PHIO PHARMACEUTICALS CORP. In this document, "we," "our," "ours," "us," "Phio" and the "Company" refers toPhio Pharmaceuticals Corp. and our subsidiary,MirImmune, LLC and the ongoing business operations ofPhio Pharmaceuticals Corp. andMirImmune, LLC , whether conducted throughPhio Pharmaceuticals Corp. orMirImmune, LLC . This management's discussion and analysis of financial condition as ofSeptember 30, 2020 and results of operations for the three and nine months endedSeptember 30, 2020 and 2019 should be read in conjunction with the financial statements included in our Annual Report on Form 10-K for the year endedDecember 31, 2019 , which was filed with theSecurities and Exchange Commission (the "SEC") on
March 26, 2020 . This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "intends," "believes," "anticipates," "indicates," "plans," "expects," "suggests," "may," "would," "should," "potential," "designed to," "will," "ongoing," "estimate," "forecast," "predict," "could" and similar references, although not all forward-looking statements contain these words. Forward-looking statements are neither historical facts nor assurances of future performance. These statements are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Risks that could cause actual results to vary from expected results expressed in our forward-looking statements include, but are not limited to, the impact to our business and operations by the recent coronavirus outbreak, the development of our product candidates, our ability to execute on business strategies, our ability to develop our product candidates with collaboration partners, the timeline and duration for advancing our product candidates into clinical development, results from our preclinical and clinical activities and our ability to obtain future financing. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements as a result of a number of important factors, including those identified in our Annual Report on Form 10-K for the year endedDecember 31, 2019 under the heading "Risk Factors" and in other filings the Company periodically makes with theSEC . Therefore, you should not rely on any of these forward-looking statements. Forward-looking statements contained in this Quarterly Report on Form 10-Q speak as of the date hereof and the Company does not undertake to update any of these forward-looking statements to reflect a change in its views or events or circumstances that occur after the date of this report. OverviewPhio Pharmaceuticals Corp. is a biotechnology company developing the next generation of immuno-oncology therapeutics based on our self-delivering RNAi ("INTASYL™") therapeutic platform. Our efforts are focused on silencing tumor-induced suppression of the immune system through our proprietary INTASYL platform with utility in immune cells and the tumor micro-environment. Our goal is to develop powerful INTASYL therapeutic compounds that can weaponize immune effector cells to overcome tumor immune escape, thereby potentially providing patients a powerful new treatment option that goes beyond current treatment modalities. Our development efforts are based on our broadly patented INTASYL technology platform. Our INTASYL compounds do not require a delivery vehicle to penetrate into tissues and cells and are designed to "silence" or down-regulate, the expression of a specific gene which is over-expressed in cancer. We believe that our INTASYL platform uniquely positions the Company in the field of immuno-oncology because of this and the following reasons: · Efficient uptake of INTASYL by target cells obviating the need for facilitated delivery (mechanical or formulation); · Does not require permanent genetic modification;
· Can target multiple genes (i.e. multiple immunosuppression pathways) in
a single therapeutic entity;
· Gene silencing by INTASYL has been shown to have a sustained, or
long-term, effect in vivo;
· Favorable clinical safety profile of INTASYL with local administration; and
· Can be readily manufactured under current good manufacturing practices.
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The self-delivering nature of our compounds makes INTASYL ideally suited for use
with adoptive cell transfer ("ACT") treatments and direct therapeutic use. ACT
consists of the infusion of immune cells with antitumor properties, after
growing them in a lab to large numbers. These cells can be derived from
unmodified (i.e. naturally occurring) immune cells, immune cells isolated from
resected tumors, or genetically engineered immune cells that recognize tumor
cells.
Regardless of the source of immune cells (ACT or naturally occurring immune cells), in patients with solid tumors, these cells face several hurdles. Multiple inhibitory mechanisms restrain immune cells from effectively eradicating tumors, including immune checkpoints, reduced cell fitness and cell persistence. Furthermore, the immunosuppressive tumor micro-environment (the "TME") can pose a formidable barrier to immune cell infiltration and function. We have developed a product platform based on our INTASYL technology that allows easy, precise, rapid, and selective non-genetically modified programming of ACT cells (ex vivo, during manufacturing) and of the TME (in vivo, by local application), resulting in reduced immune inhibition and in improved immunotherapy. Adoptive Cell Transfer
ACT includes a number of different types of immunotherapy treatments. These
treatments use immune cells, isolated from patients, donors or retrieved from
allogeneic immune cell banks. They are grown in a lab to large numbers, followed
by administering them to the body to fight the cancer cells. Sometimes, immune
cells that naturally recognize a tumor are used, while other times immune cells
are modified or "genetically engineered" to make them recognize and kill the
cancer cells. There are several types of ACT, including: a.) non-engineered cell
therapy in which immune cells are grown from the patient's tumor or blood, such
as tumor infiltrating lymphocytes ("TILs"), or from donor blood or tissue such
as natural killer ("NK") cells, dendritic cells ("DC") and macrophages, and b.)
