10-Q
--12-31falseQ20001484565SOLENO THERAPEUTICS 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2

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 June 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: 001-36593

 

SOLENO THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

77-0523891

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

203 Redwood Shores Parkway, Suite 500

Redwood City, California

(Address of principal executive offices)

94065

(Zip Code)

(650) 213-8444

(Registrant’s telephone number, including area code)

 

 

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, $0.001 par value

SLNO

NASDAQ

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 August 3, 2023, there were 9,992,178 shares of the registrant’s Common Stock, par value $0.001 per share, outstanding.

 


 

SOLENO THERAPEUTICS, INC.

TABLE OF CONTENTS

 

Page

PART I—FINANCIAL INFORMATION

3

Item 1. Financial Statements

3

Condensed Consolidated Balance Sheets (unaudited)

3

Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited)

4

Condensed Consolidated Statements of Stockholders’ Equity (unaudited)

5

Condensed Consolidated Statements of Cash Flows (unaudited)

6

Notes to Condensed Consolidated Financial Statements (unaudited)

7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

Item 3. Quantitative and Qualitative Disclosures About Market Risk

21

Item 4. Controls and Procedures

21

PART II—OTHER INFORMATION

23

Item 1. Legal Proceedings

23

Item 1A. Risk Factors

23

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

23

Item 3. Defaults Upon Senior Securities

23

Item 4. Mine Safety Disclosures

23

Item 5. Other Information

23

Item 6. Exhibits

24

EXHIBIT INDEX

25

SIGNATURES

25

 

 

 

 


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Soleno Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

 

 

 

June 30,
2023

 

 

December 31,
2022

 

Assets

 

(Unaudited)

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

19,368

 

 

$

14,602

 

Prepaid expenses and other current assets

 

 

1,130

 

 

 

1,045

 

Total current assets

 

 

20,498

 

 

 

15,647

 

Long-term assets

 

 

 

 

 

 

Property and equipment, net

 

 

19

 

 

 

26

 

Operating lease right-of-use assets

 

 

541

 

 

 

131

 

Intangible assets, net

 

 

9,721

 

 

 

10,693

 

Other long-term assets

 

 

165

 

 

 

-

 

Total assets

 

$

30,944

 

 

$

26,497

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

3,442

 

 

$

1,777

 

Accrued compensation

 

 

1,165

 

 

 

1,675

 

Accrued clinical trial site costs

 

 

3,466

 

 

 

3,222

 

Operating lease liabilities - current

 

 

212

 

 

 

155

 

Other current liabilities

 

 

513

 

 

 

484

 

Total current liabilities

 

 

8,798

 

 

 

7,313

 

Long-term liabilities

 

 

 

 

 

 

2018 PIPE Warrant liability

 

 

-

 

 

 

1

 

Operating lease liabilities - noncurrent

 

 

273

 

 

 

-

 

Contingent liability for Essentialis purchase price

 

 

9,447

 

 

 

8,835

 

Total liabilities

 

 

18,518

 

 

 

16,149

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

Preferred stock, $0.001 par value; 10,000,000 shares authorized, no shares issued and outstanding

 

 

-

 

 

 

-

 

Common stock, $0.001 par value, 100,000,000 shares authorized,
 
9,141,185 and 8,159,382 shares issued and outstanding at
   June 30, 2023 and December 31, 2022, respectively

 

 

10

 

 

 

8

 

Additional paid-in-capital

 

 

266,669

 

 

 

247,762

 

Accumulated deficit

 

 

(254,253

)

 

 

(237,422

)

Accumulated other comprehensive income

 

 

-

 

 

 

-

 

Total stockholders’ equity

 

 

12,426

 

 

 

10,348

 

Total liabilities and stockholders’ equity

 

$

30,944

 

 

$

26,497

 

 

See accompanying notes to condensed consolidated financial statements

3


 

Soleno Therapeutics, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(unaudited)

(in thousands, except share and per share data)

