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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 September 30, 2021

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: 001-38560

 

AADI BIOSCIENCE, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

61-1547850

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

17383 Sunset Boulevard Suite A250

Pacific Palisades, California

90272

(Address of principal executive offices)

(Zip Code)

(424) 473-8055

(Registrant’s telephone number, including area code)

 

 

 

Aerpio Pharmaceuticals, Inc.

c/o 10663 Loveland-Madeira Road #168

Loveland, OH 45140

(Former name, former address and former fiscal year, if changed since last report)

 

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

AADI

The Nasdaq Stock 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  

 

As of November 5, 2021, the registrant had 20,894,029 shares of common stock, $0.0001 par value per share, outstanding.

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

2

Item 1.

Condensed Consolidated Financial Statements

2

 

Condensed Consolidated Balance Sheets – September 30, 2021 (Unaudited) and December 31, 2020

2

 

Condensed Consolidated Statements of Operations and Comprehensive Loss – Three and Nine Months Ended September 30, 2021 and 2020 (Unaudited)

3

 

Condensed Consolidated Statements of Stockholders’ Equity (Deficit) – Three and Nine Months Ended September 30, 2021 and 2020 (Unaudited)

4

 

Condensed Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2021 and 2020 (Unaudited)

6

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

7

Item 2.

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

27

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

37

Item 4.

Controls and Procedures

37

PART II.

OTHER INFORMATION

38

Item 1.

Legal Proceedings

38

Item 1A.

Risk Factors

39

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

104

Item 3.

Defaults Upon Senior Securities

104

Item 4.

Mine Safety Disclosures

104

Item 5.

Other Information

104

Item 6.

Exhibits

105

Signatures

107

 

 

 

 


 

PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements.

AADI BIOSCIENCE, INC.

Condensed Consolidated Balance Sheets

(Amounts in thousands, except share and per share amounts)

 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

161,375

 

 

$

4,455

 

Accounts receivable

 

 

 

 

 

14,149

 

Prepaid expenses and other current assets

 

 

643

 

 

 

81

 

Total current assets

 

 

162,018

 

 

 

18,685

 

Property and equipment, net

 

 

14

 

 

 

21

 

Operating lease right-of-use assets

 

 

597

 

 

 

119

 

Intangible asset, net

 

 

3,880

 

 

 

 

Other assets

 

 

2,263

 

 

 

 

Total assets

 

$

168,772

 

 

$

18,825

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity (deficit)

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

5,205

 

 

$

2,392

 

Accrued liabilities

 

 

6,250

 

 

 

4,099

 

Payable to related party

 

 

22

 

 

 

14,314

 

Convertible related party promissory notes payable at fair value

 

 

 

 

 

9,029

 

Operating lease liabilities, current portion

 

 

90

 

 

 

125

 

Other current liabilities

 

 

 

 

 

99

 

Total current liabilities

 

 

11,567

 

 

 

30,058

 

Convertible promissory notes payable at fair value

 

 

 

 

 

1,102

 

Payable to related party

 

 

5,757

 

 

 

 

Operating lease liabilities, net of current portion

 

 

523

 

 

 

 

Other liabilities

 

 

 

 

 

97

 

Total liabilities

 

 

17,847

 

 

 

31,257

 

Commitments and contingencies (Note 15)

 

 

 

 

 

 

 

 

Stockholders’ equity (deficit):

 

 

 

 

 

 

 

 

Series Seed preferred stock, $0.0001 par value, zero and 734,218 shares

authorized, issued and outstanding as of September 30, 2021 and December

31, 2020, respectively; aggregate liquidation preference of $0 and $1,101 as of September 30, 2021 and December 31, 2020, respectively

 

 

 

 

 

 

Series A preferred stock, $0.0001 par value, zero and 7,211,948 shares authorized, issued and outstanding as of September 30, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $28,433 as of September 30, 2021 and December 31, 2020, respectively

 

 

 

 

 

1

 

Common stock, $0.0001 par value; 300,000,000 and 20,000,000 shares authorized;

20,883,454 and 2,542,358 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

 

 

2

 

 

 

1

 

Additional paid-in capital

 

 

277,618

 

 

 

20,161

 

Accumulated deficit

 

 

(126,695

)

 

 

(32,595

)

Total stockholders’ equity (deficit)

 

 

150,925

 

 

 

(12,432

)

Total liabilities and stockholders’ equity (deficit)

 

$

168,772

 

 

$

18,825

 

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

2


 

AADI BIOSCIENCE, INC.

