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MarketScreener Homepage  >  Equities  >  Nasdaq  >  Ritter Pharmaceuticals Inc    RTTR

RITTER PHARMACEUTICALS INC

(RTTR)
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RITTER PHARMACEUTICALS : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

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08/14/2019 | 05:17pm EDT
The following discussion and analysis should be read in conjunction with our
interim unaudited condensed financial statements and related notes included in
this Quarterly Report on Form 10-Q ("Quarterly Report") and the audited
financial statements and notes thereto as of and for the year ended December 31,
2018 and the related Management's Discussion and Analysis of Financial Condition
and Results of Operations, both of which are contained in our Annual Report on
Form 10-K for the fiscal year ended December 31, 2018 filed with the Securities
and Exchange Commission ("SEC") on April 1, 2019 (the "2018 Annual Report"). As
used in this report, unless the context suggests otherwise, "we," "us," "our,"
or "Ritter" refer to Ritter Pharmaceuticals, Inc. All common share amounts and
per share amounts have been adjusted to reflect a 1-for-10 reverse stock split
of our common stock on March 23, 2018. In addition to historical information,
this discussion and analysis contains forward-looking statements that involve
risks, uncertainties and assumptions.



Special Note Regarding Forward-Looking Statements and Industry Data




This Quarterly Report contains forward-looking statements that involve
substantial risks and uncertainties. All statements other than statements of
historical facts contained in this Quarterly Report, including statements
regarding our strategy, future operations, future financial position, future
revenue, projected costs, prospects, plans, objectives of management and
expected market growth are forward-looking statements. The words "anticipate,"
"believe," "could," "estimate," "expect," "intend," "may," "plan," "potential,"
"predict," "project," "should," "target," "will," "would" and similar
expressions are intended to identify forward-looking statements, although not
all forward-looking statements contain these identifying words. These statements
involve known and unknown risks, uncertainties and other important factors that
may cause our actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or
implied by the forward-looking statements.



Some of the factors that we believe could cause actual results to differ from those anticipated or predicted include:

? our ability to obtain additional financing on acceptable terms;

? the accuracy of our estimates regarding expenses, future revenues and capital

requirements;

? the success and timing of our preclinical studies and clinical trials;

? our ability to obtain and maintain regulatory approval of RP-G28 and any other

product candidates we may develop, and the labeling under any approval we may

obtain;

? regulatory developments in the United States and other countries;

? the performance of third-party manufacturers;

? our ability to develop and commercialize RP-G28 and any other product

candidates we may develop;

? our ability to obtain and maintain intellectual property protection for RP-G28

and any other product candidates that we may develop in the future;

? the successful development of our sales and marketing capabilities;

? the potential markets for RP-G28 and any other product candidates we may

develop in the future and our ability to serve those markets;

? the rate and degree of market acceptance of our products, if approved;

? the success of competing drugs that are or become available; and

? the loss of key scientific or management personnel.




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By their nature, forward-looking statements involve risks and uncertainties
because they relate to events, competitive dynamics, and healthcare, regulatory
and scientific developments and depend on the economic circumstances that may or
may not occur in the future or may occur on longer or shorter timelines than
anticipated. Although we believe that we have a reasonable basis for each
forward-looking statement contained in this Quarterly Report, we caution you
that forward-looking statements are not guarantees of future performance and
that our actual results of operations, financial condition and liquidity, and
the development of the industry in which we operate may differ materially from
the forward-looking statements contained in this Quarterly Report. In addition,
even if our results of operations, financial condition and liquidity, and the
development of the industry in which we operate are consistent with the
forward-looking statements contained in this Quarterly Report, they may not be
predictive of results or developments in future periods.



Any forward-looking statement that we make in this Quarterly Report speaks only
as of the date of such statement, and we undertake no obligation to update such
statements to reflect events or circumstances after the date of this Quarterly
Report. You should also read carefully the factors described in the "Risk
Factors" section of our 2018 Annual Report and this Quarterly Report to better
understand the risks and uncertainties inherent in our business and underlying
any forward-looking statements.



