UnitedStates
Securitiesand Exchange Commission
Washington,D.C. 20549
FORM
(MarkOne)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Forthe quarterly period ended
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Forthe transition period from ____ to ____
CommissionFile Number
(Exactname of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
Securitiesregistered pursuant to Section 12(b) of the Exchange Act:
| Title of Each Class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicateby check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities ExchangeAct 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.
Indicateby check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicateby check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reportingcompany, or emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smallerreporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
Ifan emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complyingwith any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
Thenumber of outstanding shares of the registrant’s common stock at August 5, 2025 was .
PROCESSAPHARMACEUTICALS, INC.
TABLEOF CONTENTS
| 2 |
PartI: Financial Information
Item1: Financial Statements
ProcessaPharmaceuticals, Inc.
CondensedConsolidated Balance Sheets
| June 30, 2025 | December 31, 2024 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepaid expenses and other | ||||||||
| Total Current Assets | ||||||||
| Property and Equipment, net | ||||||||
| Non-current Assets | ||||||||
| Prepaid expenses | ||||||||
| Total Non-current Assets | ||||||||
| Other Assets | ||||||||
| Right-of-use assets, net | ||||||||
| Other | ||||||||
| Total Other Assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities | ||||||||
| Current maturities of lease liability | $ | $ | ||||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Total Current Liabilities | ||||||||
| Non-current Liabilities | ||||||||
| Non-current lease liability | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Stockholders’ Equity | ||||||||
| Preferred stock, par value $, shares authorized; shares issued or outstanding at June 30, 2025 or December 31, 2024 | ||||||||
| Common stock, par value $, shares authorized; issued and outstanding at June 30, 2025; and issued and outstanding at December 31, 2024 | ||||||||
| Additional paid-in capital | ||||||||
| Treasury stock, shares | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
Theaccompanying notes are an integral part of these condensed consolidated financial statements.
| 3 |
ProcessaPharmaceuticals, Inc.
CondensedConsolidated Statements of Operations
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Operating Expenses | ||||||||||||||||
| Research and development expenses | $ | $ | $ | $ | ||||||||||||
| General and administrative expenses | ||||||||||||||||
| Operating Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Income (Expense), net | ||||||||||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net Loss per Common Share - Basic and Diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted Average Common Shares Used to Compute Net Loss Applicable to Common Shares - Basic and Diluted | ||||||||||||||||
Theaccompanying notes are an integral part of these condensed consolidated financial statements.
| 4 |
ProcessaPharmaceuticals, Inc.
CondensedConsolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
| Additional | ||||||||||||||||||||||||||||
| Common Stock | Paid-In | Treasury Stock | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Capital | Shares | Amount | Deficit | Total | ||||||||||||||||||||||
| Balance at January 1, 2024 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||||||
| Shares issued in connection with capital raise, net of transaction costs | - | |||||||||||||||||||||||||||
| Shares issued in connection with license agreement | - | |||||||||||||||||||||||||||
| Settlement of stock award | - | ( | ) | - | ( | ) | ||||||||||||||||||||||
| Shares withheld to pay income taxes on stock-based compensation | ( | ) | ( | ) | ( | ) | - | ( | ) | |||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, March 31, 2024 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||||||
| Shares withheld to pay income taxes on stock-based compensation | ( | ) | ( | ) | - | ( | ) | |||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||
| Additional | ||||||||||||||||||||||||||||
| Common Stock | Paid-In | Treasury Stock | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Capital | Shares | Amount | Deficit | Total | ||||||||||||||||||||||
| Balance at January 1, 2025 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||||||
| Shares issued in connection with capital raise, net of transaction costs | - | |||||||||||||||||||||||||||
| Shares withheld to pay income taxes on stock-based compensation | ( | ) | ( | ) | ( | ) | - | ( | ) | |||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, March 31, 2025 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||||||
| Shares issued in connection with capital raise, net of transaction costs | - | |||||||||||||||||||||||||||
| Shares withheld to pay income taxes on stock-based compensation | ( | ) | ( | ) | ( | ) | - | ( | ) | |||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, June 30, 2025 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||
Theaccompanying notes are an integral part of these condensed consolidated financial statements.
| 5 |
ProcessaPharmaceuticals, Inc.
CondensedConsolidated Statements of Cash Flows
(Unaudited)
| Six Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| Cash Flows From Operating Activities | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Non-cash lease expense for right-of-use assets | ||||||||
| Stock-based compensation | ||||||||
| Net changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other | ( | ) | ||||||
| Operating lease liability | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ||||||
| Due from related parties | ( | ) | ||||||
| Accrued expenses | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows From Financing Activities | ||||||||
| Net proceeds from issuance of stock | ||||||||
| Shares withheld to pay taxes on stock-based compensation | ( | ) | ( | ) | ||||
| Settlement of stock award | ( | ) | ||||||
| Payment of finance lease obligation | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Net Decrease in Cash and Cash Equivalents | ||||||||
| Cash and Cash Equivalents - Beginning of Period | ||||||||
| Cash and Cash Equivalents - End of Period | $ | $ | ||||||
| Supplemental Cash Flow Information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Non-Cash Financing Activities | ||||||||
| Issuance of shares of common stock in connection with a licensing agreement which had previously been recorded as a due to licensor | $ | $ | ||||||
| New right-of-use asset | $ | $ | ||||||
| Financing lease liability | ( | ) | ||||||
| Net | $ | $ | ||||||
Theaccompanying notes are an integral part of these condensed consolidated financial statements.
| 6 |
ProcessaPharmaceuticals, Inc.
Notesto Condensed Consolidated Financial Statements
(Unaudited)
Note1 – Organization and Summary of Significant Accounting Policies
Organization
Weare a clinical-stage biopharmaceutical company focused on incorporating our Regulatory Science Approach into the development of our NextGeneration Cancer therapy (“NGC”) drugs to improve the safety and efficacy of cancer treatment. Our NGC drugs are modificationsof existing FDA-approved oncology drugs resulting in an alteration of the metabolism and/or distribution while maintaining the well-knownand established existing mechanisms of killing the cancer cells. By modifying the NGC drugs in this manner, we believe our NGC treatmentswill provide improved safety-efficacy profiles when compared to their currently marketed counterparts.
Basisof Presentation
Theaccompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generallyaccepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions of theSecurities and Exchange Commission (“SEC”) on Form 10-Q and Article 8 of Regulation S-X.
