendments in ASU 2020-06 further revise the guidance in FASB ASC Topic 260, Earnings Per Share, to require entities to calculate diluted earnings per share (“EPS”) for convertible instruments by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares. The amendments in ASU 2020-06 are effective for public entities that meet the definition of an SEC filer, excluding smaller reporting companies as defined by the SEC for fiscal years beginning after December 15, 2021. For all other entities, including the Company, the amendments are effective for fiscal years beginning after December 15, 2023. The Company adopted this guidance effective January 1, 2024 and the adoption of ASU 2020-06 did not have a material impact on its condensed consolidated financial statements.
Note 3 – Common Stock
Pursuant
to an amendment to the Company’s Certificate of Incorporation filed in April 2019, the Company increased the number of authorized
shares of common stock to
F-10 |
On
February 16, 2022, the Company entered into an agreement for marketing and investor related consulting services. Pursuant to the agreement,
compensation includes a monthly fee and an upfront issuance of shares of the Company’s common stock. On the effective date of February
16, 2022, the Company issued
On
March 17, 2023, the Company filed a Registration Statement on Form S-3 with the SEC using a “shelf” registration process
pursuant to which, the Company may sell, from time to time in one or more offerings, shares of common stock and preferred stock, various
series of debt securities and/or warrants to purchase any of such securities, either individually or as units comprised of a combination
of one or more of the other securities in one or more offerings up to a total dollar amount of $
On
May 2, 2023, the Company closed a public offering pursuant to which it issued
On July 26, 2023, pursuant to the research and development collaboration and license agreement with Applied Biomedical Science Institute (“ABSI”), further described in Note 5 to the condensed consolidated financial statements, the Company issued shares of its common stock with a per share value of $ , representing total compensation expense of $ (as calculated based on the trailing 10-day average closing value of the Company’s common stock prior to the agreement date).
On
November 30, 2023, the Company closed a public offering pursuant to which it issued
On January 24, 2024, pursuant to a corporate advisory consulting agreement, the Company issued shares of its common stock with a per share value of $ , representing total compensation expense of $ (as calculated based on the closing value of the Company’s common stock at the effective transfer date).
Incentive Plans and Options
Under the Company’s 2017 Stock Incentive Plan (the “2017 Plan”) the Company may grant incentive stock options, non-statutory stock options, rights to purchase common stock, stock appreciation rights, restricted stock, performance shares, and performance units to employees, directors, and consultants of the Company and its affiliates. Up to shares of the Company’s common stock may be issued pursuant to the 2017 Plan.
F-11 |
The Company has granted options to acquire shares of common stock at $ per share under the 2017 Plan, and shares remain available for issuance. At both March 31, 2024 and December 31, 2023, there were options outstanding to acquire shares of common stock. As of March 31, 2024 and December 31, 2023, all such options were fully vested, and the weighted average remaining contractual life for such options was approximately and years, respectively.
In July 2019, the Company authorized an additional plan, the 2019 Stock Incentive Plan (the “2019 Plan”). Under the 2019 Plan, the Company may grant incentive stock options, non-statutory stock options, rights to purchase common stock, stock appreciation rights, restricted stock, performance shares, and performance units to employees, directors, and consultants of the Company and its affiliates. At both March 31, 2024 and December 31, 2023, a total of shares were authorized for issuance under the 2019 Plan.
As of both March 31, 2024 and December 31, 2023, the Company has granted options to acquire shares of common stock under the 2019 Plan and shares of common stock remain available for issuance under the 2019 Plan. There are stock options outstanding to acquire shares of common stock with a weighted-average exercise price of $ at both March 31, 2024 and December 31, 2023 and weighted average contractual terms of years and years at March 31, 2024 and December 31, 2023, respectively.
On August 17, 2023, the Company authorized a new plan, the Tharimmune, Inc. 2023 Omnibus Incentive Plan (the “2023 Plan”). Under the Company’s 2023 Plan, the Company may grant incentive stock options, non-statutory stock options, rights to purchase common stock, stock appreciation rights, restricted stock, performance shares, and performance units to employees, directors, and consultants of the Company and its affiliates. Up to shares of the Company’s common stock may initially be issued pursuant to the 2023 Plan.
During the three months ended March 31, 2024, the Company granted options to acquire shares of common stock under the 2023 Plan. At both March 31, 2024 and December 31, 2023, shares of common stock remain available for issuance under the 2023 Plan. There are stock options outstanding to acquire shares of common stock with a weighted-average exercise price of $ at both March 31, 2024 and December 31, 2023 and weighted-average contractual terms of years and years at March 31, 2024 and December 31, 2023, respectively.
