GridAI Technologies Corp 10-Q, filed Nov 15, 2021
GridAI Technologies Corp. (GRDX)
About this 10-Q
GridAI Technologies Corp filed this 10-Q on November 15, 2021, covering the quarter ended September 30, 2021.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
☐ TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT OF 1934
From the transition period from to
Commission File Number 001-37853
|
FIRST WAVE BIOPHARMA, INC. |
|
(Exact name of registrant as specified in its charter) |
|
Delaware |
46-4993860 |
|
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S Employer Identification No.) |
777 Yamato Road, Suite 502
Boca Raton, Florida 33431
(Address of principal executive offices) (Zip Code)
(561) 589-7020
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
|
Title of Each Class |
Trading Symbol |
Name of Each Exchange on Which Registered |
||
|
Common stock, par value $0.0001 per share |
FWBI |
Nasdaq Capital Market |
Securities registered under Section 12(g) of the Exchange Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
Large accelerated filer |
☐ |
Accelerated filer |
☐ |
|
Non-accelerated filer |
☒ |
Smaller reporting company |
☒ |
|
Emerging growth company |
☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
There were 12,460,848 shares of the registrant’s common stock, par value $0.0001 per share (the “Common Stock”), outstanding as of November 12, 2021.
TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
In our opinion, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly our financial position, results of operations, and cash flows for the interim periods presented. We have consolidated such financial statements in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Therefore, such financial statements do not include all disclosures required by accounting principles generally accepted in the United States of America. In preparing these unaudited consolidated financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through the date the unaudited consolidated financial statements were issued by filing with the SEC.
These financial statements should be read in conjunction with our audited financial statements for the year ended December 31, 2020 included in our Annual Report filed on Form 10-K, filed with the SEC on March 31, 2021.
The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2021.
FORMERLY AZURRX BIOPHARMA, INC.
Consolidated Balance Sheets (unaudited)
|
September 30, |
December 31, |
|||||||
|
2021 |
2020 |
|||||||
|
ASSETS |
||||||||
|
Current Assets: |
||||||||
|
Cash and cash equivalents |
$ | 7,210,645 | $ | 6,062,141 | ||||
|
Other receivables |
- | 551,489 | ||||||
|
Prepaid expenses |
291,844 | 1,256,154 | ||||||
|
Total Current Assets |
7,502,489 | 7,869,784 | ||||||
|
Property, equipment, and leasehold improvements, net |
80,387 | 18,329 | ||||||
|
Other Assets: |
||||||||
|
Patents, net |
2,483,875 | 2,879,536 | ||||||
|
Goodwill |
1,944,742 | 2,054,048 | ||||||
|
Operating lease right-of-use assets |
368,502 | 74,238 | ||||||
|
Deposits |
44,034 | 27,920 | ||||||
|
Total Other Assets |
4,841,153 | 5,035,742 | ||||||
|
Total Assets |
$ | 12,424,029 | $ | 12,923,855 | ||||
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||
|
Current Liabilities: |
||||||||
|
Accounts payable and accrued expenses |
$ | 18,582,906 | $ | 1,685,603 | ||||
|
Payable related to license agreement |
- | 13,250,000 | ||||||
|
Accrued dividend payable |
349,131 | - | ||||||
|
Note payable |
- | 552,405 | ||||||
|
Other current liabilities |
166,291 | 57,417 | ||||||
|
Total Current Liabilities |
19,098,328 | 15,545,425 | ||||||
|
Other liabilities |
295,689 | 19,123 | ||||||
|
Total Liabilities |
19,394,017 | 15,564,548 | ||||||
|
Stockholders' Equity: |
||||||||
|
Common stock - Par value $0.0001 per share; 25,000,000 shares authorized; 11,115,228 and 3,115,031 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively. |
1,112 | 312 | ||||||
|
Series B preferred stock- Par value $0.0001 per share; 5,194.81 shares authorized; 676.05 and 2,773.6 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively. |
- | - | ||||||
|
Series C preferred stock- Par value $0.0001 per share; 57,000 shares authorized; 0 shares issued and outstanding at September 30, 2021 and December 31, 2020. |
- | - | ||||||
|
Additional paid-in capital |
137,027,567 | 93,837,739 | ||||||
|
Accumulated deficit |
(142,731,560 | ) | (95,366,198 | ) | ||||
|
Accumulated other comprehensive loss |
(1,267,107 | ) | (1,112,546 | ) | ||||
|
Total Stockholders' Equity |
(6,969,988 | ) | (2,640,693 | ) | ||||
|
Total Liabilities and Stockholders' Equity |
$ | 12,424,029 | $ | 12,923,855 | ||||
See accompanying notes to consolidated financial statements
FORMERLY AZURRX BIOPHARMA, INC.
Consolidated Statements of Operations and Comprehensive Loss (unaudited)
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
|
2021 |
2020 |
2021 |
2020 |
|||||||||||||
|
Operating expenses: |
||||||||||||||||
|
Research and development expenses |
$ | 24,378,318 | $ | 1,795,684 | $ | 32,542,143 | $ | 4,438,229 | ||||||||
|
General and administrative expenses |
6,021,160 | 1,916,250 | 15,347,764 | 4,595,860 | ||||||||||||
|
Total operating expenses |
30,399,478 | 3,711,934 | 47,889,907 | 9,034,089 | ||||||||||||
|
Loss from operations |
(30,399,478 | ) | (3,711,934 | ) | (47,889,907 | ) | (9,034,089 | ) | ||||||||
|
Other income (expenses): |
||||||||||||||||
|
Interest expense |
(742 | ) | (1,203,404 | ) | (8,840 | ) | (5,838,417 | ) | ||||||||
|
Gain on settlement |
- | 211,430 | - | 211,430 | ||||||||||||
|
Loss on debt extinguishment |
- | (609,998 | ) | - | (609,998 | ) | ||||||||||
|
Other income |
(568 | ) | - | 1,032 | - | |||||||||||
|
Change in fair value of liability |
- | - | 532,353 | - | ||||||||||||
|
Total other income (expenses) |
(1,310 | ) | (1,601,972 | ) | 524,545 | (6,236,985 | ) | |||||||||
|
Net loss |
$ | (30,400,788 | ) | $ | (5,313,906 | ) | $ | (47,365,362 | ) | $ | (15,271,074 | ) | ||||
|
Other comprehensive loss: |
||||||||||||||||
|
Foreign currency translation adjustment |
(41,604 | ) | 61,232 | (154,561 | ) | 55,007 | ||||||||||
|
Total comprehensive loss |
$ | (30,442,392 | ) | $ | (5,252,674 | ) | $ | (47,519,923 | ) | $ | (15,216,067 | ) | ||||
|
Net loss |
$ | (30,400,788 | ) | $ | (5,313,906 | ) | $ | (47,365,362 | ) | $ | (15,271,074 | ) | ||||
|
Deemed dividend on preferred stock |
- | (8,155,212 | ) | (4,507,125 | ) | (8,155,212 | ) | |||||||||
|
Deemed dividend on preferred stock exchanges |
- | - | (21,008,253 | ) | - | |||||||||||
|
Preferred stock dividends |
(118,089 | ) | - | (349,132 | ) | - | ||||||||||
|
Net loss applicable to common shareholders |
$ | (30,518,877 | ) | $ | (13,469,118 | ) | $ | (73,229,872 | ) | $ | (23,426,286 | ) | ||||
|
Basic and diluted weighted average shares outstanding |
9,342,357 | 2,851,883 | 7,593,545 | 2,782,823 | ||||||||||||
|
Loss per share - basic and diluted |
$ | (3.27 | ) | $ | (4.72 | ) | $ | (9.64 | ) | $ | (8.42 | ) | ||||
See accompanying notes to consolidated financial statements
FORMERLY AZURRX BIOPHARMA, INC.
Consolidated Statements of Changes in Stockholders’ Equity (unaudited)
|
Series C Convertible |
Series B Convertible |
Additional |
Other |
|||||||||||||||||||||||||||||||||||||
|
Preferred Stock |
Preferred Stock |
Common Stock |
Paid In |
Accumulated |
Comprehensive |
|||||||||||||||||||||||||||||||||||
|
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Capital |
Deficit |
Loss |
Total |
|||||||||||||||||||||||||||||||
|
Balance, January 1, 2021 |
- | $ | - | 2,774 | $ | - | 3,115,031 | $ | 312 | $ | 93,837,739 | $ | (95,366,198 | ) | $ | (1,112,546 | ) | $ | (2,640,693 | ) | ||||||||||||||||||||
|
Issuance of Series C preferred stock and warrants for cash, net of offering costs |
10,667 | 1 | - | - | - | - | 7,105,167 | - | - | 7,105,168 | ||||||||||||||||||||||||||||||
|
Issuance of Series C preferred stock for license acquired |
3,290 | 1 | - | - | - | - | 2,467,648 | - | - | 2,467,649 | ||||||||||||||||||||||||||||||
|
Beneficial conversion feature of Series C preferred stock |
- | - | - | - | - | - | 4,507,125 | - | - | 4,507,125 | ||||||||||||||||||||||||||||||
|
Deemed dividend of Series C preferred stock |
- | - | - | - | - | - | (4,507,125 | ) | - | - | (4,507,125 | ) | ||||||||||||||||||||||||||||
|
Issuance of Series C preferred stock upon exchange of Series B preferred stock |
19,140 | 1 | (1,839 | ) | - | - | - | (1,431 | ) | - | - | (1,430 | ) | |||||||||||||||||||||||||||
|
Warrants issued in connection with exchange of Series B preferred stock |
- | - | - | - | - | - | 21,009,683 | - | - | 21,009,683 | ||||||||||||||||||||||||||||||
|
Deemed dividend related to exchange of Series B preferred stock |
- | - | - | - | - | - | (21,008,253 | ) | - | - | (21,008,253 | ) | ||||||||||||||||||||||||||||
|
Common stock issued upon conversion of Series B preferred stock |
- | - | (259 | ) | - | 258,278 | 26 | (26 | ) | - | - | - | ||||||||||||||||||||||||||||
|
Dividends on preferred stock |
- | - | - | - | - | - | (349,132 | ) | - | - | (349,132 | ) | ||||||||||||||||||||||||||||
|
Common stock and pre-funded warrants issued upon conversion of Series C preferred stock |
(33,097 | ) | (3 | ) | - | - | 3,125,460 | 312 | (309 | ) | - | - | - | |||||||||||||||||||||||||||
|
Issuance of common stock, pre-funded warrants and warrants for cash, net of offering costs |
- | - | - | - | 1,625,454 | 163 | 14,155,887 | - | - | 14,156,050 | ||||||||||||||||||||||||||||||
|
Effect of cancelled shares from the 10-for-1 reverse stock split |
- | - | - | - | (1,706 | ) | - | - | - | - | - | |||||||||||||||||||||||||||||
|
Issuance of common stock at-the-market for cash, net of offering costs |
- | - | - | - | 1,651,225 | 165 | 8,325,030 | - | - | 8,325,195 | ||||||||||||||||||||||||||||||
|
Common stock issued for intellectual property acquired, net |
- | - | - | - | 624,025 | 62 | 3,999,938 | - | - | 4,000,000 | ||||||||||||||||||||||||||||||
|
Common stock cancelled in connection with acquisition of First Wave Bio, Inc. |
- | - | - | - | (332,913 | ) | (33 | ) | 33 | - | - | - | ||||||||||||||||||||||||||||
|
Common stock issued upon exercise of warrants |
- | - | - | - | 945,644 | 94 | 4,906,536 | - | - | 4,906,630 | ||||||||||||||||||||||||||||||
|
Common stock and warrants issued to consultants |
- | - | - | - | 97,230 | 10 | 1,215,849 | - | - | 1,215,859 | ||||||||||||||||||||||||||||||
|
Settlement with former placement agent |
- | - | - | - | 7,500 | 1 | 94,498 | - | - | 94,499 | ||||||||||||||||||||||||||||||
|
Stock-based compensation |
- | - | - | - | - | - | 1,268,710 | - | - | 1,268,710 | ||||||||||||||||||||||||||||||
|
Foreign currency translation adjustment |
- | - | - | - | - | - | - | - | (154,561 | ) | (154,561 | ) | ||||||||||||||||||||||||||||
|
Net loss |
- | - | - | - | - | - | - | (47,365,362 | ) | - | (47,365,362 | ) | ||||||||||||||||||||||||||||
|
Balance, September 30, 2021 |
- | $ | - | 676 | $ | - | 11,115,228 | $ | 1,112 | $ | 137,027,567 | $ | (142,731,560 | ) | $ | (1,267,107 | ) | $ | (6,969,988 | ) | ||||||||||||||||||||
|
Accumulated |
||||||||||||||||||||||||||||||||||||||||
|
Series C Convertible |
Series B Convertible |
Additional |
Other |
|||||||||||||||||||||||||||||||||||||
|
Preferred Stock |
Preferred Stock |
Common Stock |
Paid In |
Accumulated |
Comprehensive |
|||||||||||||||||||||||||||||||||||
|
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Capital |
Deficit |
Loss |
Total |
|||||||||||||||||||||||||||||||
|
Balance, July 1, 2021 |
- | $ | - | 676 | $ | - | 8,258,507 | $ | 826 | $ | 120,592,372 | $ | (112,330,771 | ) | $ | (1,225,503 | ) | $ | 7,036,924 | |||||||||||||||||||||
|
Dividends on preferred stock |
- | - | - | - | - | - | (118,089 | ) | - | - | (118,089 | ) | ||||||||||||||||||||||||||||
|
Issuance of common stock, pre-funded warrants and warrants for cash, net of offering costs |
- | - | - | - | 1,045,454 | 105 | 5,096,655 | - | - | 5,096,760 | ||||||||||||||||||||||||||||||
|
Issuance of common stock at-the-market for cash, net of offering costs |
- | - | - | - | 1,501,661 | 150 | 7,150,697 | - | - | 7,150,847 | ||||||||||||||||||||||||||||||
|
Effect of cancelled shares from the 10-for-1 reverse stock split |
- | - | - | - | (1,706 | ) | - | - | - | - | - | |||||||||||||||||||||||||||||
|
Common stock issued for intellectual property acquired, net |
- | - | - | - | 624,025 | 62 | 3,999,938 | - | - | 4,000,000 | ||||||||||||||||||||||||||||||
|
Common stock cancelled in connection with acquisition of First Wave Bio, Inc. |
- | - | - | - | (332,913 | ) | (33 | ) | 33 | - | - | - | ||||||||||||||||||||||||||||
|
Common stock and warrants issued to consultants |
- | - | - | - | 20,200 | 2 | 123,547 | - | - | 123,549 | ||||||||||||||||||||||||||||||
|
Stock-based compensation |
- | - | - | - | - | - | 182,414 | - | - | 182,414 | ||||||||||||||||||||||||||||||
|
Foreign currency translation adjustment |
- | - | - | - | - | - | - | - | (41,604 | ) | (41,604 | ) | ||||||||||||||||||||||||||||
|
Net loss |
- | - | - | - | - | - | - | (30,400,789 | ) | - | (30,400,789 | ) | ||||||||||||||||||||||||||||
|
Balance, September 30, 2021 |
- | $ | - | 676 | $ | - | 11,115,228 | $ | 1,112 | $ | 137,027,567 | $ | (142,731,560 | ) | $ | (1,267,107 | ) | $ | (6,969,988 | ) | ||||||||||||||||||||
See accompanying notes to consolidated financial statements
FIRST WAVE BIOPHARMA, INC.
FORMERLY AZURRX BIOPHARMA, INC.
Consolidated Statements of Changes in Stockholders’ Equity (unaudited)
|
Series B Convertible |
Additional |
Other |
||||||||||||||||||||||||||||||
|
Preferred Stock |
Common Stock |
Paid In |
Accumulated |
Comprehensive |
||||||||||||||||||||||||||||
|
Shares |
Amount |
Shares |
Amount |
Capital |
Deficit |
Loss |
Total |
|||||||||||||||||||||||||
|
Balance, January 1, 2020 |
- | $ | - | 2,680,052 | $ | 268 | $ | 68,578,263 | $ | (62,694,732 | ) | $ | (1,266,555 | ) | $ | 4,617,244 | ||||||||||||||||
|
Issuance of Series B preferred stock and warrants for cash, conversion of promissory notes, net of offering costs |
2,912 | - | - | - | 14,460,155 | - | - | 14,460,155 | ||||||||||||||||||||||||
|
Warrants issued in connection with Series B convertible preferred stock private placement |
- | - | - | - | 5,952,516 | - | - | 5,952,516 | ||||||||||||||||||||||||
|
Warrants issued as inducement to exchange promissory notes into Series B convertible preferred stock private placement |
- | - | - | - | 986,526 | - | - | 986,526 | ||||||||||||||||||||||||
|
Beneficial conversion feature of Series B preferred stock |
- | - | - | - | 8,155,212 | - | - | 8,155,212 | ||||||||||||||||||||||||
|
Deemed dividend of preferred stock |
- | - | - | - | (8,155,212 | ) | - | - | (8,155,212 | ) | ||||||||||||||||||||||
|
Accrued dividends on Series B preferred stock |
- | - | - | - | (412,829 | ) | - | - | (412,829 | ) | ||||||||||||||||||||||
|
Deemed dividend related to exchange of promissory notes into Series B preferred stock |
- | - | - | - | (1,129,742 | ) | - | - | (1,129,742 | ) | ||||||||||||||||||||||
|
Conversion of Series B preferred shares into common stock |
(34 | ) | - | 34,127 | 3 | (3 | ) | - | - | - | ||||||||||||||||||||||
|
Issuance of common stock for accrued dividends upon conversion of Series B preferred stock |
- | - | 621 | - | 4,786 | - | - | 4,786 | ||||||||||||||||||||||||
|
Common stock issued to settle accounts payable |
- | - | 10,594 | 1 | 131,136 | - | - | 131,137 | ||||||||||||||||||||||||
|
Common stock issued to consultants |
- | - | 13,284 | 1 | 109,604 | - | - | 109,605 | ||||||||||||||||||||||||
|
Common stock issued to Lincoln Park for Equity Purchase agreement |
- | - | 149,520 | 15 | 988,333 | - | - | 988,348 | ||||||||||||||||||||||||
|
Warrants issued in association with convertible debt issuances |
- | - | - | - | 1,252,558 | - | - | 1,252,558 | ||||||||||||||||||||||||
|
Beneficial conversion feature on convertible debt issuances |
- | - | - | - | 1,838,422 | - | - | 1,838,422 | ||||||||||||||||||||||||
|
Settlement with former chief executive officer |
- | - | - | - | 85,770 | - | 85,770 | |||||||||||||||||||||||||
|
Stock-based compensation |
- | - | - | - | 396,809 | - | - | 396,809 | ||||||||||||||||||||||||
|
Foreign currency translation adjustment |
- | - | - | - | - | - | 55,007 | 55,007 | ||||||||||||||||||||||||
|
Net loss |
- | - | - | - | - | (15,271,074 | ) | - | (15,271,074 | ) | ||||||||||||||||||||||
|
Balance, September 30, 2020 |
2,878 | $ | - | 2,888,198 | $ | 288 | $ | 93,242,304 | $ | (77,965,806 | ) | $ | (1,211,548 | ) | $ | 14,065,238 | ||||||||||||||||
|
Accumulated |
||||||||||||||||||||||||||||||||
|
Series B Convertible |
Additional |
Other |
||||||||||||||||||||||||||||||
|
Preferred Stock |
Common Stock |
Paid In |
Accumulated |
Comprehensive |
||||||||||||||||||||||||||||
|
Shares |
Amount |
Shares |
Amount |
Capital |
Deficit |
Loss |
Total |
|||||||||||||||||||||||||
|
Balance, July 1, 2020 |
- | $ | - | 2,850,285 | $ | 285 | $ | 73,126,945 | $ | (72,651,900 | ) | $ | (1,272,780 | ) | $ | (797,450 | ) | |||||||||||||||
|
Issuance of Series B preferred stock and warrants for cash, conversion of promissory notes, net of offering costs |
2,912 | - | - | - | 14,460,155 | - | - | 14,460,155 | ||||||||||||||||||||||||
|
Warrants issued in connection with Series B convertible preferred stock private placement |
- | - | - | - | 5,952,516 | - | - | 5,952,516 | ||||||||||||||||||||||||
|
Warrants issued as inducement to exchange promissory notes into Series B convertible preferred stock private placement |
- | - | - | - | 986,526 | - | - | 986,526 | ||||||||||||||||||||||||
|
Beneficial conversion feature of Series B preferred stock |
- | - | - | - | 8,155,212 | - | - | 8,155,212 | ||||||||||||||||||||||||
|
Deemed dividend of preferred stock |
- | - | - | - | (8,155,212 | ) | - | - | (8,155,212 | ) | ||||||||||||||||||||||
|
Accrued dividends on Series B preferred stock |
- | - | - | - | (412,829 | ) | - | - | (412,829 | ) | ||||||||||||||||||||||
|
Deemed dividend related to exchange of promissory notes into Series B preferred stock |
- | - | - | - | (1,129,742 | ) | - | - | (1,129,742 | ) | ||||||||||||||||||||||
|
Conversion of Series B preferred shares into common stock |
(34 | ) | - | 34,127 | 3 | (3 | ) | - | - | |||||||||||||||||||||||
|
Issuance of common stock for accrued dividends upon conversion of Series B preferred stock |
- | - | 621 | - | 4,786 | - | - | 4,786 | ||||||||||||||||||||||||
|
Common stock issued to consultants |
- | - | 3,165 | - | 22,500 | - | - | 22,500 | ||||||||||||||||||||||||
|
Settlement with former chief executive officer |
- | - | - | - | 85,770 | - | 85,770 | |||||||||||||||||||||||||
|
Stock-based compensation |
- | - | - | - | 145,680 | - | - | 145,680 | ||||||||||||||||||||||||
|
Foreign currency translation adjustment |
- | - | - | - | - | - | 61,232 | 61,232 | ||||||||||||||||||||||||
|
Net loss |
- | - | - | - | - | (5,313,906 | ) | - | (5,313,906 | ) | ||||||||||||||||||||||
|
Balance, September 30, 2020 |
2,878 | $ | - | 2,888,198 | $ | 288 | $ | 93,242,304 | $ | (77,965,806 | ) | $ | (1,211,548 | ) | $ | 14,065,238 | ||||||||||||||||
See accompanying notes to consolidated financial statements
FORMERLY AZURRX BIOPHARMA, INC.
