UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20212022
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-39717
LIXTE BIOTECHNOLOGY HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 20-2903526 | |
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification Number) |
680 East Colorado Boulevard, Suite 180
Pasadena, California 91101
(Address of principal executive offices, including Zip Code)
(631) 830-7092
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The Stock Market LLC | ||||
| The Stock Market LLC |
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.
Yes ☒ No ☐
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).
Yes ☒ No ☐
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 ☐ | Accelerated filer ☐ | |
| Non-accelerated filer | Smaller reporting company ☒ | |
| Emerging growth company ☐ |
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).
Yes ☐ No ☒
As of November 1, 2021,2022, the Company had shares of common stock, $0.0001 par value, issued and outstanding.
LIXTE BIOTECHNOLOGY HOLDINGS, INC.
AND SUBSIDIARY
TABLE OF CONTENTS
| 2 |
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
LIXTE BIOTECHNOLOGY HOLDINGS, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, | December 31, | September 30, 2022 | December 31, 2021 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| ASSETS | ||||||||||||||||
| Current assets: | ||||||||||||||||
| Cash | $ | 5,960,594 | $ | 5,069,266 | $ | 6,561,840 | $ | 4,823,745 | ||||||||
| Advances on research and development contract services | 216,018 | 76,898 | 147,017 | 150,241 | ||||||||||||
| Prepaid insurance | 98,323 | 67,311 | 86,654 | 109,029 | ||||||||||||
| Other prepaid expenses and current assets | 32,224 | 15,000 | 23,957 | 10,249 | ||||||||||||
| Total current assets | 6,307,159 | 5,228,475 | 6,819,468 | 5,093,264 | ||||||||||||
| Deferred offering costs | 26,376 | — | ||||||||||||||
| Total assets | $ | 6,333,535 | $ | 5,228,475 | $ | 6,819,468 | $ | 5,093,264 | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
| Current liabilities: | ||||||||||||||||
| Accounts payable and accrued expenses, including $60,333 and $0 to related parties at September 30, 2021 and December 31, 2020, respectively | $ | 232,016 | $ | 190,292 | ||||||||||||
| Accrued offering costs | — | 10,467 | ||||||||||||||
| Accounts payable and accrued expenses, including $54,972 and $32,500 to related parties at September 30, 2022 and December 31, 2021, respectively | $ | 307,398 | $ | 225,965 | ||||||||||||
| Research and development contract liabilities | 26,683 | 15,765 | 100,930 | 76,961 | ||||||||||||
| Total current liabilities | 258,699 | 216,524 | 408,328 | 302,926 | ||||||||||||
| Commitments and contingencies | - | - | - | |||||||||||||
| Stockholders’ equity: | ||||||||||||||||
| Preferred Stock, $ par value; authorized – shares; issued and outstanding – shares of Series A Convertible Preferred Stock, $10.00 per share stated value, liquidation preference based on assumed conversion into common shares – shares | 3,500,000 | 3,500,000 | 3,500,000 | 3,500,000 | ||||||||||||
| Common stock, $ par value; authorized – shares; issued and outstanding – shares and shares at September 30, 2021 and December 31, 2020, respectively | 1,374 | 1,240 | ||||||||||||||
| Common stock, $ par value; authorized – shares; issued and outstanding – shares at September 30, 2022 and shares at December 31, 2021 | 1,664 | 1,374 | ||||||||||||||
| Additional paid-in capital | 37,626,264 | 31,864,479 | 44,672,871 | 38,371,128 | ||||||||||||
| Accumulated deficit | (35,052,802 | ) | (30,353,768 | ) | (41,763,395 | ) | (37,082,164 | ) | ||||||||
| Total stockholders’ equity | 6,074,836 | 5,011,951 | 6,411,140 | 4,790,338 | ||||||||||||
| Total liabilities and stockholders’ equity | $ | 6,333,535 | $ | 5,228,475 | $ | 6,819,468 | $ | 5,093,264 | ||||||||
See accompanying notes to condensed consolidated financial statements.
| 3 |
LIXTE BIOTECHNOLOGY HOLDINGS, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||
| Revenues | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
| Costs and expenses: | ||||||||||||||||||||||||||||||||
| General and administrative costs, including compensation to related parties of $540,972 and $464,483 for the three months ended September 30, 2021 and 2020, respectively, and $2,390,308 and $518,483 to related parties for the nine months ended September 30, 2021 and 2020, respectively | 1,010,539 | 802,273 | 3,762,373 | 1,350,201 | ||||||||||||||||||||||||||||
| Research and development costs, including $ of stock-based compensation costs to consultant for the three months and nine months ended September 30, 2020 | 227,181 | 799,420 | 933,122 | 1,012,038 | ||||||||||||||||||||||||||||
| General and administrative costs: | ||||||||||||||||||||||||||||||||
| Compensation to related parties, including stock-based compensation expense of $ and $ for the three months ended September 30, 2022 and 2021, respectively, and $ and $ for the nine months ended September 30, 2022 and 2021, respectively | 643,957 | 573,472 | 1,963,409 | 2,450,641 | ||||||||||||||||||||||||||||
| Patent and licensing legal and filing fees and costs | 271,163 | 137,114 | 944,789 | 365,466 | ||||||||||||||||||||||||||||
| Other costs and expenses | 290,993 | 299,953 | 875,016 | 946,266 | ||||||||||||||||||||||||||||
| Research and development costs | 272,388 | 227,181 | 895,649 | 933,122 | ||||||||||||||||||||||||||||
| Total costs and expenses | 1,237,720 | 1,601,693 | 4,695,495 | 2,362,239 | 1,478,501 | 1,237,720 | 4,678,863 | 4,695,495 | ||||||||||||||||||||||||
| Loss from operations | (1,237,720 | ) | (1,601,693 | ) | (4,695,495 | ) | (2,362,239 | ) | (1,478,501 | ) | (1,237,720 | ) | (4,678,863 | ) | (4,695,495 | ) | ||||||||||||||||
| Interest income | 161 | 38 | 487 | 4,284 | 3,911 | 161 | 4,211 | 487 | ||||||||||||||||||||||||
| Interest expense | — | — | (2,944 | ) | — | (2,119 | ) | — | (5,240 | ) | (2,944 | ) | ||||||||||||||||||||
| Foreign currency loss | (1,165 | ) | — | (1,082 | ) | — | (1,300 | ) | (1,165 | ) | (1,339 | ) | (1,082 | ) | ||||||||||||||||||
| Net loss | $ | (1,238,724 | ) | $ | (1,601,655 | ) | $ | (4,699,034 | ) | $ | (2,357,955 | ) | $ | (1,478,009 | ) | $ | (1,238,724 | ) | $ | (4,681,231 | ) | $ | (4,699,034 | ) | ||||||||
| Net loss per common share – basic and diluted | $ | (0.09 | ) | $ | (0.14 | ) | $ | (0.35 | ) | $ | (0.21 | ) | $ | (0.09 | ) | $ | (0.09 | ) | $ | (0.30 | ) | $ | (0.35 | ) | ||||||||
| Weighted average common shares outstanding – basic and diluted | 13,733,912 | 11,174,302 | 13,381,922 | 11,174,302 | 16,646,593 | 13,733,912 | 15,541,831 | 13,381,922 | ||||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
| 4 |
LIXTE BIOTECHNOLOGY HOLDINGS, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
Three Months and Nine Months Ended September 30, 20212022 and 20202021
| Series A | ||||||||||||||||||||||||||||
| Convertible | Additional | Total | ||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Par Value | Capital | Deficit | Equity | ||||||||||||||||||||||
| Three months ended September 30, 2021: | ||||||||||||||||||||||||||||
| Balance, June 30, 2021 | 350,000 | $ | 3,500,000 | 13,663,260 | $ | 1,366 | $ | 37,179,050 | $ | (33,814,078 | ) | $ | 6,866,338 | |||||||||||||||
| Proceeds from sale of common stock in direct equity offering, net of offering costs | ||||||||||||||||||||||||||||
| Proceeds from sale of common stock in direct equity offering, net of offering costs, shares | ||||||||||||||||||||||||||||
| Exercise of warrants | ||||||||||||||||||||||||||||
| Exercise of warrants, shares | ||||||||||||||||||||||||||||
| Exercise of options | — | — | 83,333 | 8 | 99,992 | — | 100,000 | |||||||||||||||||||||
| Stock-based compensation expense | — | — | �� | — | — | 347,222 | — | 347,222 | ||||||||||||||||||||
| Net loss for the period | — | — | — | — | — | (1,238,724 | ) | (1,238,724 | ) | |||||||||||||||||||
| Balance, September 30, 2021 | 350,000 | $ | 3,500,000 | 13,746,593 | $ | 1,374 | $ | 37,626,264 | $ | (35,052,802 | ) | $ | 6,074,836 | |||||||||||||||
| Nine months ended September 30, 2021: | ||||||||||||||||||||||||||||
| Balance, December 31, 2020 | 350,000 | $ | 3,500,000 | 12,402,157 | $ | 1,240 | $ | 31,864,479 | $ | (30,353,768 | ) | $ | 5,011,951 | |||||||||||||||
| Proceeds from sale of common stock in direct equity offering, net of offering costs | — | — | 1,133,102 | 113 | 3,689,648 | — | 3,689,761 | |||||||||||||||||||||
| Exercise of warrants | — | — | 3,000 | 1 | 17,099 | — | 17,100 | |||||||||||||||||||||
| Exercise of options | — | — | 208,334 | 20 | 200,980 | — | 201,000 | |||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | 1,854,058 | — | 1,854,058 | |||||||||||||||||||||
| Net loss for the period | — | — | — | — | — | (4,699,034 | ) | (4,699,034 | ) | |||||||||||||||||||
| Balance, September 30, 2021 | 350,000 | $ | 3,500,000 | 13,746,593 | $ | 1,374 | $ | 37,626,264 | $ | (35,052,802 | ) | $ | 6,074,836 | |||||||||||||||
| Shares | Amount | Shares | Par Value | Capital | Deficit | Equity | ||||||||||||||||||||||
Convertible Series A Preferred Stock | Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Par Value | Capital | Deficit | Equity | ||||||||||||||||||||||
| Three months ended September 30, 2022: | ||||||||||||||||||||||||||||
| Balance, June 30, 2022 | 350,000 | $ | 3,500,000 | 16,646,593 | $ | 1,664 | $ | 44,275,988 | $ | (40,285,386 | ) | $ | 7,492,266 | |||||||||||||||
| Stock-based compensation expense | — | — | — | — | 396,883 | — | 396,883 | |||||||||||||||||||||
| Net loss | — | — | — | — | — | (1,478,009 | ) | (1,478,009 | ) | |||||||||||||||||||
| Balance, September 30, 2022 | 350,000 | $ | 3,500,000 | 16,646,593 | $ | 1,664 | $ | 44,672,871 | $ | (41,763,395 | ) | $ | 6,411,140 | |||||||||||||||
| Nine months ended September 30, 2022: | ||||||||||||||||||||||||||||
| Balance, December 31, 2021 | 350,000 | $ | 3,500,000 | 13,746,593 | $ | 1,374 | $ | 38,371,128 | $ | (37,082,164 | ) | $ | 4,790,338 | |||||||||||||||
| Proceeds from sale of common stock in direct equity offering, net of offering costs | — | — | 2,900,000 | 290 | 5,141,094 | — | 5,141,384 | |||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | 1,160,649 | — | 1,160,649 | |||||||||||||||||||||
| Net loss | — | — | — | — | — | (4,681,231 | ) | (4,681,231 | ) | |||||||||||||||||||
| Balance, September 30, 2022 | 350,000 | $ | 3,500,000 | 16,646,593 | $ | 1,664 | $ | 44,672,871 | $ | (41,763,395 | ) | $ | 6,411,140 | |||||||||||||||
(Continued)
| 5 |
LIXTE BIOTECHNOLOGY HOLDINGS, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
(Continued)
Three Months and Nine Months Ended September 30, 20212022 and 20202021
| Series A | ||||||||||||||||||||||||||||
| Convertible | Additional | Total | ||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Par Value | Capital | Deficit | Equity | ||||||||||||||||||||||
| Three months ended September 30, 2020: | ||||||||||||||||||||||||||||
| Balance, June 30, 2020 | 350,000 | $ | 3,500,000 | 11,174,302 | $ | 1,117 | $ | 26,021,904 | $ | (27,845,186 | ) | $ | 1,677,835 | |||||||||||||||
| Stock-based compensation expense | — | — | — | — | 1,064,746 | — | 1,064,746 | |||||||||||||||||||||
| Net loss for the period | — | — | — | — | — | (1,601,655 | ) | (1,601,655 | ) | |||||||||||||||||||
| Balance, September 30, 2020 | 350,000 | $ | 3,500,000 | 11,174,302 | $ | 1,117 | $ | 27,086,650 | $ | (29,446,841 | ) | $ | 1,140,926 | |||||||||||||||
| Nine months ended September 30, 2020: | ||||||||||||||||||||||||||||
| Balance, December 31, 2019 | 350,000 | $ | 3,500,000 | 11,174,302 | $ | 1,117 | $ | 26,021,904 | $ | (27,088,886 | ) | $ | 2,434,135 | |||||||||||||||
| Stock-based compensation expense | — | — | — | — | 1,064,746 | — | 1,064,746 | |||||||||||||||||||||
| Net loss for the period | — | — | — | — | — | (2,357,955 | ) | (2,357,955 | ) | |||||||||||||||||||
| Balance, September 30, 2020 | 350,000 | $ | 3,500,000 | 11,174,302 | $ | 1,117 | $ | 27,086,650 | $ | (29,446,841 | ) | $ | 1,140,926 | |||||||||||||||
Series A Convertible Preferred Stock | Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Par Value | Capital | Deficit | Equity | ||||||||||||||||||||||
| Three months ended September 30, 2021: | ||||||||||||||||||||||||||||
| Balance, June 30, 2021 | 350,000 | $ | 3,500,000 | 13,663,260 | $ | 1,366 | $ | 37,179,050 | $ | (33,814,078 | ) | $ | 6,866,338 | |||||||||||||||
| Exercise of stock options | — | — | 83,333 | 8 | 99,992 | — | 100,000 | |||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | 347,222 | — | 347,222 | |||||||||||||||||||||
| Net loss for the period | — | — | — | — | — | (1,238,724 | ) | (1,238,724 | ) | |||||||||||||||||||
| Balance, September 30, 2021 | 350,000 | $ | 3,500,000 | 13,746,593 | $ | 1,374 | $ | 37,626,264 | $ | (35,052,802 | ) | $ | 6,074,836 | |||||||||||||||
| Nine months ended September 30, 2021: | ||||||||||||||||||||||||||||
| Balance, December 31, 2020 | 350,000 | $ | 3,500,000 | 12,402,157 | $ | 1,240 | $ | 31,864,479 | $ | (30,353,768 | ) | $ | 5,011,951 | |||||||||||||||
| Proceeds from sale of common stock in direct equity offering, net of offering costs | — | — | 1,133,102 | 113 | 3,689,648 | — | 3,689,761 | |||||||||||||||||||||
| Exercise of warrants | — | — | 3,000 | 1 | 17,099 | — | 17,100 | |||||||||||||||||||||
| Exercise of stock options | — | — | 208,334 | 20 | 200,980 | — | 201,000 | |||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | 1,854,058 | — | 1,854,058 | |||||||||||||||||||||
| Net loss for the period | — | — | — | — | — | (4,699,034 | ) | (4,699,034 | ) | |||||||||||||||||||
| Balance, September 30, 2021 | 350,000 | $ | 3,500,000 | 13,746,593 | $ | 1,374 | $ | 37,626,264 | $ | (35,052,802 | ) | $ | 6,074,836 | |||||||||||||||
See accompanying notes to condensed consolidated financial statements.
| 6 |
LIXTE BIOTECHNOLOGY HOLDINGS, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| 2022 | 2021 | |||||||||||||||
Nine Months Ended | Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2022 | 2021 | |||||||||||||
| Cash flows from operating activities: | ||||||||||||||||
| Net loss | $ | (4,699,034 | ) | $ | (2,357,955 | ) | $ | (4,681,231 | ) | $ | (4,699,034 | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||||
| Stock-based compensation expense included in - | ||||||||||||||||
| General and administrative costs | 1,854,058 | 394,031 | 1,160,649 | 1,854,058 | ||||||||||||
| Research and development costs | — | 670,715 | ||||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||||
| (Increase) decrease in - | ||||||||||||||||
| Advances on research and development contract services | (139,120 | ) | (29,792 | ) | 3,224 | (139,120 | ) | |||||||||
| Accrued interest receivable | — | 14,367 | ||||||||||||||
| Prepaid insurance | (31,012 | ) | (34,583 | ) | 22,375 | (31,012 | ) | |||||||||
| Other prepaid expenses and current assets | (17,224 | ) | 11,294 | (13,708 | ) | (17,224 | ) | |||||||||
| Increase (decrease) in - | ||||||||||||||||
| Increase in - | ||||||||||||||||
| Accounts payable and accrued expenses | 25,348 | (28,031 | ) | 81,433 | 25,348 | |||||||||||
| Research and development contract liabilities | 10,918 | (32,418 | ) | 23,969 | 10,918 | |||||||||||
| Net cash used in operating activities | (2,996,066 | ) | (1,392,372 | ) | (3,403,289 | ) | (2,996,066 | ) | ||||||||
| Cash flows from financing activities: | ||||||||||||||||
| Proceeds from sale of common stock in direct equity offering, net of offering costs | 3,689,761 | — | 5,141,384 | 3,689,761 | ||||||||||||
| Payment of deferred offering costs | (10,000 | ) | (130,244 | ) | ||||||||||||
| Exercise of common stock warrants | 17,100 | — | — | 17,100 | ||||||||||||
| Exercise of common stock options | 201,000 | — | — | 201,000 | ||||||||||||
| Payment of public offering costs | (10,467 | ) | — | |||||||||||||
| Net cash provided by (used in) financing activities | 3,887,394 | (130,244 | ) | |||||||||||||
| Payment of deferred offering costs | — | (20,467 | ) | |||||||||||||
| Net cash provided by financing activities | 5,141,384 | 3,887,394 | ||||||||||||||
| Cash: | ||||||||||||||||
| Net increase (decrease) | 891,328 | (1,522,616 | ) | |||||||||||||
| Net increase | 1,738,095 | 891,328 | ||||||||||||||
| Balance at beginning of period | 5,069,266 | 2,598,864 | 4,823,745 | 5,069,266 | ||||||||||||
| Balance at end of period | $ | 5,960,594 | $ | 1,076,248 | $ | 6,561,840 | $ | 5,960,594 | ||||||||
| Supplemental disclosures of cash flow information: | ||||||||||||||||
| Cash paid for - | ||||||||||||||||
| Interest | $ | 2,944 | $ | — | $ | 5,240 | $ | 2,944 | ||||||||
| Income taxes | $ | — | $ | — | $ | — | $ | — | ||||||||
| Noncash investing and financing activities: | ||||||||||||||||
| Non-cash investing and financing activities: | ||||||||||||||||
| Accrual of deferred offering costs | $ | 16,376 | $ | 44,009 | $ | — | $ | 16,376 | ||||||||
See accompanying notes to condensed consolidated financial statements.
| 7 |
LIXTE BIOTECHNOLOGY HOLDINGS, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Three Months and Nine Months Ended September 30, 20212022 and 20202021
1. Organization and Basis of Presentation
The condensed consolidated financial statements of Lixte Biotechnology Holdings, Inc., a Delaware corporation (“Holdings”), including its wholly-owned Delaware subsidiary, Lixte Biotechnology, Inc. (“Lixte”) (collectively, the “Company”), at September 30, 2021,2022, and for the three months and nine months ended September 30, 20212022 and 2020,2021, are unaudited. In the opinion of management of the Company, all adjustments, including normal recurring accruals, have been made that are necessary to present fairly the financial position of the Company as of September 30, 2021,2022, and the results of its operations for the three months and nine months ended September 30, 20212022 and 2020,2021, and its cash flows for the nine months ended September 30, 20212022 and 2020.2021. Operating results for the interim periods presented are not necessarily indicative of the results to be expected for a full fiscal year. The consolidated balance sheet at December 31, 20202021 has been derived from the Company’s audited consolidated financial statements at such date.
The condensed consolidated financial statements and related notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the financial statements and other information included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020,2021, as filed with the SEC.
Listing of the Company’s Common Stock on The Nasdaq Capital Market
The Company’s common stock and the warrants issued in its public offering are traded on The Nasdaq Capital Market under the symbols “LIXT” and “LIXTW”, respectively.
On June 24, 2022, the Company received a written notice (the “Notice”) from The Nasdaq Stock Market LLC (“Nasdaq”) that the Company has not been in compliance with the minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) for a period of 30 consecutive business days. Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum closing bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum closing bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The Notice had no immediate effect on the listing of the Company’s common stock on The Nasdaq Capital Market.
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company is provided a compliance period of 180 calendar days from the date of the Notice, or until December 21, 2022, to regain compliance with the minimum closing bid price requirement. If the Company does not regain compliance during the compliance period ending December 21, 2022, the Company may be afforded a second 180 calendar day period to regain compliance. To qualify for the second compliance period, the Company must (i) meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the minimum closing bid price requirement, and (ii) notify Nasdaq of its intent to cure the deficiency. The Company can achieve compliance with the minimum closing bid price requirement if, during either compliance period, the minimum closing bid price per share of the Company’s common stock is at least $1.00 for a minimum of 10 consecutive business days. The Company anticipates that its shares of common stock will continue to be listed and traded on The Nasdaq Capital Market during the compliance period(s).
The Company is continuing to assess potential actions to regain compliance. However, the Company may be unable to regain compliance with the minimum closing bid price requirement during the compliance period(s), in which case the Company anticipates Nasdaq would provide a notice to the Company that its shares of common stock are subject to delisting, and the Company’s common shares would thereupon be delisted.
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2. Business
The Company is a drug discovery company that uses biomarker technology to identify enzyme targets associated with serious common diseases and then designs novel compounds to attack those targets. The Company’s product pipeline is primarily focused on inhibitors of protein phosphatases, used alone and in combination with cytotoxic agents and/or x-ray and immune checkpoint blockers, and encompasses two major categories of compounds at various stages of pre-clinical and clinical development that the Company believes have broad therapeutic potential not only for cancer but also for other debilitating and life-threatening diseases.
The Company’s activities are subject to significant risks and uncertainties, including the need for additional capital. The Company has not yet commenced any revenue-generating operations, does not have positive cash flows from operations, and is dependent on periodic infusions of equity capital to fund its operating requirements.
Going Concern
At September 30, 2021,2022, the Company had cash of $5,960,5946,561,840 available to fund its operations. Because the Company is currently engaged in Phase 2 clinical trials, it is expected that it will take a significant amount of time and resources to develop any product or intellectual property capable of generating sustainable revenues. Accordingly, the Company’s business is unlikely to generate any sustainable operating revenues in the next several years and may never do so. Even if the Company is able to generate revenues through licensing its technologies or through product sales, there can be no assurance that the Company will be able to achieve positive earnings and operating cash flows.
