ETERNA THERAPEUTICS INC. You should read this discussion together with the unaudited interim condensed consolidated financial statements, related notes, and other financial information included elsewhere in this Quarterly Report on Form 10-Q together with our audited consolidated financial statements, related notes, and other information contained in the Form 10-K/A filed with theSecurities and Exchange Commission (the "SEC") onJune 30, 2022 (the "10-K/A"), as well as the information contained in our Annual Report on Form 10-K for the year endedDecember 31, 2021 (the "Original 10-K"), filed with theSEC onApril 15, 2022 , to the extent the information contained in the Original 10-K was not superseded by the information contained in the 10-K/A. The following discussion contains assumptions, estimates and other forward-looking statements that involve a number of risks and uncertainties, including those discussed under "Risk Factors," in Part I, Item 1A of the 10-K/A and as described from time to time in our other filings with theSEC . These risks could cause our actual results to differ materially from those anticipated in these forward-looking statements.
Overview
We are a biopharmaceutical company utilizing our mRNA technology platform,
including mRNA-based cell reprogramming and gene editing technologies, to create
next generation mRNA, gene-editing and cell therapies, including iPSC therapies
for multiple therapeutic indications. Our mRNA technology platform, which
includes novel lipid nanoparticles ("LNPs") for mRNA delivery and targeted
transgene insertion, was acquired through a license with Factor Bioscience
Limited , or Factor, and through our acquisition of Novellus, Inc. and Novellus,
Ltd. in July 2021 , which we refer to as the Acquisition.
Merger with
On
• prior to the Merger, a reverse stock split of its common stock, par value$0.005 per share, at a ratio of one-for-two; and • following the Merger, a change in its corporate name from "NTN Buzztime, Inc." to "Brooklyn ImmunoTherapeutics, Inc. " OnMarch 26, 2021 , we sold the rights, title and interest in and to the assets relating to the business operated under the name "NTN Buzztime, Inc. " prior to the Merger to eGames.comHoldings LLC , or eGames.com, in exchange for eGames.com's payment of a purchase price of$2.0 million and assumption of specified liabilities relating to such pre-Merger business. This transaction, which we refer to as the Disposition, was completed in accordance with the terms of an asset purchase agreement datedSeptember 18, 2020 , as amended, between us and eGames.com. The Merger has been accounted for as a reverse acquisition in accordance withU.S. generally accepted accounting principles, or GAAP. Under this method of accounting,Brooklyn LLC was deemed the "acquiring" company andBrooklyn (then known asNTN Buzztime, Inc. ) was treated as the "acquired" company for financial reporting purposes. Operations prior to the Merger are those ofBrooklyn LLC , and the historical financial statements ofBrooklyn LLC became the historical financial statements ofBrooklyn with respect to periods prior to the completion of the Merger. Acquisition of Novellus OnJuly 16, 2021 , we acquiredNovellus, Inc. andNovellus, Inc.'s wholly owned subsidiary,Novellus, Ltd. Brooklyn also acquired 25.0% of the total outstanding equity interests ofNoveCite, Inc. As consideration for the Acquisition, we paid$22.9 million in cash and delivered 7,022,000 shares of common stock, which under the terms of the Acquisition Agreement, were valued at a total of$102.0 million based on an agreed upon price of$14.5253 per share. At the date of issuance, the fair value of the shares was approximately$58.7 million . 26
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mRNA, Gene-Editing, and Cellular Medicines
We are advancing the technology that we obtained through a license with Factor and through the Acquisition ofNovellus, Inc. andNovellus, Ltd. inJuly 2021 to evaluate and develop mRNA, gene-editing, and cellular medicines, with an initial focus on hematologic and solid tumors. We expect that the first-generation product candidates will include gene-editing mRNA for in vivo cell engineering and induced pluripotent stem cell ("iPSC")-derived cytotoxic lymphocytes ("iCLs") and immune-modulating cells ("iIMCs"). We expect to begin preclinical development, including manufacturing process development, of iCLs and iIMCs for clinical indications including hematologic and solid tumors, as well as other indications that require overcoming molecular cues of the tissue microenvironment. The prior work of Novellus and NoveCite shows evidence for preclinical efficacy of iPSC-derived cells in inflammatory conditions (for example, acute respiratory distress syndrome, or ARDS). Interactions with the FDA provided guidance on Chemistry, Manufacturing and Controls ("CMC"), and manufacturing plans, which will be undertaken in a similar manner for additional applications. We expect that second generation products will involve more complex gene editing, for which we anticipate using the stepwise addition of genes provided by the in-licensed Factor Bioscience gene editing machinery, NoveSlice, to efficiently place genes and regulatory sequences into safe harbor locations. Development of processes to advance CMC and manufacturing will follow the experience from first generation products. We are also exploring opportunities to advance in vivo mRNA cell engineering therapies for hematologic and solid tumors by combining the NoveSlice gene editing technology with ToRNAdoTM, the in-licensed LNP technology.
