rvph20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

☐	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: 001-38634

Reviva Pharmaceuticals Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware		85-4306526
(State or Other Jurisdiction of		(I.R.S. Employer Identification No.)
Incorporation or Organization)

19925 Stevens Creek Blvd., Suite 100
Cupertino, CA		95014
(Address of principal executive offices)		(Zip Code)

(408) 501-8881

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered

Common Stock, par value $0.0001 per share	RVPH	The Nasdaq Capital Market
Warrants to purchase one share of Common Stock	RVPHW	The Nasdaq Capital Market

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 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.

Large accelerated filer ☐	Accelerated filer ☐

Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☒

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 the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of November 10, 2022 the number of outstanding shares of the registrant’s common stock, par value $0.0001 per share, was 20,442,871.

REVIVA PHARMACEUTICALS HOLDINGS, INC.

TABLE OF CONTENTS

		Page
Part I Financial Information

Item 1.	Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 (unaudited)	F-1

	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021 (unaudited)	F-2
	Condensed Consolidated Statement of Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021 (unaudited)	F-3
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 (unaudited)	F-5
	Notes to Condensed Consolidated Financial Statements (unaudited)	F-6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	12

Item 4.	Controls and Procedures	12


Part II Other Information

Item 1.	Legal Proceedings	13

Item 1A.	Risk Factors	13

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	13

Item 3.	Defaults Upon Senior Securities	13

Item 4.	Mine Safety Disclosures	13

Item 5.	Other Information	13

Item 6.	Exhibits	14

Signatures		15

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

REVIVA PHARMACEUTICALS HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	September 30,			December 31,
	2022			2021
Assets
Cash	$	23,191,927		$	29,687,944
Prepaid expenses and other current assets		849,023			1,716,057

Total Assets	$	24,040,950		$	31,404,001

Liabilities and Stockholders' Equity

Liabilities
Accounts payable	$	2,347,798		$	509,583
Accrued expenses and other current liabilities		1,227,934			1,835,228
Total current liabilities		3,575,732			2,344,811
Warrant liabilities		105,699			372,730
Total Liabilities		3,681,431			2,717,541

Commitments and contingencies (Note 9)

Stockholders' equity
Common stock, par value of $0.0001; 115,000,000 shares authorized; 20,442,871 and 14,433,286 shares issued and outstanding as of September 30, 2022, and December 31, 2021, respectively		2,044			1,443
Additional paid-in capital		103,410,464			95,516,986
Accumulated deficit		(83,052,989	)		(66,831,969	)
Total stockholders' equity		20,359,519			28,686,460

Total Liabilities and Stockholders' Equity	$	24,040,950		$	31,404,001

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-1

PART 1. FINANCIAL INFORMATION

REVIVA PHARMACEUTICALS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three and Nine Months Ended September 30, 2022 and 2021

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Operating expenses
Research and development	$	2,305,981		$	1,423,359		$	12,650,388		$	2,188,849
General and administrative		1,256,972			1,053,481			3,882,210			3,951,021
Total operating expenses		3,562,953			2,476,840			16,532,598			6,139,870
Loss from operations		(3,562,953	)		(2,476,840	)		(16,532,598	)		(6,139,870	)
Other income (expense)
Gain on remeasurement of warrant liabilities		—			200,273			267,031			1,312,899
Interest and other income (expense), net		49,509			(547	)		56,961			(3,948	)
Total other income (expense), net		49,509			199,726			323,992			1,308,951
Loss before provision for income taxes		(3,513,444	)		(2,277,114	)		(16,208,606	)		(4,830,919	)
Provision for income taxes		1,864			2,102			12,414			6,004
Net loss	$	(3,515,308	)	$	(2,279,216	)	$	(16,221,020	)	$	(4,836,923	)

Net loss per share:
Basic and diluted	$	(0.18	)	$	(0.12	)	$	(0.87	)	$	(0.36	)

Weighted average shares outstanding
Basic and diluted		19,269,989			18,455,586			18,737,330			13,554,548

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-2

REVIVA PHARMACEUTICALS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED)

For the Three and Nine Months Ended September 30, 2022

					Additional					Total
	Common Stock				Paid-In		Accumulated			Stockholders'
Three Months Ended September 30, 2022	Shares		Amount		Capital		Deficit			Equity
Balance at June 30, 2022		15,133,286	$	1,513	$	95,596,548	$	(79,537,681	)	$	16,060,380
Common stock issued in connection with warrant exercises		3,333,300		333		—		—			333
Issuance of common stock and warrants in offering, net of transaction costs		1,976,285		198		7,773,329		—			7,773,527
Stock-based compensation expense		—		—		40,587		—			40,587
Net loss		—		—		—		(3,515,308	)		(3,515,308	)
Balance at September 30, 2022		20,442,871	$	2,044	$	103,410,464	$	(83,052,989	)	$	20,359,519

					Additional					Total
	Common Stock				Paid-In		Accumulated			Stockholders'
Nine Months Ended September 30, 2022	Shares		Amount		Capital		Deficit			Equity
Balance at December 31, 2021		14,433,286	$	1,443	$	95,516,986	$	(66,831,969	)	$	28,686,460
Common stock issued in connection with warrant exercises		4,033,300		403		—		—			403
Issuance of common stock and warrants in offering, net of transaction costs		1,976,285		198		7,773,329		—			7,773,527
Stock-based compensation expense		—		—		120,149		—			120,149
Net loss		—		—		—		(16,221,020	)		(16,221,020	)
Balance at September 30, 2022		20,442,871	$	2,044	$	103,410,464	$	(83,052,989	)	$	20,359,519

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-3

REVIVA PHARMACEUTICALS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED)

For the Three and Nine Months Ended September 30, 2021

					Additional					Total
	Common Stock				Paid-In		Accumulated			Stockholders'
Three Months Ended September 30, 2021	Shares		Amount		Capital		Deficit			Equity
Balance at June 30, 2021		13,388,986	$	1,338	$	95,387,434	$	(60,867,800	)	$	34,520,972
Stock-based compensation expense		—		—		27,590		—			27,590
Net loss		—		—		—		(2,279,216	)		(2,279,216	)
Balance at September 30, 2021		13,388,986	$	1,338	$	95,415,024	$	(63,147,016	)	$	32,269,346

					Additional					Total
	Common Stock				Paid-In		Accumulated			Stockholders'
Nine Months Ended September 30, 2021	Shares		Amount		Capital		Deficit			Equity
Balance at December 31, 2020		9,231,737	$	923	$	63,774,920	$	(58,310,093	)	$	5,465,750
Issuance of units in public offering, net		4,133,400		413		31,497,050		—			31,497,463
Common stock issued in connection with warrant exercises		23,849		2		98,375		—			98,377
Stock-based compensation expense		—		—		44,679		—			44,679
Net loss		—		—		—		(4,836,923	)		(4,836,923	)
Balance at September 30, 2021		13,388,986	$	1,338	$	95,415,024	$	(63,147,016	)	$	32,269,346

