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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED September 30, 2022 

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ______________ TO ____________.

Commission file number 033-80623

Achieve Life Sciences, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware

 

95-4343413

(State or Other Jurisdiction of

 

(I.R.S. Employer

Incorporation or Organization)

 

Identification Number)

1040 West Georgia Street, Suite 1030, Vancouver, British Columbia, Canada V6E 4H1

(Address of Principal Executive Offices)

(604) 210-2217

(Registrant’s telephone number, including area code)

 

    Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol

Name of exchange on which registered

 

Common Stock, par value $0.001 per share

ACHV

The NASDAQ Capital Market

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes     No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes     No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

Smaller reporting company  

 

 

 

 

Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes     No  

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of November 10, 2022, there were 9,710,747 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.

 


 

Achieve Life Sciences, Inc.

Index to Form 10-Q

 

 

Page
Number

 

 

Part I.   Financial Information

3

 

 

 

Item 1

Consolidated Financial Statements (unaudited)

3

 

 

 

 

Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021

3

 

 

 

 

Consolidated Statements of Loss and Comprehensive Loss (unaudited) for the three and nine months ended September 30, 2022 and September 30, 2021

4

 

 

 

 

Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2022 and September 30, 2021

5

 

 

 

 

Consolidated Statements of Stockholders’ Equity (unaudited) for the nine months ended September 30, 2022 and September 30, 2021

6

 

 

 

 

Notes to Consolidated Financial Statements (unaudited)

8

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

 

 

 

 

 

 

Item 4.

Controls and Procedures

30

 

 

Part II.   Other Information

32

 

 

 

Item 1A.

Risk Factors

33

 

 

 

Item 6.

Exhibits

62

 

 

Items 2, 3 and 4 are not applicable and therefore have been omitted.

 

 

 

Signatures

63

2


 

PART I. FINANCIAL INFORMATION

Item 1.

Consolidated Financial Statements

Achieve Life Sciences, Inc.

Consolidated Balance Sheets

(Unaudited)

(In thousands, except per share and share amounts) 

 

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents [note 6]

 

 

18,197

 

 

$

43,022

 

Grant receivable [note 3]

 

 

145

 

 

 

153

 

Prepaid expenses and other assets

 

 

2,615

 

 

 

1,419

 

Total current assets

 

 

20,957

 

 

 

44,594

 

Right-of-use assets [note 9]

 

 

18

 

 

 

64

 

Other assets and restricted cash [note 6]

 

 

239

 

 

 

183

 

License agreement [note 4 and 5]

 

 

1,475

 

 

 

1,641

 

Goodwill [note 5]

 

 

1,034

 

 

 

1,034

 

Total assets

 

$

23,723

 

 

$

47,516

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

412

 

 

$

841

 

Accrued liabilities other

 

 

539

 

 

 

348

 

Accrued clinical liabilities

 

 

4,552

 

 

 

1,352

 

Accrued compensation

 

 

1,390

 

 

 

1,940

 

Current portion of long-term obligations [note 9]

 

 

23

 

 

 

69

 

Total current liabilities

 

 

6,916

 

 

 

4,550

 

Convertible debt [note 7]

 

 

15,763

 

 

 

14,920

 

Long-term obligations [note 9]

 

 

 

 

 

4

 

Total liabilities

 

 

22,679

 

 

 

19,474

 

Commitments and contingencies [note 9]

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Series A convertible preferred stock, $0.001 par value, 9,158 shares designated, zero

issued and outstanding at September 30, 2022 and zero issued and outstanding at December 31, 2021

 

 

 

 

 

 

Series B convertible preferred stock, $0.001 par value, 6,256 shares designated, zero

issued and outstanding at September 30, 2022 and zero issued and outstanding at December 31, 2021

 

 

 

 

 

 

Common stock, $0.001 par value, 150,000,000 shares authorized, 9,710,747 issued and outstanding at September 30, 2022 and 9,453,542 issued and outstanding at December 31, 2021

 

 

79

 

 

 

79

 

Additional paid-in capital

 

 

125,665

 

 

 

121,545

 

Accumulated deficit

 

 

(124,704

)

 

 

(93,586

)

Accumulated other comprehensive income

 

 

4

 

 

 

4

 

Total stockholders' equity

 

 

1,044

 

 

 

28,042

 

Total liabilities and stockholders' equity

 

$

23,723

 

 

$

47,516

 

Going concern [note 1]

 

 

 

 

 

 

 

 

 

See accompanying notes.

