Panbela Therapeutics (PBLA) 10-Q2023 Q3 Quarterly report

Panbela Therapeutics, Inc.
Index to Quarterly Report on Form 10-Q

PART I – FINANCIAL INFORMATION

Item 1.     Financial Statements.

Panbela Therapeutics, Inc.
Condensed Consolidated Balance Sheets

(In thousands, except share amounts)

Share and per share data have been adjusted for all periods presented to reflect the one-for-thirty reverse stock split effective June 1, 2023 and the one-for-forty reverse stock split effective January 13, 2023.

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

Panbela Therapeutics, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share and per share amounts)

(Unaudited)

Share and per share data have been adjusted for all periods presented to reflect the one-for-thirty reverse stock split effective June 1, 2023 and the one-for-forty reverse stock split effective January 13, 2023.

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

Panbela Therapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ (Deficit) Equity

(In thousands, except share amounts)

(Unaudited)

Share and per share data have been adjusted for all periods presented to reflect the one-for-thirty reverse stock split effective June 1, 2023 and the one-for-forty reverse stock split effective January 13, 2023.

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

Panbela Therapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ (Deficit) Equity

(In thousands, except share amounts)

(Unaudited)

Share and per share data have been adjusted for all periods presented to reflect the one-for-thirty reverse stock split effective June 1, 2023 and the one-for-forty reverse stock split effective January 13, 2023.

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

Panbela Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows
(In thousands)

(Unaudited)

Share and per share data have been adjusted for all periods presented to reflect the one-for-thirty reverse stock split effective June 1, 2023 and the one-for-forty reverse stock split effective January 13, 2023.

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

Panbela Therapeutics, Inc.
Notes to Condensed Consolidated Financial Statements

1.         Business

Panbela Therapeutics, Inc. (“Panbela”) and its direct wholly owned subsidiaries: Panbela Research, Inc. (“Panbela Research”) Cancer Prevention Pharmaceuticals, Inc. (“CPP”) and Cancer Prevention Pharma (Ireland) Limited exist for the primary purpose of developing disruptive therapeutics for the treatment of patients with urgent unmet medical needs. Panbela Therapeutics Pty Ltd is a wholly owned subsidiary of Panbela Research organized under the laws of Australia. Cancer Prevention has two wholly owned dormant subsidiaries: Cancer Prevention Pharma Limited, a United Kingdom entity, and Cancer Prevention Pharmaceuticals, LLC, an Arizona limited liability company. Panbela Therapeutics, Inc., together with its direct and indirect subsidiaries is referred to as “we,” “us,” “our,” and the “Company.”

The primary objective of our pipeline is the utilization of pharmacotherapies to reduce or normalize increased disease-associated polyamines using complementary pharmacotherapies. Our lead candidates are ivospemin (SBP-101) for which we have exclusively licensed the worldwide rights from the University of Florida Research Foundation, Inc., Flynpovi™ a combination of eflornithine (CPP-1X) and sulindac and eflornithine (CPP-1X) alone in tablet or sachet form. We have exclusively licensed rights from the Arizona Board of Regents of the University of Arizona to commercialize Flynpovi, and a sublicense agreement to develop and commercialize Flynpovi in North America was terminated by the licensee on April 4, 2023.

Reverse stock splits

Effective June 1, 2023, Panbela effected a 1-for-30 reverse stock split of its outstanding shares of common stock. Effective January 13, 2023, Panbela effected a 1-for-40 reverse stock split of its outstanding shares of common stock. Unless specifically provided otherwise herein, all share and per share amounts of our common stock presented have been retroactively adjusted to reflect the reverse stock splits. See Note 7 for more information.

2.         Risks and Uncertainties

The Company operates in a highly regulated and competitive environment. The development, manufacturing and marketing of pharmaceutical products require approval from, and are subject to ongoing oversight by, the Food and Drug Administration (the “FDA”) in the United States, the Therapeutic Goods Administration in Australia, the European Medicines Agency in the European Union, and comparable agencies in other countries. Obtaining approval for a new pharmaceutical product is never certain, may take many years, and is normally expected to involve substantial expenditures.

We have incurred losses of $109.9 million since our inception in 2011. For the nine months ended September 30, 2023, we incurred a net loss of $18.8 million. We also incurred negative cash flows from operating activities of approximately $22.2 million for this period. As we continue to pursue development activities and seek commercialization, we expect to incur substantial losses, which are likely to generate negative net cash flows from operating activities. We generated approximately $21.4 million positive cash flows from financing activities related to proceeds from the sale of common stock, pre-funded warrants, and warrants, partially offset by the payments made on two promissory notes. As of September 30, 2023, we had cash of approximately $0.9 million, working capital deficit of $7.0 million, (working capital is defined as current assets less current liabilities), and stockholders’ deficit of $2.5 million. The Company’s principal sources of cash have historically included the issuance of convertible debt and equity securities.

The accompanying condensed consolidated financial statements have been prepared assuming that we will continue as a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The condensed consolidated financial statements do not include any adjustments relating to the recoverability or classification of assets or the amounts of liabilities that might result from the outcome of these uncertainties. Our current independent registered public accounting firm included a paragraph emphasizing this going concern uncertainty in their audit report regarding our 2022 financial statements dated March 16, 2023. Our ability to continue as a going concern, realize the carrying value of our assets and discharge our liabilities in the ordinary course of business is dependent upon a number of factors, including our ability to obtain additional financing, the success of our development efforts, our ability to obtain marketing approval for our product candidates in the United States, Australia, the European Union or other markets and ultimately our ability to market and sell our product candidates. These factors, among others, raise substantial doubt about our ability to continue operations as a going concern. See Note 4 titled “Liquidity and Business Plan.”

In January of 2022, the Company announced the opening of a global randomized Phase II/III clinical trial, which is being conducted in the United States, Europe and Asia Pacific (APAC). The Company does not expect any disruption to the conduct of this new clinical trial associated with COVID-19. The trial is reliant on adequate supply of gemcitabine and Abraxane (nab-paclitaxel) which can be subject to supply shortages.

3.         Basis of Presentation

We have prepared the accompanying interim condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Regulation S-X of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These interim condensed consolidated financial statements reflect all adjustments consisting of normal recurring accruals, which, in the opinion of management, are necessary to present fairly our consolidated financial position, consolidated results of operations and consolidated cash flows for the periods and as of the dates presented. Our fiscal year ends on December 31. The condensed consolidated balance sheet as of December 31, 2022, was derived from audited consolidated financial statements but does not include all disclosures required by U.S. GAAP. These interim condensed consolidated financial statements should be read in conjunction with the annual consolidated financial statements and the notes thereto included in our most recent filed Annual Report on Form 10-K and our subsequent filings with the SEC. The nature of our business is such that the results of any interim period may not be indicative of the results to be expected for the entire year.

