☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Delaware

20-1000967

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

19900 MacArthur Blvd., Suite 550

Irvine, California

92612

(Address of principal executive offices)

(Zip Code)

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value

ELDN

Nasdaq Capital Market

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☐

•

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;

•

the impact of the COVID-19 pandemic on our operations, including our ability to execute clinical trials or access capital markets;

•

expectations regarding the timing for the commencement and completion of product development or clinical trials for the Company’s product candidates;

•

the timing, costs, conduct and outcome of preclinical studies and clinical trials;

•

meeting future clinical and regulatory milestones, such as New Drug Application (“NDA”) submissions;

•

the risk that clinical trials of the Company’s product candidates may not be successful in establishing safety and tolerability or efficacy;

•

the Company’s plans and timing with respect to seeking regulatory approvals and uncertainties regarding the regulatory process;

•

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;

•

the rate and degree of market acceptance and clinical utility of the Company’s product candidates;

•

the Company’s commercialization, marketing, and manufacturing capabilities and strategy;

•

the Company’s intellectual property position and strategy;

•

the Company’s ability to identify additional product candidates with significant commercial potential;

•

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;

•

the Company’s estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

•

the Company’s ability to continue as a going concern;

•

developments relating to the Company’s competitors and industry;

•

the impact of government laws and regulations; and

•

the duration over which the Company’s cash balances will fund its operations.

•

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.

•

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.

•

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.

•

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.

•

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.

•

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.

•

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.

•

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.

•

Our future success depends on our ability to retain executives and key employees and to attract, retain and motivate qualified personnel in the future.

•

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.

•

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.

•

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.

•

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.

•

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.

•

European data collection is governed by restrictive regulations governing the collection, use, processing and cross-border transfer of personal information.

•

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.

•

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.

•

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.

•

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.

•

We face substantial competition, which may result in others discovering, developing or commercializing competing products before or more successfully than we do.

•

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.

•

Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop.

•

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.

•

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.

•

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.

•

We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time-consuming and unsuccessful.

•

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.

•

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

•

We may be subject to trade secret claims from former employers of Company personnel.

•

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.

•

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.

•

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.

•

We do not expect to pay any cash dividends in the foreseeable future.

Page

PART I.

FINANCIAL INFORMATION

Item 1.

Condensed Consolidated Financial Statements - Unaudited

7

Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020

7

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2021 and 2020

8

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2021 and 2020

9

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020

10

Notes to Condensed Consolidated Financial Statements

11

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

24

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

31

Item 4.

Controls and Procedures

32

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings

33

Item 1A.

Risk Factors

33

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

53

Item 3.

Defaults Upon Senior Securities

53

Item 4.

Mine Safety Disclosures

53

Item 5.

Other Information

53

Item 6.

Exhibits

53

Exhibit Index

54

Signatures

June 30,

2021

December 31,

2020

ASSETS

Current assets:

Cash and cash equivalents

$

101,133

$

114,195

Prepaid expenses and other current assets

1,449

1,435

Total current assets

102,582

115,630

Operating lease asset, net

267

138

Goodwill

48,648

48,648

In-process research and development

32,386

32,386

Other assets

422

383

Total assets

$

184,305

$

197,185

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

857

$

1,366

Current operating lease liability

179

144

Accrued expenses and other liabilities

1,641

973

Total current liabilities

2,677

2,483

Deferred tax liabilities

3,017

4,106

Non-current operating lease liability

90

—

Total liabilities

5,784

6,589

Commitments and contingencies (Note 5)

Stockholders’ equity:

Series X¹ non-voting convertible preferred stock, $0.001 par value, 515,000 shares

   authorized; 108,070 shares issued and outstanding at June 30, 2021 and

   December 31, 2020

—

—

Series X preferred stock, $0.001 par value, 10,000 shares authorized; 6,204 and no shares

   issued and outstanding at June 30, 2021 and December 31, 2020, respectively

—

—

Common stock, $0.001 par value, 200,000,000 shares authorized at June 30, 2021

   and December 31, 2020; 14,306,614 and 15,160,397 shares issued and

   outstanding at June 30, 2021 and December 31, 2020, respectively

14

15

Additional paid-in capital

274,783

270,974

Accumulated deficit

(96,276

)

(80,393

)

Total stockholders’ equity

178,521

190,596

Total liabilities and stockholders’ equity

$

184,305

$

197,185

For the Three Months

Ended June 30,

For the Six Months

Ended June 30,

2021

2020

2021

2020

Operating expenses

Research and development

$

4,242

$

832

$

9,895

$

2,480

General and administrative

3,729

1,269

7,081

2,999

Restructuring expense

—

490

—

490

Total operating expenses

7,971

2,591

16,976

5,969

Loss from operations

(7,971

)

