Pulmatrix(PULM) - 2021 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for the periods ended June 30, 2021, and December 31, 2020 Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets | Metric | June 30, 2021 (unaudited, $ in thousands) | December 31, 2020 ($ in thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | 56,903 | 31,657 | | Total current assets | 60,469 | 32,538 | | Total assets | 65,433 | 38,169 | | Liabilities | | | | Total current liabilities | 6,917 | 8,254 | | Total liabilities | 12,340 | 15,030 | | Stockholders' Equity | | | | Total stockholders' equity | 53,093 | 23,139 | - Total assets increased by $27.26 million (71.4%) from December 31, 2020, to June 30, 2021, primarily driven by a significant increase in cash and cash equivalents[10] - Total stockholders' equity increased by $29.95 million (129.4%) from December 31, 2020, to June 30, 2021, indicating substantial capital infusion[10] Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations | Metric | Three Months Ended June 30, 2021 ($ in thousands) | Three Months Ended June 30, 2020 ($ in thousands) | Six Months Ended June 30, 2021 ($ in thousands) | Six Months Ended June 30, 2020 ($ in thousands) | | :--- | :--- | :--- | :--- | :--- | | Revenues | 2,254 | 3,500 | 3,644 | 6,262 | | Research and development expenses | 4,541 | 3,184 | 8,397 | 8,471 | | General and administrative expenses | 1,562 | 1,490 | 3,181 | 3,702 | | Total operating expenses | 6,103 | 4,674 | 11,578 | 12,173 | | Loss from operations | (3,849) | (1,174) | (7,934) | (5,911) | | Net loss | (3,852) | (1,170) | (7,956) | (5,856) | | Net loss per share (basic and diluted) | (0.07) | (0.05) | (0.16) | (0.26) | - Revenues decreased by $1.246 million (35.6%) for the three months ended June 30, 2021, and by $2.618 million (41.8%) for the six months ended June 30, 2021, compared to the respective prior-year periods[13] - Net loss increased significantly to $(3.852) million for the three months ended June 30, 2021, from $(1.170) million in the prior year, and to $(7.956) million for the six months ended June 30, 2021, from $(5.856) million in the prior year[13] Condensed Consolidated Statements of Stockholders' Equity Condensed Consolidated Statements of Stockholders' Equity | Metric | January 1, 2021 | June 30, 2021 | January 1, 2020 | June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Common Stock Shares | 36,105,097 | 56,249,062 | 19,994,560 | 25,749,356 | | Common Stock Amount ($ in thousands) | 4 | 6 | 2 | 3 | | Additional Paid-In Capital ($ in thousands) | 257,604 | 295,512 | 226,178 | 234,899 | | Accumulated Deficit ($ in thousands) | (234,469) | (242,425) | (215,161) | (221,017) | | Total Stockholders' Equity ($ in thousands) | 23,139 | 53,093 | 11,019 | 13,885 | - Common stock shares outstanding increased significantly from 36,105,097 at January 1, 2021, to 56,249,062 at June 30, 2021, primarily due to the issuance of common stock, net of issuance costs[15] - Additional paid-in capital increased by $37.908 million during the six months ended June 30, 2021, reflecting new equity issuances and share-based compensation[15] Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Six Months Ended June 30, 2021 ($ in thousands) | Six Months Ended June 30, 2020 ($ in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | (12,019) | (4,200) | | Net cash used in investing activities | (18) | (98) | | Net cash provided by financing activities | 37,283 | 8,113 | | Net increase in cash, cash equivalents and restricted cash | 25,246 | 3,815 | | Cash, cash equivalents and restricted cash — end of period | 57,107 | 27,459 | - Net cash used in operating activities increased to $(12.019) million for the six months ended June 30, 2021, from $(4.200) million in the prior year, primarily due to a higher net loss and changes in operating assets and liabilities[18] - Net cash provided by financing activities significantly increased to $37.283 million for the six months ended June 30, 2021, from $8.113 million in the prior year, driven by proceeds from common stock issuance[18] Notes to Condensed Consolidated Financial Statements - The condensed consolidated financial statements are prepared in accordance with SEC rules and GAAP, with certain information condensed or omitted as permitted for interim reports[22] - Management makes estimates and assumptions affecting reported amounts, including valuing equity securities, future expected costs for revenue recognition, useful lives of assets, and goodwill impairment[23] - Revenue is recognized using a five-step model for contracts when collectability is probable, primarily from