Weighted | Weighted | |||||||||||
Shares | Average | Average | ||||||||||
Underlying | Exercise | Contractual | ||||||||||
Options | Price | Terms | ||||||||||
Outstanding at December 31, 2023 | $ | years | ||||||||||
Outstanding at March 31, 2024 | $ | years | ||||||||||
Exercisable options at March 31, 2024 | $ | years | ||||||||||
Vested and expected to vest at March 31, 2024 | $ | years |
The fair value of stock option awards is estimated at the date of grant using the Black-Scholes option-pricing model. The estimated fair value of each stock option is then expensed over the requisite service period, which is generally the vesting period (ranging between immediate vesting and four years). The determination of fair value using the Black-Scholes model is affected by the Company’s share price as well as assumptions regarding a number of complex and subjective variables, including expected price volatility, expected life, risk-free interest rate and forfeitures. Forfeitures are accounted for as they occur.
F-12 |
For the three months ended March 31, | ||||||||
2024 | 2023 | |||||||
Expected volatility | N/A | % | ||||||
Risk-free interest rate | N/A | % | ||||||
Expected dividend yield | N/A | % | ||||||
Expected life of options in years | N/A | |||||||
Estimated fair value of options granted | N/A | $ |
stock options were granted during the three months ended March 31, 2024.
The weighted-average grant date fair value of stock options granted during the three months ended March 31, 2023 was $ . The weighted-average fair value of stock options vested during the three months ended March 31, 2024 and 2023 was approximately $ and $ , respectively.
For the three months ended March 31, | ||||||||
2024 | 2023 | |||||||
Research and development | $ | $ | ||||||
General and administrative | ||||||||
Total stock-based compensation | $ | $ |
As of March 31, 2024, the total unrecognized compensation expense related to non-vested options was approximately $ million and is expected to be recognized over the remaining weighted-average service period of approximately years.
Warrants
In
connection with the IPO, the Company issued warrants to purchase such number of shares of the Company’s common stock equal to 5%
of the total shares of common stock issued in the IPO. The warrants are exercisable at $
In
connection with the May Offering as described in Note 3 to the consolidated financial statements, the Company issued warrants to designees
of the underwriter (the “Representative’s Warrants”) to purchase
F-13 |
In
connection with the November Offering as described in Note 3 to the consolidated financial statements, the Company issued pre-funded
warrants to purchase
Terms of the warrants outstanding at March 31, 2024 are as follows:
Initial | Expiration | Exercise | Warrants | Warrants | Warrants | |||||||||||||||
Issuance Date | Exercise Date | Date |
Price |
Issued |
Exercised |
Outstanding | ||||||||||||||
$ | ||||||||||||||||||||
$ | ||||||||||||||||||||
$ | ||||||||||||||||||||
$ | ||||||||||||||||||||
$ |
F-14 |
Note 5 – Commitments and Contingencies
Small Molecule Analogues
On
December 30, 2019,
Research Collaboration and Product License Agreement with Minotaur Therapeutics, Inc. (“Minotaur”) and Commercial License Agreement with Taurus Biosciences, LLC (“Taurus”)
The Company has entered into a research collaboration and product license agreement with Minotaur (as amended, the “Minotaur Agreement”) and a commercial license agreement with Taurus (the “Taurus Agreement”) for use of certain technology, including OmniAb antibodies, to advance Picobodies against novel, unreachable, and undruggable epitopes in high-value validated targets starting with PD-1. The Minotaur Agreement and Taurus Agreement are for the development of proprietary targeted biologics, including TH 1940, against PD-1. It is anticipated that the Company will collaborate with Minotaur under the license from Taurus to discover, develop, and advance biotherapeutics against high-value validated IO targets starting with PD-1.
The
Minotaur Agreement included an up-front payment of $
Research and Development Collaboration and License Agreement with Applied Biomedical Science Institute
On July 5, 2023 (the “ABSI Effective Date”), the Company entered into a Research and Development Collaboration and License Agreement (the “ABSI Agreement”) with ABSI pursuant to which ABSI granted the Company an exclusive royalty-bearing, sublicensable license to the ABSI Patents (as defined in the ABSI Agreement) and a non-exclusive, royalty-bearing, sublicensable license to the ABSI Know-How (as defined in the ABSI Agreement) to Exploit (as defined in the ABSI Agreement) the ABSI Products (as defined in the ABSI Agreement) for the treatment, diagnosis, prediction, detection or prevention of disease in humans and animals worldwide (the “Territory”).
