PRF Technologies Ltd 6-K, filed Nov 14, 2022
PRF Technologies Ltd. (PRFX)
6-K
2022-11-14
For: 2022-11-14
View Original
Added on
April 10, 2026
About this 6-K
PRF Technologies Ltd filed this 6-K on November 14, 2022.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For the month of November 2022
Commission File Number: 001-39481
PainReform Ltd.
(Translation of registrant’s name into English)
65 Yigal Alon St., Tel Aviv 6744316
Israel
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ____
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ____
This Report on Form 6-K (including Exhibits 99.1 and 99.2) is incorporated by reference into the Company’s Registration Statement on Form S-8 (Registration No. 333-257968 and 333-265902) and Form F-3 (File No.
333-259318), to be a part thereof from the date on which this report is submitted, to the extent not superseded by documents or reports subsequently filed or furnished.
On November 14, 2022, PainReform Ltd. (the "Company") published its unaudited condensed financial statements, as well as its operating and financial review as of
September 30, 2022 and for the nine months then ended. Attached hereto are the following exhibits:
|
99.1
|
Unaudited Condensed Financial Statements as of September 30, 2022
|
|
|
|
|
99.2
|
Operating and Financial Review as of September 30, 2022 and for the nine months then ended
|
Exhibit Index
|
Exhibit No.
|
|
Description
|
SIGNATURES
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.
|
Date: November 14, 2022
|
PAINREFORM LTD.
|
|
|
|
|
|
|
|
By:
|
/s/ Ilan Hadar
|
|
|
|
Ilan Hadar
|
|
|
|
Chief Executive Officer
|
Exhibit 99.1
PAINREFORM LTD.
CONDENSED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2022,
UNAUDITED
U.S. DOLLARS IN THOUSANDS
INDEX
|
Page
|
|
|
F-2
|
|
|
F-3
|
|
|
F-4
|
|
|
F-5
|
|
|
F-6 - F-11
|
PAINREFORM LTD.
|
U.S. dollars in thousands (except share and per share data)
|
|||
|
Note
|
As of
September 30,
2022
|
As of
December 31,
2021
|
||||||||||
|
Assets
|
||||||||||||
|
Current assets:
|
||||||||||||
|
Cash and cash equivalents
|
$
|
6,922
|
$
|
16,537
|
||||||||
|
Short term deposits
|
6,034
|
-
|
||||||||||
|
Restricted cash
|
24
|
34
|
||||||||||
|
Prepaid clinical trial expenses and deferred clinical trial costs
|
7
|
1,728
|
1,728
|
|||||||||
|
Prepaid expenses and other current assets
|
100
|
721
|
||||||||||
|
Total current assets
|
14,808
|
19,020
|
||||||||||
|
Property and equipment, net
|
44
|
53
|
||||||||||
|
Total assets
|
$
|
14,852
|
$
|
19,073
|
||||||||
|
Liabilities and shareholders’ equity
|
||||||||||||
|
Current liabilities:
|
||||||||||||
|
Trade payables
|
$
|
385
|
$
|
136
|
||||||||
|
Employees and related liabilities
|
414
|
423
|
||||||||||
|
Accrued expenses
|
395
|
198
|
||||||||||
|
Total current liabilities
|
1,194
|
757
|
||||||||||
|
Non-current liabilities:
|
||||||||||||
|
Provision for uncertain tax positions
|
240
|
234
|
||||||||||
|
Total liabilities
|
1,434
|
991
|
||||||||||
|
Commitments and contingencies (Note 7)
|
||||||||||||
|
Shareholders’ equity:
|
||||||||||||
|
Ordinary shares, NIS 0.03 par value; Authorized: 26,666,667 shares as of September 30,
2022 and December 31, 2021; Issued and outstanding: 10,634,166 and 10,482,056
shares as of September 30, 2022 and December 31, 2021, respectively.
|
94
|
94
|
||||||||||
|
Additional paid-in capital
|
42,677
|
41,715
|
||||||||||
|
Accumulated deficit
|
(29,353
|
)
|
(23,727
|
)
|
||||||||
|
Total shareholders’ equity
|
4
|
13,418
|
18,082
|
|||||||||
|
Total liabilities and shareholders’ equity
|
$
|
14,852
|
$
|
19,073
|
||||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
F - 2
PAINREFORM LTD.
U.S. dollars in thousands (except share and per share data)
| Nine months ended September 30, |
||||||||||||
|
|
Note
|
2022
|
2021
|
|||||||||
|
Operating expenses:
|
||||||||||||
|
Research and development expenses
|
$
|
(2,473
|
)
|
$
|
(2,304
|
)
|
||||||
|
General and administrative expenses
|
(3,140
|
)
|
(3,163
|
)
|
||||||||
|
Operating loss
|
(5,613
|
)
|
(5,467
|
)
|
||||||||
|
Financial expense, net
|
6 |
(13
|
)
|
(46
|
)
|
|||||||
|
Net loss and comprehensive loss
|
$
|
(5,626
|
)
|
$
|
(5,513
|
)
|
||||||
|
Basic and diluted net loss per share
|
$
|
(0.53
|
)
|
$
|
(0.57
|
)
|
||||||
| Weighted average number of shares of ordinary share used in computing basic and diluted net
loss per share |
10,634,166 |
9,731,501 |
||||||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
F - 3
PAINREFORM LTD.
