Pulmatrix, Inc.: Form 10-Q for the period ended Jun 30, 2023

Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. The information set forth below should be read in conjunction with the condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q as well as the audited consolidated financial statements and the notes thereto contained in our Annual Report on Form 10-K filed with the SEC on March 30, 2023. Unless stated otherwise, references in this Quarterly Report on Form 10-Q to “us,” “we,” “our,” or our “Company” and similar terms refer to Pulmatrix, Inc., a Delaware corporation and its subsidiaries.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical fact contained herein, including statements regarding our business plans or strategies, projected or anticipated benefits or other consequences of our plans or strategies, projected or anticipated benefits from acquisitions to be made by us, or projections involving anticipated revenues, earnings, or other aspects of our operating results, are forward-looking statements. Words such as “anticipates,” “assumes,” “believes,” “can,” “could,” “estimates,” “expects,” “forecasts,” “guides,” “intends,” “is confident that,” “may,” “plans,” “seeks,” “projects,” “targets,” and “would,” and their opposites and similar expressions, as well as statements in future tense, are intended to identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and may not be accurate indications of when such performance or results will actually be achieved. Forward-looking statements are based on information we have when those statements are made or our management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:

• the impact of the coronavirus (“COVID-19”) endemic and its continuing effects on the global economy and on the Company’s ongoing and planned clinical trials;
• our history of recurring losses and negative cash flows from operating activities, significant future commitments and the uncertainty regarding the adequacy of our liquidity to pursue or complete our business objectives;
• our inability to carry out research, development and commercialization plans;
• our inability to manufacture our product candidates on a commercial scale on our own or in collaborations with third parties;
• our inability to complete preclinical testing and clinical trials as anticipated;
• our collaborators’ inability to successfully carry out their contractual duties;
• termination of certain license agreements;
• our ability to adequately protect and enforce rights to intellectual property, or defend against claims of infringement by others;
• difficulties in obtaining financing on commercially reasonable terms, or at all;
• intense competition in our industry, with competitors having substantially greater financial, technological, research and development, regulatory and clinical, manufacturing, marketing and sales, distribution, personnel and resources than we do;
• entry of new competitors and products and potential technological obsolescence of our products;
• adverse market and economic conditions;
• our ability to maintain compliance with Nasdaq’s listing standards;
• loss of one or more key executives or scientists; and
• difficulties in securing regulatory approval to market our product candidates.

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For a more detailed discussion of these and other risks that may affect our business and that could cause our actual results to differ from those projected in these forward-looking statements, see the risk factors and uncertainties described under the heading “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q and in Part I, Item 1A of our Annual Report on Form 10-K. The forward-looking statements contained in this Quarterly Report on Form 10-Q are expressly qualified in their entirety by this cautionary statement. We do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which any such statement is made or to reflect the occurrence of unanticipated events, except as required by law.

“iSPERSE™” is one of our trademarks used in this Quarterly Report on Form 10-Q. Other trademarks appearing in this report are the property of their respective holders. Solely for convenience, these and other trademarks, trade names and service marks referred to in this report appear without the ®, TM and SM symbols, but those references are not intended to indicate, in any way, we or the owners of such trademarks will not assert, to the fullest extent under applicable law, their rights to these trademarks and trade names.

Overview

Business

We are a clinical-stage biopharmaceutical company focused on the development of novel inhaled therapeutic products intended to prevent and treat respiratory and other diseases with significant unmet medical needs using our patented iSPERSE™ technology. Our proprietary product pipeline includes treatments for serious lung diseases, such as allergic bronchopulmonary aspergillosis (“ABPA”) and Chronic Obstructive Pulmonary Disease (“COPD”), and central nervous system (“CNS”) disorders such as acute migraine. Our product candidates are based on our proprietary engineered dry powder delivery platform, iSPERSE™, which seeks to improve therapeutic delivery to the lungs by optimizing pharmacokinetics and reducing systemic side effects to improve patient outcomes.

We design and develop inhaled therapeutic products based on our proprietary dry powder delivery technology, iSPERSE™ (inhaled Small Particles Easily Respirable and Emitted), which enables delivery of small or large molecule drugs to the lungs by inhalation for local or systemic applications. The iSPERSE™ powders are engineered to be small, dense particles with highly efficient dispersibility and delivery to airways. iSPERSE™ powders can be used with an array of dry powder inhaler technologies and can be formulated with a broad range of drug substances including small molecules and biologics. We believe the iSPERSE™ dry powder technology offers enhanced drug loading and delivery efficiency that outperforms traditional lactose-blend inhaled dry powder therapies.