Pursuant to the ABSI Agreement, the parties shall form a committee to manage the preclinical, investigational new drug enabling studies and such other activities as shall lead to the initiation of a Phase 1 clinical trial of the ABSI Product. The parties will collaborate on a Target-by-Target basis to identify and evaluate ABSI Products directed against such Target (as defined below) with a view to identifying or generating suitable Products (as defined in the ABSI Agreement) for the Company to Exploit. “Target” means ErB2 (Her2) and ErbB3. Upon completion of the Discovery Timeline (as defined in the ABSI Agreement) for a Target, subject to the terms and conditions of ABSI Agreement, the Company shall exclusively own any ABSI Products against such Target. In the event the committee determines that the discovery activities are unsuccessful with respect to a Target, the Company may propose an additional target, which, upon approval by ABSI, shall replace a failed Target.
F-15 |
Pursuant
to the ABSI Agreement: (i) the Company issued ABSI
On a Product-by-Product basis, upon the expiration of the last Royalty Term of such Product in the Territory, licenses granted to the Company with respect to such Product shall be deemed non-exclusive, fully paid, royalty-free, perpetual and irrevocable. The ABSI Agreement shall expire upon the expiration of the last Royalty Term of the last Product, unless such agreement is terminated earlier pursuant to its terms. The ABSI Agreement may also be terminated (i) by either the Company or ABSI for (A) a material breach of the ABSI Agreement or (B) bankruptcy, (ii) ABSI may terminate the ABSI Agreement upon the commencement of a Challenge Proceeding (as defined in the ABSI Agreement) or (iii) the Company may terminate the ABSI Agreement at any time upon 90 days prior written notice to ABSI. Upon termination or expiration of the ABSI Agreement other than as a result of a bankruptcy or Challenge Proceeding, all licenses granted to the Company pursuant to such agreement will terminate and all rights under such licenses shall revert to ABSI.
On
March 11, 2024, the Company entered into an addendum to the ABSI Agreement to fund research services with quarterly payments of $
Avior Patent License Agreement
On
November 3, 2023 (the “Avior Effective Date”), the Company entered into the Avior Patent License Agreement with Avior pursuant
to which the Company received an exclusive sublicensable right and license to Licensed Patent Rights and Licensed Technology to, among
other things, Develop, have Developed, make, have made, use, sell, import, export and commercialize TH104 and TH103 and to practice the
Licensed Technology in connection with the foregoing, throughout the world. Pursuant to the Avior Patent License Agreement, the Company
shall pay Avior a mid-six digit up front license fee within ten days of the Avior Effective Date and an additional mid six-digit license
fee which shall be paid in four equal installments within ten days of the end of each fiscal quarter following the Avior Effective Date.
In addition, the Company shall pay Avior a high single digit percentage of any upfront payments received by it as a result of the grant
of any sublicenses with respect to TH104. The Company shall also pay Avior milestone payments in the aggregate amount of $
F-16 |
During
the three months ended March 31, 2024, the Company paid milestone fees of $
Employment Agreements
On
June 1, 2021, the Company entered into an Amended and Restated Employment Agreement with the Company’s CEO, as amended periodically
(the “Amended and Restated Employment Agreement”). The term of the Amended and Restated Employment Agreement commenced upon
the closing of the Company’s IPO in January 2022 and continues for a period of five years and automatically renews for successive
one-year periods at the end of each term unless either party provides written notice of their intent not to renew at least 60 days prior
to the expiration of the then effective term. Pursuant to the Amended and Restated Employment Agreement, the CEO will receive an annual
base salary of $
On January 1, 2023, in lieu of half of his 2023 salary, the CEO was issued options to purchase up to shares of the Company’s common stock at an exercise price of $ per share, which options vested immediately on the date of grant.
On
July 6, 2023, the Company entered into an amended and restated employment agreement (the “CEO Employment Agreement”) with
the CEO. The Employment Agreement has the same terms as the COO Employment Agreement (as defined below) except, the CEO shall (i) receive
a base salary of $
In
connection with the appointment of the Company’s Chief Operating Officer, on July 11, 2023 (the “Effective Date”),
the Company entered into an employment agreement (the “COO Employment Agreement”) with the COO. The COO Employment Agreement
shall continue for a period of five years and, thereafter, shall automatically renew for successive one-year terms unless either party
provides the other party with written notice of non-renewal at least 60 days prior to the last day of the then-current term. Pursuant
to the COO Employment Agreement, the COO shall: (i) receive a base salary of $
Note 6 – Subsequent Events
There were no material subsequent events that required recognition or additional disclosure in these condensed consolidated financial statements.
F-17 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited interim condensed consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as may be amended, supplemented, or superseded from time to time by other reports we file with the SEC. All amounts in this report are in U.S. dollars, unless otherwise noted.