U.S. dollars in thousands (except share data)
|
Ordinary shares
|
Additional
paid-in
|
Accumulated |
Total shareholders’ |
|||||||||||||||||
| Number
|
Amount |
capital |
deficit |
Equity
|
||||||||||||||||
|
Balance as of January 1, 2021
|
8,758,037
|
$
|
78
|
$
|
33,023
|
$
|
(16,481
|
)
|
$
|
16,620
|
||||||||||
|
Shares and warrants issuance - Private Investment in Public Equity ("PIPE"), net
|
1,304,346
|
12
|
5,542
|
-
|
5,554
|
|||||||||||||||
|
Exercise of warrants
|
419,673
|
18
|
1,912
|
1,930
|
||||||||||||||||
|
Share-based compensation to employees and directors
|
-
|
-
|
582
|
-
|
582
|
|||||||||||||||
|
Share-based compensation to service providers
|
-
|
-
|
309
|
-
|
309
|
|||||||||||||||
|
Net loss and comprehensive loss
|
-
|
-
|
-
|
(5,513
|
)
|
(5,513
|
)
|
|||||||||||||
|
Balance as of September 30, 2021
|
10,482,056
|
$
|
108
|
$
|
41,368
|
(21,994
|
)
|
$
|
19,482
|
|||||||||||
| Ordinary shares |
Additional
paid-in
capital
|
Accumulated
deficit
|
Total shareholders’
Equity
|
|||||||||||||||||
|
Number
|
Amount
|
|||||||||||||||||||
|
Balance as of January 1, 2022
|
10,482,056
|
$
|
94
|
$
|
41,715
|
$
|
(23,727
|
)
|
$
|
18,082
|
||||||||||
|
Share-based compensation to employees and directors
|
-
|
-
|
653
|
-
|
653
|
|||||||||||||||
|
Share-based compensation to service providers
|
-
|
-
|
309
|
-
|
309
|
|||||||||||||||
|
Shares issuance to service providers
|
152,110
|
*
|
-
|
-
|
*
|
|||||||||||||||
|
Net loss and comprehensive loss
|
-
|
-
|
-
|
(5,626
|
)
|
(5,626
|
)
|
|||||||||||||
|
Balance as of September 30, 2022
|
10,634,166
|
$
|
94
|
$
|
42,677
|
$
|
(29,353
|
)
|
$
|
13,418
|
||||||||||
(*) Less than $1.
The accompanying notes are an integral part of the unaudited condensed financial statements.
F - 4
PAINREFORM LTD.
U.S. dollars in thousands
| Nine months ended September 30, |
||||||||
|
2022
|
2021
|
|||||||
|
Cash flows from operating activities
|
||||||||
|
Net loss
|
$
|
(5,626
|
)
|
$
|
(5,513
|
)
|
||
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
|
Depreciation
|
9
|
4
|
||||||
|
Share-based compensation to employees and directors
|
653
|
582
|
||||||
|
Share-based compensation to service providers
|
309
|
309
|
||||||
|
Change in:
|
||||||||
|
Other current assets
|
621
|
161
|
||||||
|
Trade payables
|
249
|
(550
|
)
|
|||||
|
Other accounts payable
|
194
|
225
|
||||||
|
Net cash used in operating activities
|
(3,591
|
)
|
(4,782
|
)
|
||||
|
Cash flows from investing activities
|
||||||||
|
Purchase of short term deposit
|
(6,034
|
)
|
||||||
|
Purchase of property and equipment
|
-
|
(22
|
)
|
|||||
|
Net cash used in investing activities
|
(6,034
|
)
|
(22
|
)
|
||||
|
Cash flows from financing activities
|
||||||||
|
Proceeds from Exercise of warrants
|
1,930
|
|||||||
|
Proceeds from issuance of ordinary shares under Private Investment in Public Equity
|
-
|
6,000
|
||||||
|
Issuance costs
|
-
|
(446
|
)
|
|||||
|
Net cash provided by financing activities
|
-
|
7,484
|
||||||
|
Change in cash, cash equivalents and restricted cash
|
(9,625
|
)
|
2,680
|
|||||
|
Cash, cash equivalents and restricted cash at the beginning of the period
|
16,571
|
15,690
|
||||||
|
Cash, cash equivalents and restricted cash at the end of the period
|
$
|
6,946
|
$
|
18,370
|
The below table reconciles cash, cash equivalents and restricted cash as reported in the balance sheets to the total of the same amounts shown in the statements of cash flows:
|
|
As of September 30,
|
|||||||
|
|
2022
|
2021
|
||||||
|
Cash and cash equivalents
|
$
|
6,922
|
$
|
18,337
|
||||
|
Restricted cash
|
24
|
33
|
||||||
|
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows
|
$
|
6,946
|
$
|
18,370
|
||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
F - 5
PAINREFORM LTD.
