Evoke Pharma(EVOK) - 2019 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Evoke Pharma reported a $4.1 million net loss for H1 2019, with cash at $7.4 million, facing 'going concern' and FDA challenges for Gimoti Condensed Balance Sheets Total assets increased to $7.6 million by June 30, 2019, driven by a rise in cash to $7.4 million, with equity at $6.3 million Condensed Balance Sheet Data (Unaudited) | Account | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $7,440,079 | $5,319,004 | | Total current assets | $7,561,369 | $5,648,222 | | Total assets | $7,631,164 | $5,659,773 | | Liabilities & Equity | | | | Total current liabilities | $1,285,018 | $1,634,453 | | Total stockholders' equity | $6,346,146 | $4,025,320 | | Total liabilities and stockholders' equity | $7,631,164 | $5,659,773 | Condensed Statements of Operations Net loss for Q2 2019 was $2.1 million, improving from $2.3 million in 2018, primarily due to lower R&D Operating Results (Unaudited) | Metric | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $1,205,599 | $1,388,791 | $1,952,481 | $2,774,157 | | General and administrative | $918,139 | $917,305 | $2,141,152 | $1,949,550 | | Loss from operations | ($2,123,738) | ($2,306,096) | ($4,093,633) | ($4,723,707) | | Net loss | ($2,114,096) | ($2,303,194) | ($4,079,362) | ($4,285,980) | | Net loss per share | ($0.09) | ($0.14) | ($0.20) | ($0.27) | Condensed Statements of Cash Flows Operating cash outflow improved to $3.6 million for H1 2019, with $5.7 million from financing leading to a $2.1 million net cash increase Cash Flow Summary for Six Months Ended June 30 (Unaudited) | Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | ($3,555,313) | ($4,579,708) | | Net cash provided by financing activities | $5,676,388 | $3,431,520 | | Net increase (decrease) in cash | $2,121,075 | ($1,148,188) | | Cash and cash equivalents at end of period | $7,440,079 | $6,531,079 | Notes to Condensed Financial Statements Notes detail Gimoti's FDA CRL, 'going concern' warning, Nasdaq delisting risk, and capital raised via ATM and NGP - The company's sole product candidate, Gimoti™, received a Complete Response Letter (CRL) from the FDA on April 1, 2019. The company plans to resubmit the New Drug Application (NDA) in the fourth quarter of 2019 after a Type A meeting with the FDA[22] - There is substantial doubt about the company's ability to continue as a going concern. Existing cash and cash equivalents of $7.4 million are expected to fund operations only into the second quarter of 2020[23] - On May 15, 2019, the company received a delisting notice from Nasdaq because its common stock bid price closed below the $1.00 minimum for 30 consecutive business days. The company has until November 11, 2019, to regain compliance[26] - During the first six months of 2019, the company sold 6,686,423 shares of common stock through its at-the-market (ATM) program, receiving net proceeds of approximately $5.7 million[41] - The company entered into a commercial services agreement with NGP for the commercialization of Gimoti. Upon FDA approval, NGP will provide a working capital loan and a line of credit of up to $5.0 million[47] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Gimoti's FDA CRL, reduced R&D, and critical liquidity issues, with cash projected only into Q2 2020 Comparison of Operating Expenses (Six Months Ended June 30) | Expense Category | 2019 | 2018 | Change | | :--- | :--- | :--- | :--- | | Research & Development | $1,952,481 | $2,774,157 | ($821,676) | | General & Administrative | $2,141,152 | $1,949,550 | $191,602 | - R&D expenses decreased by approximately $822,000 for the six months ended June 30, 2019, compared to 2018, as costs shifted from NDA preparation to responding to the FDA's CRL and manufacturing registration batches[70] - The company's ability to raise capital via its Form S-3 shelf registration is limited by 'baby shelf rules' because its public float is below $75 million. As of July 31, 2019, the company could only raise an additional $1.7 million under this facility[74] - Management concluded there is substantial doubt about the company's ability to continue as a going concern, with cash sufficient to fund operations only into Q2 2020, requiring additional funding to continue operations[74][57] Item 3. Quantitative and Qualitative Disclosures about Market Risk No material changes in market risk have occurred since the company's 2018 Annual Report on Form 10-K - There have been no material changes in market risk since the company's 2018 Annual Report on Form 10-K[81] Item 4. Controls and Procedures Management concluded disclosure controls were effective as of June 30, 2019, with no material changes in internal controls - The company's management concluded that disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2019[82] - No changes in internal control over financial reporting occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal controls[83] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently a party to any material legal proceedings - As of the report date, the company is not involved in any material legal proceedings[86] Item 1A. Risk Factors The company faces significant risks: Gimoti's uncertain FDA approval, 'going concern' doubt from recurring losses, funding needs, and Nasdaq delisting risk Risks Related to Business and Regulatory Approval The company's success hinges entirely on Gimoti's uncertain FDA approval following a CRL, requiring issue resolution and third-party commercialization - The business is entirely dependent on the success of Gimoti, which received a Complete Response Letter (CRL) from the FDA, making its approval uncertain[87] - The company plans to resubmit the Gimoti NDA in Q4 2019, but the FDA may determine the resubmission is inadequate or require additional clinical trials[87][93] - The company has no internal sales, marketing, or distribution capabilities and will rely on NGP and other third parties for the commercialization of Gimoti, if approved[95] Risks Related to Financial Position and Capital Needs Recurring losses raise 'going concern' doubt, requiring significant additional capital constrained by market conditions and 'baby shelf rules' - Recurring losses from operations have raised substantial doubt about the company's ability to continue as a going concern[98] - The company will require substantial additional capital to fund operations, respond to the FDA's CRL, and prepare for potential commercialization of Gimoti[99] - The company's ability to raise capital through its ATM facility is limited to one-third of its public float (approx. $1.7 million as of July 31, 2019) due to SEC 'baby shelf rules'[101] Risks Related to Nasdaq Listing The company faces Nasdaq delisting risk due to its stock price falling below the $1.00 minimum bid, with a November 11, 2019 deadline - The company received a delisting notice from Nasdaq for its stock price falling below the $1.00 minimum requirement and must regain compliance by November 11, 2019[102] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - None Item 4. Mine Safety Disclosure This item is not applicable to the company - Not applicable Item 5. Other Information The company reported no other information - None Item 6. Exhibits This section lists exhibits filed with the quarterly report, including corporate documents and officer certifications