The Company’s consolidated financial statements have been presented on the basis that it will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has no recurring source of revenue and has experienced negative operating cash flows since inception. The Company has financed its working capital requirements primarily through the recurring sale of its equity securities.
As a result, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern. The Company’s independent registered public accounting firm, in its report on the Company’s consolidated financial statements for the year ended December 31, 2020,2021, has also expressed substantial doubt about the Company’s ability to continue as a going concern. The Company’s consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The Company’s ability to continue as a going concern is dependent upon its ability to raise additional equity capital to fund its research and development activities and to ultimately achieve sustainable operating revenues and profitability. The amount and timing of future cash requirements depends on the pace and design of the Company’s clinical trial program, which, in turn, depends on the availability of operating capital to fund such activities.
Effective November 30, 2020, the Company listedBased on The Nasdaq Capital Market in conjunction with the completion of its public offering of units of common stock and warrants that generated net cash proceeds of $4,591,349. Subsequently, on January 18, 2021, the Company entered into a clinical trial agreement to carry out a Phase 1b clinical trial of LB-100, combined with a standard regimen for untreated, extensive-stage disease small cell lung cancer. This clinical trial is being conducted through City of Hope and is estimated to cost from $2,500,000 to $2,900,000 and take approximately 24 to 30 months. Combined with the Company’s existing clinical trial commitments, this clinical trial commitment represents an additional demand on the Company’s working capital resources. Although the Company completed a sale of common stock under a registered direct equity offering on March 2, 2021 that generated net cash proceeds of $3,689,761,current operating plans, the Company estimates that itexisting cash resources will provide sufficient working capital to fund the current clinical trial program with respect to the development of the Company’s lead anti-cancer clinical compound LB-100 through approximately September 30, 2023. However, existing cash resources will not be sufficient to complete development of and obtain regulatory approval for the Company’s product candidate, and the Company will need to raise significant additional capital to fund its operations, including its various clinical trial commitments, by the middle of 2022.do so. In addition, the Company’s operating plan may change as a result of many factors which are currently unknown, to the Company, including possible additional clinical trials, and the Company may need additional funds may be needed sooner than currently planned.
As market conditions present uncertainty as to the Company’s ability to secure additional funds, there can be no assurances that the Company will be able to secure additional financing on acceptable terms, as and when necessary, to continue to conduct operations. There is also significant uncertainty as to the effect that the coronavirus pandemic may have on the Company’s clinical trial schedule and the amount and type of financing available to the Company in the future.
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If cash resources are insufficient to satisfy the Company’s ongoing cash requirements, the Company would be required to scale back or discontinue its clinical trial program, as well as its licensing and patent prosecution efforts and its technology and product development efforts, or obtain funds, if available, through strategic alliances or joint ventures that could require the Company to relinquish rights to and/or control of LB-100, or to discontinue operations entirely.
Reverse Stock Split
On November 18, 2020, the Company effected a 1-for-6 reverse split of its outstanding shares of common stock. No fractional shares were issued in connection with the reverse split, with any fractional shares resulting from the reverse split being rounded up to the nearest whole share.
All share and per share amounts and information presented herein has been retroactively adjusted to reflect the reverse stock split for all periods presented.
3. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying condensed consolidated financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and include the financial statements of Holdings and its wholly owned subsidiary, Lixte. Intercompany balances and transactions have been eliminated in consolidation.
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 at the date of the financial statements and the reported amounts of expenses during the reporting period. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates. Significant estimates include those related to assumptions used in accruals for potential liabilities, valuing equity instruments issued for services, and the realization of deferred tax assets.
Cash
Cash including accrued interest, is primarily held in a cash bank deposit program maintained by a major financial institution. The Company’s policy is to maintain its cash balances with financial institutions with high credit ratings and in accounts insured by the Federal Deposit Insurance Corporation (the “FDIC”) and/or by the Securities Investor Protection Corporation (the “SIPC”). The Company may periodically have cash balances in financial institutions in excess of the FDIC and SIPC insurance limits of $250,000 and $500,000, respectively. The financial institution that currently holds the Company’s cash balances also maintains supplemental insurance coverage for the cash balances of its customers’ cash balances.customers. The Company has not experienced any losses to date resulting from this practice.policy.
Research and Development
Research and development costs consist primarily of fees paid to consultants and contractors, and other expenses relating to the acquisition, design, development and clinical trials with respect to the Company’s compounds and product candidates. Research and development costs also include the costs to produce the compounds used in research and clinical trials, which are charged to operations as incurred.
Research and development costs are generally charged to operations ratably over the life of the underlying contracts, unless the achievement of milestones, the completion of contracted work, the termination of an agreement, or other information indicates that a different expensing schedule is more appropriate. However, payments for research and development costs that are contractually defined as non-refundable are charged to operations as incurred.
Obligations incurred with respect to mandatory scheduled payments under research agreements with milestone provisions are recognized as charges to research and development costs in the Company’s consolidated statement of operations based on the achievement of such milestones, as specified in the agreement. Obligations incurred with respect to mandatory scheduled payments under research agreements without milestone provisions are accounted for when due, are recognized ratably over the appropriate period, as specified in the agreement, and are recorded as liabilities in the Company’s consolidated balance sheet, with a corresponding charge to research and development costs in the Company’s consolidated statement of operations.
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Payments made pursuant to research and development contracts are initially recorded as advances on research and development contract services in the Company’s consolidated balance sheet and are then charged to research and development costs in the Company’s consolidated statement of operations as those contract services are performed. Expenses incurred under research and development contracts in excess of amounts advanced are recorded as research and development contract liabilities in the Company’s consolidated balance sheet, with a corresponding charge to research and development costs in the Company’s consolidated statement of operations. The Company reviews the status of its research and development contracts on a quarterly basis.
Prepaid Insurance
Prepaid insurance represents the premiums paid for directors and officers insurance coverage and for general liability insurance coverage in excess of the amortization of the total policy premium charged to operations toat each balance sheet date. Such amortization is determined by amortizing the total policy premium charged on a straight-line basis over the respective policy periods. As the policy premiums incurred are amortizable in the ensuing twelve-month period, they are recorded as a current asset in the Company’s consolidated balance sheet at each reporting date and amortized to the Company’s consolidated statement of operations for each reporting period.
Patent and Licensing Related Legal and Filing Fees and Costs
Due to the significant uncertainty associated with the successful development of one or more commercially viable products based on the Company’s research efforts and related patent applications, all patent-relatedpatent and licensing legal and filing fees and licensing-related legal feescosts related to the development and protection of its intellectual property are charged to operations as incurred. Patent and licensing-relatedlicensing legal and filing fees and costs were $137,114271,163 and $163,987137,114 for the three months ended September 30, 2022 and 2021, and 2020,respectively, and $365,466944,789 and $440,899365,466 for the nine months ended September 30, 20212022 and 2020,2021, respectively. Patent and licensing related legal and filing fees and costs are included in general and administrative costs in the Company’s consolidated statements of operations.
Concentration of Risk
The Company periodically contracts with vendors and consultants to provide services related to the Company’s operations. Charges incurred for these services can be for a specific time period (typically one year) or for a specific project or task. Costs and expenses incurred that represented 10%10% or more of general and administrative costs or research and development costs for the three months and nine months ended September 30, 20212022 and 20202021 are described as follows.
General and administrative costs for the three months ended September 30, 20212022 and 20202021 include charges from a legal firmfirms and other vendors for general licensing and patent prosecution costs relating to the Company’s intellectual properties representing 13.622.5% and 20.4%, respectively, of total general and administrative costs. General and administrative costs for the three months ended September 30, 2020 also included charges for the amortized value of stock options granted to three corporate officers representing 49.113.6% of total general and administrative costs, for that period.
General and administrative costs for the nine months ended September 30, 2021 and 2020 include charges from a legal firm for general licensing and patent prosecution costs relating to the Company’s intellectual properties representing 9.7% and 32.7%, respectively, of total general and administrative costs. General and administrative costs for the nine months ended September 30, 2020 also included charges for the amortized value of stock options granted to three corporate officers representing 29.2% of total general and administrative costs for that period.respectively.
Research and development costs for the three months ended September 30, 20212022 include charges from four vendors and consultants representing 49.132.0%, 13.523.2%, 13.216.9%%, and 12.711.0%, respectively, of total research and development costs for that period. Research and development costs for the three months ended September 30, 2020 included2021 include charges from a consultant,three vendors and the value associated with extending stock options previously granted to that consultant,consultants representing 87.713.5%, 13.2% and 12.7%, respectively, of total research and development costs for that period.
General and administrative costs for the nine months ended September 30, 2022 and 2021 include charges from legal firms and other vendors for general licensing and patent prosecution costs relating to the Company’s intellectual properties representing 25.0% and 9.7% of total general and administrative costs, respectively.
Research and development costs for the nine months ended September 30, 2022 include charges from two vendors and consultants representing 31.0% and 16.7%, respectively, of total research and development costs for that period. Research and development costs for the nine months ended September 30, 2021 include charges from three vendors and consultants representing 33.2%, 26.9%, and 10.5%, respectively, of total research and development costs for that period. Research and development costs for the nine months ended September 30, 2020 included charges from a consultant, and the value associated with extending stock options previously granted to that consultant, representing 75.2% of total research and development costs for that period.
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Income Taxes
The Company accounts for income taxes under an asset and liability approach for financial accounting and reporting for income taxes. Accordingly, the Company recognizes deferred tax assets and liabilities for the expected impact of differences between the financial statements and the tax basis of assets and liabilities.
The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. In the event the Company was to determine that it would be able to realize its deferred tax assets in the future in excess of its recorded amount, an adjustment to the deferred tax assets would be credited to operations in the period such determination was made. Should the Company determine that it would not be able to realize all or part of its deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to operations in the period such determination was made.
The Company is subject to U.S. federal income taxes and income taxes of various state tax jurisdictions. As the Company’s net operating losses have yet to be utilized, all previous tax years remain open to examination by Federal authorities and other jurisdictions in which the Company currently operates or has operated in the past. The Company had 0no unrecognized tax benefits as of September 30, 20212022 or December 31, 20202021 and does not anticipate any material amount of unrecognized tax benefits within the 12 months subsequent to September 30, 2021.through December 31, 2022.
The Company accounts for uncertainties in income tax law under a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns as prescribed by GAAP. The tax effects of a position are recognized only if it is “more-likely-than-not” to be sustained by the taxing authority as of the reporting date. If the tax position is not considered “more-likely-than-not” to be sustained, then no benefits of the position are recognized. The Company had not recorded any liability for uncertain tax positions as of September 30, 20212022 or December 31, 2020.2021. Subsequent to September 30, 2021,2022, any interest and penalties related to uncertain tax positions will be recognized as a component of income tax expense.
The Company periodically issues common stock and stock options to officers, directors, employees, Scientific Advisory Committee members, contractors and consultants for services rendered. Options vest and expire according to terms established at the issuance date of each grant. Stock grants, which are generally time vested, are measured at the grant date fair value and charged to operations ratably over the vesting period.
The Company accounts for stock-based payments to officers, directors, employees, Scientific Advisory Committee members contractors and consultants by measuring the cost of services received in exchange for equity awards utilizing the grant date fair value of the awards, with the cost recognized as compensation expense on the straight-line basis in the Company’s financial statements over the vesting period of the awards.
The fair value of stock options granted as stock-based compensation is determined utilizing the Black-Scholes option-pricing model, and is affected by several variables, the most significant of which are the expected life of the stock option, the exercise price of the stock option as compared to the fair market value of the common stock on the grant date, and the estimated volatility of the common stock. Unless sufficient historical exercise data is available, the expected life of the stock option is calculated as the mid-point between the vesting period and the contractual term (the “simplified method”). The estimated volatility is based on the historical volatility of the Company’s common stock, calculated utilizing a look-back period approximately equal to the contractual life of the stock option being granted. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The fair market value of the common stock is determined by reference to the quoted market price of the Company’s common stock on the grant date. The expected dividend yield is based on the Company’s expectation of dividend payouts and is assumed to be zero.
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The Company recognizes the fair value of stock-based compensation awards in general and administrative costs and in research and development costs, as appropriate, in the Company’s consolidated statements of operations. The Company issues new shares of common stock to satisfy stock option exercises.
The Company’s computation of earnings (loss) per share (“EPS”) includes basic and diluted EPS. Basic EPS is measured as the income (loss) attributable to common stockholders divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., preferred shares, warrants and stock options) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.
Loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the respective periods. Basic and diluted loss per common share was the same for all periods presented because all preferred shares, warrants and stock options outstanding were anti-dilutive.
Schedule of Anti-dilutive Securities Excluded from Computation of Earnings Per Share
| 2021 | 2020 | 2022 | 2021 | |||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2022 | 2021 | |||||||||||||
| Series A Convertible Preferred Stock | 729,167 | 729,167 | 729,167 | 729,167 | ||||||||||||
| Common stock warrants | 3,110,310 | 1,500,000 | 3,400,310 | 3,110,310 | ||||||||||||
| Common stock options, including options issued in the form of warrants | 2,466,667 | 1,508,333 | 3,325,000 | 2,466,667 | ||||||||||||
| Total | 6,306,144 | 3,737,500 | 7,454,477 | 6,306,144 | ||||||||||||
Fair Value of Financial Instruments
The authoritative guidance with respect to fair value established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels and requires that assets and liabilities carried at fair value be classified and disclosed in one of three categories, as presented below. Disclosure as to transfers in and out of Levels 1 and 2, and activity in Level 3 fair value measurements, is also required.
Level 1. Observable inputs such as quoted prices in active markets for an identical asset or liability that the Company has the ability to access as of the measurement date. Financial assets and liabilities utilizing Level 1 inputs include active-exchange traded securities and exchange-based derivatives.
Level 2. Inputs, other than quoted prices included within Level 1, which are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. Financial assets and liabilities utilizing Level 2 inputs include fixed income securities, non-exchange-based derivatives, mutual funds, and fair-value hedges.
Level 3. Unobservable inputs in which there is little or no market data for the asset or liability which requires the reporting entity to develop its own assumptions. Financial assets and liabilities utilizing Level 3 inputs include infrequently traded non-exchange-based derivatives and commingled investment funds and are measured using present value pricing models.
The Company determines the level in the fair value hierarchy within which each fair value measurement falls in its entirety, based on the lowest level input that is significant to the fair value measurement in its entirety. In determining the appropriate levels, the Company performs an analysis of the assets and liabilities at each reporting period end.
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The carrying value of financial instruments (consisting of accounts payable and accrued expenses) is considered to be representative of their respective fair values due to the short-term nature of those instruments.
Recent Accounting Pronouncements
In December 2019,August 2020, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions and enhances and simplifies various aspects of the income tax accounting guidance in ASC 740. ASU 2019-12 was effective January 1, 2021. The adoption of ASU 2019-12 did not have any impact on the Company’s consolidated financial statement presentation or disclosures.
In August 2020, the FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for convertible debt by eliminating the beneficial conversion and cash conversion accounting models. Upon adoption of ASU 2020-06, convertible debt proceeds, unless issued with a substantial premium or an embedded conversion feature that is not clearly and closely related to the host contract, will no longer be allocated between debt and equity components. This modification will reduce the issue discount and result in less non-cash interest expense in financial statements. ASU 2020-06 also updates the earnings per share calculation and requires entities to assume share settlement when the convertible debt can be settled in cash or shares. For contracts in an entity’s own equity, the type of contracts primarily affected by ASU 2020-06 are freestanding and embedded features that are accounted for as derivatives under the current guidance due to a failure to meet the settlement assessment by removing the requirements to (i) consider whether the contract would be settled in registered shares, (ii) consider whether collateral is required to be posted, and (iii) assess shareholder rights. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, and only if adopted as of the beginning of such fiscal year. The Company adopted ASU 2020-06 effective January 1, 2021. The adoption of ASU 2020-06 did not have any impact on the Company’s consolidated financial statement presentation or disclosures.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50), Compensation — Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”). ASU 2021-04 provides guidance as to how an issuer should account for a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option (i.e., a warrant) that remains classified after modification or exchange as an exchange of the original instrument for a new instrument. An issuer should measure the effect of a modification or exchange as the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification or exchange and then apply a recognition model that comprises four categories of transactions and the corresponding accounting treatment for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination or modification). ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the guidance provided in ASU 2021-04 prospectively to modifications or exchanges occurring on or after the effective date. Early adoption is permitted for all entities, including adoption in an interim period. If an entity elects to early adoptThe Company adopted ASU 2021-04 in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes that interim period.effective January 1, 2022. The adoption of ASU 2021-04 isdid not expected to have any impact on the Company’s consolidated financial statement presentation or disclosures.
Management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on the Company’s financial statement presentation or disclosures.
4. Stockholders’ Equity
Preferred Stock
The Company is authorized to issue a total of shares of preferred stock, par value $ per share. On March 17, 2015, the Company filed a Certificate of Designations, Preferences, Rights and Limitations of its Series A Convertible Preferred Stock with the Delaware Secretary of State to amend the Company’s certificate of incorporation. The Company has designated a total of shares as Series A Convertible Preferred Stock, which are non-voting and are not subject to increase without the written consent of a majority of the holders of the Series A Convertible Preferred Stock or as otherwise set forth in the Preferences, Rights and Limitations. The holders of each tranche of shares of the Series A Convertible Preferred Stock are entitled to receive a per share dividend equal to 1% of the annual net revenue of the Company divided by , until converted or redeemed. As of September 30, 20212022 and December 31, 2020,2021, the Company had shares of undesignated preferred stock were undesignated andwhich may be issued with such rights and powers as the Board of Directors may designate.
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Each share of Series A Convertible Preferred Stock may be converted, at the option of the holder, into shares of common stock (subject to customary anti-dilution provisions) and the Series A Convertible Preferred Stock is subject to mandatory conversion at the conversion rate in the event of a merger or sale transaction resulting in gross proceeds to the Company of at least $21,875,000. The Series A Convertible Preferred Stock has a liquidation preference based on its assumed conversion into shares of common stock. The Series A Convertible Preferred Stock does not have a cash liquidation preference.
If fully converted, the outstanding shares of Series A Convertible Preferred Stock would convert into shares of common stock at September 30, 20212022 and December 31, 2020. The Company had the right to redeem the Series A Convertible Preferred Stock up to the fifth anniversary of their respective closing dates (March 17, 2015 and January 21, 2016) at a price per share equal to $. Accordingly, as of December 31, 2020, the Company had the right to redeem the shares of Series A Convertible Preferred Stock that were issued on January 21, 2016; however, that right expired on January 21, 2021. The Series A Convertible Preferred Stock has no right to cash, except with respect to the payment of the aforementioned dividend based on the generation of revenues by the Company. The shares of Series A Convertible Preferred Stock do not have any registration rights.
Based on the attributes of the Series A Convertible Preferred Stock as previously described, the Company has accounted for the Series A Convertible Preferred Stock as a permanent component of stockholders’ equity.
Common Stock
The Company is authorized to issue a total of shares of common stock, par value $ per share. As of September 30, 20212022 and December 31, 2020,2021, the Company had shares and shares, respectively, of common stock issued, issuable and outstanding.
Effective November 30, 2020,April 12, 2022, the Company raised gross proceeds $5,700,000 through a public offeringcompleted the sale of unitsshares of common stock at a sale price of $ per unit. Each unit consistedshare in a registered direct equity offering, generating gross proceeds of one share$5,800,000. The total cash costs of this offering were $658,616, resulting in net proceeds of $5,141,384. Pursuant to the placement agents’ agreement, the Company granted warrants to the placement agents to purchase up to 290,000 shares of common stock and one warrant to purchase one share of common stock exercisable for five yearsexpiring on April 14, 2027, at an exercise price of $5.70 per share. Additionally, on December 7, 2020, the Company received an additional $1,800 from the sale of warrants as part of the overallotment option granted to the underwriters in the public offering. The warrants sold are exercisable for five years and represent the right to purchase one share of common stock at an exercise price of $5.70 per share. The total cash costs of the public offering were $1,110,451, resulting in net cash proceeds of $4,591,349. Pursuant to the underwriting agreement, the Company also granted to the underwriters warrants to purchase up to 120,000 shares of common stock commencing on May 24, 2021 and expiring on November 24, 2025, at an exercise price of $5.702.00 per share.
During February and March 2021, the Company issued shares of common stock upon the exercise of warrants at $5.70$5.70 per share and received cash proceeds of $17,100.
Effective March 2, 2021, the Company completed the sale of shares of common stock at a price of $ per share in a registered direct equity offering, generating gross proceeds of $4,192,478. The total cash costs of this offering were $502,717, resulting in net cash proceeds of $3,689,761. Pursuant to the placement agents’ agreement, the Company granted warrants to the placement agents warrants to purchase up to 113,310 shares of common stock commencing on March 2, 2021 and expiring on March 2, 2026, at an exercise price of $3.70 per share.
EffectiveOn April 22, 2021, the Company issued shares of its common stock upon the exercise of options held by an officer and two of the Company’s directors for shares of common stock were exercised. Such stock options consisted ofDirectors as follows: options at $ per share, options at $ per share, and options at $ per share. The exercise of these stock options generatedshare, for total cash proceeds of $101,000 and resulted in the issuance of 125,001 shares of common stock..
Effective July 14, 2021, a stock option held by a consultant of the Company for shares of common stock were exercised at $ per share. The exercise of this stock option generated total cash proceeds of $100,000 and resulted in the issuance of shares of common stock.
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Common Stock Warrants
A summary of common stock warrant activity during the nine months ended September 30, 20212022 is presented below.
Schedule of Warrants Outstanding
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in Years) | Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in Years) | |||||||||||||||||||
| Warrants outstanding at December 31, 2020 | 3,000,000 | $ | 5.850 | |||||||||||||||||||||
| Warrants outstanding at December 31, 2021 | 3,110,310 | $ | 5.772 | |||||||||||||||||||||
| Issued | 113,310 | 3.700 | 290,000 | 2.000 | ||||||||||||||||||||
| Exercised | (3,000 | ) | 5.700 | — | — | |||||||||||||||||||
| Expired | — | — | — | — | ||||||||||||||||||||
| Warrants outstanding at September 30, 2021 | 3,110,310 | $ | 5.772 | 2.73 | ||||||||||||||||||||
| Warrants outstanding at September 30, 2022 | 3,400,310 | $ | 5.450 | |||||||||||||||||||||
At September 30, 2021,2022, the outstanding warrants are exercisable at the following prices per common share:
Schedule of Warrants Outstanding and Exercisable
Exercise Prices | Warrants Outstanding (Shares) | |||
| $3.700 | 113,310 | |||
| $5.700 | 1,497,000 | |||
| $6.000 | 1,500,000 | |||
| 3,110,310 | ||||
Exercise Prices | Warrants Outstanding (Shares) | |||||
| $ | 2.000 | 290,000 | ||||
| $ | 3.700 | 113,310 | ||||
| $ | 5.700 | 1,497,000 | ||||
| $ | 6.000 | 1,500,000 | ||||
| 3,400,310 | ||||||
Based on a fair market value of $ per share on September 30, 2021,2022, there was no intrinsic value attributed to exercisable but unexercised in-the-money common stock warrants at September 30, 2021.2022.
