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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended March 31, 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: 001-39866

 

eFFECTOR Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

85-3306396

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

 

 

142 North Cedros Avenue, Suite B

Solana Beach, California

92075

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (858) 925-8215

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common stock, $0.0001 par value per share

 

EFTR

 

Nasdaq Capital Market

Warrants to purchase common stock

 

EFTRW

 

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, 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

As of April 30, 2022, the registrant had 41,395,362 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 

 


 

Table of Contents

 

 

 

Page

 

 

 

PART I.

FINANCIAL INFORMATION

1

 

 

 

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

2

 

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit)

3

 

Condensed Consolidated Statements of Cash Flows

4

 

Notes to Unaudited Condensed Consolidated Financial Statements

5

Item 2.

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

24

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

33

Item 4.

Controls and Procedures

33

 

 

 

PART II.

OTHER INFORMATION

34

 

 

 

Item 1.

Legal Proceedings

34

Item 1A.

Risk Factors

34

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

34

Item 3.

Defaults Upon Senior Securities

34

Item 4.

Mine Safety Disclosures

34

Item 5.

Other Information

34

Item 6.

Exhibits

35

Signatures

36

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

eFFECTOR THERAPEUTICS, INC.

Condensed Consolidated Balance Sheets

(in thousands, except share par value data)

(Unaudited)

 

 

 

March 31,
2022

 

 

December 31,
2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

17,664

 

 

$

49,702

 

Short-term investments

 

 

28,042

 

 

 

 

Prepaid expenses and other current assets

 

 

2,633

 

 

 

3,194

 

Total current assets

 

 

48,339

 

 

 

52,896

 

Property and equipment, net

 

 

149

 

 

 

91

 

Operating lease right-of-use assets

 

 

153

 

 

 

166

 

Other assets

 

 

854

 

 

 

903

 

Total assets

 

$

49,495

 

 

$

54,056

 

Liabilities and stockholders' equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

294

 

 

$

516

 

Accrued expenses

 

 

2,290

 

 

 

3,418

 

Lease liabilities, current portion

 

 

46

 

 

 

44

 

Total current liabilities

 

 

2,630

 

 

 

3,978

 

Earn-out liability

 

 

1,373

 

 

 

12,130

 

Non-current term loans, net

 

 

18,816

 

 

 

18,760

 

Accrued final payment on term loans

 

 

1,100

 

 

 

1,100

 

Non-current warrant liability

 

 

233

 

 

 

678

 

Non-current lease liabilities

 

 

109

 

 

 

126

 

Total liabilities

 

 

24,261

 

 

 

36,772

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 100,000,000 and zero shares authorized at March 31, 2022
     and December 31, 2021 respectively;
zero shares issued and outstanding as of
     March 31, 2022 and December 31, 2021

 

 

 

 

 

 

Common stock, $0.0001 par value; 1,000,000,000 shares authorized at March 31, 2022
     and December 31, 2021;
41,395,352 shares issued and 41,095,352 shares issued and
     outstanding as of March 31, 2022;
40,689,975 shares issued and 40,389,975 shares
     issued and outstanding as of December 31, 2021

 

 

4

 

 

 

4

 

Additional paid-in capital

 

 

143,112

 

 

 

138,181

 

Accumulated other comprehensive loss

 

 

(50

)

 

 

 

Accumulated deficit

 

 

(117,832

)

 

 

(120,901

)

Total stockholders' equity

 

 

25,234

 

 

 

17,284

 

Total liabilities and stockholders' equity

 

$

49,495

 

 

$

54,056

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

1


 

eFFECTOR THERAPEUTICS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(in thousands, except share and per share data)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

 

3,112

 

 

 

4,468

 

General and administrative

 

 

3,436

 

 

 

1,269

 

Total operating expenses

 

 

6,548

 

 

 

5,737

 

Operating loss

 

 

(6,548

)

 

 

(5,737

)

Other income (expense)

 

 

 

 

 

 

Interest income

 

 

24

 

 

 

1

 

Interest expense

 

 

(478

)

 

 

(306

)

Other income (expense), net

 

 

(686

)

 

 

(48

)

Change in fair value of earn-out liability

 

 

10,757

 

 

 

 

Loss on debt extinguishment

 

 

 

 

 

(492

)

Total other income (expense)

 

 

9,617

 

 

 

(845

)

Net income (loss)

 

$

3,069

 

 

$

(6,582

)

Comprehensive income (loss):

 

 

 

 

 

 

Net income (loss)

 

$

3,069

 

 

$

(6,582

)

Other comprehensive loss

 

 

(50

)

 

 

 

Comprehensive income (loss)

 

$

3,019

 

 

$

(6,582

)

Net income (loss) per share attributable to common shareholders:

 

 

 

 

 

 

Basic

 

$

0.08

 

 

$

(4.55

)

Diluted

 

$

0.07

 

 

$

(4.55

)

Weighted-average common shares outstanding:

 

 

 

 

 

 

Basic

 

 

40,848,325

 

 

 

1,445,065

 

Diluted

 

 

43,382,444

 

 

 

1,445,065

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

2


 

eFFECTOR THERAPEUTICS, INC.