4.         Liquidity and Business Plan

On June 21, 2023, the Company completed a registered public offering of common stock, pre-funded warrants and warrants which resulted in net proceeds of approximately $7.7 million.

On January 30, 2023, the Company completed a registered public offering of common stock, pre-funded warrants and warrants which resulted in net proceeds of approximately $13.8 million. Also, in the first quarter of 2023, the Company received net proceeds of approximately $1.6 million from the sale of common stock via the Company’s ATM Program (See Note 7). No sales occurred under the ATM Program during the second quarter of 2023.

We need to raise additional capital to support our current business plans. We may seek to raise additional funds through various sources, such as equity and debt financing, or through strategic collaborations and license agreements. We can give no assurances that we will be able to secure additional sources of funds to support our operations, or if such funds are available to us, that such additional financing will be sufficient to meet our needs or on terms acceptable to us. This risk would increase if our clinical data were not positive or economic and market conditions deteriorate.

Our future success is dependent upon our ability to obtain additional financing, the success of our development efforts, our ability to obtain marketing approval for our product candidates ivospemin, Flynpovi and eflornithine in the United States or other markets and ultimately our ability to market and sell product candidates. If we are unable to obtain additional financing when needed, if our clinical trials are not successful or if we are unable to obtain marketing approval, we would not be able to continue as a going concern and would be forced to cease operations and liquidate our company.

There can be no assurances that we will be able to obtain additional financing on commercially reasonable terms, or at all. The sale of additional convertible debt or equity securities would likely result in dilution to our current stockholders.

5.         Summary of Significant Accounting Policies

Principles of consolidation

The accompanying condensed consolidated financial statements include the assets, liabilities, and expenses of the Company. All significant intercompany transactions and balances have been eliminated in consolidation.

Use of estimates

The preparation of condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amount of expenses during the reporting period. Actual results could differ from those estimates, particularly given the significant social and economic disruptions and uncertainties with the ongoing pandemic and control responses.

Research and development costs

Research and development costs include expenses incurred in the conduct of our clinical trials; for third-party service providers performing various testing and accumulating data related to our preclinical studies; sponsored research agreements; developing and scaling the manufacturing process necessary to produce sufficient amounts of drug product for our product candidates for use in our pre-clinical studies and human clinical trials; consulting resources with specialized expertise related to execution of our development plan for our product candidates; personnel costs, including salaries, benefits and share-based compensation; and costs to license and maintain licensed intellectual property.

We charge research and development costs, including clinical trial costs, to expense when incurred. Our human clinical trials are, and will be, performed at clinical trial sites and are administered jointly by us with assistance from contract research organizations (“CROs”). Costs of setting up clinical trial sites are accrued upon execution of the study agreement. Expenses related to the performance of clinical trials generally are accrued based on contracted amounts and the achievement of agreed upon milestones, such as patient enrollment, patient follow-up, etc. We monitor levels of performance under each significant contract, including the extent of patient enrollment and other activities through communications with the clinical trial sites and CROs, and adjust the estimates, if required, on a quarterly basis so that clinical expenses reflect the actual effort expended at each clinical trial site and by each CRO.

The cost to secure certain third-party drug product for the clinical trials, which is often paid for in advance of delivery, is charged to research and development when it is received and available to be shipped to clinical sites.

Research and development costs for 2022 include IPR&D. This asset was acquired from the security holders of CPP and written off to research and development immediately subsequent to the asset acquisition.

All material CRO contracts are terminable by us upon written notice, and we are generally only liable for actual effort expended by the CROs and certain non-cancelable expenses incurred at any point of termination.

We expense costs associated with obtaining licenses for patented technologies when it is determined there is no alternative future use of the intellectual property subject to the license.

Stock-based compensation

In accounting for stock-based incentive awards, we measure and recognize the cost of employee and non-employee services received in exchange for awards of equity instruments based on the fair value of those awards on the grant date. Calculating stock-based compensation expense requires the input of highly subjective assumptions, which represent our best estimates and involve inherent uncertainties and the application of management’s judgment. Compensation cost is recognized ratably using the straight-line attribution method over the vesting period, which is considered to be the requisite service period. Compensation expense for performance-based stock option awards is recognized when “performance” has occurred or is probable of occurring.

The fair value of stock-based awards is estimated at the date of grant using the Black-Scholes option pricing model. The determination of the fair value of stock-based awards is affected by our stock price, as well as assumptions regarding a number of complex and subjective variables. Risk free interest rates are based upon U.S. Treasury rates appropriate for the expected term of each award. Expected volatility rates are based on historical company share price volatility. The assumed dividend yield is zero, as we do not expect to declare any dividends in the foreseeable future. The expected term of options granted is determined using the “simplified” method. Under this approach, the expected term is presumed to be the mid-point between the average vesting date and the end of the contractual term.

Foreign currency translation adjustments

The functional currency of Panbela Therapeutics Pty Ltd is the Australian Dollar. Accordingly, assets and liabilities, and equity transactions of Panbela Therapeutics Australia Pty Ltd, are translated into U.S. dollars at period-end exchange rates. Revenues and expenses are translated at the average exchange rate in effect for the period. The resulting translation gains and losses are recorded as a component of accumulated comprehensive loss presented within the stockholders’ equity. During the nine-month periods ended September 30, 2023 and 2022, any reclassification adjustments from accumulated other comprehensive loss to operations were inconsequential.

Comprehensive loss

Comprehensive loss consists of our net loss and the effects of foreign currency translation.

Net loss per share

Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is based on the weighted average of common shares outstanding during the period plus dilutive potential common shares calculated using the treasury stock method. Such potentially dilutive shares are excluded when the effect is anti-dilutive or reduce a net loss per share. The Company’s potentially dilutive shares, which include outstanding common stock options, and warrants, have not been included in the computation of diluted net loss per share for all periods as the result would be anti-dilutive.

The following table sets forth the potential shares of common stock that were not included in the calculation of diluted net loss per share as their effects would have been anti-dilutive as of the dates indicated:

6.         Notes Payable

Sucampo promissory note

As of September 30, 2023, CPP had a balance outstanding of approximately $5.4 million for principal and interest under an amended and restated promissory note (the “Sucampo Note). The note was issued with an initial principal amount of approximately $6.2 million in favor of Sucampo GmbH dated as of June 15, 2022. The principal balance outstanding as of September 30, 2023 of approximately $5.2 million under the Sucampo Note bears simple interest at a rate of 5% per annum. All unpaid principal, together with any then unpaid and accrued interest is payable as follows: (i) $1.0 million, plus all interest accrued but unpaid on or before each of January 31, 2024, January 31, 2025, and January 31, 2026; and (ii) all remaining principal plus accrued but unpaid interest on or before January 31, 2027. On February 1, 2023, Panbela paid the balance due of $1.0 million plus accrued and unpaid interest of approximately $295,000. As of September 30, 2023, the Company was current in all payments due under the Sucampo Note and the accrued and unpaid interest on this note was approximately $172,000. Panbela has agreed to guarantee CPP’s payment obligations under the Sucampo Note pursuant to a Guaranty dated as of June 15, 2022.

