achv-10q_20220630.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, 2022

☐	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 11, 2022, there were 9,681,855 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, 2022 (unaudited) and December 31, 2021	3

	Consolidated Statements of Loss and Comprehensive Loss (unaudited) for the three and six months ended June 30, 2022 and June 30, 2021	4

	Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2022 and June 30, 2021	5

	Consolidated Statements of Stockholders’ Equity (unaudited) for the six months ended June 30, 2022 and June 30, 2021	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	28

Part II. Other Information		30

Item 1A.	Risk Factors	31

Item 6.	Exhibits	60

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

Signatures		61

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,
	2022			2021

ASSETS
Current assets:
Cash and cash equivalents [note 6]	$	29,378		$	43,022
Grant receivable [note 3]		313			153
Prepaid expenses and other assets		1,457			1,419
Total current assets		31,148			44,594
Right-of-use assets [note 9]		33			64
Other assets and restricted cash [note 6]		240			183
License agreement [note 4 and 5]		1,530			1,641
Goodwill [note 5]		1,034			1,034
Total assets	$	33,985		$	47,516
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	656		$	841
Accrued liabilities other		513			348
Accrued clinical liabilities		3,046			1,352
Accrued compensation		1,103			1,940
Current portion of long-term obligations [note 9]		41			69
Total current liabilities		5,359			4,550
Convertible debt [note 7]		15,460			14,920
Long-term obligations [note 9]		—			4
Total liabilities		20,819			19,474
Commitments and contingencies [note 9]
Stockholders' equity:
Series A convertible preferred stock, $0.001 par value, 9,158 shares designated, zero issued and outstanding at June 30, 2022 and zero issued and outstanding at December 31, 2021		—			—
Series B convertible preferred stock, $0.001 par value, 6,256 shares designated, zero issued and outstanding at June 30, 2022 and zero issued and outstanding at December 31, 2021		—			—
Common stock, $0.001 par value, 150,000,000 shares authorized, 9,681,855 issued and outstanding at June 30, 2022 and 9,453,542 issued and outstanding at December 31, 2021		79			79
Additional paid-in capital		124,710			121,545
Accumulated deficit		(111,627	)		(93,586	)
Accumulated other comprehensive income		4			4
Total stockholders' equity		13,166			28,042
Total liabilities and stockholders' equity	$	33,985		$	47,516
Going concern [note 1]

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,
	2022			2021			2022			2021
EXPENSES
Research and development		7,207			9,227			11,595			14,869
General and administrative		2,866			2,075			5,704			4,417
Total operating expenses		10,073			11,302			17,299			19,286
OTHER INCOME (EXPENSE)
Interest income		4			3			8			11
Interest expense [note 7]		(404	)		—			(761	)
Other income (expense)		5			(12	)		11			(35	)
Total other (expense)		(395	)		(9	)		(742	)		(24	)
Net loss and comprehensive loss	$	(10,468	)	$	(11,311	)		(18,041	)		(19,310	)
Basic and diluted net loss per common share [note 8[d]]	$	(1.08	)	$	(1.53	)	$	(1.89	)	$	(2.85	)
Weighted average shares used in computation of basic and diluted net loss per common share [note 8[d]]		9,647,726			7,390,600			9,553,757			6,764,688
										\

See accompanying notes.

