Matinas BioPharma Holdings, Inc. - Quarter Report: 2021 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended September 30, 2021

OR

For the transition period from                    to

Commission File Number: 001-38022

MATINAS BIOPHARMA HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

1545 Route 206 South, Suite 302

Bedminster, New Jersey 07921

(Address of principal executive offices) (Zip Code)

908-484-8805

(Registrant’s telephone number, including area code)

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

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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 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.:

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 Act). Yes ☐ No ☒

As of November 4, 2021, there were 216,247,528 shares of the registrant’s common stock, $0.0001 par value, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None.

MATINAS BIOPHARMA HOLDINGS, INC.

Form 10-Q

Quarter Ended September 30, 2021

Table of Contents

Matinas BioPharma Holdings, Inc.

Condensed Consolidated Balance Sheets

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

Matinas BioPharma Holdings, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

Unaudited

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

Matinas BioPharma Holdings, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

Unaudited

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

Matinas BioPharma Holdings, Inc.

Condensed Consolidated Statements of Cash Flow

Unaudited

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

MATINAS BIOPHARMA HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

(Tabular dollars and shares in thousands, except per share data)

Note 1 – Description of Business

Matinas BioPharma Holdings Inc. (“Holdings”) is a Delaware corporation formed in 2013. Holdings is the parent company of Matinas BioPharma, Inc. (“BioPharma”), and Matinas BioPharma Nanotechnologies, Inc. (“Nanotechnologies,” formerly known as Aquarius Biotechnologies, Inc.), its operating subsidiaries (“Nanotechnologies”, and together with “Holdings” and “BioPharma”, “the Company” or “we” or “our” or “us”). The Company is a clinical-stage biopharmaceutical company with a focus on identifying and developing novel pharmaceutical products.

Note 2 – Liquidity and Plan of Operations

The Company has experienced net losses and negative cash flows from operations each period since its inception. Through September 30, 2021, the Company had an accumulated deficit of approximately $124.9 million. The Company’s net loss was approximately $16.6 million and $16.1 million for the nine-month periods ended September 30, 2021 and 2020, respectively.

The Company has been engaged in developing LYPDISO (formerly MAT9001) as well as its lipid nanocrystal (“LNC”) platform delivery technology and a pipeline of associated product candidates, including MAT2203 and MAT2501, since 2011. To date, the Company has not obtained regulatory approval for any of its product candidates nor generated any revenue from product sales, and the Company expects to incur significant expenses to complete development of its product candidates. The Company may never be able to obtain regulatory approval for the marketing of any of its product candidates in any indication in the United States or internationally and there can be no assurance that the Company will generate revenues or ever achieve profitability.

Assuming the Company obtains Food and Drug Administration (“FDA”) approval for one or more of its product candidates, the Company expects that its expenses will continue to increase once the Company reaches commercial launch. The Company also expects that its research and development expenses will continue to increase as it moves forward with additional clinical studies for its current product candidates and development of additional product candidates. As a result, the Company expects to continue to incur substantial losses for the foreseeable future, and that these losses will be increasing.

To continue to fund operations, during January 2021, the Company sold 3,023,147 shares of common stock under its At-The-Market Sales Agreement with BTIG, LLC, generating net proceeds of approximately $5.6 million (See Note 11 – Stockholders’ Equity).

As of September 30, 2021, the Company had cash and cash equivalents of approximately $24.9 million, marketable securities of approximately $28.9 million and restricted cash of approximately $0.3 million. The Company believes the cash and cash equivalents and marketable securities on hand are sufficient to fund planned operations into 2024.

Note 3 – Summary of Significant Accounting Policies

Basis of presentation and principles of consolidation

The accompanying unaudited condensed consolidated financial statements include the consolidated accounts of Holdings and its wholly owned subsidiaries, BioPharma, and Nanotechnologies. The Company has prepared its condensed consolidated financial statements following the requirements of the SEC for interim reporting. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and reflect the operations of the Company and its wholly owned subsidiaries. All intercompany transactions have been eliminated in consolidation.

The Company’s significant accounting policies are described in Note 3 within the Company’s Notes to Consolidated Financial Statements included in the Company’s 2020 Form 10-K.