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-4

REVIVA PHARMACEUTICALS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Nine Months Ended September 30, 2022, and 2021

	Nine Months Ended September 30,
	2022			2021
Cash flows from operating activities
Net loss	$	(16,221,020	)	$	(4,836,923	)
Adjustments to reconcile net loss to net cash used in operating activities
Change in fair value of warrant liabilities		(267,031	)		(1,312,899	)
Stock-based compensation expense		120,149			44,679
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		1,074,587			(302,123	)
Accounts payable		1,630,662			(587,263	)
Accrued expenses and other current liabilities		(607,294	)		228,220
Net cash used in operating activities		(14,269,947	)		(6,766,309	)
Cash flows from financing activities
Proceeds from issuance common stock and warrants in offering, net		7,773,527			31,497,463
Proceeds from exercise of warrants		403			—
Net cash provided by financing activities		7,773,930			31,497,463
Net (decrease) increase in cash		(6,496,017	)		24,731,154
Cash, beginning of period		29,687,944			8,760,462
Cash, end of period	$	23,191,927		$	33,491,616

Supplemental disclosures of cash flow information:
Cash paid for taxes	$	4,981		$	2,400
Prepaid expenses included in accounts payable	$	207,553		$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-5

REVIVA PHARMACEUTICALS HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.	ORGANIZATION AND NATURE OF OPERATIONS

On December 14, 2020, Reviva Pharmaceuticals Holdings, Inc. (the “Company”), a Delaware corporation and the successor by re-domiciliation to Tenzing Acquisition Corp. (“Tenzing”), a British Virgin Islands exempted company, Tenzing Merger Subsidiary Inc., a Delaware corporation and wholly-owned subsidiary of Tenzing (“Merger Sub”), and Reviva Pharmaceuticals, Inc., a Delaware corporation (together with its consolidated subsidiary), consummated a business combination (the “Business Combination”) through the merger of Merger Sub with and into Reviva Pharmaceuticals, Inc., contemplated by the previously announced Agreement and Plan of Merger, dated as of July 20, 2020 (the “Merger Agreement”), by and among Tenzing, Merger Sub, Reviva Pharmaceuticals, Inc., and the other parties thereto. Pursuant to the Merger Agreement, at the effective time of the Merger (the “Effective Time”), Merger Sub merged with and into Reviva Pharmaceuticals, Inc., with Reviva Pharmaceuticals, Inc. as the surviving company in the Merger and, after giving effect to such Merger, Reviva Pharmaceuticals, Inc. becoming a wholly-owned subsidiary of Reviva Pharmaceuticals Holdings, Inc. (together with its consolidated subsidiary).

Reviva Pharmaceuticals, Inc. was originally incorporated in the state of Delaware and commenced operations on May 1, 2006 and its Indian subsidiary, Reviva Pharmaceuticals India Pvt. Ltd. was incorporated in 2014. The Company is an emerging research based pharmaceutical company focused on developing a portfolio of internally discovered next generation safe and effective therapeutic drugs by using an integrated chemical genomics technology platform and proprietary chemistries. The Company is currently focused on developing drugs for the central nervous system (CNS), cardiovascular (CV), metabolic and inflammatory diseases.

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. Certain footnotes and other financial information normally required by accounting principles generally accepted in the United States of America, or GAAP, have been condensed or omitted in accordance with such rules and regulations. In management’s opinion, these condensed consolidated financial statements have been prepared on the same basis as our annual consolidated financial statements and notes thereto and include all adjustments, consisting of normal recurring items, considered necessary for the fair presentation. The operating results for the nine months ended September 30, 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

The condensed consolidated balance sheet as of December 31, 2021, has been derived from our audited financial statements at that date but does not include all disclosures and financial information required by GAAP for complete financial statements. The information included in the quarterly report on Form 10-Q should be read in conjunction with our consolidated financial statements and notes thereto for the year ended December 31, 2021, which were included in our annual report on Form 10-K, as filed with the Securities and Exchange Commission on March 15, 2022.

Liquidity and Going Concern

The Company has recognized recurring losses. As of September 30, 2022 the Company had a working capital of approximately $20.5 million, an accumulated deficit of $83.1 million and cash on hand of approximately $23.2 million. The Company’s net loss for the three months ended September 30, 2022 and 2021, was approximately $3.5 million and $2.3 million, respectively. The Company’s net loss for the nine months ended September 30, 2022 and 2021, was approximately $16.2 million and $4.8 million, respectively. The Company expects to incur significant expenses and increased operating losses for the next several years. The Company expects its expenses to increase in connection with its ongoing activities to research, develop and commercialize its product candidates. The Company will need to generate significant revenues to achieve profitability, and it may never do so. The Company expects the balance of cash on hand to be sufficient to meet its obligations for the 12 months from the issuance of these consolidated financial statements.

F-6

Use of estimates

The preparation of consolidated 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 as of the date of the financial statements and the reported amounts of expenses during the reporting periods covered by the financial statements and accompanying notes. Significant areas requiring the use of management estimates include, but are not limited to, valuation of intangible assets, depreciative and amortization useful lives, assumptions used to calculate the fair value of the contingent share consideration, stock-based compensation, beneficial conversion features, warrant values, deferred taxes and the assumptions used to calculate derivative liabilities. Actual results could differ materially from such estimates under different assumptions or circumstances.

Concentration of credit risk and other risks and uncertainties

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash. Substantially, all the Company’s cash is held in demand deposit form by one financial institution. The Company has not experienced any losses on its deposits of cash.

The Company is subject to all of the risks inherent in an early-stage company developing new pharmaceutical products. These risks include, but are not limited to, limited management resources, dependence upon medical acceptance of the product in development, regulatory approvals, successful clinical trials, availability and willingness of patients to participate in human trials, and competition in the pharmaceutical industry. The Company’s operating results may be materially affected by the foregoing factors.

Impact of COVID-19

In response to the spread of COVID-19, the Company has taken temporary precautionary measures intended to help minimize the risk of the virus to its employees and community, including temporarily requiring employees to work remotely and suspending all non-essential travel for the Company’s employees.

As a result of the COVID-19 pandemic, the Company may experience disruptions that could adversely impact the Company’s business. The COVID-19 pandemic may negatively affect clinical site initiation, patient recruitment and enrollment, patient dosing, distribution of drug to clinical sites and clinical trial monitoring for our clinical trials. The COVID-19 pandemic may also negatively affect the operations of the third-party contract research organizations that the Company intends to rely upon to assist it in conducting its clinical trials and the contract manufacturers who manufacture the Company’s drug candidates.

The Company is continuing to assess the potential impact of the COVID-19 pandemic on its business and operations as of September 30, 2022.

