You should read the following discussion of our financial condition and results of operations together with the unaudited interim condensed consolidated financial statements and the notes thereto included elsewhere in this report and other financial information included in this report. The following discussion may contain predictions, estimates and other forward looking statements that involve a number of risks and uncertainties, including those discussed under “Part I — Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Special Note Regarding Forward Looking Statements” in this report and under “Part I — Item 1A. Risk Factors” in our annual report on Form 10-K for the fiscal year ended December 31, 2018. These risks could cause our actual results to differ materially from any future performance suggested below.

Business Overview

We are a clinical stage biotechnology company developing new treatments for life-threatening conditions by improving the body’s ability to bring oxygen to the areas where it is needed most. We are developing our lead product candidate, transcrocetinate sodium, also known as trans sodium crocetinate (“TSC”), for use in those life-threatening conditions in which cellular oxygen deprivation (“hypoxia”) is the basis for significant unmet medical needs. TSC is designed to safely and selectively target and re-oxygenate the micro-environment of hypoxic cells, and can potentially be used in many indications, including stroke, oncology and cardiovascular disease. In stroke, TSC helps promote the diffusion of oxygen into those brain cells in which oxygen-deprivation causes neuronal death resulting in patient mortality or morbidity. In cancer, TSC re-oxygenates treatment-resistant cancerous tissue, making the cancer cells up to three times more susceptible to the therapeutic effects of standard-of-care radiation therapy and chemotherapy.

A range of tissue types, including both normal and cancerous cells, has been shown to be safely re-oxygenated in our preclinical and clinical studies using TSC’s novel mechanism of action. We believe TSC’s ability to re-oxygenate normal tissue that has become oxygen-deprived provides opportunities for new therapeutic approaches to conditions ranging from stroke and emergency medicine to cardiovascular and neurodegenerative diseases. In oncology, we believe TSC’s therapeutic potential is not limited to one specific tumor type, thereby making it potentially useful to improve standard-of-care treatments in many life-threatening cancers. Given TSC's safety profile and animal data, we could, with appropriate funding, move directly into Phase 2 studies for TSC in many such cancers. The successful completion of trials for TSC or any other potential product candidate in these or any other indication is dependent upon our ability to further raise necessary capital.

We believe that TSC has potential applications in stroke and emergency medicine. A Phase 2 trial in cooperation with UCLA and the University of Virginia to test TSC in the treatment of acute stroke has received approval for enrollment by the FDA. We enrolled our first patient in the study in October of 2019. This trial, which will feature in-ambulance dosing of TSC, is named the PreHospital Acute Stroke Therapy - TSC (PHAST - TSC) and is expected to enroll 160 patients, with 80 in the treatment arm and 80 in the control arm. We believe in-ambulance dosing of TSC could significantly cut the time in which the stroke-related oxygen deprivation to brain cells goes untreated, potentially leading to a better outcome for stroke victims treated in this manner. Subject to receipt of adequate funding to support the PHAST – TSC trial, we expect to receive data readout during the first half of 2021.

Our primary oncology program targets TSC against treatment-resistant brain cancer. A Phase 2 clinical program, completed in the second quarter of 2015, evaluated 59 patients with newly diagnosed glioblastoma multiforme (“GBM”), a particularly deadly form of primary brain cancer. GBM affects approximately 12,000 patients annually in the United States and approximately 35,000 patients annually worldwide. This open label, historically controlled study demonstrated a favorable safety and efficacy profile for TSC when combined with GBM’s standard of care, including a 37% improvement in overall survival over the control group at two years. A particularly strong efficacy signal was seen in the inoperable patients, where survival of TSC-treated patients at two years was increased by almost four-fold over the controls. In December 2017, the Company initiated the INvestigation of TSC Against Cancerous Tumors (INTACT) Phase 3 trial in the newly diagnosed inoperable GBM patient population. The trial is designed to enroll 236 patients in total, with 118 in the treatment arm and 118 in the control arm.

The trial began with an open label 8 patient safety run-in for which enrollment has completed and is now closed. With the FDA’s permission, a total of 19 patients were enrolled to ensure 8 complete data sets. The INTACT Trial Data Safety Monitoring Board (DSMB) met in the third quarter of 2019 and recommended that the study be continued. The DSMB concluded that no adverse safety signal had been observed, and unanimously recommended continuing the study as planned using the highest tested dose of TSC – 1.5 mg/kg – during the adjuvant treatment chemotherapy period with temozolomide. Commencement of enrollment in the randomization portion of the INTACT Phase 3 Trial is contingent upon our entering into a strategic partnership providing the necessary resources to undertake the full trial.

