UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
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☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2021
OR
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☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ______ to ______
Commission File Number 001-37411
TIMBER PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
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Delaware |
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59-3843182 |
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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110 Allen Road, Suite 410
Basking Ridge, NJ 07920
(Address of principal executive offices and zip code)
(908) 636-7160
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Common Stock, par value $0.001 per share |
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TMBR |
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The NYSE American, LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ⌧ NO ◻
Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ⌧ NO ◻
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large Accelerated Filer ☐ |
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Accelerated Filer ☐ |
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Non-accelerated Filer ☒ |
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Smaller Reporting Company ☒ |
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Emerging growth company ☐ |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
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Class of Common Stock |
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Outstanding Shares as of August 6, 2021 |
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Common Stock, $0.001 par value |
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36,659,685 |
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TIMBER PHARMACEUTICALS, INC. & SUBSIDIARIES
Form 10-Q
For the Quarter Ended June 30, 2021
Table of Contents
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Page
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PART I. FINANCIAL INFORMATION |
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3 |
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Condensed Consolidated Balance Sheets as of June 30, 2021 (unaudited) and December 31, 2020 |
3 |
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4 |
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5 |
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8 |
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Notes to Condensed Consolidated Financial Statements (unaudited) |
9 |
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Management’s Discussion and Analysis of the Results of Operations |
22 |
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33 |
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33 |
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33 |
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33 |
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33 |
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33 |
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34 |
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35 |
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2
Item 1. Financial Statements.
Timber Pharmaceuticals, Inc. & Subsidiaries
Condensed Consolidated Balance Sheets
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June 30, |
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December 31, |
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2021 |
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2020 |
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ASSETS |
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(unaudited) |
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Current assets |
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Cash |
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$ |
6,129,035 |
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$ |
10,348,693 |
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Other receivable |
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253,892 |
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— |
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Other current assets |
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378,382 |
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377,290 |
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Total current assets |
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6,761,309 |
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10,725,983 |
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Deposits |
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127,534 |
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114,534 |
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Property and equipment, net |
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16,728 |
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— |
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Right of use asset |
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784,674 |
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787,432 |
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Total assets |
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$ |
7,690,245 |
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$ |
11,627,949 |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities |
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Accounts payable |
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$ |
1,385,852 |
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$ |
395,049 |
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Accrued expenses |
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568,732 |
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768,661 |
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Lease liability, current portion |
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295,045 |
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217,651 |
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Total current liabilities |
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2,249,629 |
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1,381,361 |
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Notes payable |
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37,772 |
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37,772 |
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Lease liability |
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505,998 |
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579,455 |
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Deferred tax liability |
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37,842 |
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37,842 |
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Other liabilities |
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73,683 |
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73,683 |
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Total liabilities |
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2,904,924 |
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2,110,113 |
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Commitments and contingencies (Note 7) |
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Redeemable Series A convertible preferred stock, par value $0.001; 2,500 shares authorized; 1,819 shares issued and outstanding as of June 30, 2021 and December 31, 2020 |
