Elicio Therapeutics Inc

Previous wording

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q and in our audited financial statements and accompanying notes for the years ended December 31, 2023 and 2022 included in our Annual Report on Form 10-K filed March 29, 2024 (the “Form 10-K”). In addition to the historical financial information, this discussion contains forward-looking statements that involve risks, assumptions and uncertainties, such as statements of our plans, objectives, expectations, intentions, forecasts and projections. Our actual results and the timing of selected events could differ materially from those discussed in these forward-looking statements as a result of several factors, including those set forth under the section of this Quarterly Report on Form 10-Q titled“Risk Factors” and the Form 10-K, which you should read carefully to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section titled“Forward-Looking Statements”at the beginning of this report.

Current wording

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q and in our audited financial statements and accompanying notes for the years ended December 31, 2023 and 2022 included in our Annual Report on Form 10-K filed March 29, 2024, as amended (the “Form 10-K”). In addition to the historical financial information, this discussion contains forward-looking statements that involve risks, assumptions and uncertainties, such as statements of our plans, objectives, expectations, intentions, forecasts and projections. Our actual results and the timing of selected events could differ materially from those discussed in these forward-looking statements as a result of several factors, including those set forth under the section of this Quarterly Report on Form 10-Q titled“Risk Factors” and the Form 10-K, which you should read carefully to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section titled“Forward-Looking Statements”at the beginning of this report.

Previous wording

Our operations to date have been financed primarily by aggregate net proceeds of $151.7 million from the issuance of convertible preferred stock, convertible notes, and the exercise of stock options and common stock warrants, the private placement of our securities, an at-the-market offering, and proceeds from the Merger. Since inception, we have had significant annual operating losses. Our net loss was $11.8 million and $8.0 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, we had an accumulated deficit of $154.0 million and $11.9 million in cash and cash equivalents.

Current wording

Our operations to date have been financed primarily by aggregate net proceeds of $152.0 million from the issuance of common stock, pre-funded warrants, convertible preferred stock, convertible notes, the exercise of stock options and common stock warrants, the private placement of our securities, an at-the-market offering, and proceeds from the Merger. Since inception, we have had significant annual operating losses. Our net loss was $7.2 million and $19.1 million for the three and six months ended June 30, 2024, respectively, and $7.6 million and $15.6 million for the three and six months ended June 30, 2023, respectively. As of June 30, 2024, we had an accumulated deficit of $161.3 million and $3.4 million in cash and cash equivalents.

Previous wording

We are currently facing substantial doubt about our ability to continue as a going concern, given our cash position and cash runway. We believe that our cash on hand will enable us to fund our operations into the third quarter of calendar year 2024 based on our current plan. This period could be shortened if there are any significant increases in planned or actual spending on development programs or more rapid progress of development programs than anticipated. There is no assurance that financing will be available when needed to allow us to continue as a going concern. Our losses from operations, negative operating cash flows and accumulated deficit, as well as the additional capital needed to fund operations for at least twelve months following the issuance of the condensed consolidated financial statements, raise substantial doubt about our ability to continue as a going concern. We expect to incur substantial expenditures in the foreseeable future for the development of our product candidates and will require additional financing to continue this development. We plan to address this condition through the sale of common stock in public offerings and/or private placements, debt financings, or through other capital sources, including licensing arrangements, partnerships and collaborations with other companies or other strategic transactions, but there is no assurance these plans will be completed successfully or at all. If we are unable to obtain additional capital when and as needed to continue as a going concern, we might have to further reduce or scale back our operations and/or liquidate our assets, and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements.

Current wording

We are currently facing substantial doubt about our ability to continue as a going concern, given our cash position and cash runway. As of the filing date of this Quarterly Report on Form 10-Q, we believe that our cash on hand will enable us to fund our operations into the second quarter of calendar year 2025 based on our current plan. This period could be shortened if there are any significant increases in planned or actual spending on development programs or more rapid progress of development programs than anticipated. There is no assurance that financing will be available when needed to allow us to continue as a going concern. Our losses from operations, negative operating cash flows and accumulated deficit, as well as the additional capital needed to fund operations for at least twelve months following the issuance of the condensed consolidated financial statements, raise substantial doubt about our ability to continue as a going concern. We expect to incur substantial expenditures in the foreseeable future for the development of our product candidates and will require additional financing to continue this development. We plan to address this condition through the sale of common stock or other securities in public offerings and/or private placements, debt financings, or through other capital sources, including licensing arrangements, partnerships and collaborations with other companies or other strategic transactions, but there is no assurance these plans will be completed successfully or at all. If we are unable to obtain additional capital when and as needed to continue as a going concern, we might have to further reduce or scale back our operations and/or liquidate our assets, and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements.