Accordingly,they do not include all the information and disclosures required by U.S. GAAP for complete financial statements. All material intercompanyaccounts and transactions have been eliminated in consolidation. In the opinion of management, the accompanying unaudited condensed consolidatedfinancial statements include all adjustments necessary, which are of a normal and recurring nature, for the fair presentation of ourfinancial position and of the results of operations and cash flows for the periods presented. These condensed consolidated financialstatements should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form10-K for the year ended December 31, 2024, as filed with the SEC. The results of operations for the interim periods shown in this reportare not necessarily indicative of the results that may be expected for any other interim period or for the full year.
Liquidity
Ourconsolidated financial statements have been prepared on a going concern basis, which contemplates the continuity of operations, realizationof assets and the satisfaction of liabilities and commitments in the ordinary course of business. We have incurred losses since inception,currently devoting substantially all our efforts toward research and development of our NGC drug product candidates, including conductingclinical trials and providing general and administrative support for these operations, and have an accumulated deficit of $
OnJanuary 29, 2025, we closed a public offering where we sold shares of our common stock, pre-funded warrants to purchaseup to
On August 4, 2025, we enteredinto a Securities Purchase Agreement with an accredited investor and sold shares for $
| 7 |
AtJune 30, 2025, we had cash and cash equivalents totaling $
Weplan to raise additional funds in the future through a combination of public or private equity offerings, debt financings, collaborations,strategic alliances, licensing arrangements and other marketing and distribution arrangements, but will only do so if the terms are acceptableto us. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of, or suspend our current orplanned future clinical trial plans, or research and development programs. This may also cause us to not meet obligations contained incertain of our license agreements and put these assets at risk. To the extent that we raise additional capital through marketing anddistribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquishvaluable rights to our product candidates, future revenue streams, research programs or product candidates or to grant licenses on termsthat may not be favorable to us. If we raise additional capital through public or private equity offerings, the ownership interest ofour existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adverselyaffect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limitingor restricting our ability to take specific actions, such as incurring additional debt or making capital expenditures. There can be noassurance that future funding will be available when needed.
Absentadditional funding, we believe that our cash and cash equivalents will not be sufficient to fund our operations for a period of one yearor more after the date that these consolidated financial statements are available to be issued based on the timing and amount of ourprojected net loss from continuing operations and cash to be used in operating activities during that period of time. As a result, substantialdoubt exists about our ability to continue as a going concern within one year after the date that these consolidated financial statementsare available to be issued. The accompanying consolidated financial statements do not include any adjustments to reflect the possiblefuture effects on the recoverability and classification of recorded assets, or the amounts and classification of liabilities that mightbe different should we be unable to continue as a going concern based on the outcome of these uncertainties described above.
Useof Estimates
Inpreparing our condensed consolidated financial statements and related disclosures in conformity with U.S. GAAP and pursuant to the rulesand regulations of the SEC, we make estimates and judgments that affect the amounts reported in the condensed consolidated financialstatements and accompanying notes. Estimates are used for, but not limited to preclinical and clinical trial expenses, stock-based compensation,intangible assets, future milestone payments and income taxes. These estimates and assumptions are continuously evaluated and are basedon management’s experience and knowledge of the relevant facts and circumstances. While we believe the estimates to be reasonable,actual results could differ materially from those estimates and could impact future results of operations and cash flows.
IncomeTaxes
Weaccount for income taxes in accordance with ASC Topic 740, Income Taxes. Deferred income taxes are recorded for the expected taxconsequences of temporary differences between the basis of assets and liabilities for financial reporting purposes and amounts recognizedfor income tax purposes. At June 30, 2025 and December 31, 2024, we recorded a valuation allowance equal to the full recorded amountof our net deferred tax assets since it is more-likely-than-not that such benefits will not be realized. The valuation allowance is reviewedquarterly and is maintained until sufficient positive evidence exists to support its reversal.
UnderASC 740-270 Income Taxes – Interim Reporting, we are required to project our annual federal and state effective income taxrate and apply it to the year-to-date ordinary operating tax basis loss before income taxes. Based on the projection, no current incometax benefit or expense is expected for 2025 and the foreseeable future since we expect to generate taxable net operating losses.
| 8 |
Concentrationof Credit Risk
Financialinstruments that potentially subject us to significant concentration of credit risk consist primarily of our cash and cash equivalents.We utilize only well-established banks and financial institutions with high credit ratings. Balances on deposit are insured by the FederalDeposit Insurance Corporation (FDIC) up to specified limits. Total cash held by our banks at June 30, 2025, exceeded FDIC limits.
RecentAccounting Pronouncements
Fromtime to time, the Financial Accounting Standards Board (“FASB”) or other standard setting bodies issue new accounting pronouncements.Updates to the FASB Accounting Standards Codification are communicated through issuance of an Accounting Standards Update (“ASU”).We have implemented all new accounting pronouncements that are in effect and that may impact our condensed consolidated financial statements.We have evaluated recently issued accounting pronouncements and determined that there is no material impact on our condensed consolidatedfinancial position or results of operations.
Note2 – Stockholders’ Equity
CommonStock
Duringthe six months ended June 30, 2025, we issued the following shares of common stock:
| ● | On January 29, 2025, we sold shares of our common stock, pre-funded warrants to purchase up to | |
| ● | On June 18, 2025, we sold shares of our common stock, pre-funded warrants to purchase up to | |
| ● | shares of common stock to employees, net of shares of common stock withheld for income and FICA taxes owed upon the distribution of the shares; and | |
| ● | shares of common stock in connection with consulting agreements. |
| 9 |
OnJune 19, 2019, our stockholders approved, and we adopted, the Processa Pharmaceuticals Inc. 2019 Omnibus Equity Incentive Plan (the “2019Plan”). The 2019 Plan allows us, under the direction of our Board of Directors or a committee thereof, to make grants of stockoptions, restricted and unrestricted stock and other stock-based awards to employees, including our executive officers, consultants anddirectors. The 2019 Plan provides for the aggregate issuance of shares of our common stock. At June 30, 2025, we have shares available for future grants.