Information with respect to the issuance of common stock in connection with various stock-based compensation arrangements is provided at Note 6.
5. Related Party Transactions
Related party transactions include transactions with the Company’s officers, directors and affiliates.
Gil N Schwartzberg
In September 2007, the Company entered into a consulting agreement with Gil N Schwartzberg for Mr. Schwartzberg to provide financial advisory and consulting services to the Company with respect to financing matters, capital structure and strategic development, and to assist management in communications with investors and stockholders. Consideration under this consulting agreement, including amendments, has been paid exclusively in the form of stock options In January 2014 and August 2018, the Company entered into respective amendments to this consulting agreement, which have resulted in the extension of the consulting agreement, as well as stock options for shares of common stock exercisable at $ per share, through January 28, 2024. Effective April 9, 2021, Mr. Schwartzberg was appointed to the Company’s Board of Directors. Mr. Schwartzberg is currently a significant stockholder of the Company and continues to be a consultant to the Company.
Employment Agreements with Officers
During July and August 2020, the Company entered into one-year employment agreements with its executive officers, consisting of Dr. John S. Kovach, Eric J. Forman, Dr. James S. Miser, and Robert N. Weingarten, payable monthly, as described below. The employment agreements are automatically renewable for additional one-year periods unless terminated by either party upon 60 days written notice prior to the end of the applicable one-year period, or by death, or by termination for cause. These employment agreements were automatically renewed for an additional one-year period in July and August 2021 and 2022.
The Company entered into an employment agreement with Dr. Kovach dated July 15, 2020, effective October 1, 2020, for Dr. Kovach to continue to act as the Company’s President, Chief Executive Officer and Chief Scientific Officer with an annual salary of $250,000. During the three months and nine months ended September 30, 2020,2022 and for services rendered prior to the above-described employment agreement,2021, the Company paid Dr. Kovach a salary of $15,00062,500 and $45,00062,500, respectively, to Dr. Kovach under this employment agreement, which amount isare included in general and administrative costs in the Company’s consolidated statements of operations.operations for such periods. During the nine months ended September 30, 2022 and 2021, the Company paid $187,500 and $187,500, respectively, to Dr. Kovach under this employment agreement, which are included in general and administrative costs in the Company’s consolidated statements of operations for such periods.
The Company entered into an employment agreement with Dr. James S. Miser, M.D., effective August 1, 2020 to act as the Company’s Chief Medical Officer with an annual salary of $150,000. Effective May 1, 2021, Dr. Miser’s annual salary was increased to $175,000. Dr. Miser is required to devote at least 50% of his business time to the Company’s activities. During the three months ended September 30, 2022 and 2021, the Company paid $43,750 and $43,750, respectively, to Dr. Miser under this employment agreement, which are included in general and administrative costs in the Company’s consolidated statements of operations for such periods. During the nine months ended September 30, 2022 and 2021, the Company paid $131,250 and $122,917, respectively, to Dr. Miser under this employment agreement, which are included in general and administrative costs in the Company’s consolidated statements of operations for such periods.
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The Company entered into an employment agreement with Eric J. Forman effective July 15, 2020, as amended on August 12, 2020, to act as the Company’s Chief Administrative Officer with an annual salary of $120,000. Eric Forman is the son-in-law of Gil Schwartzberg, a member of the Company’s Board of Directors, and a significant stockholder of and consultant to the Company, and is the son of Dr. Stephen Forman, a member of the Company’s Board of Directors. Julie Forman, the wife of Eric Forman and the daughter of Gil Schwartzberg, is Vice President of Morgan Stanley Wealth Management, at which firm the Company’s cash is on deposit and with which the Company maintains a continuing banking relationship. Effective May 1, 2021, Mr. Forman’s annual salary was increased to $175,000. During the three months and nine months ended September 30, 2020,2022 and for services rendered prior to his appointment as Chief Administrative Officer,2021, the Company paid legal and consulting fees to the Eric Forman Law Office of $14,00043,750 and $38,00043,750, respectively, to Mr. Forman under this employment agreement, which amount isare included in general and administrative costs in the Company’s consolidated statements of operations.operations for such periods. During the nine months ended September 30, 2022 and 2021, the Company paid $131,250 and $112,917, respectively, to Mr. Forman under this employment agreement, which are included in general and administrative costs in the Company’s consolidated statements of operations for such periods.
The Company entered into an employment agreement with Robert N. Weingarten effective August 12, 2020 to act as the Company’s Vice President and Chief Financial Officer with an annual salary of $120,000. Effective May 1, 2021, Mr. Weingarten’s annual salary was increased to $175,000. During the three months ended September 30, 2022 and 2021, the Company paid $43,750 and $43,750, respectively, to Mr. Weingarten under this employment agreement which are included in general and administrative costs in the Company’s consolidated statements of operations for such periods. During the nine months ended September 30, 2020,2022 and for services rendered prior to his appointment as Vice President and Chief Financial Officer,2021, the Company paid Mr. Weingarten a total of $32,620131,250 and $79,995112,917, respectively, for accountingto Mr. Weingarten under this employment agreement which are included in general and financial consulting services rendered with respect to the preparation ofadministrative costs in the Company’s consolidated financial statements of operations for such periods.
Appointment of Dr. René Bernards to the Board of Directors
Effective as of June 15, 2022, Dr. René Bernards was appointed to the Company’s Board of Directors as an independent director. Dr. Bernards is a leader in the field of molecular carcinogenesis and certain other financial and compliance matters.is employed by the Netherlands Cancer Institute in Amsterdam.
On April 9,October 8, 2021, the BoardCompany entered into a Development Collaboration Agreement with the Netherlands Cancer Institute, Amsterdam, one of Directors increased the annual compensationworld’s leading comprehensive cancer centers, and Oncode Institute, Utrecht, a major independent cancer research center, to identify the most promising drugs to be combined with LB-100, and potentially LB-100 analogues, to be used to treat a range of Eric J. Forman,cancers, as well as to identify the Company’s Chief Administrative Officer, Dr. James S. Miser,specific molecular mechanisms underlying the Company’s Chief Medical Officer, and Robert N. Weingarten, the Company’s Chief Financial Officer, under the employment agreements such that the total aggregate annual compensation of all officers increased to $775,000, effective May 1, 2021.identified combinations, as described at Note 8.
Compensatory Arrangements for Members of the Board of Directors
Effective April 9, 2021, the Board of Directors approved a comprehensive cash and equity compensation packageprogram for the independent members of the Board of Directors and committee members. Effective May 25, 2022, the Board of Directors approved an amendment to the program. Officers who also serve on the Board of Directors are not compensated separately for their service on the Board of Directors.
The Board of Directors approved the following cashCash compensation for non-officerindependent directors, payable quarterly:quarterly, is as follows:
Base director compensation - $20,000 per year
Chairman of audit committee - additional $10,000 per year
Chairman of any other committees - additional $5,000 per year
Member of audit committee - additional $5,000 per year
Member of any other committees - additional $2,500 per year
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Equity compensation for independent directors is as follows:
Appointment of new independent directors - The Company will grant options to purchase shares of common stock, exercisable for a period of five years at the closing market price on the date of grant, vesting % on the grant date and the remaining % vesting % on the last day of each calendar quarter beginning in the quarter immediately subsequent to the date of the grant until fully vested, subject to continued service. At the discretion of the Board of Directors, for a nominee to the Board of Directors who is restricted by their respective institution or employer from receiving equity-based compensation, in lieu of the grant of such stock options, the Company may elect to pay a one-time cash fee of $100,000 to such director, payable upfront.
Annual grant of options to independent directors - Effective on the last business day of the month of June, the Company will grant options to purchase shares of common stock, exercisable for a period of five years at the closing market price on the date of grant, vesting % on the last day of each calendar quarter beginning in the quarter immediately subsequent to the date of grant until fully vested, subject to continued service. If any director has served for less than 12 full calendar months at the grant date, the amount of such stock option grant shall be prorated based on the length of service of such director. At the discretion of the Board of Directors, for a nominee to the Board of Directors who is restricted by their respective institution or employer from receiving equity-based compensation, in lieu of the grant of such stock options, the Company may elect to pay an annual cash fee of $40,000 to such director, payable quarterly.
Total cash compensation paid to independent directors was $ and $, respectively, for the three months ended September 30, 2022 and 2021. Total cash compensation paid to independent directors was $ and $, respectively, for the nine months ended September 30, 2022 and 2021.
Stock-based compensation arrangements involvinggranted to members of the Company’s Board of Directors. officers and affiliates areis described at Note 6.
A summary of related party costs, including compensation under employment and consulting agreements and fees paid to non-officer directors for their serviceservices on the Board of Directors, for the three months and nine months ended September 30, 20212022 and 20202021 is presented below. This summary includes the above-described payments to Mr. Forman in 2020 prior to his appointment as Chief Administrative Officer and excludes the payments to Mr. Weingarten in 2020 prior to his appointment as Vice President and Chief Financial Officer.
Summary of Related Party Costs
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Related party costs: | ||||||||||||||||
| Cash-based | $ | 193,750 | $ | 70,452 | $ | 536,250 | $ | 124,452 | ||||||||
| Stock-based | 347,222 | 394,031 | 1,854,058 | 394,031 | ||||||||||||
| Total | $ | 540,972 | $ | 464,483 | $ | 2,390,308 | $ | 518,483 | ||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Compensation to related parties: | ||||||||||||||||
| Cash-based | $ | 247,074 | $ | 226,250 | $ | 802,760 | $ | 596,583 | ||||||||
| Stock-based | 396,883 | 347,222 | 1,160,649 | 1,854,058 | ||||||||||||
| Total | $ | 643,957 | $ | 573,472 | $ | 1,963,409 | $ | 2,450,641 | ||||||||
The Company issues common stock and stock options as incentive compensation to directors and as compensation for the services of employees, contractors, and consultants of the Company.
On July 14, 2020, the Board of Directors of the Company adopted the 2020 Stock Incentive Plan (the “2020 Plan”), which provides for the granting of equity-based awards, consisting of stock options, restricted stock, restricted stock units, stock appreciation rights, and other stock-based awards to employees, officers, directors and consultants of the Company and its affiliates for up to shares of the Company’s common stock, under terms and conditions as determined by the Company’s Board of Directors. Stockholders holding a majorityThe 2020 Plan was subsequently approved by the stockholders of the voting power of the common stock of the Company approved the 2020 Plan pursuant to an action by written consent dated July 31, 2020. Stockholders of the Company were notified of such action by written consent pursuant to an Information Statement dated August 31, 2020 and mailed to stockholders on or about September 3, 2020. Company.
As of September 30, 2021,2022, unexpired stock options for shares were issued and outstanding under the 2020 Plan and shares were available for issuance under the 2020 Plan. Subsequently, on October 7, 2022, the Company held a meeting of stockholders, at which meeting the stockholders approved a proposal to amend the 2020 Plan to increase the number of common shares issuable thereunder by shares, to a total of shares.
Effective April 9, 2021, the Board of Directors approved a comprehensive cash and equity compensation package for the members of the Board of Directors and committee members.
Stock-based features of the compensation package consisted of the annual granting of stock options to each non-officer director to purchase shares of common stock at the closing market price on the earlier of the date of the annual meeting of shareholders or the last business day of the month ending June 30, vesting 12.5% on the last day of each subsequent calendar quarter-end until fully vested, and the granting of stock options to a new director to purchase shares of common stock, exercisable at the closing market price on the grant date for a period of five years, vesting 50% on the grant date and the remainder vesting 12.5% on the last day of each subsequent calendar quarter-end until fully vested.
Cash-based features of the compensation package are described at Note 8.
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The fair value of a stock option award is calculated on the grant date using the Black-Scholes option-pricing model. The risk-free interest rate is based on the U.S. Treasury yield curve in effect as of the grant date. The expected dividend yield assumption is based on the Company’s expectation of dividend payouts and is assumed to be zero. The estimated volatility is based on the historical volatility of the Company’s common stock, calculated utilizing a look-back period approximately equal to the contractual life of the stock option being granted. Unless sufficient historical exercise data is available, the expected life of the stock option is calculated as the mid-point between the vesting period and the contractual term (the “simplified method”). The fair market value of the common stock is determined by reference to the quoted market price of the common stock on the grant date.
Schedule of Fair Value of Each Option Award Estimated Assumption
| Risk-free interest rate | % | |||
| Expected dividend yield | % | |||
| Expected volatility | % | |||
| Expected life | |
For stock options requiring an assessment of value during the nine months ended September 30, 2020,2021, the fair value of each stock option award was estimated using the Black-Scholes option-pricing model with the following assumptions:
| Risk-free interest rate | % | |||
| Expected dividend yield | % | |||
| Expected volatility | % | |||
| Expected life | to years |
Effective September 14, 2015, in connection with the Collaboration Agreement with BioPharmaWorks LLC (“BioPharmaWorks”) as described at Note 8, the Company issued to BioPharmaWorks two stock options, in the form of warrants, to purchase 166,667 shares (83,333.5 shares per warrant) of the Company’s common stock. The first warrant vested on September 14, 2016 and was exercisable for a period of five years from the grant date at $6.00 per share. The second warrant vested on September 14, 2017 and was exercisable for a period of five years from the grant date at $12.00 per share. On July 3, 2020, the Company’s Board of Directors approved an extension of the term of the outstanding warrants to acquire an aggregate of 166,667 shares of the Company’s common stock from September 14, 2020 to September 14, 2025. The Company’s closing stock price on July 2, 2020 was $5.40 per share. The fair value of the extension of these stock options, as calculated pursuant to the Black-Scholes option-pricing model, was measured for accounting purposes as the difference in the fair value of the stock options immediately before and immediately after the extension date, and was determined to be $ ($ per share), which was reflected as a charge to general and administrative costs in the consolidated statement of operations on that date.
.
On August 1, 2020, in connection with an employment agreement entered into with .
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.
Effective January 6, 2021, in recognition withof their service as directors of the Company over the past year, the Company granted fully-vested stock options to purchase shares of common stock to each of Dr. Winson Sze Chun Ho, Dr. Yun Yen, Dr. Stephen Forman, and Dr. Philip Palmedo (an aggregate of shares), exercisable for a period of years from the grant date at $ per share, which was the approximate fair market value of the Company’s common stock on such date. The fair value of these stock options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $571,312 ($ per share) and was recorded as a chargecharged to general and administrative costs in the consolidated statement of operations on the grant date.
On April 9, 2021, .
On May 11, 2021, .
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On June 30, 2021, .
On June 17, 2022, .
On June 30, 2022, .
Summary of Stock-based Compensation Costs
| 2021 | 2020 | 2021 | 2020 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||
| Related parties | $ | 347,222 | $ | 394,031 | $ | 1,854,058 | $ | 394,031 | $ | 396,883 | $ | 347,222 | $ | 1,160,649 | $ | 1,854,058 | ||||||||||||||||
| Non-related parties | — | 670,715 | — | 670,715 | — | — | — | — | ||||||||||||||||||||||||
| Total stock-based compensation costs | $ | 347,222 | $ | 1,064,746 | $ | 1,854,058 | $ | 1,064,746 | $ | 396,883 | $ | 347,222 | $ | 1,160,649 | $ | 1,854,058 | ||||||||||||||||
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Summary of Stock Option Activity Including Options Form of Warrants
Number of Shares | Weighted Average Exercise Price | Weighted Average Life (in Years) | ||||||||||
| Stock options outstanding at December 31, 2020 | 1,475,000 | $ | 4.136 | |||||||||
| Granted | 1,200,000 | 3.048 | ||||||||||
| Exercised | (208,334 | ) | 0.965 | |||||||||
| Expired | — | — | ||||||||||
| Rounding adjustment attributable to reverse stock split | 1 | — | ||||||||||
| Stock options outstanding at September 30, 2021 | 2,466,667 | $ | 3.032 | 3.66 | ||||||||
| Stock options exercisable at September 30, 2021 | 1,710,417 | $ | 3.971 | 1.83 | ||||||||
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in Years) | ||||||||||
| Stock options outstanding at December 31, 2021 | 2,666,667 | $ | 3.738 | |||||||||
| Granted | 750,000 | 0.740 | ||||||||||
| Exercised | — | — | ||||||||||
| Expired/Forfeited | (91,667 | ) | 2.962 | |||||||||
| Stock options outstanding at September 30, 2022 | 3,325,000 | $ | 3.083 | |||||||||
| Stock options exercisable at September 30, 2022 | 2,446,875 | $ | 3.532 | |||||||||
Total deferred compensation expense for the outstanding value of unvested stock options was approximately $2,444,0001,411,000 at September 30, 2021,2022, which will be recognized subsequent to September 30, 20212022 over a weighted-average period of approximately 12 months.
Schedule of Exercise Prices of Common Stock Options Outstanding and Exercisable Including Options Form of Warrants
Exercise Prices | Options Outstanding | Options Exercisable | ||||||||
| $ | 0.900 | 33,333 | 33,333 | |||||||
| $ | 1.680 | 66,667 | 66,667 | |||||||
| $ | 2.800 | 250,000 | 140,625 | |||||||
| $ | 3.000 | 666,667 | 666,667 | |||||||
| $ | 3.030 | 500,000 | 62,500 | |||||||
| $ | 3.200 | 250,000 | 140,625 | |||||||
| $ | 3.210 | 200,000 | 200,000 | |||||||
| $ | 6.000 | 166,667 | 166,667 | |||||||
| $ | 6.600 | 50,000 | 50,000 | |||||||
| $ | 7.140 | 200,000 | 100,000 | |||||||
| $ | 12.000 | 83,333 | 83,333 | |||||||
| 2,466,667 | 1,710,417 | |||||||||
Exercise Prices | Options Outstanding (Shares) | Options Exercisable (Shares) | ||||||||
| $ | 0.740 | 750,000 | 203,125 | |||||||
| $ | 0.900 | 33,333 | 33,333 | |||||||
| $ | 1.680 | 33,333 | 33,333 | |||||||
| $ | 2.060 | 200,000 | 200,000 | |||||||
| $ | 2.800 | 250,000 | 203,125 | |||||||
| $ | 3.000 | 666,667 | 666,667 | |||||||
| $ | 3.030 | 500,000 | 312,500 | |||||||
| $ | 3.200 | 250,000 | 203,125 | |||||||
| $ | 3.210 | 150,000 | 150,000 | |||||||
| $ | 6.000 | 166,667 | 166,667 | |||||||
| $ | 6.600 | 41,667 | 41,667 | |||||||
| $ | 7.140 | 200,000 | 150,000 | |||||||
| $ | 12.000 | 83,333 | 83,333 | |||||||
| 3,325,000 | 2,446,875 | |||||||||
The intrinsic value of exercisable but unexercised in-the-money stock options at September 30, 2021 was approximately $, basedBased on a fair market value of $ per share on September 30, 2021.2022, there was no intrinsic value attributed to exercisable but unexercised in-the-money common stock options at September 30, 2022.
Outstanding stock options to acquire shares of the Company’s common stock had not vested at September 30, 2021.2022.
The Company expects to satisfy such stock obligations through the issuance of authorized but unissued shares of common stock.
7. Income Taxes
During the three months and nine months ended September 30, 20212022 and 2020,2021, the Company haddid not recordedrecord any provision for income taxes as the Company incurred losses during those periods. Deferred tax assets and liabilities reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company has recorded a full valuation allowance against its deferred tax assets for all periods presented as the Company believes it is more likely than not the deferred tax assets will not be realized.
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8. Commitments and Contingencies
Legal Claims
The Company may be subject to legal claims and actions from time to time as part of its business activities. As of September 30, 2022 and December 31, 2021, the Company was not subject to any pending or threatened legal claims or actions.
Principal Commitments
Clinical Trial Agreements
At September 30, 2022, the Company’s unpaid remaining contractual commitments pursuant to clinical trial agreements, and clinical trial monitoring agreements, as described below, aggregated $8,002,000, which are currently scheduled to be incurred through December 31, 2025. The Company’s ability to conduct and fund these contractual commitments is subject to the timely availability of sufficient capital to fund such expenditures, as well as any changes in the allocation or reallocation of such funds to the Company’s current or future clinical trial programs. The Company expects that the full amount of these expenditures will be incurred only if such clinical trial programs are conducted as originally designed and their respective enrollments and duration are not modified or reduced. Clinical trial programs, such as the types that the Company is engaged in, can be highly variable and can frequently involve a series of changes and modifications over time as clinical data is obtained and analyzed, and are frequently modified, suspended or terminated before the clinical trial endpoint. Accordingly, such contractual commitments as discussed herein should be considered as estimates only based on current clinical assumptions and conditions, and are typically subject to significant revisions over time.
Moffitt. Effective August 20, 2018, the Company entered into a Clinical Trial Research Agreement with the Moffitt Cancer Center and Research Institute Hospital Inc., Tampa, Florida, effective for a term of five years, unless terminated earlier by the Company pursuant to 30 days written notice. Pursuant to the Clinical Trial Research Agreement, Moffitt agreed to conduct and manage a Phase 1b/2 clinical trial to evaluate the therapeutic benefit of the Company’s lead anti-cancer clinical compound LB-100 to be administered intravenously in patients with low or intermediate-1 risk myelodysplastic syndrome (MDS).
In November 2018, the Company received approval from the U.S. Food and Drug Administration for its Investigational New Drug Application (“IND”) to conduct a Phase 1b/2 clinical trial to evaluate the therapeutic benefit of LB-100 in patients with low and intermediate-1 risk MDS who have failed or are intolerant of standard treatment. Patients with MDS, although usually older, are generally well except for severe anemia requiring frequent blood transfusions. This Phase 1b/2 clinical trial utilizes LB-100 as a single agent in the treatment of patients with low and intermediate-1 risk MDS, including patients with del(5q) myelodysplastic syndrome (del5qMDS) failing first line therapy. The bone marrow cells of patients with del5qMDS are deficient in PP2A by virtue of an acquired mutation and are especially vulnerable to further inhibition of PP2A by LB-100. The clinical trial began at a single site in April 2019 and the first patient was entered into the clinical trial in July 2019. A total enrollment of 41 patients is planned. An interim analysis will be done after the first 21 patients are entered. If there are 3 or more responders but fewer than 7, an additional 20 patients will be entered. If at any point there are 7 or more responders, this will be sufficient evidence to support continued development of LB-100 for the treatment of low and intermediate-1 risk MDS. Recruitment has been slow and the Covid-19 pandemic has further reduced recruitment of patients into the protocol. At the current rate of accrual, the clinical trial is expected to be completed over a period of approximately four years from its initiation.by June 30, 2025. However, with additional funds, the Company would consider adding two additional MDS centers to the Phase 2 portion of the study to accelerate patient accrual.
During the three months ended September 30, 20212022 and 2020,2021, the Company incurred costs of $09,218 and $10,6430, respectively, pursuant to this agreement.agreement, which have been included in research and development costs in the Company’s consolidated statements of operations. During the nine months ended September 30, 20212022 and 2020,2021, the Company incurred costs of $17,69318,623 and $36,00817,693, respectively, pursuant to this agreement.agreement, which have been included in research and development costs in the Company’s consolidated statements of operations. As of September 30, 2021,2022, total costs of $103,927123,300 have been incurred pursuant to this agreement.The Company’s aggregate commitment pursuant to this agreement, less amounts previously paid to date, totaled approximately $590,000 as of September 30, 2022, which is expected to be incurred through December 31, 2025.