In addition to the TSC programs, we are exploring alternatives regarding how best to capitalize upon our product candidate RES-529, which may include possible out-licensing and other options. RES-529 is a novel PI3K/Akt/mTOR pathway inhibitor which has completed two Phase 1 clinical trials for age-related macular degeneration and was in preclinical development in oncology. RES-529 has shown activity in both in vitro and in vivo glioblastoma animal models and has been demonstrated to be orally bioavailable and capable of crossing the blood-brain barrier.

Financial Summary

In May 2019, we completed a registered direct public offering of 1,317,060 shares of Common Stock and a private placement of warrants to purchase 1,317,060 shares of Common Stock. The shares of Common Stock and warrants were sold for a combined purchase price of $4.895 for total net proceeds of $5.6 million. The warrants are exercisable beginning on the date of their issuance until November 29, 2024 at an initial exercise price equal to $5.00. In addition, at the closing of such offering, the Company issued warrants to purchase up to 65,853 shares of Common Stock to designees of the placement agent. The placement agent’s warrants have an exercise price of $6.11875 per share, a term of five years from the date of issuance and otherwise substantially similar terms to the form of the investor warrant.

At September 30, 2019, we had cash and cash equivalents of $6.1 million. We have incurred operating losses since inception, have not generated any product revenue and have not achieved profitable operations. We incurred net losses of $2.8 million and $8.0 million for the three and nine months ended September 30, 2019, respectively. Our accumulated deficit as of September 30, 2019 was $88.0 million, and we expect to continue to incur substantial losses in future periods. We anticipate that our operating expenses will increase substantially as we continue to advance our lead, clinical-stage product candidate, TSC. We anticipate that our expenses will substantially increase as we:

We intend to use our existing cash and cash equivalents for working capital and to fund the research and development of TSC. We believe that our cash and cash equivalents as of September 30, 2019 will enable us to fund our operating expenses and capital expenditure requirements into the first quarter of 2020. However, we will need to secure additional funding in the future, from one or more equity or debt financings, collaborations, or other sources, in order to carry out all of our planned research and development activities with respect to TSC and our other product candidates.

Financial Operations Overview

Revenues

We have not yet generated any revenue from product sales. We do not expect to generate revenue from product sales for the foreseeable future.

Research and Development Expense

Research and development costs are charged to expense as incurred. These costs include, but are not limited to, expenses related to third-party contract research arrangements, employee-related expenses, including salaries, benefits, stock-based compensation and travel expense reimbursement. Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.

General and Administrative Expense

General and administrative expenses consist principally of salaries and related costs for executive and other personnel, including stock-based compensation, expenses associated with investment bank and other financial advisory services, and travel expenses. Other general and administrative expenses include professional fees, facility-related costs, communication expenses and professional fees for legal, patent prosecution and maintenance, and consulting and accounting services.

Goodwill Impairment Expense

Goodwill impairment expense relates to a non-cash impairment charge recognized to write-down goodwill due to the fact the Company's carrying value of equity exceeded its fair value throughout the third quarter of 2018.

Interest Income

Interest income consists of interest earned from our cash and cash equivalents.

Income Tax Benefit

Since inception, we had incurred net losses and until 2018, we had not recorded any U.S. federal or state income tax benefits for the losses as they had been offset by valuation allowances. As a result of the change in net operating loss carryforward period associated with the Tax Cuts and Jobs Act (“the 2017 Tax Act”), we recognize income tax benefit to reflect the adjustment allowed by the 2017 Tax Act to utilize indefinite deferred tax liabilities as a source of income against indefinite-lived portions of our deferred tax assets.

Results of Operations for Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018

The following table sets forth our results of operations for the three months ended September 30, 2019 and 2018.

We recognized $1.7 million in research and development expenses during the three months ended September 30, 2019 compared to $1.2 million during the three months ended September 30, 2018. The increase in research and development expense was attributable to a $0.6 million increase in expense related to the commencement of our Phase 2 stroke trial and an increase in manufacturing expense of $0.2 million, offset by a decrease of $0.2 million in expense related to our Phase 3 GBM trial and a $0.1 million decrease in salary and other expenses.