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

Research and development

$

5,141

 

 

$

3,696

 

 

$

10,457

 

 

$

7,684

 

General and administrative

 

3,169

 

 

 

2,467

 

 

 

6,023

 

 

 

5,110

 

Change in fair value of contingent consideration

 

313

 

 

 

616

 

 

 

612

 

 

 

(242

)

Total operating expenses

 

8,623

 

 

 

6,779

 

 

 

17,092

 

 

 

12,552

 

Operating loss

 

(8,623

)

 

 

(6,779

)

 

 

(17,092

)

 

 

(12,552

)

Other income

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of warrants liabilities

 

1

 

 

 

2

 

 

 

1

 

 

 

29

 

Interest income

 

147

 

 

 

52

 

 

 

260

 

 

 

74

 

Total other income

 

148

 

 

 

54

 

 

 

261

 

 

 

103

 

Net loss

$

(8,475

)

 

$

(6,725

)

 

$

(16,831

)

 

$

(12,449

)

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

(16

)

 

 

1

 

 

 

-

 

 

 

(1

)

Total comprehensive loss

$

(8,491

)

 

$

(6,724

)

 

$

(16,831

)

 

$

(12,450

)

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share, basic and diluted

$

(0.81

)

 

$

(0.72

)

 

$

(1.69

)

 

$

(1.69

)

Weighted-average common shares outstanding used to calculate basic and diluted net loss per common share

 

10,423,598

 

 

 

9,339,254

 

 

 

9,938,171

 

 

 

7,348,045

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements

4


 

Soleno Therapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

For the Three and Six Months Ended June 30, 2023 and 2022

(unaudited)

(in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income

 

 

Equity

 

Balances at January 1, 2023

 

 

8,159,382

 

 

$

8

 

 

$

247,762

 

 

$

(237,422

)

 

$

-

 

 

$

10,348

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

495

 

 

 

-

 

 

 

-

 

 

 

495

 

Issuance of restricted stock units under equity incentive plan

 

 

9,534

 

 

 

-

 

 

 

136

 

 

 

-

 

 

 

-

 

 

 

136

 

Tax withholding payments for net share-settled equity awards

 

 

(128

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

16

 

 

 

16

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(8,356

)

 

 

-

 

 

 

(8,356

)

Balances at March 31, 2023

 

 

8,168,788

 

 

 

8

 

 

 

248,393

 

 

 

(245,778

)

 

 

16

 

 

 

2,639

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

1,204

 

 

 

-

 

 

 

-

 

 

 

1,204

 

Issuance of common stock warrants, net of issuance costs

 

 

-

 

 

 

-

 

 

 

9,973

 

 

 

-

 

 

 

-

 

 

 

9,973

 

Sale of common stock, net of costs

 

 

1,772,397

 

 

 

2

 

 

 

7,099

 

 

 

-

 

 

 

-

 

 

 

7,101

 

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(16

)

 

 

(16

)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(8,475

)

 

 

-

 

 

 

(8,475

)

Balances at June 30, 2023

 

 

9,941,185

 

 

$

10

 

 

$

266,669

 

 

$

(254,253

)

 

$

-

 

 

$

12,426

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balances at January 1, 2022

 

 

5,324,287

 

 

$

5

 

 

$

231,143

 

 

$

(213,355

)

 

$

-

 

 

$

17,793

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

464

 

 

 

-

 

 

 

-

 

 

 

464

 

Issuance of restricted stock units under equity incentive plan

 

 

18,650

 

 

 

-

 

 

 

180

 

 

 

-

 

 

 

-

 

 

 

180

 

Tax withholding payments for net share-settled equity awards

 

 

(3,683

)

 

 

-

 

 

 

(16

)

 

 

-

 

 

 

-

 

 

 

(16

)

Sale of common stock and pre-funded warrants in public offering, net of costs of $1,034

 

 

2,666,667

 

 

 

3

 

 

 

13,763

 

 

 

