Gyre Therapeutics(GYRE) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section details the company's financial statements, management's analysis, market risk disclosures, and internal controls Financial Statements Q1 2023 financial statements reflect a net income of $0.3 million, cash decreased to $8.1 million, and going concern doubts are noted Condensed Consolidated Balance Sheets This section presents the company's financial position, highlighting changes in assets, liabilities, and stockholders' deficit Condensed Consolidated Balance Sheet Highlights (in thousands USD) | Account | March 31, 2023 (Unaudited) | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $8,099 | $21,666 | | Total current assets | $14,014 | $28,206 | | Total assets | $18,750 | $28,444 | | Liabilities & Stockholders' Deficit | | | | Total current liabilities | $6,844 | $16,824 | | Total liabilities | $11,394 | $16,824 | | Redeemable convertible preferred stock | $33,309 | $33,309 | | Total stockholders' deficit | $(25,953) | $(21,689) | - Cash and cash equivalents decreased significantly from $21.7 million to $8.1 million, primarily due to dividend payments. Total liabilities also decreased from $16.8 million to $11.4 million, mainly from the settlement of dividends payable[9] Condensed Consolidated Statements of Operations This section details the company's revenues, expenses, and net income or loss for the reporting periods Condensed Consolidated Statements of Operations Highlights (in thousands USD, except per share data) | Metric | Three Months Ended Mar 31, 2023 | Three Months Ended Mar 31, 2022 | | :--- | :--- | :--- | | Collaboration Revenue | $0 | $794 | | Research and development | $588 | $9,703 | | General and administrative | $3,970 | $4,994 | | Gain on disposal of assets, net | $(4,736) | $0 | | Net income (loss) | $260 | $(14,536) | | Net income (loss) per share, basic | $0.01 | $(0.46) | - The company shifted from a net loss of $14.5 million in Q1 2022 to a net income of $0.3 million in Q1 2023, primarily due to a $4.7 million gain on asset disposal and a significant reduction in R&D expenses from $9.7 million to $0.6 million after ceasing R&D activities[11] - The company paid a cash dividend of $0.24 per common share and a CVR cash dividend of $0.01 per common share during the first quarter of 2023[11] Condensed Consolidated Statements of Cash Flows This section outlines the cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Highlights (in thousands USD) | Cash Flow Category | Three Months Ended Mar 31, 2023 | Three Months Ended Mar 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(6,216) | $(12,050) | | Net cash provided by investing activities | $411 | $2,504 | | Net cash (used in) provided by financing activities | $(7,762) | $16 | | Net decrease in cash and cash equivalents | $(13,567) | $(9,530) | - Cash used in operating activities decreased to $6.2 million from $12.1 million year-over-year due to the cessation of R&D activities[17][113][114] - Financing activities used $7.8 million in cash, primarily for dividend payments, while investing activities provided $0.4 million from the sale of the legacy rare bleeding disorder program to GCBP[17] Notes to Financial Statements These notes provide additional details and context for the figures presented in the financial statements - The company has transitioned from a biopharmaceutical R&D company to a vehicle for a business combination, having ceased its own R&D in March 2022 and sold its legacy assets[19] - On February 27, 2023, Catalyst sold its legacy rare bleeding disorder program to GC Biopharma Corp (GCBP)[21] - The company acquired F351 assets from GNI Group in December 2022 and concurrently signed a definitive agreement to acquire a controlling interest in Beijing Continent Pharmaceutical Co Ltd (BC), subject to stockholder approval[22][23] - There is substantial doubt about the company's ability to continue as a going concern due to a potential cash redemption requirement for its Series X redeemable convertible preferred stock if stockholder approval for its conversion is not obtained by September 30, 2023[27][40] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the strategic shift, Q1 2023 results, and critical liquidity risks, including going concern uncertainty Overview This section provides a high-level summary of the company's recent strategic transactions and business developments - On December 26, 2022, Catalyst acquired F351 assets from GNI Group Ltd in exchange for common stock and Series X convertible preferred stock[82] - The company has entered into a Business Combination Agreement to acquire an indirect controlling interest in Beijing Continent Pharmaceutical Co Ltd (BC), which is