LIXTE BIOTECHNOLOGY HOLDINGS, INC. Forward-Looking Statements
This Quarterly Report on Form 10-Q ofLixte Biotechnology Holdings, Inc. (the "Company") contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These might include statements regarding the Company's financial position, business strategy and other plans and objectives for future operations, and assumptions and predictions about future clinical trials and their timing and costs, product demand, supply, manufacturing costs, marketing and pricing factors are all forward-looking statements. These statements are generally accompanied by words such as "intend", "anticipate", "believe", "estimate", "potential(ly)", "continue", "forecast", "predict", "plan", "may", "will", "could", "would", "should", "expect" or the negative of such terms or other comparable terminology. The Company believes that the assumptions and expectations reflected in such forward-looking statements are reasonable, based on information available to it on the date hereof, but the Company cannot provide assurances that these assumptions and expectations will prove to have been correct or that the Company will take any action that the Company may presently be planning. These forward-looking statements are inherently subject to known and unknown risks and uncertainties. Actual results or experience may differ materially from those expected, anticipated or implied in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, regulatory policies or changes thereto, available cash, research and development results, competition from other similar businesses, and market and general economic factors. This discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included in Item 1 of this Quarterly Report on Form 10-Q and the Company's Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 , including the section entitled "Item 1A. Risk Factors". The Company does not intend to update or revise any forward-looking statements to reflect new information, future events or otherwise. Overview The Company is a drug discovery company that uses biomarker technology to identify enzyme targets associated with serious common diseases and then designs novel compounds to attack those targets. The Company's product pipeline is primarily focused on inhibitors of protein phosphatases, used alone and in combination with cytotoxic agents and/or x-ray and immune checkpoint blockers, and encompasses two major categories of compounds at various stages of pre-clinical and clinical development that the Company believes have broad therapeutic potential not only for cancer but also for other debilitating and life-threatening diseases. The Company has developed two classes of drugs for the treatment of cancer, consisting of protein phosphatase inhibitors (PTase-i), designated by us as the LB-100 series of compounds, and histone deacetylase inhibitors (HDACi), designated by us as the LB-200 series of compounds. The Company's activities are subject to significant risks and uncertainties, including the need for additional capital. The Company has not yet commenced any revenue-generating operations, relies on stock-based compensation for a substantial portion of employee and consultant compensation, does not have positive cash flows from operations, and is dependent on periodic infusions of equity capital to fund its operating requirements. Recent Developments
The following is a summary of recent developments, including information contained in recent news releases issued by the Company:
Summary of
The Company announced that theSpanish Agency for Medicines andHealth Products (Agencia Española de Medicamentos y Productos Sanitarios, or AEMPS) has authorized a Phase 1b/randomized Phase 2 study of LB-100, the Company's lead clinical compound, plus doxorubicin versus doxorubicin alone, the global standard for initial treatment of advanced soft tissue sarcomas (ASTS). 30 The combination of doxorubicin with drugs that are able to impair the mechanisms of DNA repair is a promising topic of research, as LB-100 has demonstrated synergistic action in in vivo preclinical mesenchymal tumors. The authorization of this clinical trial by AEMPS is expected to facilitate approval of other LB-100 protocols in EU countries. The purpose of this clinical trial is to obtain information with respect to the efficacy and safety of LB-100 combined with doxorubicin in soft tissue sarcomas. Doxorubicin alone has been the cornerstone of first line treatment of ASTS for over 40 years, with little therapeutic gain from adding cytotoxic compounds to or substituting other cytotoxic compounds for doxorubicin. In animal models, LB-100 has consistently enhanced the anti-tumor activity of doxorubicin without apparent increases in toxicity. The interim analysis of this clinical trial will be done before full accrual is completed to determine whether the study has the possibility of showing superiority of the combination of LB-100 plus doxorubicin compared to doxorubicin alone. A positive study would have the potential to change the standard therapy for this disease after four decades of failure to improve the marginal benefit of doxorubicin alone. This study was designed and will be carried out by theSpanish Sarcoma Group (Grupo Español de Investigación en Sarcomas, or GEIS). GEIS was formed in 1994 by oncologists from four hospitals and has grown to include members from more than 60 medical centers acrossSpain . For relatively uncommon but life-threatening diseases like ASTS, GEIS has shown that it is essential for many institutions to collaborate and accrue a large enough group of patients needed to timely evaluate promising new treatments. GEIS has chosen to study whether the Company's lead clinical compound, LB-100, can significantly improve the anti-tumor activity of doxorubicin, the current clinical standard, an only marginally effective treatment for previously untreated ASTS. The clinical trial is expected to begin later this year or during the first quarter of 2023; up to 170 patients will be entered onto the trial, which is expected to be completed within two and a half years.
Listing of the Company's Common Stock on The Nasdaq Capital Market
The Company's common stock and the warrants issued in its public offering are traded on The Nasdaq Capital Market under the symbols "LIXT" and "LIXTW", respectively.
OnJune 24, 2022 , the Company received a written notice (the "Notice") fromThe Nasdaq Stock Market LLC ("Nasdaq") that the Company has not been in compliance with the minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) for a period of 30 consecutive business days. Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum closing bid price of$1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum closing bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The Notice had no immediate effect on the listing of the Company's common stock on The Nasdaq Capital Market. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company is provided a compliance period of 180 calendar days from the date of the Notice, or untilDecember 21, 2022 , to regain compliance with the minimum closing bid price requirement. If the Company does not regain compliance during the compliance period endingDecember 21, 2022 , the Company may be afforded a second 180 calendar day period to regain compliance. To qualify for the second compliance period, the Company must (i) meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the minimum closing bid price requirement, and (ii) notify Nasdaq of its intent to cure the deficiency. The Company can achieve compliance with the minimum closing bid price requirement if, during either compliance period, the minimum closing bid price per share of the Company's common stock is at least$1.00 for a minimum of 10 consecutive business days. The Company anticipates that its shares of common stock will continue to be listed and traded on The Nasdaq Capital Market during the compliance period(s). The Company is continuing to assess potential actions to regain compliance. However, the Company may be unable to regain compliance with the minimum closing bid price requirement during the compliance period(s), in which case the Company anticipates Nasdaq would provide a notice to the Company that its shares of common stock are subject to delisting, and the Company's common shares would thereupon be delisted. 31 Going Concern
AtSeptember 30, 2022 , the Company had cash of$6,561,840 available to fund its operations. Because the Company is currently engaged in Phase 2 clinical trials, it is expected that it will take a significant amount of time and resources to develop any product or intellectual property capable of generating sustainable revenues. Accordingly, the Company's business is unlikely to generate any sustainable operating revenues in the next several years and may never do so. Even if the Company is able to generate revenues through licensing its technologies or through product sales, there can be no assurance that the Company will be able to achieve positive earnings and operating cash flows. The Company's consolidated financial statements have been presented on the basis that it will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has no recurring source of revenue and has experienced negative operating cash flows since inception. The Company has financed its working capital requirements primarily through the recurring sale of its equity securities. As a result, management has concluded that there is substantial doubt about the Company's ability to continue as a going concern. The Company's independent registered public accounting firm, in its report on the Company's consolidated financial statements for the year endedDecember 31, 2021 , has also expressed substantial doubt about the Company's ability to continue as a going concern. The Company's consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Recent Accounting Pronouncements
Information with respect to recent accounting pronouncements is provided at Note 3 to the condensed consolidated financial statements for the three months and nine months endedSeptember 30, 2022 and 2021 included elsewhere in this document. Concentration of Risk
Information with respect to concentration of risk is provided at Note 3 to the condensed consolidated financial statements for the three months and nine months endedSeptember 30, 2022 and 2021 included elsewhere in this document.