Previous wording

We believe that our cash on hand will enable us to fund our operations into the third quarter of calendar year 2024 based on our current plan. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. To finance our operations beyond that point we will need to raise additional capital, which cannot be assured. Our losses from operations, negative operating cash flows and accumulated deficit, as well as the additional capital needed to fund operations for at least twelve months following the issuance of the condensed consolidated financial statements, raise substantial doubt about our ability to continue as a going concern.

Current wording

As of the filing date of this Quarterly Report on Form 10-Q, we believe that our cash on hand will enable us to fund our operations into the second quarter of calendar year 2025 based on our current plan. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. To finance our operations beyond that point we will need to raise additional capital, which cannot be assured. Our losses from operations, negative operating cash flows and accumulated deficit, as well as the additional capital needed to fund operations for at least twelve months following the issuance of the condensed consolidated financial statements, raise substantial doubt about our ability to continue as a going concern.

Previous wording

For the three months ended March 31, 2024 and 2023, other income and expense consisted primarily of interest income, foreign exchange transaction losses, gain on sale of equipment, interest expense, changes in fair value of the embedded derivative, and gains and losses related to the re-measurement of our warrant liabilities.

Current wording

For the three and six months ended June 30, 2024 and 2023, other income and expense consisted primarily of interest income, foreign exchange transaction gains and losses, gain on sale of equipment, interest expense, changes in fair value of the embedded derivative, gain on extinguishment of the promissory note payable, and gains and losses related to the re-measurement of our warrant liabilities.

Previous wording

Research and development expenses were $7.6 million for the three months ended March 31, 2024, compared to $5.5 million for the three months ended March 31, 2023. The increase of $2.1 million was primarily due to clinical trial expenses as the Company advanced ELI-002 clinical development.

Current wording

Research and development expenses were $8.2 million for the three months ended June 30, 2024, compared to $4.9 million for the three months ended June 30, 2023. The increase of $3.2 million was primarily due to clinical trial expenses as the Company advanced ELI-002 clinical development.

Previous wording

Other income (expense), net for the three months ended March 31, 2024 was expense of $1.6 million compared to expense of $0.2 million for the three months ended March 31, 2023. The increase of $1.4 million was primarily due to the change in fair value associated with the Pre-Funded Warrants, as defined in our condensed consolidated financial statements for the three months ended March 31, 2024.

Current wording

Other income (expense), net for the three months ended June 30, 2024 was expense of $3.7 million compared to expense of $0.2 million for the three months ended June 30, 2023. The increase of $3.5 million was primarily due to the change in fair value associated with the Pre-Funded Warrants, as defined in our condensed consolidated financial statements for the three and six months ended June 30, 2024.

Previous wording

General and administrative expenses were $2.7 million for the three months ended March 31, 2024, compared to $2.3 million for the three months ended March 31, 2023. The increase of $0.4 million was primarily due to higher personnel-related costs in support of organizational growth and higher professional fees incurred in connection with operating as a public company.

Current wording

General and administrative expenses were $5.4 million for the six months ended June 30, 2024, compared to $5.2 million for the six months ended June 30, 2023. The increase of $0.3 million was primarily due to higher personnel-related costs in connection with operating as a public company.

Previous wording

Our operations through March 31, 2024 have been financed primarily by aggregate net proceeds of $151.7 million from the issuance of common stock, convertible preferred stock, convertible notes, the exercise of stock options and common stock warrants, the private placement of our securities, an at-the-market offering, and proceeds from the Merger. Since inception, we have had significant operating losses. Our net loss was $11.8 million and $8.0 million for the three months ended March 31, 2024 and three months ended March 31, 2023, respectively. As of March 31, 2024, we had an accumulated deficit of $154.0 million and $11.9 million in cash and cash equivalents. Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and to a lesser extent, general and administrative expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.

Current wording

Our operations through June 30, 2024 have been financed primarily by aggregate net proceeds of $152.0 million from the issuance of common stock, pre-funded warrants, convertible preferred stock, convertible notes, the exercise of stock options and common stock warrants, the private placement of our securities, an at-the-market offering, and proceeds from the Merger. Since inception, we have had significant operating losses. Our net loss was $19.1 million and $15.6 million for the six months ended June 30, 2024 and six months ended June 30, 2023, respectively. As of June 30, 2024, we had an accumulated deficit of $161.3 million and $3.4 million in cash and cash equivalents. Cash and cash equivalents as of June 30, 2024 did not include $9.9 million of net proceeds from the public offering that was received on July 1, 2024 or $19.7 million of net proceeds from the convertible note financing that was received on August 12, 2024. Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and to a lesser extent, general and administrative expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.