collaborative arrangements and license agreements related to Pulmazole and PUR1800, and reimbursement of clinical study costs[28][30] 1. Organization A clinical-stage biotechnology company developing inhaled therapeutics using its proprietary iSPERSE™ delivery platform - Pulmatrix, Inc. is a clinical stage biotechnology company focused on novel inhaled therapeutic products[21] - The company utilizes its proprietary iSPERSE™ dry powder delivery platform for efficient drug delivery to airways[21] - The iSPERSE platform is designed for small, dense particles with high dispersibility, compatible with various dry powder inhaler technologies and drug substances[21] 2. Summary of Significant Accounting Policies and Recent Accounting Standards This section outlines significant accounting policies, including basis of presentation, use of estimates, credit risk, and revenue recognition - The condensed consolidated financial statements are prepared in accordance with SEC rules and GAAP, with certain information condensed or omitted as permitted for interim reports[22] - Management makes estimates and assumptions affecting reported amounts, including valuing equity securities, future expected costs for revenue recognition, useful lives of assets, and goodwill impairment[23] - Revenue is recognized using a five-step model for contracts when collectability is probable, primarily from collaborative arrangements and license agreements related to Pulmazole and PUR1800, and reimbursement of clinical study costs[28][30] Basis of Presentation - Financial statements are prepared under SEC rules and GAAP, with condensed disclosures for interim reporting[22] - Interim operating results are not necessarily indicative of full fiscal year results[22] Use of Estimates - Management's estimates include valuing equity securities, future expected costs for revenue recognition, useful lives of assets, interest borrowing rates, valuation allowance against deferred tax assets, goodwill impairment, and fair value of long-lived assets[23] - Actual results may differ from these estimates due to inherent uncertainties[23] Concentrations of Credit Risk and Off-Balance Sheet Arrangements - Substantially all cash is deposited in a single financial institution, exposing the Company to credit risk for amounts exceeding FDIC insured limits[24] - The Company has no material off-balance sheet arrangements[25] Cash, Cash Equivalents and Restricted Cash - Cash and cash equivalents include cash, checking accounts, and money market accounts[26] - Restricted cash consists of security deposits[26] Cash, Cash Equivalents and Restricted Cash | Metric | Six months ended June 30, 2021 ($ in thousands) | Six months ended June 30, 2020 ($ in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | 56,903 | 27,255 | | Restricted cash | 204 | 204 | | Total cash, cash equivalents and restricted cash | 57,107 | 27,459 | Revenue Recognition - Revenue is recognized using a five-step model when collectability is probable and performance obligations are satisfied[28] - Principal revenue sources are collaborative arrangements and license agreements (Cipla, JJEI, Sensory Cloud) and reimbursement of clinical study costs[30][31] - Amounts received prior to revenue recognition are recorded as deferred revenue, classified as current or non-current based on expected recognition timing[29] Milestone Payments - Milestone payments are included in the transaction price if probable of being achieved and a significant revenue reversal would not occur[32] - Milestones not controlled by the Company or licensee (e.g., regulatory approvals) are not considered probable until approvals are received[32] Royalties - Sales-based royalties are recognized at the later of when related sales occur or when the performance obligation is satisfied[33] - To date, only immaterial royalty revenue from the Sensory Cloud licensing arrangement has been recognized[33] Research and Development Costs - Research and development costs are expensed as incurred, including salaries, benefits, share-based compensation, license fees, milestone payments, and costs for third-party contractors (CROs, CMOs)[34] - Clinical trial costs are accrued based on estimates of services rendered by third-party contractors[34] Goodwill - Goodwill is not amortized but is evaluated for impairment annually or more frequently if circumstances indicate impairment[35] - The impact of COVID-19 was considered in the qualitative assessment, with no significant impact on carrying value to date[35] Recently Issued Accounting Pronouncements - No new or recently issued accounting pronouncements