REBUS HOLDINGS, INC. Basis of Presentation
We have prepared our unaudited condensed consolidated financial statements on the basis that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We have incurred losses from operations since inception, we have a working capital deficit of$5.3million and we have an accumulated deficit of$64.3million as ofSeptember 30, 2021 . We anticipate incurring additional losses for the foreseeable future until such time, if ever, that we can generate significant sales from our therapeutic product candidates which are currently in development, or we enter into cash flow positive business development transactions.
To date, we have generated no sales or revenues, have incurred significant losses and expect to incur significant additional losses as we advance our product candidates through development. Consequently, our operations are subject to all the risks inherent in the establishment of a pre-revenue business enterprise as well as those risks associated with a company engaged in the research and development of pharmaceutical compounds.
Our cash balances atSeptember 30, 2021 were approximately$995,000 , representing 100% of our total assets. Based on our current expected level of operating expenditures, and including$500,000 that we raised inJanuary 2021 and$500,000 that we raised inJune 2021 , pursuant to the sale of our senior convertible debentures, we expect to be able to fund our operations into the second quarter of 2022. We will require additional cash to fund and continue our operations beyond that point. This period could be shortened if there are any unanticipated increases in planned spending on development programs or other unforeseen events. We anticipate raising additional funds through public or private sales of debt or equity securities, or some combination thereof. There is no assurance that any such financing will be available when needed in order to allow us to continue our operations, or if available, on terms favorable
or acceptable to us. In the event additional financing is not obtained, we may pursue cost cutting measures as well as explore the sale of assets to generate additional funds. If we are required to significantly reduce operating expenses and delay, reduce the scope of, or eliminate any of our development programs or clinical trials, these events could have a material adverse effect on our business, results of operations, and financial condition. These factors raise substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern. Our current cash level raises substantial doubt about our ability to continue as a going concern past the second quarter of 2022. If we do not obtain additional funds by such time, we may no longer be able to continue as a going concern and will cease operation which means that our shareholders will lose their entire investment.
NOTE 3 - SUMMARY OF CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES
Basis of Presentation
The accompanying condensed consolidated financial statements are unaudited. The unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted inthe United States ("GAAP") and pursuant to the rules and regulations of theSecurities and Exchange Commission (the "SEC"). Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. These interim consolidated financial statements for the three and nine months endedSeptember 30, 2021 and 2020 are unaudited; however, in the opinion of management, such statements include all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position, results of operations and cash flows of the Company for the periods presented. The results for the three and nine months endedSeptember 30, 2021 are not necessarily indicative of the results to be expected for the year endingDecember 31, 2021 or for any future period. All references toSeptember 30, 2021 and 2020 financials in these footnotes refer to unaudited consolidated financial statements as of those dates. 7
These unaudited condensed consolidated financial statements should be read in conjunction with our audited financial statements and the notes thereto for the year endedDecember 31, 2020 , included in the Company's annual report on Form 10-K filed with theSEC onMarch 31, 2021 . The consolidated balance sheet as ofDecember 31, 2020 has been derived from the audited consolidated financial statements at such date but do not include all disclosures required by the accounting principles generally accepted in the
United States of America . Principles of Consolidation
The consolidated financial statements include the accounts of the parent
company,
Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Significant estimates include the fair value of derivative instruments, stock-based compensation, recognition of clinical trial costs and other accrued liabilities. Actual results may differ from those estimates.
Research and Development
Research and development costs are charged to expense as incurred. Our research and development expenses consist primarily of expenditures for pre-clinical research, toxicology and other studies, manufacturing, clinical trials, compensation and consulting costs associated therewith.
We incurred research and development expenses of approximately$97,000 and$11,000 for the three months endedSeptember 30, 2021 and 2020, respectively. We incurred research and development expenses of approximately$190,000 and$33,000 for the nine months endedSeptember 30, 2021 and 2020, respectively. Cash Equivalents
For purposes of the statements of cash flows, we consider all highly liquid debt instruments purchased with a maturity date of three months or less to be cash equivalents. We maintain our cash in bank deposit accounts which, at times, may exceed applicable government mandate insurance limits. We have not experienced any losses in our accounts. We did not have any cash equivalents atSeptember 30, 2021 orDecember 31, 2020 .
Concentrations of Credit Risk
Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents. The Company places its cash and temporary cash investments with credit quality institutions. At times, such investments may exceed applicable government mandated insurance limits. Cash was$1.0 million and$0.4 million atSeptember 30, 2021 andDecember 31, 2020 , respectively. As ofSeptember 30, 2021 andDecember 31, 2020 , there was no cash over the federally insured limit.
Loss per Share Basic loss per share is calculated by dividing net loss and net loss attributable to common shareholders by the weighted average number of common shares outstanding for the period. Basic and diluted loss per share are the same, in that any potential common stock equivalents would have the effect of being anti-dilutive in the computation of net loss per share. 8
The following potentially dilutive securities have been excluded from the
computations of diluted weighted average shares outstanding for the three and
nine months ended
Schedule of Anti dilutive Securities Excluded from Computation of Earnings Per Share
Three and Nine Months
Ended
September 30,
2021 2020Shares underlying options outstanding 9 9 Shares underlying warrants outstanding 53 53 Shares underlying convertible preferred stock outstanding 95,250
3,739
95,312 3,801
Diluted loss per share for the three and nine months ended
Diluted loss per share
Three months Three months Nine months Nine months
ended ended ended ended
September 30, September 30, September 30, September 30,
2021 2020 2021 2020
Net income attributable to common
shareholders $ 6,125 $ 2,106 $ 2,646 $ 205
Income attributable to convertible
instruments (6,612 ) (2,264 ) (4,131 ) (751 )
Expense attributable to convertible
instruments 272 21 924 169
Diluted loss attributable to common
shareholders $ (215 ) $ (137 ) $ (561 ) $ (377 )
Basic shares outstanding 7,612,241 181,774 6,740,889 94,764 Dilutive convertible instruments 30,924,532 7,048,792 14,187,583 7,048,792 Diluted shares outstanding 38,536,773 7,230,566 20,928,472 7,143,556 Diluted loss per share$ (0.01 ) $ (0.02 ) $ (0.03 ) $ (0.05 ) Derivative Liability The Company has financial instruments that are considered derivatives or contain embedded features subject to derivative accounting. Embedded derivatives are valued separately from the host instrument and are recognized as derivative liabilities in the Company's balance sheet. The Company measures these instruments at their estimated fair value and recognizes changes in their estimated fair value in results of operations during the period of change. The Company values its derivative liabilities using the Black-Scholes option valuation model. The resulting liability is valued at each reporting date and the change in the liability is reflected as change in derivative liability
in the statement of operations.