3.	PUBLIC OFFERING

On June 1, 2021, the Company completed a public offering (the “Offering”) of Units (each, a “Unit”), with each Unit consisting of (a) one share of common stock (or pre-funded warrant to purchase one share of common stock in lieu thereof, with an exercise price of $0.0001 per share, each a “Pre-Funded Warrant”) and (b) one warrant to purchase 0.75 of a share of our common stock, with an exercise price of $4.125 per share (each, an “Investor Warrant”). Pursuant to the Offering, the Company sold 4,133,400 Units consisting of (a) one share of common stock and (b) one Investor Warrant (inclusive the underwriter’s overallotment option of 1,200,000 of such Units), and 5,066,600 Units consisting of (a) one Pre-Funded Warrant and (b) one Investor Warrant. The Units had no stand-alone rights and were not certificated or issued as stand-alone securities. Accordingly, as result of the sale of such Units in the Offering, the Company issued in aggregate 4,133,400 shares of common stock, Pre-Funded Warrants exercisable for 5,066,600 shares of common stock, and Investor Warrants exercisable for 6,900,000 shares of common stock. The offering price was $3.75 for each Unit consisting of (a) one share of common stock and (b) one Investor Warrant, and $3.7499 for each Unit consisting of (a) one Pre-Funded Warrant and (b) one Investor Warrant. Net proceeds from the Offering were approximately $31.5 million, after underwriter discounts, commissions, legal and accounting fees, and certain other costs of approximately $3.0 million.

F-7

4.	REGISTERED DIRECT OFFERING AND PRIVATE PLACEMENT

On September 8, 2022, the Company completed a registered direct offering and concurrent private placement (together, the “September 2022 Offering”). In the registered direct offering, the Company issued 1,976,285 shares of common stock at a purchase price per share of $2.53, for aggregate gross proceeds to the Company of approximately $5.0 million, before deducting certain transaction expenses payable by the Company. The transaction expenses were net against the proceeds received and were included in additional paid-in capital.

The Company issued to the investors in the September 2022 Offering warrants to purchase up to 3,359,684 shares of common stock (the “Private Placement Warrants”). The Private Placement Warrants were immediately exercisable upon issuance at an exercise price of $2.40 per share and will expire on September 8, 2027.

In a concurrent private placement the Company issued pre-funded warrants (the “Private Pre-Funded Warrants”) to purchase up to an aggregate of 1,383,399 shares of common stock at a purchase price of $2.5299 per Private Pre-Funded Warrant, for aggregate gross proceeds to the Company of approximately $3.5 million, before deducting transaction expenses payable by the Company, which were net against the proceeds received and were included in additional paid-in capital. The Private Pre-Funded Warrants were immediately exercisable at an exercise price of $0.0001 per share and will expire when the Private Pre-Funded Warrants are fully exercised. No Private Pre-Funded Warrants or Private Placement Warrants have been exercised as of September 30, 2022 (see Note 7).

The September 2022 Offering resulted in aggregate gross proceeds of approximately $8.5 million before deducting transaction expenses. The total net proceeds totaled approximately $7.8 million after deducting transaction costs of $0.7 million.

5.	AT THE MARKET OFFERING

In January 2022, the Company entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC, as sales agent (“Wainwright”), pursuant to which the Company may offer and sell, from time to time through Wainwright, shares of its common stock for aggregate gross proceeds of up to $12.9 million.

Effective July 28, 2022, the Company terminated the ATM Agreement. Prior to termination, the Company had not sold any shares of its Common Stock pursuant to the ATM Agreement.

6.	LOSS PER SHARE

Basic and diluted net loss per share is computed by dividing the net loss for the period by the weighted average number of common stock outstanding during the period. Diluted loss per share includes potentially dilutive securities such as stock options, warrants to purchase common stock, and other convertible instruments unless the result of inclusion would be anti-dilutive. These securities have been excluded from the calculation of diluted net loss per shares for the three and nine months ended September 30, 2022 and September 30, 2021 because all such securities are anti-dilutive for all periods presented.

F-8

The following table summarizes the Company’s potentially dilutive securities, in common share equivalents, which have been excluded from the calculation of dilutive loss per share as their effect would be anti-dilutive:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Shares issuable upon exercise of stock options		179,627		146,698		179,627		146,698
Shares issuable upon exercise of warrants to purchase common stock		17,237,604		13,883,732		17,237,604		13,883,732
Shares contingently issuable for earnout		1,000,000		1,000,000		1,000,000		1,000,000
		18,417,231		15,030,430		18,417,231		15,030,430

The diluted loss per share computation equals basic loss per share for the three and nine months ended September 30, 2022 and September 30, 2021 because the Company had a net loss and the impact of the assumed exercise of stock options and warrants would have been anti-dilutive.

7.	WARRANTS

As of September 30, 2022, there were public warrants outstanding to purchase an aggregate of 6,325,000 shares of common stock and private warrants outstanding to purchase an aggregate of 3,915,997 shares of common stock.

Each public warrant entitles the holder thereof to purchase one share of common stock at a price of $11.50 per share, subject to adjustment. No public warrants will be exercisable for cash unless we have an effective and current registration statement covering the issuance of the shares of common stock issuable upon exercise of the public warrants and a current prospectus relating to such shares of common stock.

We may call the public warrants for redemption, in whole and not in part, at a price of $0.01 per warrant;

•

if, and only if, the reported last sale price of the common stock equals or exceeds $21.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations), for any 20 trading days within a 30 trading day period ending on the third trading business day prior to the notice of redemption to holders of the public warrants, and

•

if, and only if, there is a current registration statement in effect with respect to the issuance of the shares of Common Stock underlying such Public Warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of redemption

•

at any time while the public warrants are exercisable

•

upon not less than 30 days’ prior written notice of redemption to each warrant holder

The private warrants are substantially similar to the public warrants except such private warrants;

•

are exercisable for cash or on a cashless basis, at the holder’s option

•

cannot be redeemed by us, so long as they are still held by the initial purchasers or their affiliates.

•

The redemption price is to be calculated as the 10-day average trading price ending one trading business day prior to the notice of redemption.

In no event will the Company be required to net cash settle either the public or the private warrants.

The exercise price and number of shares of common stock issuable on exercise of the warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or a recapitalization, reorganization, merger or consolidation.

F-9

Further, there were assumed warrants outstanding to purchase an aggregate of 126,268 shares of common stock. These warrants were classified as equity as of September 30, 2022, and December 31, 2021. The fair value of these warrants on the date of issuance was $1,279,182.

In connection with the September 2022 Offering, the Company issued Pre-Funded Warrants exercisable for 5,066,600 shares of common stock. Total proceeds from the sale of Units including the Pre-Funded Warrants were approximately $19.0 million and the Pre-Funded Warrants are exercisable into one share of common stock at an exercise price of $0.0001 per share at any time after issuance. Additionally, in connection with the Offering, the Company issued Investor Warrants exercisable for 6,900,000 shares of common stock with an exercise price of $4.125 per share of common stock any time after issuance. The Investor Warrants expire on June 1, 2026. No Investor Warrants were exercised during the nine months ended September 30, 2022. The Company has determined that as the Pre-Funded Warrants and Investor Warrants were issued at fair value in a public offering of Units with no debt funding included in the offering, the Pre-Funded Warrants and Investor Warrants should be classified as equity. During fiscal year 2021, 1,033,300 of Pre-Funded Warrants were exercised for $103 in proceeds, resulting in the issuance of 1,033,300 common shares. During the nine months ended September 30, 2022, 4,033,300 Pre-Funded Warrants were exercised for $403 in proceeds, resulting in the issuance of 4,033,300 common shares. There were no Pre-Funded Warrants outstanding as of September 30, 2022.