Achieve Life Sciences, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

	Six Months Ended
	June 30,
	2022			2021
Operating Activities:
Net loss	$	(18,041	)	$	(19,310	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization [note 4]		116			127
Stock-based compensation [note 8[c], note 8[e], note 8[f] and note 8[g]]		1,663			1,163
Shares issued as settlement with trade vendor		26			41
Accrued interest on SVB convertible debt [note 7]		560			—
Changes in operating assets and liabilities:
Grant receivable [note 3]		(160	)		—
Prepaid expenses and other assets		(99	)		702
Accounts payable		(185	)		243
Accrued liabilities other		165			(391	)
Accrued clinical liabilities		1,694			2,585
Accrued compensation		(837	)		(680	)
Lease obligation [note 9]		(1	)		(8	)
Net cash used in operating activities		(15,099	)		(15,528	)
Financing Activities:
Proceeds from exercise of warrants		24			331
Proceeds from ATM, net of issuance costs [note 8[b]]		1,499			—
Financing costs relating to convertible debt with SVB [note 7]		(20	)		—
Proceeds from the May 2021 public offering, net of issuance costs		—			21,343
Taxes paid related to net share settlement of equity awards		(47	)		—
Net cash provided by financing activities		1,456			21,674
Effect of exchange rate changes on cash		(1	)		2
Net decrease in cash, cash equivalents and restricted cash		(13,644	)		6,148
Cash, cash equivalents and restricted cash at beginning of the period		43,072			35,903
Cash, cash equivalents and restricted cash at end of the period	$	29,428		$	42,051

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, 2021		9,453,542		$	79		—	$	—	$	121,545		$	4	$	(93,586	)	$	28,042
Stock-based compensation expense		—			—		—		—		823			—		—			823
Shares issued on exercise of warrants		3,709			—		—		—		24			—		—			24
Shares issued from purchase agreement with Virtu		12,742			—		—		—		91			—		—			91
Shares issued as settlement with trade vendor		3,584			—		—		—		26			—		—			26
Net loss		—			—		—		—		—			—		(7,573	)		(7,573	)
Balance, March 31, 2022		9,473,577		$	79		—	$	—	$	122,509		$	4	$	(101,159	)	$	21,433
Stock-based compensation expense		—			—		—		—		840			—		—			840
Shares issued from purchase agreement with Virtu		187,258			—		—		—		1,408			—		—			1,408
Restricted stock unit settlements		26,625			—		—		—		—			—		—			—
Restricted stock unit settlements withheld and retired to treasury		(5,605	)		—		—		—		(47	)		—		—			(47	)
Net loss		—			—		—		—		—			—		(10,468	)		(10,468	)
Balance, June 30, 2022		9,681,855		$	79		—	$	—	$	124,710		$	4	$	(111,627	)	$	13,166

											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

See accompanying notes.

Achieve Life Sciences, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

1. NATURE OF BUSINESS, BASIS OF PRESENTATION AND GOING CONCERN UNCERTAINTY

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 and nicotine addiction. 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, 2021 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, 2021 and filed with the U.S. Securities and Exchange Commission, or the SEC, on March 10, 2022.

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.

Going Concern Uncertainty

The accompanying financial statements have been prepared assuming we will continue to operate as a going concern, which contemplates the realization of assets and liabilities and commitments in the normal course of business.

We have historically experienced recurring losses from operations and have incurred an accumulated deficit of $111.6 million through June 30, 2022. As of June 30, 2022, we had cash and cash equivalents of $29.4 million and a positive working capital balance of $25.8 million. For the six months ended June 30, 2022, we incurred a net loss of $18.0 million and net cash used in operating activities was $15.1 million.

Substantial doubt exists as to our ability to continue as a going concern. Our ability to continue as a going concern is subject to material uncertainty and dependent on our ability to obtain additional financing. There is no assurance that we will obtain financing from other sources. We have historically financed our operations through equity and debt financings. Without additional funds, we may be forced to delay, scale back or eliminate some of our research and development, or R&D, activities or other operations and potentially delay product development in an effort to provide sufficient funds to continue our operations. If any of these events occurs, our ability to achieve our development and commercialization goals would be adversely affected.