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1,981,978 |
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1,909,805 |
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Stockholders' equity |
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Common stock, par value $0.001; 450,000,000 shares authorized; 36,659,685 shares issued and outstanding as of June 30, 2021, and 27,132,420 shares issued and outstanding as of December 31, 2020 |
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36,660 |
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27,132 |
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Additional paid-in capital |
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25,852,542 |
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25,826,295 |
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Accumulated deficit |
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(23,085,859) |
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(18,245,396) |
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Total stockholders' equity |
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2,803,343 |
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7,608,031 |
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Total liabilities, redeemable convertible preferred stock, and stockholders' equity |
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$ |
7,690,245 |
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$ |
11,627,949 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
Timber Pharmaceuticals, Inc. & Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
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Three months ended June 30, |
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Six months ended June 30, |
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2021 |
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2020 |
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2021 |
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2020 |
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Grant revenue |
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$ |
134,927 |
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$ |
— |
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$ |
175,661 |
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$ |
26,907 |
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Milestone revenue |
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253,892 |
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— |
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253,892 |
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— |
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Total revenue |
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388,819 |
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— |
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429,553 |
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26,907 |
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Operating costs and expenses |
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Research and development |
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1,800,100 |
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536,170 |
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2,649,618 |
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1,554,401 |
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Research and development - license acquired |
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— |
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12,371,332 |
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— |
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12,371,332 |
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Transaction costs |
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— |
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311,291 |
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— |
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1,501,133 |
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Selling, general and administrative |
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1,556,012 |
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1,055,084 |
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2,621,401 |
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1,511,878 |
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Total operating expenses |
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3,356,112 |
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14,273,877 |
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5,271,019 |
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16,938,744 |
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Loss from operations |
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(2,967,293) |
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(14,273,877) |
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(4,841,466) |
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(16,911,837) |
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Other income (expense) |
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Interest expense |
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— |
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(3,314,140) |
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— |
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(4,416,746) |
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Interest income |
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— |
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359,880 |
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— |
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816,655 |
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Change in fair value of investment in BioPharmX |
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— |
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476,245 |
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— |
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559,805 |
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Change in fair value of warrant liability |
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— |
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1,504,511 |
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— |
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1,183,460 |
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Gain on foreign currency exchange |
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1,090 |
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1,772 |
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1,003 |
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4,454 |
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Total other income (expense) |
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1,090 |
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(971,732) |
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1,003 |
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(1,852,372) |
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Net loss |
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(2,966,203) |
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(15,245,609) |
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(4,840,463) |
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(18,764,209) |
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Accrued dividend on preferred stock units |