Overview



Ritter Pharmaceuticals, Inc. develops novel therapeutic products that modulate
the gut microbiome to treat digestive disorders. Our lead product candidate,
RP-G28, is an orally administered, high purity galacto-oligosaccharide,
currently in Phase 3 clinical development for the treatment of lactose
intolerance ("LI"), a condition that affects millions of people worldwide.
RP-G28 is designed to selectively stimulate the growth of lactose-metabolizing
bacteria in the colon, thereby effectively adapting the gut microbiome to assist
in digesting lactose (the sugar found in milk) that reaches the large intestine.
RP-G28 has the potential to become the first drug approved by the U.S. Food and
Drug Administration ("FDA") for the treatment of LI. We are further exploring
the functionality and discovering the therapeutic potential that gut microbiome
changes may have on treating/preventing a variety of conditions including
gastrointestinal diseases, cancer, metabolic, and liver diseases. We intend to
expand our product pipeline and create added value in the future by evaluating
RP-G28 in other indications, including orphan indications, developing additional
products based on our underlying microbiome-modulating technology, and/or
in-licensing complementary products to treat these, or other, conditions.



In March 2019, we announced that we had completed enrollment in our Phase 3
clinical trial known as "Liberatus". In July 2019, we announced that the last
patient had completed their last visit, that trial finalization leading to data
lock and top-line data readout had begun and that data is expected to be
publicly released in the early fourth quarter of 2019. We expect our Phase 3
clinical program will include two confirmatory clinical trials of similar trial
design.



We have devoted substantially all of our resources to development efforts
relating to RP-G28, including conducting clinical trials of RP-G28, providing
general and administrative support for these operations and protecting our
intellectual property. We currently do not have any products approved for sale
and we have not generated any revenue from product sales since our inception.



Financial Overview


We have incurred net losses in each year since our inception, including net
losses of approximately $7.5 million for the six months ended June 30, 2019. We
had an accumulated deficit of approximately $77.7 million as of June 30, 2019.
Substantially all of our net losses resulted from costs incurred in connection
with our research and development programs, patent costs, stock-based
compensation, and from general and administrative costs associated with our
operations.



We expect to continue to incur significant expenses and increasing operating
losses for at least the next several years. We anticipate that our expenses will
increase substantially as we:



? complete the development of our lead product candidate, RP-G28, for the

reduction of symptoms associated with LI in patients;




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? seek to obtain regulatory approvals for RP-G28;

? outsource the commercial manufacturing of RP-G28 for any indications for which

we receive regulatory approval;

? contract with third parties for the sales, marketing and distribution of RP-G28

for any indications for which we receive regulatory approval;

? maintain, expand and protect our intellectual property portfolio;

? continue our research and development efforts; and

? add operational, financial and management information systems and personnel,

including personnel to support our product development and commercialization

  efforts.




Revenue


We do not expect to generate revenue from product sales unless and until we
successfully complete development and obtain marketing approval for one or more
of our product candidates, which we expect will take a number of years and is
subject to significant uncertainty. Accordingly, we anticipate that we will need
to raise additional capital prior to the commercialization of RP-G28. Until such
time, if ever, as we can generate substantial revenue from product sales, we
expect to finance our operating activities through a combination of equity
offerings (including shares sold to Aspire Capital LLC ("Aspire Capital")
pursuant to our common stock purchase agreement with Aspire Capital), debt
financings, government or other third-party funding, commercialization,
marketing and distribution arrangements and other collaborations, strategic
alliances and licensing arrangements. However, we may be unable to raise
additional funds or enter into such other arrangements when needed on favorable
terms or at all. Our failure to raise capital or enter into such other
arrangements as and when needed would have a negative impact on our financial
condition and our ability to develop our product candidates.