U.S. dollars in thousands, except share and per share data
NOTE 1: GENERAL
| a. |
PainReform Ltd. (the "Company") was incorporated under the laws of the State of Israel in November 2007. The Company is a clinical stage specialty pharmaceutical company focused on the reformulation of established therapeutics. The
Company’s proprietary extended release drug-delivery system is designed to provide an extended period of post-surgical pain relief without the need for repeated dose administration while reducing the potential need for the use of opiates.
|
| b. |
As a result of issues in the manufacturing process, the Company has decided to postpone the commencement of its planned Phase 3 clinical trial. The Company is currently investigating
these manufacturing issues and cannot predict the costs that may be incurred or the timeline for commencing the Phase 3 trial.
|
| c. |
Liquidity
|
Since its inception, the Company has devoted substantially all of its efforts to research and development, clinical trials, and
capital raising activities. The Company is still in its development and clinical stage and has not yet generated revenues.
The Company has incurred losses of $5,626 and $5,513 for the nine months periods ended on September 30, 2022, and 2021, respectively and has negative cash outflow from
operating activities. The Company expects to continue to incur losses and negative cash flows from operations until its product reaches profitability. As of September 30, 2022, the Company’s accumulated deficit was $29,353. The Company has funded
its operations to date primarily through equity financing and has cash on hand (including short term deposits) of $12,956 as of September 30, 2022. Additional funding will be required to complete the Company’s research and development and clinical
trials, to attain regulatory approvals, to begin the commercialization efforts of the Company’s product and to achieve a level of sales adequate to support the Company’s current and planned cost structure. The Company monitors its cash flow
projections on a current basis and based on the Company's current operating plan, the Company believes that its existing capital resources will be sufficient to fund operations for at least twelve months after the date the financial statements are
issued.
| d. |
In late 2019, a novel strain of COVID-19, was reported in Wuhan, China. While initially the outbreak was largely concentrated in China, it rapidly spread across the globe, including in Israel and the United States. The extent to which the
COVID-19 pandemic impacts the Company’s operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and severity of the outbreak, and the actions that may be
required to contain the COVID-19 or treat its impact. Through the financial report approval date, November 14, 2022, the Company has not experienced a significant impact on its operations due to the COVID-19 pandemic.
|
| e. |
In April 2022, the Company's board of directors increased the number of reserved ordinary shares under the 2019 Plan by an additional amount of 1,000,000 ordinary shares. (Note 4b)
|
| f. |
In April 2022, the Company issued 152,110 shares to a consultant pursuant to an agreement signed in August 2020. Since August 2020, the Company has recognized $857 ($309 for the nine months ended September 30, 2022) as share-based
compensation expense related to the shares issued to the consultant.
|
F - 6
PAINREFORM LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
U.S. dollars in thousands, except share and per share data
NOTE 2: UNAUDITED CONDENSED FINANCIAL STATEMENTS
The unaudited condensed financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United
States (“U.S. GAAP”) and, on the same basis as the audited financial statements included in the Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2021 (the “2021 Form 20-F”).
Certain information and disclosures normally included in annual financial statements have been omitted in this interim period report pursuant to the rules
and regulations of the Securities and Exchange Commission. Because the unaudited condensed financial statements do not include all of the information and disclosures required by U.S. GAAP for annual financial statements, they should be read in
conjunction with the audited financial statements and notes included in the 2021 Form 20-F.
The year-end balance sheet data were derived from the audited financial statements as of December 31, 2021, but not all disclosures required by generally
accepted accounting principles in the United States (“U.S. GAAP”) are included.
In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair statement of the Company’s
financial position as of September 30, 2022 and its results of operations and cash flows for the nine months ended September 30, 2022 and 2021 have been included. Operating results for the nine months ended September 30, 2022, are not necessarily
indicative of the results that may be expected for the year ending December 31, 2022 or any other interim period or for any other future year.
NOTE 3: SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies that have been applied in the preparation of the unaudited condensed financial statements are identical to those that
were applied in preparation of the Company’s most recent annual financial statements in connection with its Annual Report on Form 20-F, except for the following:
|
-
|
In August 2020, the FASB issued guidance ASU 2020-06 that is expected to reduce complexity and improve comparability of financial reporting associated with accounting for convertible
instruments and contracts in an entity’s own equity. This guidance is effective for the Company from January 1, 2022 and did not have a material impact on the Company’s financial statements and disclosures.
