UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Acurx Pharmaceuticals, Inc.
Table of Contents
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Quarterly Report”) and certain information incorporated herein by reference contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In this Quarterly Report, we refer to Acurx Pharmaceuticals, Inc., together with its subsidiary, as the “Company,” “we,” “our” or “us.” All statements other than statements of historical facts contained herein, including statements regarding our future results of operations and financial position, strategy and plans, and our expectations for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “design,” “intend,” “expect” or the negative version of these words and similar expressions are intended to identify forward-looking statements.
We have based these forward-looking statements on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, strategy, short- and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in Part II, Item 1A “Risk Factors.” In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances included herein may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:
● | general economic and financial conditions; |
● | the adverse effects of public health epidemics, including the recent COVID-19 outbreak, on our business, results of operations and financial condition; |
● | the costs of being a public company; |
● | our ability to keep pace with technological advances; |
● | the success of our marketing activities; |
● | a disruption of breach of our information technology systems; |
● | our dependence on third parties; |
● | the performance of third parties on which we depend; |
● | compliance with health and safety laws; |
● | our ability to obtain and maintain protection for our intellectual property and proprietary rights; |
● | our ability to protect and defend against litigation, including claims related to intellectual property and proprietary rights; |
● | product shortages and relationships with key suppliers; |
● | our ability to attract key employees; |
● | the volatility of the price of our common stock; |
● | the marketability of our common stock; and |
● | other risks and uncertainties, including those listed in “Risk Factors.” |
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. In addition, neither we nor any other person assumes responsibility for
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the accuracy and completeness of any of these forward-looking statements. Any forward-looking statement made by us in this Quarterly Report speaks only as of the date on which it is made. We disclaim any duty to update any of these forward-looking statements after the date of this Quarterly Report to conform these statements to actual results or revised expectations.
Other risks may be described from time to time in our filings made under applicable securities laws. New risks emerge from time to time. It is not possible for our management to predict all risks. All forward-looking statements in this Quarterly Report speak only as of the date made and are based on our current beliefs and expectations. We undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
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PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
ACURX PHARMACEUTICALS, INC.
CONDENSED INTERIM BALANCE SHEETS
September 30, | December 31, | |||||
| 2021 |
| 2020 | |||
(unaudited) |
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ASSETS | ||||||
CURRENT ASSETS |
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Cash | $ | | $ | | ||
Prepaid Expenses |
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TOTAL ASSETS | $ | | $ | | ||
LIABILITIES AND MEMBERS' AND SHAREHOLDERS' EQUITY |
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CURRENT LIABILITIES |
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Accounts Payable and Accrued Expenses | $ | | $ | | ||
Paycheck Protection Program Loan |
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TOTAL CURRENT LIABILITIES |
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NONCURRENT LIABILITIES |
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Paycheck Protection Program Loan |
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TOTAL LIABILITIES |
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COMMITMENTS AND CONTINGENCIES |
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MEMBERS' AND SHAREHOLDERS' EQUITY |
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Members' Equity, Class A |
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Members' Equity, Class B | — |
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Common Stock; $ |
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Additional Paid-In capital |
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Accumulated Deficit |
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TOTAL MEMBERS' AND SHAREHOLDERS' EQUITY |
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TOTAL LIABILITIES AND MEMBERS' AND SHAREHOLDERS' EQUITY | $ | | $ | |
See accompanying notes to the condensed interim financial statements.
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ACURX PHARMACEUTICALS, INC.
CONDENSED INTERIM STATEMENTS OF OPERATIONS
Three Months Ended | Nine Months Ended | |||||||||||
| September 30, | September 30, | ||||||||||
| 2021 |
| 2020 |
| 2021 |
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(unaudited) |
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OPERATING EXPENSES |
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Research and Development | $ | | $ | | $ | | $ | | ||||
General and Administrative |
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TOTAL OPERATING EXPENSES |
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Gain on forgiveness of Paycheck Protection Program Loan |
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NET LOSS | $ | ( | $ | ( | $ | ( | $ | ( | ||||
LOSS PER SHARE |
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Basic and diluted net loss per common share/units | ( | ( | ( | ( | ||||||||
Weighted average pro forma shares outstanding basic and diluted |
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See accompanying notes to the condensed interim financial statements.
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ACURX PHARMACEUTICALS, INC.
