achv-10q_20210630.htm

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 June 30, 2021

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

FOR THE TRANSITION PERIOD FROM ______________ TO ____________.

Commission file number 033-80623

Achieve Life Sciences, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		95-4343413
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification Number)

1040 West Georgia Street, Suite 1030, Vancouver, British Columbia, Canada V6E 4H1

(Address of Principal Executive Offices)

(604) 210-2217

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol	Name of exchange on which registered
Common Stock, par value $0.001 per share	ACHV	The NASDAQ Capital Market

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 ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of August 12, 2021, there were 9,452,223 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.

Achieve Life Sciences, Inc.

Index to Form 10-Q

		Page Number

Part I. Financial Information		3

Item 1	Consolidated Financial Statements (unaudited)	3

	Consolidated Balance Sheets as of June 30, 2021 (unaudited) and December 31, 2020	3

	Consolidated Statements of Loss and Comprehensive Loss (unaudited) for the three and six months ended June 30, 2021 and June 30, 2020	4

	Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2021 and June 30, 2020	5

	Consolidated Statements of Stockholders’ Equity (unaudited) for the six months ended June 30, 2021 and June 30, 2020	6

	Notes to Consolidated Financial Statements (unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18


Item 4.	Controls and Procedures	27

Part II. Other Information		28

Item 1A.	Risk Factors	29

Item 6.	Exhibits	53

Items 2, 3 and 4 are not applicable and therefore have been omitted.

Signatures		54

PART I. FINANCIAL INFORMATION

Item 1.

Consolidated Financial Statements

Achieve Life Sciences, Inc.

Consolidated Balance Sheets

(Unaudited)

(In thousands, except per share and share amounts)

	June 30,			December 31,
	2021			2020

ASSETS
Current assets:
Cash and cash equivalents [note 5]	$	42,001		$	35,853
Prepaid expenses and other assets		430			1,122
Total current assets		42,431			36,975
Property and equipment, net		27			42
Right-of-use assets [note 7]		94			146
Other assets and restricted cash [note 5]		227			237
License agreement [note 3 and 4]		1,752			1,864
Goodwill [note 4]		1,034			1,034
Total assets	$	45,565		$	40,298
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	575		$	332
Accrued liabilities other		193			584
Accrued clinical liabilities		3,039			453
Accrued compensation		795			1,474
Current portion of long-term obligations [note 7]		68			92
Total current liabilities		4,670			2,935
Long-term obligations [note 7]		41			77
Total liabilities		4,711			3,012
Commitments and contingencies [note 7]
Stockholders' equity:
Series A convertible preferred stock, $0.001 par value, 9,158 shares designated, zero issued and outstanding at June 30, 2021 and zero issued and outstanding at December 31, 2020.		—			—
Series B convertible preferred stock, $0.001 par value, 6,256 shares designated, zero issued and outstanding at June 30, 2021 and zero issued and outstanding at December 31, 2020		—			—
Common stock, $0.001 par value, 150,000,000 shares authorized, 9,452,223 issued and outstanding at June 30, 2021 and 6,111,735 issued and outstanding at December 31, 2020, respectively.		79			76
Additional paid-in capital		120,515			97,640
Accumulated deficit		(79,744	)		(60,434	)
Accumulated other comprehensive income		4			4
Total stockholders' equity		40,854			37,286
Total liabilities and stockholders' equity	$	45,565		$	40,298
Subsequent events [note 8]

See accompanying notes.

Achieve Life Sciences, Inc.

Consolidated Statements of Loss and Comprehensive Loss

(Unaudited)

(In thousands, except per share and share amounts)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
EXPENSES
Research and development		9,227			1,103			14,869			2,644
General and administrative		2,075			1,815			4,417			3,631
Total operating expenses		11,302			2,918			19,286			6,275
OTHER INCOME (EXPENSE)
Interest income		3			3			11			45
Other expenses		(12	)		(7	)		(35	)		(12	)
Total other income (expense)		(9	)		(4	)		(24	)		33
Net loss and comprehensive loss	$	(11,311	)	$	(2,922	)		(19,310	)		(6,242	)
Basic and diluted net loss per common share	$	(1.53	)	$	(1.68	)	$	(2.85	)	$	(3.79	)
Weighted average shares used in computation of basic and diluted net loss per common share		7,390,600			1,744,014			6,764,688			1,645,426

See accompanying notes.