Critical Accounting Policies and Estimates
The preparation of the Company's consolidated financial statements in conformity with generally accepted accounting principles inthe United States ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole 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. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates. Significant estimates include those related to assumptions used in accruals for potential liabilities, valuing equity instruments issued for services, and the realization of deferred tax assets. There were no changes to the critical accounting policies described in the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 that impacted the Company's condensed consolidated financial statements and related notes for the three months and nine months endedSeptember 30, 2022 and 2021.
The following critical accounting policies affect the more significant judgements and estimates used in the preparation of the Company's consolidated financial statements.
32 Research and Development Research and development costs consist primarily of fees paid to consultants and contractors, and other expenses relating to the acquisition, design, development and clinical trials with respect to the Company's compounds and product candidates. Research and development costs also include the costs to produce the compounds used in research and clinical trials, which are charged to operations as incurred.
Research and development costs are generally charged to operations ratably over the life of the underlying contracts, unless the achievement of milestones, the completion of contracted work, the termination of an agreement, or other information indicates that a different expensing schedule is more appropriate. However, payments for research and development costs that are contractually defined as non-refundable are charged to operations as incurred. Obligations incurred with respect to mandatory scheduled payments under research agreements with milestone provisions are recognized as charges to research and development costs in the Company's consolidated statement of operations based on the achievement of such milestones, as specified in the agreement. Obligations incurred with respect to mandatory scheduled payments under research agreements without milestone provisions are accounted for when due, are recognized ratably over the appropriate period, as specified in the agreement, and are recorded as liabilities in the Company's consolidated balance sheet, with a corresponding charge to research and development costs in the Company's consolidated statement of operations.
Payments made pursuant to research and development contracts are initially recorded as advances on research and development contract services in the Company's consolidated balance sheet and are then charged to research and development costs in the Company's consolidated statement of operations as those contract services are performed. Expenses incurred under research and development contracts in excess of amounts advanced are recorded as research and development contract liabilities in the Company's consolidated balance sheet, with a corresponding charge to research and development costs in the Company's consolidated statement of operations. The Company reviews the status of its research and development contracts on a quarterly basis.
Patent and Licensing Legal and Filing Fees and Costs
Due to the significant uncertainty associated with the successful development of one or more commercially viable products based on the Company's research efforts and related patent applications, all patent and licensing legal and filing fees and costs related to the development and protection of its intellectual property are charged to operations as incurred. Patent and licensing legal and filing fees and costs are included in general and administrative costs in the Company's consolidated statements of operations. During the three months endedSeptember 30, 2022 and 2021, patent and licensing legal and filing fees and costs related to the development and protection of its intellectual property were$271,163 and$137,114 , respectively, an increase of$134,049 , or 97.8% in 2022, as compared to 2021. During the nine months endedSeptember 30, 2022 and 2021, patent and licensing legal and filing fees and costs related to the development and protection of its intellectual property were$944,789 and$365,466 , respectively, an increase of$579,323 , or 158.5% in 2022, as compared to 2021. In late 2021, the Company engaged a new patent law firm that is highly regarded for its expertise in biotechnology. This firm conducted a comprehensive analysis of the Company's extensive patent portfolio in order to implement a program to maximize the Company's intellectual property protection, both domestically and internationally. In addition, several new patents were recently filed, reflecting potential new uses of the Company's unique lead clinical compound LB-100 in cancer therapy. These activities have resulted in an increase in patent and licensing legal and filing fees and costs in 2022 as compared to 2021. The Company expects that such patent and licensing related legal and filing costs will continue to increase during the remainder of 2022 as compared to 2021, and likely thereafter, as the Company continues to develop and expand its patent portfolio related to the clinical development of LB-100. 33 Stock-Based Compensation
The Company periodically issues common stock and stock options to officers, directors, employees,Scientific Advisory Committee members, contractors and consultants for services rendered. Options vest and expire according to terms established at the issuance date of each grant. Stock grants, which are generally time vested, are measured at the grant date fair value and charged to operations ratably over the vesting period. The Company accounts for stock-based payments to officers, directors, employees,Scientific Advisory Committee members contractors and consultants by measuring the cost of services received in exchange for equity awards utilizing the grant date fair value of the awards, with the cost recognized as compensation expense on the straight-line basis in the Company's financial statements over the vesting period of the awards. The fair value of stock options granted as stock-based compensation is determined utilizing the Black-Scholes option-pricing model, and is affected by several variables, the most significant of which are the expected life of the stock option, the exercise price of the stock option as compared to the fair market value of the common stock on the grant date, and the estimated volatility of the common stock. Unless sufficient historical exercise data is available, the expected life of the stock option is calculated as the mid-point between the vesting period and the contractual term (the "simplified method"). The estimated volatility is based on the historical volatility of the Company's common stock, calculated utilizing a look-back period approximately equal to the contractual life of the stock option being granted. The risk-free interest rate is based on theU.S. Treasury yield curve in effect at the time of grant. The fair market value of the common stock is determined by reference to the quoted market price of the Company's common stock on the grant date. The expected dividend yield is based on the Company's expectation of dividend payouts and is assumed to be zero.
The Company recognizes the fair value of stock-based compensation awards in general and administrative costs and in research and development costs, as appropriate, in the Company's consolidated statements of operations. The Company issues new shares of common stock to satisfy stock option exercises.
Summary of Business Activities and Plans
Company Overview The Company is a drug discovery company that uses biomarker technology to identify enzyme targets associated with serious common diseases and then designs novel compounds to attack those targets. The Company's product pipeline is primarily focused on inhibitors of protein phosphatases, used alone and in combination with cytotoxic agents and/or x-ray and immune checkpoint blockers, and encompasses two major categories of compounds at various stages of pre-clinical and clinical development that the Company believes have broad therapeutic potential not only for cancer but also for other debilitating and life-threatening diseases.
The Company has developed two series of pharmacologically active drugs, the LB-100 series and the LB-200 series. The Company believes that the mechanism by which compounds of the LB-100 series affect cancer cell growth is different from cancer agents currently approved for clinical use. Lead compounds from each series have activity against a broad spectrum of common and rarer human cancers in cell culture systems. In addition, compounds from both series have anti-cancer activity in animal models of glioblastoma multiforme, neuroblastoma, and medulloblastoma, all cancers of neural tissue. Lead compounds of the LB-100 series also have activity against melanoma, breast cancer and sarcoma in animal models and enhance the effectiveness of commonly used anti-cancer drugs in these animal models. The enhancement of anti-cancer activity of these anti-cancer drugs occurs at doses of LB-100 that do not significantly increase toxicity in animals. It is therefore hoped that, when combined with standard anti-cancer regimens against many tumor types, the Company's compounds will improve therapeutic benefit without enhancing toxicity in humans. Product Candidates
The LB-100 series consists of novel structures which have the potential to be first in their class and may be useful in the treatment of not only several types of cancer but also vascular and metabolic diseases. The LB-200 series contains compounds which have the potential to be the most effective in its class and may be useful for the treatment of chronic hereditary diseases, such as Gaucher's disease, in addition to cancer and neurodegenerative diseases.
