novn-20210331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2021

☐ 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 001-37880

Novan, Inc.

(Exact name of registrant as specified in its charter)


Delaware		20-4427682
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

4020 Stirrup Creek Drive, Suite 110
Durham,	North Carolina	27703
(Address of principal executive offices)		(Zip Code)

(919) 485-8080

(Registrant’s telephone number, including area code)

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


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $0.0001 par value	NOVN	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Sections 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 May 4, 2021, there were 151,707,150 shares of the registrant’s Common Stock outstanding.

Table of Contents


		Page
PART I - FINANCIAL INFORMATION		3
Item 1.	Financial Statements	3
	Unaudited Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 20 20	3
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31 , 202 1 and 20 20	4
	Unaudited Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the three months ended March 31, 202 1 and 20 20	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31 , 202 1 and 20 20	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	56
Item 4.	Controls and Procedures	57

PART II - OTHER INFORMATION		58
Item 1.	Legal Proceedings	58
Item 1A.	Risk Factors	58
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58
Item 3.	Defaults Upon Senior Securities	58
Item 4.	Mine Safety Disclosures	59
Item 5.	Other Information	59
Item 6.	Exhibits	60
	Signatures	61

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

NOVAN, INC.

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands, except share and per share amounts)


	March 31, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	32,661	$	35,879

Contracts and grants receivable	4,563		4,863

Prepaid insurance	1,239		1,818
Prepaid expenses and other current assets	964		1,333
Other current asset related to leasing arrangement, net	1,637		—
Assets held for sale	114		114
Total current assets	41,178		44,007
Restricted cash	472		—
Intangible assets	75		75
Other assets	321		341
Property and equipment, net	3,493		2,406
Right-of-use lease assets	1,444		—
Total assets	$	46,983	$	46,829
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,001	$	1,192
Accrued compensation	507		1,154
Accrued outside research and development services	996		930
Accrued legal and professional fees	215		168
Other accrued expenses	1,071		801
Deferred revenue, current portion	2,990		2,990
Paycheck Protection Program loan, current portion	836		478
Research and development service obligation liability, current portion	969		987

Total current liabilities	8,585		8,700
Deferred revenue, net of current portion	7,834		8,238
Paycheck Protection Program loan, net of current portion	120		478
Lease liabilities	3,120		—
Research and development service obligation liability, net of current portion	649		649
Research and development funding arrangement liability	25,000		25,000
Other long-term liabilities	825		787
Total liabilities	46,133		43,852
Commitments and contingencies (Note 8)
Stockholders’ equity
Common stock $0.0001 par value; 200,000,000 shares authorized as of March 31, 2021 and December 31, 2020; 151,662,650 and 145,709,591 shares issued as of March 31, 2021 and December 31, 2020, respectively; 151,653,150 and 145,700,091 shares outstanding as of March 31, 2021 and December 31, 2020, respectively	15		14
Additional paid-in capital	259,219		252,395
Treasury stock at cost, 9,500 shares as of March 31, 2021 and December 31, 2020	(155)		(155)
Accumulated deficit	(258,229)		(249,277)
Total stockholders’ equity	850		2,977
Total liabilities and stockholders’ equity	$	46,983	$	46,829

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

Table of Contents

NOVAN, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(unaudited)

(in thousands, except share and per share amounts)


	Three Months Ended March 31,
		2021		2020
License and collaboration revenue		$	747	$	1,024
Government research contracts and grants revenue		72		189

Total revenue		819		1,213
Operating expenses:
Research and development		6,418		4,916
General and administrative		2,686		2,507


Total operating expenses		9,104		7,423
Operating loss		(8,285)		(6,210)
Other (expense) income, net:
Interest income		3		35


Other (expense) income		(670)		8
Total other (expense) income, net		(667)		43
Net loss and comprehensive loss		$	(8,952)	$	(6,167)
Net loss per share, basic and diluted		$	(0.06)	$	(0.17)
Weighted-average common shares outstanding, basic and diluted		150,028,864		37,043,876

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

Table of Contents

NOVAN, INC.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(unaudited)

(in thousands, except share amounts)


	Three Months Ended March 31, 2021
				Additional Paid-In Capital		Treasury Stock
	Common Stock							Accumulated
	Shares	Amount						Deficit		Total
Balance as of December 31, 2020	145,700,091	$	14	$	252,395	$	(155)	$	(249,277)	$	2,977
Stock-based compensation	—	—		36		—		—		36
Exercise of common stock warrants	996,509	—		442		—		—		442
Common stock issued pursuant to common stock purchase agreement	4,931,633	1		6,333		—

SEC Form 10-Q filed by Novan, Inc.