REBUS HOLDINGS, INC. 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 annual report. The following discussion should be read in conjunction with our financial statements and related notes thereto included elsewhere in this annual report.
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 remainder of 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 year
ended
? Liquidity and Capital Resources - Liquidity discussion of our financial
condition and potential sources of liquidity.
Company Overview Business
We are 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.
Adenosine Receptor Modulators
The adenosine receptor modulators include A2A, 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 the direct effects with
our drug candidates on certain types of cancer cells.
27
Pursuant to our recent termination of license withRidgeway Therapeutics, Inc. , 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: (i) further characterization of the anti-cancer activity of our unique pipeline delivery platform containing A2A, 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. 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.
Recent Developments
? Effective
and (ii) a holding company reorganization whereby we changed our name to Rebus
? On
executive officer and principal accounting officer and (ii) a member of the
Board of Directors.
? On
non-interest bearing senior convertible debentures in exchange for
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 ofDecember 31, 2022 , we had an accumulated deficit of approximately$65.3 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 atDecember 31, 2022 were approximately$5,000 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 first quarter of 2023. 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. 28 Going Concern Our auditors' report on ourDecember 31, 2022 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. 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.
Recent Accounting Pronouncements
There have not been any recent changes in accounting pronouncements and
Accounting Standards Update (ASU) issued by the
Results of Operations
Year 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 years endingDecember 31, 2022 and 2021. We do not anticipate generating any revenues during 2023. Net loss for 2022 was approximately$1.0 million and net income for 2021 was approximately$2.7 million , resulting from the operational activities described below. Operating Expenses Operating expense totaled$0.7 million and$1.0 million during 2022 and 2021, respectively. The decrease in operating expenses is the result of the following factors. Year Ended Change in 2022 December 31, Versus 2021 2022 2021 $ % (amount in thousands) Operating Expenses Research and development$ 239 $ 494 $ (255 ) (52 )% General and administrative 425 528 (103 ) (20 )% Total operating expense$ 664 $ 1,022 $ (358 ) (35 )% 29 Research and Development
Research and development expenses totaled
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$0.4 million and$0.5 million during 2022 and 2021, respectively. The decrease of approximately$0.1 million , or 20%, in 2022 compared to 2021 was primarily due to decreased professional fees, director compensation and corporate communications.
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
Year Ended Change in 2022
December 31, Versus 2021
2022 2021 $ %
(amount in thousands)
Gain (loss) on change in fair value of
derivative liability $ (263 ) $ 3,687 $ (3,950 ) (107 )%
Gain on conversion of debt (24 ) 1,116 (1,140 ) (102 )%
Interest (expense), net (69 ) (1,083 ) 1,014 94 %
Total other income (expense) $ (356 ) $ 3,720 $ (4,076 ) (110 )%
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 loss of$0.3 million and gain of$3.7 million during the years endedDecember 31, 2022 and 2021, 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 7 in our Consolidated Financial Statements for further discussion on our derivative liability. Gain on conversion of debt There was a loss on conversion of debt of approximately$0.02 million during the year endedDecember 31, 2022 , with a gain of approximately$1.1 million during the year endedDecember 31, 2021 . 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$0.1 million net interest expense in 2022, compared to$1.1 million of expense in 2021. The decrease of$1.0 million was attributable to a decrease in the cost associated with derivative instruments issued with a value in excess of proceeds received. 30
Liquidity and Capital Resources
We have incurred losses since our inception in 2003 as a result of significant expenditures for operations and research and development and the lack of any approved products to generate revenue. We have an accumulated deficit of approximately$65.3 million as ofDecember 31, 2022 and anticipate that we will continue to incur additional losses for the foreseeable future. ThroughDecember 31, 2022 , we have funded our operations through the private sale of our equity securities, convertible debt and exercise of options and warrants, resulting in gross proceeds of$39.1 million . Cash atDecember 31, 2022 was approximately$5,000 . Our auditors' report on ourDecember 31, 2022 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 the first quarter of 2023. This assumes that we spend minimally on general operations and only continue conducting our ongoing clinical trials, 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.
Year Ended
December 31,
2022 2021
(amounts in thousands)
Cash at beginning of year $ 711 $ 404 Net cash used in operating activities (706 ) (693 ) Net cash provided by investing activities - - Net cash provided by financing activities - 1,000 Cash at end of year$ 5 $ 711
Net cash used in operating activities was$0.7 million and$0.7 million during 2022 and 2021, respectively. A decrease in net loss (after adjusting for noncash items) of approximately$0.4 million was offset by an increase in changes in accounts payable and accrued expense of approximately$0.4 million .
Cash provided by investing activities was
Net Cash Provided by Financing Activities
There was no cash provided by financing activities for the year ended
31
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