|
F - 7
PAINREFORM LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
U.S. dollars in thousands, except share and per share data
NOTE 4: SHAREHOLDERS’ EQUITY
| a. |
Warrants and warrants units
|
The following table summarizes the warrants outstanding as of September 30, 2022:
|
Type
|
Issuance Date
|
Number of warrants
|
Exercise price
|
Exercisable through
|
|
August 2019 warrants
|
August 22, 2019
|
205,268
|
$6.72 (*)
|
August 22, 2024
|
|
December 2019 warrants
|
December 9, 2019
|
148,106
|
$6.72 (*)
|
December 8, 2024
|
|
Warrants to underwriters
|
September 3, 2020
|
125,000
|
$10.00
|
September 1, 2025
|
|
Warrants to underwriters
|
October 5, 2020
|
375,000
|
$8.80
|
September 3, 2025
|
|
IPO warrants
|
September 3, 2020
|
2,812,170
|
$8.80
|
September 3, 2025
|
|
PIPE warrants
|
March 11, 2021
|
232,500
|
$4.60
|
September 10, 2026
|
|
Warrants to PIPE placement agent
|
March 11,2021
|
52,173
|
$5.06
|
March 8, 2026
|
|
TOTAL
|
3,950,217
|
(*) Each warrant is exercisable into one IPO unit consisting of one share and one IPO warrant with an exercise price of $8.80.
F - 8
PAINREFORM LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
U.S. dollars in thousands, except share and per share data
NOTE 4: SHAREHOLDERS’ EQUITY (Cont.)
| b. |
Share-based compensation:
|
Share options outstanding and exercisable to employees and directors under the 2008 Plan as of September 30, 2022 and December 31, 2021 were as follows:
|
Weighted
|
||||||||||||
|
Weighted
|
average
|
|||||||||||
|
average
|
remaining
|
|||||||||||
|
Number of
|
exercise
|
contractual
|
||||||||||
|
options
|
price
|
life
|
||||||||||
|
Options outstanding as of December 31, 2021
|
153,882
|
$
|
0.24
|
2.25
|
||||||||
|
Options granted
|
-
|
-
|
-
|
|||||||||
|
Options exercised
|
-
|
-
|
-
|
|||||||||
|
Options forfeited
|
-
|
-
|
-
|
|||||||||
|
Options outstanding as of September 30, 2022
|
153,882
|
$
|
0.24
|
1.50
|
||||||||
|
Options exercisable as of September 30, 2022
|
153,882
|
$
|
0.24
|
1.50
|
||||||||
Share options outstanding and exercisable to employees and directors under the 2019 Share Option Plan (the “2019 Plan”) as of September 30, 2022 and December
31, 2021, were as follows:
|
Weighted
|
||||||||||||
|
Weighted
|
average
|
|||||||||||
|
average
|
remaining
|
|||||||||||
|
Number of
|
exercise
|
contractual
|
||||||||||
|
options
|
price
|
life
|
||||||||||
|
Options outstanding as of December 31, 2021
|
971,476
|
$
|
4.51
|
8.72
|
||||||||
|
Options granted
|
164,455
|
1.06
|
9.54
|
|||||||||
|
Options exercised
|
-
|
-
|
-
|
|||||||||
|
Options forfeited
|
-
|
-
|
-
|
|||||||||
|
Options outstanding as of September 30, 2022
|
1,135,931
|
$
|
4.01
|
8.84
|
||||||||
|
Options exercisable as of September 30, 2022
|
560,831
|
$
|
4.11
|
7.72
|
||||||||
In April 2022, the Company’s board of directors approved the grant of options to purchase 164,455 ordinary shares of the Company to employees. The options were granted under
the Company's 2019 plan. The fair value of share options granted was estimated using the Black Scholes option-pricing model, which requires a number of assumptions, of which the most significant are the expected share price, volatility, and the
expected option term. The options vest over a four-year period, 4/16 of the options shall vest following the lapse of a period of twelve months commencing at the date of grant. The remaining 12/16 of the options shall vest on quarterly basis, so
that 1/16 of the options shall vest on the expiry of each quarter. The weighted average grant date fair value per option was $0.89.
F - 9
PAINREFORM LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
U.S. dollars in thousands, except share and per share data
NOTE 4: SHAREHOLDERS’ EQUITY (Cont.)
The following table summarizes information about share options that were granted in 2022 as part of the 2019 plan:
| 2022 | ||||
|
Share price at grant day (USD)
|
$ | 1.22 | ||
|
Expected life (years)
|
6.12 | |||
|
Risk-free interest rates
|
2.69
|
%
|
||
|
Expected volatility
|
79.30
|
%
|
||
|
Dividend yield
|
-
|
|||
| Exercise price |
1.06 | |||
| Weighted average grant date fair value per option |
$ | 0.89 | ||
NOTE 5: LOSS PER SHARE
Basic loss per share is computed by dividing the loss for the period applicable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the
period.
For the periods ended September 30, 2022 and 2021, all outstanding share options and warrants have been excluded from the calculation of the diluted net loss per share as all such securities are
anti-dilutive for all periods presented.
