REVELATION BIOSCIENCES, INC. You should read the following discussion of our financial condition and results of operations in conjunction with our financial statements and the notes included elsewhere in the Form 10-Q. The following discussion contains forward-looking statements that involve certain risks and uncertainties. Our actual results could differ materially from those discussed in these statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in the Form 10-Q and our Annual Report on Form 10-K for the year endedDecember 31, 2021 , particularly under the "Risk Factors" and "Disclosure Regarding Forward-Looking Statements" sections.
Throughout this section, unless otherwise noted, "we," "our," "us," "Revelation"
and the "Company" refer to
Overview
Revelation is a clinical-stage biopharmaceutical company founded inMay 2020 . We are focused on the development or commercialization of immune system therapeutics and diagnostics. Our current product candidates are being developed for the prevention, treatment and detection of allergies and viral infections. REVTx-99a, is being developed as a broad anti-viral nasal drop for the potential prevention or treatment of respiratory viral infections. REVTx-99b is being developed for the prevention or treatment of nasal congestion due to allergies or chronic rhinosinusitis. Our lead diagnostic, REVDx-501 (REVIDTM Rapid Test Kit), is being developed as a rapid point of care diagnostic product that can potentially be used to detect various respiratory viral infections. Since our inception inMay 2020 , we have devoted substantially all of our resources to organizing and staffing our Company, business planning, raising capital, and research and development of REVTx-99a/b and REVDx-501, our product candidates. We have funded our operations since our inception inMay 2020 toMarch 31, 2022 through the issuance and sale of our capital stock, from which we have raised net proceeds of$25.5 million . Our current cash and cash equivalents balance will not be sufficient to complete all necessary product development or future commercialization efforts. We anticipate that our current cash and cash equivalents balance will not be sufficient to sustain operations within one year after the date that our unaudited financial statements forMarch 31, 2022 were issued, which raises substantial doubt about our ability to continue as a going concern. We plan to seek additional funding through public or private equity or debt financings. We may not be able to obtain financing on acceptable terms, or at all. The terms of any financing may adversely affect the holdings or the rights of our stockholders. If we are unable to obtain funding we could be required to delay, reduce or eliminate research and development programs, product portfolio expansion or future commercialization efforts, which could adversely affect our business operations. We have incurred recurring losses since our inception, including a net loss of$6.6 million and$2.6 million for the three months endedMarch 31, 2022 and 2021, respectively. As ofMarch 31, 2022 we had an accumulated deficit of$21.1 million . We expect to continue to generate operating losses and negative operating cash flows for the foreseeable future if and as we:
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continue the research and development of our product candidates;
•
initiate clinical studies for, or preclinical development of, our product candidates;
•
further develop and refine the manufacturing processes of our product candidates;
•
change or add manufacturers or suppliers of product candidate materials;
•
seek regulatory and marketing authorizations for any of our product candidates that successfully complete development;
•
acquire or license other product candidates, technologies or biological materials;
•
make milestone, royalty or other payments under future license agreements;
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obtain, maintain, protect and enforce our intellectual property portfolio;
•
seek to attract and retain new and existing skilled personnel;
•
create additional infrastructure to support our operations as a public company and incur increased legal, accounting, investor relations and other expenses; and
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experience delays or encounter issues with any of the above.
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--------------------------------------------------------------------------------Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical studies and our expenditures on other research and development activities.
