ACTUATE THERAPEUTICS INC
For the period ended Sep 30, 2024. Filed Nov 13, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 13, 2024
ACTU$0.33+0.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-09-24.
0001683168-24-006623
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-13.
0001683168-24-007971
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 116 previous paragraphs and 115 current paragraphs.
73 unchanged; 31 reworded; 9 added; 11 removed; 1 previous and 2 current paragraphs rearranged.
Tables are not compared: 25 previous and 15 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (9)
Current report
In addition, the Company’s Redeemable Convertible Preferred Stock, Related Party Convertible Notes Payable and in-the-money warrants to purchase the Company’s Redeemable Convertible Preferred Stock converted into or were automatically exercised for, as applicable, common stock immediately prior to the closing of the IPO.
Current report
Prior to the closing of the Company’s IPO, the fair value of the Related Party Convertible Notes Payable was estimated at each reporting period using a scenario-weighted binomial lattice model to calculate equity values at different points in time leading up to a conversion event. Assumptions in the model included but were not limited to the following: equity value, conversion price, accrued interest, volatility, risk-free interest rate, dividend yield, time to a conversion event, and scenario weightings. Accrued interest on the Related Party Convertible Notes Payable was included in the determination of the estimated fair value.
Current report
In connection with the closing of the Company’s IPO on August 14, 2024, the Company issued Bios Clinical Opportunity Fund, LP 884,427 shares of its common stock upon the conversion of the Related Party Convertible Notes Payable, including accrued interest thereon, at a conversion price of $6.40 per share, representing 80% of the IPO price of $8.00 per share. The Related Party Convertible Notes Payable was marked to market to its fair value on the conversion date before being reclassified to equity. The aggregate fair value at the time of conversion was calculated by multiplying the number of shares of common stock issued upon conversion by the fair value per share on the conversion date, which was the closing price of the Company’s common stock on the Nasdaq Global Market on the closing date of the IPO.
Current report
The increase in general and administrative expenses of approximately $0.9 million for the three months ended September 30, 2024 compared to the same prior year period was primarily due to (i) an increase in personnel-related expenses of approximately $0.5 million mostly due to an increase in non-cash stock-based compensation expense of $0.4 million related to awards granted to the president and chief executive officer, the chief financial officer, and the members of the board of directors in connection with the IPO combined with an increase in compensation expense of approximately $0.1 million related to hiring the Company’s chief financial officer in June 2024, (ii) an increase in professional and consulting fees of approximately $0.2 million primarily related to increased investor relations fees, increased accounting fees, and increased general corporate legal fees associated with operating as a public company during the current quarter combined with an increase in intellectual property fees and tax preparation fees, and (iii) an increase in other expenses of approximately $0.2 million primarily due to an increase in the cost of directors and officer insurance combined with an increase in board fees and other public company expenses.
Current report
Comparison of the Nine Months Ended September 30, 2024 and 2023:
Current report
Nine Months Ended September 30, 2024 — During the nine months ended September 30, 2024, net cash provided by financing activities primarily consisted of net proceeds received from the closing of the IPO and Overallotment Option of $22,135,023 (net of underwriting discounts and commissions and after payment of offering costs of $1,821,777) and proceeds of $5,500,000 from the issuance of the Related Party Convertible Notes Payable.
Current report
The Company accounts for the grant of stock options based on the estimated fair value of the underlying option using the Black-Scholes valuation model on the date of grant and expense is recognized on a straight-line basis over the requisite service period, which is the vesting period. The Black-Scholes valuation model requires the input of subjective assumptions, including expected volatility, expected dividend yield, expected term, risk-free rate of return and the estimated fair value of the underlying common stock on the date of grant. Forfeitures are recognized as a reduction of stock-based compensation expense as they occur.
Current report
Redeemable Convertible Preferred Stock Warrants
Current report
The Company’s Redeemable Convertible Preferred Stock Warrants required liability classification and accounting as the underlying Redeemable Convertible Preferred Stock was considered contingently redeemable and could have obligated the Company to transfer assets to the holders at a future date upon occurrence of a deemed liquidation event. The warrants were recorded at their estimated fair value upon issuance and were subject to remeasurement to estimated fair value at each balance sheet date, with changes in the estimated fair value recognized as a component of other income (expense) in the accompanying unaudited condensed consolidated statements of operations. The Company adjusted the warrant liability for changes in estimated fair value until the earlier of the exercise, conversion, or expiration of the Redeemable Convertible Preferred Stock Warrants. In July 2024, the Redeemable Convertible Preferred Stock Warrants were amended to provide that if underlying Redeemable Convertible Preferred Stock Warrants were out-of-the-money based on the initial public offering price in the IPO, the out-of-the-money Redeemable Convertible Preferred Stock Warrants would convert into warrants to purchase common stock with an exercise price per share that reflected the Conversion Ratio then in effect for the underlying Redeemable Convertible Preferred Stock. Accordingly, the Redeemable Convertible Preferred Stock Warrants were remeasured upon the closing of the IPO and marked to market to its fair value before being reclassified to equity.
