Panbela Therapeutics(PBLA) - 2022 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Unaudited H1 2022 financials show a significant net loss increase from a $17.7 million IPR&D write-off, leading to a stockholders' deficit and going concern doubt Condensed Consolidated Balance Sheets As of June 30, 2022, the company's financial position significantly declined, with total assets decreasing to $6.6 million, liabilities increasing to $11.4 million, and stockholders' equity shifting to a $4.8 million deficit Financial Metric Comparison (In thousands) | Financial Metric (In thousands) | June 30, 2022 (Unaudited) | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $2,530 | $11,867 | | Total current assets | $3,456 | $12,279 | | Total assets | $6,557 | $12,872 | | Liabilities & Equity | | | | Total current liabilities | $6,201 | $2,660 | | Total liabilities | $11,395 | $2,660 | | Total stockholders' (deficit) equity | $(4,838) | $10,212 | Condensed Consolidated Statements of Operations and Comprehensive Loss For H1 2022, net loss surged to $25.8 million from $4.4 million, primarily due to a $17.7 million IPR&D write-off, increasing loss per share to $1.84 Operating Results and Net Loss (In thousands, except per share) | Metric (In thousands, except per share) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | General and administrative | $3,053 | $2,391 | | Research and development | $22,236 | $2,084 | | Operating loss | $(25,289) | $(4,475) | | Net loss | $(25,796) | $(4,443) | | Basic and diluted net loss per share | $(1.84) | $(0.44) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities increased to $8.7 million in H1 2022, with no financing proceeds, leading to a $9.3 million decrease in cash and equivalents Cash Flow Summary (In thousands) | Cash Flow Activity (In thousands) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(8,680) | $(3,658) | | Net cash used in investing activities | $(655) | $0 | | Net cash provided by financing activities | $0 | $1,042 | | Net change in cash | $(9,337) | $(2,617) | Notes to Condensed Consolidated Financial Statements The notes detail the CPP acquisition as an asset purchase with a $17.7 million IPR&D write-off, new debt, and substantial doubt about the company's going concern due to an $82.0 million accumulated deficit - On June 15, 2022, Panbela acquired Cancer Prevention Pharmaceuticals, Inc. (CPP), which became a wholly-owned subsidiary, accounted for as an asset acquisition[24][49] - The company has incurred losses of $82.0 million since its inception in 2011 and had a net loss of $25.8 million for the six months ended June 30, 2022, raising substantial doubt about its ability to continue as a going concern[26][27] - The acquisition of CPP involved total consideration of $10.3 million, primarily allocated to In-Process Research and Development (IPR&D) of $17.7 million, which was immediately expensed to R&D[54][39] - As part of the CPP acquisition, the company assumed debt, including a $6.2 million note payable to Sucampo GmbH and a $0.7 million note to Tillotts Pharma AG[55][56] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the CPP acquisition and drug candidates, highlighting a significant increase in R&D expenses and net loss due to a $17.7 million IPR&D write-off, with urgent need for capital to fund operations beyond Q4 2022 - The company's lead candidates are ivospemin (SBP-101) for pancreatic cancer and Flynpovi (eflornithine and sulindac), with a new global randomized trial for ivospemin, ASPIRE, initiated in January 2022[73][77] - The acquisition of CPP resulted in a non-cash write-off of approximately $17.7 million from IPR&D, which was the primary driver of the increased net loss for the period[89][90] - The company's cash balance of $2.5 million as of June 30, 2022, is only expected to fund operations until early in the fourth quarter of 2022, making additional capital raising critical[91][92] Operating Results (In thousands) | Operating Results (In thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $20,028 | $985 | $22,236 | $2,084 | | Total operating expenses | $21,286 | $2,226 | $25,289 | $4,475 | | Net Loss | $(22,130) | $(2,186) | $(25,796) | $(4,443) | Quantitative and Qualitative Disclosure About Market Risk As a smaller reporting company, Panbela Therapeutics is not required to provide disclosure for this item - The company is not required to provide disclosure pursuant to this item because it qualifies as a smaller reporting company[119] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2022, despite a significant deficiency in personnel for segregation of duties, mitigated by senior management review - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2022[122] - The company has a significant deficiency in internal control due to insufficient personnel resources for segregation of duties, which is mitigated by executive and senior management review[120] - No material changes in internal control over financial reporting were identified during the most recent fiscal quarter[123] PART II – OTHER INFORMATION Legal Proceedings The company reported no material legal proceedings, though Note 9 to the financial statements discloses an ongoing arbitration with a former CFO of the acquired subsidiary, CPP - The company states there are no legal proceedings to report under this item[126] - Note 9 of the financial statements discloses that subsidiary CPP is in arbitration with a former chief financial officer over a termination for cause in November 2020, with the company defending against the claim[59] Risk Factors This section outlines significant risks, including the company's pre-revenue status, history of losses, and a "going concern" qualification, highlighting an urgent need for additional capital, successful CPP integration, and managing clinical trial uncertainties - The company has a history of negative operating cash flow and its auditors have expressed substantial doubt about its ability to continue as a 'going concern'[129][131] - The company will require additional capital to continue operations beyond early Q4 2022 and may be forced to cease operations if it cannot secure funding[133] - The recent acquisition of CPP introduces substantial risks, including integration difficulties, unforeseen costs and liabilities, and potential disruption to ongoing business[151][152][153] - Clinical trials are expensive, time-consuming, and highly uncertain, with failure to demonstrate safety and efficacy materially harming the business[157][158] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the reporting period - None[196] Defaults Upon Senior Securities The company reported no defaults upon its senior securities - None[197][199] Mine Safety Disclosures This item is not applicable to the company's business - Not applicable[201] Other Information The company reported no information under this item - None[202] Exhibits This section lists all exhibits filed with the Form 10-Q, including the merger agreement, corporate governance documents, financing agreements, and required certifications - The report includes a list of filed exhibits, such as the merger agreement, corporate governance documents, financing agreements, and required certifications[203][204]