IRX-2
IRX-2 is a mixed, human-derived cytokine product with multiple active constituents including Interleukin-2, or IL2, and other key cytokines. Together, these cytokines are believed to signal, enhance and restore immune function suppressed by the tumor, thus enabling the immune system to attack cancer cells, unlike many existing cancer therapies, which rely on targeting the cancer directly. IRX-2 is prepared from the supernatant of pooled allogeneic peripheral blood mononuclear cells, known as PBMCs, that have been stimulated using a proprietary process employing a specific population of cells and a specific mitogen. Unlike existing recombinant IL2 therapies, IRX-2 is derived from human blood cells. We believe this may promote better tolerance, broader targeting and a natural molecular conformation leading to greater activity, and may permit low physiologic dosing, rather than the high doses needed in other existing IL2 therapies. Results of the Phase 2b INSPIRE trial, or the INSPIRE trial, released inJune 2022 , showed outcomes favored IRX-2 in certain predefined subgroups but the INSPIRE trial did not meet the primary endpoint of Event-Free Survival ("EFS") at two years of follow up. One hundred and fifty patients were enrolled in the study. At two years of follow-up in the intention-to-treat (ITT, n=105) population the median EFS was 48.3 months and was not reached in the control arm (Hazard Ratio 1.10 (95% Confidence Interval, 0.6-2.1; p value=0.62)). Subgroups favoring the IRX-2 arm included patients with later stage (III and IV) disease and those that did not receive chemotherapy. Trends in EFS rates as defined by the Kaplan-Meier estimate at two years of follow-up in patients with later stage (III and IV) disease were 57.2 (40.3, 70.9) vs 49.4 (28.3, 67.4) in favor of IRX-2. In patients that did not receive chemotherapy (radiation only) as part of adjuvant treatment, the EFS Kaplan-Meier estimate at two years of follow-up was 76.4 (52.2, 89.4) vs 60.6 (29.4, 81.4) in favor of IRX-2. There were no new safety signals observed with IRX-2. We currently do not have plans to further develop the IRX-2 product candidate.