Fair Value of Financial Instruments
Our short-term financial instruments, including cash, accounts payable and other liabilities, consist primarily of instruments with maturities of one year or less when acquired. We believe that the fair values of our current assets and current liabilities approximate their reported carrying amounts. The derivative liabilities consist of our convertible notes and Series F preferred stock with variable conversion features. The Company uses the Black-Scholes option-pricing model to value its derivative liabilities which incorporate the Company's stock price, volatility,U.S. risk-free interest rate, dividend rate, and estimated life. Fair Value Measurements TheU.S. GAAP Valuation Hierarchy establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value. A financial asset or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. 9 The Company has recorded a derivative liability for its convertible notes and preferred stock with variable conversion features as ofSeptember 30, 2021 and 2020. The tables below summarize the fair values of our financial liabilities as ofSeptember 30, 2021 andDecember 31, 2020 (in thousands): Schedule of fair values of financial liabilities Fair Value at September 30, Fair Value Measurement Using 2021 Level 1 Level 2 Level 3 Convertible notes $ 542 - - $ 542 Preferred stock 1,416 - - 1,416 Derivative liability $ 1,958 $ - $ -$ 1,958 Fair Value at December 31, Fair Value Measurement Using 2020 Level 1 Level 2 Level 3 Convertible notes $ 2,705 - -$ 2,705 Preferred stock 4,123 - - 4,123 Derivative liability $ 6,828 $ - $ -$ 6,828
The reconciliation of the derivative liability measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows (in thousands):
Schedule of derivative liability measured at fair value on a recurring basis using unobservable inputs (Level 3)
Nine Months ended
September 30,
2021 2020
Balance at beginning of period$ 6,828 $ 1,785 Additions to derivative instruments 1,354
167
Reclassification on conversion (3,223 ) (766 ) Gain on change in fair value of derivative liability (3,001 )
(353 )
Balance at end of period $ 1,958 $ 833 Recent Accounting Pronouncements
With the exception of those discussed below, there have not been any recent changes in accounting pronouncements and Accounting Standards Update (ASU) issued by theFinancial Accounting Standards Board (FASB) during the nine months endedSeptember 30, 2021 that are of significance or potential significance
to the Company.
InDecember 2019 , the FASB issued ASU 2019-12, "Simplifying the Accounting for Income Taxes." This guidance, among other provisions, eliminates certain exceptions to existing guidance related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. This guidance also requires an entity to reflect the effect of an enacted change in tax laws or rates in its effective income tax rate in the first interim period that includes the enactment date of the new legislation, aligning the timing of recognition of the effects from enacted tax law changes on the effective income tax rate with the effects on deferred income tax assets and liabilities. Under existing guidance, an entity recognizes the effects of the enacted tax law change on the effective income tax rate in the period that includes the effective date of the tax law. ASU 2019-12 is effective for interim and annual periods beginning afterDecember 15, 2020 , with early adoption permitted. The adoption of this standard did not have a material impact on the Company's consolidated financial statements. 10
NOTE 4 - SUPPLEMENTAL CASH FLOW INFORMATION
The following table contains additional information for the periods reported (in thousands).
Schedule of additional information of cash flow
Nine Months Ended
September 30,
2021 2020Non-cash financial activities: Common stock issued on conversion of notes payable and derivative liability
$ 4,202 $ 1,300 Debentures converted to common stock 2,568
933
Derivative liability extinguished upon conversion of notes payable 3,223
766
Derivative liability issued 1,354
167
Accounts payable paid through issuance of debentures 100
-
Accrued directors fees forgiven and credited to paid in capital 336 -
There was no cash paid for interest and income taxes for the nine months ended
NOTE 5 - ACCRUED EXPENSES
Accrued expenses consist of the following (in thousands):
Schedule of accrued expenses
September 30 , December 31,
2021 2020
Accrued compensation and benefits $ 1,326
233 233
Accrued other 427 381
Total accrued expenses $ 1,986 $ 1,940
NOTE 6 - DERIVATIVE LIABILITY
We account for equity-linked financial instruments, such as our convertible preferred stock, convertible debentures and our common stock warrants as either equity instruments or derivative liabilities depending on the specific terms of the respective agreement. Equity-linked financial instruments are accounted for as derivative liabilities, in accordance with ASC Topic 815 - Derivatives and Hedging, if the instrument allows for cash settlement or issuance of a variable number of shares. We classify derivative liabilities on the balance sheet at fair value, and changes in fair value during the periods presented in the statement of operations, which is revalued at each balance sheet date subsequent to the initial issuance of the stock warrant. We have issued convertible debentures and preferred stock which contain variable conversion features, anti-dilution protection and other conversion price adjustment provisions. As a result, the Company assessed its outstanding equity-linked financial instruments and concluded that the convertible notes and preferred stock are subject to derivative accounting. The fair value of the conversion feature is classified as a liability in the consolidated financial statements, with the change in fair value during the periods presented recorded in the consolidated statement of losses. 11 During the three months endedSeptember 30, 2021 and 2020, we recorded income of approximately$6.7 million and$2.0 million , respectively, related to the change in fair value of the derivative liabilities during the periods. During the nine months endedSeptember 30, 2021 and 2020, we recorded income of approximately$3.0 million and$0.4 million , respectively. For purpose of determining the fair market value of the derivative liability, the Company used Black Scholes option valuation model. The significant assumptions used in the Black Scholes valuations of the derivatives atSeptember 30, 2021 are as follows: Schedule of valuations of derivatives Volatility 121% - 182 % Expected term (years) 3 - 9 months Risk-free interest rate 0.04% - 0.05 % Dividend yield None
As of
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Operating Leases
the Company currently does not have any ongoing leases for office space. It has availability to office space on an as needed basis. Its employees work on a remote basis.
There was no rent expense for the three and nine months ended
Legal Matters The Company is subject at times to legal proceedings and claims, which arise in the ordinary course of its business. Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters should not have a material adverse effect on its financial position, results of operations or liquidity.