(2,591

)

(16,976

)

(5,969

)

Other income (expense), net

(1

)

5

4

35

Warrant inducement expense

—

—

—

(4,829

)

Loss before income tax benefit

(7,972

)

(2,586

)

(16,972

)

(10,763

)

Income tax benefit

588

—

1,089

—

Net loss and comprehensive loss

$

(7,384

)

$

(2,586

)

$

(15,883

)

$

(10,763

)

Net loss per share, basic and diluted

$

(0.50

)

$

(2.74

)

$

(1.07

)

$

(11.31

)

Weighted-average common shares outstanding,

   basic and diluted

14,815,731

943,419

14,823,348

951,352

Series X¹ Preferred Stock

Series X Preferred Stock

Common Stock

Additional

Paid-In

Accumulated

Shares

Amount

Shares

Amount

Shares

Amount

Capital

Deficit

Total

Balance as of December 31, 2020

108,070

$

—

—

$

—

15,160,397

$

15

$

270,974

$

(80,393

)

$

190,596

Cancellation of common stock in connection

   with exchange for preferred stock

—

—

6,204

—

(344,666

)

—

—

—

—

Cancellation of common stock in connection

   with exchange for warrants

—

—

—

—

(509,117

)

(1

)

1

—

—

Stock-based compensation

—

—

—

—

—

—

3,808

—

3,808

Net loss and other comprehensive loss

—

—

—

—

—

—

—

(15,883

)

(15,883

)

Balance as of June 30, 2021

108,070

$

—

6,204

$

—

14,306,614

$

14

$

274,783

$

(96,276

)

$

178,521

Balance as of March 31, 2021

108,070

$

—

6,204

$

—

14,306,614

$

14

$

272,749

$

(88,892

)

$

183,871

Stock-based compensation

—

—

—

—

—

—

2,034

—

2,034

Net loss and other comprehensive loss

—

—

—

—

—

—

—

(7,384

)

(7,384

)

Balance as of June 30, 2021

108,070

$

—

6,204

$

—

14,306,614

$

14

$

274,783

$

(96,276

)

$

178,521

Balance as of December 31, 2019

—

$

—

—

$

—

720,408

$

1

$

67,046

$

(57,582

)

$

9,465

Issuance of common stock in connection with

   exercise of warrants, net of issuance costs

—

—

—

—

383,234

—

5,191

—

5,191

Issuance of common stock in connection with

  conversion of preferred stock

—

—

(3,285

)

—

182,500

—

—

—

—

Issuance of common stock in connection with

   vesting of restricted stock units

—

—

—

1,389

—

—

—

—

Cancellation of common stock in connection

   with exchange for preferred stock

—

—

3,796

—

(210,889

)

—

—

—

—

Warrant inducement expense

—

—

—

—

—

—

4,829

—

4,829

Stock-based compensation

—

—

—

—

—

—

634

—

634

Net loss and other comprehensive loss

—

—

—

—

—

—

—

(10,763

)

(10,763

)

Balance as of June 30, 2020

—

$

—

511

$

—

1,076,642

$

1

$

77,700

$

(68,345

)

$

9,356

Balance as of March 31, 2020

—

$

—

3,796

$

—

892,753

$

1

$

77,503

$

(65,759

)

$

11,745

Issuance of common stock in connection with

  conversion of preferred stock

—

—

(3,285

)

—

182,500

—

—

—

—

Issuance of common stock in connection with

   vesting of restricted stock units

—

—

—

—

1,389

—

—

—

—

Stock-based compensation

—

—

—

—

—

—

197

—

197

Net loss and other comprehensive loss

—

—

—

—

—

—

—

(2,586

)

(2,586

)

Balance as of June 30, 2020

—

$

—

511

$

—

1,076,642

$

1

$

77,700

$

(68,345

)

$

9,356

For the Six Months

Ended June 30,

2021

2020

Operating activities

Net loss

$

(15,883

)

$

(10,763

)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

—

4

Amortization of operating lease asset

90

88

Warrant inducement expense

—

4,829

Stock-based compensation

3,808

634

Deferred tax liabilities

(1,089

)

—

Changes in operating assets and liabilities:

Prepaid expenses and other assets

(53

)

311

Accounts payable and accrued expenses

609

(233

)

Operating lease liability

(94

)

(88

)

Net cash used in operating activities

(12,612

)

(5,218

)

Financing activities

Proceeds from exercise of warrants, net

—

5,191

Offering costs in connection with PIPE transaction

(450

)

—

Net cash (used in) provided by financing activities

(450

)

5,191

Net change in cash and cash equivalents

(13,062

)

(27

)

Cash and cash equivalents at beginning of period

114,195

8,791

Cash and cash equivalents at end of period

$

101,133

$

8,764