Throughout this Quarterly Report on Form 10-Q, references to “we,” “our,” “us,” the “Company,” or “Tharimmune,” refer to Tharimmune, Inc. (formerly, Hillstream BioPharma, Inc.), individually, or as the context requires, collectively with its subsidiaries.
Overview
Tharimmune is a clinical-stage biotechnology company developing therapeutic candidates in immunology and inflammation with high unmet need. On November 3, 2023, we entered into a patent license agreement (the “Avior License Agreement”) with Avior Inc. d/b/a Avior Bio, LLC (“Avior”) pursuant to which we received an exclusive sublicensable right and license to Licensed Patent Rights and Licensed Technology to, among other things, Develop, have Developed, make, have made, use, sell, import, export and commercialize TH104 and TH103 and to practice the Licensed Technology in connection with the foregoing, throughout the world, each as defined in the Avior License Agreement. See “Recent Developments” below for additional information. In February 2023, the U.S. Food and Drug Administration (“FDA”) approved an investigational new drug (“IND”) application for TH104. TH104 has a dual mechanism of action by affecting multiple receptors, known to suppress chronic, debilitating pruritis or “uncontrollable itching.” With respect to TH104, we intend to first seek approval for the treatment of moderate-to-severe chronic pruritis in patients with primary biliary cholangitis (“PBC”), an orphan rare form of liver disease with no known cure in which more than 70% of patients suffer from debilitating chronic pruritis, and with respect to TH103, we intend to develop the product candidate and potentially file an IND.
We are also developing an early-stage pipeline of novel therapeutic candidates targeting validated high value immuno-oncology (“IO”) targets including human epidermal growth factor (“EGF”) receptor 2 (“HER2”), human EGF receptor 3 (“HER3”) and programmed cell death protein 1 (“PD-1”). We are developing antibodies including bispecific antibodies, antibody drug conjugates (“ADCs”) and small molecular weight bovine-derived Picobodies™ or antibody “knob” domains which have the potential to target and bind more tightly to “undruggable” epitopes better than full sized antibodies. We are advancing TH3215, a bispecific against both HER2 and HER3 antibody which targets a novel “bridging epitope” encompassing multiple domains of the HER2 extracellular domain (“ECD”) as well as ligand-dependent and independent blocking of the ECD of HER3 into IND-enabling studies in 2025. In addition, we anticipate that TH0059, a HER2/HER3 bispecific ADC (“bsADC”), and TH1940, a PD-1 Picobody, will progress to enter IND-enabling studies in 2025.
We have deprioritized our previous preclinical candidate, HSB-1216, due to a strategic reprioritization of our vision to focus on therapeutics in high unmet need cancers focused on novel epitopes of certain antitumor drug targets.
The critical components of our business strategy to achieve our goals include:
● | Develop TH104 as a transmucosal buccal film product for the treatment of moderate-to-severe chronic pruritis in PBC and other inflammatory diseases; | |
● | Continue to advance TH3215 as an anti-HER2/HER3 BspAb for multiple tumor types including high unmet need cancers; | |
● | Effectively create a strategy to develop TH0059 as a bispecific ADC specifically targeted to both HER2 and HER3 receptors in high unmet need standard-of-care resistant tumors with a high capacity to metastasize; |
3 |
● | Create a preclinical and clinical path forward for our third product candidate, TH1940, a unique PD-1 Picobody with unique binding differentiation compared to full length antibodies for IO vulnerable tumors; | |
● | Hasten the discovery of next generation multi-specific (bi- and tri) antibodies with binding capabilities to novel epitopes of combinations of HER2, HER3, PD-1, PD-L1, TROP2 with and without toxin delivery capacity to multiple high unmet need rare cancers and other validated immunology and metabolic targets; | |
● | Pursue strategic collaboration opportunities to maximize the value of our pipeline to bring novel therapies to patients suffering from high unmet need conditions |
Applied Biomedical Research Institute Research and Development Collaboration and License Agreement
On July 5, 2023 (the “ABSI Effective Date”), we entered into a Research and Development Collaboration and License Agreement (the “ABSI Agreement”) with Applied Biomedical Science Institute (“ABSI”) pursuant to which ABSI granted us an exclusive royalty-bearing, sublicensable license to the ABSI Patents and a non-exclusive, royalty-bearing, sublicensable license to the ABSI Know-How to Exploit the ABSI Products for the treatment, diagnosis, prediction, detection or prevention of disease in humans and animals worldwide (the “Territory”). Pursuant to the ABSI Agreement, the parties shall form a committee to manage the preclinical, IND- enabling studies and such other activities as shall lead to the initiation of a Phase 1 clinical trial of the ABSI Product. The parties will collaborate on a Target-by-Target basis to identify and evaluate ABSI Products directed against such Target with a view to identifying or generating suitable Products for our Company to Exploit. “Target” means ErB2 (Her2) and ErbB3. Upon completion of the Discovery Timeline for a Target, subject to the terms and conditions of ABSI Agreement, we shall exclusively own any ABSI Products against such Target. In the event the committee determines that the discovery activities are unsuccessful with respect to a Target, we may propose an additional target, which, upon approval by ABSI, shall replace a failed Target, each capitalized term as defined in the ABSI Agreement.