NOTE 6: FINANCIAL EXPENSES, NET
| Nine months ended September 30, |
||||||||
| 2022 |
2021
|
|||||||
|
Bank fees
|
(9
|
)
|
(6
|
)
|
||||
|
Income from deposits
|
65
|
-
|
||||||
|
Exchange rate differences
|
(69
|
)
|
(40
|
)
|
||||
|
Total financial expenses, net
|
$
|
(13
|
)
|
$
|
(46
|
)
|
||
F - 10
PAINREFORM LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
U.S. dollars in thousands, except share and per share data
NOTE 7: COMMITMENTS AND CONTINGENCIES
On November 13, 2020, the Company entered into a Master Clinical Research Organization Agreement (the "First Agreement"), and on December 3, 2020, the
Company entered into a Master Clinical Trial Agreement (the "Second Agreement") both with Lotus Clinical Research as the Company's clinical research organization for the Company's planned Phase 3 trial of PRF-110, which was expected to commence in
the fourth quarter of 2022, but has been postponed due to issues in the manufacturing process ( note 9) .
Under the First Agreement, the Company paid the first milestone of $581 on December 28, 2020, and paid an additional milestone of $581 during the first
nine months of 2021. In addition, the Company paid a non-refundable deposit of $710 under the Second Agreement in January 2021.
As of September 30, 2022, the Company accounted for these amounts of net $1,728 as prepaid clinical trial expense and deferred clinical trial costs after recognition of $144 clinical trials expenses
in 2021.
NOTE 8: FINANCIAL INSTRUMENTS
The carrying amount of cash equivalents, restricted cash, trade payables and accrued expenses approximate their fair value due to their short-term characteristics.
NOTE 9: SUBSEQUENT EVENTS
As a result of issues in the manufacturing process, the Company has decided to postpone the commencement of its
planned Phase 3 clinical trial. See note 1b.
F - 11
Exhibit 99.2
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
You should read the following selected financial data and discussion of our operating and financial condition and prospects in conjunction with the financial
statements and the notes thereto included elsewhere in this 6-K. Our financial statements are prepared in accordance with U.S. GAAP, and reported in U.S. dollars. We maintain our accounting books and records in U.S. dollars and our functional
currency is the U.S. dollar. Certain amounts presented herein may not sum due to rounding. Unless the context requires otherwise, references in this report to “PainReform,” the “Company,” “we,” “us” and “our” refer to PainReform Ltd, an Israeli
company. “NIS” means New Israeli Shekel, and “$,” “US$,”“U.S. dollars” and “USD” mean United States dollars.
Forward Looking Statements
The following discussion contains “forward-looking statements,” including statements regarding expectations, beliefs, intentions or strategies for the future. These statements may
identify important factors which could cause our actual results to differ materially from those indicated by the forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking
statements. Factors that could cause our actual results to differ materially from those expressed or implied in such forward-looking statements include, but are not limited to:
● our history of losses and needs for additional capital to fund our operations and our ability to obtain additional capital on acceptable terms, or at all;
● our dependence on the success of our initial product candidate, PRF-110;
● the outcomes of preclinical studies, clinical trials and other research regarding PRF-110 and future product candidates;
● the impact of the COVID-19 pandemic on our operations;
● our limited experience managing clinical trials;
● our ability to retain key personnel and recruit additional employees;
● our reliance on third parties for the conduct of clinical trials, product manufacturing and development;
● the impact of competition and new technologies;
● our ability to comply with regulatory requirements relating to the development and marketing of our product candidates;
● our ability to establish and maintain strategic partnerships and other corporate collaborations;
● the implementation of our business model and strategic plans for our business and product candidates;
● the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and our ability to operate our business without infringing
the intellectual property rights of others;
● the overall global economic environment;
● our ability to develop an active trading market for our ordinary shares and whether the market price of our ordinary shares is volatile; and
● statements as to the impact of the political and security situation in Israel on our business.
All forward-looking statements attributable to us or persons acting on our behalf speak only as of the date of the 6-K to which this discussion is attached and are expressly qualified in
their entirety by the cautionary statements included herein. We undertake no obligations to update or revise forward-looking statements to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated
events. In evaluating forward-looking statements, you should consider these risks and uncertainties.
Overview
We are a clinical stage specialty pharmaceutical company focused on the reformulation of established therapeutics. Our proprietary extended release drug-delivery system is
designed to provide an extended period of post-surgical pain relief without the need for repeated dose administration while reducing the potential need for the use of opiates. Our strategy is to incorporate generic drugs with our proprietary
extended release drug-delivery system in order to create extended release drug products and to take advantage of the 505(b)(2) regulatory pathway created by the U.S. Food and Drug Administration, or FDA. The 505(b) (2) new drug application, or NDA,
process, provides for FDA approval of a new drug based in part on data that was developed by others, including published literature references and data previously reviewed by the FDA in its approval of a separate application. Using this pathway can
significantly reduce the time and costs associated with clinical development. PRF-110, our first product, is based on the local anesthetic ropivacaine, targeting the post-operative pain relief market. PRF-110 is an oil-based, viscous, clear
solution that is deposited directly into the surgical wound bed prior to closure to provide localized and extended post-operative analgesia.