Our current resources are insufficient to fund our planned operations for the next twelve months. We will continue to require substantial additional capital to continue our clinical development activities. Accordingly, we will need to raise substantial additional capital to continue to fund our operations from the sale of our securities, partnering arrangements or other financing transactions in order to finance the commercialization of our product candidate. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our clinical development efforts. The uncertainty with respect to our operations and the market generally due to the COVID-19 pandemic and increasing interest rates and inflation may also make it challenging to raise additional capital on favorable terms, if at all. Failure to raise capital as and when needed, on favorable terms or at all, will have a negative impact on our financial condition and our ability to develop our product candidate. We expect our R&D expenses to substantially increase in connection with our ongoing activities, particularly as we advance our product candidate in clinical development.

The consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that might be necessary should we be unable to continue as a going concern. Such adjustments could be material.

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, 2021 in our Annual Report on Form 10-K filed with the SEC, on March 10, 2022. Since December 31, 2021, there have been no material changes to our critical accounting policies or the methodologies or assumptions we apply under them.

3. GOVERNMENT GRANT

In July 2021, we were awarded a grant from the National Institute on Drug Abuse, or NIDA, of the National Institutes of Health, or NIH, to evaluate the use of cytisinicline as a treatment for cessation of nicotine e-cigarette use. This initial grant award, in the amount of $0.3 million, commenced on August 1, 2021, and was utilized to complete critical regulatory and clinical operational activities, such as protocol finalization, clinical trial site identification, drug packaging, and submission of a new Investigational New Drug Application, or IND, to the U.S. Food and Drug Administration, or FDA, for investigating cytisinicline in nicotine e-cigarette users. In November 2021, we announced that the FDA had completed their review and accepted the IND application to investigate cytisinicline as a cessation treatment in this population. In June 2022, following NIH review of completed milestones, we announced that we were awarded the next grant funding from the NIDA in the amount of approximately $2.5 million, which is expected to be used to conduct the ORCA-V1 Phase 2 clinical trial.

In June 2022, we announced the initiation of the ORCA-V1 Phase 2 clinical trial. ORCA-V1 will evaluate the efficacy and safety of 3 mg cytisinicline dosed three times daily compared to placebo in approximately 150 adult e-cigarette users at five clinical trial locations in the United States. Participants will be randomized to receive cytisinicline or placebo for 12 weeks in combination with standard cessation behavioral support.

The full grant award of $2.8 million is expected to cover approximately half of the total ORCA-V1 clinical study costs. The Primary Investigators for the grant are our Chief Medical Officer, Dr. Cindy Jacobs, and Dr. Nancy Rigotti, Professor of Medicine at Harvard Medical School and Director, Tobacco Research and Treatment Center, Massachusetts General Hospital.

For the six months ended June 30, 2022, we incurred $0.3 million in qualifying R&D expenditures under the NIH grant, which has been recorded as a reduction in R&D expense. As of June 30, 2022, we had $0.3 million in grant receivable related to the NIH grant.

4. 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, 2022							December 31, 2021
	Gross Carrying		Accumulated			Net Carrying		Gross Carrying		Accumulated			Net Carrying
	Value		Amortization			Value		Value		Amortization			Value
License Agreements	$	3,117	$	(1,587	)	$	1,530	$	3,117	$	(1,476	)	$	1,641

For the three and six months ended June 30, 2022, and 2021 we recorded license agreement amortization expense of $0.1 million and $0.1 million, respectively. The following table outlines the estimated future amortization expense related to intangible assets held as of June 30, 2022:

Year Ending December 31,
2022		111
2023		223
2024		223
Thereafter		973
Total	$	1,530

We evaluate the carrying amount of intangible assets periodically by taking into account events or circumstances that may warrant revised estimates of useful life or that indicate the asset may be impaired. We conducted an analysis of potential impairment indicators

for long lived assets, including the license and supply agreements for the active pharmaceutical ingredient cytisinicline, and concluded that there were no indicators of impairment identified as of June 30, 2022.

5. LICENSE AGREEMENTS

Sopharma License and Supply Agreements

We are party to a license agreement, or the Sopharma License Agreement, and a supply agreement, or the Sopharma Supply Agreement, with Sopharma, AD,