Research and Development Expenses




Since our inception, we have focused our resources on our research and
development activities, including conducting nonclinical studies and clinical
trials, manufacturing development efforts and activities related to regulatory
filings for RP-G28. Our research and development expenses consist primarily of:



? fees paid to consultants and clinical research organizations ("CROs"),

including in connection with our nonclinical and clinical trials, and other

related clinical trial fees, such as for investigator grants, patient

screening, laboratory work, clinical trial database management, clinical trial

material management and statistical compilation and analysis;

? costs related to acquiring and manufacturing clinical trial materials;

? depreciation of equipment, computers and furniture and fixtures;

? costs related to compliance with regulatory requirements; and

? overhead expenses for personnel in research and development functions.

From inception through June 30, 2019, we have incurred approximately $39.2
million in research and development expenses. We plan to increase our research
and development expenses for the foreseeable future as we continue the
development of RP-G28 for lactose intolerance and other indications, subject to
the availability of additional funding.



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The successful development of RP-G28 is highly uncertain. At this time, we
cannot reasonably estimate the nature, timing or costs of the efforts that will
be necessary to complete the development of RP-G28 or when, if ever, net cash
inflows from RP-G28 may commence. This is due to the numerous risks and
uncertainties associated with developing drugs, including the uncertainty of:



? the scope, rate of progress and expense of our ongoing, as well as any

additional, clinical trials and other research and development activities;

? future clinical trial results; and

? the timing and receipt of any regulatory approvals.

For example, if the FDA or another regulatory authority were to require us to
conduct clinical trials beyond those that we currently anticipate will be
required for the completion of the clinical development of RP-G28 or if we
experience significant delays in enrollment in any of our clinical trials, we
could be required to expend significant additional financial resources and time
on the completion of clinical development.



Patent Costs


Patent costs consist primarily of professional fees for legal services to prosecute patents and maintain patent rights.

General and Administrative Expenses

General and administrative expenses include facilities costs, salaries, benefits, and stock-based compensation for employees, professional fees for directors, fees for independent contractors, insurance and accounting and legal services.




We expect that our general and administrative expenses will increase if RP-G28
is approved for commercialization. We believe that these increases will likely
include increased costs for director and officer liability insurance, and
increased fees for outside consultants, lawyers and accountants, among other
expenses.


Interest Income and Interest Expense

Interest income consists of interest earned on our cash, cash equivalents and short-term investments in marketable debt securities.

Critical Accounting Policies and Estimates




This discussion and analysis is based on our financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States of America ("GAAP"). The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses and the disclosure of contingent
assets and liabilities in our financial statements. On an ongoing basis, we
evaluate our estimates and judgments, including those related to fair value of
financial instruments, research and development costs, accrued expenses and
stock-based compensation. We base our estimates on historical experience, known
trends and events and various other factors we believe to be reasonable under
the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates
under different assumptions or conditions.



A critical accounting policy is one that is both important to the portrayal of
our financial condition and results of operation and requires management's most
difficult, subjective or complex judgments, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain. Our
critical accounting estimates are disclosed in the Management's Discussion and
Analysis of Financial Condition and Results of Operations section of our 2018
Annual Report. There have not been any material changes to such critical
accounting estimates since December 31, 2018.



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Fair Value of Financial Instruments

The fair value of the Company's financial instruments reflects the amounts that
it estimates it would receive in connection with the sale of an asset or pay in
connection with the transfer of a liability in an orderly transaction between
market participants at the measurement date (exit price). The Company discloses
and recognizes the fair value of its assets and liabilities using a hierarchy
that prioritizes the inputs to valuation techniques used to measure fair value.
The hierarchy gives the highest priority to valuations based upon unadjusted
quoted prices in active markets for identical assets or liabilities (Level 1
measurements) and the lowest priority to valuations based upon unobservable
inputs that are significant to the valuation (Level 3 measurements). The
guidance establishes three levels of the fair value hierarchy as follows:



Level 1 - Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date;




Level 2 - Inputs other than quoted prices that are observable for the assets or
liability either directly or indirectly, including inputs in markets that are
not considered to be active;


Level 3 - Inputs that are unobservable.




