bbi-20220630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

(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, 2022


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

For the transition period from to

Commission File Number: 000-21088

BRICKELL BIOTECH, INC.

(Exact name of registrant as specified in its charter)

Delaware

93-0948554

(State or other jurisdiction of incorporation or organization)

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

5777 Central Avenue,

Boulder,

80301

(Address of principal executive offices)

(Zip Code)

(720) 505-4755

(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, $0.01 par value per share	BBI	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 Exchange Act). Yes ☐ No ☒

As of August 11, 2022, there were 2,873,965 shares of the registrant’s common stock outstanding.

EXPLANATORY NOTE

Brickell Biotech, Inc. (the “Company”) is filing this Amendment No. 1 (this “Form 10-Q/A”) to its Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, which was originally filed with the Securities and Exchange Commission (the “SEC”) on August 11, 2022 (the “Original 10-Q”), to amend and restate certain items in the Company’s condensed consolidated balance sheets at June 30, 2022 and December 31, 2021, condensed consolidated statements of operations and condensed consolidated statements of redeemable preferred stock and stockholders’ equity for the three and six months ended June 30, 2022 and 2021, related notes, and certain other related matters in the Original 10-Q.

Background of Restatement

Subsequent to the filing of the Original 10-Q, the Company determined that certain of the information in the Original 10-Q had not been appropriately adjusted for the 1-for-45 reverse stock split that the Company had effected on July 5, 2022, after the end of the period covered by, but prior to the filing of, the Original Form 10-Q as required by Accounting Standards Codification 260 and related guidance. Accordingly, the Company is restating the interim financial statements in the Original 10-Q to adjust retroactively common stock share, per-share amounts, and other related balances and computations for the reverse stock split. In addition, because the par value per share of the Company’s common stock was not changed by the reverse stock split, historical amounts for common stock par value and additional paid-in capital have been adjusted retroactively to reflect the reverse stock split.

Updates to Management’s Discussion and Analysis of Financial Condition and Results of Operations, Controls and Procedures, and Risk Factor Disclosures

All common stock share, per-share amounts, and other related balances and computations presented in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item 1A, “Risk Factors” give effect to the 1-for-45 reverse stock split of the Company’s outstanding shares of common stock that occurred on July 5, 2022.

In addition, the Company’s management has concluded that in light of the presentation error described above, a material weakness exists in the Company’s internal control over financial reporting and that the Company’s disclosure controls and procedures were not effective as of June 30, 2022, as further discussed in Part I, Item 4, “Controls and Procedures.”

Items Amended in this Form 10-Q/A

This Form 10-Q/A sets forth the Original 10-Q, as modified and superseded where necessary to reflect the restatement and the related internal control considerations. Accordingly, the following items included in the Original 10-Q have been amended:

•Part I, Item 1, Financial Statements

•Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations

•Part I, Item 4, Controls and Procedures

•Part II, Item 1A, Risk Factors

Additionally, in accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company is including with this Form 10-Q/A currently dated certifications from its principal executive officer and principal financial officer as Exhibits 31.1, 31.2 and 32.1.

Except as described above, this Form 10-Q/A does not amend, update, or change any other disclosures in the Original 10-Q. This Form 10-Q/A does not reflect events occurring after the filing of the Original 10-Q, and, except as expressly described above, does not modify or update any other disclosures in the Original 10-Q.

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements that involve substantial risks and uncertainties for purposes of the safe harbor provided by the Private Securities Litigation Reform Act of 1995. All statements contained in this Quarterly Report other than statements of historical fact, including statements relating to future financial, business, and/or research and clinical performance, conditions, plans, prospects, trends, or strategies and other such matters, including without limitation, our strategy; future operations; future financial position; future liquidity; future revenue and payments of any type; territorial focus; projected expenses; results of operations; the anticipated timing, scope, design, progress, results, and/or reporting of data of ongoing and future nonclinical and clinical trials; intellectual property rights, including the acquisition, validity, term, and enforceability of such; the expected timing and/or results of regulatory submissions and approvals; and prospects for commercializing any product candidates of Brickell or third parties, or research and/or licensing collaborations with, or actions of, its partners, including in the United States (“U.S.”), Japan, South Korea, or any other country, or business development activities with other potential partners. The words “may,” “could,” “should,” “might,” “anticipate,” “reflects,” “believe,” “estimate,” “expect,” “intend,” “plan,” “predict,” “potential,” “will,” evaluate,” “advance,” “excited,” “aim,” “strive,” “help,” “progress,” “select,” “initiate,” “looking forward,” “promise,” “provide,” “commit,” “best-in-class,” “first-in-class,” and similar expressions and their variants, are intended to identify forward-looking statements. Such statements are based on management’s current expectations and involve risks and uncertainties. Actual results and performance could differ materially from those projected in the forward-looking statements as a result of many factors. Unless otherwise mentioned or unless the context requires otherwise, all references in this Quarterly Report to “Brickell,” “Brickell Subsidiary,” “Company,” “we,” “us,” and “our,” or similar references, refer to Brickell Biotech, Inc. and its consolidated subsidiaries.

We based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy and business development activities, pipeline legal status, short-term and long-term business operations and objectives, employees, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described in Part II, Item 1A, “Risk Factors” in this Quarterly Report, in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, and in Part II, Item 1A. “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, and under a similar heading in any other periodic or current report we may file with the SEC in the future. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge quickly and from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business and operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. All forward-looking statements are qualified in their entirety by this cautionary statement.

You should read carefully the factors described in Part II, Item 1A, “Risk Factors” in this Quarterly Report to better understand the risks and uncertainties inherent in our business and underlying any forward-looking statements. You are advised to consult any further disclosures we make on related subjects in our future public filings and on our website.

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BRICKELL BIOTECH, INC.

