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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, 2023

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)

22722 29th Drive SE, Suite 100, Bothell, WA 98021

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 LLC

 

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 9, 2023 there were 21,165,760 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

5

 

 

 

Item 1

Consolidated Financial Statements (unaudited)

5

 

 

 

 

Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022

5

 

 

 

 

Consolidated Statements of Loss and Comprehensive Loss (unaudited) for the three and nine months ended September 30, 2023 and September 30, 2022

6

 

 

 

 

Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2023 and September 30, 2022

7

 

 

 

 

Consolidated Statements of Stockholders’ Equity (unaudited) for the nine months ended September 30, 2023 and September 30, 2022

8

 

 

 

 

Notes to Consolidated Financial Statements (unaudited)

9

 

 

 

Item 2.

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

22

 

 

 

 

 

 

Item 4.

Controls and Procedures

33

 

 

Part II. Other Information

34

 

 

 

Item 1A.

Risk Factors

34

 

 

 

Item 6.

Exhibits

66

 

 

Items 2, 3, 4 and 5 are not applicable and therefore have been omitted.

 

 

 

Signatures

67

 

 

2


 

INFORMATION REGARDING FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve a number of risks and uncertainties. We caution readers that any forward-looking statement is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking statement. These statements are based on current expectations of future events. Such statements include, but are not limited to, statements about future financial and operating results, plans, objectives, expectations and intentions, costs and expenses, interest rates, outcome of contingencies, financial condition, results of operations, liquidity, business strategies, cost savings, objectives of management and other statements that are not historical facts. You can find many of these statements by looking for words like “believes,” “expects,” “anticipates,” “estimates,” “may,” “should,” “will,” “could,” “plan,” “intend” or similar expressions in this Quarterly Report on Form 10-Q or in documents incorporated by reference into this Quarterly Report on Form 10-Q. We intend that such forward-looking statements be subject to the safe harbors created thereby. Examples of these forward-looking statements include, but are not limited to:

our ability to raise additional capital as needed to fund our planned development and commercialization efforts and repay our existing debt;
progress and preliminary and future results of any clinical trials;
anticipated regulatory filings and U.S. Food and Drug Administration responses, recommendations, requirements or additional future clinical trials;
the performance of, and our ability to obtain sufficient supply of cytisinicline in a timely manner from, third-party suppliers and manufacturers;
timing and plans for the expansion of our focus to address other methods of nicotine addiction;
timing and amount of future contractual payments, product revenue and operating expenses;
market acceptance of our products and the estimated potential size of these markets; and
our expectations regarding the impact of the macroeconomic and geopolitical environment, including inflation, rising interest rates, increased volatility in the debt and equity markets, instability in the global banking system, global health crises and pandemics and geopolitical conflict, and their potentially material adverse impact on our business and the execution of our preclinical studies and clinical trials.

 

These forward-looking statements are based on the current beliefs and expectations of our management and are subject to significant risks and uncertainties. If underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results may differ materially from current expectations and projections. Factors that might cause such a difference include those discussed in Item 1A “Risk Factors,” as well as those discussed elsewhere in the Quarterly Report on Form 10-Q. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q or, in the case of documents referred to or incorporated by reference, the date of those documents.

All subsequent written or oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events, except as may be required under applicable U.S. securities law. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

 

Summary of Risk Factors

An investment in our common stock involves various risks, and prospective investors are urged to carefully consider the matters discussed in the section titled “Risk Factors” prior to making an investment in our common stock. These risks include, but are not limited to, the following:

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 success at raising additional capital sufficient to meet our obligations on a timely basis. If we fail to obtain additional financing when needed, we may be unable to complete the development, regulatory approval and commercialization of our product candidate.

3


 