StockCompensation Expense
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Research and development | $ | $ | $ | $ | ||||||||||||
| General and administrative | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
StockOptions
Nostock options to purchase shares of common stock were forfeited or expired during the six months ended June 30, 2025. At June 30, 2025,we had outstanding and exercisable options for the purchase of shares with a weighted average exercise price of $ and a weightedaverage remaining contractual life of years. AtJune 30, 2025, we did not have any unrecognized stock-based compensation expense related to our granted stock options.
RestrictedStock Units
| Number of shares | Weighted- average grant-date fair value per share | |||||||
| Outstanding at January 1, 2025 | $ | |||||||
| Granted | ||||||||
| Forfeited | ( | ) | ||||||
| Issued | ( | ) | ||||||
| Outstanding at June 30, 2025 | ||||||||
| Vested and unissued | ( | ) | ||||||
| Unvested at June 30, 2025 | $ | |||||||
| 10 |
AtJune 30, 2025, unrecognized stock-based compensation expense of approximately $ for RSUs is expected to be fully recognized overa weighted average period of years. The unrecognized expense excludes approximately $ of expense related to certain grantsof RSUs with performance milestones that are being accounted for as though the performance milestones are not probable of occurring atthis time.
Holdersof our vested RSUs will be issued shares of our common stock upon meeting the distribution restrictions contained in their RestrictedStock Unit Award Agreement. The distribution restrictions are different (longer) than the vesting schedule, imposing an additional restrictionon the holder. While certain employees may hold fully vested RSUs, the individual does not hold any shares or have any rights of a stockholderuntil the distribution restrictions are met. Upon distribution to the employee, each RSU converts into one share of our common stock.The RSUs contain dividend equivalent rights.
Warrants
Duringthe six months ended June 30, 2025, we sold pre-funded warrants, and accompanying Series A Warrants to purchase up to
AtJune 30, 2025, we had outstanding exercisable stock purchase warrants excluding the Series A and B Warrants for the purchase of
Wedid not have any unrecognized stock-based compensation expense related to our granted stock purchase warrants at June 30, 2025.
NetLoss Per Share
Basicnet loss per share is computed by dividing our net loss available to common stockholders by the weighted average number of shares ofcommon stock outstanding (which includes vested RSUs and unexercised pre-funded warrants) during the period. Diluted loss per share iscomputed by dividing our net loss available to common stockholders by the diluted weighted average number of shares of common stock (whichincludes the potentially dilutive effect of stock options, unvested RSUs and warrants) during the period. Since we experienced a netloss for both periods presented, basic and diluted net loss per share are the same. As such, diluted loss per share for the three andsix months ended June 30, 2025 and 2024 excludes the impact of potentially dilutive common shares since those shares would have an anti-dilutiveeffect on net loss per share.
| 11 |
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Basic and diluted net loss per share: | ||||||||||||||||
| Net loss available to common stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of common shares-basic and diluted | ||||||||||||||||
| Basic and diluted net loss per share | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Weighted-average number of common shares outstanding – basic and diluted | ||||||||||||||||
| Weighted-average number of vested RSUs– basic and diluted | ||||||||||||||||
| Weighted-average number of common shares-basic and diluted | ||||||||||||||||
| June 30, | ||||||||
| 2025 | 2024 | |||||||
| Stock options | ||||||||
| Restricted stock units (unvested) | ||||||||
| Warrants for common stock | ||||||||
| Total | ||||||||
Wehave not included any potential impact of the Series A and B Warrants from the January PO since they were subject to shareholderapproval as of June 30, 2025.
Note5 – Leases
Welease our office space under an operating lease agreement. This lease does not have significant rent escalation, concessions, leaseholdimprovement incentives, or other build-out clauses. Further, the lease does not contain contingent rent provisions. Our office spacelease includes both lease (e.g., fixed payments including rent, taxes, and insurance costs) and non-lease components (e.g., common-areaor other maintenance costs), which are accounted for as a single lease component as we have elected the practical expedient to grouplease and non-lease components for all leases. We also lease office equipment under a financing lease. Our leases do not provide an implicitrate and, as such, we have used our incremental borrowing rate of
Leasecosts included in our condensed consolidated statements of operations totaled $
| Remaining lease term (years) for our facility lease | ||||
| Remaining lease term (years) for our equipment lease | ||||
| Weighted average discount rate for our facility and equipment leases | % |
Annuallease liabilities for the operating lease were as follows at June 30, 2025:
| Remainder of 2025 | $ | |||
| Total lease payments | ||||
| Less: Interest | ( | ) | ||
| Present value of lease liabilities | ||||
| Less: current maturities | ( | ) | ||
| Non-current lease liability | $ |
Annuallease liabilities for the financing lease were as follows at June 30, 2025:
| Remainder of 2025 | $ | |||
| 2026 | ||||
| Total lease payments | ||||
| Less: Interest | ( | ) | ||
| Present value of lease liabilities | ||||
| ( | ) | |||
| $ |
| 12 |
Note6 – Related Party Transactions
CorLyst,LLC (“CorLyst”) reimburses us for shared costs related to payroll, health insurance and rent based on actual costs incurred,which are recognized as a reduction of our general and administrative operating expenses being reimbursed in our condensed consolidatedstatement of operations. Included in our general and administrative expenses is approximately $
Note7 – Segment Reporting
Wemanage our operations as a single segment, focused on developing the next generation of cancer therapy drugs. As our chief operatingdecision maker (CODM), our CEO manages and allocates resources at a consolidated level. He assesses performance, monitors budget versusactual results, and decides how to allocate resources based on net loss that also is reported on the consolidated statement of operationsand comprehensive loss as consolidated net loss.
Thefollowing table presents reportable segment profit and loss, including significant expense categories, attributable to our reportablesegment for the three and six months ended June 30, 2025 and 2024:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Preclinical, clinical trial and other costs | $ | $ | $ | $ | ||||||||||||
| Research and development personnel expense(1) | ||||||||||||||||
| General and administrative personnel expense(2) | ||||||||||||||||
| Administrative and facilities expense(3) | ||||||||||||||||
| Other income, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| (1) | ||
| (2) | ||
| (3) |
Note8 – PCS12852
OnJune 17, 2025, we entered into a binding term sheet (“Term Sheet”) with Intact Therapeutics (“Intact”) grantingIntact the exclusive option to license PCS12852, a highly specific and potent 5HT5 agonist thatis Phase 2B ready as potentially the first meaningful treatment for diabetic gastroparesis patients.
