Pulmatrix(PULM) - 2022 Q1 - Quarterly Report

PART I — FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for the reported period Item 1. Condensed Consolidated Financial Statements This section presents Pulmatrix, Inc.'s unaudited condensed consolidated financial statements and explanatory notes for the periods ended March 31, 2022 Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of March 31, 2022, and December 31, 2021 Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2022 | December 31, 2021 | Change (vs. Dec 31, 2021) | | :-------------------------- | :------------- | :---------------- | :------------------------ | | Cash and cash equivalents | $47,534 | $53,840 | $(6,306) | | Total current assets | $50,608 | $54,778 | $(4,170) | | Total assets | $54,303 | $58,817 | $(4,514) | | Total current liabilities | $5,377 | $4,442 | $935 | | Total liabilities | $11,546 | $11,368 | $178 | | Total stockholders' equity | $42,757 | $47,449 | $(4,692) | - The company's cash and cash equivalents decreased by $6.3 million from December 31, 2021, to March 31, 2022, reflecting a reduction in overall liquidity[12] - Total stockholders' equity decreased by $4.7 million, primarily due to the net loss incurred during the quarter and conversion of preferred stock[12][17] Consolidated Statements of Operations This section outlines the company's revenues, expenses, and net loss for the three months ended March 31, 2022, and 2021, highlighting operational performance Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change (YoY) | | :-------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Revenues | $1,160 | $1,390 | $(230) | | Research and development | $4,149 | $3,856 | $293 | | General and administrative | $1,974 | $1,619 | $355 | | Total operating expenses | $6,123 | $5,475 | $648 | | Loss from operations | $(4,963) | $(4,085) | $(878) | | Net loss | $(4,973) | $(4,104) | $(869) | | Net loss per share (basic & diluted) | $(1.51) | $(1.78) | $0.27 | | Weighted average common shares outstanding | 3,297,280 | 2,301,610 | 995,670 | - Revenue decreased by $0.23 million (16.5%) year-over-year, primarily due to the termination of the JJEI License Agreement, partially offset by increased revenue from the Cipla Agreement[15][117][125] - Net loss increased by $0.87 million (21.2%) year-over-year, driven by higher operating expenses, particularly in research and development and general and administrative costs[15][125] Consolidated Statements of Stockholders' Equity This section details changes in the company's equity accounts, including preferred stock, common stock, and accumulated deficit, for the reported period Consolidated Statements of Stockholders' Equity Highlights (in thousands, except share data) | Metric | January 1, 2022 | March 31, 2022 | Change | | :-------------------------- | :-------------- | :------------- | :----- | | Preferred Stock Shares | 1,830 | 915 | (915) | | Preferred Stock Amount | $1,081 | $540 | $(541) | | Common Stock Shares | 3,222,037 | 3,310,922 | 88,885 | | Additional Paid-in Capital | $301,008 | $301,830 | $822 | | Accumulated Deficit | $(254,640) | $(259,613) | $(4,973) | | Total Stockholders' Equity | $47,449 | $42,757 | $(4,692) | - The decrease in preferred stock shares and amount is due to the conversion of preferred stock to common stock during the period[17] - The accumulated deficit increased by $4.973 million, directly reflecting the net loss for the three months ended March 31, 2022[17] Consolidated Statements of Cash Flows This section presents the company's cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2022, and 2021 Consolidated Statements of Cash Flows Highlights (in thousands) | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change (YoY) | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :----------- | | Net cash used in operating activities | $(6,144) | $(5,495) | $(649) | | Net cash used in investing activities | $(10) | $- | $(10) | | Net cash (used in) provided by financing activities | $(152) | $37,283 | $(37,435) | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(6,306) | $31,788 | $(38,094) | | Cash, cash equivalents and restricted cash — end of period | $49,159 | $63,649 | $(14,490) | - Net cash used in operating activities increased by $0.649 million year-over-year, primarily due to a higher net loss and increased cash outflows from changes in operating assets and liabilities[19][133][134] - Net cash provided by financing activities significantly decreased from $37.283 million in Q1 2021 to a net cash outflow of $0.152 million in Q1 2022, reflecting the absence of large equity offerings in the current period[19][136] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures for the condensed consolidated financial statements, covering accounting policies, agreements, and equity Note 1. Organization Pulmatrix, Inc. is