Tillotts promissory note

As of December 31, 2022, CPP had a balance outstanding of approximately $0.7 million representing principal and interest under an amended promissory note issued with an initial principal amount of approximately $650,000 in favor of Tillotts Pharma AG. The principal balance and accrued and unpaid interest were paid in full on January 31, 2023.

7.         Stockholders’ Equity

Public offering of common stock and warrants June 2023

On June 21, 2023, the Company completed a registered public offering and issued an aggregate of 586,000 shares of its common stock, pre-funded warrants to purchase up to an aggregate of 1,684,000 shares of common stock at an exercise price of $0.001 per share and warrants to purchase up to an aggregate of 4,540,000 shares of its common stock at an exercise price of $3.75 per share. The securities were issued for a combined offering price of $3.75 per share of common stock and warrants to purchase two shares, or $3.749 per pre-funded warrant and warrants to purchase two shares. Net proceeds from the offering totaled approximately $7.7 million. As of September 30, 2023, all pre-funded warrants had been exercised. The securities were offered pursuant to an effective registration statement on Form S-1.

Of the remaining warrants, warrants to purchase 2,270,000 shares of common stock, have an alternative cashless exercise provision pursuant to which the holder may provide notice and receive an aggregate number of shares equal to the product of (x) the aggregate number of shares of common stock that would be issuable upon a cash exercise and (y) 0.24. This feature became available on June 28, 2023 and as of June 30, 2023 no shares were issued with this alternative cashless exercise. As of September 30, 2023 120,744 shares of common stock had been issued for warrants to purchase 503,100 shares of common stock.

As of the same date warrants to purchase up to an aggregate of 4,036,900 shares of common stock remained outstanding with an exercise price of $3.75 per shares, of which warrants to purchase 1,766,900 were eligible for alternative cashless exercise.

Public offering of common stock and warrants January 2023

On January 30, 2023, the Company completed a registered public offering and issued an aggregate of 161,407 shares of its common stock, pre-funded warrants to purchase up to an aggregate of 61,090 shares of common stock at an exercise price of $0.001 per share and warrants to purchase up to an aggregate of 444.999 shares of its common stock at an exercise price as adjusted, of $2.239 per share. The securities were issued for a combined offering price of $67.50 per share of common stock and warrants to purchase two shares, or $67.47 per pre-funded warrant and warrants to purchase two shares. Net proceeds from the offering totaled approximately $13.8 million. The securities were offered pursuant to an effective registration statement on Form S-1.

All of the pre-funded warrants were exercised by February 3, 2023. The remaining warrants have an alternative cashless exercise provision pursuant to which the holder may provide notice and receive an aggregate number of shares equal to the product of (x) the aggregate number of shares of common stock that would be issuable upon a cash exercise and (y) 0.75. This feature became available on March 1, 2023 and as of as of September 30, 2023, 331,824 shares of common stock had been issued for warrants to purchase 442,434 shares. Warrants to purchase 2,566 shares of common stock remained outstanding with an exercise price as adjusted,  of $2.239 per share.

At-the-market program

We are party to a Sales Agreement dated July 29, 2022, pursuant to which Roth Capital Partners, LLC (the “Agent”) may sell shares of the Company’s common stock having an aggregate gross sales price of up to $8.4 million, from time to time, through an “at-the-market” equity offering program (the “ATM Program”). Under the Sales Agreement, Roth is entitled to a commission equal to 3.0% of the aggregate gross proceeds of any sales of common stock under the ATM Program.

During January 2023, the Company sold 14,694 shares of common stock under the ATM Program for approximately $1.6 million in gross proceeds.

During September 2023, the Company sold 3,017 shares of common stock under the ATM program for approximately $3,900 in gross proceeds.

In connection with the warrant transactions that occurred subsequent to the end of the period, the Company is restricted from selling under the ATM Program until at least May 2, 2024 (See Note 10).

Reverse stock splits

On May 25, 2023, the Company held a special meeting of its stockholders at which the stockholders approved a proposal to effect an amendment to the Company's certificate of incorporation, as amended, to implement a reverse stock split within a range of a ratio of one-for-five (1:5) up to a ratio of one-for-one hundred (1:100). On June 1, 2023, the Company's Board of Directors approved the implementation of the reverse stock split of the Company's Common Stock at a ratio of one-for-thirty (1:30). As a result of the reverse stock split, every thirty (30) shares of the Company's Common Stock either issued and outstanding immediately prior to the effective time was, automatically and without any action on the part of the respective holders thereof, combined and converted into one (1) share of the Company's common stock. No fractional shares were issued in connection with the reverse stock split. Stockholders who otherwise were entitled to receive a fractional share in connection with the reverse stock split instead were eligible to receive a cash payment, which was not material in the aggregate, instead of shares. On June 1, 2023, the Company filed a Certificate of Amendment of its Certificate of Incorporation, as amended with the Secretary of State of Delaware effecting a one-for-thirty (1:30) reverse stock split of the shares of the Company’s common stock, issued and outstanding, effective June 1, 2023.

On November 29, 2022, the Company held a special meeting of its stockholders at which the stockholders approved a proposal to effect an amendment to the Company's certificate of incorporation, as amended, to implement a reverse stock split at a ratio of one-for-forty (1:40). On January 13, 2023, the Company's Board of Directors approved the implementation of the reverse stock split of the Company's Common Stock. As a result of the reverse stock split, every forty (40) shares of the Company's Common Stock either issued and outstanding immediately prior to the effective time was, automatically and without any action on the part of the respective holders thereof, combined and converted into one (1) share of the Company's common stock. No fractional shares were issued in connection with the reverse stock split. Stockholders who otherwise were entitled to receive a fractional share in connection with the reverse stock split instead were eligible to receive a cash payment, which was not material in the aggregate, instead of shares. On January 13, 2023, the Company filed a Certificate of Amendment of its Certificate of Incorporation, as amended with the Secretary of State of Delaware effecting a one-for-forty (1:40) reverse stock split of the shares of the Company’s common stock, issued and outstanding, effective January 13, 2023.

Shares reserved

The following shares of common stock were reserved for future issuance as of the date indicated:

8.         Stock-based Compensation

2016 Omnibus Incentive Plan

The Panbela Therapeutics, Inc. 2016 Omnibus Incentive Plan (the “2016 Plan”) was adopted by our Board of Directors in March 2016 and approved by our stockholders in May 2016. The 2016 Plan permits the granting of incentive and non-statutory stock options, restricted stock, stock appreciation rights, performance units, performance shares and other stock awards to eligible employees, directors and consultants. We grant options to purchase shares of common stock under the 2016 Plan at no less than the fair market value of the underlying common stock as of the date of grant. Options granted under the 2016 Plan have a maximum term of ten years. As of September 30, 2023, options to purchase 12,054 shares of common stock were outstanding under the 2016 Plan and no shares remained available for future awards. The weighted average exercise price is $1,105.88 and the average remaining life is approximately 9.0 years.