Consolidated Statements of Cash Flows (unaudited)
|
Nine Months Ended September 30, |
||||||||
|
2021 |
2020 |
|||||||
|
Cash flows from operating activities: |
||||||||
|
Net loss |
$ | (47,365,362 | ) | $ | (15,271,074 | ) | ||
|
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
|
Depreciation |
9,390 | 26,556 | ||||||
|
Amortization |
395,661 | 395,661 | ||||||
|
Non-cash lease expense |
(4,855 | ) | (4,855 | ) | ||||
|
Common stock issued to settle accounts payable |
- | 131,137 | ||||||
|
Change in fair value of liability |
(532,353 | ) | - | |||||
|
Stock-based compensation |
1,268,710 | 369,517 | ||||||
|
Restricted stock granted to employees/directors |
- | 27,292 | ||||||
|
Common stock granted to consultants |
1,310,358 | 109,605 | ||||||
|
Accreted interest on convertible debt |
- | 234,334 | ||||||
|
Accretion of debt discount |
- | 4,580,167 | ||||||
|
Loss on debt extinguishment |
- | 609,998 | ||||||
|
Gain on settlement |
- | (211,430 | ) | |||||
|
Beneficial conversion feature related to promissory note exchange |
- | 798,413 | ||||||
|
Changes in assets and liabilities: |
||||||||
|
Accounts receivables |
- | (220,094 | ) | |||||
|
Other receivables |
551,489 | 2,121,336 | ||||||
|
Prepaid expenses |
964,310 | 446,766 | ||||||
|
Right of use assets |
(289,409 | ) | - | |||||
|
Deposits |
(16,114 | ) | (4,180 | ) | ||||
|
Accounts payable and accrued expenses |
16,897,303 | 90,147 | ||||||
|
Accrued dividends payable |
- | 408,043 | ||||||
|
Other liabilities |
385,440 | 31,104 | ||||||
|
Net cash used in operating activities |
(26,425,432 | ) | (5,331,557 | ) | ||||
|
Cash flows from investing activities: |
||||||||
|
Purchase of property and equipment |
(71,448 | ) | (2,808 | ) | ||||
|
Payment made related to license agreement |
(10,250,000 | ) | - | |||||
|
Net cash used in investing activities |
(10,321,448 | ) | (2,808 | ) | ||||
|
Cash flows from financing activities: |
||||||||
|
Proceeds from issuance of notes payable, net |
- | 179,408 | ||||||
|
Proceeds from issuance of preferred stock, net |
7,105,168 | 13,197,740 | ||||||
|
Proceeds from issuance of common stock, net |
18,156,050 | 988,348 | ||||||
|
Proceeds from exercise of warrants |
4,906,630 | - | ||||||
|
Proceeds from issuance of convertible debt, net |
- | 3,227,002 | ||||||
|
Issuance of common stock at-the-market for cash, net of offering costs |
8,325,195 | - | ||||||
|
Repayments of convertible debt |
- | (475,000 | ) | |||||
|
Repayments of note payable |
(552,405 | ) | (623,772 | ) | ||||
|
Net cash provided by financing activities |
37,940,638 | 16,493,726 | ||||||
|
Increase in cash |
1,193,758 | 11,159,361 | ||||||
|
Effect of exchange rate changes on cash |
(45,254 | ) | 33,523 | |||||
|
Cash, beginning balance |
6,062,141 | 175,796 | ||||||
|
Cash, ending balance |
$ | 7,210,645 | $ | 11,368,680 | ||||
|
Supplemental disclosures of cash flow information: |
||||||||
|
Cash paid for interest |
$ | - | $ | 105,460 | ||||
|
Cash paid for income taxes |
$ | - | $ | - | ||||
|
Non-cash investing and financing activities: |
||||||||
|
Deemed dividend on preferred stock issuances |
$ | (4,507,125 | ) | $ | (8,155,212 | ) | ||
|
Deemed dividend on preferred stock exchanges |
$ | (21,008,253 | ) | $ | - | |||
|
Accrued dividends on preferred stock |
$ | (349,132 | ) | $ | (408,043 | ) | ||
|
Issuance of preferred stock to settle liability related to license agreement |
$ | 2,467,649 | $ | - | ||||
|
Exchange of promissory notes into preferred stock and warrants |
$ | - | $ | (609,998 | ) | |||
See accompanying notes to consolidated financial statements
Note 1 - The Company and Basis of Presentation
The Company
AzurRx BioPharma, Inc. (“AzurRx”), renamed itself First Wave BioPharma, Inc. (“First Wave” or “Parent”) and changed its ticker symbol to “FWBI” on September 21, 2021, in connection with its acquisition of First Wave Bio, Inc. (“FWB”). Parent and its wholly owned subsidiaries, including FWB and AzurRx SAS, are collectively referred to as the “Company”. The Company’s common shares commenced trading on the Nasdaq Capital Market under the new ticker symbol “FWBI” and CUSIP number (33749P101) at the market open on September 22, 2021.
On September 13, 2021, AzurRx consummated its acquisition of FWB, a clinical-stage biotechnology company developing novel gut-targeted small molecules for inflammatory bowel disease (IBD) and other serious gastrointestinal (GI) conditions.
Also, on September 13, 2021, AzurRx effected a reverse stock split, whereby every ten shares of the Company’s issued and outstanding Common Stock was converted automatically into one issued and outstanding share of Common Stock, with a corresponding 1-for-10 reduction in the number of authorized shares of Common Stock, but without any change in the par value per share. All share and per share amounts have been retroactively restated to reflect the 10-for-1 reverse stock split.
The Company is engaged in the research and development of targeted, non-systemic therapies for the treatment of patients with gastrointestinal (“GI”) diseases. Non-systemic therapies are non-absorbable drugs that act locally, i.e., in the intestinal lumen, skin or mucosa, without reaching an individual’s systemic circulation.
The Company is currently focused on developing its pipeline of gut-restricted GI clinical drug candidates, including niclosamide, an oral small molecule with anti-viral and anti-inflammatory properties, and the biologic adrulipase (formerly MS1819), a recombinant lipase enzyme designed to enable the digestion of fats and other nutrients.
The Company’s niclosamide programs leverage proprietary oral and topical formulations to address multiple GI conditions, including inflammatory bowel diseases (“IBD”) indications and viral diseases. The Company is currently advancing two separate clinical programs of its niclosamide formulations currently in Phase 2 clinical trials, including FW-COV for Severe Acute Respiratory Syndrome Coronavirus 2 (“COVID-19”) GI infections, and FW-UP for ulcerative proctitis (“UP”) and ulcerative proctosigmoiditis (“UPS”). In April 2021, the Company launched the Phase 2 RESERVOIR COVID-19 GI clinical trial using a proprietary oral immediate-release tablet formulation of micronized niclosamide in the U.S., Ukraine and India. In September 2021, the Company announced the initiation of patient screening for the Phase 2 Ulcerative Proctitis trial in Italy and in October 2021 announced the dosing of the first patient in the trial.
Additionally, the Company plans to clinically advance FW-ICI-AC for Immune Checkpoint Inhibitor-associated colitis (“ICI-AC”) and diarrhea in advanced stage oncology patients in 2022, which has received FDA clearance of the investigational new drug (“IND”) application filed in September 2021. The Company is further developing two pre-IND programs of its niclosamide therapies for additional IBD indications, including FW-UC for ulcerative colitis (“UC”) and FW-CD for Crohn’s disease (“CD”).
The Company’s adrulipase programs are focused on the development of an oral, non-systemic, biologic capsule for the treatment of exocrine pancreatic insufficiency (“EPI”) in patients with cystic fibrosis (“CF”) and chronic pancreatitis (“CP”). The Company’s goal is to provide CF and CP patients with a safe and effective therapy to control EPI that is non-animal derived and offers the potential to dramatically reduce their daily pill burden. In March 2021, the Company announced topline results from its Phase 2b OPTION 2 monotherapy trial, and in 2021, the Company announced positive topline results from its Phase 2 Combination trial in Europe. The Company is currently focused on formulation development for adrulipase.
The Company is developing its drug candidates for a host of GI diseases where there are significant unmet clinical needs and limited therapeutic options, resulting in painful, life threatening and discomforting consequences for patients. The Company’s mission is to help protect the health and restore quality of life for the millions of people afflicted by these GI diseases.
Since its inception, the Company has devoted substantially all its efforts to research and development, business development, and raising capital, and has primarily financed its operations through issuance of common stock, convertible preferred stock, convertible debt, and other debt/equity instruments. The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development and regulatory success, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, and ability to secure additional capital to fund clinical trials and operations.
The Company has implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on our business. The extent to which the ongoing COVID-19 pandemic impacts our business, our clinical development and regulatory efforts, our corporate development objectives and the value of and market for our Common Stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, quarantines, social distancing and business closure requirements in the U.S., Europe and other countries, and the effectiveness of actions taken globally to contain and treat the disease. The global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
In addition, the Company is subject to other challenges and risks specific to its business and its ability to execute on its strategy, as well as risks and uncertainties common to companies in the biotechnology and pharmaceutical industries with development and commercial operations, including, without limitation, risks and uncertainties associated with: obtaining regulatory approval of its drug candidates; delays or problems in the manufacture and supply of its drug candidates, loss of single source suppliers or failure to comply with manufacturing regulations; identifying, acquiring or in-licensing additional products or drug candidates; pharmaceutical product development and the inherent uncertainty of clinical success; and the challenges of protecting and enhancing our intellectual property rights; complying with applicable regulatory requirements. In addition, to the extent the ongoing COVID-19 pandemic adversely affects the Company’s business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties discussed above.
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and include the accounts of First Wave and its wholly owned subsidiaries, FWB and AzurRx SAS. Intercompany transactions and balances have been eliminated upon consolidation.
In our opinion, the accompanying unaudited interim consolidated financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly our financial position, results of operations, and cash flows. The consolidated balance sheet at December 31, 2020, has been derived from audited financial statements of that date. The unaudited interim consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain information and footnote disclosure normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to instructions, rules, and regulations prescribed by the SEC. The Company believes that the disclosures provided herein are adequate to make the information presented not misleading when these unaudited interim consolidated financial statements are read in conjunction with the audited financial statements and notes previously distributed in our Annual Report Form 10-K for the year ended December 31, 2020, filed with the SEC on March 31, 2021.
Going Concern Uncertainty
The accompanying unaudited interim consolidated financial statements have been prepared as if the Company will continue as a going concern. The Company has incurred significant operating losses and negative cash flows from operations since inception. On September 30, 2021, the Company had cash and cash equivalents of approximately $7.2 million, and an accumulated deficit of approximately $142.7 million. The Company has incurred recurring losses, has experienced recurring negative operating cash flows, and requires significant cash resources to execute its business plans. Historically, the Company’s major sources of cash have been comprised of proceeds from various public and private offerings of its capital stock. The Company is dependent on obtaining additional working capital funding from the sale of equity and/or debt securities in order to continue to execute its development plans and continue operations. As of November 15, 2021, the Company reached an agreement with the hired representative of the former stockholders of FWB to substantially reduce the immediate payment obligations of the Company and defer certain remaining milestone and other payment obligations over time, with an immediate payment of $2.0 million and periodic installments of $500,000 per month payable from January 2022 through August 2022 and $1.0 million per month payable from September 2022 through July 2023 until an aggregate of $17.0 million is received (See Note 19).
Without adequate working capital, the Company may not be able to meet its obligations and continue as a going concern. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 2 - Significant Accounting Policies and Recent Accounting Pronouncements
Use of Estimates
The accompanying unaudited consolidated financial statements are prepared in conformity with GAAP and include certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements (including goodwill, intangible assets, and contingent consideration), and the reported amounts of revenue and expense during the reporting period, including contingencies. Accordingly, actual results may differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less from date of purchase to be cash equivalents. All cash balances were highly liquid on September 30, 2021, and December 31, 2020, respectively.
Concentrations of Credit Risk
Financial instruments that potentially expose the Company to concentrations of credit risk consist of cash. The Company primarily maintains its cash balances with financial institutions in federally insured accounts in the U.S. The Company may from time to time have cash in banks in excess of FDIC insurance limits. On September 30, 2021, and December 31, 2020, the Company had approximately $0.3 million and $2.7 million, respectively, in one account in the U.S. in excess of these limits. The Company has not experienced any losses to date resulting from this practice. The Company mitigates its risk by maintaining most of its cash and equivalents with high quality financial institutions.
The Company also has exposure to foreign currency risk as its subsidiary in France has a functional currency in Euros.
Debt Instruments
Detachable warrants issued in conjunction with debt are measured at their relative fair value, if they are determined to be equity instrument, or their fair value, if they are determined to be liability instruments, and recorded as a debt discount. Conversion features that are in the money at the commitment date constitute a beneficial conversion feature that is measured at its intrinsic value and recognized as debt discount. Debt discount is amortized as interest expense over the maturity period of the debt using the effective interest method. Contingent beneficial conversion features are recognized when the contingency has been resolved.
Debt Issuance Costs
Debt issuance costs are recorded as a direct reduction of the carrying amount of the related debt. Debt issuance costs are amortized over the maturity period of the related debt instrument using the effective interest method.
Equity-Based Payments to Non-Employees
Equity-based payments to non-employees are measured at fair value on the grant date per ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting.
Fair Value Measurements
The Company follows Accounting Standards Codification (“ASC”) Topic 820-10, Fair Value Measurements and Disclosures (“ASC 820”), which among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.
As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions, which reflect those that a market participant would use.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the overall fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.
The Company recognizes transfers between levels as if the transfers occurred on the last day of the reporting period.
Foreign Currency Translation
The Company’s foreign subsidiary has operations denominated in a foreign currency, and assets and liabilities are translated to U.S. dollars, which is the functional currency, at period end exchange rates. Income and expense items are translated at average rates of exchange prevailing during the periods presented. Gains and losses from translation adjustments are accumulated in a separate component of stockholders’ equity.
Goodwill and Intangible Assets
Goodwill represents the excess of the purchase price of the acquired business over the fair value of amounts assigned to assets acquired and liabilities assumed. Goodwill and other intangible assets with indefinite useful lives are reviewed for impairment annually or more frequently if events or circumstances indicate impairment may be present. Any excess in carrying value over the estimated fair value is charged to results of operations. The Company has not recognized any impairment charges through September 30, 2021.
Intangible assets subject to amortization consist of in process research and development, license agreements, and patents reported at the fair value at date of the acquisition less accumulated amortization. Amortization expense is provided using the straight-line method over the estimated useful lives of the assets as follows:
Patents 7.2 years
Impairment of Long-Lived Assets
The Company periodically evaluates its long-lived assets for potential impairment in accordance with ASC Topic 360, Property, Plant and Equipment (“ASC 360”). Potential impairment is assessed when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. Recoverability of these assets is assessed based on undiscounted expected future cash flows from the assets, considering a number of factors, including past operating results, budgets and economic projections, market trends and product development cycles. If impairments are identified, assets are written down to their estimated fair value. The Company has not recognized any impairment charges through September 30, 2021.
Income Taxes
Income taxes are recorded in accordance with ASC 740, Accounting for Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. The Company determines its deferred tax assets and liabilities based on differences between financial reporting and tax bases of assets and liabilities, which are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. On September 30, 2021 and December 31, 2020, the Company does not have any significant uncertain tax positions. The past three tax years are still open for audit.
Leases
The Company determines if an arrangement is a lease at inception. Operating leases are included in right-of-use (“ROU”) assets, and lease liability obligations are included in the Company’s balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liability obligations represent its obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company’s leases typically do not provide an implicit rate, the Company estimates its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company uses the implicit rate when readily determinable. The ROU asset also includes any lease payments made and excludes lease incentives and lease direct costs. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense is recognized on a straight-line basis over the lease term. Please refer to Note 15 for additional information.
License Agreements
As more fully discussed in Note 14, the Company entered into a license agreement (the “FWB License Agreement”) with FWB, pursuant to which FWB granted the Company an exclusive license to certain patents and patent applications related to a proprietary formulation of niclosamide for use in the fields of ICI-AC and COVID-19 GI infections. The acquisition of intellectual property and patents for the worldwide, exclusive right to develop, manufacture, and commercialize proprietary formulations of niclosamide for the fields of treating ICI-AC and COVID-19 in humans was accounted for as an asset acquisition and initial liabilities of approximately $13.3 million in connection with the license acquisition were recorded as research and development expense, because it was determined to have no alternative future uses and therefore no separate economic value, which included cash payments totaling approximately $10.3 million and the issuance of approximately $3.0 million worth of preferred stock. Upon consummation of the FWB Merger (as defined below) on September 13, 2021, the FWB License Agreement was effectively canceled.
Research and Development
Research and development costs are charged to operations when incurred and are included in operating expense, except for goodwill related to patents. Research and development costs consist principally of compensation of employees and consultants that perform the Company’s research activities, payments to third parties for preclinical and non-clinical activities, expenses with clinical research organizations (CROs), investigative sites, consultants and contractors that conduct or provide other services relating to clinical trials, costs to acquire drug product, drug supply and clinical trial materials from contract development and manufacturing organization (CDMOs) and third-party contractors relating to chemistry, manufacturing and controls (“CMC”) efforts, the fees paid for and to maintain the Company’s licenses, amortization of intangible assets related to the acquisition of MS1819 and research and development costs related to niclosamide.
Research and Development – Intellectual Property Acquired
The Company concluded that its acquisition of FWB completed on September 13, 2021 should be accounted for as an asset acquisition rather than a business combination under ASC 805, Business Combinations. The merger was accounted for as an asset acquisition because substantially all the fair value of the assets being acquired are concentrated in a single asset – intellectual property, which does not constitute a business.
