ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information we believe is relevant to an assessment and understanding of our results of operations, financial condition, liquidity and cash flows for the periods presented below. This discussion should be read in conjunction with the interim unaudited condensed consolidated financial statements and related notes contained elsewhere in this Quarterly Report, Part II, Item 1A-Risk Factors in this Quarterly Report, and Item 1A-Risk Factors in our 2023 Annual Report. As discussed in the section above titled “Cautionary Note Regarding Forward-Looking Statements,” the following discussion contains forward-looking statements that are based upon our current expectations, including with respect to our future operations, revenues and operating results. Our actual results may differ materially from those anticipated in such forward-looking statements as a result of various factors. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included under Part II, Item 1A below, as well as in Item 1A-Risk Factors in our 2023 Annual Report.
Unless otherwise provided, references to the “Company,” “we,” “us” and “our” refer to Entera Bio Ltd. and its consolidated subsidiary.
Overview
Entera is a clinical stage company focused on developing first-in-class oral tablet formats of peptides or protein replacement therapies. We focus on underserved, chronic medical conditions for which oral administration of a protein therapy has the potential to significantly shift a treatment paradigm.
Currently, most protein therapies are administered via frequent intravenous, subcutaneous or intramuscular injections. In chronic diseases where patients require persistent management, these cumbersome, often painful and high-priced injections can create a major treatment gap.
From a technical standpoint, oral delivery of therapeutic proteins is challenging due to the enzymatic degradation within the gastrointestinal tract and poor absorption into the blood stream due to the proteins’ polarity and molecular weight. We leverage our N-Tab™ oral delivery technology, which is designed to simultaneously stabilize the peptide in the gastrointestinal tract and promote its absorption into the bloodstream.
Oral PTH(1-34) Programs
Our most advanced product candidate, EB613, oral PTH (1-34), is being developed as the first oral, osteoanabolic (bone building) once-daily tablet treatment for post-menopausal women with low bone mineral density (“BMD”) and high-risk osteoporosis with no prior fracture. A placebo controlled, dose ranging Phase 2 study of EB613 tablets (n= 161) met primary (pharmacodynamic/bone turnover biomarker) and secondary endpoints (BMD). Following the completion of a Type C and a Type D meeting with the U.S. Food and Drug Administration’s (FDA), we announced the FDA’s concurrence that a 2-year, placebo-controlled phase 3 (registrational) study with Total Hip BMD as primary endpoint could support a new drug application (“NDA”) for EB613. In November 2023, we reported that the American Society for Bone and Mineral Research (ASBMR) announced that the SABRE (Strategy to Advance BMD as a Regulatory Endpoint) project team had submitted its full qualification plan to the FDA for the use of BMD as a surrogate endpoint for fractures in future trials of new anti-osteoporosis drugs. In March 2024, we reported that the ASBMR had announced that the FDA ruling to qualify the treatment-related change in BMD as a surrogate endpoint for fractures in future trials of new anti-osteoporosis drugs would be provided within 10 months of March 2024. We believe EB613 stands as the first program to potentially avail itself of the ASBMR-SABRE BMD endpoint.
The EB612 program is being developed as the first oral PTH(1-34) tablet peptide replacement tablet therapy for hypoparathyroidism. With respect to our EB612 program, we are currently testing new generations of our N-Tab™ Technology with the naked PTH(1-34) peptide to assess the effectiveness of once or twice a day dosing regimens, as well as collaborating with a third party on another peptide in this field.
To date, Entera’s proprietary PTH tablets have been safely administered to a total of 102 healthy subjects in Phase 1 studies and 153 patients in Phase 2 studies in osteoporosis and hypoparathyroidism, two diseases that remain underserved with the current standard of care and which disproportionately affect women. We believe these product candidates, if approved, hold the potential to become standards of care for patients with osteoporosis and hypoparathyroidism.
Our ability to deliver our oral PTH(1-34) peptide in a simple mini tablet format with reproduceable, dose dependent pharmacokinetics and rapid biological responses across gender, age, and health status was highlighted as part of two poster sessions at the ASBMR 2023 Annual Meeting. We believe our work to date has built the foundation for our oral PTH (1-34) tablets to potentially treat diverse patient populations, including younger men and women athletes at risk of stress fractures. We are exploring the use of our PTH(1-34) tablets for the treatment of stress fractures in athletes and an investigator sponsored phase 2 study is expected to be initiated with respect to this indication in the second half of 2024.
