UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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, ~~2020~~2021


◻☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to

Commission file number 001-37809

NeuroBo Pharmaceuticals, Inc.

(Exact name of Registrant as specified in its charter)


Delaware		47-2389984
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

200 Berkeley Street, Office 19^th Floor Boston, Massachusetts		02116
(Address of principal executive offices)		(Zip Code)

~~(857)~~ (857) 702-9600

(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(s)	Name of Each Exchange On Which Registered
Common stock, $0.001 par value	NRBO	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 ⌧☒

The number of outstanding shares of the registrant’s common stock, $0.001 par value, as of August ~~11, 2020~~12, 2021 was ~~16,427,307.~~22,285,492.

Table of Contents

NeuroBo Pharmaceuticals, Inc.

FORM 10-Q

INDEX


PART I	FINANCIAL INFORMATION

ITEM 1:	Financial Statements (unaudited):

	Condensed Consolidated Balance Sheets as of June 30, ~~2020~~2021 (unaudited) and December 31, ~~2019~~2020	3

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2021 and 2020 ~~and 2019~~ (unaudited)	4

	Condensed Consolidated Statements of Changes in Stockholders’ Equity ~~(Deficit)~~ for the three and six months ended June 30, 2021 and 2020 ~~and 2019~~ (unaudited)	5

	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020 ~~and 2019~~ (unaudited)	6

	Notes to Condensed Consolidated Financial Statements (unaudited)	7

ITEM 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2622

ITEM 3:	Quantitative and Qualitative Disclosures about Market Risk	3631

ITEM 4:	Controls and Procedures	3631

PART II	OTHER INFORMATION	3832

ITEM 1:	Legal Proceedings	3832

ITEM 1A :	Risk Factors	3833

ITEM 2:	Unregistered Sales of Equity Securities and Use of Proceeds	3933

ITEM 3:	Default upon Senior Securities	3933

ITEM 4:	Mine Safety Disclosures	3933

ITEM 5:	Other Information	3933

ITEM 6:	Exhibits	4034

SIGNATURES		4135

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

NeuroBo Pharmaceuticals, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share amounts and par value)

June 30,

December 31,

2020

2019

(unaudited)

Assets

Current assets:

Cash

$
14,298

$
13,908

Restricted cash

—

15

Prepaid expenses

908

153

Other assets

37

42

Total current assets

15,243

14,118

Right-of-use assets

105

116

Property and equipment, net

172

200

Other assets

32

34

Total assets

$
15,552

$
14,468

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$
1,683

$
638

Accrued liabilities

1,426

1,422

Lease liability, short-term

23

22

Total current liabilities

3,132

2,082

Lease and other long-term liabilities

82

94

Total liabilities

3,214

2,176

Commitments and contingencies (Note 5)

Stockholders’ equity:

Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding as of June 30, 2020 and December 31, 2019.

—

—

Common stock, $0.001 par value per share, 100,000,000 shares authorized; 16,427,307 and 15,592,718 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively.

17

16

Additional paid–in capital

56,317

49,130

Accumulated other comprehensive (loss) income

(16)

12

Accumulated deficit

(43,980)

(36,866)

Total stockholders’ equity

12,338

12,292

Total liabilities and stockholders’ equity

$
15,552

$
14,468


	June 30,		December 31,
	2021		2020
	(unaudited)
Assets
Current assets:
Cash	$	9,513	$	10,089
Prepaid expenses		789		546
Other assets		166		48
Total current assets		10,468		10,683
Right-of-use assets and other		117		130
Property and equipment, net		134		155
Total assets	$	10,719	$	10,968
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	347	$	2,575
Accrued liabilities		811		1,096
Lease liability, short-term		25		24
Total current liabilities		1,183		3,695
Lease liability, long-term		58		70
Total liabilities		1,241		3,765
Commitments and contingencies (Notes 4, 5, 6 and 11)
Stockholders’ equity
Preferred stock, $0.001 par value; 10,000,000 shares authorized as of June 30, 2021 and December 31, 2020; 0 shares issued or outstanding as of June 30, 2021 and December 31, 2020.		—		—
Common stock, $0.001 par value per share, 100,000,000 shares authorized as of June 30, 2021 and December 31, 2020; 22,285,492 and 19,671,182 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively.		22		20
Additional paid–in capital		83,242		73,713
Accumulated other comprehensive income		3		14
Accumulated deficit		(73,789)		(66,544)
Total stockholders’ equity		9,478		7,203
Total liabilities and stockholders’ equity	$	10,719	$	10,968

See accompanying notes to condensed consolidated financial statements.

Table of Contents

NeuroBo Pharmaceuticals, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(unaudited)

For the Three Months Ended

For the Six Months Ended

June 30,

June 30,

2020

2019

2020

2019

Operating expenses:









Research and development

$
674

$
948

$
2,826

$
2,748

General and administrative

1,718

939

4,315

1,590

Total operating expenses

2,392

1,887

7,141

4,338

Loss from operations

(2,392)

(1,887)

(7,141)

(4,338)

Interest income (expense), net

8

(14)

28

(27)

Other expense, net

—

—

(1)

—

Loss before income taxes

(2,384)

(1,901)

(7,114)

(4,365)

Provision for income taxes

—

—

—

—

Net loss

(2,384)

(1,901)

(7,114)

(4,365)

Other comprehensive loss:

Foreign currency translation loss, net of tax

6

11

(28)

9

Total other comprehensive loss

6

11

(28)

9

Comprehensive loss

$
(2,378)

$
(1,890)

$
(7,142)

$
(4,356)

Loss per share:

Net loss per share, basic and diluted (Note 11)

$
(0.15)

$
(0.37)

$
(0.44)

$
(0.84)

Weighted average common shares outstanding:

Basic and diluted

16,303,681

5,166,812

15,987,240

5,166,812


	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Operating expenses:
Research and development	$	2,012	$	674	$	3,155	$	2,826
General and administrative		1,914		1,718		4,101		4,315
Total operating expenses		3,926		2,392		7,256		7,141
Loss from operations		(3,926)		(2,392)		(7,256)		(7,141)
Interest income		5		8		11		28
Other expense, net		—		—		—		(1)
Loss before income taxes		(3,921)		(2,384)		(7,245)		(7,114)
Provision for income taxes		—		—		—		—
Net loss		(3,921)		(2,384)		(7,245)		(7,114)
Other comprehensive (loss) income, net of tax		(4)		6		(11)		(28)
Comprehensive loss	$	(3,925)	$	(2,378)	$	(7,256)	$	(7,142)
Loss per share:
Net loss per share, basic and diluted	$	(0.18)	$	(0.15)	$	(0.33)	$	(0.44)
Weighted average common shares outstanding:
Basic and diluted		22,200,074		16,303,681		21,909,464		15,987,240

See accompanying notes to condensed consolidated financial statements.

Table of Contents

NeuroBo Pharmaceuticals, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity ~~(Deficit)~~

(in thousands, except share amounts)

(unaudited)

Redeemable Convertible

Additional

Accumulated

Preferred Stock

Common Stock

Paid–In

Other Comprehensive

Accumulated

Total


Shares

Amount



Shares

Amount

Capital

(Loss) Income

Deficit

Equity (Deficit)

Balance at January 1, 2020

—

$
—

15,592,718

$
16

$
49,130

$
12

$
(36,866)

$
12,292

Exercise of stock options

—

—

84,589

—

53

—

—

53

Stock–based compensation

—

—

—

—

159

—

—

159

Foreign currency translation adjustment

—

—

—

—

—

(34)

—

(34)

Net loss

—

—

—

—

—

—

(4,730)

(4,730)

Balance at March 31, 2020

—

—

15,677,307

16

49,342

(22)

(41,596)

7,740

Issuance of common stock in connection with equity financing

—

—

750,000

1

7,499

—

—

7,500

Transaction costs in connection with equity financing

—

—

—

—

(984)

—

—

(984)

Stock–based compensation

—

—

—

—

171

—

—

171

Issuance of broker warrants in connection with equity financing

—

—

—

—

289

—

—

289

Foreign currency translation adjustment

—

—

—

—

—

6

—

6

Net loss

—

—

—

—

—

—

(2,384)

(2,384)

Balance at June 30, 2020

—

$
—

16,427,307

$
17

$
56,317

$
(16)

$
(43,980)

$
12,338

Balance at January 1, 2019

4,801,020

$
16,746

5,166,812

$
—

$
2,266

$
2

$
(15,554)

$
(13,286)

Stock-based compensation

—

—

—

—

60

—

—

60

Foreign currency translation adjustment

—

—

—

—

—

(2)

—

(2)

Net loss

—

—

—

—

—

—

(2,464)

(2,464)

Balance at March 31, 2019

4,801,020

16,746

5,166,812

—

2,326

—

(18,018)

(15,692)

Issuance of redeemable convertible preferred stock, net of issuance costs of $65

3,463,593

24,175

—

—

—

—

—

—

Stock-based compensation

—

—

—

—

79

—

—

79

Foreign currency translation adjustment

—

—

—

—

—

11

—

11

Net loss

—

—

—

—

—

—

(1,901)

(1,901)

Balance at June 30, 2019

8,264,613

$
40,921

5,166,812

$
—

$
2,405

$
11

$
(19,919)

$
(17,503)

~~Table of Contents~~

~~See accompanying notes to condensed consolidated financial statements.~~

~~NeuroBo Pharmaceuticals, Inc.~~

~~Condensed Consolidated Statements of Cash Flows~~


				Additional		Accumulated
	Common Stock			Paid–In		Comprehensive		Accumulated		Total
	Shares	Amount		Capital		Income (Loss)		Deficit		Equity
Balance at December 31, 2019	15,592,718	$	16	$	49,130	$	12	$	(36,866)	$	12,292
Exercise of stock options	84,589		—		53		—		—		53
Stock–based compensation	—		—		159		—		—		159
Foreign currency translation adjustment	—		—		—		(34)		—		(34)
Net loss	—		—		—		—		(4,730)		(4,730)
Balance at March 31, 2020	15,677,307		16		49,342		(22)		(41,596)		7,740
Issuance of common stock in connection with equity financing	750,000		1		7,499		—		—		7,500
Transaction costs in connection with equity financing	—		—		(984)		—		—		(984)
Stock–based compensation	—		—		171		—		—		171
Issuance of broker warrants in connection with equity financing	—		—		289		—		—		289
Foreign currency translation adjustment	—		—		—		6		—		6
Net loss	—		—		—		—		(2,384)		(2,384)
Balance at June 30, 2020	16,427,307	$	17	$	56,317	$	(16)	$	(43,980)	$	12,338

Balance at December 31, 2020	19,671,182	$	20	$	73,713	$	14	$	(66,544)	$	7,203
Issuance of common stock and warrants in connection with equity financing	2,500,000		2		9,998		—		—		10,000
Transaction costs in connection with equity financing	—		—		(908)		—		—		(908)
Stock–based compensation	—		—		187		—		—		187
Foreign currency translation adjustment	—		—		—		(7)		—		(7)
Net loss	—		—		—		—		(3,324)		(3,324)
Balance at March 31, 2021	22,171,182		22		82,990	$	7		(69,868)		13,151
Stock–based compensation	—		—		180		—		—		180
Exercise of stock options	114,310		—		72		—		—		72
Foreign currency translation adjustment	—		—		—		(4)		—		(4)
Net loss	—		—		—		—		(3,921)		(3,921)
Balance at June 30, 2021	22,285,492	$	22	$	83,242	$	3	$	(73,789)	$	9,478

~~(in thousands)~~

~~(unaudited)~~

For the Six Months Ended

June 30,

2020

2019

Operating activities

Net loss

$
(7,114)

$
(4,365)

Adjustments to reconcile net loss to net cash used in operating activities:

Stock-based compensation

330

139

Non cash interest related to convertible notes - related party

—

29

Depreciation

23

1

Lease liability principal payment

(10)

—

Non-cash lease expense

10

—

Change in assets and liabilities, net of the effects of the reverse asset acquisition:

Prepaid expenses and other assets

(751)

899

Accounts payable

1,045

599

Accrued and other liabilities

5

282

Net cash used in operating activities

(6,462)

(2,416)

Investing activities

Purchases of property and equipment

(2)

(25)

Net cash used in investing activities

(2)

(25)

Financing activities

Proceeds from issuance of common stock and redeemable convertible preferred stock

7,500

24,240

Exercise of stock options

53

—

Issuance costs

(695)

(65)

Net cash provided by financing activities

6,858

24,175

Net increase in cash and restricted cash

394

21,734

Net foreign exchange difference

(19)

9

Cash and restricted cash at beginning of period

13,923

2,845

Cash and restricted cash at end of period

$
14,298

$
24,588

Supplemental disclosure of cash flow information:

Cash paid for income taxes

$
—

$
—

Cash paid for interest

$
—

$
—

Supplemental non-cash investing and financing transactions:

Placement warrants issued in connection with equity financing

$
289

$
—

See accompanying notes to condensed consolidated financial statements.