Impact of COVID-19 Pandemic
The development of our product candidates has been, and could continue to be, disrupted and materially adversely affected by past and continuing impacts of the COVID-19 pandemic. This is largely a result of measures imposed by the governments and hospitals in affected regions, businesses and schools were suspended due to quarantines intended to contain this outbreak. The spread of COVID-19 fromChina to other countries resulted in the Director General of theWorld Health Organization declaring COVID-19 a pandemic inMarch 2020 . Despite progress in vaccination efforts, the longer-term impact of the COVID-19 pandemic on our development plans and on the ability to conduct our clinical trials remains uncertain and cannot be predicted with confidence. COVID-19 could continue to disrupt production and cause delays in the supply and delivery of products used in our operations, may affect our operations, including the conduct of clinical studies, or the ability of regulatory bodies to grant approvals or supervise our candidates and products, may further divert the attention and efforts of the medical community to coping with the COVID-19 and disrupt the marketplace in which we operate and may have a material adverse effects on our operations. COVID-19 may also affect our employees and employees and operations at suppliers that may result in delays or disruptions in supply. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock. Additionally, if the COVID-19 pandemic has a significant impact on our business and financial results for an extended period of time, our liquidity and cash resources could be negatively impacted. The extent to which the COVID-19 pandemic and ongoing global efforts to contain its spread will impact our operations will depend on future developments, which are highly uncertain, and include the duration, severity and scope of the pandemic and the actions taken to contain or treat the COVID-19 pandemic. Further, the specific clinical outcomes, or future pandemic related impacts of emerging COVID-19 variants cannot be reliably predicted. 27
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Table of Contents Recent Developments PIPE Transaction OnMarch 6, 2022 , we entered into a Securities Purchase Agreement with an investor (the "PIPE Investor") providing for the private placement (the "PIPE Transaction") to the PIPE Investor of approximately 6,857,000 units (the "Units"), each of which consisted of (i) one share of our common stock (or, in lieu thereof, one pre-funded warrant (the "Pre-Funded Warrants") to purchase one share of common stock) and (ii) one warrant (the "Common Warrants") to purchase one share of common stock, for an aggregate purchase price of approximately$12.0 million (the "Subscription Amount"). The PIPE Transaction closed onMarch 9, 2022 . We incurred fees of$1.0 million throughJune 30, 2022 related to the PIPE Transaction. Each Pre-Funded Warrant has an exercise price of$0.005 per share of common stock, was immediately exercisable and may be exercised at any time and has no expiration date and is subject to customary adjustments. The Pre-Funded Warrants may not be exercised if the aggregate number of shares of common stock beneficially owned by the holder thereof would exceed 9.99% immediately after exercise thereof. Each Common Warrant has an exercise price of$1.91 per share, becomes exercisable six months following the closing of the PIPE Transaction, expires five-and-one-half years from the date of issuance, and is subject to customary adjustments. The Common Warrants may not be exercised if the aggregate number of shares of common stock beneficially owned by the holder thereof would exceed 4.99% immediately after exercise thereof, subject to increase to 9.99% at the option of the holder. The Common Warrants and Pre-Funded Warrants were accounted for as liabilities under ASC 815-40, Derivatives and Hedging, Contracts in Entity's Own Equity, as these warrants provide for a cashless settlement provision that fails the requirement of the indexation guidance under ASC 815-40. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within the statement of operations.
The fair values of the Common Warrants and the Pre-Funded Warrants at the
issuance date totaled
In connection with the PIPE Transaction, we and the PIPE Investor also entered into a registration rights agreement, datedMarch 6, 2022 , pursuant to which we agreed to prepare and file a registration statement with theSecurities and Exchange Commission (the "SEC") to register the resale of the shares of common stock included in the Units and the shares of common stock issuable upon exercise of the Pre-Funded Warrants and the Common Warrants. We agreed to use our best efforts to have such registration statement declared effective as promptly as possible after the filing thereof, subject to certain specified penalties if timely effectiveness is not achieved. We filed such registration statement onApril 29, 2022 , which became effective onMay 11, 2022 . 28
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Pursuant to the registration rights agreement, we are obligated to pay the PIPE Investor liquidated damages equal to 2% of the Subscription Amount per month, with a maximum aggregate payment of 12% of the Subscription Amount, in the event the PIPE Investor is not permitted to use the registration statement to resell the related securities for more than 10 consecutive calendar days or more than an aggregate of fifteen calendar days (which need not be consecutive calendar days) during any 12-month period. OnMay 24, 2022 , we provided the PIPE Investor with notice that it was not able to resell the securities under the registration agreement because we did not timely file our Quarterly Report on Form 10-Q (the "Q1 2022 10-Q") with theSEC , and that the PIPE Investor could not use the registration statement to resell the related securities until we filed the Q1 2022 10-Q. Because the PIPE Investor was unable to use the resale registration statement for at least 10 consecutive calendar days, we accrued$0.2 million during the first quarter of 2022 for the estimated contingent loss we expect to incur as a result of the late Q1 2022 10Q filing, which is recorded in other expense, net for the six months endedJune 30, 2022 in the accompanying condensed consolidated statements of operations. We paid the$0.2 million liquidated damages payment inJune 2022 . OnJune 30, 2022 , we filed the Q1 2022 10-Q along with the 10-K/A, and onJuly 1, 2022 , we provided notice to the PIPE Investor that it may resume use of the resale registration statement.