Inconnection with the Term Sheet, Yuhan Corporation executed Amendment No. 1 to our existing license agreement dated August 19, 2020 (the“Yuhan Agreement”), effective June 11, 2025, which, among other things, extended the deadline to dose the first patient ina Phase 2B clinical trial, Phase 3 clinical trial or other pivotal clinical trial from 48 months to 108 months from the effective dateof the original agreement.
Note9 – Commitments and Contingencies
PurchaseObligations
Weenter into contracts in the normal course of business with contract research organizations (CROs) and subcontractors to further developour products. The contracts are cancelable, with varying provisions regarding termination. If we terminated a cancelable contract witha specific vendor, we would only be obligated for products or services that we received at the effective date of the termination andany applicable cancellation fees. At June 30, 2025, we are contractually obligated to pay up to $
NGC-Gem(also identified as PCS3117)
OnJune 27, 2025, we provided a 120-day written notice of termination of our licensing agreement with Ocuphire Pharma, Inc. (now Opus Genetics)dated June 16, 2021, rescinding all rights and licenses previously granted to us for NGC-Gem.
Note10 – Subsequent Events
RSUGrants
OnJuly 24, 2025, the Compensation Committee of our Board of Directors granted RSUs for the future issuance of up to shares of common stock to our employees and independent directors.The RSUs vest over a 1-3 year period.
EquitySales
OnAugust 4, 2025, we entered into a Securities Purchase Agreement with an accredited investor and sold shares for $
| 13 |
Item2. Management’s Discussion and Analysis of Financial Condition and Results of Operation
ForwardLooking Statements
ThisQuarterly Report on Form 10-Q contains “forward-looking statements” that reflect, when made, the Company’s expectationsor beliefs concerning future events that involve risks and uncertainties. Forward-looking statements frequently are identified by thewords “believe,” “anticipate,” “expect,” “estimate,” “intend,” “project,”“will be,” “will continue,” “will likely result,” or other similar words and phrases. Similarly,statements herein that describe the Company’s objectives, plans or goals also are forward-looking statements. Actual results coulddiffer materially from those projected, implied or anticipated by the Company’s forward-looking statements. Some of the factorsthat could cause actual results to differ include: our limited cash and history of losses; our ability to achieve profitability; ourability to obtain adequate financing to fund our business operations in the future; our ability to secure required FDA or other governmentalapprovals for our product candidates and the breadth of the indication sought; the impact of competitive or alternative products, technologiesand pricing; whether we are successful in developing and commercializing our technology, including through licensing; the adequacy ofprotections afforded to us and/or our licensors by the anticipated patents that we own or license and the cost to us of maintaining,enforcing and defending those patents; our and our licensors’ ability to protect non-patented intellectual property rights; ourexposure to and ability to defend third-party claims and challenges to our and our licensors’ anticipated patents and other intellectualproperty rights; our ability to remain listed on the Nasdaq Capital Market; and our ability to continue as a going concern. For a discussionof these and all other known risks and uncertainties that could cause actual results to differ from those contained in the forward-lookingstatements, see “Risk Factors” herein and in the Company’s Annual Report on Form 10-K for the year ended December 31,2024, which is available on the SEC’s website at www.sec.gov. All forward-looking statements are qualified in their entirety bythis cautionary statement, and the Company undertakes no obligation to revise or update this Quarterly Report on Form 10-Q to reflectevents or circumstances after the date hereof.
Referencesto the “Company,” “we,” “us” or “our” refer to the operations of Processa Pharmaceuticals,Inc. and its direct and indirect subsidiaries for the periods described herein.
Overview
Weare a clinical-stage biopharmaceutical company developing a pipeline of Next Generation Cancer therapy (“NGC”) small molecules,one of which is currently in a Phase 2 trial, while the other is in pre-clinical development. Our risk-mitigated strategy is to identifyexisting cancer therapies where the mechanism of action is well understood and that are cornerstones of current treatment regimens, butare highly toxic, with side effects that are often treatment limiting. We devise technologies to change the way the body metabolizesthem, or the way they are distributed within the body, to improve the therapeutic effect and reduce toxicity. We then efficiently developour pipeline of Next Generation Cancer therapies utilizing our proprietary Regulatory Science Approach, which we believe will furtherincrease the likelihood of regulatory approval. Since the underlying active metabolites of these drugs are already commonly used in cancertherapy, we believe that if our clinical trials are successful and are showing better efficacy and tolerability than the currently useddrugs, the commercial adoption for our NGC therapies will be rapid and broad.
Ouroncology pipeline currently consists of NGC-Cap and NGC-Iri (also identified as PCS6422 and PCS11T, respectively) and two non-oncologydrugs (PCS12852 and PCS499). We are exploring options for our non-oncology drugs, which may include out-licensing or partnership opportunities.The current status of our drug pipeline is set forth below:
OurDrug Pipeline
RecentDevelopments
Overthe last nine months since the first patient was dosed in the NGC-Cap Phase 2 advanced or metastatic breast cancer trial, the study hasbeen actively adding additional U.S. clinical study sites and screening and enrolling more patients. We plan to obtain preliminary safety-efficacydata from these breast cancer patients in order to provide insight into the benefit of NGC-Cap over existing treatments. This preliminarydata should provide information that could also help to adaptively modify the protocol to increase the efficiency and/or improve theinformation obtained from the study.
SinceFDA now accepts surrogate endpoints for nephrology diseases, such as primary glomerular diseases (PGDs), we have recently begun to re-evaluatethe potential clinical safety and efficacy of PCS499 in PGDs. These analyses have been based on PCS499 and pentoxifylline (PTX) safety-efficacyin diabetic nephropathy and, for PTX, in primary glomerular diseases. PTX is a generic drug with similar pharmacological properties toPCS499 and is approved for the treatment of patients with intermittent claudication. The data suggests that PCS499 may not only be safer,but also more efficacious in more patients than PTX or other drugs presently used on- and off-label for PGDs.
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PublicOfferings
Asdescribed in Note 2, during the six months ended June 30, 2025, we raised net proceeds of $10.6 million from the January and June POs.We sold a cumulative 15,340,972 shares of common stock, pre-funded warrants to purchase up to 20,709,700 shares of common stock, accompanyingSeries A Warrants to purchase up to 8,050,672 shares of our common stock and Series B Warrants to purchase up to 4,025,336 shares ofcommon stock in the January PO and common accompanying warrants to purchase up to 28,000,000 shares of common stock in the June PO. Duringthe six months ended June 30, 2025, all pre-funded warrants were exercised.