Table of Contents

NeuroBo Pharmaceuticals, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	For the Six Months Ended
	June 30,
	2021		2020
Operating activities
Net loss	$	(7,245)	$	(7,114)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		367		330
Non-cash lease expense		12		10
Depreciation		24		23
Change in assets and liabilities
Prepaid expenses and other assets		(361)		(751)
Accounts payable		(2,228)		1,045
Accrued and other liabilities		(297)		(5)
Net cash used in operating activities		(9,728)		(6,462)
Investing activities
Purchases of property and equipment		(3)		(2)
Net cash used in investing activities		(3)		(2)
Financing activities
Proceeds from equity offering		10,000		7,500
Issuance costs		(908)		(695)
Exercise of stock options		72		53
Net cash provided by financing activities		9,164		6,858
Net (decrease) increase in cash		(567)		394
Net foreign exchange difference		(9)		(19)
Cash at beginning of period		10,089		13,923
Cash at end of period	$	9,513	$	14,298


Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	—	$	—
Cash paid for interest	$	—	$	—

Supplemental non-cash investing and financing transactions:
Placement warrants issued in connection with equity financing	$	—	$	289

See accompanying notes to condensed consolidated financial statements.

Table of Contents

NeuroBo Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

1. The Company and Basis of Presentation

NeuroBo Pharmaceuticals, Inc. (together with its subsidiaries, the ~~"Company"~~“Company” or ~~"NeuroBo"), formerly known as Gemphire Therapeutics Inc. (“Gemphire”~~“NeuroBo”), is a clinical-stage biotechnology company with ~~three~~four therapeutics programs designed to impact a range of indications in viral, neurodegenerative and cardiometabolic disease:

●

ANA001, which is focused on the development for coronavirus indications, is currently in Phase 2/3 clinical trials as a treatment for COVID-19;

●

NB-01, which is primarily focused on the development of a treatment for painful diabetic neuropathy, but which the Company believes could also treat a range of neuropathic conditions, including chemotherapy-induced peripheral neuropathy and post-traumatic peripheral neuropathy;

●

NB-02, which has the potential to treat the symptoms of cognitive impairment and modify the progression of neurodegenerative diseases associated with the malfunction of a protein called tau, and with amyloid beta plaque deposition; and

●

Gemcabene, which is currently being assessed as an acute indication for COVID-19. Gemcabene was previously focused on developing and commercializing therapies for the treatment of dyslipidemia, a serious medical condition that increases the risk of life-threatening cardiovascular disease, focused on orphan indications such as homozygous familial hypercholesterolemia, as well as nonalcoholic fatty liver disease/nonalcoholic steatohepatitis.

The Company was originally incorporated as Gemphire Therapeutics Inc. (“Gemphire”). In connection with the closing of the 2019 Merger (as defined below), the Company changed its name to NeuroBo Pharmaceuticals, Inc. The Company’s operations have consisted principally of performing research and development activities, clinical development and raising capital. The ~~Company's~~Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding before sustainable revenues and profit from operations are achieved.

COVID-19

The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on the Company’s business is highly uncertain and difficult to predict, as the responses that the Company, other businesses and governments are taking continue to evolve. Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it is possible that it could cause a lasting national ~~and/~~or global economic recession. Policymakers around the globe have responded with fiscal policy actions to support the healthcare industry and economy as a whole. The magnitude and overall effectiveness of these actions remain uncertain.

~~To date, except for~~Exclusive of the ~~adjustments to scientific activity described under “Current Scientific Activity” below,~~development of certain of the ~~Company has not experienced any significant changes in our business that would have a significant negative impact on our consolidated statements of operations or cash flows.~~

~~The~~Company’s proposed therapies, the severity of the impact of the COVID-19 pandemic on the Company’s business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company’s service providers, suppliers, contract research organizations and the Company’s clinical trials, all of which are uncertain and cannot be predicted. As of the date of issuance of Company’s financial statements, the extent to which the COVID-19 pandemic may in the future materially impact the Company’s financial condition, liquidity or results of operations is uncertain. To date, other than prioritizing development on COVID-19 therapeutics over non-COVID related therapeutics, the Company has not experienced any significant external changes in our business that has had a significant negative impact on its consolidated statements of operations or cash flows.

~~Current Scientific Activity~~

~~In light of the present business environment, including the impact of the COVID-19 virus that emerged in December~~

Table of Contents

NeuroBo Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

~~2019 and became a global pandemic, the Company is currently conducting the scientific activities described below~~Mergers

2020 Merger with ~~a view toward conserving financial resources.~~ANA

For NB-01, the Company has determined that any attempt to conduct Phase 3 clinical trials, as previously announced, would be difficult if not impossible in the short or medium term. Accordingly, in the first quarter ofOn December 31, 2020, the Company ~~directed its contract research organization~~acquired 100% of ANA Therapeutics, Inc., a Delaware corporation (“~~CRO”~~ANA”) ~~partners~~, pursuant to an Agreement and ~~other vendors working on the Phase 3 clinical trials~~Plan of ~~NB-01 to cease all work and has terminated its existing contract arrangements with each of them.~~

~~The Company is currently devoting scientific resources to evaluating the potential to bring the NB-01 asset~~Merger, dated December 31, 2020 (the “2020 Merger Agreement” or “2020 Merger”). Pursuant to the ~~market through a different regulatory pathway. Development~~2020 Merger Agreement, NeuroBo issued to the stockholders of ~~NB-01~~ANA 3,243,875 shares of its common stock. The 2020 Merger, which closed on December 31, 2020, was accounted for as an ~~orphan drug is among the alternatives that the Company is considering, and the Company may conduct feasibility studies~~asset acquisition pursuant to ~~identify a rare disease relevant to NB-01. There is no assurance that the Company will be able to pursue any orphan drug indication for NB-01.The Company considered marketing NB-01~~Topic 805, Business Combinations, as ~~a nutraceutical (non-pharmaceutical) product, but has determined not to pursue such pathway at this time.~~

The Company is preparing an Investigational New Drug (“IND”) application to the U.S. Food and Drug Administration (“FDA”) for NB-02. The Company intends to postpone the first human clinical trials for NB-02 until global health and macroeconomic conditions improve, with a view toward commencing clinical trial activity in the first half of 2021, subject to improvementsubstantially all of the ~~constraints imposed by~~fair value of the ~~COVID-19 pandemic. The Company is also considering engaging~~assets acquired were concentrated in a group of similar non-financial assets.

2019 Merger with ~~a strategic partner to assist with clinical trials for NB-02.~~

In May 2020, the Company received written communication from the U.S. Food and Drug Administration (“FDA”) that the clinical development program for Gemcabene remains on a partial clinical hold. The Company is reviewing its options regarding Gemcabene.

~~Merger~~

Gemphire

On July 24, 2019, Gemphire ~~Therapeutics Inc. (“Gemphire”),~~ and NeuroBo Pharmaceuticals, Inc. (“Private NeuroBo”) entered into a definitive agreement, which was amended on October 29, 2019 (the ~~“Merger~~“2019 Merger Agreement”). The merger closed on December 30, 2019, ~~(the “Effective Date”),~~ whereby Private NeuroBo merged with a wholly-owned subsidiary of the Company in an all-stock transaction (the ~~“Merger”~~“2019 Merger”).

Upon completion of the Merger, the Company changed its name to NeuroBo Pharmaceuticals, Inc., Private NeuroBo changed its name to NeuroBo Therapeutics, Inc., and the Company changed its ticker symbol on the Nasdaq Capital Market from “GEMP” to "NRBO". Except as otherwise indicated, references herein to “NeuroBo,” “the Company,” the “combined company,” “we,” “us,” and “our,” refer to NeuroBo Pharmaceuticals, ~~Inc. on a post-Merger basis.~~

Pursuant to the terms of the Merger Agreement, each outstanding share of Private NeuroBo common stock outstanding immediately prior to the closing of the Merger was converted into 1.1431 shares of the Company’s common stock (the “Exchange Ratio”). Immediately prior to the closing of the Merger, all shares of Private NeuroBo redeemable preferred stock then outstanding were exchanged into shares of common stock of Private NeuroBo. In addition, all outstanding options exercisable for common stock of Private NeuroBo converted into options exercisable for shares of the Company’s common stock upon the Merger. Such options and their related terms were adjusted by the Exchange Ratio. Immediately following the Merger, the stockholders of Private NeuroBo owned approximately 96.2% of the outstanding common stock of the Company.

The transaction was accounted for as a reverse asset acquisition in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Under this method of accounting, Private NeuroBo was deemed to be the accounting acquirer for financial reporting purposes. This determination was primarily based on the facts that, immediately following the Merger: (i) Private NeuroBo’s stockholders owned substantially all of the voting rights in the

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~~NeuroBo Pharmaceuticals, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

combined company, (ii) Private NeuroBo designated all, but one, of the members of the initial board of directors of the combined company, and (iii) Private NeuroBo’s senior management holds all key positions in the senior management of the combined company. As a result, as of the closing date of the Merger, the net assets of Gemphire were recorded at their acquisition-date relative fair values in the consolidated financial statements of the Company and the reported operating results prior to the Merger are those of Private NeuroBo.

Basis of presentation and consolidation principles

The accompanying condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with ~~GAAP~~U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated financial statements may not include all disclosures required by GAAP; however, the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited condensed financial statements should be read in conjunction with the audited financial statements and the notes thereto for the fiscal year ended December 31, ~~2019~~2020 included in the Company’s Annual Report on Form 10-K filed with the SEC on ~~March 30, 2020~~April 15, 2021. The condensed consolidated balance sheet atas of December 31, ~~2019~~2020 was derived from the audited financial statements.

In the opinion of management, all adjustments, consisting of only normal recurring adjustments that are necessary to present fairly the financial position, results of operations, and cash flows for the interim periods, have been made. The results of operations for the interim periods are not necessarily indicative of the operating results for the full fiscal year or any future periods.

