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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

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 333-88480

NEUBASE THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware

 

 46-5622433 

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

350 Technology Drive, Pittsburgh, PA 15219

(Address of principal executive offices and zip code)

(646) 450-1790

(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, $0.0001 par value per share

NBSE

The Nasdaq Stock Market 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 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 the definitions 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 August 11, 2021, 32,716,827 shares of the common stock, par value $0.0001, of the registrant were outstanding.

Table of Contents

Table of Contents

PART I.

1

ITEM 1.

FINANCIAL STATEMENTS

1

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

17

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

25

ITEM 4.

CONTROLS AND PROCEDURES

26

PART II.

27

ITEM 1.

LEGAL PROCEEDINGS

27

ITEM 1A.

RISK FACTORS

28

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

30

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

30

ITEM 4.

MINE SAFETY DISCLOSURES

30

ITEM 5.

OTHER INFORMATION

30

ITEM 6.

EXHIBITS

31

SIGNATURES

32

-i-

Table of Contents

PART I.

ITEM 1. FINANCIAL STATEMENTS

NeuBase Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

    

June 30, 

    

September 30, 

    

2021

    

2020

ASSETS

CURRENT ASSETS

 

  

 

  

Cash and cash equivalents

$

58,842,475

$

31,992,283

Prepaid insurance

705,161

521,617

Other prepaid expenses and current assets

 

669,141

 

294,640

Total current assets

 

60,216,777

 

32,808,540

 

  

 

  

EQUIPMENT, net

 

2,258,610

 

1,166,934

 

  

 

  

OTHER ASSETS

 

 

Investment

 

541,527

 

323,557

Long-term prepaid insurance

145,250

Right-of-use asset

6,048,350

Security deposit

253,565

Total other assets

6,843,442

468,807

TOTAL ASSETS

$

69,318,829

$

34,444,281

 

  

 

  

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES

 

  

 

  

Accounts payable

$

1,519,581

$

1,505,042

Accrued expenses and other current liabilities

1,038,141

555,883

Warrant liabilities

13,895

950,151

Insurance note payable

 

294,934

 

138,557

Operating lease liability

273,585

Total current liabilities

 

3,140,136

 

3,149,633

Long-term operating lease liability

5,902,997

TOTAL LIABILITIES

9,043,133

3,149,633

 

  

 

  

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY

 

  

 

  

Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding as of June 30, 2021 and September 30, 2020

 

 

Common stock, $0.0001 par value; 250,000,000 shares authorized; 32,716,827 and 23,154,084 shares issued and outstanding as of June 30, 2021 and September 30, 2020, respectively

 

3,271

 

2,315

Additional paid-in capital

 

122,081,896

 

74,850,935

Accumulated deficit

 

(61,809,471)

 

(43,558,602)

Total stockholders’ equity

 

60,275,696

 

31,294,648

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

69,318,829

$

34,444,281

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

1

Table of Contents

NeuBase Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

Three Months ended

Nine Months ended

June 30, 

June 30,

    

2021

    

2020

    

2021

    

2020

OPERATING EXPENSES

 

  

 

  

 

  

 

  

General and administrative

$

3,470,104

$

2,331,283

$

8,833,214

$

7,624,984

Research and development

 

2,480,961

 

1,492,881

 

7,675,014

 

4,336,576

Research and development, Vera acquisition

 

2,888,029

 

 

2,888,029

 

TOTAL OPERATING EXPENSES

 

8,839,094

 

3,824,164

 

19,396,257

 

11,961,560

 

  

 

 

  

 

  

LOSS FROM OPERATIONS

 

(8,839,094)

 

(3,824,164)

 

(19,396,257)

 

(11,961,560)

 

  

 

  

 

  

 

  

OTHER INCOME (EXPENSE)

 

  

 

  

 

  

 

  

Interest expense

 

(3,074)

 

(1,573)

 

(19,271)

 

(3,226)

Interest income

2,054

11,520

Change in fair value of warrant liabilities

 

215,547

 

(285,284)

 

936,256

 

(909,474)

Equity in losses on equity method investment

 

(37,215)

 

(101,238)

 

(98,754)

 

(218,589)

Other income (expense)