The former FWB stockholders are also entitled to (i) up to $207.0 million of cash milestone payments contingent upon the achievement of specified development, regulatory and sales goals for the use of the acquired assets, and (ii) certain revenue-sharing. The potential milestone payments and revenue share are not yet considered probable, therefore no milestone payments have been accrued as of September 30, 2021. Depending on the status of development at the time a contingent payment is recognized the Company may determine that the payment should be expensed as research and development or be capitalized as an intangible asset. This determination will be based on the facts and circumstances that exist at the time a contingent payment is recognized.
Stock-Based Compensation
The Company’s board of directors (the “Board”) and stockholders have adopted and approved the Amended and Restated 2014 Omnibus Equity Incentive Plan (the “2014 Plan”) which took effect on May 12, 2014, and the 2020 Omnibus Equity Incentive Plan, which took effect on September 11, 2020 (the “2020 Plan”). From the effective date of the 2020 Plan, no new awards have been or will be made under the 2014 Plan. The Company accounts for its stock-based compensation awards to employees and Board members in accordance with ASC Topic 718, Compensation-Stock Compensation (“ASC 718”). ASC 718 requires all stock-based payments to employees and Board members, including grants of employee stock options, to be recognized in the statements of operations by measuring the fair value of the award on the date of grant and recognizing this fair value as stock-based compensation using a straight-line method over the requisite service period, generally the vesting period.
For awards with performance conditions that affect their vesting, such as the occurrence of certain transactions or the achievement of certain operating or financial milestones, recognition of fair value of the award occurs when vesting becomes probable.
The Company estimates the grant date fair value of stock option awards using the Black-Scholes option-pricing model. The use of the Black-Scholes option-pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of the Common Stock consistent with the expected life of the option, risk-free interest rates and expected dividend yields of the Common Stock.
Recent Accounting Pronouncements
In August 2020, the FASB issued accounting pronouncement (ASU 2020-06) related to the measurement and disclosure requirements for convertible instruments and contracts in an entity’s own equity. The pronouncement simplifies and adds disclosure requirements for the accounting and measurement of convertible instruments and the settlement assessment for contracts in an entity’s own equity. As a smaller reporting company, as defined by the U.S. Securities and Exchange Commission (the “SEC”), this pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2023. The Company is currently evaluating the impact of this ASU on the financial statements.
Note 3 - Fair Value Disclosures
Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous market at the measurement date. U.S. GAAP establishes a hierarchical disclosure framework that prioritizes and ranks the level of observability of inputs used in measuring fair value.
The fair value of the Company’s financial instruments are as follows:
|
Fair Value Measured at Reporting Date Using |
||||||||||||||||||||
|
Carrying Amount |
Level 1 |
Level 2 |
Level 3 |
Fair Value |
||||||||||||||||
|
September 30, 2021: |
||||||||||||||||||||
|
Cash and cash equivalents |
$ | 7,210,645 | $ | 6,709,028 | $ | 501,617 | $ | - | $ | 7,210,645 | ||||||||||
|
December 31, 2020: |
||||||||||||||||||||
|
Cash and cash equivalents |
$ | 6,062,141 | $ | 3,000,184 | $ | 3,061,957 | $ | - | $ | 6,062,141 | ||||||||||
|
Other receivables |
$ | 551,489 | $ | - | $ | - | $ | 551,489 | $ | 551,489 | ||||||||||
|
Note payable |
$ | 552,405 | $ | - | $ | - | $ | 552,405 | $ | 552,405 | ||||||||||
On September 30, 2021, and December 31, 2020, cash and cash equivalents included approximately $6.7 million, and $3.0 million, respectively, held in high-quality money market funds quoted in an active market and included in level 1 in the table above.
The fair value of other receivables approximates carrying value as these consist primarily of French research and development tax credits that are normally received the following year.
The fair value of the note payable in connection with the financing of directors and officer’s liability insurance approximates carrying value due to the terms of such instruments and applicable interest rates.
Note 4 – Asset Acquisition
The Asset Acquisition
On September 13, 2021, the Company completed its acquisition of FWB, in accordance with the terms of an Agreement and Plan of Merger dated as of September 13, 2021 (the “FWB Merger Agreement”) by and among the Company, Alpha Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“Merger Sub”), and FWB. On September 13, 2021, pursuant to the FWB Merger Agreement, Merger Sub was merged with and into FWB (the “FWB Merger”), with FWB being the surviving corporation and becoming a wholly-owned subsidiary of the Company. In connection with the Merger, AzurRx changed its name to First Wave BioPharma, Inc.
At the effective time of the FWB Merger, the former FWB stockholders received an applicable pro rata share of (i) $3.0 million in cash and (ii) 624,025 shares of the Common Stock. The remaining non-contingent purchase price is payable to the former FWB stockholders on a pro rata basis upon the Company’s payment of (i) $8.0 million in cash, payable within 45 days of the FWB Merger, (iii) $7.0 million in cash, payable by March 31, 2022. As of November 15, 2021, the Company reached an agreement with the hired representative of the former stockholders of FWB to substantially reduce the immediate payment obligations of the Company and defer certain remaining milestone and other payment obligations over time, with an immediate payment of $2.0 million and periodic installments of $500,000 per month payable from January 2022 through August 2022 and $1.0 million per month payable from September 2022 through July 2023 until an aggregate of $17.0 million is received (See Note 19). In addition, the Company cancelled 332,913 shares of Common Stock held by FWB immediately prior to the FWB Merger for no additional consideration, which shares of Common Stock are authorized and unissued.
The former FWB stockholders are also entitled to up to $207 million of cash milestone payments contingent upon the achievement of specified development, regulatory and sales goals relating to the use of the acquired assets. All milestone payments will be payable in cash, provided that 25% of the milestone payments attributable to a certain IBD indications may be payable in Common Stock, at the option of the Company. In addition, the former FWB stockholders are entitled to 10% of certain specified revenue received by the Company from any third-party with a pre-existing niclosamide development program relating to COVID.
Accounting Treatment
The Company concluded that the FWB Merger should be accounted for as an asset acquisition under ASC 805 because substantially all the fair value of the assets being acquired are concentrated in a single asset - intellectual property, which does not constitute a business. Because the acquired intellectual property has not received regulatory approval, the $21.3 million non-contingent purchase price was immediately expensed in the Company’s statement of operations as research and development – intellectual property acquired. The $0.9 million of transaction expenses paid at closing were classified in general and administrative expenses. The Common Stock issued for the asset acquisition was valued at $4.0 million which is equal to the 624,025 common shares issued multiplied by $6.41 per share.
The potential milestone payments and revenue share are not yet considered probable, therefore no milestone payments have been accrued as of September 30, 2021. Depending on the status of development at the time a contingent payment is recognized the Company may determine that the payment should be expensed as research and development or be capitalized as an intangible asset. This determination will be based on the facts and circumstances that exist at the time a contingent payment is recognized.
Note 5 - Property, Equipment and Leasehold Improvements
Property, equipment, and leasehold improvements consisted of the following:
|
September 30, |
December 31, |
|||||||
|
2021 |
2020 |
|||||||
|
Laboratory equipment |
$ | - | $ | 2,410 | ||||
|
Computer equipment and software |
11,540 | 19,676 | ||||||
|
Office equipment |
48,277 | 5,483 | ||||||
|
Leasehold improvements |
28,000 | 29,163 | ||||||
|
Total property, plant, and equipment |
87,817 | 56,732 | ||||||
|
Less accumulated depreciation |
(7,430 | ) | (38,403 | ) | ||||
|
Property, plant and equipment, net |
$ | 80,387 | $ | 18,329 | ||||
Depreciation expense for the three months ended September 30, 2021 and 2020 was approximately $6,000 and $8,000, respectively. Depreciation expense for the nine months ended September 30, 2021 and 2020 was approximately $9,000 and $27,000, respectively.
During the nine months ended September 30, 2021, approximately $29,000 of leaseholds improvements were written off in connection with closing the Company’s laboratory in France.
Note 6 - Intangible Assets and Goodwill
Patents
Pursuant to the Mayoly asset purchase agreement entered in March 2019 (see Note 14), in which the Company purchased all remaining rights, title and interest in and to MS1819 from Mayoly, the Company recorded Patents in the amount of approximately $3.8 million as follows:
|
Common stock issued at signing to Mayoly |
$ | 1,740,959 | ||
|
Due to Mayoly at December 31, 2019 |
449,280 | |||
|
Due to Mayoly at December 31, 2020 |
393,120 | |||
|
Assumed Mayoly liabilities and forgiveness of Mayoly debt |
1,219,386 | |||
| $ | 3,802,745 |
Patents are as follows:
|
September 30, |
December 31, |
|||||||
|
2021 |
2020 |
|||||||
|
Patents |
$ | 3,802,745 | $ | 3,802,745 | ||||
|
Less accumulated amortization |
(1,318,870 | ) | (923,209 | ) | ||||
|
Patents, net |
$ | 2,483,875 | $ | 2,879,536 | ||||
Amortization expense was approximately $132,000 and $132,000 for the three months ended September 30, 2021, and 2020, respectively.
Amortization expense was approximately $396,000 and $396,000 for the nine months ended September 30, 2021, and 2020, respectively.
As of September 30, 2021, amortization expense related to patents is expected to be as follows for the next five years (2021 through 2026):
|
2021 (balance of year) |
$ | 131,887 | ||
|
2022 |
527,548 | |||
|
2023 |
527,548 | |||
|
2024 |
527,548 | |||
|
2025 |
527,548 | |||
|
2026 |
241,796 | |||
|
Total |
$ | 2,483,875 |
Goodwill is as follows:
|
Goodwill |
||||
|
Balance on January 1, 2020 |
$ | 1,886,686 | ||
|
Foreign currency translation |
167,362 | |||
|
Balance on December 31, 2020 |
2,054,048 | |||
|
Foreign currency translation |
(109,306 | ) | ||
|
Balance on September 30, 2021 |
$ | 1,944,742 | ||
Note 7 - Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consisted of the following:
|
September 30, |
December 31, |
|||||||
|
2021 |
2020 |
|||||||
|
Trade payables |
$ | 18,447,834 | $ | 1,558,591 | ||||
|
Accrued expenses |
135,072 | 127,012 | ||||||
|
Total accounts payable and accrued expenses |
$ | 18,582,906 | $ | 1,685,603 | ||||
The increase in trade payables as of September 30, 2021 as compared to December 31, 2020 was primarily attributable to the $15 million due pursuant to the FWB Merger.
Note 8 - Note Payable
Directors and Officer’s Liability Insurance
On November 30, 2020, the Company entered into a 9-month financing agreement for its directors and officer’s liability insurance in the amount of approximately $620,000 that bears interest at an annual rate of 4.250%. Monthly payments, including principal and interest, of approximately $70,000 per month. The balance due under this financing agreement was approximately $0 and $552,000 on September 30, 2021 and December 31, 2020, respectively.
Note 9 - Convertible Debt
The ADEC Note Offering
On February 14, 2019, the Company entered into a note purchase agreement with ADEC Private Equity Investments, LLC (“ADEC”), pursuant to which the Company issued to ADEC two Senior Convertible Notes (each an “ADEC Note,” and together, the “ADEC Notes”), in the principal amount of $1.0 million per ADEC Note, resulting in gross proceeds to the Company of $2.0 million (the “ADEC Note Offering”).
In December 2019, the Company repaid $1,550,000 principal amount of the ADEC Notes and in January 2020, the Company repaid the remaining principal balance of $450,000 plus outstanding accrued interest of approximately $104,000 on the ADEC Notes to ADEC Private Equity Investments, LLC.
Senior Convertible Promissory Note Offering
On December 20, 2019, the Company began an offering of (i) Senior Convertible Promissory Notes (each a “Promissory Note,” and together, the “Promissory Notes”) in the principal amount of up to $8.0 million to certain accredited investors (the “Note Investors”), and (ii) warrants (“Note Warrants”) to purchase shares of Common Stock, each pursuant to Note Purchase Agreements entered into by and between the Company and each of the Note Investors (the “Promissory NPAs”) (the “Promissory Note Offering”).
The Promissory Notes were scheduled to mature on September 20, 2020, accrue interest at a rate of 9% per annum, and were convertible, at the sole option of the holder, into shares of Common Stock (the “Promissory Note Conversion Shares”) at a price of $9.70 per share (the “Conversion Option”). The Promissory Notes could be prepaid by the Company at any time prior to the maturity date in cash without penalty or premium (the “Prepayment Option”).
On January 2, 2020, January 3, 2020, and January 9, 2020, the Company issued Promissory Notes to the Note Investors in the aggregate principal amount of approximately $3.5 million.
As additional consideration for the execution of the Promissory NPA, each Note Investor also received Note Warrants to purchase that number of shares of Common Stock equal to one-half (50%) of the Promissory Note Conversion Shares issuable upon conversion of the Promissory Notes (the “Note Warrant Shares”). The Note Warrants have an exercise price of $10.70 per share and expire five years from the date of issuance. In July 2020, the Company filed a registration statement covering the Note Warrant Shares in connection with the Series B Private Placement and the Exchange described in Note 11, which was declared effective in September 2020.
In connection with the three closings in January 2020 of the Promissory Note Offering, the Company paid aggregate placement agent fees of approximately $277,000, which fees were based on (i) 9% of the aggregate principal amount of the Promissory Notes issued to the Note Investors introduced by the placement agent, and (ii) a non-accountable expense allowance of 1% of the gross proceeds from the Promissory Note Offering. In addition, the placement agent was issued warrants (the “Placement Agent Warrants”), to purchase an aggregate of 19,973 shares of Common Stock representing 7% of the Promissory Note Conversion Shares issuable upon conversion of the Promissory Notes issued to the Note Investors. The Placement Agent Warrants expire five years from the date of issuance. Of these Placement Agent Warrants, 4,149 have an exercise price of $12.10 per share and 15,823 have an exercise price of $14.20 per share.
The Company determined the Prepayment Option feature represents a contingent call option. The Company evaluated the Prepayment Option in accordance with ASC 815-15-25. The Company determined that the Prepayment Option feature is clearly and closely related to the debt host instrument and is not an embedded derivative requiring bifurcation. Additionally, the Company determined the Conversion Option represents an embedded call option. The Company evaluated the Conversion Option in accordance with ASC 815-15-25. The Company determined that the Conversion Option feature meets the scope exception from ASC 815 and is not an embedded derivative requiring bifurcation.
The Company evaluated the Promissory Notes for a beneficial conversion feature in accordance with ASC 470-20. The Company determined that at each commitment date the effective conversion price was below the closing stock price (market value), and the Convertible Notes contained a beneficial conversion feature.
Pursuant to the January 2020 closings of the Promissory Note Offering, the principal amount of approximately $3.5 million was first allocated based on the relative fair value of the Promissory Notes and the Note Warrants. The fair value of the Note Warrants amounted to approximately $2.4 million. Then the beneficial conversion feature was calculated, which amounted to approximately $1.8 million. The Company incurred debt issuance costs of approximately $0.5 million related to the offering. The initial carrying value of the Promissory Notes issued amounted to approximately $0.1 million.
On June 1, 2020, the Company entered into an amendment to a certain Promissory Note in the principal amount of $100,000 issued on December 20, 2019, to Edward J. Borkowski, the former chairman of the Board and current lead independent director, to increase the Conversion Price to $10.70 per share (the “Note Amendment”). The Company evaluated the Note Amendment transaction in accordance with ASC 470-50 and determined the Note Amendment did not constitute a substantive modification of the Promissory Note and that the transaction should be accounted for as a debt modification with no accounting treatment required.
During the three months ended September 30, 2020, the Company recognized approximately $400,000 of interest expense related to these Promissory Notes, including amortization of debt discount related to the value of the Note Warrants of approximately $120,000, amortization of the beneficial conversion feature of approximately $193,000, amortization of debt discount related to debt issuance costs of approximately $63,000, and accrued interest expense of approximately $27,000.
During the nine months ended September 30, 2020, the Company recognized approximately $4.9 million of interest expense related to these Promissory Notes, including amortization of debt discount related to the value of the Note Warrants of approximately $1.5 million, amortization of the beneficial conversion feature of approximately $2.3 million, amortization of debt discount related to debt issuance costs of approximately $0.8 million and accrued interest expense of approximately $0.3 million.
Note 10 - Other Liabilities
Other liabilities consisted of the following:
|
September 30, |
December 31, |
|||||||
|
2021 |
2020 |
|||||||
|
Current |
||||||||
|
Lease liabilities |
$ | 94,794 | $ | 57,417 | ||||
|
Other liabilities |
71,497 | - | ||||||
| $ | 166,291 | $ | 57,417 | |||||
|
Long-term |
||||||||
|
Lease liabilities |
$ | 295,689 | $ | 19,123 | ||||
| $ | 295,689 | $ | 19,123 | |||||
Note 11 – Equity
The Company’s certificate of incorporation, as amended and restated (the “Charter”) authorizes the issuance of up to 25,000,000 shares of Common Stock, par value $0.0001 per share, and 10,000,000 shares of preferred stock, par value $0.0001 per share.
On February 24, 2021 the Company held a Special Meeting of Stockholders (the “2021 Special Meeting”), whereby, the shareholders approved, among others, the following proposals: (i) amending the Company’s Certificate of Incorporation to increase the authorized shares of its Common Stock to 25,000,000 shares from 15,000,000 shares, and (ii) amending the Company’s Charter to authorize the Board to effect a reverse stock split of both the issued and outstanding and authorized shares of Common Stock, at a specific ratio, ranging from one-for-five (1:5) to one-for-ten (1:10), any time prior to the one-year anniversary date of the 2021 Special Meeting, with the exact ratio to be determined by the Board (the “Reverse Split”). On September 13, 2021, the Company effected a reverse stock split, whereby every ten shares of the Company’s issued and outstanding common stock was converted automatically into one issued and outstanding share of common stock, with a corresponding 1-for-10 reduction in the number of authorized shares of common stock, but without any change in the par value per share. All share and per share amounts have been retroactively restated to reflect the reverse stock split and the Company effectively cancelled approximately 1,706 shares of Common Stock.
Common Stock
The Company had 11,115,228 and 3,115,030 shares of its Common Stock issued and outstanding on September 30, 2021 and December 31, 2020, respectively.
Each holder of Common Stock is entitled to one vote for each share of Common Stock held on all matters submitted to a vote of the stockholders. The Company’s Charter and Amended and Restated Bylaws (the “Bylaws”) do not provide for cumulative voting rights.
In addition, the holders of Common Stock will be entitled to receive ratably such dividends, if any, as may be declared by the Board out of legally available funds; however, the current policy of the Board is to retain earnings, if any, for operations and growth. Upon liquidation, dissolution or winding-up, the holders of Common Stock will be entitled to share ratably in all assets that are legally available for distribution.
Holders of Common Stock have no preemptive, conversion or subscription rights, and there are no redemption or sinking fund provisions applicable to the Common Stock. The rights, preferences, and privileges of the holders of Common Stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of the Company’s preferred stock that the Company may designate and issue in the future.
Preferred Stock
The Company has 10,000,000 shares of preferred stock, par value $0.0001 per share, authorized and available for issuance in one or more series. The Board is authorized to divide the preferred stock into any number of series, fix the designation and number of each such series, and determine or change the designation, relative rights, preferences, and limitations of any series of preferred stock. The Board of may increase or decrease the number of shares initially fixed for any series, but no decrease may reduce the number below the shares then outstanding and duly reserved for issuance.
On July 16, 2020, the Company authorized 5,194.805195 shares as Series B Preferred Stock. Shares of Series B Preferred Stock that are converted into shares of Common Stock shall be retired and may not be reissued as Series B Preferred Stock but may be reissued as all or part of another series of Preferred Stock. On September 30, 2021, 676.05 shares of Series B Preferred Stock were issued and outstanding, with approximately 2,168.14 shares of Series B Preferred Stock remaining authorized but unissued.