Removed paragraphs (11)
Previous report
To date, we have primarily funded our operations with proceeds from the sale of shares of our Redeemable Convertible Preferred Stock, issuance of convertible notes that were converted into Redeemable Convertible Preferred Stock, and the issuance of Related Party Convertible Notes Payable (referred to as Related Party Convertible Notes or Bridge Notes below and elsewhere in this Report). Through June 30, 2024, we have received aggregate net proceeds of approximately $99.7 million from the sale of shares of our Redeemable Convertible Preferred Stock, the issuance of convertible notes that were converted into Redeemable Convertible Preferred Stock, and issuance of Bridge Notes. As of June 30, 2024, we had cash and cash equivalents of approximately $0.4 million, which amount excludes net proceeds we received from the IPO and Overallotment Option of approximately $22 million as described below.
Previous report
Comparison of the Six Months Ended June 30, 2024 and 2023:
Previous report
Six Months Ended June 30, 2024 — During the six months ended June 30, 2024, net cash provided by financing activities consisted of net proceeds received from the issuance of the Related Party Convertible Notes Payable of $5,500,000, which amount was offset by deferred offering costs paid during the period in the amount of $185,730 associated with the IPO. The deferred offering costs will be offset against the proceeds upon the consummation of the IPO.
Previous report
Quantitative and Qualitative Disclosures about Market Risks
Previous report
Interest Rate Risk
Previous report
Our cash and cash equivalents consist of cash held in readily available checking and money market accounts. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. However, because of the short-term nature of the instruments in our portfolio, a sudden change in market interest rates would not be expected to have a material impact on our financial condition or results of operations.
Previous report
Under our investment policy, we invest in highly rated securities, issued by the U.S. government or liquid money market funds. We do not invest in financial instruments for trading or speculative purposes, nor do we use leveraged financial instruments. A hypothetical 10% change in interest rates would not have a material impact on the value of our cash, cash equivalents, marketable securities and cash flows.
Previous report
Foreign Currency Exchange Risk
Previous report
We are not currently exposed to significant market risk related to changes in foreign currency exchange rates. As we continue to develop our business, our results of operations and cash flows will likely be more affected by fluctuations in foreign currency exchange rates, including the Euro and other currencies, which could adversely affect our results of operations. All of our employees and operations are currently located in the United States and our expenses are generally denominated in U.S. Dollars. To date, we have not entered into any foreign currency hedging contracts to mitigate our exposure to foreign currency exchange risk. We do not believe that a hypothetical 10% increase or decrease in exchange rates during any of the periods presented would have had a material impact on our financial statements included elsewhere in this Report.
Previous report
Effects of Inflation
Previous report
Inflation could affect us by increasing our cost of labor and research and development costs. We do not believe inflation has had a material effect on our business, financial condition or results of operations, or on our financial statements included elsewhere in this Report.
Reworded paragraphs (31)
Previous wording
We have developed several oral dosage forms of elraglusib, which we believe will allow us to expand the number of cancer indications that we are able to target and allow us to further explore optimal dosing. A clinical candidate tablet (Elraglusib Oral Tablet) has been selected for further development and we are planning a Phase 1 study (Actuate-2401) to identify the maximum tolerated does (“MTD”) and recommended Phase II dose (“RP2D”) for Elraglusib Oral Tablet in patients with advanced, refractory adult cancers subject to future funding. Subject to additional funding, several Phase 2 indications, including refractory, metastatic melanoma and refractory, metastatic colorectal cancer have been identified for further clinical development of Elraglusib Oral Tablet based on data from the Actuate-1801 study.
Current wording
We have developed several oral dosage forms of elraglusib, which we believe will allow us to expand the number of cancer indications that we are able to target and allow us to further explore optimal dosing. A clinical candidate tablet (Elraglusib Oral Tablet) has been selected for further development and we are planning a Phase 1 study (Actuate-2401) to identify the maximum tolerated does (“MTD”) and recommended Phase 2 dose (“RP2D”) for Elraglusib Oral Tablet in patients with advanced, refractory adult cancers subject to future funding. Subject to additional funding, several Phase 2 studies have been identified for further clinical development of Elraglusib Oral Tablet based on data from the Actuate-1801 study in indications, including but not limited to, refractory, metastatic melanoma and refractory, metastatic colorectal cancer.
Previous wording
We have incurred significant operating losses and negative cash flows from operations since our inception. Our net losses were approximately $24.7 million and $20.2 million for the years ended December 31, 2023 and 2022, respectively, and $14.9 million and $10.8 million for the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024, we had an accumulated deficit of approximately $120.0 million. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and, to a lesser extent, from general and administrative costs associated with our operations. We expect to continue to incur significant expenses and operating losses in the foreseeable future, and we anticipate these losses will increase substantially as we continue our development of, seek regulatory approval for, and potentially commercialize elraglusib, and potentially seek to discover and develop additional product candidates, utilize third parties to manufacture elraglusib, hire additional personnel, expand and protect our intellectual property, and incur additional costs associated with being a public company. If we obtain regulatory approval for elraglusib, we expect to incur significant expenses related to developing our commercialization capability to support product sales, marketing and distribution.
