Revelation Biosciences, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. Revelation is a clinical-stage biopharmaceutical company developing innate-immune therapeutics and diagnostics. It has no approved products and has never generated product revenue. The January 2022 business combination was accounted for as a reverse recapitalization.
Financial results and liquidity
- Revenue and margins: No revenue was reported; gross margin is not applicable.
- Q3 net loss: $1.17 million, compared with $3.04 million in Q3 2021. Operating expenses were $1.20 million versus $3.04 million. Basic and diluted loss per share was $0.06 versus $0.48.
- Nine-month net loss: $9.62 million, compared with $8.13 million in 2021. Operating expenses rose to $9.65 million from $8.09 million. Basic and diluted loss per share was $0.57 versus $3.83.
- Operating expenses: Nine-month R&D increased 19% to $5.04 million; G&A increased 20% to $4.61 million. Q3 R&D fell to $0.38 million from $1.53 million, and G&A fell to $0.82 million from $1.51 million.
- Cash flow: Nine-month operating cash use was $10.27 million, compared with $8.21 million in 2021. Financing provided $15.19 million; cash increased $4.92 million during the period.
- Balance sheet: Cash and cash equivalents were $6.20 million; current assets were $6.51 million and current liabilities $4.37 million at September 30. Total liabilities were $4.37 million, stockholders’ equity $2.23 million, and accumulated deficit $24.14 million. The filing reports no long-term liabilities.
Material changes and financing
- The July 2022 public offering raised $4.45 million net from 8.33 million common shares sold with warrants to purchase another 8.33 million shares. The warrants have a $0.60 exercise price.
- The January PIPE raised $7.26 million net and included common warrants exercisable at $3.29 per share. In total, the company reported 23.54 million common shares outstanding at September 30, versus 2.31 million at December 31, 2021. The filing also lists 23.15 million potential common shares excluded from diluted loss per share as anti-dilutive.
- The company repurchased 750,000 shares for $7.65 million under a forward share purchase agreement in February. It also repaid $0.80 million of promissory notes, including interest.
- Q3 expense reductions reflected, among other things, lower REVTx-99a clinical activity, reduced REVDx-501 diagnostic development and the July release of nine employees. Nine-month R&D rose principally because of higher REVTx-99a and REVTx-99b study costs, partly offset by lower REVDx-501 spending.
Outlook, risks and unusual items
- Management expects continued significant operating losses and negative operating cash flows, and says current cash is not expected to sustain operations for one year after the financial statements were issued. The filing states this raises substantial doubt about the company’s ability to continue as a going concern. Additional financing is needed; none is committed.
- Management does not expect product revenue for at least several years, if ever. It expects R&D spending to increase as programs advance, but provides no specific financial guidance or forecast.
- REVTx-99a development as a broad antiviral nasal product was discontinued in June 2022. The company describes ongoing development of REVTx-99b, REVTx-100, REVTx-200, REVTx-300 and REVDx-501.
- Two material disputes are pending: LifeSci Capital seeks approximately $2.7 million in cash and $2.6 million in equity for fees; A-IR Clinical Research seeks £1.6 million plus interest and costs. Revelation disputes both claims. The filing records $2.91 million in deferred underwriting commissions but says additional liabilities for the LifeSci matter cannot be determined.
- Nasdaq continued-listing compliance is a risk. The company reported a stockholders’ equity compliance plan deadline of November 21, 2022, and risk of delisting if its share price remained below the $1 minimum bid requirement.
- The company reported disclosure controls effective at a reasonable assurance level and no material change in internal control over financial reporting during the quarter.
Investor verification priorities
- Confirm current cash, subsequent financing and expected cash runway against the going-concern warning.
- Verify Nasdaq equity and minimum-bid compliance status and any reverse-stock-split actions.
- Track the outcomes, potential cash and equity exposure, and accounting treatment of both pending lawsuits.
- Review clinical, regulatory and spending updates for each active program, including the status of REVTx-99a after its discontinuation.
- Assess dilution and potential warrant exercises against the reported share count and outstanding warrant overhang.