2011 Stock Option Plan

Our Board of Directors ceased making awards under the Panbela Therapeutics, Inc. 2011 Stock Option Plan (the “2011 Plan”) upon the original receipt of stockholder approval for the 2016 Plan in May 2016. Awards outstanding under the 2011 Plan remain outstanding in accordance with and pursuant to the terms thereof. As of September 30, 2023, options to purchase 171 shares of common stock remained outstanding under the 2011 Plan. The weighted average exercise price is $3,721.58 and the average remaining life is approximately 1.3 years.

CPP’s 2010 Equity Incentive Plan

The Company has assumed all remaining rights and obligations with respect to CPP’s 2010 Equity Incentive Plan (the “CPP Plan”) through the issuance of replacement options. As of September 30, 2023, options to purchase 1,230 shares of common stock remained outstanding under the CPP Plan, with a weighted average exercise price of $361.56 per share, and the average remaining contractual life was 6.8 years.

Stock-based compensation expense

General and administrative (“G&A”) and research and development (“R&D”) expenses include non-cash stock-based compensation expense as a result of our issuance of stock options. The terms and vesting schedules for stock-based awards vary by type of grant and the employment status of the grantee. The awards granted through September 30, 2023 vest based upon time-based and performance conditions. There was approximately $0.2 million unamortized stock-based compensation expense related to options granted to employees, directors, and consultants as of September 30, 2023. The unamortized expense will be recognized over the next 12 months.

Stock-based compensation expense for each of the periods presented is as follows (in thousands):

Details of options granted, exercised, cancelled, or forfeited during the nine months ended September 30, 2023 follows:

Information about stock options outstanding, vested and expected to vest as of September 30, 2023 is as follows:

Assumptions used to calculate the fair market value of options granted in the nine month period ended September 30, 2023 include:

9.         Gain on Sale of Intellectual Property

On July 17, 2023, the Company divested certain rights, titles and interests in its eflornithine pediatric neuroblastoma program. Under the terms of the agreement, the Company is entitled to receive up to approximately $9.5 million in non-dilutive funding in exchange for the sale of these assets. An initial payment of $400,000 was received by the Company at the time of closing, remaining payments will be receivable if the acquiring company successfully completes certain milestones related to clinical development, regulatory approval and commercial sales. At the time of closing, the successful completion of these milestones is not probable and the Company did not recognize these future payments on the date of the sale as they did not have any realized or realizable value. It was determined that the contract was not with a customer and did not represent the sale of a business and therefore the initial payment was recognized as a gain on sale of intellectual property which was reflected in other income during the three months ended September 30, 2023.

10.         Subsequent Events

On November 2, 2023, the Company entered into warrant exercise inducement offer letters (the “Inducement Letters”) with certain holders (the “Holders”) of its existing warrants to purchase shares of common stock (the “Existing Warrants”), pursuant to which the Holders agreed to exercise for cash their Existing Warrants to purchase 2,130,000 shares of the Company’s common stock, in the aggregate, at a reduced exercise price of $0.78 per share, in exchange for the Company’s agreement to issue new warrants (the “Inducement Warrants”) on substantially the same terms as the Existing Warrants described below, to purchase up to 4,260,000 shares of the Company’s common stock (the “Inducement Warrant Shares”) and a cash payment of $0.125 per Existing Warrant Share which was paid in full upon the exercise of the Existing Warrants. The Company received aggregate gross proceeds of approximately $1.9 million from the exercise of the Existing Warrants by the Holders and the sale of the Inducement Warrants. The Company incurred $115,659 in investment banking fees relating to the transaction, in addition to reimbursement for certain expenses.

The Company has agreed to file a registration statement on Form S-3 covering the resale of the Inducement Warrants Shares issued or issuable upon the exercise of the Inducement Warrants (the “Resale Registration Statement”) within twenty (20) calendar days of the date of the Inducement Letters. In the Inducement Letters, the Company agreed not to issue any shares of common stock or common stock equivalents or to file any other registration statement with the SEC (in each case, subject to certain exceptions) until the Company receives stockholder approval. The Company also has agreed not to effect or agree to effect any variable rate transaction (as defined in the Inducement Letters) until one year from the date of the Inducement Letters, other than an at-the-market offering, which may be effected after the date that is six months from the date of the Inducement Letters.

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

This Quarterly Report and other publicly available documents, including any documents incorporated herein and therein by reference, contain, and our officers and representatives may from time to time make, “forward-looking statements,” including within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. When used in the following discussion, the words “anticipates,” “intends,” “believes,” “expects,” “plans,”” seeks,” “estimates,” “likely,” “may,” “would,” “will,” and similar expressions, as they relate to us or our management, are intended to identify such forward-looking statements. Examples of forward-looking statements include, among others, statements we make regarding (i) our plans to initiate a randomized clinical trial; and (ii) our estimates of additional funds that may be required to complete our development plan and obtain necessary approvals.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially and adversely from the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: (i) our ability to obtain additional capital, on acceptable terms or at all, required to implement our business plan; (ii) our lack of diversification and the corresponding risk of an investment in our Company; (iii) our ability to maintain our listing on a national securities exchange; (iv) progress and success of our randomized Phase II/III clinical trial; (v) our ability to demonstrate the safety and effectiveness of our product candidates: ivospemin ( SBP-101 ), Flynpovi, and eflornithine (CPP-1X) (v) our ability to obtain regulatory approvals for our product candidates, SBP-101, Flynpovi and CPP-1X in the United States, the European Union or other international markets; (vii) the market acceptance and level of future sales of our product candidates, SBP-101, Flynpovi and CPP-1X ; (viii) the cost and delays in product development that may result from changes in regulatory oversight applicable to our product candidates, SBP-101, Flynpovi and CPP-1X ; (ix) the rate of progress in establishing reimbursement arrangements with third-party payors; (x) the effect of competing technological and market developments; (xi) the costs involved in filing and prosecuting patent applications and enforcing or defending patent claims; and (xii) such other factors as discussed in Part I, Item 1A under the caption “Risk Factors” in our most recent Annual Report on Form 10-K, any additional risks presented in our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K.

Any forward-looking statement made by us in this Quarterly Report is based on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement or reasons why actual results would differ from those anticipated in any such forward-looking statement, whether written or oral, whether as a result of new information, future developments or otherwise.

Overview

Panbela Therapeutics, Inc. (“Panbela” and together with its direct and indirect subsidiaries, “we,” “us,” “our,” and the “Company”) is a clinical stage biopharmaceutical company developing disruptive therapeutics for the treatment of patients with urgent unmet medical needs.