We have never generated revenue and do not expect to generate revenue from product sales unless and until we successfully complete development and obtain regulatory approval for REVTx-99a/b, REVDx-501 or other product candidates, which we expect will not be for at least several years, if ever. Accordingly, until such time as we can generate significant revenue from sales of REVTx-99a/b, REVDx-501 or other product candidates, if ever, we expect to finance our cash needs through a combination of public or private equity offerings, debt financings or other capital sources, including potential collaborations, licenses and other similar 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 when needed would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. Recent Developments Business Combination OnJanuary 10, 2022 , we consummated the previously announced Business Combination, pursuant to the terms of the agreement and plan of merger, dated as ofAugust 29, 2021 with Petra and Merger Sub. Pursuant to the Business Combination Agreement, on the Closing Date, (i) Merger Sub merged with and into Revelation Sub, with Revelation Sub as the surviving company in the Business Combination, and became a wholly-owned subsidiary of Petra and (ii) Petra changed its name to "Revelation Biosciences, Inc. "
Research and Development
Research and development expenses consist primarily of costs incurred for the
development of our lead product candidates, REVTx-99a/b and our lead diagnostic
product REVDx-501. Our research and development expenses consist primarily of
external costs related to clinical development, costs related to contract
research organizations, costs related to consultants, costs related to acquiring
and manufacturing clinical study materials, costs related to contract
manufacturing organizations and other vendors, costs related to the preparation
of regulatory submissions, costs related to laboratory supplies and services,
and personnel costs. Personnel and related costs consist of salaries, employee
benefits and stock-based compensation for personnel involved in research and
development efforts.
We expense all research and development expenses in the periods in which they
are incurred. We accrue for costs incurred as the services are being provided by
monitoring the status of specific activities and the invoices received from our
external service providers. We adjust our accrual as actual costs become known.
We expect our research and development expenses to increase substantially for
the foreseeable future as we continue the development of REVTx-99a/b and
REVDx-501 and continue to invest in research and development activities. The
process of conducting the necessary clinical research and product development to
obtain regulatory approval is costly and time consuming, and the successful
development of REVTx-99a/b, REVDx-501 and any future product candidates is
highly uncertain. To the extent that either REVTx-99a/b continue to advance into
larger and later stage clinical studies, our expenses will increase
substantially and may become more variable.
The actual probability of success for REVTx-99a/b, REVDx-501 or any future
product candidate may be affected by a variety of factors, including the safety
and efficacy of our product candidates, investment in the development of
REVDx-501, investment in our clinical programs, manufacturing capability and
competition with other products. As a result, we are unable to determine the
timing of initiation, duration and completion costs of our research and
development efforts or when and to what extent we will generate revenue from the
commercialization and sale of REVTx-99a/b, REVDx-501 or any future product
candidate.
General and Administrative
Our general and administrative expenses consist primarily of personnel costs,
expenses for outside professional services, including financial advisory, legal,
human resource, audit and accounting services and consulting costs. Personnel
and related costs consist of salaries, employee benefits and stock-based
compensation for personnel involved in executive, finance and other
administrative functions. We expect our general and administrative expenses to
increase for the foreseeable future as we increase the size of our
administrative function to support the growth of our business and support our
continued research and development activities. We also anticipate increased
expenses as a result of operating as a public company, including increased
expenses related to
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financial advisory services, audit, legal, regulatory, investor relations costs,
director and officer insurance premiums associated with maintaining compliance
with exchange listing and SEC requirements.
Other Income (Expense), Net
Other income (expense), net primarily consists of foreign currency transaction gains and losses, interest expense for the Promissory Notes Payable and Convertible Note and interest income from our cash balances in savings accounts.