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GEIS. Effective July 31, 2019, the Company entered into a Collaboration Agreement for an Investigator-Initiated Clinical Trial with the Spanish Sarcoma Group (Grupo Español de Investigación en Sarcomas or “GEIS”), Madrid, Spain, to carry out a study entitled “Randomized phase I/II trial of LB-100 plus doxorubicin vs. doxorubicin alone in first line of advanced soft tissue sarcoma”. The purpose of this clinical trial is to obtain information aboutwith respect to the efficacy and safety of LB-100 combined with doxorubicin in soft tissue sarcomas. Doxorubicin is the global standard for initial treatment of advanced soft tissue sarcomas (“ASTS”). Doxorubicin alone has been the mainstay of first line treatment of ASTS for over 40 years, with little therapeutic gain from adding cytotoxic compounds to or substituting other cytotoxic compounds for doxorubicin. In animal models, LB-100 consistently enhances the anti-tumor activity of doxorubicin without apparent increases in toxicity.
GEIS has a network of referral centers in Spain and across Europe that have an impressive track record of efficiently conducting innovative studies in ASTS. The Company agreed to provide GEIS with a supply of LB-100 to be utilized in the conduct of this clinical trial, as well as to provide funding for the clinical trial. The goal was to enter the first patientapproximately 150 patients in this clinical trial during the quarter ended December 31, 2020, with approximately 150 patients to be enrolled over a period of two years. As advanced sarcoma is a very aggressive disease, the design of the study assumes a median progression free survival (PFS, no evidence of disease progression or death from any cause) of 4.5 months in the doxorubicin arm and an alternative median PFS of 7.5 months in the doxorubicin plus LB-100 arm to demonstrate a statistically significant decrease in relative risk of progression or death by adding LB-100. There is a planned interim analysis of the primary endpoint when about halfapproximately 50% of the 102 events required for final analysis is reached.
The Company had previously expected that this clinical trial would commence during the quarter ended June 30, 2020. However, during July 2020, the Spanish regulatory authority advised the Company that although it had approved the scientific and ethical basis of the protocol, it required that the Company manufacture new inventory of LB-100 under current Spanish pharmaceutical manufacturing standards. These regulationsstandards were adopted subsequent to the production of the Company’s existing LB-100 inventory.
AIn order to manufacture a new batchinventory supply of LB 100 has been preparedLB-100 for the GEIS clinical trial, the Company engaged a number of vendors to carry out the multiple tasks needed to make and is now undergoinggain approval of a new clinical product for investigational study in Spain. These tasks include the multitude of analytical studiessynthesis under good manufacturing practices (GMP) of the formulatedactive pharmacologic ingredient (API), with documentation of each of the steps involved by an independent auditor. The API was then transferred to a vendor that prepares the clinical drug product, necessaryalso under GMP conditions documented by an independent auditor. The clinical drug product was then sent to gain approvala vendor to test for purity and sterility, provide appropriate labels, store the drug, and distribute the drug to the clinical centers for use in the European Union. Regulatory reviews byclinical trials. A formal application documenting all steps taken to prepare the clinical drug product for clinical use must be submitted to the appropriate regulatory authorities for review and approval before being used in a clinical trial.
As of September 30, 2022, this program to provide new inventory of the clinical drug product for the Spanish Sarcoma Group study, and potentially for subsequent multiple trials within the European Union, havehad cost $1,144,041. While the production of new inventory has been delayed, ascompleted, immaterial amounts of trailing costs are expected.
On October 13, 2022, the Company announced that the Spanish Agency for Medicines and Health Products (Agencia Española de Medicamentos y Productos Sanitarios or “AEMPS”) had authorized a resultPhase 1b/randomized Phase 2 study of whichLB-100, the final reviewCompany’s lead clinical compound, plus doxorubicin, versus doxorubicin alone, the global standard for initial treatment of advanced soft tissue sarcomas (ASTS). Consequently, the clinical product by Spanish regulatory authorities will also be delayed. Accordingly, theGEIS clinical trial is now estimatedscheduled to begincommence during late 2022 or the first quarter endingof 2023 and to be completed by June 30, 20222025. Up to 170 patents will be entered into the clinical trial. The Phase 1b section of the protocol is expected to be completed by December 31, 2023, at which time the Company expects to have data on both response and take approximately three years to conduct.toxicity from this portion of the clinical trial.
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The interim analysis of this clinical trial could indicate either inferiority orwill be done before full accrual of patients is completed to determine whether the study has the possibility of showing superiority of the combination of LB-100 plus doxorubicin as compared to doxorubicin alone. A positive study would have the potential to change the standard therapy for this disease after four decades of failure to improve the marginal benefit of doxorubicin alone.
The Company’s agreement with GEIS provides for various payments based on achieving specific milestones over the term of the agreement. Through September 30, 2021,2022, the Company has paid GEIS an aggregate of $67,582 towards the second milestone payment for current work being done under this agreement.
Accordingly, duringDuring the three months ended September 30, 20212022 and 2020,2021, the Company incurreddid not incur any costs of $0 and $0, respectively, pursuant to this agreement. During the nine months ended September 30, 20212022 and 2020,2021, the Company incurred costs of $24,1710 and $43,41124,171, respectively, pursuant to this agreement.agreement, which have been included in research and development costs in the Company’s consolidated statements of operations. As of September 30, 2021,2022, total costs of $155,053 have been incurred pursuant to this agreement.
The Company’s aggregate commitmentscommitment pursuant to the aforementioned clinical trial agreements, less amounts previously paid to date under these agreements, totaled approximately $4,950,000 as of September 30, 2021, consisting of approximately $4,348,000 relating to the GEIS clinical trial and approximately $602,000 relating to the Moffit clinical trial, which are expected to be incurred through December 31, 2025.
In order to manufacture a new inventory supply of LB-100 for the GEIS clinical trial, the Company has engaged a number of vendors to carry out the multiple tasks needed to make and gain approval of a new clinical product for investigational study in Spain. These tasks include the synthesis under good manufacturing practices (GMP) of the active pharmacologic ingredient (API), with documentation of each of the steps involved by an independent auditor. The API is then transferred to a vendor that prepares the clinical drug product (DP), also under GMP conditions documented by an independent auditor. The DP is then sent to a vendor to test for purity and sterility, provide appropriate labels, store the drug, and distribute the drug to the clinical centers for use in the clinical trials. A formal application documenting all steps taken to prepare the DP for clinical use must be submitted to the appropriate regulatory authorities for review and approval before being used in a clinical trial.
As of September 30, 2021, the Company estimates that this program to provide new inventory of the DP for the Spanish sarcoma study, and potentially for subsequent multiple trials within the European Union, will cost approximately $977,000. The Company’s remaining aggregate commitments under this program,agreement, less amounts previously paid to date, totaled approximately $394,0003,836,000 as of September 30, 2021. As2022, which is expected to be incurred through December 31, 2025.
On October 7, 2022, the productionthird milestone pursuant to this agreement was achieved. Accordingly, as of that date, the new inventory is being conducted in Europe and is paid for in Euros, final costs are subjectbalance remaining pursuant to foreign currency fluctuations between the United States Dollarsecond milestone of $18,244, and the Euro.amount due upon achieving the third milestone of $254,543, became due and were paid subsequent to September 30, 2022.
City of Hope. Effective January 18, 2021, the Company executed a Clinical Research Support Agreement with the City of Hope National Medical Center, an NCI-designated comprehensive cancer center, and City of Hope Medical Foundation (collectively, “City of Hope”), to carry out a Phase 1b clinical trial of LB-100, the Company’s first-in-class protein phosphatase inhibitor, combined with a standard regimen for treatment of untreated extensive- stage disease small cell lung cancer (ED-SCLC). LB-100 will be given in combination with carboplatin, etoposide and atezolizumab, an FDA-approved but marginally effective regimen, to previously untreated ED-SCLC patients. The dose of LB-100 will be escalated with the standard fixed doses of the 3-drug regimen to reach a recommended Phase 2 dose (RP2D). Patient entry will be expanded so that a total of 12 patients will be evaluable at the RP2D to confirm the safety of the LB-100 combination and to look for potential therapeutic activity as assessed by objective response rate, duration of overall response, progression-free-survival and overall survival.
The clinical trial was initiated on March 9, 2021, with patient accrual expected to take approximately 18 to 24 monthstwo years to complete. If LB-100 does potentiate the benefit of the standard regimen, some evidence could be noted at 12 months into the clinical trial, but an assessment of potential increased activity is likely to require at least 24 months.However, patient accrual has been slower than expected. The Company is currently seeking to add two additional centers to increase the rate of patient accrual. With the additional sites, the Company expects this clinical trial to be completed by December 31, 2024. Without additional sites, the completion date for this clinical trial will be no sooner than December 31, 2025.
During the three months ended September 30, 2022 and 2021, the Company did not incur any costs pursuant to this agreement. During the nine months ended September 30, 2022 and 2021, the Company incurred costs of $0 and $309,509525,528, respectively, pursuant to this agreement. As of September 30, 2021, total costs of $309,509 have been incurredThe Company’s aggregate commitment pursuant to this agreement.
The Company’s aggregate commitments pursuant to this clinical trial agreement, less amounts previously paid to date, under this agreement, totaled approximately $2,433,000 as of September 30, 2021,2022, which areis expected to be incurred over the next three yearsthrough December 31, 2024, based upon a target of 42 enrollees. If a significant number of patients fail during the dose-escalation process, an increase of up to 12 patients would likely be necessary, at an estimated additional cost of approximately $800,000. Alternatively, should fewer than 42 enrollees be required, the Company has agreed to compensate City of Hope on a per enrollee basis. The Company currently expects that enrollment in this clinical trial will range from approximately 18 to 30 enrollees, with 24 enrollees as the most likely number. Should fewer than 42 enrollees be required, the Company has agreed to compensate City of Hope on a per enrollee basis.
National Cancer Institute Pharmacologic Clinical Trial. In May 2019, the National Cancer Institute (NCI) initiated a glioblastoma (GBM) pharmacologic clinical trial. During the fourth quarter of 2019, the NCI enrolled the first two patients of a planned eight patient pharmacologic study of the ability of LB-100 to enter the brain and penetrate recurrent brain tumors in patients where surgical removal of the cancers is indicated (clinical trials registry NCT03027388). This study is being conducted and funded by the NCI under a Cooperative Research and Development Agreement, with the Company providingbeing required to provide the LB-100 clinical compound.
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Primary malignant brain tumors (gliomas) are very challenging to treat. Radiation combined with the chemotherapeutic drug temozolomide has been the mainstay of therapy of the most aggressive gliomas (glioblastoma multiforme or GBM) for decades, with some further benefit gained by the addition of one or more anti-cancer drugs, but without major advances in overall survival for the majority of patients. In animal models of GBM, the Company’s novel protein phosphatase inhibitor, LB-100, has been found to enhance the effectiveness of radiation, temozolomide chemotherapy treatments and immunotherapy, raising the possibility that LB-100 may improve outcomes of standard GBM treatment in the clinic. Although LB-100 has proven safe in patients at doses associated with apparent anti-tumor activity against several human cancers arising outside the brain, the ability of LB-100 to penetrate tumor tissue arising in the brain is not known. Unfortunately, many drugs potentially useful for GBM treatment do not enter the brain in amounts necessary for anti-cancer action.
The NCI study is designed to determine the extent to which LB-100 enters recurrent malignant gliomas. Patients having surgery to remove one or more tumors will receive one dose of LB-100 prior to surgery and have blood and tumor tissue analyzed to determine the amount of LB-100 present and to determine whether the cells in the tumors show the biochemical changes expected to be present if LB-100 reaches its molecular target. The goal is to obtain data in up to eight patients. As a result of the innovative design of the NCI study, data from so few patients should be sufficient to provide a sound rationale for conducting a larger clinical trial to determine the effectiveness of adding LB-100 to the standard treatment regimen for GBMs.
The neurosurgical unit at the NCI, which had been closed to research studies due to the Covid-19 epidemic, haswas reopened and patient accrual has resumed. Patient entry remains at two, withbeen completed, and the goal to enter eight patients before analyzing results.Company is awaiting the resulting data. There is an urgent need to improve therapy for this type of aggressive brain tumor. If the NCI study shows that LB-100 does penetrate the brain, a clinical study of LB-100 in combination with standard therapy for GBM, the drug temozolomide and radiation, both of which have been well documented in pre-clinical studies to be significantly enhanced by LB-100, would be of significant interest to neuro-oncologists frustrated by decades of limited advances in therapy for this common brain tumor in adults.
The NCI study is designed to determine the extent to which LB-100 enters recurrent malignant gliomas. Patients having surgery to remove one or more tumors will receive one dose of LB-100 prior to surgery and have blood and tumor tissue analyzed to determine the amount of LB-100 present and to determine whether the cells in the tumors show the biochemical changes expected to be present if LB-100 reaches its molecular target. As a result of the innovative design of the NCI study, data from a few patients should be sufficient to provide a sound rationale for conducting a larger clinical trial to determine the effectiveness of adding LB-100 to the standard treatment regimen for GBMs. Five patients have been entered and analysis of the blood and tissue will now proceed. If there is evidence in at least two of the patients of penetration of LB 100 into tumor tissue, the study will be deemed as successful.
Clinical Trial Monitoring Agreements
Moffitt. On September 12, 2018, the Company finalized a work order agreement with Theradex Systems, Inc. (“Theradex”), an international contract research organization (“CRO”), to monitor the Phase 1b/2 clinical trial being managed and conducted by Moffitt. The clinical trial began in April 2019 and the first patient was entered into the clinical trial in July 2019. At the current rate of accrual, the clinical trial is expected to be completed over a period of four years from its initiation.by June 30, 2025.
Costs under this work order agreement are estimated to be approximately $954,000, with such payments expected to be divided approximately 94% to Theradex for services and approximately 6% for payments for pass-through costs. The costs of the Phase 1b/2 clinical trial being paid to or through Theradex are being recorded and charged to operations based on the periodic documentation provided by the CRO. During the three months ended September 30, 20212022 and 2020,2021, the Company incurred costs of $86911,953 and $917869, respectively, pursuant to this work order. During the nine months ended September 30, 20212022 and 2020,2021, the Company incurred costs of $9,35019,791 and $12,3939,350, respectively, pursuant to this work order. As of September 30, 2021,2022, total costs of $91,505111,676 have been incurred pursuant to this work order agreement.
The Company’s aggregate commitment pursuant to this clinical trial monitoring agreement, less amounts previously paid to date, under this agreement, totaled approximately $868,000853,000 as of September 30, 2021,2022, which areis expected to be incurred through June 30, 2025.
City of Hope. On February 5, 2021, the Company signed a new work order agreement with Theradex to monitor the City of Hope investigator-initiated clinical trial in small cell lung cancer in accordance with FDA requirements for oversight by the sponsoring party. Costs under this work order agreement are estimated to be approximately $335,000. During the three months and nine months ended September 30, 2022 and 2021, the Company incurred costs of $7,731 and $6,857, respectively, pursuant to this work order. During the nine months ended September 30, 2022 and 2021, the Company incurred costs of $23,466 and $21,170, respectively, pursuant to this work order. As of September 30, 2021,2022, total costs of $21,17048,092 have been incurred pursuant to this work order agreement.
The Company’s aggregate commitment pursuant to this clinical trial monitoring agreement, less amounts previously paid to date, under this agreement, totaled approximately $319,000290,000 as of September 30, 2021,2022, which areis expected to be incurred through June 30, 2024.2025.
Patent and License Agreements
INSERM. On March 22, 2018, the Company entered into a Patent Assignment and Exploitation Agreement with INSERM TRANSFERT SA, acting as delegatee of the French National Institute of Health and Medical Research, for the assignment to the Company of INSERM’S interest in United States Patent No. 9,833,450 entitled “Oxabicyloheptanes and Oxabicycloheptenes for the Treatment of Depressive and Stress Disorders”, which was filed with the United States Patent and Trademark Office in the name of INSERM and the Company as co-owners on February 19, 2015 and granted on May 12, 2017, and related patent applications and filings. INSERM is a French public institution dedicated to research in the field of health and medicine that had previously entered into a Material Transfer Agreement with the Company to allow INSERM to conduct research on the Company’s proprietary compound LB-100 and/or its analogs for the treatment of depressive or stress disorders in humans. Pursuant to the Agreement, the Company has agreed to make certain milestone payments to INSERM aggregating up to $1,750,000upon achievement of development milestones and up to $6,500,000upon achievement of commercial milestones. The Company also agreed to pay INSERM certain commercial royalties on net sales of products attributed to the Agreement. The Company’s initial plan was to complete the validation process to evaluate LB-100 for the treatment of depressive or stress disorders in humans within three years; however, the exploitation of this patent for the treatment of depressive and stress disorders in humans will require substantial additional capital and/or a joint venture or other type of business arrangement with a pharmaceutical company with substantially greater capital and business resources than those available to the Company. As there can be no assurances that the Company will be able to obtain the capital or business resources necessary to focus on the exploitation of this patent, it is uncertain as to when, if at all, the Company may reach any of the development or commercialization milestones under the Agreement. As of September 30, 2022 and December 31, 2021, and 2020, no amounts were due under this agreement.
Moffitt.Effective August 20, 2018, the Company entered into an Exclusive License Agreement with Moffitt. Pursuant to the License Agreement, Moffitt granted the Company an exclusive license under certain patents owned by Moffitt (the “Licensed Patents”) relating to the treatment of MDS and a non-exclusive license under inventions, concepts, processes, information, data, know-how, research results, clinical data, and the like (other than the Licensed Patents) necessary or useful for the practice of any claim under the Licensed Patents or the use, development, manufacture or sale of any product for the treatment of MDS which would otherwise infringe a valid claim under the Licensed Patents. The Company was obligated to pay Moffitt a non-refundable license issue fee of $25,000after the first patient is entered into a Phase 1b/2 clinical trial to be managed and conducted by Moffitt. The clinical trial began at a single site in April 2019 and the first patient was entered into the clinical trial in July 2019. The Company is also obligated to pay Moffitt an annual license maintenance fee of $25,000commencing on the first anniversary of the Effective Date and every anniversary thereafter until the Company commences payment of minimum royalty payments. The Company has also agreed to pay non-refundable milestone payments to Moffitt, which cannot be credited against earned royalties payable by the Company, based on reaching various clinical and commercial milestones aggregating $1,897,000, subject to reduction by 40%40% under certain circumstances relating to the status of Valid Claims, as such term is defined in the License Agreement. During the three months ended September 30, 20212022 and 2020,2021, the Company recorded charges to operations of $6,301and $6,301, respectively, in connection with its obligations under the License Agreement. During the nine months ended September 30, 20212022 and 2020,2021, the Company recorded charges to operations of $18,69818,699 and $18,69918,698, respectively, in connection with its obligations under the License Agreement. As of September 30, 2021,2022, no milestones had yet been attained.
The Company will be obligated to pay Moffitt earned royalties of 4% on worldwide cumulative net sales of royalty-bearing products, subject to reduction to 2% under certain circumstances, on a quarterly basis, with a minimum royalty payment of $50,000 in the first four years after sales commence, and $100,000 in year five and each year thereafter, subject to reduction by 40% under certain circumstances relating to the status of Valid Claims, as such term is defined in the License Agreement. The Company’s obligation to pay earned royalties under the License Agreement commences on the date of the first sale of a royalty-bearing product, and shall automatically expire on a country-by-country basis on the date on which the last valid claim of the Licensed Patents expires, lapses or is declared invalid, and the obligation to pay any earned royalties under the License Agreement shall terminate on the date on which the last valid claim of the Licensed Patents expires, lapses, or is declared to be invalid in all countries.
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Employment Agreements with Officers
During July and August 2020, the Company entered into one-year employment agreements with its executive officers, consisting of Dr. John S. Kovach, Eric J. Forman, Dr. James S. Miser, and Robert N. Weingarten, which provided for aggregate annual compensation of $640,000, payable monthly (see Note 5). The employment agreements are automatically renewable for additional one-year periods unless terminated by either party upon 60 days written notice prior to the end of the applicable one-year period, or by death, or by termination for cause. These employment agreements were automatically renewed for an additional one-year periodperiods in July and August 2021.2021 and 2022.
On April 9, 2021, the Board of Directors increased the annual compensation of Eric J. Forman, the Company’s Chief Administrative Officer, Dr. James S. Miser, the Company’s Chief Medical Officer, and Robert N. Weingarten, the Company’s Chief Financial Officer, under the employment agreements, such that the total aggregate annual compensation of all officers increased to $, effective May 1, 2021.
Other Significant Agreements and Contracts
On December 24, 2013, the Company entered into an agreement with NDA Consulting Corp. for consultation and advice in the field of oncology research and drug development. As part of the agreement, NDA also agreed to cause its president, Dr. Daniel D. Von Hoff, M.D., to become a member of the Company’s Scientific Advisory Committee. The term of the agreement was for one year and provided for a quarterly cash fee of $4,000. The agreement has been automatically renewed for additional one-year terms on its anniversary date since 2014. Consulting and advisory fees charged to operations pursuant to this agreement were $4,000 and $4,000 for the three months ended September 30, 20212022 and 2020,2021, respectively, and $12,000 and $12,000 for the nine months ended September 30, 20212022 and 2020, respectively,2021, which were included in research and development costs in the consolidated statements of operations.
Effective September 14, 2015, the Company entered into a Collaboration Agreement with BioPharmaWorks, pursuant to which the Company engaged BioPharmaWorks to perform certain services for the Company. Those services included, among other things: (a) assisting the Company to (i) commercialize its products and strengthen its patent portfolio, (ii) identify large pharmaceutical companies with potential interest in the Company’s product pipeline, and (iii) prepare and deliver presentations concerning the Company’s products; (b) at the request of the Board of Directors, serving as backup management for up to three months should the Company’s Chief Executive Officer and scientific leader be temporarily unable to carry out his duties; (c) being available for consultation in drug discovery and development; and (d) identifying providers and overseeing tasks relating to clinical use and commercialization of new compounds.
BioPharmaWorks was founded in 2015 by former Pfizer scientists with extensive multi-disciplinary research and development and drug development experience. The Collaboration Agreement was for an initial term of two years and automatically renews for subsequent annual periods unless terminated by a party not less than 60 days prior to the expiration of the applicable period. In connection with the Collaboration Agreement, the Company agreed to pay BioPharmaWorks a monthly fee of $10,000, subject to the right of the Company to pay a negotiated hourly rate in lieu of the monthly payment and agreed to issue to BioPharmaWorks certain equity-based compensation. In April 2018, it was mutually agreed to suspend services and payments underExcluding expense reimbursements, the Collaboration Agreement, without extending its term, for the period from February 1, 2018 through the September 13, 2019 anniversary date. In February 2019, the Company and BioPharmaWorks subsequently agreed to resume the Collaboration Agreement effective March 1, 2019, and the Collaboration Agreement is currently in effect. The Company recorded charges to operations pursuant to this Collaboration Agreement of $30,000 and $30,000 for the three months ended September 30, 20212022 and 2020,2021, respectively, and $90,000 and $90,000 for the nine months ended September 30, 20212022 and 2020,2021, respectively, which were included in research and development costs in the consolidated statements of operations.