Assets and liabilities measured at fair value are classified in their entirety
based on the lowest level of input that is significant to the fair value
measurement. The Company's assessment of the significance of a particular input
to the fair value measurement in its entirety requires management to make
judgments and consider factors specific to the asset or liability.



The Company recognizes transfers between levels of the fair value hierarchy as
of the end of the reporting period. There were no transfers within the hierarchy
during the three months ended June 30, 2019.



A summary of the assets and liabilities carried at fair value in accordance with the hierarchy defined above is as follows :



                                          Fair Value Measurements Using
                               Level 1        Level 2       Level 3         Total
June 30, 2019
Assets:
Cash and money market fund   $ 4,380,494     $       -     $       -     $
4,380,494
Total assets                 $ 4,380,494     $       -     $       -     $ 4,380,494




The Company uses a market approach for determining the fair value of all its
Level 1 and Level 2 money market funds and marketable securities. To value its
money market funds, the Company values the funds at $1 stable net asset value,
which is the market pricing convention for identical assets that the Company has
the ability to access.



The investments are classified as available-for-sale debt securities. At June
30, 2019, the balance in the Company's accumulated other comprehensive income
comprised primarily of temporary unrealized gains related to the Company's
available-for-sale debt securities. There were no realized gains or losses
recognized on the sale or maturity of available-for-sale debt securities for the
six months ended June 30, 2019 and as a result, the Company did not reclassify
any amounts out of accumulated other comprehensive loss for the period. The
Company has no available-for-sale debt securities as of June 30, 2019.



Research and Development Costs




We expense the cost of research and development as incurred. Research and
development expenses consist of costs incurred in performing research and
development activities, including clinical study costs, contracted services, and
other external costs. Nonrefundable advance payments for goods and services that
will be used in future research and development activities are expensed when the
activity is performed or when the goods have been received, rather than when
payment is made, in accordance with ASC 730, Research and Development.



  20







Accrued Expenses



As part of the process of preparing our financial statements, we are required to
estimate our accrued expenses. This process involves reviewing quotations and
contracts, identifying services that have been performed on our behalf and
estimating the level of service performed and the associated cost incurred for
the service when we have not yet been invoiced or otherwise notified of the
actual cost. The majority of our service providers invoice us monthly in arrears
for services performed or when contractual milestones are met. We make estimates
of our accrued expenses as of each balance sheet date in our financial
statements based on facts and circumstances known to us at that time. We
periodically confirm the accuracy of our estimates with the service providers
and make accrued expense adjustments if necessary. The significant estimates in
our accrued research and development expenses include fees due to service
providers.



Emerging Growth Company Status

The Jumpstart Our Business Startups Act of 2012 ("JOBS Act") was enacted on
April 5, 2012. Section 107 of the JOBS Act provides that an "emerging growth
company" can take advantage of the extended transition period provided in
Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the "Securities
Act"), for complying with new or revised accounting standards. In other words,
an "emerging growth company" can delay the adoption of certain accounting
standards until those standards would otherwise apply to private companies. We
have elected to use the extended transition period for complying with new or
revised accounting standards under Section 102(b)(1) of the JOBS Act. This
election allows us to delay the adoption of new or revised accounting standards
that have different effective dates for public and private companies until those
standards apply to private companies. As a result of this election, our
financial statements may not be comparable to companies that comply with public
company effective dates.



As an "emerging growth company," we are entitled to rely on certain of
exemptions and reduced reporting requirements, including without limitation, (i)
providing an auditor's attestation report on our system of internal controls
over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act
and (ii) complying with any requirement that may be adopted by the PCAOB
regarding mandatory audit firm rotation or a supplement to the auditor's report
providing additional information about the audit and the financial statements,
known as the auditor discussion and analysis. We will remain an emerging growth
company until the earlier of (i) the last day of the fiscal year (a) following
the fifth anniversary of the date we completed our initial public offering,
which was June 29, 2015, (b) in which we have total annual gross revenue of at
least $1.07 billion, or (c) in which we are deemed to be a large accelerated
filer, which means the market value of our common stock that is held by
non-affiliates exceeded $700.0 million as of the prior June 30th, and (ii) the
date on which we have issued more than $1.0 billion in non-convertible debt
during the prior three-year period.