34
The Company has demonstrated that lead compounds of both the LB-100 series and the LB-200 are active against a broad spectrum of human cancers in cell culture and against several types of human cancers in animal models. The research on these compounds was initiated in 2006 under aCooperative Research and Development Agreement, or CRADA, with theNational Institute of Neurologic Disorders and Stroke , or NINDS, of theNational Institutes of Health , orNIH , datedMarch 22, 2006 that was subsequently extended through a series of amendments until it terminated onApril 1, 2013 . As discussed below, the Company's primary focus is on the clinical development of LB-100. The LB-200 series consists of histone deacetylase inhibitors (HDACi). Many pharmaceutical companies are also developing drugs of this type, and at least two companies have HDACi approved for clinical use, in both cases for the treatment of a type of lymphoma. Despite this significant competition, the Company has demonstrated that its HDACi have broad activity against many cancer types, have neuroprotective activity, and have anti-fungal activity. In addition, these compounds have low toxicity. LB-200 has not yet advanced to the clinical stage and would require additional capital to fund further development. Accordingly, because of the Company's focus on the clinical development of LB-100 and analogs for cancer therapy as described below in more detail, the Company has decided not to actively pursue pre-clinical development of the LB-200 series of compounds at this time. At this time, the Company intends to only maintain composition of matter patents for LB-200. Collaborations with leading academic research centers inthe United States ,Europe andAsia have established the breadth of activity of LB-100 in pre-clinical models of several major cancers. There is considerable scientific interest in LB-100 because it exerts its activity by a novel mechanism and is the first of its type to be evaluated so broadly in multiple animal models of cancer and now in human beings. LB-100 is one of a series of serine/threonine phosphatase (s/t ptase) inhibitors designed by the Company. The s/t ptases are ubiquitous enzymes that regulate many cell-signaling networks important to cell growth, division and death. The s/t ptases have long been appreciated as potentially important targets for anti-cancer drugs. However, because of the multi- functionality of these enzymes, it had been widely held that pharmacologic inhibitors of s/t ptases would be too toxic to allow their development as anti-cancer treatments, but the Company has shown that this is not the case. LB-100 was well tolerated at doses associated with objective regression (significant tumor shrinkage) and/or the arresting of tumor progression in patients with progressive cancers. Pre-clinical studies showed that LB-100 itself inhibits a spectrum of human cancers and that combined with standard cytotoxic drugs and/or radiation, LB-100 potentiates their effectiveness against hematologic and solid tumor cancers without enhancing toxicity. Given at very low doses in animal models of cancer, LB-100 markedly increased the effectiveness of a PD-1 blocker, one of the widely used new immunotherapy drugs. This finding raises the possibility that LB-100 may further expand the value of the expanding field of cancer immunotherapy. The Company completed a Phase 1 clinical trial of LB-100 to evaluate its safety that showed it is associated with antitumor activity in humans at doses that are readily tolerable. Responses included objective regression (tumor shrinkage) lasting for 11 months of a pancreatic cancer and cessation of growth (stabilization of disease) for 4 months or more of 9 other progressive solid tumors out of 20 patients who had measurable disease. As Phase 1 clinical trials are fundamentally designed to determine safety of a new compound in humans, the Company was encouraged by these results. The next step is to demonstrate in Phase 2 clinical trials the efficacy of LB-100 in one or more specific tumor types, against which the compound has well documented activity in pre-clinical models. As a compound moves through the FDA-approval process, it becomes an increasingly valuable property, but at a cost of additional investment at each stage. As the potential effectiveness of LB-100 has been documented at the clinical trial level, the Company has allocated resources to expand the breadth and depth of its patent portfolio. The Company's approach has been to operate with a minimum of overhead, moving compounds forward as efficiently and inexpensively as possible, and to raise funds to support each of these stages as certain milestones are reached. The Company's longer-term objective is to secure one or more strategic partnerships or licensing agreements with pharmaceutical companies with major programs in cancer.
External Risks Associated with the Company's Business Activities
Covid-19 Virus. The global outbreak of the novel coronavirus (Covid-19) has led to disruptions in general economic activities worldwide, as businesses and governments have taken broad actions to mitigate this public health crisis. In light of the uncertain and continually evolving situation relating to the spread of Covid-19, this pandemic could pose a risk to the Company. The extent to which the coronavirus may impact the Company's business activities and capital raising efforts will depend on future developments, which are highly uncertain and cannot be predicted at this time. The Company intends to continue to monitor the situation and may adjust its current business plans as more information and
guidance become available. 35 The coronavirus pandemic presents a challenge to medical facilities worldwide. As the Company's clinical trials are conducted on an outpatient basis, it is not currently possible to predict the full impact of this developing health crisis on such clinical trials, which could include delays in and increased costs of such clinical trials. Current indications from the clinical research organizations conducting the clinical trials for the Company are that such clinical trials are being delayed or extended for several months or more as a result of the coronavirus pandemic. Inflation Risk. The Company does not believe that inflation has had a material effect on its operations to date, other than its impact on the general economy. However, there is a risk that the Company's operating costs could become subject to inflationary and interest rate pressures in the future, which would have the effect of increasing the Company's operating costs (including, specifically, clinical trial costs), and which would put additional stress on the Company's working capital resources. SupplyChain Issues . The Company does not currently expect that supply chain issues will have a significant impact on its business activities, including
its ongoing clinical trials. Potential Recession. There are various indications thatthe United States economy may be entering a recessionary period. Although unclear at this time, an economic recession would likely impact the general business environment and the capital markets, which could, in turn, affect the Company.
The Company is continuing to monitor these matters and will adjust its current business and financing plans as more information and guidance become available.
Results of Operations
At
The Company's condensed consolidated statements of operations as discussed
herein are presented below.
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Revenues $ - $ - $ - $ -
Costs and expenses:
General and administrative costs:
Compensation to related parties 643,957 573,472 1,963,409 2,450,641
Patent and licensing legal and
filing fees and costs 271,163 137,114 944,789 365,466
Other costs and expenses 290,993 299,953 875,016 946,266
Research and development costs 272,388 227,181 895,649 933,122
Total costs and expenses 1,478,501 1,237,720 4,678,863 4,695,495
Loss from operations (1,478,501 ) (1,237,720 ) (4,678,863 ) (4,695,495 )
Interest income 3,911 161 4,211 487
Interest expense (2,119 ) - (5,240 ) (2,944 )
Foreign currency loss (1,300 ) (1,165 ) (1,339 ) (1,082 )
Net loss $ (1,478,009 ) $ (1,238,724 ) $
(4,681,231 )
Net loss per common share - basic and diluted$ (0.09 ) $ (0.09 ) $
(0.30 )
Weighted average common shares outstanding - basic and diluted 16,646,593 13,733,912 15,541,831 13,381,922
36
Three Months Ended
Revenues. The Company did not have any revenues for the three months ended
General and Administrative Costs. For the three months endedSeptember 30, 2022 , general and administrative costs were$1,206,113 , which consisted of the fair value of vested stock options issued to directors and officers of$396,883 , patent and licensing legal and filing fees and costs of$271,163 , other consulting and professional fees of$108,630 , insurance expense of$114,983 , officer's salary and related costs of$207,091 , cash-based director and board committee fees of$53,324 , licensing fees of$6,301 , shareholder reporting costs of$20,487 , listing fees of$14,875 , filing fees of$3,048 , taxes and licenses of$4,094 , and other operating costs of$5,234 . For the three months endedSeptember 30, 2021 , general and administrative costs were$1,010,539 , which consisted of the fair value of vested stock options issued to directors and officers of$347,222 , patent and licensing legal and filing fees and costs of$137,114 , other consulting and professional fees of$138,869 , insurance expense of$92,663 , officer's salary and related costs of$207,264 , cash-based director and board committee fees of$32,500 , licensing fees of$6,301 , shareholder reporting costs of$21,000 , listing fees of$14,500 , filing fees of$4,653 , taxes and licenses of$3,481 , and other operating costs of$4,972 . General and administrative costs increased by$195,574 , or 19.4%, in 2022 as compared to 2021, primarily as a result of an increase in the fair value of vested stock options issued to directors and officers of$49,661 , an increase in patent and licensing legal and filing fees and costs of$134,049 , an increase in insurance expense of$22,320 , an increase in cash-based director and board committee fees of$20,824 , offset by a decrease in other consulting and professional fees of$30,239 . Research and Development Costs. For the three months endedSeptember 30, 2022 , research and development costs were$272,388 , which consisted of contractor costs incurred in connection with the synthesis work done to develop a new supply of LB-100 of$1,246 , clinical and related oversight costs of$34,232 , and pre-clinical research focused on development of additional novel anti-cancer compounds to add to the Company's clinical pipeline of$236,910 . For the three months endedSeptember 30, 2021 , research and development costs were$227,181 , which consisted of contractor costs incurred in connection with the synthesis work done to develop a new supply of LB-100 of$151,814 , clinical and related oversight costs of$7,726 , and pre-clinical research focused on development of additional novel anti-cancer compounds to add to the Company's clinical pipeline of$67,641 . Research and development costs increased by$45,207 , or 19.9%, in 2022 as compared to 2021, primarily as a result of an increase in clinical and related oversight costs of$26,506 and an increase in pre-clinical research focused on development of additional novel anti-cancer compounds to add to the Company's clinical pipeline of$169,269 offset by a decrease in contractor costs incurred in connection with the synthesis work done to develop a new supply of LB-100 of$150,568 . The absence of costs associated with ongoing clinical trials during the three months endedSeptember 30, 2022 and 2021 reflects the slow accrual of patients into such clinical trials and the delay in starting theSpanish Sarcoma Group clinical trial.
