UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
As of August 9, 2021, there were
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. Any statements in this Quarterly Report on Form 10-Q about the Company’s future expectations, plans and prospects, including statements about its strategy, future operations, development of its product candidates, and other statements containing words such as “believes,” “anticipates,” “plans,” “expects,” “estimates,” “intends,” “predicts,” “projects,” “targets,” “could,” “may,” and similar expressions, constitute forward-looking statements, although not all forward-looking statements include such identifying words. Forward-looking statements include, but are not limited to statements regarding:
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our short operating history and the Anelixis acquisition, which may make it difficult to evaluate the success of our business to date and to assess our future viability; |
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the impact of the COVID-19 pandemic on our operations, including our ability to execute clinical trials or access capital markets; |
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expectations regarding the timing for the commencement and completion of product development or clinical trials for the Company’s product candidates; |
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the timing, costs, conduct and outcome of preclinical studies and clinical trials; |
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meeting future clinical and regulatory milestones, such as New Drug Application (“NDA”) submissions; |
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the risk that clinical trials of the Company’s product candidates may not be successful in establishing safety and tolerability or efficacy; |
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the Company’s plans and timing with respect to seeking regulatory approvals and uncertainties regarding the regulatory process; |
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the anticipated treatment of data by the U.S. Food and Drug Administration (“FDA”), the European Medicines Agency (“EMA”) or other regulatory authorities of the Company’s product candidates; |
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the rate and degree of market acceptance and clinical utility of the Company’s product candidates; |
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the Company’s commercialization, marketing, and manufacturing capabilities and strategy; |
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the Company’s intellectual property position and strategy; |
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the Company’s ability to identify additional product candidates with significant commercial potential; |
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the availability of funds and resources to pursue the Company’s research and development projects, including preclinical studies and clinical trials of its product candidates, and manufacturing activities; |
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the Company’s estimates regarding expenses, future revenue, capital requirements and needs for additional financing; |
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the Company’s ability to continue as a going concern; |
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developments relating to the Company’s competitors and industry; |
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the impact of government laws and regulations; and |
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the duration over which the Company’s cash balances will fund its operations. |
Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including: the ability to develop commercially viable product formulations on a timely basis, or at all; the sufficiency of the Company’s cash resources; the ability to obtain necessary regulatory and ethics approvals to commence additional clinical trials; whether data from early clinical trials will be indicative of the data that will be obtained from future clinical trials; whether the results of clinical trials will warrant submission for regulatory approval of any investigational product; whether any such submission will receive approval from the FDA or equivalent foreign regulatory agencies and, if the Company is able to obtain such approval for an investigational product, whether it will be successfully distributed and marketed; and the duration of the COVID-19 pandemic, including economic and other impacts of the pandemic and actions taken in response to it by governments, businesses, and individuals. These risks and uncertainties, as well as other risks and uncertainties that could cause the Company’s actual results to differ significantly from the forward-looking statements contained herein, are described in greater detail in Part II, Item 1A. Risk Factors in this Quarterly Report on Form 10-Q.
2
Any forward-looking statements contained in this Quarterly Report on Form 10-Q speak only as of the date hereof and not of any future date, and the Company expressly disclaims any intent to update any forward-looking statements, whether as a result of new information, future events or otherwise.
The market data and certain other statistical information used in this Quarterly Report are based on independent industry publications, governmental publications, reports by market research firms or other independent sources. Some data are also based on our good faith estimates. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information.
3
RISK FACTOR SUMMARY
The following summarizes the principal factors that make an investment in the Company speculative or risky, all of which are more fully described in Part II, Item 1A, Risk Factors in this Quarterly Report on Form 10-Q. This summary should be read in conjunction with the Risk Factors section and should not be relied upon as an exhaustive summary of the material risks facing our business. The occurrence of any of these risks could harm our business, financial condition, results of operations and/or growth prospects or cause our actual results to differ materially from those contained in forward-looking statements we have made in this report and those we may make from time to time. You should consider all of the risk factors described in our public filings when evaluating our business.