We believe the advantages of using the iSPERSE™ technology include reduced total inhaled powder mass, enhanced dosing efficiency, reduced cost of goods, and improved safety and tolerability profiles.

Our goal is to develop breakthrough therapeutic products that are safe, convenient, and more effective than the existing therapeutic products for respiratory and other diseases where iSPERSE™ properties are advantageous.

Our current pipeline is aligned to this goal as we develop iSPERSE™-based therapeutic candidates which target the prevention and treatment of a range of diseases, including CNS disorders and pulmonary diseases. These therapeutic candidates include PUR1900 for the treatment of ABPA in patients with asthma and in patients with cystic fibrosis (“CF”), PUR3100 for the treatment of acute migraine, and PUR1800 for the treatment of acute exacerbations of chronic obstructive pulmonary disease (“AECOPD”). Each program is enabled by its unique iSPERSE™ formulation designed to achieve specific therapeutic objectives.

We intend to capitalize on our iSPERSE™ technology platform and our expertise in inhaled therapeutics to identify new product candidates for the prevention and treatment of diseases with significant unmet medical needs and to build our product pipeline beyond our existing candidates. In order to advance clinical trials for our therapeutic candidates and leverage the iSPERSE™ platform to enable delivery of partnered compounds, we intend to form strategic alliances with third parties, including pharmaceutical and biotechnology companies or academic or private research institutes.

We expect to continue to incur significant expenses and increasing operating losses for at least the next several years based on our drug development plans. We expect our expenses and capital requirements will increase substantially in connection with our ongoing activities, as we:

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Therapeutic Candidates

PUR1900

On April 15, 2019, we entered into the Cipla Agreement with Cipla for the co-development and commercialization, on a worldwide, except for the Cipla Territory defined below, exclusive basis, of PUR1900, our inhaled iSPERSE™ drug delivery system (the “Product”) enabled formulation of the antifungal drug, itraconazole, which is only available as an oral drug, for the treatment of all pulmonary indications, including ABPA in patients with asthma. We entered into the Amendment to the Cipla Agreement on November 8, 2021, and all references to the Cipla Agreement herein refer to the Agreement, as amended.

The Cipla Agreement will remain in effect in perpetuity, unless otherwise earlier terminated in accordance with its terms. In the event of circumstances affecting the continuity of development of the Product in line with the Cipla Agreement or certain development milestones are not achieved within a specified timeframe discussed in greater detail below, the JSC will evaluate the cause and effect and make a recommendation as to the most optimal option available to Cipla and us. In such events, the parties are not obligated to follow the recommendation of the JSC and, a Terminating Party may elect to terminate its obligation to fund additional costs and expenses for the development and/or commercialization of the Product. If the non-Terminating Party wishes to continue the development of the Product, it will have the right to purchase the rights of the Terminating Party in the Product at its fair market value. If both Cipla and we abandon the development program, Cipla and we shall make commercially reasonable efforts to monetize the Product and development program in connection with the Pulmonary Indications. Cipla and we will equally share the proceeds.

Pursuant to the Amendment, we and Cipla will each initially be responsible for 60% and 40%, respectively, of our Direct Costs. Upon the achievement of each development milestone set forth in the table below, Cipla will reimburse us an amount equal to 10% of the cumulative aggregate Direct Costs incurred (each reimbursement referred to as a “Holdback Payment”), potentially bringing the sharing of Direct Costs to a 50/50 basis. If a development milestone is not achieved, the respective Holdback Payment will continue to aggregate and be reimbursed by Cipla to us if we achieve the subsequent development milestone for that trial set forth in the table below. We will share all other development costs with Cipla that are not Direct Costs, such as the cost of clinical research organizations, manufacturing costs and other third-party costs, on a 50/50 basis.

Pursuant to the Cipla Agreement, (i) all development and commercialization activities with respect to the Product in the Cipla Territory will be conducted exclusively by Cipla at Cipla’s sole cost and expense, and (ii) Cipla shall be entitled to all profits from the sale of the Product in the Cipla Territory, except that if Cipla successfully transfers manufacturing of the Product for the Cipla Territory to a manufacturing site determined by Cipla, we will become entitled to a royalty equal to 2% of net sales in the Cipla Territory.

