You should read the following discussion and analysis of our results of operations, financial condition and liquidity in conjunction with our financial statements and the related notes, which are included in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategies for our business, statements regarding the industry outlook, our expectations regarding the future performance of our business, and the other non-historical statements contained herein are forward-looking statements. See "Cautionary Statement Regarding ForwardLooking Statements." You should also review the "Risk Factors" section under this Item 1A of this Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described herein or implied by such forward-looking statements.
OVERVIEW
We are a clinical stage biopharmaceutical company developing innovative therapies to improve patient outcomes in cancers that are difficult to treat. Our pipeline features two clinical-stage product candidates and additional compounds in preclinical development.
We have no product sales to date, and our major sources of working capital have
been proceeds from various private and public financings and licensing and
collaboration agreements with our partners. In
Critical Accounting Policies
A "critical accounting policy" is one which is both important to the portrayal
of our financial condition and results and requires our management's most
difficult, subjective or complex judgments, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain. Our
accounting policies are in accordance with
Research and Development
Research and development costs are expensed as incurred. Research and development expenses consist primarily of third-party service costs under research and development agreements, salaries and related personnel costs, as well as stock-based compensation related to these costs, costs to acquire pharmaceutical products and product rights for development and amounts paid to CROs, hospitals and laboratories for the provision of services and materials for drug development and clinical trials.
Costs incurred in obtaining the license rights to technology in the research and development stage that have no alternative future uses and are for unapproved product compounds are expensed as incurred.
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We are required to estimate our accrued expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services performed on our behalf and estimating the level of service performed and the associated cost incurred when we have not yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met. We estimate our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time. Examples of estimated accrued research and development expenses include fees paid to:
• CROs and investigative sites in connection with clinical studies;
• vendors in connection with product manufacturing, development, and distribution
of clinical supplies; and
• vendors in connection with preclinical development activities.
We record expenses related to clinical studies and manufacturing development activities based on our estimates of the services received and efforts expended pursuant to contracts with multiple CROs and manufacturing vendors. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. Payments under some of these contracts depend on factors such as the successful enrollment of subjects and the completion of clinical trial milestones. In accruing service fees, we estimate the time period over which services will be performed, enrollment of subjects, number of sites activated and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrued or prepaid expense balance accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, we may report amounts that are too high or too low in any particular period. To date, there have been no material differences from our estimates to the amounts actually incurred.
Fair Value of Financial Instruments
The carrying amounts reported in the accompanying financial statements for cash and cash equivalents and accounts payable and accrued expenses approximate fair value because of the shortterm maturity of these financial instruments. The fair value methodology for our warrant liabilities and marketable securities is described in detail in Item 8 of this Annual Report.
Income Taxes
We account for income taxes in accordance with Accounting Standards Codification ("ASC") 740, "Income Taxes." For additional information on our income tax accounting, see Note 2, "Summary of Significant Accounting Policies," in the Notes to the Financial Statements in this Annual Report.
Warrants
We record warrants as either equity instruments or liabilities at fair value in accordance with ASC 480, "Distinguishing Liabilities from Equity" ("ASC 480") or ASC 815, "Derivatives and Hedging" ("ASC 815"), as discussed further in Note 2, "Summary of Significant Accounting Policies," in the Notes to Financial Statements in this Annual Report. We reevaluate the balance sheet classification of our warrants and the fair value of our liability-classified warrants each reporting period, and changes in the fair value of our warrant liabilities between reporting periods is recorded as "unrealized gain (loss) on fair value of warrants" in the statement of operations.
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Stock-Based Compensation
In accordance with ASC 718, "Stock Compensation," compensation costs related to share-based payment transactions, including employee stock options, are recognized in the financial statements, as discussed further in Note 2, "Summary of Significant Accounting Policies" and Note 11, "Stock-Based Compensation," in the Notes to Financial Statements in this Annual Report. We estimate the fair value of stock options using the Black-Scholes valuation model. As required, we review our valuation assumptions at each grant date and, as a result, we may change our valuation assumptions used to value employee stock-based awards granted in future periods. Employee and director stock-based compensation costs are recognized over the vesting period of the award.
Concentration of Credit Risk
ASC 825, "Financial Instruments," requires disclosure of any significant offbalance sheet risk and credit risk concentration. See Note 2, "Summary of Significant Accounting Policies," in the Notes to Financial Statements in this Annual Report.
For more information on our critical accounting policies, see Note 2, "Summary of Significant Accounting Policies," in the Notes to Financial Statements in this Annual Report.
Recently Issued Accounting Standards
See Note 2, "Summary of Significant Accounting Policies" in the Notes to the Financial Statements," in this Annual Report for a discussion of recent accounting pronouncements.
Results of Operations
Comparison of the Years Ended
Total Revenues
We had no revenues for the years ended
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related expenses for executive, finance and other administrative personnel, recruitment expenses, professional fees and other corporate expenses, including business development, investor relations, and general legal activities.
General and administrative expenses decreased approximately
Research and Development Expenses
Research and development expenses decreased approximately
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The table below summarizes the approximate amounts incurred on each of our research and development projects for the years endedDecember 31, 2019 and 2018: For the Year Ended December 31, 2019 2018 Clinical Candidates: RX-3117$ 3,088,900 $ 6,126,200 RX-5902 887,200 3,104,400 RX-0201 175,600 651,200
Preclinical, Personnel and Overhead 1,325,076 3,227,258
We expect total research and development expenses and research and development expense for each of our research and development projects to decrease in 2020 as we progress toward the completion of our Phase 2a clinical trial of RX-3117 with Abraxane, evaluate the development strategy for RX-5902, and explore and evaluate strategic alternatives.
Interest Income
Interest income increased approximately
Other Income
During the year ended
Unrealized Gain on Fair Value of Warrants
Our warrants that are classified as liabilities are recorded at fair value using
a lattice model. Changes in the fair value of liability-classified warrants are
recorded as unrealized gains or losses in our statement of operations. During
the years ended
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Net Loss
As a result of the above, net loss for the year ended
Liquidity and Capital Resources
Current and Future Financing Needs
We have incurred negative cash flow from operations since we started our
business. We expect to continue to incur negative cash flow and operating
losses as we explore strategic alternatives. We have spent, and subject to our
exploration of strategic alternatives, expect to continue to spend, substantial
amounts in connection with implementing our business strategy, including our
planned product development efforts, our clinical trials and our research and
development efforts. Subject to the result of our exploration of strategic
alternatives, we will need to raise additional capital through public or private
equity or debt offerings or through arrangements with strategic partners or
other sources in order to continue to develop our drug candidates. In
conjunction with our exploration of strategic alternatives, we are exploring
opportunities to extend our resources. We believe that our cash, cash
equivalents, and marketable securities of approximately
Cash Flows
The table below summarizes our net cash flow activity:
For the Year Ended December 31, 2019 2018 Net Cash Used in Operating Activities$ (10,277,133 ) $ (18,838,638 ) Net Cash Provided By Investing Activities 3,098,551 11,910,996 Net Cash Provided by Financing Activities 7,653,828 6,772,789
Net Increase (Decrease) in Cash and Cash Equivalents $ 475,246
Cash used in operating activities was approximately
Cash provided by investing activities was approximately
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Cash provided by financing activities was approximately
Financings
On
On
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements or holdings in variable interest entities.
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