CONDENSED INTERIM STATEMENTS OF CHANGES IN MEMBERS’ AND SHAREHOLDERS’ EQUITY (unaudited)
Class A Membership Interests | Class B Membership Interests | Common Stock | Additional | Accumulated | Total | |||||||||||||||||||
| Number of Units |
| Amount |
| Number of Units |
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| Shares |
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| Paid-In Capital |
| Deficit |
| Members' Equity | |||||||
Balance at January 1,2020 |
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Private Placement Offerings, net of issuance costs of $ |
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Executive Compensation Settled with Membership Interests |
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Share-Based Compensation |
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Share-Based Payments to Vendors |
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Net Loss |
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Balance at March 31, 2020 |
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Share-Based Compensation |
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Share-Based Payments to Vendors |
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Net Loss |
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Balance at June 30, 2020 |
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Private Placement Offerings | | | — | — | — | — | — | — | | |||||||||||||||
Share-Based Compensation | | | — | — | — | — | — | — | | |||||||||||||||
Share-Based Payments to Vendors | | | — | — | — | — | — | — | | |||||||||||||||
Net Loss | — | — | — | — | — | — | — | ( | ( | |||||||||||||||
Balance at September 30, 2020 | | $ | | | $ | | — | $ | — | $ | — | $ | ( | $ | | |||||||||
Balance at January 1,2021 | | $ | | | $ | | | $ | | $ | | $ | ( | $ | | |||||||||
Executive Compensation Settled with Membership Interests | | | | | | | | | | |||||||||||||||
Cancellation of Class B Issuance | | | ( | | | | | | | |||||||||||||||
Share-Based Compensation | | | | | | | | | | |||||||||||||||
Share-Based Payments to Vendors | | | | | | | | | | |||||||||||||||
Net Loss | | | | | | | | ( | ( | |||||||||||||||
Balance at March 31, 2021 | | | | | | | | ( | | |||||||||||||||
Share-Based Compensation | | | | | | | | | | |||||||||||||||
Share-Based Payments to Vendors | | | | | | | | | | |||||||||||||||
Corporate Conversion | ( | ( | ( | ( | | | | | | |||||||||||||||
Initial Public Offering, net of $ | | | | | | | | | | |||||||||||||||
Net Loss | | | | | | | | ( | ( | |||||||||||||||
Balance at June 30, 2021 | | | | | | | | ( | | |||||||||||||||
Share-Based Compensation | — | — | — | — | — | — | | — | | |||||||||||||||
Share-Based Payments to Vendors | — | — | — | — | | | | — | | |||||||||||||||
Net Loss | — | — | — | — | — | — | — | ( | ( | |||||||||||||||
Balance at September 30, 2021 | — | $ | — | — | $ | — | | $ | | $ | | $ | ( | $ | |
See accompanying notes to the condensed interim financial statements.
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ACURX PHARMACEUTICALS, INC.
CONDENSED INTERIM STATEMENTS OF CASH FLOWS
Nine Months Ended | ||||||
September 30, | ||||||
| 2021 |
| 2020 | |||
(unaudited) | (unaudited) | |||||
Cash Flow from Operating Activities: |
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Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
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Share-Based Compensation |
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Share-Based Payments to Vendors |
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Executive Compensation Settled with Membership Interests |
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Gain on forgiveness of Paycheck Protection Program Loan |
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(Increase) / Decrease in: |
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Prepaid Expenses |
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Accounts Payable and Accrued Expenses |
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Net Cash Used in Operating Activities |
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Cash Flow from Financing Activities: |
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Proceeds from Advanced Receipts of Private Placement Offerings |
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Proceeds from Paycheck Protection Program Loan |
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Proceeds from Initial Public Offering, net of issuance costs |
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Proceeds from Private Placement Offerings, net of issuance costs |
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Net Cash Provided by Financing Activities |
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Net Increase in Cash |
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Cash at Beginning of Period |
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Cash at End of Period | $ | | $ | |
See accompanying notes to the condensed interim financial statements.
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ACURX PHARMACEUTICALS, INC
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 – NATURE OF OPERATIONS
Business:
Acurx Pharmaceuticals, Inc., a Delaware corporation, formerly Acurx Pharmaceuticals, LLC (the “Company”) is a publicly-held, clinical stage biopharmaceutical company formed in July 2017, with operations commencing in February 2018. The Company is focused on developing novel antibiotics that address difficult to treat bacterial infections. The Company’s approach is to develop antibiotic candidates that could potentially block an entirely new molecular target, the DNA polymerase IIIC (“Pol IIIC”) enzyme, and its research and development pipeline includes early stage Pol IIIC antibiotic candidates that target other Gram-positive bacteria, including Methicillin-Resistant Staphylococcus aureus (“MRSA”), Vancomycin-Resistant Enterococcus (“VRE”) and Penicillin-Resistant Streptococcus pneumoniae (“PRSP”). The Pol IIIC enzyme is the primary catalyst for the replication of DNA in certain Gram-positive bacterial cells.