Results of Operations


Comparison of the Three Months Ended June 30, 2019 and 2018

The following table summarizes our results of operations for the three months ended June 30, 2019 and 2018, together with the changes in those items in dollars and as a percentage:



                                       For the Three Months Ended
                                                June 30,                   Dollar        Percentage
                                          2019              2018           Change          Change
Statement of Operations Data:
Operating costs and expenses
Research and development             $    1,433,036$  1,871,242$ (438,206 )            (23 )%
Patent costs                                 69,944           48,263         21,681               45 %
General and administrative                1,345,486        1,686,903       (341,417 )            (20 )%
Total operating costs and expenses        2,848,466        3,606,408       (757,942 )            (21 )%

Operating loss                           (2,848,466 )     (3,606,408 )      757,942              (21 )%

Other income:
Interest income                              33,314           21,756         11,558               53 %
Total other income                           33,314           21,756         11,558               53 %
Net Loss                             $   (2,815,152 )$ (3,584,652 )$  769,500              (21 )%




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Research and Development Expenses

Research and development expenses decreased by approximately $0.4 million, or
23%, during the three months ended June 30, 2019 as compared to the three months
ended June 30, 2018. The primary reason for this decrease is from the winding
down of our ongoing Liberatus clinical trial after reaching our enrollment
target in March 2019. Research and development expenses during the three months
ended June 30, 2018 primarily reflect the preparation for the Liberatus clinical
trial including manufacturing.



Patent Costs



Patent costs were approximately $70,000 and $48,000 for the three months ended
June 30, 2019 and 2018, respectively, representing an increase of approximately
$22,000, or 45%. The primary reason for the increase is the timing of expenses
related to the maintenance of patent rights, the prosecution of patents, the
application for the issuance of patents, as well as the preparation to file
national Phase applications in certain foreign countries.



General and Administrative Expenses




General and administrative expenses decreased by approximately $0.3 million, or
20%, during the three months ended June 30, 2019 as compared to the three months
ended June 30, 2018, primarily due to decreases of approximately $266,000 in
payroll expenses and $107,000 in recruitment fees, partially offset by increases
of approximately $84,000 in professional fees and $81,000 in taxes.
Approximately $123,000 in stock-based compensation expense was recognized during
the three months ended June 30, 2019 as compared to approximately $178,000
during the same period in 2018.



Other Income



Other income increased by approximately $12,000, or 53%, during the three months
ended June 30, 2019 as compared to the three months ended June 30, 2018,
primarily due to our investing in higher-yielding short-term marketable debt
securities in the three months ended June 30, 2019 as compared to the
comparative period ended June 30, 2018.



Comparison of the Six Months Ended June 30, 2019 and 2018

The following table summarizes our results of operations for the six months ended June 30, 2019 and 2018, together with the changes in those items in dollars and as a percentage:



                                       For the Six Months Ended
                                               June 30,                   Dollar         Percentage
                                         2019             2018            Change           Change
Statement of Operations Data:
Operating costs and expenses
Research and development             $  5,007,891$  2,720,925$  2,286,966               84 %
Patent costs                              118,569          111,351            7,218                6 %
General and administrative              2,499,063        2,812,794         (313,731 )            (11 )%
Total operating costs and expenses      7,625,523        5,645,070        1,980,453               35 %

Operating loss                         (7,625,523 )     (5,645,070 )     (1,980,453 )             35 %

Other income:
Interest income                           104,605           47,728           56,877              119 %
Total other income                        104,605           47,728           56,877              119 %
Net Loss                             $ (7,520,918 )$ (5,597,342 )$ (1,923,576 )             34 %




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Research and Development Expenses

Research and development expenses increased by approximately $2.3 million, or
84%, during the six months ended June 30, 2019 as compared to the six months
ended June 30, 2018. The primary reason for this increase is due to the
continued progression of our ongoing Liberatus clinical trial through completion
of enrollment in March 2019. Research and development expenses during the six
months ended June 30, 2018 primarily reflect extension study costs and the
preparation for the Liberatus clinical trial.