On January 5, 2021, the Company authorized 75,000 shares as Series C Preferred Stock. Shares of Series C Preferred Stock converted into Common Stock (or Prefunded Warrants, as applicable) or redeemed shall be canceled and shall not be reissued. On September 30, 2021, 0 shares of Series C Preferred Stock were issued and outstanding, with approximately 41,902.90 shares of Series C Preferred Stock remaining authorized but unissued.
On September 30, 2021, the Company had approximately 676.05 shares of preferred stock issued and outstanding with approximately 9,919,805.19 shares of preferred stock remaining authorized but unissued.
Series B Convertible Preferred Stock
Pursuant to the Certificate of Designation of Rights and Preferences of the Series B Preferred Stock (the “Series B Certificate of Designation”), the terms of the Series B Preferred Stock are as follows:
Ranking
The Series B Preferred Stock will rank senior to the Common Stock with respect to distributions of assets upon the liquidation, dissolution or winding up of the Company.
Stated Value
Each share of Series B Preferred Stock has a stated value of $7,700, subject to adjustment for stock splits, combinations, and similar events (the “Series B Stated Value”).
Dividends
Each holder of shares of Series B Preferred Stock, in preference and priority to the holders of all other classes or series of stock of the Company, is entitled to receive dividends, commencing from the date of issuance. Such dividends may be paid by the Company only when, as and if declared by the Board, out of assets legally available therefor, semiannually in arrears on the last day of June and December in each year, commencing December 31, 2020, at the dividend rate of 9.0% per year, which is cumulative and continues to accrue on a daily basis whether or not declared and whether or not the Company has assets legally available therefor. The Company may pay such dividends at its option either in cash or in kind in additional shares of Series B Preferred Stock (rounded down to the nearest whole share), provided the Company must pay in cash the fair value of any such fractional shares in excess of $100.00. On September 30, 2021, aggregate dividends payable amounted to approximately $349,000.
Liquidation Preference; Liquidation Rights
Under the Certificate of Designations, each share of Series B Preferred Stock carries a liquidation preference equal to the Series B Stated Value (as adjusted thereunder) plus accrued and unpaid dividends thereon (the “Liquidation Preference”).
If the Company voluntarily or involuntarily liquidates, dissolves or winds up its affairs, each holder of the Series B Preferred Stock will be entitled to receive out of the Company’s assets available for distribution to stockholders, after satisfaction of liabilities to creditors, if any, but before any distribution of assets is made on the Common Stock or any of the Company’s shares of stock ranking junior as to such a distribution to the Series B Preferred Stock, a liquidating distribution in the amount of the Stated Value of all such holder’s Series B Preferred Stock plus all accrued and unpaid dividends thereon. On September 30, 2021, the value of the liquidation preference of the Series B Preferred Stock aggregated to approximately $5.6 million.
Conversion
Each share of Series B Preferred Stock will be convertible at the holder’s option at any time, into Common Stock at a conversion rate equal to the quotient of (i) the Series B Stated Value divided by (ii) the initial conversion price of $7.70, subject to specified adjustments for stock splits, cash or stock dividends, reorganizations, reclassifications other similar events as set forth in the Series B Certificate of Designations. In addition, at any time after the six month anniversary of the Series B Closing Date, if the closing sale price per share of Common Stock exceeds 250% of the initial conversion price, or $19.25, for 20 consecutive trading days, then all of the outstanding shares of Series B Preferred Stock will automatically convert (the “Automatic Conversion”) into such number of shares of Common Stock as is obtained by multiplying the number of shares of Series B Preferred Stock to be so converted, plus the amount of any accrued and unpaid dividends thereon, by the Series B Stated Value per share and dividing the result by the then applicable conversion price. The Series B Preferred Stock contains limitations that prevent the holder thereof from acquiring shares of Common Stock upon conversion (including pursuant to the Automatic Conversion) that would result in the number of shares beneficially owned by such holder and its affiliates exceeding 9.99% of the total number of shares of Common Stock outstanding immediately after giving effect to the conversion, which percentage may be increased or decreased at the holder’s election not to exceed 19.99%.
Most Favored Nations (MFN) Exchange Right
In the event the Company effects any issuance by the Company or any of its subsidiaries of Common Stock or Common Stock equivalents for cash consideration, or a combination of units thereof (a “Subsequent Financing”), each holder of the Series B Preferred Stock has the right, subject to certain exceptions set forth in the Series B Certificate of Designations, at its option, to exchange (in lieu of cash subscription payments) all or some of the Series B Preferred Stock then held (with a value per share of Series B Preferred Stock equal to the stated value, plus accrued and unpaid dividends thereon, of the Series B Preferred Stock (the “Series B Exchange Amount”)) for any securities or units issued in a Subsequent Financing on dollar-for-dollar basis (the “Series B Exchange Right”).
Voting
The holders of the Series B Preferred Stock, voting as a separate class, have customary consent rights with respect to certain corporate actions of the Company. The Company may not take the following actions without the prior consent of the holders of at least a majority of the Series B Preferred Stock then outstanding: (a) authorize, create, designate, establish, issue or sell an increased number of shares of Series B Preferred Stock or any other class or series of capital stock ranking senior to or on parity with the Series B Preferred Stock as to dividends or upon liquidation; (b) reclassify any shares of Common Stock or any other class or series of capital stock into shares having any preference or priority as to dividends or upon liquidation superior to or on parity with any such preference or priority of Series B Preferred Stock; (c) amend, alter or repeal the Certificate of Incorporation or Bylaws of the Company and the powers, preferences, privileges, relative, participating, optional and other special rights and qualifications, limitations and restrictions thereof, which would adversely affect any right, preference, privilege or voting power of the Series B Preferred Stock; (d) issue any indebtedness or debt security, other than trade accounts payable, insurance premium financings and/or letters of credit, performance bonds or other similar credit support incurred in the ordinary course of business, or amend, renew, increase, or otherwise alter in any material respect the terms of any such indebtedness existing as of the date of first issuance of shares of Series B Preferred Stock; (e) redeem, purchase, or otherwise acquire or pay or declare any dividend or other distribution on (or pay into or set aside for a sinking fund for any such purpose) any capital stock of the Company; (f) declare bankruptcy, dissolve, liquidate, or wind up the affairs of the Company; (g) effect, or enter into any agreement to effect, a Change of Control (as defined in the Certificate of Designations); or (h) materially modify or change the nature of the Company’s business.
2014 Equity Incentive Plan
The Company’s Board and stockholders adopted and approved the Amended and Restated 2014 Omnibus Equity Incentive Plan (the “2014 Plan”), which took effect on May 12, 2014. Upon adoption of the 2020 Plan on September 11, 2020, the Company ceased making grants under the 2014 Plan.
The Company issued an aggregate of 79,500 stock options, during the nine months ended September 30, 2020, under the 2014 Plan (see Note 13).
As of September 30, 2021, there were 272,050 shares issued and outstanding under the 2014 Plan and 38,700 shares are reserved subject to issuance of restricted stock and restricted stock unit awards (“RSUs”).
2020 Equity Incentive Plan
The Company’s Board and stockholders adopted and approved the 2020 Omnibus Equity Incentive Plan (the “2020 Plan”), which took effect on September 11, 2020. The initial number of shares of Common Stock available for issuance under the 2020 Plan is 1,000,000 shares, which will, on January 1 of each calendar year, unless the Board decides otherwise, automatically increase to equal ten percent (10%) of the total number of shares of Common Stock outstanding on December 31 of the immediately preceding calendar year, calculated on an As Converted Basis. As Converted Shares include all outstanding shares of Common Stock and all shares of Common Stock issuable upon the conversion of outstanding preferred stock, warrants and other convertible securities, but will not include any shares of Common Stock issuable upon the exercise of options and other convertible securities issued pursuant to either the 2014 Plan or the 2020 Plan. The number of shares permitted to be issued as “incentive stock options” (“ISOs”) is 1,500,000 under the 2020 Plan.
The Company issued an aggregate of 175,246 stock options during the nine months ended September 30, 2021, under the 2020 Plan (see Note 13).
As of September 30, 2021, 1,000,000 total shares were available under the 2020 Plan, of which 176,246 were issued and outstanding and 823,754 shares were available for potential issuances.
Equity Line with Lincoln Park
In November 2019, the Company entered into a purchase agreement (the “Equity Line Agreement”), together with a registration rights agreement (the “Lincoln Park Registration Rights Agreement”), with Lincoln Park. Under the terms of the Equity Line Agreement, Lincoln Park has committed to purchase up to $15,000,000 of Common Stock (the “Equity Line”). Upon execution of the Equity Line Agreement, the Company issued Lincoln Park 48,716 shares of Common Stock (the “Commitment Shares”) as a fee for its commitment to purchase shares of Common Stock under the Equity Line Agreement, which had a grant date fair value of approximately $297,000 and had no effect on expenses or stockholders’ equity.
The remaining shares of Common Stock that may be issued under the Equity Line Agreement may be sold by the Company to Lincoln Park at the Company’s discretion from time-to-time over a 30-month period commencing after the satisfaction of certain conditions set forth in the Equity Line Agreement, subject to the continued effectiveness of a registration statement covering such shares of Common Stock sold to Lincoln Park by the Company. The registration statement was filed with the SEC on December 31, 2019 and was declared effective on January 14, 2020.
There is approximately $14.0 million of availability left for issuance pursuant to the Equity Line Agreement. The Company issued an aggregate of 0, and 149,519 shares of Common Stock, during the nine months ended September 30, 2021 and 2020, respectively, in connection with the Equity Line Agreement, resulting in net proceeds to the Company of approximately $0, and $988,000, respectively.
At The Market Agreement with H.C. Wainwright
On May 26, 2021, the Company entered into the ATM Agreement with H.C. Wainwright & Co., LLC (“Wainwright”), as sales agent, pursuant to which the Company may issue and sell, from time to time, through Wainwright, shares of its Common Stock, and pursuant to which Wainwright may sell its Common Stock by any method permitted by law deemed to be an “at the market offering” as defined by Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended. The Company will pay Wainwright a commission of 3.0% of the aggregate gross proceeds from each sale of Common Stock. As of May 26, 2021, the Company was authorized to offer and sell up to $50 million of its Common Stock pursuant to the ATM Agreement. During the three months ended September 30, 2021, the Company issued and sold an aggregate of 1,501,661 shares of Common Stock under the ATM Agreement for which the Company received gross proceeds of approximately $7.4 million, less issuance costs incurred of approximately $228,000. During the nine months ended September 30, 2021, the Company issued and sold an aggregate of 1,651,225 shares of Common Stock under the ATM Agreement for which the Company received gross proceeds of approximately $8.6 million, less issuance costs incurred of approximately $274,000.
Common Stock Issuances
2021 Issuances
During the three months ended September 30, 2021, the Company issued an aggregate of 20,200 shares of its Common Stock to consultants with a grant date fair value of approximately $124,000 for investor relations services provided, which was recorded as stock-based compensation and included as part of general and administrative expense.
During the three months ended September 30, 2021, the Company issued an aggregate of 1,045,454 shares of Common Stock in connection with the July 2021 Offering as detailed below.
During the three months ended September 30, 2021, the Company issued an aggregate of 624,025 shares of Common Stock in connection with the FWB Merger and canceled and 332,913 shares of Common Stock held by FWB immediately prior to the FWB Merger, which shares of Common Stock are authorized and unissued (see Note 4).
During the three months ended September 30, 2021, the Company cancelled an aggregate of 1,706 shares of Common Stock in connection with the 10-for-1 reverse stock split on September 13, 2021.
During the nine months ended September 30, 2021, the Company issued an aggregate of 97,230 shares of its Common Stock to consultants with a grant date fair value of approximately $1.2 million for investor relations services provided, which was recorded as stock-based compensation and included as part of general and administrative expense.
During the nine months ended September 30, 2021, the Company issued an aggregate 7,500 shares of its Common Stock with a grant date fair value of approximately $94,000 in connection with the settlement with the Company’s former investment bank, which was recorded as stock-based compensation and included as part of general and administrative expense.
During the nine months ended September 30, 2021, the Company issued an aggregate of 3,125,460 shares of Common Stock upon the conversion of an aggregate of 33,097.10 shares of Series C Preferred Stock with a stated value of approximately $24.7 million plus accrued dividends of approximately $198,000.
During the nine months ended September 30, 2021, the Company issued an aggregate of 945,644 shares of Common Stock upon the exercise of an aggregate of 9,526,209 investor warrants, including an aggregate of 3,991,882 pre-funded warrants (See Note 12).
During the nine months ended September 30, 2021, the Company issued an aggregate of 258,278 shares of Common Stock upon the conversion of an aggregate of 258.08 shares of Series B Preferred Stock with a stated value of approximately $2.0 million plus accrued dividends of approximately $3,000.
During the nine months ended September 30, 2021, the Company issued an aggregate of 1,625,454 shares of Common Stock in connection with the March 2021 Offering and July 2021 Offering, as detailed below.
2020 Issuances
During the three months ended September 30, 2020, the Company did not issue any shares of its Common Stock to consultants or outside Board members.
During the three months ended September 30, 2020, holders of shares of Series B Preferred Stock converted 34.127448 shares of Series B Preferred Stock into an aggregate of 34,127 shares of Common Stock at the stated conversion price of $7.70 per share, plus the issuance of 461 shares of Common Stock for accrued dividends of $3,551 through such conversion dates.
During the three months ended September 30, 2020, the Company issued an aggregate of 3,164 shares of its Common Stock to consultants with a total grant date fair value of approximately $25,000 for investor relations services provided, which was recorded as stock-based compensation and included as part of general and administrative expense.
During the nine months ended September 30, 2020, the Company issued an aggregate of 13,284 shares of its Common Stock to consultants with a total grant date fair value of approximately $112,000 for investor relations services provided, which was recorded as stock-based compensation and included as part of general and administrative expense.
During the nine months ended September 30, 2020, the Company issued an aggregate of 10,593 shares of its Common Stock to outside Board members as payment of Board fees with an aggregate grant date fair value of approximately $131,000 that was recorded as stock-based compensation, included as part of general and administrative expense. The aggregate effective settlement price was $12.40 per share, and each individual stock issuance was based on the closing stock price of the Common Stock on the initial date the payable was accrued.
Restricted Stock and Restricted Stock Units
Restricted stock refers to shares of Common Stock subject to vesting based on certain service, performance, and market conditions. Restricted stock unit awards refer to an award under the 2014 Plan or 2020 Plan, which constitutes a promise to grant shares of Common Stock at the end of a specified restriction period.
During the three and nine months ended September 30, 2021, there was no vesting of restricted shares of Common Stock or RSUs.
During the three months ended September 30, 2020, an aggregate of 174 unvested restricted shares of Common Stock, subject to service conditions, vested with a total grant date fair value of approximately $6,000 and was recorded as stock-based compensation, included as part of general and administrative expense.
During the nine months ended September 30, 2020, an aggregate of 1,008 unvested restricted shares of Common Stock, subject to service conditions, vested with a total grant date fair value of approximately $36,000 and was recorded as stock-based compensation, included as part of general and administrative expense.
During the three and nine months ended September 30, 2020, an aggregate of 0, and 400 unvested restricted shares of Common Stock were forfeited, respectively.
As of September 30, 2021, the Company had unrecognized restricted common stock expense of approximately $394,000. Approximately $197,000 of this unrecognized expense vests upon the first commercial sale in the United States of adrulipase (MS1819) and approximately $197,000 of this unrecognized expense vests upon the total market capitalization of the Company exceeding $1.0 billion for 20 consecutive trading days. These milestones were not considered probable on September 30, 2021.
As of September 30, 2020, the Company had unrecognized restricted common stock expense of approximately $394,000. Approximately $197,000 of this unrecognized expense vests upon the first commercial sale in the United States of adrulipase (MS1819) and approximately $197,000 of this unrecognized expense vests upon the total market capitalization of the Company exceeding $1.0 billion for 20 consecutive trading days. These milestones were not considered probable at September 30, 2020.
The Series B Private Placement and the Exchange
On July 16, 2020 (the “Series B Closing Date”), the Company consummated a private placement offering (the “Series B Private Placement”) whereby the Company entered into a Convertible Preferred Stock and Warrant Securities Purchase Agreement (the “Series B Purchase Agreement”) with certain accredited and institutional investors (the “Series B Investors”). Pursuant to the Series B Purchase Agreement, the Company issued an aggregate of 2,912.583005 shares of Series B Convertible Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock”), at a price of $7,700.00 per share, initially convertible into an aggregate of 2,912,575 shares of Common Stock at $7.70 per share, together with warrants (the “Series B Warrants”) to purchase an aggregate of 1,456,282 shares of Common Stock at an exercise price of $8.50 per share. The amount of the Series B Warrants is equal to 50% of the shares of Common Stock into which the Series B Preferred Stock is initially convertible.
In connection with the Series B Private Placement, an aggregate of approximately 1,975.58 shares of Series B Preferred Stock initially convertible into 1,975,574 shares of Common Stock and related 987,783 Series B Warrants were issued for cash consideration, resulting in aggregate gross proceeds of approximately $15.2 million and aggregate net proceeds to the Company of approximately $13.2 million after deducting placement agent compensation and offering expenses.
An aggregate of approximately 937.00 shares of Series B Preferred Stock initially convertible into 937,000 shares of Common Stock and related Series B Warrants to purchase 468,499 shares of Common Stock were issued to certain Series B Investors (the “Exchange Investors”) in exchange for consideration consisting of approximately $6.9 million aggregate outstanding principal amount, together with accrued and unpaid interest thereon through the Series B Closing Date of approximately $0.3 million, of certain Senior Convertible Promissory Notes (the “Promissory Notes”) issued between December 20, 2019 and January 9, 2020 (the “Exchange”), pursuant to an Exchange Addendum (the “Exchange Addendum”) executed by the Company and the Exchange Investors. As additional consideration to the Exchange Investors, the Company also issued certain additional warrants (the “Exchange Warrants”) to purchase an aggregate of 177,293 shares of Common Stock at an exercise price of $8.50 per share. The amount of the Exchange Warrants is equal to 25% of the shares of Common Stock into which such Promissory Notes were originally convertible upon the initial issuance thereof.
Pursuant to the Series B Private Placement and the Series B Purchase Agreement, for purposes of complying with Nasdaq Listing Rule 5635(c) and 5635(d), the Company was required to hold a meeting of its stockholders not later than 60 days following the Series B Closing Date to seek approval (the “2020 Stockholder Approval”) for, among other things, the issuance of shares of Common Stock upon (i) full conversion of the Series B Preferred Stock; and (ii) full exercise of the Series B Warrants and the Exchange Warrants. In the event the 2020 Stockholder Approval was not received on or prior to the 90th day following the Series B Closing Date, subject to extension upon the prior written approval of the holders of at least a majority of the Series B Preferred Stock then outstanding, the Company would have been required to repurchase all of the then outstanding shares of Series B Preferred Stock at a price equal to 150% of the stated value thereof plus accrued and unpaid dividends thereon, in cash. On September 11, 2020, the Company received the 2020 Stockholder Approval.
The Company prepaid the remaining outstanding balance of $25,000 aggregate principal amount of Promissory Notes, together with accrued and unpaid interest thereon through the prepayment date of approximately $1,000, held by those holders who did not participate in the Exchange. Following these transactions, no Promissory Notes remain outstanding.
January 2021 Offerings
On December 31, 2020, the Company entered into a securities purchase agreement (the “Series C Purchase Agreement”), pursuant to which the Company agreed to sell in a registered direct offering 5,333.333 shares of Series C Preferred Stock, at a price of $750.00 per share, initially convertible into an aggregate of 533,333 shares of Common Stock, at an initial stated value of $750.00 per share and a conversion price of $7.50 per share (the “January 2021 Registered Direct Offering”).