Weplan to use the net proceeds from both financings for continued research and development for NCG-Cap, and for working capital and generalcorporate purposes.
PCS12852Update: Intact Therapeutics and Yuhan Corporation
OnJune 17, 2025, we entered into a binding term sheet (“Term Sheet”) with Intact Therapeutics (“Intact”) grantingIntact the exclusive option to license PCS12852, a highly specific and potent 5HT5 agonist thatis Phase 2B ready as potentially the first meaningful treatment for diabetic gastroparesis patients. Upon execution of the TermSheet, Intact agreed to pay a non-refundable standstill payment of $20,000 and upon execution of a license agreement, the Company willreceive a 3.5% equity interest in Intact and a payment of $2.5 million, with $1.0 million paid within thirty days of closing and theremaining $1.5 million paid within twelve months of closing. The Term Sheet also provides that the license agreement will provide fordevelopment and regulatory milestone payments, commercial milestone payments based on net product sales and a 12% royalty on worldwidenet sales of licensed products, excluding South Korea.
Theobligations of the parties to enter into the license agreement are subject to additional diligence by Intact. Pursuant to the Term Sheet,the parties have one hundred and twenty (120) days to finish any remaining due diligence and enter into the license agreement, whichperiod may be extended for an additional one hundred and twenty days for an additional fee of $30,000. There can be no assurance thatthe Company and Intact will enter into a license agreement.
Inconnection with the Term Sheet, Yuhan Corporation executed Amendment No. 1 to our existing license agreement dated August 19, 2020(the “Yuhan Agreement”), effective June 11, 2025, which, among other things, extended the deadline to dose the firstpatient in a Phase 2B clinical trial, Phase 3 clinical trial or other pivotal clinical trial from 48 months to 108 months from theeffective date of the original agreement.
NGC-Gem(also identified as PCS3117)
OnJune 27, 2025, we provided a 120-day written notice of termination of our licensing agreement with Ocuphire Pharma, Inc. (now Opus Genetics)dated June 16, 2021, rescinding all rights and licenses previously granted to us for NGC-Gem.
Resultsof Operations
Comparisonof the three and six months ended June 30, 2025 and 2024
Thefollowing table summarizes our net loss during the periods indicated:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||
| 2025 | 2024 | Change | 2025 | 2024 | Change | |||||||||||||||||||
| Operating Expenses | ||||||||||||||||||||||||
| Research and development expenses | $ | 2,447,286 | $ | 1,730,444 | $ | 716,842 | $ | 4,035,767 | $ | 3,269,555 | $ | 766,212 | ||||||||||||
| General and administrative expenses | 1,503,497 | 1,351,580 | 151,917 | 2,762,006 | 2,622,067 | 139,939 | ||||||||||||||||||
| Operating Loss | (3,950,783 | ) | (3,082,024 | ) | (6,797,773 | ) | (5,891,622 | ) | ||||||||||||||||
| Other Income (Expense), net | 16,865 | 71,698 | (54,833 | ) | 29,450 | 154,915 | (125,465 | ) | ||||||||||||||||
| Net Loss | $ | (3,933,918 | ) | $ | (3,010,326 | ) | $ | (6,768,323 | ) | $ | (5,736,707 | ) | ||||||||||||
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Revenues
Wedo not currently have any revenue under contract or any immediate sales prospects.
Researchand Development Expenses
Ourresearch and development costs are expensed as incurred. Research and development expenses include (i) program and testing related expensesincluding external consulting and professional fees related to the product testing and our development activities and (ii) internal researchand development staff salaries and other payroll costs including stock-based compensation, payroll taxes and employee benefits.
Costsfor the three- and six-month periods for the periods ended June 30, 2025 and 2024 were as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Research and development salaries and benefits | 305,057 | 468,724 | 696,504 | 976,554 | ||||||||||||
| Preclinical, clinical trial and other costs | 2,142,229 | 1,261,720 | 3,339,263 | 2,293,001 | ||||||||||||
| Total | $ | 2,447,286 | $ | 1,730,444 | $ | 4,035,767 | $ | 3,269,555 | ||||||||
Theincrease in research and development expenses was due to an increase in preclinical, clinical trial and other costs for our Phase 1Band Phase 2 clinical trials for NGC-Cap during the three and six months ended June 30, 2025 when compared to the same period in 2024.During the same period in 2024, the majority of the costs incurred were related to our Phase 1B trial for NGC-Cap, as well as the IND/initiationof our Phase 2 trial for NGC-Cap. The increase was offset by a decrease in salaries and benefits from the voluntary departures of researchand development employees since March 2024.
Thefunding necessary to bring a drug candidate to market is subject to numerous uncertainties. Once a drug candidate is identified, thefurther development of that drug candidate may be halted or abandoned at any time due to a number of factors. These factors include,but are not limited to, funding constraints, safety or a change in market demand. For each of our drug candidate programs, we periodicallyassess the scientific progress and merits of the programs to determine if continued research and development is economically viable.Some programs may be terminated due to the lack of scientific progress and lack of prospects for ultimate commercialization.
Ourclinical trial cost accruals are based on estimates of patient enrollment and related costs at clinical investigator sites, as well asestimates for the services received and efforts expended pursuant to contracts with multiple research institutions and CROs that conductand manage clinical trials on our behalf.
Weestimate preclinical and clinical trial expenses based on the services performed, pursuant to contracts with research institutions andclinical research organizations that conduct and manage preclinical studies and clinical trials on our behalf. In accruing service fees,we estimate the period over which services will be performed and the level of patient enrollment and activity expended in each period.If the actual timing of the performance of services or the level of effort varies from the estimate, we will adjust the accrual accordingly.Payments made to third parties under these arrangements in advance of the receipt of the related services are recorded as prepaid expensesand expensed when the services are rendered.