General and administrative expenses were $1.3 million during the three months ended September 30, 2019 compared to $1.6 million during the three months ended September 30, 2018. Salaries and wages decreased by $0.2 million and stock compensation expense decreased by $0.2 million. These amounts were partially offset by an increase in insurance and other costs of $0.1 million.

We recognized a non-cash goodwill impairment charge of $4.2 million during the three months ended September 30, 2018 as a result of a sustained decrease in our market capitalization during the third quarter of 2018.

As a result of the change in net operating loss carryforward period associated with the 2017 Tax Act, the Company recognized an income tax benefit of $0.2 million to reflect the utilization of indefinite deferred tax liabilities as a source of income against indefinite-lived portions of our deferred tax assets.

We recognized $5.0 million in research and development expenses during the nine months ended September 30, 2019 compared to $4.4 million during the nine months ended September 30, 2018. The increase in research and development expense was attributable to a $1.6 million increase in expense related to the commencement of our Phase 2 stroke trial and an increase in manufacturing expense of $0.2 million, offset by a decrease of $1.2 million in expense related to our Phase 3 GBM trial.

General and administrative expenses were $3.6 million during the nine months ended September 30, 2019 compared to $4.7 million during the nine months ended September 30, 2018. The decrease in general and administrative expense was primarily due to a $0.6 million decrease in stock-based compensation expense, a $0.4 million decrease in salaries and wages and a $0.1 million decrease in professional fees and other expense.

We recognized a non-cash goodwill impairment charge of $4.2 million during the nine months ended September 30, 2018 as a result of a sustained decrease in our market capitalization during the third quarter of 2018.

As a result of the change in net operating loss carryforward period associated with the 2017 Tax Act, we recognized an income tax benefit of $0.5 million during both the nine months ended September 30, 2019 and 2018 to reflect the utilization of indefinite deferred tax liabilities as a source of income against indefinite-lived portions of our deferred tax assets.

Liquidity and Capital Resources

Working Capital

To date, we have funded our operations primarily through the issuance and sale of common stock and warrants, convertible debt and convertible preferred stock. In May 2019, we completed a registered direct public offering of 1,317,060 shares of Common Stock and a private placement of warrants to purchase 1,317,060 shares of Common Stock. The shares of Common Stock and warrants were sold for a combined purchase price of $4.895 for total net proceeds of $5.6 million. The warrants are exercisable beginning on the date of their issuance until November 29, 2024 at an initial exercise price equal to $5.00.

As of September 30, 2019, we had $6.1 million in cash and cash equivalents, working capital of $5.5 million and an accumulated deficit of $88.0 million. We expect to continue to incur net losses for the foreseeable future. We intend to use our existing cash and cash equivalents to fund our working capital and research and development of our product candidates.

Operating Activities

Net cash used in operating activities of $7.4 million during the nine months ended September 30, 2019 was primarily attributable to our net loss of $8.0 million and our change in deferred income taxes of $0.5 million. These amounts were offset by our net change in operating assets and liabilities of $0.7 million, $0.4 million in stock-based compensation expense, and $0.1 million in depreciation expense. The net change in our operating assets and liabilities is primarily attributable to the decrease in our prepaid expenses, deposits and other current assets and an increase in accounts payable.

Net cash used in operating activities of $7.7 million during the nine months ended September 30, 2018 was primarily attributable to our net loss of $12.8 million and a change in deferred income taxes of $0.5 million. This amount was offset by the recognition of a $4.2 million non-cash impairment charge to goodwill, $1.0 million in stock-based compensation expense, our net change in operating assets and liabilities of $0.3 million and $0.1 million of depreciation expense. The net change in our operating assets and liabilities is primarily attributable to the decrease in our prepaid expenses, deposits and other current assets.

Financing Activities

Net cash provided by financing activities was $5.6 million during the nine months ended September 30, 2019, which was attributable to the $5.7 million in proceeds received upon the sale of our Common Stock and warrants, offset by approximately $0.2 million in payments for related offering costs.

Net cash provided by financing activities was $9.9 million during the nine months ended September 30, 2018, which was attributable to the $10.8 million in proceeds received upon the sale of our Common Stock, offset by approximately $0.4 million in payments for additional related offering costs. During the nine months ended September 30, 2018, we repaid the outstanding balance of our convertible debt in the amount of approximately $0.6 million.