a clinical-stage biotechnology company developing inhaled therapeutics, which executed a 1-for-20 reverse stock split in February 2022 - Pulmatrix, Inc. is a clinical-stage biotechnology company developing inhaled therapeutic products using its iSPERSE dry powder delivery platform[20] - A 1-for-20 reverse stock split was effectuated on February 28, 2022, with all common stock and per share data retrospectively restated[21] Note 2. Summary of Significant Accounting Policies and Recent Accounting Standards The unaudited financial statements rely on management estimates for key areas, with no material impact from early adoption of new accounting standards - The financial statements are unaudited and prepared under SEC rules, requiring management estimates for areas like revenue recognition and clinical trial accruals[22][23][24] - The company early adopted ASU 2020-06 and ASU 2021-04 as of January 1, 2022, with no material impact on the condensed consolidated financial statements[28][29] - One customer accounted for 99% of revenue for the three months ended March 31, 2022, indicating significant customer concentration[26] Note 3. Fair Value of Financial Instruments The company held no financial assets or liabilities measured at fair value, except for Level 1 money market funds, as of March 31, 2022 - Money market funds, classified as Level 1 instruments, were the only financial assets measured at fair value on a recurring basis, totaling $41.801 million as of March 31, 2022[32] Note 4. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets significantly increased to $1.961 million, primarily due to higher clinical and consulting prepayments Prepaid Expenses and Other Current Assets (in thousands) | Category | March 31, 2022 | December 31, 2021 | Change | | :-------------------------- | :------------- | :---------------- | :----- | | Insurance | $147 | $325 | $(178) | | Software and hosting costs | $133 | $- | $133 | | Cloud computing implementation costs | $72 | $- | $72 | | Clinical and consulting | $1,365 | $230 | $1,135 | | Other | $244 | $316 | $(72) | | Total | $1,961 | $871 | $1,090 | - Clinical and consulting prepaid expenses saw a significant increase of $1.135 million, from $230 thousand to $1.365 million, indicating increased upfront payments for R&D activities[33] Note 5. Property and Equipment, Net Net property and equipment remained stable at $319 thousand, with depreciation and amortization expense of $35 thousand for Q1 2022 Property and Equipment, Net (in thousands) | Category | March 31, 2022 | December 31, 2021 | | :-------------------------- | :------------- | :---------------- | | Laboratory equipment | $1,838 | $1,838 | | Computer equipment | $298 | $304 | | Office furniture and equipment | $217 | $217 | | Leasehold improvements | $602 | $602 | | Capital in progress | $33 | $- | | Less accumulated depreciation and amortization | $(2,669) | $(2,640) | | Property and equipment, net | $319 | $321 | - Depreciation and amortization expense for the three months ended March 31, 2022, was $35 thousand, a decrease from $51 thousand in the prior year period[34] Note 6. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities decreased to $1.067 million, driven by lower wages and incentives, partially offset by increased clinical accruals Accrued Expenses and Other Current Liabilities (in thousands) | Category | March 31, 2022 | December 31, 2021 | Change | | :-------------------------- | :------------- | :---------------- | :----- | | Wages and incentives | $290 | $991 | $(701) | | Clinical and consulting | $526 | $97 | $429 | | Vacation | $106 | $60 | $46 | | Legal and patents | $65 | $58 | $7 | | Other | $80 | $27 | $53 | | Total | $1,067 | $1,233 | $(166) | - Accrued wages and incentives decreased by $0.701 million, while clinical and consulting accruals increased by $0.429 million[36] Note 7. Significant Agreements This section details key collaboration and license agreements, including the Cipla Agreement for Pulmazole and the Sensory Cloud Agreement for NasoCalm - The Cipla Agreement for Pulmazole involves co-development and commercialization, with Pulmatrix and Cipla responsible for 60% and 40% of Direct Costs, respectively, and 50/50 sharing of other development costs[37][40] - A Phase 2b clinical study for Pulmazole, with a 16-week dosing regimen, was approved on November 8, 2021, following the termination of the initial Phase 2 study due to COVID-19[43][44] - Revenue recognized from the Cipla Agreement was $1.2 million for Q1 2022, compared to $0.6 million for Q1 2021, with $7.3 million in aggregate transaction price related to unsatisfied obligations recorded as deferred revenue[51] - The Sensory Cloud Agreement grants an exclusive, worldwide, royalty-bearing license for PUR003 and PUR006 (NasoCalm) for over-the-counter products, with royalty rates increasing