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Generaland Administrative Expenses
Ourgeneral and administrative expenses for the three months ended June 30, 2025 increased by approximately $152,000 to $1.5 million from$1.4 million for the three months ended June 30, 2024. This increase was due primarily to increases in salaries and other-payroll relatedcosts of $105,000, primarily due to salary increases to our C-suite executives; an increase in employee stock-based compensation of $82,000(our 2024 stock grant was contingent on receiving stockholder approval to increase the number of shares available for issuance underour Incentive Plan, so we did not recognize any expense related to grants made during the first quarter of 2024 and awards that werepreviously not probable of occurring that vested in 2025); and net increases in taxes and other miscellaneous office expenses of $24,000.The increases were offset by decreases in office expenses of $32,000; professional fees of $19,000 and travel expenses of $4,000. Wereceived approximately $4,000 more in reimbursements from CorLyst during the three months ended June 30, 2025 when compared to the sameperiod in 2024.
Ourgeneral and administrative expenses for the six months ended June 30, 2025 increased by approximately $140,000 to $6.8 million from $5.9million for the three months ended June 30, 2024. This increase was due primarily to increases in salaries and other-payroll relatedcosts of $182,000, primarily due to salary increases to our C-suite executives; an increase in employee stock-based compensation of $166,000(our 2024 stock grant was contingent on receiving stockholder approval to increase the number of shares available for issuance underour Incentive Plan, so we did not recognize any expense related to grants made during the first quarter of 2024 and awards that werepreviously not probable of occurring that vested in 2025); and net increases in taxes and other miscellaneous office expenses of $23,000.The increases were offset by decreases in office expenses of $42,000; professional fees of $170,000; insurance of $5,000; and travelexpenses of $4,000. We received approximately $10,000 more in reimbursements from CorLyst during the six months ended June 30, 2025 whencompared to the same period in 2024.
OtherIncome
Otherincome for the three and six months ended June 30, 2025 includes our portion of the Intact payment of $8,000 along with interest incomeof approximately $9,000 and $72,000 for the three months ended June 30, 2025 and 2024, respectively, and approximately $21,000 and $155,000for the six months ended June 30, 2025 and 2024, respectively.
IncomeTax Benefit
Wedid not recognize any income tax benefit for the three or six months ended June 30, 2025 or 2024.
CashFlows
Thefollowing table sets forth our sources and uses of cash and cash equivalents for the six months ended June 30, 2025 and 2024:
| Six months ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| Net cash (used in) provided by: | ||||||||
| Operating activities | $ | (5,000,253 | ) | $ | (5,394,713 | ) | ||
| Financing activities | 10,745,548 | 6,259,636 | ||||||
| Net increase in cash | $ | 5,745,295 | $ | 864,923 | ||||
Netcash used in operating activities
Weused net cash in our operating activities of $5,000,253 and $5,394,713 during the six months ended June 30, 2025 and 2024, respectively.The decrease in cash used in operating activities was primarily due to the timing of our use and/or payment of amounts recorded as prepaidassets with our CROs. During 2024, we continued to incur costs related to our Phase 1B trial for NGC-Cap and, we made a prepayment tothe CRO for our Phase 2 trial for NGC-Cap as we began the trial.
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Aswe continue our development of NGC-Cap and evaluate the other NGC drug in our portfolio, we anticipate our research and development effortsand ongoing general and administrative costs will continue to generate negative cash flows from operating activities for the foreseeablefuture. As we continue our Phase 2 clinical trial for NGC-Cap in 2025, we anticipate our clinicaltrial costs will increase when compared to prior periods since activities in 2024 were primarily related to the completion of our Phase1B trial and setup of our Phase 2 trial for NGC-Cap.
Netcash provided by financing activities
Duringthe six months ended June 30, 2025, as described in Note 2, we sold acumulative 15,340,972 shares of common stock, pre-funded warrants to purchase up to 20,709,700 shares of common stock, accompanying SeriesA Warrants to purchase up to 8,050,672 shares of our common stock and Series B Warrants to purchase up to 4,025,336 shares of commonstock in the January PO and common accompanying warrants to purchase up to 28,000,000 shares of common stock in the June PO.We also received $100,000 from the exercise of warrants to purchase 400,000 shares of common stock sold in the June PO. We usedcash classified as financing activities of approximately $10,000 to pay income taxes owed on stock-based compensation, and $3,000 forpayments owed under a financing lease obligation.
Duringthe six months ended June 30, 2024, we sold 476,000 shares of common stock, pre-funded warrants to purchase up to 1,079,555 shares ofcommon stock in lieu of shares of common stock, all of which were exercised into shares of our common stock, and warrants to purchaseup to 1,555,555 shares of our common stock pursuant to a public offering for net proceeds of $6.3 million. Wealso used cash classified as financing activities of $12,000 to pay income taxes owed on stock-based compensation, $8,600 for the settlementof a stock award and $2,300 for payments owed under a financing lease obligation.
Liquidity
AtJune 30, 2025, we had cash and cash equivalents totaling $6.9 million. Based on our current business plans,we believe these funds, together with the $2.4 million in gross proceeds we received in August 2025, will satisfy our capitalneeds into the first quarter of 2026. However, absent additional funding, our current cash and cash equivalents will notbe sufficient to fund our planned operations for a period of one year or more after the date that these condensed consolidated financialstatements were available to be issued based on the timing and amount of our projected net loss from continuing operations and the relatedamount of cash to be used in operating activities during that period of time. Our ability to execute our longer-term operating plans,including future preclinical studies and clinical trials for our portfolio of drugs depend on our ability to obtain additional fundingfrom the sale of equity and/or debt securities, a strategic transaction or other funding transactions.
Wehave incurred losses since inception, currently devoting substantially all our efforts toward research and development of our next generationcancer therapy drug product candidates, including conducting clinical trials and providing general and administrative support for theseoperations, and have an accumulated deficit of $94.0 million at June 30, 2025. During the six months ended June 30, 2025, we generateda net loss of $6.8 million and used $5.0 million in net cash for operating activities from continuing operations. To date, none of ourdrug candidates have been approved for sale, and therefore we have not generated any product revenue and do not expect positive cashflow from operations in the foreseeable future. We will continue to be dependent upon equity and/or debt financing until we are ableto generate positive cash flows from its operations.