Basis of Presentation
Revenues
We are a development stage company and have had no revenues from product sales to date. We will not have revenues from product sales until such time as we receive regulatory approval of our product candidates, successfully commercialize our products or enter into a licensing agreement which may include up-front licensing fees, of which there can be no assurance.
Research and Development Expenses
We expense our research and development costs as incurred. Our research and development expenses consist of costs incurred for company-sponsored research and development activities, as well as support for selected investigator-sponsored research. Upfront payments and milestone payments for the licensing of technology are expensed as research and development in the period in which they are incurred if the technology is not expected to have any alternative future uses other than the specific research and development project for which it was intended.In-Process Research and Development ("IPR&D") that is acquired through an asset acquisition and has no alternative future uses and, therefore, no separate economic values, is expensed to research and development costs at the time the costs are incurred. The major components of research and development costs include preclinical study costs, clinical manufacturing costs, clinical study and trial expenses, insurance coverage for clinical trials, expensed licensed technology, consulting, scientific advisors and other third-party costs, salaries and employee benefits, stock-based compensation expense, supplies and materials and allocations of various overhead costs related to our product development efforts. In the normal course of our business, we contract with third parties to perform various clinical study and trial activities in the on-going development and testing of potential products. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Payments under the contracts depend on factors such as the achievement of certain events or milestones, the successful enrollment of patients, the allocation of responsibilities among the parties to the agreement, and the completion of portions of the clinical study or trial or similar conditions. Preclinical and clinical study and trial associated activities such as production and testing of clinical material require significant up-front expenditures. We anticipate paying significant portions of a study's or trial's cost before such begins and incurring additional expenditures as the study or trial progresses and reaches certain milestones. 29
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General and Administrative Expenses
Our general and administrative expenses consist primarily of salaries, benefits and other costs, including equity-based compensation, for our executive and administrative personnel, legal and other professional fees, travel, insurance, and other corporate costs. Results of Operations
Comparison of the Three and Six Months Ended
Three months ended June 30, Six months ended June 30,
2022 2021 Change 2022 2021 Change
(in thousands)
Operating expenses:
Research and development $ 1,685 $ 5,432 $ (3,747 ) $ 3,467 $ 6,965 $ (3,498 )
General and administrative 6,205 4,581 1,624 10,719 6,204 4,515
Impairment of in-process research and 5,990 - 5,990 5,990 - 5,990
Transaction costs - - - - 5,765 (5,765 )
Total operating expenses 13,880 10,013 3,867 20,176 18,934 1,242
Loss from operations (13,880 ) (10,013 ) (3,867 ) (20,176 ) (18,934 ) (1,242 )
Other income (expense), net:
Loss on sale of NTN assets - (50 ) 50 - (9,648 ) 9,648
Change in fair value of warrant liabilities 10,792 - 10,792 9,470 - 9,470
Loss on non-controlling investment (296 ) - (296 ) (911 ) - (911 )
Other expense, net (14 ) (22 ) 8 (1,156 ) (25 ) (1,131 )
Total other income (expense), net 10,482 (72 ) 10,554 7,403 (9,673 ) 17,076
Net loss $ (3,398 ) $ (10,085 ) $ 6,687 $ (12,773 ) $ (28,607 ) $ 15,834
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Research and Development Expenses
Three months ended June 30,
2022 2021 Change
(in thousands)
License fees $ - $ 4,000 $ (4,000 )
Stock-based compensation 470 168 302
Payroll-related 639 593 46
Clinical trials 402 526 (124 )
Professional fees 79 39 40
Other expenses, net 95 106 (11 )
Total research and development expenses $ 1,685 $ 5,432 $ (3,747 )
Six months ended June 30,
2022 2021 Change
(in thousands)
License fees $ - $ 4,000 $ (4,000 )
Payroll-related 1,601 1,054 547
Stock-based compensation 891 571 320
Clinical trials 632 961 (329 )
Professional fees 120 126 (6 )
Other expenses, net 223 253
(30 )
Total research and development expenses