Oral GLP-2 and Oral GLP-1/Glucagon Programs in Collaboration with OPKO Biologics
In May 2023, the results from our oral GLP-2 program were published in the International Journal of Peptide Research and Therapeutics, “Oral Delivery Technology Enabling Gastro-Mucosal Absorption of Glucagon-Like-Peptide-2 Analog (Teduglutide, Gattex®) - A Novel Approach for Injection-Free Treatment of Short Bowel Syndrome.” We believe GLP-2 represents a strong candidate for our N-Tab™ technology and warrants further development as an injection-free alternative to patients suffering from short bowel syndrome and other gastrointestinal disorders where GLP-2 plays a role.
In September 2023, we entered into a research collaboration agreement with OPKO Biologics, Inc., a subsidiary of OPKO Health, Inc. (“OPKO”). Under the terms of this agreement, OPKO has agreed to supply its proprietary long-acting GLP-2 peptide and certain Oxyntomodulin analogs for the development of oral tablet formulations using our proprietary N-Tab™ technology. In March 2024, we announced positive in vivo pharmacokinetic (PK) results from our collaborative research combining a proprietary long acting GLP-2 agonist developed by OPKO with Entera’s proprietary N-Tab™ technology. The program is focused on developing the first and only GLP-2 peptide tablet alternative for patients suffering from short bowel syndrome and additional disorders involving mucosal inflammation and nutrient malabsorption.
Oxyntomodulin (OXM) is a naturally occurring peptide hormone found in the colon, with glucagon-like-peptide 1 (GLP-1) and glucagon dual agonist activity which suppresses appetite and induces weight loss. OPKO has developed several proprietary, modified OXM analogs as potential candidates for treating obesity, including an injectable pegylated peptide which demonstrated significant reductions in weight loss and decreased plasma triglyceride levels in over 430 patients in phase 2/2B studies.
We expect additional in vivo PK/PD data from both the oral GLP-2 tablet program and the oral OXM tablet program in 2024. We and OPKO have each agreed to be responsible for specific phases of development of the two oral peptides to the point of demonstrated in vivo feasibility.
Patent Transfer, Licensing Agreements and Grant Funding
Oramed Patent Transfer Agreement
In 2011, we entered into a patent transfer agreement with Oramed, which we refer to as the Patent Transfer Agreement, pursuant to which Oramed assigned to us all of its rights, title and interest in the patent rights Oramed licensed to us when we were originally organized, subject to a worldwide, royalty-free, exclusive, irrevocable, perpetual and sub-licensable license granted to Oramed under the assigned patent rights to develop, manufacture and commercialize products or otherwise exploit such patent rights in the fields of diabetes and influenza. Additionally, we agreed not to engage, directly or indirectly, in any activities in the fields of diabetes and influenza that involve the use of, or utilize, the patents underlying the Patent Transfer Agreement. Under the terms of the Patent Transfer Agreement, we agreed to pay Oramed royalties equal to 3% of our net revenues generated, directly or indirectly, from our exploitation of the assigned patent rights, including the sale, lease or transfer of the assigned patent rights or sales of products or services covered by the assigned patent rights.
The Israeli Innovation Authority Grants
We have received grants of approximately $0.5 million from the Israeli Innovation Authority (“IIA”) to partially fund our research and development. The grants are subject to certain requirements and restrictions under the Israeli Encouragement of Research, Development and Technological Innovation in Industry Law 5477-1984 (the “Research Law”). In general, until the grants are repaid with interest, royalties are payable to the Israeli government in the amount of 3% on revenues derived from sales of products or services developed in whole or in part using the IIA grants, which include EB613, EB612 and any other oral PTH product candidates that we may develop. The royalty rate may increase to 5% with respect to approved grant applications filed following any year in which we achieve sales of over $70 million.
The amount that must be repaid may be increased up to six times the amount of the grant received plus interest. The rate of royalties may be accelerated, and the royalty liability may increase (up to three times the amount of the grant amount and the interest) if manufacturing of the products developed with the grant money is transferred outside of the State of Israel. As of March 31, 2024, the total royalty amount that would be payable by the Company to the IIA, before interest and payments as described above, is approximately $460 thousand. As of March 31, 2024, we had paid royalties to the IIA in the amount of $96,000 related to a collaboration agreement and other material transfer agreements.