Interest Income. For the three months endedSeptember 30, 2022 , the Company had interest income of$3,911 , as compared to interest income of$161 for the three months endedSeptember 30, 2021 , related to the investment of funds generated by the Company's financing activities.
Interest Expense. For the three months ended
37
Foreign Currency Loss. For the three months ended
Net Loss. For the three months endedSeptember 30, 2022 , the Company incurred a net loss of$1,478,009 , as compared to a net loss of$1,238,724 for the three months endedSeptember 30, 2021 .
Nine Months Ended
Revenues. The Company did not have any revenues for the nine months ended
General and Administrative Costs. For the nine months endedSeptember 30, 2022 , general and administrative costs were$3,783,214 , which consisted of the fair value of vested stock options issued to directors and officers of$1,160,649 , patent and licensing legal and filing fees and costs of$944,789 , other consulting and professional fees of$344,085 , insurance expense of$349,254 , officer's salary and related costs of$627,579 , cash-based director and board committee fees of$221,510 , licensing fees of$18,699 , shareholder reporting costs of$26,811 , listing fees of$44,625 , filing fees of$11,460 , taxes and licenses of$12,231 , and other operating costs of$21,522 . For the nine months endedSeptember 30, 2021 , general and administrative costs were$3,762,373 , which consisted of the fair value of vested stock options issued to directors and officers of$1,854,058 , patent and licensing legal and filing fees and costs of$365,466 , other consulting and professional fees of$488,245 , insurance expense of$268,177 , officer's salary and related costs of$578,535 , cash-based director and board committee fees of$60,332 , licensing fees of$18,698 , shareholder reporting costs of$40,760 , listing fees of$43,500 , filing fees of$17,217 , taxes and licenses of$10,594 , and other operating costs of$16,791 . General and administrative costs increased by$20,841 , or 1.0%, in 2022 as compared to 2021, primarily as a result of an increase in patent and licensing legal and filing fees and costs of$579,323 , an increase in officer's salary and related costs of$49,044 , an increase in cash-based director and board committee fees of$161,178 , and an increase in insurance expense of$81,077 , offset by a decrease in the fair value of vested stock options issued to directors and officers of$693,409 , and a decrease in other consulting and professional fees of$144,160 . Research and Development Costs. For the nine months endedSeptember 30, 2022 , research and development costs were$895,649 , which consisted of contractor costs incurred in connection with the synthesis work done to develop a new supply of LB-100 of$352,734 , clinical and related oversight costs of$67,570 , and pre-clinical research focused on development of additional novel anti-cancer compounds to add to the Company's clinical pipeline of$475,345 . For the nine months endedSeptember 30, 2021 , research and development costs were$933,122 , which consisted of contractor costs incurred in connection with the synthesis work done to develop a new supply of LB-100 of$424,141 , clinical and related oversight costs of$382,134 , and pre-clinical research focused on development of additional novel anti-cancer compounds to add to the Company's clinical pipeline of$126,847 . Research and development costs decreased by$37,473 , or 4.0%, in 2022 as compared to 2021, primarily as a result of a decrease in contractor costs incurred in connection with the synthesis work done to develop a new supply of LB-100 of$71,407 , a decrease in clinical and related oversight costs of$314,564 , offset by an increase in pre-clinical research focused on development of additional novel anti-cancer compounds to add to the Company's clinical pipeline of$348,498 . Interest Income. For the nine months endedSeptember 30, 2022 , the Company had interest income of$4,211 , as compared to interest income of$487 for the nine months endedSeptember 30, 2021 , related to the investment of funds generated by the Company's financing activities. 38
Interest Expense. For the nine months endedSeptember 30, 2022 , the Company had interest expense of$5,240 , as compared to interest expense of$2,944 for the nine months endedSeptember 30, 2021 related to the financing of its directors and officers liability insurance policy premium. Foreign Currency Loss. For the nine months endedSeptember 30, 2022 , the Company had a foreign currency loss of$1,339 , as compared to a foreign currency loss of$1,082 for the nine months endedSeptember 30, 2021 , from foreign currency transactions. Net Loss. For the nine months endedSeptember 30, 2022 , the Company incurred a net loss of$4,681,231 , as compared to a net loss of$4,699,034 for the nine months endedSeptember 30, 2021 .
Liquidity and Capital Resources -
The Company's condensed consolidated statements of cash flows as discussed
herein are presented below.
Nine Months Ended September 30,
2022 2021
Net cash used in operating activities$ (3,403,289 ) $ (2,996,066 ) Net cash provided by (used in) investing activities - - Net cash provided by financing activities 5,141,384
3,887,394
Net increase in cash $ 1,738,095 $ 891,328
At September 30, 2022 , the Company had working capital of $6,411,140 , as
compared to working capital of $4,790,338 at December 31, 2021 , reflecting an
increase in working capital of $1,620,802 for the nine months ended September
30, 2022 . The increase in working capital during the nine months ended September
30, 2022 was the result of the Company completing the sale of 2,900,000 shares
of common stock at a price of $2.00 per share in a registered direct equity
offering on April 12, 2022 , generating net proceeds of $5,141,384 , reduced by
the funding of the Company's ongoing research and development activities and
other ongoing operating expenses, including maintaining and developing its
patent portfolio. At September 30, 2022 , the Company had cash of $6,561,840
available to fund its operations.
The Company's ability to continue as a going concern is dependent upon its
ability to raise additional equity capital to fund its research and development
activities and to ultimately achieve sustainable operating revenues and
profitability. The amount and timing of future cash requirements depends on the
pace and design of the Company's clinical trial program, which, in turn, depends
on the availability of operating capital to fund such activities.
Based on current operating plans, the Company estimates that existing cash
resources will provide sufficient working capital to fund the current clinical
trial program with respect to the development of the Company's lead anti-cancer
clinical compound LB-100 through approximately September 30, 2023 . However,
existing cash resources will not be sufficient to complete development of and
obtain regulatory approval for the Company's product candidate, and the Company
will need to raise significant additional capital to do so. In addition, the
Company's operating plan may change as a result of many factors currently
unknown, and additional funds may be needed sooner than planned.