Concurrently with the Registered Direct Offering, in a private placement offering pursuant to the Series C Purchase Agreement (the “January 2021 Private Placement,” and together with the January 2021 Registered Direct Offering, the “January 2021 Offerings”), the Company agreed to sell an additional 5,333.3333 shares of Series C Preferred Stock at the same price as the Series C Preferred Stock offered in the January 2021 Registered Direct Offering and convertible on the same terms and warrants (the “January 2021 Investor Warrants”) to purchase up to an aggregate of 1,066,666 shares of Common Stock, with an exercise price of $8.00 per share and a maturity date of July 6, 2026.
In connection with the January 2021 Private Placement, the Company entered into a registration rights agreement, dated as of December 31, 2020, pursuant to which the Company filed a registration statement on Form S-1 (File No. 333-252087) to register the shares of Common Stock issuable upon the conversion of the Series C Preferred Stock sold in the January 2021 Private Placement and the exercise of the January 2021 Investor Warrants. The registration statement was declared effective by the SEC on January 21, 2021.
On January 6, 2021, the January 2021 Offerings closed, and the Company received aggregate gross proceeds of approximately $8.0 million, excluding the net proceeds. The net proceeds to the Company from the January 2021 Offerings, after deducting the placement agent’s fees and expenses, was approximately $7.1 million. The Company used the net proceeds to fund the payment of cash consideration to FWB under the FWB License Agreement, and for other general corporate purposes.
The Company paid the placement agent a cash fee equal to 8.0% and a management fee equal to 1.0% of the aggregate gross proceeds received by the Company in the January 2021 Offerings, or approximately $700,000. The Company also agreed to issue to the placement agent or its designees warrants (the “January 2021 Placement Agent Warrants”) exercisable for up to 74,666 shares of Common Stock, which is equal to 7.0% of the amount determined by dividing the gross proceeds of the January 2021 Offerings by the offering price per share of Common Stock, or $7.50. The January 2021 Placement Agent Warrants have substantially the same terms as the January 2021 Investor Warrants, except they are exercisable at $9.375 per share, or 125% of the effective purchase price per share of the Series C Preferred Stock issued. The Company also reimbursed the placement agent $35,000 for non-accountable expenses, $125,000 for legal fees and expenses and other out-of-pocket expenses and $12,900 for clearing fees.
Pursuant to the January 2021 Private Placement and the Series C Purchase Agreement, the Company was required to hold a meeting of its stockholders not later than March 31, 2021 to seek approval (the “2021 Stockholder Approval”) for, among other things, the issuance of shares of Common Stock upon (i) full conversion of the Series C Preferred Stock; and (ii) full exercise of the January 2021 Investors Warrants and the January 2021 Placement Agent Warrants, and to increase the authorized shares to 250,000,000 from 150,000,000.
On February 24, 2021, the Company received the 2021 Stockholder Approval, and all outstanding shares of Series C Preferred Stock were converted to Common Stock.
Accounting for the January 2021 Offerings
Upon receiving the 2021 Stockholder Approval on February 24, 2021, the Company classified the Series C Preferred Stock as permanent equity because no features provide for redemption by the holders of the Series C Preferred Stock or conditional redemption, which is not solely within the Company’s control, and there are no unconditional obligations in that (1) the Company must or may settle in a variable number of its equity shares and (2) the monetary value is predominantly fixed, varying with something other than the fair value of the Company’s equity shares or varying inversely in relation to the Company’s equity shares.
Because the Series C Preferred Stock contains certain embedded features that could affect the ultimate settlement of the Series C Preferred Stock, the Company analyzed the instrument for embedded derivatives that require bifurcation. The Company’s analysis began with determining whether the Series C Preferred Stock is more akin to equity or debt. The Company evaluated the following criteria/features in this determination: redemption, voting rights, collateral requirements, covenant provisions, creditor and liquidation rights, dividends, and conversion rights. The Company determined that the Series C Preferred Stock was more akin to equity than to debt when evaluating the economic characteristics and risks of the entire Series C Preferred Stock, including the embedded features. The Company then evaluated the embedded features to determine whether their economic characteristics and risks were clearly and closely related to the economic characteristics and risks of the Series C Preferred Stock. Since the Series C Preferred Stock was determined to be more akin to equity than debt, and the underlying that causes the value of the embedded features to fluctuate would be the value of the Company’s common stock, the embedded features were considered clearly and closely related to the Series C Preferred Stock. As a result, the embedded features would not need to be bifurcated from the Series C Preferred Stock.
The Company concluded the freestanding January 2021 Investor Warrants did not contain any provision that would require liability classification and therefore should be classified in stockholder’s equity, based on their relative fair value.
The proceeds from the January 2021 Offerings were allocated to the Series C Preferred Stock and the January 2021 Investor Warrants based on their relative fair values. The total proceeds of approximately $7.1 million, net of $0.9 million offering costs, were allocated as follows: approximately $4.6 million to the Series C Preferred Stock and approximately $3.4 million to the January 2021 Investor Warrants. After allocation of the proceeds, the effective conversion price of the Series C Preferred Stock was determined to be beneficial and, as a result, the Company recorded a deemed dividend of approximately $4.3 million equal to the intrinsic value of the beneficial conversion feature and recognized on the closing date and recorded as a reduction of income available to common stockholders in computing basic and diluted loss per share. The total offering costs of approximately $0.9 million were recognized in equity.
Series B Most Favored Nations (MFN) Exchanges into the January 2021 Offerings
Subject to the consummating the January 2021 Offerings, the holders of the Series B Preferred Stock became entitled to exercise their Series B Exchange Right to exchange their Series B Preferred Stock at the Series B Exchange Amount into the Series C Preferred Stock and related January 2021 Investor Warrants.
During the nine months ended September 30, 2021, holders of approximately 1,839.76 shares of Series B Preferred Stock with an aggregate Exchange Amount of approximately $14.4 million had elected to exercise their Series B Exchange Rights into 19,140.14 shares of Series C Preferred Stock, convertible into an aggregate of 1,914,024 shares of Common Stock and additional January 2021 Investor Warrants exercisable for up to an aggregate of 1,914,024 shares of Common Stock. Immediately upon issuance of the Series C Preferred Stock pursuant to the Series B Exchange Right prior to February 24, 2021, an aggregate of 13,166.62 shares of Series C Preferred Stock were converted into 1,316,662 shares of Common Stock, at an effective conversion price of $7.70 per share, and an aggregate of 334.46 shares of Series C Preferred Stock, convertible into 33,446 shares of Common Stock, remained unconverted pending stockholder approval. Upon receiving the 2021 Stockholder Approval on February 24, 2021, the Company elected to convert all 334.46 remaining shares of Series C Preferred Stock issued pursuant to the Series B Exchange Right, plus accrued dividends thereon of approximately $2,000 into 33,699 shares of Common Stock.
As a result, as of September 30, 2021, any holders of Series B Preferred Stock who elect to exercise their Series B Exchange Right in connection with up to 676.05 shares of Series B Preferred Stock plus accrued dividends of approximately $349,000 may require the Company to issue either: (i) up to 7,406 additional shares of Series C Preferred Stock that are currently convertible up to 740,612 underlying shares of Common Stock, together with January 2021 Investor Warrants to purchase up to an additional 740,612 shares of Common Stock, to any holders of Series B Preferred Stock who elect to exercise their Series B Exchange Right into the January 2021 Offerings, or (ii) up to 1,633,720 additional shares of Common Stock at a price of $3.40 per share, with no warrants, to any holders of Series B Preferred Stock who elect to exercise their Series B Exchange Right into shares of Common Stock. Any shares of Series C Preferred Stock to be issued pursuant to the Series B Exchange Right into the January 2021 Offerings would, upon issuance, be immediately converted into underlying shares of Common Stock.
Accounting for the Series B Exchanges into the January 2021 Offerings
During the nine months ended September 30, 2021, pursuant to the Series B Exchange Right, the Company issued an aggregate of 19,140.14 shares of Series C Preferred Stock and warrants to purchase an aggregate of 1,914,014 shares of Common Stock in connection with the exchange of approximately 1,839.76 shares of Series B Preferred Stock. The exercise of all of these warrants and the conversion of a portion of these shares of Series C Preferred Stock were prohibited until the Company received stockholder approval on February 24, 2021. The Company analyzed the exchanges pursuant to the Series B Exchange Right from preferred stock to preferred stock qualitatively and determined that the exchanges result in a substantive change and should be accounted for as an extinguishment. As such, for the nine months ended September 30, 2021, the Company recognized an aggregate deemed dividend of approximately $21.0 million as calculated by the difference in the carrying value of the Series B Preferred Stock exchanged and the fair value of the Series C Preferred Stock and January 2021 Investor Warrants issued on each exchange date.
March 2021 Offering
On March 7, 2021, the Company entered into a securities purchase agreement (the “March 2021 Purchase Agreement”), pursuant to which the Company agreed to sell, in a registered direct offering (the “March 2021 Offering”) priced at the market under Nasdaq rules, (i) 580,000 shares of Common Stock, (ii) pre-funded warrants (the “March 2021 Pre-Funded Warrants”) to purchase up to 205,854 shares of Common Stock, with an exercise price of $0.01 per share and no expiration term and (iii) warrants (the “March 2021 Warrants”) to purchase an aggregate of 392,927 shares of Common Stock with an exercise price of $12.10 per share and an expiration term of five years from the date of issuance. The price per share of March 2021 Offering was $12.725.
On March 10, 2021, the March 2021 Offering closed and the Company received aggregate gross proceeds of approximately $10.0 million, excluding the net proceeds, if any, from the exercise of the March 2021 Warrants. The net proceeds to the Company from the March 2021 Offering were approximately $9.1 million, after deducting the placement agent’s fees and expenses.
The Company paid the placement agent a cash fee equal to 8.0% of the aggregate gross proceeds received by the Company, or approximately $800,000. The Company also agreed to issue the placement agent or its designees warrants (the “March 2021 Placement Agent Warrants”) exercisable for up to 55,009 shares of Common Stock, which is equal to 7.0% of the amount determined by dividing the gross proceeds of the March 2021 Offering by the offering price per share of Common Stock, or $12.725. The March 2021 Placement Agent Warrants have substantially the same terms as the March 2021 Warrants, except they are exercisable at $15.906 per share, or 125% of the effective purchase price per share of Common Stock issued. The Company also reimbursed the placement agent $35,000 for non-accountable expenses, $50,000 for legal fees and expenses and other out-of-pocket expenses and approximately $16,000 for clearing fees.
The March 2021 Offering was made pursuant to the Company’s effective shelf registration statement on Form S-3 (Registration No. 333-231954) originally filed with the SEC on June 21, 2019, and declared effective on June 25, 2019. The Company filed a prospectus supplement with the SEC in connection with the sale of such securities in the March 2021 Offering.
The Company concluded the freestanding March 2021 Warrants and the March 2021 Placement Agent Warrants did not contain any provisions that would require liability classification and therefore should be classified in stockholder’s equity.
July 2021 Offering
On July 22, 2021, the Company entered into an underwriting agreement with Wainwright pursuant to which the Company agreed to sell, in an upsized firm commitment offering, 909,091 shares of Common Stock to Wainwright at an offering price to the public of $5.50 per share, less underwriting discounts and commissions. On July 27, 2021, pursuant to the terms of the underwriting agreement, Wainwright exercised its 30-day over-allotment option in full to purchase an additional 136,363 shares of Common Stock at the same offering price to the public, less underwriting discounts and commissions. The offering closed on July 27, 2021.
The Company received net proceeds from the offering of approximately $5.1 million. The Company intends to use the net proceeds from the offering for milestone payments due under the Company’s license agreements and for other general corporate purposes.
The Company paid Wainwright an underwriting discount equal to 8.0% of the gross proceeds of the offering, and reimbursed Wainwright for a non-accountable expense allowance of $35,000, $125,000 in legal fees and $15,950 for clearing expenses. Additionally, as partial compensation for Wainwright’s services as underwriter in the offering, the Company issued to Wainwright (or its designees) warrants to purchase 73,181 shares of Common Stock equal to 7.0% of the aggregate number of shares of Common Stock sold in the offering (the “Wainwright Warrants”). The Wainwright Warrants have a term of five (5) years from the date of the offering and an exercise price of $6.875 per share (equal to 125% of the offering price per share), subject to adjustments as provided in the terms of the Wainwright Warrants. The Wainwright Warrants provide for liquidated damages and compensation for buy-ins, if the Company fails to timely deliver the underlying Common Stock within specified timeframes from exercise. The Wainwright Warrants do not provide for any Black Scholes payout in the event of a fundamental transaction relating to the Company.
The Company concluded the freestanding Wainwright Warrants did not contain any provisions that would require liability classification and therefore should be classified in stockholder’s equity.
Most Favored Nations (MFN) Exchange Right
Under the Series B Certificate of Designations, each holder of the Series B Preferred Stock may have the right to exchange the stated value, plus accrued and unpaid dividends, of the Series B Preferred Stock for shares of common stock on a dollar-for-dollar basis with investors in this offering, in lieu of any cash subscription payments therefor, referred to herein as the Exchange Right. Any shares of our common stock issued pursuant to the Exchange Right are anticipated to be made pursuant to exemptions provided by Section 3(a)(9) under the Securities Act, or another applicable exemption therefrom, and accordingly will be freely transferable without restriction upon issuance pursuant to the exemption provided by Rule 144 under the Securities Act.
As of September 30, 2021, holders of approximately 1,839.76 shares of Series B Preferred Stock with an aggregate Series B Exchange Amount of approximately $14.4 million had previously elected to exercise their Series B Exchange Rights into Series C Preferred Stock, convertible into an aggregate of 1,914,024 shares of Common Stock (which conversion the Company elected to make in full), and additional January 2021 Investor Warrants exercisable for up to an aggregate of 1,914,014 shares of Common Stock.
As a result, as of September 30, 2021, any holders of Series B Preferred Stock who elect to exercise their Series B Exchange Right in connection with up to 676.05 shares of Series B Preferred Stock plus accrued dividends of approximately $349,000 may require the Company to issue either: (i) up to 7,406 additional shares of Series C Preferred Stock that are currently convertible up to 740,612 underlying shares of Common Stock, together with January 2021 Investor Warrants to purchase up to an additional 740,612 shares of Common Stock an exercise price of $8.00 per share, to any holders of Series B Preferred Stock who elect to exercise their Series B Exchange Right into the January 2021 Offerings, or (ii) up to 1,633,720 additional shares of Common Stock at a price of $3.40 per share under our At The Market Agreement dated May 26, 2021 (the “ATM Agreement”) (such price being the lowest price per share sold under the ATM Agreement to date), with no warrants, to any holders of Series B Preferred Stock who elect to exercise their Series B Exchange Right into shares of Common Stock.
Note 12 – Warrants
During the three months ended September 30, 2021, in connection with the July 2021 Offering, the Company issued July 2021 Placement Agent Warrants to the placement agent and/or their designees to purchase an aggregate of 73,181 shares of Common Stock, as referenced in Note 11. These July 2021 Placement Agent Warrants were issued on July 22, 2021, are exercisable at $6.875 per share and expire five years from the date of issuance. The total grant date fair value of these warrants was determined to be approximately $263,000, as calculated using the Black-Scholes model, and had no effect on shareholders’ equity (See Note 11).
During the nine months ended September 30, 2021, the Company issued January 2021 Investor Warrants to purchase an aggregate of 563,915 shares of Common Stock to holders of Series B Preferred Stock who elected to exercise their Series B Exchange Rights into Series C Preferred Stock and related warrants, as referenced in Note 11. These January 2021 Investor Warrants were issued between April 1, 2021 and June 9, 2021, are exercisable at $8.00 per share and expire on July 6, 2026. The total grant date fair value of these warrants was determined to be approximately $3.4 million, as calculated using the Black-Scholes model, and were recorded as a deemed dividend and recognized on the exchange date and recorded as a reduction of income available to common stockholders in computing basic and diluted loss per share.
During the nine months ended September 30, 2021, in connection with the January 2021 Offerings, the Company issued January 2021 Investor Warrants to the investor to purchase an aggregate of 1,066,666 shares of Common Stock, as referenced in Note 11. These January 2021 Investor Warrants were issued on January 6, 2021, are exercisable at $8.00 per share and expire on July 6, 2026. The exercise of the January 2021 Investor Warrants was prohibited until the Company received stockholder approval on February 24, 2021. The total grant date fair value of these warrants was determined to be approximately $6.0 million, as calculated using the Black-Scholes model, and were recorded as additional paid in capital based on their relative fair value of approximately $3.4 million (See Note 11).
During the nine months ended September 30, 2021, in connection with the conversion of the Series C Preferred Stock issued in the January 2021 Offerings, the Company issued pre-funded warrants to the investor to purchase an aggregate of 193,333 shares of Common Stock as referenced in Note 11. These pre-funded warrants were issued on January 6, 2021, are exercisable at $0.01 per share and do not expire. The total grant date fair value of these pre-funded was determined to be approximately $1.6 million and was recorded as additional paid in capital (See Note 11).
During the nine months ended September 30, 2021, in connection with the January 2021 Offerings, the Company issued January 2021 Placement Agent Warrants to the placement agent and/or their designees to purchase an aggregate of 74,666 shares of Common Stock, as referenced in Note 11. These January 2021 Placement Agent Warrants were issued on January 6, 2021, are exercisable at $9.375 per share and expire on July 6, 2026. The total grant date fair value of these warrants was determined to be approximately $392,000, as calculated using the Black-Scholes model, and had no effect on shareholders’ equity (See Note 11).
During the nine months ended September 30, 2021, the Company issued January 2021 Investor Warrants to purchase an aggregate of 1,914,024 shares of Common Stock to holders of Series B Preferred Stock elected to exercise their Series B Exchange Rights into Series C Preferred Stock and related warrants, as referenced in Note 11. These January 2021 Investor Warrants were issued between January 13, 2021 and June 9, 2021, are exercisable at $8.00 per share and expire on July 6, 2026. The exercise of 1,350,108 of these warrants was prohibited until the Company received stockholder approval on February 24, 2021. The total grant date fair value of these warrants was determined to be approximately $21.0 million, as calculated using the Black-Scholes model, and were recorded as a deemed dividend and recognized on the exchange date and recorded as a reduction of income available to common stockholders in computing basic and diluted loss per share.
During the nine months ended September 30, 2021, in connection with the March 2021 Offering, the Company issued March 2021 Warrants to the investor to purchase an aggregate of 392,927 shares of Common Stock, as referenced in Note 11. These March 2021 Warrants were issued on March 10, 2021, are exercisable at $12.10 per share and expire five years from the date of issuance. The total grant date fair value of these warrants was determined to be approximately $3.5 million, as calculated using the Black-Scholes model, and were recorded as additional paid in capital (See Note 11).
During the nine months ended September 30, 2021, in connection with March 2021 Offering, the Company issued pre-funded warrants to the investor to purchase an aggregate of 205,854 shares of Common Stock, as referenced in Note 11. These pre-funded warrants were issued on March 10, 2021, are exercisable at $0.10 per share and do not expire. The total grant date fair value of these pre-funded was determined to be approximately $2.6 million and was recorded as additional paid in capital (See Note 11).
During the nine months ended September 30, 2021, in connection with the March 2021 Offering, the Company issued March 2021 Placement Agent Warrants to the placement agent and/or their designees to purchase an aggregate of 55,008 shares of Common Stock, as referenced in Note 11. These March 2021 Placement Agent Warrants were issued on March 10, 2021, are exercisable at $15.906 per share and expire five years from the date of issuance. The total grant date fair value of these warrants was determined to be approximately $453,000, as calculated using the Black-Scholes model, and had no effect on shareholders’ equity (See Note 11).
During the nine months ended September 30, 2021, the Company issued warrants to a consultant to purchase an aggregate of 20,000 shares of Common Stock that are subject to service-based milestone vesting conditions for investor relations services. These warrants were issued on February 8, 2021, are exercisable at $16.90 per share and expire four years from the date of issuance. The total grant date fair value of these warrants was determined to be approximately $214,000, as calculated using the Black-Scholes model.
During the three months ended September 30, 2021, warrants to purchase a total of 15,000 shares of Common Stock vested, with a grant date fair value of approximately $161,000, which was recorded as stock-based compensation and was included as part of general and administrative expense.