Current wording
We have incurred significant operating losses and negative cash flows from operations since our inception. Our net losses were approximately $24.7 million and $20.2 million for the years ended December 31, 2023 and 2022, respectively, and $20.8 million and $17.1 million for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, we had an accumulated deficit of approximately $125.9 million. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and, to a lesser extent, from general and administrative costs associated with our operations. We expect to continue to incur significant expenses and operating losses in the foreseeable future, and we anticipate these losses will increase substantially as we continue our development of, seek regulatory approval for, and potentially commercialize elraglusib, and potentially seek to discover and develop additional product candidates, utilize third parties to manufacture elraglusib, hire additional personnel, expand and protect our intellectual property, and incur additional costs associated with being a public company. If we obtain regulatory approval for elraglusib, we expect to incur significant expenses related to developing our commercialization capability to support product sales, marketing and distribution.
Previous wording
Based upon our current operating plan, we estimate that our existing cash and cash equivalents as of the date of this Report, together with the net proceeds from the IPO, will not be sufficient to fund our projected operating expenses and capital expenditure requirements for at least twelve (12) months from the issuance date of the unaudited condensed consolidated financial statements.
Current wording
As of September 30, 2024, we had cash and cash equivalents of approximately $13.5 million. Based on our current operating plan, we estimate that our existing cash and cash equivalents as of the date of this Report will not satisfy the Company’s operational and capital requirements through twelve months from the issuance date of these unaudited condensed consolidated financial statements.
Previous wording
Also, we will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for elraglusib or any future product candidates, which we expect will take a number of years and may never occur. As a result, we will need substantial additional funding in addition to the net proceeds from the IPO to support our continuing operations and pursue our business strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through equity offerings, debt financings, or other capital sources, including potential future collaborations, licenses, and other similar arrangements and non-dilutive arrangements to the extent available through licensing partner funding, foundations and grants. We intend to seek additional financing in the near term; however, we may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements or arrangements as, and when needed, we may delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves, or even cease operations.
Current wording
Also, we will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for elraglusib or any future product candidates, which we expect will take a number of years and may never occur. As a result, we will need substantial additional funding to support our continuing operations and pursue our business strategy. Until such time we can generate significant revenue from product sales, if ever, we expect to finance our operations through equity offerings, debt financings, or other capital sources, including potential future collaborations, licenses, and other similar arrangements and non-dilutive arrangements to the extent available through licensing partner funding, foundations and grants. We intend to seek additional financing in the near term; however, we may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements or arrangements as, and when needed, we may delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves, or even cease operations.
Previous wording
On August 14, 2024, we completed the closing of our IPO of 2,800,000 shares of common stock at an initial offering price to the public of $8.00 per share, before the underwriters discount of $0.56 per share. Additionally, the underwriters exercised their Overallotment Option to purchase an additional 420,000 shares at the same price of $8.00 per share less the underwriters discount on September 12, 2024. The common shares began trading on the Nasdaq Global Market on August 13, 2024, under the symbol "ACTU". The Company received net proceeds of approximately $22 million, after deducting discounts and commissions and other estimated offering expenses of approximately $3.7 million, in exchange for the issuance of 3,220,000 shares of common stock of the Company, including shares issued under the Overallotment Option.
Current wording
On August 14, 2024, the Company completed the closing of its IPO of 2,800,000 shares of common stock at an initial offering price to the public of $8.00 per share, before the underwriters discount of $0.56 per share. Additionally, the underwriters exercised their option (“Overallotment Option”) to purchase an additional 420,000 shares at the same price of $8.00 per share less the underwriters discount on September 12, 2024. The Company’s common shares began trading on the Nasdaq Global Market on August 13, 2024, under the symbol “ACTU”. The Company received net proceeds of approximately $22 million, after deducting discounts and commissions and other offering expenses of approximately $3.7 million for the issuance of 3,220,000 shares of common stock of the Company, including shares issued under the Overallotment Option.
Previous wording
Effective upon the closing of the Company’s IPO, the Company's authorized capital consisted of 200 million shares of common stock, $0.000001 par value per share, and 10 million shares of preferred stock, $0.000001 par value per share.
Current wording
Effective upon the closing of the Company’s IPO, the Company’s authorized capital consisted of 200,000,000 shares of common stock, $0.000001 par value per share, and 10,000,000 shares of preferred stock, $0.000001 par value per share.
Previous wording
We anticipate our general and administrative expenses will increase substantially in the future as we expand our operations, including increasing our headcount to support our continued research and development activities and preparing for later-stage clinical trials and potential commercialization of elraglusib. We also anticipate we will incur increased accounting, audit, legal, regulatory, compliance, director and officer insurance, and investor and public relations expenses associated with operating as a public company.
Current wording
We anticipate our general and administrative expenses will increase substantially in the future as we expand our operations, including increasing our headcount to support our continued research and development activities and preparing for later-stage clinical trials and potential commercialization of elraglusib. We also anticipate we will continue to incur increased accounting, audit, legal, regulatory, compliance, director and officer insurance, and investor and public relations expenses associated with operating as a public company.