As market conditions present uncertainty as to the Company's ability to secure
additional funds, there can be no assurances that the Company will be able to
secure additional financing on acceptable terms, as and when necessary, to
continue to conduct operations. There is also significant uncertainty as to the
effect that the coronavirus pandemic may have on the Company's clinical trial
schedule and the amount and type of financing available to the Company in the
future.
If cash resources are insufficient to satisfy the Company's ongoing cash
requirements, the Company would be required to scale back or discontinue its
clinical trial program, as well as its licensing and patent prosecution efforts
and its technology and product development efforts, or obtain funds, if
available, through strategic alliances or joint ventures that could require the
Company to relinquish rights to and/or control of LB-100, or to discontinueoperations 39 Operating Activities. For the nine months endedSeptember 30, 2022 , operating activities utilized cash of$3,403,289 , as compared to utilizing cash of$2,996,066 for the nine months endedSeptember 30, 2021 , to fund the Company's ongoing research and development activities and to fund its other ongoing operating expenses, including maintaining and developing its patent portfolio.
Investing Activities. For the nine months ended
Financing Activities. For the nine monthsSeptember 30, 2022 , financing activities consisted of the gross proceeds from the sale of common stock in the Company's direct equity offering of$5,800,000 , reduced by offering costs of$658,616 . For the nine months endedSeptember 30, 2021 , financing activities consisted of the gross proceeds from the sale of common stock in the Company's direct equity offering of$4,192,478 , reduced by offering costs of$502,717 ,$17,100 from the exercise of common stock warrants, and$201,000 from the exercise of common stock options. The Company also paid public offering costs of$20,467 during the nine months endedSeptember 30, 2021 related to the Company's financing activities. Principal Commitments Clinical Trial Agreements AtSeptember 30, 2022 , the Company's unpaid remaining contractual commitments pursuant to clinical trial agreements, and clinical trial monitoring agreements, as described below, aggregated$8,002,000 , which are currently scheduled to be incurred throughDecember 31, 2025 . The Company's ability to conduct and fund these contractual commitments is subject to the timely availability of sufficient capital to fund such expenditures, as well as any changes in the allocation or reallocation of such funds to the Company's current or future clinical trial programs. The Company expects that the full amount of these expenditures will be incurred only if such clinical trial programs are conducted as originally designed and their respective enrollments and duration are not modified or reduced. Clinical trial programs, such as the types that the Company is engaged in, can be highly variable and can frequently involve a series of changes and modifications over time as clinical data is obtained and analyzed, and are frequently modified, suspended or terminated before the clinical trial endpoint. Accordingly, such contractual commitments as discussed herein should be considered as estimates only based on current clinical assumptions and conditions, and are typically subject to significant revisions over time. Moffitt. EffectiveAugust 20, 2018 , the Company entered into a Clinical Trial Research Agreement with theMoffitt Cancer Center andResearch Institute Hospital Inc. ,Tampa, Florida , effective for a term of five years, unless terminated earlier by the Company pursuant to 30 days written notice. Pursuant to the Clinical Trial Research Agreement, Moffitt agreed to conduct and manage a Phase 1b/2 clinical trial to evaluate the therapeutic benefit of the Company's lead anti-cancer clinical compound LB-100 to be administered intravenously in patients with low or intermediate-1 risk myelodysplastic syndrome (MDS). InNovember 2018 , the Company received approval from theU.S. Food and Drug Administration for its Investigational New Drug Application ("IND") to conduct a Phase 1b/2 clinical trial to evaluate the therapeutic benefit of LB-100 in patients with low and intermediate-1 risk MDS who have failed or are intolerant of standard treatment. Patients with MDS, although usually older, are generally well except for severe anemia requiring frequent blood transfusions. This Phase 1b/2 clinical trial utilizes LB-100 as a single agent in the treatment of patients with low and intermediate-1 risk MDS, including patients with del(5q) myelodysplastic syndrome (del5qMDS) failing first line therapy. The bone marrow cells of patients with del5qMDS are deficient in PP2A by virtue of an acquired mutation and are especially vulnerable to further inhibition of PP2A by LB-100. The clinical trial began at a single site inApril 2019 and the first patient was entered into the clinical trial inJuly 2019 . A total enrollment of 41 patients is planned. An interim analysis will be done after the first 21 patients are entered. If there are 3 or more responders but fewer than 7, an additional 20 patients will be entered. If at any point there are 7 or more responders, this will be sufficient evidence to support continued development of LB-100 for the treatment of low and intermediate-1 risk MDS. Recruitment has been slow and the Covid-19 pandemic has further reduced recruitment of patients into the protocol. At the current rate of accrual, the clinical trial is expected to be completed byJune 30, 2025 . However, with additional funds, the Company would consider adding two additional MDS centers to the Phase 2 portion of the study to accelerate patient accrual. 40 During the three months endedSeptember 30, 2022 and 2021, the Company incurred costs of$9,218 and$0 , respectively, pursuant to this agreement, which have been included in research and development costs in the Company's consolidated statements of operations. During the nine months endedSeptember 30, 2022 and 2021, the Company incurred costs of$18,623 and$17,693 , respectively, pursuant to this agreement, which have been included in research and development costs in the Company's consolidated statements of operations. As ofSeptember 30, 2022 , total costs of$123,300 have been incurred pursuant to this agreement. The Company's aggregate commitment pursuant to this agreement, less amounts previously paid to date, totaled approximately$590,000 as ofSeptember 30, 2022 , which is expected to be incurred throughDecember 31, 2025 . GEIS. EffectiveJuly 31, 2019 , the Company entered into a Collaboration Agreement for an Investigator-Initiated Clinical Trial with theSpanish Sarcoma Group (Grupo Español de Investigación en Sarcomas or "GEIS"),Madrid, Spain , to carry out a study entitled "Randomized phase I/II trial of LB-100 plus doxorubicin vs. doxorubicin alone in first line of advanced soft tissue sarcoma". The purpose of this clinical trial is to obtain information with respect to the efficacy and safety of LB-100 combined with doxorubicin in soft tissue sarcomas. Doxorubicin is the global standard for initial treatment of advanced soft tissue sarcomas ("ASTS"). Doxorubicin alone has been the mainstay of first line treatment of ASTS for over 40 years, with little therapeutic gain from adding cytotoxic compounds to or substituting other cytotoxic compounds for doxorubicin. In animal models, LB-100 consistently enhances the anti-tumor activity of doxorubicin without apparent increases in toxicity. GEIS has a network of referral centers inSpain and acrossEurope that have an impressive track record of efficiently conducting innovative studies in ASTS.The Company agreed to provide GEIS with a supply of LB-100 to be utilized in the conduct of this clinical trial, as well as to provide funding for the clinical trial. The goal was to enter approximately 150 patients in this clinical trial over a period of two years. As advanced sarcoma is a very aggressive disease, the design of the study assumes a median progression free survival (PFS, no evidence of disease progression or death from any cause) of 4.5 months in the doxorubicin arm and an alternative median PFS of 7.5 months in the doxorubicin plus LB-100 arm to demonstrate a statistically significant decrease in relative risk of progression or death by adding LB-100. There is a planned interim analysis of the primary endpoint when approximately 50% of the 102 events required for final analysis is reached.