Results of Operations
The following table summarizes our results of operations for the periods
presented:
Three Months Three Months
Ended Ended
March 31, March 31,
2022 2021 Change
Operating expenses:
Research and development $ 3,680,280 $ 1,557,039 $ 2,123,241
General and administrative 2,906,020 1,050,672 1,855,348
Total operating expenses 6,586,300 2,607,711 3,978,589
Loss from operations (6,586,300 ) (2,607,711 ) (3,978,589 )
Other income (expense), net (30,241 ) (4,642 ) (25,599 )
Net loss $ (6,616,541 ) $ (2,612,353 ) $ (4,004,188 ) Research and Development Expenses
The following table summarizes our research and development expenses for the
periods presented:
Three Months Three Months
Ended Ended
March 31, March 31,
2022 2021 Change
REVTx-99a clinical study expenses $ 2,773,115 $ 591,200 $ 2,181,915
REVTx-99b clinical study expenses 170,361 - 170,361
REVTx-99a/b manufacturing expenses 106,754 - 106,754
REVDx-501 diagnostic development 6,889 511,678 (504,789 )
Personnel expenses (including stock-based
compensation) 576,435 354,490 221,945
Other expenses 46,726
99,671 (52,945 )
Total research and development expenses
Research and development expenses increased by$2.1 million , from$1.6 million for the three months endedMarch 31, 2021 to$3.7 million for the three months endedMarch 31, 2022 . The increase was primarily due to an increase of$2.2 million in clinical study expenses related to REVTx-99a,$0.2 million in clinical study expenses related to REVTx-99b,$0.1 million in REVTx-99a/b manufacturing expenses and$0.2 million in personnel expenses, which included$57,808 of employee stock-based compensation expense. These increases were offset by a decrease of$0.5 million in diagnostic development expenses related to REVDx-501.
General and Administrative Expenses
The following table summarizes our general and administrative expenses for the
periods presented:
Three Months Three Months
Ended Ended
March 31, March 31,
2022 2021 Change
Personnel expenses (including employee
stock-based compensation) $ 678,107 $ 685,070 $ (6,963 )
Legal and professional fees (including
non-employee stock-based compensation) 1,499,366 329,911 1,169,455
Other expenses 728,547
35,691 692,856
Total general and administrative expenses.
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General and administrative expenses increased by $1.9 million , from $1.1 million
for the three months ended March 31, 2021 to $2.9 million for the three months
ended March 31, 2022 . The increase was primarily due to an increase $1.2 million
in financial advisory fees, legal fees and professional consulting service fees.
In addition, other expenses increased by $0.7 million as a result of an increase
in D&O Insurance .
Other Income (Expense), Net
Other income (expense), net was $4,645 for the three months ended March 31, 2021
and $30,241 for the three months ended March 31, 2022 , related to interest
expense for the Promissory Notes Payable and Convertible Note, foreign currency
transaction gains and losses, and interest income from our cash balances in
savings accounts.
Liquidity and Capital Resources
Since our inception toMarch 31, 2022 , we have funded our operations from the issuance and sale of our common stock, preferred stock and warrants, from which we have raised net proceeds of$25.5 million , of which$11.6 million was received during the three months endingMarch 31, 2022 . As ofMarch 31, 2022 , we had available cash and cash equivalents of$7.2 million and an accumulated deficit of$21.1 million . Our use of cash is to fund operating expenses, which consist primarily of research and development expenditures related to our lead therapeutic product candidates, REVTx-99a/b and the development of our lead diagnostic product, REVDx-501. We plan to increase our research and development expenses substantially for the foreseeable future as we continue the clinical development of our current and future product candidates. At this time, due to the inherently unpredictable nature of product development, we cannot reasonably estimate the costs we will incur and the timelines that will be required to complete development, obtain marketing approval, and commercialize our current product candidate, diagnostic product or any future product candidates. For the same reasons, we are also unable to predict when, if ever, we will generate revenue from product sales or any future license agreements which we may enter into or whether, or when, if ever, we may achieve profitability. Clinical and preclinical development timelines, the probability of success, and development costs can differ materially from expectations. In addition, we cannot forecast the timing and amounts of milestone, royalty and other revenue from licensing activities, which future product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements. We expect to continue to generate substantial operating losses for the foreseeable future as we expand our research and development activities. We will continue to fund our operations primarily through utilization of our current financial resources and through additional raises of capital. To the extent that we raise additional capital through partnerships or licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates, future revenue streams or research programs or to grant licenses on terms that may not be favorable to us. If we raise additional capital through public or private equity offerings, the ownership interest of our then-existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders' rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of or suspend one or more of our clinical studies or preclinical studies, research and development programs or commercialization efforts or grant rights to develop and market our product candidates or diagnostic product even if we would otherwise prefer to develop and market such product candidates or diagnostic product ourselves.