Effective August 12, 2020, the Company entered into a Master Service Agreement with the Foundation for Angelman Syndrome Therapy (FAST) to collaborate in supporting pre-clinical studies of the potential benefit of LB-100 in a mouse model of Angelman Syndrome (AS) as reported in The Proceedings of The National Academy of Science (Wang et al, June 3, 2019). The pre-clinical studies willwere to be conducted at The University of California - Davis under the direction of Dr. David Segal, an internationally recognized leader in AS research. If the pre-clinical studies confirm that LB-100 reduces AS signs in rodent models, the Company has agreed to enter into discussions with FAST with respect to possible collaborations to most efficiently assess the benefit of LB-100 in patients with AS, which is a rare disease affecting an estimated one out of 12,000 to one out of 20,000 persons in the United States. The genetic cause of AS, reduced function of a specific maternal gene called Ube3, has been understood for some time, but the molecular abnormality resulting from the genetic lesion has now been shown to be increased concentrations of protein phosphatase 2A (PP2A), a molecular target of the Company’s investigational compound, LB-100. The Company has agreed to provide FAST with a supply of LB-100 to be utilized in the conduct of this study, which iswas initially expected to be completed within three years. Conditioned on FAST’s completion of this study, the Company has agreed to pay FAST five percent (5%) of all proceeds, as defined in the Master Service Agreement, received by the Company, up to a maximum of $250,000, from the exploitation of the study results.
The research team at the University of California - Davis recently completed their pre-clinical study of the potential benefit of LB-100 in a mouse model of AS, and the results are currently under review by FAST. The preliminary analysis indicates that the positive results previously reported by Chinese investigators were not confirmed in the US model. The Company is currently awaiting input from FAST as to whether it intends to continue to pursue pre-clinical studies of LB 100. To date, FAST has not indicated whether it desires to pursue further studies of LB-100.
Effective December 21, 2020,On October 8, 2021, the Company entered into a services agreementDevelopment Collaboration Agreement with IRTH Communications, LLC for investor/public relations, financial communications,the Netherlands Cancer Institute, Amsterdam (NKI), one of the world’s leading comprehensive cancer centers, and strategic consulting services, effective for an initial termOncode Institute, Utrecht, a major independent cancer research center, to identify the most promising drugs to be combined with LB-100, and potentially LB-100 analogues, to be used to treat a range of twelve monthscancers, as well as to identify the specific molecular mechanisms underlying the identified combinations. The Company has agreed to fund the study and renewable annually thereafter.provide a sufficient supply of LB-100 to conduct the study. The services agreement provided for a monthly cash fee of $7,500, including during any renewal term, and the issuance of restricted shares of common stock, fully vested upon issuance, with a grant date fair value of $ (see Note 4). Upon the commencement of any renewal term, the Company will be obligatedstudy is expected to issue additional restricted shares of common stock, fully vested upon issuance, with a grant date fair value of $.take approximately two years to conduct. During the three months and nine months ended September 30, 2021,2022, the Company incurred charges in the amount of $22,50046,068 and $67,500, respectively, with respect to this agreement, which amount is included in generalresearch and administrativedevelopment costs in the Company’s consolidated statements of operations. During the nine months ended September 30, 2022, the Company incurred charges in the amount of $149,184 with respect to this agreement, which amount is included in research and development costs in the Company’s consolidated statements of operations. As of September 30, 2022, total costs of $204,433 have been incurred pursuant to this collaboration agreement. The Company’s aggregate commitment pursuant to this collaboration agreement, less amounts previously paid to date, totaled approximately $250,000 as of September 30, 2022, which is expected to be incurred through June 30, 2025. As the work is being conducted in Europe and is paid for in Euros, final costs are subject to foreign currency fluctuations between the United States Dollar and the Euro.
On February 2, 2012, the Company entered into a contract with MRI Global for the analysis and stability testing of LB-100. On June 10, 2022, the contract was amended to reflect a new total contract price of $273,980 and an estimated completion date of April 30, 2023. During the three months ended September 30, 2022 and 2021, the Company incurred costs of $6,749 and $0, respectively, pursuant to this work order. During the nine months ended September 30, 2022 and 2021, the Company incurred costs of $27,102 and $17,432, respectively, pursuant to this work order. As of September 30, 2022, total costs of $212,778 have been incurred pursuant to this work order agreement. The Company’s aggregate commitment pursuant to this clinical trial monitoring agreement, less amounts previously paid to date, totaled approximately $61,000 as of September 30, 2022.
Impact of the Novel Coronavirus (Covid-19) onExternal Risks Associated with the Company’s Business Activities
Covid-19 Virus. The global outbreak of the novel coronavirus (Covid-19) has led to disruptions in general economic activities worldwide, as businesses and governments have taken broad actions to mitigate this public health crisis. In light of the uncertain and continually evolving situation relating to the spread of Covid-19, this pandemic could pose a risk to the Company. The extent to which the coronavirus may impact the Company’s business activities and capital raising efforts will depend on future developments, which are highly uncertain and cannot be predicted at this time. The Company intends to continue to monitor the situation and may adjust its current business plans as more information and guidance become available.
The coronavirus pandemic presents a challenge to medical facilities worldwide. As the Company’s clinical trials are conducted on an outpatient basis, it is not currently possible to predict the full impact of this developing health crisis on such clinical trials, which could include delays in and increased costs of such clinical trials. Current indications from the clinical research organizations conducting the clinical trials for the Company are that such clinical trials are being delayed or extended for several months or more as a result of the coronavirus pandemic.
OverInflation Risk. The Company does not believe that inflation has had a material effect on its operations to date, other than its impact on the near term,general economy. However, there is also significanta risk that the Company’s operating costs could become subject to inflationary and continuing uncertainty as tointerest rate pressures in the future, which would have the effect of increasing the Company’s operating costs (including, specifically, clinical trial costs), and which would put additional stress on the Company’s working capital resources.
Supply Chain Issues. The Company does not currently expect that supply chain issues will have a significant impact on its business activities, including its ongoing clinical trials.
Potential Recession. There are various indications that the coronavirusUnited States economy may have onbe entering a recessionary period. Although unclear at this time, an economic recession would likely impact the general business environment and the capital markets, which could, in general and onturn, affect the amount and type of financing available to the Company in particular.Company.
The Company intends to continueis continuing to monitor the situationthese matters and maywill adjust its current business and financing plans as more information and guidance become available.
9. Subsequent Events
The Company performed an evaluation of subsequent events through the date of filing of these condensed consolidated financial statements with the SEC. Other than thosethe matters describednoted below, there were no material subsequent events which affected, or could affect, the amounts or disclosures in the condensed consolidated financial statements.
On October 8, 2021,November 6, 2022, the Board of Directors of the Company entered into a Development Collaboration Agreement withapproved the Netherlands Cancer Institute, Amsterdam (NKI), onefollowing actions:
(1) Promoted Eric Forman, the Company’s Chief Administrative Officer, to Vice President and Chief Operating Officer, and increased his annual salary from $175,000 to $200,000 per year.
(2) Authorized the issuance of warrants to BioPharmaWorks, which has provided consulting services to the Company since September 2015, to purchase shares of the world’s leading comprehensive cancer centers,Company’s common stock, fully vested upon issuance, exercisable for a period of at $ per share, which was the closing market price of the Company’s common stock on Friday, November 4, 2022.
(3) Authorized the issuance of stock options under the Company’s 2020 Stock Incentive Plan to Dr. John S. Kovach, Eric J. Forman, Dr. James S. Miser and Oncode Institute, Utrecht, a major independent cancer research center,Robert N. Weingarten to identify the most promising drugs to be combined with LB-100, and potentially LB-100 analogues, to be used to treat a range of cancers, as well as to identify the specific molecular mechanisms underlying the identified combinations. The Company has agreed to fund the study and provide a sufficient supply of LB-100 to conduct the study. The study is expected to take approximately two years to conduct.
each purchase
(4) .
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This Quarterly Report on Form 10-Q of Lixte Biotechnology Holdings, Inc. (the “Company”) contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These might include statements regarding the Company’s financial position, business strategy and other plans and objectives for future operations, and assumptions and predictions about future clinical trials and their timing and costs, product demand, supply, manufacturing costs, marketing and pricing factors are all forward-looking statements. These statements are generally accompanied by words such as “intend”, “anticipate”, “believe”, “estimate”, “potential(ly)”, “continue”, “forecast”, “predict”, “plan”, “may”, “will”, “could”, “would”, “should”, “expect” or the negative of such terms or other comparable terminology. The Company believes that the assumptions and expectations reflected in such forward-looking statements are reasonable, based on information available to it on the date hereof, but the Company cannot provide assurances that these assumptions and expectations will prove to have been correct or that the Company will take any action that the Company may presently be planning. These forward-looking statements are inherently subject to known and unknown risks and uncertainties. Actual results or experience may differ materially from those expected, anticipated or implied in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, regulatory policies or changes thereto, available cash, research and development results, competition from other similar businesses, and market and general economic factors. This discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included in Item 1 of this Quarterly Report on Form 10-Q and the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020,2021, including the section entitled “Item 1A. Risk Factors”. The Company does not intend to update or revise any forward-looking statements to reflect new information, future events or otherwise.
Overview
The Company is a drug discovery company that uses biomarker technology to identify enzyme targets associated with serious common diseases and then designs novel compounds to attack those targets. The Company’s product pipeline is primarily focused on inhibitors of protein phosphatases, used alone and in combination with cytotoxic agents and/or x-ray and immune checkpoint blockers, and encompasses two major categories of compounds at various stages of pre-clinical and clinical development that the Company believes have broad therapeutic potential not only for cancer but also for other debilitating and life-threatening diseases. The Company has developed two classes of drugs for the treatment of cancer, consisting of protein phosphatase inhibitors (PTase-i), designated by us as the LB-100 series of compounds, and histone deacetylase inhibitors (HDACi), designated by us as the LB-200 series of compounds.
The Company’s activities are subject to significant risks and uncertainties, including the need for additional capital. The Company has not yet commenced any revenue-generating operations, relies on stock-based compensation for a substantial portion of employee and consultant compensation, does not have positive cash flows from operations, and is dependent on periodic infusions of equity capital to fund its operating requirements.
Recent Developments
The following are summariesis a summary of recent developments, including information contained in recent news releases issued by the Company:
Collaboration with Netherlands Cancer Institute (Amsterdam)Summary of October 13, 2022 News Release
The Company announced that the Spanish Agency for Medicines and Oncode Institute (Utrecht) to Identify the Most Promising Drug Combinations forHealth Products (Agencia Española de Medicamentos y Productos Sanitarios, or AEMPS) has authorized a Phase 1b/randomized Phase 2 study of LB-100, the Company’s Lead Clinical Compound, LB-100,lead clinical compound, plus doxorubicin versus doxorubicin alone, the global standard for Cancer Treatmentinitial treatment of advanced soft tissue sarcomas (ASTS).
On October 8, 2021, the Company entered into a Development Collaboration Agreement with the Netherlands Cancer Institute, Amsterdam (NKI), one of the world’s leading comprehensive cancer centers, and Oncode Institute, Utrecht, a major independent cancer research center, to identify the most promising drugs to be combined with LB-100, and potentially LB-100 analogues, to be used to treat a range of cancers, as well as to identify the specific molecular mechanisms underlying the identified combinations. The Company has agreed to fund the study and provide a sufficient supply of LB-100 to conduct the study. The study is expected to take approximately two years to conduct.
The pre-clinical studies will be directed by Professor René Bernards (NKI), a leader in using genome wide functional genetic techniquescombination of doxorubicin with drugs that are able to identify effective drug combinations, new drug targets, andimpair the mechanisms of resistanceDNA repair is a promising topic of research, as LB-100 has demonstrated synergistic action in in vivo preclinical mesenchymal tumors. The authorization of this clinical trial by AEMPS is expected to cancer drugs. Using this technology, Prof. Bernards’ group identified the now FDA-approved combinationfacilitate approval of BRAF and EGFR inhibitors for a group of colon cancer patients (Nature 483, 100-103, 2012), and more recently reported the identification of a new two drug regimen for liver cancer, whichother LB-100 protocols in preliminary Phase 1 clinical trials appears to be more active than standard therapy (Nature 595, 730–734, 2021).EU countries.
There areThe purpose of this clinical trial is to obtain information with respect to the efficacy and safety of LB-100 combined with doxorubicin in soft tissue sarcomas. Doxorubicin alone has been the cornerstone of first line treatment of ASTS for over 40 years, with little therapeutic gain from adding cytotoxic compounds to or substituting other cytotoxic compounds for doxorubicin. In animal models, LB-100 has consistently enhanced the anti-tumor activity of doxorubicin without apparent increases in toxicity. The interim analysis of this clinical trial will be done before full accrual is completed to determine whether the study has the possibility of showing superiority of the combination of LB-100 plus doxorubicin compared to doxorubicin alone. A positive study would have the potential to change the standard therapy for this disease after four decades of failure to improve the marginal benefit of doxorubicin alone.
This study was designed and will be carried out by the Spanish Sarcoma Group (Grupo Español de Investigación en Sarcomas, or GEIS). GEIS was formed in 1994 by oncologists from four hospitals and has grown to include members from more than 60 medical centers across Spain. For relatively uncommon but life-threatening diseases like ASTS, GEIS has shown that it is essential for many pre-clinical studies demonstrating the abilityinstitutions to collaborate and accrue a large enough group of patients needed to timely evaluate promising new treatments. GEIS has chosen to study whether the Company’s lead clinical compound, LB-100, an inhibitor of protein phosphatase 2A, to potentiatecan significantly improve the anti-tumor activity of different cytotoxic drugs. Although a targeted approachdoxorubicin, the current clinical standard, an only marginally effective treatment for previously untreated ASTS. The clinical trial is expected to cancer treatment has been a long-standing research goalbegin later this year or during the first quarter of 2023; up to 170 patients will be entered onto the Company, LB-100’s ubiquitous activity and low toxicity have made it challenging to identify the most effective drug combinations and/or tumor targets. Prof. Bernards’ approach makes it possible to select, from among a multitude of previously identified compounds, those most likelytrial, which is expected to be effective when combined withcompleted within two and a second drug such as LB-100 and/or in cancers with a particular molecular abnormality. The ability to identify the most effective two drug combinations utilizing LB-100 and/or the molecular sub-types of cancers most vulnerable to treatment with LB-100 would be a significant milestone in the development of this novel compound.half years.
LB-100 Elicits Anti-Tumor Activity in Small Lung Cancer Models by Unique Mechanism in an Important Pre-Clinical StudyListing of the Company’s Common Stock on The Nasdaq Capital Market
The Company’s lead clinical compound, LB-100, a protein phosphatase 2A (PP2A) inhibitor, was reported to enhancecommon stock and the effectiveness of elements of standard therapywarrants issued in models of small cell lung cancer (SCLC) (Mirzapoiazova el al.its public offering are traded on The Nasdaq Capital Market under the symbols “LIXT” and “LIXTW”, Molecular Cancer Therapeutics, online July 12, 2021). This pre-clinical study reported that LB-100 potentiates standard therapy for SCLC, thus providing a strong rationale for a clinical trial of LB-100 in SCLC cancer recently initiated at City of Hope.respectively.
Dr. Ravi Salgia, MD, PhD, ProfessorOn June 24, 2022, the Company received a written notice (the “Notice”) from The Nasdaq Stock Market LLC (“Nasdaq”) that the Company has not been in compliance with the minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) for a period of 30 consecutive business days. Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum closing bid price of $1.00 per share, and ChairNasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum closing bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The Notice had no immediate effect on the listing of the Department of Medical Oncology and Therapeutics Research and Arthur & Rosalie Kaplan Chair in Medical Oncology, City of Hope, is the corresponding author of the paper. He is also the principal investigator for a recently opened Phase 1b clinical trial (NCT04560972) for patients with previously untreated advanced SCLC, in which LB-100 is added to a standard regimen of carboplatin, etoposide, and atezolizumab. Dr. Salgia and his scientific collaborators have carried out extensive pre-clinical studies of abnormal molecular features of SCLC and the effects of LB-100Company’s common stock on components of a standard regimen for the treatment of this disease.The Nasdaq Capital Market.
They found multiple metabolic changes associatedIn accordance with cell death in these cancer cells when exposedNasdaq Listing Rule 5810(c)(3)(A), the Company is provided a compliance period of 180 calendar days from the date of the Notice, or until December 21, 2022, to LB-100 alone and when combinedregain compliance with the drugs in this standard clinical regimenminimum closing bid price requirement. If the Company does not regain compliance during the compliance period ending December 21, 2022, the Company may be afforded a second 180 calendar day period to regain compliance. To qualify for this notoriously aggressive disease. LB-100 has been reported to increase the effectivenesssecond compliance period, the Company must (i) meet the continued listing requirement for market value of a number of anti-cancer drugs against several different types of human cancers without increasing toxicity in animal models.publicly held shares and all other initial listing standards for The recent pre-clinical study of SCLC cells noted that (1) LB-100 increasesNasdaq Capital Market, with the amount of carboplatin that enters the tumor cells without increasing toxicity, and (2) LB-100 potentiates the actionexception of the immune-blocker, atezolizumab.minimum closing bid price requirement, and (ii) notify Nasdaq of its intent to cure the deficiency. The Company can achieve compliance with the minimum closing bid price requirement if, during either compliance period, the minimum closing bid price per share of the Company’s common stock is at least $1.00 for a minimum of 10 consecutive business days. The Company anticipates that its shares of common stock will continue to be listed and traded on The Nasdaq Capital Market during the compliance period(s).
These observations are important because, taken together, they not only constitute a strong rationale forThe Company is continuing to assess potential actions to regain compliance. However, the recently opened clinical trial of LB-100 plus chemo-immunotherapy in SCLC, but they complement earlier pre-clinical observations that LB-100 can (1) reverse resistance of cancer cells (ovarian) to cisplatin, another widely used chemotherapy drug (Chang et al., Molecular Cancer Therapeutics, Nov. 5, 2014), (2) increase the entry of another important anti-cancer agent, doxorubicin, into liver cancer cells associated with increased antitumor activity (Bai et al, Molecular Cancer Therapeutics, Aug. 14, 2014) , and (3) enhance the effectiveness of immune-blockers against several types of cancers (Ho et al. Nature Comm., May 29, 2018). These observations raise the possibility that the addition of LB-100Company may be a general wayunable to enhance standard therapies for cancers for which better treatments are urgently needed. The present trial in SCLC is an initial step in testing that hypothesis, as isregain compliance with the planned clinical trial in advanced soft tissue sarcomaminimum closing bid price requirement during the compliance period(s), in which LB-100 is combined with doxorubicin.
National Cancer Institute Pharmacologic Clinical Trialcase the Company anticipates Nasdaq would provide a notice to the Company that its shares of common stock are subject to delisting, and the Company’s common shares would thereupon be delisted.
In May 2019, the National Cancer Institute (NCI) initiated a glioblastoma (GBM) pharmacologic clinical trial. During the fourth quarter of 2019, the NCI enrolled the first two patients of a planned eight patient pharmacologic study of the ability of LB-100 to enter the brain and penetrate recurrent brain tumors in patients where surgical removal of the cancers is indicated (clinical trials registry NCT03027388). This study is being conducted and funded by the NCI under a Cooperative Research and Development Agreement, with the Company providing the LB-100 clinical compound.
The neurosurgical unit at the NCI, which had been closed due to the Covid-19 epidemic, has reopened, and patient accrual has resumed. Patient entry remains at two, with the goal to enter eight patients before analyzing results. There is an urgent need to improve therapy for this type of aggressive brain tumor. If the NCI study shows that LB-100 does penetrate the brain, a clinical study of LB-100 in combination with standard therapy for GBM, the drug temozolomide and radiation, both of which have been well documented in pre-clinical studies to be significantly enhanced by LB-100, would be of significant interest to neuro-oncologists frustrated by decades of limited advances in therapy for this common brain tumor in adults.
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Going Concern
At September 30, 2021,2022, the Company had cash of $5,960,594$6,561,840 available to fund its operations. Because the Company is currently engaged in Phase 2 clinical trials, it is expected that it will take a significant amount of time and resources to develop any product or intellectual property capable of generating sustainable revenues. Accordingly, the Company’s business is unlikely to generate any sustainable operating revenues in the next several years and may never do so. Even if the Company is able to generate revenues through licensing its technologies or through product sales, there can be no assurance that the Company will be able to achieve positive earnings and operating cash flows.
The Company’s consolidated financial statements have been presented on the basis that it will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has no recurring source of revenue and has experienced negative operating cash flows since inception. The Company has financed its working capital requirements primarily through the recurring sale of its equity securities.
As a result, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern. The Company’s independent registered public accounting firm, in its report on the Company’s consolidated financial statements for the year ended December 31, 2020,2021, has also expressed substantial doubt about the Company’s ability to continue as a going concern. The Company’s consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Recent Accounting Pronouncements
Information with respect to recent accounting pronouncements is provided at Note 3 to the condensed consolidated financial statements for the three months and nine months ended September 30, 20212022 and 20202021 included elsewhere in this document.
Concentration of Risk
Information with respect to concentration of risk is provided at Note 3 to the condensed consolidated financial statements for the three months and nine months ended September 30, 20212022 and 20202021 included elsewhere in this document.
Critical Accounting Policies and Estimates
The preparation of the Company’s consolidated financial statements in conformity with generally accepted accounting principles in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates. Significant estimates include those related to assumptions used in accruals for potential liabilities, valuing equity instruments issued for services, and the realization of deferred tax assets. There were no changes to the critical accounting policies described in the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 that impacted the Company’s condensed consolidated financial statements and related notes for the three months and nine months ended September 30, 2022 and 2021.
The following critical accounting policies affect the more significant judgements and estimates used in the preparation of the Company’s consolidated financial statements.
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Research and Development
Research and development costs consist primarily of fees paid to consultants and contractors, and other expenses relating to the acquisition, design, development and clinical trials with respect to the Company’s compounds and product candidates. Research and development costs also include the costs to produce the compounds used in research and clinical trials, which are charged to operations as incurred.
Research and development costs are generally charged to operations ratably over the life of the underlying contracts, unless the achievement of milestones, the completion of contracted work, the termination of an agreement, or other information indicates that a different expensing schedule is more appropriate. However, payments for research and development costs that are contractually defined as non-refundable are charged to operations as incurred.
Obligations incurred with respect to mandatory scheduled payments under research agreements with milestone provisions are recognized as charges to research and development costs in the Company’s consolidated statement of operations based on the achievement of such milestones, as specified in the agreement. Obligations incurred with respect to mandatory scheduled payments under research agreements without milestone provisions are accounted for when due, are recognized ratably over the appropriate period, as specified in the agreement, and are recorded as liabilities in the Company’s consolidated balance sheet, with a corresponding charge to research and development costs in the Company’s consolidated statement of operations.
