# Processa Pharmaceuticals, Inc.: Form 10-Q for the period ended Mar 31, 2025

- Company: [Processa Pharmaceuticals, Inc.](/companies/pcsa.md) (CIK 1533743)
- Form: 10-Q
- Filed: 2025-05-08
- Accepted by EDGAR: May 8, 2025, 16:06 ET
- Period: 2025-03-31
- Accession: 0001641172-25-009252
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1533743/000164117225009252/form10-q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1533743/000164117225009252/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Operating income | 3 months, 2025-01-01 to 2025-03-31 | −$2.8m | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2025-01-01 to 2025-03-31 | −$2.8m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2025-01-01 to 2025-03-31 | −$0.30 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-01-01 to 2025-03-31 | −$0.30 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-01-01 to 2025-03-31 | 9,526,796 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2025-01-01 to 2025-03-31 | −$2.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2025-03-31 | $2.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2025-03-31 | $3.8m | us-gaap:AssetsCurrent |
| Total assets | at 2025-03-31 | $4.8m | us-gaap:Assets |
| Current liabilities | at 2025-03-31 | $1.3m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2025-03-31 | $1.3m | us-gaap:Liabilities |
| Shareholders' equity | at 2025-03-31 | $3.5m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 19,803 characters.

### Forward Looking Statements

*This Quarterly Report on Form 10-Q contains “forward-looking statements” that reflect, when made, the Company’s expectations or beliefs concerning future events that involve risks and uncertainties. Forward-looking statements frequently are identified by the words “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 could differ materially from those projected, implied or anticipated by the Company’s forward-looking statements. Some of the factors that could cause actual results to differ include: our limited cash and history of losses; our ability to achieve profitability; our ability to obtain adequate financing to fund our business operations in the future; our ability to secure required FDA or other governmental approvals for our product candidates and the breadth of the indication sought; the impact of competitive or alternative products, technologies and pricing; whether we are successful in developing and commercializing our technology, including through licensing; the adequacy of protections 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; our exposure to and ability to defend third-party claims and challenges to our and our licensors’ anticipated patents and other intellectual property rights; our ability to remain listed on the Nasdaq Capital Market; and our ability to continue as a going concern. For a discussion of these and all other known risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements, 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 by this cautionary statement, and the Company undertakes no obligation to revise or update this Quarterly Report on Form 10-Q to reflect events or circumstances after the date hereof.*

*References to 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

We are a clinical-stage biopharmaceutical company developing a pipeline of Next Generation Cancer therapy (“NGC”) small molecules, two of which are in, or have completed, Phase 2 trials, and one is in pre-clinical development. Our risk-mitigated strategy is to identify existing cancer therapies where the mechanism of action is well understood and that are cornerstones of current treatment regimens, but are highly toxic, with side effects that are often treatment limiting. We devise technologies to change the way the body metabolizes them, or the way they are distributed within the body, to improve the therapeutic effect and reduce toxicity. We then efficiently develop our pipeline of Next Generation Cancer therapies utilizing our proprietary Regulatory Science Approach, which we believe will further increase the likelihood of regulatory approval. Since the underlying active metabolites of these drugs are already commonly used in cancer therapy, we believe that if our clinical trials are successful and are showing better efficacy and tolerability than the currently used drugs, the commercial adoption for our NGC therapies will be rapid and broad.

Our oncology pipeline currently consists of NGC-Cap, NGC-Gem and NGC-Iri (also identified as PCS6422, PCS3117, and PCS11T, respectively) and two non-oncology drugs (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:

### Our Drug Pipeline

### Recent Developments

Over the last six months since the first patient was dosed in the NGC-Cap Phase 2 advanced or metastatic breast cancer trial, the study has been actively adding more U.S. clinical study sites while screening and enrolling more patients. We plan to obtain preliminary safety-efficacy data in these breast cancer patients in order to provide insight into the benefit of this treatment over existing treatments. This preliminary data should provide information that could also help to adaptively modify the protocol to increase the efficiency and/or improve the information obtained from the study.

In addition, since FDA now accepts surrogate endpoints for nephrology diseases such as primary glomerular diseases (PGDs), we have more recently begun to re-evaluate the potential clinical safety and efficacy of PCS499 in PGDs. These analyses have been based on PCS499 and pentoxifylline (PTX) safety-efficacy in diabetic nephropathy and, for PTX, in primary glomerular diseases. PTX is a generic drug with similar pharmacological properties to PCS499 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. We have been designing a drug development strategy and program to obtain approval of PCS499 in rare PGDs while demonstrating the benefit of PCS499 over all other treatments.

### Public Offering

On January 27, 2025, we raised net proceeds in a public offering of $4.4 million from the sale of 1,030,972 shares of our common stock, pre-funded warrants to purchase up to 7,019,700 shares of our common stock, accompanying Series 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 of common stock, as described in Note 2. Since the Offering closed, all pre-funded warrants were exercised. We plan to use the net proceeds from this financing for continued research and development for NCG-Cap, and for working capital and general corporate purposes.