On August 11, 2019, Private NeuroBo’s board of directors and stockholders approved an amendment to the restated certificate of incorporation to affect a ten thousand-for-one (10,000-for-1) stock split of Private NeuroBo's common stock and convertible preferred stock. The par value and the authorized shares of the common and convertible preferred stock and the exercise prices of options to purchase common stock were adjusted accordingly as a result of the stock split. All issued and outstanding common stock, options for common stock, convertible preferred stock and convertible notes, as well as the exercise price of each option for common stock and the conversion price for convertible preferred stock and convertible notes, have been retroactively adjusted to reflect this stock split for all periods presented.

All of the share and per share amounts presented were adjusted, on a retroactive basis, to reflect the ten thousand-for-one (10,000-for-1) stock split and the effect of the exchange of the shares of Private NeuroBo into the shares of the Company at the Exchange Ratio, except for par value and share authorizations of Private NeuroBo for periods presented prior to the Merger.

The condensed consolidated financial statements of the Company include a South Korean subsidiary, NeuroBo Co., LTD., which is fully owned by the Company. All significant intercompany accounts and transactions have been eliminated in the preparation of the financial statements.

Reclassifications

~~Reclassification~~

Certain amounts presented in the prior year period have been reclassified to conform to current period financial statement presentation. The non-cash portion of ~~Prior Year Amounts~~

~~Interest income~~the lease liability line item reported in the condensed consolidated statements of cash flows during the comparable prior year ~~periods~~period was ~~reclassified from~~incorporated in the change in accrued and other ~~(expense) income, net~~liabilities line ~~item~~item.

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NeuroBo Pharmaceuticals, Inc.

Notes to ~~the interest income (expense), net line item to conform to current year classifications.~~Condensed Consolidated Financial Statements (unaudited)

Going Concern

From its inception through June 30, ~~2020,~~2021, the Company has devoted substantially all of its efforts to drug discovery and development and conducting clinical trials. The Company has a limited operating history and the sales and income potential of the Company's business and market are unproven. Successful transition to attaining profitable operations is

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~~NeuroBo Pharmaceuticals, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

dependent upon achieving a level of revenues adequate to support the Company's cost structure. As of June 30, ~~2020,~~2021, the Company had ~~$14.3~~$9.5 million in cash. The Company has experienced net losses and negative cash flows from operating activities since its inception and had an accumulated deficit of ~~$44.0~~$73.8 million as of June 30, ~~2020.~~2021.

To date, the Company has raised capital principally through the ~~issuance~~private placements of common stock, ~~convertible notes~~warrants and ~~private placements of redeemable convertible preferred stock. The Company has raised a total of $16.8 million from the issuance by Private NeuroBo of Series A~~ redeemable convertible preferred stock ~~and $0.5 million from~~as well as via the issuance ~~by Private NeuroBo~~ of convertible ~~notes through December 31, 2018,~~notes. In January 2021, the Company entered into a private placement and ~~$24.2 million from the issuance by Private NeuroBo~~issued common stock and warrants that resulted in gross proceeds of ~~Series B redeemable convertible preferred stock in May and June 2019.~~$10 million. On April 13, 2020, the Company entered into a Securities Purchase Agreement, pursuant to which the Company ~~agreed to issue~~issued and ~~sell,~~sold shares of the Company’s common stock in a registered ~~direct~~ offering (the “Registered Offering”)~~, 750,000 shares of common stock at an offering price of $10 per share. The Registered Offering~~ which resulted in gross proceeds of $7.5 million. See Note 7 – Stockholders’ Equity. The Company will need to continue to raise a substantial amount of funds until it is able to generate revenues to fund its development activities.

The determination as to whether the Company can continue as a going concern contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company expects to continue to incur net losses and negative cash flows from operations into the foreseeable future. Successful transition to attaining profitable operations is dependent upon achieving a level of revenues adequate to support the Company's cost structure. The Company has incurred net losses since inception and has relied on its ability to fund its operations through debt and equity financings. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The accompanying ~~condensed~~ consolidated financial statements have been prepared assuming that the Company will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty. This basis of accounting contemplates the recovery of the Company's assets and the satisfaction of liabilities in the normal course of business.

The Company believes that its existing cash will be sufficient to fund its operations into the ~~second~~first quarter of ~~2021 at the level of scientific activity described above under “~~~~Current Scientific Activity~~”.2022. The Company plans to continue to fund its operations and capital funding needs through a combination of equity offerings, debt financings, or other sources, potentially including collaborations, licenses and other similar arrangements. There can be no assurance that the Company will be able to obtain any sources of financing on acceptable terms, or at all. To the extent that the Company can raise additional funds by issuing equity securities, the Company's stockholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants that impact the Company's ability to conduct its business.

2. Summary of Significant Accounting Policies

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, expenses, and related disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. The most significant estimates in the Company's consolidated financial statements relate to accrued expenses and the fair value of stock-based compensation and warrant issuances. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgements about the carrying values of assets and liabilities. Actual results could differ from those estimates. Changes in estimates are reflected in reported results in the period in which they become known.

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NeuroBo Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash. The

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~~NeuroBo Pharmaceuticals, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

Company’s cash is principally held by one financial institution in the United States. Amounts on deposit may at times exceed federally insured limits. Management believes that the financial institution is financially sound, and accordingly, minimal credit risk exists with respect to the financial institution. As of June 30, ~~2020,~~2021, the Company had deposits in excess of federally insured amounts by ~~$13.7~~$9.1 million.

Segment Information

Operating segments are components of an enterprise for which separate financial information is available and is evaluated regularly by the Company’s chief operating decision maker in deciding how to allocate resources and assessing performance. The Company’s chief operating decision maker is its Chief Executive Officer. The Company’s Chief Executive Officer views the Company’s operations and manages its business in 1 operating segment, which is principally the business of development and commercialization of therapeutics.

Fair Value of Financial Instruments

The Company’s financial instruments include principally cash, prepaid, other current assets, right of use assets, accounts payable, accrued liabilities ~~lease liabilities, convertible debt~~ and ~~preferred stock.~~ warrants. The carrying amounts of prepaid expenses, accounts payable, and accrued liabilities are reasonable estimates of their fair value because of the short maturity of these items.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel-related costs, including salaries and stock-based compensation costs, for personnel in functions not directly associated with research and development activities. Other significant costs include legal fees related to intellectual property and corporate matters and professional fees for accounting and other services.

Research and Development Costs

Research and development costs are charged to expense as incurred. Research and development expenses are comprised of costs incurred in performing research and development activities, including clinical trial costs, manufacturing costs for both clinical and pre-clinical materials as well as other contracted services, license fees, and other external costs. Nonrefundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity is performed or when the goods have been received, rather than when payment is made, in accordance with Accounting Standards Codification (“ASC”) 730, Research and Development.

Income Taxes

The Company utilizes the liability method of accounting for income taxes as required by ASC 740, Income Taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and the tax basis of assets and liabilities and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. Currently, there is no0 provision for income taxes, as the Company has incurred operating losses to date, and a full valuation allowance has been provided on the net deferred tax assets.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with the provisions of ASC 718, Compensation — Stock Compensation (“ASC 718”). Accordingly, compensation costs related to equity instruments granted are recognized

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NeuroBo Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

at the grant-date fair value. The Company records forfeitures when they occur. Stock-based compensation arrangements to non-employees are accounted for in accordance with the applicable provisions of ASC 718 using a fair value approach.

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~~NeuroBo Pharmaceuticals, Inc.~~Leases

~~Notes to Condensed Consolidated Financial Statements~~

~~Convertible Notes~~

The Company evaluates all conversion and redemption features contained in a debt instrument to determine if there are any embedded features that require bifurcation as a derivative or separation as a beneficial conversion feature. The host debt instrument is discounted for the value of any embedded feature that is accounted for as either a derivative or a beneficial conversion feature. The discount is amortized and recorded to interest expense over the term of the host debt instrument using the effective interest method. The Company’s convertible debt contained an embedded beneficial conversion feature that was separated and recorded as additional paid-in capital.

~~Fair Value of common stock~~

In the absence of a public trading market prior to the Merger, and as a development stage company with no significant revenues, the Company believed that it was appropriate to consider a range of factors to determine the fair value of the common stock at each grant date. In determining the fair value of its common stock, the Company used methodologies, approaches, and assumptions consistent with the American Institute of Certified Public Accountants' (“AICPA”) Audit and Accounting Practice Aid Series: ~~Valuation of Privately Held Company Equity Securities Issued as Compensation~~ (the "AICPA Practice Guide"). The valuations of Private NeuroBo common stock were prepared using a hybrid method, which used market approaches to estimate the enterprise value of Private NeuroBo. The hybrid method is a probability-weighted expected return method ("PWERM"), where the equity value in one or more of the scenarios is calculated using an option pricing method ("OPM"). The PWERM is a scenario-based methodology that estimates the fair value of common stock based upon an analysis of future values for Private NeuroBo, assuming various outcomes. The common stock value was based on the probability-weighted present value of expected future investment returns considering each of the possible outcomes available as well as the rights of each class of stock. The future value of the common stock under each outcome was discounted back to the valuation date at an appropriate risk-adjusted discount rate and probability weighted to arrive at an indication of value for the common stock. A discount for lack of marketability of the common stock was then applied to arrive at an indication of value for the common stock. The OPM treats common stock and preferred stock as call options on the total equity value of a company, with exercise prices based on the value thresholds at which the allocation among the various holders of a company's securities changes. Under this method, the common stock has value only if the funds available for distribution to stockholders exceeded the value of the preferred stock liquidation preferences at the time of the liquidity event, such as a strategic sale or a merger. In addition, the Company considered various objective and subjective factors, along with input from an independent third-party valuation firm. The factors included (1) the achievement of technical and operational milestones by the Company; (2) the status of strategic relationships with collaborators; (3) the significant risks associated with the Company's stage of development; (4) capital market conditions for life science companies and, in particular, similarly situated, privately held, early-stage life science companies; (5) the Company's available cash, financial condition, and results of operations; (6) the most recent sales of the Company's preferred stock to the extent they were with outside parties; and (7) the preferential rights of the outstanding preferred stock.

~~Leases~~

On July 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) ~~(“ASU 2016-02”)~~. The Company assesses its contracts at inception to determine whether the contract contains a lease, including evaluation of whether the contract conveys the right to control an explicitly or implicitly identified asset for a period of time. The Company has recognized right-of-use assets and lease liabilities that represent the net present value of future operating lease payments utilizing a discount rate corresponding to the Company’s incremental borrowing rate and amortized over the remaining terms of the leases. For operating leases of a short-term nature, i.e., those with a term of less than twelve months, the Company recognizes lease payments as an expense on a straight-line basis over the remaining lease term.

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~~NeuroBo Pharmaceuticals, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

Property and Equipment

Property and equipment is recorded at cost and reduced by accumulated depreciation. Depreciation expense is recognized over the estimated useful lives of the assets using the straight-line method. The estimated useful life for property and equipment ranges from three to five years. Tangible assets acquired for research and development activities and that have an alternative use are capitalized over the useful life of the acquired asset. Estimated useful lives are periodically reviewed, and when appropriate, changes are made prospectively. When certain events or changes in operating conditions occur, asset lives may be adjusted and an impairment assessment may be performed on the recoverability of the carrying amounts. Maintenance and repairs are charged directly to expense as incurred.