In partnership with Cipla, we initiated a Phase 2 clinical study in 2019, entitled: “A Randomized, Double-Blind, Multicenter, Placebo-Controlled, Phase 2 Study to Evaluate the Safety, Tolerability, and Pharmacokinetics of Itraconazole Administered as a Dry Powder for Inhalation (PUR1900) in Adult Asthmatic Patients with ABPA.” This clinical study was terminated in July 2020 due to the impact of the COVID-19 pandemic on patient enrollment and clinical study conduct at the time.

Following termination of the initial Phase 2 clinical study, we conducted a Type C meeting with the FDA on January 27, 2021, in order to discuss the program overall development plan and the current Phase 2b clinical study design. The current Phase 2b clinical study design includes a 16-week dosing regimen with an 8-week follow up and is intended to explore potential efficacy endpoints, whereas the terminated Phase 2 clinical study had comprised only a 4-week dosing regimen with safety and tolerability as its primary endpoint. The longer dosing regimen of the new Phase 2b clinical study is supported by the 6-month inhalation toxicology study in dogs completed in April 2020. The new development plan, including the planned current Phase 2b clinical study, was approved on November 8, 2021. On February 6, 2023, we announced the first patient dosed in the Phase 2b study.

In addition to the terms of the Cipla Agreement described above, if any of the below development milestones are not met by the date that is nine months after the applicable deadline for achieving such development milestone, either party may elect to terminate its obligation to fund additional development costs, in which case either (i) the non-Terminating Party can acquire the rights of the Terminating Party for fair market value or (ii) the parties will monetize the Product. The table below sets forth the development milestones.

The first Phase 2b development milestone was not achieved by June 30, 2023, in part due to delays in regulatory approval in certain foreign jurisdictions. Accordingly, the associated cumulative aggregated Holdback Payment could be reimbursed by Cipla to us if we achieve the subsequent development milestone by June 30, 2024. However, we are currently forecasting that the summary of key efficacy and safety data will not be available until after June 30, 2024, therefore such subsequent milestone is not expected to be achieved. The PUR1900 Phase 2b study is anticipated to deliver topline data in the third quarter of 2024.

PUR3100

In 2020, we developed PUR3100, the iSPERSE™ formulation of DHE, for the treatment of acute migraine. Over 38 million people suffer from migraine in the United States. Currently DHE is only available as intravenous infusion or intranasal delivery. If approved for commercialization, PUR3100 should be the first orally inhaled DHE treatment for acute migraine and be an alternative to other acute therapies, such as oral and intravenous triptans that currently represent the majority of the annual migraine prescriptions in the United States. Given the oral inhaled route of delivery, PUR3100 is anticipated to provide a rapid onset of migraine symptom relief with a favorable tolerability profile.

A total of three 14-day GLP toxicology studies have been completed with PUR3100 to support single dose clinical studies. Preparations are underway for chronic toxicology to support long-term dosing and an eventual new drug application (“NDA”).

We have completed several interactions with the FDA, and they have confirmed that, in addition to the planned Phase 2 and Phase 3 studies, long-term safety should be assessed in a minimum of one hundred patients for six months of dosing and fifty patients for twelve months of dosing. The FDA also confirmed that it will be necessary to perform a safety study administering PUR3100 to otherwise healthy patients with asthma before an NDA is submitted.

On September 26, 2022, we announced the completion of patient dosing in a Phase 1 clinical study, performed in Australia, designed to assess not only safety, tolerability, and pharmacokinetics of PUR3100 in humans, but also provide preliminary comparative bioavailability data to support the use of the 505(b)(2) pathway for marketing authorization. The study design was a double-dummy, double-blinded trial to assess the safety, tolerability, and pharmacokinetics of three dose levels of single doses of inhaled PUR3100 with IV placebo, as compared to IV DHE (DHE mesylate injection) with inhaled placebo. Twenty-six healthy subjects were enrolled and each of the four groups contained at least six subjects. On January 4, 2023, we announced topline results. PUR3100 was well-tolerated and there was a lower incidence of nausea in PUR3100 dose groups compared to IV DHE, and we presented the Phase 1 study data at the American Headache Society 65th Annual Meeting in June 2023.