In addition to paying any royalties due, we must abide by other restrictions associated with receiving such grants under the Research Law that continue to apply following repayment to the IIA.
Recent Developments Potentially Affecting Our Business
In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on the Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel. These attacks resulted in thousands of deaths and injuries, and Hamas additionally kidnapped hundreds Israeli civilians and soldiers, including infants, children and elderly men and women. Following the attack, Israel’s security cabinet declared war against Hamas and commenced a military campaign against Hamas.
In April 2024, Israel experienced a direct attack from Iran, involving hundreds of drones and missiles launched towards various parts of the country, mostly targeting military bases. The Israeli defense systems, aided by international allies, successfully intercepted the majority of these attacks, minimizing physical damage and casualties. Despite the effectiveness of Israel's missile defense systems, such incidents contribute to regional instability and could potentially escalate into broader conflicts with Iran and its proxies in the Middle East, affecting Israel's political and trade relations, especially with neighboring countries and global allies. The situation remains fluid, and the potential for further escalation exists.
While we have a few employees who are in active military service, the ongoing war with Hamas and the conflict with Iran and its proxies have not, to date, materially impacted our business or operations. Furthermore, we do not expect any delays to any of our programs as a result of such conflicts. While R&D and management are located in Israel, other core activities including clinical, regulatory and our supply chain are not. However, we cannot currently predict the intensity or duration of Israel’s war against Hamas and/or the conflict with Iran and its proxies, nor can we predict how such conflicts will ultimately affect our business and operations or Israel’s economy in general.
Financial Overview
Since our inception, we have raised a total of $91.9 million from a combination of public and private equity offerings, IIA grants and the exercise of options and warrants. Since inception, we have incurred significant losses. For the three months ended March 31, 2024 and 2023, our operating losses were $2.1 million and $2.2 million, respectively, and we expect to continue to incur significant expenses and losses for the foreseeable future.
As of March 31, 2024, we had an accumulated deficit of $106.4 million. Our losses may fluctuate significantly from quarter to quarter and year to year, depending on the timing of our clinical trials, our expenditures on research and development activities and any third-party collaborations into which we may enter.
Notwithstanding our current expectation that we will have sufficient capital to continue operations into the third quarter of 2025 without additional funding, as a result of our recurring losses from operations, negative cash flows and lack of liquidity, management is of the opinion that there is substantial doubt as to the Company's ability to continue as a going concern, and our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements as of, and for the year ended, December 31, 2023, expressing the existence of substantial doubt about our ability to continue as a going concern. The unaudited condensed consolidated financial statements included herein have been prepared assuming that we will continue as a going concern and do not include adjustments that might result from the outcome of this uncertainty. See “Item 1A-Risk Factors-Risks Related to Our Financial Position and Need for Additional Capital” contained in our 2023 Annual Report.
As of March 31, 2024, we had cash and cash equivalents of $9.2 million. We believe that our existing cash resources will be sufficient to meet our projected operating requirements into the third quarter of 2025, which include the capital required to fund our ongoing operations, including R&D, the completion of the Phase 1 PK study related to our new generation platform and the GLP-2/OXM collaborative research we are conducting with OPKO. Our ability to commence the Phase 3 study of EB613 in osteoporosis will depend on finalizing discussions with the FDA pursuant to their qualification of the total hip BMD endpoint and will require additional funding, which may not be available on reasonable terms, or at all. Any delay or our inability to secure such funding will delay or prevent the commencement of these studies.
In order to fund further operations, we will need to raise additional capital. We may raise these funds through a variety of means, including private or public equity offerings, debt financings, strategic collaborations and licensing arrangements. Additional financing may not be available when we need it or may not be available on terms that are favorable to us.
As of March 31, 2024, we had a total of 19 employees, of whom 17 are full-time employees, and all are based in Israel (including our Chief Executive Officer, EVP of Research and Development and Chief Operating Officer). In addition, we employ a number of specialized outside advisors and expert consultants based in the United States, the United Kingdom and Europe. Our operations are located in Jerusalem, Israel.