genetically engineered immune cells that are genetically modified to recognize
specific tumor proteins and to remain in an activated state (such as T cell
receptor technology ("TCRs"), chimeric antigen receptor ("CAR") T cells, or
CAR-NK cells).
In ACT, such immune cells are then expanded and modified before being returned
and used to treat the patient. Multiple inhibitory mechanisms restrain immune
cells used in ACT from effectively eradicating tumors, including immune
checkpoints, reduced cell fitness and cell persistence, and other barriers to
immune cell infiltration and function mainly in solid tumors. We believe our
INTASYL compounds are ideally suited to be used in combination with ACT, in
order to make these immune cells more effective without the need for additional
complicated manufacturing steps and/or genetic engineering.
Our approach builds on well-established methodologies of ACT and involves the
treatment of immune cells with our INTASYL compounds ex vivo while they are
grown in the lab and before administering them to the patient. Because our
INTASYL compounds do not require a delivery vehicle to penetrate into the cells,
we are able to enhance the function of these cells by merely adding our INTASYL
compounds during the expansion process and without the need for genetic
engineering and without additional needed complex manufacturing steps. By adding
INTASYL to the cell culture media used during the cell expansion, we can reduce
or eliminate the expression of genes that make the immune cells less effective.
For example, with our INTASYL compounds, we can reduce the expression of
immunosuppressive proteins by the therapeutic immune cells, potentially enabling
them to overcome tumor resistance mechanisms and thus improving their ability to
destroy the tumor cells. In various types of immune cells tested to date,
INTASYL treatment results in potent silencing with close to 100% transfection
efficiency and while maintaining nearly full cell viability. After expanding
these cells and enhancing them with INTASYL ex vivo, they are returned to the
patient for treatment.
Our lead product candidate and most advanced program being developed in ACT is PH-762, an INTASYL compound that targets the checkpoint protein PD-1. Checkpoint proteins, such as PD-1, normally act as a type of "off switch" that prevents T cells from attacking certain cells, such as cancer cells, in the body. Our T cells are immune cells that protect the body from cancer cells and infections. Data developed by Phio and with collaborators has shown that PH-762 silences PD-1 checkpoint expression, thereby removing the "off switch" and resulting in enhanced T cell activation and tumor cytotoxicity. Experimental data shows that PH-762 can silence the expression of PD-1 in target human T cells in a potent and durable manner, and can increase function of patient derived TILs for use in ACT, showing that PH-762 is suitable for use both in ACT and as a standalone therapeutic through intra-tumoral injection. This supports the application of INTASYL technology in immunotherapy of cancer. 18 Our second ACT product candidate PH-894, an INTASYL compound that targets BRD4, is a regulator of gene expression impacting cell differentiation. In previous studies, PH-894 has been shown to improve T cell function and persistence by differentiating T cells into a more active state (stem-cell like memory phenotype). Data, completed in partnership with the Karolinska Institutet, demonstrated that the application of PH-894, was shown to silence BRD4 in human T cells during expansion for ACT, which has the potential to confer superior anti-tumor activity, for example by improving T cell persistence. With this data, we expanded our collaboration with the Karolinska Institutet to build upon these findings and develop INTASYL compounds for additional targets and cell types toward clinical application in areas of the Karolinska Institutet's ongoing clinical research. We are also developing our INTASYL compound PH-804 for use in ACT. PH-804 targets the suppressive immune receptor TIGIT, which is a checkpoint protein present on T cells and NK cells. To date, we have shown that PH-804 can silence the expression of TIGIT in NK cells and T cells, overcoming their "off switch" and the cells becoming "weaponized" to kill cancer cells. InMarch 2020 , we entered into a collaboration and option agreement with Medigene AG and the Helmholtz Zentrum München ("HMGU"). This three-way collaboration expands upon our outstanding research