### Results of Operations

### Comparison of the three months ended March 31, 2025 and 2024

The following table summarizes our net loss during the periods indicated:

| Operating Expenses | Three months ended March 31, 2025 | 2024 | Change |
| --- | ---: | ---: | ---: |
| Research and development expenses | $1,588,540 | $1,539,070 | $49,470 |
| General and administrative expenses | 1,258,450 | 1,270,528 | (12,078) |
| **Operating Loss** | (2,846,990) | (2,809,598) |  |
| **Other Income, net** | 12,585 | 83,217 | (70,632) |
| **Net Loss** | $(2,834,405) | $(2,726,381) |  |

15

#### Revenues

We do not currently have any revenue under contract or any immediate sales prospects.

#### Research and Development Expenses

Our research and development costs are expensed as incurred. Research and development expenses include (i) program and testing related expenses including external consulting and professional fees related to the product testing and our development activities and (ii) internal research and development staff salaries and other payroll costs including stock-based compensation, payroll taxes and employee benefits.

During the three months ended March 31, 2025, our research and development expenses increased by approximately $49,000 to $1,588,540 from $1,539,070 for the three months ended March 31, 2024. Costs for the three months ended March 31, 2025 and 2024 were as follows:

|  | Three months ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Research and development salaries and benefits | $391,505 | $507,790 |
| Preclinical, clinical trial and other costs | 1,197,035 | 1,031,280 |
| Total | $1,588,540 | $1,539,070 |

The slight increase in research and development expenses was primarily due to an increase in preclinical, clinical trial and other costs for our Phase 1B and Phase 2 clinical trials for NGC-Cap during the three months ended March 31, 2025 when compared to the same period in 2024. During the same period in 2024, we were only incurring costs related to the Phase 1B trial for NGC-Cap. The increase was offset by a decrease in salaries and benefits from the voluntary departures of research and development employees since March 2024.

The funding necessary to bring a drug candidate to market is subject to numerous uncertainties. Once a drug candidate is identified, the further 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 periodically assess 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.

Our clinical trial cost accruals are based on estimates of patient enrollment and related costs at clinical investigator sites, as well as estimates for the services received and efforts expended pursuant to contracts with multiple research institutions and CROs that conduct and manage clinical trials on our behalf.

We estimate preclinical and clinical trial expenses based on the services performed, pursuant to contracts with research institutions and clinical research organizations that conduct and manage preclinical studies and clinical trials on our behalf. In accruing service fees, we estimate the time 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 expenses and expensed when the services are rendered.

#### General and Administrative Expenses

Our general and administrative expenses for the three months ended March 31, 2025 decreased by approximately $12,000 to $1,258,450 from $1,270,528 for the three months ended March 31, 2024. This decrease was due primarily to decreases in professional fees of approximately $151,000; office expenses of approximately $11,000; repairs and maintenance of approximately $9,000; and insurance of $6,000. The decreases were offset by increases in salaries and other-payroll related costs of $77,000, primarily due to salary increases to our C-suite executives; an increase in employee stock-based compensation of $84,000 since our 2024 stock grant was contingent on receiving stockholder approval to increase the number of shares available for issuance under our Incentive Plan, so we did not recognize any expense related to that grant during the first quarter of 2024; and taxes and other miscellaneous office expenses of $9,000. We received approximately $6,000 more in reimbursements from CorLyst during the three months ended March 31, 2025 when compared to the same period in 2024.

#### Other Income

Other income represents interest income of $12,585 and $83,217 for the three months ended March 31, 2025 and 2024, respectively.

#### Income Tax Benefit

We did not recognize any income tax benefit for the three months ended March 31, 2025 or 2024.

### Cash Flows

The following table sets forth our sources and uses of cash and cash equivalents for the three months ended March 31, 2025 and 2024:

| Net cash (used in) provided by: | Three months ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Operating activities | $(2,729,848) | $(2,048,884) |
| Financing activities | 4,435,595 | 6,263,050 |
| Net increase in cash | $1,705,747 | $4,214,166 |

#### Net cash used in operating activities

We used net cash in our operating activities of $2,729,848 and $2,048,884 during the three months ended March 31, 2025 and 2024, respectively. The increase in cash used in operating activities during the first quarter of 2024 compared to the same period in 2023 of approximately $681,000 was primarily related to trial costs we incurred and a paydown in our accounts payable.

As we continue our development of NGC-Cap and evaluate the other NGC drugs in our portfolio, we anticipate our research and development efforts and ongoing general and administrative costs will continue to generate negative cash flows from operating activities for the foreseeable future. As we continue our Phase 2 clinical trial for NGC-Cap in 2025, we anticipate our clinical trial costs will increase when compared to prior periods since activities in 2024 were primarily related to the completion of our Phase 1B trial and setup of our Phase 2 trial for NGC-Cap.