As part of the ABSI Agreement, on July 26, 2023, we issued 25,107 shares of our common stock with a per share value of $9.95, representing total compensation expense of $250,000.
On March 11, 2024, we entered into an addendum to the ABSI Agreement to fund research services with quarterly payments of $50,000 beginning March 18, 2024 with subsequent payments due on the 18th of each calendar quarter.
Avior Patent License Agreement
On November 3, 2023 (the “Avior Effective Date”), we entered into the Avior Patent License Agreement with Avior pursuant to which we received an exclusive sublicensable right and license to Licensed Patent Rights and Licensed Technology to, among other things, Develop, have Developed, make, have made, use, sell, import, export and commercialize TH104 and TH103 and to practice the Licensed Technology in connection with the foregoing, throughout the world. Pursuant to the Avior Patent License Agreement, we paid Avior a mid-six digit up front license fee within ten days of the Avior Effective Date and an additional mid-six digit license fee which shall be paid in four equal installments within ten days of the end of each fiscal quarter following the Avior Effective Date. In addition, we shall pay Avior a high single digit percentage of any upfront payments received by us as a result of the grant of any sublicenses with respect to TH104. We shall also pay Avior milestone payments in the aggregate amount of $24.25 million upon the occurrence of various development milestones (the “Development Milestone Payments”). Furthermore, we shall pay Avior certain fees based upon sales milestones. The payments for such sales milestones range from the low seven digits to the low eight digits with higher sales being subject to higher fees. Finally, we shall pay Avior royalties based on net sales. Such royalties range from low single digit percentages to mid-single digit percentages with higher sales being subject to lower percentages. The Avior Patent License Agreement shall expire upon the expiration of the final payment obligation due to Avior as set forth in such agreement. Upon the expiration of the Avior Patent License Agreement, we shall have a fully paid-up, irrevocable, freely transferable and sublicensable worldwide license to the Licensed Patent Rights and Licensed Technology to Develop, have Developed, make, have made, use, have used sell, offer for sale, have sold, import, have imported, export, have exported, commercialize or have commercialized any and all Licensed Products and to practice the Licensed Technology worldwide. Pursuant to the Avior Patent License Agreement, we may terminate the agreement at any time without cause, upon 30 days’ prior written notice to Avior along with payment of the next unpaid Development Milestone Payment, if any. Furthermore, either we or Avior may terminate the Avior Patent License Agreement (i) on written notice to the other party if the other party materially breaches any provision of the Avior Patent License Agreement and fails to cure such breach within 30 days after the breaching party receives written notice thereof or (ii) on written notice in the event that either party (A) becomes insolvent or admits its inability to pay its debts generally as they become due; (B) becomes subject, voluntarily or involuntarily, to any proceeding under any domestic or foreign bankruptcy or insolvency law, which is not fully dismissed or vacated within 60 days; (C) is dissolved or liquidated or takes any corporate action for such purpose; (D) makes a general assignment for the benefit of creditors; or (E) has a receiver, trustee, custodian or similar agent appointed by order of any court of competent jurisdiction to take charge of or sell any material portion of its property or business. Upon termination of the Avior Patent License Agreement, the license granted pursuant to such agreement shall terminate and all rights in the Licensed Patent Rights and Licensed Products shall revert back to Avior.
4 |
Recent Developments
The Company completed a Phase 1 clinical trial which was a pharmacokinetic bridging study in the U.S. and was designed as a single-dose, single-center, open-label, randomized 2-way crossover study with 16 mg of TH104 compared to an intravenous 1 mg dose of nalmefene administered under fasting conditions, with a 7-day washout period between doses. Sixteen subjects were planned and pre-specified to complete both doses of the crossover design per the study protocol and twenty normal healthy volunteers participated, with 19 subjects completing the study. The primary objective was to evaluate the absolute bioavailability of TH104 as well as assess safety and tolerability. Full data is expected to be achieved and reported in the second quarter of 2024. This study demonstrated that TH104 had a comparable safety and tolerability profile to the FDA approved nalmefene reference intravenous formulation. In the preliminary analysis of the completed trial safety results, all adverse events reported in the clinical trial were categorized as mild and were evenly reported between TH104 and intravenous injection. One patient did not return for the second dose of the study after a 7-day washout post the first dose which was unrelated to the study. There were no deaths, serious adverse events, or other significant adverse events reported during the entire study with events consistent with the safety profile of marketed formulations as well as those described in the literature including self-resolving nausea, dizziness, and drowsiness per previous reports with nalmefene.