agreement with HMGU to design and develop novel candidates for the use of INTASYL compounds in ACT to enhance immune cell function. Under the agreement, Medigene AG will contribute expertise regarding clinical development, as well as proprietary research material and has the option to an exclusive license for the clinical and/or commercial development of certain INTASYL immune cell enhancers. Tumor Micro-Environment The TME is the environment that surrounds and feeds a tumor, including normal cells, blood vessels, immune cells, and the extracellular matrix. The TME is an immunosuppressive environment that inhibits the immune system's natural ability to recognize and destroy tumor cells by negatively impacting how immunosuppressive cells are being attracted and activated. Reprogramming different components of the TME may overcome resistance to immunotherapy. Such reprogramming of the TME by INTASYL compounds through direct local administration into the tumor, could potentially become an important form of therapy. The Company has previously shown in a clinical setting that our INTASYL compounds are safe and well-tolerated following local administration, therefore we believe that our INTASYL technology can not only be used with ACT, but can also be used as an independent therapeutic platform. We have pipeline programs in place for the development of INTASYL compounds for direct administration into the tumor, including the use of PH-762, PH-804 and PH-894 for in situ transfection and activation of immune cells in the TME. Data presented inJanuary 2020 from in vivo studies performed by the Company showed that intra-tumoral injection of a mouse version of PH-804 reduced the tumor growth in colorectal carcinoma tumor bearing mice, which was shown to inhibit tumor growth and was correlated with the silencing of TIGIT mRNA expression and in increase in cytotoxic effector T cells in the TME. Building on the animal data with PH-804, the Company conducted several animal studies with a mouse version of PH-762 and with PH-894 in a validated mouse model of hepatocellular carcinoma. These studies showed that local administration of the mouse version of PH-762 or PH-894 through intra-tumoral injection resulted in potent anti-tumoral effects. The treated animals showed a complete and statistically significant inhibition of tumor growth, whereas placebo treated animals displayed exponential tumor growth. The combined PH-804, PH-762, and PH-894 data further shows that INTASYL compounds can trigger associated changes in the TME such as an increase of TILs, including CD8+ T cells responsible for tumor cell killing, and an increase of activation markers on these cells. These preclinical findings demonstrate that direct injection of INTASYL compounds can successfully infiltrate solid tumors and impact the TME by activating the immune response in animal models of solid tumors resulting in reduced tumor growth. This is one of the key challenges for many other immunotherapy platforms to be able to achieve an adequate therapeutic effect in solid tumors. 19
We are also investigating other relevant compounds for TME targets, such as PH-790, an INTASYL compound targeting PD-L1. PD-L1 is a protein formed by cancer cells that activate the PD-1 "off switch" on immune cells. Our approach with PH-790 is to block the formation of the PD-L1 protein, which may prevent cancer cells from inactivating T cells and attack the cancer, and will be evaluated alongside PH-762. Previously, a series of preclinical in vivo studies in tumor models showed dose-dependent attenuated tumor growth for the INTASYL compounds compared to control groups. Recent data presented at the 35th Annual Meeting ofSociety for Immunotherapy of Cancer inNovember 2020 demonstrated that the antitumoral efficacy of our individual pipeline products, PH-762, PH-790 and PH-804, can be further improved by combining them in a single drug treatment. This data showed that the combination of our INTASYL compounds inhibited tumor growth without having a negative impact on the tolerability of the treatment. Based on our positive preclinical data, the Company is preparing for its first in-human clinical study with PH-762 using intra-tumoral administration for patients with advanced melanoma. The rationale for the study and its design were recently presented at a key opinion leader event held by the Company inJune 2020 with Dr.Caroline Robert of theGustave Roussy Cancer Center inParis, France who will be our lead principal investigator for the trial.