Payments made pursuant to research and development contracts are initially recorded as advances on research and development contract services in the Company’s consolidated balance sheet and are then charged to research and development costs in the Company’s consolidated statement of operations as those contract services are performed. Expenses incurred under research and development contracts in excess of amounts advanced are recorded as research and development contract liabilities in the Company’s consolidated balance sheet, with a corresponding charge to research and development costs in the Company’s consolidated statement of operations. The Company reviews the status of its research and development contracts on a quarterly basis.
Patent and Licensing Related Legal and Filing Fees and Costs
Due to the significant uncertainty associated with the successful development of one or more commercially viable products based on the Company’s research efforts and related patent applications, all patent-relatedpatent and licensing legal and filing fees and licensing-related legal feescosts related to the development and protection of its intellectual property are charged to operations as incurred. Patent and licensing related legal and filing fees and costs are included in general and administrative costs in the Company’s consolidated statements of operations.
During the three months ended September 30, 2022 and 2021, patent and licensing legal and filing fees and costs related to the development and protection of its intellectual property were $271,163 and $137,114, respectively, an increase of $134,049, or 97.8% in 2022, as compared to 2021. During the nine months ended September 30, 2022 and 2021, patent and licensing legal and filing fees and costs related to the development and protection of its intellectual property were $944,789 and $365,466, respectively, an increase of $579,323, or 158.5% in 2022, as compared to 2021.
In late 2021, the Company engaged a new patent law firm that is highly regarded for its expertise in biotechnology. This firm conducted a comprehensive analysis of the Company’s extensive patent portfolio in order to implement a program to maximize the Company’s intellectual property protection, both domestically and internationally. In addition, several new patents were recently filed, reflecting potential new uses of the Company’s unique lead clinical compound LB-100 in cancer therapy. These activities have resulted in an increase in patent and licensing legal and filing fees and costs in 2022 as compared to 2021. The Company expects that such patent and licensing related legal and filing costs will continue to increase during the remainder of 2022 as compared to 2021, and likely thereafter, as the Company continues to develop and expand its patent portfolio related to the clinical development of LB-100.
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Stock-Based Compensation
The Company periodically issues common stock and stock options to officers, directors, employees, Scientific Advisory Committee members, contractors and consultants for services rendered. Options vest and expire according to terms established at the issuance date of each grant. Stock grants, which are generally time vested, are measured at the grant date fair value and charged to operations ratably over the vesting period.
The Company accounts for stock-based payments to officers, directors, employees, Scientific Advisory Committee members contractors and consultants by measuring the cost of services received in exchange for equity awards utilizing the grant date fair value of the awards, with the cost recognized as compensation expense on the straight-line basis in the Company’s financial statements over the vesting period of the awards.
The fair value of stock options granted as stock-based compensation is determined utilizing the Black-Scholes option-pricing model, and is affected by several variables, the most significant of which are the expected life of the stock option, the exercise price of the stock option as compared to the fair market value of the common stock on the grant date, and the estimated volatility of the common stock. Unless sufficient historical exercise data is available, the expected life of the stock option is calculated as the mid-point between the vesting period and the contractual term (the “simplified method”). The estimated volatility is based on the historical volatility of the Company’s common stock, calculated utilizing a look-back period approximately equal to the contractual life of the stock option being granted. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The fair market value of the common stock is determined by reference to the quoted market price of the Company’s common stock on the grant date. The expected dividend yield is based on the Company’s expectation of dividend payouts and is assumed to be zero.
The Company recognizes the fair value of stock-based compensation awards in general and administrative costs and in research and development costs, as appropriate, in the Company’s consolidated statements of operations. The Company issues new shares of common stock to satisfy stock option exercises.
Summary of Business Activities and Plans
Company Overview
The Company is a drug discovery company that uses biomarker technology to identify enzyme targets associated with serious common diseases and then designs novel compounds to attack those targets. The Company’s product pipeline is primarily focused on inhibitors of protein phosphatases, used alone and in combination with cytotoxic agents and/or x-ray and immune checkpoint blockers, and encompasses two major categories of compounds at various stages of pre-clinical and clinical development that the Company believes have broad therapeutic potential not only for cancer but also for other debilitating and life-threatening diseases.
The Company has developed two series of pharmacologically active drugs, the LB-100 series and the LB-200 series. The Company believes that the mechanism by which compounds of the LB-100 series affect cancer cell growth is different from cancer agents currently approved for clinical use. Lead compounds from each series have activity against a broad spectrum of common and rarer human cancers in cell culture systems. In addition, compounds from both series have anti-cancer activity in animal models of glioblastoma multiforme, neuroblastoma, and medulloblastoma, all cancers of neural tissue. Lead compounds of the LB-100 series also have activity against melanoma, breast cancer and sarcoma in animal models and enhance the effectiveness of commonly used anti-cancer drugs in these model systems.animal models. The enhancement of anti-cancer activity of these anti-cancer drugs occurs at doses of LB-100 that do not significantly increase toxicity in animals. It is therefore hoped that, when combined with standard anti-cancer regimens against many tumor types, the Company’s compounds will improve therapeutic benefit without enhancing toxicity in humans.
Product Candidates
The LB-100 series consists of novel structures which have the potential to be first in their class and may be useful in the treatment of not only several types of cancer but also vascular and metabolic diseases. The LB-200 series contains compounds which have the potential to be the most effective in its class and may be useful for the treatment of chronic hereditary diseases, such as Gaucher’s disease, in addition to cancer and neurodegenerative diseases.
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The Company has demonstrated that lead compounds of both the LB-100 series and the LB-200 are active against a broad spectrum of human cancers in cell culture and against several types of human cancers in animal models. The research on these compounds was initiated in 2006 under a Cooperative Research and Development Agreement, or CRADA, with the National Institute of Neurologic Disorders and Stroke, or NINDS, of the National Institutes of Health, or NIH, dated March 22, 2006 that was subsequently extended through a series of amendments until it terminated on April 1, 2013. As discussed below, the Company’s primary focus is on the clinical development of LB-100.
The LB-200 series consists of histone deacetylase inhibitors (HDACi). Many pharmaceutical companies are also developing drugs of this type, and at least two companies have HDACi approved for clinical use, in both cases for the treatment of a type of lymphoma. Despite this significant competition, the Company has demonstrated that its HDACi have broad activity against many cancer types, have neuroprotective activity, and have anti-fungal activity. In addition, these compounds have low toxicity. LB-200 has not yet advanced to the clinical stage and the Company would require additional capital to fund further development. Accordingly, because of the Company’s focus on the clinical development of LB-100 and analogs for cancer therapy as described below in more detail, the Company has decided not to actively pursue the pre-clinical development of the LB-200 series of compounds at this time. At this time, andthe Company intends to only maintain composition of matter patents for LB-200.
Collaborations with leading academic research centers in the United States, Europe and Asia have established the breadth of activity of LB-100 in pre-clinical models of several major cancers. There is considerable scientific interest in LB-100 because it exerts its activity by a novel mechanism and is the first of its type to be evaluated so broadly in multiple animal models of cancer and now in human beings. LB-100 is one of a series of serine/threonine phosphatase (s/t ptase) inhibitors designed by the Company. The s/t ptases are ubiquitous enzymes that regulate many cell-signaling networks important to cell growth, division and death. The s/t ptases have long been appreciated as potentially important targets for anti-cancer drugs. However, because of the multi- functionality of these enzymes, it had been widely held that pharmacologic inhibitors of s/t ptases would be too toxic to allow their development as anti-cancer treatments, but the Company has shown that this is not the case. LB-100 was well tolerated at doses associated with objective regression (significant tumor shrinkage) and/or the arresting of tumor progression in patients with progressive cancers.
Pre-clinical studies showed that LB-100 itself inhibits a spectrum of human cancers and that combined with standard cytotoxic drugs and/or radiation, LB-100 potentiates their effectiveness against hematologic and solid tumor cancers without enhancing toxicity. Given at very low doses in animal models of cancer, LB-100 markedly increased the effectiveness of a PD-1 blocker, one of the widely used new immunotherapy drugs. This finding raises the possibility that LB-100 may further expand the value of the expanding field of cancer immunotherapy.
The Company completed a Phase 1 clinical trial of LB-100 to evaluate its safety that showed it is associated with anti-tumorantitumor activity in humans at doses that are readily tolerable. Responses included objective regression (tumor shrinkage) lasting for 11 months of a pancreatic cancer and cessation of growth (stabilization of disease) for 4 months or more of 9 other progressive solid tumors out of 20 patients who had measurable disease. As Phase 1 clinical trials are fundamentally designed to determine safety of a new compound in humans, the Company was encouraged by these results. The next step is to demonstrate in Phase 2 clinical trials the efficacy of LB-100 in one or more specific tumor types, against which the compound has well documented activity in pre-clinical models.
As a compound moves through the FDA-approval process, it becomes an increasingly valuable property, but at a cost of additional investment at each stage. As the potential effectiveness of LB-100 has been documented at the clinical trial level, the Company has allocated resources to expand the breadth and depth of its patent portfolio. The Company’s approach has been to operate with a minimum of overhead, moving compounds forward as efficiently and inexpensively as possible, and to raise funds to support each of these stages as certain milestones are reached. The Company’s longer-term objective is to secure one or more strategic partnerships or licensing agreements with pharmaceutical companies with major programs in cancer.
Impact of the Novel Coronavirus (Covid-19) onExternal Risks Associated with the Company’s Business Activities
Covid-19 Virus. The global outbreak of the novel coronavirus (Covid-19) has led to disruptions in general economic activities worldwide, as businesses and governments have taken broad actions to mitigate this public health crisis. In light of the uncertain and continually evolving situation relating to the spread of Covid-19, this pandemic could pose a risk to the Company. The extent to which the coronavirus may impact the Company’s business activities and capital raising efforts will depend on future developments, which are highly uncertain and cannot be predicted at this time. The Company intends to continue to monitor the situation and may adjust its current business plans as more information and guidance become available.
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The coronavirus pandemic presents a challenge to medical facilities worldwide. As the Company’s clinical trials are conducted on an outpatient basis, it is not currently possible to predict the full impact of this developing health crisis on such clinical trials, which could include delays in and increased costs of such clinical trials. Current indications from the clinical research organizations conducting the clinical trials for the Company are that such clinical trials are being delayed or extended for several months or more as a result of the coronavirus pandemic.
OverInflation Risk. The Company does not believe that inflation has had a material effect on its operations to date, other than its impact on the near term,general economy. However, there is also significanta risk that the Company’s operating costs could become subject to inflationary and continuing uncertainty as tointerest rate pressures in the future, which would have the effect of increasing the Company’s operating costs (including, specifically, clinical trial costs), and which would put additional stress on the Company’s working capital resources.
Supply Chain Issues. The Company does not currently expect that supply chain issues will have a significant impact on its business activities, including its ongoing clinical trials.
Potential Recession. There are various indications that the coronavirusUnited States economy may have onbe entering a recessionary period. Although unclear at this time, an economic recession would likely impact the general business environment and the capital markets, which could, in general and onturn, affect the amount and type of financing available to the Company in particular.Company.
The Company intends to continueis continuing to monitor the situationthese matters and maywill adjust its current business and financing plans as more information and guidance become available.
Results of Operations
At September 30, 2021,2022, the Company had not yet commenced any revenue-generating operations, does not have any positive cash flows from operations, and is dependent on its ability to raise equity capital to fund its operating requirements.
The Company’s condensed consolidated statements of operations as discussed herein are presented below.
| Three Months Ended | Nine Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||
| Revenues | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
| Costs and expenses: | ||||||||||||||||||||||||||||||||
| General and administrative costs | 1,010,539 | 802,273 | 3,762,373 | 1,350,201 | ||||||||||||||||||||||||||||
| General and administrative costs: | ||||||||||||||||||||||||||||||||
| Compensation to related parties | 643,957 | 573,472 | 1,963,409 | 2,450,641 | ||||||||||||||||||||||||||||
| Patent and licensing legal and filing fees and costs | 271,163 | 137,114 | 944,789 | 365,466 | ||||||||||||||||||||||||||||
| Other costs and expenses | 290,993 | 299,953 | 875,016 | 946,266 | ||||||||||||||||||||||||||||
| Research and development costs | 227,181 | 799,420 | 933,122 | 1,012,038 | 272,388 | 227,181 | 895,649 | 933,122 | ||||||||||||||||||||||||
| Total costs and expenses | 1,237,720 | 1,601,693 | 4,695,495 | 2,362,239 | 1,478,501 | 1,237,720 | 4,678,863 | 4,695,495 | ||||||||||||||||||||||||
| Loss from operations | (1,237,720 | ) | (1,601,693 | ) | (4,695,495 | ) | (2,362,239 | ) | (1,478,501 | ) | (1,237,720 | ) | (4,678,863 | ) | (4,695,495 | ) | ||||||||||||||||
| Interest income | 161 | 38 | 487 | 4,284 | 3,911 | 161 | 4,211 | 487 | ||||||||||||||||||||||||
| Interest expense | — | — | (2,944 | ) | — | (2,119 | ) | — | (5,240 | ) | (2,944 | ) | ||||||||||||||||||||
| Foreign currency loss | (1,165 | ) | — | (1,082 | ) | — | (1,300 | ) | (1,165 | ) | (1,339 | ) | (1,082 | ) | ||||||||||||||||||
| Net loss | $ | (1,238,724 | ) | $ | (1,601,655 | ) | $ | (4,699,034 | ) | $ | (2,357,955 | ) | $ | (1,478,009 | ) | $ | (1,238,724 | ) | $ | (4,681,231 | ) | $ | (4,699,034 | ) | ||||||||
| Net loss per common share – basic and diluted | $ | (0.09 | ) | $ | (0.14 | ) | $ | (0.35 | ) | $ | (0.21 | ) | $ | (0.09 | ) | $ | (0.09 | ) | $ | (0.30 | ) | $ | (0.35 | ) | ||||||||
| Weighted average common shares outstanding – basic and diluted | 13,733,912 | 11,174,302 | 13,381,922 | 11,174,302 | 16,646,593 | 13,733,912 | 15,541,831 | 13,381,922 | ||||||||||||||||||||||||
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Three Months Ended September 30, 20212022 and 20202021
Revenues. The Company did not have any revenues for the three months ended September 30, 20212022 and 2020.2021.
General and Administrative Costs. For the three months ended September 30, 2022, general and administrative costs were $1,206,113, which consisted of the fair value of vested stock options issued to directors and officers of $396,883, patent and licensing legal and filing fees and costs of $271,163, other consulting and professional fees of $108,630, insurance expense of $114,983, officer’s salary and related costs of $207,091, cash-based director and board committee fees of $53,324, licensing fees of $6,301, shareholder reporting costs of $20,487, listing fees of $14,875, filing fees of $3,048, taxes and licenses of $4,094, and other operating costs of $5,234.
For the three months ended September 30, 2021, general and administrative costs were $1,010,539, which consisted of the fair value of vested stock options issued to directors and officers of $347,222, patent and licensing legal and filing fees and costs of $137,114, other consulting and professional fees of $138,869, insurance expense of $92,663, officer’s salary and related costs of $207,264, cash-based director and board committee fees of $32,500, licensing fees of $6,301, shareholder reporting costs of $21,000, listing fees of $14,500, filing fees of $4,653, taxes and licenses of $3,481, and other operating costs of $4,972.
For the three months ended September 30, 2020, generalGeneral and administrative costs were $802,273, which consistedincreased by $195,574, or 19.4%, in 2022 as compared to 2021, primarily as a result of an increase in the fair value of vested stock options issued to directors and officers of $394,031,$49,661, an increase in patent and licensing legal and filing fees and costs of $163,987,$134,049, an increase in insurance expense of $22,320, an increase in cash-based director and board committee fees of $20,824, offset by a decrease in other consulting and professional fees of $139,379, insurance expense of $26,403, officer’s salary and related costs of $61,833, licensing fees of $6,301, shareholder reporting costs of $3,353, listing fees of $3,000, filing fees of $598, taxes and licenses of $928, and other operating costs of $2,460.
General and administrative costs increased by $208,266, or 26.0%, in 2021 as compared to 2020, primarily as a result of an increase in insurance expense of $66,260, and an increase in officer’s salary and related costs of $145,431.$30,239.
Research and Development Costs. For the three months ended September 30, 2022, research and development costs were $272,388, which consisted of contractor costs incurred in connection with the synthesis work done to develop a new supply of LB-100 of $1,246, clinical and related oversight costs of $34,232, and pre-clinical research focused on development of additional novel anti-cancer compounds to add to the Company’s clinical pipeline of $236,910.
For the three months ended September 30, 2021, research and development costs were $227,181, which consisted of contractor costs incurred in connection with the synthesis work done to develop a new supply of LB-100 of $151,814, clinical and related oversight costs of $7,726, and pre-clinical research focused on development of additional novel anti-cancer compounds to add to the Company’s clinical pipeline of $67,641.
For the three months ended September 30, 2020, researchResearch and development costs were $799,420, which consistedincreased by $45,207, or 19.9%, in 2022 as compared to 2021, primarily as a result of the fair value of vested stock options issued to a consultant of $670,715, and contractor costs incurredan increase in connection with the synthesis work done to develop a new supply of LB-100 of $41,625, clinical and related oversight costs of $16,686,$26,506 and an increase in pre-clinical research focused on the development of additional novel anti-cancer compounds to add to the Company’s clinical pipeline of $70,394.
Research and development costs decreased by $572,239, or 71.6% in 2021 as compared to 2020, primarily as a result of a decrease in the fair value of vested stock options issued to a consultant of $670,715,$169,269 offset by an increasea decrease in contractor costs incurred in connection with the synthesis work done to develop a new supply of LB-100 of $110,189.$150,568. The absence of costs associated with ongoing clinical trials during the three months ended September 30, 20212022 and 20202021 reflects the slow accrual of patients into such clinical trials.trials and the delay in starting the Spanish Sarcoma Group clinical trial.
Interest Income. For the three months ended September 30, 2021,2022, the Company had interest income of $161,$3,911, as compared to interest income of $38$161 for the three months ended September 30, 2020, as a result2021, related to the investment of an increase infunds generated by the Company’s cash resources invested in money market funds.financing activities.
Interest Expense. TheFor the three months ended September 30, 2022, the Company had no interest expense duringof $2,119 related to the financing of its directors and officers liability insurance policy premium. For the three months ended September 30, 2021, and 2020.the Company had no interest expense.
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Foreign Currency Loss. For the three months ended September 30, 2021,2022, the Company had a loss from foreign currency transactionsloss of $1,165. The Company had no$1,300, as compared to a foreign currency transactions duringloss of $1,165 for the three months ended September 30, 2020.2021, from foreign currency transactions.
Net Loss. For the three months ended September 30, 2021,2022, the Company incurred a net loss of $1,238,724,$1,478,009, as compared to a net loss of $1,601,655$1,238,724 for the three months ended September 30, 2020.2021.
Nine Months Ended September 30, 20212022 and 20202021
Revenues. The Company did not have any revenues for the nine months ended September 30, 20212022 and 2020.2021.
General and Administrative Costs. For the nine months ended September 30, 2022, general and administrative costs were $3,783,214, which consisted of the fair value of vested stock options issued to directors and officers of $1,160,649, patent and licensing legal and filing fees and costs of $944,789, other consulting and professional fees of $344,085, insurance expense of $349,254, officer’s salary and related costs of $627,579, cash-based director and board committee fees of $221,510, licensing fees of $18,699, shareholder reporting costs of $26,811, listing fees of $44,625, filing fees of $11,460, taxes and licenses of $12,231, and other operating costs of $21,522.
For the nine months ended September 30, 2021, general and administrative costs were $3,762,373, which consisted of the fair value of vested stock options issued to directors and officers of $1,854,058, patent and licensing legal and filing fees and costs of $365,466, other consulting and professional fees of $488,245, insurance expense of $268,177, officer’s salary and related costs of $578,535, cash-based director and board committee fees of $60,333,$60,332, licensing fees of $18,698, shareholder reporting costs of $40,760, listing fees of $43,500, filing fees of $17,217, taxes and licenses of $10,594, and other operating costs of $16,790.$16,791.
For the nine months ended September 30, 2020, general and administrative costs were $1,350,201, which consisted of the fair value of vested stock options issued to directors of $394,031, patent and licensing legal fees and costs of $440,899, other consulting and professional fees of $311,298, insurance expense of $54,818, officer’s salary and related costs of $95,724, licensing fees of $18,699, shareholder reporting costs of $9,739, listing fees of $9,000, filing fees of $6,894, taxes and licenses of $2,088, and other operating costs of $7,011.
General and administrative costs increased by $2,412,172,$20,841, or 178.7%1.0%, in 20212022 as compared to 2020,2021, primarily as a result of an increase in patent and licensing legal and filing fees and costs of $579,323, an increase in officer’s salary and related costs of $49,044, an increase in cash-based director and board committee fees of $161,178, and an increase in insurance expense of $81,077, offset by a decrease in the fair value of vested stock options issued to directors and officers of $1,460,027, an increase$693,409, and a decrease in other consulting and professional fees of $176,947, an increase in insurance expense of $213,359, and an increase in officer’s salary and related costs of $482,811.$144,160.
Research and Development Costs. For the nine months ended September 30, 2022, research and development costs were $895,649, which consisted of contractor costs incurred in connection with the synthesis work done to develop a new supply of LB-100 of $352,734, clinical and related oversight costs of $67,570, and pre-clinical research focused on development of additional novel anti-cancer compounds to add to the Company’s clinical pipeline of $475,345.
For the nine months ended September 30, 2021, research and development costs were $933,122, which consisted of contractor costs incurred in connection with the synthesis work done to develop a new supply of LB-100 of $424,141, clinical and related oversight costs of $382,134, and pre-clinical research focused on development of additional novel anti-cancer compounds to add to the Company’s clinical pipeline of $156,639, offset by a refund of $29,792 from a cancelled contract.
For the nine months ended September 30, 2020, research and development costs were $1,012,038, which consisted of the fair value of vested stock options issued to a consultant of $670,715, and contractor costs incurred in connection with the synthesis work done to develop a new supply of LB-100 of $41,625, clinical and related oversight costs of $105,537, and pre-clinical research focused on development of additional novel anti-cancer compounds to add to the Company’s clinical pipeline of $194,161.$126,847.
Research and development costs decreased by $78,916,$37,473, or 7.8%4.0%, in 20212022 as compared to 2020,2021, primarily as a result of a decrease in the fair value of vested stock options issued to a consultant of $670,715, offset by an increase in contractor costs incurred in connection with the synthesis work done to develop a new supply of LB-100 of $382,516 and an increase$71,407, a decrease in clinical and related oversight costs of $276,597, which included$314,564, offset by an upfront paymentincrease in pre-clinical research focused on development of additional novel anti-cancer compounds to Cityadd to the Company’s clinical pipeline of Hope of $240,508 upon execution of the Clinical Research Support Agreement in January 2021. The absence of costs associated with ongoing clinical trials during the nine months ended September 30, 2021 and 2020 reflects the slow accrual of patients into such clinical trials.$348,498.
Interest Income. For the nine months ended September 30, 2021,2022, the Company had interest income of $487,$4,211, as compared to interest income of $4,284$487 for the nine months ended September 30, 2020, as a result2021, related to the investment of a reduction infunds generated by the Company’s cash resources previously invested in short-term federally insured certificates of deposit.financing activities.