In contrast to IV DHE, no vomiting was observed in any of the PUR3100 dose groups. Oral inhalation of PUR3100 achieved peak exposures in the targeted therapeutic range at all doses and the Tmax occurred at five minutes after dosing.

Based on the rapid systemic exposure in the therapeutic range and the improved side effect profile relative to IV dosing, we believe the PUR3100 formulation of DHE is highly differentiated from other DHE products already approved or in development. We believe PUR3100 can be immediately and conveniently self-administered and has a pharmacokinetic profile that may potentially advance the treatment of patients with acute migraine.

We submitted an IND in June 2023 in order to conduct a randomized placebo-controlled Phase 2 clinical study in patients with migraine to assess the safety and effectiveness of two doses of PUR3100, in which the selection of the two doses has been informed by the initial Phase 1 clinical study. We anticipate that this Phase 2 clinical study will initiate once financing or partnership arrangements have been made.

PUR1800

We completed the Phase 1b safety, tolerability, and pharmacokinetics clinical study of PUR1800 for patients with stable moderate-severe COPD. Topline data was delivered in the first quarter of 2022.

The clinical study, performed at the Medicines Evaluation Unit in Manchester, UK, was a randomized, three-way crossover double-blind study with 14 days of daily dosing which included placebo and one of two doses of PUR1800, and included a 28-day follow up period after each treatment period. A total of 18 adults with stable chronic obstructive pulmonary disease COPD were enrolled. Safety and tolerability as well as systemic PK were evaluated.

PUR1800 was well tolerated and there were no observed safety signals. The PK data indicate that PUR1800 results in low and consistent systemic exposure when administered via oral inhalation. The topline data, along with the results from chronic toxicology studies, was delivered in the first quarter of 2022 and presented at the American Academy of Allergy, Asthma & Immunology (AAAAI) conference in the first quarter of 2023 and support the continued development of PUR1800 for the treatment of AECOPD and other inflammatory respiratory disease. We completed all data analysis to inform a study design for a potential Phase 2 efficacy and safety study, treating subjects with AECOPD. We plan to pursue an appropriate partner as a path forward to advance PUR1800 into a Phase 2 clinical trial.

Toxicology studies in rats and dogs, with durations of six and nine months respectively, are complete. The data from both studies demonstrated that PUR1800 is safe and well tolerated with chronic dosing, with little to no progression of findings from 28-day studies. We believe that this indicates potential for chronic dosing of PUR1800, enabling us to explore PUR1800 therapy for chronic respiratory disease such as steroid resistant asthma, COPD, or idiopathic pulmonary fibrosis. While the program is currently in development for treatment of acute exacerbation of AECOPD, these positive toxicology study results could expand potential indications and value of the program.

Financial Overview

Revenues

To date, we have not generated any product sales. The revenue for the three and six months ended June 30, 2023 and 2022 was primarily generated by the collaboration and license agreement with Cipla on our PUR1900 program.

For more discussion on the collaboration or licensing agreements, please see Note 7, Significant Agreements, of the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for the research and development of our preclinical and clinical candidates, and include:

• employee-related expenses, including salaries, benefits and stock-based compensation expense;
• expenses incurred under agreements with CROs or CMOs, and consultants that conduct our clinical trials and preclinical activities;
• the cost of acquiring, developing and manufacturing clinical trial materials and lab supplies;
• facility, depreciation and other expenses, which include direct and allocated expenses for rent, maintenance of our facility, insurance and other supplies;
• costs associated with preclinical activities and clinical regulatory operations; and
• consulting and professional fees associated with research and development activities

We expense research and development costs to operations as incurred. We recognize costs for certain development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations or information provided to us by our vendors.

Research and development activities are central to our business model. We utilize a combination of internal and external efforts to advance product development from early-stage work to clinical trial manufacturing and clinical trial support. External efforts include work with consultants and substantial work at CROs and CMOs. We support an internal research and development team and facility for our pipeline and other potential development programs. To move these programs forward along our development timelines, a large portion (approximately 81%) of our staff are research and development employees. In addition, we maintain an office and research and development facility which includes capital equipment for the manufacture and characterization of our iSPERSE™ powders for our development efforts. As we identify opportunities for iSPERSE™ in additional indications, we anticipate additional headcount, capital, and development costs will be incurred to support these programs. Because of the numerous risks and uncertainties associated with product development, however, we cannot determine with certainty the duration and completion costs of these or other current or future preclinical studies and clinical trials. The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors, including the uncertainties of future clinical and preclinical studies, uncertainties in clinical trial enrollment rates and significant and changing government regulation. In addition, the probability of success for each product candidate will depend on numerous factors, including competition, manufacturing capability and commercial viability.