Revenue
To date, we have not generated any revenue from sales of our products, and we do not expect to receive any revenue from our product candidates unless and until we obtain regulatory approval and successfully commercialize our products.
Research and Development Expenses
Research and development expenses consist of costs incurred for the development of our drug delivery technology and our product candidates, including:
| | • | employee-related expenses, including salaries, bonuses and share-based compensation expenses for employees and service providers in the research and development function; |
| | • | expenses incurred in operating our laboratories including our small-scale manufacturing facility; |
| | • | expenses incurred under agreements with CROs, and investigative sites that conduct our clinical trials; |
| | • | expenses related to outsourced and contracted services, such as external laboratories, consulting and advisory services; |
| | • | supply, development and manufacturing costs relating to clinical trial materials; and |
| | • | other costs associated with pre-clinical and clinical activities. |
Research and development activities are the primary focus of our business. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will increase significantly in future periods as we advance our clinical candidates into later stages of clinical development and invest in additional preclinical candidates.
Our research and development expenses may vary substantially from period to period based on the timing of our research and development activities, including due to the timing of initiation of clinical trials and the enrollment of patients in clinical trials. Our research and development expenses were $0.7 million and $0.9 million for the three months ended March 31, 2024 and 2023, respectively, and were primarily for the development of EB613, EB612 and our collaboration with OPKO related to GLP-2 and OXM. The successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing and estimated costs of the efforts that will be necessary to complete the development of, or the period, if any, in which material net cash inflows may commence from, any of our product candidates. This is due to numerous risks and uncertainties associated with developing drugs, including:
| | • | the uncertainty of the scope, rate of progress, results and cost of our clinical trials, nonclinical testing and other related activities; |
| | • | the cost of manufacturing clinical supplies and establishing commercial supplies of our product candidates and any products that we may develop; |
| | • | the number and characteristics of product candidates that we pursue; |
| | • | the cost, timing and outcomes of regulatory approvals; |
| | • | the cost and timing of establishing any sales, marketing, and distribution capabilities; and |
| | • | the terms and timing of any collaborative, licensing and other arrangements that we may establish, including any milestone and royalty payments thereunder. |
A change in the outcome of any of these variables with respect to the development of EB613, EB612 or any other product candidate that we may develop could mean a significant change in the costs and timing associated with the development of such product candidate. For example, if the FDA or other regulatory authority were to require us to conduct preclinical or clinical studies beyond those which we currently anticipate will be required for the completion of clinical development, if we experience significant delays in enrollment in any clinical trials or if we encounter difficulties in manufacturing our clinical supplies, then we could be required to expend significant additional financial resources and time on the completion of the clinical development.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries, benefits, share-based compensation and related costs for directors and personnel in executive and finance functions. Other general and administrative expenses include D&O insurance and other insurance, communication expenses, professional fees for legal and accounting services, costs associated with maintaining and prosecuting our intellectual property portfolio and business development expenses.
Financial Income, Net
Financial income, net is composed primarily of interest income from bank deposits and exchange rate differences of certain currencies against our functional currency.
Taxes on Income
We have not generated taxable income since our inception, and as of March 31, 2024, we had carry-forward tax losses of $77.7 million.
We anticipate that we will be able to carry forward these tax losses indefinitely to future tax years. Accordingly, we do not expect to pay taxes in Israel until we have taxable income after the full utilization of our carryforward tax losses. We provided a full valuation allowance with respect to the deferred tax assets related to these carry-forward losses of the Company.
The Company’s subsidiary, Entera Bio, Inc., is taxed separately under U.S. tax laws. As of March 31, 2024, Entera Bio Inc. had tax loss carry-forwards of $154 thousand.