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Interest Expense. For the nine months ended September 30, 2021,2022, the Company had interest expense of $5,240, as compared to interest expense of $2,944 for the nine months ended September 30, 2021 related to the financing of its directors and officers liability insurance policy premium. The Company had no interest expense during the nine months ended September 30, 2020.
Foreign Currency Loss. For the nine months ended September 30, 2021,2022, the Company had a loss from foreign currency transactionsloss of $1,082. The Company had no$1,339, as compared to a foreign currency transactions duringloss of $1,082 for the nine months ended September 30, 2020.2021, from foreign currency transactions.
Net Loss. For the nine months ended September 30, 2021,2022, the Company incurred a net loss of $4,699,034,$4,681,231, as compared to a net loss of $2,357,955$4,699,034 for the nine months ended September 30, 2020.2021.
Liquidity and Capital Resources – September 30, 20212022
The Company’s condensed consolidated statements of cash flows as discussed herein are presented below.
| Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Net cash used in operating activities | $ | (3,403,289 | ) | $ | (2,996,066 | ) | ||
| Net cash provided by (used in) investing activities | — | — | ||||||
| Net cash provided by financing activities | 5,141,384 | 3,887,394 | ||||||
| Net increase in cash | $ | 1,738,095 | $ | 891,328 | ||||
At September 30, 2021,2022, the Company had working capital of $6,048,460,$6,411,140, as compared to working capital of $5,011,951$4,790,338 at December 31, 2020,2021, reflecting an increase in working capital of $1,036,509$1,620,802 for the nine months ended September 30, 2021.2022. The increase in working capital during the nine months ended September 30, 20212022 was the result of the net cash proceedsCompany completing the sale of $3,689,761 from the Company’s March 20212,900,000 shares of common stock at a price of $2.00 per share in a registered direct equity offering on April 12, 2022, generating net proceeds of $17,100 from$5,141,384, reduced by the exercisefunding of warrants, and proceeds of $201,000 from the exercise of stock options, that were utilized to pay offering costs of $20,467 and to fund the Company’s ongoing research and development activities and other ongoing operating expenses, including the Company’s clinical trial program and maintaining and developing theits patent portfolio. At September 30, 2021,2022, the Company had cash of $5,960,594$6,561,840 available to fund its operations.
The Company’s ability to continue as a going concern is dependent upon its ability to raise additional equity capital to fund its research and development activities and to ultimately achieve sustainable operating revenues and profitability. The amount and timing of future cash requirements depends on the pace and design of the Company’s clinical trial program, which, in turn, depends on the availability of operating capital to fund such activities.
Effective November 30, 2020, the Company listedBased on The Nasdaq Capital Market in conjunction with the completion of its public offering of units of common stock and warrants that generated net cash proceeds of $4,591,349. Subsequently, on January 18, 2021, the Company entered into a clinical trial agreement to carry out a Phase 1b clinical trial of LB-100, combined with a standard regimen for untreated, extensive-stage disease small cell lung cancer. This clinical trial is being conducted through City of Hope and is estimated to cost approximately $2,900,000 and take approximately 24 to 30 months. Combined with the Company’s existing clinical trial commitments, this clinical trial commitment represents an additional demand on the Company’s working capital resources. Although the Company completed a sale of common stock under a registered direct equity offering on March 2, 2021 that generated net cash proceeds of $3,689,761,current operating plans, the Company estimates that itexisting cash resources will provide sufficient working capital to fund the current clinical trial program with respect to the development of the Company’s lead anti-cancer clinical compound LB-100 through approximately September 30, 2023. However, existing cash resources will not be sufficient to complete development of and obtain regulatory approval for the Company’s product candidate, and the Company will need to raise significant additional capital to fund its operations, including its various clinical trial commitments, by the middle of 2022.do so. In addition, the Company’s operating plan may change as a result of many factors which are currently unknown, to the Company, including possible additional clinical trials, and the Company may need additional funds may be needed sooner than currently planned.
As market conditions present uncertainty as to the Company’s ability to secure additional funds, there can be no assurances that the Company will be able to secure additional financing on acceptable terms, as and when necessary, to continue to conduct operations. There is also significant uncertainty as to the effect that the coronavirus pandemic may have on the Company’s clinical trial schedule and the amount and type of financing available to the Company in the future.
If cash resources are insufficient to satisfy the Company’s ongoing cash requirements, the Company would be required to scale back or discontinue its clinical trial program, as well as its licensing and patent prosecution efforts and its technology and product development efforts, or obtain funds, if available, through strategic alliances or joint ventures that could require the Company to relinquish rights to and/or control of LB-100, or to discontinue operations entirely.
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Operating Activities. For the nine months ended September 30, 2021,2022, operating activities utilized cash of $2,996,066,$3,403,289, as compared to utilizing cash of $1,392,372$2,996,066 for the nine months ended September 30, 2020,2021, to fund the Company’s ongoing research and development activities and to fund its other ongoing operating expenses, including maintaining and developing its patent portfolio.
Investing Activities. For the nine months ended September 30, 20212022 and 2020,2021, the Company had no investing activities.
Financing Activities. For the nine months September 30, 2022, financing activities consisted of the gross proceeds from the sale of common stock in the Company’s direct equity offering of $5,800,000, reduced by offering costs of $658,616. For the nine months ended September 30, 2021, financing activities consisted of the gross proceeds from the salessale of common stock in the Company’s direct equity offering of $4,192,478, reduced by offering costs of $502,717, $17,100 from the exercise of common stock warrants, and $201,000 from the exercise of common stock options. The Company also paid public offering costs of $20,467 during the nine months ended September 30, 2021. For2021 related to the nine months ended September 30, 2020,Company’s financing activities consisted of the payment of deferred offering costs of $130,244.activities.
Principal Commitments
Clinical Trial Agreements
At September 30, 2022, the Company’s unpaid remaining contractual commitments pursuant to clinical trial agreements, and clinical trial monitoring agreements, as described below, aggregated $8,002,000, which are currently scheduled to be incurred through December 31, 2025. The Company’s ability to conduct and fund these contractual commitments is subject to the timely availability of sufficient capital to fund such expenditures, as well as any changes in the allocation or reallocation of such funds to the Company’s current or future clinical trial programs. The Company expects that the full amount of these expenditures will be incurred only if such clinical trial programs are conducted as originally designed and their respective enrollments and duration are not modified or reduced. Clinical trial programs, such as the types that the Company is engaged in, can be highly variable and can frequently involve a series of changes and modifications over time as clinical data is obtained and analyzed, and are frequently modified, suspended or terminated before the clinical trial endpoint. Accordingly, such contractual commitments as discussed herein should be considered as estimates only based on current clinical assumptions and conditions, and are typically subject to significant revisions over time.
Moffitt. Effective August 20, 2018, the Company entered into a Clinical Trial Research Agreement with the Moffitt Cancer Center and Research Institute Hospital Inc., Tampa, Florida, effective for a term of five years, unless terminated earlier by the Company pursuant to 30 days written notice. Pursuant to the Clinical Trial Research Agreement, Moffitt agreed to conduct and manage a Phase 1b/2 clinical trial to evaluate the therapeutic benefit of the Company’s lead anti-cancer clinical compound LB-100 to be administered intravenously in patients with low or intermediate-1 risk myelodysplastic syndrome (MDS).
In November 2018, the Company received approval from the U.S. Food and Drug Administration for its Investigational New Drug Application (“IND”) to conduct a Phase 1b/2 clinical trial to evaluate the therapeutic benefit of LB-100 in patients with low and intermediate-1 risk MDS who have failed or are intolerant of standard treatment. Patients with MDS, although usually older, are generally well except for severe anemia requiring frequent blood transfusions. This Phase 1b/2 clinical trial utilizes LB-100 as a single agent in the treatment of patients with low and intermediate-1 risk MDS, including patients with del(5q) myelodysplastic syndrome (del5qMDS) failing first line therapy. The bone marrow cells of patients with del5qMDS are deficient in PP2A by virtue of an acquired mutation and are especially vulnerable to further inhibition of PP2A by LB-100. The clinical trial began at a single site in April 2019 and the first patient was entered into the clinical trial in July 2019. A total enrollment of 41 patients is planned. An interim analysis will be done after the first 21 patients are entered. If there are 3 or more responders but fewer than 7, an additional 20 patients will be entered. If at any point there are 7 or more responders, this will be sufficient evidence to support continued development of LB-100 for the treatment of low and intermediate-1 risk MDS. Recruitment has been slow and the Covid-19 pandemic has further reduced recruitment of patients into the protocol. At the current rate of accrual, the clinical trial is expected to be completed over a period of approximately four years from its initiation.by June 30, 2025. However, with additional funds, the Company would consider adding two additional MDS centers to the Phase 2 portion of the study to accelerate patient accrual.
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During the three months ended September 30, 20212022 and 2020,2021, the Company incurred costs of $0$9,218 and $10,643,$0, respectively, pursuant to this agreement.agreement, which have been included in research and development costs in the Company’s consolidated statements of operations. During the nine months ended September 30, 20212022 and 2020,2021, the Company incurred costs of $17,693$18,623 and $36,008,$17,693, respectively, pursuant to this agreement.agreement, which have been included in research and development costs in the Company’s consolidated statements of operations. As of September 30, 2021,2022, total costs of $103,927$123,300 have been incurred pursuant to this agreement. The Company’s aggregate commitment pursuant to this agreement, less amounts previously paid to date, totaled approximately $590,000 as of September 30, 2022, which is expected to be incurred through December 31, 2025.
GEIS. Effective July 31, 2019, the Company entered into a Collaboration Agreement for an Investigator-Initiated Clinical Trial with the Spanish Sarcoma Group (Grupo Español de Investigación en Sarcomas or “GEIS”), Madrid, Spain, to carry out a study entitled “Randomized phase I/II trial of LB-100 plus doxorubicin vs. doxorubicin alone in first line of advanced soft tissue sarcoma”. The purpose of this clinical trial is to obtain information aboutwith respect to the efficacy and safety of LB-100 combined with doxorubicin in soft tissue sarcomas. Doxorubicin is the global standard for initial treatment of advanced soft tissue sarcomas (“ASTS”). Doxorubicin alone has been the mainstay of first line treatment of ASTS for over 40 years, with little therapeutic gain from adding cytotoxic compounds to or substituting other cytotoxic compounds for doxorubicin. In animal models, LB-100 consistently enhances the anti-tumor activity of doxorubicin without apparent increases in toxicity.
GEIS has a network of referral centers in Spain and across Europe that have an impressive track record of efficiently conducting innovative studies in ASTS. The Company agreed to provide GEIS with a supply of LB-100 to be utilized in the conduct of this clinical trial, as well as to provide funding for the clinical trial. The goal was to enter the first patientapproximately 150 patients in this clinical trial during the quarter ended December 31, 2020, with approximately 150 patients to be enrolled over a period of two years. As advanced sarcoma is a very aggressive disease, the design of the study assumes a median progression free survival (PFS, no evidence of disease progression or death from any cause) of 4.5 months in the doxorubicin arm and an alternative median PFS of 7.5 months in the doxorubicin plus LB-100 arm to demonstrate a statistically significant decrease in relative risk of progression or death by adding LB-100. There is a planned interim analysis of the primary endpoint when about halfapproximately 50% of the 102 events required for final analysis is reached.
The Company had previously expected that this clinical trial would commence during the quarter ended June 30, 2020. However, during July 2020, the Spanish regulatory authority advised the Company that although it had approved the scientific and ethical basis of the protocol, it required that the Company manufacture new inventory of LB-100 under current Spanish pharmaceutical manufacturing standards. These regulationsstandards were adopted subsequent to the production of the Company’s existing LB-100 inventory.
A new batch of LB 100 has been prepared and is now undergoing the multitude of analytical studies of the formulated product necessary to gain approval for use in the European Union. Regulatory reviews by the European Union have been delayed, as a result of which the final review of the clinical product by Spanish regulatory authorities will also be delayed. Accordingly, the clinical trial is now estimated to begin during the quarter ending June 30, 2022 and take approximately three years to conduct.
The interim analysis of this clinical trial could indicate either inferiority or superiority of LB-100 plus doxorubicin as compared to doxorubicin alone. A positive study would have the potential to change the standard therapy for this disease after four decades of failure to improve the marginal benefit of doxorubicin alone.
The Company’s agreement with GEIS provides for various payments based on achieving specific milestones over the term of the agreement. Through September 30, 2021, the Company has paid GEIS an aggregate of $67,582 towards the second milestone payment for current work being done under this agreement.
Accordingly, during the three months ended September 30, 2021 and 2020, the Company incurred costs of $0 and $0, respectively, pursuant to this agreement. During the nine months ended September 30, 2021 and 2020, the Company incurred costs of $24,171 and $43,411 respectively, pursuant to this agreement. As of September 30, 2021, total costs of $155,053 have been incurred pursuant to this agreement.
The Company’s aggregate commitments pursuant to the aforementioned clinical trial agreements, less amounts previously paid to date under these agreements, totaled approximately $4,950,000 as of September 30, 2021, consisting of approximately $4,348,000 relating to the GEIS clinical trial and approximately $602,000 relating to the Moffit clinical trial, which are expected to be incurred through December 31, 2025.
In order to manufacture a new inventory supply of LB-100 for the GEIS clinical trial, the Company has engaged a number of vendors to carry out the multiple tasks needed to make and gain approval of a new clinical product for investigational study in Spain. These tasks include the synthesis under good manufacturing practices (GMP) of the active pharmacologic ingredient (API), with documentation of each of the steps involved by an independent auditor. The API iswas then transferred to a vendor that prepares the clinical drug product, (DP), also under GMP conditions documented by an independent auditor. The DP isclinical drug product was then sent to a vendor to test for purity and sterility, provide appropriate labels, store the drug, and distribute the drug to the clinical centers for use in the clinical trials. A formal application documenting all steps taken to prepare the DPclinical drug product for clinical use must be submitted to the appropriate regulatory authorities for review and approval before being used in a clinical trial.
As of September 30, 2021, the Company estimates that2022, this program to provide new inventory of the DPclinical drug product for the Spanish sarcomaSarcoma Group study, and potentially for subsequent multiple trials within the European Union, had cost $1,144,041. While the production of new inventory has been completed, immaterial amounts of trailing costs are expected.
On October 13, 2022, the Company announced that the Spanish Agency for Medicines and Health Products (Agencia Española de Medicamentos y Productos Sanitarios or “AEMPS”) had authorized a Phase 1b/randomized Phase 2 study of LB-100, the Company’s lead clinical compound, plus doxorubicin, versus doxorubicin alone, the global standard for initial treatment of advanced soft tissue sarcomas (ASTS). Consequently, the GEIS clinical trial is now scheduled to commence during late 2022 or the first quarter of 2023 and to be completed by June 30, 2025. Up to 170 patents will cost approximately $977,000. be entered into the clinical trial. The Phase 1b section of the protocol is expected to be completed by December 31, 2023, at which time the Company expects to have data on both response and toxicity from this portion of the clinical trial.
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The interim analysis of this clinical trial will be done before full accrual of patients is completed to determine whether the study has the possibility of showing superiority of the combination of LB-100 plus doxorubicin compared to doxorubicin alone. A positive study would have the potential to change the standard therapy for this disease after four decades of failure to improve the marginal benefit of doxorubicin alone.
The Company’s remainingagreement with GEIS provides for various payments based on achieving specific milestones over the term of the agreement. Through September 30, 2022, the Company has paid GEIS an aggregate commitmentsof $67,582 towards the second milestone payment for current work being done under this program,agreement.
During the three months ended September 30, 2022 and 2021, the Company did not incur any costs pursuant to this agreement. During the nine months ended September 30, 2022 and 2021, the Company incurred costs of $0 and $24,171, respectively, pursuant to this agreement, which have been included in research and development costs in the Company’s consolidated statements of operations. As of September 30, 2022, total costs of $155,053 have been incurred pursuant to this agreement. The Company’s aggregate commitment pursuant to this agreement, less amounts previously paid to date, totaled approximately $394,000$3,836,000 as of September 30, 2021. As2022, which is expected to be incurred through December 31, 2025.
On October 7, 2022, the productionthird milestone pursuant to this agreement was achieved. Accordingly, as of that date, the new inventory is being conducted in Europe and is paid for in Euros, final costs are subjectbalance remaining pursuant to foreign currency fluctuations between the United States Dollarsecond milestone of $18,244, and the Euro.amount due upon achieving the third milestone of $254,543 became due, and were paid subsequent to September 30, 2022.
City of Hope. Effective January 18, 2021, the Company executed a Clinical Research Support Agreement with the City of Hope National Medical Center, an NCI-designated comprehensive cancer center, and City of Hope Medical Foundation (collectively, “City of Hope”), to carry out a Phase 1b clinical trial of LB-100, the Company’s first-in-class protein phosphatase inhibitor, combined with a standard regimen for treatment of untreated extensive- stage disease small cell lung cancer (ED-SCLC). LB-100 will be given in combination with carboplatin, etoposide and atezolizumab, an FDA-approved but marginally effective regimen, to previously untreated ED-SCLC patients. The dose of LB-100 will be escalated with the standard fixed doses of the 3-drug regimen to reach a recommended Phase 2 dose (RP2D). Patient entry will be expanded so that a total of 12 patients will be evaluable at the RP2D to confirm the safety of the LB-100 combination and to look for potential therapeutic activity as assessed by objective response rate, duration of overall response, progression-free-survival and overall survival.
The clinical trial was initiated on March 9, 2021, with patient accrual expected to take approximately 18 to 24 monthstwo years to complete. If LB-100 does potentiate the benefit of the standard regimen, some evidence could be noted at 12 months into the clinical trial, but an assessment of potential increased activity is likely to require at least 24 months.However, patient accrual has been slower than expected. The Company is currently seeking to add two additional centers to increase the rate of patient accrual. With the additional sites, the Company expects this clinical trial to be completed by December 31, 2024. Without additional sites, the completion date for this clinical trial will be no sooner than December 31, 2025.
During the three months ended September 30, 2022 and 2021, the Company did not incur any costs pursuant to this agreement. During the nine months ended September 30, 2022 and 2021, the Company incurred costs of $0 and $309,509,$525,528, respectively, pursuant to this agreement. As of September 30, 2021, total costs of $309,509 have been incurredThe Company’s aggregate commitment pursuant to this agreement.
The Company’s aggregate commitments pursuant to this clinical trial agreement, less amounts previously paid to date, under this agreement, totaled approximately $2,433,000 as of September 30, 2021,2022, which areis expected to be incurred over the next three yearsthrough December 31, 2024, based upon a target of 42 enrollees. If a significant number of patients fail during the dose-escalation process, an increase of up to 12 patients would likely be necessary, at an estimated additional cost of approximately $800,000. Alternatively, should fewer than 42 enrollees be required, the Company has agreed to compensate City of Hope on a per enrollee basis. The Company currently expects that enrollment in this clinical trial will range from approximately 18 to 30 enrollees, with 24 enrollees as the most likely number. Should fewer than 42 enrollees be required, the Company has agreed to compensate City of Hope on a per enrollee basis.
National Cancer Institute Pharmacologic Clinical Trial. In May 2019, the National Cancer Institute (NCI) initiated a glioblastoma (GBM) pharmacologic clinical trial. During the fourth quarter of 2019, the NCI enrolled the first two patients of a planned eight patient pharmacologic study of the ability of LB-100 to enter the brain and penetrate recurrent brain tumors in patients where surgical removal of the cancers is indicated (clinical trials registry NCT03027388). This study is being conducted and funded by the NCI under a Cooperative Research and Development Agreement, with the Company providingbeing required to provide the LB-100 clinical compound.
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Primary malignant brain tumors (gliomas) are very challenging to treat. Radiation combined with the chemotherapeutic drug temozolomide has been the mainstay of therapy of the most aggressive gliomas (glioblastoma multiforme or GBM) for decades, with some further benefit gained by the addition of one or more anti-cancer drugs, but without major advances in overall survival for the majority of patients. In animal models of GBM, the Company’s novel protein phosphatase inhibitor, LB-100, has been found to enhance the effectiveness of radiation, temozolomide chemotherapy treatments and immunotherapy, raising the possibility that LB-100 may improve outcomes of standard GBM treatment in the clinic. Although LB-100 has proven safe in patients at doses associated with apparent anti-tumor activity against several human cancers arising outside the brain, the ability of LB-100 to penetrate tumor tissue arising in the brain is not known. Unfortunately, many drugs potentially useful for GBM treatment do not enter the brain in amounts necessary for anti-cancer action.
The NCI study is designed to determine the extent to which LB-100 enters recurrent malignant gliomas. Patients having surgery to remove one or more tumors will receive one dose of LB-100 prior to surgery and have blood and tumor tissue analyzed to determine the amount of LB-100 present and to determine whether the cells in the tumors show the biochemical changes expected to be present if LB-100 reaches its molecular target. The goal is to obtain data in up to eight patients. As a result of the innovative design of the NCI study, data from so few patients should be sufficient to provide a sound rationale for conducting a larger clinical trial to determine the effectiveness of adding LB-100 to the standard treatment regimen for GBMs.
The neurosurgical unit at the NCI, which had been closed to research studies due to the Covid-19 epidemic, haswas reopened and patient accrual has resumed. Patient entry remains at two, withbeen completed, and the goal to enter eight patients before analyzing results.Company is awaiting the resulting data. There is an urgent need to improve therapy for this type of aggressive brain tumor. If the NCI study shows that LB-100 does penetrate the brain, a clinical study of LB-100 in combination with standard therapy for GBM, the drug temozolomide and radiation, both of which have been well documented in pre-clinical studies to be significantly enhanced by LB-100, would be of significant interest to neuro-oncologists frustrated by decades of limited advances in therapy for this common brain tumor in adults.
The NCI study is designed to determine the extent to which LB-100 enters recurrent malignant gliomas. Patients having surgery to remove one or more tumors will receive one dose of LB-100 prior to surgery and have blood and tumor tissue analyzed to determine the amount of LB-100 present and to determine whether the cells in the tumors show the biochemical changes expected to be present if LB-100 reaches its molecular target. As a result of the innovative design of the NCI study, data from a few patients should be sufficient to provide a sound rationale for conducting a larger clinical trial to determine the effectiveness of adding LB-100 to the standard treatment regimen for GBMs. Five patients have been entered and analysis of the blood and tissue will now proceed. If there is evidence in at least two of the patients of penetration of LB 100 into tumor tissue, the study will be deemed as successful.
Clinical Trial Monitoring Agreements
Moffitt. On September 12, 2018, the Company finalized a work order agreement with Theradex Systems, Inc. (“Theradex”), an international contract research organization (“CRO”), to monitor the Phase 1b/2 clinical trial being managed and conducted by Moffitt. The clinical trial began in April 2019 and the first patient was entered into the clinical trial in July 2019. At the current rate of accrual, the clinical trial is expected to be completed over a period of four years from its initiation.by June 30, 2025.