(1,087)

412,371

315,637

409,141

Total other income (expense), net

 

176,225

 

24,276

 

1,145,388

 

(722,148)

 

 

  

 

  

 

  

NET LOSS

$

(8,662,869)

$

(3,799,888)

$

(18,250,869)

$

(12,683,708)

 

 

 

 

BASIC AND DILUTED LOSS PER SHARE

$

(0.29)

$

(0.18)

$

(0.72)

$

(0.69)

 

  

 

 

  

 

  

WEIGHTED AVERAGE SHARES OUTSTANDING:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

BASIC AND DILUTED

 

30,092,493

 

21,193,387

 

25,482,082

 

18,441,961

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

2

Table of Contents

NeuBase Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

For the Three and Nine Months Ended June 30, 2021 and 2020

(Unaudited)

Common Stock

Additional Paid-In 

Accumulated 

Total Stockholders’

    

Shares

    

Amount

    

Capital

    

Deficit

    

Equity

Balance as of March 31, 2021

 

23,180,024

$

2,317

$

77,082,072

$

(53,146,602)

$

23,937,787

Stock-based compensation expense

625,182

625,182

Issuance of common stock, net of issuance costs

9,200,000

920

42,615,456

42,616,376

Issuance of common stock, Vera acquisition

308,635

31

1,759,189

1,759,220

Issuance of restricted stock for services

2,692

Exercise of stock options

25,476

3

(3)

Net loss

(8,662,869)

(8,662,869)

Balance as of June 30, 2021

32,716,827

$

3,271

$

122,081,896

$

(61,809,471)

$

60,275,696

Common Stock

Additional Paid-In

Accumulated

Total Stockholders’

    

Shares

    

Amount

    

Capital

    

Deficit

    

Equity

Balance as of September 30, 2020

23,154,084

$

2,315

$

74,850,935

$

(43,558,602)

$

31,294,648

Stock-based compensation expense

 

 

2,743,875

 

 

2,743,875

Issuance of common stock, net of issuance costs

9,200,000

920

42,615,456

42,616,376

Issuance of common stock, Vera acquisition

308,635

31

1,759,189

1,759,220

Issuance of restricted stock for services

7,056

Exercise of stock options

47,052

5

112,441

112,446

Net loss

 

 

 

(18,250,869)

 

(18,250,869)

Balance as of June 30, 2021

32,716,827

$

3,271

$

122,081,896

$

(61,809,471)

$

60,275,696

Common Stock

Additional Paid-In 

Accumulated 

Total Stockholders’

    

Shares

    

Amount

    

Capital

    

Deficit

    

Equity

Balance as of March 31, 2020

17,080,625

$

1,708

$

39,045,394

$

(35,057,902)

$

3,989,200

Stock-based compensation expense

1,210,715

1,210,715

Issuance of common stock, net of issuance costs

6,037,500

604

33,283,366

33,283,970

Issuance of restricted stock for services

2,071

Net loss

(3,799,888)

(3,799,888)

Balance as of June 30, 2020

23,120,196

$

2,312

$

73,539,475

$

(38,857,790)

$

34,683,997

Common Stock

Additional Paid-In

Accumulated

Total Stockholders’

    

Shares

    

Amount

    

Capital

    

Deficit

    

Equity

Balance as of September 30, 2019

17,077,873

$

1,708

$

36,201,758

$

(26,174,082)

$

10,029,384

Stock-based compensation expense

 

 

4,054,351

 

 

4,054,351

Issuance of common stock, net of issuance costs

6,037,500

604

33,283,366

33,283,970

Issuance of restricted stock for services

4,823

Net loss

 

 

 

(12,683,708)

 

(12,683,708)

Balance as of June 30, 2020

23,120,196

$

2,312

$

73,539,475

$

(38,857,790)

$

34,683,997

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

3

Table of Contents

NeuBase Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Nine Months ended

June 30, 

    

2021

    

2020

Cash flows from operating activities

  

Net loss

$

(18,250,869)

$

(12,683,708)

Adjustments to reconcile net loss to net cash used in operating activities

 

 

Stock-based compensation

 

2,743,875

 

4,054,351

Research and development expense, Vera acquisition

 