from 7% in 2020 to 17% from 2022 onwards[52][55] - Royalty revenue from Sensory Cloud decreased from $8 thousand in Q1 2021 to $1 thousand in Q1 2022[57] Note 8. Preferred Stock As of March 31, 2022, 915 shares of Series A convertible preferred stock were outstanding, a decrease due to conversions - As of March 31, 2022, 915 shares of Series A convertible preferred stock were outstanding, a decrease from 1,830 shares at December 31, 2021, due to conversions[12][58] Note 9. Common Stock The company has an At-The-Market Sales Agreement to sell up to $20.0 million of common stock, with no sales as of March 31, 2022 - An At-The-Market Sales Agreement allows for the issuance and sale of up to $20.0 million of common stock, but no sales occurred as of March 31, 2022[60][61] Note 10. Warrants As of March 31, 2022, the company had 1,539,745 warrants outstanding, with no issuance, exercise, or expiration during the quarter - As of March 31, 2022, there were 1,539,745 warrants outstanding, with 1,222,160 exercisable, at various exercise prices and expiration dates[63] Note 11. Stock-Based Compensation The company granted 93,922 stock options in Q1 2022, incurring $281 thousand in stock-based compensation expense, with $2.427 million unrecognized - 93,922 stock options were granted in Q1 2022 with a weighted-average fair value of $5.93 per share[66] Stock-Based Compensation Expense (in thousands) | Category | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Research and development | $63 | $56 | | General and administrative | $218 | $272 | | Total | $281 | $328 | - As of March 31, 2022, $2.427 million of unrecognized stock-based compensation expense related to unvested options is expected to be recognized over approximately 2.5 years[68] Note 12. Commitments and Contingencies The company has aggregate commitments of approximately $148 thousand for R&D contracts and no material legal proceedings are pending - Aggregate commitments for research and development contracts totaled approximately $148 thousand as of March 31, 2022[70] - The company is not aware of any pending legal proceedings that would materially impact its financial position or results of operations[71] Note 13. Leases Total lease cost for Q1 2022 was $561 thousand, with a new 10-year corporate headquarters lease commencing in May 2023, including a $3.9 million tenant allowance Lease Expense (in thousands) | Category | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Fixed lease cost | $357 | $259 | | Variable lease cost | $204 | $126 | | Total lease cost | $561 | $385 | - A new 10-year lease for corporate headquarters at 36 Crosby Drive, Bedford, MA, was executed on January 7, 2022, expected to commence in May 2023, with a base rent of $101 thousand per month[74] - The landlord will fund improvements for the new headquarters through a tenant allowance of up to $3.9 million[74] Note 14. Income Taxes No income tax expense was recognized due to operating losses, with a full valuation allowance recorded against deferred tax assets - No income tax expense was recognized due to operating losses, and a full valuation allowance was recorded against deferred tax assets[77] Note 15. Net Loss Per Share Basic and diluted net loss per share are computed using the two-class method, excluding anti-dilutive securities like stock options and warrants Potentially Dilutive Securities Excluded from Diluted EPS (shares) | Security Type | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Stock options | 288,038 | 194,665 | | Preferred stock convertible | 76,250 | - | | Warrants | 1,539,745 | 1,222,160 | | Total | 1,904,033 | 1,416,825 | - All potentially dilutive securities were excluded from diluted EPS calculations because their inclusion would be anti-dilutive due to the company's net loss[79] Note 16. Subsequent Events No subsequent events requiring disclosure were identified after March 31, 2022, through the financial statement issuance date - No subsequent events requiring disclosure were identified after March 31, 2022, through the date of financial statement issuance[81] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition, operations, and liquidity for Q1 2022, including pipeline updates and critical accounting policies Overview Pulmatrix is a clinical-stage biotech company leveraging iSPERSE technology for inhaled therapeutics, with a pipeline including Pulmazole, PUR1800, and PUR3100 - Pulmatrix is a clinical-stage biotechnology company developing inhaled therapeutic products using its proprietary iSPERSE dry powder delivery technology[88][89] - The current pipeline includes Pulmazole (ABPA/CF), PUR1800 (AECOPD), and PUR3100 (acute migraine), all based on iSPERSE formulations[91] - The company plans to resume Pulmazole clinical trials, advance PUR1800, initiate PUR3100 clinical studies, identify new product candidates, invest