GRI Bio, Inc. — Form 10-Q Summary
Reporting period: Quarter ended March 31, 2023. The reported financial statements reflect Vallon Pharmaceuticals’ pre-merger operations, not the combined company’s post-merger business. On April 21, 2023, Vallon completed its merger with Private GRI, effected a 1-for-30 reverse stock split, and changed its name to GRI Bio, Inc. Share and per-share amounts are retroactively adjusted for the split.
Financial performance and position
| Metric | Q1 2023 | Q1 2022 / prior date |
|---|---|---|
| Revenue | No significant operating revenue | No significant operating revenue |
| Research and development expense | $(124,000), a net credit | $1.271 million |
| General and administrative expense | $2.473 million | $1.363 million |
| Total operating expenses | $2.349 million | $2.634 million |
| Net loss | $2.396 million | $2.635 million |
| Operating cash used | $2.116 million | $2.290 million |
| Cash and cash equivalents, period end | $1.665 million | $3.781 million at Dec. 31, 2022 |
| Total assets / liabilities | $2.097 million / $2.066 million | $4.152 million / $1.810 million at Dec. 31, 2022 |
| Stockholders’ equity | $31,000 | $2.342 million at Dec. 31, 2022 |
Q1 2023 operating cash use was partly offset by changes in working capital. There was no investing or financing cash flow in the quarter; Q1 2022 investing proceeds included $1.154 million from marketable-security sales. The filing reports no debt on the March 31 balance sheet. It reports a $185,000 warrant liability, measured using Level 3 inputs, and a $63,000 loss from its increase in fair value. Interest income, net, was $16,000. The filing reports no clear gross-margin measure; the company had no significant operating revenue.
Changes and business developments
- R&D expense fell by about $1.4 million year over year, primarily because spending on Vallon’s ADAIR development program, consulting, and personnel declined. The reported Q1 2023 R&D amount was a net credit.
- G&A expense rose by about $1.1 million, primarily from personnel and professional fees related to the merger.
- The company’s business shifted from Vallon’s CNS drug candidates ADAIR and ADMIR to GRI’s immune-disease pipeline. The lead candidate, GRI-0621, is being developed for idiopathic pulmonary fibrosis (IPF); GRI-0803 is an earlier-stage candidate for autoimmune disorders.
- At the merger, Private GRI shares, options, warrants, and restricted stock awards were converted or assumed under the transaction terms. The filing reports approximately 2.919 million company shares outstanding immediately after closing. It also describes a $12.25 million equity investment arrangement and warrants issued in May 2023, as well as bridge notes with $3.333 million aggregate principal issued for $2.5 million. These are post-quarter events, not March 31 balance-sheet amounts.
Outlook, risks and unusual items
- Management expects to initiate a 36-patient Phase 2a trial of GRI-0621 in IPF in the second half of 2023 and expects topline results in the second half of 2024. It expects to file an IND for a Phase 1a/1b GRI-0803 trial in the first half of 2024, subject to IND clearance.
- Management says the combined organization’s resources, following the merger and contemplated equity financing, are expected to fund planned operations for at least 12 months; this estimate excludes proceeds from Series T warrant exercises. Those exercises are conditional and not assured. The company expects to need substantial additional capital.
- The filing cites the prior auditor’s going-concern warning and substantial doubt about the company’s ability to continue as a going concern. It warns that financing may not be available on acceptable terms and that development programs could be delayed, reduced, or discontinued if funding is insufficient.
- Clinical, regulatory, manufacturing, patient-enrollment, intellectual-property, reimbursement, and competition risks are material. GRI-0621’s prior pilot Phase 2a liver-disease study stopped after 14 of 60 intended patients because of recruitment challenges and updated FDA guidance; the filing cautions that reported observations were from an underpowered study and are not necessarily predictive.
- Cash balances included $1.218 million uninsured at March 31. Former Vallon CEO David Baker’s separation agreement provides for 18 months of salary continuation, a payment equal to 150% of target bonus subject to release terms, and certain COBRA benefits.
- Management assessed disclosure controls and procedures as effective at March 31, 2023. The filing reports no material changes in internal control over financial reporting and no legal proceedings.
Investor facts to verify
- Actual post-merger cash, financing proceeds, debt obligations, and current runway; distinguish completed funding from conditional warrant proceeds.
- The share count and potential dilution from merger consideration, assumed and exchange warrants, equity warrants, and stock awards.
- Whether GRI-0621’s IPF trial starts on schedule, enrolls as planned, and produces interpretable results.
- Whether the planned GRI-0803 IND filing occurs and what additional capital is required to advance the pipeline.
- The basis for the reported R&D credit and how post-merger spending compares with the pre-merger quarter.