In connection with the September 2022 Offering (see note 4), the Company issued Private Placement Warrants to purchase up to 3,359,684 shares of Common Stock, which were immediately exercisable at an exercise price of $2.40 per share and will expire on September 8, 2027. Additionally, the Company issued Private Pre-Funded Warrants to purchase up to an aggregate of 1,383,399 shares of common stock at a purchase price of $2.5299 per share. The Private Pre-Funded Warrants were immediately exercisable at an exercise price of $0.0001 per share.

The fair value of the Private Placement Warrants and Private Pre-Funded Warrants was determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., Company share price of $2.20, exercise price of $2.40 for the Private Placement Warrants and $0.0001 for the Private Pre-Funded Warrants, term of 5 years, volatility of 111%, risk-free rate of 3.4%, and expected dividend rate of 0%). The grant date relative fair value of these warrants was estimated to be $5,712,592 on September 8, 2022 and are classified as equity.

The Company evaluated the Private Placement Warrants and the Private Pre-Funded Warrants in accordance with the guidance at ASC 480, Distinguishing Liabilities from Equity and ASC 815-40, Derivatives and Hedging, and determined that they should be classified as equity instruments, with no recurring fair value measurement required. The warrants are indexed to the Company’s common stock and are required to be settled through physical settlement or net share settlement, if exercised. Accordingly, the warrants were recorded at their grant date fair value with no subsequent remeasurement.

8.	STOCK OPTION PLANS AND STOCK-BASED COMPENSATION

Stock-Based Compensation Expense

The Company records stock-based compensation expense in connection with the amortization of the fair value of stock options granted to employees, non-employee consultants and non-employee directors. During the three months ended September 30, 2022 and 2021, the Company recorded stock-based compensation of $40,587 and $27,590 respectively. During the nine months ended September 30, 2022, and 2021, the Company recorded stock-based compensation of $120,149 and $44,679 respectively. As of September 30, 2022, the Company had unrecognized stock-based compensation expense of $163,779, which is expected to be recognized over a weighted-average period of 1.5 years. As of September 30, 2022, there are 0 and 2,695,663 shares of common stock available for issuance under the 2006 Equity Incentive Plan and 2020 Equity Incentive Plan.

Determining Fair Value

Valuation and Recognition – The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes pricing model utilizes the following assumptions:

Expected Term – Expected life of an option award is the average length of time over which the Company expects employees will exercise their options, which is based on historical experience with similar grants.

F-10

Expected Volatility - Expected volatility is based on the Company’s historical stock volatility data over the expected term of the awards.

Risk-Free Interest Rate - The Company bases the risk-free interest rate on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent expected term.

Dividend Yield – The Company has not paid a dividend and does not anticipate paying a dividend in the foreseeable future.

The value of option grants is calculated using the Black-Scholes option pricing model with the following assumptions for options granted during the nine months ended September 30, 2022 and 2021:

	September 30, 2022	September 30, 2021
Risk-free interest rate	2.95%	0.95%	-	1.10%
Expected term (in years)	5.45	5.75	-	6.08
Expected volatility	86.6%	91.4%	-	92.2%
Expected dividend yield	0%		0%

Activity under the stock plans for the nine months ending September 30, 2022, is as follows:

	Number of Options Outstanding			Weighted Average Exercise price per share		Weighted Average Remaining Contractual Term in Years
Balance, December 31, 2021		192,898		$	8.46		6.76
Granted		5,000		$	0.71
Expired		(18,271	)	$	11.89
Balance, September 30, 2022		179,627		$	7.89		6.74
Balance at September 30, 2022		179,627		$	7.89		6.74

Options exercisable at September 30, 2022		101,674		$	10.91		5.12

9.	COMMITMENTS AND CONTINGENCIES

Clinical trials

Since 2010, the Company has entered into multiple clinical trial agreements with medical institutions in the United States, Europe and Asia for the purpose of enrolling patients into various clinical trials. The agreements are substantially similar by trial and include a detailed listing of the clinical trial services for which the Company will pay, how much will be paid for each service, a set-up charge (if any), Investigational Review Board fees, contractual term, and other provisions. The clinical trial services provided by each site generally include the screening of prospective patients and, for those patients to be enrolled in the study, administration of the Company’s investigation drug according to the trial protocol, any required hospitalization, ancillary medical supplies, and 2-week patient follow-up. Further, each agreement requires the Company to indemnify each respective clinical site against any and all liability, loss, or damage it may suffer as a result of third-party claims; the Company maintains product liability insurance of not less than $10 million in conjunction with this indemnification. The agreements may be terminated upon 30 days’ written notice, subject to conditions of paying all liabilities incurred through the date of termination. Additionally, with each screened patient, the Company incurs expense with other entities engaged to provide independent review of patient medical records.

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Indemnification

From time to time, in its normal course of business, the Company may indemnify other parties, with whom it enters into contractual relationships, including lessors and parties to other transactions with the Company. The Company may agree to hold other parties harmless against specific losses, such as those that could arise from a breach of representation, covenant or third-party infringement claims. It may not be possible to determine the maximum potential amount of liability under such indemnification obligations due to the unique facts and circumstances that are likely to be involved in each particular claim and indemnification provision. Historically, there have been no such indemnification claims. The Company has also indemnified its directors and executive officers, to the extent legally permissible, against all liabilities reasonably incurred in connection with any action in which such individual may be involved by reason of such individual being or having been a director or executive officer.

Operating Leases

The Company adopted ASC 842, Leases, on January 1, 2020. The Company has elected to apply the short-term lease exception to leases of one year or less. Presently, the Company has a single twelve-month lease on its Corporate Office located at 19925 Stevens Creek Blvd., Suite 100, Cupertino, CA 95014. The monthly lease payment is approximately $1,300 and the lease was renewed in February 2021 and again on February 1, 2022, for another 12-month term.

10.

FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:

•

Level 1 - quoted prices in active markets for identical assets or liabilities;

•

Level 2 - quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability; or

•

Level 3 - unobservable inputs for the asset or liability, such as discounted cash flow models or valuations.

