Unicycive(UNCY) - 2024 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The company's financial position strengthened due to a recent financing, driving a Q2 net income of $9.86 million Balance Sheets Total assets grew to $44.7 million, primarily from a cash increase, while liabilities decreased due to a lower warrant liability Balance Sheet Comparison (in thousands) | Account | Dec 31, 2023 | June 30, 2024 (Unaudited) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $9,701 | $41,780 | | Total current assets | $13,399 | $44,054 | | Total assets | $14,191 | $44,701 | | Liabilities & Equity | | | | Warrant liability | $13,134 | $8,131 | | Total liabilities | $18,000 | $13,360 | | Mezzanine equity | - | $46,187 | | Total stockholders' deficit | ($3,809) | ($14,846) | | Total liabilities and stockholders' deficit | $14,191 | $44,701 | Statements of Operations A significant positive change in warrant liability fair value drove a Q2 2024 net income of $9.86 million, despite rising operating expenses Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2023 | Q2 2024 | H1 2023 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Licensing revenues | $- | $- | $675 | $- | | Research and development | $2,267 | $4,868 | $5,297 | $11,681 | | General and administrative | $2,055 | $2,533 | $3,902 | $4,925 | | Loss from operations | ($4,322) | ($7,401) | ($8,524) | ($16,606) | | Change in fair value of warrant liability | $282 | $16,810 | ($10,093) | $5,002 | | Net income (loss) | ($3,838) | $9,855 | ($18,413) | ($11,108) | | Net income (loss) per share, basic | ($0.29) | $0.08 | ($1.26) | ($0.34) | Statements of Cash Flows Financing activities provided $44.9 million in cash, offsetting increased operational cash use and resulting in a net cash increase of $32.1 million Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2023 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($9,422) | ($12,775) | | Net cash used in investing activities | ($12) | ($26) | | Net cash provided by financing activities | $27,797 | $44,880 | | Net increase in cash and cash equivalents | $18,363 | $32,079 | | Cash and cash equivalents at end of period | $18,818 | $41,780 | Notes to Financial Statements The notes detail drug development programs, an accumulated deficit of $75.6 million, and the impact of a recent $50 million financing - The company is developing UNI 494 for acute kidney injury and Renazorb for hyperphosphatemia in Chronic Kidney Disease (CKD) patients[12] - As of June 30, 2024, the company had an accumulated deficit of $75.6 million and expects to continue incurring losses; however, management believes it has sufficient resources to continue operations for at least one year[15][18] - In March 2024, the company raised $50 million in gross proceeds through a private placement of Series B Convertible Preferred Stock, receiving net proceeds of $46.2 million[17] - A subsequent event occurred on July 5, 2024, when the company completed the automatic conversion of its Series B-1 convertible preferred stock into a combination of common stock and Series B-2 preferred stock[154] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management highlights rising R&D expenses for its kidney disease treatments and confirms sufficient capital for the next year following a recent financing Results of Operations Operating expenses increased significantly in H1 2024, with R&D costs growing 121% due to higher drug development activities Comparison of Operating Expenses for Three Months Ended June 30 (in thousands) | Expense Category | 2023 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $2,267 | $4,868 | $2,601 | 115% | | General and administrative | $2,055 | $2,533 | $478 | 23% | Comparison of Operating Expenses for Six Months Ended June 30 (in thousands) | Expense Category | 2023 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $5,297 | $11,681 | $6,384 | 121% | | General and administrative | $3,902 | $4,925 | $1,023 | 26% | - The increase in R&D expenses for H1 2024 was primarily due to a $5.8 million increase in drug development costs[183] Liquidity and Capital Resources The company maintains liquidity through equity financing, including a recent $50 million placement, ensuring sufficient capital for at least one year - The company secured $50 million in gross proceeds from a private placement of Series B Convertible Preferred Stock in March 2024[186] - Management believes that based on the current level of expenditures, the company has sufficient resources to continue operations for at least one year after the date the financial statements are issued[189] Summary of Cash Flows for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2023 | 2024 | | :--- | :--- | :--- | | Operating activities | ($9,422) | ($12,775) | | Investing activities | ($12) | ($26) | | Financing activities | $27,797 | $44,880 | Critical Accounting Policies, Significant Judgments and Use of Estimates Key accounting policies involve significant judgment, particularly in the classification of equity instruments and the fair value measurement of warrant liabilities - The company classifies its Series A-1 and B-1 Preferred Stock as temporary (mezzanine) equity because they are contingently redeemable upon events not solely within the company's control[201] - Warrants are accounted for as liabilities and remeasured at fair value each reporting period, with changes recognized in earnings; the valuation uses Level 3 inputs, involving significant management estimates[202] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The company is exempt from market risk disclosure requirements as a smaller reporting company - The company is exempt from this disclosure requirement due to its status as a smaller reporting company[211] ITEM 4. CONTROLS AND PROCEDURES Management concluded that disclosure controls were ineffective due to a material weakness in financial reporting, with a remediation plan underway - Management concluded that disclosure controls and procedures were not effective as of the end of the period[212] - A material weakness was identified due to an insufficient number of professionals with appropriate accounting knowledge, training, and experience, leading to inadequate segregation of duties and formal controls[213] - The remediation plan includes increasing accounting personnel and engaging third-party experts, with an expected completion by the end of 2024[215][216] PART II – OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The company is not currently involved in any material legal proceedings - As of June 30, 2024, the company reports no material legal proceedings[219] ITEM 1A. RISK FACTORS No material changes have been reported to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes to risk factors were reported since the last Form 10-K filing[220] ITEM 6. EXHIBITS This section lists filed exhibits, including an amended manufacturing agreement and required officer certifications - Key exhibits filed include the First Amendment to the Manufacturing and Supply Agreement with Shilpa Medicare Ltd, dated June 25, 2024[221]