-

 

 

 

-

 

 

 

13,766

 

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2

)

 

 

(2

)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(5,724

)

 

 

-

 

 

 

(5,724

)

Balances at March 31, 2022

 

 

8,005,921

 

 

 

8

 

 

 

245,534

 

 

 

(219,079

)

 

 

(2

)

 

 

26,461

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

571

 

 

 

-

 

 

 

-

 

 

 

571

 

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1

 

 

 

1

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(6,725

)

 

 

-

 

 

 

(6,725

)

Balances at June 30, 2022

 

 

8,005,921

 

 

$

8

 

 

$

246,105

 

 

$

(225,804

)

 

$

(1

)

 

$

20,308

 

 

See accompanying notes to condensed consolidated financial statements

5


 

Soleno Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(16,831

)

 

$

(12,449

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

979

 

 

 

984

 

Non-cash lease expense

 

 

187

 

 

 

142

 

Stock-based compensation expense

 

 

1,835

 

 

 

1,215

 

Change in fair value of stock warrants

 

 

(1

)

 

 

(29

)

Change in fair value of contingent consideration

 

 

612

 

 

 

(242

)

Other non-cash reconciling items

 

 

-

 

 

 

(1

)

Change in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses, other current assets and other assets

 

 

(290

)

 

 

334

 

Accounts payable

 

 

1,679

 

 

 

(848

)

Accrued compensation

 

 

(510

)

 

 

204

 

Accrued clinical trial site costs

 

 

244

 

 

 

(264

)

Operating lease liabilities

 

 

(227

)

 

 

(120

)

Other liabilities

 

 

29

 

 

 

92

 

Net cash used in operating activities

 

 

(12,294

)

 

 

(10,982

)

Cash flows from investing activities

 

 

 

 

 

 

Purchases of property and equipment

 

 

-

 

 

 

(7

)

Net cash used in investing activities

 

 

-

 

 

 

(7

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from sale of common stock and common stock warrants, net of costs

 

 

17,060

 

 

 

-

 

Proceeds from sale of common stock and pre-funded warrants, net of costs

 

 

-

 

 

 

13,766

 

Tax withholding payments for net share-settled equity awards

 

 

-

 

 

 

(16

)

Net cash provided by financing activities

 

 

17,060

 

 

 

13,750

 

Net increase in cash and cash equivalents

 

 

4,766

 

 

 

2,761

 

Cash and cash equivalents, beginning of period

 

 

14,602

 

 

 

21,304

 

Cash and cash equivalents, end of period

 

$

19,368

 

 

$

24,065

 

 

 

 

 

 

 

Supplemental disclosure of non-cash financing information

 

 

 

 

 

 

Operating lease right-of-use assets obtained in exchange for operating lease obligations

 

$

597

 

 

$

-

 

Unpaid financing costs included in accounts payable

 

$

14

 

 

$

-

 

 

See accompanying notes to condensed consolidated financial statements.

6


 

Soleno Therapeutics, Inc.

June 30, 2023

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 1. Overview

Soleno Therapeutics, Inc. (the Company or Soleno) is focused on the development and commercialization of novel therapeutics for the treatment of rare diseases. Its lead candidate is DCCR (Diazoxide Choline Extended-Release) tablets, a once-daily oral tablet for the treatment of Prader-Willi Syndrome (PWS). DCCR has received orphan designation for the treatment of PWS in the United States (U.S.) as well as in the European Union (E.U.).

The Company incorporated in the State of Delaware on August 25, 1999, and is located in Redwood City, California. It initially established its operations as Capnia, a diversified healthcare company that developed and commercialized innovative diagnostics, devices and therapeutics addressing unmet medical needs. During 2017, the Company merged with Essentialis, Inc (Essentialis) and subsequently received stockholder approval to amend its Amended and Restated Certificate of Incorporation to change its name from “Capnia, Inc.” to “Soleno Therapeutics, Inc.”. Essentialis was a privately held clinical-stage company focused on the development of breakthrough medicines for the treatment of rare diseases where there is increased mortality and risk of cardiovascular and endocrine complications. After the merger, the Company’s primary focus has been the development and commercialization of novel therapeutics for the treatment of rare diseases and the Company divested all prior business efforts.