Results of Operations
Comparison of Three Months Ended March 31, 2024 and 2023
| | Three Months Ended
March 31, | | | Increase (Decrease) | |
| | 2024 | | | 2023 | | | $ | | | % | |
| | (In thousands, except for percentage information) | |
Operating expenses: | | | | | | | | | | | | |
Research and development expenses | | $ | 735 | | | $ | 931 | | | $ | (196 | ) | | | (21 | )% |
General and administrative expenses | | $ | 1,327 | | | $ | 1,294 | | | $ | 33 | | | | 2.6 | % |
Other income | | $ | - | | | $ | (13 | ) | | $ | (13 | ) | | | (100 | )% |
Operating loss | | $ | 2,062 | | | $ | 2,212 | | | $ | (150 | ) | | | (6.8 | )% |
Financial income, net | | $ | (45 | ) | | $ | (22 | ) | | $ | 23 | | | | 104.5 | % |
Net loss | | $ | 2,017 | | | $ | 2,190 | | | $ | (173 | ) | | | (7.9 | )% |
Research and Development Expenses
Research and development expenses for the three months ended March 31, 2024 were $0.7 million, as compared to $0.9 million for the three months ended March 31, 2023. The decrease was attributable to a decrease o f $0.2 million in clinical expenses for our Phase 1 PK study related to our new generation platform and new formulations for EB612 and related expenses.
General and Administrative Expenses
General and administrative expenses for both the three months ended March 31, 2024 and 2023 were $1.3 million. For the three months ended March 31, 2024, there was a decrease of $0.1 million in D&O insurance costs and an increase of $0.1 million in compensation, consultant and other fees.
Financial Income, Net
Financial income, net for the three months ended March 31, 2024 was $45 thousand as compared to $22 thousand for the three months ended March 31, 2023. Our financial income, net for the three months ended March 31, 2024 and 2023 was composed mainly of interest income from bank deposits and exchange rate differences of certain currencies against our functional currency, which is the U.S. Dollar.
Liquidity and Capital Resources
Since inception, we have incurred significant losses. For the three months ended March 31, 2024 and 2023, our operating losses were $2.1 million and $2.2 million, respectively. As of March 31, 2024, we had an accumulated deficit of $106.4 million. We expect to continue to incur significant expenses and losses for the next several years as we advance our products through development and provide administrative support for our operations.
Notwithstanding our current expectation that we will have sufficient capital to continue operations into the third quarter of 2025 without additional funding, as a result of our recurring losses from operations, negative cash flows and lack of liquidity, management is of the opinion that there is substantial doubt as to the Company's ability to continue as a going concern. See “Item 1A-Risk Factors-Risks Related to Our Financial Position and Need for Additional Capital” contained in our 2023 Annual Report.
Since our inception, we have raised a total of $91.9 million, including $25.9 million through at-the-market-offering (“ATM”) programs, $20.9 million in private placements since our IPO, $11.2 million in our IPO in 2018 and $33.9 million in aggregate funding from a combination of grants, exercises of options and warrants and private placements of Ordinary Shares, preferred shares and debt prior to our IPO. In addition, as of March 31, 2024, we had received approximately $1.7 million under our previously terminated collaboration agreement.
As of March 31, 2024, we had cash and cash equivalents of $9.2 million. Our primary uses of cash have been to fund research and development, general and administrative expenses and working capital requirements, and we expect these will continue to be our primary uses of cash.
Equity Offerings
On September 2, 2022, we entered into a Sales Agreement with Leerink Partners LLC (f/k/a SVB Securities LLC), as sales agent, to implement an ATM program, under which we may from time to time offer and sell up to 5,000,000 Ordinary Shares (the “Leerink ATM Program”) under our currently effective Registration Statement on Form S-3 and a related prospectus supplement forming a part thereof. The sales agent is entitled to a fixed commission of 3% of the aggregate gross proceeds as well as reimbursement of expenses. As of March 31, 2024, we had sold an aggregate of 4,030 shares under the Leerink ATM Program for aggregate proceeds of $5 thousand, net of issuance costs. Through May 6, 2024, we had sold 218,118 shares under the Leerink ATM Program for aggregate proceeds of $0.5 million, net of issuance costs.
Funding Requirements
We believe that our existing capital resources will be sufficient to fund our operations into the third quarter of 2025, which include R&D, the completion of the Phase 1 PK study related to our new generation platform and the GLP-2/OXM collaborative research we are conducting with OPKO. Our ability to commence the Phase 3 study of EB613 in osteoporosis will depend on finalizing discussions with the FDA pursuant to their qualification of the total hip BMD endpoint and will require additional funding, which may not be available on reasonable terms, or at all. Any delay or our inability to secure such funding will delay or prevent the commencement of these studies.
