UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED
or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM ______________ TO ____________.
Commission file number
(Exact Name of Registrant as Specified in Its Charter)
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(I.R.S. Employer |
Incorporation or Organization) |
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Identification Number) |
(Address of Principal Executive Offices)
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: |
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The |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
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
Achieve Life Sciences, Inc.
Index to Form 10-Q
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Item 1 |
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Consolidated Balance Sheets as of June 30, 2022 (unaudited) and December 31, 2021 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 4. |
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Item 1A. |
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Item 6. |
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Items 2, 3 and 4 are not applicable and therefore have been omitted. |
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2
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)
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June 30, |
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December 31, |
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2022 |
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2021 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents [note 6] |
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$ |
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Grant receivable [note 3] |
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Prepaid expenses and other assets |
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Total current assets |
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Right-of-use assets [note 9] |
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Other assets and restricted cash [note 6] |
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License agreement [note 4 and 5] |
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Goodwill [note 5] |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued liabilities other |
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Accrued clinical liabilities |
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Accrued compensation |
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Current portion of long-term obligations [note 9] |
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Total current liabilities |
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Convertible debt [note 7] |
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Long-term obligations [note 9] |
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— |
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Total liabilities |
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Commitments and contingencies [note 9] |
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Stockholders' equity: |
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Series A convertible preferred stock, $ issued and outstanding at June 30, 2022 and zero issued and outstanding at December 31, 2021 |
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Series B convertible preferred stock, $ issued and outstanding at June 30, 2022 and zero issued and outstanding at December 31, 2021 |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Accumulated other comprehensive income |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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Going concern [note 1] |
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See accompanying notes.
3
Achieve Life Sciences, Inc.
Consolidated Statements of Loss and Comprehensive Loss
(Unaudited)
(In thousands, except per share and share amounts)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2022 |
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2021 |
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2022 |
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2021 |
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EXPENSES |
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Research and development |
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General and administrative |
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Total operating expenses |
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OTHER INCOME (EXPENSE) |
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Interest income |
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Interest expense [note 7] |
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— |
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Other income (expense) |
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( |
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( |
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Total other (expense) |
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( |
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( |
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( |
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( |
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Net loss and comprehensive loss |
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$ |
( |
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$ |
( |
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Basic and diluted net loss per common share [note 8[d]] |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
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Weighted average shares used in computation of basic and diluted net loss per common share [note 8[d]] |
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See accompanying notes.
4
Achieve Life Sciences, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
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Six Months Ended |
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June 30, |
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2022 |
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2021 |
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Operating Activities: |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization [note 4] |
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Stock-based compensation [note 8[c], note 8[e], note 8[f] and note 8[g]] |
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Shares issued as settlement with trade vendor |
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Accrued interest on SVB convertible debt [note 7] |
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— |
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Changes in operating assets and liabilities: |
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Grant receivable [note 3] |
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( |
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— |
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Prepaid expenses and other assets |
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( |
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Accounts payable |
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( |
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Accrued liabilities other |
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( |
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Accrued clinical liabilities |
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Accrued compensation |
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( |
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( |
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Lease obligation [note 9] |
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( |
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( |
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Net cash used in operating activities |
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( |
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( |
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Financing Activities: |
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Proceeds from exercise of warrants |
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Proceeds from ATM, net of issuance costs [note 8[b]] |
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— |
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Financing costs relating to convertible debt with SVB [note 7] |
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( |
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— |
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Proceeds from the May 2021 public offering, net of issuance costs |
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— |
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Taxes paid related to net share settlement of equity awards |
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( |
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— |
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Net cash provided by financing activities |
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Effect of exchange rate changes on cash |
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( |
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Net decrease in cash, cash equivalents and restricted cash |
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( |
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Cash, cash equivalents and restricted cash at beginning of the period |
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Cash, cash equivalents and restricted cash at end of the period |
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$ |
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$ |
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See accompanying notes.
5
Achieve Life Sciences, Inc.
Consolidated Statements of Stockholders’ Equity
(Unaudited)
(In thousands, except share amounts)
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Accumulated |
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Additional |
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Other |
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Total, |
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Common Stock |
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Preferred Stock |
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Paid-in |
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Comprehensive |
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Accumulated |
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Stockholders |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Income (Loss) |
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Deficit |
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Equity |
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Balance, December 31, 2021 |
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$ |
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— |
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$ |
— |
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$ |
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$ |
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$ |
( |
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$ |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Shares issued on exercise of warrants |
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— |
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— |
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— |
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— |
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— |
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Shares issued from purchase agreement with Virtu |
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— |
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— |
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— |
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— |
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— |
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Shares issued as settlement with trade vendor |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balance, March 31, 2022 |
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$ |
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— |
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$ |
— |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Shares issued from purchase agreement with Virtu |
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— |
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— |
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— |
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— |
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— |
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Restricted stock unit settlements |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Restricted stock unit settlements withheld and retired to treasury |
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( |
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— |
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— |
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— |
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( |
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— |
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— |
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( |
) |
Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balance, June 30, 2022 |
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$ |
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— |
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$ |
— |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Accumulated |
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Additional |
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Other |
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Total, |
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Common Stock |
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Preferred Stock |
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Paid-in |
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Comprehensive |
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Accumulated |
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Stockholders’ |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Income (Loss) |
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Deficit |
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Equity |
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Balance, December 31, 2020 |
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$ |
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— |
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$ |
— |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Shares issued on exercise of warrants |
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— |
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— |
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— |
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— |
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— |
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Shares issued as settlement with trade vendor |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balance, March 31, 2021 |
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$ |
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— |
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$ |
— |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Shares issued on exercise of warrants |
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— |
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— |
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— |
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— |
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— |
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Shares issued - May 2021 public offering |
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— |
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— |
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— |
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— |
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Shares issued as settlement with trade vendor |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balance, June 30, 2021 |
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$ |
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— |
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$ |
— |
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$ |
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$ |
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$ |
( |
) |
|
$ |
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|
See accompanying notes.
6
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 $
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
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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 $
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 $
For the six months ended June 30, 2022, we incurred $
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 $
The components of intangible assets were as follows:
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June 30, 2022 |
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December 31, 2021 |
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Gross Carrying |
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Gross Carrying |
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Amortization |
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Amortization |
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License Agreements |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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For the three and six months ended June 30, 2022, and 2021 we recorded license agreement amortization expense of $
Year Ending December 31, |
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2022 |
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2023 |
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2024 |
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Thereafter |
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Total |
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$ |
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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
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for long lived assets, including the license and supply agreements for the active pharmaceutical ingredient cytisinicline, and concluded that there were
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,