The Company had previously expected that this clinical trial would commence
during the quarter ended
In order to manufacture a new inventory supply of LB-100 for the GEIS clinical trial, the Company engaged a number of vendors to carry out the multiple tasks needed to make and gain approval of a new clinical product for investigational study inSpain . These tasks include the synthesis under good manufacturing practices (GMP) of the active pharmacologic ingredient (API), with documentation of each of the steps involved by an independent auditor. The API was then transferred to a vendor that prepares the clinical drug product, also under GMP conditions documented by an independent auditor. The clinical drug product was then sent to a vendor to test for purity and sterility, provide appropriate labels, store the drug, and distribute the drug to the clinical centers for use in the clinical trials. A formal application documenting all steps taken to prepare the clinical drug product for clinical use must be submitted to the appropriate regulatory authorities for review and approval before being used in a clinical trial. As ofSeptember 30, 2022 , this program to provide new inventory of the clinical drug product for theSpanish Sarcoma Group study, and potentially for subsequent multiple trials within theEuropean Union , had cost$1,144,041 . While the production of new inventory has been completed, immaterial amounts of trailing costs are expected. OnOctober 13, 2022 , the Company announced that theSpanish Agency for Medicines andHealth Products (Agencia Española de Medicamentos y Productos Sanitarios or "AEMPS") had authorized a Phase 1b/randomized Phase 2 study of LB-100, the Company's lead clinical compound, plus doxorubicin, versus doxorubicin alone, the global standard for initial treatment of advanced soft tissue sarcomas (ASTS). Consequently, the GEIS clinical trial is now scheduled to commence during late 2022 or the first quarter of 2023 and to be completed byJune 30, 2025 . Up to 170 patents will be entered into the clinical trial. The Phase 1b section of the protocol is expected to be completed byDecember 31, 2023 , at which time the Company expects to have data on both response and toxicity from this portion of the clinical trial. 41 The interim analysis of this clinical trial will be done before full accrual of patients is completed to determine whether the study has the possibility of showing superiority of the combination of LB-100 plus doxorubicin compared to doxorubicin alone. A positive study would have the potential to change the standard therapy for this disease after four decades of failure to improve the marginal benefit of doxorubicin alone. The Company's agreement with GEIS provides for various payments based on achieving specific milestones over the term of the agreement. ThroughSeptember 30, 2022 , the Company has paid GEIS an aggregate of$67,582 towards the second milestone payment for current work being done under this agreement. During the three months endedSeptember 30, 2022 and 2021, the Company did not incur any costs pursuant to this agreement. During the nine months endedSeptember 30, 2022 and 2021, the Company incurred costs of$0 and$24,171 , respectively, pursuant to this agreement, which have been included in research and development costs in the Company's consolidated statements of operations. As ofSeptember 30, 2022 , total costs of$155,053 have been incurred pursuant to this agreement. The Company's aggregate commitment pursuant to this agreement, less amounts previously paid to date, totaled approximately$3,836,000 as ofSeptember 30, 2022 , which is expected to be incurred throughDecember 31, 2025 . OnOctober 7, 2022 , the third milestone pursuant to this agreement was achieved. Accordingly, as of that date, the balance remaining pursuant to the second milestone of$18,244 , and the amount due upon achieving the third milestone of$254,543 became due, and were paid subsequent toSeptember 30, 2022 . City of Hope. EffectiveJanuary 18, 2021 , the Company executed a Clinical Research Support Agreement with theCity of Hope National Medical Center , an NCI-designated comprehensive cancer center, andCity of Hope Medical Foundation (collectively, "City of Hope"), to carry out a Phase 1b clinical trial of LB-100, the Company's first-in-class protein phosphatase inhibitor, combined with a standard regimen for treatment of untreated extensive- stage disease small cell lung cancer (ED-SCLC). LB-100 will be given in combination with carboplatin, etoposide and atezolizumab, an FDA-approved but marginally effective regimen, to previously untreated ED-SCLC patients. The dose of LB-100 will be escalated with the standard fixed doses of the 3-drug regimen to reach a recommended Phase 2 dose (RP2D). Patient entry will be expanded so that a total of 12 patients will be evaluable at the RP2D to confirm the safety of the LB-100 combination and to look for potential therapeutic activity as assessed by objective response rate, duration of overall response, progression-free-survival and overall survival. The clinical trial was initiated onMarch 9, 2021 , with patient accrual expected to take approximately two years to complete. However, patient accrual has been slower than expected. The Company is currently seeking to add two additional centers to increase the rate of patient accrual. With the additional sites, the Company expects this clinical trial to be completed byDecember 31, 2024 . Without additional sites, the completion date for this clinical trial will be no sooner thanDecember 31, 2025 . During the three months endedSeptember 30, 2022 and 2021, the Company did not incur any costs pursuant to this agreement. During the nine months endedSeptember 30, 2022 and 2021, the Company incurred costs of$0 and$525,528 , respectively, pursuant to this agreement. The Company's aggregate commitment pursuant to this agreement, less amounts previously paid to date, totaled approximately$2,433,000 as ofSeptember 30, 2022 , which is expected to be incurred throughDecember 31, 2024 , based upon a target of 42 enrollees. If a significant number of patients fail during the dose-escalation process, an increase of up to 12 patients would likely be necessary, at an estimated additional cost of approximately$800,000 . The Company currently expects that enrollment in this clinical trial will range from approximately 18 to 30 enrollees, with 24 enrollees as the most likely number. Should fewer than 42 enrollees be required, the Company has agreed to compensate City of Hope on
a per enrollee basis. National Cancer Institute Pharmacologic Clinical Trial. InMay 2019 , theNational Cancer Institute (NCI) initiated a glioblastoma (GBM) pharmacologic clinical trial. During the fourth quarter of 2019, the NCI enrolled the first two patients of a planned eight patient pharmacologic study of the ability of LB-100 to enter the brain and penetrate recurrent brain tumors in patients where surgical removal of the cancers is indicated (clinical trials registry NCT03027388). This study is being conducted and funded by the NCI under aCooperative Research and Development Agreement, with the Company being required to provide the LB-100 clinical compound. 42 Primary malignant brain tumors (gliomas) are very challenging to treat. Radiation combined with the chemotherapeutic drug temozolomide has been the mainstay of therapy of the most aggressive gliomas (glioblastoma multiforme or GBM) for decades, with some further benefit gained by the addition of one or more anti-cancer drugs, but without major advances in overall survival for the majority of patients. In animal models of GBM, the Company's novel protein phosphatase inhibitor, LB-100, has been found to enhance the effectiveness of radiation, temozolomide chemotherapy treatments and immunotherapy, raising the possibility that LB-100 may improve outcomes of standard GBM treatment in the clinic. Although LB-100 has proven safe in patients at doses associated with apparent anti-tumor activity against several human cancers arising outside the brain, the ability of LB-100 to penetrate tumor tissue arising in the brain is not known. Unfortunately, many drugs potentially useful for GBM treatment do not enter the brain in amounts necessary for anti-cancer action. The neurosurgical unit at the NCI, which had been closed to research studies due to the Covid-19 epidemic, was reopened and patient accrual has been completed, and the Company is awaiting the resulting data. There is an urgent need to improve therapy for this type of aggressive brain tumor. If the NCI study shows that LB-100 does penetrate the brain, a clinical study of LB-100 in combination with standard therapy for GBM, the drug temozolomide and radiation, both of which have been well documented in pre-clinical studies to be significantly enhanced by LB-100, would be of significant interest to neuro-oncologists frustrated by decades of limited advances in therapy for this common brain
tumor in adults. The NCI study is designed to determine the extent to which LB-100 enters recurrent malignant gliomas. Patients having surgery to remove one or more tumors will receive one dose of LB-100 prior to surgery and have blood and tumor tissue analyzed to determine the amount of LB-100 present and to determine whether the cells in the tumors show the biochemical changes expected to be present if LB-100 reaches its molecular target. As a result of the innovative design of the NCI study, data from a few patients should be sufficient to provide a sound rationale for conducting a larger clinical trial to determine the effectiveness of adding LB-100 to the standard treatment regimen for GBMs. Five patients have been entered and analysis of the blood and tissue will now proceed. If there is evidence in at least two of the patients of penetration of LB 100 into tumor tissue, the study will be deemed as successful.