Previous wording

Our losses from operations, negative operating cash flows and accumulated deficit, as well as the additional capital needed to fund operations for at least twelve months following the issuance of the condensed consolidated financial statements, raise substantial doubt about our ability to continue as a going concern. We expect to incur substantial expenditures in the foreseeable future for the development of our product candidates and will require additional financing to continue this development. The condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q have been prepared on a basis that assumes that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern. We plan to address this condition through the sale of common stock in public offerings and/or private placements, debt financings, or through other capital sources, including licensing arrangements, partnerships and collaborations with other companies or other strategic transactions. However, there is no assurance that we will be successful in raising additional capital or that such additional funds will be available on acceptable terms, if at all. Should we be unable to raise this amount of capital our operating plans will be limited to the amount of capital that we can access. We may also consider steps to reduce our operating expenses. There can be no assurances that we will be successful in any of the foregoing.

Current wording

Our losses from operations, negative operating cash flows and accumulated deficit, as well as the additional capital needed to fund operations for at least twelve months following the issuance of the condensed consolidated financial statements, raise substantial doubt about our ability to continue as a going concern. We expect to incur substantial expenditures in the foreseeable future for the development of our product candidates and will require additional financing to continue this development. The condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q have been prepared on a basis that assumes that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern. We plan to address this condition through the sale of common stock or other securities in public offerings and/or private placements, debt financings, or through other capital sources, including licensing arrangements, partnerships and collaborations with other companies or other strategic transactions. However, there is no assurance that we will be successful in raising additional capital or that such additional funds will be available on acceptable terms, if at all. Should we be unable to raise this amount of capital our operating plans will be limited to the amount of capital that we can access. We may also consider steps to reduce our operating expenses. There can be no assurances that we will be successful in any of the foregoing.

Previous wording

The following table sets forth a summary of our net cash flow activity for the three months ended March 31, 2024 and 2023 (in thousands):

Current wording

The following table sets forth a summary of our net cash flow activity for the six months ended June 30, 2024 and 2023 (in thousands):

Previous wording

For the three months ended March 31, 2024, net cash used in operating activities was $12.1 million, which consisted of a net loss of $11.8 million and changes in our assets and liabilities of $2.8 million, partially offset by non-cash charges of $2.5 million. The non-cash charges were related to $1.3 million of change in the fair value of warrant liability, $0.6 million loss on the issuance of the Pre-Funded Warrants, $0.3 million of stock-based compensation, $0.2 million amortization of the right of use asset, and $0.1 million of depreciation.

Current wording

For the six months ended June 30, 2024, net cash used in operating activities was $21.1 million, which consisted of a net loss of $19.1 million, changes in our assets and liabilities of $1.5 million, and non-cash charges of $0.5 million. The non-cash charges were related to $2.3 million of change in the fair value of warrant liability offset by $0.7 million of stock-based compensation, $0.6 million loss on the issuance of the Pre-Funded Warrants, $0.4 million amortization of the right of use asset, and $0.2 million of depreciation.

Previous wording

For the three months ended March 31, 2023, net cash used in operating activities was $8.1 million, which consisted of a net loss of $8.0 million and changes in our assets and liabilities of $0.7 million, partially offset by non-cash charges of $0.6 million. The non-cash charges were related to $0.3 million of interest expense related to promissory notes, $0.2 million of stock-based compensation, $0.1 million of depreciation, partially offset by a $0.1 million decrease in the fair value of the embedded derivative associated with the convertible notes.

Current wording

For the six months ended June 30, 2023, net cash used in operating activities was $17.6 million, which consisted of a net loss of $15.6 million and changes in our assets and liabilities of $3.2 million which was partially offset by non-cash charges of $1.2 million. The non-cash charges were related to $1.1 million of interest expense related to promissory notes, $0.5 million of stock-based compensation, $0.4 million decrease in the right of use asset, $0.2 million of depreciation, partially offset by a $0.6 million of gain on the settlement of the promissory note payable and $0.4 million decrease in the fair value of the embedded derivative associated with the convertible note.

Previous wording

For the three months ended March 31, 2024 and 2023, net cash provided by or used in investing activities was immaterial.

Current wording

For the six months ended June 30, 2024 and 2023, net cash provided by or used in investing activities was immaterial.

Previous wording

For the three months ended March 31, 2024, net cash provided by financing activities was $11.0 million as a result of the issuance of $5.1 million of our common stock under our at-the-market offering program with Stifel, Nicolaus & Company, Incorporated and Virtu Americas LLC, as sales agents, and $6.0 million of our pre-funded warrants in a private placement.