Patent Costs



Patent costs during the six months ended June 30, 2019 were relatively
consistent at approximately $0.1 million as compared to the same period in 2018.
Patent costs relate to our maintenance of patent rights and the prosecution of
patents, new patent applications and our preparation to file national phase
applications in certain foreign countries.



General and Administrative Expenses

General and administrative expenses decreased by approximately $314,000, or 11%,
during the six months ended June 30, 2019 as compared to the six months ended
June 30, 2018, primarily due to decreases of approximately $320,000 in payroll
expenses, $121,000 in stock option expenses and $106,000 in recruitment fees,
partially offset by increases of approximately $188,000 in professional fees and
$81,000 in taxes. Approximately $270,000 in stock-based compensation expense was
recognized during the six months ended June 30, 2019, as compared to
approximately $391,000 during the same period in 2018.



Other Income



Other income increased by approximately $57,000, or 119%, during the six months
ended June 30, 2019 as compared to the six months ended June 30, 2018, primarily
due to our investing in higher-yielding short-term marketable debt securities in
the six months ended June 30, 2019 as compared to the six months ended June
30,
2018.


Liquidity and Capital Resources




Since our inception, we have incurred net losses and negative cash flows from
operations, and, as of June 30, 2019, we had an accumulated deficit of
approximately $77.7 million. Substantially all of our net losses resulted from
costs incurred in connection with our research and development programs,
stock-based compensation, and from general and administrative costs associated
with our operations.


At June 30, 2019, we had working capital of approximately $2.0 million, and cash and cash equivalents of approximately $4.4 million.



  23







Cash Flows



The following table sets forth the significant sources and uses of cash for the
periods set forth below:



                                                For the Six Months Ended June 30,
                                                     2019                  2018

Net cash provided by (used in):

  Operating activities                        $      (10,428,725 )$  (6,372,252 )
  Investing activities                                 6,996,960              (2,008 )
  Financing activities                                         -              (3,256 )

Net decrease in cash and cash equivalents $ (3,431,765 )$ (6,377,516 )





Operating Activities



During the six months ended June 30, 2019, net cash used in operating activities
of approximately $10.4 million primarily reflects our net loss for the period of
approximately $7.5 million, offset by changes in our working capital accounts of
approximately $3.2 million. Changes in working capital accounts include
decreases in accounts payable of approximately $2.1 million and accrued expenses
of approximately $1.1 million.



Investing Activities


Net cash provided by investing activities for the six months ended June 30, 2019
was from the sale of investments in marketable securities to finance the
Liberatus clinical trial of RP-G28. Net cash used in investing activities of
approximately $1,600 and $2,000 during the six months ended June 30, 2019 and
2018, respectively, related to the purchase of office furniture and equipment.



Financing Activities


No cash was provided by financing activities for the six months ended June 30, 2019 and 2018. Net cash used in financing activities related to payout of fractional shares for the six months ended June 30, 2018.



Sources of Liquidity


Aspire Capital Common Stock Purchase Agreement




On May 4, 2017, we entered into a common stock purchase agreement with Aspire
Capital Fund, LLC ("Aspire Capital"), which was amended and restated on March
29, 2019 and on July 23, 2019 (as amended and restated, the "Aspire Purchase
Agreement"). The Aspire Purchase Agreement was amended and restated to adjust
certain provisions to improve our access to funding under the agreement and to
provide for the registration of the shares of our common stock to be sold in the
future to Aspire Capital under the Purchase Agreement on a dedicated
registration statement on Form S-1 instead of our shelf registration statement
on Form S-3. The Aspire Purchase Agreement provides access to us of up to an
aggregate of $6.5 million in proceeds through the sale of shares of our common
stock through March 31, 2021.