Risks Related to Our Operations
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Our short operating history and the Anelixis acquisition may make it difficult to evaluate the success of our business to date and to assess our future viability. |
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We have incurred significant operating losses since our inception and expect that we will continue to incur losses over the next several years and may never achieve or maintain profitability. |
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Our product candidates are in the early stages of clinical development and may not be successfully developed. If we are unable to successfully develop and commercialize these or any other product candidate, or if we experience significant delays in doing so, our business will be materially harmed. |
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The ongoing COVID-19 pandemic and actions taken in response to it may result in additional disruptions to our business operations, which could have a material adverse effect on our business. |
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Drug development involves a lengthy and expensive process with an uncertain outcome, including failure to demonstrate safety and efficacy to the satisfaction of the FDA or similar regulatory authorities outside the United States. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the formulation and commercialization of our product candidates. |
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Delays or difficulties in the enrollment of patients in clinical trials, could delay or prevent our receipt of necessary regulatory approvals and increase expenses for the development of our product candidates. |
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If serious adverse events or unacceptable side effects are identified during the development of our product candidates, we may need to abandon or limit our development of some of our product candidates. |
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We will require additional funding to be able to complete the development of our lead drug candidate. If we are unable to raise capital when needed, we may be forced to significantly alter our business strategy, substantially curtail our current operations, or liquidate and cease operations altogether. |
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Our future success depends on our ability to retain executives and key employees and to attract, retain and motivate qualified personnel in the future. |
Risks Related to Regulatory Approval of Our Product Candidates and Other Legal Compliance Matters
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If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, or the approvals may be for a narrow indication, we may not be able to commercialize our product candidates, and our ability to generate revenue may be materially impaired. |
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Any product candidate for which we obtain marketing approval will be subject to extensive post-marketing regulatory requirements and could be subject to post-marketing restrictions or withdrawal from the market, and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our products, when and if any of them are approved. |
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Legislation regulating the pharmaceutical and healthcare industries may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the prices we may obtain. |
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Our business operations and relationships will be subject to applicable anti-kickback, fraud and abuse and other broadly applicable healthcare laws, which could expose us to criminal sanctions, civil penalties, program exclusion, contractual damages, reputational harm and diminished profits and future earnings. |
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Our internal computer systems, or those of our third-party collaborators, service providers, contractors or consultants, may fail or suffer security breaches, disruptions, or incidents, which could result in a material disruption of our development programs or loss of data or compromise the privacy, security, integrity or confidentiality of sensitive information related to our business and have a material adverse effect on our reputation, business, financial condition or results of operations. |
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European data collection is governed by restrictive regulations governing the collection, use, processing and cross-border transfer of personal information. |
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If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business. |
4
Risks Related to the Commercialization of Our Product Candidates
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Even if any of our product candidates receives marketing approval, we may fail to achieve the degree of market acceptance by physicians, patients, third-party payers and others in the medical community necessary for commercial success. |
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If our current product candidates, or a future product candidate receives marketing approval and we, or others, later discover that the product is less effective than previously believed or causes undesirable side effects that were not previously identified, the ability to market the product could be compromised. |
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If we are unable to establish effective marketing and sales capabilities or enter into agreements with third parties to market and sell our product candidates, we may not be able to effectively market and sell our product candidates, if approved, or generate product revenues. |
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We face substantial competition, which may result in others discovering, developing or commercializing competing products before or more successfully than we do. |
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The insurance coverage and reimbursement status of newly approved products is uncertain. Failure to obtain or maintain adequate coverage and reimbursement for new or current products could limit our ability to market those products and decrease our ability to generate revenue. |
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Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop. |
Risks Related to Our Dependence on Third Parties
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The reliance on third parties for the manufacture of our product candidates for nonclinical and clinical trials, and for eventual commercialization, increases the risk that we will not have sufficient quantities of our product candidates or products at an acceptable cost and quality, which could delay, prevent or impair our development or commercialization efforts. |
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We depend on CROs and other contracted third parties to perform nonclinical and clinical testing and certain other research and development activities. As a result, the outcomes of the activities performed by these organizations will be, to a certain extent, beyond our control. |
Risks Related to Our Intellectual Property
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If we are unable to obtain and maintain intellectual property protection for our technology and products or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully commercialize our technology and products may be impaired. |
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We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time-consuming and unsuccessful. |
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We may need to license certain intellectual property from third parties, and such licenses may not be available or may not be available on commercially reasonable terms. |
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If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed. |
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We may be subject to trade secret claims from former employers of Company personnel. |
Risks Related to Our Common Stock
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Our stock price could be volatile as holders of our preferred stock become able to convert their shares to common stock and sell these shares in the open market. |
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If we fail to establish and maintain proper and effective internal control over financial reporting, our operating results and our ability to operate our business could be harmed. |
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Provisions in our corporate charter and under Delaware law could make an acquisition of the Company more difficult and may prevent attempts by our stockholders to replace or remove our current management. |
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We do not expect to pay any cash dividends in the foreseeable future. |
5
ELEDON PHARMACEUTICALS, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2021
Table of Contents
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Page |
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PART I. |
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Item 1. |
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7 |
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Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020 |
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8 |
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9 |
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Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020 |
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11 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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24 |
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Item 3. |
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31 |
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Item 4. |
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32 |
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PART II. |
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Item 1. |
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33 |
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Item 1A. |
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33 |
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Item 2. |
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53 |
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Item 3. |
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53 |
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Item 4. |
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53 |
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Item 5. |
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53 |
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Item 6. |
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53 |
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54 |
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6
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ELEDON PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
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June 30, 2021 |
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December 31, 2020 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Prepaid expenses and other current assets |
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Total current assets |
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Operating lease asset, net |
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Goodwill |
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In-process research and development |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Current operating lease liability |
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Accrued expenses and other liabilities |
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Total current liabilities |
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Deferred tax liabilities |
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Non-current operating lease liability |
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— |
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Total liabilities |
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Commitments and contingencies (Note 5) |
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Stockholders’ equity: |
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Series X1 non-voting convertible preferred stock, $ authorized; December 31, 2020 |
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Series X preferred stock, $ issued and outstanding at June 30, 2021 and December 31, 2020, respectively |
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Common stock, $ and December 31, 2020; outstanding at June 30, 2021 and December 31, 2020, respectively |
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Additional paid-in capital |
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Accumulated deficit |
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( |
) |
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( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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See accompanying notes to unaudited condensed consolidated financial statements.