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— |
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(18,188) |
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— |
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(52,669) |
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Cumulative dividends on Series A preferred stock |
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(36,286) |
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(17,146) |
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(72,173) |
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(17,146) |
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Net loss attributable to common stockholders |
|
$ |
(3,002,489) |
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$ |
(15,280,943) |
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$ |
(4,912,636) |
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$ |
(18,834,024) |
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Basic and diluted net loss per share attributable to common stockholders |
|
$ |
(0.08) |
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$ |
(1.36) |
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$ |
(0.14) |
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$ |
(2.15) |
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Basic and diluted weighted average number of shares outstanding |
|
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36,659,685 |
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11,222,258 |
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|
35,873,780 |
|
|
8,758,991 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
Timber Pharmaceuticals, Inc. & Subsidiaries
Condensed Consolidated Statements of Members’ and Stockholders’ Equity (Deficit)
(Unaudited)
For the Three Months Ended June 30, 2021
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Total |
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Series A Preferred Stock |
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Common Stock |
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Additional |
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Accumulated |
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Stockholders' |
|||||||||
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Shares |
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Amount |
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Shares |
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Amount |
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Paid-in Capital |
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Deficit |
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Equity |
|||||
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Balance at April 1, 2021 |
|
1,819 |
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$ |
1,945,692 |
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36,659,685 |
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$ |
36,660 |
|
$ |
25,839,395 |
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$ |
(20,119,656) |
|
$ |
5,756,399 |
|
Accrued dividend Series A preferred stock |
|
— |
|
|
36,286 |
|
— |
|
|
— |
|
|
(36,286) |
|
|
— |
|
|
(36,286) |
|
Stock-based compensation |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
49,433 |
|
|
— |
|
|
49,433 |
|
Net loss |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
(2,966,203) |
|
|
(2,966,203) |
|
Balance at June 30, 2021 |
|
1,819 |
|
$ |
1,981,978 |
|
36,659,685 |
|
$ |
36,660 |
|
$ |
25,852,542 |
|
$ |
(23,085,859) |
|
$ |
2,803,343 |
For the Three Months Ended June 30, 2020
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Total Members' |
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Series A Preferred Stock |
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Preferred Units |
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Common Units |
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Common Stock |
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Additional |
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Accumulated |
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and Stockholders' |
|||||||||||||||
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Shares |
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Amount |
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Units |
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Amount |
|
Units |
|
Amount |
|
Shares |
|
Amount |
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Paid-in Capital |
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Deficit |
|
Deficit |
|||||||
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Balance at April 1, 2020 |
|
— |
|
$ |
— |
|
1,801,101 |
|
$ |
1,801,101 |
|
10,000 |
|
$ |
92,884 |
|
— |
|
$ |
— |
|
$ |
— |
|
$ |
(6,628,194) |
|
$ |
(4,734,209) |
|
Issuance of common stock for acquisition of BioPharmX |
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
1,367,326 |
|
|
1,367 |
|
|
8,366,665 |
|
|
— |
|
|
8,368,032 |
|
Issuance of common stock and warrants, net of costs |
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
4,180,208 |
|
|
4,180 |
|
|
17,495,820 |
|
|
— |
|
|
17,500,000 |
|
Series A liability classified warrants |
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
(16,511,634) |
|
|
— |
|
|
(16,511,634) |
|
Bridge loan converted to equity |
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
5,000,000 |
|
|
— |
|
|
5,000,000 |
|
Reclassification of bridge warrant |
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
3,423,204 |
|
|
— |
|
|
3,423,204 |
|
Accrued preferred unit dividend |
|
— |
|
|
— |
|
18,188 |
|
|
18,188 |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
(18,188) |
|
|
— |
|
Conversion of common units to common stock pursuant to BioPharmX acquisition |
|
— |
|
|
— |
|
— |
|
|
— |
|
(10,000) |
|
|
(92,884) |
|
6,295,724 |
|
|
6,296 |
|
|
86,588 |
|
|
— |
|
|
— |
|
Conversion of preferred units to Series A preferred stock pursuant to BioPharmX acquisition |
|
1,819 |
|
|
1,819,289 |
|
(1,819,289) |
|
|
(1,819,289) |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,819,289) |
|
Accrued dividend Series A preferred stock |
|
— |
|
|
17,146 |
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
(17,146) |
|
|
(17,146) |
|
Stock-based compensation |
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
43,445 |
|
|
— |
|
|
43,445 |
|
Net loss |
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
(15,245,609) |
|
|
(15,245,609) |
|
Balance at June 30, 2020 |
|
1,819 |
|
$ |
1,836,435 |
|
— |
|
$ |
— |
|
— |
|
$ |
— |
|
11,843,258 |
|
$ |
11,843 |
|
$ |
17,904,088 |
|
$ |
(21,909,137) |
|
$ |
(3,993,206) |
5
Timber Pharmaceuticals, Inc. & Subsidiaries
Condensed Consolidated Statements of Members’ and Stockholders’ Equity
(Unaudited)
For the Six Months Ended June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
Series A Preferred Stock |
|
Common Stock |
|
Additional |
|
Accumulated |
|
Stockholders' |
|||||||||
|
|
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Paid-in Capital |
|
Deficit |
|
Equity |
|||||
|
Balance at January 1, 2021 |
|
1,819 |
|
$ |
1,909,805 |
|
27,132,420 |
|
$ |
27,132 |
|
$ |
25,826,295 |
|
$ |
(18,245,396) |
|
$ |
7,608,031 |
|
Accrued dividend Series A preferred stock |
|
— |
|
|
72,173 |
|
— |
|
|
— |
|
|
(72,173) |
|
|
— |
|
|
(72,173) |
|
Exercise of Series A warrants |
|
— |
|
|
— |
|
2,059,613 |
|
|
2,060 |
|
|
(2,060) |
|
|
— |
|
|
— |
|
Exercise of Series B warrants |
|
— |
|
|
— |
|
7,467,652 |
|
|
7,468 |
|
|
(7,468) |
|
|
— |
|
|
— |
|
Stock-based compensation |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