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Amounts in thousands, except shares and earnings per share amounts)

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

(unaudited)

 

 

(unaudited)

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grant Revenue

 

$

 

 

$

231

 

 

$

120

 

 

$

431

 

Total revenue

 

 

 

 

 

231

 

 

 

120

 

 

 

431

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

5,754

 

 

 

2,395

 

 

 

12,443

 

 

 

9,684

 

General and administrative

 

 

7,401

 

 

 

499

 

 

 

8,793

 

 

 

1,700

 

Impairment of acquired contract intangible asset

 

 

74,156

 

 

 

 

 

 

74,156

 

 

 

 

Total operating expenses

 

 

87,311

 

 

 

2,894

 

 

 

95,392

 

 

 

11,384

 

Loss from operations

 

 

(87,311

)

 

 

(2,663

)

 

 

(95,272

)

 

 

(10,953

)

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of convertible promissory notes

 

 

380

 

 

 

 

 

 

1,585

 

 

 

 

Gain upon extinguishment of debt

 

 

 

 

 

 

 

 

196

 

 

 

 

Interest income

 

 

 

 

 

1

 

 

 

1

 

 

 

41

 

Interest expense (includes related party amounts of $142, $204, $542 and $531, respectively)

 

 

(157

)

 

 

(229

)

 

 

(608

)

 

 

(585

)

Total other income (expense), net

 

 

223

 

 

 

(228

)

 

 

1,174

 

 

 

(544

)

Loss before income tax expense

 

 

(87,088

)

 

 

(2,891

)

 

 

(94,098

)

 

 

(11,497

)

Income tax expense

 

 

 

 

 

(1

)

 

 

(2

)

 

 

(1

)

Net and comprehensive loss

 

 

(87,088

)

 

 

(2,892

)

 

 

(94,100

)

 

 

(11,498

)

Cumulative dividends on convertible preferred stock

 

 

(154

)

 

 

(247

)

 

 

(647

)

 

 

(740

)

Net and comprehensive loss attributable to common stockholders

 

$

(87,242

)

 

$

(3,139

)

 

$

(94,747

)

 

$

(12,238

)

Net and comprehensive loss per share attributable to common stockholders, basic and diluted

 

$

(9.17

)

 

$

(1.23

)

 

$

(19.37

)

 

$

(4.81

)

Weighted average number of common shares outstanding used in computing net and comprehensive loss per share attributable to common stockholders, basic and diluted

 

 

9,510,379

 

 

 

2,542,358

 

 

 

4,890,556

 

 

 

2,542,358

 

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

 

 

3


 

AADI BIOSCIENCE, INC.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(Amounts in thousands, including share amounts)

 

 

For the Three and Nine Months Ended September 30, 2021 (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' Equity (Deficit)

 

 

 

Series Seed Preferred Stock

 

 

Series A Preferred Stock

 

 

Common Stock

 

 

Additional Paid-In

 

 

Accumulated

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Deficit

 

 

Total

 

Balance at January 1, 2021

 

 

734

 

 

$

 

 

 

7,212

 

 

$

1

 

 

 

2,542

 

 

$

1

 

 

$

20,161

 

 

$

(32,595

)

 

$

(12,432

)

Share-based compensation

expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

36

 

 

 

 

 

 

36

 

Net and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,476

)

 

 

(5,476

)

Balance at March 31, 2021

 

 

734

 

 

 

 

 

 

7,212

 

 

 

1

 

 

 

2,542

 

 

 

1

 

 

 

20,197

 

 

 

(38,071

)

 

 

(17,872

)

Share-based compensation

expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

39

 

 

 

 

 

 

39

 

Net and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,536

)

 

 

(1,536

)

