Acurx Pharmaceuticals(ACXP) - 2022 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Condensed Interim Financial Statements (unaudited) Acurx Pharmaceuticals, Inc. presents its unaudited interim financial statements, reporting a net loss of $2.7 million for Q1 2022 and $11.1 million cash sufficient for at least 12 months Condensed Interim Balance Sheet Highlights | Metric | March 31, 2022 (unaudited) | December 31, 2021 (Note 2) | | :---------------------- | :------------------------- | :------------------------- | | Cash | $11,082,846 | $12,958,846 | | Total Assets | $11,322,300 | $13,254,150 | | Total Current Liabilities | $633,028 | $843,909 | | Total Shareholders' Equity | $10,689,272 | $12,410,241 | Condensed Interim Statements of Operations Highlights (Three Months Ended March 31) | Metric | 2022 (unaudited) | 2021 (unaudited) | | :------------------------- | :--------------- | :--------------- | | Research and Development | $818,888 | $91,908 | | General and Administrative | $1,851,250 | $1,382,421 | | Total Operating Expenses | $2,670,138 | $1,474,329 | | Net Loss | $(2,670,138) | $(1,474,329) | | Basic and Diluted Net Loss Per Share | $(0.26) | $(0.21) | Condensed Interim Statements of Cash Flows Highlights (Three Months Ended March 31) | Metric | 2022 (unaudited) | 2021 (unaudited) | | :------------------------------ | :--------------- | :--------------- | | Net Cash Used in Operating Activities | $(1,876,000) | $(547,138) | | Net Decrease in Cash | $(1,876,000) | $(547,138) | | Cash at End of Period | $11,082,846 | $2,628,273 | - The company is a clinical-stage biopharmaceutical company focused on developing novel antibiotics for serious bacterial infections, with its lead candidate ibezapolstat targeting CDI. It has not generated any revenue since inception and expects to continue incurring losses[25][28][29] - As of March 31, 2022, the company had a cash balance of approximately $11.1 million, which management estimates will be sufficient to meet anticipated cash requirements for at least 12 months. However, additional equity financing and grant funding will be needed to sustain operations until profitability is achieved[29] - Research and development expenses significantly increased to $818,888 for the three months ended March 31, 2022, from $91,908 in the prior year, primarily due to Phase 2b clinical trial costs and increased consulting[35][100] Accounts Payable and Accrued Expenses | Category | March 31, 2022 | December 31, 2021 | | :---------------------------- | :------------- | :---------------- | | Accrued compensation expenses | $15,625 | $508,343 | | Accrued research and development | $532,322 | $229,090 | | Accrued professional fees | $78,725 | $43,102 | | Other accounts payable and accrued expenses | $6,356 | $63,374 | | Total | $633,028 | $843,909 | - The company completed its IPO on June 29, 2021, issuing 2,875,000 shares at $6.00 per share, generating net cash proceeds of approximately $14.8 million. Prior to the IPO, it converted from an LLC to a corporation, and membership interests were converted to common stock[45][46] Stock Option Activity (Three Months Ended March 31, 2022) | Metric | Shares | Weighted Average Exercise Price | | :----------------------------------- | :--------- | :------------------------------ | | Outstanding at the beginning of the period | 2,357,500 | $6.21 | | Granted | 80,000 | $4.44 | | Vested | (1,096,833) | $6.18 | | Outstanding and expected to vest | 1,340,667 | $6.13 | - Total unrecognized share-based compensation expense as of March 31, 2022, was $6,268,497, with a weighted average vesting period of 2.27 years[56] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Acurx Pharmaceuticals' Q1 2022 financial condition and operations, noting increased R&D and G&A expenses, a higher net loss, and liquidity for its clinical-stage antibiotic development - Acurx Pharmaceuticals is a clinical-stage biopharmaceutical company developing a new class of antibiotics targeting DNA polymerase IIIC (Pol IIIC) for Gram-positive bacterial infections, including those identified as priority pathogens by WHO, CDC, and FDA[66][67][68] - The lead antibiotic candidate, ibezapolstat, targets CDI and has shown promising results in a Phase 2a clinical trial with a 100% Clinical Cure rate. Enrollment for a double-blind, active-controlled Phase 2b clinical trial commenced on December 3, 2021[69][70][71] - The COVID-19 pandemic has disrupted clinical trial enrollment rates, but the company believes it has highlighted the importance of antibiotic development. A Paycheck Protection Program (PPP) loan received in May 2020 was fully forgiven in April 2021[75][76][78] - The company has not generated any revenue since its inception and does not expect to in the near future. Research and development expenses are recognized as incurred and are expected to substantially increase as product candidates advance[79][80][82] Results of Operations Summary (Three Months Ended March 31, in thousands) | Expense Category | 2022 (in thousands) | 2021 (in thousands) | Percentage Increase (Decrease) | | :---------------------------- | :------------------ | :------------------ | :----------------------------- | | Research and Development Expenses | $819 | $92 | 790% | | General and Administrative Expenses | $1,851 | $1,382 | 34% | | Total Operating Expenses | $2,670 | $1,474 | 81% | | Net Loss | $(2,670) | $(1,474) | 81% | - The increase in Research and Development expenses by $0.7 million was primarily due to Phase 2b clinical trial related costs and increased consulting costs. General and Administrative expenses rose by $0.5 million, mainly from higher professional fees, legal, insurance, and compensation costs[88] - As of March 31, 2022, the company had working capital of $10.7 million, primarily consisting of $11.1 million in cash. Net cash used in operating activities was $1.9 million for the three months ended March 31, 2022, compared to $0.5 million for the same period in 2021[90][94] - The company is an 'emerging growth company' and 'smaller reporting company,' allowing it