107,948 |
|
|
— |
|
|
107,948 |
|
Net loss |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
(4,840,463) |
|
|
(4,840,463) |
|
Balance at June 30, 2021 |
|
1,819 |
|
$ |
1,981,978 |
|
36,659,685 |
|
$ |
36,660 |
|
$ |
25,852,542 |
|
$ |
(23,085,859) |
|
$ |
2,803,343 |
6
Timber Pharmaceuticals, Inc. & Subsidiaries
Condensed Consolidated Statements of Members’ and Stockholders’ Deficit
(Unaudited)
For the Six Months Ended June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Members' |
|
|
|
|
Series A Preferred Stock |
|
Preferred Units |
|
Common Units |
|
Common Stock |
|
Additional |
|
Accumulated |
|
and Stockholder's |
|||||||||||||||
|
|
|
Shares |
|
Amount |
|
Units |
|
Amount |
|
Units |
|
Amount |
|
Shares |
|
Amount |
|
Paid-in Capital |
|
Deficit |
|
Deficit |
|||||||
|
Balance at January 1, 2020 |
|
— |
|
$ |
— |
|
1,624,228 |
|
$ |
1,624,228 |
|
10,000 |
|
$ |
74,667 |
|
— |
|
$ |
— |
|
$ |
— |
|
$ |
(3,075,113) |
|
$ |
(1,376,218) |
|
Issuance of common stock for acquisition of BioPharmX |
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
1,367,326 |
|
|
1,367 |
|
|
8,366,665 |
|
|
— |
|
|
8,368,032 |
|
Issuance of common stock and warrants, net of costs |
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
4,180,208 |
|
|
4,180 |
|
|
17,495,820 |
|
|
— |
|
|
17,500,000 |
|
Series A liability classified warrants |
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
(16,511,634) |
|
|
— |
|
|
(16,511,634) |
|
Bridge loan converted to equity |
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
5,000,000 |
|
|
— |
|
|
5,000,000 |
|
Reclassification of bridge warrant |
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
3,423,204 |
|
|
— |
|
|
3,423,204 |
|
Non-cash contribution from TardiMed |
|
— |
|
|
— |
|
142,392 |
|
|
142,392 |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
142,392 |
|
Accrued preferred unit dividend |
|
— |
|
|
— |
|
52,669 |
|
|
52,669 |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
(52,669) |
|
|
— |
|
Conversion of common units to common stock pursuant to BioPharmX acquisition |
|
— |
|
|
— |
|
— |
|
|
— |
|
(10,000) |
|
|
(74,667) |
|
6,295,724 |
|
|
6,296 |
|
|
68,371 |
|
|
— |
|
|
— |
|
Conversion of preferred units to Series A preferred stock pursuant to BioPharmX acquisition |
|
1,819 |
|
|
1,819,289 |
|
(1,819,289) |
|
|
(1,819,289) |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,819,289) |
|
Accrued dividend Series A preferred stock |
|
— |
|
|
17,146 |
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
(17,146) |
|
|
(17,146) |
|
Stock-based compensation |
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
61,662 |
|
|
— |
|
|
61,662 |
|
Net loss |
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
(18,764,209) |
|
|
(18,764,209) |
|
Balance at June 30, 2020 |
|
1,819 |
|
$ |
1,836,435 |
|
— |
|
$ |
— |
|
— |
|
$ |
— |
|
11,843,258 |
|
$ |
11,843 |
|
$ |
17,904,088 |
|
$ |
(21,909,137) |
|
$ |
(3,993,206) |
|
(a) |
On May 18, 2020, an exchange ratio of approximately 629.57 shares of the Timber Pharmaceuticals, Inc. common stock, par value $0.001 per share, was used for each Timber Pharmaceuticals LLC (“Timber Sub”) unit. The exchange ratio of 0.001 was used for conversion of the preferred units of Timber Sub to the newly created convertible Series A preferred stock. All share information has been retroactively adjusted to reflect the stock split within the condensed consolidated statements of member’s and stockholders’ equity (deficit) and proceeding disclosures. |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
Timber Pharmaceuticals, Inc. & Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, |
||||
|
|
|
2021 |
|
2020 |
||
|
|
|
|
|
|
|
|
|
Cash flows from operating activities |
|
|
|
|
|
|
|
Net loss |
|
$ |
(4,840,463) |
|
$ |
(18,764,209) |
|
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
Research and development-licenses acquired |
|
|
— |
|
|
12,371,332 |
|
Non-cash contribution from TardiMed |
|
|
— |
|
|
142,392 |
|
Stock-based compensation |
|
|
107,948 |
|
|
61,662 |
|
Change in fair value of warrant liability |
|
|
— |
|
|
(1,183,460) |
|
Change in fair value of investment in BioPharmX |
|
|
— |
|
|
(559,805) |
|
Amortization of loan discount |
|
|
— |
|
|
(775,000) |
|
Amortization of debt discount |
|
|
— |
|
|
4,232,718 |
|
Amortization of right of use assets |
|
|
125,567 |
|
|
16,140 |
|
Depreciation |
|
|
175 |
|
|
— |
|
Accrued interest on BioPharmX loan |
|
|
— |
|
|
(41,655) |
|
Accrued interest on bridge notes |
|
|
— |
|
|
183,333 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
Other receivable |
|
|
(253,892) |
|
|
|
|
Other current assets |
|
|
(1,092) |
|
|
(211,799) |
|
Deposits |
|
|
(13,000) |
|
|
— |
|
Accounts payable |
|
|
990,803 |
|
|
(498,761) |
|
Accrued expenses |
|
|
(199,929) |
|
|
(39,210) |
|
Lease liability |
|
|
(118,872) |
|
|
(16,140) |
|
Net cash used in operating activities |
|
|
(4,202,755) |
|
|
(5,082,462) |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
Cash acquired with acquisition of BioPharmX |
|
|
— |
|
|
340,786 |
|
Loan to BioPharmX |
|
|
— |
|
|
(2,250,000) |
|
Purchase of property and equipment |
|
|
(16,903) |
|
|
— |
|
Purchase of research and development licenses - AFT Pharmaceuticals Limited |
|
|
— |
|
|
(750,000) |
|
Net cash used in investing activities |
|
|
(16,903) |
|
|
(2,659,214) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
Proceeds from PPP loan |
|
|
— |
|
|
37,772 |
|
Proceeds from the issuance of common stock and warrants, net of issuance costs |
|
|
— |
|
|
17,500,000 |
|
Proceeds from bridge notes payable |
|
|
— |
|
|
3,700,000 |
|
Net cash provided by financing activities |
|
|
— |
|
|
21,237,772 |
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents |
|
|
(4,219,658) |
|
|
13,496,096 |
|
Cash and cash equivalents, beginning of period |
|
|
10,348,693 |
|
|
57,073 |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
6,129,035 |
|
$ |
13,553,169 |
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
— |
|
$ |
183,333 |
|
|
|
|
|
|
|
|
|
Non cash investing and financing activities: |
|
|
|
|
|
|
|
Issuance of common stock for acquisition of BioPharmX |
|
$ |
— |
|
$ |
8,368,032 |
|
Conversion of preferred units to Series A preferred stock pursuant to BioPharmX acquisition |
|
$ |
— |
|
$ |
1,819,289 |
|
Conversion of common units to common stock pursuant to BioPharmX acquisition |
|
$ |
— |
|
$ |
6,296 |
|
Bridge loan converted to equity |
|
$ |
— |
|
$ |
5,000,000 |
|
Reclassification of bridge warrant |
|
$ |
— |
|
$ |
3,423,204 |
|
Series A liability classified warrants |
|
$ |
— |
|
$ |
16,511,634 |
|
Accrued Series A preferred stock dividend |
|
$ |
72,173 |
|
$ |
— |
|
Cashless exercise of Series A warrants |
|
$ |
2,060 |
|
$ |
— |
|
Cashless exercise of Series B warrants |
|
$ |
7,468 |
|
$ |
— |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8
Timber Pharmaceuticals, Inc. & Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1. Organization and description of business operations
Timber Pharmaceuticals, Inc., formerly known as BioPharmX Corporation (together with its subsidiaries Timber Pharmaceuticals Australia Pty Ltd., BioPharmX Inc. and Timber Pharmaceuticals LLC, the “Company” or “Timber”) is incorporated under the laws of the state of Delaware. Timber was founded in 2019 to develop treatments for unmet needs in medical dermatology. Timber has a particular focus on rare diseases or conditions of the skin for which there are no current treatments. Timber is initially targeting multiple indications in rare/orphan dermatology with no approved treatments.