FORM 10-Q/A

INDEX


FORWARD-LOOKING STATEMENTS		4
RISK FACTORS SUMMARY		6
PART I. FINANCIAL INFORMATION		7
	ITEM 1. Financial Statements (Restated)	7






	ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
	ITEM 3. Quantitative and Qualitative Disclosures About Market Risk	43
	ITEM 4. Controls and Procedures	43
PART II. OTHER INFORMATION		45
	ITEM 1. Legal Proceedings	45
	ITEM 1A. Risk Factors	45
	ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	75
	ITEM 3. Defaults Upon Senior Securities	75
	ITEM 4. Mine Safety Disclosures	75
	ITEM 5. Other Information	75
	ITEM 6. Exhibits	76

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RISK FACTORS SUMMARY

Our business, financial condition, and operating results may be affected by a number of factors, whether currently known or unknown. Any one or more of such factors could directly or indirectly cause our actual results of operations and financial condition to vary materially from past or anticipated future results of operations and financial condition. Any of these factors, in whole or in part, let alone combined with any of the others, could materially and adversely affect our business, financial condition, results of operations, and stock price. We have provided a summary of some of these risks below, with a more detailed explanation of those and other risks applicable to the Company in Part II, Item 1A. “Risk Factors” in this Quarterly Report.

•Our business depends on the successful continued financing, nonclinical and clinical development, regulatory approval, and commercialization of our pipeline assets.

•Clinical drug development for our pipeline assets is expensive, time-consuming, and uncertain. Any data resulting from our trials may not be favorable for further development.

•Our inability to maintain compliance with continued listing requirements of The Nasdaq Stock Market LLC (“Nasdaq”), including if we are unable to maintain the required minimum closing bid price of our common stock, could result in the delisting of our common stock.

•Major public health issues, and specifically the pandemic and related impacts caused by the ongoing spread of COVID-19 and COVID-19 variants, including in terms of constraints on supply chains and human resource availability, could have an adverse impact on our financial condition and results of operations and other aspects of our business and that of our suppliers, contractors, and business partners.

•We have sponsored or supported and in the future expect to sponsor or support clinical trials for our product candidates outside the U.S., and the U.S. Food and Drug Administration (“FDA”) and applicable foreign regulatory authorities may not accept data from such trials; in addition, we may not be allowed alone or with local country business partners to obtain regulatory approval for our product candidates without first conducting clinical trials in each of these other countries.

•We rely and expect to continue to rely on third-party contractors for supply, manufacture, and distribution of preclinical, clinical, and commercial supplies, and possibly sales and promotion, of any future product candidates.

•We may not be able to obtain, afford, maintain, enforce, or protect our intellectual property rights covering our product candidates, including our autoimmune and inflammatory portfolio, and related technologies, that are of sufficient type, breadth, and term throughout the world.

•If we fail to comply with our obligations under our intellectual property and related license agreements, we could lose license rights that are important to our business. Additionally, these agreements may be subject to disagreement over contract interpretation, which could narrow the scope of our rights to the relevant intellectual property or technology, or other key aspects of product development and/or commercialization, or increase our financial or other obligations to our licensors.

•Our receipt of future payments from Botanix SB Inc. (“Botanix”) is contingent on various factors outside of our control, including the successful development, regulatory approval, and commercialization of sofpironium bromide gel, 15%, by Botanix outside of Japan, the successful continued commercialization of sofpironium bromide gel, 5% (“ECCLOCK®”) by Kaken Pharmaceutical Co., Ltd. (“Kaken”) in Japan, and the sufficiency of funds to pay us and Bodor Laboratories, Inc. (“Bodor”), the licensor of this product.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BRICKELL BIOTECH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (RESTATED)

(in thousands, except share and per share data)

(unaudited)




	June 30, 2022		December 31, 2021

Assets
Current assets:
Cash and cash equivalents	$	14,480	$	26,884

Prepaid expenses and other current assets	3,771		2,716
Total current assets	18,251		29,600
Property and equipment, net	45		58
Contract asset, net of current portion	181		—
Operating lease right-of-use asset	30		59

Total assets	$	18,507	$	29,717
Liabilities, redeemable preferred stock, and stockholders’ equity
Current liabilities:
Accounts payable	$	1,263	$	1,605
Accrued liabilities	1,571		3,136
Lease liability, current portion	36		69





Total current liabilities	2,870		4,810








Commitments and contingencies (Note 7)

Redeemable preferred stock, $0.01 par value, 5,000,000 shares authorized as of June 30, 2022 and December 31, 2021; 1 and 0 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively	—		—
Stockholders’ equity:
Common stock, $0.01 par value, 300,000,000 shares authorized as of June 30, 2022 and December 31, 2021; 2,690,360 and 2,652,828 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively	27		27
Additional paid-in capital	171,534		170,247

Accumulated deficit	(155,924)		(145,367)
Total stockholders’ equity	15,637		24,907
Total liabilities, redeemable preferred stock, and stockholders’ equity	$	18,507	$	29,717

See accompanying notes to these condensed consolidated financial statements.

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BRICKELL BIOTECH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (RESTATED)

(in thousands, except share and per share data)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Revenue
Contract revenue	$	4,315	$	—	$	4,315	$	—
Royalty revenue	—		151		92		168
Total revenue	4,315		151		4,407		168

Operating expenses:
Research and development	1,865		8,838		7,878		14,890
General and administrative	3,908		2,891		7,394		5,858
Total operating expenses	5,773		11,729		15,272		20,748
Loss from operations	(1,458)		(11,578)		(10,865)		(20,580)
Other income	313		459		314		490

Interest expense	(2)		(30)		(6)		(

SEC Form 10-Q/A filed by Brickell Biotech Inc. (Amendment)