During the nine months ended September 30, 2021, warrants to purchase a total of 20,000 shares of Common Stock vested, with a grant date fair value of approximately $214,000, which was recorded as stock-based compensation and was included as part of general and administrative expense.
During the nine months ended September 30, 2021, warrants to purchase an aggregate of 952,620 shares of Common Stock, including the pre-funded warrants issued in January 2021 and March 2021, were exercised for 945,633 shares of Common Stock resulting in cash proceeds of approximately $4.9 million.
During the nine months ended September 30, 2020, in connection with the January 2020 closings of the Promissory Note Offering, the Company issued Note Warrants to investors to purchase an aggregate of 181,325 shares of Common Stock with the issuance of the Promissory Notes as referenced in Note 9. These Note Warrants were issued between January 2, 2020 and January 9, 2020, and became exercisable commencing six (6) months following the issuance date at $10.70 per share and expire five years from issuance. The total grant date fair value of these warrants was determined to be approximately $1.6 million, as calculated using the Black-Scholes model, and were recorded as a debt discount based on their relative fair value.
During the nine months ended September 30, 2020, in connection with the January 2020 closings of the Promissory Note Offering, the Company issued placement agent warrants to purchase an aggregate of 19,973 shares of Common Stock. These placement agent warrants were issued between January 2, 2020 and January 9, 2020, vested immediately, and expire five years from issuance. 4,149 of these Placement Agent Warrants are exercisable at $12.10 per share and 15,823 are exercisable at $14.20 per share. The total grant date fair value of these placement agent warrants was determined to be approximately $174,000, as calculated using the Black-Scholes model, and was charged to debt discount that will be amortized over the life of the debt.
For the three and nine months ended September 30, 2020, in connection with the closing of the Series B Private Placement, the Company issued Series B Warrants to investors to purchase an aggregate of 145,628 shares of Common Stock with the issuance of the Series B Preferred Stock as referenced in Note 11. These Series B Warrants were issued on July 16, 2020, are exercisable commencing six (6) months following the issuance date at $8.50 per share and expire five years from issuance. The total grant date fair value of the Series B Warrants was determined to be approximately $8.1 million, as calculated using the Black-Scholes model, and were recorded as equity based on their relative fair value (See Note 11).
For the three and nine months ended September 30, 2020, in connection with the closing of the Exchange (See Note 11), the Company issued Exchange Warrants to certain investors to purchase an aggregate of 177,293 shares of Common Stock with the issuance of the Series B Preferred Stock as referenced in Note 11. These Exchange Warrants were issued on July 16, 2020, are exercisable commencing six (6) months following the issuance date at $8.50 per share and expire five years from issuance. The total grant date fair value of the Exchange warrants was determined to be approximately $1.0 million, as calculated using the Black-Scholes model, and were recorded as part of the loss on extinguishment (See Note 9).
For the three and nine months ended September 30, 2020, in connection with the closing of the Series B Private Placement, the Company issued the July Placement Agent Warrants to purchase an aggregate of 137,745 shares of Common Stock to the placement agent and/or their designees as referenced in Note 11. The July Placement Agent Warrants were issued on July 16, 2020, are exercisable commencing six (6) months following the issuance date at $9.60 per share and expire five years from issuance. The total grant date fair value of the July Placement Agent Warrants was determined to be approximately $745,000, as calculated using the Black-Scholes model, and were recorded as equity (See Note 11).
For the three and nine months ended September 30, 2020, in connection with the settlement and release with the Company’s former CEO, on July 14, 2020 the Company granted warrants to purchase an aggregate of 15,000 shares of Common Stock. The warrants were immediately exercisable, have an exercise price equal to $10.00 per share, a five-year term and may be exercised pursuant to a cashless exercise provision commencing six months from the issuance date. The total grant date fair value of these warrants was determined to be approximately $85,000, as calculated using the Black-Scholes model, and were included in the gain on settlement.
During the nine months ended September 30, 2020, warrants to purchase an aggregate of 5,977 shares of Common Stock expired with exercise prices ranging between $32.50 and $73.70 per share.
Warrant transactions for the nine months ended September 30, 2021 and 2020 were as follows:
|
Exercise |
Weighted |
||||||||||||
|
Price Per |
Average |
||||||||||||
|
Warrants |
Share |
Price |
|||||||||||
|
Warrants outstanding and exercisable on January 1, 2020 |
537,828 | $10.70 | - | 73.70 | $ | 25.30 | |||||||
|
Granted during the period |
1,988,165 | $8.50 | - | 14.20 | $ | 8.80 | |||||||
|
Expired during the period |
(5,977 | ) | $32.50 | - | 73.70 | $ | 51.50 | ||||||
|
Exercised during the period |
- | - | - | ||||||||||
|
Warrants outstanding and exercisable on September 30, 2020 |
2,520,016 | $8.50 | - | 73.70 | $ | 12.20 | |||||||
|
Warrants outstanding and exercisable on January 1, 2021 |
2,517,722 | $8.50 | - | 73.70 | $ | 12.20 | |||||||
|
Granted during the period |
3,995,602 | $0.01 | - | 16.90 | $ | 7.77 | |||||||
|
Expired during the period |
(51,061 | ) | - | - | |||||||||
|
Exercised during the period |
(952,588 | ) | - | - | |||||||||
|
Warrants outstanding and exercisable on September 30, 2021 |
5,509,675 | $6.87 | - | 66.00 | $ | 9.96 | |||||||
Warrants exercisable on September 30, 2021, were as follows:
|
Exercise Price |
Number of Shares Under Warrants |
Weighted Average Remaining Contract Life in Years |
Weighted Average Exercise Price |
||||||||||||||||||
| $ | 0.00 | - | 9.99 | 4,482,860 | 4.40 | ||||||||||||||||
| $ | 10.00 | - | 19.99 | 840,745 | 3.62 | ||||||||||||||||
| $ | 20.00 | - | 29.99 | 32,003 | 1.82 | ||||||||||||||||
| $ | 30.00 | - | 39.99 | 61,155 | 0.61 | ||||||||||||||||
| $ | 40.00 | - | 49.99 | 16,425 | 0.53 | ||||||||||||||||
| $ | 50.00 | - | 59.99 | 72,714 | 0.47 | ||||||||||||||||
| $ | 60.00 | - | 69.99 | 3,773 | 0.17 | ||||||||||||||||
|
Totals |
5,509,675 | 4.16 | $ | 9.96 | |||||||||||||||||
The weighted average fair value of warrants granted during the nine months ended September 30, 2021, and 2020, was $8.85 and $8.80 per share, respectively. The grant date fair values were calculated using the Black-Scholes model with the following weighted average assumptions:
|
September 30, |
||||||
|
2021 |
||||||
| Expected life (in years) | 5.19 | |||||
|
Volatility |
83.8 | - | 90.8 |
% |
||
| Risk-free interest rate | 0.28 | - | 1.67 | |||
| Dividend yield | -% | |||||
Note 13 - Stock Options
Under the 2014 Plan and the 2020 Plan, the fair value of options granted is estimated on the grant date using the Black-Scholes option valuation model. This valuation model for stock-based compensation expense requires the Company to make assumptions and judgments about the variables used in the calculation, including the expected term (weighted-average period of time that the options granted are expected to be outstanding), the volatility of the common stock price and the assumed risk-free interest rate. The Company recognizes stock-based compensation expense for only those shares expected to vest over the requisite service period of the award. No compensation cost is recorded for options that do not vest and the compensation cost from vested options, whether forfeited or not, is not reversed.
On June 30, 2021, the Board rescinded and cancelled certain stock option awards previously made under the 2014 Plan (the “Prior Awards”) to James Sapirstein, the Company’s President, Chief Executive Officer and Chairman of the Board, and Daniel Schneiderman, the Company’s Chief Financial Officer, and issued new stock options awards (the “New Awards”) under the 2020 Plan in an equivalent amount and with equivalent exercise price, vesting and expiration terms to the Prior Awards. This action was approved by the Board following the recommendation of a special committee of the Board upon review of certain matters raised in a stockholder litigation demand letter received by the Company on or about July 27, 2020, as previously disclosed in the Company’s definitive proxy statement, dated August 11, 2020, in connection with stockholder approval of the 2020 Plan.
The terms of the New Awards to Mr. Sapirstein (the “New Sapirstein Awards”) covering 90,000 shares of the Common Stock at an exercise price of $8.50 per share comprised of (i) stock options to purchase 30,000 shares of Common Stock that vest over a term of 18 months in 18 equal monthly installments starting with the first monthly installment on February 16, 2022, (ii) stock options to purchase 20,000 shares of Common Stock that vested immediately upon the grant of such stock options, and (iii) stock options to purchase 40,000 shares of Common Stock subject to milestone-based vesting based upon the achievement of certain strategic milestones specified by the Board. The Company determined the cancellation and reissue of the New Sapirstein Awards did not result in modification accounting under ASC 718 as there was no change between the fair value of the original stock options immediately prior to the modification and the grant date fair value of the replacement stock options and no change to vesting conditions. The Company will recognize a total of approximately $359,000, representing the original unexpensed amount over the remaining requisite service periods of the New Sapirstein Awards.
The terms of the New Awards to Mr. Schneiderman (the “New Schneiderman Awards”) covering an aggregate of 28,500 shares of Common Stock at an exercise price of $8.50 per share comprised of (i) stock options to purchase 25,000 shares of Common Stock, of which stock options to purchase 7,986 shares of Common Stock vested immediately upon the grant of such stock options and the remaining stock options to purchase 17,014 shares of Common Stock will vest over a term of 2 years and 1 month in 25 equal monthly installments, and (ii) stock options to purchase 3,500 shares of Common Stock, of which stock options to purchase 1,750 shares of Common Stock vested immediately upon the grant of such stock options and the remaining options to purchase 1,750 shares of Common Stock vest over a term of 19 months in 19 equal monthly installments. The Company determined the cancellation and reissue of the New Schneiderman Awards did not result in modification accounting under ASC 718 as there was no change between the fair value of the original stock options immediately prior to the modification and the grant date fair value of the replacement stock options and no change to vesting conditions. The Company will recognize a total of $192,000 over the remaining requisite service periods of the New Schneiderman Awards, which amounts to the unexpensed amount of the original stock option grants.
During the three months ended September 30, 2021, the Company issued stock options under the 2020 Plan to new employees to purchase an aggregate of 18,781 shares of Common Stock with strike prices ranging from $5.80 to $7.50 per share and a term of ten years that vest in equal monthly installments over three years. These options had a total fair value of approximately $102,000, as calculated using the Black-Scholes model.
During the three months ended September 30, 2021, excluding the Prior Awards described above, stock options to purchase an aggregate of 0 shares of Common Stock under the 2014 Plan were cancelled.
During the nine months ended September 30, 2021, the Company issued stock options under the 2020 Plan to new employees to purchase an aggregate of 175,246 shares of Common Stock with strike prices ranging from $6.40 to $15.40 per share and a term of ten years that vest in equal monthly installments over three years. These options had a total fair value of approximately $403,000, as calculated using the Black-Scholes model.
During the nine months ended September 30, 2021, excluding the Prior Awards described above, stock options to purchase an aggregate of 15,477 shares of Common Stock under the 2014 Plan were cancelled with strike prices ranging between $8.50 and $36.00 per share.
During the nine months ended September 30, 2021, stock options to purchase an aggregate of 41,614 shares of Common Stock, subject to service-based milestone vesting conditions, vested with a total grant date fair value of approximately $305,000 which was recorded as stock-based compensation, of which approximately $245,000 was included as part of general and administrative expense and approximately $60,000 was included as part of research and development expense.
During the nine months ended September 30, 2021, stock options to purchase an aggregate of 75,500 shares of Common Stock, subject to performance-based milestone vesting conditions, vested due to the Company achieving certain clinical milestones, with a total grant date fair value of approximately $623,000 which was recorded as stock-based compensation, of which approximately $253,000 was included as part of general and administrative expense and approximately $370,000 was included as part of research and development expense. Stock options to purchase an aggregate of 43,750 shares of Common Stock, with a total grant date fair value of approximately $427,000, vested due to the Company completing enrollment of the Phase 2 OPTION 2 clinical trial. Stock options to purchase an aggregate of 21,000 shares of Common Stock, with a total grant date fair value of approximately $148,000, vested due to the Company’s public announcement of topline data for the Phase 2 OPTION 2 clinical trial. Stock options to purchase an aggregate of 750 shares of Common Stock, with a total grant date fair value of approximately $8,000, vested due to the Company completing enrollment of the Phase 2 Combination Trial in Europe. Stock options to purchase an aggregate of 10,000 shares of Common Stock, with a total grant date fair value of approximately $40,000, vested due to the Company determining that initiating a U.S. Phase 1 clinical trial for any product other than MS1819 became probable in connection with the initiation of the COVID-19 niclosamide trial.
During the three months ended September 30, 2020, the Company issued stock options to purchase an aggregate of 204,000 shares of Common Stock with a strike price of $8.50 per share and a term of ten years to its employees. These options had a total grant date fair value of approximately $1.4 million, as calculated using the Black-Scholes model.
During the three months ended September 30, 2020, the Board approved an amended and restated option grant to its Chief Financial Officer, amending and restating a grant previously made on January 2, 2020, to reduce the amount of shares issuable upon exercise of such option to be the maximum number of shares Mr. Schneiderman was eligible to receive under the 2014 Incentive Plan on the original grant date, or 30,000 shares, due to the 2014 Incentive Plan provisions relating to the Section 162(m) limitations described above. The Board also approved the issuance of a replacement option covering the balance of shares intended to be issued at that time, or 3,500 shares. The original stock option has an exercise price of $10.30, the closing sale price of Common Stock on January 2, 2020, which was the date of its original grant, and the replacement stock option has an exercise price of $8.50, the closing sale price of the Common Stock on its date of grant. Both the original stock option and the replacement stock option vest over a term of three years, in 36 equal monthly installments on each monthly anniversary of January 2, 2020. On the issuance date, 633 shares had vested, and 286 shares were unvested with approximately $24,000 of unrecognized expense. The Company determined the cancellation and reissue of these stock options resulted in an effective repricing of the stock options and modification accounting should be applied under ASC 718. The fair value of the original stock options immediately prior to the modification was approximately $23,000 and the grant date fair value of the replacement stock options was approximately $24,000. The Company will recognize a total of approximately $25,000 over the remaining requisite service period through January 1, 2023.
During the nine months ended September 30, 2020, the Company issued stock options to purchase an aggregate of 33,500 shares of Common Stock with a strike price of $10.30 per share and a term of ten years to its chief financial officer that vest quarterly over three years. These options had a total grant date fair value of approximately $281,000, as calculated using the Black-Scholes model.
During the nine months ended September 30, 2020, the Company issued stock options to purchase an aggregate of 46,000 shares of Common Stock with a strike price of $9.70 per share and a term of ten years to its non-executive directors. These options had a total grant date fair value of approximately $210,000, as calculated using the Black-Scholes model.
During the nine months ended September 30, 2020, stock options to purchase an aggregate of 23,500 shares of Common Stock were cancelled with strike prices ranging between $9.70 and $36.00 per share.
During the three months ended September 30, 2020, stock options to purchase an aggregate of 23,425 shares of Common Stock, subject to service conditions, vested with a total grant date fair value of approximately $139,000 and recorded as stock-based compensation, of which approximately $120,000 was included as part of general and administrative expense and approximately $20,000 was included as part of research and development expense.
During the nine months ended September 30, 2020, stock options to purchase an aggregate of 60,008 shares of Common Stock, subject to service conditions, vested with a total grant date fair value of approximately $361,000 and recorded as stock-based compensation, of which approximately $341,000 was included as part of general and administrative expense and approximately $20,000 was included as part of research and development expense.
During the nine months ended September 30, 2020, stock options to purchase an aggregate of 5,000 shares of Common Stock, subject to performance conditions vesting, vested with a total grant date fair value of approximately $20,000 and were recorded as stock-based compensation, and included as part of general and administrative expense due to the Company initiating the Option 2 clinical trial for adrulipase.
The fair values were estimated on the grant dates using the Black-Scholes option-pricing model with the following weighted-average assumptions:
|
September 30, |
|||||||
|
2021 |
|||||||
| Contractual term (in years) | 10 | ||||||
|
Volatility |
83.8 | - | 90.6 | % | |||
| Risk-free interest rate | 83.9 | - | 1.69 | ||||
| Dividend yield | -% | ||||||
The expected term of the options is based on expected future employee exercise behavior. Volatility is based on the historical volatility of the Company’s Common Stock if available or of several public entities that are similar to the Company. The Company bases volatility this way because it may not have sufficient historical transactions in its own shares on which to solely base expected volatility. The risk-free interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected term at the grant date. The Company has not historically declared any dividends and does not expect to in the future.
During the nine months ended September 30, 2021 and 2020, stock option activity under the 2014 Plan and 2020 Plan was as follows:
|
Average |
Remaining |
|||||||||||||||
|
Number |
Exercise |
Contract |
Intrinsic |
|||||||||||||
|
of Shares |
Price |
Life (Years) |
Value |
|||||||||||||
|
Stock options outstanding on January 1, 2020 |
167,750 | $ | 21.70 | 5.37 | $ | - | ||||||||||
|
Granted during the period |
287,001 | $ | 8.90 | 9.79 | - | |||||||||||
|
Canceled during the period |
(23,500 | ) | $ | 19.40 | 3.28 | - | ||||||||||
|
Stock options outstanding on September 30, 2020 |
431,251 | $ | 13.80 | 6.52 | $ | - | ||||||||||
|
Exercisable on September 30, 2020 |
131,275 | $ | 22.20 | 6.09 | $ | - | ||||||||||
|
Non-vested stock options outstanding on January 1, 2020 |
88,350 | $ | 13.30 | 6.26 | $ | - | ||||||||||
|
Granted during the period |
287,001 | $ | 10.00 | 10.00 | - | |||||||||||
|
Vested during the period |
(59,375 | ) | $ | 25.90 | 6.88 | - | ||||||||||
|
Canceled during the period |
(16,000 | ) | $ | 13.00 | 7.10 | - | ||||||||||
|
Non-vested stock options outstanding on September 30, 2020 |
299,976 | $ | 9.80 | 8.75 | $ | - | ||||||||||
|
Average |
Remaining |
|||||||||||||||
|
Number |
Exercise |
Contract |
Intrinsic |
|||||||||||||
|
of Shares |
Price |
Life (Years) |
Value |
|||||||||||||
|
Stock options outstanding on January 1, 2021 |
407,026 | 12.46 | 7.94 | $ | - | |||||||||||
|
Granted during the period |
175,246 | $ | 8.61 | 10.00 | - | |||||||||||
|
Canceled during the period |
(134,476 | ) | $ | 10.47 | 2.87 | - | ||||||||||
|
Stock options outstanding on September 30, 2021 |
447,796 | $ | 11.55 | 7.57 | - | |||||||||||
|
Exercisable on September 30, 2021 |
280,272 | $ | 13.76 | 6.78 | $ | - | ||||||||||
|
Non-vested stock options outstanding on January 1, 2021 |
274,065 | $ | 9.90 | 8.42 | - | |||||||||||
|
Granted during the period |
175,246 | $ | 8.61 | 10.00 | - | |||||||||||
|
Vested during the period |
(185,870 | ) | $ | 10.38 | - | - | ||||||||||
|
Canceled during the period |
(95,917 | ) | $ | - | - | - | ||||||||||
|
Non-vested stock options outstanding on September 30, 2021 |
167,524 | $ | 8.44 | 8.87 | $ | - | ||||||||||
As of September 30, 2021, the Company had unrecognized stock-based compensation expense of approximately $1.1 million. Approximately $0.9 million of this unrecognized expense will be recognized over the average remaining vesting term of the stock options of 1.85 years. Approximately $40,000 of this unrecognized expense will vest upon initiating a Phase 3 clinical trial in the U.S. for MS1819. Approximately, $140,000 of this unrecognized expense will vest upon the public release of topline data of the complete Combination Trial results. Approximately, $140,000 of this unrecognized expense will vest upon signing of a definitive term sheet with Board approval for either (i) a strategic licensing, distribution, or commercialization agreement for MS1819 with a bona fide partner, or (ii) the substantial sale of the Company or the MS1819 asset, on or before December 31, 2021. The Company will recognize the expense related to these milestones when the milestones become probable.