These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes in Item 8 of Part II, “Financial Statements and Supplementary Data,” of our Annual Report on Form 10-K for the year ended December 31, 2020.
Merger Agreement
On May 18, 2020, BioPharmX Corporation (“BioPharmX”) completed its business combination with Timber Pharmaceuticals LLC, a Delaware limited liability company (“Timber Sub”), in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated as of January 28, 2020 (the “Merger Agreement”), by and among BioPharmX, Timber Sub and BITI Merger, Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“Merger Sub”), as amended by Amendment No. 1 thereto made and entered into as of March 24, 2020 (the “First Amendment”) and Amendment No. 2 thereto made and entered into as of April 27, 2020 (the “Second Amendment”) (the Merger Agreement, as amended by the First Amendment and the Second Amendment, the “Amended Merger Agreement”), pursuant to which Merger Sub merged with and into Timber Sub, with Timber Sub surviving as a wholly-owned subsidiary of the Company (the “Merger”). In connection with, and immediately prior to the completion of, the Merger, BioPharmX effected a reverse stock split of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a ratio of 1-for-12 (the “Reverse Stock Split”). Immediately after completion of the Merger, BioPharmX changed its name to “Timber Pharmaceuticals, Inc.” and the officers and directors of Timber Sub became the officers and directors of the Company.
Under the terms of the Amended Merger Agreement, BioPharmX issued shares of Common Stock to the holders of common units of Timber Sub. Immediately after the Merger, there were approximately 11,849,031 shares of Common Stock outstanding (after the Reverse Stock Split). Pursuant to the terms of the Amended Merger Agreement, the former holders of common units of Timber Sub (including the Investors, as defined below, but excluding Value Appreciation Rights of Timber Sub (“VARs”), as defined below) owned in the aggregate approximately 88.5% of the outstanding Common Stock, with the Company’s stockholders immediately prior to the Merger owning approximately 11.5% of the outstanding Common Stock. The number of shares of Common Stock issued to the holders of common units of Timber Sub for each common unit of Timber Sub outstanding immediately prior to the Merger was calculated using an exchange ratio of approximately 629.57 shares of Common Stock for each Timber Sub unit. In addition, the 584 VARs that were outstanding immediately prior to Merger became denoted and payable in 367,670 shares of Common Stock at the Effective Time of the Merger (the “Effective Time”). Further, the holder of the 1,819,289 preferred units of Timber Sub outstanding immediately prior to the Merger received 1,819 shares of the newly created convertible Series A preferred stock at the Effective Time.
Securities Purchase Agreement
On May 18, 2020, Timber and Timber Sub completed a private placement transaction (the “Pre-Merger Financing”) with the Investors pursuant to the Securities Purchase Agreement for an aggregate purchase price of approximately $25.0 million (comprised of (i) approximately $5 million credit with respect to the senior secured notes issued in connection with the bridge loan that certain of the Investors made to Timber Sub at the time of the execution of the Merger Agreement and (ii) approximately $20 million in cash from the Investors).
9
Timber Pharmaceuticals, Inc. & Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Liquidity and Capital Resources
The Company has no product revenues, incurred operating losses since inception, and expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. The Company had an accumulated deficit of approximately $23.1 million at June 30, 2021, a net loss of approximately $4.8 million, and approximately $4.2 million of net cash used in operating activities for the six months ended June 30, 2021. As of June 30, 2021 the Company had $6.1 million of cash.
Going Concern
The Company has evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year beyond the filing of this Quarterly Report on Form 10-Q. Based on such evaluation and the Company's current plans, which are subject to change, management believes that the Company's existing cash and cash equivalents as of June 30, 2021 are not sufficient to satisfy our operating cash needs for the year after the filing of this Quarterly Report on Form 10-Q.
The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue to operate as a going concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from uncertainty related to its ability to continue as a going concern.
The Company’s future liquidity and capital funding requirements will depend on numerous factors, including:
| ● | its ability to raise additional funds to finance its operations, including its ability to access financing that may be unavailable due to contractual limitations under the Securities Purchase Agreement; |
| ● | the dilutive effect of the Company's outstanding securities; |
| ● | the impact of the COVID-19 pandemic on the Company's operations, including on the Company's clinical development plans and timelines; |
| ● | the outcome, costs and timing of clinical trial results for the Company’s current or future product candidates, including the timing, progress, costs and results of its Phase 2b clinical trial of TMB-001 for the treatment of congenital ichthyosis as well as its ongoing Phase 2b clinical trial of TMB-002 for the treatment of facial angiofibromas in tuberous sclerosis complex; |
| ● | the outcome, timing and cost of meeting regulatory requirements established by the FDA and other comparable foreign regulatory authorities; |
| ● | the emergence and effect of competing or complementary products; |
| ● | its ability to maintain, expand and defend the scope of its intellectual property portfolio, including the amount and timing of any payments the Company may be required to make, or that it may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights; |
| ● | the cost and timing of completion of commercial-scale manufacturing activities; |
10
Timber Pharmaceuticals, Inc. & Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| ● | the cost of establishing sales, marketing and distribution capabilities for its products in regions where it chooses to commercialize its products on its own; |
| ● | the initiation, progress, timing and results of the commercialization of its product candidates, if approved for commercial sale; |
| ● | the volatility of the price of the Company's common stock; |
| ● | acceptance of the Company's products in the Company's industry; |
| ● | the accuracy of the Company's estimates regarding expenses and capital requirements; |
| ● | its ability to retain its current employees and the need and ability to hire additional management and scientific and medical personnel; and |
| ● | the terms and timing of any collaborative, licensing or other arrangements that it has or may establish. |
The Company will need to raise substantial additional funds through one or more of the following: issuance of additional debt or equity and/or the completion of a licensing or other commercial transaction for one or more of the Company's product candidates. If the Company is unable to maintain sufficient financial resources, its business, financial condition and results of operations will be materially and adversely affected. This could affect future development and business activities and potential future clinical studies and/or other future ventures. There can be no assurance that the Company will be able to obtain the needed financing on acceptable terms or at all. Additionally, equity or convertible debt financings will likely have a dilutive effect on the holdings of the Company's existing stockholders.