2,888,029

 

Change in fair value of warrant liabilities

 

(936,256)

 

909,474

Depreciation and amortization

 

251,701

 

230,715

Loss on marketable security

15,024

Loss on disposal of fixed asset

 

1,087

 

3,230

Equity in losses on equity method investment

 

98,754

 

218,589

Gain on sale of intellectual property

(316,724)

Amortization of right-of-use assets

69,423

Changes in operating assets and liabilities

 

 

Prepaid insurance, other prepaid expenses and current assets

 

(166,420)

 

117,068

Long-term prepaid insurance

145,250

145,250

Security deposit

 

(253,565)

 

Accounts payable

 

(173,913)

 

(166,684)

Accrued expenses and other current liabilities

 

394,258

 

29,375

Operating lease liability

58,809

Net cash used in operating activities

 

(13,431,537)

 

(7,142,340)

Cash flows from investing activities

 

 

Purchase of laboratory and office equipment

 

(1,096,781)

 

(362,915)

Purchase of marketable securities

(44,992,196)

Sale of marketable securities

44,977,172

Cash paid for Vera acquisition

(1,100,040)

Net cash used in investing activities

 

(2,211,845)

 

(362,915)

Cash flows from financing activities

 

 

Principal payment of financed insurance

(235,248)

(167,925)

Proceeds from issuance of stock, net of issuance costs

42,616,376

33,283,970

Proceeds from exercise of stock options

 

112,446

 

Net cash provided by financing activities

 

42,493,574

 

33,116,045

Net increase in cash and cash equivalents

 

26,850,192

 

25,610,790

Cash and cash equivalents, beginning of period

31,992,283

10,313,966

Cash and cash equivalents, end of period

$

58,842,475

$

35,924,756

 

  

 

  

Supplemental disclosure of cash flow information:

Cash paid for interest

$

10,400

$

3,244

Cash paid for income taxes

Non-cash investing and financing activities:

Issuance of common stock, Vera acquisition

$

1,759,220

Purchases of laboratory and office equipment in accounts payable

$

188,452

Preferred shares in DepYmed received as consideration for sale of intellectual property

$

316,724

Insurance financed through note payable

$

391,625

$

365,430

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

4

Table of Contents

NeuBase Therapeutics, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.  Organization and Description of Business

NeuBase Therapeutics, Inc. and subsidiaries (the “Company” or “NeuBase”) is developing a modular peptide-nucleic acid (“PNA”) antisense oligo (“PATrOL™”) platform to address genetic diseases, with a single, cohesive approach. The PATrOL™-enabled anti-gene therapies are designed to improve upon current genetic medicine strategies by combining the advantages of synthetic approaches with the precision of antisense technologies. NeuBase plans to use its platform to address diseases which have a genetic source, with an initial focus on Myotonic Dystrophy Type 1 (“DM1”), Huntington’s Disease (“HD”) and oncology applications.

NeuBase is a pre-clinical-stage biopharmaceutical company and continues to develop its clinical and regulatory strategy with its internal research and development team with a view toward prioritizing market introduction as quickly as possible. NeuBase’s lead programs are NT0100 and NT0200.

The NT0100 program is a PATrOL™-enabled therapeutic program being developed to target the mutant expansion in the HD messenger ribonucleic acid (“mRNA”). The NT0100 program includes proprietary PNAs which have the potential to be highly selective for the mutant transcript vs. the wild-type transcribed allele and the expectation to be applicable for all HD patients as it directly targets the expansion itself, and has the potential to be delivered systemically. PATrOL™-enabled drugs also have the unique ability to open RNA secondary structures and bind to either the primary nucleotide sequences or the secondary and/or tertiary structures. NeuBase believes the NT0100 program addresses an unmet need for a disease which currently has no effective therapeutics that target the core etiology of the condition. NeuBase believes there is a large opportunity in the U.S. and European markets for drugs in this space.

The NT0200 program is a PATrOL™-enabled therapeutic program being developed to target the mutant expansion in the DM1 disease mRNA. The NT0200 program includes several proprietary PNAs which have the potential to be highly selective for the mutant transcript versus the wild-type transcribed allele and the expectation to be effective for nearly all DM1 patients as it directly targets the expansion itself. NeuBase believes the NT0200 program addresses an unmet need for a disease which currently has no effective therapeutics that target the core etiology of the condition. NeuBase believes there is a large opportunity in the U.S. and European markets for drugs in this space.