NOTE 8 - CAPITAL STOCK AND STOCKHOLDERS' EQUITY
Preferred Stock As ofSeptember 30, 2021 , there were outstanding (i) 133.8 134shares of Series A Preferred Stock, (ii) 71shares of Series B Preferred Stock, (iii) 290.4 290 shares of Series C Preferred Stock, (iv) 5,000 shares of Series D Preferred Stock, (v) 5,000 shares of Series E Preferred Stock, and (vi) 8,000 shares
of Series F Preferred Stock.
Pursuant to a Certificate of Designation filed with theDelaware Secretary of State onOctober 6, 2020 , each share of Series F Preferred Stock has a stated value of$10.00 per share and is convertible into Common Stock at any time at the election of the holder. We issued all 8,000 shares of the Series F stock toRidgeway Therapeutics, Inc. in connection with the Termination Agreement described in Note 1. In the aggregate, all of the Series F Preferred Stock issued to Ridgeway is convertible into such number of shares of Common Stock equal to eighty percent (80%) of the issued and outstanding shares of Common Stock, post-conversion, on the conversion date (taking into effect any forward or reverse stock splits or consolidations). The Series F Preferred Stock votes on an as if converted to common stock basis. Additionally, upon the Company's outstanding Convertible Debentures (as such term is defined in the Certificate of Designation) being terminated, converted, or otherwise extinguished, the Series F Preferred Stock will automatically convert into Common Stock. As a result of past equity financings and conversions of debentures, the conversion prices of (i) our Series A Preferred Stock has been reduced to$29,812.50 per share atSeptember 30, 2021 , (ii) our Series B Preferred Stock has been reduced to$0.75 per share atSeptember 30, 2021 , (iii) 200 shares of our Series C preferred stock has been reduced to$1,125.00 per share atSeptember 30, 2021 , (iv) 90.43418 shares of our Series C Preferred Stock has been reduced to$562.50 per share atSeptember 30, 2021 . Common Stock During the nine months endedSeptember 30, 2021 , we issued a total of 7,101,031 shares of common stock, valued at$4,201,812 , upon the conversion of$2,568,048 principal amount of our convertible debentures. We recorded loss on conversion of debt of$47,872 and gain on conversion of debt of$1,129,632 during the three and nine months endedSeptember 30, 2021 , respectively. 12 During the three months endedMarch 31, 2021 , we entered into settlement and release agreements with two of our independent directors for the settlement of past due director fees and the mutual release of all claims. Pursuant to the agreements, the directors agreed to waive an aggregate of$435 ,667in outstanding director fees in exchange for the following: (i) the aggregate payment of$100,000 (of which$50,000 was paid inNovember 2020 and$50,000 inFebruary 2021 ) and (ii) immediately prior to the announcement that the Company has received approval from the FDA to commence its first Phase 1 clinical trial afterMarch 1, 2021 (which has yet to occur), common stock purchase options with an aggregate Black Scholes' value of$80,000 , having an exercise price equal to the closing price on the day preceding the announcement, and a term of 10 years. The difference between the amount waived of$435,667 and the cash paid of$100,000 has been credited to paid in capital during the three months endedMarch 31, 2021 . During the nine months endedSeptember 30, 2020 , we issued a total of 531,564 shares of common stock, valued at$1,300,653 , upon the conversion of$932,935 principal amount of our convertible debentures. We recorded gain on conversion of debt of$240,356 and$398,323 during the three and nine months endedSeptember 30, 2020 , respectively.
NOTE 9 - CONVERTIBLE DEBENTURES AND NOTES
June 2021 Debenture OnJune 18, 2021 , the Company sold an aggregate of$600,000 of senior convertible debentures ("June Debentures") for (i)$500 ,000in cash and (ii)$100,000 in cancellation of outstanding indebtedness to existing accredited and institutional investors of the Company. The June Debentures (i) are non-interest bearing, (ii) have a maturity date ofJune 18, 2022 , (iii) are convertible into shares of Common Stock at the election of the holders at any time, subject to a beneficial ownership limitation of 9.99%, and (iv) have a conversion price equal to the lesser of$24.75 and 85% of the lowest Volume Weighted Average Price (VWAP) during the five (5) trading days immediately prior to the conversion date, subject to adjustment, as described therein. The June Debentures also contain provisions providing for an adjustment in the event of stock splits or dividends, and fundamental transactions. The investors also have the right to participate in subsequent rights offerings and pro rata distributions. Additionally, the June Debentures contains anti-dilution protection in the event of subsequent equity sales at a price that is lower than the then applicable conversion price until such time that the June Debentures are no longer outstanding. Additionally, the Company has the option to redeem some or all of the June Debentures for cash upon notice of twenty (20) trading days provided certain conditions are met by the Company as more fully described in the June Debentures.
We recorded an initial derivative liability of$644,457 related to the fair value of the derivative liability associated with the June Debentures. We recorded debt discount of$600,000 , which will be amortized to interest expense over the term of the June Debentures, and we charged$44,457 to interest expense upon issue. We have amortized$155,000 and$175,000 of discount to interest expense during the three and nine months endedSeptember 30, 2021 , respectively. Unamortized discount atSeptember 30, 2021 was$425,000 .January 2021 Debenture OnJanuary 12, 2021 , we sold a$500,000 senior convertible debenture ("January Debenture") for (i)$500,000 for cash to an existing institutional investor of the Company. The January Debenture (i) is non-interest bearing, (ii) has a maturity date ofJanuary 12, 2022 , (iii) is convertible into shares of Common Stock at the election of the holder at any time, subject to a beneficial ownership limitation of 9.99%, and (iv) has a conversion price equal to the lesser of$24.75 and 85% of the lowest VWAP during the five (5) trading days immediately prior to the conversion date, subject to adjustment, as described therein.
The January Debenture also contains provisions providing for an adjustment in the event of stock splits or dividends, and fundamental transactions. The investor also has the right to participate in subsequent rights offerings and pro rata distributions. Additionally, the January Debentures contains anti-dilution protection in the event of subsequent equity sales at a price that is lower than the then applicable conversion price until such time that the January Debenture is no longer outstanding. Additionally, the Company has the option to redeem some or all of the January Debenture for cash upon notice of twenty (20) trading days provided certain conditions are met by the Company as more fully described in the January Debenture. 13 During the nine months endedSeptember 30, 2021 ,$412,480 of January Debenture has been converted to Common Stock and$87,520 remained outstanding atSeptember 30, 2021 .