Clinical Trial Monitoring Agreements
Moffitt. OnSeptember 12, 2018 , the Company finalized a work order agreement withTheradex Systems, Inc. ("Theradex"), an international contract research organization ("CRO"), to monitor the Phase 1b/2 clinical trial being managed and conducted by Moffitt. The clinical trial began inApril 2019 and the first patient was entered into the clinical trial inJuly 2019 . At the current rate of accrual, the clinical trial is expected to be completed byJune 30, 2025 . Costs under this work order agreement are estimated to be approximately$954,000 , with such payments expected to be divided approximately 94% to Theradex for services and approximately 6% for payments for pass-through costs. The costs of the Phase 1b/2 clinical trial being paid to or through Theradex are being recorded and charged to operations based on the periodic documentation provided by the CRO. During the three months endedSeptember 30, 2022 and 2021, the Company incurred costs of$11,953 and$869 , respectively, pursuant to this work order. During the nine months endedSeptember 30, 2022 and 2021, the Company incurred costs of$19,791 and$9,350 , respectively, pursuant to this work order. As ofSeptember 30, 2022 , total costs of$111,676 have been incurred pursuant to this work order agreement. The Company's aggregate commitment pursuant to this clinical trial monitoring agreement, less amounts previously paid to date, totaled approximately$853,000 as ofSeptember 30, 2022 , which is expected to be incurred throughJune 30, 2025 . City of Hope. OnFebruary 5, 2021 , the Company signed a new work order agreement with Theradex to monitor the City of Hope investigator-initiated clinical trial in small cell lung cancer in accordance with FDA requirements for oversight by the sponsoring party. Costs under this work order agreement are estimated to be approximately$335,000 . During the three months endedSeptember 30, 2022 and 2021, the Company incurred costs of$7,731 and$6,857 , respectively, pursuant to this work order. During the nine months endedSeptember 30, 2022 and 2021, the Company incurred costs of$23,466 and$21,170 , respectively, pursuant to this work order. As ofSeptember 30, 2022 , total costs of$48,092 have been incurred pursuant to this work order agreement. The Company's aggregate commitment pursuant to this clinical trial monitoring agreement, less amounts previously paid to date, totaled approximately$290,000 as ofSeptember 30, 2022 , which is expected to be incurred throughJune 30, 2025 . 43
Patent and License Agreements
INSERM . OnMarch 22, 2018 , the Company entered into a Patent Assignment and Exploitation Agreement withINSERM TRANSFERT SA , acting as delegatee of theFrench National Institute of Health and Medical Research , for the assignment to the Company ofINSERM'S interest inUnited States Patent No. 9,833,450 entitled "Oxabicyloheptanes and Oxabicycloheptenes for the Treatment of Depressive and Stress Disorders", which was filed with the United States Patent and Trademark Office in the name ofINSERM and the Company as co-owners onFebruary 19, 2015 and granted onMay 12, 2017 , and related patent applications and filings.INSERM is a French public institution dedicated to research in the field of health and medicine that had previously entered into a Material Transfer Agreement with the Company to allowINSERM to conduct research on the Company's proprietary compound LB-100 and/or its analogs for the treatment of depressive or stress disorders in humans. Pursuant to the Agreement, the Company has agreed to make certain milestone payments toINSERM aggregating up to$1,750,000 upon achievement of development milestones and up to$6,500,000 upon achievement of commercial milestones. The Company also agreed to payINSERM certain commercial royalties on net sales of products attributed to the Agreement. The Company's initial plan was to complete the validation process to evaluate LB-100 for the treatment of depressive or stress disorders in humans within three years; however, the exploitation of this patent for the treatment of depressive and stress disorders in humans will require substantial additional capital and/or a joint venture or other type of business arrangement with a pharmaceutical company with substantially greater capital and business resources than those available to the Company. As there can be no assurances that the Company will be able to obtain the capital or business resources necessary to focus on the exploitation of this patent, it is uncertain as to when, if at all, the Company may reach any of the development or commercialization milestones under the Agreement. As ofSeptember 30, 2022 andDecember 31, 2021 , no amounts were
due under this agreement. Moffitt. EffectiveAugust 20, 2018 , the Company entered into an Exclusive License Agreement with Moffitt. Pursuant to the License Agreement, Moffitt granted the Company an exclusive license under certain patents owned by Moffitt (the "Licensed Patents") relating to the treatment of MDS and a non-exclusive license under inventions, concepts, processes, information, data, know-how, research results, clinical data, and the like (other than the Licensed Patents) necessary or useful for the practice of any claim under the Licensed Patents or the use, development, manufacture or sale of any product for the treatment of MDS which would otherwise infringe a valid claim under the Licensed Patents. The Company was obligated to pay Moffitt a non-refundable license issue fee of$25,000 after the first patient is entered into a Phase 1b/2 clinical trial to be managed and conducted by Moffitt. The clinical trial began at a single site inApril 2019 and the first patient was entered into the clinical trial inJuly 2019 . The Company is also obligated to pay Moffitt an annual license maintenance fee of$25,000 commencing on the first anniversary of the Effective Date and every anniversary thereafter until the Company commences payment of minimum royalty payments. The Company has also agreed to pay non-refundable milestone payments to Moffitt, which cannot be credited against earned royalties payable by the Company, based on reaching various clinical and commercial milestones aggregating$1,897,000 , subject to reduction by 40% under certain circumstances relating to the status of Valid Claims, as such term is defined in the License Agreement. During the three months endedSeptember 30, 2022 and 2021, the Company recorded charges to operations of$6,301 and$6,301 , respectively, in connection with its obligations under the License Agreement. During the nine months endedSeptember 30, 2022 and 2021, the Company recorded charges to operations of$18,699 and$18,698 , respectively, in connection with its obligations under the License Agreement. As ofSeptember 30, 2022 , no milestones had yet been attained. The Company will be obligated to pay Moffitt earned royalties of 4% on worldwide cumulative net sales of royalty-bearing products, subject to reduction to 2% under certain circumstances, on a quarterly basis, with a minimum royalty payment of$50,000 in the first four years after sales commence, and$100,000 in year five and each year thereafter, subject to reduction by 40% under certain circumstances relating to the status of Valid Claims, as such term is defined in the License Agreement. The Company's obligation to pay earned royalties under the License Agreement commences on the date of the first sale of a royalty-bearing product, and shall automatically expire on a country-by-country basis on the date on which the last valid claim of the Licensed Patents expires, lapses or is declared invalid, and the obligation to pay any earned royalties under the License Agreement shall terminate on the date on which the last valid claim of the Licensed Patents expires, lapses, or is declared to be invalid
in all countries. 44
Employment Agreements with Officers
During July andAugust 2020 , the Company entered into one-year employment agreements with its executive officers, consisting of Dr.John S. Kovach ,Eric J. Forman , Dr.James S. Miser , andRobert N. Weingarten , which provided for aggregate annual compensation of$640,000 , payable monthly. The employment agreements are automatically renewable for additional one-year periods unless terminated by either party upon 60 days written notice prior to the end of the applicable one-year period, or by death, or by termination for cause. These employment agreements were automatically renewed for additional one-year periods in July andAugust 2021 and 2022. OnApril 9, 2021 , the Board of Directors increased the annual compensation ofEric J. Forman , the Company's Chief Administrative Officer, Dr.James S. Miser , the Company's Chief Medical Officer, andRobert N. Weingarten , the Company's Chief Financial Officer, under the employment agreements, such that the total aggregate annual compensation of all officers increased to$775,000 , effectiveMay 1, 2021 .
