Sun BioPharma, Inc. filed 10-Q

Sun BioPharma, Inc. revealed 10-Q form on Tue, Aug 13.

Notes On June 30, 2019, all $2.2 million aggregate principal balance of Notes outstanding plus $105,000 of accrued interest was converted at a conversion rate of $3.50 per share of common stock into 651,758 shares of common stock per the terms of the Notes. The Notes were issued in December 2018 and January 2019 and bore interest at a rate of 10.0% per year. Both the relative value of the Warrants and the beneficial conversion feature of the Notes were recorded as a debt discount at the times the Notes were sold which was presented as a direct deduction from the carrying value of the Notes. The discount was fully amortized through interest expense immediately prior to the conversion on June 30, 2019. Term debt Effective April 5, 2019 the terms of our unsecured loan (the ‘Term Debt’) payable to the Institute for Commercialization of Public Research, Inc. (the ‘Institute’) were amended to extend the maturity date from May 1, 2019 to December 31, 2019. The Institute agreed to the amendment in exchange for a warrant to purchase 5,555 shares of common stock at an exercise price of $4.50. The warrant expires five years from issuance. The fair market value of the warrant was nominal and as such has not been given any accounting treatment. The amendment requires the continuation of monthly payments of principal and interest totaling $10,000. The unpaid principal balance at June 30, 2019 was $232,000. Unsecured Promissory Notes On May 17, 2019 the Company executed an unsecured promissory note with a vendor that relieved the Company’s immediate obligation to pay the outstanding vendor invoices. The outstanding vendor invoices totaling approximately $742,000 were removed from the Company’s accounts payable as consideration for the promissory note. The promissory note is unsecured, does not bear interest and the balance is payable in full on the earlier of (1) December 31, 2020 or (2) the date the Company’s stock is registered on a national exchange.

On June 30, 2019, all $2.2 million aggregate principal balance of Notes outstanding plus $105,000 of accrued interest was converted at a conversion rate of $3.50 per share of common stock into 651,758 shares of common stock per the terms of the Notes. The Notes were issued in December 2018 and January 2019 and bore interest at a rate of 10.0% per year. Both the relative value of the Warrants and the beneficial conversion feature of the Notes were recorded as a debt discount at the times the Notes were sold which was presented as a direct deduction from the carrying value of the Notes. The discount was fully amortized through interest expense immediately prior to the conversion on June 30, 2019.

In August 2015, the U.S. FDA granted an Investigational New Drug (‘IND’) approval for our SBP-101 product candidate. From January 2016 through September 2017, we enrolled twenty-nine patients into six cohorts, or groups, in the dose-escalation phase of a Phase 1 safety trial and published results in the Spring of 2018. The Company’s second trial, a Phase 1a/1b combination of SBP-101 with gemcitabine and nab-paclitaxel in patients previously untreated for metastatic pancreatic ductal adenocarcinoma (‘PDA’), began dosing patients in June of 2018. The Phase 1a portion of this study will have a total of 3 dosing levels, cohorts, and determine a recommended dose of SBP-101 to be given in combination with standard treatment. The Company completed enrollment of an expanded cohort 2 during the quarter ended June 30, 2019. Following review by the Data Safety Monitoring Board (‘DSMB’) of cohort 2 data, approval was received to advance to the third and final planned dose level of SBP-101. Enrollment in cohort 3 began in the middle of July 2019. Encouraging signals of efficacy were noted in the second cohort. Six of 6 subjects (100%) had significant decreases in Tumor Marker CA19-9 levels during treatment, with changes from baseline ranging from 75% to 95%. The CA19-9 level changes were accompanied by Response Evaluation Criteria in Solid Tumors (‘RECIST’) tumor assessments of 4 partial responses and 2 subjects with stable disease. Subsequent to the review of cohort 2 data by the DSMB a new RECIST tumor assessment on one of the 6 subjects was moved from stable disease to partial response, resulting in interim efficacy RECIST tumor assessments of 5 partial responses and 1 subject with stable disease at dose level 2. The next phase is planned to be an expansion at the recommended dose of SBP-101 to guide SBP-101’s subsequent development for patients with PDA. We estimate that completion of our current Phase 1 clinical trial in PDA will require additional funding of approximately $4 to $8 million. Additional clinical trials will likely be required for FDA or other similar approvals if the results of the current clinical trial of our SBP-101 product candidate are positive. The cost and timing of additional clinical trials are highly dependent on the nature and size of the trials. However, it is estimated that the next steps in the approval process could cost between $25 and $30 million.

Our G&A expenses decreased 11.3% to $0.6 million in the second quarter of 2019 down from $0.7 million in the second quarter of 2018. G&A decreased 32.7% to $0.9 million in the six months ended June 30, 2019, down from $1.3 in the six months ended June 30, 2018. The decrease in the quarter ended June 30, 2019 is primarily associated with reduced headcount versus the same quarter in the prior year. For the six-months ended June 30, 2019 the decrease is due to a combination of lower salary expense and lower stock compensation expense.

Our R&D expenses increased 14.9% to $0.5 million in the second quarter of 2019 up from $0.4 million in the second quarter of 2018. R&D decreased 16.2% to $0.9 million in the six months ended June 30, 2019, down from $1.0 million in the six months ended June 30, 2018. The increase in the quarter ended June 30, 2019 was due primarily to incremental expenses associated with a preclinical study in a second indication and higher stock compensation expense. The decrease in the six-months ended June 30, 2019 was due primarily to reduced stock compensation expense.

Included in the $1.0 million of indebtedness is $232,000 outstanding in an unsecured loan that accrues interest of 4.125% per year and is scheduled to mature on December 31, 2019. In accordance with the terms of this loan we commenced monthly payments of $10,000 on May 1, 2018.

On June 30, 2019, we issued 651,758 shares of common stock upon the conversion of unsecured convertible promissory notes totaling approximately $2.3 million principal and accrued interest at a conversion rate of $3.50 per share per the terms of the notes. The notes provided for a mandatory conversion into common stock on the earlier of (1) June 30, 2019 or (2) the date the Company received gross proceeds of at least $6.0 million from the sale of equity securities (subject to certain exclusions) and bore interest at a rate of 10.0% per year.

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