Foreign Currency Translation

The foreign subsidiary uses the local currency as the functional currency. The Company translates the assets and liabilities of its foreign operation into U.S. dollars based on the rates of exchange in effect as of the balance sheet date. Expenses are translated into U.S. dollars using average exchange rates for each period. The resulting adjustments from the translation process are included in accumulated other comprehensive loss in the accompanying condensed consolidated balance sheets.

Certain transactions of the Company are settled in foreign currency and are thus translated to U.S. dollars at the rate of exchange in effect at the end of each month. Gains and losses resulting from the translation are included in other income or expense in the accompanying condensed consolidated statements of operations and comprehensive loss.

Patent Costs

Costs related to filing and pursuing patent applications are expensed as incurred, as recoverability of such expenditures is uncertain. These costs are included in general and administrative expenses.

Comprehensive Loss

Comprehensive loss is comprised of net loss and other comprehensive income or loss. Comprehensive loss includes net loss as well as other changes in stockholders' equity ~~(deficit)~~ that result from transactions and economic events other than those with stockholders. Comprehensive loss currently consists of net loss and changes in foreign currency translation adjustments.

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~~Segment Information~~NeuroBo Pharmaceuticals, Inc.

~~Operating segments are components of an enterprise for which separate financial information is available and is evaluated regularly by the Company’s chief operating decision maker in deciding how~~Notes to allocate resources and assessing performance. The Company’s chief operating decision maker is its Chief Executive Officer. The Company’s Chief Executive Officer views the Company’s operations and manages its business in one operating segment, which is principally the business of development and commercialization of therapeutics.Condensed Consolidated Financial Statements (unaudited)

Recent Accounting Pronouncements Adopted

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB") or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its consolidated financial position or results of operations upon adoption.

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~~NeuroBo Pharmaceuticals, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~In August 2018, the FASB issued ASU 2018-13,~~ ~~Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13).~~ ~~The new guidance modifies the disclosure requirements in Topic 820 as follows:~~

●	Removals: the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level 3 fair value measurements.

●

Modifications: for investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date when restrictions from redemption might lapse only if the investee has communicated the timing to the entity or announced the timing publicly; and the amendments clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date.

●

Additions: the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period; and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements.

This guidance is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should all be applied prospectively for only the most recent interim or annual period presented in the initial year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted. The Company adopted the new guidance on January 1, 2020. The guidance did not have a material impact on the consolidated financial statements.

~~Recent Accounting Pronouncements Not Yet Adopted~~

In December 2019, ~~the~~ FASB issued ASU No. 2019-12, Income Taxes (Topic 740) which amends the existing guidance relating to the accounting for income taxes. This ASU is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles of accounting for income taxes and to improve the consistent application of GAAP for other areas of accounting for income taxes by clarifying and amending existing guidance. The ASU is effective for fiscal years beginning after December 15, 2020. The Company ~~does not expect that the adoption of~~adopted this new guidance ~~will~~on January 1, 2021 and the adoption did not have a material impact on the Company’s consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which, among other things, provides guidance on how to account for contracts on an entity’s own equity. This ASU eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, this ASU modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted earnings per share computation. The amendments in this ASU are effective for smaller reporting companies as defined by the SEC for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The Company adopted this new guidance on January 1, 2021 and the adoption did not have a material impact on the Company’s consolidated financial statements.

~~3. Balance Sheet Detail (in thousands)~~

Recent Accounting Pronouncements Not Yet Adopted

~~Property~~

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses”. The ASU sets forth a “current expected credit loss” (CECL) model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and ~~Equipment~~

~~Property~~reasonable supportable forecasts. This replaces the existing incurred loss model and ~~equipment consist~~is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. Recently, the FASB issued the final ASU to delay adoption for smaller reporting companies to calendar year 2023. The Company is currently assessing the impact of the ~~following:~~adoption of this ASU on its consolidated financial statements.

As of

June 30,

December 31,

2020

2019

Research and development equipment

$
153

$
158

Office equipment

59

59

Total property and equipment

212

217

Less accumulated depreciation

(40)

(17)

Property and equipment, net

$
172

$
200

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NeuroBo Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

3. Balance Sheet Detail (in thousands)

Property and Equipment

Property and equipment consist of the following:



	June 30,		December 31,
	2021		2020
Research and development equipment	$	158	$	158
Office equipment		63		60
Total property and equipment		221		218
Less accumulated depreciation		(87)		(63)
Property and equipment, net	$	134	$	155

Depreciation expense was $12 ~~and less than $1~~ for the three months ended June 30, 2021 and 2020, and ~~2019, respectively,~~$24 and $23 ~~and less than $1~~ for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

Accrued liabilities

Accrued liabilities consist of the following as of:


	June 30,		December 31,		June 30,		December 31,
	2020		2019		2021		2020
External research and development expenses	$	1,197	$	915	$	671	$	218
Payroll related						58		277
Professional services		167		158		46		561
Payroll related		27		160
Other		35		189		36		40
Total	$	1,426	$	1,422	$	811	$	1,096

In the first quarter of 2020, the Company directed its contract research organization (“CRO”) partners and other vendors working on the Phase 3 clinical trials of NB-01 to cease all work and has terminated its existing contract arrangements with each of them. The Company incurred termination expenses of approximately $675 in connection with these terminations which are included in the external research and development expenses line item in the above table. One CRO invoiced termination charges that the Company disputes. In accordance with ASC 450, ~~Contingencies~~, the Company has determined that it is reasonably possible that a loss has occurred with respect to these invoiced amounts and estimates the range of loss as $0 to $1,100. Since no amount in this range is a better estimate than any other amount within the range, the Company has not accrued any liability arising from potential losses relating to these disputed termination charges.

During the three months ended March 31, 2020, the Company recorded adjustments to research and development expenses related to clinical trial expenses that were not correctly recorded in prior periods. The net adjustments resulted in an increase of $186 in the Company’s net loss for the three months ended March 31, 2020, which the Company considers immaterial to all periods.

4. Merger Related Agreements

~~The~~ANA Merger ~~which closed on December 30, 2019, was accounted for as a reverse asset acquisition pursuant to Topic 805,~~ ~~Business Combinations~~~~, as substantially all of the fair value of the assets acquired were concentrated in a group of similar non-financial assets, and the acquired assets did not have outputs or employees.~~Milestone Payments

~~Contingent Value Rights Agreement~~

~~On December 30, 2019, in connection with the Merger, the Company, Grand Rapids Holders’ Representative, LLC, as representative of the Company’s stockholders prior~~Pursuant to the 2020 Merger ~~and Computershare Inc. and Computershare Trust Company, N.A. as the rights agent, entered into a Contingent Value Rights~~ Agreement, (the “CVR Agreement”). The Company’s stockholders of record as of immediately prior to the effective date of the Merger received one contingent value right (“CVR”) entitling such holders to receive, in the aggregate, 80% of the Gross Consideration less other Permitted Deductions (each as defined in the CVR Agreement) received during the 15-year period afterfollowing the closing of the 2020 Merger, (the “CVR Term”) from the grant, sale or transfer of rights to Gemcabene (other than a grant, sale or transfer of rights involving a sale or disposition of the post-Merger combined company) that is entered into during the 10-year period after the closing of the Merger or pursuant to the Beijing SL Agreement (as defined in Note 6 – ~~License Agreement~~ ~~below), but not including the $2.5 million upfront gross payment pursuant to the Beijing SL Agreement. Under the CVR Agreement,~~ the Company ~~agreed~~is obligated to ~~commit up~~pay milestone payments (each, a “Milestone Payment”) to ~~$1 million to support~~certain persons identified in the ~~further development of~~2020 Merger Agreement (each a “Stakeholder” and collectively, the “Stakeholders”) in the form, time and manner as set forth in the 2020 Merger

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NeuroBo Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

~~Gemcabene, to be funded following execution~~Agreement, upon the achievement of the ~~Beijing SL Agreement and the receipt~~following milestone events set forth below by the Company or any of its affiliates (each, a “Milestone Event”):


Milestone Event				Milestone Payment
First receipt of Marketing Approval (as defined in the 2020 Merger Agreement) from the FDA for any Niclosamide Product (as defined in the 2020 Merger Agreement)		$		45.0 million
Sales Milestones:
Milestone Event – Worldwide Cumulative Net Sales of a Niclosamide Product
equal to or greater than:				Milestone Payment
$500 million			$	$9.0 million
$1 billion	$			13.5 million
$3 billion	$			36.0 million
$5 billion	$			72.0 million

In connection with the 2020 Merger, the Company assumed a license agreement (the “YourChoice Agreement”) between ANA and YourChoice Therapeutics, Inc. (“YourChoice”).YourChoice granted to ANA, during the term of the ~~$2.5 million upfront gross payment payable under~~YourChoice Agreement, an exclusive, worldwide, fee-bearing license derived from the ~~Beijing SL~~licensed intellectual property throughout the world. As further discussed in Note 5, pursuant to the YourChoice Agreement, ~~which~~ the Company ~~received~~is obligated to pay Milestone Payments to YourChoice.

Additionally, pursuant to the 2020 Merger Agreement, the Company is obligated to pay a royalty of two and a half percent (2.5%) of annual worldwide net sales of each Niclosamide Product (as defined in ~~October 2019. The CVRs are not transferable, except~~the 2020 Merger Agreement) (each such payment, a “Royalty Payment”) to the Stakeholders in ~~certain limited circumstances, will not be certificated or evidenced by any instrument, will not accrue interest~~the form, time and ~~will not be registered with~~manner as set forth in the ~~SEC or listed for trading~~2020 Merger Agreement, following the first commercial sale of each Niclosamide Product (as defined in the 2020 Merger Agreement) on ~~any exchange. The CVR Agreement will continue in effect until the later~~a country-by-country and Niclosamide Product-by-Niclosamide Product basis.

As of ~~the end of the CVR Term and the payment of all amounts payable thereunder. Through~~ June 30, ~~2020, no milestones~~2021, 0 Royalty Payments had been accrued as there were no potential milestones yet considered probable.

Gemphire Contingent Value Rights Agreement.

On December 30, 2019, in connection with the 2019 Merger, Gemphire entered into the Contingent Value Rights Agreement (the “CVR Agreement”) with Grand Rapids Holders’ Representative, LLC, as representative of Gemphire’s stockholders prior to the 2019 Merger (the “Holders’ Representative”), and Computershare Inc. and Computershare Trust Company, N.A. as the rights agents (collectively, the “Rights Agent”). Under the CVR Agreement, which NeuroBo assumed in connection with the 2019 Merger, the holders of Gemphire shares at the time of the 2019 Merger (collectively, the “CVR Holders”) were entitled to receive 80% of the proceeds from the grant, sale, or transfer of rights to Gemcabene.

On March 23, 2021, NeuroBo, the Holders’ Representative, and the Rights Agent entered into the First Amendment to Contingent Value Rights Agreement (the “CVR Amendment”) to amend the CVR Agreement. Pursuant to the CVR Amendment, (i) the CVR Holders will continue to have the right to receive 80% of the proceeds from the grant, sale, or transfer of rights to Gemcabene as a treatment for cardiovascular conditions and (ii) the CVR Holders will now also

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NeuroBo Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

receive 10% of the proceeds from the grant, sale, or transfer of rights to Gemcabene as a treatment for any indication outside of treating cardiometabolic diseases, including COVID-19.

As of the June 30, 2021, 0 milestones had been accrued as there were no potential payments under the CVR Agreement or the CVR Amendment that were yet considered probable.