Previous wording
The Redeemable Convertible Preferred Stock Warrants require liability classification as the underlying Redeemable Convertible Preferred Stock is considered contingently redeemable and may obligate us to transfer assets to the holders at a future date upon occurrence of a deemed liquidation event. The warrants were recorded at fair value upon issuance and are subject to remeasurement to fair value at each balance sheet date, with any changes in fair value recognized in other income (expense), net. We will continue to adjust the warrant liability for changes in fair value until the earlier of the exercise or expiration of the Redeemable Convertible Preferred Stock Warrants.
Current wording
The Redeemable Convertible Preferred Stock Warrants required liability classification as the underlying Redeemable Convertible Preferred Stock was considered contingently redeemable and could have obligated us to transfer assets to the holders at a future date upon occurrence of a deemed liquidation event. The warrants were recorded at fair value upon issuance and were subject to remeasurement to fair value at each balance sheet date, with any changes in fair value recognized in other income (expense), net. We adjusted the warrant liability for changes in fair value until the earlier of the exercise, conversion, or expiration of the Redeemable Convertible Preferred Stock Warrants. In July 2024, the Redeemable Convertible Preferred Stock Warrants were amended to provide that if underlying Redeemable Convertible Preferred Stock Warrants were out-of-the-money based on the initial public offering price in the IPO, the out-of-the-money Redeemable Convertible Preferred Stock Warrants would convert into warrants to purchase common stock. Accordingly, the Redeemable Convertible Preferred Stock Warrants were remeasured upon the closing of the IPO and marked to market to its fair value before being reclassified to equity.
Previous wording
The Related Party Convertible Notes Payable are measured at fair value on their issuance date and remeasured at estimated fair value at the end of each reporting period with changes in fair value recognized as a component of other income (expense). Upon issuance of the Related Party Convertible Notes Payable, we elected to apply the fair value option to the Related Party Convertible Notes Payable in accordance with ASC 825,Financial Instruments. In certain circumstances, the estimated fair value at issuance may be greater than the principal amount at issuance. The loss on issuance of the Related Party Convertible Notes Payable represents the difference between the estimated fair value of the Related Party Convertible Notes Payable on the issuance date and the gross proceeds received on the issuance date based on the valuation assumptions, including but not limited to, the proximity in time to the IPO, the discount on conversion of the Related Party Convertible Notes Payable upon a financing or IPO, and the increased probability weighted IPO scenario on the issuance date.
Current wording
The Related Party Convertible Notes Payable were measured at fair value on their issuance date and remeasured at estimated fair value at the end of each reporting period with changes in fair value recognized as a component of other income (expense). Upon issuance of the Related Party Convertible Notes Payable, we elected to apply the fair value option to the Related Party Convertible Notes Payable in accordance with ASC 825,Financial Instruments. In certain circumstances, the estimated fair value at issuance may be greater than the principal amount at issuance. The loss on issuance of the Related Party Convertible Notes Payable represented the difference between the estimated fair value of the Related Party Convertible Notes Payable on the issuance date and the gross proceeds received on the issuance date based on the valuation assumptions, including but not limited to, the proximity in time to the IPO, the discount on conversion of the Related Party Convertible Notes Payable upon a financing or IPO, and the increased probability weighted IPO scenario on the issuance date.
Previous wording
The increase in research and development expenses of approximately $1.9 million for the six months ended June 30, 2024 compared to the same prior year period was primarily due to an increase in external clinical trial expenses mostly related to increased patient enrollment and the number of patients on study in the randomized Phase 2 mPDAC trial (Actuate-1801 Part 3B) during the current period of approximately $3.0 million. Such amount was partially offset by a decrease of approximately $0.7 million in CMC related costs due to a decrease in manufacturing costs of elraglusib in the current period due to the timing of drug substance manufacturing to support the randomized Phase 2 mPDAC trial (Actuate-1801 Part 3B) and other ongoing trials combined with a decrease in personnel and consulting fees of approximately $0.4 million primarily due to a decrease in consulting fees in the current period as certain consultants transitioned to full-time employment at an overall lower cost to the Company.
Current wording
The decrease in research and development expenses of approximately $2.0 million for the three months ended September 30, 2024 compared to the same prior year period was primarily due to (i) a decrease in preclinical and biomarker studies in the current period of approximately $0.8 million due to few contracted studies in the current period, (ii) a decrease in external clinical trial expenses of approximately $0.8 million mostly related to fewer patients on treatment in the randomized Phase 2 mPDAC trial (Actuate-1801 Part 3B) during the current period, and (iii) a decrease in personnel and consulting fees of approximately $0.4 million primarily due to a decrease in consulting fees in the current period as certain consultants transitioned to full-time employment at an overall lower cost to the Company.
