Processa Pharmaceuticals(PCSA) - 2023 Q2 - Quarterly Report

PART 1: FINANCIAL INFORMATION Financial Statements Processa Pharmaceuticals reported a reduced net loss for the six months ended June 30, 2023, but faces significant going concern doubts despite increased cash and a recent CEO appointment Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $8,677,133 | $6,503,595 | | Total Assets | $10,090,423 | $8,619,851 | | Total Liabilities | $930,741 | $1,149,110 | | Total Stockholders' Equity | $9,159,682 | $7,470,741 | | Accumulated Deficit | $(70,882,199) | $(64,247,561) | Condensed Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Research and development expenses | $1,688,164 | $3,137,292 | $3,342,509 | $5,181,912 | | General and administrative expenses | $1,026,301 | $2,034,456 | $3,477,490 | $3,218,550 | | Net Loss | $(2,612,565) | $(5,164,368) | $(6,634,638) | $(8,391,499) | | Net Loss per Share - Basic and Diluted | $(0.10) | $(0.32) | $(0.27) | $(0.53) | Condensed Consolidated Statements of Cash Flows (Unaudited, Six Months Ended June 30) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(4,178,539) | $(4,133,439) | | Net cash provided by (used in) financing activities | $6,352,077 | $(300,000) | | Net Increase (Decrease) in Cash | $2,173,538 | $(4,433,439) | | Cash and Cash Equivalents – End of Period | $8,677,133 | $12,064,142 | - The company has incurred losses since inception, with an accumulated deficit of $70.9 million as of June 30, 2023, raising substantial doubt about the company's ability to continue as a going concern[24][26] - During the first six months of 2023, the company raised gross proceeds of $7.0 million (net proceeds of $6.4 million) from the sale of 8,432,192 shares of common stock[25][41] - On August 8, 2023, Mr. George Ng was appointed as the new Chief Executive Officer and a Board Director, while Dr. David Young transitioned to President, Research and Development[62][63] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a strategic shift to the NGC pipeline, reduced R&D expenses, and the critical need for additional funding due to substantial going concern risk - The company has strategically prioritized its pipeline of Next Generation Chemotherapy (NGC) oncology drugs, designed to improve the safety-efficacy profiles of existing approved treatments[68][73] - The company's drug pipeline is led by NGC-Capecitabine (Phase 1B ongoing), followed by NGC-Gemcitabine and NGC-Irinotecan, with non-core assets PCS12852 and PCS499 being evaluated for monetization after the PCS499 trial termination[69][76][88] Comparison of Operating Expenses (Six Months Ended June 30) | Expense Category | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Research and development expenses | $3,342,509 | $5,181,912 | $(1,839,403) | | General and administrative expenses | $3,477,490 | $3,218,550 | $258,940 | - The decrease in R&D expenses for the first six months of 2023 compared to 2022 is mainly due to the completion of the PCS12852 clinical trial and the early termination of the PCS499 trial[93] - The increase in G&A expenses for the six months ended June 30, 2023, was primarily driven by a $1.4 million professional fee expense related to stock warrants, offset by a $1.4 million decrease in employee stock-based compensation[100] - The company's cash balance of $8.7 million as of June 30, 2023, is expected to fund operations only through the second quarter of 2024, raising substantial doubt about its ability to continue as a going concern without securing additional funding[111][117] Quantitative and Qualitative Disclosures About Market Risk The company, as a smaller reporting company, has omitted this section as it is not applicable - Item 3 is not applicable to the company as it qualifies as a smaller reporting company[125] Controls and Procedures Management concluded disclosure controls were effective as of June 30, 2023, with no material changes to internal controls during the quarter - Management concluded that as of June 30, 2023, the company's disclosure controls and procedures were effective at a reasonable assurance level[126] - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2023, that materially affected or are likely to materially affect these controls[127] PART II. OTHER INFORMATION Legal Proceedings As of the reporting date, the company is not involved in any material legal proceedings - The company is currently not a party to any material legal proceedings[128] Risk Factors The company faces significant Nasdaq listing risk due to a minimum bid price deficiency, potentially leading to delisting and impacting liquidity and capital - On March 22, 2023, the company received a deficiency letter from Nasdaq for failing to maintain a minimum bid price of $1.00 per share[129] - The company has until September 18, 2023, to regain compliance with the Nasdaq minimum bid price rule[129] - Potential delisting from Nasdaq could lead to reduced liquidity, limited market quotations, and challenges in raising additional financing[132] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities, use of public offering proceeds, or issuer equity purchases during the period - There were no unregistered sales of equity securities, no use of proceeds from public offerings, or no issuer purchases of equity securities in the reported period[131][133][134] Other Information No directors or officers modified, adopted, or terminated Rule 10b5-1 trading plans during the second quarter of 2023 - No modifications, adoptions, or terminations of Rule 10b5-1 trading plans by directors or officers occurred during the second quarter of 2023[138] Exhibits This section lists exhibits filed with the Form 10-Q, including the new CEO's employment agreement and officer certifications - Exhibits filed include the employment agreement for the new CEO, George Ng, and certifications by the Principal Executive and Financial Officers[139]