NeuroBo Pharmaceuticals(NRBO) - 2020 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, changes in equity, and cash flows, with notes detailing key events and financial health Condensed Consolidated Balance Sheets As of June 30, 2020, total assets were $15,552 thousand, primarily cash, with total liabilities of $3,214 thousand and stockholders' equity of $12,338 thousand Condensed Consolidated Balance Sheets (in thousands) | | June 30, 2020 (unaudited) | December 31, 2019 | | :--- | :--- | :--- | | Total current assets | $15,243 | $14,118 | | Total assets | $15,552 | $14,468 | | Total current liabilities | $3,132 | $2,082 | | Total liabilities | $3,214 | $2,176 | | Total stockholders' equity | $12,338 | $12,292 | | Total liabilities and stockholders' equity | $15,552 | $14,468 | Condensed Consolidated Statements of Operations and Comprehensive Loss For the three and six months ended June 30, 2020, net losses were $2,384 thousand and $7,114 thousand, respectively, primarily due to increased general and administrative expenses Condensed Consolidated Statements of Operations (in thousands) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | | | 2020 | 2019 | 2020 | 2019 | | Research and development | $674 | $948 | $2,826 | $2,748 | | General and administrative | $1,718 | $939 | $4,315 | $1,590 | | Total operating expenses | $2,392 | $1,887 | $7,141 | $4,338 | | Loss from operations | ($2,392) | ($1,887) | ($7,141) | ($4,338) | | Net loss | ($2,384) | ($1,901) | ($7,114) | ($4,365) | | Net loss per share, basic and diluted | ($0.15) | ($0.37) | ($0.44) | ($0.84) | Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) Stockholders' equity increased from $12,292 thousand to $12,338 thousand by June 30, 2020, driven by a $7,500 thousand equity financing largely offset by a $7,114 thousand net loss - In the second quarter of 2020, the company issued 750,000 shares of common stock in an equity financing, generating $7,500 thousand in gross proceeds[12] - The net loss for the six months ended June 30, 2020 was $7,114 thousand (reported as $4,730 thousand in Q1 and $2,384 thousand in Q2), which reduced stockholders' equity[12] Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2020, net cash used in operating activities was $6,462 thousand, offset by $6,858 thousand from financing, resulting in a $394 thousand net increase in cash Cash Flow Summary for the Six Months Ended June 30 (in thousands) | | 2020 | 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(6,462) | $(2,416) | | Net cash used in investing activities | $(2) | $(25) | | Net cash provided by financing activities | $6,858 | $24,175 | | Net increase in cash and restricted cash | $394 | $21,734 | | Cash and restricted cash at end of period | $14,298 | $24,588 | Notes to Condensed Consolidated Financial Statements Notes detail significant events, including halting NB-01 Phase 3 trials due to COVID-19, postponing NB-02 trials, a going concern warning with cash of $14,300 thousand sufficient only into Q2 2021, and a $7,500 thousand equity financing - Due to the COVID-19 pandemic, the company halted all work on Phase 3 clinical trials for its lead candidate, NB-01, in the first quarter of 2020 and terminated its CRO contracts[24] - The company is preparing an IND application for NB-02 but intends to postpone the first human clinical trials until the first half of 2021, contingent on improved global conditions[26] - The company has experienced net losses since inception, with an accumulated deficit of $44,000 thousand as of June 30, 2020, raising substantial doubt about its ability to continue as a going concern, with cash expected to last only into Q2 2021[40][42][43] - On April 13, 2020, the company sold 750,000 shares of common stock at $10 per share in a registered direct offering, resulting in gross proceeds of $7,500 thousand[105][106] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses financial condition and operations, highlighting the halt of NB-01 Phase 3 trials due to COVID-19, increased net loss from higher G&A expenses, and substantial doubt about going concern with $14,300 thousand cash projected only into Q2 2021 - Due to the COVID-19 pandemic and to conserve financial resources, the company has indefinitely postponed Phase 3 clinical trials for NB-01 and is exploring alternative regulatory pathways, such as for an orphan drug[140][141][142] - The company's cash of $14,300 thousand as of June 30, 2020, is expected to fund operations into the second quarter of 2021, which raises substantial doubt about its ability to continue as a going concern[146][151] Comparison of Operating Results (in thousands) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | | | 2020 | 2019 | 2020 | 2019 | | Research and development | $674 | $948 | $2,826 | $2,748 | | General and administrative | $1,718 | $939 | $4,315 | $1,590 | | Net loss | ($2,384) | ($1,901) | ($7,114) | ($4,365) | - G&A expenses for the six months ended June 30, 2020, increased by $2,700 thousand compared to the prior year, mainly due to costs of operating as a public company, including legal, audit, and D&O insurance premiums[177] Quantitative and Qualitative Disclosures about Market Risk The company states this item is not applicable, indicating no significant exposure to market risks requiring quantitative and qualitative disclosure - This section is not applicable to the company for the reporting period[206] Controls and Procedures Management concluded that disclosure controls and procedures were not effective as of June 30, 2020, due to a material weakness in accounting for clinical trial costs, with remediation efforts underway - Management concluded that disclosure controls and procedures were not effective as of June 30, 2020, due to a material weakness[210] - The material weakness relates to internal control deficiencies in accounting for clinical trial costs and related supply materials, which led to misstatements discovered during the audit/review process[211] - Remediation efforts are underway, including adding more experienced accounting personnel, improving clinical site expense monitoring, and retaining qualified outside consultants[214] PART II OTHER INFORMATION Legal Proceedings The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business - The company is not currently a party to any legal proceedings expected to have a material adverse effect on its business[216] Risk Factors This section updates risk factors, focusing on postponing NB-01 Phase 3 trials due to COVID-19, risks of alternative development pathways, and broader pandemic impacts on supply chains, clinical trials, and capital access - The company has postponed the initiation of Phase 3 clinical trials for NB-01 and terminated all related CRO agreements due to the business environment and the COVID-19 pandemic[218][219] - The company is considering alternative pathways for NB-01, such as development as an orphan drug, but there is no assurance of success and this path carries its own risks, such as difficulty in conducting clinical trials for rare diseases[220][221] - The COVID-19 pandemic poses ongoing risks to the business, including potential disruption of the supply chain, manufacturing, clinical trial enrollment, and the ability to secure future financing[224] Unregistered Sales of Equity Securities and Use of Proceeds The company indicates that this item is not applicable for the reporting period - This section is not applicable[225] Default upon Senior Securities The company indicates that this item is not applicable, signifying no defaults on senior securities have occurred - This section is not applicable[226] Mine Safety Disclosures The company indicates that this item is not applicable, as it is not involved in mining operations - This section is not applicable[227] Other Information The company disclosed a five-year manufacturing and supply agreement with Dong-A ST on June 7, 2020, for NB-02 drug product and placebo for R&D and its first human clinical trial - On June 7, 2020, the company entered into a manufacturing and supply agreement with Dong-A ST for its NB-02 drug product and placebo to be used in R&D and the first human clinical trial[228] Exhibits This section lists exhibits filed with the 10-Q report, including documents related to the April 2020 equity financing, the new manufacturing agreement for NB-02, and officer certifications - Key exhibits filed with this report include documents related to the April 2020 equity financing and the new manufacturing agreement for NB-02 with Dong-A ST dated June 7, 2020[231] SIGNATURES - The quarterly report was signed on August 11, 2020, by Richard Kang, President and Chief Executive Officer[235]