Impact of COVID-19 on our Business
InDecember 2019 , a novel strain of coronavirus was reported to have surfaced inWuhan, China and has since spread to other parts of the world, includingthe United States . InMarch 2020 , theWorld Health Organization (the "WHO") declared the outbreak a pandemic. Health and Safety From the first signs of the outbreak, we have taken proactive measures intended to protect the health and safety of our employees. We have implemented safety measures following the guidance provided by theWHO and theCenters for Disease Control (the "CDC") such as working remotely for employee personnelwho do not need to be physically present in our premises, social distancing protocols, suspending travel, and extensively and frequently disinfecting our workspaces. We expect to continue following these safety measures and may take further actions as we require, as government authorities require or recommend, or as we determine to be in the best interests of our employees, partners and suppliers. Operations The coronavirus pandemic is affectingthe United States and global economies and as a result, government authorities have implemented restrictions and limited certain operations, such as limits on the number of people at a gathering, travel restrictions and stay-at-home orders, to try and slow the spread of coronavirus. Our office and lab space are located in one facility inMarlborough, Massachusetts and onMarch 23, 2020 ,Massachusetts ordered most physical business workplaces closed, mandating work-from-home arrangements, where feasible, in response to the coronavirus pandemic. The order excluded businesses that provide certain essential services, which included companies operating in the biotechnology and life sciences industry. As a result, our facility remained operational with employee personnelwho did not need to be physically present in our premises working remotely during that time. OnMay 18, 2020 ,Massachusetts commenced its four phased approach and re-opening plan of the economy, which allows for the gradual re-opening of each sector, industry and business in line with state mandated workplace safety standards and sector-specific protocols and best practices. The Company's facilities remain operational and are operating in accordance withMassachusetts' mandated requirements, as well as in accordance with the federal government,WHO ,CDC and other governmental authority guidelines. Employee personnelwho do not need to be physically present on our premises are continuing to work remotely, but have the ability to be on site as required. Safety measures are in place for the health and safety of our employees, including formal policies related to health checks, wearing a face mask, staggered scheduling and socially distancing, in line with the guidelines provided by government authorities. While these measures may be modified or extended, we expect that our activities, including our internal research and development functions, will continue to remain largely operational.
We have experienced limited absenteeism from our employees and we do not currently expect that our operations will be significantly impacted by employee absenteeism.
While we believe the impact to our internal operations has been minimal thus far, current and future restrictions may further impact our operations and may slow or diminish our research and development activities. 20 Supply and Services If the measures to contain the outbreak continue or are extended, it may affect our operations and those of third parties on which we rely, including causing disruptions in the supplies we order, outsourced development services for our product candidates and the conduct of current and planned preclinical and clinical studies. Presumably as a result of the coronavirus pandemic, we have begun to see some of our third-party suppliers and service providers on which we rely becoming impacted. If the impact on their operations continue or extend, it may affect our operations. We previously had been able to engage with third-party service providers in areas with limited or no impact (e.g. countries with limited or no restrictions), but with the global spread of the virus and associated restrictions, this has been no longer possible. Our service providers, for example those performing required preclinical research studies, are now facing impacts to their operations, including restrictions on the availability of critical materials that are needed for this type of research. Without a significant and sustained improvement of the current situation, we may experience significant impacts to certain of our development activities outsourced to third-party service providers, however, the ultimate impact on our third-party service providers is highly uncertain and subject to change. If the measures to contain the outbreak are extended or further expanded, it could reduce or delay the availability of supplies and services that we purchase and outsource. This may in turn slow or delay our preclinical and clinical research and development activities, and/or result in higher costs. We anticipate a continued decline in the commencement of new clinical trials, at least in the short-term, as many Institutional Review Boards (the "IRB") are currently focused on reviewing and approving clinical trial protocols related to COVID-19. Additionally, due to the implementation of restrictive measures such as stay-at-home orders by government authorities inthe United States and global economies to try and contain the spread of coronavirus, we anticipate a continued negative impacts, at least in the short-term, in the enrollment and participation of patients in clinical trials outside of those related to COVID-19. The required studies and steps needed to initiate clinical trials with PH-762 in the 2021 timeframe are continuing and ongoing, however, the ultimate impact of the coronavirus pandemic is highly uncertain and subject to change. The Company does not yet know the full extent of potential delays or impacts on its business and preclinical and clinical trial activities.