Components of Results of Operations
Revenue
We did not recognize revenues for the three months ended March 31, 2024 and 2023.
Research and Development Expenses
Research and development expenses include personnel costs associated with research and development activities, including third-party contractors to perform research, conduct clinical trials, and manufacture drug supplies and materials as well as stock-based compensation for our research and development personnel. Research and development expenses are charged to operations as incurred.
We accrue costs incurred by external service providers, including contract research organizations and clinical investigators, based on estimates of service performed and costs incurred. These estimates include the level of services performed by third parties, patient enrollment in clinical trials, administrative costs incurred by third parties, and other indicators of the services completed. Based on the timing of amounts invoiced by service providers, we may also record payments made to those providers as prepaid expenses that will be recognized as expense in future periods as the related services are rendered.
We have incurred research and development expenses related to the development of HSB-1216, which has been deprioritized. We expect that our research and development expenses will increase as we plan for and commence our clinical trials of TH3215 and TH1940.
5 |
We cannot determine with certainty the duration and costs of future clinical trials of our product candidates, TH3215 and TH1940, or any other product candidates we may develop or if, when or to what extent we will generate revenue from the commercialization and sale of any of our product candidates for which we obtain marketing approval. We may never succeed in obtaining marketing approval for any of our product candidates. The duration, costs and timing of clinical trials and development of our current and future product candidates will depend on a variety of factors, including:
● | the scope, rate of progress, expense and results of clinical trials of our current product candidates, as well as of any future clinical trials of our future product candidates and other research and development activities that we may conduct; |
● | uncertainties in clinical trial design and patient enrollment rates; |
● | the actual probability of success for our product candidates, including their safety and efficacy, early clinical data, competition, manufacturing capability and commercial viability; |
● | significant and changing government regulations and regulatory guidance; and |
● | the timing and receipt of any marketing approvals. |
A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in our clinical trials due to slower than expected patient enrollment or other reasons, we would be required to expend significant additional financial resources and time on the completion of clinical development.
General and Administrative Expenses
General and administrative expenses consist primarily of compensation and consulting related expenses, including stock-based compensation for our general and administrative personnel. General and administrative expenses also include professional fees and other corporate expenses, including legal fees relating to corporate matters; professional fees for accounting, auditing, tax, and consulting services; insurance costs; travel expenses and other operating costs that are not specifically attributable to research activities.
We expect that our general and administrative expenses will increase in the future as we increase our personnel headcount to support our continued research activities and development of our product candidates. We also incur expenses associated with being a public company, including expenses related to compliance with the rules and regulations of the SEC and Nasdaq, directors and officers insurance expenses, corporate governance expenses, investor relations activities and other administrative and professional services.
Interest Income
Interest income consists of interest income from funds held in our cash accounts.
Deferred Offering Costs
Deferred offering costs consisted of legal, accounting, printing, and filing fees that were capitalized and offset against the proceeds from our common stock offerings. Deferred offering costs at March 31, 2023 consisted of professional services incurred for filing a Registration Statement on Form S-3 using a “shelf” registration process for additional securities offerings which were offset against the proceeds from Offering.
6 |
Results of Operations
Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023
Three Months Ended March 31, | ||||||||||||
2024 | 2023 | Change | ||||||||||
Condensed Consolidated Statements of Operations Data: | ||||||||||||
Operating expenses: | ||||||||||||
Research and development | $ | 1,025,258 | $ | 1,047,677 | $ | (22,419 | ) | |||||
General and administrative | 1,322,045 | 1,666,721 | (344,676 | ) | ||||||||
Total operating expenses | 2,347,303 | 2,714,398 | (367,095 | ) | ||||||||
Other expense: | ||||||||||||
Interest expense | (4,700 | ) | (6,138 | ) | 1,438 | |||||||
Interest income | 95,894 | 32,248 | 63,646 | |||||||||
Total other income (expense) | 91,194 | 26,110 | 65,084 | |||||||||
Net loss | $ | (2,256,109 | ) | $ | (2,688,288 | ) | $ | (432,179 | ) |
Research and Development Expenses
Research and development expenses decreased by less than $0.1 million, or 2%, to $1.0 million for the three months ended March 31, 2024 from $1.0 million for three months ended March 31, 2023. The decrease was primarily the result of a decrease in pre-clinical expenses of approximately $0.3 million and as well as a decrease of approximately $0.1 million in stock-based compensation expense related to a decrease in stock options vested during the period of our research and development personnel. These decreases were offset by increases in clinical trial expenses of approximately $0.2 million due to the launch of our Phase 1 clinical trial in TH104 and licensing fees of $0.1 million.