The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The following is a listing of the Company’s warrant liabilities required to be measured at fair value on a recurring basis and where they are classified within the fair value hierarchy as of September 30, 2022 and December 31, 2021:

	September 30, 2022
	Level 1		Level 2		Level 3		Total
	*(unaudited)*
Liabilities:
Warrant liability		—		—	$	105,699	$	105,699
Total	$	—	$	—	$	105,699	$	105,699

	December 31, 2021
	Level 1		Level 2		Level 3		Total
Liabilities:
Warrant liability	$	—	$	—	$	372,730	$	372,730
Total	$	—	$	—	$	372,730	$	372,730

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The following table summarizes the changes in the fair value of the warrant liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2022		2021			2022			2021
	*(unaudited)*					*(unaudited)*
Balance, beginning of period	$	105,699	$	851,159		$	372,730		$	1,963,785
Change in fair value of warrant liability		—		(200,273	)		(267,031	)		(1,312,899	)
Balance, end of period	$	105,699	$	650,886		$	105,699		$	650,886

The Company classifies the private warrants pursuant to ASC 815 as derivative liabilities as the warrants have terms which are modified upon any future transfer of ownership, with subsequent changes in their fair values to be recognized in the consolidated financial statements at each reporting date. The Company calculated the fair value of the private warrants as of September 30, 2022 as $105,699 using a Black-Scholes model. The key inputs used in the Black-Scholes calculation were, the risk-free interest rate, expected volatility, expected life, exercise price and stock price. The risk-free interest rate was estimated to be 4.23%, the expected volatility was estimated to be 76.8%, and the expected life was estimated to be 3.21 years. The exercise price was $11.50, and the stock price $1.59.

The Company recorded a gain on remeasurement of warrant liabilities of $0 and $200,273 for the three months ended September 30, 2022 and 2021, respectively. The Company recorded a gain on remeasurement of warrant liabilities of $267,031 and $1,312,899 for the nine months ended September 30, 2022 and 2021, respectively.

11.

SUBSEQUENT EVENTS

In connection with the September 2022 Offering, on October 6, 2022, the Company filed a registration statement on Form S-1 with the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended, relating to the resale from time to time, by the selling stockholders identified in the prospectus of (i) up to 3,359,684 shares of common stock, which the selling stockholders may acquire upon the exercise the Private Placement Warrants and (ii) up to 1,383,399 shares of common stock which the selling stockholders may acquire upon the exercise of the Private Pre-Funded Warrants. The Company issued the Private Placement Warrants and the Private Pre-Funded Warrants to the selling stockholders in the September 2022 Offering on September 8, 2022. On October 17, 2012, the SEC issued the Company a Notice of Effectiveness for the registration statement on Form S-1. The Company will not receive any proceeds from the sale of the shares by the selling stockholders.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

All statements other than statements of historical fact included in this section regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward- looking statements. When used in this section, words such “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to our management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those contemplated by the forward- looking statements as a result of certain factors detailed herein. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report on Form 10-Q contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “can,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “seek,” “estimate,” “continue,” “plan,” “point to,” “project,” “predict,” “could,” “intend,” “target,” “potential” and other similar words and expressions of the future.

There are a number of important factors that could cause the actual results to differ materially from those expressed in any forward-looking statement made by us. These factors include, but are not limited to:

•

our ability to grow and manage growth economically;

•

our ability to retain key executives and medical and science personnel;

•

the impact of the COVID-19 pandemic, and related responses of businesses and governments to the pandemic, on our operations and personnel, on commercial activity in the markets in which we operate and on our results of operations;

•

the possibility that our products in development succeed in or fail clinical trials or are not approved by the U.S. Food and Drug Administration or other applicable authorities;

•

the possibility that we could be forced to delay, reduce or eliminate our planned clinical trials or development programs;

•

our ability to obtain approval from regulatory agents in different jurisdictions for our current or future product candidates;

•

changes in applicable laws or regulations;

•

changes to our relationships within the pharmaceutical ecosystem;

•

our current and future capital requirements to support our development and commercialization efforts and our ability to satisfy our capital needs;

•

the accuracy of our estimates regarding expenses and capital requirements, including estimated costs of our clinical studies.

•

our limited operating history;

•

our history of operating losses in each year since inception and expectation that we will continue to incur operating losses for the foreseeable future;

•

changes in the markets that we target;

•

our ability to meet the continued listing requirements for the listing of our common stock and warrants on Nasdaq;

•

our ability to maintain or protect the validity of our patents and other intellectual property;

•

our exposure to any liability, protracted and costly litigation or reputational damage relating to data security;

•

our ability to develop and maintain effective internal controls; and

•

the possibility that we may be adversely affected by other economic, business, and/or competitive factors.

The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with that may cause our actual results to differ from those anticipated in such forward-looking statements. Please see “Risk Factors” for additional risks which could adversely impact our business and financial performance.

All forward-looking statements are expressly qualified in their entirety by this cautionary notice. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this report or the date of the document incorporated by reference into this report. We have no obligation, and expressly disclaims any obligation, to update, revise or correct any of the forward-looking statements, whether as a result of new information, future events or otherwise. We have expressed our expectations, beliefs and projections in good faith and believe they have a reasonable basis. However, we cannot assure you that our expectations, beliefs or projections will result or be achieved or accomplished.

Company Overview

We are a clinical-stage biopharmaceutical company that discovers, develops, and seeks to commercialize next-generation therapeutics for diseases representing significant unmet medical needs and burden to society, patients, and their families. Our current pipeline focuses on the central nervous system, respiratory, and metabolic diseases. We use a chemical genomics driven technology platform and proprietary chemistry to develop new medicines. Our pipeline currently has two drug candidates, RP5063 (brilaroxazine) and RP1208. Both are new chemical entities discovered in-house. We have been granted composition of matter patents for both RP5063 and RP1208 in the United States (U.S.), Europe, and several other countries.

Our lead drug candidate, RP5063, is ready for continued clinical development for multiple neuropsychiatric indications. These include schizophrenia, bipolar disorder (BD), major depressive disorder (MDD), attention–deficit/hyperactivity disorder (ADHD), behavioral and psychotic symptoms of dementia or Alzheimer’s disease (BPSD), and Parkinson’s disease psychosis. Furthermore, RP5063 is also ready for clinical development for two respiratory indications — pulmonary arterial hypertension (PAH) and idiopathic pulmonary fibrosis (IPF). The U.S. Food and Drug Administration (FDA) has granted Orphan Drug designation to RP5063 for the treatment of PAH in November 2016 and IPF in April 2018.

On January 10, 2022, the FDA notified us that we may proceed with our Phase 3 RECOVER trial for RP5063. On February 1, 2022, we announced that the first patients have been dosed in our Phase 3 RECOVER trial to assess RP5063 for the treatment of subjects with an acute exacerbation of schizophrenia. On July 27, 2022, we announced that we had enrolled patients in 15 geographically diverse sites across the US. RECOVER is a global Phase 3, randomized, double-blind, placebo-controlled, multicenter study designed to assess the safety and efficacy of RP5063 in approximately 400 patients with acute schizophrenia compared to placebo. On October 31, 2022 we announced over 30% enrollment in our Phase 3 RECOVER trial in the United States and the initiation and ongoing enrollment across sites in Europe. The Company has received regulatory approval for initiating the study in Asia (India), with enrollment at multiple sites in India expected in 2022.

