First Wave BioPharma, Inc. — Q1 2022 Form 10-Q
Issuer discrepancy: The request identifies Gridai Technologies Corp., but the supplied filing is for First Wave BioPharma, Inc. (Nasdaq: FWBI). This summary covers the filing supplied, for the unaudited quarter ended March 31, 2022.
Business context and reporting period
First Wave is a clinical-stage biotechnology company developing gut-restricted therapies for gastrointestinal diseases, principally adrulipase and niclosamide. It reported no revenue and said it had not achieved profitability. The company cautioned that quarterly results are not necessarily indicative of full-year results.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $4.98 million | $2.52 million; up 98% |
| General and administrative expense | $4.41 million | $5.70 million; down 23% |
| Total operating expenses / operating loss | $9.38 million | $8.21 million |
| Net loss | $9.63 million | $7.69 million |
| Net loss applicable to common shareholders; loss per share | $10.31 million; $0.66 | $29.98 million; $5.42 |
| Cash used in operating activities | $7.91 million | $5.07 million |
| Cash and cash equivalents, March 31 | $5.69 million | $12.03 million at March 31, 2021 |
Margins are not meaningful because the company had no revenue. R&D expense rose mainly because of clinical-trial spending, including the RESERVOIR trial; G&A fell chiefly due to lower stock compensation and public-company costs. The company reported $8.83 million in total assets, $18.07 million in total liabilities, and a $9.24 million stockholders’ deficit. Current assets of $6.55 million were below current liabilities of $14.22 million. Current note payable was $403,000; liabilities related to the FWB acquisition totaled approximately $12.59 million, of which $9.0 million was current.
Financing activities provided $5.37 million, including approximately $8.0 million net proceeds from a registered offering, partly offset by $2.41 million of acquisition-related payments. Cash declined by approximately $2.54 million during the quarter. Management estimated that March 31 cash would fund planned operations into June 2022 and stated that additional capital was necessary. The filing says substantial doubt exists about the company’s ability to continue as a going concern.
Material changes and financing
- Compared with Q1 2021, net loss increased by $1.94 million and operating cash use increased by $2.84 million.
- The March 2022 registered direct offering generated approximately $8.0 million net and included common shares, pre-funded warrants, and warrants. Common shares outstanding rose from 14.86 million at December 31, 2021 to 21.55 million at March 31, 2022. The filing reported 12.51 million warrants outstanding at quarter-end.
- The company recorded a $594,975 deemed dividend related to a warrant modification; this affected loss applicable to common shareholders, not net loss.
- Q1 2021 common-shareholder loss included substantial deemed preferred-stock dividends, explaining why it was considerably larger than the reported net loss for that period.
Outlook, risks, contingencies, and unusual items
- After quarter-end, the company reported that the Phase 2 RESERVOIR trial of FW-COV did not meet its efficacy endpoint. It reported the drug was safe, with no serious adverse events among more than 150 participants. The company said full data analysis was pending.
- Following the trial results, management announced a 20% workforce reduction and closure of its California office and Langlade, France facility. It expected R&D and G&A expenses to decline, while previously stating that adrulipase formulation work would continue and a Phase 2b monotherapy trial was expected in the second half of 2022. The FW-ICI-AC program was on hold; the company was reviewing early FW-UP trial data.
- The company suspended payments to former FWB stockholders and sought to renegotiate its acquisition obligations. On May 19, 2022, their representative filed suit seeking enforcement of payment obligations and damages. The company warned that an unfavorable outcome or inability to restructure could require further cuts or bankruptcy protection. Additional contingent acquisition milestones of up to $207 million were described; the filing said these were not accrued because they were not considered probable.
- Nasdaq had previously notified the company of a stockholders’ equity listing deficiency, with an extension through May 25, 2022. A separate May 16 notice cited a minimum-bid-price deficiency and gave a compliance period through November 14, 2022. Delisting could impair liquidity and access to financing.
- Other disclosed risks include reliance on future equity or debt financing, clinical and regulatory uncertainty, possible clinical-supply or manufacturing disruptions, COVID-19 impacts, and uncertain economic effects from the war in Ukraine. The company reported effective disclosure controls and no material change in internal control over financial reporting.
Important facts for investors to verify
- Confirm the issuer: the supplied filing is First Wave BioPharma, not Gridai Technologies Corp.
- Check subsequent cash, financing, and operating runway against the stated expectation of funding into June 2022.
- Review the RESERVOIR full data and subsequent status of FW-COV, FW-UP, and adrulipase programs.
- Track the FWB litigation, acquisition-payment renegotiations, and any resulting liquidity or going-concern developments.
- Verify Nasdaq compliance status, including the stockholders’ equity and minimum-bid-price requirements.