2.  Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto as of and for the year ended September 30, 2020 included in the Company’s Annual Report on Form 10-K (the “Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on December 23, 2020. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated during the consolidation process. The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. The accompanying unaudited condensed consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. In the opinion of management, the accompanying unaudited condensed consolidated financial statements for the periods presented reflect all adjustments, consisting of only normal, recurring adjustments, necessary to fairly state the Company’s financial position, results of operations and cash flows. The unaudited condensed consolidated financial statements for the interim periods are not necessarily indicative of results for the full year. The preparation of these unaudited condensed consolidated financial statements requires the Company to make estimates and judgments that affect the amounts reported in the financial statements and the accompanying notes. The Company’s actual results may differ from these estimates under different assumptions or conditions.

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NeuBase Therapeutics, Inc. and 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 valuation of stock-based compensation, the measurement of operating lease liabilities, the fair value of warrant liabilities and the valuation allowance of deferred tax assets resulting from net operating losses. 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.

The Company assesses and updates estimates each period to reflect current information, such as the economic considerations related to the impact that the novel coronavirus disease (“COVID-19”) could have on its significant accounting estimates (see Part II, Item 1A – Risk Factors—”Our operations may be adversely affected by the coronavirus outbreak, and we face risks that could impact our business” in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2020  for further discussion of the effect of the COVID-19 pandemic on the Company’s operations). 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.  

Fair Value Measurements

Fair value measurements are based on the premise that fair value is an exit price representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the following three-tier fair value hierarchy has been used in determining the inputs used in measuring fair value:

Level 1 – Quoted prices in active markets for identical assets or liabilities on the reporting date.

Level 2 – Pricing inputs are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Pricing inputs are generally unobservable and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require management’s judgment or estimation of assumptions that market participants would use in pricing the assets or liabilities. The fair values are therefore determined using factors that involve considerable judgment and interpretations, including but not limited to private and public comparables, third-party appraisals, discounted cash flow models, and fund manager estimates.

Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Management’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The use of different assumptions and/or estimation methodologies may have a material effect on estimated fair values. Accordingly, the fair value estimates disclosed, or initial amounts recorded may not be indicative of the amount that the Company or holders of the instruments could realize in a current market exchange.

Marketable Securities

Marketable securities are classified as trading and are carried at fair value. The Company’s marketable securities consist of corporate bonds and highly liquid mutual funds and exchange-traded & closed-end funds which are valued at quoted market prices. The Company had no marketable securities as of June 30, 2021 and September 30, 2020.

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NeuBase Therapeutics, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Net Loss Per Share

Basic net loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during each period. Diluted net loss per share includes the dilutive effect, if any, from the potential exercise or conversion of securities, such as convertible debt, warrants and stock options that would result in the issuance of incremental shares of common stock. In computing the basic and diluted net loss per share applicable to common stockholders, the weighted average number of shares remains the same for both calculations due to the fact that when a net loss exists, dilutive shares are not included in the calculation as the impact is anti-dilutive.

The following potentially dilutive securities outstanding as of June 30, 2021 and 2020 have been excluded from the computation of diluted weighted average shares outstanding, as they would be anti-dilutive:

As of June 30, 

    

2021

    

2020

Common stock purchase options

 

7,002,421

6,514,466

Unvested restricted stock

 

1,250

Restricted stock units

 

10,000

Common stock purchase warrants

 

820,939

715,939

7,833,360

7,231,655

Recent Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). This guidance introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. ASU 2016-13 also provides updated guidance regarding the impairment of available-for-sale debt securities and includes additional disclosure requirements. The new guidance is effective for public business entities that meet the definition of a Smaller Reporting Company as defined by the Securities and Exchange Commission for interim and annual periods beginning after December 15, 2022. Early adoption is permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

Immaterial Reclassification Adjustments

The Company made an immaterial reclassification adjustment (the “reclassification adjustment”) to its unaudited condensed consolidated statement of operations during the three months ended June 30, 2021 to reclassify an aggregate of approximately $0.3 million of expenses previously recorded to general and administrative expense during the six months ended March 31, 2021 to Research and development expense, and Research and development expense  – Vera acquisition. The reclassification adjustment has no effect on the Company’s total operating expenses, loss from operations or net loss during the three and nine months ended June 30, 2021 or during any previously reported period. The reclassification adjustment has no effect on the Company’s unaudited condensed consolidated balance sheet and unaudited condensed consolidated statement of cash Flows as of and for the nine months ended June 30, 2021 or as of and for any previously reported period.