Our primary focus is to complete the clinical development of RP5063 for the treatment of acute and maintenance schizophrenia.

We are currently developing Phase 2 trial protocols for studies of brilaroxazine in ADHD and PAH and anticipate submitting the protocols to regulatory agencies in the first half of 2023 and initiating the Phase 2 studies in the second half of 2023.

Subject to the receipt of additional financing, we may also continue the clinical development of RP5063 for the treatment of BD, MDD, BPSD, PDP, and IPF. Moreover, subject to the receipt of additional financing, we may also advance the development of our second drug candidate, RP1208, for the treatment of depression and obesity.

Impact of COVID-19

In response to the spread of COVID-19, we have taken temporary precautionary measures intended to help minimize the risk of the virus to our employees and community, including temporarily requiring employees to work remotely and suspending all non-essential travel for our employees.

As a result of the COVID-19 pandemic, we may experience disruptions that could adversely impact our business. The COVID-19 pandemic may negatively affect clinical site initiation, patient recruitment and enrollment, patient dosing, distribution of drug to clinical sites and clinical trial monitoring for our clinical trials. The COVID-19 pandemic may also negatively affect the operations of the third-party contract research organizations that we intend to rely upon to assist us in conducting our clinical trials and the contract manufacturers who manufacture our drug candidates.

We are continuing to assess the potential impact of the COVID-19 pandemic on our business and operations. For additional information on the various risks posed by the COVID-19 pandemic, refer to Part I—Item 1A—Risk Factors of our Annual Report on Form 10-K, as filed with the Securities and Exchange Commission (the “SEC”) on March 15, 2022.

Financial Overview

We are a clinical-stage biopharmaceutical company and have not generated any revenues from the sale of products. We have never been profitable, and our accumulated deficit as of September 30, 2022, was $83.1 million. Our net loss for the three months ended September 30, 2022 and 2021, was approximately $3.5 million and $2.3 million, respectively. Our net loss for the nine months ended September 30, 2022 and 2021, was approximately $16.2 million and $4.8 million, respectively. We expect to incur significant expenses and increased operating losses for the next several years. We expect our expenses to increase in connection with our ongoing activities to research, develop and commercialize our product candidates. Furthermore, we expect to incur additional costs associated with operating as a public company. We will need to generate significant revenues to achieve profitability, and we may never do so.

We expect our expenses will increase substantially in connection with our ongoing activities, as we:

•

invest significantly to further research and develop, through clinical trials for RP5063 (Brilaroxazine) and pre-clinical research for RP1208, and seek regulatory approval for our product candidates RP5063 (Brilaroxazine) and RP1208;

•

identify and develop additional product candidates;

•

hire additional clinical, scientific and management personnel;

•

seek regulatory and marketing approvals for any product candidates that we may develop;

•

ultimately establish a sales, marketing and distribution infrastructure to commercialize any drugs for which we may obtain marketing approval;

•

maintain, expand and protect our intellectual property portfolio;

•

acquire or in-license other drugs and technologies; and

•

add operational, financial and management information systems and personnel, including personnel to support our product candidate development, any future commercialization efforts and our transition to a public company.

We have funded our operations to date primarily from the issuance and sale of our equity and convertible equity securities. As of September 30, 2022, we had cash of approximately $23.2 million. To fund our current operating plans, we will need to raise additional capital. Our existing cash will not be sufficient for us to complete development of our product candidates and, if applicable, to prepare for commercializing any product candidate that may receive approval. Accordingly, we will continue to require substantial additional capital beyond our existing cash to continue our clinical development and potential commercialization activities, however, we believe that our existing cash, will be sufficient to fund our current operating plans through at least November 2023. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our clinical development efforts. We will seek to fund our operations through public or private equity or debt financings or other sources, which may include collaborations with third parties. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition, and our ability to pursue our business strategy. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.

Research and Development Expenses

We focus our resources on research and development activities, including the conduct of preclinical and clinical studies and product development and expense such costs as they are incurred. We have not historically tracked or recorded research and development expenses on a project-by-project basis, primarily because we use our employee and infrastructure resources across multiple research and development projects, and it is not practical for us to allocate such costs on a project-by-project basis. Our research and development expenses primarily consist of employee-related expenses, including deferred salaries, salaries, benefits and taxes for personnel in research and development functions.

The largest recurring component of our total operating expenses has historically been research and development activities. we expect our research and development expenses will increase for the next several years as we advance our development programs, pursues regulatory approval of our product candidates in the U.S. and other jurisdictions and prepare for potential commercialization, which would require a significant investment in costs related to contract manufacturing, inventory buildup and sales and marketing activities.

Our primary product candidates and their current status is as follows:

Drug Candidate	Indication	Status
RP5063	Schizophrenia	Phase 2 complete. Commenced our Phase 3 RECOVER trial in acute schizophrenia.
RP5063	Bipolar Disorder	Phase 1 complete**
RP5063	Depression-MDD	Phase 1 complete**
RP5063	Alzheimer’s (AD-Psychosis/Behavior)	Phase 1 complete**
RP5063	Parkinson’s	Phase 1 complete**
RP5063	ADHD/ADD	Phase 1 complete**
RP5063	PAH	Phase 1 complete**
RP5063	IPF	Phase 1 complete**
RP1208	Depression	Completed pre-clinical development studies, including in vitro receptor binding studies, animal efficacy studies, and PK studies. Compound ready for IND enabling studies.
RP1208	Obesity	Completed pre-clinical development studies, including in vitro receptor binding studies and PK studies. Compound ready for animal efficacy studies.

** We completed the Phase 1 clinical study for RP5063 (Brilaroxazine) prior to starting the Phase 2 study in schizophrenia and schizoaffective disorder. We collected safety data for RP5063 (Brilaroxazine) in over 200 patients, including healthy subjects and patients with stable schizophrenia, acute schizophrenia and schizoaffective disorder. Generally, no separate Phase 1 study is required for conducting a Phase 2 study for an additional indication, provided the treatment doses in the Phase 2 study for an additional indication are within the range of doses tested in the previously completed Phase 1 study.

The successful development of our platform and product candidates is highly uncertain, and we may never succeed in achieving marketing approval for our product candidates RP5063 (Brilaroxazine), RP1208, or any future product candidates. We estimate that initial costs to conduct our Phase 3 clinical study for RP5063 could total approximately $26 million, with approximately $1.0 million having been paid over the course of calendar 2021, with approximately $16.2 million payable during calendar 2022, approximately $6.6 million payable during calendar 2023, and approximately $2.5 million payable during calendar 2024. At this time, other than our estimates for conducting our Phase 3 clinical study for RP5063, we cannot reasonably estimate the nature, timing, or costs of the efforts necessary to finish developing any of our product candidates or the period in which material net cash, if any, from these product candidates may commence. This is due to the numerous risks and uncertainties associated with developing therapeutics, including the uncertainty of:

•

the scope, rate of progress, expense, and results of clinical trials;

•

the scope, rate of progress, and expense of process development and manufacturing;

•

preclinical and other research activities; and

•

the timing of regulatory approvals.