We recorded an initial derivative liability of$709,835 related to the fair value of the derivative liability associated with the January debenture. We recorded debt discount of$500,000 , which will be amortized to interest expense over the term of the January debenture, and we charged$209,835 to interest expense upon issue. We have amortized$94,404 and$326,253 of discount to interest expense during the three and nine months endedSeptember 30, 2021 , respectively, and$148,842 has been charged off against gain upon the conversion of the October Debentures during the three and nine months endedSeptember 30, 2021 . Unamortized discount atSeptember 30, 2021 was$24,905 .October 2020 Debentures OnOctober 23, 2020 , the Company sold an aggregate of$600,000 of senior convertible debentures ("October Debentures") for (i)$500,000 in cash and (ii)$100,000 in cancellation of outstanding indebtedness to existing accredited and institutional investors of the Company. The October Debentures (i) are non-interest bearing, (ii) have a maturity date ofOctober 23, 2021 , (iii) are convertible into shares of Common Stock at the election of the holders at any time, subject to a beneficial ownership limitation of 9.99%, and (iv) have a conversion price equal to the lesser of (i)$24.75 and (ii) 85% of the lowest VWAP during the five trading days immediately prior to the date of conversion.
During the nine months ended
We had recorded debt discount of$600,000 related to the October Debentures, which will be amortized to interest expense over the term of the October Debentures. We have amortized$23,551 and$168,539 of discount to interest expense during the three and nine months endedSeptember 30, 2021 , and$0 and$311,111 has been charged off against gain upon the conversion of the October Debentures during the three and nine months endedSeptember 30, 2021 , respectively. Unamortized discount atSeptember 30, 2021 was$7,850 .March 2020 Debentures OnMarch 6, 2020 , the Company sold an aggregate of$250,000 of senior convertible debentures (the "March Debentures") for cash to existing accredited institutional investors of the Company. The March Debentures (i) are non-interest bearing, (ii) have a maturity date ofJuly 16, 2020 and (iii) are convertible into shares of Common Stock at the election of the holder at any time, subject to a beneficial ownership limitation of 9.99%. The March Debentures have a conversion price equal to the lesser of (i)$24.75 and (ii) 85% of the lowest VWAP during the five trading days immediately prior to the date of conversion. The maturity date of the debentures was extended toJune 30, 2021 .
The March Debentures were fully converted to Common Stock during the three
months ended
November 2019 Debentures
An existing institutional investor has paid certain of our accounts payable in the amount of$26,235 . We issued$26,235 in new debentures with substantially the same terms as our October Debenture. The debentures were issued inNovember 2019 . The debentures originally maturedNovember 20, 2020 . The maturity date of the debentures was extended toJune 30, 2021 .
The debentures were fully converted to Common Stock during the three months
ended
14October 2019 Debentures EffectiveSeptember 30 2019 , debenture holders waived certain events of default under debentures and notes issued in our debenture offerings and extended the maturity date of such debentures untilMarch 31, 2020 in exchange for the issuance of$96,000 in new debentures with substantially the same terms as our October Debentures. The debentures were issued inOctober 2019 . The debentures originally matured onOctober 1, 2020 . The maturity date of the debentures
was extended toJune 30, 2021 .
The debentures were fully converted to Common Stock during the three months
ended
July 2019 Debentures OnJuly 16, 2019 , we entered into securities purchase agreements with certain institutional investors. Pursuant to the securities purchase agreement, we issued an aggregate of$154,000 of senior convertible debentures (the "July 2019 Debentures") in exchange for the extension of the maturity date of ourDecember 2018 convertible notes and certain of ourJuly 2018 andSeptember 2017 convertible debentures, and the waiver of certain default provisions of ourJuly 2018 andSeptember 2017 convertible debentures. The maturity date of the debentures was extended toJune 30, 2021 .
The
December 2018 Notes OnDecember 13, 2018 , we issued an aggregate of$25,000 in convertible promissory notes for cash proceeds of$25,000 . The notes mature on the earlier of (i)June 30, 2019 or (ii) such time as we raise capital in exchange for the sale of securities and bear interest at 10% per year, payable on the maturity date. Pursuant to the terms of the notes, they may be converted into shares of Common Stock upon an event of default (as such term is defined in the notes) or upon the maturity date at the election of the holder at a price per share equal to 75% of the lowest trade price of our Common Stock on the trading day immediately prior to the date such exchange is exercised by the holder. The maturity date of the notes was extended toJune 30, 2021 .
The notes were fully converted to Common Stock during the three months ended
July 2018 Debentures OnJuly 3, 2018 , we entered into securities purchase agreements with certain institutional investors. Pursuant to the securities purchase agreement, we sold an aggregate of$515,000 of senior convertible debentures ("July 2018 Debentures") consisting of$500 ,000in cash and the cancellation of$15,000 of obligations of the Company. Pursuant to the terms of the securities purchase agreement, we issued$515,000 in principal amount ofJuly 2018 Debentures. TheJuly 2018 Debentures have substantially the same terms as the October Debentures. The maturity date of the debentures was extended toJune 30, 2021 .
The
September 2017 Debentures OnSeptember 12, 2017 , we entered into an exchange agreement with certain holders of our Series A 0% Convertible Preferred Stock ("Series A Shares") and Series B 0% Convertible Preferred Stock ("Series B Shares"). Pursuant to the terms of the agreement, we issued to the investors approximately$2.5 million in principal amount of senior convertible debentures (the "September 2017 Debentures") in exchange for 1,614.8125 Series A Shares with a stated value of approximately$1.6 million and 890 Series B Shares with a stated value of approximately$0.9 million . OnSeptember 12, 2017 , we sold an aggregate of$320,000 of ourSeptember 2017 Debentures. The sale consisted of$250,000 in cash and the cancellation of$70,000 of obligations of the Company. The maturity date of the debentures was extended toDecember 31, 2021 .