The impact of the worldwide spread of a novel strain of coronavirus (“COVID-19”) has been unprecedented and unpredictable. Site activation and patient enrollment have been impacted by the COVID-19 pandemic in the TMB-002 study, especially at our contracted test sites in Eastern Europe. As of June 30, 2021, all 17 sites are open and 50% of patients in the Phase 2b study have been enrolled for the TMB-002 program. The Company is also continuing to assess the effect of COVID-19 on the TMB-002 study as well as the Company’s overall operations by monitoring the spread of COVID-19 and the actions implemented to combat the virus throughout the world. The Company’s assessment of the impact of COVID-19 may change in the future.
Note 2. Significant accounting policies
Basis of presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10- Q and Article 8 of Regulation S-X of the SEC. In the opinion of management, the accompanying unaudited condensed financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of such interim results.
The results for the unaudited condensed consolidated statement of operations are not necessarily indicative of results to be expected for the year ending December 31, 2021 or for any future interim period. The unaudited condensed consolidated financial statements do not include all of the information and notes required by U.S. GAAP for complete financial statements.
11
Timber Pharmaceuticals, Inc. & Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. The most significant estimates in the Company’s unaudited condensed consolidated financial statements relate to the valuations of warrants, and equity-based awards and member units. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.
Loss Per Share
Basic net loss per share (“EPS”) of common stock is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.
To calculate the basic EPS numerator, income available to common stockholders must be computed by deducting both the dividends declared in the period on preferred stock (whether or not paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not declared) from income from continuing operations and also from net income. If there is a loss from continuing operations or a net loss, the amount of the loss shall be increased by those preferred dividends. The outstanding Series A Preferred Stock has cumulative dividends, whether or not declared.
The basic and diluted net loss amounts are the same for the three and six months ended June 30, 2021 and 2020, as a result of the net loss and anti-dilutive impact of the potentially dilutive securities. Potentially dilutive shares are determined by applying the treasury stock method to the assumed exercise of outstanding stock options, value appreciation rights, and warrants. Potentially dilutive shares issuable upon conversion of the Series A Preferred Stock are calculated using the if-converted method.
The following is a reconciliation of the numerator and denominator of the diluted net loss per share computations for the periods presented below:
12
Timber Pharmaceuticals, Inc. & Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Securities that could potentially dilute loss per share in the future were not included in the computation of diluted loss per share for the six months ended June 30, 2021 and 2020, because their inclusion would be anti-dilutive are as follows (unaudited):
Recent accounting pronouncements
In August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. This ASU is effective for annual reporting periods beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. This update permits the use of either the modified retrospective or fully retrospective method of transition. The Company is currently evaluating the impact this ASU will have on its condensed consolidated financial statements and related disclosures.
Note 3. Acquisition of BioPharmX
As described in Note 1, on May 18, 2020, the Company completed its acquisition of BioPharmX in accordance with the terms of the Merger Agreement. The acquisition was accounted for as an asset acquisition/reverse merger.
Pursuant to the Merger Agreement, following the Merger, the Timber Sub members, including the investors funding the $20 million investment and the bridge investors, owned approximately 88.5% of the outstanding common stock of BioPharmX, and the BioPharmX stockholders own approximately 11.5% of the outstanding common stock as of the date of the merger. The cost of the BioPharmX acquisition, which represents the consideration transferred to BioPharmX stockholders in the BioPharmX acquisition, of $12.4 million consists of the following:
13
Timber Pharmaceuticals, Inc. & Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The total cost of the BioPharmX acquisition was allocated to the net liabilities acquired as follows:
Note 4. Purchases of Assets
Acquisition of Intellectual Property Rights from Patagonia Pharmaceuticals LLC (“Patagonia”)
On February 28, 2019, the Company acquired the intellectual property rights to a topical formulation of isotretinoin for the treatment of congenital ichthyosis and identified as TMB-001, formerly PAT-001, from Patagonia (the “TMB-001 Acquisition”).