General Administrative Expenses

General and administrative expenses primarily consist of payroll and related costs for employees in executive, business development, finance, and administrative functions. Other significant general and administrative expenses include professional fees for accounting and legal services.

We expect general and administrative expenses to increase as we expand infrastructure and continue the development of our clinical programs. Other increases could potentially include increased costs for director and officer liability insurance, costs related to the hiring of additional personnel, and increased fees for directors, outside consultants, lawyers, and accountants. We expect to incur significant costs to comply with corporate governance, internal controls, and similar requirements applicable to public companies.

Critical Accounting Policies and Use of Estimates

Our critical accounting policies are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on March 15, 2022. Since the date of the Annual Report, there have been no material changes in our critical accounting policies.

Results of Operations

Comparison of the three months ended September 30, 2022, and 2021:

The following table summarizes our results of operations for the three months ended September 30, 2022, and 2021:

	Three Months Ended September 30,						Change			Change
	2022			2021			$			%
	*(unaudited)*
Operating expenses
Research and development	$	2,305,981		$	1,423,359			882,622			62	%
General and administrative		1,256,972			1,053,481			203,491			19	%
Total operating expenses		3,562,953			2,476,840
Loss from operations		(3,562,953	)		(2,476,840	)
Gain on remeasurement of warrant liabilities		—			200,273			(200,273	)		(100	)%
Interest and other income (expense), net		49,509			(547	)		50,056			9151	%
Total other income (expense), net		49,509			199,726
Loss before provision for income taxes		(3,513,444	)		(2,277,114	)
Provision for income taxes		1,864			2,102			(238	)		(11	)%
Net loss	$	(3,515,308	)	$	(2,279,216	)

Research and Development Expenses

We incurred approximately $2.3 million and $1.4 million in research and development expenses for the three months ended September 30, 2022 and 2021, respectively. The primary reason for the increase of $0.9 million, or 62%, was attributable to an increase in Phase 3 clinical trial activity, higher drug development costs of approximately $0.4 million for our product candidate RP5063, an increase of approximately $0.4 million related to preclinical expenditures, other clinical expenses, and increases in salary. Our research and development expenses are expected to increase for the foreseeable future as we continue to advance our platform and product candidates.

General and Administrative Expenses

We incurred approximately $1.3 million and $1.1 million in general and administrative expenses for the three months ended September 30, 2022 and 2021, respectively. The increase of $0.2 million, or 19%, was primarily attributable to an increase in consultant and professional fees of $0.2 million.

Gain on Remeasurement of Warrant Liabilities

The gain on remeasurement of warrant liabilities of $0 million and $0.2 million for the three months ended September 30, 2022 and 2021, respectively, resulted from the decrease in calculated fair value principally as a result of the decline in stock price during the three months ended September 30, 2021.

Interest and Other Income (Expense), Net

Interest and other income (expense), net was approximately $49,509 and $(547) for the three months ended September 30, 2022 and 2021, respectively. The increase is primarily due to higher interest income of approximately $50,000 due to an increase in market interest rates in 2022 as compared to 2021.

Provision for Income Taxes

The provision for income taxes was approximately $1,864 and $2,102 for the three months ended September 30, 2022 and 2021, respectively. The increase was primarily due to an increase of taxable income related to subsidiary revenue operations.

Comparison of the nine months ended September 30, 2022, and 2021:

The following table summarizes our results of operations for the nine months ended September 30, 2022, and 2021:

	Nine Months Ended September 30,						Change			Change
	2022			2021			$			%
	*(unaudited)*
Operating expenses
Research and development	$	12,650,388		$	2,188,849			10,461,539			478	%
General and administrative		3,882,210			3,951,021			(68,811	)		(2	)%
Total operating expenses		16,532,598			6,139,870
Loss from operations		(16,532,598	)		(6,139,870	)
Gain on remeasurement of warrant liabilities		267,031			1,312,899			(1,045,868	)		(80	)%
Interest and other income (expense), net		56,961			(3,948	)		60,909			1543	%
Total other income (expense), net		323,992			1,308,951
Loss before provision for income taxes		(16,208,606	)		(4,830,919	)
Provision for income taxes		12,414			6,004			6,410			107	%
Net loss	$	(16,221,020	)	$	(4,836,923	)

Research and Development Expenses

We incurred approximately $12.7 million and $2.2 million in research and development expenses for the nine months ended September 30, 2022 and 2021, respectively. The primary reason for the increase of $10.5 million, or 478%, was attributable to an increase in Phase 3 clinical trial activity and higher drug development costs of approximately $6.7 million for our product candidate RP5063, an increase of approximately $1.0 million related to preclinical expenditures and other clinical expenses, an increase of approximately $2.0 million related to manufacturing, testing, and delivery of chemicals, approximately $0.4 million related to safety and toxicology studies, and other increases in salary. Our research and development expenses are expected to increase for the foreseeable future as we continue to advance our platform and product candidates.

General and Administrative Expenses

We incurred approximately $3.9 million and $4.0 million in general and administrative expenses for the nine months ended September 30, 2022 and 2021, respectively. The decrease of $0.1 million, or 2%, was primarily attributable to a decrease in legal expense of approximately $0.3 million, offset by an increase in consultant and professional fees of $0.1 million and recruiting expenses of approximately $0.1 million.

Gain on Remeasurement of Warrant Liabilities

The gain on remeasurement of warrant liabilities of approximately $0.3 million and $1.3 million for the nine months ended September 30, 2022 and 2021, respectively, resulted from the smaller decrease in calculated fair value principally as a result of the smaller decline in stock price during those nine month period ended September 30, 2022 versus 2021.

Interest and Other Income (Expense), Net

The interest and other income (expense), net of approximately $56,961 and $(3,948) for the nine months ended September 30, 2022 and 2021, respectively. The increase is primarily a result of higher interest income of approximately $67,000 due to an increase in market interest rates in 2022 as compared to 2021.

Provision for Income Taxes

The provision for income taxes was approximately $12,414 and $6,004 for the nine months ended September 30, 2022 and 2021, respectively. The increase was primarily due to an increase of taxable income related to subsidiary revenue operations.