General and Administrative Expenses
General and administrative expenses decreased by $0.4 million, or 21%, to $1.3 million for the three months ended March 31, 2024 from $1.7 million for the three months ended March 31, 2023. The change in general and administrative expenses was primarily due to a decreases of approximately $0.4 million in investor relations expenses, $0.1 million in legal expenses, $0.1 million in insurance expense, and $0.1 million in stock-based compensation expense related to a decrease in stock options vested during the period of our general and administrative personnel. These decreases were offset by an increase of $0.3 million in personnel expenses due to appointing a Chief Operating Officer in July 2023.
Interest Expense
Interest expense decreased by $1,438, or 23%, to $4,700 for the three months ended March 31, 2024 from $6,138 for the three months ended March 31, 2023. The decrease in interest expense was primarily related to the decrease in D&O insurance premium financing liability.
Interest Income
Interest income increased by $63,646, or 197%, to $95,894 for the three months ended March 31, 2024 from $32,248 for the three months ended March 31, 2023. The increase in interest income was primarily due to the increase in cash from the November Offering.
7 |
Liquidity and Capital Resources
The accompanying condensed consolidated financial statements have been prepared on the basis that we are a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. For the three months ended March 31, 2024, we incurred operating losses of approximately $2.3 million, expended approximately $2.8 million in cash in operating activities, and had an accumulated deficit of approximately $27.0 million as of March 31, 2024. Historically we have financed our working capital requirements through March 31, 2024 primarily through the issuance of common stock in various public and private offerings. During the year ended December 31, 2023, we received gross proceeds of approximately $13.6 million through public offerings of our common stock in the May Offering and November Offering which generated net proceeds to us of approximately $2.1 million and $9.7 million, respectively. See Note 3 to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for details regarding these offerings.
Based on our limited operating history, recurring negative cash flows from operations, current plans and available resources, we will need substantial additional funding to support future operating activities. We have concluded that the prevailing conditions and ongoing liquidity risks faced by us raise substantial doubt about our ability to continue as a going concern for at least one year following the date these condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q are issued. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern.
We may seek to raise additional funding through the sale of additional equity or debt securities, enter into strategic partnerships, grants or other arrangements or a combination of the foregoing to support our future operations; however, there can be no assurance that we will be able to obtain additional capital on terms acceptable to us, on a timely basis, or at all. The failure to obtain sufficient additional funding could adversely affect our ability to achieve our business objectives and product development timelines and may result in delaying or terminating clinical trial activities which could have a material adverse effect on our results of operations.
Cash Flow Activities for the Three Months Ended March 31, 2024 and 2023
The following table sets forth a summary of our cash flows for the periods presented.
Three Months Ended March 31, | ||||||||
2024 | 2023 | |||||||
Net cash used in operating activities | $ | (2,825,181 | ) | $ | (3,464,690 | ) | ||
Net cash provided by financing activities | 317,119 | 523,364 | ||||||
Net decrease in cash | $ | (2,508,062 | ) | $ | (2,941,326 | ) |
Cash Flows from Operating Activities
Cash used in operating activities for the three months ended March 31, 2024 was $2.8 million which consisted of net loss of $2.3 million, increase in prepaid and other current assets of $0.4 million and decrease in operating liabilities of $0.3 million, partially offset by non-cash stock-based compensation of $0.2 million.
Cash used in operating activities for the three months ended March 31, 2023 was $3.5 million which consisted of net loss of $2.7 million, increase in prepaid expenses and other current assets of $0.9 million and decrease in operating liabilities of $0.2 million, partially offset by non-cash stock-based compensation of $0.3 million.
Cash Flows from Financing Activities
Cash provided by financing activities for the three months ended March 31, 2024 was $0.3 million. The net increase in financing activities was due to proceeds from insurance premium financing liability of $0.4 million, offset by repayments of insurance premium financing liability of $0.1 million.
Cash provided by financing activities for the three months ended March 31, 2023 was $0.5 million. The net increase in financing activities was due to proceeds from insurance premium financing liability of $0.7 million, offset by repayments of insurance premium financing liability of $0.2 million.