3


Achieve Life Sciences, Inc.

Consolidated Statements of Loss and Comprehensive Loss

(Unaudited)

(In thousands, except per share and share amounts)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

9,869

 

 

 

4,591

 

 

 

21,464

 

 

 

19,460

 

General and administrative

 

 

2,770

 

 

 

2,102

 

 

 

8,474

 

 

 

6,519

 

Total operating expenses

 

 

12,639

 

 

 

6,693

 

 

 

29,938

 

 

 

25,979

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

73

 

 

 

3

 

 

 

81

 

 

 

14

 

Interest expense [note 7]

 

 

(481

)

 

 

 

 

 

(1,242

)

 

 

 

Other income (expense)

 

 

(30

)

 

 

(1

)

 

 

(19

)

 

 

(36

)

Total other (expense)

 

 

(438

)

 

 

2

 

 

 

(1,180

)

 

 

(22

)

Net loss and comprehensive loss

 

$

(13,077

)

 

$

(6,691

)

 

 

(31,118

)

 

 

(26,001

)

Basic and diluted net loss per common share [note 8[d]]

 

$

(1.35

)

 

$

(0.71

)

 

$

(3.24

)

 

$

(3.39

)

Weighted average shares used in computation of basic and diluted net loss per common share [note 8[d]]

 

 

9,693,788

 

 

 

9,452,238

 

 

 

9,600,947

 

 

 

7,670,383

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4


 

Achieve Life Sciences, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2022

 

 

2021

 

Operating Activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(31,118

)

 

$

(26,001

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization [note 4]

 

 

171

 

 

 

188

 

Stock-based compensation [note 8[c], note 8[e], note 8[f] and note 8[g]]

 

 

2,492

 

 

 

1,693

 

Shares issued as settlement with trade vendor

 

 

26

 

 

 

41

 

Accrued interest on SVB convertible debt [note 7]

 

 

863

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Grant receivable [note 3]

 

 

8

 

 

 

(151

)

Prepaid expenses and other assets

 

 

(1,256

)

 

 

(146

)

Accounts payable

 

 

(429

)

 

 

483

 

Accrued liabilities other

 

 

191

 

 

 

(390

)

Accrued clinical liabilities

 

 

3,200

 

 

 

304

 

Accrued compensation

 

 

(550

)

 

 

(233

)

Lease obligation [note 9]

 

 

(4

)

 

 

(10

)

Net cash used in operating activities

 

 

(26,406

)

 

 

(24,222

)

Financing Activities:

 

 

 

 

 

 

 

 

Proceeds from exercise of warrants

 

 

24

 

 

 

339

 

Proceeds from ATM, net of issuance costs [note 8[b]]

 

 

1,499

 

 

 

 

Financing costs relating to convertible debt with SVB [note 7]

 

 

(20

)

 

 

 

Proceeds from the May 2021 public offering, net of issuance costs

 

 

 

 

 

21,343

 

Proceeds from employee stock purchase plan [note 8[g]]

 

 

126

 

 

 

 

Taxes paid related to net share settlement of equity awards

 

 

(47

)

 

 

 

Net cash provided by financing activities

 

 

1,582

 

 

 

21,682

 

Effect of exchange rate changes on cash

 

 

(1

)

 

 

(1

)

Net decrease in cash, cash equivalents and restricted cash

 

 

(24,825

)

 

 

(2,541

)

Cash, cash equivalents and restricted cash at beginning of the period

 

 

43,072

 

 

 

35,903

 

Cash, cash equivalents and restricted cash at end of the period

 

$

18,247

 

 

$

33,362

 

 

See accompanying notes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5


 

 

Achieve Life Sciences, Inc.

 

Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands, except share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total,

 

 

 

Common Stock

 

 

Preferred Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balance, December 31, 2021

 

 

9,453,542

 

 

$

79

 

 

 

 

 

$

 

 

$

121,545

 

 

$

4

 

 

$

(93,586

)

 

$

28,042

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

823

 

 

 

 

 

 

 

 

 

823

 

Shares issued on exercise of warrants

 

 

3,709

 

 

 

 

 

 

 

 

 

 

 

 

24

 

 

 

 

 

 

 

 

 

24

 

Shares issued from purchase agreement with Virtu

 

 

12,742

 

 

 

 

 

 

 

 

 

 

 

 

91

 

 

 

 

 

 

 

 

 

91

 

Shares issued as settlement with trade vendor

 

 

3,584

 

 

 

 

 

 

 

 

 

 

 

 

26

 