Current wording

For the six months ended June 30, 2024, net cash provided by financing activities was $11.3 million as a result of the issuance of $5.4 million of our common stock under the 2022 ATM program and $6.0 million of our pre-funded warrants in a private placement.

Previous wording

For the three months ended March 31, 2023, net cash provided by financing activities was $10.0 million, consisting primarily of proceeds from the promissory note as a result of the Merger Agreement.

Current wording

For the six months ended June 30, 2023, net cash provided by financing activities was $31.6 million, primarily as a result of the Merger Agreement.

Previous wording

Based on our current operating plan, we believe our cash and cash equivalents will be sufficient to fund our planned operations into the third quarter of calendar year 2024. However, we have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all our available capital resources sooner than we expect. We are unable to estimate the exact amount of our operating capital requirements. The amount and timing of our future funding requirements will depend on many factors, including, but not limited to:

Current wording

Based on our current operating plan, as of the filing date of this Quarterly Report on Form 10-Q, we believe our cash and cash equivalents will be sufficient to fund our planned operations into the second quarter of calendar year 2025. However, we have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all our available capital resources sooner than we expect. We are unable to estimate the exact amount of our operating capital requirements. The amount and timing of our future funding requirements will depend on many factors, including, but not limited to:

Previous wording

Until such time as we can generate significant revenue from sales of product candidates, if ever, we expect to finance our operations through the sale of common stock in public offerings and/or private placements, debt financings, or through other capital sources, including licensing arrangements, partnerships and collaborations with other companies or other strategic transactions. Adequate funding may not be available to us on acceptable terms, or at all. To the extent we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through additional collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to and/or may reduce the value of our common stock. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.

Current wording

Until such time as we can generate significant revenue from sales of product candidates, if ever, we expect to finance our operations through the sale of common stock or other securities in public offerings and/or private placements, debt financings, or through other capital sources, including licensing arrangements, partnerships and collaborations with other companies or other strategic transactions. Adequate funding may not be available to us on acceptable terms, or at all. To the extent we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

Previous wording

Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Judgments and Estimates” in the Form 10-K. There have been no material changes in our critical accounting policies and estimates in the preparation of our condensed consolidated financial statements during the three months ended March 31, 2024 compared to those disclosed in the Form 10-K, other than as set forth below with respect to our accounting policy related to pre-funded warrants.

Current wording

Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Judgments and Estimates” in the Form 10-K. There have been no material changes in our critical accounting policies and estimates in the preparation of our condensed consolidated financial statements during the six months ended June 30, 2024 compared to those disclosed in the Form 10-K, other than as set forth in Footnotes 4 and 9, with respect to our accounting policy related to pre-funded warrants.

Previous wording

The Pre-Funded Warrants, as defined in our condensed consolidated financial statements for the three months ended March 31, 2024, did not meet the equity classification requirements under ASC 815 - Derivative and Hedging; specifically, the Pre-Funded Warrants do not meet the condition of index to its own stock and because the Pre-Funded Warrants were pre-funded and proceeds were received before exercise, these Pre-Funded Warrants do not meet the definition of a derivative. The Pre-Funded Warrants could not be exercised in an amount that would cause the holder to exceed 19.99% beneficial ownership of our shares unless we obtained stockholder approval pursuant to the rules and regulations of the Nasdaq Stock Market LLC, which limited our ability to issue Company common stock to settle the Pre-Funded Warrants beyond such 19.99% ownership blocker. Consequently, the Pre-Funded Warrants were classified as liabilities and measured at fair value as of the grant date. Subsequent to the grant date, we remeasured the Pre-Funded Warrants at fair value and recognized a loss from change in fair value of Pre-Funded Warrants on the condensed consolidated financial statements during the three months ended March 31, 2024.

Current wording

The Pre-Funded Warrants, as defined in our condensed consolidated financial statements for the six months ended June 30, 2024, did not meet the equity classification requirements under ASC 815, Derivative and Hedging; specifically, the Pre-Funded Warrants do not meet the condition of index to its own stock and because the Pre-Funded Warrants were pre-funded and proceeds were received before exercise, these Pre-Funded Warrants do not meet the definition of a derivative. The Pre-Funded Warrants could not be exercised in an amount that would cause the holder to exceed 19.99% beneficial ownership of our shares unless we obtained stockholder approval pursuant to the rules and regulations of the Nasdaq Stock Market LLC, which limited our ability to issue common stock to settle the Pre-Funded Warrants beyond such 19.99% ownership blocker. Consequently, the Pre-Funded Warrants were classified as liabilities and measured at fair value as of the grant date. Subsequent to the grant date, we remeasured the Pre-Funded Warrants at fair value and recognized a gain from change in fair value of the Pre-Funded Warrants on the condensed consolidated financial statements during the six months ended June 30, 2024.