Achieve Life Sciences, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

	Six Months Ended
	June 30,
	2021			2020
Operating Activities:
Net loss	$	(19,310	)	$	(6,242	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization [note 3]		127			126
Stock-based compensation [note 6 [c] and note 6 [d]]		1,163			610
Shares issued as settlement with trade vendor		41			—
Changes in operating assets and liabilities:
Amounts receivable		—			8
Prepaid expenses and other assets		702			(142	)
Accounts payable		243			(336	)
Accrued liabilities other		(391	)		10
Accrued clinical liabilities		2,585			(314	)
Accrued compensation		(680	)		(381	)
Lease obligation [note 7]		(8	)		2
Net cash used in operating activities		(15,528	)		(6,659	)
Financing Activities:
Proceeds from the April 2020 private placement, net of issuance costs		—			1,579
Financing costs relating to December 2019 public offering		—			(34	)
Proceeds from exercise of warrants		331			589
Proceeds from the May 2021 public offering, net of issuance costs		21,343			—
Financing costs relating to purchase agreement with Lincoln Park Capital		—			(14	)
Net cash provided by financing activities		21,674			2,120
Investing Activities:
Purchase of property and equipment		—			(14	)
Net cash used in investing activities		—			(14	)
Effect of exchange rate changes on cash		2			—
Net increase (decrease) in cash, cash equivalents and restricted cash		6,148			(4,553	)
Cash, cash equivalents and restricted cash at beginning of the period		35,903			16,714
Cash, cash equivalents and restricted cash at end of the period	$	42,051		$	12,161

See accompanying notes.

Achieve Life Sciences, Inc.

Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands, except share amounts)

											Accumulated
									Additional		Other					Total,
	Common Stock				Preferred Stock				Paid-in		Comprehensive		Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Capital		Income (Loss)		Deficit			Equity
Balance, December 31, 2020		6,111,735	$	76		—	$	—	$	97,640	$	4	$	(60,434	)	$	37,286
Stock-based compensation expense		—		—		—		—		542		—		—			542
Shares issued on exercise of warrants		35,217		—		—		—		236		—		—			236
Shares issued as settlement with trade vendor		2,965		—		—		—		23		—		—			23
Net loss		—		—		—		—		—		—		(7,999	)		(7,999	)
Balance, March 31, 2021		6,149,917	$	76		—	$	—	$	98,441	$	4	$	(68,433	)	$	30,088
Stock-based compensation expense		—		—		—		—		621		—		—			621
Shares issued on exercise of warrants		14,443		—		—		—		95		—		—			95
Shares issued - May 2021 public offering		3,285,714		3		—		—		21,340		—		—			21,343
Shares issued as settlement with trade vendor		2,149		—		—		—		18		—		—			18
Net loss		—		—		—		—		—		—		(11,311	)		(11,311	)
Balance, June 30, 2021		9,452,223	$	79		—	$	—	$	120,515	$	4	$	(79,744	)	$	40,854

