NeuroBo Pharmaceuticals(NRBO) - 2019 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements Gemphire Therapeutics reported a net loss of $3.8 million for Q1 2019, an improvement from $7.2 million in Q1 2018, driven by reduced R&D expenses, but with $5.5 million cash and declining assets, raising substantial doubt about its going concern Condensed Balance Sheet Highlights (in thousands) | | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $ 5,510 | $ 18,954 | | Total current assets | $ 6,106 | $ 19,686 | | Total assets | $ 6,158 | $ 19,694 | | Liabilities and Stockholders' Equity | | | | Total current liabilities | $ 1,712 | $ 11,919 | | Total liabilities | $ 1,712 | $ 11,920 | | Total stockholders' equity | $ 4,446 | $ 7,774 | Condensed Statements of Comprehensive Loss (in thousands, except per share amounts) | | For the Three Months Ended March 31, | | | :--- | :--- | :--- | | | 2019 | 2018 | | General and administrative | $ 1,407 | $ 2,087 | | Research and development | $ 1,393 | $ 4,977 | | Total operating expenses | $ 2,800 | $ 7,064 | | Net loss | $ (3,801) | $ (7,224) | | Net loss per share (basic and diluted) | $ (0.27) | $ (0.58) | Condensed Statements of Cash Flows Highlights (in thousands) | | For the Three Months Ended March 31, | | | :--- | :--- | :--- | | | 2019 | 2018 | | Net cash used in operating activities | $ (3,170) | $ (7,236) | | Net cash (used in) provided by financing activities | $ (10,259) | $ 23,224 | | Net (decrease) increase in cash | $ (13,429) | $ 15,988 | | Cash, cash equivalents and restricted cash at end of period | $ 5,525 | $ 34,461 | - The company has incurred losses since inception, with an accumulated deficit of $87.9 million as of March 31, 2019, and its cash balance of $5.5 million is insufficient to fund operations for the next twelve months, raising substantial doubt about its ability to continue as a going concern[27][28] - On January 28, 2019, the company fully prepaid its term loan with Silicon Valley Bank, including approximately $8.9 million in principal and interest and a $1.0 million final payment fee, leading to $0.8 million in unamortized note discounts recognized as interest expense[50] Management's Discussion and Analysis of Financial Condition and Results of Operations The company's Q1 2019 net loss decreased to $3.8 million from $7.2 million in Q1 2018, driven by a $3.6 million reduction in R&D expenses due to a partial clinical hold on gemcabene, with $5.5 million cash projected to last only into Q3 2019, necessitating additional capital and strategic alternatives Comparison of Operating Results (in thousands) | | For the Three Months Ended March 31, | Change | | :--- | :--- | :--- | :--- | | | 2019 | 2018 | | | General and administrative | $ 1,407 | $ 2,087 | $ (680) | | Research and development | $ 1,393 | $ 4,977 | $ (3,584) | | Total operating expenses | $ 2,800 | $ 7,064 | $ (4,264) | | Net loss | $ (3,801) | $ (7,224) | $ 3,423 | - R&D expenses decreased by $3.6 million in Q1 2019 compared to Q1 2018, primarily due to reduced clinical trial activities while the company works to resolve the FDA's partial clinical hold on gemcabene[132] - As of March 31, 2019, the company had $5.5 million in cash and cash equivalents, which management believes are sufficient to fund operations only into the third quarter of 2019, necessitating additional capital for continued development[137][149] - The FDA has maintained a partial clinical hold on gemcabene, preventing studies longer than six months, with the company conducting additional preclinical studies for submission in Q4 2019, and an End of Phase 2 meeting contingent on the hold being lifted[110] - In December 2018, the Board of Directors initiated a review of strategic alternatives to maximize stockholder value, engaging Ladenburg Thalmann & Co. Inc. as a strategic financial advisor[113] Quantitative and Qualitative Disclosures about Market Risk The company indicates that this section is not applicable - The company has indicated that this section is not applicable[170] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2019, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of March 31, 2019, the company's principal executive and financial officer concluded that its disclosure controls and procedures were effective[173] - There were no changes in the company's internal control over financial reporting during the quarter ended March 31, 2019, that have materially affected, or are reasonably likely to materially affect, its internal control[174] PART II - OTHER INFORMATION Legal Proceedings The company may face ordinary course claims and lawsuits, but believes their resolution will not materially adversely affect its financial position or results - The Company may be subject to claims and lawsuits arising primarily in the ordinary course of business, but believes their ultimate resolution will not have a material adverse effect on its financial position, results of operations, or cash flows[175] Risk Factors The company faces delisting risk due to non-compliance with Nasdaq's $10 million equity requirement, prompting a plan to transfer to the Nasdaq Capital Market with a $2.5 million equity requirement, as failure to comply could negatively impact stock liquidity and capital raising - On March 20, 2019, the company received a Nasdaq notice for non-compliance with the $10 million minimum stockholders' equity requirement for continued listing on the Nasdaq Global Market[180] - On May 6, 2019, the company submitted a plan to regain compliance by applying to transfer its common stock listing to The Nasdaq Capital Market, which has a lower minimum stockholders' equity requirement of $2.5 million[181] - If delisted, the company's common stock could be subject to penny stock regulations, adversely affecting its market liquidity, price, and ability to obtain financing[183] Unregistered Sales of Equity Securities and Use of Proceeds The company indicates that this section is not applicable - The company has indicated that this section is not applicable[186] Default upon Senior Securities The company indicates that this section is not applicable - The company has indicated that this section is not applicable[187] Mine Safety Disclosures The company indicates that this section is not applicable - The company has indicated that this section is not applicable[188] Other Information This section reiterates the company's Nasdaq non-compliance notice received on March 20, 2019, for failing to meet the $10 million minimum stockholders' equity, and its plan submitted on May 6, 2019, to transfer to the Nasdaq Capital Market for compliance - This section repeats information from the Risk Factors section regarding the Nasdaq non-compliance notice received on March 20, 2019, and the subsequent plan submitted on May 6, 2019, to transfer to the Nasdaq Capital Market[189][190] Exhibits This section lists exhibits filed with the 10-Q report, including corporate governance documents, officer certifications (SOX 302 & 906), and XBRL data files - Lists filed exhibits, including corporate governance documents, officer certifications (SOX 302 & 906), and XBRL data files[192] Signatures The report was duly signed on May 9, 2019, by Steven Gullans, President and Chief Executive Officer, who also serves as Principal Executive Officer and Principal Financial Officer - The report was signed on May 9, 2019, by Steven Gullans, President and Chief Executive Officer (Principal Executive Officer and Principal Financial Officer)[196]