General and Administrative Expenses

General and administrative expenses consist principally of salaries, benefits and related costs such as stock-based compensation for personnel and consultants in executive, finance, business development, corporate communications and human resource functions, facility costs not otherwise included in research and development expenses, patent filing fees and legal fees. Other general and administrative expenses include travel expenses, expenses related to being a publicly traded company and professional fees for consulting, auditing and tax services.

We anticipate that our general and administrative expenses will increase in the future as they relate to audit, legal, regulatory, and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer liability insurance, investor relations costs and other costs associated with being a public company. Additionally, if and when we believe a regulatory approval of a product candidate appears likely, we anticipate an increase in staffing and related expenses as a result of our preparation for commercial operations, especially as it relates to the sales and marketing of our product candidates.

Critical Accounting Policies, Judgments and Estimates

This management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our condensed consolidated financial statements. On an ongoing basis, we evaluate our most critical estimates and judgments, including those related to revenue recognition and the accrual and recognition of research and development expenses. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

There were no changes to our critical accounting policies during the six months ended June 30, 2023, including estimates, assumptions, and judgments as compared to those described in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report. It is important that the discussion of our operating results that follow be read in conjunction with the critical accounting policies disclosed in our Annual Report.

Results of Operations

Comparison of the Three Months Ended June 30, 2023 and 2022

The following table sets forth our results of operations for each of the periods set forth below (in thousands):

Revenues — Revenues were $1.8 million for the three months ended June 30, 2023, as compared to $1.3 million for the three months ended June 30, 2022, an increase of $0.5 million. The increase is related to revenues under the Cipla Agreement during the period.

Research and development expenses — Research and development expenses were $4.2 million for the three months ended June 30, 2023, as compared to $4.3 million for the three months ended June 30, 2022, a decrease of approximately $0.2 million. The decrease was primarily due to decreased spend of $0.8 million in costs related to our PUR3100 program and $0.1 million in costs related to our PUR1800 program, partially offset by increased spend of $0.5 million in costs related to our PUR1900 program and $0.2 million of employment and operating costs.

General and administrative expenses — General and administrative expenses were $1.7 million for the three months ended June 30, 2023, as compared to $1.6 million for the three months ended June 30, 2022, an increase of $0.1 million. The increase was primarily due to an increase in incurred professional services costs.

Comparison of the Six Months Ended June 30, 2023 and 2022

The following table sets forth our results of operations for each of the periods set forth below (in thousands):

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Revenues — Revenues were $3.3 million for the six months ended June 30, 2023, as compared to $2.5 million for the six months ended June 30, 2022, an increase of $0.9 million. The increase is related to revenues under the Cipla Agreement during the period.

Research and development expenses — Research and development expenses were $8.0 million for the six months ended June 30, 2023, as compared to $8.5 million for the six months ended June 30, 2022, a decrease of approximately $0.4 million. The decrease was primarily due to decreased spend of $1.4 million in costs related to our PUR3100 program and $0.4 million in costs related to our PUR1800 program, partially offset by increased spend of $1.1 million in costs related to our PUR1900 program and $0.3 million of employment and operating costs.

General and administrative expenses — General and administrative expenses were $3.9 million for the six months ended June 30, 2023, as compared to $3.5 million for the six months ended June 30, 2022, an increase of $0.4 million. The increase was primarily due to an increase in incurred legal and professional services costs.

Liquidity and Capital Resources

Through June 30, 2023, we incurred an accumulated deficit of $281.7 million, primarily as a result of expenses incurred through a combination of research and development activities related to our various product candidates and general and administrative expenses supporting those activities. We have financed our operations since inception primarily through the sale of preferred and common stock, the issuance of convertible promissory notes, term loans, and collaboration and license agreements. Our total cash and cash equivalents balance as of June 30, 2023 was $25.8 million.

We anticipate that we will continue to incur losses, and that such losses will increase over the next several years due to development costs associated with our iSPERSE™ pipeline programs. We expect that our research and development and general and administrative expenses will continue to increase and, as a result, we will need additional capital to fund our operations, which we may raise through a combination of equity offerings, debt financings, other third-party funding and other collaborations and strategic alliances. We are currently exploring financing or partnership arrangements to develop and initiate a potential Phase 2 clinical study for PUR3100.