Note 2. Going Concern and Management’s Plans

The Company had a net loss of $16.8 million during the six months ended June 30, 2023 and has an accumulated deficit of $254.3 million at June 30, 2023 resulting from having incurred losses since its inception. The Company had $19.4 million of cash and cash equivalents on hand at June 30, 2023 and used $12.3 million of cash in its operating activities during the six months ended June 30, 2023.

The accompanying condensed consolidated financial statements have been prepared under the assumption the Company will continue to operate as a going concern, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts of liabilities that may result from uncertainty related to the Company’s ability to continue as a going concern.

The Company expects to continue incurring losses for the foreseeable future and will be required to raise additional capital to complete its clinical trials, pursue product development initiatives, obtain regulatory approval and penetrate markets for the sale of its products. In December 2022, the Company entered into a Securities Purchase Agreement for up to $60.0 million in additional funding if certain conditions are met. We completed the closing of the sale and issuance of the warrants for $10.0 million in May 2023. The receipt of up to $50.0 million is contingent upon the exercise of the warrants and the future performance of the Company. As the remaining funds are contingent, under accounting principles generally accepted in the United States of America (GAAP), management is not able to consider them available when assessing the Company's ability to operate as a going concern. Management believes that the Company will continue to have access to capital resources through possible public or private equity offerings, debt financings, corporate collaborations or other means. However, access to such capital resources is uncertain and not assured. If the Company is unable to secure additional capital, it may be required to curtail its clinical trials and development of new products and take additional measures to reduce expenses in order to conserve its cash in amounts sufficient to sustain operations and meet its obligations. These measures could cause significant delays in the Company’s efforts to complete its clinical trials and commercialize its products, which are critical to the realization of its business plan and the future operations of the Company.

Management believes that the Company does not have sufficient capital resources to sustain operations through at least the next twelve months from the date of this filing. Additionally, in view of the Company’s expectation to incur significant losses for the foreseeable future it will be required to raise additional capital resources in order to fund its operations, although the availability of, and the Company’s access to such resources is not assured. Accordingly, management believes that there is substantial doubt regarding the Company’s ability to continue operating as a going concern through at least the next twelve months from the date of this filing.

7


 

Note 3. Basis of Presentation and Summary of Significant Accounting Policies

Significant Accounting Policies

There have been no material changes to the significant accounting policies during the three and six months ended June 30, 2023 as compared to the significant accounting policies described in Note 3 of the “Notes to Consolidated Financial Statements” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared on a going concern basis in accordance with GAAP for interim financial reporting and as required by Regulation S-X, Rule 10-01. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (including those which are normal and recurring) considered necessary for a fair presentation of the interim financial information have been included. When preparing financial statements in conformity with GAAP, the Company must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures at the date of the financial statements. Actual results could differ from those estimates. Additionally, operating results for the three and six months ended June 30, 2023, are not necessarily indicative of the results that may be expected for any other interim period or for the fiscal year ending December 31, 2023. For further information, refer to the financial statements and footnotes included in the Company’s annual financial statements for the fiscal year ended December 31, 2022, which are included in the Company’s annual report on Form 10-K filed with the SEC on March 22, 2023.

Reverse Stock Split

On August 26, 2022, the Company filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation in order to effectuate a reverse stock split of the Company’s issued and outstanding common stock on a one-for-fifteen basis. All common share and per share data are retrospectively restated to give effect of the split for all periods presented herein. After giving effect to the reverse stock split, the total number of shares of all classes of capital stock that the Corporation is authorized to issue is 110,000,000 shares, consisting of 100,000,000 shares of common stock, having a par value of $0.001 and