 

 

 

 

 

 

 

 

26

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,573

)

 

 

(7,573

)

Balance, March 31, 2022

 

 

9,473,577

 

 

$

79

 

 

 

 

 

$

 

 

$

122,509

 

 

$

4

 

 

$

(101,159

)

 

$

21,433

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

840

 

 

 

 

 

 

 

 

 

840

 

Shares issued from purchase agreement with Virtu

 

 

187,258

 

 

 

 

 

 

 

 

 

 

 

 

1,408

 

 

 

 

 

 

 

 

 

1,408

 

Restricted stock unit settlements

 

 

26,625

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock unit settlements withheld and retired to treasury

 

 

(5,605

)

 

 

 

 

 

 

 

 

 

 

 

(47

)

 

 

 

 

 

 

 

 

(47

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,468

)

 

 

(10,468

)

Balance, June 30, 2022

 

 

9,681,855

 

 

$

79

 

 

 

 

 

$

 

 

$

124,710

 

 

$

4

 

 

$

(111,627

)

 

$

13,166

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

829

 

 

 

 

 

 

 

 

 

829

 

Shares issued under employee share purchase plan

 

 

28,892

 

 

 

 

 

 

 

 

 

 

 

 

126

 

 

 

 

 

 

 

 

 

126

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,077

)

 

 

(13,077

)

Balance, September 30, 2022

 

 

9,710,747

 

 

$

79

 

 

 

 

 

$

 

 

$

125,665

 

 

$

4

 

 

$

(124,704

)

 

$

1,044

 

 

 

6


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total,

 

 

 

Common Stock

 

 

Preferred Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balance, December 31, 2020

 

 

6,111,735

 

 

$

76

 

 

 

 

 

$

 

 

$

97,640

 

 

$

4

 

 

$

(60,434

)

 

$

37,286

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

542

 

 

 

 

 

 

 

 

 

542

 

Shares issued on exercise of warrants

 

 

35,217

 

 

 

 

 

 

 

 

 

 

 

 

236

 

 

 

 

 

 

 

 

 

236

 

Shares issued as settlement with trade vendor

 

 

2,965

 

 

 

 

 

 

 

 

 

 

 

 

23

 

 

 

 

 

 

 

 

 

23

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,999

)

 

 

(7,999

)

Balance, March 31, 2021

 

 

6,149,917

 

 

$

76

 

 

 

 

 

$

 

 

$

98,441

 

 

$

4

 

 

$

(68,433

)

 

$

30,088

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

621

 

 

 

 

 

 

 

 

 

621

 

Shares issued on exercise of warrants

 

 

14,443

 

 

 

 

 

 

 

 

 

 

 

 

95

 

 

 

 

 

 

 

 

 

95

 

Shares issued - May 2021 public offering

 

 

3,285,714

 

 

 

3

 

 

 

 

 

 

 

 

 

21,340

 

 

 

 

 

 

 

 

 

21,343

 

Shares issued as settlement with trade vendor

 

 

2,149

 

 

 

 

 

 

 

 

 

 

 

 

18

 

 

 

 

 

 

 

 

 

18

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,311

)

 

 

(11,311

)

Balance, June 30, 2021

 

 

9,452,223

 

 

$

79

 

 

 

 

 

$

 

 

$

120,515

 

 

$

4

 

 

$

(79,744

)

 

$

40,854

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

530

 

 

 

 

 

 

 

 

 

530

 

Shares issued on exercise of warrants

 

 

1,174

 

 

 

 

 

 

 

 

 

 

 

 

8

 

 

 

 

 

 

 

 

 

8

 

Restricted stock unit settlements

 

 

145

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

(1

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,691

)

 

 

(6,691

)

Balance, September 30, 2021

 

 

9,453,542

 

 

$

79

 

 

 

 

 

$

 

 

$

121,052

 

 

$

4

 

 

$

(86,435

)

 

$

34,700

 

 

See accompanying notes.

 

7


 

Achieve Life Sciences, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

 

 

1. NATURE OF BUSINESS, BASIS OF PRESENTATION AND GOING CONCERN UNCERTAINTY

Achieve Life Sciences, Inc. (referred to as “Achieve,” “we,” “us,” or “our”) is a clinical-stage pharmaceutical company committed to the global development and commercialization of cytisinicline for smoking cessation and nicotine addiction. We were incorporated in the state of Delaware, and operate out of Vancouver, British Columbia and Seattle, Washington.

The unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required to be presented for complete financial statements. The accompanying unaudited consolidated financial statements reflect all adjustments (consisting only of normal recurring items) which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. The accompanying consolidated Balance Sheet at December 31, 2021 has been derived from the audited consolidated financial statements included in our Annual Report on Form 10-K for the year then ended. The unaudited consolidated financial statements and related disclosures have been prepared with the assumption that users of the interim financial information have read or have access to the audited consolidated financial statements for the preceding fiscal year. Accordingly, these financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2021 and filed with the U.S. Securities and Exchange Commission, or the SEC, on March 10, 2022.

The consolidated financial statements include the accounts of Achieve and our wholly owned subsidiaries, Achieve Life Sciences Technologies Inc., Achieve Life Science, Inc., Extab Corporation, and Achieve Pharma UK Limited. All intercompany balances and transactions have been eliminated.

 

Going Concern Uncertainty

 

The accompanying financial statements have been prepared assuming we will continue to operate as a going concern, which contemplates the realization of assets and liabilities and commitments in the normal course of business.

We have historically experienced recurring losses from operations and have incurred an accumulated deficit of $124.7 million through September 30, 2022. As of September 30, 2022, we had cash and cash equivalents of $18.2 million and a positive working capital balance of $14.0 million. For the nine months ended September 30, 2022, we incurred a net loss of $31.1 million and net cash used in operating activities was $26.4 million. 

Substantial doubt exists as to our ability to continue as a going concern. Our ability to continue as a going concern is subject to material uncertainty and dependent on our ability to obtain additional financing. There is no assurance that we will obtain financing from other sources. We have historically financed our operations through equity and debt financings. Without additional funds, we may be forced to delay, scale back or eliminate some of our research and development, or R&D, activities or other operations and potentially delay product development in an effort to provide sufficient funds to continue our operations. If any of these events occurs, our ability to achieve our development and commercialization goals would be adversely affected.

Our current resources are insufficient to fund our planned operations for the next twelve months. We will continue to require substantial additional capital to continue our clinical development activities. Accordingly, we will need to raise substantial additional capital to continue to fund our operations from the sale of our securities, partnering arrangements or other financing transactions in order to finance the commercialization of our product candidate. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our clinical development efforts. The uncertainty with respect to our operations and the market generally due to the COVID-19 pandemic and increasing interest rates and inflation may also make it challenging to raise additional capital on favorable terms, if at all. Failure to raise capital as and when needed, on favorable terms or at all, will have a negative impact on our financial condition and our ability to develop our product candidate. We expect our R&D expenses to substantially increase in connection with our ongoing activities, particularly as we advance our product candidate in clinical development.

The consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that might be necessary should we be unable to continue as a going concern. Such adjustments could be material.

 

 

2. ACCOUNTING POLICIES

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures. We have discussed those estimates that we believe are critical and require the use of

8


complex judgment in their application in our audited financial statements for the year ended December 31, 2021 in our Annual Report on Form 10-K filed with the SEC, on March 10, 2022. Since December 31, 2021, there have been no material changes to our critical accounting policies or the methodologies or assumptions we apply under them.

 

3. GOVERNMENT GRANT

 

In July 2021, we announced that we were awarded a grant from the National Institute on Drug Abuse, or NIDA, of the National Institutes of Health, or NIH, to evaluate the use of cytisinicline as a treatment for cessation of nicotine e-cigarette use. This initial grant award, in the amount of $0.3 million, commenced on August 1, 2021, and was utilized to complete critical regulatory and clinical operational activities, such as protocol finalization, clinical trial site identification, drug packaging, and submission of a new Investigational New Drug Application, or IND, to the U.S. Food and Drug Administration, or FDA, for investigating cytisinicline in nicotine e-cigarette users. In November 2021, we announced that the FDA had completed their review and accepted the IND application to investigate cytisinicline as a cessation treatment in this population. In June 2022, following NIH review of completed milestones, we announced that we were awarded the next grant funding from the NIDA in the amount of approximately $2.5 million, which we have used to conduct the ORCA-V1 Phase 2 clinical trial.

 

In June 2022, we announced the initiation of the ORCA-V1 Phase 2 clinical trial. ORCA-V1 will evaluate the efficacy and safety of 3 mg cytisinicline dosed three times daily compared to placebo in approximately 150 adult e-cigarette users at five clinical trial locations in the United States. Participants will be randomized to receive cytisinicline or placebo for 12 weeks in combination with standard cessation behavioral support.