We have been preparing for the launch
of our two Phase 3 clinical trials of PRF-110, one for the treatment of patients undergoing bunionectomy and the other for the treatment of hernia repair operations. As previously announced, we recently encountered issues in the manufacturing process of PRF-110 and as a result delayed the commencement of our Phase 3
clinical trial. We expect to provide near-term updates on the manufacturing process and timeline for commencing the Phase 3 trial.
Since our inception in November 2007, we have devoted substantially all of our efforts to organizing and planning our business, building our management and technical team,
developing our proprietary drug delivery system and PRF-110, and raising capital.
In December 2019, a novel strain of coronavirus, COVID-19, was identified in Wuhan, China. Initially the outbreak
was largely concentrated in China, but it rapidly spread to countries across the globe, including in Israel and the United States. The spread of COVID-19 has resulted in the World Health Organization declaring the outbreak of COVID-19 as a
“pandemic,” or a worldwide spread of a new disease. Many countries around the world, including Israel and the United States, have imposed quarantines and restrictions on travel and mass gatherings to slow the spread of the virus. While the spread
of COVID-19 has not yet directly impacted our operations, the spread of COVID-19 may result in the inability of our outside scientific collaborators, suppliers, consultants, advisors and other third parties to work with us on a timely basis and
will likely impact the timing of the initiation of our planned clinical studies and the enrollment of patients. The extent to which COVID-19 impacts our development efforts will depend on future developments, which are highly uncertain and cannot
be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others.
We expect to continue to incur significant expenses and increasing losses for next several years. Our net losses may fluctuate significantly from period to period, depending on the
timing of our planned clinical trials and expenditures on our other research and development and commercial development activities. We expect our expenses will increase substantially over time as we:
• continue the ongoing and planned preclinical and clinical development of our drug candidates;
• build a portfolio of drug candidates through the acquisition or in-license of drugs, drug candidates or technologies;
• initiate preclinical studies and clinical trials for any additional drug candidates that we may pursue in the future;
• seek marketing approvals for our current and future drug candidates that successfully complete clinical trials;
• establish a sales, marketing and distribution infrastructure to commercialize any drug candidate for which we may obtain marketing approval;
• develop, maintain, expand and protect our intellectual property portfolio;
• implement operational, financial and management systems; and
• attract, hire and retain additional administrative, clinical, regulatory and scientific personnel.
Financial Operations Overview
Revenue
We have not generated any revenue and do not expect to generate any revenue unless or until we obtain regulatory approval of and commercialize one or more of our current or future
drug candidates. In the future, we may also seek to generate revenue from a combination of research and development payments, license fees and other upfront or milestone payments.
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, which include, among other things:
● employee-related expenses, including salaries, benefits and stock-based compensation expense;
● fees paid to consultants for services directly related to our drug development and regulatory effort;
● expenses incurred under contract manufacturing organizations, as well as contract manufacturing organizations and consultants that conduct preclinical studies and clinical trials;
● costs associated with development activities;
● costs associated with technology and intellectual property licenses; and
● milestone payments and other costs under licensing agreements.
Costs incurred in connection with research and development activities are expensed as incurred. Costs for certain development activities, such as clinical trials, are recognized
based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations or other information provided to us by our vendors.
Research and development activities are and will continue to be central to our business model. We expect our research and development expenses to increase for the foreseeable
future as we advance our current and future drug candidates through preclinical studies and clinical trials. The process of conducting preclinical studies and clinical trials necessary to obtain regulatory approval is costly and time-consuming. It is
difficult to determine with certainty the duration and costs of any preclinical study or clinical trial that we may conduct. The duration, costs and timing of clinical trial programs and development of our current and future drug candidates will
depend on a variety of factors that include, but are not limited to, the following:
● number of clinical trials required for approval and any requirement for extension trials;
● per patient trial costs;
● number of patients that participate in the clinical trials;
● number of sites included in the clinical trials;
● countries in which the clinical trial is conducted;
● length of time required to enroll eligible patients;
● potential additional safety monitoring or other studies requested by regulatory agencies; and
● efficacy and safety profile of the drug candidate.
In addition, the probability of success for any of our current or future drug candidates will depend on numerous factors, including competition, manufacturing capability and
commercial viability. We will determine which programs to pursue and how much to fund each program in response to the scientific and clinical success of each drug candidate, as well as an assessment of each drug candidate’s commercial potential.
General and Administrative Expenses
General and administrative expenses consist primarily of employee-related expenses, including salaries, benefits and share-based compensation. Other general and administrative
expenses include directors’ and officers’ liability insurance premiums, costs associated with being a publicly traded company, fees associated with investor relations, professional fees for consultants, tax and legal services and facility-related
costs.
We expect that general and administrative expenses will increase in the future as we expand our operating activities and incur additional costs. In addition, if our current or
future drug candidates are approved for sale, we expect that we would incur expenses associated with building our commercial and distribution infrastructure.