Upon closing of the TMB-001 Acquisition, the Company paid a one-time upfront payment of $50,000 to Patagonia. Patagonia is entitled to up to $27.0 million of cash milestone payments relating to certain regulatory and commercial achievements of TMB-001, with the first being $4.0 million for the initiation of a Phase 3 pivotal trial, as agreed with the FDA. In addition, Patagonia is entitled to net sales earn-out payments ranging from low single digits to mid-double digits. The Company is responsible for all development activities. The potential regulatory and commercial milestones are not yet considered probable, and no milestone payments have been accrued at June 30, 2021 and December 31, 2020.
On June 26, 2019 the Company acquired the intellectual property rights to a locally administered formulation of Sitaxsentan for the treatment of cutaneous fibrosis and/or pigmentation disorders, and identified as TMB-003, formerly PAT-S03, from Patagonia (the “TMB-003 Acquisition”).
Upon closing of the TMB-003 Acquisition, the Company paid a one-time upfront payment of $20,000 to Patagonia. Patagonia is entitled to up to $10.25 million of cash milestone payments relating to certain regulatory and commercial achievements of TMB-003, with the first being a one-time payment of $250,000 upon the opening of an IND with the FDA. In addition, Patagonia is entitled to net sales earn-out payments ranging from low to mid-single digits. The Company is responsible for all development activities. The potential regulatory and commercial milestones are not yet considered probable, and no milestone payments have been accrued at June 30, 2021 and December 31, 2020.
On January 12, 2021, the Company announced that the U.S. Food and Drug Administration has granted orphan drug designation to TMB-003.
Acquisition of License from AFT Pharmaceuticals Limited (“AFT”)
On July 5, 2019, the Company and AFT entered into a license agreement which provides the Company with (i) an exclusive license to certain licensed patents, licensed know-how and AFT trademarks to commercialize the Pascomer product in the United States, Canada and Mexico and (2) a co-exclusive license to develop the Pascomer product in this territory.
14
Timber Pharmaceuticals, Inc. & Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Concurrently, the Company granted to AFT an exclusive license to commercialize the Pascomer product outside of the Company’s territory and co-exclusive sublicense to develop and manufacture the licensed product for commercialization outside of the Company’s territory (the “AFT License Agreement”).
The development of the Pascomer product is being conducted pursuant to a written development plan, written by AFT and approved by the joint steering committee, which is reviewed on at least an annual basis. AFT shall perform clinical trials of the Pascomer product in the specified territory and shall perform all CMC (chemistry, manufacturing and controls) and related activities to support regulatory approval. The Company is responsible for all expenses incurred by AFT during the term of the AFT License Agreement and shall equally share all costs and expenses with AFT, incurred by AFT for development and marketing work performed in furtherance of regulatory approval and commercialization worldwide, outside of the specified territory. The Company is entitled to receive a significant percentage of the economics (royalties and milestones) in any licensing transaction that AFT executes outside of North America, Australia, New Zealand, and Southeast Asia. In March 2021 the Company announced that its development partner, AFT Pharmaceuticals Limited has signed an exclusive license and supply agreement with Desitin Arzneimittel GmbH (“Desitin”) for Pascomer® (TMB-002 topical rapamycin) for the treatment of facial angiofibromas (FA) associated with Tuberous Sclerosis Complex (TSC) in Europe. The Company is entitled to €213,750 related to an upfront milestone payment paid to AFT by Desitin during the quarter ending June 30, 2021 and has recorded approximately $0.3 million in these financial statements.
Pursuant to the AFT License Agreement, the Company was obligated to reimburse AFT for previously spent development costs, subject to certain limitations, and to pay a one-time, irrevocable and non-creditable upfront payment to AFT, payable in scheduled installments. The Company paid $0.25 million in October 2019 and the remaining $0.75 million was paid during the year ended December 31, 2020.
AFT is entitled to up to $25.5 million of cash milestone payments relating to certain regulatory and commercial achievements of the AFT License. In addition, AFT is entitled to net sales royalties ranging from high single digits to low double digits for the program licensed. The potential regulatory and commercial milestones are not yet considered probable, and no milestone payments have been accrued at June 30, 2021 and December 31, 2020.
Note 5. Accrued Expenses
As of June 30, 2021 and December 31, 2020, the Company’s accrued expenses consisted of the following:
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June 30, |
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December 31, |
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2021 |
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2020 |
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Research and development |
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$ |
45,443 |
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$ |
158,911 |
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Professional fees |
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181,234 |
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142,599 |
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Personnel expenses |
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342,055 |
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438,722 |
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Other |
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— |
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28,429 |
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Total |
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$ |
568,732 |
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$ |
768,661 |
15
Timber Pharmaceuticals, Inc. & Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 6. Temporary Equity, and Members’ and Stockholder’s Equity (Deficit)
The Company entered into a Merger Agreement with BioPharmX and effective May 18, 2020, the Company converted its common and preferred units into shares of common and preferred stock.
Common Stock
On May 18, 2020, pursuant to the Merger Agreement (see Note 1), 1,367,326 shares of common stock were issued for the acquisition of BioPharmX, with a fair value of approximately $8.4 million or $6.12 per share.