Liquidity and Capital Resources

On June 1, 2021, we completed a public offering (the “Offering”) of Units (each, a “Unit”), with each Unit consisting of (a) one share of common stock (or pre-funded warrant to purchase one share of common stock in lieu thereof, with an exercise price of $0.0001 per share, each a “Pre-Funded Warrant”) and (b) one warrant to purchase 0.75 of a share of our common stock, with an exercise price of $4.125 per share (each, an “Investor Warrant”). Pursuant to the Offering, we sold 4,133,400 Units consisting of (a) one share of common stock and (b) one Investor Warrant (inclusive the underwriter’s overallotment option of 1,200,000 of such Units), and 5,066,600 Units consisting of (a) one Pre-Funded Warrant and (b) one Investor Warrant. The Units had no stand-alone rights and were not certificated or issued as stand-alone securities. Accordingly, as result of the sale of such Units in the Offering, we issued in aggregate 4,133,400 shares of common stock, Pre-Funded Warrants exercisable for 5,066,600 shares of common stock, and Investor Warrants exercisable for 6,900,000 shares of common stock. The offering price was $3.75 for each Unit consisting of (a) one share of common stock and (b) one Investor Warrant, and $3.7499 for each Unit consisting of (a) one Pre-Funded Warrant and (b) one Investor Warrant. Net proceeds from the Offering were approximately $31.5 million, after underwriter discounts, commissions, legal and accounting fees, and certain other costs of approximately $3.0 million.

In January 2022, we entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC, as sales agent, pursuant to which we may offer and sell, from time to time through Wainwright, shares of our common stock for aggregate gross proceeds of up to $12.9 million. Effective July 28, 2022, we terminated the ATM Agreement. Prior to termination, the Company had not sold any shares of its Common Stock pursuant to the ATM Agreement.

In a concurrent private placement the Company issued pre-funded warrants (the “Private Pre-Funded Warrants”) to purchase up to an aggregate of 1,383,399 shares of common stock at a purchase price of $2.5299 per share, for aggregate gross proceeds to the Company of approximately $3.5 million, before deducting transaction expenses payable by the Company, which were net against the proceeds received and were included in additional paid-in capital. The Private Pre-Funded Warrants were immediately exercisable at an exercise price of $0.0001 per share and will expire when the Private Pre-Funded Warrants are fully exercised. No Private Pre-Funded Warrants or Private Placement Warrants have been exercised as of September 30, 2022.

As of September 30, 2022, we had cash of approximately $23.2 million. We expect the balance of cash on hand to be sufficient to at least meet our obligations for the period through November 2023. We expect to continue to incur significant expenses and operating losses for the foreseeable future as we continue our research and preclinical and clinical development of our product candidates; expand the scope of our current studies for our product candidates; initiate additional preclinical, clinical or other studies for our product candidates; change or add additional manufacturers or suppliers; seek regulatory and marketing approvals for any of our product candidates that successfully complete clinical studies; seek to identify, evaluate and validate additional product candidates; acquire or in-license other product candidates and technologies; maintain, protect and expand our intellectual property portfolio; attract and retain skilled personnel; and experience any delays or encounter issues with any of the above.

Until such time as we can generate substantial product revenue, if ever, we expect to finance our cash needs through a combination of equity or debt financings and collaboration agreements. We do not currently have any committed external sources of capital.

To the extent that we raise additional capital through the future sale of equity or debt, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing stockholders.

If we raise additional funds through collaboration agreements in the future, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us.

If we are unable to raise additional funds through equity or debt financings when needed, we may be required 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.

The table below sets forth selected cash flow data for the periods presented:

	Nine Months Ended September 30,						Change			Change
	2022			2021			$			%
	*(unaudited)*
Net cash provided by (used in)
Operating activities	$	(14,269,947	)	$	(6,766,309	)		(7,503,638	)		111	%
Financing activities		7,773,930			31,497,463			(23,723,533	)		(75	)%
Net (decrease) increase in cash	$	(6,496,017	)	$	24,731,154

Net Cash Used in Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2022, was approximately $14.3 million, consisting primarily of a net loss of approximately $16.2 million, a noncash gain related to the remeasurement of warrant liabilities of approximately $0.3 million, stock-based compensation expense of approximately $0.1 million, and a decrease in net operating assets of approximately $2.1 million. The decrease in net operating assets was primarily due to increases in accounts payable, a decrease in prepaid expenses and other current assets and a decrease in accrued expenses and other current liabilities.

Net cash used in operating activities for the nine months ended September 30, 2021, was approximately $6.8 million, consisting primarily of a net loss of approximately $4.8 million, a noncash gain related to the remeasurement of warrant liabilities of approximately $1.3 million and an increase in net operating assets of approximately $0.7 million. The increase in net operating assets was due to increases in prepaid expenses and accrued expenses and other liabilities, offset by a decrease in accounts payable.

Net Cash Provided by Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2022, of $7.8 million related to proceeds from the sale of the common stock and warrants in the September 2022 Offering. Net cash provided by financing activities for the nine months ended September 30, 2021, of approximately $31.5 million related to proceeds from the public offering.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and do not currently have, any off-balance sheet arrangements, as defined under SEC rules.

JOBS Act Accounting Election

As an emerging growth company under the JOBS Act, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. We have elected not to opt out of such extended transition period. Accordingly, when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, will adopt the new or revised standard at the time private companies adopt the new or revised standard, unless early adoption is permitted by the standard, and we elect early adoption. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the rules and regulations thereunder, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rule 13a-15(b) under the Exchange Act, our management, under the supervision and with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2022. Based on such evaluation, our principal executive officer and principal financial officer have concluded that, as of September 30, 2022, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

PART II – Other Information

ITEM 1. LEGAL PROCEEDINGS

We may, from time to time, become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that may be, individually or in the aggregate, material to us.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on March 15, 2022, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K, for the year ended December 31, 2021, as filed with the SEC on March 15, 2022, may not be the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial also may materially adversely affect the Company’s business, financial condition and/or operating results.

There were no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on March 15, 2022.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibit No.		Exhibit
4.1		Form of Private Pre-Funded Warrant (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K as filed on September 7, 2022, and incorporated here by reference)

4.2		Form of Private Placement Warrant (filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K as filed on September 7, 2022, and incorporated here by reference)

10.1		Form of Securities Purchase Agreement, dated September 6, 2022, by and between the Company and the Institutional Investor (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed on September 7, 2022, and incorporated here by reference)

10.2		Form of Securities Purchase Agreement, dated September 6, 2022, by and between the Company and the Private Placement Entities (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K as filed on September 7, 2022, and incorporated here by reference)

10.3		Placement Agency Agreement, dated September 6, 2022, by and between the Company and the Placement Agent (filed as Exhibit 10.3 to the Company's Current Report on Form 8-K as filed on September 7, 2022, and incorporated here by reference)

31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a)

31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a)

32.1**		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350

101.INS*		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH*		Inline XBRL Taxonomy Extension Schema Document

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibits 101)

*	Filed herewith.

The certifications furnished in Exhibit 32.1 hereto are deemed to accompany this Annual Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.

SIGNATURES

Pursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Reviva Pharmaceuticals Holdings, Inc.
	(Registrant)


Date: November 14, 2022	/s/ Laxminarayan Bhat
	Laxminarayan Bhat
	Chief Executive Officer
	(Principal Executive Officer)

Date: November 14, 2022	/s/ Narayan Prabhu
	Narayan Prabhu
	Chief Financial Officer
	(Principal Financial and Accounting Officer)