Other Significant Agreements and Contracts
OnDecember 24, 2013 , the Company entered into an agreement withNDA Consulting Corp. for consultation and advice in the field of oncology research and drug development. As part of the agreement, NDA also agreed to cause its president, Dr.Daniel D. Von Hoff , M.D., to become a member of the Company'sScientific Advisory Committee . The term of the agreement was for one year and provided for a quarterly cash fee of$4,000 . The agreement has been automatically renewed for additional one-year terms on its anniversary date since 2014. Consulting and advisory fees charged to operations pursuant to this agreement were$4,000 and$4,000 for the three months endedSeptember 30, 2022 and 2021, respectively, and$12,000 and$12,000 for the nine months endedSeptember 30, 2022 and 2021, which were included in research and development costs in the consolidated statements of operations. EffectiveSeptember 14, 2015 , the Company entered into a Collaboration Agreement with BioPharmaWorks, pursuant to which the Company engaged BioPharmaWorks to perform certain services for the Company. Those services included, among other things: (a) assisting the Company to (i) commercialize its products and strengthen its patent portfolio, (ii) identify large pharmaceutical companies with potential interest in the Company's product pipeline, and (iii) prepare and deliver presentations concerning the Company's products; (b) at the request of the Board of Directors, serving as backup management for up to three months should the Company's Chief Executive Officer and scientific leader be temporarily unable to carry out his duties; (c) being available for consultation in drug discovery and development; and (d) identifying providers and overseeing tasks relating to clinical use and commercialization of new compounds. BioPharmaWorks was founded in 2015 by former Pfizer scientists with extensive multi-disciplinary research and development and drug development experience. The Collaboration Agreement was for an initial term of two years and automatically renews for subsequent annual periods unless terminated by a party not less than 60 days prior to the expiration of the applicable period. In connection with the Collaboration Agreement, the Company agreed to pay BioPharmaWorks a monthly fee of$10,000 , subject to the right of the Company to pay a negotiated hourly rate in lieu of the monthly payment and agreed to issue to BioPharmaWorks certain equity-based compensation. Excluding expense reimbursements, the Company recorded charges to operations pursuant to this Collaboration Agreement of$30,000 and$30,000 for the three months endedSeptember 30, 2022 and 2021, respectively, and$90,000 and$90,000 for the nine months endedSeptember 30, 2022 and 2021, respectively, which were included in research and development costs in the consolidated statements of operations. EffectiveAugust 12, 2020 , the Company entered into a Master Service Agreement with theFoundation for Angelman Syndrome Therapy (FAST) to collaborate in supporting pre-clinical studies of the potential benefit of LB-100 in a mouse model of Angelman Syndrome (AS) as reported in The Proceedings ofThe National Academy of Science (Wang et al,June 3, 2019 ). The pre-clinical studies were to be conducted at TheUniversity of California - Davis under the direction of Dr.David Segal , an internationally recognized leader in AS research. If the pre-clinical studies confirm that LB-100 reduces AS signs in rodent models, the Company has agreed to enter into discussions with FAST with respect to possible collaborations to most efficiently assess the benefit of LB-100 in patients with AS, which is a rare disease affecting an estimated one out of 12,000 to one out of 20,000 persons inthe United States . The genetic cause of AS, reduced function of a specific maternal gene called Ube3, has been understood for some time, but the molecular abnormality resulting from the genetic lesion has now been shown to be increased concentrations of protein phosphatase 2A (PP2A), a molecular target of the Company's investigational compound, LB-100. The Company has agreed to provide FAST with a supply of LB-100 to be utilized in the conduct of this study, which was initially expected to be completed within three years. Conditioned on FAST's completion of this study, the Company has agreed to pay FAST five percent (5%) of all proceeds, as defined in theMaster Service Agreement, received by the Company, up to a maximum of$250,000 from the exploitation of the study results. 45 The research team at theUniversity of California - Davis recently completed their pre-clinical study of the potential benefit of LB-100 in a mouse model of AS, and the results are currently under review by FAST. The preliminary analysis indicates that the positive results previously reported by Chinese investigators were not confirmed in the US model. The Company is currently awaiting input from FAST as to whether it intends to continue to pursue pre-clinical studies of LB 100. To date, FAST has not indicated whether it desires to pursue further studies of LB-100, OnOctober 8, 2021 , the Company entered into a Development Collaboration Agreement with theNetherlands Cancer Institute ,Amsterdam (NKI), one of the world's leading comprehensive cancer centers, andOncode Institute ,Utrecht , a major independent cancer research center, to identify the most promising drugs to be combined with LB-100, and potentially LB-100 analogues, to be used to treat a range of cancers, as well as to identify the specific molecular mechanisms underlying the identified combinations. The Company has agreed to fund the study and provide a sufficient supply of LB-100 to conduct the study. The study is expected to take approximately two years to conduct. During the three months endedSeptember 30, 2022 , the Company incurred charges in the amount of$46,068 with respect to this agreement, which amount is included in research and development costs in the Company's consolidated statements of operations. During the nine months endedSeptember 30, 2022 , the Company incurred charges in the amount of$149,184 with respect to this agreement, which amount is included in research and development costs in the Company's consolidated statements of operations. As ofSeptember 30, 2022 , total costs of$204,433 have been incurred pursuant to this collaboration agreement. The Company's aggregate commitment pursuant to this collaboration agreement, less amounts previously paid to date, totaled approximately$250,000 as ofSeptember 30, 2022 , which is expected to be incurred throughJune 30, 2025 . As the work is being conducted inEurope and is paid for in Euros, final costs are subject to foreign currency fluctuations between the United States Dollar and the Euro. OnFebruary 2, 2012 , the Company entered into a contract with MRI Global for the analysis and stability testing of LB-100. OnJune 10, 2022 , the contract was amended to reflect a new total contract price of$273,980 and an estimated completion date ofApril 30, 2023 . During the three months endedSeptember 30, 2022 and 2021, the Company incurred costs of$6,749 and$0 , respectively, pursuant to this work order. During the nine months endedSeptember 30, 2022 and 2021, the Company incurred costs of$27,102 and$17,432 , respectively, pursuant to this work order. As ofSeptember 30, 2022 , total costs of$212,778 have been incurred pursuant to this work order agreement. The Company's aggregate commitment pursuant to this clinical trial monitoring agreement, less amounts previously paid to date, totaled approximately$61,000 as ofSeptember 30, 2022 .
Off-Balance Sheet Arrangements
At
Trends, Events and Uncertainties
Research and development of new pharmaceutical compounds is, by its nature, unpredictable. Although the Company undertakes research and development efforts with commercially reasonable diligence, there can be no assurance that the Company's cash position will be sufficient to enable it to develop pharmaceutical compounds to the extent needed to create future revenues sufficient to sustain operations.
There can be no assurances that the Company's pharmaceutical compounds will obtain the regulatory approvals and market acceptance to achieve sustainable revenues sufficient to support operations. Even if the Company is able to generate revenues, there can be no assurances that it will be able to achieve operating profitability or positive operating cash flows. There can be no assurances that the Company will be able to secure additional financing, to the extent required, on acceptable terms or at all. If cash resources are insufficient to satisfy the Company's ongoing cash requirements, the Company would be required to reduce or discontinue its research and development programs, or attempt to obtain funds, if available (although there can be no assurances), through strategic alliances that may require the Company to relinquish rights to certain of its pharmaceutical compounds, or to curtail or discontinue its operations entirely. Other than as discussed above, the Company is not currently aware of any trends, events or uncertainties that are likely to have a material effect on its financial condition in the near term, although it is possible that new trends or events may develop in the future that could have a material effect on the Company's financial condition.
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