Capital Requirements

We expect to continue to incur substantial expenses and generate significant operating losses as we continue to pursue our business strategy of developing our lead product candidate, TSC, for use in the treatment of GBM, stroke and other hypoxia related indications. Our operations have consumed substantial amounts of cash since inception. We expect to continue to spend substantial amounts of cash to advance the clinical development of our product candidates. At the current time, the bulk of our cash resources for clinical development is dedicated to the Phase 2 trial for TSC in acute stroke. While we believe we have adequate cash resources to continue operations into the first quarter of 2020, we will need to raise additional funds in order to complete these trials. We do not expect to commence any clinical trials beyond these trials unless we are able to raise additional capital, enter into strategic collaborations, or make alternative financing arrangements for any such trials. To date, we have funded our ongoing business operations and short-term liquidity needs, primarily through the sale and issuance of preferred stock, common stock and convertible debt. We expect to continue this practice for the foreseeable future, however, we may enter into strategic partnerships or transactions in order to fund our ongoing capital requirements.

As of September 30, 2019, we did not have credit facilities under which we could borrow funds or any other sources of committed capital. We may seek to raise additional funds through various sources, such as equity and debt financings, or through strategic collaborations and license agreements. We can give no assurances that we will be able to secure additional sources of funds to support our operations, or if such funds are available to us, that such additional financing will be sufficient to meet our needs or be on terms acceptable to us. This risk may increase if economic and market conditions deteriorate. If we are unable to obtain additional financing when needed, we may need to terminate, significantly modify or delay the development of our product candidates and our operations, or we may need to obtain funds through collaborators that may require us to relinquish rights to our technologies or product candidates that we might otherwise seek to develop or commercialize independently. If we are unable to raise any additional capital in the near-term and/or we cannot significantly reduce our expenses and are forced to terminate our operations, investors may experience a complete loss of their investment.

To the extent that we raise additional capital through the sale of our common stock, the interests of our current stockholders may be diluted. If we issue additional preferred stock or convertible debt securities, it could affect the rights of our common stockholders or reduce the value of our common stock or any outstanding classes of preferred stock. In particular, specific rights granted to future holders of preferred stock or convertible debt securities may include voting rights, preferences as to dividends and liquidation, conversion and redemption rights, sinking fund provisions, and restrictions on our ability to merge with or sell our assets to a third party. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through strategic collaborations in the future, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates or grant licenses.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, as defined by the rules and regulations of the SEC that have or are reasonably likely to have a material effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources. As a result, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these arrangements.

Critical Accounting Policies

The Critical Accounting Policies included in our Form 10-K for the year ended December 31, 2018, filed with the SEC pursuant to Section 13 or 15(d) under the Securities Act on March 19, 2019 have not changed.

Special Note Regarding Forward-Looking Statements

This report includes forward-looking statements. We may, in some cases, use terms such as “believes,” “estimates,” “anticipates,” “expects,” “plans,” “intends,” “may,” “could,” “might,” “will,” “should,” “approximately” or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements. Forward-looking statements appear in a number of places throughout this Quarterly Report and include statements regarding our intentions, beliefs, projections, outlook, analyses or current expectations concerning, among other things, our ongoing and planned preclinical development and clinical trials, the timing of and our ability to make regulatory filings and obtain and maintain regulatory approvals for our product candidates, our intellectual property position, the degree of clinical utility of our products, particularly in specific patient populations, our ability to develop commercial functions, expectations regarding clinical trial data, our results of operations, cash needs, financial condition, liquidity, prospects, growth and strategies, the industry in which we operate and the trends that may affect the industry or us.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events, competitive dynamics and industry change, and depend on the economic circumstances that may or may not occur in the future or may occur on longer or shorter timelines than anticipated. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Quarterly Report. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report, they may not be predictive of results or developments in future periods.

Actual results could differ materially from our forward-looking statements due to a number of factors, including risks related to:

You should also read carefully the factors described in the “Risk Factors” section of our Annual Report on Form 10-K filed with the SEC on March 19, 2019, as amended, and elsewhere in our public filings to better understand the risks and uncertainties inherent in our business and underlying any forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements contained or incorporated by reference in this Quarterly Report on Form 10-Q will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all.

Any forward-looking statements that we make in this Quarterly Report speak only as of the date of such statement, and, except as required by applicable law, we undertake no obligation to update such statements to reflect events or circumstances after the date of this Quarterly Report or to reflect the occurrence of unanticipated events. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.