5. Commitments and Contingencies (in thousands)

Operating Leases

Boston ~~Leases~~Lease

~~In April 2018,~~On May 14, 2021, the Company entered into a non-cancelable operating lease for its corporate headquarters located in Boston Massachusetts. The agreement, effective August 1, 2021, has a six month term, and rental costs of approximately $3 per month prior to the application of certain rent concessions granted by the landlord in the amount of approximately $2 over the term of the lease.

Prior to May 2021, the Company entered a non-cancelable operating lease for its corporate headquarters ~~in Boston, MA (the “Boston Lease”).~~effective February 1, 2021. The lease ~~was subsequently amended,~~had a six month term, and rental costs of approximately $3 per month prior to the application of certain rent concessions granted by the landlord in the amount of approximately $1 over the term ~~was extended~~of the lease. Prior to August 2019 with an option to extend the term on a month-to-month basis. The Company exercised the option and extended the lease term on a month-to-month basis through January 15, 2020. The lease is subject to base lease payments and additional charges for common costs related to usage of shared space. Due to its short-term nature, the Company recognizes lease payments as an expense on a straight-line basis over the remaining lease term.

~~In September 2019, the Company entered~~February 1, 2021, a non-cancelable operating lease was in effect as ~~amended, for its new corporate headquarters located in Boston, Massachusetts (“New Boston Lease”). The agreement, effective~~of February 1, 2020 ~~has~~which had a one-year term and rental costs of $21 per month prior to the application of certain rent concessions granted by the landlord in the amount of $32.

NaN assets and liabilities were recognized for the corporate headquarter leases at June 30, 2021 and December 31, 2020. Due to the short-term nature of the leases, the Company recognized lease payments as an expense on a straight-line basis over the remaining lease term. For the three and six months ended June 30, 2021, expense under the corporate headquarters leases in the aggregate was $8 and $34, respectively. For the three and six months ended June 30, 2020, expense under the New Boston Lease and Boston Lease in the aggregate was $65 and $180, respectively, inclusive of a termination fee of $83, ~~respectively. For the three and six months ended June 30, 2019, expense under the Boston Lease~~ in ~~the aggregate was $27 and $53, respectively.~~each case.

~~Future minimum lease payments at June 30, 2020 were as follows under the New Boston Lease (in thousands):~~

December 31,

2020 (period from July 1 to December 31)

$
129

2021

21

Total minimum payments

$
150

Lease in Korea:

In May 2019, the Company entered a non-cancelable operating lease for its new facility in Korea (the “Korea Lease”). The initial lease term is five years with an option to renew for an additional five-year term. The lease commenced on July 2, 2019 and expires on July 1, 2024. The operating lease is subject to a deposit, base rent payments and additional charges for utilities and other common costs. In the third quarter of 2019, the Company recognized a right-of-use asset of $126 as well as a lease liability of $20 in other current liabilities and $106 in other non-current liabilities in conjunction with the commencement of the Korea Lease. The Company’s lease liability represents the net present value of future lease payments utilizing a discount rate of 10%, which corresponds to the Company’s incremental borrowing rate. As of June 30, ~~2020,~~2021, the weighted average remaining lease term was ~~4.00~~3.0 years. For the three ~~and six~~ month periods ended June 30, 2021 and 2020, the Company recorded non-cash expense of $8$7 and ~~$16, respectively,~~$8 related to the Korea ~~Lease. During~~

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~~Notes to Condensed Consolidated Financial Statements~~

Lease, respectively. For the six month ~~period~~periods ended June 30, 2021 and 2020, the Company recorded non-cash expense of $12 and $16 related to the Korea Lease, respectively. During the six month periods ended June 30, 2021 and 2020, the Company made cash payments of $16 for amounts included in the measurement of lease liabilities. ~~There was no expense or payment activity related~~

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NeuroBo Pharmaceuticals, Inc.

Notes to ~~the Korea Lease during the three and six month periods ended June 30, 2019.~~Condensed Consolidated Financial Statements (unaudited)

The following table reconciles the undiscounted lease liabilities to the total lease liabilities recognized on the consolidated balance sheet as of June 30, ~~2020~~2021 (in thousands):

December 31,

2020 (period from July 1 to December 31)

$
16

2021

32

2022

32

2023

32

2024

16

Total lease payments

128

Less effect of discounting

(23)

Total

105

Short-term portion

(23)

Long-term portion

$
82


	As of
	June 30,
2021 (period July 1 to December 31)	$	16
2022		32
2023		32
2024		17
Total lease payments		97
Less effect of discounting		(14)
Total		83
Short-term portion		(25)
Long-term portion	$	58

Xiehecheng Cultivation Service Agreement

On September 1, 2018 and as amended on October 1, 2020, the Company entered into a cultivation service agreement with Xiehecheng Chinese Herm Limited Corporation for the cultivation of two plants used to manufacture the Company's clinical assets.

As of June 30, ~~2020,~~2021, future minimum payments under the agreement, which is cancellable annually at the end of each research year, are as follows (in thousands):


		December 31,		December 31,

2020	(period from July 1 to December 31)	$	66
2021			220
2021 (July 1 to December 31)				$	66
2022			220		220
		$	506	$	286

YourChoice License Agreement

As described in Note 4, in connection with 2020 Merger, the Company assumed the YourChoice License Agreement. The fees due under the YourChoice Agreement include royalty payments of 0.5% of annual worldwide net sales of each Niclosamide Product (as defined in the 2020 Merger Agreement) and milestone payments in the aggregate of $19.5 million. The first milestone payment due is $5 million upon first receipt of Marketing Approval (as defined in the 2020 Merger Agreement) from the U.S. Food and Drug Administration (“FDA”) for any Niclosamide Product (as defined by the 2020 Merger Agreement), followed by sales milestones of $1 million, $1.5 million, $4 million, and $8 million if worldwide cumulative net sales of a Niclosamide Product are equal or greater than $500 million, $1, billion, $3, billion, and $5 billion, respectively. The term of the YourChoice Agreement will expire on the expiration or invalidation of the last of the licensed patents under the YourChoice Agreement.

As of June 30, 2021, there was sufficient uncertainty with regard to both the outcome of the clinical trials and the ability to obtain sufficient funding to support any of the cash milestone payments under the YourChoice Agreement, and as such, no liabilities were recorded related to the YourChoice Agreement.

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NeuroBo Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

Pfizer License Agreement

Upon the close of the 2019 Merger, the exclusive license agreement with Pfizer, Inc. (“Pfizer”) for the clinical product candidate Gemcabene (the “Pfizer Agreement”) was assumed by the Company. Under the Pfizer Agreement, in exchange for this worldwide exclusive right and license to certain patent rights to make, use, sell, offer for sale and import the clinical product Gemcabene, the Company has agreed to certain milestone and royalty payments on future sales.

The Company agreed to make milestone payments totaling up to $37 million upon the achievement of certain milestones, including the first new drug application (or its foreign equivalent) in any country, regulatory approval in each of the United States, Europe and Japan, the first anniversary of the first regulatory approval in any country, and upon achieving certain aggregate sales levels of Gemcabene. Future milestone payments under the Pfizer Agreement, if any, are not expected to begin for at least several years and extend over a number of subsequent years.

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~~Notes to Condensed Consolidated Financial Statements~~

The Company also agreed to pay Pfizer tiered royalties on a country-by-country basis based upon the annual amount of net sales, as specified in the Pfizer Agreement, until the later of: (a) five (5) years after the first commercial sale in such country; (b) the expiration of all regulatory or data exclusivity for Gemcabene in such country; and (c) the expiration or abandonment of the last valid claim of the licensed patents, including any patent term extensions or supplemental protection certificates in such country (collectively, the Royalty Term). Under the Pfizer Agreement, the Company is obligated to use commercially reasonable efforts to develop and commercialize Gemcabene.

~~None of the future milestone or royalty payments were triggered through June 30, 2020.~~

The Pfizer Agreement will expire upon expiration of the Royalty Term. On expiration (but not earlier termination), the Company will have a perpetual, exclusive, fully paid-up, royalty-free license under the licensed patent rights and related data to make, use, develop, commercialize, import and otherwise exploit the clinical product candidate Gemcabene. Either party may terminate the Pfizer Agreement for the other party’s material breach following a cure period or immediately upon certain insolvency events relating to the other party. Pfizer may immediately terminate the Pfizer Agreement in the event that (i) the Company or any of its affiliates or sublicenses contests or challenges, or supports or assists any third party to contest or challenge, Pfizer’s ownership of or rights in, or the validity, enforceability or scope of any of the patents licensed under the Pfizer Agreement or (ii) the Company or any of its affiliates or sublicensees fails to achieve the first commercial sale in at least one country by April 16, 2024.

Furthermore, upon termination of the Pfizer Agreement by Pfizer for any of the foregoing reasons, the Company grants Pfizer a non-exclusive, fully paid-up, royalty free, worldwide, transferrable, perpetual and irrevocable license to use any intellectual property rights arising from the development or commercialization of Gemcabene by the Company and any trademarks identifying Gemcabene and agrees to transfer regulatory filings and approvals to Pfizer or permit Pfizer to cross-reference and rely on such regulatory filings and approvals for Gemcabene. The Company may terminate the Pfizer Agreement for convenience upon 90 days’ written notice and payment of an early termination fee of $3.0 million.

As of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, there was sufficient uncertainty with regard to both the outcome of the clinical trials and the ability to obtain sufficient funding to support any of the cash milestone payments, ~~under the license agreement,~~ and as such, no liabilities were recorded related to the Pfizer Agreement.

Contingencies

From time to time, the Company may be subject to various claims and suits arising in the ordinary course of business. The Company does not expect that the resolution of these matters will have a material adverse effect on its financial position or results of operations.

~~Contract Research Agreements~~

In the first quarter of 2020, the Company directed its CRO partners and other vendors working on the Phase 3 clinical trials of NB-01 to cease all work and has terminated its existing contract arrangements with each of them. The Company incurred termination expenses of approximately $675 in connection with these terminations. One CRO invoiced termination charges that the Company disputes. In accordance with ASC 450, ~~Contingencies~~, the Company has determined that it is reasonably possible that a loss has occurred with respect these invoiced amounts and estimates the range of loss as $0 to $1,100. Since no amount in this range is a better estimate than any other amount within the range, the Company has not accrued any liability arising from potential losses relating to these disputed termination charges.

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~~NeuroBo Pharmaceuticals, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

6. License and Collaboration Agreement

Beijing SL License and Collaboration Agreement

Upon the close of the 2019 Merger, the License and Collaboration Agreement (the “Beijing SL Agreement”) with Beijing SL Pharmaceutical Co., Ltd. (“Beijing SL”) was assumed by the Company, pursuant to which the Company granted Beijing SL an exclusive royalty-bearing license to research, develop, manufacture and commercialize pharmaceutical products comprising, as an active ingredient, Gemcabene in mainland China, Hong Kong, Macau and ~~Taiwan (each, a “region,” and collectively, the “Territory”).~~Taiwan. The terms of the ~~agreement~~Beijing SL Agreement include payments based upon achievement of milestones and royalties on net product sales. Under the Beijing SL Agreement, the Company has variable consideration in the form of milestone payments. As of June 30, ~~2020, no~~2021, 0 revenue under the Beijing SL Agreement has been recognized.