Our lead candidates are ivospemin (SBP-101) for which we have exclusively licensed the worldwide rights from the University of Florida Research Foundation, Inc. and Flynpovi (eflornithine (CPP-1X) and Sulindac). Flynpovi is delivered in an oral form. The Company has an exclusive worldwide license to commercialize Flynpovi from the Arizona Board of Regents of the University of Arizona.

As Panbela is focused on utilizing a polyamine platform to develop disruptive therapeutics for the treatment of patients with urgent unmet medical needs, we are engaged in two sponsored research agreements to evaluate the polyamines individually and combined for various diseases. At present, the collaboration with Johns Hopkins University School of Medicine has been focused on mechanism of action and solid tumors while the MD Anderson Cancer Center has been focused on the hematologic malignancies. An abstract about SBP-101 and CPP-1X (also known as DFMO or Eflornithine) research in multiple myeloma (cell lines), has been accepted for an online publication on the American Society of Hematology (ASH) meeting site in the November 2023 supplemental issue of the journal Blood.

Ivospemin (SBP-101)

In 2015, the FDA accepted our Investigational New Drug (“IND”) application for our ivospemin product candidate. In May of 2022 we were notified that the United States Adopted Names (“USAN”) had adopted ivospemin as a USAN for SBP-101. The USAN information on ivospemin was posted on the USAN Web site (www.ama-assn.org/go/usan).

We have completed an initial clinical trial of ivospemin in patients with previously treated locally advanced or metastatic pancreatic cancer. This was a Phase I, first-in-human, dose-escalation, safety study. From January 2016 through September 2017, we enrolled twenty-nine patients into six cohorts, or groups, in the dose-escalation phase of the Phase I trial. No drug-related bone marrow toxicity or peripheral neuropathy was observed at any dose level. In addition to being evaluated for safety, 23 of the 29 patients were evaluable for preliminary signals of efficacy prior to or at the eight-week conclusion of their first cycle of treatment using the Response Evaluation Criteria in Solid Tumors (“RECIST”), the currently accepted standard for evaluating change in the size of tumors.

In 2018, we began enrolling patients in our second clinical trial, a Phase Ia/Ib study of the safety, efficacy and pharmacokinetics of ivospemin administered in combination with two standard-of-care chemotherapy agents, gemcitabine and nab-paclitaxel. A total of 25 subjects were enrolled in four cohorts to evaluate the dosage level and schedule. An additional 25 subjects were enrolled in the expansion phase of the trial. Interim results were presented in January of 2022. Best response in evaluable subjects (cohorts 4 and Ib N=29) was a CR in 1 (3%), PR in 13 (45%), SD in 10 (34%) and PD in 5 (17%). One subject did not have post baseline scans with RECIST tumor assessments. Median PFS, now final at 6.5 months, may have been negatively impacted by drug dosing interruptions to evaluate potential toxicity. Median overall survival in cohort 4 + Phase Ib was 12.0 months when data was presented in January 2022 and is now final at 14.6 months. Two patients from cohort 2 have demonstrated long term survival. One at 30.3 months (final data) and one at 33.0 months and still alive at data base lock on March 18, 2022. Seven subjects are still alive at database lock, one from cohort 2 and six from cohort 4 plus Phase Ib.

In January of 2022, the Company announced the initiation of a new clinical trial. Referred to as ASPIRE, the trial is a randomized double-blind placebo-controlled trial in combination with gemcitabine and nab-paclitaxel, a standard pancreatic cancer treatment regimen in patients previously untreated for metastatic pancreatic cancer. The trial will be conducted globally at approximately 94 sites in the United States, Europe and Asia - Pacific. The Company announced the first patient enrolled in the trial in Australia in August of 2022. In September 2022, the company announced that they had obtained regulatory approval to open sites in Spain, France and Italy. On September 30, 2023 there were 81 sites open in 10 countries.

While opening of clinical sites in the United States and the rest of the world has been slower than originally anticipated, due in part to resource fatigue in the medical community, the Company expects all countries and sites to be open by mid-2023.

The trial was originally designed as a Phase II/III with a smaller initial sample size. In response to European and FDA regulatory feedback, the study was amended to include the total trial sample size (600) and the design modified to utilize overall survival (the primary endpoint) to be examined at interim analysis as well. All Countries are open and the full complement of sites is expected to be open by year-end. The independent Data Safety Monitoring Board (DSMB) met for a prespecified safety analysis and recommended the trial continue without modification. The study is anticipated to take 36 months for complete enrollment of 600 subject with the interim analysis available in early 2024.

In early April 2023 the Company announced a poster presentation highlighting the results for ivospemin as a polyamine metabolism modulator in ovarian cancer at the American Association for Cancer Research Annual Conference. The poster concludes that the ivospemin chemotherapy treatment of C57Bl/6 mice injected with VDID8+ ovarian cancer cells significantly prolonged survival and decreased overall tumor burden. The results suggest that ivospemin in combination with standard of care chemotherapy may have a role in the clinical management of ovarian cancer, and the Company intends to continue pre-clinical and clinical studies in ovarian cancer.

Additional clinical trials may be required for FDA or other country approvals. The cost and timing of additional clinical trials are highly dependent on the nature and size of the trials.

Flynpovi (eflornithine (CPP-1X) and sulindac)

In 2009, the FDA accepted our IND application for the combination product, Flynpovi, product candidate.

In a Phase III study, the efficacy and safety of the combination of eflornithine and sulindac known as Flynpovi, as compared with either drug eflornithine or sulindac alone, in adults with familial adenomatous polyposis (“FAP”) was conducted. A total of 171 patients underwent randomization. Disease progression occurred in 18 of 56 patients (32%) in the Flynpovi group, 22 of 58 (38%) in the sulindac group, and 23 of 57 (40%) in the eflornithine group, with a hazard ratio of 0.71 (95% confidence interval [CI], 0.39 to 1.32) for Flynpovi as compared with sulindac (p = 0.29) and 0.66 (95% CI, 0.36 to 1.23) for Flynpovi as compared with eflornithine. In a post-hoc analysis, none of the patients in the Flynpovi arm progressed to a need for lower gastrointestinal (“LGI”) surgery for up to 48 months compared with 7 (13.2%) and 8 (15.7%) patients in the sulindac and eflornithine (CPP-1X) arms. These data corresponded to risk reductions for the need for LGI surgery approaching 100% between Flynpovi and either monotherapy with HR = 0.00 (95% CI, 0.00–0.48; p = 0.005) for Flynpovi versus sulindac and HR = 0.00 (95% CI, 0.00–0.44; p = 0.003) for Flynpovi versus eflornithine. Given the statistical significance of the LGI group, a new drug application (“NDA”) was filed with the FDA. As the study failed to meet the primary endpoint, and the NDA was based on the results of an exploratory analysis, a complete response letter was issued. To address this deficiency concern, the Company must submit the results of one or more adequate and well-controlled clinical trials which demonstrate an effect on a clinical endpoint.