7
ELEDON PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share and per share data)
(Unaudited)
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For the Three Months Ended June 30, |
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For the Six Months Ended June 30, |
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2021 |
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2020 |
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2021 |
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2020 |
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Operating expenses |
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Research and development |
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$ |
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$ |
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$ |
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$ |
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General and administrative |
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Restructuring expense |
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— |
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— |
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Total operating expenses |
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Loss from operations |
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( |
) |
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( |
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( |
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( |
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Other income (expense), net |
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( |
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Warrant inducement expense |
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— |
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— |
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— |
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( |
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Loss before income tax benefit |
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( |
) |
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( |
) |
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( |
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( |
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Income tax benefit |
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— |
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— |
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Net loss and comprehensive loss |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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$ |
( |
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Net loss per share, basic and diluted |
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$ |
( |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Weighted-average common shares outstanding, basic and diluted |
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See accompanying notes to unaudited condensed consolidated financial statements.
8
ELEDON PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share data)
(Unaudited)
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Series X1 Preferred Stock |
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Series X Preferred Stock |
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Common Stock |
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Additional Paid-In |
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Accumulated |
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Shares |
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Amount |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Deficit |
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Total |
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Balance as of December 31, 2020 |
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$ |
— |
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— |
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$ |
— |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Cancellation of common stock in connection with exchange for preferred stock |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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— |
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— |
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Cancellation of common stock in connection with exchange for warrants |
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— |
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— |
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— |
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— |
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( |
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( |
) |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Net loss and other comprehensive loss |
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— |
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— |
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— |
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— |
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— |
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— |
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|
|
— |
|
|
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( |
) |
|
|
( |
) |
Balance as of June 30, 2021 |
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$ |
— |
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$ |
— |
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$ |
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$ |
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$ |
( |
) |
|
$ |
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Balance as of March 31, 2021 |
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$ |
— |
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$ |
— |
|
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$ |
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|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
Stock-based compensation |
|
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— |
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|
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— |
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|
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— |
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— |
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|
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— |
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— |
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— |
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Net loss and other comprehensive loss |
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|
— |
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— |
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— |
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— |
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— |
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— |
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|
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— |
|
|
|
( |
) |
|
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( |
) |
Balance as of June 30, 2021 |
|
|
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$ |
— |
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$ |
— |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Balance as of December 31, 2019 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
Issuance of common stock in connection with exercise of warrants, net of issuance costs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Issuance of common stock in connection with conversion of preferred stock |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Issuance of common stock in connection with vesting of restricted stock units |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Cancellation of common stock in connection with exchange for preferred stock |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Warrant inducement expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Net loss and other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance as of June 30, 2020 |
|
|
— |
|
|
$ |
— |
|
|
|
|
|
|
$ |
— |
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2020 |
|
|
— |
|
|
$ |
— |
|
|
|
|
|
|
$ |
— |
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
Issuance of common stock in connection with conversion of preferred stock |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Issuance of common stock in connection with vesting of restricted stock units |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Net loss and other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance as of June 30, 2020 |
|
|
— |
|
|
$ |
— |
|
|
|
|
|
|
$ |
— |
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
See accompanying notes to unaudited condensed consolidated financial statements.
9
ELEDON PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
|
For the Six Months Ended June 30, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
Operating activities |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
— |
|
|
|
|
|
Amortization of operating lease asset |
|
|
|
|
|
|
|
|
Warrant inducement expense |
|
|
— |
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
|
|
Deferred tax liabilities |
|
|
( |
) |
|
|
— |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Prepaid expenses and other assets |
|
|
( |
) |
|
|
|
|
Accounts payable and accrued expenses |
|
|
|
|
|
|
( |
) |
Operating lease liability |
|
|
( |
) |
|
|
( |
) |
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
Financing activities |
|
|
|
|
|
|
|
|
Proceeds from exercise of warrants, net |
|
|
— |
|
|
|
|
|
Offering costs in connection with PIPE transaction |
|
|
( |
) |
|
|
— |
|
Net cash (used in) provided by financing activities |
|
|
( |
) |
|
|
|
|
Net change in cash and cash equivalents |
|
|
( |
) |
|
|
( |
) |
Cash and cash equivalents at beginning of period |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
|
|
|
$ |