OnJanuary 29, 2025, we sold 1,030,972 shares of common stock, pre-funded warrants to purchase up to 7,019,700 shares of common stock, andaccompanying Series A Warrants to purchase up to 8,050,672shares of our common stock and Series B Warrants to purchase up to 4,025,336 shares of common stock fornet proceeds of $4.4 million, after deducting placement agent fees and offering-related expenses. On June 18, 2025, we sold 14,310,000shares of common stock, pre-funded warrants to purchase up to 13,690,000 shares of common stock, and accompanying common warrants topurchase up to 28,000,000 shares of common stock for net proceeds of $6.2 million, after deducting placement agent fees and offering-relatedexpenses. On August 4, 2025, we entered into a Securities Purchase Agreement with an accredited investor and sold 5,467,181 shares for$1.3 million in gross proceeds. We also sold 4,597,612 shares for $1.1 million in gross proceeds under our ATM agreement. Following theseinvestments, we are exploring options to pursue a cryptocurrency treasury strategy.
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Weplan to raise additional funds in the future through a combination of public or private equity offerings, debt financings, collaborations,strategic alliances, licensing arrangements and other marketing and distribution arrangements, but will only do so if the terms are acceptableto us. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of, or suspend our current orplanned future clinical trial plans, or research and development programs. This may also cause us to not meet obligations contained incertain of our license agreements and put these assets at risk. To the extent that we raise additional capital through marketing anddistribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquishvaluable rights to our product candidates, future revenue streams, research programs or product candidates or to grant licenses on termsthat may not be favorable to us. If we raise additional capital through public or private equity offerings, the ownership interest ofour existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adverselyaffect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limitingor restricting our ability to take specific actions, such as incurring additional debt or making capital expenditures. There can be noassurance that future funding will be available when needed.
ContractualObligations and Commitments
Therehave been no significant changes to the contractual obligations reported in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2024.
OffBalance Sheet Arrangements
AtJune 30, 2025, we did not have any off-balance sheet arrangements.
CriticalAccounting Policies and Use of Estimates
Ourdiscussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financialstatements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to makeestimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingentassets and liabilities.
Webelieve that the estimates, assumptions and judgments involved in the accounting policies described in the “Management’sDiscussion and Analysis of Financial Condition and Results of Operations” section of our most recent Annual Report on Form 10-Khave the greatest potential impact on our financial statements, so we consider these to be our critical accounting policies. Actual resultscould differ from the estimates we use in applying our critical accounting policies. We are not currently aware of any reasonably likelyevents or circumstances that would result in materially different amounts being reported.
Therehave been no changes in our critical accounting policies from those included in our most recent Annual Report on Form 10-K.
RecentlyIssued Accounting Pronouncements
Wehave evaluated recently issued accounting pronouncements and determined that there is no material impact on our financial position orresults of operations.
Item3. Quantitative and Qualitative Disclosures About Market Risk
Item3 is not applicable to us as a smaller reporting company and has been omitted.
Item4. Controls and Procedures
AtJune 30, 2025, management, with the participation of the Chief Executive Officer and ChiefFinancial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures,as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the evaluation of its disclosure controls and procedures,the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at June30, 2025 to provide reasonable assurance that information required to be disclosed in ourreports under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’srules and forms and (ii) accumulated and communicated to our management, as appropriate, to allow timely decisions regarding requireddisclosure. In designing and evaluating our 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 their objectives, and management necessarilyapplies its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
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Changesin Internal Control over Financial Reporting
Therewere no changes in our internal control over financial reporting during the quarter ended June 30, 2025 that have materially affected,or are reasonably likely to materially affect the Company’s internal control over financial reporting.
PartII. Other Information
Item1. Legal Proceedings
OnMay 7, 2024, the Company received notification from Elion purporting to terminate the license agreement by and between the Company andElion as a result of the Company’s alleged breach thereof. The Company believes that Elion’s claims are without merit anddisputes that the license agreement has been validly terminated. On July 5, 2024, the Company filed a complaint in the Commercial Divisionof the Supreme Court of the State of New York, New York County seeking monetary damages, declaratory judgement and injunctive relief.On August 14, 2024, the Company received Elion’s answer and counterclaims. On October 10, 2024, the Company filed its responseto Elion’s counterclaims. The Company intends to enforce its rights under the license agreement and will pursue such other remediesas it determines are appropriate. The discovery phase of the matter has commenced.
OnDecember 3, 2024, Jason Assad and Marc Gyimesi, two of the investors in our February 2021 private offering, filed a lawsuit that hasbeen assigned to the Commercial Division of the Supreme Court of the State of New York, New York County alleging fraud and negligentmisrepresentation in connection therewith regarding alleged company communication and statements and are seeking monetary damages. Inaddition to being an investor, Mr. Assad was a former investor relations and communications consultant to the Company from September1, 2021 through June 30, 2024. On April 25, 2025, the Company filed a motion to dismiss the complaint in its entirety. The motion isfully submitted to the court and is awaiting decision. The discovery phase of the matter has commenced.
Weintend to vigorously defend ourselves in these lawsuits and cannot at this time predict the likely outcome of any litigation, reasonablydetermine either the probability of a material adverse result or any estimated range of potential exposure, or reasonably determine howthese matters or any future matters might impact our business, our financial condition, or our results of operations, although such impact,including the costs of defense, as well as any judgments or indemnification obligations, among other things, could be materially adverseto us.
Item1A. Risk Factors
Exceptas set forth below, there have been no material changes to our risk factors as described in Item 1A of our Annual Report on Form 10-Kfor the year ended December 31, 2024.
Disruptionsat the FDA and other government agencies could hinder new or modified products from being developed, approved, or commercialized in atimely manner or at all, which could negatively impact our business.
Theability of the FDA and other government agencies to review and approve new products can be affected by a variety of factors, includinggovernment budget and funding levels, statutory, regulatory and policy changes, staffing cuts, the FDA’s ability to hire and retainkey personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s ability to perform routinefunctions. Average review times at the FDA have fluctuated in recent years as a result. In addition, government funding of other governmentagencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.The ability of the FDA and other government agencies to properly administer their functions is highly dependent on the levels of governmentfunding and the ability to fill key leadership appointments, among various factors.
Recentactions by the United States federal government have caused concern in the industry that the FDA will experience staffing reductionsand budget cuts. In addition, some senior FDA employees with responsibility for regulation of drugs and biologics have already resignedfrom the FDA. There are also reports that the United States federal government intends to request Congress to reduce FDA funding in upcomingbudgets. Such funding cuts may also delay the development and approval of our products.
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Nasdaqmay delist our securities from trading on its exchange which could limit investors’ ability to make transactions in our securitiesand subject us to additional trading restrictions.