In April of 2023 the Company regained the North American rights to develop and commercialize Flynpovi in patients with FAP, as a result of the termination of the licensing agreement between CPP and One-Two Therapeutics Assets Limited. 

We also have an ongoing double-blind placebo-controlled trial of Flynpovi to prevent recurrence of high-risk adenomas and second primary colorectal cancers in patients with stage 0-III colon or rectal cancer, Phase III - Preventing Adenomas of the Colon with Eflornithine and Sulindac (“PACES”). The purpose of this study is to assess whether the combination of eflornithine and sulindac (compared to corresponding placebos) has efficacy against colorectal lesions with respect to high-grade dysplasia, adenomas with villous features, adenomas one cm or greater, multiple adenomas, any adenomas >/= 0.3 cm, total advanced colorectal events, or total colorectal events. The PACES trial is funded by the National Cancer Institute (“NCI”) in collaboration with Southwest Oncology Group (“SWOG”). The Company announced on June 28, 2023 that the PACES trial passed a pre-planned futility analysis.

Eflornithine (CPP-1X)/eflornithine sachets (CPP-1X-S)

In 2009 and 2018, the FDA accepted our IND applications for eflornithine.

There is a trial evaluating eflornithine sachets in STK11 mutation patients with non-small cell lung cancer scheduled to begin this year. For eflornithine tablets, a Phase II trial in early onset Type I diabetes was opened on January 11, 2023 in collaboration with Indiana University and the Juvenile Diabetes Research Foundation (“JDRF”). Two poster presentations were given discussing the Phase I T1D results, one at the Endocrine Society meeting and the other at the Immunology of Diabetes Society Meeting in June 2023. Additionally, eflornithine is being evaluated with high dose testosterone and enzalutamide in metastatic castration-resistant prostate cancer in a Phase II trial.

On July 17, 2023, the Company divested certain rights, titles and interests in its eflornithine pediatric neuroblastoma program. Included in these assets is an ongoing trial evaluating eflornithine sachets in relapsed refractory neuroblastoma supported by the Children’s Oncology Group (“COG”) /NCI Under the terms of the agreement with US World Meds®, the Company is entitled to receive up to approximately $9.5 million in non-dilutive funding in exchange for the sale of these assets. An initial payment of $400,000 was received by the Company at the time of closing, remaining payments will be receivable if the acquiring company successfully completes certain milestones related to clinical development, regulatory approval and commercial sales.

Financial Overview

On June 1, 2023, we effected a reverse stock split at a ratio of one-for-forty (1:30) shares of the Company’s common stock and on January 13, 2023, we effected a reverse stock split at a ratio of one-for-forty (1:40) shares of the Company’s common stock. All share and per share amounts of our common stock presented have been retroactively adjusted to reflect these reverse stock splits.

We have incurred losses of $109.9 million since 2011. For the nine months ended September 30, 2023 we incurred a net loss of $18.8 million. We also incurred negative cash flows from operating activities of approximately $21.8 million for this period. We expect to continue to incur substantial losses, which will generate negative net cash flows from operating activities, as we continue to pursue research and development activities and commercialize.

Our cash was approximately $0.9 million and $1.3 million as of September 30, 2023 and December 31, 2022, respectively. A decrease of $0.4 million in cash for the nine months ended September 30, 2023 was due to $21.8 million negative cash flow from operations offset in part to $21.4 million net financing activities. Due to drug shortages of Abraxane, which is utilized in addition to ivospemin for the current randomized clinical trial, the Company has become responsible for procuring this standard of care component to the clinical trial and in the quarter ended approximately $3.1 million was charged to research and development when the drug was made available to our clinical sites. The Company continues to explore all avenues to procure supply and prepayments of an additional approximately $0.5 million were required in the third quarter. These prepayments are required well in advance of delivery and will be held on the balance sheet as a prepaid expense and reflected in the periods cash used in operations. Net financing activities included a registered public offering of common stock, pre-funded warrants, and warrants with net proceeds of approximately $23.0 million. The Company also sold common stock through its at-the market sales arrangement, with net proceeds of approximately $1.6 million. In the same period, the Company also recorded $1.6 million in loan repayments.

We need to raise additional capital to continue our operations and execute our business plan past the third quarter of 2023 including completing required future trials and pursuing regulatory approvals in the United States, the European Union, and other international markets. Historically we have financed our operations principally from the sale of equity securities and debt. While we have been successful in the past in obtaining the necessary capital to support our operations and we are likely to seek additional financing through similar means, there is no assurance that we will be able to obtain additional financing under commercially reasonable terms and conditions, or at all. This risk would increase if our clinical data were not positive or if economic or market conditions deteriorate. The accompanying condensed consolidated financial statements have been prepared assuming that we will continue as a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business.

If we are unable to obtain additional financing when needed, we would need to scale back our operations, taking actions which may include, among other things, reducing use of outside professional service providers, reducing staff or staff compensation, significantly modifying, or delaying the development of our product candidates, licensing to third parties the rights to commercialize our product candidates, or ceasing operations.

The Company did not experience any significant disruptions to our operations as a result of the COVID-19 pandemic.

Warrant Transaction After Period End

On November 2, 2023, the Company entered into warrant exercise inducement offer letters (the “Inducement Letters”) with certain holders (the “Holders”) of its existing warrants to purchase shares of common stock (the “Existing Warrants”), pursuant to which the Holders agreed to exercise for cash their Existing Warrants to purchase 2,130,000 shares of the Company’s common stock, in the aggregate, at a reduced exercise price of $0.78 per share, in exchange for the Company’s agreement to issue new warrants (the “Inducement Warrants”) on substantially the same terms as the Existing Warrants described below, to purchase up to 4,260,000 shares of the Company’s common stock (the “Inducement Warrant Shares”) and a cash payment of $0.125 per Existing Warrant Share which was paid in full upon the exercise of the Existing Warrants.  The Company received aggregate gross proceeds of approximately $1.9 million from the exercise of the Existing Warrants by the Holders and the sale of the Inducement Warrants. The Company incurred $115,659 in investment banking fees relating to the transaction, in addition to reimbursement for certain expenses.

The Company has agreed to file a registration statement on Form S-3 covering the resale of the Inducement Warrants Shares issued or issuable upon the exercise of the Inducement Warrants (the “Resale Registration Statement”) within twenty (20) calendar days of the date of the Inducement Letters. In the Inducement Letters, the Company agreed not to issue any shares of common stock or common stock equivalents or to file any other registration statement with the SEC (in each case, subject to certain exceptions) until the Company receives stockholder approval. The Company also has agreed not to effect or agree to effect any variable rate transaction (as defined in the Inducement Letters) until one year from the date of the Inducement Letters, other than an at-the-market offering, which may be effected after the date that is six months from the date of the Inducement Letters.