Previous wording
The following table summarizes our results of operations for the six months ended June 30, 2024 and 2023:
Current wording
The following table summarizes our results of operations for the nine months ended September 30, 2024 and 2023:
Previous wording
The following table summarizes our research and development expenses for the six months ended June 30, 2024 and 2023:
Current wording
The following table summarizes our research and development expenses for the nine months ended September 30, 2024 and 2023:
Previous wording
The decrease in research and development expenses of approximately $0.4 million for the three months ended June 30, 2024 compared to the same prior year period was primarily due to an decrease of approximately $0.4 million in chemistry, manufacturing and controls (“CMC”) related costs due to a decrease in manufacturing costs of elraglusib in the current period due to the timing of drug substance manufacturing to support the randomized Phase 2 mPDAC trial (Actuate-1801 Part 3B) and other ongoing trials combined with a decrease in preclinical bioanalytical studies in the current period of approximately $0.2 million due to few contracted studies in the current period and a decrease in personnel and consulting fees of approximately $0.2 million primarily due to a decrease in consulting fees in the current period as certain consultants transitioned to full-time employment at an overall lower cost to the Company. This amount was partially offset by an increase in external clinical trial expenses mostly related to increased patient enrollment and the number of patients on study in the randomized Phase 2 mPDAC trial (Actuate-1801 Part 3B) during the current period.
Current wording
The decrease in research and development expenses of approximately $0.1 million for the nine months ended September 30, 2024 compared to the same prior year period was primarily due to (i) a decrease in personnel and consulting fees of approximately $0.8 million primarily due to a decrease in consulting fees in the current period as certain consultants transitioned to full-time employment at an overall lower cost to the Company, (ii) a decrease in preclinical and biomarker studies in the current period of approximately $0.8 million due to few contracted studies in the current period, and (iii) a decrease of approximately $0.6 million in CMC related costs due to a decrease in manufacturing costs of elraglusib in the current period due to the timing of drug substance manufacturing to support the randomized Phase 2 mPDAC trial (Actuate-1801 Part 3B), which amounts were partially offset by an increase in external clinical trial expenses of approximately $2.2 million mostly related to increased patient enrollment and the number of patients on study in the randomized Phase 2 mPDAC trial (Actuate-1801 Part 3B) during the current period.
Previous wording
The following table summarizes our general and administrative expenses for the six months ended June 30, 2024 and 2023:
Current wording
The following table summarizes our general and administrative expenses for the nine months ended September 30, 2024 and 2023:
Previous wording
The increase in general and administrative expenses of approximately $0.4 million for the six months ended June 30, 2024 compared to the same prior year period was primarily due to an increase in professional and consulting fees of approximately $0.4 million primarily related to an increase in (i) search firm related fees to identify new potential board members to comply with Nasdaq listing requirements, (ii) valuation services to support the estimated fair market value of the Company’s common stock and other financial instruments, including the fair value of the Related Party Convertible Notes Payable, (iii) legal fees related to additional corporate matters and intellectual property costs, and (iv) audit and audit related fees associated with the annual and quarterly review of the Company’s financial statements.
Current wording
The increase in general and administrative expenses of approximately $1.3 million for the nine months ended September 30, 2024 compared to the same prior year period was primarily due to (i) an increase in professional and consulting fees of approximately $0.7 million primarily related to an increase in search firm related fees to identify and add three new board members to the Company’s Board of Directors to comply with Nasdaq listing requirements, an increase in valuation services to support the estimated fair market value of the Company’s common stock and other financial instruments, including the fair value of the Related Party Convertible Notes Payable, an increase in legal fees related to additional corporate matters and intellectual property costs, and an increase in audit and audit related fees associated with the annual and quarterly review of the Company’s financial statements, (ii) an increase in personnel-related expenses of approximately $0.4 million primarily due to an increase in non-cash stock-based compensation expense of $0.4 million related to awards granted to the president and chief executive officer, the chief financial officer, and the members of the board of directors in connection with the IPO, and (iii) an increase in other expenses of approximately $0.1 million primarily due to an increase in the cost of directors and officer insurance during the current period, combined with an increase in board fees and other public company expenses.
Previous wording
Other income (expense), net, for the six months ended June 30, 2024 and 2023 is comprised of the following:
Current wording
Other income (expense), net, for the nine months ended September 30, 2024 and 2023 is comprised of the following:
Previous wording
Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from operations. We expect to incur significant expenses and operating losses in the foreseeable future as we advance the clinical development of elraglusib and any future product candidates. To date, we have primarily funded our operations with proceeds from the sale of shares of our Redeemable Convertible Preferred Stock, the issuance of convertible notes that were converted into Redeemable Convertible Preferred Stock, and the issuance of the Related Party Convertible Notes or Bridge Notes. Through June 30, 2024, we have received aggregate net proceeds of approximately $99.7 million from the sale of shares of our Redeemable Convertible Preferred Stock, the issuance of convertible notes that were converted into Redeemable Convertible Preferred Stock, and issuance of Bridge Notes. As of June 30, 2024, we had cash and cash equivalents of approximately $0.4 million. On August 14, 2024, we completed the closing of our IPO of 2,800,000 shares of common stock at an initial offering price to the public of $8.00 per share, before the underwriters discount of $0.56 per share. Additionally, the underwriters exercised their Overallotment Option to purchase an additional 420,000 shares at the same price of $8.00 per share less the underwriters discount on September 12, 2024. The Company received net proceeds of approximately $22 million, after deducting discounts and commissions and other estimated offering expenses of approximately $3.7 million, in exchange for the issuance of 3,220,000 shares of common stock of the Company, including shares issued under the Overallotment Option.