Balance at June 30, 2021

 

 

734

 

 

 

 

 

 

7,212

 

 

 

1

 

 

 

2,542

 

 

 

1

 

 

 

20,236

 

 

 

(39,607

)

 

 

(19,369

)

Exercise of stock options to

purchase common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

61

 

 

 

 

 

 

745

 

 

 

 

 

 

745

 

Issuance of common stock to PIPE Investors, net

of issuance costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,853

 

 

 

1

 

 

 

145,383

 

 

 

 

 

 

145,384

 

Issuance of common stock to

former stockholders of Aerpio upon Merger

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,209

 

 

 

 

 

 

105,888

 

 

 

 

 

 

105,888

 

Conversion of convertible

promissory note into common stock upon Merger

 

 

 

 

 

 

 

 

 

 

 

 

 

 

698

 

 

 

 

 

 

9,130

 

 

 

 

 

 

9,130

 

Conversion of convertible

preferred stock into common stock upon Merger

 

 

(734

)

 

 

 

 

 

(7,212

)

 

 

(1

)

 

 

2,520

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

Share-based compensation

expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

648

 

 

 

 

 

 

648

 

Cumulative dividends paid on Series A preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,412

)

 

 

 

 

 

(4,412

)

Net and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(87,088

)

 

 

(87,088

)

Balance at September 30, 2021

 

 

 

 

$

 

 

 

 

 

$

 

 

 

20,883

 

 

$

2

 

 

$

277,618

 

 

$

(126,695

)

 

$

150,925

 

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

4


 

AADI BIOSCIENCE, INC.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit) (continued)

(Amounts in thousands, including share amounts)

 

 

For the Three and Nine Months Ended September 30, 2020 (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' Equity (Deficit)

 

 

 

Series Seed Preferred Stock

 

 

Series A Preferred Stock

 

 

Common Stock

 

 

Additional Paid-In

 

 

Accumulated

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Deficit

 

 

Total

 

Balance at January 1, 2020

 

 

734

 

 

$

 

 

 

7,212

 

 

$

1

 

 

 

2,542

 

 

$

1

 

 

$

20,022

 

 

$

(29,117

)

 

$

(9,093

)

Share-based compensation

expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29

 

 

 

 

 

 

29

 

Net and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,324

)

 

 

(3,324

)

Balance at March 31, 2020

 

 

734

 

 

 

 

 

 

7,212

 

 

 

1

 

 

 

2,542

 

 

 

1

 

 

 

20,051

 

 

 

(32,441

)

 

 

(12,388

)

Share-based compensation

expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

37

 

 

 

 

 

 

37

 

Net and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,282

)

 

 

(5,282

)

Balance at June 30, 2020

 

 

734

 

 

 

 

 

 

7,212

 

 

 

1

 

 

 

2,542

 

 

 

1

 

 

 

20,088

 

 

 

(37,723

)

 

 

(17,633

)

Share-based compensation

expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

34

 

 

 

 

 

 

34

 

Net and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,892

)

 

 

(2,892

)

Balance at September 30, 2020

 

 

734

 

 

$

 

 

 

7,212

 

 

$

1

 

 

 

2,542

 

 

$

1

 

 

$

20,122

 

 

$

(40,615

)

 

$

(20,491

)

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

 

 

 

 

5


 

AADI BIOSCIENCE, INC.

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands) 

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

(unaudited)

 

Net and comprehensive loss

 

$

(94,100

)

 

$

(11,498

)

Adjustments to reconcile net and comprehensive loss

   to net cash used in operating activities:

 

 

 

 

 

 

 

 

Impairment of acquired contract intangible asset

 

 

74,156

 

 

 

 

Change in fair value of convertible promissory notes (includes related party amounts of $135 and $0, respectively)

 

 

(1,585

)

 

 

 

Non-cash interest expense (includes related party amounts of $542 and $531, respectively)

 

 

584

 

 

 

585

 

Gain on forgiveness of Payroll Protection Plan loan

 

 

(196

)

 

 

 

Share-based compensation expense

 

 

723

 

 

 

100

 

Non-cash lease expense