For the three and six months endedJune 30, 2022 , our research and development expenses decreased primarily due to a$4.0 million license fee paid in 2021 toFactor and Novellus, Ltd. (the "Licensors") under the exclusive license agreement with the Licensors, as well as due to a decrease in clinical trial and other miscellaneous expense, offset by increased stock compensation expense due to increased equity awards granted during 2022, as compared to equity awards granted in 2021, and increased payroll expense due to increased headcount, as well as increased severance expense when compared to the same periods in 2021. InJanuary 2022 , we completed a reduction in our workforce involving eight research and development employees. As a result, we incurred approximately$0.5 million for severance and termination-related costs, which we recorded during the first quarter of 2022. InJune 2022 , we made the decision to consolidated our research and development inCambridge, Massachusetts , and as a result, we accrued approximately$0.1 million for severance and termination-related costs for certain employees in theSan Diego, California location. 31
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General and Administrative Expenses
Three months ended June 30,
2022 2021 Change
(in thousands)
Payroll-related $ 1,533 $ 142 $ 1,391
Impairment of ROU asset 772 - 772
Professional fees 2,083 2,721 (638 )
Stock-based compensation 409 986 (577 )
Insurance 527 367 160
Occupancy expense 182 150 32
Other expenses, net 699 215 484
Total general and administrative expenses $ 6,205 $ 4,581 $ 1,624
Six months ended June 30,
2022 2021 Change
(in thousands)
Payroll-related $ 2,282 $ 175 $ 2,107
Impairment of ROU asset 772 - 772
Professional fees 3,404 4,040 (636 )
Insurance 894 400 494
Stock-based compensation 1,170 1,003 167
Occupancy expense 382 301 81
Loss on disposal of fixed assets 274 - 274
Other expenses, net 1,541 285
1,256
Total general and administrative expenses
The increase in general and administrative expense for the three and six months endedJune 30, 2022 was primarily related to increased headcount as well as severance expense for certain employees, including our former Chief Executive Officer,who resigned effectiveMay 26, 2022 . We also recognized a non-cash impairment charge on ourSan Diego, California right-of-use ("ROU") operating lease asset due to our intent to consolidate our research and development activities inCambridge, Massachusetts and to sublease theSan Diego, California facility. Other increases include premiums for public company insurance policies, non-cash stock-based compensation expense due to increased equity awards, increased other expenses, net, primarily due to legal-related matters, and losses on the disposal of fixed assets when compared to the same periods in 2021.
Impairment of
As discussed above, inJune 2022 , we received the results from the INSPIRE phase 2 trial of IRX-2. The IRX-2 multi-cytokine biologic immunotherapy represents substantially all the fair value assigned to the technologies of IRX that we acquired in 2018. Despite outcomes that favored IRX-2 in certain predefined subgroups, the INSPIRE trial did not meet the primary endpoint of Event-Free Survival (EFS) at two years of follow up. Significant additional clinical development work will be required to advance IRX-2 in the form of additional Phase 2 and 3 studies to further evaluate the treatment effect of IRX-2 in patient subgroups and in combination with checkpoint inhibitor therapies. The INSPIRE trial is the only company sponsored study of IRX-2. IRX-2 has been studied externally in other clinical settings outside of head and neck cancer in the form of investigator sponsored trials, which have either ended or are not currently active. Based on the totality of available information, we currently do not have plans to further develop the IRX-2 product candidate. As such, we determined that the carrying value of the IPR&D asset was impaired and recognized a non-cash impairment charge of approximately$6.0 million on the condensed consolidated balance sheet as ofJune 30, 2022 , which reduced the value of this asset to zero. 32
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Table of Contents Transaction Costs The$5.8 million in transaction costs during the six months endedJune 30, 2021 related to the issuance of common stock toBrooklyn LLC's financial advisor upon consummation of the Merger, and there were no comparable transaction costs for same periods in 2022. Loss on Sales of NTN Assets A$0.1 million and$9.6 million loss on the sale of NTN assets for the three and six months endedJune 30, 2021 , respectively, were incurred when we completed the Disposition, and there were no comparable losses on sale for the three and six months endedJune 30, 2022 .