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) (1)

(in thousands, except share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Series A

Series B

 

 

Series C

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

Total

 

 

 

Convertible Preferred Stock

 

 

Convertible Preferred Stock

 

 

Convertible Preferred Stock

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2021

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

40,389,975

 

 

$

4

 

 

$

138,181

 

 

$

 

 

$

(120,901

)

 

$

17,284

 

Stock option exercises

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,828

 

 

 

 

 

 

3

 

 

 

 

 

 

 

 

 

3

 

Issuance of common stock, net of issuance costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

700,549

 

 

 

 

 

 

3,791

 

 

 

 

 

 

 

 

 

3,791

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,137

 

 

 

 

 

 

 

 

 

1,137

 

Unrealized loss on short-term investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(50

)

 

 

 

 

 

(50

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,069

 

 

 

3,069

 

Balance at March 31, 2022

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

41,095,352

 

 

$

4

 

 

$

143,112

 

 

$

(50

)

 

$

(117,832

)

 

$

25,234

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Series A

 

 

Series B

 

 

Series C

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

Total

 

 

 

Convertible Preferred Stock

 

 

Convertible Preferred Stock

 

 

Convertible Preferred Stock

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Deficit

 

Balance at December 31, 2020

 

 

11,563,819

 

 

$

46,567

 

 

 

10,154,819

 

 

$

51,084

 

 

 

6,734,590

 

 

$

35,573

 

 

 

 

1,445,065

 

 

$

 

 

$

4,454

 

 

$

 

 

$

(136,699

)

 

$

(132,245

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

188

 

 

 

 

 

 

 

 

 

188

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,582

)

 

 

(6,582

)

Balance at March 31, 2021

 

 

11,563,819

 

 

$

46,567

 

 

 

10,154,819

 

 

$

51,084

 

 

 

6,734,590

 

 

$

35,573

 

 

 

 

1,445,065

 

 

$

 

 

$

4,642

 

 

$

 

 

$

(143,281

)

 

$

(138,639

)

(1) Historical shares and capital amounts for the year-ended December 31, 2020, have been retroactively restated for reverse recapitalization as described in Note 1.

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


 

eFFECTOR THERAPEUTICS, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Operating activities:

 

 

 

 

 

 

Net income (loss)

 

$

3,069

 

 

$

(6,582

)

Adjustments to reconcile net income (loss) to cash used in operating
      activities:

 

 

 

 

 

 

Depreciation and amortization expense

 

 

5

 

 

 

7

 

Accretion of discount and amortization of premium on investments, net

 

 

49

 

 

 

 

Stock-based compensation

 

 

1,138

 

 

 

188

 

Loss on debt extinguishment

 

 

 

 

 

492

 

(Gain)/loss on change in fair value of warrant liability

 

 

(445

)

 

 

49

 

Gain on change in fair value of earn-out liability

 

 

(10,757

)

 

 

 

Other expense related to the equity purchase agreement

 

 

1,131

 

 

 

 

Non-cash interest expense

 

 

93

 

 

 

36

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

637

 

 

 

532

 

Other non-current assets

 

 

48

 

 

 

 

Accounts payable

 

 

(223

)

 

 

111

 

Accrued expenses

 

 

(1,241

)

 

 

174

 

Operating lease right-of-use assets and liabilities, net

 

 

(1

)

 

 

(4

)

Net cash used in operating activities

 

 

(6,497

)

 

 

(4,997

)

Investing activities:

 

 

 

 

 

 

Proceeds from sale of fixed assets

 

 

 

 

 

607

 

Purchases of fixed assets

 

 

(57

)

 

 

 

Purchases of short-term investments

 

 

(28,217

)

 

 

 

Net cash (used in) provided by investing activities

 

 

(28,274

)

 

 

607

 

Financing activities:

 

 

 

 

 

 

Payment of debt issuance costs

 

 

(37

)

 

 

 

Proceeds from exercise of common stock options

 

 

3

 

 

 

 

Proceeds from issuance of common stock, net of issuance costs

 

 

2,767

 

 

 

 

Issuance of term loans, net of issuance costs

 

 

 

 

 

19,889

 

Repayment of term loans

 

 

 

 

 

(13,940

)

Payment of offering costs

 

 

 

 

 

(1

)

Net cash provided by financing activities

 

 

2,733

 

 

 

5,948

 

Net (decrease) increase in cash and cash equivalents

 

 

(32,038

)

 

 

1,558

 

Cash and cash equivalents at beginning of period

 

 

49,702

 

 

 

15,216

 

Cash and cash equivalents at end of period

 

$

17,664

 

 

$

16,774

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Interest paid

 

$

422

 

 

$

296

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

Issuance of commitment shares

 

$

862

 

 

$

 

Accrued issuance costs

 

$

107

 

 

$

55

 

Accrued debt issuance costs

 

$