Liquidity and Capital Resources
While we believe that the coronavirus pandemic has not had a significant impact on our financial condition and results of operations at this time, the extent to which the coronavirus pandemic impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus pandemic and the actions to contain the coronavirus or treat its impact, among others. We believe that our current cash on hand should be sufficient to fund our operations for at least the next twelve months from the date of the release of these financial statements, although the pandemic has created uncertainty around our ability to access capital markets to provide necessary working capital to fund our long term operations. In light of this uncertainty around our ability to access additional working capital, onMay 11, 2020 , the Company received loan proceeds in the amount of$231,252 fromBank of America, N.A ., as lender, pursuant to the PPP under the CARES Act. The PPP loan matures onMay 11, 2022 and bears interest at a rate of 1% per year. The loan may be forgiven if used for eligible purposes, including payroll, benefits, rent and utilities. Monthly principal, interest and other fee payments are deferred until the date on which the determination of PPP loan forgiveness is remitted to the lender, or ten (10) months after the end of the borrower's loan forgiveness covered period. The Company carefully assessed the requirements for application under the PPP and believes that the loan is necessary to support its operations. The Company intends to apply for loan forgiveness and while the Company has used the PPP loan proceeds for the eligible purposes allowed, the Company cannot guarantee that the loan will
be forgiven. 21 In connection with and in addition to the PPP loan, we have taken other proactive steps to control costs in response to the coronavirus pandemic and these actions include the reduction of the salaries of our senior management team by 10% through the remainder of 2020. We believe these savings will help mitigate the financial impact of the coronavirus pandemic. Additionally, while the potential economic impact brought by, and the duration of, the coronavirus pandemic is difficult to assess or predict, the impact of the coronavirus on the global financial markets may reduce our ability to access capital, which could negatively impact our short-term and long-term liquidity and our ability to complete our preclinical and planned clinical studies on a timely basis, or at all. There may be developments outside of our control that require us to adjust our operating plans and given the nature of the situation, cannot reasonably estimate the impact of the coronavirus on our financial condition, results of operations or cash flows in the future. In addition, risk factors identified in our Annual Report on Form 10-K for the year endedDecember 31, 2019 under the heading "Risk Factors," which was filed with theSEC onMarch 26, 2020 , should be read in conjunction with Part II-Item 1A, "Risk Factors," included herein for updates to our risk factors regarding risks associated with the COVID-19 pandemic.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions and could have a material impact on our reported results. There have been no significant changes to our critical accounting policies since the beginning of this fiscal year. Our critical accounting policies are described in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of our Annual Report on Form 10-K for the year endedDecember 31, 2019 , which we filed with theSEC onMarch 26, 2020 . Results of Operations
The following data summarizes the results of our operations for the periods indicated, in thousands:
Three Months Ended Nine Months Ended
September 30, September 30,
Dollar Dollar
Description 2020 2019 Change 2020 2019 Change
Revenues $ - $ - $ - $ - $ 21 $ (21 ) Operating expenses 2,306 2,113 193 6,331
6,339 (8 ) Operating loss (2,306 ) (2,113 ) (193 ) (6,331 ) (6,318 ) (13 ) Net loss (2,309 ) (2,094 ) (215 ) (6,332 ) (6,248 ) (84 ) 22
Comparison of the Three and Nine Months Ended
Operating Expenses
The following table summarizes our total operating expenses, for the periods indicated, in thousands:
Three Months Ended September 30, Nine Months Ended September 30,
Dollar Dollar
Description 2020 2019 Change 2020 2019 Change
Research and
development $ 1,256 $ 1,042 $ 214 $ 3,253 $ 3,277 $ (24 )
General and
administrative 1,050 1,071 (21 ) 3,078 3,062 16
Total operating
expenses $ 2,306 $ 2,113 $ 193 $ 6,331 $ 6,339 $ (8 ) Research and Development Expenses
Research and development expenses relate to compensation and benefits for research and development personnel, facility-related expenses, supplies, external services, costs to acquire technology licenses, expenses associated with preclinical and clinical development activities and other operating costs.
Research and development expenses for the three months endedSeptember 30, 2020 increased 21% as compared with the three months endedSeptember 30, 2019 , primarily due to an increase in the use of third-party service providers to conduct preclinical research studies to support the development of the Company's pipeline programs as compared to the prior year period offset by a decrease in the use of an outside interim temporary labor consultant in the prior year period. Research and development expenses for the nine months endedSeptember 30, 2020 decreased 1% as compared with the nine months endedSeptember 30, 2019 , primarily due to decreases in lab supply purchases, in the use of an outside interim temporary labor consultant and decreased patent-related expenses as compared to the prior year period offset by increases in the use of third-party service providers to conduct preclinical research studies to support the development of the Company's pipeline programs.
