Pulse Biosciences, Inc. — Q1 2018 Form 10-Q
Reporting period: Three months ended March 31, 2018. Financial statements are unaudited; amounts below are in U.S. dollars unless noted.
Business context
Pulse Biosciences is a clinical-stage medical technology company developing its Nano-Pulse Stimulation (NPS) platform for potential oncology, dermatology, aesthetics and other applications. It had no commercialized products or revenue and remained focused on research, product development and clinical work.
Financial results and liquidity
| Metric | Q1 2018 | Q1 2017 / comparison |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $8.724 million | $3.237 million |
| Net loss | $8.668 million | $3.198 million |
| Net loss per share | $0.51 | $0.23 |
| Operating cash used | $5.018 million | $2.499 million |
| Cash, cash equivalents and investments at March 31 | $33.4 million | $38.1 million at December 31, 2017 |
- General and administrative expense increased to $5.383 million from $1.344 million; research and development expense increased to $3.175 million from $1.727 million. The company attributed much of the increase to higher compensation and stock-based compensation.
- Stock-based compensation was $3.420 million, versus $0.263 million in Q1 2017. Interest income was $56,000; no gross margin or operating margin is meaningful given the absence of revenue.
- Cash and cash equivalents were $10.667 million and investments were $22.708 million. Net investing cash inflow of $11.999 million primarily reflected purchases, sales and maturities of investment securities—not operating cash generation. Financing provided $300,000.
- Total liabilities were $3.703 million, largely deferred rent and current operating liabilities; the filing reports no debt. Current assets were $33.743 million versus current liabilities of $2.191 million.
Changes, outlook and risks
- Net loss widened by $5.470 million year over year as operating expenses rose substantially. Operating cash use approximately doubled.
- Management expected general and administrative and R&D expenses to increase substantially during 2018, citing staffing, ongoing development, expanded clinical studies and regulatory work.
- Management said available cash, cash equivalents and investments were expected to fund projected operating requirements for at least 12 months from the filing date, while also stating the company planned to raise additional capital. Future financing may dilute shareholders or may not be available on acceptable terms.
- In September 2017, after the FDA requested additional data for the PulseTx System soft-tissue-ablation clearance application, the company withdrew the application to collect further data, with intent to submit a subsequent application. No approval or commercialization timing is assured.
- The SEC had issued subpoenas to the company and certain directors in an investigation into trading before the September 2017 stock-purchase announcement. The company said it was cooperating and could not estimate any possible loss; the filing states the investigation is a fact-finding inquiry, not a conclusion that anyone violated the law.
- Key risks include clinical and regulatory uncertainty, the need for additional capital, uncertain product adoption and reimbursement, intellectual-property protection, and potential dilution. Robert W. Duggan beneficially owned approximately 35% of outstanding common stock, according to the filing.
Investor facts to verify
- Whether the company’s cash runway and planned financing remain adequate relative to its research, clinical and operating plans.
- Progress, data requirements and regulatory pathway for the withdrawn PulseTx application and any subsequent submission.
- Whether rising expenses—especially stock-based compensation—and operating cash burn are tracking management’s expectations.
- Developments or potential financial exposure related to the SEC investigation and other contingencies.
- Potential dilution from future equity financing and the effects of concentrated ownership.