Warrant Liabilities Expense
For the three months endedJune 30, 2022 , we recognized a credit of$10.8 million for the change in the fair value of warrant liabilities due to a decrease in the market price of our common stock during the quarter. For the six months endedJune 30, 2022 , we recognized a credit of$10.1 million for the change in the fair value of warrant liabilities, which was offset by$0.6 million in expense related to the excess fair value of the Common Warrants and Pre-Funded Warrant issued in connection with the PIPE Transaction over the$12.0 million gross proceeds received. There were no comparable expenses for the three and six months endedJune 30, 2021 .
Loss on
During the three and six months endedJune 30, 2022 , we recognized$0.3 million and$0.9 million of loss on our 25% non-controlling investment in NoveCite, respectively. Of the$0.9 million loss for the six months endedJune 30, 2022 ,$0.5 million relates to the prior year. We account for our investment in NoveCite under the equity method. There were no comparable expenses for the three and six months endedJune 30, 2021 . Other Expense, Net Three months ended June 30, 2022 2021 Change (in thousands) PIPE transaction fees$ (15 ) $ -$ (15 ) Interest expense, net (13 ) (22 ) 9 Other (expense) income , net 14 - 14 Total other expense, net$ (14 ) $ (22 ) $ 8 Six months ended June 30, 2022 2021 Change (in thousands) PIPE transaction fees$ (1,007 ) $ -$ (1,007 ) Liquidated damages (240 ) - (240 ) Interest expense, net (14 ) (36 ) 22 Other (expense) income , net 105 11 94 Total other expense, net$ (1,156 ) $ (25 ) $ (1,131 ) For the three months endedJune 30, 2022 , we recognized an immaterial decrease in other expense, net when compared to the same period in 2021. During the six months endedJune 30, 2022 , our increase in other expense, net was primarily due to fees related to the PIPE Transaction, which was allocated to the warrants issued in connection with the transaction. Additionally, we incurred a loss related to the liquidated damages we incurred as a result of not timely filing the Q1 2022 10Q with the SEC. These increases in expense were offset by a decrease in interest expense and an increase in other income for the six months endedJune 30, 2022 when compared to the same period in 2021. 33
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Liquidity and Capital Resources
AtJune 30, 2022 , we had cash and cash equivalents of approximately$19.4 million . OnMarch 9, 2022 , we issued 5,500,000 shares of common stock and Pre-Funded Warrants representing approximately 1,357,000 shares of common stock for net proceeds of approximately$11.0 million in connection with the PIPE Transaction. Pursuant to the purchase agreement entered into in respect of the PIPE Transaction, we are prohibited from issuing equity in variable rate transactions for a period of one-year following consummation of the PIPE Transaction, including issuing equity under the Second Purchase Agreement. We have to date incurred operating losses, and we expect these losses to continue in the future as we further develop our product development programs and operate as a publicly traded company. Developing product candidates, conducting clinical trials and commercializing products are expensive, and we will need to raise substantial additional funds to achieve our strategic objectives. It will likely be some years before we obtain the necessary regulatory approvals to commercialize one or more of our product candidates. Based on our current financial condition and forecasts of available cash, including as mentioned above, we believe we do not have sufficient funds to fund our operations for the next twelve months from the filing of the financial statements contained in this Quarterly Report on Form 10-Q for the period endedJune 30, 2022 (the "Q2 2022 10-Q"). There can be no assurance that we will ever be in a position to commercialize IRX-2 or any other product candidate we may acquire, or that we will obtain any additional financing that we require in the future or, even if such financing is available, that it will be obtainable on terms acceptable to us.