Critical Accounting Policies and Use of Estimates
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Management bases its estimates on historical experience and on assumptions believed to be reasonable under the circumstances. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes, and management must select an amount that falls within that range of reasonable estimates. Estimates are used in the following areas, among others: research and development expense recognition, stock-based compensation, allowances of deferred tax assets, and cash flow assumptions regarding going concern considerations. Although management believes the estimates that have been used are reasonable, actual results could vary from the estimates that were used.
8 |
Critical Accounting Policies
Research and development
Research and development costs are expensed as incurred. Research and development expenses include personnel costs associated with research and development activities, including third-party contractors to perform research, conduct clinical trials and manufacture drug supplies and materials. We accrue for costs incurred by external service providers, including contract research organizations and clinical investigators, based on our estimates of service performed and costs incurred. These estimates include the level of services performed by third parties, patient enrollment in clinical trials, administrative costs incurred by third parties, and other indicators of the services completed.
Stock-based compensation
Stock-based compensation represents the cost related to stock-based awards granted to our employees, directors, consultants, and affiliates. We measure stock-based compensation costs at the grant date, based on the estimated fair value of the award and recognize the cost over the requisite service period.
We recognize compensation costs resulting from the issuance of stock-based awards to employees, non-employees and directors as an expense in the condensed consolidated statements of operations over the requisite service period based on a measurement of fair value for each stock-based award. The fair value of each option grant to employees, non-employees and directors is estimated as of the date of grant using the Black-Scholes option-pricing model, net of actual forfeitures. The fair value is amortized as compensation cost on a straight-line basis over the requisite service period of the awards, which is generally the vesting period.
The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. Prior to January 12, 2022, we were a private company and our common stock has only been publicly traded since that date. As a result, we lack company-specific historical and implied volatility information. Therefore, we have estimated our expected stock price volatility based on the historical volatility of a publicly traded set of peer companies. The expected term of stock options granted was between five and seven years. The risk-free interest rate was determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award.
Recently Issued and Adopted Accounting Standards
See Note 2 to our condensed consolidated financial statements included elsewhere in this quarterly Report on Form 10-Q.
9 |
JOBS Act
On April 5, 2012, the Jumpstart Our Business Startups Act (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.
We have chosen to take advantage of the extended transition periods available to emerging growth companies under the JOBS Act for complying with new or revised accounting standards until those standards would otherwise apply to private companies provided under the JOBS Act. As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates for complying with new or revised accounting standards.
Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we intend to rely on certain of these exemptions, including, without limitation, (i) providing an auditor’s attestation report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended, and (ii) complying with the requirement adopted by the Public Company Accounting Oversight Board regarding the communication of critical audit matters in the auditor’s report on financial statements. 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 $1.235 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of our IPO; (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.
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.
Evaluation of Disclosure Controls and Procedures
Our principal executive officer and principal financial officer evaluated the effectiveness of our “disclosure controls and procedures” as of March 31, 2024, the end of the period covered by this Quarterly Report on Form 10-Q. 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 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 under the Exchange Act is accumulated and communicated to a company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures as of March 31, 2024, our Chief Executive Officer and our Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective.
Changes in Internal Control
There were no significant changes in our internal control over financial reporting that occurred during the three months ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedure, management recognizes that any controls and procedures, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedure relative to their costs.
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PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
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.
ITEM 1A. RISK FACTORS.
Risk factors that affect our business and financial results are discussed in Part I, Item 1A “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC on February 23, 2024 (“Annual Report”). There have been no material changes in our risk factors from those previously disclosed in our Annual Report. You should carefully consider the risks described in our Annual Report which could materially affect our business, financial condition or future results. The risks described in our Annual Report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results. If any of the risks actually occur, our business, financial condition, and/or results of operations could be negatively affected.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
In February 2024, we issued 50,000 shares of our common stock pursuant to a services agreement. The foregoing issuances were exempt from registration under Section 4(a)(2) of the Securities Act.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION.
During
the fiscal quarter ended March 31, 2024, none of the Company’s directors or executive officer
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ITEM 6. EXHIBITS.
* | Filed herewith. |
** | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
THARIMMUNE, INC. | ||
Date: May 9, 2024 | By: | /s/ Randy Milby |
Randy Milby | ||
Chief Executive Officer | ||
(Principal Executive Officer) | ||
Date: May 9, 2024 | By: | /s/ Thomas Hess |
Thomas Hess | ||
Chief Financial Officer | ||
(Principal Financial and Accounting Officer) |
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