have a significant impact on the Company's condensed consolidated financial statements[36] 3. Prepaid Expenses and Other Current Assets This note details the composition of prepaid expenses and other current assets, showing a significant increase from 2020 to 2021 Prepaid Expenses and Other Current Assets | Prepaid Expense Category | June 30, 2021 ($ in thousands) | December 31, 2020 ($ in thousands) | | :--- | :--- | :--- | | Prepaid insurance | 632 | 276 | | Prepaid clinical trials | 531 | 317 | | Deferred operating costs | 283 | 74 | | Prepaid other | 150 | 130 | | Total prepaid and other current assets | 1,596 | 797 | - Total prepaid expenses and other current assets increased by $799 thousand (100.2%) from December 31, 2020, to June 30, 2021[37] 4. Property and Equipment, Net This note provides a breakdown of property and equipment, net of accumulated depreciation and amortization Property and Equipment, Net | Property and Equipment Category | June 30, 2021 ($ in thousands) | December 31, 2020 ($ in thousands) | | :--- | :--- | :--- | | Laboratory equipment | 1,741 | 1,702 | | Computer equipment | 304 | 302 | | Office furniture and equipment | 216 | 217 | | Leasehold improvements | 600 | 596 | | Capital in progress | 87 | 25 | | Total property and equipment | 2,948 | 2,842 | | Less accumulated depreciation and amortization | (2,569) | (2,481) | | Property and equipment, net | 379 | 361 | - Net property and equipment increased by $18 thousand (5.0%) from December 31, 2020, to June 30, 2021[38] 5. Accrued Expenses and Other Current Liabilities This note details the components of accrued expenses, showing a decrease from 2020 to 2021 Accrued Expenses and Other Current Liabilities | Accrued Expense Category | June 30, 2021 ($ in thousands) | December 31, 2020 ($ in thousands) | | :--- | :--- | :--- | | Accrued vacation | 117 | 56 | | Accrued wages and incentive | 409 | 813 | | Accrued clinical & consulting | 449 | 1,010 | | Accrued legal & patent | 164 | 129 | | Accrued other expenses | 52 | 20 | | Total accrued expenses | 1,191 | 2,028 | - Total accrued expenses decreased by $837 thousand (41.3%) from December 31, 2020, to June 30, 2021[39] 6. Significant Agreements This note describes key collaboration and license agreements, including the termination of the JJEI agreement and a dispute with Cipla License, Development and Commercialization Agreement with Johnson & Johnson Enterprise Innovation, Inc. ("JJEI") - JJEI exercised its option to terminate the license agreement in April 2021, with all rights to the kinase inhibitor portfolio (including PUR1800 and PUR5700) reverting to Pulmatrix on July 6, 2021[41] - Pulmatrix intends to continue the development of PUR1800 for AECOPD and other chronic airway diseases[41] - During the six months ended June 30, 2021, the Company recognized $2.688 million in revenue related to the JJEI license agreement and reimbursed expenses[42] Collaborations - Development and Commercialization Agreement with Cipla Technologies LLC ("Cipla") - The Company received a non-refundable upfront payment of $22.0 million under the Cipla Agreement, assigning certain assets related to Pulmazole for Pulmonary Indications[43] - Pulmatrix notified Cipla of a material breach in May 2021 due to Cipla's refusal to fund 50% of Pulmazole's Phase 2b clinical study development costs[46] - Dispute resolution procedures are ongoing, and the agreement remains in effect, but the Company intends to pursue remedies if Cipla does not reaffirm its obligations[47] - During the six months ended June 30, 2021, the Company recognized $0.755 million in R&D services revenue and $0.189 million for the irrevocable license to Assigned Assets under the Cipla Agreement[50] 7. Common Stock This note details common stock activities, including offerings and warrant/stock option exercises that increased outstanding shares and capital 2021 At-the-Market Offering - On May 26, 2021, the Company entered into an At-The-Market Sales Agreement to sell up to $20.0 million of common stock[51] - No sales of common stock occurred under this agreement during the three months ended June 30, 2021[52] 2021 Registered Direct Offering - On February 16, 2021, the Company closed a registered direct offering of 20,000,000 shares of common stock for gross proceeds of $40.0 million[53] - Net proceeds after fees and expenses were approximately $37.079 million[53] - 1,300,000 warrants with a five-year expiry and an exercise price of $2.50 per share were issued to placement agent designees[53] 2020 Common Stock Sale - In April 2020, the Company sold 4,787,553 shares at $1.671 per share, generating