in IP, and hire additional personnel[92][94][95] Pulmazole Program Update The Pulmazole program, co-developed with Cipla for ABPA, has a new Phase 2b study approved, with dosing anticipated in Q1 2023 and data in mid-2024 - The Pulmazole program is a co-development with Cipla for an inhaled itraconazole formulation to treat pulmonary indications, including ABPA[96] - A Phase 2 clinical study was terminated in July 2020 due to COVID-19 impacts on patient enrollment[100] - A new Phase 2b clinical study, with a 16-week dosing regimen and efficacy endpoints, was approved in November 2021, with first patient dosing anticipated in Q1 2023 and top-line data in mid-2024[101][103] PUR1800 Program Update The PUR1800 Phase 1b study showed good tolerability, chronic toxicology supports broader indications, and all rights reverted to Pulmatrix post-JJEI agreement termination - Phase 1b clinical study for PUR1800 in COPD patients was completed, with topline data in Q1 2022 indicating good tolerability and low systemic exposure[104][106] - Chronic toxicology studies in rats and dogs demonstrated PUR1800 is safe and well tolerated with chronic dosing, suggesting potential for chronic respiratory diseases like steroid-resistant asthma, COPD, or idiopathic pulmonary fibrosis[107] - All rights to the kinase inhibitor portfolio, including PUR1800, reverted to Pulmatrix following the termination of the JJEI License Agreement in July 2021[108] PUR3100 Program Update PUR3100, an iSPERSE DHE formulation for acute migraine, is set for a Phase 1 study in Australia in Q3 2022, with data expected in Q4 2022 - PUR3100 is an iSPERSE formulation of DHE developed for acute migraine, aiming to be the first orally inhaled DHE treatment[109] - FDA communications have confirmed the development plan, including a Phase 1 double-blind matching placebo clinical study in healthy volunteers[111] - Patient dosing for the Phase 1 clinical study is anticipated to begin in Australia in Q3 2022, with top-line data expected in Q4 2022[112] Nasdaq Minimum Bid Price Requirement Pulmatrix regained full compliance with the Nasdaq Minimum Bid Price Rule on March 15, 2022, after a prior period of non-compliance - The company regained full compliance with the Nasdaq Minimum Bid Price Rule on March 15, 2022, after receiving an extension until August 15, 2022[113] Recent Developments Bylaws were amended on April 28, 2022, to lower the stockholder meeting quorum, and Peter Ludlum was appointed Interim CFO on April 18, 2022 - Bylaws were amended on April 28, 2022, to lower the quorum for stockholder meetings from a majority to one-third[114] - Peter Ludlum was appointed Interim Chief Financial Officer, effective April 18, 2022[115] Financial Overview Revenue is primarily from collaboration agreements, with significant R&D expenses and anticipated increases in G&A costs due to public company compliance and future commercialization - Revenue is generated primarily from collaboration and license agreements (Cipla, JJEI), with no product sales to date[117] - Research and development expenses are significant, covering preclinical and clinical activities, internal R&D team, and facility costs, with a large portion of staff (approximately 77%) dedicated to R&D[119][120] - General and administrative expenses are expected to increase due to public company compliance, investor relations, and future commercialization preparations[122] Critical Accounting Policies, Judgments, and Estimates Management's estimates are crucial for financial statement preparation, with no changes to critical accounting policies during Q1 2022 - No changes were made to critical accounting policies, judgments, and estimates during the three months ended March 31, 2022[124] Results of Operations (Three Months Ended March 31, 2022 vs. 2021) Revenues decreased by $0.23 million, while R&D and G&A expenses increased, leading to a higher net loss of $4.973 million for Q1 2022 Results of Operations (in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change | | :-------------------------- | :-------------------------------- | :-------------------------------- | :----- | | Revenues | $1,160 | $1,390 | $(230) | | Research and development | $4,149 | $3,856 | $293 | | General and administrative | $1,974 | $1,619 | $355 | | Loss from operations | $(4,963) | $(4,085) | $(878) | | Net loss | $(4,973) | $(4,104) | $(869) | - Research and development expenses increased by $0.3 million, primarily due to a $0.7 million increase in employment costs and $0.1 million in rent, partially offset by decreased preclinical and clinical/manufacturing costs[126] - General and administrative expenses increased by $0.4 million, mainly due to higher employment costs ($0.1 million), consulting and legal fees ($0.3 million), and audit/public company expenses ($0.1 million)[127] Liquidity and Capital