~~Under~~

7. Stockholders’ Equity

2021 Private Placement

On January 21, 2021, the ~~terms~~Company closed on a Securities Purchase Agreement (the “2021 Purchase Agreement”) with certain institutional and accredited investors, pursuant to which the Company, in a private placement (“2021 Private Placement”), agreed to issue and sell an aggregate of 2,500,000 shares of the ~~Beijing SL Agreement, Beijing SL will be responsible,~~Company’s common stock at ~~its expense, for developing and commercializing products containing Gemcabene (each,~~ a “Licensed Product”) in the Territory, with certain assistance from the Company. To the extent mutually agreed to in writing, the Company and Beijing SL will collaborate on the Phase 3 clinical trial for homozygous familial hypercholesterolemia or other clinical trials with the Company as the sponsor designed to enroll patients both inside and outside the Territory (a “Global Study”), but Beijing SL will be responsible, at its expense, for the conduct of any Global Study to the extent solely in the Territory, subject to the Company’s final decision making authority, and the Company will be responsible, at its expense, for the conduct of any Global Study to the extent solely outside of the Territory. Under a territory development plan, the parties shall develop Licensed Products with respect to the Territory. Beijing SL will be responsible for development activities, including non-clinical and clinical studies directed at obtaining regulatory approval of the Licensed Product in the Territory. Beijing SL has agreed to use commercially reasonable efforts to commercialize the Licensed Products for each indication that receives regulatory approval in the Territory and shall prepare and present a commercialization plan that shall be subject to approval by the joint steering committee.

Pursuant to the Beijing SL Agreement, Beijing SL was to make a non-refundable upfront gross payment of $2.5 million to the Company within 45 days of the effective date of the Beijing SL Agreement; the upfront payment was received in October 2019 and such funds were fully expended prior to the close of Merger. Additionally, with respect to each Licensed Product, the Company is eligible to receive (i) payments for specified developmental and regulatory milestones (including submission of a new drug application to China’s National Medical Product Administration, dosing of the first patient in a phase 3 clinical trial in mainland China and regulatory approval for the first and each additional indication of a Licensed Product in the Territory) totaling up to $6 million in the aggregate and (ii) payments for specified global net sales milestones of up to $20 million in the aggregate multiplied by the ratio of the net sales of a Licensed Product sold by Beijing SL in the Territory divided by the global net sales of a Licensed Product, which net sales milestone payments are payable once, upon the first achievement of such milestone.

Beijing SL is also obligated to pay the Company tiered royalties ranging from the mid-teens to twenty percent on the net sales of all Licensed Products in the Territory until the latest of (a) the date on which any applicable regulatory exclusivity with respect to such Licensed Product expires in such region, (b) the expiration or abandonment of the last valid patent claim or joint patent claim covering such Licensed Product in each region and (c) the fifth anniversary of the first commercial sale of such Licensed Product in such region (the “Royalty Term”). Future milestone payments under the Beijing SL Agreement, if any, are not expected to begin for at least one year and will extend over a number of subsequent years. The Company cannot determine the date on which Beijing SL’s potential royalty payment obligations to the Company would expire because Beijing SL has not yet developed any Licensed Products under the Beijing SL Agreement and therefore the Company cannot at this time identify the date of the first commercial sale or the periods of any regulatory exclusivity or patent claims with respect to any Licensed Product.

On a Licensed Product-by-Licensed Product and region-by-region basis upon the expiration of the Royalty Term, the license granted to Beijing SL shall be deemed perpetual, fully paid-up and royalty free with respect to such Licensedpurchase price

1917

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NeuroBo Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

~~Product in such region. Either party may terminate the Agreement (x) with written notice in the event~~ of ~~the other party’s material breach following a cure period or (y) if the other party becomes subject~~$4.00 per share, and warrants to certain insolvency proceedings. In addition, the Company may terminate the agreement in its entirety if Beijing SL or its affiliates or sublicensees commence a proceeding challenging the validity, enforceability or scopepurchase an aggregate of ~~any~~2,500,000 shares of the Company’s ~~patents.~~

~~To the extent rights granted~~common stock (the “2021 Warrants”), resulting in total gross proceeds to ~~Beijing SL under the Beijing SL Agreement are controlled by~~ the Company ~~pursuant to~~of $10.0 million, before deducting placement agent fees and offering expenses. The 2021 Warrants have an initial exercise price of $6.03 per share. The 2021 Warrants are exercisable beginning six months following the ~~Pfizer Agreement, such rights are subject to the terms and conditions of such agreement with Pfizer, and Beijing SL has agreed to comply with such terms and conditions.~~

~~The Beijing SL Agreement contemplates that Beijing SL and the Company shall, no later than twelve months prior to the anticipated~~ date of ~~the first commercial sale of a Licensed Product, if any, negotiate in good faith~~issuance and ~~execute a commercial supply agreement, pursuant to which Beijing SL shall purchase from the Company,~~will expire five and the Company shall use commercially reasonable efforts to supply, Gemcabene or Licensed Product for clinical or commercial purposes, as applicable, until manufacturing and regulatory transfers are complete.

Each of the Company and Beijing SL has agreed to indemnify the other party against certain losses and expenses relating to the development or commercialization of a Licensed Product by the indemnifying party, the negligence or willful misconduct of the indemnifying party or its directors, officers, employees or agents or a breach of the indemnifying party’s representations, warranties or covenants.

~~7. Debt (in thousands, except share and per share data)~~

In February 2018, the Company received a total of $500 from the issuance by Private NeuroBo of convertible promissory notes (the "Convertible Notes") with an original maturity date of December 31, 2022. On December 30, 2019, the Convertible Notes were converted into 1,565,300 shares of common stock.

Prior to conversion, the lenders had the option to convert all of the then-unpaid note balance including principal and accrued but unpaid interest into common stock, at a conversion price of $0.40 per share after the earlier of (A) the closing of a firmly underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of common stock for the account of the Company in the United States of America or similar registration in the Republic of Korea, or (B) January 1, 2020. On October 23, 2019, the Convertible Notes were amended (the “Amended Convertible Notes”) to require mandatory conversion upon the completion of a reverse merger transaction based on the then-unpaid note balance including principal and accrued but unpaid interest into common stock, at a conversion price of $0.40 per share.

The Convertible Notes and Amended Convertible Notes (herein collectively referred to as the “Notes”) accrued interest at a rate of 5.00% per annum. The Company recorded interest on principal of $7 and $13 for the three and six month periods ended June 30, 2019, respectively. The Notes were not outstanding during 2020.

one-half years following such date. The fair value of the common stock, as determined using an option pricing model consistent with the AICPA Practice Guide, was in excess of the conversion price of the Convertible Notes. Accordingly, the Company initially recorded a $401 beneficial conversion feature upon issuance based on the intrinsic value of the conversion feature, which resulted in a debt discount with a corresponding amount to additional paid in capital.

Debt discount related to the beneficial conversion feature was being amortized over the life of the Convertible Notes using the effective interest method as additional interest expense. The Company recorded interest expense of $8 and $16 for the three and six month periods ended June 30, 2019 , respectively, related to the debt discount.

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~~Notes to Condensed Consolidated Financial Statements~~

~~8. Stockholders’ Equity (Deficit)~~

~~Common Stock~~

The voting, dividend, and liquidation rights of the holders of the common stock are subject to and qualified by the rights, powers, and preferences of the holders of the preferred stock when outstanding. The holders of the common stock are entitled to one vote for each share of common stock held at all meetings of stockholders.

~~Dividend Rights~~

~~Common stock holders are entitled to receive dividends at the sole discretion of the board of directors of the Company. There have been no dividends declared on common stock as of June 30, 2020.~~

~~Voting Rights~~

The holders of common stock are entitled to one vote for each share of common stock along with all other classes and series of stock of the Company on all actions to be taken by the stockholders of the Company, including actions that would amend the certificate of incorporation of the Company to increase the number of authorized shares of the common stock.

~~Liquidation Rights~~

In the event of any liquidation, dissolution, or winding-up of the Company, the holders of common stock shall be entitled to share in the remaining assets of the Company available for distribution post preferential distributions made to holders of the Company’s preferred stock.

~~April 2020 Equity Financing~~

On April 13, 2020, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an institutional investor, pursuant to which the Company sold, in a registered direct offering (the “Registered Offering”), 750,000 shares (the “Shares”) of the Company’s common stock at an offering price of $10 per share.

~~The Registered Offering resulted in gross proceeds of $7.5 million, before deducting the placement agent’s fees and related offering expenses. The Registered Offering closed on April 16, 2020.~~

In connection with the Registered Offering, the placement agent received a cash commission equal to 7% of the gross proceeds from the sale of the Common Stock and warrants (the “Placement Agent’s Warrants”) to purchase up to 37,500 shares of Common Stock, which represented 5.0% of the Shares sold in the Registered Offering. The Placement Agent’s Warrants have an exercise price of $12.50 per share, which represented 125% of the per share offering price of the Shares and a termination date of April 16, 2025. The fair value of the Placement Agent’s2021 Warrants was ~~$289~~$7.5 million and was based on the Black-Scholes pricing model. Input assumptions used were as follows: a risk-free interest rate of ~~0.4%~~0.5%; expected volatility of ~~78.0%~~76.0%; expected life of 55.5 years; ~~and~~ expected dividend yield of 0%~~. The~~; and the underlying traded stock ~~price was used in the analysis.~~price. The ~~Placement Agent’s~~2021 Warrants were classified in stockholders’ equity as the number of shares were fixed and determinable, ~~and given that the Placement Agent’s Warrants did not require~~no cash settlement ~~or have~~required and no other provisions precluding equity treatment.

~~During the three and six months ended June 30, 2020, issuance~~Issuance costs in connection with the ~~Registered Offering~~2021 Private Placement were ~~$1.0~~$0.9 million which included cash commissions equal to ~~$0.5~~$0.7 million and legal and other fees of $0.2 ~~million and Placement Agent’s Warrants with a value of $0.3~~ million.

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~~NeuroBo Pharmaceuticals, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

Warrants

~~Warrants~~

The following warrants were outstanding as of June 30, ~~2020~~2021 and December 31, ~~2019:~~

Exercise Price

Number Outstanding

Expiration Date

Number Exercisable

$
186.75

1,440

July 2028

1,440

$
260.00

39,115

March 2022

39,115

Total outstanding December 31, 2019

40,555

40,555

$
12.50

37,500

April 2025

37,500

Total outstanding June 30, 2020

78,055

78,055

2020:



	Exercise Price		Number Outstanding		Expiration Date	Number Exercisable
	$	186.75		1,440	July 2028		1,440
	$	260.00		39,115	March 2022		39,115
	$	12.50		37,500	April 2025		37,500
Total outstanding December 31, 2020				78,055			78,055

	$	$6.03		2,500,000	July 2026		—
Total outstanding June 30, 2021				2,578,055			78,055

9.8. Stock-based Compensation

Stock-based compensation expense was included in general and administrative and research and development costs as follows in the accompanying statements of comprehensive loss (in thousands):


	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	June 30,				June 30,				June 30,				June 30,
		2020		2019		2020		2019		2021		2020		2021		2020
Research and development	$	4	$	16	$	18	$	55	$	—	$	4	$	—	$	18
General and administrative		167		63		312		84		180		167		367		312
Total stock-based compensation	$	171	$	79	$	330	$	139	$	180	$	171	$	367	$	330

Stock Options

2019 and 2018 Stock Plans

In December 2018, Private NeuroBo adopted the NeuroBo Pharmaceuticals, Inc. 2018 Stock Plan (the "2018 Plan") and in December 2019 in connection with the 2019 Merger, the Company adopted the 2019 Equity Incentive Plan (the “2019 Plan”). 2018 Plan options to purchase Private NeuroBo common stock outstanding as of immediately prior to the 2019 Merger were assumed by the Company upon the 2019 Merger and became options to purchase the Company’s common stock, as adjusted by the ~~Exchange Ratio.~~exchange ratio in effect for the 2019 Merger. The 2018 Plan and the 2019 Plan provide for the

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NeuroBo Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

grant of stock options, restricted stock and other equity awards of the Company's common stock to employees, officers, consultants, and directors. Options expire within a period of not more than ten years from the date of grant.