COVID-19

In March 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, and has and may continue to cause economic downturns.

The Company has been actively monitoring the impact of COVID-19. The financial results for the three and nine months ended September 30, 2021 were not significantly impacted by COVID-19. However, the Company cannot predict the impact of the progression of COVID-19 on future results or the Company’s ability to raise capital due to a variety of factors, including but not limited to the continued good health of Company employees, the ability of suppliers to continue to operate and deliver, the ability of the Company to maintain operations, any further government and/or public actions taken in response to the pandemic and ultimately the length of the pandemic.

Note 4 – Cash, Cash Equivalents, Restricted Cash and Marketable Securities

The Company considers all highly liquid financial instruments with original maturities of three months or less when purchased to be cash and cash equivalents and all investments with maturities of greater than three months from date of purchase are classified as marketable securities. Cash and cash equivalents consisted of cash in bank checking and savings accounts, money market funds and short-term U.S. treasury bonds that mature within three months of settlement date.

Cash, Cash Equivalents and Restricted Cash

The Company presents restricted cash with cash and cash equivalents in the Condensed Consolidated Statements of Cash Flows. Restricted cash represents funds the Company is required to set aside to cover building operating leases and other purposes.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Condensed Consolidated Balance Sheets to the total of the amounts in the Condensed Consolidated Statements of Cash Flows as of September 30, 2021, December 31, 2020, September 30, 2020 and December 31, 2019:

 Schedule of Cash, Cash Equivalents and Restricted Cash

Marketable Securities

The Company has classified its investments in marketable securities as available-for-sale and as a current asset. The Company’s investments in marketable securities are carried at fair value, with unrealized gains and losses included as a separate component of stockholders’ equity. Unrealized losses and gains are classified as other comprehensive (loss)/income and costs are determined on a specific identification basis. Realized gains and losses from our marketable securities are recorded in other income, net. For the three and nine months ended September 30, 2021, the Company recorded unrealized losses of approximately $53 thousand and $230 thousand, respectively. For the three and nine months ended September 30, 2020, the Company recorded unrealized loss of approximately $114 thousand and unrealized gains of approximately $367 thousand, respectively. As of September 30, 2021 and December 31, 2020, the Company had net accumulated unrealized (loss)/gains of approximately ($2) thousand and $228 thousand, respectively.

The following tables summarizes the Company’s marketable securities as of September 30, 2021:

 Summary of Marketable Securities

Maturities of debt securities classified as available-for-sale were as follows at September 30, 2021:

 Schedule of Maturities of Debt Securities Available-for-sale

The following tables summarizes the Company’s marketable securities for the year ended December 31, 2020 consisted of the following:

Maturities of debt securities classified as available-for-sale were as follows at December 31, 2020:

Note 5 - Fair Value Measurements

The Company uses the fair value hierarchy to measure the value of its financial instruments. The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable inputs reflect a reporting entity’s pricing based upon its own market assumptions. The basis for fair value measurements for each level within the hierarchy is described below:

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.

The carrying amounts of certain cash and cash equivalents, current portion of restricted cash, marketable securities, prepaid expenses and other current assets, accounts payable, current portion of lease liability and accrued expenses approximate fair value due to the short-term nature of these instruments.

A summary of the assets and liabilities carried at fair value in accordance with the hierarchy defined above is as follows:

 Schedule of Fair Value Measurement of Assets and Liabilities

U.S. treasury bonds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices for identical assets in active markets. Marketable securities consisting of U.S. government notes, corporate debt securities and state and municipal bonds are classified as Level 2 and are valued using quoted market prices in markets that are not active.

Note 6 – Leasehold Improvements and Equipment

Leasehold improvements and equipment, summarized by major category, consist of the following as of September 30, 2021 and December 31, 2020:

 Schedule of Leasehold Improvements and Equipment

Depreciation and amortization expense for the three and nine months ended September 30, 2021 was approximately $62 thousand and $179 thousand, respectively, and for the three and nine months ended September 30, 2020 was approximately $58 thousand and $173 thousand, respectively. During the three and nine months ended September 30, 2021 the Company purchased equipment and leasehold improvements of approximately $224 thousand. During the three and nine months ended September 30, 2020 the Company purchased equipment of approximately $0 and $6 thousand, respectively.