During the nine months ended
15 NOTE 10 - SUBSEQUENT EVENTS
Adoption of Agreement and Plan of Merger and Consummation of Reorganization
OnSeptember 28, 2021 the Company implemented a holding company reorganization through an Agreement and Plan of Merger (the "Merger Agreement"), which became effective with theFinancial Industry Regulatory Authority ("FINRA") onOctober 11, 2021 at5:00 p.m. Eastern Time (the "Effective Time"). The Merger Agreement was entered into by and amongInspyr Therapeutics, Inc. ,Rebus Holdings, Inc. , andRebus Sub, Inc. , a wholly-owned subsidiary ofRebus Holdings which has resulted in Rebus becoming the direct parent company ofInspyr Therapeutics and replacingInspyr Therapeutics as the public company trading on the OTC Markets ("OTC") (the "Reorganization"). Further, the Company will begin trading under the symbol RBSH in twenty (20) trading days fromOctober 12, 2021 . Pursuant to the Merger Agreement, Rebus Sub has merged withInspyr Therapeutics pursuant to the filing of a certificate of merger withInspyr Therapeutics surviving as a direct, wholly-owned subsidiary ofRebus Holdings (the "Merger"). At the Effective Time of the Merger:
(i) Each outstanding share of Inspyr Therapeutics Common Stock, par value
share of Common Stock of
rights, powers, and preferences, and qualifications, limitations, and
restrictions as a share of Inspyr Therapeutics Common Stock immediately
prior to the Reorganization;
(ii) Each outstanding share of Inspyr Series A Convertible Preferred Stock, par
value
into one share of Series A Convertible Preferred Stock par value
per share, of Rebus Holdings ("Rebus Series A Stock"), having the same
designation, rights, powers, and preferences, and qualifications,
limitations, and restrictions as a share of Inspyr Series A Stock
immediately prior to the Reorganization;
(iii) Each outstanding share of Inspyr Series B Convertible Preferred Stock, par
value
into one share of Series B Convertible Preferred Stock par value
per share, of Rebus Holdings ("Rebus Series B Stock"), having the same
designation, rights, powers, and preferences, and qualifications,
limitations, and restrictions as a share of Inspyr Series B Stock
immediately prior to the Reorganization;
(iv) Each outstanding share of Inspyr Series C Convertible Preferred Stock, par
value
into one share of Series C Convertible Preferred Stock par value
per share, of
designation, rights, powers, and preferences, and qualifications,
limitations, and restrictions as a share of Inspyr Series C Stock
immediately prior to the Reorganization;
(v) Each outstanding share of Inspyr Series D Convertible Preferred Stock, par
value
into one share of Series D Convertible Preferred Stock par value
share, of Rebus Holdings ("Rebus Series D Stock"), having the same
designation, rights, powers, and preferences, and qualifications,
limitations, and restrictions as a share of Inspyr Series D Stock
immediately prior to the Reorganization;
(vi) Each outstanding share of Inspyr Series E Convertible Preferred Stock, par
value
into one share of Series E Convertible Preferred Stock par value
per share, of Rebus Holdings ("Rebus Series E Stock"), having the same
designation, rights, powers, and preferences, and qualifications,
limitations, and restrictions as a share of Inspyr Series E Stock
immediately prior to the Reorganization; and
(vii) Each outstanding share of Inspyr Series F Convertible Preferred Stock, par
value
into one share of Series F Convertible Preferred Stock par value
per share, of Rebus Holdings ("Rebus Series F Stock"), having the same
designation, rights, powers, and preferences, and qualifications,
limitations, and restrictions as a share of Inspyr Series F Stock
immediately prior to the Reorganization.
16
Accordingly, upon consummation of the Reorganization (and the Reverse Stock Split as defined below), Inspyr stockholders automatically became stockholders ofRebus Holdings , on a one-for-one basis, with the same number and approximate ownership percentage of shares of the same class as they held in Inspyr immediately prior to the Effective Time. The Reorganization is intended to be a tax-free transaction forU.S. federal income tax purposes for Inspyr stockholders. The Reorganization has been conducted pursuant to Section 251(g) of the General Corporation Law of theState of Delaware , which provides for the formation of a holding company without a vote of the stockholders of the constituent corporation. The conversion of stock occurred automatically without an exchange of stock certificates. In addition, at the Effective Time: ? Each outstanding and unexpired option to purchase Inspyr Common Stock automatically converted into one share of Rebus Holdings Common Stock; ? Each outstanding warrant to purchase Inspyr Common Stock ("Inspyr Warrant"), whether or not vested, automatically converted into and become a warrant to purchase Rebus Holdings Common Stock ("Rebus Warrant") and
each Inspyr Warrant, and such Rebus Warrant has the same number of shares,
the same exercise price (subject to adjustments), the same restrictions on
exercise, and any other provisions contained in the Inspyr Warrants; and
? Each outstanding convertible debt instrument of
including but not limited to, promissory notes or debentures that are
convertible into Inspyr Common Stock ("Inspyr Convertible Notes")
automatically converted into, assumed, and became the convertible debt
instruments of Rebus Holdings ("Rebus Convertible Notes").
As a result of the Reorganization,
Reverse Stock Split The 1-for-75 Reverse Stock Split became effective with the Secretary ofState of Delaware as of4:59 p.m. Eastern Time onOctober 5, 2021 , and the Company began trading on a post Reverse Stock Split basis at the market open onOctober 12, 2021 . As a result of the Reverse Stock Split, each of the holders of the Company's Common Stock received one (1) new share of Common Stock for every seventy-five (75) shares such shareholder held immediately prior. The Reverse Stock Split also affected the Company's outstanding stock options, warrants and other exercisable or convertible instruments and resulted in the shares underlying such instruments being reduced and the exercise price being increased proportionately to the Reverse Stock Split ratio. All share and per share data has been retroactively restated in the accompanying consolidated financial statements and footnotes for all periods presented to reflect the effects of the Reverse Stock Split. As a result, effective onOctober 12, 2021 (and just prior to the completion of the Reorganization), each of the holders of Inspyr Common Stock received one (1) new share of Inspyr Common Stock for every seventy-five (75) shares such shareholder held immediately prior to the Reverse Split Effective Time. The Reverse Stock Split also affected the Company's outstanding stock options, warrants and other exercisable or convertible instruments and resulted in the shares underlying such instruments being reduced and the exercise price being increased proportionately to the Reverse Stock Split ratio. No fractional shares were issued as a result of the Reverse Stock Split. Any fractional shares that would have otherwise resulted from the Reverse Stock Split will be rounded up to the next whole number of shares. As a result of the Reverse Stock Split, the number of issued and outstanding shares of Common Stock was adjusted from 772,902,289 shares to 10,309,212 shares. Additionally, pursuant to the terms of their Certificates of Designation, each Series of Inspyr preferred stock had the conversion price at which shares of such applicable preferred stock may be converted into shares of Inspyr Common Stock proportionately adjusted to reflect the Reverse Stock Split. Additionally, all outstanding options, warrants and convertible debt of Inspyr were adjusted proportionately pursuant to the Reverse Stock Split. 17
As a result of the Reorganization, each shareholder received such number of shares of Rebus Holdings Common Stock and Rebus Holdings Preferred Stock as the shareholder would have held of Inspyr immediately following the Reverse Stock Split.
