Daré Bioscience(US:DARE)2021-08-11 16:00PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) The company reports a wider net loss and higher operating expenses driven by increased R&D costs Financial Statements Financials show a widened net loss and increased cash from financing activities in H1 2021 Condensed Consolidated Balance Sheets | Financial Metric | June 30, 2021 (Unaudited) | December 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $9,111,741 | $4,669,467 | | Total current assets | $14,059,220 | $6,983,912 | | Total assets | $14,822,410 | $7,550,712 | | Total liabilities | $7,078,406 | $8,702,445 | | Total stockholders' equity (deficit) | $7,744,004 | $(1,151,733) | Condensed Consolidated Statements of Operations (Three Months) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | | :--- | :--- | :--- | | Research and development | $7,340,289 | $5,547,450 | | Total operating expenses | $9,162,926 | $7,125,831 | | Net loss | $(9,162,751) | $(7,124,213) | | Loss per common share | $(0.18) | $(0.27) | Condensed Consolidated Statements of Operations (Six Months) | Metric | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Research and development | $13,068,495 | $7,927,254 | | Total operating expenses | $16,856,460 | $11,379,900 | | Net loss | $(16,486,395) | $(11,376,461) | | Loss per common share | $(0.35) | $(0.45) | Condensed Consolidated Statements of Cash Flows | Cash Flow Activity (Six Months Ended June 30) | 2021 | 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(20,168,469) | $(10,684,464) | | Net cash provided by financing activities | $24,626,464 | $11,277,329 | | Net change in cash and cash equivalents | $4,442,274 | $566,765 | Notes to Financial Statements Notes highlight a 'going concern' warning, significant financing, and key post-quarter FDA updates - The company's financial statements were prepared on a going concern basis, but recurring losses and negative cash flows raise "substantial doubt about the Company's ability to continue as a going concern"3743 - In June 2021, the company entered into a new grant agreement with the Bill & Melinda Gates Foundation for up to $48.95 million to support the development of DARE-LARC1118126 - Subsequent to the quarter end, the FDA accepted the New Drug Application (NDA) for DARE-BV1, granted Priority Review, and set a PDUFA target action date of December 7, 2021128129 - In July 2021, the company entered into a Cooperative Research and Development Agreement (CRADA) with NICHD for the pivotal Phase 3 study of Ovaprene, committing to $5.5 million in payments122 - Between July 1 and August 9, 2021, the company sold approximately 13.1 million shares of common stock under its ATM equity offering program for net proceeds of approximately $25.4 million125 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses rising R&D expenses, a critical liquidity position, and key clinical pipeline updates Business Overview and Clinical Pipeline The company focuses on advancing its women's health portfolio, led by DARE-BV1, Ovaprene, and Sildenafil Cream - The company's portfolio has three product candidates in advanced clinical development: DARE-BV1, Ovaprene®, and Sildenafil Cream, 3.6%133 - The FDA accepted the NDA for DARE-BV1, granted Priority Review, and set a PDUFA target action date of December 7, 2021142 - A pivotal Phase 3 study of Ovaprene is planned to commence in 2022 under a Cooperative Research and Development Agreement (CRADA) with the NICHD144 - The Phase 2b RESPOND clinical trial of Sildenafil Cream, 3.6% is ongoing, but enrollment has declined at some sites due to COVID-19 related guidelines145 Results of Operations Operating expenses increased significantly due to higher R&D costs for key clinical trials Comparison of Operating Expenses (Three Months) | Expense Category | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | | :--- | :--- | :--- | | General and administrative | $1,797,637 | $1,557,548 | | Research and development | $7,340,289 | $5,547,450 | | Total operating expenses | $9,162,926 | $7,125,831 | Comparison of Operating Expenses (Six Months) | Expense Category | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | General and administrative | $3,737,965 | $3,419,313 | | Research and development | $13,068,495 | $7,927,254 | | Total operating expenses | $16,856,460 | $11,379,900 | - The increase in R&D expenses for H1 2021 was primarily driven by a $3.7 million increase in costs for lead clinical-stage candidates and a $1.9 million increase for Phase 1 programs179 - In Q1 2021, the company recorded a gain of $369,887 from the full forgiveness of its Paycheck Protection Program (PPP) loan182111 Liquidity and Capital Resources The company faces a 'going concern' issue and requires substantial additional capital despite recent fundraising - The company explicitly states there is "substantial doubt about our ability to continue as a going concern" and that cash on hand is not sufficient for the next 12 months183188 - During the first six months of 2021, the company raised approximately $24.6 million through financing activities, primarily from the sale of common stock196188 - Post-quarter financing activities provided significant additional capital, including $25.4 million from ATM sales and an $11.45 million initial grant payment188 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exempt from market risk disclosures as a smaller reporting company - The company is exempt from this disclosure requirement as it qualifies as a smaller reporting company under SEC rules202 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of the quarter-end - Based on an evaluation, the CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2021204 - No material changes in internal control over financial reporting occurred during the quarter205 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not a party to any material pending legal proceedings - There are no material pending legal proceedings to which the company is a party207 Item 1A. Risk Factors Key risks include potential FDA rejection of DARE-BV1, commercialization challenges, and clinical trial delays - A significant risk is that the FDA could issue a complete response letter (CRL) for the DARE-BV1 NDA, which would prevent approval and could cause the stock price to drop significantly209210 - The company has not finalized its commercial strategy for DARE-BV1 and lacks a commercial partner, which could delay a potential launch214215 - The COVID-19 pandemic remains a risk that could negatively impact business by increasing costs and timelines for clinical development programs219223 - The pivotal Phase 3 study of Ovaprene is dependent on a CRADA with NICHD; failure to meet obligations could significantly delay the study217 - The sale of common stock in "at the market" (ATM) offerings may cause substantial dilution to existing stockholders and could cause the stock price to decline249250 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities were reported during the period - None reported251 Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported during the period - None reported251 Item 4. Mine Safety Disclosures This section is not applicable to the company's operations - Not applicable251 Item 5. Other Information No other material information was reported for the period - None reported251 Item 6. Exhibits Exhibits filed include a major grant agreement and officer certifications - Key exhibits filed include the Grant Agreement with the Bill & Melinda Gates Foundation effective June 30, 2021, and standard CEO/CFO certifications254