Note 7 – Accrued Expenses and Other Liabilities

Accrued Expenses, summarized by major category, as of September 30, 2021 and December 31, 2020 consist of the following:

 Schedule of Accrued Expenses

Note 8 – Leases

The Company has various lease agreements with terms up to 10 years, including leases of office space, a laboratory and manufacturing facility, and various equipment. Some leases include purchase, termination or extension options for one or more years. These options are included in the lease term when it is reasonably certain that the option will be exercised.

Operating lease obligations

On November 1, 2013, the Company entered into a 7-year lease for office space in Bedminster, New Jersey which commenced in June 2014 at a monthly rent of approximately $13,000, increasing to approximately $14,000 per month toward the end of the term.

On September 23, 2020, the Company entered into an amendment to the Bedminster lease. Pursuant to the amendment, the Company leased an additional 3,034 rentable square feet (“Expansion Premises”). The amendment became effective upon delivery to the Company of the Expansion Premises, which occurred on August 1, 2021, and extends the term of the lease for seven years from such date. There is no renewal option, no security deposit, no residual value or significant restrictions or covenants other than those customary in such arrangements. Except as expressly provided, all other terms, covenants, conditions and agreements as set forth in the lease will remain unchanged and in full force and effect.

The assets and liabilities from operating and finance leases are recognized at the lease commencement date based on the present value of remaining lease payments over the lease term using the Company’s incremental borrowing rates or implicit rates, when readily determinable. Short-term leases, which have an initial term of 12 months or less, are not recorded on the balance sheet.

The Company’s operating leases did not provide an implicit rate that can readily be determined. Therefore, the Company uses a discount rate based on its incremental borrowing rate.

The Company incurred lease expense for its operating leases of approximately $219 thousand and $626 thousand for the three and nine months ended September 30, 2021, respectively, and approximately $203 thousand and $610 thousand for the three and nine months ended September 30, 2020. The Company incurred amortization expense on its operating lease right-of-use assets of approximately $125 thousand and $368 thousand for the three and nine months ended September 30, 2021, respectively, and approximately $122 thousand and $360 thousand for the three and nine months ended September 30, 2020, respectively.

The Company incurred interest expense on its finance leases of approximately $1 thousand and $3 thousand for the three and nine months ended September 30, 2021, respectively, and approximately $1 thousand and $5 thousand for the three and nine months ended September 30, 2020, respectively. The Company incurred amortization expense on its finance lease right-of-use assets of approximately $9 thousand and $29 thousand for the three and nine months ended September 30, 2021, respectively, and approximately $9 thousand and $50 thousand for the three and nine months ended September 30, 2020, respectively.

The following table presents information about the amount and timing of liabilities arising from the Company’s operating leases and finance leases as of September 30, 2021:

 Schedule of Maturity of Operating and Finance Leases Liabilities

The following table presents information about the amount and timing of liabilities arising from the Company’s operating leases, excluding the Expansion Premises which the Company had not taken control of as of December 31, 2020, and finance leases as of December 31, 2020:

Note 9 - Collaboration Agreements, Licenses and Other Research and Development Agreements

Cystic Fibrosis Foundation Therapeutics Development Award

On November 19, 2020, the Company entered into an award agreement (the “CFF Agreement”) with the CFF, pursuant to which it received a Therapeutics Development Award of up to $4.2 million (the “Award”) (of which $484,249 was received during 2020) to support the preclinical development (the “Development Program”) of the Company’s MAT2501 product candidate, a lipid nanocrystal oral formulation of the broad-spectrum aminoglycoside amikacin, for the treatment of pulmonary non-tubercular mycobacteria infections and other pulmonary diseases.

During the three and nine months ended September 30, 2021, the Company recognized approximately $588 thousand and $1,558 thousand, respectively, as credits to research and development expenses related to the Award. At September 30, 2021, a receivable of approximately $980 thousand related to the Award was included in prepaid expenses and other current assets and the remaining deferred liability balance is approximately $1,199 thousand and is included in accrued expenses and other current liabilities (See Note 7 – Accrued Expenses and Other Liabilities). At December 31, 2020, a receivable of $650 thousand related to the Award was included in prepaid expenses and other current assets and a related deferred liability balance of $577 thousand was included in accrued expense and other current liabilities. The remainder of the Award will be paid to the Company incrementally in installments upon the achievement of certain milestones related to the development program as set forth in the CFF Agreement.