Post Reverse Stock Split and Reorganization Information
The Company began trading on post Reverse Stock Split and Reorganization basis on the Pink Sheets of the OTC Markets Group onOctober 12, 2021 under the same symbol NSPX. In twenty (20) trading days fromOctober 12, 2021 , the Company will begin trading under the symbol RBSH .
The officers and members of the
Pursuant to the Reorganization,Rebus Holdings has, on a consolidated basis, the same assets, businesses, and operations asInspyr Therapeutics had immediately prior to the Reorganization.
Issuance of Common Stock upon Conversion of Debentures
The Company issued 729,333 shares of Common Stock pursuant to the conversion of
18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements regarding our business development plans, pre-clinical and clinical studies, regulatory reviews, timing, strategies, expectations, anticipated expenses levels, business prospects and positioning with respect to market, demographic and pricing trends, business outlook, technology spending and various other matters (including contingent liabilities and obligations and changes in accounting policies, standards and interpretations) and express our current intentions, beliefs, expectations, strategies or predictions. These forward-looking statements are based on a number of assumptions and currently available information and are subject to a number of risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Special Note Regarding Forward-Looking Statements" and under "Risk Factors" and elsewhere in this quarterly report. The following discussion should be read in conjunction with Part I, Item 1 of this Quarterly Report as well as the financial statements and related notes thereto included in our Annual Report on Form 10-K for the year endedDecember 31, 2020 , filed with theSEC on March
31, 2021.
Our Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is provided in addition to the accompanying financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. MD&A is organized as follows:
? Company overview - Discussion of our business plan and strategy in order to
provide context for the reminder of the MD&A.
? Critical Accounting Policies - Accounting policies that we believe are
important to understanding the assumptions and judgments incorporated in our
reported financial results and forecasts.
? Results of Operations - Analysis of our financial results comparing the three
and nine month periods ended
2020.
? Liquidity and Capital Resources - Liquidity discussion of our financial
condition and potential sources of liquidity.
Company Overview BusinessRebus Holdings, Inc. (fkaInspyr Therapeutics, Inc. ) is a pharmaceutical company focused on the research and development of novel targeted precision therapeutics for the treatment of cancer. Our approach utilizes our proprietary delivery technology to better enhance immuno-modulation for improved therapeutic outcomes. Our potential first-in-class immune-oncology lead asset, RT-AR001, an adenosine A2B receptor antagonist, is differentiated by its intratumoral delivery of nano- or microparticle formulations that allows for better tumor infiltration. The adenosine A2 Receptor is one of many T-cell surface immune checkpoint proteins. Our patented portfolio of adenosine receptor antagonists provides flexibility to optimize treatment based on the specific adenosine targets found in each type of cancer. 19
Adenosine Receptor Modulators
The adenosine receptor modulators include A2B and dual A2A/A2B antagonists that have broad development applicability including indications within immuno-oncology. Very high concentrations of adenosine are produced in the tumor microenvironment which prevents the host's own immune cells from attacking the tumor. Adenosine receptor antagonists as single-agents and in combination with other existing immuno-oncology agents may overcome this immunosuppression, and boost the host immune response leading to enhanced anti-tumor activity as well as inhibition of metastasis. Preclinical data has shown effects with our drug candidates in animal models utilizing a novel platform delivery system. While we believe that the data from our nonclinical studies appear encouraging, the outcome of our ongoing or future studies may ultimately be unsuccessful.
Pursuant to our recent termination of license withRidgeway Therapeutics, Inc. , aDelaware Corporation , we reacquired the rights to certain intellectual property, discussed above, and are currently focusing on a pipeline of small molecule adenosine receptor modulators. InOctober 2020 , pursuant to the cancellation of a license agreement whereby we previously licensed US Patent 9,593,118, we reacquired the exclusive right to such patent that covers both A2B and dual A2A/A2B antagonists. Accordingly, going forward our major focus will be to: (i) further characterization of the anti-cancer activity of our unique pipeline delivery platform containing A2B and dual A2A/A2B antagonists, leading to selection of a clinical candidate or candidates for an Investigative New Drug or IND enabling studies; and (ii) licensing and/or partnering our delivery platform and the A2B and dual A2A/A2B antagonists for further development. DuringMarch 2020 , we sold$250,000 of debt securities for cash, inOctober 2020 , we sold$500,000 of debt securities for cash, inJanuary 2021 , we sold$500,000 of debt securities for cash and inJune 2021 we sold$500,000 of debt securities for cash. We are currently using such funds to maintain ourSEC reporting requirements, pay outstanding invoices to our independent registered accounting firm, legal fees, and to retain consultants and other personnel in preparation for an Investigational New Drug Application filing related to our unique delivery platform and portfolio of adenosine A2R antagonists for the treatment of certain solid tumors. Should we fail to further raise sufficient funds to execute our business plan, our priority would be to maintain our intellectual property portfolio and seek business development opportunities with potential development partners and/or acquirors. Pre-Revenue
We are a pre-revenue, early-stage company that has not achieved profitability, and has no product revenues. Additionally, we have no approved products for sale.
20 Recent Developments
? Effective
and (ii) a holding company reorganization whereby we changed our name to
? On
chief executive officer and principal accounting officer and (ii) as a
member of the Board of Directors.
? On June 18, 2021 , we completed the private placement of $600,000 of
non-interest bearing senior convertible debentures in exchange for
in cash and the cancellation of $100,000 in obligations.
? On January 12, 2021 , we completed the private placement of $500,000 of
non-interest bearing senior convertible debentures.
Financial
To date, we have devoted substantially all of our efforts and financial resources to the development of our proposed drug candidates. We have not received FDA approval to market, distribute or sell any products. We have recently begun working on developing IND approved studies for our adenosine receptor technology platform.