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~~NeuroBo Pharmaceuticals, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

The following table summarizes the Company’s activity related to its stock options for the six months ended June 30, ~~2020~~2021 and ~~2019:~~2020:


	Six Months Ended		Six Months Ended
	June 30,		June 30,
	2020	2019	2021	2020
Outstanding on January 1	633,277	—	920,355	633,277
Granted	360,000	960,204	—	360,000
Exercised	(84,589)	—	(114,310)	(84,589)
Forfeited/Cancelled	—	—	(270,287)	—
Outstanding on June 30	908,688	960,204	535,758	908,688

During the six month ~~periods~~period ended June 30, 2020, ~~and 2019,~~ 360,000 ~~and 960,204~~ stock options were granted ~~respectively,~~ to ~~employees,~~ non-employee ~~directors and non-employee~~ ~~consultants with both service and performance conditions.~~directors. The options granted with service conditions vest quarterly over a period between one year and fifteen months. The total number of stock options outstanding as of June 30, 2020 and December 31, 2019 was 908,688 and 633,277, respectively. There were no stock options granted during the ~~three~~six month ~~periods~~period ended June 30, 2020 ~~and 2019.~~

vest over a three year period. The weighted average fair value per share of options granted during the six month period ended June 30, 2020 was $5.59. No options were granted during the three and six month periods ended June 30, ~~2020 and 2019, was $5.59 and $0.50, respectively.~~2021.

The Company measures the fair value of stock options with service-based and performance-based vesting criteria to employees, consultants and directors on the date of grant using the Black-Scholes option pricing model. The Company does not have history to support a calculation of volatility and expected term. As such, the Company has used a weighted-average volatility considering the volatilities of several guideline companies.

For purposes of identifying similar entities, the Company considered characteristics such as industry, length of trading history, and stage of life cycle. The assumed dividend yield was based on the Company’s expectation of not paying dividends in the foreseeable future. The average expected life of the options was determined based on the mid-point between the vesting date and the end of the contractual term according to the “simplified method” as described in Staff Accounting Bulletin 110. The risk-free interest rate is determined by reference to implied yields available from U.S. Treasury securities with a remaining term equal to the expected life assumed at the date of grant. The Company records forfeitures when they occur.

The weighted-average assumptions used in the Black-Scholes option-pricing model are as follows:


	Six Months Ended				Three Months Ended		Six Months Ended
	June 30,				June 30,		June 30,
	2020		2019		2021	2020	2021	2020

Expected stock price volatility	77.5	%	75.0	%	—	—	—	77.5	%
Expected life of options (years)	5.8		10.0		—	—	—	5.8
Expected dividend yield	0	%	0	%	—	—	—	0	%
Risk free interest rate	1.71	%	2.75	%	—	—	—	1.71	%

Evergreen provision

Under the 2019 Plan, the shares reserved automatically increase on January 1st of each year, for a period of not more than ten years commencing on January 1, 2020 and ending on (and including) January 1, 2029, to an amount equal to the

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~~NeuroBo Pharmaceuticals, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

lesser of 4% of the common shares outstanding as of January 1^st, or a lesser amount as determined by the ~~Board.~~board of

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NeuroBo Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

directors. The aggregate maximum number of shares of common stock that may be issued pursuant to the 2019 Plan under the evergreen provision is 6,680,000 shares of common stock. On January 1, ~~2020, 623,708~~2021, 786,847 shares were added to the 2019 Plan as a result of the evergreen provision.

During the three month periods ended June 30, 2021 and 2020, 25,000 and ~~2019,~~ 44,289 ~~and 37,150~~ stock options vested, respectively, and 50,000 and 87,151 vested during the six month period ended June 30, 2021 and ~~157,176~~2020, respectively. During the three month periods ended June 30, 2021 and 2020, 0 stock options ~~vested~~were forfeited, and 270,287 and 0 stock options were forfeited during the six month periods ended June 30, 2021 and 2020, ~~and 2019,~~ respectively. ~~During the three and six month periods ended June 30, 2020 and 2019, no stock options were forfeited.~~

As of June 30, ~~2020, 4,127,179~~2021, 5,172,646 shares in the aggregate were available for future issuance under the 2019 Plan and 2018 Plan.

Unrecognized stock-based compensation cost for the stock options issued under the both the Company’s 2019 Plan and 2018 Plan was ~~$1.7~~$0.7 million as of June 30, ~~2020.~~2021. The unrecognized stock-based expense is expected to be recognized over a weighted average period of ~~2.5~~1.7 years.

10. ~~Redeemable Preferred Stock (in thousands, except share and per share data)~~

Upon close of the Merger on December 30, 2019, 8,264,613 shares of Private NeuroBo Series A and Series B redeemable preferred stock (as adjusted for the Exchange Ratio) were converted to Private NeuroBo common stock on a 1:1 basis. Previously in April 2018, Private NeuroBo sold and issued in a private placement 4,801,020 shares of Series A redeemable convertible preferred stock (as adjusted for the Exchange Ratio) at $3.50 per share, raising $16,800 in gross proceeds. Subsequently in May and June 2019, Private NeuroBo sold and issued 3,463,593 Series B redeemable convertible preferred stock (as adjusted for the Exchange Ratio) at $7.00 per share, raising $24,240 in gross proceeds.

~~While outstanding, the redeemable preferred stock was classified outside of stockholders' equity (deficit) because the shares contained certain redemption features that were not solely within the control of the Company.~~ Private NeuroBo did not adjust the carrying values of the convertible preferred stock to the liquidation preferences of such shares because the occurrence of any such change of control event was not deemed probable.

~~11.~~9. Net Loss Per Common Share

Basic net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding for the period, without consideration for potentially dilutive securities if their effect is antidilutive. Diluted net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding for the period determined using the treasury stock ~~and if-converted methods.~~method. Dilutive common stock equivalents are comprised of ~~convertible preferred stock, convertible notes payable,~~ options outstanding under the Company's stock option ~~plan~~plans and warrants. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding as inclusion of the potentially dilutive securities would be antidilutive.

The following potential common shares were not considered in the computation of diluted net loss per share as their effect would have been anti-dilutive:

Three Months Ended

Six Months Ended

June 30,

June 30,


2020

2019

2020

2019

Redeemable preferred stock

—

8,264,613

—

8,264,613

Convertible notes

—

1,531,268

—

1,531,268

Stock options

908,688

960,204

908,688

960,204


	Three Months Ended		Six months ended
	June 30,		June 30,
	2021	2020	2021	2020
Stock options	535,758	908,688	535,758	908,688
Warrants	2,578,055	78,055	2,578,055	78,055

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~~NeuroBo Pharmaceuticals, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~Warrants~~

~~78,055~~

—

~~78,055~~

—

~~12.~~10. Income Taxes

The effective tax rate for the three and six month periods ended June 30, 2021 and 2020 ~~and 2019~~ was ~~zero~~0 percent. As a result of the analysis of all available evidence as of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company recorded a full valuation allowance on its net deferred tax assets. Consequently, the Company reported no0 income tax benefit for the three and six month periods ended June 30, ~~2020~~2021 and ~~2019.~~2020. If the Company’s assumptions change and the Company believes that it will be able to realize these deferred tax assets, the tax benefits relating to any reversal of the valuation allowance on deferred tax assets will be recognized as a reduction of future income tax expense. If the assumptions do not change, each period the Company could record an additional valuation allowance on any increases in the deferred tax assets.

On ~~March~~December 27, 2020, the ~~U.S. government enacted~~President of the United States signed the Consolidated Appropriations Act, 2021 (“Consolidated Appropriations Act”) into law. The Consolidated Appropriations Act is intended to enhance and expand certain provisions of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) ~~which includes modifications~~, allows for the deductions of expenses related to the ~~limitation on business interest expense and net operating loss provisions,~~Paycheck Protection Program funds received by companies, and provides ~~a payment delay of employer payroll taxes during 2020 after the date of enactment.~~an update to meals and entertainment expensing for 2021. The ~~CARES~~Consolidated Appropriations Act isdid not ~~expected to~~ have a material impact onto the Company’s ~~consolidated financial statements.~~income tax provision for during the three and six months ended June 30, 2021.

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~~13.~~NeuroBo Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

11. Related Party Transactions (in ~~thousands, except per share data)~~thousands)

Agreements with Dong-A ST

On September 28, 2018, Private NeuroBo entered into a five year manufacturing and supply agreement with Dong-A ST Co., Ltd. (“Dong-A ST”) for manufacturing and supply of NB-01 drug substance and placebos for the purpose of research and development to be used in Phase 3 clinical trials (the “Manufacturing Agreement”). ~~The Company recognized no product~~There were 0 manufacturing related costs under the Manufacturing Agreement for the three ~~month~~ and six ~~month periods~~months ended June 30, ~~2020,~~2021 and ~~$309 and $314 during the three and six month periods ended June 30, 2019, respectively.~~2020. The product manufacturing related costs, when incurred, are reflected as research and development expenses.

The Manufacturing Agreement will automatically terminate in the event that the license agreement with Dong-A ST is terminated for any reason. In addition, each of Dong-A ST and Private NeuroBo may terminate the Manufacturing Agreement (1) upon the material breach by the other party, if the breach is not cured within a specified number of days after receiving notice from the terminating party, or if the breach cannot reasonably be cured within such period and the breaching party has not started to remedy the breach within such period and diligently endeavored to cure the breach within a reasonable time thereafter, or (2) in the event that (i) the other party is the subject of a petition for bankruptcy, reorganization, or arrangement and the same is not dismissed within thirty days thereof, (ii) a receiver or trustee is appointed for all or a substantial portion of the assets of the other party, or (iii) the other party makes an assignment for the benefit of its creditors.

On June 7, 2020, the Company entered into a manufacturing and supply agreement (the “Manufacturing and Supply Agreement”) with Dong-A ST for the manufacturing and supply of NB-02 drug product and placebo for the purpose of research and development of NB-02, including but not limited to, the use in the first NB-02 human clinical trial to be conducted by the Company. Under the terms of the Manufacturing and Supply Agreement, upon receipt of a purchase order from the Company no later than 270 days prior to the requested delivery date, Dong-A ST has agreed to produce for the Company tablets of the NB-02 drug substance and placebos at a specified supply price. The Company is obligated to manufacture, or have manufactured, and supply to Dong-A ST the active pharmaceutical ingredients which are necessary to manufacture the NB-02 drug product. The Manufacturing and Supply Agreement has a five year term, subject to earlier termination under certain circumstances. The Company recognized 0 product manufacturing related costs under the Manufacturing and Supply Agreement for during the three and six months ended June 30, 2021 and 2020. NaN of the costs incurred under the Manufacturing Agreement remained unpaid as of June 30, 2021 or December 31, 2020.