subject to stockholder approval expected in Q3 2023[84][85] - A Contingent Value Rights (CVR) Agreement was established to distribute net proceeds from the disposition of legacy assets to stockholders of record as of January 5, 2023 (excluding GNI)[87] - The company sold its legacy rare bleeding disorders programs to GCBP for $6.0 million in February 2023, with net proceeds to be distributed to CVR Holders[88] Results of Operations This section analyzes the company's financial performance, detailing changes in revenues and expenses Comparison of Results of Operations (in thousands USD) | Line Item | Three Months Ended Mar 31, 2023 | Three Months Ended Mar 31, 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Collaboration Revenue | $0 | $794 | $(794) | (100)% | | Research and development | $588 | $9,703 | $(9,115) | (94)% | | General and administrative | $3,970 | $4,994 | $(1,024) | (21)% | | Gain on disposal of assets, net | $(4,736) | $0 | $(4,736) | 100% | | Net income (loss) | $260 | $(14,536) | $14,796 | * | - Research and development expenses decreased by 94% to $0.6 million from $9.7 million in the prior year, following the cessation of R&D activities in March 2022[103] - General and administrative expenses decreased by 21% to $4.0 million, primarily due to lower professional services and personnel-related costs[104] - A gain of $4.7 million was recognized from the sale of the legacy rare bleeding disorder program to GCBP in February 2023[105] Liquidity and Capital Resources This section assesses the company's cash position, cash flow, and ability to meet its financial obligations - As of March 31, 2023, the company had $8.1 million in cash and cash equivalents[109] - The company paid a one-time cash dividend of approximately $7.6 million in January 2023 and distributed $0.2 million in net proceeds from the GCBP asset sale in March 2023[108] - A substantial doubt exists about the company's ability to continue as a going concern, as failure to obtain stockholder approval for the conversion of Catalyst Convertible Preferred Stock could require a cash redemption the company may not have sufficient liquidity to make[110] Quantitative and Qualitative Disclosures About Market Risk This section is not applicable as the company qualifies as a smaller reporting company - The company has indicated that quantitative and qualitative disclosures about market risk are not applicable[120] Controls and Procedures Management concluded disclosure controls were effective as of March 31, 2023, with no material changes to internal control - Management concluded that as of March 31, 2023, the company's disclosure controls and procedures were effective at the reasonable assurance level[122] - There were no changes in internal control over financial reporting during the quarter ended March 31, 2023, that materially affected, or are reasonably likely to materially affect, internal controls[123] PART II. OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, and other required disclosures Legal Proceedings The company is not currently involved in any material legal proceedings - Catalyst is not currently involved in any material legal proceedings[125] Risk Factors The company faces significant Nasdaq delisting risk due to non-compliance with minimum bid price and stockholders' equity requirements - The company is not in compliance with Nasdaq's minimum bid price requirement (Rule 5550(a)(2)) and minimum stockholders' equity requirement (Rule 5550(b)(1))[127][128] - Nasdaq has notified the company of its intent to delist the stock, and the company has requested a hearing, which stays the suspension pending a decision[128] - Delisting from Nasdaq could adversely impact the stock's liquidity, value, and the ability to close the pending Business Combination Agreement[129] Unregistered Sales of Equity Securities and Use of Proceeds This section is not applicable for the current reporting period - The company reports no unregistered sales of equity securities for the period[130] Defaults Upon Senior Securities The company reports no defaults upon senior securities during the period - There were no defaults upon senior securities during the period[131] Mine Safety Disclosures Mine safety disclosures are not applicable to the company's operations - Mine safety disclosures are not applicable to the company's operations[132] Other Information The company reports no other material information for this period - There is no other information to report for the quarter[133] Exhibits This section incorporates the Exhibit Index, listing all documents filed with the quarterly report - This section incorporates the Exhibit Index by reference, which lists all exhibits filed with the Form 10-Q[134]