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NeuBase Therapeutics, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

3.  Liquidity

The Company expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. As a result, the Company will likely need to raise additional capital through one or more of the following: issuance of additional debt or equity or complete a licensing transaction for one or more of the Company’s pipeline assets. With the closing of the common stock offering discussed below, management believes that it has sufficient working capital on hand to fund operations through at least the next twelve months from the date these unaudited condensed consolidated financial statements were available to be issued. There can be no assurance that the Company will be successful in acquiring additional funding, that the Company’s projections of its future working capital needs will prove accurate, or that any additional funding would be sufficient to continue operations in future years.

Common Stock Offering

On April 26, 2021, the Company closed an underwritten public offering of 9,200,000 shares of its common stock (inclusive of 1,200,000 shares that were sold pursuant to the underwriters’ full exercise of their option to purchase additional shares of the Company’s common stock), at a price to the public of $5.00 per share. The Company received net proceeds from the offering of approximately $42.6 million, after deducting the underwriting discounts and commissions and other estimated offering expenses payable by the Company.

4.  Asset Purchase Agreement

On January 27, 2021, the Company entered into an Asset Purchase Agreement by and among us, NeuBase Corporation, our wholly owned subsidiary, and Vera Therapeutics, Inc. (“Vera”) as amended by the Amendment to Asset Purchase Agreement, dated as of April 20, 2021, by and between the Company and Vera (collectively, the “APA”) and the transaction closed on April 26, 2021 (the “Vera Acquisition”). Pursuant to the terms of the APA, the Company acquired infrastructure, materials, and intellectual property for peptide-nucleic acid (“PNA”) scaffolds from Vera for total consideration of approximately $0.8 million in cash and 308,635 shares of Common Stock (of which 146,375 were to be issued to Vera and 162,260 were to be held in escrow and released to Vera in accordance with the terms of an escrow agreement between NeuBase Corporation and Vera). The Company accounted for the Vera Acquisition as an asset acquisition under Accounting Standard Codification (“ASC”) 805-50, Acquisition of Assets Rather Than a Business.

Total consideration for the Vera transaction consisted of the following:

Cash consideration

    

$

796,124

Acquisition costs

 

303,916

Fair value of common stock (1)

 

1,759,220

Total consideration

$

2,859,260

(1)The fair value of common stock represents the closing share price of 308,635 shares of the Company’s common stock on April 26, 2021.

The total consideration for the Vera transaction was allocated as follows:

Property, plant and equipment

    

$

59,231

Other liabilities

 

(88,000)

Fair value of net assets acquired

 

(28,769)

Research and development expense

 

2,888,029

Total cost of Vera acquisition

$

2,859,260

In-process research and development assets with no future alternative use acquired in the Vera Acquisition were expensed under the guidance of ASC 730, Research and Development.

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NeuBase Therapeutics, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

5.  Other Prepaid Expenses and Other Current Assets

The Company’s prepaid expenses and other current assets consisted of the following:

As of June 30, 

As of September 30, 

    

2021

    

2020

Prepaid research and development expense

$

308,490

$

205,641

Prepaid rent

285,577

Other prepaid expenses and other current assets

 

75,074

 

88,999

Total

$

669,141

$

294,640

6.  Equipment

The Company’s equipment consisted of the following:

As of June 30, 

As of September 30, 

    

2021

    

2020

Laboratory equipment

$

2,415,381

$

1,319,123

Office equipment

 

252,921

 

6,477

Total

 

2,668,302

 

1,325,600

Accumulated depreciation

 

(409,692)

 

(158,666)

Property, plant and equipment, net

$

2,258,610

$

1,166,934

Depreciation expense for the three months ended June 30, 2021 and 2020 was approximately $0.1 million and $0.03 million, respectively. Depreciation expense for the nine months ended June 30, 2021 and 2020 was approximately $0.3 million and $0.1 million, respectively.