Financial Expenses, Net
Financial expenses, net, primarily consists of bank management fees and commissions and exchange rate differences
expenses.
Results of Operations
Research and development expenses. Research and development expenses were $2.5 million for the nine months ended September 30, 2022
compared to $2.3 million for the nine months ended September 30, 2021, an increase of $0.2 million. The increase was primarily due to an increase in chemistry and manufacturing controls (CMC) activities and preparation for the initiation of clinical
trials.
General and
administrative expenses. General and administrative expenses were $3.1 million for the nine months ended September 30, 2022 compared to $3.2 for the nine months ended September 30, 2021, an immaterial increase of $0.1 million. The
increase was primarily due to an increase in certain professional services costs.
Financial expense,
net. Financial expense, net was $13,000 for the nine months ended September 30, 2022 compared to financial expenses, net of $46,000 for the nine months ended September 30, 2021, a decrease of $33,000 million. The decrease was primarily due
to a decrease in exchange rate differences expenses that was offset with financial income from bank deposits.
Net loss. As a result of the foregoing, we incurred a net loss of $5.6 million for the nine months ended September 30, 2022 compared to a
net loss of $5.5 million for the nine months ended September 30, 2021, an increase of $0.1 million.
Liquidity and Capital Resources
Since our inception through September 30, 2022, we have funded our operations primarily through proceeds from our
initial public offering and private placements. As of September 30, 2022, we had an accumulated deficit of approximately $29.4 million, cash and cash equivalents and short term bank deposits of $12.9 million and a positive working capital of $13.6
million.
Developing drugs, conducting clinical trials and commercializing products is expensive and we will need to raise substantial additional funds to achieve our strategic objectives.
We believe our existing financial resources as of the date of issuance of this Form 6-K, will be sufficient to fund our operating expenses and capital expenditure requirements for at least 12 months from the date of the date of issuance of this Form
6-K. Our estimate as to how long we expect our funds to support our operations is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Further, changing circumstances, some
of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned. Our future capital requirements will depend on many factors,
including:
● the scope, progress, results and costs of our current and future clinical trials of PRF-110 for our current targeted uses;
● the costs, timing and outcome of regulatory review of PRF-110;
● the extent to which we acquire or invest in businesses, products and technologies, including entering into or maintaining licensing or collaboration arrangements for PRF-110 on favorable
terms, although we currently have no commitments or agreements to complete any such transactions;
● the costs and timing of future commercialization activities, including drug sales, marketing, manufacturing and distribution, for any of our product candidates for which we receive
marketing approval, to the extent that such sales, marketing, manufacturing and distribution are not the responsibility of any collaborator that we may have at such time;
● the amount of revenue, if any, received from commercial sales of PRF-110, should it receive marketing approval;
● the costs of preparing, filing and prosecuting patent applications, maintaining, defending and enforcing our intellectual property rights and defending intellectual property-related
claims;
● our headcount growth and associated costs as we expand our business operations and our research and development activities;
● the costs of operating as a public company;
● maintaining minimum shareholders’ equity requirements under the Nasdaq rules; and
● the impact of the COVID-19 pandemic.
We expect our expenses to increase in connection with our planned operations. Until such time, if ever, as we can generate substantial revenues, we expect to finance our cash needs
through a combination of equity offerings, debt financings, collaborations, strategic alliances and/or licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership
interest may be diluted, and the terms of these securities could include liquidation or other preferences and anti-dilution protections that could adversely affect your rights as a shareholder. In addition, debt financing, if available, would result
in fixed payment obligations and may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures, creating liens, redeeming shares or declaring
dividends, that could adversely impact our ability to conduct our business. In addition, securing financing could require a substantial amount of time and attention from our management and may divert a disproportionate amount of their attention away
from day-to-day activities, which may adversely affect our management’s ability to oversee the development of our product candidates.
If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technology,
future revenue streams or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds when needed, we may be required to delay, reduce and/or eliminate our product candidate development or
future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Cash Flows
The following table sets forth the major components of our statements of cash flows for the periods presented (U.S. dollars in thousands):
|
Nine months
Ended September 30,
2022
|
Nine months
Ended September 30,
2021
|
|||||||
|
Net cash used in operating activities
|
$
|
(3,591
|
)
|
$
|
(4,782
|
)
|
||
|
Net cash used in investing activities
|
(6,034
|
)
|
(22
|
)
|
||||
|
Net cash provided by financing activities
|
-
|
7,484
|
||||||
|
Increase (decrease) in cash and cash equivalents and restricted cash
|
(9,625
|
)
|
2,680
|
|||||
|
Cash and cash equivalents and restricted cash, at the beginning of year
|
16,571
|
15,690
|
||||||
|
Cash and cash equivalents and restricted cash, at September 30, 2022
|
$
|
6,946
|
$
|
18,370
|
||||
Net cash used in operating activities
For the nine months ended September 30, 2022 and 2021, net cash used in operating activities was $3.6 million and $4.8 million respectively. The decrease was mainly due to an
increase in trade payable and a decrease of current assets.