Current wording
Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from operations. We expect to incur significant expenses and operating losses in the foreseeable future as we advance the clinical development of elraglusib and any future product candidates. As of September 30, 2024, we had cash and cash equivalents of approximately $13.5 million.
Previous wording
Based on our current operating plan, we estimate that our existing cash and cash equivalents as of the date of this Report including net proceeds from the IPO as described below, will not satisfy the Company’s operational and capital requirements through twelve months from the issuance date of these unaudited condensed consolidated financial statements.
Current wording
Based on our current operating plan, we estimate that our existing cash and cash equivalents as of the date of this Report will not satisfy the Company’s operational and capital requirements through twelve months from the issuance date of these unaudited condensed consolidated financial statements.
Previous wording
The following table provides a summary of our cash flows for the six months ended June 30, 2024 and 2023:
Current wording
The following table provides a summary of our cash flows for the nine months ended September 30, 2024 and 2023:
Previous wording
Six Months Ended June 30, 2024 — Net cash used in operating activities for the six months ended June 30, 2024 consisted of our net loss of $14,868,278, which amount was offset by (i) non-cash stock-based compensation expense of $238,225, (ii) a non-cash increase in the fair value of our warrant liability of $272,854, (iii) a loss on issuance of Related Party Convertible Notes Payable at fair value of $400,000, (iv) the change in estimated fair value of Related Party Convertible Notes Payable of $1,000,000 at June 30, 2024, (v) an increase in accrued interest on license payable of $10,152, and (vi) cash provided by a net change in operating assets and liabilities of $5,025,827.
Current wording
Nine Months Ended September 30, 2024 — Net cash used in operating activities for the nine months ended September 30, 2024 consisted of our net loss of $20,839,239 combined with the gain on settlement of the warrant liability of $343,240, which amounts were offset by (i) non-cash stock-based compensation expense of $804,206, (ii) a non-cash increase in the fair value of our warrant liability of $78,903, (iii) a loss on issuance of Related Party Convertible Notes Payable at fair value of $400,000, (iv) the change in estimated fair value of Related Party Convertible Notes Payable of $2,192,507, (v) an increase in accrued interest on license payable of $13,565, and (vi) cash provided by a net change in operating assets and liabilities of $623,065.
Previous wording
Six Months Ended June 30, 2023 — Net cash used in operating activities for the six months ended June 30, 2023 consisted of our net loss of $10,794,541, which amount was offset by (i) non-cash stock-based compensation expense of $146,262, (ii) a non-cash increase in the fair value of our warrant liability of $45,090, (iii) an increase in accrued interest on license payable of $33,516, and (vi) cash provided by a net change in operating assets and liabilities of $94,601.
Current wording
Nine Months Ended September 30, 2023 — Net cash used in operating activities for the nine months ended September 30, 2023 consisted of our net loss of $17,132,466, which amount was offset by (i) non-cash stock-based compensation expense of $301,489, (ii) a non-cash increase in the fair value of our warrant liability of $28,224, (iii) an increase in accrued interest on license payable of $38,579, and (vi) cash provided by a net change in operating assets and liabilities of $650,851.
Previous wording
Six Months Ended June 30, 2023 — During the six months ended June 30, 2023, net cash provided by financing activities consisted of net proceeds of $4,134,516 related to the issuance of Series C Redeemable Convertible Preferred Stock.
Current wording
Nine Months Ended September 30, 2023 — During the nine months ended September 30, 2023, net cash provided by financing activities consisted of net proceeds of $4,134,516 related to the issuance of Series C Redeemable Convertible Preferred Stock.
Previous wording
We periodically grant equity-based awards in the form of RSAs, restricted sock units (“RSUs”) and stock options to purchase common stock, to employees, directors and non-employees and record stock-based compensation expense for awards of stock-based payments based on their estimated fair value at the grant date. We recognize stock-based compensation expense for all equity-based payments. The fair value of service-based RSAs and RSUs is measured at the grant date based on the fair market value of our common stock on the date of grant (see the subsection titled “— Determination of Fair Value of Our Common Stock” below) and is recognized as expense over the requisite service period, which is generally the awards’ vesting period. The fair value of performance-based RSAs is measured at the grant date, based on the fair value of shares expected to be earned at the end of the performance period, and is recognized as expense ratably over the performance period based upon the probable number of shares expected to vest. RSAs are subject to forfeiture if the requisite service period is not completed or the performance obligation is not achieved and are recognized as a reduction of stock-based compensation expense as they occur. We classify stock-based compensation expense in the consolidated statements of operations in the same manner in which the recipient’s services are classified. We expect to continue to grant equity-based awards in the future, and to the extent that we do, our stock-based compensation expense recognized in future periods will likely increase.