to take advantage of reduced reporting requirements and an extended transition period for adopting new accounting standards[104][105][212] Item 3. Quantitative and Qualitative Disclosures about Market Risk Acurx Pharmaceuticals is exempt from market risk disclosures due to its status as a smaller reporting company - The company is exempt from providing quantitative and qualitative disclosures about market risk due to its status as a smaller reporting company[107] Item 4. Controls and Procedures Management identified a material weakness in disclosure controls and procedures as of March 31, 2022, due to inadequate segregation of duties, with remediation efforts initiated - Management concluded that disclosure controls and procedures were not effective as of March 31, 2022, due to a material weakness in internal control over financial reporting, specifically inadequate segregation of duties resulting from the company's size and limited personnel[108] - To remediate the material weakness, management has engaged a third-party specialist to review internal controls and recommend improvements, and has hired a controller who commenced employment in April 2022[109] - No changes in internal control over financial reporting were identified during the period that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[111] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any legal proceedings expected to materially impact its business - The company is not currently involved in any litigation or legal proceedings that management believes would have a material adverse effect on its business[113] Item 1A. Risk Factors This section outlines significant risks, including limited operating history, ongoing losses, funding needs, reliance on ibezapolstat, regulatory hurdles, third-party dependencies, and intellectual property challenges - The company is a clinical-stage biopharmaceutical company with a limited operating history, no products approved for commercial sale, and has incurred significant net losses since inception, expecting these losses to continue[115][116][121] - A material weakness in internal control over financial reporting due to inadequate segregation of duties was identified as of March 31, 2022, which could adversely affect financial reporting accuracy and timing[118] - The company will need substantial additional funding beyond its current $11.1 million cash balance (as of March 31, 2022) to support ongoing research and development, clinical trials, and potential commercialization efforts, with no assurance of availability on acceptable terms[125][127][129] - The business heavily relies on the successful development and commercialization of its lead product candidate, ibezapolstat, for CDI. Failure to achieve timely regulatory approval or market acceptance would materially harm the business[134][135][137] - Clinical trials are costly, unpredictable, and subject to intense regulatory scrutiny. Delays in patient enrollment, unforeseen events, or failure to demonstrate safety and efficacy could prevent or delay marketing approval[143][144][162][163][166] - The company depends on third-party manufacturers for product candidates and third-party CROs/investigators for clinical trials, increasing risks related to supply, quality, compliance, and control over timelines and resources[181][185][186] - The company faces significant competition from larger, better-capitalized pharmaceutical companies and is exposed to product liability risks inherent in drug development[140][146] - Intellectual property protection is critical, and the company may be involved in costly and time-consuming lawsuits to protect or enforce its patents, or may need to license third-party IP, which may not be available on reasonable terms[195][198][201][203] - As an 'emerging growth company' and 'smaller reporting company,' the company benefits from reduced reporting requirements but this status could make its common stock less attractive to investors, and its stock price may be volatile[209][210][213][216] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company details the use of $14.8 million net proceeds from its June 2021 IPO, primarily for ibezapolstat's Phase 2b trial and general corporate purposes, with no material changes - The company completed its IPO on June 29, 2021, generating net cash proceeds of $14.8 million from the sale of 2,875,000 shares of common stock at $6.00 per share[246] - Proceeds from the IPO are allocated to: (i) completing the Phase 2b clinical trial of ibezapolstat for CDI, (ii) completing preclinical development of ACX-375C, and (iii) general corporate purposes, including research, development, manufacturing, capital expenditures, and hiring[246][247] - There has been no material change in the planned use of proceeds from the IPO as described in the prospectus[247] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported for the period - There were no defaults upon senior securities[248] Item 4. Mine Safety Disclosure This item is not applicable to the company - This item is not applicable to the registrant[248] Item 5. Other Information No other information is reported under this item - No other information is reported under this item[248] Item 6. Exhibits This section lists exhibits filed with the Quarterly Report, including officer certifications and Inline XBRL documents Key Exhibits Filed | Exhibit Number | Description of Exhibit | | :------------- | :--------------------- | | 31.1* | Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | 31.2* | Certification of Principal Financial and Accounting Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | 32.1* | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | 32.2* | Certification of Principal Financial and Accounting Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | 101.INS | Inline XBRL Instance Document | | 104 | Cover Page Interactive Data File | - Certifications 31.1, 31.2, 32.1, and 32.2 are furnished pursuant to the Sarbanes-Oxley Act and are deemed not filed for purposes of Section 18 of the Securities Exchange Act[251]