 

The full grant award of $2.8 million is expected to cover approximately half of the total ORCA-V1 clinical study costs. The Primary Investigators for the grant are our Chief Medical Officer, Dr. Cindy Jacobs, and Dr. Nancy Rigotti, Professor of Medicine at Harvard Medical School and Director, Tobacco Research and Treatment Center, Massachusetts General Hospital.

For the nine months ended September 30, 2022, we incurred $0.7 million in qualifying R&D expenditures under the NIDA/NIH grant, which has been recorded as a reduction in R&D expense. As of September 30, 2022, we had $0.1 million in grant receivable related to the NIDA/NIH grant.

 

4. INTANGIBLES

All of our intangible assets are subject to amortization and are amortized using the straight-line method over their estimated useful life.

We acquired license and supply agreements in relation to cytisinicline upon the acquisition of Extab Corporation, or Extab, on May 18, 2015. The agreements were determined to have a fair value of $3.1 million with an estimated useful life of 14 years.

The components of intangible assets were as follows:

 

 

 

September 30, 2022

 

 

December 31, 2021

 

 

 

Gross Carrying

 

 

Accumulated

 

 

Net Carrying

 

 

Gross Carrying

 

 

Accumulated

 

 

Net Carrying

 

 

 

Value

 

 

Amortization

 

 

Value

 

 

Value

 

 

Amortization

 

 

Value

 

License Agreements

 

$

3,117

 

 

$

(1,642

)

 

$

1,475

 

 

$

3,117

 

 

$

(1,476

)

 

$

1,641

 

 

For the three and nine months ended September 30, 2022, we recorded license agreement amortization expense of $0.1 million and $0.2 million, respectively. For the three and nine months ended September 30, 2021, we recorded license agreement amortization expense of $0.1 million and $0.2 million, respectively. The following table outlines the estimated future amortization expense related to intangible assets held as of September 30, 2022:

 

Year Ending December 31,

 

 

 

 

2022

 

 

56

 

2023

 

 

223

 

2024

 

 

223

 

Thereafter

 

 

973

 

Total

 

$

1,475

 

 

9


 

We evaluate the carrying amount of intangible assets periodically by taking into account events or circumstances that may warrant revised estimates of useful life or that indicate the asset may be impaired. We conducted an analysis of potential impairment indicators for long lived assets, including the license and supply agreements for the active pharmaceutical ingredient cytisinicline, and concluded that there were no indicators of impairment identified as of September 30, 2022.

 

 

5. LICENSE AGREEMENTS

Sopharma License and Supply Agreements

We are party to a license agreement, or the Sopharma License Agreement, and a supply agreement, or the Sopharma Supply Agreement, with Sopharma, AD, or Sopharma. Pursuant to the Sopharma License Agreement, we were granted access to all available manufacturing, efficacy and safety data related to cytisinicline, as well as a granted patent in several European countries related to new oral dosage forms of cytisinicline providing enhanced stability. Additional rights granted under the Sopharma License Agreement include the exclusive use of, and the right to sublicense, certain cytisinicline trademarks in all territories described in the Sopharma License Agreement. Under the Sopharma License Agreement, we agreed to pay a nonrefundable license fee. In addition, we agreed to make certain royalty payments equal to a mid-single digit percentage of all net sales of cytisinicline products in our territory during the term of the Sopharma License Agreement, including those sold by a third party pursuant to any sublicense which may be granted by us. To date, any amounts paid to Sopharma pursuant to the Sopharma License Agreement have been immaterial.

University of Bristol License Agreement

In July 2016, we entered into a license agreement with the University of Bristol, or the University of Bristol License Agreement. Under the University of Bristol License Agreement, we received exclusive and nonexclusive licenses from the University of Bristol to certain patent and technology rights resulting from research activities into cytisinicline and its derivatives, including a number of patent applications related to novel approaches to cytisinicline binding at the nicotinic receptor level.

In consideration of rights granted by the University of Bristol, we paid a nominal license fee and agreed to pay amounts of up to $3.2 million, in the aggregate, tied to a financing milestone and to specific clinical development and commercialization milestones resulting from activities covered by the University of Bristol License Agreement. Additionally, if we successfully commercialize any product candidates subject to the University of Bristol License Agreement, we are responsible for royalty payments in the low-single digits and payments up to a percentage in the mid-teens of any sublicense income, subject to specified exceptions, based upon net sales of such licensed products.

On January 22, 2018, we and the University of Bristol entered into an amendment to the University of Bristol License Agreement. Pursuant to the amended University of Bristol License Agreement, we re