Current wording
We periodically grant equity-based awards in the form of RSAs, restricted stock units (“RSUs”) and stock options to purchase common stock, to employees, directors and non-employees and record stock-based compensation expense for awards of stock-based payments based on their estimated fair value at the grant date. We recognize stock-based compensation expense for all equity-based payments. The fair value of service-based RSAs and RSUs is measured at the grant date based on the fair market value of our common stock on the date of grant (see the subsection titled “— Determination of Fair Value of Our Common Stock” below) and is recognized as expense over the requisite service period, which is generally the awards’ vesting period. The fair value of performance-based RSAs is measured at the grant date, based on the fair value of shares expected to be earned at the end of the performance period, and is recognized as expense ratably over the performance period based upon the probable number of shares expected to vest. RSAs are subject to forfeiture if the requisite service period is not completed or the performance obligation is not achieved and are recognized as a reduction of stock-based compensation expense as they occur.
Previous wording
There are significant judgments and estimates inherent in the determination of the fair value of our common stock. These judgments and estimates include assumptions regarding our future operating performance, the time to complete an IPO or other liquidity event, and the determination of the appropriate valuation methods.
Current wording
There are significant judgments and estimates inherent in the determination of the fair value of our common stock. Historically, these judgments and estimates included assumptions regarding our future operating performance, the time to complete an IPO or other liquidity event, and the determination of the appropriate valuation methods.
Previous wording
Authoritative guidance requires disclosure of the fair value of financial instruments. The carrying amount of certain of our financial instruments, including cash and cash equivalents, accounts payable and accrued liabilities, approximate their estimated fair values primarily due to the short-term nature of the instruments or based on information obtained from market sources and management estimates. The Redeemable Convertible Preferred Stock Warrant liability is carried at fair value based on unobservable market inputs. We measure the fair value of certain of its financial liabilities on a recurring basis. A fair value hierarchy is used to rank the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value which is not equivalent to cost will be classified and disclosed in one of the following three categories:
Current wording
Authoritative guidance requires disclosure of the fair value of financial instruments. The Company applies fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The carrying amount of certain of the Company’s financial instruments, including cash and cash equivalents, accounts payable and accrued liabilities, approximate their estimated fair values primarily due to the short-term nature of the instruments or based on information obtained from market sources and management estimates. The Related Party Convertible Notes Payable and the Redeemable Convertible Preferred Stock Warrant Liability were carried at fair value until the closing of the IPO based on unobservable market inputs. The Company measures the fair value of certain of its financial liabilities on a recurring basis. A fair value hierarchy is used to rank the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value which is not equivalent to cost will be classified and disclosed in one of the following three categories:
Previous wording
The Redeemable Convertible Preferred Stock Warrant liability is valued using the Black-Scholes model, which requires the use of highly subjective assumptions to determine the appropriate fair value of each warrant, including:
Current wording
The Redeemable Convertible Preferred Stock Warrant Liability was valued using the Black-Scholes valuation model, which requires the use of highly subjective assumptions to determine the appropriate fair value of each warrant, including:
Previous wording
When financial instruments contain various embedded derivatives which may require bifurcation and separate accounting of those derivatives apart from the entire host instrument, if eligible, ASC 825,Financial Instruments (“ASC 825”) allows issuers to elect the fair value option (“FVO”) of accounting for those instruments. The FVO may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. The FVO allows the issuer to account for the entire financial instrument at fair value with subsequent remeasurements of that fair value recorded through the statements of operations at each reporting date. A financial instrument is generally eligible for the FVO if, amongst other factors, no part of the convertible, or contingently convertible, instrument is classified in stockholder’s equity.
Current wording
When financial instruments contain various embedded derivatives which may require bifurcation and separate accounting of those derivatives apart from the entire host instrument, if eligible, ASC 825,Financial Instruments (“ASC 825”) allows issuers to elect the fair value option (“FVO”) of accounting for those instruments. The FVO may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. The FVO allows the issuer to account for the entire financial instrument at fair value with subsequent remeasurements of that fair value recorded through the statements of operations at each reporting period until the conversion or payment of the Related Party Convertible Notes Payable balance. A financial instrument is generally eligible for the FVO if, amongst other factors, no part of the convertible, or contingently convertible, instrument is classified in stockholders’ equity.
Previous wording
Based on the eligibility assessment discussed above, the Company concluded that its Related Party Convertible Notes Payable are eligible for the FVO and accordingly elected to apply the FVO to its Related Party Convertible Notes Payable in accordance with ASC 825. Accordingly, the Related Party Convertible Notes Payable are measured at fair value on their issuance dates and remeasured at estimated fair value at the end of each reporting period with changes in fair value recognized as a component of other income (expense) in the unaudited condensed consolidated statements of operations. The primary reason for electing the FVO was to address simplification and cost-benefit considerations that result from accounting for hybrid financial instruments at fair value in their entirety versus bifurcation of the embedded derivatives from the debt hosts.