7.  Investment

The Company owns common and preferred shares of DepYmed, Inc. (“DepYmed”), which in aggregate represents approximately 13% ownership of DepYmed. In addition, the Company is entitled to hold one of the six seats on DepYmed’s board of directors.

In February 2021, the Company sold certain intellectual property to DepYmed in exchange for shares of Series A-4 preferred stock. The Company recognized a gain of $0.3 million related to the sale, which was recorded in other income (expense) on the Company’s unaudited condensed consolidated statement of operations during the nine months ended June 30, 2021.

The Company accounts for its investment in DepYmed common shares using the equity method of accounting and records its proportionate share of DepYmed’s net income and losses in the accompanying unaudited condensed consolidated statements of operations. Equity in losses for the three months ended June 30, 2021 and 2020 were approximately $0.04 million and $0.1 million, respectively. Equity in losses for the nine months ended June 30, 2021 and 2020 were approximately $0.1 million and $0.2 million, respectively.

The Company accounts for its investment in preferred shares of DepYmed at cost, less any impairment, as the Company determined the preferred stock did not have a readily determinable fair value.

As of June 30, 2021 and September 30, 2020, the carrying amount of the Company’s aggregate investment in DepYmed was $0.5 million and $0.3 million, respectively.

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NeuBase Therapeutics, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

8.  Accrued Expenses and Other Current Liabilities

The Company’s accrued expenses and other current liabilities consisted of the following:

As of June 30, 

As of September 30, 

    

2021

    

2020

Accrued compensation and benefits

$

176,930

$

88,527

Accrued consulting settlement

100,000

Accrued professional fees

 

223,845

 

241,755

Accrued research and development

 

227,246

 

41,313

Accrued franchise tax

56,176

155,865

Accrued patent expenses

162,237

24,716

Other accrued expenses

 

91,707

 

3,707

Total

$

1,038,141

$

555,883

9.  Notes Payable

Insurance Notes Payable

As of June 30, 2021 and September 30, 2020, the Company had the following insurance notes payable outstanding:

Stated

Balance at

Balance at

Maturity

Interest

Original

June 30,

September

    

Date

    

Rate

    

Principal

    

2021

    

30, 2020

Insurance Note Payable

 

  

 

  

 

  

 

  

 

  

2020 Insurance Note

 

December 2020

 

5.25

%  

$

365,430

 

$

138,557

2021 Insurance Note

 

January 2022

 

4.99

%  

$

391,625

$

294,934

 

10.  Leases

In October 2020, the Company entered into a ten-year operating lease agreement with annual escalating rental payments for approximately 14,189 square feet of office and laboratory space in Pittsburgh, Pennsylvania. The leased premises will serve as the Company’s headquarters. The first and second amendments to the lease agreement were executed in December 2020 and April 2021, respectively (collectively with the lease agreement, referred to herein as the “Lease”). In November 2020, the Company prepaid rent of $0.3 million and paid a security deposit of $0.3 million for the Lease. The Lease commenced on May 1, 2021 and the Company was obligated to begin making rental payments on this date. The Company will apply the prepaid amount toward the rental payments through December 2021. The Company is also entitled to use half of the security deposit towards rental payments in May and June 2022. The Company measured and recognized an initial right-of-use (“ROU”) asset and operating lease liability upon lease commencement. The Company has the right to extend the term of the Lease for an additional five-year term; however, this extension has not been included in the calculation of the lease liability and ROU asset at the lease inception as the exercise of the option was not reasonably certain.

The Company continued to operate under its operating lease in Pittsburgh until the Company moved into its new headquarters and laboratory space, which occurred in June 2021. The Company’s prior office and operating space was leased under operating leases with original terms of less than 12 months which expire at various dates through November 2021; therefore, the Company’s previous operating leases are not recognized as ROU assets on the unaudited condensed consolidated balance sheet as of June 30, 2021. The Company also maintains its short-term rental of office space in New York, which the Company extended the term of until November 2021, as well as short term rentals of office space in Boston and San Diego.

