NeuroBo Pharmaceuticals(NRBO) - 2023 Q3 - Quarterly Report

PART I FINANCIAL INFORMATION FINANCIAL STATEMENTS This section presents NeuroBo Pharmaceuticals' unaudited condensed consolidated financial statements, detailing clinical program focus and 'going concern' uncertainty due to recurring losses and funding needs Condensed Consolidated Balance Sheet Data (in thousands) | | September 30, 2023 (unaudited) | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash | $25,837 | $33,364 | | Total current assets | $26,145 | $33,532 | | Total assets | $26,425 | $33,534 | | Liabilities and Stockholders' Equity | | | | Total current liabilities | $4,722 | $11,784 | | Total liabilities | $4,875 | $11,784 | | Total stockholders' equity | $21,550 | $21,750 | Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | | Three Months Ended Sep 30 | Nine Months Ended Sep 30 | | :--- | :--- | :--- | | | 2023 | 2022 | 2023 | 2022 | | Research and development | $2,292 | $571 | $5,293 | $2,473 | | General and administrative | $1,601 | $2,533 | $4,926 | $6,725 | | Loss from operations | $(3,893) | $(3,104) | $(10,219) | $(9,198) | | Net loss | $(3,818) | $(3,113) | $(7,156) | $(9,291) | | Net loss per share, basic and diluted | $(0.09) | $(3.50) | $(0.18) | $(10.45) | Condensed Consolidated Statements of Cash Flows (in thousands) | | For the Nine Months Ended September 30, | | :--- | :--- | :--- | | | 2023 | 2022 | | Net cash used in operating activities | $(7,406) | $(9,905) | | Net cash used in (provided by) investing activities | $(41) | $8 | | Net cash used in financing activities | $(80) | $(134) | | Net decrease in cash | $(7,527) | $(10,031) | | Cash at beginning of period | $33,364 | $16,387 | | Cash at end of period | $25,837 | $6,356 | Notes to Condensed Consolidated Financial Statements These notes detail the company's strategic shift to DA-1241 and DA-1726, discontinuation of prior programs, a 'going concern' issue with cash into Q4 2024, and unaccrued milestone payment obligations - The company is a clinical-stage biotechnology firm focusing on two primary programs: DA-1241 for NASH and T2D, and DA-1726 for obesity and NASH[16][21] - In June 2023, the company discontinued the clinical development of ANA001 (niclosamide) and gemcabene for the treatment of COVID-19[17] - The company has an accumulated deficit of $103.0 million as of September 30, 2023, raising substantial doubt about its ability to continue as a going concern, with existing cash projected to fund operations into the fourth quarter of 2024[23][24] - The company has potential future milestone payment obligations related to license agreements with Dong-A ST (up to $316 million), the ANA Merger, and Pfizer, but no milestones were achieved or considered probable as of September 30, 2023[40][41][43] - The valuation methodology for the 2022 Warrant liabilities was changed from a Level 3 (Monte Carlo simulation) to a Level 2 input, approximating the underlying stock price due to a cashless exercise provision[70][71] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, strategic focus on DA-1241 and DA-1726, increased R&D expenses, and liquidity challenges, including a 'going concern' disclosure due to limited cash runway into Q4 2024 - The company's primary focus is on developing DA-1241 for NASH/T2D and DA-1726 for obesity, having discontinued ANA001 and Gemcabene for COVID-19 in June 2023[87][88] - A Phase 2a clinical trial for DA-1241 in NASH patients was initiated in Q3 2023, with plans to file an IND for DA-1726 and begin Phase 1 trials in Q4 2023[92][100] Comparison of Operating Expenses (in thousands) | | Three Months Ended Sep 30 | Nine Months Ended Sep 30 | | :--- | :--- | :--- | | | 2023 | 2022 | 2023 | 2022 | | Research and development | $2,292 | $571 | $5,293 | $2,473 | | General and administrative | $1,601 | $2,533 | $4,926 | $6,725 | - The increase in R&D expenses for Q3 2023 (+$1.7 million YoY) and the nine months ended Sep 30, 2023 (+$2.8 million YoY) was primarily driven by DA-1241 clinical trial costs, including toxicology studies and drug manufacturing[103][111] - The decrease in G&A expenses was mainly due to lower professional fees related to the exploration of business opportunities in 2022 and reduced insurance costs[106][114] - As of September 30, 2023, the company had $25.8 million in cash, expected to fund operations into the fourth quarter of 2024, raising substantial doubt about its ability to continue as a going concern[131][132] Quantitative and Qualitative Disclosures about Market Risk This section is noted as not applicable for the company - Not applicable[136] Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of September 30, 2023, due to material weaknesses in segregation of duties, logical access, and supervision, with a remediation plan underway - Management concluded that disclosure controls and procedures were not effective as of September 30, 2023[141] - Material weaknesses were identified in internal control over financial reporting, specifically: a lack of segregation of duties, issues with logical access to financial systems, and insufficient supervision and review[142] - Remediation efforts are underway, including hiring additional accounting personnel, enhancing controls over disbursements, improving review and oversight processes, and restricting system administrator rights[144][153] PART II OTHER INFORMATION Legal Proceedings The company reports no current material legal proceedings expected to adversely affect its business - The company is not currently a party to any material legal proceedings[147] Risk Factors This section updates the company's risk factors, emphasizing substantial doubt about its going concern ability due to losses and limited cash, alongside Nasdaq non-compliance and potential delisting risks - The company has incurred losses since inception, with an accumulated deficit of $103.0 million as of September 30, 2023, raising substantial doubt about its ability to continue as a going concern[149][150][153] - Existing cash of $25.8 million is expected to fund operations only into the fourth quarter of 2024, necessitating additional unsecured financing[151][152] - The company is not in compliance with Nasdaq's minimum bid price rule ($1.00/share) and has an extension until February 5, 2024, to regain compliance[156][158] - Failure to regain compliance with Nasdaq listing requirements could lead to delisting, adversely affecting stock liquidity, value, and capital raising ability, though a reverse stock split has been approved as a potential remedy[157][159] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - None[164] Default upon Senior Securities This section is noted as not applicable - Not applicable[165] Mine Safety Disclosures This section is noted as not applicable - Not applicable[166] Other Information The company discloses that no directors or Section 16 officers adopted or terminated a Rule 10b5-1 trading plan during Q3 2023 - During the three months ended September 30, 2023, no directors or Section 16 officers adopted or terminated a Rule 10b5-1 trading plan[167] Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents, a new lease agreement, and required officer certifications - The report includes a list of filed exhibits, notably a new Lease Agreement dated August 23, 2023, and required officer certifications (302 and 906)[169]