Processa Pharmaceuticals(PCSA) - 2022 Q3 - Quarterly Report

PART I: FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed consolidated financial statements, highlighting decreases in cash and assets, increased liabilities, and a widening net loss due to higher R&D expenses Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets | Financial Metric | September 30, 2022 ($) | December 31, 2021 ($) | | :--- | :--- | :--- | | Cash and cash equivalents | 9,054,576 | 16,497,581 | | Total Current Assets | 10,886,685 | 18,327,151 | | Total Assets | 18,604,465 | 26,463,505 | | Total Current Liabilities | 1,192,733 | 971,020 | | Total Liabilities | 1,364,440 | 978,405 | | Total Stockholders' Equity | 17,240,025 | 25,485,100 | Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations | Metric | Three Months Ended Sep 30, 2022 ($) | Three Months Ended Sep 30, 2021 ($) | Nine Months Ended Sep 30, 2022 ($) | Nine Months Ended Sep 30, 2021 ($) | | :--- | :--- | :--- | :--- | :--- | | Research and development expenses | 3,136,838 | 1,722,364 | 8,319,907 | 4,806,845 | | General and administrative expenses | 2,920,280 | 1,338,113 | 6,137,674 | 3,391,105 | | Operating Loss | (6,057,118) | (3,111,430) | (14,457,581) | (8,764,533) | | Net Loss | (6,020,410) | (2,987,217) | (14,411,909) | (8,243,740) | | Net Loss per Share (Basic & Diluted) | (0.37) | (0.19) | (0.90) | (0.54) | Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows | Cash Flow Metric | Nine Months Ended Sep 30, 2022 ($) | Nine Months Ended Sep 30, 2021 ($) | | :--- | :--- | :--- | | Net Cash Used In Operating Activities | (7,107,758) | (5,990,321) | | Net Cash (Used In) Provided By Financing Activities | (335,247) | 9,667,285 | | Net (Decrease) Increase in Cash | (7,443,005) | 3,676,964 | | Cash and Cash Equivalents – End of Period | 9,054,576 | 19,093,188 | Notes to Condensed Consolidated Financial Statements - The company is a clinical-stage biopharmaceutical company with five drugs in its pipeline: Next Generation Capecitabine (PCS6422), PCS12852, PCS499, PCS3117, and PCS11T[18][24] - Management believes current cash balances and available financing under the Lincoln Park Purchase Agreement are adequate for at least the next twelve months, but acknowledges that future operations depend on obtaining additional funding[25] - On March 23, 2022, the company entered into a Purchase Agreement with Lincoln Park Capital Fund, LLC, for up to $15.0 million of its common stock[28][38] - Stock-based compensation expense for the nine months ended September 30, 2022, was $6.05 million, a significant increase from $2.29 million in the same period of 2021[45] Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes the company's financial performance, detailing its drug pipeline progress, increased net loss from higher R&D and G&A expenses, and current liquidity position Our Drug Pipeline Our Drug Pipeline | Drug | Disease Target | Development Stage | Upcoming Milestones | | :--- | :--- | :--- | :--- | | PCS6422 (Next Gen Capecitabine) | Metastatic Colorectal, Other Cancers | Phase 1B | 1H'23 - Complete Phase 1B Trial; 2023 - Initiate Phase 2B Trial | | PCS12852 | Gastroparesis | Phase 2A/2B | 2H'22 - Complete Phase 2A analysis; 2023 - Initiate Phase 2B Trial | | PCS499 | Ulcerative Necrobiosis Lipoidica | Phase 2B | 2023 - Complete Interim Analysis & Enrollment; 2023-2024 - Initiate Phase 3 Trial | | PCS3117 | Pancreatic, Other Cancers | Phase 2B | 2H'22 - 1H'23 - Define paths to FDA Approval | | PCS11T | Small Cell Lung, Other Cancers | Pre-IND | 2H'22 - Select Manufacturing Sites; Define paths to FDA Approval | - The Phase 1B trial for Next Generation Capecitabine (NGC) is expected to complete enrollment in the first half of 2023, with plans to initiate a Phase 2B trial later in 2023[88] - The Phase 2A trial for PCS12852 in gastroparesis completed enrollment in September 2022, with early results showing improvements in gastric emptying; a Phase 2B study is planned for 2023[20][95] - Enrollment in the PCS499 Phase 2B trial has been delayed due to COVID-19 and the rarity of the disease; an interim analysis is expected in the first half of 2023[22][102] Results of Operations - The company currently has no revenue from products[120] Results of Operations | Expense Category | Nine Months Ended Sep 30, 2022 ($) | Nine Months Ended Sep 30, 2021 ($) | Change ($) | | :--- | :--- | :--- | :--- | | Research and development expenses | 8,319,907 | 4,806,845 | +3,513,062 | | General and administrative expenses | 6,137,674 | 3,391,105 | +2,746,569 | | Net Loss | (14,411,909) | (8,243,740) | +(5,819,310) | - The increase in R&D expenses for the first nine months of 2022 was driven by higher payroll and related costs, a $1.4 million increase in stock-based compensation, and increased costs for three active clinical trials[123][124] - The increase in G&A expenses for the first nine months of 2022 was primarily due to a $2.3 million increase in employee stock-based compensation[129] Liquidity and Capital Resources - As of September 30, 2022, the company had $9.1 million in cash and cash equivalents[140] - Net cash used in operating activities for the nine months ended September 30, 2022, was $7.1 million, an increase from $6.0 million in the prior-year period, mainly due to payments for clinical trials and increased salaries[135] - Management believes its current cash balance, along with funds available from the Lincoln Park Purchase Agreement and the ATM Offering, will be adequate for at least the next twelve months[142] Quantitative and Qualitative Disclosures About Market Risk This section is omitted as the company qualifies as a smaller reporting company, rendering market risk disclosures not applicable - This item is not applicable to the company as it qualifies as a smaller reporting company[152] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal controls during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2022[153] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control[154] PART II: OTHER INFORMATION Legal Proceedings The company is not currently involved in any material legal proceedings - The company is not currently a party to any material legal proceedings[155] Risk Factors No material changes to risk factors have occurred since the 2021 Annual Report on Form 10-K - There have been no material changes to the risk factors as described in the Annual Report on Form 10-K for the year ended December 31, 2021[156] [Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECU RITIES%20AND%20USE%20OF%20PROCEEDS) No unregistered securities were sold during the third quarter of 2022 - There were no sales of unregistered securities during the three months ended September 30, 2022[157] Other Information The company reported a change in its transfer agent during the quarter - On July 25, 2022, the company changed its transfer agent from Equiniti Trust Ltd. to Continental Stock Transfer and Trust Company[162] Exhibits This section lists exhibits filed with the Form 10-Q, including management certifications and XBRL data files - The report lists several exhibits filed, including the First Amendment to the Lease Agreement, CEO and CFO certifications under Rule 13a-14(a) and Section 1350, and various Inline XBRL documents[163]