Oursecurities are currently listed on Nasdaq. If Nasdaq delists our securities from trading on its exchange, we could face significant materialadverse consequences, including:
| ● | a limited availability of market quotations for our securities; | |
| ● | reduced liquidity with respect to our securities; | |
| ● | a determination that shares of our common stock are “penny stock” which will require brokers trading in our shares to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our shares; | |
| ● | a limited amount of news and analyst coverage; and | |
| ● | a decreased ability to issue additional securities or obtain additional financing in the future. |
OnFebruary 4, 2025, we received a deficiency letter from the Nasdaq Listing Qualifications Department (the “Staff”) notifyingus that, for the last 30 consecutive business days, the closing bid price for the Company’s common stock has been below the minimum$1.00 per share required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (“Rule 5550(a)(2)”).As a result, the Company is not in compliance with the $1.00 minimum bid price requirement for the continued listing on the Nasdaq CapitalMarket. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company had been given 180 calendar days, or through August 4, 2025,to regain compliance with Rule 5550(a)(2). Nasdaq has indicated that they will review our Form 10-Q for the six monthsended June 30, 2025 before making a final determination regarding our extension request.
TheNational Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating thesale of certain securities, which are referred to as “covered securities.” Because our common stock is listed on Nasdaq,our securities are covered securities. If we are no longer listed on Nasdaq, our securities would not be covered securities and we wouldbe subject to regulation in each state in which our securities are offered.
Item2. Unregistered Sales of Equity Securities and Use of Proceeds
Duringthe quarter ended June 30, 2025, we issued a total 50,000 shares of common stock to RedChip Companies, Inc. in connection with a consultingagreement. The shares were issued pursuant to exemptions from the registration requirements of the Securities Act of 1933, as amended,in reliance on Section 4(a)(2) of the Securities Act, Rule 701 promulgated under the Securities Act or Regulation D promulgated underthe Securities Act, relating to transactions by an issuer not involving a public offering. All of the foregoing securities are deemedrestricted securities for purposes of the Securities Act.
Item3. Defaults Upon Senior Securities
None.
Item4. Mine Safety Disclosures
Notapplicable.
Item5. Other Information
Duringthe three months ended June 30, 2025, none of our directors or officers
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Item6. Exhibits
*Filed herewith.
++This certification is being furnished solely to accompany this Quarterly Report pursuant to 18 U.S.C. Section 1350 and are not beingfiled for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference intoany filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filingherewith.
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SIGNATURES
Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf bythe undersigned thereunto duly authorized.
| PROCESSA PHARMACEUTICALS, INC. | ||
| By: | /s/ George Ng | |
| George Ng | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Dated: August 7, 2025 | ||
| By: | /s/ Russell Skibsted | |
| Russell Skibsted | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
| Dated: August 7, 2025 | ||
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Exhibit31.1
CERTIFICATION
I,George Ng, Chief Executive Officer of PROCESSA PHARMACEUTICALS, INC. certify that:
1.I have reviewed this quarterly report on Form 10-Q of PROCESSA PHARMACEUTICALS, INC. for the six months ended June 30, 2025;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessaryto make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to theperiod covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the registrant at, and for, the periods presented in this report;
4.I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules13a-15(f) and 15d-15 (f)) for the registrantand have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by otherswithin those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed underour supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statementsfor external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusionsabout the effectiveness of the disclosure controls and procedures, at the end of the period covered by this report based on such evaluation;and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’smost recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected,or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
5.I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditorsand the audit committee of registrant’s board of directors (or persons performing equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’sinternal control over financial reporting.
| By: | /s/ George Ng | |
| George Ng | ||
Chief Executive Officer (Principal Executive Officer) | ||
| Date: | August 7, 2025 |
Exhibit31.2
CERTIFICATION
I,Russell Skibsted, Chief Financial Officer of PROCESSA PHARMACEUTICALS, INC. certify that:
1.I have reviewed this quarterly report on Form 10-Q of PROCESSA PHARMACEUTICALS, INC. for the six months ended June 30, 2025;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessaryto make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to theperiod covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the registrant at, and for, the periods presented in this report;
4.I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules13a-15(f) and 15d-15 (f)) for the registrantand have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by otherswithin those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed underour supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statementsfor external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusionsabout the effectiveness of the disclosure controls and procedures, at the end of the period covered by this report based on such evaluation;and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’smost recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected,or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
5.I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditorsand the audit committee of registrant’s board of directors (or persons performing equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’sinternal control over financial reporting.
| By: | /s/ Russell Skibsted | |
| Russell Skibsted | ||
Chief Financial Officer (Principal Financial and Accounting Officer) | ||
| Date: | August 7, 2025 |
Exhibit32.1
WrittenStatement of the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. §1350
Solelyfor the purposes of complying with 18 U.S.C. §1350, I, the undersigned Chief Executive Officer of Processa Pharmaceuticals, Inc.(the “Company”), hereby certify, to the best of my knowledge, that the quarterly report on Form 10-Q of the Company for thequarter ended June 30, 2025 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of theSecurities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financialcondition and results of operations of the Company.
Thiscertification is being furnished solely to accompany this Report pursuant to 18 U.S.C. 1350 and is not being filed for purposes of Section18 of the Securities Exchange Act of 1934 and is not to be incorporated by reference into any filing of the registrant, whether madebefore or after the date hereof, regardless of any general incorporation language in such filing.
| By: | /s/ George Ng | |
| George Ng | ||
Chief Executive Officer (Principal Executive Officer) | ||
| Date: | August 7, 2025 |
Solelyfor the purposes of complying with 18 U.S.C. §1350, I, the undersigned Chief Financial Officer of Processa Pharmaceuticals, Inc.(the “Company”), hereby certify, to the best of my knowledge, that the quarterly report on Form 10-Q of the Company for thequarter ended June 30, 2025 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of theSecurities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financialcondition and results of operations of the Company.
Thiscertification is being furnished solely to accompany this Report pursuant to 18 U.S.C. 1350 and is not being filed for purposes of Section18 of the Securities Exchange Act of 1934 and is not to be incorporated by reference into any filing of the registrant, whether madebefore or after the date hereof, regardless of any general incorporation language in such filing.
| By: | /s/ Russell Skibsted | |
| Russell Skibsted | ||
Chief Financial Officer (Principal Financial and Accounting Officer) | ||
| Date: | August 7, 2025 |