Results of Operations

Comparison of the results of operations (in thousands):

Research and development (“R&D”) and general and administrative (“G&A”) expenses include non-cash share-based compensation expense resulting from our issuance of stock options. We expense the fair value of equity awards over their vesting periods. The terms and vesting schedules for share-based awards vary by type of grant and the employment status of the grantee. The awards granted through September 30, 2023 vest upon performance or time-based conditions. We expect to record additional non-cash share-based compensation expense in the future, which may be significant.

The following table summarizes the stock-based compensation expense in our statements of comprehensive loss:

Three months ended September 30, 2023 and September 30, 2022

General and administrative expense

Our G&A expenses decreased 14.5% to $1.1 million in the third quarter of 2023 down from $1.3 million in the third quarter of 2022. The decrease is due primarily to reduced legal and other professional services.

Research and development expense

Our R&D expenses increased 189.4% to $6.7 million in the third quarter of 2023 up from $2.3 million in the third quarter of 2022. The increase is primarily due to the cost of approximately $3.2 million or approximately 6 months’ supply of Abraxane a standard of care drug used in the ASPIRE clinical trial and first made available to the clinical sites during the three months ended September 30, 2023. The ASPIRE trial, and the need to supply standard of care drug to many sites, will continue to drive increased costs versus the prior year.

Other expense, net

Other expense, net, was approximately $4,000 for the three months ended September 30, 2023. Other expense for this period of $0.4 million from foreign currency exchange loss on the intercompany receivable balance and interest expense on one promissory note, was nearly offset by $0.4 million of other income from the gain on sale of assets and interest income on a money market account. Other expense, net, was approximately $0.9 million for the three months ended September 30, 2022. Other expense in the three months ended September 30, 2022, is related to foreign currency exchange loss on the intercompany receivable balance and interest expense on two promissory notes.

Income tax benefit

Income tax benefit decreased to $19,000 for the three months ended September 30, 2023 down from $56,000 for the three months ended September 30, 2022. Our income tax benefit is derived primarily from refundable tax credits associated with our R&D activities conducted in Australia. The ASPIRE trial is being conducted in several countries across the world, including five clinical sites in Australia as of September 30, 2023. Costs incurred to do research in Australia are available for this refundable credit.

Nine months ended September 30, 2023 and September 30, 2022

General and administrative expense

Our G&A expenses decreased 5.7% to $4.1 million in the nine months ended September 30, 2023 down from $4.3 million in the nine months ended September 30, 2022. The decrease is due primarily to professional services incurred in connection with the acquisition of CPP incurred in the nine months ended September 30, 2022.

Research and development expense

Our R&D expenses decreased 41.0% to $14.5 million in the nine months ended September 30, 2023 down $10.1 million from the nine months ended September 30, 2022. The decrease is primarily due to a $17.7 million IPR&D write-off in the second quarter of 2022 for the CPP acquisition. Exclusive of this one-time write-off, R&D increased $7.6 million in the first nine months of 2023 related to the cost of Abraxane and increased sites and subject enrollments in the ASPIRE trial. The ASPIRE trial will continue to drive increased costs versus the prior year.

Other expense, net

Other expense, net, was approximately $0.4 million for the nine months ended September 30, 2023. Other expenses for this period are related to foreign currency exchange loss on the intercompany receivable balance and interest expense on two promissory notes, partially offset by gain on sale of fixed assets and interest income on a money market account.

Other expense, net, was approximately $1.4 million for the nine months ended September 30, 2022, it is related to foreign currency exchange loss on the intercompany receivable balance.

Income tax benefit

Income tax benefit increased to $167,000 for the nine months ended September 30, 2023 up from $104,000 for the nine months ended September 30, 2022. Our income tax benefit is derived primarily from refundable tax credits associated with our R&D activities conducted in Australia which have started to increase versus last year due to the ASPIRE trial.

Liquidity and Capital Resources

The following table summarizes our liquidity and capital resources as of September 30, 2023 and December 31, 2022, and our cash flow data for the nine months ended September 30, 2023 and 2022. It is intended to supplement the more detailed discussion that follows (in thousands):

Working Capital

Our total cash and cash equivalents were $0.9 million and $1.3 million as of September 30, 2023, and December 31, 2022, respectively. We had $8.9 million in current liabilities and a working capital deficit of $7.0 million as of September 30, 2023, compared to $7.8 million in current liabilities and working capital deficit of $6.1 million as of December 31, 2022. Working capital is defined as current assets less current liabilities.

Cash Flows

Net Cash Used in Operating Activities

Net cash used in operating activities was approximately $21.8 million in the nine months ended September 30, 2023, compared to approximately $10.3 million in the nine months ended September 30, 2022. The net cash used in each of these periods primarily reflects the net loss for these periods and is partially offset by the effects of changes in operating assets and liabilities. For the nine months ended September 30, 2023, cash used in operating activities also included $5.5 million to fund long term deposits held by the CRO leading our randomized trial, offset in part by an increase in Accounts Payable as we slowed payments to the CRO for these Deposits. Also reflected in the increased cash used in operations is approximately $3.2 million to provide standard of care drug supply to the sites to support the Aspire Trial, and $0.5 million for prepayment of standard of care drug supply.

Net Cash Provided by Investing Activities

Cash provided by investing activities included the proceeds from the sale of intellectual property in the nine months ended September 30, 2023. In the nine months ended September 30, 2022, the cash incurred was related to banker and legal costs to acquire the in process research and development from CPP.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was approximately $21.4 million for the nine months ended September 30, 2023 with $5,000 provided by financing activities for the nine months ended September 30, 2022. The cash provided for the nine months ended September 30, 2023 represents the proceeds from the sale of common stock, pre-funded warrants and warrants, partially offset by the payments made on promissory notes. The cash provided for the nine months ended September 30, 2022 represents the proceeds from exercise of stock purchase warrants.

Capital Requirements

As we continue to pursue our operations and execute our business plan, including the completion of the clinical development plan for our initial product candidate, ivospemin, in pancreatic cancer, and pursuing regulatory approvals in the United States, the European Union and other international markets, we expect to continue to incur substantial and increasing losses, which will continue to generate negative net cash flows from operating activities.

Our future capital uses and requirements depend on numerous current and future factors. These factors include, but are not limited to, the following:

As of September 30, 2023, we did not have any existing credit facilities under which we could borrow funds. Historically we have financed our operations principally from the sale of equity securities and debt. While we have been successful in the past in obtaining the necessary capital to support our operations and we are likely to seek additional financing through similar means, there is no assurance that we will be able to obtain additional financing under commercially reasonable terms and conditions, or at all.

Indebtedness

CPP issued to Sucampo GmbH (“Lender”) an Amended and Restated Promissory Note (the “Note”) on June 15, 2022 for the principal sum of approximately $6.2 million (the “Principal”). The note bears simple interest on any outstanding Principal at a rate of 5% per annum. All unpaid Principal, together with any then unpaid and accrued interest, is payable as follows: (i) $1.0 million, plus all interest accrued but unpaid on or before each of January 31, 2024, January 31, 2025 and January 31, 2026; and (ii) all remaining Principal plus accrued but unpaid interest on or before January 31, 2027. The Company made the scheduled January 31, 2023 payment of $1.0 million plus accrued interest. The outstanding principal balance on September 30, 2023 was approximately $5.2 million. Accrued and unpaid interest as of September 30, 2023 totaled approximately $172,000.