We expect that our existing cash and cash equivalents as of June 30, 2023 will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months following the date of this Quarterly Report on Form 10-Q and into the first quarter of 2025. Such projections do not include any contingent milestone payments but do include operational efficiencies and prioritization of spending implemented in the second quarter of 2023. We have based our projections of operating capital requirements on assumptions that may prove to be incorrect, and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development, achievement of contingent milestones and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements.

We have no material off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

The following table sets forth the major sources and uses of cash for each of the periods set forth below (in thousands):

Net cash used in operating activities

Net cash used in operating activities for the six months ended June 30, 2023 was $9.8 million, which was primarily the result of a net loss of $8.3 million and $3.0 million in cash outflows associated with changes in operating assets and liabilities, partially offset by $1.4 million of net non-cash adjustments.

Net cash used in operating activities for the six months ended June 30, 2022 was $10.7 million, which was primarily the result of a net loss of $9.6 million and $2.4 million in cash outflows associated with changes in operating assets and liabilities, partially offset by $1.3 million of net non-cash adjustments.

Net cash used in investing activities

Net cash used in investing activities for the six months ended June 30, 2023 and 2022 was due to purchases of property and equipment.

Net cash provided by (used in) financing activities

Net cash provided by financing activities for the six months ended June 30, 2023 resulted from proceeds from the issuance of common stock, net of issuance costs. Net cash used in financing activities for the six months ended June 30, 2022 resulted from the payment of preferred stock issuance costs from a registered direct offering in December 2021.

Financings

In May 2021, we entered into the Sales Agreement with HCW to act as our sales agent with respect to the issuance and sale of up to $20,000,000 of our shares of common stock, from time to time in an ATM Offering. Sales of common stock under the Sales Agreement are made pursuant to an effective shelf registration statement on Form S-3, which was filed with the SEC on May 26, 2021, and subsequently declared effective on June 9, 2021 (File No. 333-256502), and a related prospectus. HCW acts as our sales agent on a commercially reasonable efforts basis, consistent with its normal trading and sales practices and applicable state and federal laws, rules and regulations and the rules of Nasdaq. If expressly authorized by us, HCW may also sell our common stock in privately negotiated transactions. There is no specific date on which the ATM Offering will end, there are no minimum sale requirements and there are no arrangements to place any of the proceeds of the ATM Offering in an escrow, trust or similar account. HCW is entitled to compensation at a fixed commission rate of 3.0% of the gross proceeds from the sale of our common stock pursuant to the Sales Agreement. During the six months ended June 30, 2023, we sold 13,100 shares of common stock under the Sales Agreement at a weighted-average price of approximately $4.25 per share, which resulted in net proceeds of approximately $53 thousand.

Known Trends, Events and Uncertainties

In May 2023, the World Health Organization determined that COVID-19 no longer fit the definition of a public health emergency and the U.S. government announced its plan to let the declaration of a public health emergency associated with COVID-19 expire on May 11, 2023. The COVID-19 endemic and its ongoing effects are expected to remain a serious endemic threat for an indefinite future period and may continue to create significant economic uncertainty and volatility in the credit and capital markets, supply chain issues, global shortages of supplies, materials and products, and contribute to rising global inflation. In addition, the ongoing conflict between Russia and Ukraine, including related sanctions and countermeasures, are difficult to predict, and could adversely impact geopolitical and macroeconomic conditions, the global economy, and contribute to increased market volatility, which may in turn adversely affect our business and operations. We may not be able to raise sufficient additional capital and may tailor our drug candidate development program based on the amount of funding we are able to raise in the future. Nevertheless, there is no assurance that these initiatives will be successful.

Other than as discussed above and elsewhere in this report, we are not aware of any trends, events or uncertainties that are likely to have a material effect on our financial condition.

Disclosure Controls and Procedures

Our Principal Executive Officer and Principal Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q, have concluded that, based on such evaluation, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer as appropriate to allow timely decisions regarding required disclosure.

In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Changes in Internal Controls over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described in Part I, Item 1A under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 in addition to the other information included in this Form 10-Q before making an investment decision regarding our common stock. If any of these risks actually occur, our business, financial condition, or operating results would likely suffer, possibly materially, the trading price of our common stock could decline, and you could lose part or all of your investment.