At June 30, 2021, the Company had a ROU asset and operating lease liabilities of approximately $6.0 million and approximately $6.2 million, respectively.

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NeuBase Therapeutics, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following tables summarize quantitative information about the Company’s leases for the three and nine months ended June 30, 2021 and 2020:

 

Nine months ended June 30, 

    

2021

    

2020

Operating cash flows - operating lease

$

15,904

$

Right-of-use asset obtained in exchange for operating lease liabilities at lease commencement

$

6,117,772

 

As of June 30, 

 

    

2021

 

Weighted-average remaining lease term – operating lease (in years)

 

10.08

Weighted-average discount rate – operating lease

 

7.3

%

Three Months Ended

Nine Months Ended

June 30, 

June 30, 

    

2021

    

2020

    

2021

    

2020

Operating leases

 

  

 

  

 

  

 

  

Operating lease cost

$

144,136

$

 

144,136

$

Short-term lease rent expense

 

29,083

 

31,174

 

85,522

 

71,014

Net lease cost

$

173,219

$

31,174

$

229,658

$

71,014

As of June 30, 2021, future minimum lease payments under the non-cancelable operating lease was as follows:

Operating

    

Lease

Remaining Period Ended September 30, 2021

$

113,058

Year Ended September 30, 2022

 

822,660

Year Ended September 30, 2023

 

867,367

Year Ended September 30, 2024

 

874,320

Year Ended September 30, 2025

 

881,391

Year Ended September 30, 2026

 

888,627

Thereafter

 

4,401,029

Total

 

8,848,452

Less present value discount

 

(2,671,870)

Operating lease liabilities

$

6,176,582

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NeuBase Therapeutics, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

11.  Fair Value

The following tables present the Company’s fair value hierarchy for its warrant liabilities measured at fair value on a recurring basis as of June 30, 2021 and September 30, 2020:

    

Fair Value Measurements 

as of June 30, 2021

    

(Level 1)

    

(Level 2)

    

(Level 3)

    

Total

Liabilities

  

 

  

 

  

 

  

Warrant liabilities

$

13,895

$

13,895

Fair Value Measurements 

as of September 30, 2020

    

(Level 1)

    

(Level 2)

    

(Level 3)

    

 Total  

Liabilities

 

  

 

  

 

  

 

Warrant liabilities

$

950,151

$

950,151

The fair value of the warrant liabilities were determined using the Black-Scholes option pricing model. The following assumptions were used in determining the fair value of the warrant liabilities :

As of June 30, 

    

2021

    

2020

Remaining contractual term (years)

 

0.5 - 0.8

1.5 - 1.8

Common stock price volatility

 

69.3% - 72.3%

87.9% - 89.8%*

Risk-free interest rate

 

0.07%

0.16%

Expected dividend yield

 

*    The Company was historically a private company and lacked company-specific historical and implied volatility information, therefore the Company estimated its expected stock volatility based on the historical volatility of a set of publicly traded peer companies.

During the three and nine months ended June  30, 2021, the Company utilized its historical volatility in the valuation of warrant liabilities as it had sufficient trading history.

The change in fair value of the warrant liabilities for the three and nine months ended June 30,2021 and 2020 is as follows:

Fair value as of September 30, 2020

    

$

950,151

Change in fair value

 

(630,112)

Fair value as of December 31, 2020

320,039

Change in fair value

(90,597)

Fair value as of March 31, 2021

229,442

Change in fair value

(215,547)

Fair value as of June 30, 2021

$

13,895

Fair value as of September 30, 2019

$

496,343

Change in fair value

694,134

Fair value as of December 31, 2019

1,190,477

Change in fair value

(69,944)

Fair value as of March 31, 2020

1,120,533

Change in fair value

285,284

Fair value as of June 30, 2020

$

1,405,817

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NeuBase Therapeutics, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

As of June 30, 2021 and September 30, 2020, the carrying value of cash and cash equivalents, accounts payable and the insurance note payable approximate fair value due to the short-term nature of these instruments.