In that regard, our future funding requirements will depend on many factors, including:
• the terms and timing of any collaborative, licensing and other agreements that
we may establish;
• the cost and timing of regulatory approvals;
• the cost and delays in product development as a result of any changes in
regulatory oversight applicable to our products;
• the cost and timing of establishing sales, marketing and distribution
capabilities;
• the effect of competition and market developments;
• the cost of filing and potentially prosecuting, defending and enforcing any
patent claims and other intellectual property rights;
• the scope, rate of progress and cost of our clinical trials and other product
development activities; and
• future clinical trial results.
We plan to raise additional funds to support our product development activities
and working capital requirements through the remaining availability under the
Second Purchase Agreement (to the extent we are permitted to use such
agreement), public or private equity offerings, debt financings, corporate
collaborations or other means. We may also seek governmental grants to support
our clinical trials and preclinical trials. Further, we may seek to raise
capital to fund additional product development efforts even if we have
sufficient funds for our planned operations. Any sale by us of additional equity
or convertible debt securities could result in dilution to our stockholders.
There can be no assurance that any such required additional funding will be
available to us at all or available on terms acceptable to us.
Further, to the extent that we raise additional funds through collaborative
arrangements, it may be necessary to relinquish some rights to our technologies
or grant sublicenses on terms that are not favorable to us. If we are not able
to secure additional funding when needed, we may have to delay the commercialize
of our products, reduce the scope of or eliminate one or more research and
development programs, which could have an adverse effect on our business.
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Cash Flows
Cash flows from operating, investing and financing activities, as reflected in
the accompanying consolidated statements of cash flows, are summarized as
follows:
For the six months ended
June 30,
(in thousands) 2022 2021 Change
Cash provided by (used in):
Operating activities $ (9,425 ) $ (10,234 ) $ 809
Investing activities (133 ) 266 (399 )
Financing activities 11,980 58,503 (46,523 )
Net increase in cash and cash equivalents $ 2,422 $ 48,535 The decrease in cash used in operating activities was due to a decrease in net loss of$0.6 million , after giving effect to adjustments made for non-cash transactions, offset by an increase in cash provided by operating assets and liabilities of$1.4 million during the six months endedJune 30, 2022 compared to the same period in 2021. The increase in cash provided by operating assets and liabilities was primarily driven by increased accrued compensation due to higher headcount and severance as well as accrued costs for litigation matters, offset by a decrease in prepaid expenses and other current assets during the six months endedJune 30, 2022 compared to the same period in 2021.
The increase in net cash used in investing activities was primarily due to purchases of capital equipment of$0.2 million offset by proceeds from the sale of fixed assets of$0.1 million during the six months endedJune 30, 2022 compared to the same period in 2021. Also, the six months endedJune 30, 2021 included proceeds of approximately$0.3 million from the Merger and the Disposition transactions. There were no similar transactions during the six months endedJune 30, 2022 .
Net Cash Provided by Financing Activities
The decrease in net cash provided by financing activities was primarily the result of a decrease in net proceeds from capital raises of approximately$47 million , net, offset by a decrease in principal payments made for long-term debt arrangements of$0.5 million during the six months endedJune 30, 2022 compared to the same period in 2021.
Critical Accounting Policies and Estimates
There were no significant changes in our critical accounting estimates during
the three and six months ended
Recent Accounting Pronouncements
InJune 2022 , the Financial Accounting Standard Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions ("ASU 2022-03"). The FASB issued ASU 2022-03 to (1) clarify the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, (2) to amend a related illustrative example, and (3) to introduce new disclosure requirements for equity related securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. ASU 2022-03 clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The guidance is effective for fiscal years beginning afterDecember 15, 2023 , and interim periods within those fiscal years with early adoption permitted. We are evaluating when to adopt the amendments in ASU 2022-02. We do not expect a material impact as a result of adopting this amendment. 35
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