In March 2020, the World Health Organization declared the outbreak of COVID-19, a novel strain of coronavirus, a global pandemic. This outbreak caused major disruptions to businesses and markets worldwide as the virus continued to spread. The COVID-19 pandemic has disrupted, and the Company expects it will continue to disrupt, its operations. The extent of the effect on the Company’s operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic, and governmental, regulatory and private sector responses, all of which are uncertain and difficult to predict. Although the Company is unable to estimate the financial effect of the pandemic, at this time, if the pandemic continues over a long period of time, it could have a material adverse effect on the Company’s business, results of operations, financial condition, and cash flows. The financial statements do not reflect any adjustments as a result of the pandemic.
In February 2018, the Company purchased the active pharmaceutical ingredient, the intellectual property and other rights to an antibiotic product candidate known as GLS362E (renamed ACX-362E and now approved for non-proprietary name, ibezapolstat) (the “Asset”) from GLSynthesis, Inc. The Company paid $
The Company’s primary activities since inception have included organizational activities and performing research and development activities relating to the development of its two antibiotic candidates and raising funds through equity offerings including its initial public offering (“IPO”) consummated in June 2021. The Company has not generated any revenues since inception.
The Company has experienced net losses and negative cash flows from operations since inception and expects these conditions to continue for the foreseeable future. The Company has needed to raise capital from sales of its securities to sustain operations. On June 29, 2021, the Company completed the IPO issuing
9
ACURX PHARMACEUTICALS, INC
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in accordance with the rules and regulations of the United States Securities Exchange Commission for interim reporting. In the opinion of management, these unaudited interim financial statements include all adjustments, consisting only of normal, recurring adjustments, necessary for a fair statement of the Company’s financial position, results of operations, and cash flows. The unaudited interim results of operations are not necessarily indicative of the results that may occur for the full fiscal year. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. Management believes that the disclosures provided herein are adequate when these unaudited interim financial statements are read in conjunction with the audited financial statements and notes thereto as of December 31, 2020.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Federal Income Taxes
The Company estimates an annual effective tax rate of
Based on the Company’s history of generating operating losses and its anticipation of operating losses for the foreseeable future, the Company has determined that it is more likely than not that the tax benefits from those net operating losses would not be realized and a full valuation allowance against all deferred tax assets has been recorded. Should the Company’s assessment change, tax benefits associated with the historic net operating loss carryforwards would be limited due to the ownership change.
Prior to the Company’s corporate conversion in June 2021, the Company was organized as a limited liability company. As such, the Company was not a tax paying entity for federal income tax purposes and, therefore,
Concentration of Credit Risk
The Company maintains its cash balance in one financial institution. The balance is insured up to the maximum allowable by the Federal Deposit Insurance Corporation (“FDIC”). The Company has not experienced any losses in such accounts and does not believe it is exposed to any significant risk of loss on cash. At times, the cash balance may exceed the maximum insured limit of the FDIC. As of September 30, 2021, the Company had cash of $
Guaranteed Payments to Members
Prior to the corporate conversion, guaranteed payments to members of the Company that were designated to represent reasonable compensation for services rendered, were accounted for as Company expenses rather than an allocation of the Company’s net income.
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ACURX PHARMACEUTICALS, INC
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
Research and Development
In accordance with Accounting Standards Codification Topic No. 730, Accounting for Research and Development Costs, the Company expenses research and development costs when incurred. At times, the Company may make cash advances for future research and development services. These amounts are deferred and expensed in the period the service is provided.
Share-Based Compensation
The Company accounts for the cost of services performed by officers and directors received in exchange for an award of Company membership interests, common stock or stock options, based on the grant-date fair value of the award. The Company recognizes compensation expense based on the vesting period.
Share-Based Payments to Vendors
The Company accounts for the cost of services performed by vendors in exchange for an award of Company membership interests, common stock, or stock options, based on the grant-date fair value of the award or the fair value of the services rendered; whichever is more readily determinable. Such fair value is measured as of the date the services or the date performance by the other party is complete. The Company recognizes the expense in the same period and in the same manner as if the Company had paid cash for the services.