													Accumulated
										Additional			Other					Total,
	Common Stock				Preferred Stock					Paid-in			Comprehensive		Accumulated			Stockholders’
	Shares		Amount		Shares			Amount		Capital			Income (Loss)		Deficit			Equity
Balance, December 31, 2019		1,474,258	$	41		1,121		$	—	$	63,709		$	4	$	(45,704	)	$	18,050
Stock-based compensation expense		—		—		—			—		302			—		—			302
Costs relating to December 2019 financing		—		—		—			—		(34	)		—		—			(34	)
Costs relating to purchase agreement with Lincoln Park Capital		—		—		—			—		(13	)		—		—			(13	)
Shares issued on conversion of Series B preferred shares		93,379		2		(1,121	)		—		(2	)		—		—			—
Net loss		—		—		—			—		—			—		(3,320	)		(3,320	)
Balance, March 31, 2020		1,567,637	$	43		—		$	—	$	63,962		$	4	$	(49,024	)	$	14,985
Stock-based compensation expense		—		—		—			—		308			—		—			308
Costs relating to purchase agreement with Lincoln Park Capital		—		—		—			—		(1	)		—		—			(1	)
Shares issued on exercise of warrants		89,281		—		—			—		589			—		—			589
Shares issued - April 2020 private placement		280,782		6		—			—		1,573			—		—			1,579
Shares issued on conversion of preferred shares		—		2		—			—		(2	)		—		—			—
Adjustment of fractional shares on reverse stock split		3		—		—			—		—			—		—			—
Net loss		—		—		—			—		—			—		(2,922	)		(2,922	)
Balance, June 30, 2020		1,937,703	$	51		—		$	—	$	66,429		$	4	$	(51,946	)	$	14,538

See accompanying notes.

Achieve Life Sciences, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

1. NATURE OF BUSINESS, BASIS OF PRESENTATION AND LIQUIDITY RISK

Achieve Life Sciences, Inc. (referred to as “Achieve,” “we,” “us,” or “our”) is a clinical-stage pharmaceutical company committed to the global development and commercialization of cytisinicline for smoking cessation. We were incorporated in the state of Delaware, and operate out of Vancouver, British Columbia and Seattle, Washington.

The unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required to be presented for complete financial statements. The accompanying unaudited consolidated financial statements reflect all adjustments (consisting only of normal recurring items) which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. The accompanying consolidated Balance Sheet at December 31, 2020 has been derived from the audited consolidated financial statements included in our Annual Report on Form 10-K for the year then ended. The unaudited consolidated financial statements and related disclosures have been prepared with the assumption that users of the interim financial information have read or have access to the audited consolidated financial statements for the preceding fiscal year. Accordingly, these financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2020 and filed with the U.S. Securities and Exchange Commission, or the SEC, on March 11, 2021.

The consolidated financial statements include the accounts of Achieve and our wholly owned subsidiaries, Achieve Life Sciences Technologies Inc., Achieve Life Science, Inc., Extab Corporation, and Achieve Pharma UK Limited. All intercompany balances and transactions have been eliminated.

Liquidity

We have historically experienced recurring losses from operations and have incurred an accumulated deficit of $79.7 million through June 30, 2021. At June 30, 2021, we had cash and cash equivalents of $42.0 million and a positive working capital balance of $37.8 million. For the six months ended June 30, 2021, we incurred a net loss of $19.3 million and net cash used in operating activities was $15.5 million. We have historically financed our operations through equity financings. While we believe that we will be able to settle our commitments and liabilities in the normal course of business as they fall due during the next 12 months, as a development-stage company with no current sources of revenue, we are dependent on our ability to raise funds (through public or private securities offerings, debt financings, government funding or grants, or other sources, which may include licensing, collaborations or other strategic transactions or arrangements) to support the ongoing advancement of our clinical trials and corporate activities.

2. ACCOUNTING POLICIES

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures. We have discussed those estimates that we believe are critical and require the use of complex judgment in their application in our audited financial statements for the year ended December 31, 2020 in our Annual Report on Form 10-K filed with the SEC, on March 11, 2021. Since December 31, 2020, there have been no material changes to our critical accounting policies or the methodologies or assumptions we apply under them.

3. INTANGIBLES

All of our intangible assets are subject to amortization and are amortized using the straight-line method over their estimated useful life.

We acquired license and supply agreements in relation to cytisinicline upon the acquisition of Extab Corporation, or Extab, on May 18, 2015. The agreements were determined to have a fair value of $3.1 million with an estimated useful life of 14 years.

The components of intangible assets were as follows:

June 30, 2021

December 31, 2020

Gross Carrying

Accumulated