We have based these estimates on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development of our product candidates, and the extent to which we may enter into collaborations with third parties for development of these or other product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the development of our current and future product candidates. Our future capital requirements will depend on many factors, including:
| | • | the costs, timing and outcome of clinical trials for, and regulatory review of, EB613, EB612 and any other product candidates we may develop; |
| | • | the costs of development activities for any other product candidates we may pursue; |
| | • | the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; and |
| | • | our ability to establish collaborations on favorable terms, if at all. |
We continuously evaluate various financing alternatives in the public or private equity markets or through license of our N-Tab™ technology to additional external parties through partnerships or research collaborations as we will need to finance future research and development activities, general and administrative expenses and working capital through fund raising. However, there is no certainty about our ability to obtain such funding.
Other than the Leerink ATM Program, we do not have any committed external sources of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our then-existing shareholders will be diluted, and the terms of these securities may include liquidation or other preferences that may adversely affect our existing shareholders’ rights as shareholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends and may include requirements to hold minimum levels of funding. If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or collaborations, when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts.
Notwithstanding our current expectation that we will have sufficient capital to continue operations into the third quarter of 2025 without additional funding, as a result of our recurring losses from operations, negative cash flows and lack of liquidity, management is of the opinion that there is substantial doubt as to the Company's ability to continue as a going concern and our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements as of, and for the year ended, December 31, 2023, expressing the existence of substantial doubt about our ability to continue as a going concern. The unaudited condensed consolidated financial statements contained in this Quarterly Report have been prepared on a going concern basis and do not include any adjustments that may be necessary should we be unable to continue as a going concern. If we are unable to finance our operations, our business would be in jeopardy, and we might not be able to continue operations and might have to liquidate our assets. In that case, investors might receive less than the value at which those assets are carried on our financial statements, and it is likely that investors would lose all or a part of their investment.
Cash Flows
Three Months Ended March 31, 2024 compared to Three Months Ended March 31, 2023
The following table sets forth the primary sources and uses of cash for each of the periods set forth below:
| | Three Months Ended March 31,
(unaudited) | |
| | 2024 | | | 2023 | |
| | (In thousands) | |
Net Cash used in operating activities | | $ | (1,862 | ) | | $ | (1,609 | ) |
Net Cash used in investing activities | | | - | | | | (11 | ) |
Net Cash provided by financing activities | | | 30 | | | | - | |
Net decrease in cash and cash equivalents | | $ | (1,832 | ) | | $ | (1,620 | ) |
Net Cash Used in Operating Activities
Net cash used in operating activities for the three months ended March 31, 2024 was $1.9 million, consisting primarily of our operating loss of $2.1 million and an increase of $0.3 million in our working capital, which was partially offset by $0.5 million of share-based compensation and depreciation expenses.
Net cash used in operating activities for the three months ended March 31, 2023 was $1.6 million, consisting primarily of our operating loss of $2.2 million, which was partially offset by a decrease of $0.1 million in our working capital and approximately $0.5 million of share-based compensation expense and depreciation expenses.
The increase of $0.3 million in cash used in operating activities for the three months ended March 31, 2024 compared to the same period in 2023 was mainly attributed to an increase of $0.4 million in working capital, which was partially offset by a decrease of $0.1 million in our operating loss.
Net Cash Used in Investing Activities
There was no net cash used in investing activities for the three months ended March 31, 2024. Net cash used in investing activities for the three months ended March 31, 2023 consisted primarily of the purchase of property and equipment.
Net Cash Provided by Financing Activities
Net cash provided by financing activities for the three months ended March 31, 2024 consisted of the net proceeds of $30 thousand from the issuance of Ordinary Shares due to exercise of outstanding warrants.
Contractual Obligations
There have not been any material changes in our assessment of material contractual obligations and commitments as set forth in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2023 Annual Report.
Critical Accounting Policies and Estimates
See Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” and our consolidated financial statements and related notes included in the 2023 Annual Report for accounting policies and related estimates we believe are the most critical to understanding our consolidated financial statements, financial condition and results of operations and which require complex management judgment and assumptions, or involve uncertainties. The preparation of consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. There have been no changes to our critical accounting policies or their application since the date of the 2023 Annual Report.
Recently Issued Accounting Pronouncements
Certain recently issued accounting pronouncements are discussed in Note 2 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act and regulations promulgated thereunder) as of March 31, 2024, which we refer to as the Evaluation Date. Based on such evaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