General and Administrative Expenses
General and administrative expenses relate to compensation and benefits for general and administrative personnel, facility-related expenses, professional fees for legal, audit, tax and consulting services, as well as other general corporate expenses. General and administrative expenses for the three months endedSeptember 30, 2020 decreased 2% as compared with the three months endedSeptember 30, 2019 , primarily due to a decrease in recruiting fees to support employee hiring activities as compared to the same period in the prior year. General and administrative expenses for the nine months endedSeptember 30, 2020 increased 1% as compared with the nine months endedSeptember 30, 2019 , primarily due to increases in the Company's D&O insurance premiums and the use of business development consultants offset by a decrease in recruiting fees to support employee hiring activities as compared to the same period in the prior year. 23
Liquidity and Capital Resources
OnAugust 8, 2017 , the Company entered into a purchase agreement (the "2017 Purchase Agreement") and a registration rights agreement withLincoln Park Capital Fund, LLC ("LPC"), pursuant to which the Company had the right to sell to LPC up to$15,000,000 in shares of the Company's common stock, subject to certain limitations and conditions set forth therein, over the 30-month term of the 2017 Purchase Agreement. The 2017 Purchase Agreement expired onApril 1, 2020 and a total of 9,000 shares of common stock were sold to LPC for net proceeds of$1,602,000 under the 2017 Purchase Agreement. OnAugust 7, 2019 , the Company entered into a purchase agreement (the "2019 Purchase Agreement") and a registration rights agreement with LPC, pursuant to which the Company has the right to sell to LPC up to$10,000,000 in shares of the Company's common stock over the 30-month term of the 2019 Purchase Agreement, subject to certain limitations and conditions. The 2019 Purchase Agreement initially limits the Company's issuance of shares of common stock to LPC to 19.99% of the Company's shares outstanding on the date of the 2019 Purchase Agreement unless stockholder approval is obtained to issue more than such amount or the average price of all sales under the 2019 Purchase Agreement exceed certain amounts as set forth in the 2019 Purchase Agreement. To date, no shares of common stock have been sold to LPC under the 2019 Purchase Agreement. OnFebruary 6, 2020 , the Company closed itsFebruary 2020 Registered Offering. Net proceeds to the Company from theFebruary 2020 Registered Offering were$1,467,000 after deducting placement agent fees and offering expenses paid
by the Company.
On
On
We had cash of$16,868,000 as ofSeptember 30, 2020 , compared with$6,934,000 as ofDecember 31, 2019 . We have reported recurring losses from operations since inception and expect that we will continue to have negative cash flows from our operations for the foreseeable future. Historically, the Company's primary source of funding has been the sale of its securities. In the future, we will be dependent on obtaining funding from third parties, such as proceeds from the issuance of debt, sale of equity, or strategic opportunities, in order to maintain our operations. There is no guarantee that debt, additional equity or other funding will be available to us on acceptable terms, or at all. Moreover, the global coronavirus pandemic has led to significant uncertainty and increased volatility in the capital markets. If these conditions in the capital markets continue for an extended period of time it may impact our ability to raise capital. If we fail to obtain additional funding when needed, we would be forced to scale back or terminate our operations or to seek to merge with or to be acquired by another company. We believe that our existing cash should be sufficient to fund operations for at least the next twelve months from the date of the release of these financial statements. The following table summarizes our cash flows for the periods indicated, in thousands: Nine Months Ended September 30, 2020 2019 Net cash used in operating activities$ (6,179 ) $ (6,099 ) Net cash used in investing activities (18 ) (77 ) Net cash provided by financing activities 16,131 6
Net increase (decrease) in cash and restricted cash
24
Net cash used in operating activities was$6,179,000 for the nine months endedSeptember 30, 2020 , as compared with$6,099,000 for the nine months endedSeptember 30, 2019 . The increase in cash used in operating activities was primarily due to an increase in net loss as compared to the same period in
the prior year.
Net cash used in investing activities was$18,000 for the nine months endedSeptember 30, 2020 , as compared with$77,000 for the nine months endedSeptember 30, 2019 . The decrease in net cash flows from investing activities was primarily related to the amount of laboratory and computer equipment purchases year over year.
Net cash provided by financing activities was$16,131,000 for the nine months endedSeptember 30, 2020 , as compared with$6,000 for the nine months endedSeptember 30, 2019 . The increase in net cash flows from financing activities was primarily due to net proceeds received by the Company from the issuance of securities and warrant exercises during the nine months endedSeptember 30, 2020 as compared to the same period in the prior year.
Off-Balance Sheet Arrangements
In connection with certain license agreements, we are required to indemnify the licensor for certain damages arising in connection with the intellectual property rights licensed under the agreement. In addition, we are a party to a number of agreements entered into in the ordinary course of business that contain typical provisions that obligate us to indemnify the other parties to such agreements upon the occurrence of certain events. These indemnification obligations are considered off-balance sheet arrangements in accordance with ASC Topic 460, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." To date, we have not encountered material costs as a result of such obligations and have not accrued any liabilities related to such obligations in our financial statements. See Note 7 to our consolidated financial statements included in our Annual Report on Form 10-K for the year endedDecember 31, 2019 , which was filed with theSEC onMarch 26, 2020 , for further discussion of these indemnification agreements.
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