Net cash used in investing activities
For the nine months ended September 30, 2022, net cash used in investing activities was $6 million, compared to an
immaterial amount in the nine months ended September 2021. The increase was due to an investment in short term bank deposits.
Net cash provided by financing activities
For the nine months ended September 30, 2022, net cash provided by financing activities was none, compared to $7.5
million in the nine months ended September 2021 due to proceeds from the March 2021 private placement and from warrants exercised in July 2021.
Trend Information.
We are a development stage company and it is not possible for us to predict with any degree of accuracy the outcome of our research, development or commercialization efforts. As
such, it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our net sales or revenues, income from continuing
operations, profitability, liquidity or capital resources, or that would cause financial information to not necessarily be indicative of future operating results or financial condition. However, to the extent possible, certain trends, uncertainties,
demands, commitments and events are identified in the preceding subsections.
Off-Balance Sheet Arrangements.
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Critical Accounting Policies and Judgments and Estimates
Our statements are prepared in accordance with GAAP. Some of the accounting methods and policies used in preparing our financial statements under GAAP are based on complex and
subjective assessments by our management or on estimates based on past experience and assumptions deemed realistic and reasonable based on the circumstances concerned. The actual value of our assets, liabilities and shareholders’ equity and of our
accumulated deficit could differ from the value derived from these estimates if conditions change and these changes had an impact on the assumptions adopted. See Note 3 to the accompanying financial statements.
OTHER INFORMATION
Changes in Internal Control over Financial Reporting
As previously disclosed, during the quarter ended June 30, 2022, we identified a material weakness in our
internal control over financial reporting relating to a cybersecurity incident that resulted in us transferring an amount of $165,000 to a fictitious vendor. In response, to the incident, we implemented certain changes to our internal control
procedures with respect to payments to suppliers that seek to provide alternate bank account information to us, updated our information technology procedures and hired the services of a cybersecurity consultant to assist with implementing a range
of steps to enhance our security protections in order to prevent future cybersecurity incidents. In addition, we have enhanced our organizational awareness of cybersecurity, our information security and our vendor/payment validation procedures
within our organization. As a result, we believe we have put in place the proper policies, procedures and controls to remediate the material weakness.
Risk Factors
In addition to the other information set forth in this report, you should carefully consider the risk factors described in the section titled “Risk Factors” in our Annual Report
on Form 20-F as filed with the SEC on March 16, 2022 (the “2021 Annual Report”).
There have been no material changes from the risk factors previously disclosed in our 2021 Annual Report, except as noted below and in our Form 6-K furnished to the Securities
and Exchange Commission on August 15, 2022.
The price of our ordinary shares does not meet the requirements for continued listing on Nasdaq. If we fail to regain compliance with the
minimum listing requirements, our ordinary shares will be subject to delisting. Our ability to publicly or privately sell equity securities and the liquidity of our ordinary shares could be adversely affected if our ordinary shares is delisted.
The continued listing standards of Nasdaq require, among other things, that the minimum bid price of a listed company’s stock be at or above $1.00. If the closing minimum bid
price is below $1.00 for a period of more than 30 consecutive trading days, the listed company will fail to be in compliance with Nasdaq’s listing rules and, if it does not regain compliance within the grace period, will be subject to delisting. As
previously reported, on August 16, 2022, we received a notice from the Nasdaq Listing Qualifications Department notifying us that for 30 consecutive trading days, the bid price of our ordinary shares had closed below the minimum $1.00 per share
requirement. In accordance with Nasdaq’s listing rules, we were afforded a grace period of 180 calendar days, or until February 6, 2023, to regain compliance with the bid price requirement. In order to regain compliance, the bid price of ordinary
shares must close at a price of at least $1.00 per share for a minimum of 10 consecutive trading days.
If we fail to regain compliance by February 6, 2023, we may be eligible for a second 180 day compliance period if we elect to transfer to The Nasdaq Capital market, provided
that, on such date, we meet the continued listing requirement for market value of publicly held shares and all other applicable Nasdaq listing requirements (other than the minimum closing bid price requirement) and we provide written notice to Nasdaq
of our intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary. Such extension of the grace period would be subject to Nasdaq’s discretion, and there can be no guarantee that we would be
granted an extension.
We cannot provide any guarantee that we will regain compliance during the grace period or be able to maintain compliance with Nasdaq’s listing requirements in the future. If we
are not able to regain compliance during the grace period, or any extension of the grace period for which we may be eligible, our ordinary shares will be subject to delisting. Delisting from Nasdaq could adversely affect our ability to raise
additional financing through the public or private sale of equity securities, would significantly affect the ability of investors to trade our securities and would negatively affect the value and liquidity of our ordinary shares. Delisting could also
have other negative results, including the potential loss of confidence by employees, the loss of institutional investor interest and fewer business development opportunities.