Foreign Currency Transactions
The financial statements are presented in U.S. dollars (“USD”), the reporting currency of the Company. The Company may engage in transactions denominated in other foreign currencies. These transactions were translated to USD at rates which approximate those in effect on the transaction dates. Monetary assets and liabilities denominated in foreign currencies at year-end will be translated at exchange rates in effect as of those dates. Nonmonetary assets and liabilities are translated at appropriate historical rates.
Major Vendor
The Company had a major vendor that accounted for approximately
NOTE 3 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses as of September 30, 2021 and December 31, 2020 were as follows:
| September 30, 2021 |
| December 31, 2020 | |||
Accrued compensation expenses | $ | | $ | | ||
Accrued research and development |
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Accrued professional fees |
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Other accounts payable and accrued expenses |
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Total | $ | | $ | |
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ACURX PHARMACEUTICALS, INC
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
NOTE 4 – PAYCHECK PROTECTION PROGRAM LOAN
In May 2020, the Company received a Paycheck Protection Program (“PPP”) loan under the CARES Act, as administered by the U.S. Small Business Administration (”SBA”) in the amount of $
In May 2021, the Company was notified by its financial institution that the Paycheck Protection Program loan had been forgiven. The Company has accordingly reduced the full amount of the liability and recorded a gain on the forgiveness of debt in the statement of operations.
NOTE 5 – EXECUTIVE COMPENSATION
The Company’s co-founders and original
In 2019, the
In January 2020, the Company issued
In January 2021, the Company issued
The Company’s board of directors also approved certain grants to members of management as a component of year-end compensation, authorizing the issuance of
The Company is currently managed by three executives, in each case pursuant to new employment agreements effective June 29, 2021.
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ACURX PHARMACEUTICALS, INC
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
NOTE 6 – ISSUANCE OF EQUITY INTERESTS
The Company consummated two private placement equity offerings in 2018 in a total of four closings. These offerings were consummated at $
On August 8, 2019, the Company entered into a securities purchase agreement for the private placement of the Company’s Class A Membership Interests and warrants to purchase its Class A Membership Interests, at a purchase price of $
On October 18, 2019, the Company entered into a securities purchase agreement for the private placement of the Company’s Class A Membership Interests and warrants to purchase its Class A Membership Interests, at a purchase price of $
On January 6, 2020, the Company entered into a securities purchase agreement for the private placement of the Company’s Class A Membership Interests and warrants to purchase its Class A Membership Interests, at a purchase price of $
On July 20, 2020, the Company entered into a securities purchase agreement for the private placement of the Company’s Class A Membership Interests at a purchase price of $
On October 16, 2020, the Company entered into a securities purchase agreement for the private placement of the Company’s Class A Membership Interests at a purchase price of $
On June 23, 2021, Acurx Pharmaceuticals, LLC was converted into a corporation and renamed Acurx Pharmaceuticals, Inc. The Company’s certificate of incorporation authorizes
On June 29, 2021, the Company completed an IPO issuing
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ACURX PHARMACEUTICALS, INC
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
NOTE 7 – SHARE-BASED COMPENSATION
While the Company was a limited liability company in its pre-IPO phase of corporate development, the Company granted performance-based awards of restricted Class A Membership Interests to board members and corporate advisory council members in exchange for services. All of these awards of membership interests became fully vested upon consummation of the Company’s corporate conversion from Delaware limited liability company to Delaware corporation immediately prior to the Company’s IPO, with the Company recognizing all previously unrecognized compensation expense. The fair value of the membership interests granted during 2020 and 2019 was equal to the per-membership interest value of the most recent private placement ($
Total share-based compensation expense associated with these awards has been recorded in the amount of $
The following table summarizes the unvested Class A Membership Interests converted to common stock pursuant to a conversion ratio of one-for-two, and associated activity for the nine months ended September 30, 2021:
| Class A | |
Membership Interests | ||
| Converted to common stock at one-for-two ratio | |
Unvested at December 31, 2020 |
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Vested |
| ( |
Unvested at September 30, 2021 |
| — |
In April 2021, the board of directors approved the creation of the 2021 Equity Incentive Plan (the “Plan”). The Plan became effective as of the completion of the corporate conversion. The Plan currently reserves an aggregate of
In June 2021, the Company granted stock options to purchase a total of
In July 2021, the Company granted stock options to purchase a total