As of September 30, 2020, the Company had unrecognized stock-based compensation expense of approximately $2.2 million. Approximately $1.2 million of this unrecognized expense will be recognized over the average remaining vesting term of the options of.8.75 years. Approximately $440,000 of this unrecognized expense will vest upon enrollment completion of the next adrulipase Phase II clinical trial in the U.S. for CF (the OPTION 2 Trial). Approximately $41,000 of this unrecognized expense will vest upon enrollment completion of the ongoing Combination Trial in Europe. Approximately $20,000 of this unrecognized expense will vest upon trial completion of the next adrulipase Phase II clinical trial in the U.S. for CF (the OPTION 2 Trial). Approximately $40,000 of this unrecognized expense vests upon the Company initiating a Phase III clinical trial in the U.S. for adrulipase. Approximately $40,000 of this unrecognized expense vests upon initiating a U.S. Phase I clinical trial for any product other than adrulipase. Approximately, $140,000 of this unrecognized expense vests upon the public release of topline data of the complete Combination Trial results. Approximately, $140,000 of this unrecognized expense vests upon the public release of topline data of the complete OPTION 2 Trial results. Approximately, $140,000 of this unrecognized expense vests upon signing of a definitive term sheet with Board approval for either (i) a strategic licensing, distribution or commercialization agreement for adrulipase with a bona fide partner, or (ii) the substantial sale of the Company or the adrulipase asset, on or before December 31, 2021. The Company will recognize the expense related to these milestones when the milestones become probable.
Note 14 – Agreements
License Agreement with First Wave Bio, Inc. (FWB)
On December 31, 2020, the Company entered into the FWB License Agreement, pursuant to which FWB granted us a worldwide, exclusive right to develop, manufacture, and commercialize FWB’s proprietary immediate release and enema formulations of niclosamide (the “Niclosamide Product”) for the fields of treating ICI-AC and COVID-19 in humans.
In consideration of the license and other rights granted by FWB, the Company agreed to pay FWB a $9.0 million upfront cash payment due within 10 days, which was paid in January 2021 and were obligated to make an additional payment of $1.25 million due on June 30, 2021, which was paid in July 2021. In addition, the Company was obligated to pay potential milestone payments to FWB totaling up to $37.0 million for each indication, based upon the achievement of specified development and regulatory milestones. As of September 30, 2021, the Company achieved a milestone related to clinical development of niclosamide in the COVID-19 field and has expensed $1.0 million in research and development. Under the FWB License Agreement we were obligated to pay FWB royalties as a mid-single digit percentage of net sales of the Niclosamide Product, subject to specified reductions. We were also obligated to issue to FWB junior convertible preferred stock, initially convertible into $3.0 million worth of Common Stock based upon the volume weighted average price of the Common Stock for the five-day period immediately preceding the date of the FWB License Agreement, or $9.118 per share, convertible into an aggregate of 329,019 shares of Common Stock. As of December 31, 2020, this was initially classified as a liability in the consolidated balance sheet because of certain NASDAQ restrictions and the requirement to obtain stockholder approval.
On January 8, 2021, in connection with the securities purchase agreement with FWB (the “FWB Purchase Agreement”) pursuant to which we issued to FWB 3,290.1960 shares of Series C Preferred Stock, which were convertible into an aggregate of 329,019 shares of Common Stock based on a conversion price of $7.50 per share, and with a grant date fair value of approximately $2.5 million. The FWB Purchase Agreement contains demand and piggyback registration rights with respect to the Common Stock issuable upon conversion of the Series C Preferred Stock.
The conversion price of the Series C Preferred Stock was determined to be beneficial and, as a result, the Company recorded a deemed dividend of approximately $230,000 equal to the intrinsic value of the beneficial conversion feature and recognized on the issuance date and recorded as a reduction of income available to common stockholders in computing basic and diluted loss per share.
Upon the 2021 Stockholder Approval on February 24, 2021, the Company recognized a change in fair value of approximately $0.5 million based on the difference in fair value of the $3.0 million liability initially recorded pursuant to the FWB License Agreement as of December 31, 2020 and the fair value of approximately $2.5 million of Series C Preferred Stock issued pursuant to the FWB Purchase Agreement to settle the liability.
Following the 2021 Stockholder Approval, the shares of Series C Preferred Stock were automatically converted into Common Stock.
Upon consummating the FWB Merger on September 13, 2021, the FWB License Agreement was effectively canceled.
Mayoly Agreement
In March 2019, the Company and Laboratories Mayoly Spinder (“Mayoly”) entered into an Asset Purchase Agreement (the “Mayoly APA”), pursuant to which the Company purchased substantially all remaining rights, title, and interest in and to MS1819. Further, upon execution of the Mayoly APA, the Joint Development and License Agreement (the “JDLA”) previously executed by AzurRx SAS and Mayoly was assumed by the Company. In addition, the Company granted to Mayoly an exclusive, royalty-bearing right to revenue received from commercialization of MS1819 within certain territories.
TransChem Sublicense
In August 2017, the Company entered into a sublicense agreement with TransChem, pursuant to which TransChem granted the Company an exclusive license to patents and patent applications relating to Helicobacter pylori 5’methylthioadenosine nucleosidase inhibitors (the “TransChem Licensed Patents”) currently held by TransChem (the “TransChem Sublicense Agreement”). In March 2020, the Company provided TransChem with sixty (60) days prior written notice of its intent to terminate the TransChem Sublicense Agreement, which as of September 30, 2021 has been terminated.
Note 15 – Leases
The Company leases its offices and research facilities under operating leases which are subject to various rent provisions and escalation clauses.
Effective June 1, 2021, the Company commenced a sixty-three-month lease agreement for its corporate headquarters located in approximately 3,472 square feet of office space at 777 Yamato Road, Suite 502, Boca Raton, FL 33431.
The Company’s leases expire at various dates through 2026. The escalation clauses are indeterminable and considered not material and have been excluded from minimum future annual rental payments.
Lease expense amounted to approximately $79,000 and $55,000, respectively, for the three months ended September 30, 2021, and 2020.
Lease expense amounted to approximately $186,000 and $129,000, respectively, for the nine months ended September 30, 2021, and 2020.
The weighted-average remaining lease term and weighted-average discount rate under operating leases on September 30, 2021, are:
|
September 30, |
||||
|
2021 |
||||
|
Lease term and discount rate |
||||
|
Weighted-average remaining lease term (years) |
4.5 | |||
|
Weighted-average discount rate |
6.91 |
% |
||
Maturities of operating lease liabilities on September 30, 2021, were as follows:
|
2021 |
$ | 57,019 | ||
|
2022 |
81,254 | |||
|
2023 |
83,691 | |||
|
2024 |
86,202 | |||
|
2025 |
88,788 | |||
|
Thereafter |
60,593 | |||
|
Total lease payments |
457,547 | |||
|
Less imputed interest |
(67,064 | ) | ||
|
Present value of lease liabilities |
$ | 390,483 |
Note 16 - Income Taxes
The Company did not record a federal or state income tax provision or benefit for each of the nine ended September 30, 2021 and 2020 due to the expected loss before income taxes to be incurred for the years ended December 31, 2021 and 2020, as well as the Company’s continued maintenance of a full valuation allowance against its net deferred tax assets.
On September 30, 2021, and December 31, 2020, the Company had taken no uncertain tax positions that would require disclosure under ASC 740, Accounting for Income Taxes.
Note 17 - Net Loss per Common Share
Basic net loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect, in periods in which they have a dilutive effect, the impact of common shares issuable upon exercise of stock options and warrants and conversion of convertible debt that are not deemed to be anti-dilutive. The dilutive effect of the outstanding stock options and warrants is computed using the treasury stock method.
On September 30, 2021, diluted net loss per share did not include the effect of 721,364 shares of Common Stock issuable upon the conversion of Series B preferred stock, including accrued and unpaid dividends through September 30, 2021, 5,509,675 shares of Common Stock issuable upon the exercise of outstanding warrants, 11,200 shares of restricted stock not yet issued, 27,500 unearned shares of restricted stock and RSUs, and 448,296 shares of Common Stock issuable upon the exercise of outstanding options as their effect would be antidilutive during the periods prior to conversion. Also excluded from the diluted net loss per are the potentially dilutive effect of up shares of Common Stock shares of Common Stock issuable upon exercise of January 2021 Investor Warrants potentially issuable pursuant the Series B Exchange Right
At September 30, 2020, diluted net loss per share did not include the effect of 2,931,440 shares of Common Stock issuable upon the conversion of convertible debt, 736,118 shares of Common Stock issuable upon the exercise of outstanding warrants, 38,700 shares of Common Stock pursuant to unearned and unissued restricted stock and RSUs, and 227,250 shares of Common Stock issuable upon the exercise of outstanding options as their effect would be antidilutive during the periods prior to conversion.
At September 30, 2020, diluted net loss per share did not include the effect of 2,931,440 shares of Common Stock issuable upon the conversion of Series B Preferred Stock including accrued and unpaid dividends, 2,520,016 shares of Common Stock issuable upon the exercise of outstanding warrants, 38,700 shares of Common Stock pursuant to unearned and unissued restricted stock and RSUs, and 431,250 shares of Common Stock issuable upon the exercise of outstanding options as their effect would be antidilutive during the periods prior to conversion
Note 18 - Employee Benefit Plans
401(k) Plan
Since 2015, the Company has sponsored a multiple employer defined contribution benefit plan, which complies with Section 401(k) of the Internal Revenue Code covering substantially all employees of the Company.
All employees are eligible to participate in the plan. Employees may contribute from 1% to 100% of their compensation and the Company matches an amount equal to 100% on the first 6% of the employee contribution and may also make discretionary profit-sharing contributions.
Employer contributions under this 401(k) plan amounted to approximately $26,000 and $40,000 for the three months ended September 30, 2021 and 2020, respectively.
Employer contributions under this 401(k) plan amounted to approximately $81,000 and $62,000 for the nine months ended September 30, 2021 and 2020, respectively.
Note 19 - Subsequent Events
ATM Agreement Sales
On October 4, 2021, the Company achieved a milestone for clinical development pursuant to the FWB Merger Agreement in connection with dosing of the first patient in the Company’s Phase 2 clinical trial for FW-UP for ulcerative proctitis resulting in a $2.0 million payment to FWB.
Achievement of Milestone pursuant to FWB Merger Agreement
On October 4, 2021, the Company achieved a milestone for clinical development pursuant to the FWB Merger Agreement in connection with dosing of the first patient in the Company’s Phase 2 clinical trial for FW-UP for ulcerative proctitis resulting in a $2.0 million payment to FWB, which is included in the $17.0 million aggregate payment amount discussed under the heading "FWB Payments" below.
Most Favored Nations (MFN) Exchange Right
Subsequent to September 30, 2021, holders of approximately 13.80 shares of Series B Preferred Stock with an aggregate Series B Exchange Amount of approximately $113,900 have elected to exercise their Series B Exchange Rights into an aggregate of 33,500 shares of Common Stock at a price per shares of $3.40.
FWB Payments
Fortis Advisors LLC is the hired representative (in such capacity, the “Representative”) of the former stockholders of FWB in connection with the FWB Merger Agreement. On October 29, 2021, the Representative filed a complaint against us in the Court of Chancery of the State of Delaware, seeking to enforce rights to payment of $8.0 million due October 28, 2021 pursuant to the FWB Merger Agreement. On November 15, 2021, the Company reached an agreement with the Representative to settle the litigation, under terms that, among other things, involve a substantial reduction in immediate payment obligations and deferrals of certain remaining milestone and other payment obligations over time, with an immediate payment of $2.0 million and periodic installments of $500,000 per month payable from January 2022 through August 2022 and $1.0 million per month payable from September 2022 through July 2023 until an aggregate of $17.0 million is received. The aggregate amounts payable under the FWB Merger Agreement, as disclosed in the Company’s Form 8-K filed September 13, 2021, remain unchanged. The parties are currently negotiating definitive agreements with respect to the litigation settlement.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this report to “First Wave,” “AzurRx,” “Company,” “we,” “us,” “our,” or similar references mean First Wave BioPharma, Inc. and its subsidiaries on a consolidated basis. References to “First Wave BioPharma” refer to First Wave BioPharma, Inc. on an unconsolidated basis. References to “AzurRx SAS” refer to First Wave BioPharma’s wholly owned subsidiary through which we conduct our European operations. References to the “SEC” refer to the U.S. Securities and Exchange Commission.
Forward-Looking Statements
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere in this interim report. Our consolidated financial statements have been prepared in accordance with U.S. GAAP. The following discussion and analysis contains 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, as amended (the “Exchange Act”), including, without limitation, statements regarding our expectations, beliefs, intentions or future strategies that are signified by the words “expect,” “anticipate,” “intend,” “believe,” or similar language. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Our business and financial performance are subject to substantial risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. In evaluating our business, you should carefully consider the information set forth under the heading “Risk Factors” included in our Annual Report filed on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 31, 2021. Readers are cautioned not to place undue reliance on these forward-looking statements.
Overview
We are engaged in the research and development of targeted, non-systemic therapies for the treatment of patients with gastrointestinal (“GI”) diseases. Non-systemic therapies are non-absorbable drugs that act locally, i.e., in the intestinal lumen, skin or mucosa, without reaching an individual’s systemic circulation.
We are currently focused on developing our pipeline of gut-restricted GI clinical drug candidates, including niclosamide, an oral small molecule with anti-viral and anti-inflammatory properties, and the biologic adrulipase (formerly MS1819), a recombinant lipase enzyme designed to enable the digestion of fats and other nutrients.
Our niclosamide programs leverage proprietary oral and topical formulations to address multiple GI conditions, including inflammatory bowel diseases (“IBD”) indications and viral diseases. We are currently advancing two separate clinical programs of our niclosamide formulations currently in Phase 2 clinical trials, including FW-COV for Severe Acute Respiratory Syndrome Coronavirus 2 (“COVID-19”) GI infections, and FW-UP for ulcerative proctitis (“UP”) and ulcerative proctosigmoiditis (“UPS”). In April 2021, we launched the Phase 2 RESERVOIR COVID-19 GI clinical trial using a proprietary oral immediate-release tablet formulation of micronized niclosamide.
Additionally, we plan to clinically advance FW-ICI-AC for Immune Checkpoint Inhibitor-associated colitis (“ICI-AC”) and diarrhea in advanced stage oncology patients in 2022, which has received FDA clearance of the investigational new drug (“IND”) application filed in September 2021. We are further developing two pre-IND programs of our niclosamide therapies for additional IBD indications, including FW-UC for ulcerative colitis (“UC”) and FW-CD for Crohn’s disease (“CD”).
Our adrulipase programs are focused on the development of an oral, non-systemic, biologic capsule for the treatment of exocrine pancreatic insufficiency (“EPI”) in patients with cystic fibrosis (“CF”) and chronic pancreatitis (“CP”). Our goal is to provide CF and CP patients with a safe and effective therapy to control EPI that is non-animal derived and offers the potential to dramatically reduce their daily pill burden. In March 2021, we announced topline results from our Phase 2b OPTION 2 monotherapy trial, and in 2021, we announced positive topline results from our Phase 2 Combination trial in Europe. We are currently focused on formulation development for adrulipase.
We are developing our drug candidates for a host of GI diseases where there are significant unmet clinical needs and limited therapeutic options, resulting in painful, life threatening and discomforting consequences for patients. Our mission is to help protect the health and restore quality of life for the millions of people afflicted by these GI diseases.
COVID-19 Update
In March 2020, the World Health Organization declared the novel coronavirus disease, or COVID-19, outbreak a global pandemic. To limit the spread of COVID-19, governments have taken various actions including the issuance of stay-at-home orders and physical distancing guidelines. Accordingly, businesses have adjusted, reduced or suspended operating activities. Beginning in March 2020, the majority of our workforce began working from home. Disruptions caused by the COVID-19 pandemic, including the effects of the stay-at-home orders and work-from-home policies, have impacted productivity, including delayed enrollment of new patients at certain of our clinical trial sites, and may further disrupt our business and delay our development programs and regulatory timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct business in the ordinary course. As a result, our expenses may vary significantly if there is an increased impact from COVID-19 on the costs and timing associated with the conduct of our clinical trials and other related business activities.
We have implemented business continuity plans designed to address and mitigate the impact of the ongoing COVID-19 pandemic on our employees and our business. We continue to operate normally with the exception of enabling all of our employees to work productively at home and abiding by travel restrictions issued by federal, state and local governments. Our current plans to return to the office remain fluid as federal, state and local guidelines, rules and regulations continue to evolve.
Liquidity and Capital Resources
To date, we have not generated any revenues and have experienced net losses and negative cash flows from our activities.
As of September 30, 2021, we had cash and cash equivalents of approximately $7.2 million, and had sustained cumulative losses attributable to common stockholders of approximately $142.7 million. We have not yet achieved profitability and anticipate that we will continue to incur net losses for the foreseeable future. We expect that our expenses will continue to grow and, as a result, we will need to generate significant product revenues to achieve profitability. We may never achieve profitability. As such, we are dependent on obtaining, and are continuing to pursue, the necessary funding from outside sources, including obtaining additional funding from the sale of securities in order to continue our operations. Without adequate funding, we may not be able to meet our obligations. We believe these conditions may raise substantial doubt about our ability to continue as a going concern.
Our primary sources of liquidity come from capital raises through additional equity and/or debt financings. This may be impacted by the COVID-19 pandemic, which is evolving and could negatively impact our ability to raise additional capital in the future.
We have funded our operations to date primarily through the issuance of debt, convertible debt securities, preferred stock, as well as the issuance of Common Stock in various public offerings and private placement transactions. We expect to incur substantial expenditures in the foreseeable future for the development of niclosamide, adrulipase and any other drug candidates. We will require additional financing to develop our drug candidates, run clinical trials, prepare regulatory filings and obtain regulatory approvals, fund operating losses, and, if deemed appropriate, establish manufacturing, sales and marketing capabilities. Our current financial condition raises substantial doubt about our ability to continue as a going concern. Our failure to raise capital as and when needed would have a material adverse impact on our financial condition, our ability to meet our obligations, and our ability to pursue our business strategies. We will seek funds through additional equity and/or debt financings, collaborative or other arrangements with corporate sources, or through other sources of financing.
Although, we are primarily focused on the development of our drug candidates, including niclosamide and adrulipase, we are also opportunely focused on expanding our product pipeline of clinical assets through collaborations, and also through acquisitions of products and companies. We are continually evaluating potential asset acquisitions business combinations, and other partnership opportunities. To finance such acquisitions, we might raise additional equity capital, incur additional debt, or both.
Currently, we have approximately $93.7 million of securities available to be sold under the shelf registration statement filed on May 26, 2021, which was declared effective on June 2, 2021 and will expire on June 2, 2024, and approximately $37.0 million of our Common Stock available for issuance pursuant to an ATM Agreement with H.C. Wainwright & Co., LLC. We may sell the remaining shares of Common Stock that may be issued under the ATM Agreement at our discretion from time to time until June 1, 2024, subject to the continued effectiveness of a registration statement covering such shares of Common Stock sold by us.
Additionally, we have approximately $30.0 million of securities available to be sold under the shelf registration statement filed on June 5, 2019, which was declared effective on June 25, 2019 and will expire on June 25, 2022, and approximately $14.0 million of our Common Stock available for issuance pursuant to a purchase agreement with Lincoln Park Capital Fund, LLC. We may sell the remaining shares of Common Stock that may be issued under the purchase agreement at our discretion from time to time until July 2022, subject to the continued effectiveness of a registration statement covering such shares of Common Stock sold to Lincoln Park Capital Fund, LLC by us.
