Virios Therapeutics(VIRI) - 2021 Q1 - Quarterly Report

Part I: Financial Information Financial Statements The company presents its unaudited interim balance sheets, operations, equity, and cash flow statements Condensed Balance Sheets Total assets decreased to $28.3 million, primarily driven by a reduction in cash from the prior year-end Condensed Balance Sheet Highlights (Unaudited) | Balance Sheet Item | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Cash | $24,585,560 | $29,795,366 | | Total Current Assets | $28,274,537 | $31,472,731 | | Total Liabilities | $1,167,294 | $1,531,842 | | Total Stockholders' Equity | $27,107,243 | $29,940,889 | | Total Liabilities and Stockholders' Equity | $28,274,537 | $31,472,731 | Condensed Statements of Operations The company reported no revenue and a net loss of $3.1 million, a significant increase from the prior year Statement of Operations Summary (Unaudited) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Revenue | $0 | $0 | | Research and development | $1,706,957 | $30,539 | | General and administrative expenses | $1,350,476 | $352,014 | | Loss from operations | ($3,057,433) | ($382,553) | | Net loss | ($3,056,033) | ($466,553) | | Basic and diluted net loss per share | ($0.37) | ($0.10) | Condensed Statements of Cash Flows Net cash used in operations was $5.1 million, leading to a period-end cash balance of $24.6 million Cash Flow Summary (Unaudited) | Cash Flow Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($5,112,202) | ($277,379) | | Net cash (used in) provided by financing activities | ($97,604) | $1,162,500 | | Net (decrease) increase in cash | ($5,209,806) | $885,121 | | Cash, end of period | $24,585,560 | $1,194,505 | Notes to Condensed Financial Statements Notes detail the company's focus on IMC-1, its recent IPO, and management's view on its cash runway - The company is a pre-revenue, clinical-stage biotechnology company developing IMC-1, a novel fixed-dose combination of famciclovir and celecoxib, to treat fibromyalgia by suppressing the Herpes Simplex Virus-1 (HSV-1)[23] - In December 2020, the company completed its IPO, selling 3,450,000 shares at $10.00 per share, generating gross proceeds of $34.5 million and net proceeds of approximately $31.1 million[25] - Despite a history of net losses and an accumulated deficit of approximately $31.0 million as of March 31, 2021, management believes that cash from the recent IPO is sufficient to fund operations for at least the next 12 months[27][28] - During Q1 2021, the company granted 62,734 stock options to employees and recognized share-based compensation expense of $24,825[52][53] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses its focus on the IMC-1 clinical trial, rising expenses, and its liquidity position Overview The company is advancing its lead candidate IMC-1 for fibromyalgia following its recent IPO - The lead product, IMC-1, is a novel combination of famciclovir and celecoxib designed to suppress Herpes Simplex Virus-1 (HSV-1) activation and replication, a potential cause of FM[65][66] - The company is preparing to execute its Phase 2b clinical trial in FM, named the FORTRESS study, which is planned to enroll approximately 460 patients[67][68] - A collaboration has been initiated with Dr. Michael Camilleri at the Mayo Clinic to explore the potential of antiviral therapy in managing Irritable Bowel Syndrome (IBS)[69] Results of Operations Operating expenses rose sharply to $3.1 million, driven by increased R&D and G&A costs Operating Expenses Comparison (Unaudited) | Expense Category | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Research and development | $1,706,957 | $30,539 | | General and administrative | $1,350,476 | $352,014 | | Total operating expenses | $3,057,433 | $382,553 | - The $1.68 million increase in R&D expenses was primarily due to costs for clinical trials ($0.83M), toxicology studies ($0.34M), salaries ($0.27M), and drug development ($0.24M)[74] - The $1.0 million increase in G&A expenses was driven by higher salaries and compensation ($0.2M), legal and accounting fees ($0.3M), and other public company costs ($0.6M)[75] Liquidity and Capital Resources The company holds $24.6 million in cash, which is deemed sufficient to fund operations through 2022 - The principal source of liquidity is cash, which totaled $24.6 million as of March 31, 2021[76] - The company's IPO in December 2020 raised net proceeds of approximately $31.1 million[79] - Current cash is estimated to be sufficient to fund operations through the end of 2022, which includes completing the Phase 2b clinical trial for IMC-1 and planning for a Phase 3 study[81] Cash Flow Summary | Cash Flow Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(5,112,202) | $(277,379) | | Net cash (used in) provided by financing activities | $(97,604) | $1,162,500 | | (Decrease) increase in cash | $(5,209,806) | $885,121 | Quantitative and Qualitative Disclosures About Market Risk The company is exempt from this disclosure as a smaller reporting company - As a smaller reporting company, Virios Therapeutics is not required to provide this disclosure[92] Controls and Procedures Disclosure controls were deemed ineffective due to a material weakness in internal financial reporting controls - Management concluded that disclosure controls and procedures were not effective as of the end of the reporting period[94] - A material weakness in internal control over financial reporting exists due to a lack of effective segregation of duties, financial statement reporting, and general technology controls[95] - Remediation efforts initiated in April 2021 include contracting with a third party for controller assistance and implementing a Delegation of Authority Policy to improve segregation of duties[96] Part II: Other Information Legal Proceedings The company is not currently involved in any material legal proceedings - The company does not currently have any pending litigation that it believes to be material[100] Risk Factors The company is exempt from this disclosure as a smaller reporting company - As a smaller reporting company, Virios Therapeutics is not required to provide this disclosure[101] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds were reported for the period - None reported for the period[102] Defaults Upon Senior Securities No defaults upon senior securities were reported during the period - None reported[103] Mine Safety Disclosures This disclosure is not applicable to the company's operations - Not applicable[104] Other Information No other material information was required to be disclosed for the period - None reported[105] Exhibits This section lists all exhibits filed with the report, including certifications and XBRL data - The Exhibit Index lists documents filed with the report, including the Certificate of Incorporation, Bylaws, CEO/CFO certifications (302 and 906), and XBRL data files[109]