Genentech Feasibility Study Agreement

On December 12, 2019, the Company entered into a feasibility study agreement (the “Genentech Agreement”) with Genentech, Inc. (“Genentech”). This feasibility study agreement involves the development of oral formulations using the Company’s LNC platform delivery technology, which enables the development of a wide range of difficult-to-deliver molecules. Under the terms of the Genentech Agreement, Genentech shall pay the Company a total of $100 thousand for developing oral formulations of three molecules, or approximately $33 thousand per molecule, which will be recognized upon the Company fulfilling its obligations for each molecule under the Genentech Agreement. On December 13, 2019, per Genentech’s request, the Company billed Genentech for the total $100 thousand and recorded the upfront consideration as deferred revenue, which is recorded in accrued expenses on the consolidated balance sheets, and will recognize it over the term of the contract performance obligation period. During the year ended December 31, 2020, the Company fulfilled its obligations for the first of three molecules. During the nine months ended September 30, 2021, the Company fulfilled its obligations for the second of three molecules and recognized approximately $33 thousand of Genentech revenue. During the three months ended September 30, 2021, the Company did not fulfill any of its obligations and did not recognize any Genentech revenue.

Note 10 – Income Taxes

Sale of net operating losses (NOLs) & tax credits

The Company recognized approximately $1.3 million and approximately $1.1 million for the nine months ended September 30, 2021 and 2020 in connection with the sale of certain State of New Jersey Net Operating Losses (“NOL”) and Research and Development (“R&D”) tax credits to third parties under the New Jersey Technology Business Tax Certificate Transfer Program. During the three months ended September 30, 2021 and 2020, the Company did not sell any NOL and R&D tax credits.

Note 11 – Stockholders’ Equity

Common Stock

On September 3, 2021, the Company issued 1,500,000 unregistered shares of its common stock pursuant to the Agreement and Plan of Merger by and among the Company, Saffron Merger Sub, Inc., Aquarius Biotechnologies Inc. (“Aquarius”), and J Carl Craft, as holder representative, dated January 19, 2015, as subsequently amended on September 3, 2021 (the “Aquarius Merger Agreement”), to the holders of Aquarius Biotechnologies Inc., as defined in the Aquarius Merger Agreement. The shares were issued in place of certain milestone payments previously included under the Aquarius Merger Agreement upon the achievement of specified development milestones. The Company recorded a $1.2 million research and development expense related to the issuance of the 1,500,000 shares based on the closing price of the Company’s common stock of $0.80 on the date of issuance.

For the nine months ended September 30, 2021, the Company sold 3,023,147 shares of its common stock under its At-The-Market Sales Agreement with BTIG, LLC, at an average price of $1.90, generating gross proceeds of approximately $5.8 million and net proceeds of approximately $5.6 million.

On January 14, 2020, the Company closed an underwritten public offering of 32.3 million shares of its common stock at a purchase price of $1.55 per share. The Company generated gross proceeds of approximately $50.0 million and net proceeds of approximately $46.6 million, after deducting underwriting discounts and commissions and other estimated offering expenses.

Preferred Stock

In connection with a public offering of Series B Preferred Stock, on June 19, 2018, the Company filed the Series B Certificate of Designation with the Secretary of the State of Delaware to designate the preferences, rights and limitations of the Series B Preferred Stock. Pursuant to the Series B Certificate of Designation, the Company designated 8,000 shares of the Company’s previously undesignated preferred shares as Series B Preferred Stock. On June 19, 2021, each share of Series B Preferred Stock was automatically converted into 2,000 shares of the Company’s common stock resulting in the issuance of 8,436,000 shares of common stock. As of September 30, 2021 and December 31, 2020 there were 0 and 4,361 shares of Series B Preferred stock outstanding, respectively.

