Business context and reporting period
Revelation Biosciences, Inc. filed this unaudited Form 10-Q for the quarter and six months ended June 30, 2022. The clinical-stage biopharmaceutical company develops immune-system therapeutics and diagnostics and has not generated product revenue. Its January 10, 2022 business combination was accounted for as a reverse recapitalization.
REVTx-99b is being developed for allergy-related nasal congestion or chronic rhinosinusitis, and REVDx-501 is a respiratory-virus diagnostic candidate. The company said it was developing REVTx-99a as an antiviral nasal drop until June 2022.
Financial results and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development | $976,000 | $1,160,000 | $4,656,000 | $2,717,000 |
| General and administrative | $885,000 | $1,282,000 | $3,791,000 | $2,333,000 |
| Total operating expenses | $1,860,000 | $2,442,000 | $8,447,000 | $5,050,000 |
| Net loss | $1,835,000 | $2,470,000 | $8,451,000 | $5,082,000 |
Margins are not meaningful because the company reported no revenue. Basic and diluted net loss per share was $0.12 for Q2 2022 and $0.58 for the first half of 2022, compared with $0.39 and $1.61, respectively, in 2021.
- Cash flow: First-half operating cash use was $8.54 million, versus $5.98 million in the prior-year period. Financing provided $10.74 million; investing cash flow was zero. Cash increased by $2.20 million to $3.48 million at June 30.
- Balance sheet: Current assets were $4.05 million and current liabilities $6.00 million, a working-capital deficit of approximately $1.95 million. Total liabilities were $6.00 million; stockholders’ deficit was $1.84 million. No long-term debt was reported.
- Obligations: Current liabilities included $2.91 million of deferred underwriting commissions and $2.17 million of accrued expenses. The company also disclosed $297,714 in remaining 2022 premium-finance payments and $34,385 in lease payments.
Material changes versus the prior comparable period
Q2 operating expenses fell by $581,000 year over year, and net loss improved by $635,000. Lower REVDx-501 development, REVTx-99a clinical-study and other expenses contributed to the quarterly decline. For the six-month period, operating expenses rose by $3.40 million and net loss increased by $3.37 million, principally reflecting higher REVTx-99a clinical-study spending, personnel costs, manufacturing, and public-company and insurance expenses. Cash used in operations also increased by $2.56 million year over year.
During the first half, the company completed the business combination and raised funds through a PIPE investment. It repurchased 750,000 shares for $7.65 million under a forward share purchase agreement. Preferred shares converted into common stock; 15.08 million common shares were outstanding at June 30.
Outlook, risks, contingencies and unusual items
- Going concern: Management stated that, even considering approximately $4.4 million of proceeds from a July 2022 public offering, available resources were not expected to sustain operations for one year after the financial statements were issued. The filing says this raises substantial doubt about the company’s ability to continue as a going concern. Additional financing is needed, with no assurance it will be available on acceptable terms.
- July offering: The company sold 8,333,334 shares and warrants for an offering price of $0.60 per share and associated warrant. It disclosed approximately $4.4 million in proceeds, before placement-agent fees and other offering expenses payable, and intends to fund product development and working capital. The warrants are exercisable at $0.60. The offering increases potential dilution.
- Development outlook: Management expects research and development expenses to increase substantially and operating losses and negative operating cash flows to continue. Product revenue depends on successful development and regulatory approval, which the company said may be several years away, if achieved at all.
- Litigation: LifeSci Capital LLC seeks approximately $2.7 million in cash and $2.6 million in equity for disputed banking and advisory fees. The company disputes the claim, asserting defenses including an $8.5 million transaction-expense cap. A $1.5 million deferred-underwriting portion is recorded as a current liability; any additional liability could not be determined.
- Other risks: The company cited clinical and regulatory uncertainty, financing and dilution risk, and Nasdaq listing compliance concerns, including prior stockholders’ equity and minimum-bid issues. Management said disclosure controls were effective at the reasonable-assurance level and reported no material change in internal control over financial reporting.
Important facts for investors to verify
- Cash runway and financing needs, including the going-concern disclosure and the net cash actually retained from the July offering.
- Clinical and regulatory status of REVTx-99b and REVDx-501, and the status of REVTx-99a following the June 2022 change.
- Potential cash or equity exposure from the LifeSci Capital litigation and the amount, if any, beyond the recorded deferred-underwriting liability.
- Fully diluted share count and potential dilution from the July offering warrants, PIPE warrants, public warrants, options and restricted stock units.
- Nasdaq continued-listing compliance and any subsequent developments affecting liquidity or access to capital.