UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2023

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

For the transition period from _____to _____

Commission file number: 001-37526

Zynerba Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)		26-0389433 (I.R.S. Employer Identification No.)

80 W. Lancaster Avenue, Suite 300 Devon, PA (Address of principal executive offices)		19333 (Zip Code)

(484) 581-7505
(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

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


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.001 par value per share	ZYNE	The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ⌧Yes ◻ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ⌧Yes ◻ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See 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 ◻
			Smaller reporting company ⌧
Non-accelerated filer ⌧			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 Exchange Act). Yes ◻ No ⌧

As of August 9, 2023, the registrant had 53,939,431 shares of common stock, $0.001 par value per share, outstanding.

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PART I—FINANCIAL INFORMATION		5

Item 1.	Consolidated Financial Statements (Unaudited)	5

	Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022 (Unaudited)	5

	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2023 and 2022 (Unaudited)	6

	Consolidated Statements of Stockholders’ Equity for the Six Months Ended June 30, 2023 and 2022 (Unaudited)	7

	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022 (Unaudited)	8

	Notes to Unaudited Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28

Item 4.	Controls and Procedures	28

PART II—OTHER INFORMATION		29

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 3.	Defaults Upon Senior Securities	31

Item 4.	Mine Safety Disclosures	31

Item 5.	Other Information	32

Item 6.	Exhibits	33

	Signatures	34

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements made in this Quarterly Report on Form 10-Q, or this Quarterly Report, that are not statements of historical or current facts, such as those under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements discuss our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. These statements may be preceded by, followed by or include the words “aim,” “anticipate,” “believe,” “continues,” “estimate,” “expect,” “forecast,” “intend,” “outlook,” “plan,” “potential,” “project,” “projection,” “seek,” “may,” “could,” “would,” “will,” “should,” “can,” “can have,” “likely,” the negatives thereof and other words and terms of similar meaning.

Forward-looking statements are inherently subject to risks, uncertainties and assumptions; they are not guarantees of performance. You should not place undue reliance on these statements. We have based these forward-looking statements on our current expectations and projections about future events. Although we believe that our assumptions made in connection with the forward-looking statements are reasonable, we cannot assure you that the assumptions and expectations will prove to be correct.

You should understand that the following important factors could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in our forward-looking statements:

●

our expectations regarding the planned acquisition by Harmony Biosciences Holdings, Inc. (“Harmony”), including our ability to complete the pending transaction as contemplated by the Agreement and Plan of Merger, the parties’ ability to satisfy the conditions to the consummation of the offer and other conditions set forth in such agreement, the expected timetable for completing the transaction and effects of the offer and merger;

●

our expectations, projections and estimates regarding expenses, future revenue, capital requirements, incentive and other tax credit eligibility, collectability and timing and availability of and the need for additional financing, as well as our ability to continue as a going concern;

●

the results, cost and timing of our preclinical studies and clinical trials, including any delays to such clinical trials relating to enrollment or site initiation, as well as the number of required trials for regulatory approval and the criteria for success in such trials;

●

our dependence on third parties in the conduct of our preclinical studies and clinical trials;

●

legal and regulatory developments in the United States and foreign countries, including any actions or advice that may affect the design, initiation, timing, continuation, progress or outcome of clinical trials or result in the need for additional clinical trials;

●

the results of our preclinical studies and earlier clinical trials of our product candidates may not be predictive of future results and we may not have favorable results in our ongoing or planned clinical trials;

●

the difficulties and expenses associated with obtaining and maintaining regulatory approval of our product candidates, and the indication and labeling under any such approval;

●

our plans and ability to develop and commercialize our product candidates;

●

the successful development of our commercialization capabilities, including sales and marketing capabilities, whether alone or with potential future collaborators;

●

the size and growth of the potential markets for our product candidates, the rate and degree of market acceptance of our product candidates and our ability to serve those markets;

●

the coverage and reimbursement status for our product candidates from third-party payors;

●

the success of competing therapies and products that are or become available;

●

our ability to limit our exposure under product liability lawsuits, shareholder class action lawsuits or other litigation;

●

our ability to obtain and maintain intellectual property protection for our product candidates;

●

legislative developments impacting our industry or the healthcare system broadly, including but not limited to the Inflation Reduction Act of 2022 and proposed changes to the Patient Protection and Affordable Care Act;

●

our ability to obtain and maintain third-party manufacturing for our product candidates on commercially reasonable terms;

●

delays, interruptions or failures in the manufacture and supply of our product candidates;

●

the performance of third parties upon which we depend, including third-party contract research organizations, or CROs, contract manufacturing organizations, or CMOs, contract laboratories and independent contractors;

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●

our ability to recruit or retain key scientific, commercial or management personnel or to retain our executive officers;

