First Wave BioPharma(FWBI) - 2019 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Consolidated Financial Statements The company reported a Q1 2019 net loss of $4.66 million and faces a 'going concern' uncertainty due to significant operating losses Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Items | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Cash | $413,858 | $1,114,343 | | Total Current Assets | $2,803,542 | $4,800,001 | | Total Assets | $8,956,510 | $7,469,395 | | Total Current Liabilities | $5,756,693 | $2,995,523 | | Total Liabilities | $6,243,185 | $2,995,523 | | Total Stockholders' Equity | $2,713,325 | $4,473,872 | Consolidated Statement of Operations (Unaudited) | Statement of Operations | Three Months Ended 03/31/19 | Three Months Ended 03/31/18 | | :--- | :--- | :--- | | Research and development expenses | $2,118,533 | $1,678,029 | | General and administrative expenses | $2,485,111 | $1,916,333 | | Loss from operations | ($4,603,644) | ($3,584,362) | | Net loss | ($4,660,755) | ($3,632,997) | | Loss per share - basic and diluted | ($0.26) | ($0.29) | Consolidated Statement of Cash Flows (Unaudited) | Cash Flow Activities | Three Months Ended 03/31/19 | Three Months Ended 03/31/18 | | :--- | :--- | :--- | | Net cash used in operating activities | ($2,627,797) | ($2,214,267) | | Net cash used in investing activities | ($13,352) | ($29,521) | | Net cash provided by financing activities | $1,967,142 | $2,245,701 | - The company has incurred significant operating losses, had negative working capital of approximately $2,953,000, and an accumulated deficit of about $52,178,000, raising substantial doubt about its ability to continue as a going concern[26] Company Overview and Product Pipeline The company is developing its lead product MS1819-SD for EPI and recently acquired full rights from its former partner Mayoly - The company's lead product, MS1819-SD, is being evaluated in a Phase II OPTION study, with topline results expected in summer 2019[20] - On March 27, 2019, the company acquired all rights, title, and interest in MS1819-SD from its former partner Mayoly[22] Financing Activities The company secured $2 million in February 2019 through Senior Convertible Notes issued to a significant stockholder - On February 14, 2019, the company issued two Senior Convertible Notes for a total principal of $2,000,000 to ADEC, an entity controlled by a significant stockholder[46] - As additional consideration, the exercise price of 1,009,565 outstanding warrants held by ADEC was reduced to $1.50 per share[49] Subsequent Events Post-quarter end, the company raised a combined $5.05 million in net proceeds from two public stock offerings - In April 2019, the company completed a public offering resulting in net proceeds of approximately $2,500,000[108] - In May 2019, the company completed another public offering resulting in net proceeds of approximately $2.55 million[110] Management's Discussion and Analysis of Financial Condition and Results of Operations Operating expenses increased in Q1 2019 due to clinical trial costs and non-cash compensation, heightening liquidity concerns Operating Expenses Comparison (Q1 2019 vs Q1 2018) | Expense Category | Q1 2019 | Q1 2018 | Change | | :--- | :--- | :--- | :--- | | Research and development | $2,118,533 | $1,678,029 | +$440,504 | | General and administrative | $2,485,111 | $1,916,333 | +$568,778 | - The increase in R&D expenses was driven by the U.S. OPTION study, while higher G&A expenses were mainly due to a $556,292 rise in non-cash stock-based compensation[136][137] - As of March 31, 2019, the company had cash of approximately $414,000 and an accumulated deficit of about $52,178,000, raising substantial doubt about its ability to continue as a going concern[129] - Net cash used in operating activities for Q1 2019 was $2,627,797, reflecting a net loss adjusted for significant non-cash items[17][132] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, this item is not applicable due to limited exposure to market risks - The company states this item is 'Not applicable'[140] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of the quarter's end - The CEO and CFO concluded that the company's disclosure controls and procedures are effective to provide reasonable assurance of timely reporting[141] - No material changes in internal control over financial reporting were identified during the quarter[142] PART II. OTHER INFORMATION Legal Proceedings The company reports no involvement in any legal proceedings during the reporting period - The company reported no legal proceedings[144] Risk Factors No material changes to the risk factors previously disclosed in the 2018 Annual Report have occurred - As of May 15, 2019, there have been no material changes to the risk factors previously disclosed in the company's 2018 Form 10-K[145] Unregistered Sales of Equity Securities and Use of Proceeds The company did not conduct any unregistered sales of equity securities during the quarter - The company reported no unregistered sales of equity securities[146] Exhibits This section lists key agreements filed with the report, including financing, asset purchases, and officer certifications - Exhibits filed include the Note Purchase Agreement, Senior Convertible Notes, and Warrant Amendment Agreement from the February 2019 financing[150] - The Asset Purchase Agreement and Patent License Agreement with Mayoly, dated March 27, 2019, are included as exhibits[150] - Certifications from the Principal Executive Officer and Principal Financial Officer pursuant to the Sarbanes-Oxley Act are also filed[150]