Panbela has provided a Guarantee of payment in favor of the Lender for the full amount of the Note issued to the Lender.

Critical Accounting Estimates

The accounting estimates used in preparing our interim fiscal 2023 condensed consolidated financial statements are the same as those described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Item 3.     Quantitative and Qualitative Disclosures About Market Risk.

As a smaller reporting company, we are not required to provide disclosure pursuant to this item.

Item 4.     Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. As of the date of this filing, management has not identified any material weaknesses. We believe that our internal control system provides reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published financial statements. All internal controls over financial reporting, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention or overriding of controls. Therefore, even effective internal controls over financial reporting can provide only reasonable assurance with respect to financial statement preparation and presentation. Further, because of changes in conditions, the effectiveness of internal controls over financial reporting may vary over time.

As of the end of the period covered by this quarterly report, the Company’s management conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, pursuant to Rules 13a-15 and 15d-15 of the Exchange Act. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2023 our disclosure controls and procedures were effective in ensuring that information relating to the Company required to be disclosed in the reports that we file or submit under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, including ensuring that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes to Internal Control Over Financial Reporting

We have not identified any change in our internal control over financial reporting during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1.     Legal Proceedings.

None.

Item 1A.     Risk Factors.

Other than noted below there have been no material changes to the risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

We could be delisted from Nasdaq, which would seriously harm the liquidity of our stock and our ability to raise capital.

During the first quarter of 2023 we cured previously identified minimum bid price and minimum stockholders’ equity deficiencies and regained compliance with all applicable listing standards of The Nasdaq Stock Market LLC (“Nasdaq”). As previously disclosed, in April 2023, we received a notification letter from the Listing Qualifications Department of the Nasdaq Stock Market (“Nasdaq”) indicating that for 30 consecutive business days our common stock did not maintain a minimum closing bid price of $1.00 per share as required by Nasdaq Listing Rule 5550(a)(2) (“Minimum Bid Price Requirement”). Pursuant to the stockholder approval obtained at our annual meeting of stockholders held in May 2023, we effectuated a 1-for-30 reverse split ratio on June 1, 2023. The primary reason for the reverse stock split was to attempt to increase the per share market price of our common stock to exceed the Minimum Bid Price Requirement for continued listing on the Nasdaq Capital Market. In June 2023, Nasdaq informed us that we had regained compliance with the Minimum Bid Price Requirement as the closing bid price of our common stock met or exceeded $1.00 per share for a minimum of ten consecutive business days during the 180-calendar day grace period. However, because our Company has effectuated reverse stock splits over the prior two-year period with a cumulative ratio in excess of 250 shares to one, if our common stock again fails to meet the Minimum Bid Price Requirement, then we will not be eligible for any compliance cure period specified in Nasdaq Marketplace Rule 5810(c)(3)(A) and the Nasdaq staff would issue a delisting determination. Our closing bid price has been less than $1.00 per share since October 16, 2023.

Nasdaq Listing Rule 5550(b)(1) (the “Minimum Equity Rule”) requires companies listed on The Nasdaq Capital Market to maintain stockholders’ equity of at least $2,500,000. As previously disclosed, in August 2022, we received a letter from the Listing Qualifications Department of Nasdaq notifying us that we were not in compliance with the minimum stockholders’ equity requirement for continued listing on the Nasdaq Capital Market and subsequently cured the deficiency in June 2023. As of September 30, 2023, we had a stockholders’ deficit of $2,483,000.

We intend to take all reasonable measures available to regain compliance under applicable Nasdaq Listing Rules and to maintain the listing of our common stock on Nasdaq, including effectuating a reverse split of our outstanding common stock and obtaining additional financing when necessary. However, there can be no assurance that we will be able to maintain or ultimately regain compliance with all applicable requirements for continued listing or that, if granted a hearing as a result of any deficiency, that any Nasdaq Hearings Panel will grant our request for continued listing.

If, for any reason, Nasdaq were to delist our securities from trading on The Nasdaq Capital Market and we were unable to obtain listing on another reputable national securities exchange, a reduction in some or all of the following may occur, each of which could materially adversely affect our stockholders:

In addition, if we cease to be listed on The Nasdaq Capital Market, we may have to pursue trading on a less recognized or accepted market, such as the over the counter markets, our stock may be traded as a “penny stock”, which would make transactions in our stock more difficult and cumbersome, and we may be unable to access capital on favorable terms or at all, as companies trading on alternative markets may be viewed as less attractive investments with higher associated risks, such that existing or prospective institutional investors may be less interested in, or prohibited from, investing in our common stock. This may also cause the market price of our common stock to further decline.

As a result of our current limited financial liquidity, we and our auditors have expressed substantial doubt regarding our ability to continue as a “going concern.” 

As the result of our limited financial liquidity at December 31, 2022, our auditors’ report for our 2022 financial statements, which is included as part of the annual report on form 10-K, contained a statement concerning our ability to continue as a “going concern.” For the nine months ended September 30, 2023 our ability to provide cash from financing activities was less than our cash used in operations by approximately $378,000. Leaving the Company with approximately $0.9 million cash on hand on September 30, 2023. On November 2,2023 the Company raised from certain warrant holders’ gross proceeds of approximately $1.9 million. To support our ongoing cash requirements, we will have to raise incremental funds. Until such time as additional funds can be secured, the Company will work with vendors on payment terms to allow for the cash on hand to be extended without requiring that our clinical trials be suspended.

Our limited liquidity may continue to make it more difficult for us to secure additional financing or enter into strategic relationships on terms acceptable to us, if at all, and may materially and adversely affect the terms of any financing that we may obtain and our public stock price generally. 

As we identified in our annual report on form 10-K, our continuation as a “going concern” is dependent upon, among other things, achieving positive cash flow from operations and, if necessary, augmenting such cash flow using external resources to satisfy our cash needs. Our plans to achieve positive cash flow primarily include engaging in offerings of securities. Additional potential sources of funds include negotiating up-front and milestone payments on our current and potential future product candidates or royalties from sales of our products that secure regulatory approval and any milestone payments associated with such approved products. These cash sources could, potentially, be supplemented by financing or other strategic agreements. However, we may be unable to achieve these goals or obtain required funding on commercially reasonable terms, or at all, and therefore may be unable to continue as a going concern.

Item 2.     Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.

None.

Item 3.     Defaults Upon Senior Securities.

None.

Item 4.     Mine Safety Disclosures.

Not applicable.

Item 5.     Other Information.

During the three months ended September 30, 2023, no director or officer of the Company adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation

S-K.

Item 6.     Exhibits.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.