Going Concern
We have incurred recurring losses since our inception, including a net loss of$6.6 million for the three months endedMarch 31, 2022 . As ofMarch 31, 2022 we had an accumulated deficit of$21.1 million , a stockholders' deficit of$98,511 and available cash and cash equivalents of$7.2 million . We expect to continue to incur significant operating and net losses, as well as negative cash flows from operations, for the foreseeable future as we continue to complete all necessary product development or future commercialization efforts. We have never generated revenue and do not expect to generate revenue from product sales unless and until we successfully complete development and obtain regulatory approval for REVTx-99a/b, REVDx-501 or other product candidates, which we expect will not be for at least several years, if ever. We do not anticipate that our current cash and cash equivalents balance will be sufficient to sustain operations within one year after the date that our unaudited financial statements forMarch 31, 2022 were issued, which raises substantial doubt about our ability to continue as a going concern. 21 -------------------------------------------------------------------------------- To continue as a going concern, we will need, among other things, to raise additional capital resources. We plan to seek additional funding through public or private equity or debt financings. We may not be able to obtain financing on acceptable terms, or at all. The terms of any financing may adversely affect the holdings or the rights of our stockholders. If we are unable to obtain funding we could be required to delay, reduce or eliminate research and development programs, product portfolio expansion or future commercialization efforts, which could adversely affect our business operations. The unaudited condensed consolidated financial statements forMarch 31, 2022 , have been prepared on the basis that we will continue as a going concern, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability for us to continue as a going concern. Cash Flows
The following table summarizes our cash flows for the periods presented:
Three Months Three Months
Ended Ended
March 31, March 31,
2022 2021
Net cash used in operating activities $ (4,830,066 ) $ (2,382,052 )
Net cash used in investing activities. - (99,101 )
Net cash provided by financing activities. 10,741,598 8,004,865
Net increase (decrease) in cash and cash equivalents.
5,523,712
During the three months endedMarch 31, 2022 , net cash used in operating activities was$4.8 million , which consisted of a net loss of$6.6 million , offset by non-cash charges of$0.2 million comprised of stock-based compensation expense, non-cash lease expense and depreciation expense plus a net change of$1.6 million in our net operating assets and liabilities. During the three months endedMarch 31, 2021 , net cash used in operating activities was$2.4 million , which consisted of a net loss of$2.6 million , offset by non-cash charges of$0.1 million comprised of stock-based compensation expense, non-cash lease expense and depreciation expense plus a net change of$0.1 million in our net operating assets and liabilities.
During the three months ended
During the three months ended
Net Cash Provided by Financing Activities
During the three months endedMarch 31, 2022 , net cash provided by financing activities was$10.7 million , from net proceeds of$4.2 million received in connection with the Business Combination, after exercise of the Forward Share Purchase Agreement of$7.7 million , and net proceeds of$7.3 million received from the PIPE, offset by$0.8 million in repayments of Promissory Notes Payable, including interest expense.
During the three months ended
Contractual Obligations and Other Commitments
The following table summarizes our contractual obligations as ofMarch 31, 2022 and the effects of such obligations are expected to have on our liquidity and cash flow in future periods: 22 -------------------------------------------------------------------------------- Less than 1 to 3 3 to
5 More than
1 year years years 5 years Total
Operating lease obligations $ 51,578 $ - $ - $ - $ 51,578
Premium Finance Agreement (D&O
Insurance) 520,999 520,999
Total contractual obligations
- $ -$ 572,577
We have entered into an operating lease for laboratory space in
We have entered into a Premium Finance Agreement with a lender that directly
paid the Company's
We enter into contracts in the normal course of business with third party service providers and vendors. These contracts generally provide for termination on notice and, therefore, are cancellable contracts and not considered contractual obligations and commitments.
Off-Balance Sheet Arrangements
As of
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