gross proceeds of approximately $8.0 million[54] - Concurrent private placement issued warrants to purchase 4,787,553 shares at $1.55 per share and 311,191 shares to placement agent designees at $2.0888 per share, both expiring April 20, 2022[54] Exercise of Warrants - During the six months ended June 30, 2021, warrants to purchase 143,965 shares were exercised for cash, yielding $0.204 million in proceeds[55] - During the six months ended June 30, 2020, warrants to purchase 944,746 shares were exercised for cash, yielding $0.775 million in proceeds[56] Exercise of Stock Options - No stock options were exercised during the three and six months ended June 30, 2021[57] - During the six months ended June 30, 2020, stock options to buy 22,497 shares were exercised, generating $0.024 million in proceeds[57] 8. Warrants This note provides a rollforward of common stock warrants outstanding, detailing changes from exercises and issuances Warrant Activity | Metric | Outstanding January 1, 2021 | Warrants exercised | Warrants issued | Outstanding June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Number of Warrants | 23,284,813 | (143,965) | 1,300,000 | 24,440,848 | | Weighted Average Exercise Price ($) | 3.41 | 1.42 | 2.50 | 3.37 | | Weighted Average Remaining Contractual Term (Years) | 3.3 | | | 2.9 | - The number of outstanding warrants increased by 1,156,035 from January 1, 2021, to June 30, 2021, primarily due to the issuance of 1,300,000 warrants[60] - The weighted average exercise price decreased slightly from $3.41 to $3.37, and the remaining contractual term shortened from 3.3 to 2.9 years[60] 9. Share-Based Compensation This note outlines the Company's equity incentive plans, stock option activity, and associated share-based compensation expense - As of June 30, 2021, 1,859,348 shares remain available for future grant under the 2013 Employee, Director and Consultant Equity Incentive Plan[62] - As of June 30, 2021, $2.687 million of unrecognized stock-based compensation expense remains, expected to be recognized over approximately 2.8 years[67] Stock Option Activity | Stock Option Activity | Outstanding January 1, 2021 | Granted | Forfeited or expired | Outstanding June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Number of Options | 2,899,837 | 1,057,587 | (22,284) | 3,935,140 | | Weighted Average Exercise Price ($) | 3.22 | 1.44 | 2.39 | 2.75 | | Weighted Average Remaining Contractual Term (Years) | 8.75 | | | 8.58 | | Aggregate Intrinsic Value ($ in thousands) | 60 | | | 1 | Share-Based Compensation Expense | Share-Based Compensation Expense | Three Months Ended June 30, 2021 ($ in thousands) | Three Months Ended June 30, 2020 ($ in thousands) | Six Months Ended June 30, 2021 ($ in thousands) | Six Months Ended June 30, 2020 ($ in thousands) | | :--- | :--- | :--- | :--- | :--- | | Research and development | 55 | 49 | 111 | 96 | | General and administrative | 244 | 217 | 516 | 513 | | Total share-based compensation expense | 299 | 266 | 627 | 609 | 10. Commitments and Contingencies This note details contractual commitments for R&D activities and operating lease obligations for its corporate headquarters Research and Development Activities - As of June 30, 2021, the Company had aggregate commitments of approximately $0.933 million remaining on research and development contracts[68] - These contracts are generally cancellable by the Company upon written notice, subject to certain conditions[68] Operating Leases - The Company leases approximately 22,000 square feet of office and lab space for its corporate headquarters, with the lease expiring on June 30, 2022[69] Lease Cost | Lease Cost | Three Months Ended June 30, 2021 ($ in thousands) | Three Months Ended June 30, 2020 ($ in thousands) | Six Months Ended June 30, 2021 ($ in thousands) | Six Months Ended June 30, 2020 ($ in thousands) | | :--- | :--- | :--- | :--- | :--- | | Fixed lease cost | 259 | 228 | 518 | 391 | | Variable lease cost | 96 | 99 | 222 | 218 | | Total lease cost | 355 | 327 | 740 | 609 | Maturity of Lease Liabilities | Maturity of Lease Liabilities | Operating Leases ($ in thousands) | | :--- | :--- | | 2021 | 597 | | 2022 (half year) | 615 | | Total lease payments | 1,212 | | Less: interest | (28) | | Total lease liabilities | 1,184 | 11. Net Loss Per Share This note explains the calculation of basic and diluted net loss per share, excluding potentially dilutive securities - Basic and diluted net loss per share are computed using the two-class method[71] - Potentially dilutive securities (options and warrants) are excluded from diluted net loss per share calculation