Resources The company has an accumulated deficit of $259.6 million and $47.5 million in cash, projecting existing funds to last into Q2 2024, with significant cash used in operations - Accumulated deficit reached $259.6 million as of March 31, 2022, with cash and cash equivalents at $47.5 million[128] - The company expects to fund operating expenses and capital expenditures into Q2 2024 with existing cash and cash equivalents[130] Major Sources and Uses of Cash (in thousands) | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(6,144) | $(5,495) | | Net cash used in investing activities | $(10) | $- | | Net cash (used in) provided by financing activities | $(152) | $37,283 | - Net cash used in operating activities for Q1 2022 was $6.1 million, primarily due to net loss and changes in operating assets and liabilities[133] - Financing activities shifted from providing $37.3 million in Q1 2021 (from common stock issuance and warrant exercise) to using $0.2 million in Q1 2022 (for preferred stock issuance costs)[136][137][139] Known Trends, Events and Uncertainties The COVID-19 pandemic's impact on operations and capital markets remains uncertain, potentially requiring additional capital and program adjustments - The impact of the COVID-19 pandemic on operations, clinical trials, and capital markets remains uncertain[141] - The company may need to raise additional capital and tailor its drug candidate development program based on future funding availability[142] Off-Balance Sheet Arrangements The company has no material off-balance sheet arrangements impacting its financial condition or results of operations - The company has no material off-balance sheet arrangements[144] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section is not applicable to the company for the reported period - This item is not applicable[145] Item 4. Controls and Procedures Disclosure controls and procedures were effective as of March 31, 2022, with no material changes in internal control over financial reporting - The Principal Executive Officer and Principal Financial Officer concluded that disclosure controls and procedures were effective as of March 31, 2022[146][147] - No material changes in internal control over financial reporting occurred during the three months ended March 31, 2022[150] PART II — OTHER INFORMATION This section covers other information not included in the financial statements, such as legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings The company is not aware of any material pending or threatened legal proceedings that would significantly impact its financial position - The company is not aware of any material legal proceedings to which it is a party or that are threatened or pending[152] Item 1A. Risk Factors Investing in the common stock involves high risk, with potential stock price volatility influenced by product announcements, financial performance, market conditions, and NASDAQ compliance - Investing in the common stock involves high risk, and the stock price is subject to significant fluctuation and volatility[154][156] - Factors influencing stock price volatility include new product announcements, financial performance, market conditions, and macroeconomic factors like the COVID-19 pandemic[157][159] - The company recently regained full compliance with the NASDAQ Minimum Bid Price Rule, but there is no assurance it will not fall out of compliance again[160][161] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or repurchases of equity securities occurred during the three months ended March 31, 2022 - No unregistered sales of equity securities occurred during the three months ended March 31, 2022[162] - The company did not repurchase any of its equity securities during the three months ended March 31, 2022[163] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported for the period - No defaults upon senior securities were reported[164] Item 4. Mine Safety Disclosures This section is not applicable to the company - This item is not applicable[165] Item 5. Other Information No other information is reported in this section - No other information is reported[166] Item 6. Exhibits This section provides an index of exhibits filed with the Form 10-Q, including corporate documents and certifications - The exhibit index lists various corporate documents, agreements, and certifications, including the Amended and Restated Certificate of Incorporation and certifications under the Sarbanes-Oxley Act[167][172] SIGNATURES This section contains the official signatures of the company's executive officers, certifying the accuracy of the report SIGNATURES The report was officially signed by the President and CEO, and Interim CFO of Pulmatrix, Inc. on May 12, 2022 - The report was signed by Teofilo Raad, President and CEO, and Peter Ludlum, Interim CFO, on May 12, 2022[171]