Our ability to issue securities is subject to market conditions. Each issuance under the shelf registration statements will require the filing of a prospectus supplement identifying the amount and terms of the securities to be issued.
Our ability to issue common stock and other securities exercisable or convertible for shares of our common stock is subject to availability of a sufficient amount of authorized shares of common stock pursuant to our certificate of incorporation. As of November 12, 2021, there were 4,166,317 shares of common stock authorized and available for issuance on a fully-diluted basis which includes reservations of shares of common stock for the 2020 Plan and the Series B Exchange Right. We recently filed a preliminary proxy statement with the Securities and Exchange Commission including a proposal, to be voted on at our upcoming annual meeting of stockholders, to increase the total number of authorized shares of our common stock by 25,000,000 to 50,000,000 shares. This proposal must be approved by the affirmative vote of a majority of the outstanding shares of our common stock entitled to vote on the proposal at the meeting, and there can be no assurance that this proposal will be approved.
On September 13, 2021, we entered into the FWB Merger Agreement with FWB. At the effective time of the FWB Merger, the former FWB stockholders received an applicable pro rata share of (i) $3.0 million in cash and (ii) 624,025 shares of the Common Stock. The remaining non-contingent purchase price is payable to the former FWB stockholders on a pro rata basis upon our payment of (i) $8.0 million in cash, payable within 45 days of the FWB Merger and, (iii) $7.0 million in cash, payable by March 31, 2022. As of November 15, 2021, we have not made payment of the $8.0 million in cash due to the former FWB stockholders. In addition, we have not paid interest on such payment, which accrues at a rate of 8.0% per annum commencing on October 28, 2021, until satisfied. For additional information, see the disclosure under the heading “Legal Proceedings” in Item 1 of Part II of this Form 10-Q.
Consolidated Results of Operations for the Three Months Ended September 30, 2021 and 2020
The following table summarizes our consolidated results of operations for the periods indicated:
|
Three Months Ended |
||||||||||||
|
September 30, |
Increase |
|||||||||||
|
2021 |
2020 |
(decrease) |
||||||||||
|
Operating expenses: |
||||||||||||
|
Research and development expenses |
$ | 24,378,318 | $ | 1,795,684 | $ | 22,582,634 | ||||||
|
General and administrative expenses |
6,021,160 | 1,916,250 | 4,104,910 | |||||||||
|
Total operating expenses |
30,399,478 | 3,711,934 | 26,687,544 | |||||||||
|
Other expenses (income) |
1,310 | 1,601,972 | (1,600,662 | ) | ||||||||
|
Net loss |
$ | 30,400,788 | $ | 5,313,906 | $ | 25,086,882 | ||||||
Research and Development Expense
Research and development expenses include cash and non-cash expenses primarily relating to the development of our niclosamide and adrulipase drug candidates.
Non-cash research and development expenses, including stock-based compensation, and depreciation and amortization totaled approximately $0.3 million for the three months ended September 30, 2021, and approximately $0.2 million recorded for the three months ended September 30, 2020. Cash research and development expenses for the three months ended September 30, 2021 totaled approximately $24.1 million, an increase of approximately $22.5 million, or 1,395% over the approximately $1.6 million recorded for the three months ended September 30, 2020.
The increase in total research and development expenses was primarily attributable to increases of approximately $21.3 million in acquired research and development related to the FWB acquisition in September 2021 which was expensed (see Note 4), approximately $0.5 million in clinical related expenses in connection with conducting two Phase 2 clinical trials for niclosamide during the three months ended September 30, 2021, as compared to one Phase 2 clinical trial for adrulipase during the three months ended September 30, 2020, approximately $0.9 million in CMC primarily related to activates for adrulipase and drug supply for clinical trials for niclosamide.
We expect cash research and development expense to increase during the remainder of this fiscal year as we conduct two clinical trials for niclosamide, pursue additional CMC activities in connection with formulation development for adrulipase, and personnel related costs in connection with new hires.
General and Administrative Expense
General and administrative expenses include cash and non-cash expenses primarily relating to our overall operations and being a public company, including personnel, legal and financial professional services, insurance, corporate communication and investor relations, listing and compliance related costs, rent, and expenses associated with obtaining and maintaining intellectual property and patents, among others.
Non-cash general and administrative expenses, including stock-based compensation, stock expense and depreciation and amortization totaled approximately $0.2 million for the three months ended September 30, 2021, and approximately $0.1 million recorded for the three months ended September 30, 2020. Cash general and administrative expenses for the three months ended September 30, 2021 totaled approximately $5.8 million, an increase of approximately $4.1 million, or 234% over the approximately $1.9 million recorded for the three months ended September 30, 2020.
The increase in total general and administrative was due primarily to increases of approximately $2.1 million in public company costs, including investor relations, corporate communications in connection with market awareness campaigns and compliance related fees, approximately $1.3 million of legal expenses primarily related to increased transaction activity and corporate governance and the FWB Merger in September 2021, approximately, $0.3 million in insurance costs, approximately $0.1 million in personnel costs, approximately $0.1 million in director fees, and approximately $0.1 million in accounting and auditing fees.
We expect cash general and administrative expenses to remain relatively stable during the remainder of this fiscal year to support our research and development efforts and growing operations.
Other Expense (Income)
Other expense for the three months ended September 30, 2021 was about $0, a decrease of approximately $1.6 million, or 100% compared to the approximately $1.6 million of other expense recorded for the three months ended September 30, 2020. Interest expense was approximately $0 million and $1.2 million for the three months ended September 30, 2021 and 2020, respectively. The decreased interest expense was primarily due to amortization of debt discount and accrued interest related to the convertible debt issued in December 2019 and January 2020 for the three months ended September 30, 2020, which was not present for the three months ended September 30, 2021. Gain on debt extinguishment was approximately $0 million and $0.6 million for the three months ended September 30, 2021 and 2020, respectively, and loss on settlement was approximately $0 million and $0.2 million for the three months ended September 30, 2021 and 2020, respectively.
Net Loss
As a result of the factors above, our net loss for the three months ended September 30, 2021 totaled approximately $30.4 million, an increase of approximately $25.1 million, or 472% over the approximately $5.3 million recorded for the three months ended September 30, 2020.
Consolidated Results of Operations for the Nine Months Ended September 30, 2021 and 2020
The following table summarizes our consolidated results of operations for the periods indicated:
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Nine Months Ended |
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|
September 30, |
Increase |
|||||||||||
|
2021 |
2020 |
(decrease) |
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|
Operating expenses: |
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|
Research and development expenses |
$ | 32,542,143 | $ | 4,438,229 | $ | 28,103,914 | ||||||
|
General and administrative expenses |
15,347,764 | 4,595,860 | 10,751,904 | |||||||||
|
Total operating expenses |
47,889,907 | 9,034,089 | 38,855,818 | |||||||||
|
Other expenses (income) |
(524,545 | ) | 6,236,985 | (6,761,530 | ) | |||||||
|
Net loss |
$ | 47,365,362 | $ | 15,271,074 | $ | 32,094,288 | ||||||
Research and Development Expense
Research and development expenses include cash and non-cash expenses primarily relating to the development of our niclosamide and adrulipase drug candidates.
Non-cash research and development expenses, including stock-based compensation, and depreciation and amortization totaled approximately $1.0 million for the nine months ended September 30, 2021 and approximately $0.4 million recorded for the nine months ended September 30, 2020. Cash research and development expenses for the nine months ended September 30, 2021 totaled approximately $31.6 million, an increase of approximately $27.8 million, or 690% over the approximately $4.0 million recorded for the nine months ended September 30, 2020.
The increase in total research and development expenses was primarily attributable increases of approximately $21.3 million in acquired research and development related to the FWB Merger in September 2021, approximately $2.8 million in clinical related expenses in connection with conducting two Phase 2 clinical trials for adrulipase and one clinical trial for niclosamide during the nine months ended September 30, 2021, as compared to one Phase 2 clinical trial for adrulipase during the nine months ended September 30, 2020, approximately $1.9 million in CMC related activates primarily for adrulipase and drug supply for clinical trials for niclosamide, approximately $1.0 million milestone payment pursuant to the FWB License Agreement related to niclosamide clinical development, approximately $0.5 million in non-cash stock option expense, and approximately $0.7 million in regulatory and consulting expenses.
We expect cash research and development expense to remain stable during the remainder of this fiscal year as we initiate and conduct two clinical trials for niclosamide and pursue additional CMC activities in connection with formulation development for adrulipase, and personnel related costs in connection with new hires.
General and Administrative Expense
General and administrative expenses include cash and non-cash expenses primarily relating to our overall operations and being a public company, including personnel, legal and financial professional services, insurance, corporate communication and investor relations, listing and compliance related costs, rent, and expenses associated with obtaining and maintaining intellectual property and patents, among others.
Non-cash expenses, including stock-based compensation, stock expense and depreciation and amortization totaled approximately $2.0 million for the nine months ended September 30, 2021, and approximately $0.5 million recorded for the nine months ended September 30, 2020. Cash general and administrative expenses for the nine months ended September 30, 2021 totaled approximately $13.3 million, an increase of approximately $9.2 million, or 224% over the approximately $4.1 million recorded for the nine months ended September 30, 2020.
The increase in total general and administrative was due primarily to increases of approximately $5.4 million in public company costs, including investor relations, corporate communications, in connection with market awareness campaigns, including a special meeting of the shareholders, and compliance related fees, approximately $2.0 million of legal expenses primarily related to increased transaction activity, corporate governance and the FWB Merger in September 2021, approximately $0.4 million in insurance costs, approximately $0.3 million of business development costs primarily related to fees for the FWB License Agreement, approximately $0.3 million of other costs related to the settlement with our former investment bank, approximately $0.3 million in personnel costs, and approximately $0.2 million in directors fees, offset by aggregate decreases of approximately $0.1 million in consulting costs.
We expect cash general and administrative expenses to remain relatively stable during the remainder of this fiscal year to support our research and development efforts and growing operations.
Other Expense (Income)
Other income for the nine months ended September 30, 2021 totaled approximately $0.5 million, a decrease in expense of approximately $6.8 million, or 108% over the approximately $6.2 million of other expense recorded for the nine months ended September 30, 2020. Interest expense was approximately $0.0 and $5.8 million for the nine months ended September 30, 2021 and 2020, respectively. The decreased interest expense was primarily due to amortization of debt discount and accrued interest related to the convertible debt issued in December 2019 and January 2020 for the nine months ended September 30, 2020, which was not present for the nine months ended September 30, 2021. The change in fair value was approximately $0.5 million and $0 for the nine months ended September 30, 2021 and 2020, respectively. The increased change in fair value related to the extinguishment of the $3.0 million liability in connection with FWB License Agreement pursuant to the issuance of Series C Preferred Stock with a fair value of approximately $0.5 million for the nine months ended September 30, 2021, which was not present for the nine months ended September 30, 2020.
Net Loss
As a result of the factors above, our net loss for the nine months ended September 30, 2021 totaled approximately $47.4 million, an increase of approximately $32.1 million, or 210% over the approximately $15.3 million recorded for the nine months ended September 30, 2020.
Cash Flows for the Nine Months Ended September 30, 2021 and 2020
The following table summarizes our cash flows for the periods indicated:
|
Nine Months Ended |
||||||||
|
September 30, |
||||||||
|
2021 |
2020 |
|||||||
|
Net cash provided by (used in): |
||||||||
|
Operating activities |
$ | (26,425,432 | ) | $ | (5,331,557 | ) | ||
|
Investing activities |
(10,321,448 | ) | (2,808 | ) | ||||
|
Financing activities |
37,940,638 | 16,493,726 | ||||||
|
Net increase (decrease) in cash and cash equivalents |
$ | 1,193,758 | $ | 11,159,361 | ||||
Operating Activities
Net cash used in operating activities during the nine months ended September 30, 2021 of approximately $26.4 million was primarily attributable to our net loss of approximately $47.3 million adjusted for addbacks of non-cash expenses of approximately $2.4 million, mostly related to common stock and warrants issued to consultants of approximately $1.3 million, depreciation and amortization of approximately $0.4 million, and stock-based compensation of approximately $1.3 million partially offset by a change in the fair value of liability $0.5 million and a net increase of working capital of approximately $18.4 million.
Net cash used in operating activities for the nine months ended September 30, 2020 of approximately $5.3 million was attributable to our net loss of approximately $15.2 million plus adjustments to reconcile net loss to net cash used in operating activities of depreciation and amortization expense of $422,217, non-cash stock-based compensation of $369,517, non-cash restricted stock granted to employees and directors of $27,292, non-cash Common Stock granted to members of the Company's board of directors to settle accounts payable of $131,137, non-cash Common Stock granted to consultants of $109,605, non-cash accretion of debt discount of $4,580,167, non-cash interest on convertible debt of $234,334, loss on debt extinguishment of $609,998, gain on settlement of $211,430, and beneficial conversion feature related to the promissory note exchange of $798,413, and non-cash lease expense of $4,855. Changes in assets and liabilities are due to a decrease in other receivables of $2,121,336 due primarily to the payments of French research and development (“R&D”) tax credits, a decrease in prepaid expenses of $446,766 due primarily to the expensing of prepaid insurance, a decrease in other liabilities of $31,104, and a decrease of accounts payable and accrued expense of $90,147, offset by an increase in an increase in deposits of $4,180, and an increase in accrued dividends payable of $408,043.
Investing Activities
Net cash used in investing activities during the nine months ended September 30, 2021 was approximately $10.3 million, consisting of $9.0 million in cash payments related to the FWB License Agreement, $1.0 million in cash payments related to the milestone payments in connection with FWB License Agreement and approximately $71,000 related to the purchase of office furniture and equipment.
Net cash used in investing activities for the nine months ended September 30, 2020, was approximately $3,000, which consisted of the purchase of property and equipment.
Financing Activities
Net cash provided by financing activities of approximately $37.9 million for the nine months ended September 30, 2021 was primarily due to the issuance of the Series C Preferred Stock and warrants of approximately $7.1 million from the January 2021 Offerings, the issuance of the Common Stock and warrants of approximately $18.1 million from public offerings, the issuance of the Common Stock of approximately $8.3 million from ATM Agreement sales and the cash proceeds from warrant exercises of approximately $4.9 million, offset by repayments of approximately $0.4 million related to the note payable.
Net cash provided by financing activities for the nine months ended September 30, 2020 consisted of approximately $13.2 million from the from the issuance of the preferred stock in the Series B Private Placement, approximately $3.2 million from the issuance of the convertible debt in our offering of Senior Convertible Promissory Notes and warrants to purchase shares of Common Stock that occurred in December 2019, approximately $1.0 million from the proceeds of the Equity Line, and of approximately $0.2 million from the issuance of a note payable in connection with the Paycheck Protection Program (“PPP”) loan, offset by repayments of convertible debt of $475,000 plus accrued interest of approximately $105,000 related to the issuance to ADEC Equity Investments, LLC of two Senior Convertible Notes (the “ADEC Notes”) and Senior Convertible Promissory Notes, and repayment of notes payable of approximately $624,000, which included the repayment of the PPP loan.
Critical Accounting Policies and Estimates
Our accounting policies are essential to understanding and interpreting the financial results reported on the consolidated financial statements. The significant accounting policies used in the preparation of our consolidated financial statements are summarized in Note 2 to the consolidated financial statements and notes thereto found in our Annual Report on Form 10-K for the year ended December 31, 2020. Certain of those policies are considered to be particularly important to the presentation of our financial results because they require us to make difficult, complex or subjective judgments, often as a result of matters that are inherently uncertain.
During the nine months ended September 30, 2021, there were no material changes to matters discussed under the heading “Critical Accounting Policies and Estimates” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended, (the ”Exchange Act”) our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”) conducted an evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on that evaluation, our CEO and our CFO each concluded that our disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act, (i) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) is accumulated and communicated to our management, including our CEO and our CFO, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
OTHER INFORMATION
Fortis Advisors LLC is the hired representative (in such capacity, the “Representative”) of the former stockholders of FWB in connection with the FWB Merger Agreement. On October 29, 2021, the Representative filed a complaint against us in the Court of Chancery of the State of Delaware, seeking to enforce rights to payment of $8.0 million due October 28, 2021 pursuant to the FWB Merger Agreement. On November 15, 2021, the Company reached an agreement with the Representative to settle the litigation, under terms that, among other things, involve a substantial reduction in immediate payment obligations and deferrals of certain remaining milestone and other payment obligations over time, with an immediate payment of $2.0 million and periodic installments of $500,000 per month payable from January 2022 through August 2022 and $1.0 million per month payable from September 2022 through July 2023 until an aggregate of $17.0 million is received. The aggregate amounts payable under the FWB Merger Agreement, as disclosed in the Company’s Form 8-K filed September 13, 2021, remain unchanged.
Our results of operations and financial condition are subject to numerous risks and uncertainties described in our Annual Report on Form 10-K for our fiscal year ended December 31, 2020, filed on March 31, 2021. You should carefully consider these risk factors in conjunction with the other information contained in this Quarterly Report. Should any of these risks materialize our business, financial condition and future prospects could be negatively impacted. As of November 15, 2021, there have been no material changes to the disclosures made in the above referenced Form 10-K.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
None.
None.
Not applicable.
None.
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(b) |
Exhibits |
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Exhibit No. |
Description |
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2.1† |
Agreement and Plan of Merger dated September 13, 2021, by and among the Company, Alpha Merger Sub, Inc., and Fortis Advisors LLC, as shareholder representative (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed with the SEC on September 13, 2021) †† | |
| 3.1* | Amended and Restated Certificate of Incorporation of First Wave BioPharma, Inc., as amended. | |
| 4.1 | Form of Wainwright Warrant (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed with the SEC on July 27, 2021). | |
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31.1* |
Certification of the Principal Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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31.2* |
Certification of the Principal Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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32.1** |
Certification of the Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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101.INS* |
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
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101.SCH* |
Inline XBRL Taxonomy Extension Schema Document |
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101.CAL* |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF* |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB* |
Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE* |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 |
Cover Page Interactive Data File (embedded within the Inline XBRL Document and included in Exhibit 101) |
_________________
* filed herewith
** furnished, not filed
† Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company hereby undertakes to furnish supplementally copies of any of the omitted schedules upon request by the SEC.
†† Certain portions of this exhibit, that are not material and would likely cause competitive harm to the registrant if publicly disclosed, have been redacted pursuant to Item 601(b)(10) of Regulation S-K.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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FIRST WAVE BIOPHARMA, INC. |
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By |
/s/ James Sapirstein |
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James Sapirstein President, Chief Executive Officer and Chairman (Principal Executive Officer) |
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By |
/s/ Daniel Schneiderman |
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Date: November 15, 2021 |
Daniel Schneiderman Chief Financial Officer (Principal Financial and Accounting Officer) |
Exhibit 3.1
EXHIBIT 31.1
CERTIFICATION PURSUANT TO RULE 13A-14 OF THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, James Sapirstein, Chief Executive Officer of the Company, certify that:
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1. |
I have reviewed this Quarterly Report on Form 10-Q of First Wave BioPharma, Inc.; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles |
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c. |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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d. |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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Date: November 15, 2021 |
/s/ James Sapirstein |
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James Sapirstein Chief Executive Officer (Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION PURSUANT TO RULE 13A-14 OF THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Daniel Schneiderman, Chief Financial Officer of the Company, certify that:
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1. |
I have reviewed this Quarterly Report on Form 10-Q of First Wave BioPharma, Inc.; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles |
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c. |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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d. |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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Date: November 15, 2021 |
/s/ Daniel Schneiderman |
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Daniel Schneiderman Chief Financial Officer (Principal Financial and Accounting Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of First Wave BioPharma, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James Sapirstein, Chief Executive Officer of the Company, and Daniel Schneiderman, Chief Financial Officer of the Company, each certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
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(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
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Date: November 15, 2021 |
/s/ James Sapirstein |
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James Sapirstein President and Chief Executive Officer (Principal Executive Officer) |
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/s/ Daniel Schneiderman |
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Daniel Schneiderman Chief Financial Officer (Principal Financial and Accounting Officer) |