because their inclusion would be anti-dilutive due to net losses[71] Potentially Dilutive Securities | Potentially Dilutive Securities | As of June 30, 2021 | As of June 30, 2020 | | :--- | :--- | :--- | | Options to purchase common stock | 3,935,140 | 2,980,432 | | Warrants to purchase common stock | 22,440,848 | 22,902,240 | | Total | 26,375,988 | 25,882,672 | 12. Subsequent Events This note discloses the granting of additional stock options to employees and a director in July 2021 - In July 2021, the Company granted 34,900 stock options to employees and 30,000 stock options to a director[73] - No other subsequent events requiring disclosure were identified up to the date of financial statement issuance[73] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the Company's financial condition, results of operations, product pipeline developments, and liquidity Forward-Looking Statements - The report contains forward-looking statements regarding business plans, strategies, anticipated benefits, revenues, and operating results[76] - These statements are subject to risks and uncertainties, including the impact of COVID-19, recurring losses, inability to carry out development plans, manufacturing issues, and difficulties in obtaining financing or regulatory approval[77] - The Company undertakes no obligation to publicly update or revise forward-looking statements, except as required by law[78] Overview Business - Pulmatrix is a clinical-stage biotechnology company developing novel inhaled therapeutic products using its iSPERSE dry powder delivery technology[79][80] - The iSPERSE technology aims for enhanced drug loading, delivery efficiency, reduced costs, and improved efficacy/safety profiles[81] - Current pipeline includes Pulmazole (ABPA in asthma/CF), PUR1800 (AECOPD), and PUR3100 (acute migraine)[82] Future Expenses and Capital Requirements - The Company expects to incur significant expenses and increasing operating losses for several years due to drug development plans[84] - Expenses will increase for continuing clinical trials (Pulmazole, PUR1800), initiating non-clinical studies (PUR3100), seeking regulatory approval, expanding IP, and hiring personnel[84] - Funding will be sought through equity/debt financings, licensing, collaborations, and grants, as the Company has no approved products or product sales revenue[85] Recent Developments Pulmazole - The Phase 2 study for Pulmazole was terminated in July 2020 due to COVID-19 impact on enrollment[88] - A Phase 2b clinical study is planned to commence when COVID-19 risks are reduced, with a longer 16-week dosing regimen[89] - The Company notified Cipla of a material breach in May 2021 due to Cipla's refusal to fund 50% of development costs for the Phase 2b study, leading to ongoing dispute resolution[90][91] PUR1800 - JJEI terminated its license agreement for PUR1800 in April 2021, with all rights reverting to Pulmatrix on July 6, 2021[92] - Pulmatrix is continuing PUR1800 development, with 18 patients dosed in a Phase 1b safety, tolerability, and biomarker study for COPD[92][93] - Phase 1b top-line data is expected in Q1 2022, with toxicology studies demonstrating safety for chronic dosing, potentially expanding indications[94][95] PUR3100 - Nonclinical pharmacokinetic (PK) and GLP toxicology studies are underway for PUR3100 to support a planned Phase 1/Phase 2 study[96] - The Company intends to dose the first patients in a Phase 1/Phase 2 study in Q1 2022, with data anticipated in Q4 2022[96] Financial Overview Revenues - The Company has not generated any product sales to date[97] - 2021 revenue was primarily from collaboration and license agreements with Cipla (Pulmazole) and JJEI (PUR1800), and immaterial royalties from Sensory Cloud[97] - No further revenue is expected from the Cipla Agreement's upfront payment until the contractual dispute is resolved[97] Research and Development Expenses - R&D expenses are expensed as incurred and include employee costs, CRO/CMO expenses, license fees, and facility costs[99][105] - A large portion of staff (approximately 81%) are R&D employees, supporting internal and external development efforts[101] - The duration and costs of preclinical and clinical trials are uncertain due to various factors, including enrollment rates and regulatory changes[102] General and Administrative Expenses - G&A expenses include salaries, share-based compensation, facility costs, patent filing fees, and professional legal fees[103] - Future G&A expenses are expected to increase due to public company compliance costs and preparation for commercial operations if product candidates receive