Since our inception in 2003, we have generated no revenue from product sales and have funded our operations principally through the private and public sales of our equity securities. We have never been profitable and as ofSeptember 30, 2021 , we had an accumulated deficit of approximately$64.3 million . We expect to continue to incur significant operating losses for the foreseeable future as we continue the development of our product candidates and advance them through clinical trials. Our cash balances atSeptember 30, 2021 were approximately$995,000 representing 100% of total assets. InJanuary 2021 , we completed a private placement of$500,000 in cash of our debt securities and inJune 2021 we completed an additional private placement of$500,000 in cash of our debt securities. Based on our current expected level of operating expenditures and current cash balance as of the date of this report, we expect to be able to fund our operations into the second quarter of 2022. This period could be shortened if there are any significant increases in spending that were not anticipated or other unforeseen events. We anticipate raising additional cash through the private or public sales of equity or debt securities to continue to fund our operations and the development of our product candidates. There is no assurance that any such collaborative arrangement will be entered into or that financing will be available to us when needed in order to allow us to continue our operations, or if available, on terms acceptable to us. If we do not raise sufficient funds in a timely manner, we may be forced to curtail operations, delay or stop our ongoing pre-clinical studies and potential clinical trials, cease operations altogether, or file for bankruptcy. We currently do not have commitments for future funding from any source. Going Concern Our auditors' report on ourDecember 31, 2020 consolidated financial statements expressed an opinion that our capital resources as of the date of their Audit Report were not sufficient to sustain operations or complete our planned activities for the upcoming year unless we raised additional funds. Upon the cancellation of the Ridgeway license, we resumed preclinical development. Notwithstanding our recent financings in (i) January of 2021 whereby we raised$500,000 in cash and (ii)June 2021 whereby we raised$500,000 in cash, our current cash level raises substantial doubt about our ability to continue as a going concern. If we do not obtain additional funds, we may no longer be able to continue as a going concern and will cease operation which means that our shareholders will lose their entire investment
Critical Accounting Policies and Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted inthe United States requires management to make significant judgments and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Management bases these significant judgments and estimates on historical experience and other assumptions it believes to be reasonable based upon information presently available. Actual results could differ from those estimates under different assumptions, judgments or conditions. There were no material changes to our critical accounting policies and use of estimates previously disclosed in our 2020 Annual Report on Form 10-K. 21
Recent Accounting Pronouncements
With the exception of those discussed below, there have not been any recent changes in accounting pronouncements and Accounting Standards Update (ASU) issued by theFinancial Accounting Standards Board (FASB) during the nine months endedSeptember 30, 2021 that are of significance or potential significance
to the Company.
InDecember 2019 , the FASB issued ASU 2019-12, "Simplifying the Accounting for Income Taxes." This guidance, among other provisions, eliminates certain exceptions to existing guidance related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. This guidance also requires an entity to reflect the effect of an enacted change in tax laws or rates in its effective income tax rate in the first interim period that includes the enactment date of the new legislation, aligning the timing of recognition of the effects from enacted tax law changes on the effective income tax rate with the effects on deferred income tax assets and liabilities. Under existing guidance, an entity recognizes the effects of the enacted tax law change on the effective income tax rate in the period that includes the effective date of the tax law. ASU 2019-12 is effective for interim and annual periods beginning afterDecember 15, 2020 , with early adoption permitted. The adoption of this standard did not have a material impact on the Company's consolidated financial statements. Result of Operations
Three Months Ended
Our results of operations have varied significantly from year to year and quarter to quarter and may vary significantly in the future. We did not have revenue during the three months endedSeptember 30, 2021 and 2020, and we do not anticipate generating any revenues during 2021. Net income for the three months endingSeptember 30, 2021 was approximately$6.1 million and net income for the three months endedSeptember 30, 2020 was approximately$2.1 million , resulting from the operational activities described below. Operating Expenses Operating expense totaled approximately$0.2 million and$0.1 million during the three months endedSeptember 30, 2021 and 2020, respectively. The increase in operating expenses is the result of the following factors. Three months ended Change in 2021 versus September 30 2020 2021 2020 $ % (amount in thousands) Operating Expenses Research and development$ 97 $ 11 $ 86 782 % General and administrative 118 126 (8 ) 6 % Total operating expenses$ 215 $ 137 $ 78 57 %
Research and Development Expenses
Research and development expenses totaled approximately
Our current research and development expenses currently consist primarily of consulting fees and development expense related to development of the adenosine A2R antagonists and preparation for an IND filing. 22 General and Administrative
General and administrative expenses totaled approximately$0.1 million and$0.1 million for the three months endedSeptember 30, 2021 and 2020, respectively. The decrease of approximately$0.01 million , or 6%, for the three months endedSeptember 30, 2021 compared to the same period in 2020, was primarily due to decreased director compensation.
Our general and administrative expenses currently consist primarily of expenditures related to legal, accounting and tax, other professional services, and general operating expenses.
Other Income (Expense) Other income (expense) totaled approximately$6.3 million of income and$2.2 million of income for the three months endedSeptember 30, 2021 and 2020, respectively. Three Months Ended Change in 2021 Versus September 30, 2020 2021 2020 $ % (amount in thousands) Gain (loss) on change in fair value of derivative liability$ 6,660 $ 2,024 $ 4,636 229 % Gain (loss) on conversion of debt (48 ) 240 (288 ) 120 % Interest (expense), net (272 ) (21 ) (251 ) 1,195 % Total other (expense)$ 6,340 $ 2,243 $ 4,097 183 %
Gain (loss) on change in fair value of derivative liability
As a result of a change in the fair value of our derivative liability, we realized gain of$6.7 million and$2.0 million during the three months endedSeptember 30, 2021 and 2020, respectively. The change in the fair value of our derivative liability was the result of our convertible debentures and notes issued inSeptember 2017 ,October 2020 ,January 2021 andJune 2021 , where we issued convertible notes with variable conversion rates, and to the issuance of our Series F preferred stock inOctober 2020 , which is convertible into a variable number of shares of common stock. Refer to Note 6 in our unaudited condensed consolidated financial statements for further discussion on our derivative liability. Gain on conversion of debt
There was a loss on conversion of debentures of approximately$0.05 million during the three months endedSeptember 30, 2021 , with gain of approximately$0.2 million during the three months endedSeptember 30, 2020 . Gain on conversion of debt results from the difference between the fair value of common stock issued upon conversion and the carrying amount of the debt converted.
23 Interest income (expense) We had net interest expense of$0.3 million in the three months endedSeptember 30, 2021 compared to expense of$0.02 million for the three months endedSeptember 30, 2020 . The increase of$0.3 million was attributable an increase in the cost associated with derivative instruments issued with a value in excess of proceeds received.
