Evoke Pharma(EVOK) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Unaudited Q1 2022 financials show increased sales, continued net loss, negative cash flow, and substantial doubt about going concern Condensed Balance Sheets Total assets decreased to $9.0 million by March 31, 2022, primarily due to reduced cash, with total equity declining to $1.9 million Condensed Balance Sheet Data (in USD) | Financial Metric | March 31, 2022 (Unaudited) | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $7,701,201 | $9,144,710 | | Total current assets | $9,026,270 | $10,560,734 | | Total assets | $9,026,270 | $10,573,162 | | Total current liabilities | $1,356,676 | $1,405,773 | | Total liabilities | $7,092,259 | $7,018,068 | | Total stockholders' equity | $1,934,011 | $3,555,094 | Condensed Statements of Operations Net product sales significantly increased to $418,380 in Q1 2022, narrowing the net loss to $2.17 million from $2.61 million year-over-year Condensed Statement of Operations (in USD) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net product sales | $418,380 | $90,421 | | Total operating expenses | $2,469,552 | $2,680,871 | | Loss from operations | ($2,051,172) | ($2,590,450) | | Net loss | ($2,173,665) | ($2,605,495) | | Net loss per share | ($0.07) | ($0.08) | Condensed Statements of Stockholders' Equity Stockholders' equity decreased to $1.93 million by March 31, 2022, primarily due to a $2.17 million net loss, partially offset by stock-based compensation - The net loss for the quarter of $2,173,665 was the primary driver for the reduction in total stockholders' equity[13] - In contrast, for the three months ended March 31, 2021, stockholders' equity increased significantly from a deficit of ($3.2 million) to $7.8 million, mainly due to the issuance of common stock that raised net proceeds of approximately $13.1 million[13][47] Condensed Statements of Cash Flows Net cash used in operations improved to $1.6 million in Q1 2022, but minimal financing activities led to a $1.4 million net cash decrease for the quarter Condensed Statement of Cash Flows (in USD) | Cash Flow Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($1,615,030) | ($2,953,119) | | Net cash provided by financing activities | $171,521 | $13,070,154 | | Net (decrease) increase in cash | ($1,443,509) | $10,117,035 | | Cash at end of period | $7,701,201 | $18,185,974 | Notes to Condensed Financial Statements Notes disclose Gimoti® as the sole product, substantial doubt about going concern, a Nasdaq delisting notice, and patent litigation against Teva Pharmaceuticals - The company has incurred recurring losses and negative cash flows, leading to substantial doubt about its ability to continue as a going concern for one year[22] - In February 2022, Teva Pharmaceuticals submitted an ANDA for a generic version of Gimoti, leading Evoke to initiate patent infringement litigation in April 2022[45] - The company has a commercial services agreement with Eversana to commercialize Gimoti, with unreimbursed commercialization costs to Eversana approximately $32.7 million as of March 31, 2022[56] - The company received a delisting notice from Nasdaq in December 2021 for its stock price closing below $1.00 for 30 consecutive days, and plans a 1-for-12 reverse stock split to regain compliance[26] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Gimoti commercialization, significant Q1 2022 sales growth, and ongoing 'going concern' issues, with cash projected to last only into Q2 2023 Overview Evoke Pharma, focused on Gimoti®, faces substantial doubt about its going concern status, with current cash funding operations only into Q2 2023, necessitating additional financing - The company's sole product is Gimoti (metoclopramide) nasal spray, the first and only nasally-administered product for acute and recurrent diabetic gastroparesis[62] - The company has a commercialization agreement with Eversana, amended in February 2022 to extend the term to December 31, 2026, and increase the net product profit retained by Evoke[62] - Based on the current operating plan, existing cash of $7.7 million as of March 31, 2022, plus subsequent ATM proceeds, is expected to fund operations into the second quarter of 2023, raising substantial doubt about its ability to continue as a going concern[64] Results of Operations Q1 2022 saw a $328,000 increase in net product sales due to enhanced promotional activities, while R&D expenses decreased and SG&A slightly rose Comparison of Operations (in USD) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change | | :--- | :--- | :--- | :--- | | Net product sales | $418,380 | $90,421 | +$327,959 | | Research and development expenses | $41,717 | $277,825 | -$236,108 | | Selling, general and administrative expenses | $2,405,075 | $2,338,295 | +$66,780 | - The increase in net product sales was primarily driven by increased educational and promotional activities of the Eversana sales force[79] Liquidity and Capital Resources With $7.7 million cash, the company raised $7.3 million via ATM but faces a 'going concern' warning, with cash only into Q2 2023, and plans a reverse stock split - From January 1, 2022, through May 6, 2022, the company sold 7,460,397 shares of common stock under its ATM Sales Agreement, receiving net proceeds of approximately $7.3 million[82] - Management concluded there is substantial doubt about the company's ability to continue as a going concern, with cash sufficient to fund operations only into the second quarter of 2023[84] - The company received a Nasdaq delisting notice for its stock price being below $1.00 and intends to effect a 1-for-12 reverse stock split on May 23, 2022, to regain compliance[84] - The company has a $5 million revolving credit facility from Eversana, from which it borrowed the full $5 million in 2020[84] Item 3. Quantitative and Qualitative Disclosure about Market Risk As a smaller reporting company, Evoke Pharma is exempt from providing this specific market risk disclosure - The company is not required to provide information for this item as it qualifies as a smaller reporting company[90] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal controls - Based on an evaluation as of March 31, 2022, the Chief Executive Officer and Chief Business Officer concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level[92] - There were no changes in internal control over financial reporting during the quarter ended March 31, 2022, that materially affected, or are reasonably likely to materially affect, internal controls[93] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company initiated patent infringement litigation against Teva Pharmaceuticals in April 2022 after Teva filed an ANDA for a generic Gimoti - On February 25, 2022, Teva Pharmaceuticals submitted an ANDA for a generic version of Gimoti, challenging U.S. Patent Nos. 8,334,281 and 11,02,0361[94] - In April 2022, Evoke Pharma initiated litigation against Teva in the U.S. District Court for the District of New Jersey over the validity and infringement of the patents covering Gimoti[94] Item 1A. Risk Factors The company faces a critical need for substantial additional funding, as existing cash is only sufficient into Q2 2023, risking liquidation without new capital - The company requires substantial additional funding and may be unable to raise capital when needed, which could force it to liquidate or wind down operations[95] - Cash on hand as of March 31, 2022, plus subsequent ATM proceeds, is projected to be sufficient to fund operations only into the second quarter of 2023[95] - The business is entirely dependent on the success of Gimoti, and failure to secure financing or successfully commercialize the product could lead to a complete loss of investment[95] Item 6. Exhibits This section lists various exhibits filed with the Form 10-Q, including corporate governance documents and officer certifications