regulatory approval[104] Critical Accounting Policies - The Company's financial statements are prepared in accordance with U.S. GAAP, requiring management to make estimates and judgments[105] - Key estimates include accrued expenses and share-based compensation, based on historical experience and known trends[105] - No material changes to critical accounting policies and estimates have occurred since the 2020 Form 10-K filing[106] Results of Operations Three Months Ended June 30, 2021 Compared with Three Months Ended June 30, 2020 Results of Operations (Three Months Ended June 30) | Metric | June 30, 2021 ($ in thousands) | June 30, 2020 ($ in thousands) | Change ($ in thousands) | | :--- | :--- | :--- | :--- | | Revenues | 2,254 | 3,500 | (1,246) | | Research and development | 4,541 | 3,184 | 1,357 | | General and administrative | 1,562 | 1,490 | 72 | | Total operating expenses | 6,103 | 4,674 | 1,429 | | Loss from operations | (3,849) | (1,174) | (2,675) | | Net loss | (3,852) | (1,170) | (2,682) | - Revenue decreased by $1.246 million, primarily due to lower contributions from Cipla and JJEI agreements[107] - Research and development expenses increased by $1.357 million, mainly due to a $1.6 million increase in PUR3100 project spend, partially offset by a $0.3 million decrease in Pulmazole clinical trial spend[108] - General and administrative expenses increased by $0.072 million, driven by higher legal, patent, and public company costs, partially offset by decreased employment costs[109] Six Months Ended June 30, 2021 Compared with Six Months Ended June 30, 2020 Results of Operations (Six Months Ended June 30) | Metric | June 30, 2021 ($ in thousands) | June 30, 2020 ($ in thousands) | Change ($ in thousands) | | :--- | :--- | :--- | :--- | | Revenues | 3,644 | 6,262 | (2,618) | | Research and development | 8,397 | 8,471 | (74) | | General and administrative | 3,181 | 3,702 | (521) | | Total operating expenses | 11,578 | 12,173 | (595) | | Loss from operations | (7,934) | (5,911) | (2,023) | | Net loss | (7,956) | (5,856) | (2,100) | - Revenue decreased by $2.618 million, primarily due to lower contributions from Cipla and JJEI agreements[111] - Research and development expenses decreased by $0.074 million, reflecting a $1.2 million decrease in PUR1800 and Pulmazole spend, largely offset by a $2.3 million increase in PUR3100 pre-clinical and manufacturing costs[112] - General and administrative expenses decreased by $0.521 million, mainly due to reduced employment and consulting costs[113] Liquidity and Capital Resources Financings (2021 & 2020) - In February 2021, the Company completed a registered direct offering, raising $37.1 million net proceeds from the sale of 20,000,000 common shares[130] - In May 2021, an At-The-Market Sales Agreement was established to sell up to $20.0 million of common stock, with no sales occurring by June 30, 2021[129] - During the six months ended June 30, 2021, warrant exercises generated $0.2 million[131] - In April 2020, a registered direct offering raised approximately $7.3 million net proceeds, along with warrants issued[132] - During the six months ended June 30, 2020, warrant exercises generated $0.775 million[133] Off-Balance Sheet Arrangements - The Company has no material off-balance sheet arrangements that would significantly affect its financial condition or results of operations[134] Impact of COVID-19 on the Company's Operations, Financial Condition and Liquidity - The ultimate impact of COVID-19 on operations is unknown and depends on future developments, including the duration of the outbreak and new variants[120] - COVID-19 has created significant economic uncertainty and volatility, potentially affecting the Company's ability to raise additional capital[121] - Future funding requirements are dependent on factors such as clinical trial progress, regulatory approvals, intellectual property costs, and commercialization efforts[124] Cash Flows from Operating Activities - Net cash used in operating activities for the six months ended June 30, 2021, was $12.0 million, primarily due to a net loss of $8.0 million and $5.2 million in cash outflows from changes in operating assets and liabilities[125] - Non-cash adjustments included $0.6 million in share-based compensation and $0.5 million in operating lease right-of-use asset amortization[125] - Net cash used in operating activities for the six months ended June 30, 2020, was $4.2 million, driven by a net loss of $5.9 million, partially offset by non-cash adjustments and cash inflows from changes in operating assets and liabilities[126] Cash Flows from Investing