Costs under this work order agreement are estimated to be approximately $954,000, with such payments expected to be divided approximately 94% to Theradex for services and approximately 6% for payments for pass-through costs. The costs of the Phase 1b/2 clinical trial being paid to or through Theradex are being recorded and charged to operations based on the periodic documentation provided by the CRO. During the three months ended September 30, 20212022 and 2020,2021, the Company incurred costs of $869$11,953 and $917,$869, respectively, pursuant to this work order. During the nine months ended September 30, 20212022 and 2020,2021, the Company incurred costs of $9,350$19,791 and $12,393,$9,350, respectively, pursuant to this work order. As of September 30, 2021,2022, total costs of $91,505$111,676 have been incurred pursuant to this work order agreement.
The Company’s aggregate commitment pursuant to this clinical trial monitoring agreement, less amounts previously paid to date, under this agreement, totaled approximately $868,000$853,000 as of September 30, 2021,2022, which areis expected to be incurred through June 30, 2025.
City of Hope. On February 5, 2021, the Company signed a new work order agreement with Theradex to monitor the City of Hope investigator-initiated clinical trial in small cell lung cancer in accordance with FDA requirements for oversight by the sponsoring party. Costs under this work order agreement are estimated to be approximately $335,000. During the three months and nine months ended September 30, 2022 and 2021, the Company incurred costs of $7,731 and $6,857, respectively, pursuant to this work order. During the nine months ended September 30, 2022 and 2021, the Company incurred costs of $23,466 and $21,170, respectively, pursuant to this work order. As of September 30, 2021,2022, total costs of $21,170$48,092 have been incurred pursuant to this work order agreement.
The Company’s aggregate commitment pursuant to this clinical trial monitoring agreement, less amounts previously paid to date, under this agreement, totaled approximately $318,000$290,000 as of September 30, 2021,2022, which areis expected to be incurred through June 30, 2024.2025.
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Patent and License Agreements
INSERM.On March 22, 2018, the Company entered into a Patent Assignment and Exploitation Agreement with INSERM TRANSFERT SA, acting as delegatee of the French National Institute of Health and Medical Research, for the assignment to the Company of INSERM’S interest in United States Patent No. 9,833,450 entitled “Oxabicyloheptanes and Oxabicycloheptenes for the Treatment of Depressive and Stress Disorders”, which was filed with the United States Patent and Trademark Office in the name of INSERM and the Company as co-owners on February 19, 2015 and granted on May 12, 2017, and related patent applications and filings. INSERM is a French public institution dedicated to research in the field of health and medicine that had previously entered into a Material Transfer Agreement with the Company to allow INSERM to conduct research on the Company’s proprietary compound LB-100 and/or its analogs for the treatment of depressive or stress disorders in humans. Pursuant to the Agreement, the Company has agreed to make certain milestone payments to INSERM aggregating up to $1,750,000 upon achievement of development milestones and up to $6,500,000 upon achievement of commercial milestones. The Company also agreed to pay INSERM certain commercial royalties on net sales of products attributed to the Agreement. The Company’s initial plan was to complete the validation process to evaluate LB-100 for the treatment of depressive or stress disorders in humans within three years; however, the exploitation of this patent for the treatment of depressive and stress disorders in humans will require substantial additional capital and/or a joint venture or other type of business arrangement with a pharmaceutical company with substantially greater capital and business resources than those available to the Company. As there can be no assurances that the Company will be able to obtain the capital or business resources necessary to focus on the exploitation of this patent, it is uncertain as to when, if at all, the Company may reach any of the development or commercialization milestones under the Agreement. As of September 30, 20212022 and 2020,December 31, 2021, no amounts were due under this agreement.
Moffitt.Effective August 20, 2018, the Company entered into an Exclusive License Agreement with Moffitt. Pursuant to the License Agreement, Moffitt granted the Company an exclusive license under certain patents owned by Moffitt (the “Licensed Patents”) relating to the treatment of MDS and a non-exclusive license under inventions, concepts, processes, information, data, know-how, research results, clinical data, and the like (other than the Licensed Patents) necessary or useful for the practice of any claim under the Licensed Patents or the use, development, manufacture or sale of any product for the treatment of MDS which would otherwise infringe a valid claim under the Licensed Patents. The Company was obligated to pay Moffitt a non-refundable license issue fee of $25,000 after the first patient is entered into a Phase 1b/2 clinical trial to be managed and conducted by Moffitt. The clinical trial began at a single site in April 2019 and the first patient was entered into the clinical trial in July 2019. The Company is also obligated to pay Moffitt an annual license maintenance fee of $25,000 commencing on the first anniversary of the Effective Date and every anniversary thereafter until the Company commences payment of minimum royalty payments. The Company has also agreed to pay non-refundable milestone payments to Moffitt, which cannot be credited against earned royalties payable by the Company, based on reaching various clinical and commercial milestones aggregating $1,897,000, subject to reduction by 40% under certain circumstances relating to the status of Valid Claims, as such term is defined in the License Agreement. During the three months ended September 30, 20212022 and 2020,2021, the Company recorded charges to operations of $6,301 and $6,301, respectively, in connection with its obligations under the License Agreement. During the nine months ended September 30, 20212022 and 2020,2021, the Company recorded charges to operations of $18,698$18,699 and $18,699,$18,698, respectively, in connection with its obligations under the License Agreement. As of September 30, 2021,2022, no milestones had yet been attained.
The Company will be obligated to pay Moffitt earned royalties of 4% on worldwide cumulative net sales of royalty-bearing products, subject to reduction to 2% under certain circumstances, on a quarterly basis, with a minimum royalty payment of $50,000 in the first four years after sales commence, and $100,000 in year five and each year thereafter, subject to reduction by 40% under certain circumstances relating to the status of Valid Claims, as such term is defined in the License Agreement. The Company’s obligation to pay earned royalties under the License Agreement commences on the date of the first sale of a royalty-bearing product, and shall automatically expire on a country-by-country basis on the date on which the last valid claim of the Licensed Patents expires, lapses or is declared invalid, and the obligation to pay any earned royalties under the License Agreement shall terminate on the date on which the last valid claim of the Licensed Patents expires, lapses, or is declared to be invalid in all countries.
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Employment Agreements with Officers
During July and August 2020, the Company entered into one-year employment agreements with its executive officers, consisting of Dr. John S. Kovach, Eric J. Forman, Dr. James S. Miser, and Robert N. Weingarten, which provided for aggregate annual compensation of $640,000, payable monthly. The employment agreements are automatically renewable for additional one-year periods unless terminated by either party upon 60 days written notice prior to the end of the applicable one-year period, or by death, or by termination for cause. These employment agreements were automatically renewed for an additional one-year periodperiods in July and August 2021.2021 and 2022.
On April 9, 2021, the Board of Directors increased the annual compensation of Eric J. Forman, the Company’s Chief Administrative Officer, Dr. James S. Miser, the Company’s Chief Medical Officer, and Robert N. Weingarten, the Company’s Chief Financial Officer, under the employment agreements, such that the total aggregate annual compensation of all officers increased to $775,000, effective May 1, 2021.
Other Significant Agreements and Contracts
On December 24, 2013, the Company entered into an agreement with NDA Consulting Corp. for consultation and advice in the field of oncology research and drug development. As part of the agreement, NDA also agreed to cause its president, Dr. Daniel D. Von Hoff, M.D., to become a member of the Company’s Scientific Advisory Committee. The term of the agreement was for one year and provided for a quarterly cash fee of $4,000. The agreement has been automatically renewed for additional one-year terms on its anniversary date since 2014. Consulting and advisory fees charged to operations pursuant to this agreement were $4,000 and $4,000 for the three months ended September 30, 20212022 and 2020,2021, respectively, and $12,000 and $12,000 for the nine months ended September 30, 20212022 and 2020, respectively,2021, which were included in research and development costs in the consolidated statements of operations.
Effective September 14, 2015, the Company entered into a Collaboration Agreement with BioPharmaWorks, pursuant to which the Company engaged BioPharmaWorks to perform certain services for the Company. Those services included, among other things: (a) assisting the Company to (i) commercialize its products and strengthen its patent portfolio, (ii) identify large pharmaceutical companies with potential interest in the Company’s product pipeline, and (iii) prepare and deliver presentations concerning the Company’s products; (b) at the request of the Board of Directors, serving as backup management for up to three months should the Company’s Chief Executive Officer and scientific leader be temporarily unable to carry out his duties; (c) being available for consultation in drug discovery and development; and (d) identifying providers and overseeing tasks relating to clinical use and commercialization of new compounds.
BioPharmaWorks was founded in 2015 by former Pfizer scientists with extensive multi-disciplinary research and development and drug development experience. The Collaboration Agreement was for an initial term of two years and automatically renews for subsequent annual periods unless terminated by a party not less than 60 days prior to the expiration of the applicable period. In connection with the Collaboration Agreement, the Company agreed to pay BioPharmaWorks a monthly fee of $10,000, subject to the right of the Company to pay a negotiated hourly rate in lieu of the monthly payment and agreed to issue to BioPharmaWorks certain equity-based compensation. In April 2018, it was mutually agreed to suspend services and payments underExcluding expense reimbursements, the Collaboration Agreement, without extending its term, for the period from February 1, 2018 through the September 13, 2019 anniversary date. In February 2019, the Company and BioPharmaWorks subsequently agreed to resume the Collaboration Agreement effective March 1, 2019, and the Collaboration Agreement is currently in effect. The Company recorded charges to operations pursuant to this Collaboration Agreement of $30,000 and $30,000 for the three months ended September 30, 20212022 and 2020,2021, respectively, and $90,000 and $90,000 for the nine months ended September 30, 20212022 and 2020,2021, respectively, which were included in research and development costs in the consolidated statements of operations.
Effective August 12, 2020, the Company entered into a Master Service Agreement with the Foundation for Angelman Syndrome Therapy (FAST) to collaborate in supporting pre-clinical studies of the potential benefit of LB-100 in a mouse model of Angelman Syndrome (AS) as reported in The Proceedings of The National Academy of Science (Wang et al, June 3, 2019). The pre-clinical studies willwere to be conducted at The University of California - Davis under the direction of Dr. David Segal, an internationally recognized leader in AS research. If the pre-clinical studies confirm that LB-100 reduces AS signs in rodent models, the Company has agreed to enter into discussions with FAST with respect to possible collaborations to most efficiently assess the benefit of LB-100 in patients with AS, which is a rare disease affecting an estimated one out of 12,000 to one out of 20,000 persons in the United States. The genetic cause of AS, reduced function of a specific maternal gene called Ube3, has been understood for some time, but the molecular abnormality resulting from the genetic lesion has now been shown to be increased concentrations of protein phosphatase 2A (PP2A), a molecular target of the Company’s investigational compound, LB-100. The Company has agreed to provide FAST with a supply of LB-100 to be utilized in the conduct of this study, which iswas initially expected to be completed within three years. Conditioned on FAST’s completion of this study, the Company has agreed to pay FAST five percent (5%) of all proceeds, as defined in the Master Service Agreement, received by the Company, up to a maximum of $250,000 from the exploitation of the study results.
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The research team at the University of California - Davis recently completed their pre-clinical study of the potential benefit of LB-100 in a mouse model of AS, and the results are currently under review by FAST. The preliminary analysis indicates that the positive results previously reported by Chinese investigators were not confirmed in the US model. The Company is currently awaiting input from FAST as to whether it intends to continue to pursue pre-clinical studies of LB 100. To date, FAST has not indicated whether it desires to pursue further studies of LB-100,
Effective December 21, 2020,On October 8, 2021, the Company entered into a services agreementDevelopment Collaboration Agreement with IRTH Communications, LLC for investor/public relations, financial communications,the Netherlands Cancer Institute, Amsterdam (NKI), one of the world’s leading comprehensive cancer centers, and strategic consulting services, effective for an initial termOncode Institute, Utrecht, a major independent cancer research center, to identify the most promising drugs to be combined with LB-100, and potentially LB-100 analogues, to be used to treat a range of twelve monthscancers, as well as to identify the specific molecular mechanisms underlying the identified combinations. The Company has agreed to fund the study and renewable annually thereafter.provide a sufficient supply of LB-100 to conduct the study. The services agreement provided for a monthly cash fee of $7,500, including during any renewal term, and the issuance of restricted shares of common stock, fully vested upon issuance, with a grant date fair value of $100,000. Upon the commencement of any renewal term, the Company will be obligatedstudy is expected to issue additional restricted shares of common stock, fully vested upon issuance, with a grant date fair value of $100,000.take approximately two years to conduct. During the three months and nine months ended September 30, 2021,2022, the Company incurred charges in the amount of $22,500 and $67,500, respectively,$46,068 with respect to this agreement, which amount is included in generalresearch and administrativedevelopment costs in the Company’s consolidated statements of operations. During the nine months ended September 30, 2022, the Company incurred charges in the amount of $149,184 with respect to this agreement, which amount is included in research and development costs in the Company’s consolidated statements of operations. As of September 30, 2022, total costs of $204,433 have been incurred pursuant to this collaboration agreement. The Company’s aggregate commitment pursuant to this collaboration agreement, less amounts previously paid to date, totaled approximately $250,000 as of September 30, 2022, which is expected to be incurred through June 30, 2025. As the work is being conducted in Europe and is paid for in Euros, final costs are subject to foreign currency fluctuations between the United States Dollar and the Euro.
On February 2, 2012, the Company entered into a contract with MRI Global for the analysis and stability testing of LB-100. On June 10, 2022, the contract was amended to reflect a new total contract price of $273,980 and an estimated completion date of April 30, 2023. During the three months ended September 30, 2022 and 2021, the Company incurred costs of $6,749 and $0, respectively, pursuant to this work order. During the nine months ended September 30, 2022 and 2021, the Company incurred costs of $27,102 and $17,432, respectively, pursuant to this work order. As of September 30, 2022, total costs of $212,778 have been incurred pursuant to this work order agreement. The Company’s aggregate commitment pursuant to this clinical trial monitoring agreement, less amounts previously paid to date, totaled approximately $61,000 as of September 30, 2022.
Off-Balance Sheet Arrangements
At September 30, 2021,2022, the Company did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.
Trends, Events and Uncertainties
Research and development of new pharmaceutical compounds is, by its nature, unpredictable. Although the Company undertakes research and development efforts with commercially reasonable diligence, there can be no assurance that the Company’s cash position will be sufficient to enable it to develop pharmaceutical compounds to the extent needed to create future revenues sufficient to sustain operations.
There can be no assurances that the Company’s pharmaceutical compounds will obtain the regulatory approvals and market acceptance to achieve sustainable revenues sufficient to support operations. Even if the Company is able to generate revenues, there can be no assurances that it will be able to achieve operating profitability or positive operating cash flows. There can be no assurances that the Company will be able to secure additional financing, to the extent required, on acceptable terms or at all. If cash resources are insufficient to satisfy the Company’s ongoing cash requirements, the Company would be required to reduce or discontinue its research and development programs, or attempt to obtain funds, if available (although there can be no assurances), through strategic alliances that may require the Company to relinquish rights to certain of its pharmaceutical compounds, or to curtail or discontinue its operations entirely.
Other than as discussed above, the Company is not currently aware of any trends, events or uncertainties that are likely to have a material effect on its financial condition in the near term, although it is possible that new trends or events may develop in the future that could have a material effect on the Company’s financial condition.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As required by Rule 15d-15(b)The Company’s management is responsible for establishing and maintaining a system of the Securities and Exchange Commission (the “SEC”), the Company carried out an evaluation, under the supervision and with the participation of its management, consisting of the Company’s principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of September 30, 2021, the end of the most recent period covered by this report.
The term “disclosure controls and procedures”, as(as defined in RulesRule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act)Act”)), means controls and other procedures of a company that areis designed to ensure that information required to be disclosed by a companythe Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a companyan issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’sissuer’s management, including its principal executive officer and principal financial officers,officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
There are limitations inherent in any internal control, such asIn accordance with Exchange Act Rules 13a-15 and 15d-15, an evaluation was completed under the possibilitysupervision and with the participation of human errorthe Company’s management, including its Chief Executive Officer and the circumvention or overridingChief Financial Officer, of controls. As a result, even effective internal controls can provide only reasonable assurance with respect to financial statement preparation. As conditions change over time so too may the effectiveness of internal controls. Anythe design and operation of the Company’s disclosure controls and procedures as of September 30, 2022, the end of the most recent fiscal period covered by this report. Based on that evaluation, the Company’s management has concluded that the Company’s disclosure controls and procedures were effective in providing reasonable assurance that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act was recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.
Limitations on Effectiveness of Disclosure Controls and Procedures
In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide only reasonableabsolute assurance that all control issues and instances of achieving their objectives,fraud, if any, within a company have been detected. In addition, the design of disclosure controls and procedures must reflect that there are resource constraints and that management necessarily applies itsis required to apply judgment in evaluating the cost-benefit relationshipbenefits of possible controls and procedures.
Management’s Report on Internal Control Over Financial Reporting
The Company’s management, consisting of its Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designedprocedures relative to ensure that material information regarding the Company’s operations is made available to management and the Board of Directors to provide them reasonable assurance that the published financial statements are fairly presented.
Based on the Company’s assessment, management has concluded that its internal control over financial reporting was effective as of September 30, 2021 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. Generally Accepted Accounting Principles.
However, if in future periods the Company develops material weaknesses in its internal control over financial reporting, the Company may not detect errors on a timely basis and its consolidated financial statements may be materially misstated. In addition, the Company may also engage in business activities or transactions in future periods that could negatively affect its internal control over financial reporting and result in additional material weaknesses.
Management believes that the consolidated financial statements included in this report fairly present, in all material respects, the Company’s financial condition, results of operations and cash flows as of and for the period ended September 30, 2021.their costs.
Changes in Internal Control Over Financial Reporting
The Company’s management, consisting ofincluding its Chief Executive Officer and its Chief Financial Officer, has determined that no change in the Company’s internal control over financial reporting (as that term is defined in Rules 13(a)-15(f) and 15(d)-15(f) of the Securities Exchange Act of 1934) occurred during or subsequent to the period ended September 30, 20212022 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not currently subject to any pending or threatened legal actions or claims.
ITEM 1A. RISK FACTORS
The Company’s business, financial condition, results of operations and cash flows may be impacted by a number of factors, many of which are beyond the Company’s control, including those set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020,2021, as filed with the Securities and Exchange Commission on March 26, 202121, 2022 (the “2020“2021 Form 10-K”).
The Risk Factors set forth in the 20202021 Form 10-K should be read carefully in connection with evaluating the Company’s business and in connection with the forward-looking statements contained in this Quarterly Report on Form 10-Q. Any of the risks described in the 20202021 Form 10-K could materially adversely affect the Company’s business, financial condition or future results and the actual outcome of matters as to which forward-looking statements are made. These are not the only risks that the Company faces. Additional risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial also may materially adversely affect the Company’s business, financial condition and/or operating results.
As of the date of this filing, except as disclosed in this document, there have been no material changes to the Risk Factors previously disclosed in the Company’s 20202021 Form 10-K.
Listing of the Company’s Common Stock on The Nasdaq Capital Market
The Company’s common stock and the warrants issued in its public offering are traded on The Nasdaq Capital Market under the symbols “LIXT” and “LIXTW”, respectively.
On June 24, 2022, the Company received a written notice (the “Notice”) from The Nasdaq Stock Market LLC (“Nasdaq”) that the Company has not been in compliance with the minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) for a period of 30 consecutive business days. Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum closing bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum closing bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The Notice had no immediate effect on the listing of the Company’s common stock on The Nasdaq Capital Market.
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company is provided a compliance period of 180 calendar days from the date of the Notice, or until December 21, 2022, to regain compliance with the minimum closing bid price requirement. If the Company does not regain compliance during the compliance period ending December 21, 2022, the Company may be afforded a second 180 calendar day period to regain compliance. To qualify for the second compliance period, the Company must (i) meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the minimum closing bid price requirement, and (ii) notify Nasdaq of its intent to cure the deficiency. The Company can achieve compliance with the minimum closing bid price requirement if, during either compliance period, the minimum closing bid price per share of the Company’s common stock is at least $1.00 for a minimum of 10 consecutive business days. The Company anticipates that its shares of common stock will continue to be listed and traded on The Nasdaq Capital Market during the compliance period(s).
The Company is continuing to assess potential actions to regain compliance. However, the Company may be unable to regain compliance with the minimum closing bid price requirement during the compliance period(s), in which case the Company anticipates Nasdaq would provide a notice to the Company that its shares of common stock are subject to delisting, and the Company’s common shares would thereupon be delisted.
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External Risks Associated with the Company’s Business Activities
Covid-19 Virus. The global outbreak of the novel coronavirus (Covid-19) has led to disruptions in general economic activities worldwide, as businesses and governments have taken broad actions to mitigate this public health crisis. In light of the uncertain and continually evolving situation relating to the spread of Covid-19, this pandemic could pose a risk to the Company. The extent to which the coronavirus may impact the Company’s business activities and capital raising efforts will depend on future developments, which are highly uncertain and cannot be predicted at this time. The Company intends to continue to monitor the situation and may adjust its current business plans as more information and guidance become available.
The coronavirus pandemic presents a challenge to medical facilities worldwide. As the Company’s clinical trials are conducted on an outpatient basis, it is not currently possible to predict the full impact of this developing health crisis on such clinical trials, which could include delays in and increased costs of such clinical trials. Current indications from the clinical research organizations conducting the clinical trials for the Company are that such clinical trials are being delayed or extended for several months or more as a result of the coronavirus pandemic.
Inflation Risk. The Company does not believe that inflation has had a material effect on its operations to date, other than its impact on the general economy. However, there is a risk that the Company’s operating costs could become subject to inflationary and interest rate pressures in the future, which would have the effect of increasing the Company’s operating costs (including, specifically, clinical trial costs), and which would put additional stress on the Company’s working capital resources.
Supply Chain Issues. The Company does not currently expect that supply chain issues will have a significant impact on its business activities, including its ongoing clinical trials.
Potential Recession. There are various indications that the United States economy may be entering a recessionary period. Although unclear at this time, an economic recession would likely impact the general business environment and the capital markets, which could, in turn, affect the Company.
The Company is continuing to monitor these matters and will adjust its current business and financing plans as more information and guidance become available.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.On October 7, 2022, the Company held its annual meeting of stockholders (the “Annual Meeting”). The matters voted upon, and the results, were as follows:
Proposal 1: The election of seven director nominees to the Company’s Board of Directors to serve for a one-year term expiring at the 2023 annual meeting of stockholders. Each of the director nominees to the Company’s Board of Directors was elected
Proposal 2: To ratify the appointment of Weinberg & Company, P.A. as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022. The proposal was approved.
Proposal 3: To approve a proposal to amend the Company’s 2020 Stock Incentive Plan (the “2020 Plan”) to increase the number of common shares issuable thereunder by 1,800,000 shares. The proposal was approved.
ITEM 6. EXHIBITS
The following documents are filed as part of this report:
* Filed herewith.
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| LIXTE BIOTECHNOLOGY HOLDINGS, INC. | ||
| (Registrant) | ||
| Date: November | By: | /s/ JOHN S. KOVACH |
| John S. Kovach | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: November | By: | /s/ ROBERT N. WEINGARTEN |
| Robert N. Weingarten | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||