●

our ability to maintain proper functionality and security of our internal computer and information systems and to prevent or avoid cyberattacks, malicious intrusion, breakdown, destruction, loss of data privacy or other significant disruption;

●

the extent to which health pandemics and other outbreaks of communicable diseases could disrupt our operations or materially and adversely affect our business and financial conditions;

●

our ability to regain and maintain compliance with the continued listing requirements of The Nasdaq Capital Market;

●

a deterioration of the credit rating for U.S. long-term sovereign debt, and/or actions and uncertainties surrounding the debt ceiling and the federal budget;

●

adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties, could adversely affect our current and projected business operations, financial condition and results of operations;

●

the extent to which the volatility of the global financial markets, inflationary pressures, banking instability and global instability, including political instability, such as a deterioration in the relationship between the U.S. and China or the ongoing conflict between Russia and Ukraine, including any additional resulting sanctions, export controls or other restrictive actions that may be imposed by the U.S. and/or other countries against governmental or other entities in, for example, Russia, may disrupt our business operations and/or our financial condition; and

●

the other risks, uncertainties and factors discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, or our 2022 Annual Report, and our Quarterly Report on Form 10-Q for the three months ended March 31, 2023, under the caption “Item 1A. Risk Factors”.

In light of these risks and uncertainties, expected results or other anticipated events or circumstances discussed in this Quarterly Report (including the exhibits hereto) might not occur. We undertake no obligation, and specifically decline any obligation, to publicly update or revise any forward-looking statements, even if experience or future developments make it clear that projected results expressed or implied in such statements will not be realized, except as may be required by law. Except as otherwise indicated, our forward-looking statements do not assume the consummation of the proposed acquisition by Harmony. If such acquisition is consummated, many of the forward-looking statements contained in this Quarterly Report would no longer be applicable.

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PART I – FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (Unaudited)

ZYNERBA PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


	June 30,		December 31,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	35,967,515	$	50,640,993
Incentive and tax receivables		1,308,583		1,225,383
Prepaid expenses and other current assets		2,018,874		2,908,731
Total current assets		39,294,972		54,775,107
Property and equipment, net		394,904		409,572
Incentive and tax receivables		567,648		—
Right-of-use assets		219,037		336,215
Total assets	$	40,476,561	$	55,520,894
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	2,479,345	$	1,942,830
Accrued expenses		8,758,767		7,014,882
Lease liabilities		217,879		214,901
Total current liabilities		11,455,991		9,172,613
Lease liabilities, long-term		—		119,524
Total liabilities		11,455,991		9,292,137
Stockholders' equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding		—		—
Common stock, $0.001 par value; 200,000,000 shares authorized; 53,939,431 shares issued and outstanding at June 30, 2023 and 47,895,687 shares issued and outstanding at December 31, 2022		53,940		47,896
Additional paid-in capital		324,373,823		320,698,146
Accumulated deficit		(295,407,193)		(274,517,285)
Total stockholders' equity		29,020,570		46,228,757
Total liabilities and stockholders' equity	$	40,476,561	$	55,520,894

See accompanying notes to unaudited consolidated financial statements.

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ZYNERBA PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
Operating expenses:
Research and development	$	7,166,708	$	5,446,317	$	14,244,789	$	10,592,922
General and administrative		3,969,499		3,722,453		7,362,593		7,479,763
Total operating expenses		11,136,207		9,168,770		21,607,382		18,072,685
Loss from operations		(11,136,207)		(9,168,770)		(21,607,382)		(18,072,685)
Other income (expense):
Interest income		434,718		91,691		882,033		187,735
Foreign exchange loss		(74,576)		(775,927)		(164,559)		(458,675)
Total other income (expense)		360,142		(684,236)		717,474		(270,940)
Net loss	$	(10,776,065)	$	(9,853,006)	$	(20,889,908)	$	(18,343,625)

Net loss per share basic and diluted	$	(0.21)	$	(0.24)	$	(0.42)	$	(0.45)
Basic and diluted weighted average shares outstanding		50,150,138		41,406,803		49,295,103		40,858,688

See accompanying notes to unaudited consolidated financial statements.

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ZYNERBA PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)


	Six months ended June 30, 2023
								Total
	Common stock			Additional		Accumulated		stockholders'
	Shares	Amount		paid-in capital		deficit		equity
Balance at December 31, 2022	47,895,687	$	47,896	$	320,698,146	$	(274,517,285)	$	46,228,757
Issuance of common stock, net of issuance costs	3,279,077		3,279		1,747,000		—		1,750,279
Issuance of restricted stock	1,896,167		1,896		(1,896)		—

SEC Form 10-Q filed by Zynerba Pharmaceuticals Inc.