Activities - Net cash used in investing activities for both six-month periods ended June 30, 2021, and 2020, was entirely due to purchases of property and equipment[127] Cash Flows from Financing Activities - Net cash provided by financing activities for the six months ended June 30, 2021, was $37.3 million, primarily from the issuance of common stock ($37.1 million) and warrant exercises ($0.2 million)[128] - Net cash provided by financing activities for the six months ended June 30, 2020, was $8.1 million, from common stock issuance ($7.3 million) and warrant/stock option exercises ($0.8 million)[128] Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company has no material quantitative or qualitative disclosures about market risk to report for the period - The Company has no material quantitative and qualitative disclosures about market risk[135] Item 4. Controls and Procedures This section confirms the effectiveness of disclosure controls and procedures and reports no material changes in internal control - The principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of June 30, 2021[136] - No changes in internal control over financial reporting materially affected or are reasonably likely to materially affect internal control during the quarter ended June 30, 2021[138] PART II — OTHER INFORMATION Item 1. Legal Proceedings The Company is not currently aware of any material legal proceedings, threatened litigation, or governmental proceedings - The Company is not aware of any material legal proceedings to which it or its subsidiaries are a party[141] - No threatened or pending litigation or proceedings contemplated by governmental authorities are known[141] Item 1A. Risk Factors This section updates key risks related to the business, including a contractual dispute with Cipla and the impact of COVID-19 Risk Related to Our Business - The Company is in a contractual dispute with Cipla regarding funding for Pulmazole's Phase 2b clinical study, which could lead to delays, loss of rights, or financial losses[145][150] - The COVID-19 pandemic has caused interruptions and delays in clinical studies (e.g., Pulmazole Phase 2 termination, PUR1800 Phase 1b enrollment slowdown) and may continue to adversely affect business operations and financial condition[151][152][154] - Uncertainty remains regarding the full extent of potential delays or impacts on clinical trials, business partners, and the global economy due to COVID-19[156] Risks Related to Our Common Stock - The price of the Company's common stock is subject to significant fluctuation and volatility, often unrelated to operating performance[157] - Factors influencing stock price include announcements of new products, financial results, strategic relationships, industry trends, market conditions, and the impact of global events like COVID-19[158][160] - Stock price declines could lead to costly lawsuits and management distraction[159] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section confirms no unregistered sales or repurchases of equity securities occurred during the quarter - No unregistered sales of equity securities occurred during the period[161] - The Company did not repurchase any of its equity securities during the quarter ended June 30, 2021[162] Item 3. Defaults Upon Senior Securities The Company has no defaults upon senior securities to report - There are no defaults upon senior securities[163] Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable - Mine safety disclosures are not applicable to the Company[164] Item 5. Other Information This section states that there is no other information to report - No other information is reported in this section[165] Item 6. Exhibits This section refers to the Exhibit Index for a list of documents filed as exhibits - The Exhibit Index provides a list of documents filed as exhibits[166] SIGNATURES This section contains the required signatures of the Company's principal executive and financial officers - The report is signed by Teofilo Raad, President and Chief Executive Officer, and Michelle S. Siegert, Vice President, Finance, on August 10, 2021[169] EXHIBIT INDEX This section lists all exhibits filed with the Form 10-Q, including agreements, corporate documents, and certifications - The index lists various exhibits, including the At The Market Offering Agreement, Amended and Restated Certificate of Incorporation, Restated Bylaws, Forms of Common and Placement Agent Warrants, Securities Purchase Agreements, and certifications (302 and 906)[171] - Exhibits are either filed herewith or incorporated by reference from previous SEC filings[171]