Dividends. Subject to certain ownership limitations, holders of the Series B Preferred Stock received dividends paid in the Company’s common stock as follows: (i) a number of shares of common stock equal to 10% of the shares of common stock underlying the Series B Preferred Stock then held by such holder on June 19, 2019, (ii) a number of shares of common stock equal to 15% of the shares of common stock underlying the Series B Preferred Stock then held by such holder on June 19, 2020 and (iii) a number of shares of common stock equal to 20% of the shares of common stock underlying the Series B Preferred Stock then held by such holder on June 19, 2021. Based on an accounting of the holders of record of Series B Preferred Stock on June 19, 2021 and 2020, the Company made dividend payments totaling 1,687,200 and 1,365,600 shares of common stock, respectively.

Warrants

The Company has issued two types of warrants: (i) investor warrants and (ii) placement agent warrants. All warrants are exercisable immediately upon issuance and have a five-year term. The warrants may be exercised at any time in whole or in part upon payment of the applicable exercise price until expiration. No fractional shares will be issued upon the exercise of the warrants. The exercise price and the number of shares purchasable upon the exercise of the investor warrants are subject to adjustment upon the occurrence of certain events, which include stock dividends, stock splits, combinations and reclassifications of the Company’s capital stock or other similar changes to the equity structure of the Company.

As of September 30, 2021, the Company had outstanding warrants to purchase an aggregate of 988,000 shares of common stock at exercise prices ranging from $0.50 to $0.75 per share. A summary of warrants outstanding as of September 30, 2021 and December 31, 2020 is presented below, all of which are fully vested:

 Summary of Shareholders Equity Warrants Outstanding

Basic and diluted net loss per common share

During the three and nine months ended September 30, 2021 and 2020, diluted earnings per common share is the same as basic earnings per common share because, as the Company incurred a net loss during each period presented, the potentially dilutive securities from the assumed exercise of all outstanding stock options, warrants and conversion of preferred stock, would have an anti-dilutive effect. The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share attributable to common shareholders because including them would have been anti-dilutive for the three and nine months ended September 30, 2021 and 2020:

 Schedule of Anti-Diluted Securities Excluded From Computation of Earning Per Share

Note 12 – Accumulated Other Comprehensive (Loss)/Income

The following table summarizes the changes in accumulated other comprehensive (loss)/income by components during the nine months ended September 30, 2021 and 2020:

Schedule of Components of Accumulated Other Comprehensive (Loss)/Income

All components of accumulated other comprehensive (loss)/income are net of tax.

Note 13 – Stock-based Compensation

The Company’s Amended and Restated 2013 Equity Compensation Plan (the “Plan”) provides for the granting of incentive stock options, nonqualified stock options, restricted stock units, performance units, and stock purchase rights. There were no significant modifications to the Plan during the nine months ended September 30, 2021 and 2020.

With the approval of the Board of Directors and a majority of shareholders, effective May 8, 2014, the Plan was amended and restated to provide for an automatic increase in the number of shares of common stock available for issuance under the Plan each January, commencing January 1, 2015, in an amount up to four percent (4%) of the total number of shares of common stock outstanding on the preceding December 31st.

The following table contains information about the Company’s stock plan at September 30, 2021:

 Schedule of Equity Compensation Plan by Arrangements

The Company recognized stock-based compensation expense (options and restricted share grants) in its condensed consolidated statements of operations as follows:

 Schedule of Recognized Stock-Based Compensation

As of September 30, 2021, total compensation costs related to unvested awards not yet recognized was approximately $8.4 million and the weighted-average periods over which the awards are expected to be recognized was 2.6 years.

Stock Options

The following table summarizes the activity for Company’ stock options for the three months ended September 30, 2021:

 Schedule of Stock Option Activity

Restricted Stock Awards

During the nine months ended September 30, 2021 and 2020, the Company granted restricted stock awards for 24 thousand and 268 thousand shares of common stock, respectively. These awards are typically granted to members of the Board of Directors as payment in lieu of cash fees or as payment to a vendor pursuant to a consulting agreement. The Company values restricted stock awards at the fair market value on the date of grant. The Company recorded the value of these restricted awards as general and administrative expense of approximately $29 thousand and $85 thousand for the three and nine months ended September 30, 2021, respectively, and approximately $90 thousand and $263 thousand for the three and nine months ended September 30, 2020, respectively, in the Condensed Consolidated Statement of Operations. As of September 30, 2021, there was approximately $7 thousand of total unrecognized compensation costs related to 100,000 non-vested restricted stock grants which are expected to be recognized over a weighted-average period of 0.1 years.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and the related notes and the other financial information included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that involve 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 discussed below and elsewhere in this Quarterly Report on Form 10-Q, in our Annual Report on Form 10-K for the year ended December 31, 2020 and in other reports we file with the Securities and Exchange Commission, particularly those under “Risk Factors.” Dollars in tabular format are presented in thousands, except per share data, or otherwise indicated.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report on Form 10-Q contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, together with any statements related in any way to the COVID-19 pandemic including its impact on the Company, and which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. In addition, the extent to which the COVID-19 pandemic will continue to impact our business and financial results going forward will be dependent on future developments such as the length and severity of the crisis, the potential resurgence of the crisis, future government actions in response to the crisis and the overall impact of the COVID-19 pandemic on the global economy and capital markets, among many other factors, all of which remain highly uncertain and unpredictable. All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “can,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “seek,” “estimate,” “continue,” “plan,” “point to,” “project,” “predict,” “could,” “intend,” “target,” “potential” and other similar words and expressions of the future.

There are a number of important factors that could cause the actual results to differ materially from those expressed in any forward-looking statement made by us. These factors include, but are not limited to:

All forward-looking statements are expressly qualified in their entirety by this cautionary notice. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this report or the date of the document incorporated by reference into this report. We have no obligation, and expressly disclaim any obligation, to update, revise or correct any of the forward- looking statements, whether as a result of new information, future events or otherwise. We have expressed our expectations, beliefs and projections in good faith, and we believe they have a reasonable basis. However, we cannot assure you that our expectations, beliefs or projections will result or be achieved or accomplished.

Overview

We are focused on creating value through improving the intracellular delivery of critical therapeutics through our paradigm-changing lipid nanocrystal (LNC) drug delivery platform and its application to overcome current challenges in safely and effectively delivering small molecules, nucleic acids, gene therapies, proteins/peptides, and vaccines. We are also focused on creating value through finding a partner to continue the development of LYPDISO, our proprietary, next-generation prescription omega-3 drug, which we believe is differentiated from all other prescription omega-3 products and positioned to potentially demonstrate superior cardioprotective effects.

Key elements of our strategy include:

We have incurred losses for each period from our inception. For the nine months ended September 30, 2021 and 2020, our net loss was approximately $16.6 million and $16.1 million, respectively. We expect to incur significant expenses and operating losses over the next several years. Accordingly, we will need additional financing to support our continuing operations. We will seek to fund our operations through public or private equity offerings, debt financings, government or other third-party funding, collaborations and licensing arrangements. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would impact our going concern and would have a negative impact on our financial condition and our ability to pursue our business strategy and continue as a going concern. We will need to generate significant revenues to achieve profitability, and we may never do so.

Financial Operations Overview

Revenue

During the nine months ended September 30, 2021, we generated contract research revenue of approximately $33 thousand resulting from the feasibility study agreement with Genentech Inc. and approximately $96 thousand resulting from a grant with the Cystic Fibrosis Foundation and the feasibility study agreement with Genentech Inc. during the nine months ended September 30, 2020. Our ability to generate product revenue, which we do not expect to occur until 2023 at the earliest, if ever, will depend heavily on the successful development and eventual commercialization of our early-stage product candidates.

Research and Development Expenses

Research and development expenses consist of costs incurred for the development of product candidates MAT2203, MAT2501, LYPDISO and advancement of our LNC delivery technology platform, which include:

The table below summarizes our direct research and development expenses for our product candidates and development platform for the three and nine months ended September 30, 2021 and 2020. Our direct research and development expenses consist principally of external costs, such as fees paid to contractors, consultants, analytical laboratories and CROs and/or the NIH, in connection with our development work. We typically use our employee and infrastructure resources for manufacturing clinical trial materials, conducting product analysis, study protocol development and overseeing outside vendors. Included in “Internal Staffing, Overhead and Other” below is the cost of laboratory space, supplies, research and development (R&D) employee costs (including stock-based compensation), travel and medical education.