We have incurred substantial debt, which could impair our flexibility and access to capital and adversely affect our financial position, and our business would be materially adversely affected if we are unable to service our debt obligations.
We have incurred losses since inception, have a limited operating history on which to assess our business and anticipate that we will continue to incur losses for the foreseeable future.
We have never generated any revenue from product sales and may never be profitable.
We are dependent upon a single company for the manufacture and supply of cytisinicline.
Cytisinicline is currently our sole product candidate and there is no guarantee that we will be able to successfully develop and commercialize cytisinicline.
We plan to submit an NDA to the FDA for approval of cytisinicline as an aid in treating nicotine dependence for smoking cessation, based largely on data from our recently completed Phase 3 ORCA-2 and ORCA-3 clinical trials; however, there can be no assurance that the FDA will grant marketing approval of cytisinicline without additional clinical or nonclinical studies.
The development of our product candidate is dependent upon securing sufficient quantities of cytisinicline from trees and other plants, which grow outside of the United States in a limited number of locations.
If we do not obtain the necessary regulatory approvals in the United States and/or other countries, we will not be able to sell cytisinicline.
Cytisinicline may cause undesirable side effects or have other properties that could delay or prevent regulatory approval, limit the commercial viability of an approved label, or result in significant negative consequences following marketing approval, if any.
It is difficult to evaluate our current business, predict our future prospects and forecast our financial performance and growth.
We expect to continue to rely on third parties to manufacture cytisinicline for use in clinical trials, and we intend to exclusively rely on Sopharma to produce and process cytisinicline, if approved, which may be impacted by the military conflict between Russia and Ukraine, including the possibility of expanded regional or global conflict and related economic sanctions.
Our commercialization of cytisinicline could be stopped, delayed or made less profitable if Sopharma fails to obtain approval of government regulators, fails to provide us with sufficient quantities of product, or fails to do so at acceptable quality levels or prices.
Sopharma may breach its supply agreement with us and sell cytisinicline into our territories or permit third parties to export cytisinicline into our territories and negatively affect our commercialization efforts of our products in our territories.
We face substantial competition, and our competitors may discover, develop or commercialize products faster or more successfully than us.
We may not be successful in obtaining or maintaining necessary rights to cytisinicline, product compounds and processes for our development pipeline through acquisitions and in-licenses.

4


 

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,

 

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents [note 6]

 

$

19,919

 

 

$

24,771

 

Grant receivable [note 3]

 

 

83

 

 

 

105

 

Prepaid expenses and other assets

 

 

1,895

 

 

 

2,454

 

Total current assets

 

 

21,897

 

 

 

27,330

 

Right-of-use assets [note 9]

 

 

80

 

 

 

66

 

Other assets and restricted cash [note 6]

 

 

74

 

 

 

123

 

License agreement [note 4 and note 5]

 

 

1,252

 

 

 

1,418

 

Goodwill [note 5]

 

 

1,034

 

 

 

1,034

 

Total assets

 

$

24,337

 

 

$

29,971

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

638

 

 

$

1,660

 

Accrued liabilities other

 

 

693

 

 

 

403

 

Accrued clinical liabilities

 

 

990

 

 

 

1,729

 

Accrued compensation

 

 

1,700

 

 

 

1,678

 

Current portion of long-term obligations [note 9]

 

 

61

 

 

 

58

 

Convertible debt [note 6 and note 7]

 

 

 

 

 

16,071

 

Total current liabilities

 

 

4,082

 

 

 

21,599

 

Convertible debt [note 6 and note 7]

 

 

16,195

 

 

 

 

Long-term obligations [note 9]

 

 

22

 

 

 

69

 

Total liabilities

 

 

20,299

 

 

 

21,668

 

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, 2023 and
zero issued and outstanding at December 31, 2022

 

 

 

 

 

 

Series B convertible preferred stock, $0.001 par value, 6,256 shares designated, zero
issued and outstanding at September 30, 2023 and
zero issued and outstanding at December 31, 2022

 

 

 

 

 

 

Common stock, $0.001 par value, 150,000,000 shares authorized, 21,165,760 issued and outstanding at September 30, 2023 and 17,897,029 issued and outstanding at December 31, 2022

 

 

90

 

 

 

87

 

Additional paid-in capital

 

 

164,219

 

 

 

144,148

 

Accumulated deficit

 

 

(160,275

)

 

 

(135,936

)

Accumulated other comprehensive income

 

 

4

 

 

 

4

 

Total stockholders' equity

 

 

4,038

 

 

 

8,303

 

Total liabilities and stockholders' equity

 

$

24,337

 

 

$

29,971

 

Going concern [note 1]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

5


 

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,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

3,581

 

 

 

9,869

 

 

 

13,700

 

 

 

21,464

 

General and administrative

 

 

2,991

 

 

 

2,770

 

 

 

9,164

 

 

 

8,474

 

Total operating expenses

 

 

6,572

 

 

 

12,639

 

 

 

22,864

 

 

 

29,938

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

262

 

 

 

73

 

 

 

617

 

 

 

81

 

Interest expense [note 7]

 

 

(781

)

 

 

(481

)

 

 

(2,066

)

 

 

(1,242

)

Other expense

 

 

(17

)

 

 

(30

)

 

 

(26

)

 

 

(19

)

Total other expense

 

 

(536

)

 

 

(438

)

 

 

(1,475

)

 

 

(1,180

)

Net loss and comprehensive loss

 

$

(7,108

)

 

$

(13,077

)

 

 

(24,339

)

 

 

(31,118

)

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

 

$

(0.34

)

 

$

(1.35

)

 

$

(1.26

)

 

$

(3.24

)

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

 

 

21,127,281

 

