REVELATION BIOSCIENCES, INC. quarterly report, Q1 FY2022

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Revelation Biosciences, Inc. — Q1 2022 Form 10-Q

Reporting period: Three months ended March 31, 2022. The unaudited filing was made May 13, 2022. Revelation became a publicly traded clinical-stage biopharmaceutical company following its January 10, 2022 business combination, accounted for as a reverse recapitalization.

Business context

The company is developing immune therapeutics and diagnostics. Its candidates include REVTx-99a, a potential antiviral nasal treatment; REVTx-99b, for allergy-related congestion or chronic rhinosinusitis; and REVDx-501, a rapid diagnostic. It has not generated revenue and does not expect product revenue for at least several years, if ever, pending development and regulatory approval.

Financial performance and liquidity

  • Revenue: None reported.
  • Operating expenses: $6.59 million, up $3.98 million from $2.61 million in Q1 2021. Research and development was $3.68 million, up $2.12 million; general and administrative expense was $2.91 million, up $1.86 million.
  • Net loss: $6.62 million, compared with $2.61 million in Q1 2021. Basic and diluted loss per share was $0.47 versus $0.42; weighted-average shares were 14.20 million versus 6.29 million.
  • Cash flow: Operating cash use was $4.83 million, compared with $2.38 million in Q1 2021. Investing cash flow was zero. Financing provided $10.74 million, and cash increased $5.91 million to $7.19 million.
  • Balance sheet at March 31: Current assets were $7.87 million and current liabilities $8.08 million. Total liabilities were $8.08 million; stockholders’ deficit was $98,511. The filing reports no revenue-generating operations.
  • Funding and obligations: Q1 financing included $7.26 million net proceeds from a PIPE and business-combination-related cash flows; the company also repurchased 750,000 shares for $7.65 million under a forward share purchase agreement. Current liabilities include $2.91 million of deferred underwriting commissions and $513,333 under a premium-financing agreement. The filing lists $572,577 of remaining lease and premium-financing obligations, all due within one year.

Material changes versus Q1 2021

  • Operating expenses rose 153%, driven mainly by REVTx-99a clinical study costs, which increased $2.18 million. REVDx-501 development expense declined by $505,000.
  • General and administrative expense increased primarily from higher financial advisory, legal and professional fees and public-company D&O insurance costs.
  • Cash at quarter-end was lower than the $10.02 million reported at March 31, 2021, despite the Q1 2022 financing inflows.
  • The business combination and PIPE substantially changed the capital structure. At March 31, 15.08 million common shares were outstanding; the company also reported 14.44 million potential common shares excluded from diluted loss per share as anti-dilutive.

Outlook, risks and unusual items

  • Going concern: Management states current cash is not expected to sustain operations for one year after the financial statements’ issuance, raising substantial doubt about the company’s ability to continue as a going concern. Additional capital is needed, and financing may not be available on acceptable terms or at all. Without funding, programs could be delayed, reduced or eliminated.
  • Management expects significant operating losses, negative operating cash flows and higher R&D spending for the foreseeable future. It cannot reliably estimate development costs, timelines, approval prospects or when revenue or profitability might occur.
  • A lawsuit filed by LifeSci Capital seeks approximately $2.7 million in cash and $2.6 million in equity for advisory and banking fees. The company disputes the amount and asserts, among other defenses, that the fees exceed the business combination agreement’s $8.5 million transaction-expense cap. The filing records $1.5 million of the claim as deferred underwriting commissions; it recognizes no additional liability because the amount cannot be determined.
  • The PIPE issued common shares and warrants, including 2.59 million common warrants exercisable at $3.29 per share. The filing also reports 7.28 million public warrants and 3.23 million private warrants exercisable at $11.50 per share, among other potential share issuances.
  • Management reported disclosure controls effective at a reasonable assurance level and no material change in internal control over financial reporting during the quarter.

Important facts for investors to verify

  1. Cash runway and the company’s ability to raise additional capital, given the explicit going-concern uncertainty and quarterly operating cash use.
  2. Clinical and regulatory progress, costs and timelines for REVTx-99a, REVTx-99b and REVDx-501, including whether expected development plans can be funded.
  3. The outcome and potential financial exposure from the LifeSci Capital lawsuit, including any liability beyond the $1.5 million already recorded.
  4. Potential dilution from outstanding warrants, options, RSUs and other reserved shares, and the terms governing their exercise.
  5. The nature and timing of the listed current obligations, including deferred underwriting commissions and premium-financing payments.