12.  Stockholders’ Equity

Warrants

Below is a summary of the Company’s issued and outstanding warrants as of June 30, 2021:

Expiration date

    

Exercise Price

    

Warrants Outstanding

December 13, 2021

$

55.00

 

20,627

April 10, 2022

 

20.00

 

695,312

July 6, 2023

 

8.73

 

105,000

 

820,939

Weighted

Weighted

Average

Average

Remaining

Exercise

Contractual Life

    

Warrants

    

Price

    

(in years)

Outstanding as of September 30, 2020

820,939

$

19.44

Outstanding as of June 30, 2021

820,939

19.44

0.9

Exercisable as of June 30, 2021

820,939

19.44

0.9

13.  Stock-Based Compensation

As of June 30, 2021, an aggregate of 4,709,277 shares of common stock were authorized under the Company’s 2019 Stock Incentive Plan (the “2019 Plan”), subject to an “evergreen” provision that will automatically increase the maximum number of shares of common stock that may be issued under the term of the 2019 Plan. As of June 30, 2021, 807,251 common shares were available for future grants under the 2019 Plan. As of June 30, 2021, 291,667 shares of common stock were authorized under the Company’s 2016 Consolidated Stock Incentive Plan (the “2016 Plan”) and 147,041 common shares were available for future grants under the 2016 Plan.

The Company recorded stock-based compensation expense in the following expense categories of its unaudited condensed consolidated statements of operations for the three and nine months ended June 30, 2021 and 2020:

Three Months ended June 30,

Nine Months Ended June 30, 

    

2021

    

2020

    

2021

    

2020

General and administrative

$

574,353

$

847,921

$

1,865,512

$

2,915,273

Research and development

 

50,829

 

362,794

 

878,363

 

1,139,078

Total

$

625,182

$

1,210,715

$

2,743,875

$

4,054,351

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NeuBase Therapeutics, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Stock Options

Below is a table summarizing the options issued and outstanding as of and for the nine months ended June 30, 2021:

Weighted

Weighted

Average

Total

Average

Remaining

Aggregate

Exercise

Contractual Life

Intrinsic

    

Stock Options

    

Price

    

(in years)

    

Value

Outstanding as of September 30, 2020

6,190,790

$

2.76

  

  

Granted

1,291,559

6.08

  

  

Exercised

(47,052)

2.39

Forfeited

(432,876)

6.77

Outstanding as of June 30, 2021

7,002,421

3.13

7.8

$

15,864,133

Exercisable as of June 30, 2021

4,693,528

1.78

7.3

$

15,862,208

As of June 30, 2021, unrecognized compensation costs associated with the stock options of $5.4 million will be recognized over an estimated weighted-average amortization period of 1.4 years.

The weighted average grant date fair value of options granted during the nine months ended June 30, 2021 and 2020 was $4.29 and $4.67, respectively.

Key assumptions used to estimate the fair value of the stock options granted during the nine months ended June 30, 2021 and 2020 included:

Nine Months ended June 30, 

    

2021

    

2020

Expected term of options (years)

5.5 - 7.0

6.1 - 7.0

Expected common stock price volatility

83% - 83.7%

78% - 84.3%

Risk-free interest rate

0.6% - 1.3%

0.3% - 1.8%

Expected dividend yield

During the nine months ended June 30, 2021, the Company granted a stock option to purchase 225,000 shares to a consultant, which was cancelled and reissued in June 2021, in recognition of future service to the Company as an employee. The exercisability and vesting of the stock options are subject to the consultant’s effective date of employment with the Company, which had not yet occurred as of June 30, 2021, and as a result, the grant-date of such option has not occurred under GAAP. Therefore, the number and fair value of the shares subject to this option are not reflected in the table summarizing the options issued and outstanding as of and for the nine months ended June 30, 2021 and did not have impact on unrecognized compensation costs or the estimated weighted-average amortization period above as of June 30, 2021.

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NeuBase Therapeutics, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Restricted Stock

A summary of the changes in the unvested restricted stock during the nine months ended June 30, 2021 is as follows:

Weighted Average

  Grant Date

    

Unvested Restricted

    

 Fair Value

 Stock

Price

Unvested as of September 30, 2020

 

$

Granted

7,056

8.15

Vested