 

 

9,693,788

 

 

 

19,376,316

 

 

 

9,600,947

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

6


 

Achieve Life Sciences, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2023

 

 

2022

 

Operating Activities:

 

 

 

 

 

 

Net loss

 

$

(24,339

)

 

$

(31,118

)

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

 

 

 

 

 

 

Depreciation and amortization [note 4]

 

 

171

 

 

 

171

 

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

 

 

3,449

 

 

 

2,492

 

Shares issued as settlement with trade vendor

 

 

273

 

 

 

26

 

Accrued interest on SVB convertible debt [note 7]

 

 

910

 

 

 

863

 

Accretion of discount on modification of debt

 

 

268

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Grant receivable [note 3]

 

 

22

 

 

 

8

 

Prepaid expenses and other assets

 

 

618

 

 

 

(1,256

)

Accounts payable

 

 

(1,022

)

 

 

(429

)

Accrued liabilities other

 

 

310

 

 

 

171

 

Accrued clinical liabilities

 

 

(739

)

 

 

3,200

 

Accrued compensation

 

 

22

 

 

 

(550

)

Lease obligation [note 9]

 

 

(58

)

 

 

(4

)

Net cash used in operating activities

 

 

(20,115

)

 

 

(26,426

)

Financing Activities:

 

 

 

 

 

 

Proceeds from exercise of warrants

 

 

227

 

 

 

24

 

Proceeds from ATM, net of issuance costs

 

 

 

 

 

1,499

 

Financing costs relating to November 2022 private placement

 

 

(30

)

 

 

 

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

 

 

 

 

 

126

 

Taxes paid related to net share settlement of equity awards

 

 

(220

)

 

 

(47

)

Proceeds from May 2023 private placement, net of issuance costs

 

 

15,301

 

 

 

 

Net cash provided by financing activities

 

 

15,278

 

 

 

1,602

 

Investing Activities:

 

 

 

 

 

 

Purchase of property and equipment

 

 

(15

)

 

 

 

Net cash used in investing activities

 

 

(15

)

 

 

 

Effect of exchange rate changes on cash

 

 

 

 

 

(1

)

Net decrease in cash, cash equivalents and restricted cash

 

 

(4,852

)

 

 

(24,825

)

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

 

 

24,821

 

 

 

43,072

 

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

 

$

19,969

 

 

$

18,247

 

See accompanying notes.

 

7


 

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, 2022

 

 

17,897,029

 

 

$

87

 

 

 

 

 

$

 

 

$

144,148

 

 

$

4

 

 

$

(135,936

)

 

$

8,303

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,085

 

 

 

 

 

 

 

 

 

1,085

 

Shares issued on exercise of warrants

 

 

33,333

 

 

 

 

 

 

 

 

 

 

 

 

77

 

 

 

 

 

 

 

 

 

77

 

Financing costs relating to November 2022 private placement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(30

)

 

 

 

 

 

 

 

 

(30

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,992

)

 

 

(8,992

)

Balance, March 31, 2023

 

 

17,930,362

 

 

$

87

 

 

 

 

 

$

 

 

$

145,280

 

 

$

4

 

 

$

(144,928

)

 

$

443

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,190

 

 

 

 

 

 

 

 

 

1,190

 

Shares issued on exercise of warrants

 

 

65,000

 

 

 

 

 

 

 

 

 

 

 

 

150

 

 

 

 

 

 

 

 

 

150

 

Shares issued - May 2023 private placement

 

 

3,000,000

 

 

 

3

 

 

 

 

 

 

 

 

 

15,298

 

 

 

 

 

 

 

 

 

15,301

 

SVB convertible debt refinancing discount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,074

 

 

 

 

 

 

 

 

 

1,074

 

Restricted stock unit settlements

 

 

139,750

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock unit settlements withheld and retired to treasury

 

 

(29,352

)

 

 

 

 

 

 

 

 

 

 

 

(220

)

 

 

 

 

 

 

 

 

(220

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,239

)

 

 

(8,239

)

Balance, June 30, 2023

 

 

21,105,760

 

 

$

90

 

 

 

 

 

$

 

 

$

162,772

 

 

$

4

 

 

$

(153,167

)

 

$

9,699

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,174

 

 

 

 

 

 

 

 

 

1,174

 

Shares issued as settlement with trade vendor

 

 

60,000

 

 

 

 

 

 

 

 

 

 

 

 

273

 

 

 

 

 

 

 

 

 

273

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,108

)

 

 

(7,108

)

Balance, September 30, 2023

 

 

21,165,760

 

 

$

90

 

 

 

 

 

$

 

 

$

164,219

 

 

$

4

 

 

$

(160,275

)

 

$

4,038

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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