Under the Aspire Purchase Agreement, as amended, on any trading day we select,
we have the right, in our sole discretion, to present Aspire Capital with a
purchase notice (each, a "Purchase Notice"), directing Aspire Capital (as
principal) to purchase up to 100,000 shares of our common stock per trading day
(which could be increased by as much as an additional 2,000,000 shares per
trading day by mutual agreement), up to an aggregate of $6,500,000 of our common
stock, at a per share price (the "Purchase Price") equal to the lesser of: (i)
the lowest sale price of our common stock on the sale date, or (ii) the
arithmetic average of the three lowest closing sale prices for our common stock
during the ten (10) consecutive trading days ending on the trading day
immediately preceding the sale date. The aggregate purchase price payable by
Aspire Capital on any one purchase date cannot exceed $500,000, unless otherwise
mutually agreed. In addition, on any date on which we submit a Purchase Notice
to Aspire Capital in an amount of at least 100,000 shares and our stock price is
not less than $0.25 per share, we can also, in our sole discretion, present
Aspire Capital with a volume-weighted average price purchase notice (each, a
"VWAP Purchase Notice") directing Aspire Capital to purchase an amount of our
common stock equal to up to 30% of the aggregate shares of our common stock
traded on its principal market on the next trading day (the "VWAP Purchase
Date"), as determined by us. Under the terms of the Aspire Purchase Agreement,
the number of shares that can be sold pursuant to Aspire Capital is limited to
1,807,562 (the "Exchange Cap"), which represented 19.99% of our outstanding
shares of common stock as of March 29, 2019, the date the agreement was first
amended and restated, unless stockholder approval or an exception pursuant to
the rules of the NASDAQ Capital Market was obtained to issue more than 19.99%.
This limitation would not apply if, at any time the Exchange Cap was reached and
at all times thereafter, the average price paid for all shares issued under the
Aspire Purchase Agreement was equal to or greater than $0.86 (the "Minimum
Price"), which was the closing price of our common stock immediately preceding
the signing of the first amendment to the agreement. As of June 30, 2019, no
shares of common stock have been sold or issued to Aspire Capital under the
Aspire Purchase Agreement.



  24






November 2018 Private Placement Financing

On November 5, 2018, we closed a PIPE financing with certain institutional
investors, a key vendor and a member of our board of directors. Net proceeds
from the PIPE financing were approximately $5.5 million, after deducting
placement agent fees and other offering expenses. The securities sold by us
consisted of 6,000 shares of a newly designated class of our Series B
convertible preferred stock, with a stated value of $1,000 per share and an
initial conversion price per share of $1.30 (subject to customary adjustment for
stock dividends and stock splits) and warrants to purchase an aggregate of
2,307,685 shares of our common stock. Each investor received a warrant to
purchase a number of shares of common stock equal to one half the number of
shares of common stock into which their Series B convertible preferred stock is
initially convertible. The warrants are exercisable immediately for a five-year
period and have an exercise price of $1.30 per share (subject to customary
adjustment for stock dividends and stock splits but without the down-round
protective provisions of previously issued warrants). The proceeds received in
the PIPE financing were allocated to each instrument on a relative fair value
basis. Total proceeds of $6.0 million were allocated as follows: $1.4 million to
warrants issued and $4.6 million to Series B convertible preferred stock.



Certain investors in the PIPE financing who at the time of closing of the PIPE
financing owned shares of our Series A convertible preferred stock, exchanged,
on a 1 for 1 share basis, their shares of Series A convertible preferred stock
for shares of our newly designated class of Series C convertible preferred
stock, with a stated value of $1,000 per share and convertible into shares of
our common stock at an initial conversion price per share of $1.64 (subject to
customary adjustment for stock dividends and stock splits).