Nine Months Ended
Our results of operations have varied significantly from year to year and quarter to quarter and may vary significantly in the future. We did not have revenue during the nine months endedSeptember 30, 2021 and 2020, and we do not anticipate generating any revenues during 2021. Net income for the nine months endedSeptember 30, 2021 was approximately$2.6 million and net income for the nine months endedSeptember 30, 2020 was approximately$0.2 million , resulting from the operational activities described below. Operating Expenses Operating expense totaled approximately$0.6 million and$0.4 million during the nine months endedSeptember 30, 2021 and 2020, respectively. The increase in operating expenses is the result of the following factors. Nine months ended Change in 2021 versus September 30 2020 2021 2020 $ % (amount in thousands) Operating Expenses Research and development$ 190 $ 33 $ 157 476 % General and administrative 371 344 27 8 % Total operating expenses$ 561 $ 377 $ 184 49 %
Research and Development Expenses
Research and development expenses totaled approximately
Our current research and development expenses currently consist primarily of consulting fees and development expense related to development of the adenosine A2R antagonists and preparation for an IND filing. General and Administrative
General and administrative expenses totaled approximately$0.4 million and$0.3 million for the nine months endedSeptember 30, 2021 and 2020, respectively. The increase of approximately$0.03 million , or 8%, for the nine months endedSeptember 30, 2021 compared to the same period in 2020, was primarily due to increased professional fees partially offset by a reduction in director compensation.
Our general and administrative expenses currently consist primarily of expenditures related to legal, accounting and tax, other professional services, and general operating expenses.
Other Income (Expense)
Other income (expense) totaled approximately
Nine Months Ended Change in 2021 Versus
September 30, 2020
2021 2020 $ %
(amount in thousands)
Loss on change in fair value of
derivative liability $ 3,001 $ 353 $ 2,648 750 %
Gain on conversion of debt 1,130 398 732 184 %
Interest (expense), net (924 ) (169 ) (755 ) 447 %
Total other (expense) $ 3,207 $ 582 $ 2,625 451 % 24
Gain (loss) on change in fair value of derivative liability
As a result of a change in the fair value of our derivative liability, we realized income of$3.0 million and$0.4 million during the nine months endedSeptember 30, 2021 and 2020, respectively. The change in the fair value of our derivative liability was the result of our convertible debentures and notes issued inSeptember 2017 ,July 2018 ,December 2018 ,July 2019 ,October 2019 ,November 2019 ,March 2020 ,October 2020 ,January 2021 andJune 2021 , where we issued convertible notes with variable conversion rates, and to the issuance of our Series F preferred stock inOctober 2020 , which is convertible into a variable number of shares of common stock. Refer to Note 6 in our unaudited condensed consolidated financial statements for further discussion on our derivative liability. Gain on conversion of debt
There was a gain on conversion of debentures of approximately$1.1 million during the nine months endedSeptember 30, 2021 , compared to a gain of$0.4 million during the nine months endedSeptember 30, 2020 . Gain on conversion of debt results from the difference between the fair value of common stock issued upon conversion and the carrying amount of the debt converted. Interest income (expense) We had net interest expense of$0.9 million in the nine months endedSeptember 30, 2021 compared to expense of$0.2 million for the nine months endedSeptember 30, 2020 . The increase of$0.8 million was attributable an increase in the cost associated with derivative instruments issued with a value in excess of proceeds received.
Liquidity and Capital Resources
We have incurred losses since our inception in 2003 as a result of significant expenditures on operations, research and development and the lack of any approved products to generate revenue. We have an accumulated deficit of$64.3 million as ofSeptember 30, 2021 and anticipate that we will continue to incur additional losses for the foreseeable future. To date, we have funded our operations through the private sale of our equity securities, convertible debentures, and exercise of options and warrants, resulting in gross proceeds of approximately$39.1 million . Cash atSeptember 30, 2021 was approximately$995,000 . Our auditors' report on ourDecember 31, 2020 financial statements expressed an opinion that our capital resources as of the date of their audit report were not sufficient to sustain operations or complete our planned activities for the upcoming year unless we raised additional funds. Based on our current level of expected operating expenditures, we expect to be able to fund our operations into second quarter of 2022. This assumes that we spend minimally on general operations and only continue conducting our ongoing pre-clinical studies, and that we do not encounter any unexpected events or other circumstances that could shorten this time period. If we do not obtain additional funds by such time, we may no longer be able to continue as a going concern and will cease operation which means that our shareholders will lose their entire investment. We are actively seeking sources of financing to fund our continued operations and research and development programs. To raise additional capital, we may sell equity or debt securities, or enter into collaborative, strategic and/or licensing transactions. There can be no assurance that we will be able to complete any financing transaction in a timely manner or on acceptable terms or otherwise. If we are not able to raise additional cash, we may be forced to further delay, curtail, or cease development of our product candidates, or
cease
operations altogether.
25
Nine months ended Change in 2021 versus
September 30, 2020
2021 2020 $ %
(amount in thousands)
Cash at beginning of period $ 404 $ 23 $ 381 1,657 %
Net cash used in operating activities (409 ) (245 ) (164 ) 67 %
Net cash provided by investing activities - - - - %
Net cash provided by financing activities 1,000 255 745 292 %
Cash and restricted cash at end of period $ 995 $ 33 $ 962 2,915 % Cash totaled approximately$1.0 million and$0.03 million as ofSeptember 30, 2021 and 2020, respectively. The increase of approximately$1.0 million atSeptember 30, 2021 compared to the same period in 2020 was primarily attributable to cash available from current and prior year private placements offset by an increase in cash used in operations.
Net cash used in operating activities was approximately$0.4 million and$0.2 million for the nine months endedSeptember 30, 2021 and 2020, respectively. Cash used for operations increased by approximately$0.2 million , or 67%, during the nine months endedSeptember 30, 2021 , compared to the same period in 2020. The increase in cash used was primarily attributable to an increase in our net loss (after adjusting for noncash items) of approximately$0.2 million .
Net Cash Provided by Investing Activities
There was no cash provided by or used in investing activities for the nine
months ended
Net Cash Provided by Financing Activities
There was$1,000,000 cash provided by financing activities for the nine months endedSeptember 30, 2021 , compared to$255,000 cash provided by financing activities for the nine months endedSeptember 30, 2020 . In 2021, we received proceeds of$1,000,000 from the sale of convertible debentures and in 2020 we received proceeds of$250,000 from the sale of convertible debentures and$5,000 from the sale of preferred stock.
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