On May 18, 2020, pursuant to the Merger Agreement, 4,185,981 shares of common stock were issued to the investors in the $20 million private placement financing (see Note 1), with aggregate net proceeds received totaling $17.5 million) and to settle the $5 million Bridge Notes.
Series B Warrants
During the six months ended June 30, 2021, the remaining Series B Warrants outstanding totaling 7,474,033 were exercised on a cashless basis, and the Company issued 7,467,652 shares of its common stock.
Series A Warrants
During the six months ended June 30, 2021, 3,476,390 Series A Warrants were exercised on a cashless basis, and the Company issued 2,059,613 shares of its common stock. The following is a summary of Series A Warrants outstanding as of June 30, 2021:
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Weighted |
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Average |
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Shares |
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Weighted |
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Remaining |
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Aggregate |
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Underlying |
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Average |
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Contractual |
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Intrinsic |
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Options |
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Exercise Price |
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Term (Years) |
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Value |
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Outstanding as of December 31, 2020 |
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20,178,214 |
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$ |
1.16 |
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4.4 |
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$ |
— |
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Exercised |
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(3,476,390) |
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$ |
1.16 |
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— |
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— |
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Outstanding and exercisable as of June 30, 2021 |
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16,701,824 |
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$ |
1.16 |
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3.9 |
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$ |
1,002,109 |
16
Timber Pharmaceuticals, Inc. & Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Bridge Warrants
The following table summarizes the Company's Bridge Warrants for the six months ended June 30, 2021:
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Weighted |
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Average |
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Shares |
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Weighted |
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Remaining |
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Aggregate |
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Underlying |
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Average |
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Contractual |
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Intrinsic |
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Options |
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Exercise Price |
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Term (Years) |
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Value |
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Outstanding as of December 31, 2020 |
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413,751 |
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$ |
2.24 |
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4.4 |
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$ |
— |
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Outstanding and exercisable as of June 30, 2021 |
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413,751 |
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$ |
2.24 |
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3.9 |
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$ |
— |
Redeemable Series A Convertible Preferred Stock
In connection with the Merger, on May 18, 2020, the Company filed a Certificate of Designation of Preferences, Rights and Limitations (the “Certificate of Designations”) with the Secretary of State of the State of Delaware designating 2,500 shares of the Company’s previously undesignated preferred stock as Series A Preferred (the “Series A Preferred Stock”), and issued to the holder of 1,819,289 preferred units of Timber Sub outstanding immediately prior to the Merger, 1,819 shares of the newly created Series A Preferred Stock. The shares of Series A Preferred Stock have no voting rights. The holders of the Series A Preferred Stock are entitled to cumulative dividends from and after the date of issuance at a per annum of eight percent (8.00%) of the stated value. Dividends will be payable as and if declared by the Board of Directors of the Company (the “Board”) out of amounts legally available therefore or upon a liquidation or redemption. Each share of Series A Preferred Stock is convertible at any time at the holder’s option into a number of shares of common stock (subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions as specified in the Certificate of Designations) at a conversion price equal to the stated value of the Series A Preferred Stock of $1,000 (plus any accrued dividends) divided by the conversion price of $18.054. Holders of the Series A Preferred Stock are entitled to a liquidation preference in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company. In addition, upon a Change of Control, the Series A Preferred Stock is redeemable for cash at the option of the holders, in whole or in part.
As a Change of Control has occurred, the Company’s Series A Preferred Stock is currently redeemable at June 30, 2021 at the option of the holder and has been recorded at the redemption value of $2.0 million. Redemption is subject to certain limitations under Delaware law, so that the Company’s ability to pay the redemption price to such holder is limited. The following table summarizes the Company’s Series A preferred stock for the six months ended June 30, 2021:
17
Timber Pharmaceuticals, Inc. & Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 7. Equity-based compensation
On May 18, 2020, the Company’s 2020 Omnibus Equity Incentive Plan (the “2020 Plan”) became effective, and the 2020 Plan reserved a total of 970,833 shares of common stock for issuance. The 2020 Plan provides for options to purchase shares of common stock, stock appreciation rights, restricted stock units, restricted or unrestricted shares of common stock, performance shares, performance units, incentive bonus awards, other stock-based awards and other cash-based awards. Options granted generally vest over a period of three years and have a maximum term of ten years from the date of grant. As of June 30, 2021, 2,056,130 shares of common stock were reserved for issuance under the 2020 Plan. On April 20, 2021, the Board of Directors of the Company approved an amendment increasing the number of shares available for issuance under the 2020 Plan from 2,056,130 to 4,668,319, which was approved by the Company's stockholders on July 1, 2021.
Furthermore, as a result of the Merger, the Company assumed the TardiMed 2019 Equity Incentive Plan (the “2019 Plan”) from Timber Sub. The 2019 Plan permits the granting of incentive units (the “Incentive Units”). The maximum aggregate Incentive Units that may be subject to awards and issued under the Plan is 699,454. At June 30, 2021 and December 31, 2020, Incentive Units outstanding under the 2019 Plan were 367,670 units for each period comprised of VARs.
During the three and six months ended June 30, 2021 and 2020 equity-based compensation expenses were as follows (unaudited):