Future Funding Requirements


To date, we have not generated any revenue. We do not know when, or if, we will
generate any revenue from product sales. We do not expect to generate
significant revenue from product sales unless and until we obtain regulatory
approval of and commercialize RP-G28 or any of our other product candidates. At
the same time, we expect our expenses to increase in connection with our ongoing
development activities, particularly as we continue the research, development
and clinical trials of, and seek regulatory approval for, RP-G28. In addition,
subject to obtaining regulatory approval of RP-G28, we expect to incur
significant commercialization expenses for product sales, marketing,
manufacturing and distribution. We anticipate that we will need substantial
additional funding in connection with our continuing operations.



Based upon our current operating plan, we believe that our existing cash and
cash equivalents, together with interest and any proceeds received from our sale
of shares of common stock to Aspire Capital in the future pursuant to the Aspire
Purchase Agreement, will enable us to fund our operating expenses and capital
expenditure requirements through 2019.



Our future capital requirements will depend on many factors, including:

? the ability of RP-G28 and any other product candidate that we may develop in

    the future to progress through clinical development successfully;

  ? the outcome, costs and timing of seeking and obtaining FDA approval;

? the willingness of the EMA or other regulatory agencies outside the United

States to accept our Phase 3 trials of RP-G28, as well as our other completed

and planned clinical and nonclinical studies and other work, as the basis for

review and approval of RP-G28 in the European Union for the reduction of

    symptoms associated with LI in patients;

  ? our need to expand our research and development activities;

? the costs associated with securing and establishing commercialization and

    manufacturing capabilities;




  25







  ? market acceptance of RP-G28 and any other product candidate that we may
    develop in the future;

  ? the costs of acquiring, licensing or investing in businesses, products,
    product candidates and technologies;

? our ability to maintain, expand and defend the scope of our intellectual

property portfolio, including the amount and timing of any payments we may be

required to make, or that we may receive, in connection with the licensing,

filing, prosecution, defense and enforcement of any patents or other

intellectual property rights;

? our need and ability to hire additional management and scientific and medical

    personnel;

  ? the effect of competing technological and market developments;

  ? our need to implement additional internal systems and infrastructure,
    including financial and reporting systems;

? the economic and other terms, timing of and success of our existing licensing

arrangements and any collaboration, licensing or other arrangements into which

    we may enter in the future; and

  ? the costs of operating as a public company.




Until such time, if ever, as we can generate substantial revenue from product
sales, we expect to finance our cash needs through a combination of equity
offerings, debt financings, government or other third-party funding,
commercialization, marketing and distribution arrangements and other
collaborations, strategic alliances and licensing arrangements. To the extent
that we raise additional capital through the sale of equity or convertible debt
securities, the ownership interests of our common stockholders will be diluted,
and the terms of these securities may include liquidation or other preferences
that adversely affect the rights of our common stockholders. Debt financing, if
available, may involve agreements that include covenants limiting or restricting
our ability to take specific actions, such as incurring additional debt, making
capital expenditures or declaring dividends. If we raise additional funds
through government or other third-party funding, commercialization, marketing
and distribution arrangements or other collaborations, strategic alliances or
licensing arrangements with third parties, we may have to relinquish valuable
rights to our technologies, future revenue streams, research programs or product
candidates or to grant licenses on terms that may not be favorable to us.



Contractual Obligations and Commitments

There have been no material changes to our contractual obligations and commitments from those disclosed in our 2018 Annual Report.

Off-Balance Sheet Arrangements

Through June 30, 2019, we do not have any off-balance sheet arrangements, as defined by applicable SEC regulations.

© Edgar Online, source Glimpses

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Financials (USD)
Sales 2019 -
EBIT 2019 -15,3 M
Net income 2019 -15,2 M
Debt 2019 -
Yield 2019 -
P/E ratio 2019 -0,77x
P/E ratio 2020 -1,73x
Capi. / Sales2019 infx
Capi. / Sales2020 infx
Capitalization 8,87 M
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Managers
NameTitle
Andrew J. Ritter President, CEO, Secretary & Director
Ira E. Ritter Executive Chairman & Chief Strategic Officer
John W. Beck Chief Financial Officer
Diane J. Plotkin Vice President-Clinical Development
Noah J. Doyle Independent Director
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