Current wording
Based on the eligibility assessment discussed above, the Company concluded that its Related Party Convertible Notes Payable were eligible for the FVO and accordingly elected to apply the FVO to its Related Party Convertible Notes Payable in accordance with ASC 825. Accordingly, the Related Party Convertible Notes Payable were measured at fair value on their issuance dates and remeasured at estimated fair value at the end of each reporting period with changes in fair value recognized as a component of other income (expense) in the unaudited condensed consolidated statements of operations. The primary reason for electing the fair value option was to address simplification and cost-benefit considerations that result from accounting for hybrid financial instruments at fair value in their entirety versus bifurcation of the embedded derivatives from the debt hosts.
Previous wording
The estimated fair values of the Related Party Convertible Notes Payable are determined using valuation models that incorporate assumptions and estimates. The Company assesses these assumptions and estimates at each financial reporting period as additional information impacting the assumptions is obtained. Assumptions in the models include but are not limited to equity value, volatility, time to a conversion event, risk-free rate and scenario weightings. The fair value measurements of the Related Party Convertible Notes Payable are based on significant inputs that are not observable in the market and represent a Level 3 measurement. The change in fair value related to accrued interest is also included within the single line of change in fair value of Related Party Convertible Notes Payable in the unaudited condensed consolidated statements of operations.
Current wording
The estimated fair values of the Related Party Convertible Notes Payable were determined using valuation models that incorporate assumptions and estimates. The Company assessed these assumptions and estimates at each financial reporting period as additional information impacting the assumptions was obtained. Assumptions in the models included but were not limited to equity value, volatility, time to a conversion event, risk-free rate and scenario weightings. The fair value measurements of the Related Party Convertible Notes Payable were based on significant inputs that were not observable in the market and represented a Level 3 measurement. The change in fair value related to accrued interest was also included within the single line of change in fair value of Related Party Convertible Notes Payable in the unaudited condensed consolidated statements of operations.
Previous wording
A description of recently issued accounting standards that may potentially impact our financial position, results of operations, and cash flows is included in Note 2 to our consolidated financial statements for the year ended December 31, 2023 included in our final prospectus filed with the SEC on August 13, 2024 pursuant to Rule 424(b)(4) under the Securities Act, and in Note 2 to our unaudited condensed consolidated financial statements for the three and six months ended June 30, 2024, included elsewhere in this Report.
Current wording
A description of recently issued accounting standards that may potentially impact our financial position, results of operations, and cash flows is included in Note 2 to our consolidated financial statements for the year ended December 31, 2023 included in our final prospectus filed with the SEC on August 13, 2024 pursuant to Rule 424(b)(4) under the Securities Act, and in Note 2 to our unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2024, included elsewhere in this Report.
Previous wording
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards. We have elected to avail ourselves of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we can adopt the new or revised standard at the time private companies adopt the new or revised standard and may do so until such time that we either (i) irrevocably elect to opt out of such extended transition period or (ii) no longer qualify as an emerging growth company. We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies. We will continue to remain an emerging growth company until the earliest of the following: (1) the last day of the fiscal year following the fifth anniversary of the date of the completion of the IPO; (2) the last day of the fiscal year in which our total annual gross revenue is equal to or more than $1.235 billion; (3) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (4) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
Current wording
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). The JOBS Act permits an emerging growth company such as ours to take advantage of an extended transition period to comply with new or revised accounting standards. We have elected to avail ourselves of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we can adopt the new or revised standard at the time private companies adopt the new or revised standard and may do so until such time that we either (i) irrevocably elect to opt out of such extended transition period or (ii) no longer qualify as an emerging growth company. We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies. We will continue to remain an emerging growth company until the earliest of the following: (1) the last day of the fiscal year following the fifth anniversary of the date of the completion of the IPO; (2) the last day of the fiscal year in which our total annual gross revenue is equal to or more than $1.235 billion; (3) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (4) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
We classify stock-based compensation expense in the consolidated statements of operations in the same manner in which the recipient’s services are classified. We expect to continue to grant equity-based awards in the future, and to the extent that we do, our stock-based compensation expense recognized in future periods will likely increase.
Current report — wording carried from elsewhere
In addition, in certain circumstances, the estimated fair value at issuance may be greater than the face value at issuance. The loss on issuance of the Related Party Convertibles Notes Payable of $400,000 recorded during the nine months ended September 30, 2024 represented the difference between the estimated fair value of the Related Party Convertible Notes Payable and the gross proceeds received on the issuance date based on the assumptions, including the proximity in time to the anticipated IPO, the discount on conversion of the Related Party Convertible Notes Payable, and the increased probability-weighted IPO scenario.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
The increase in general and administrative expenses of approximately $0.3 million for the three months ended June 30, 2024 compared to the same prior year period was primarily due to an increase in professional and consulting fees of approximately $0.3 million primarily related to an increase in (i) search firm related fees to identify new potential board members to comply with Nasdaq listing requirements, (ii) valuation services to support the estimated fair market value of the Company’s common stock and other financial instruments, including the fair value of the Related Party Convertible Notes Payable, (iii) legal fees related to additional corporate matters, and (iv) audit related fees associated with the quarterly review of the Company’s financial statements.