#### Net cash provided by financing activities

During the three months ended March 31, 2025, as described in Note 2, we sold 1,030,972 shares of common stock; Pre-Funded Warrants to purchase up to 7,019,700 shares of common stock in lieu of shares of common stock; and accompanying Series 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 of common stock (which are subject to stockholder approval), pursuant to a public offering for net proceeds of $4.4 million. We also used cash classified as financing activities of $1,439 to pay income taxes owed on stock-based compensation, and $1,536 for payments owed under a financing lease obligation.

During the three months ended March 31, 2024, we sold 476,000 shares of common stock, pre-funded warrants to purchase up to 1,079,555 shares of common stock in lieu of shares of common stock, all of which were exercised into shares of our common stock, and warrants to purchase up to 1,555,555 shares of our common stock pursuant to a public offering for net proceeds of $6.3 million. We also used cash classified as financing activities of $9,924 to pay income taxes owed on stock-based compensation, $8,561 for the settlement of a stock award and $895 for payments owed under a financing lease obligation.

### Liquidity

At March 31, 2025, we had cash and cash equivalents totaling $2.9 million which, based on our current business plans, we believe will satisfy our capital needs into mid-2025. However, absent additional funding, our current cash and cash equivalents will not be sufficient to fund our planned operations for a period of one year or more after the date that these condensed consolidated financial statements were available to be issued based on the timing and amount of our projected net loss from continuing operations and the related amount 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 funding from the sale of equity and/or debt securities, a strategic transaction or other funding transactions.

We have incurred losses since inception, currently devoting substantially all our efforts toward research and development of our next generation chemotherapy drug product candidates, including conducting clinical trials and providing general and administrative support for these operations, and have an accumulated deficit of $90.1 million at March 31, 2025. During the three months ended March 31, 2025, we generated a net loss of $2.8 million and used $2.7 million in net cash for operating activities from continuing operations. To date, none of our drug candidates have been approved for sale, and therefore we have not generated any product revenue and do not expect positive cash flow from operations in the foreseeable future. We will continue to be dependent upon equity and/or debt financing until we are able to generate positive cash flows from its operations.

On January 27, 2025, we sold 1,030,972 shares of our common stock, pre-funded warrants to purchase up to 7,019,700 shares of our common stock, and accompanying Series 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 of common stock for net proceeds of $4.4 million, after deducting placement agent fees and offering-related expenses.

We plan 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 acceptable to us. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of, or suspend our current or planned future clinical trial plans, or research and development programs. This may also cause us to not meet obligations contained in certain of our license agreements and put these assets at risk. To the extent that we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt or making capital expenditures. There can be no assurance that future funding will be available when needed.

### Contractual Obligations and Commitments

There have been no significant changes to the contractual obligations reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

### Off Balance Sheet Arrangements

At March 31, 2025, we did not have any off-balance sheet arrangements.

### Critical Accounting Policies and Use of Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities.

We believe that the estimates, assumptions and judgments involved in the accounting policies described in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our most recent Annual Report on Form 10-K have the greatest potential impact on our financial statements, so we consider these to be our critical accounting policies. Actual results could differ from the estimates we use in applying our critical accounting policies. We are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.

There have been no changes in our critical accounting policies from those included in our most recent Annual Report on Form 10-K.

### Recently Issued Accounting Pronouncements

We have evaluated recently issued accounting pronouncements and determined that there is no material impact on our financial position or results of operations.

## Controls and procedures

As filed, 1,537 characters.

At March 31, 2025, management, with the participation of the Chief Executive Officer and Chief Financial 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 March 31, 2025 to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, as appropriate, to allow timely decisions regarding required disclosure. 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 necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.

## Risk factors

As filed, 3,903 characters.

Except as 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-K for the year ended December 31, 2024.

***Disruptions at the FDA and other government agencies could hinder new or modified products from being developed, approved, or commercialized in a timely manner or at all, which could negatively impact our business.***

The ability of the FDA and other government agencies to review and approve new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory and policy changes, staffing cuts, the FDA’s ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s ability to perform routine functions. Average review times at the FDA have fluctuated in recent years as a result. In addition, government funding of other government agencies 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 government funding and the ability to fill key leadership appointments, among various factors.

Recent actions by the United States federal government have caused concern in the industry that the FDA will experience staffing reductions and budget cuts. In addition, some senior FDA employees with responsibility for regulation of drugs and biologics have already resigned from the FDA. There are also reports that the United States federal government intends to request Congress to reduce FDA funding in upcoming budgets. Such funding cuts may also delay the development and approval of our products.

***Nasdaq may delist our securities from trading on its exchange which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.***

Our securities are currently listed on Nasdaq. If Nasdaq delists our securities from trading on its exchange, we could face significant material adverse 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.

On February 4, 2025, we received a deficiency letter from the Nasdaq Listing Qualifications Department (the “Staff”) notifying us 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 Capital Market. 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).

The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale 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 would be subject to regulation in each state in which our securities are offered.

Filed May 8, 2025.
Source: SEC EDGAR, the filing index for accession 0001641172-25-009252. Last ingested by Listed: Nov 4, 2026, 08:11 ET. No prices; not investment advice.