2521

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NeuroBo Pharmaceuticals, Inc.

Form 10-Q

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this report and the audited financial statements and related notes for the fiscal year ended December 31, ~~2019~~2020 included in our Annual Report on Form 10-K (“~~2019~~2020 Form 10-K”) filed on ~~March 30, 2020.~~April 15, 2021.

Forward-Looking Statements

Certain statements contained in this Quarterly Report on Form 10-Q are not statements of historical fact and are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements give current expectations or forecasts of future events or our future financial or operating performance. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. We may, in some cases, use words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “target,” “contemplate,” “potential,” “predict,” “project,” “should,” “will,” “would” or the negative of those terms, and similar expressions that convey uncertainty of future events or outcomes to identify these forward-looking statements.

These forward-looking statements reflect our management’s beliefs and views with respect to future events, are based on estimates and assumptions as of the date of this report and are subject to known and unknown risks and uncertainties, many of which are beyond our control, that could cause our actual results to differ materially from those in these forward-looking statements. We discuss many of these risks in greater detail under Part I, Item 1A “Risk Factors” in our ~~2019~~2020 Form 10-K filed on ~~March 30, 2020~~April 15, 2021 and in subsequent reports filed with or furnished to the SEC. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge 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 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. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

Any forward-looking statement made by us in this report speaks only as of the date hereof or as of the date specified herein. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments, changed circumstances or otherwise, except as may be required by applicable laws or regulations.

Overview

NeuroBo Pharmaceuticals, Inc. (the “Company,” “we,” “us” or “our”) is a clinical-stage biotechnology company focused on developing and commercializing novel pharmaceuticals to treat neurodegenerative disorders affecting millions of patients worldwide. For more information on our business and our ~~three~~four product candidates, ANA001, NB-01, NB-02 and Gemcabene, see “Business-Overview” in Part I, Item 1 of our Annual Report on From 10-K filed on ~~March 30, 2020.~~ April 15, 2021.

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NeuroBo Pharmaceuticals, Inc.

Form 10-Q

Recent Developments

Mergers

2020 Merger with ANA

On December 31, 2020, the Company acquired 100% of ANA Therapeutics, Inc., a Delaware corporation (“ANA”), pursuant to an Agreement and Plan of Merger, dated December 31, 2020 (the “2020 Merger Agreement” or “2020 Merger”). Pursuant to the 2020 Merger Agreement, NeuroBo issued to the stockholders of ANA 3,243,875 shares of its common stock. The 2020 Merger, which closed on December 31, 2020, was accounted for as an asset acquisition pursuant to Topic 805, Business Combinations, as substantially all of the fair value of the assets acquired were concentrated in a group of similar non-financial assets.

2019 Merger with Gemphire

On July 24, 2019, Gemphire ~~Therapeutics Inc. (“Gemphire”),~~ and NeuroBo Pharmaceuticals, Inc. (“Private NeuroBo”) entered into a definitive ~~merger~~ agreement, which was amended on October 29, 2019 (the ~~“Merger~~“2019 Merger Agreement”). The merger closed on December 30, 2019, ~~(the “Effective Date”),~~ whereby Private NeuroBo merged with a wholly-owned subsidiary of the Company in an all-stock transaction (the ~~“Merger”~~“2019 Merger”).

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~~NeuroBo Pharmaceuticals, Inc.~~COVID-19

~~Form 10-Q~~

~~Recent Developments~~

~~COVID-19~~

We are subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on our business is highly uncertain and difficult to predict, as the responses that we, other businesses and governments are taking continue to evolve. Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it is possible that it could cause a lasting national or global economic recession. Policymakers around the globe have responded with fiscal policy actions to support the healthcare industry and economy as a whole. The magnitude and overall effectiveness of these actions remain uncertain.

To date, except for the adjustments to scientific activity described under “Current Scientific Activity” below, we have not experienced any significant changes in our business that would have a significant negative impact on our consolidated statements of operations or cash flows.

The severity of the impact of the COVID-19 pandemic on our business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on our service providers, suppliers, contract research organizations and our clinical trials, all of which are uncertain and cannot be predicted. As of the date of issuance of our financial statements, the extent to which the COVID-19 pandemic may in the future materially impact our financial condition, liquidity or results of operations is uncertain.

Current Scientific Activity

In light of the present business environment, including the impact of the COVID-19 ~~virus that emerged in December 2019 and became a global~~ pandemic, we are currently conducting the scientific activities described below with a view toward conserving financial resources.

ANA001, our lead drug candidate, is a proprietary oral niclosamide formulation and was developed as a treatment for patients with moderate COVID-19. Niclosamide is a potential oral antiviral and anti-inflammatory agent with a long history of use and well-understood safety in humans. ANA001 is currently being studied in a 60-subject Phase 2 clinical trial conducted in the United States. We expect to complete our Phase 2 study in the fourth quarter of 2021.

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NeuroBo Pharmaceuticals, Inc.

Form 10-Q

NB-01. For NB-01, we have determined that any attempt to conduct Phase 3 clinical trials, as previously announced, would be difficult if not impossible in the short or medium term. Accordingly, in the first quarter of 2020, we directed our contract research organization (“CRO”) partners and other vendors working on the Phase 3 clinical trials of NB-01 to cease all work and we terminated our existing contract arrangements with each of them.

We are currently ~~devoting scientific resources to~~ evaluating ~~the potential to bring~~our options regarding the NB-01 ~~asset to the market through a different regulatory pathway.~~asset:

Orphan drug. Development of NB-01 as an orphan drug is among the alternatives we are ~~considering, and we may conduct feasibility studies to identify a~~considering. We have identified one potential rare disease ~~relevant to NB-01. There is no assurance that we will be able to pursue any orphan drug~~ indication for ~~NB-01. We also considered marketing~~ NB-01, ~~as a nutraceutical (non-pharmaceutical) product~~ but we have ~~determined~~ not yet conducted feasibility studies for it. We believe that development for such indication would depend on our ability to ~~pursue~~renegotiate milestone payments under our exclusive license agreement with Dong-A ST to reflect the potential revenue from such ~~pathway at this time.~~indication. See the risk factor entitled “We have determined to postpone ~~indefinitely~~ the initiation of Phase 3 clinical trials of NB-01 under present circumstances and we have terminated all of our agreements with contract research organizations related to NB-01. We may not be able to successfully develop NB-01 pursuant to other alternatives, including as an orphan ~~drug”~~drug or as a nutraceutical candidate,” as previously reported in ~~Part II, Item 1A “Risk Factors” below.~~our 2020 Form 10-K.

~~The Company is preparing an Investigational New Drug (“IND”) application~~Nutraceutical. We have considered marketing NB-01 as a nutraceutical (non-pharmaceutical) product, and we may re-explore this pathway if the identified rare disease indication for NB-01 does not proceed.

NB-02. In order to preserve operating capital, we have postponed continued work on the ~~U.S. Food~~IND and ~~Drug Administration (“FDA”) for NB-02. The Company intends to postpone~~ the first human clinical trials for NB-02 until global health and macroeconomic conditions improve, with a view toward commencing clinical trial activity in the ~~first~~second half of 2021, subject to improvement of the constraints imposed by the COVID-19 pandemic. ~~The Company is~~We are also considering engaging with a strategic partner to assist with clinical trials for NB-02.

Gemcabene. In May 2020, we received written communication from the ~~U.S. Food and Drug Administration (“FDA”)~~FDA that the clinical development program for Gemcabene remains on a partial clinical hold. ~~The Company is reviewing its options regarding Gemcabene.~~We are currently exploring additional therapeutic indications for Gemcabene that may strengthen our pipeline of assets to treat viral diseases, including COVID-19, either as a stand-alone treatment or in combination with ANA001.

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~~NeuroBo Pharmaceuticals, Inc.~~

~~Form 10-Q~~

As of June 30, ~~2020,~~2021, we had cash ~~and cash equivalents~~ of ~~$14.3~~$9.5 million. Operating at such level of scientific activity, we expect that our cash, including the net proceeds from the Registered Offering, will be adequate to fund operations into the ~~second~~first quarter of ~~2021.~~2022.

We will need to raise additional capital to fund continued operations at the current level through the ~~second~~first quarter of ~~2021~~2022 and beyond. Although we are exploring financing opportunities and carefully monitoring the capital markets, we do not yet have any commitments for additional financing and may not be successful in our efforts to raise additional funds. Any amounts raised will be used for further development of our product candidates and for other working capital purposes and, depending on the amount raised, for commencing clinical activity on NB-02 in the ~~first~~second half of 2021.

If we are unable to raise additional capital (which is not assured at this time, particularly as a result of recent depressed capital market conditions), our long-term business plan may not be accomplished, and we may be forced to cease, reduce, or delay operations. We have some ability to reduce costs further in ~~2020 and~~ 2021, thereby potentially lengthening our operational window further into the ~~third~~second quarter of ~~2021.~~2022.

Going Concern

The accompanying condensed consolidated financial statements have been prepared in conformity with GAAP, which contemplate our continuation as a going concern. We have not established a source of revenues and, as such, have been dependent on funding operations through the sale of equity securities. Since inception, we have experienced

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NeuroBo Pharmaceuticals, Inc.

Form 10-Q

significant losses and incurred negative cash flows from operations. We expect to incur further losses over the next several years as we develop our business. We have spent, and expect to continue to spend, a substantial amount of funds in connection with implementing our business strategy.

We will need substantial additional funding to support our continuing operations and to pursue our business strategy and, in the meantime, we have reduced scientific activity (as indicated above) and we are carefully controlling expenses. Until such time as we can generate significant revenue from product sales, if ever, we expect to continue to finance our operations primarily through proceeds derived from the sale of equity.

These factors individually and collectively raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments or classifications that may result from our possible inability to continue as a going concern. The report of our independent registered public accounting firm on our financial statements for the year ended December 31, ~~2019~~2020 includes an explanatory paragraph regarding the existence of substantial doubt about our ability to continue as a going concern.

Key operating data

We have incurred significant operating losses since inception. Our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more of our current or future product candidates. Our net losses were ~~$2.4~~$3.9 million and ~~$1.9~~$2.4 million for the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$7.1~~$7.2 million and ~~$4.4~~$7.1 million for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. To date, we have not generated any revenue from product sales, collaborations with other companies, government grants or any other source, and do not expect to generate any revenue in the foreseeable future.

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~~NeuroBo Pharmaceuticals, Inc.~~

~~Form 10-Q~~

As of June 30, ~~2020,~~2021, we had an accumulated deficit of ~~$44.0~~$73.8 million. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. We expect that our expenses and capital requirements will increase substantially in connection with our ongoing activities, particularly if and as we:

●

pursue clinical development for any of our current product candidates;

●

initiate preclinical studies and clinical trials with respect to any additional indications for our current product candidates and any future product candidates that we may pursue;

●

acquire or in-license other product candidates and/or technologies;

●

develop, maintain, expand and protect our intellectual property portfolio;

●

hire additional clinical, scientific and commercial personnel;

●

establish a commercial manufacturing source and secure supply chain capacity sufficient to provide commercial quantities of any product candidates for which we may obtain regulatory approval;

●

seek regulatory approvals for any product candidates that successfully complete clinical trials;

●

establish a sales, marketing and distribution infrastructure and/or enter into partnership arrangements to commercialize any products for which we may obtain regulatory approval; or

●

add administrative, operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts, and to support our transition to a public reporting company.

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NeuroBo Pharmaceuticals, Inc.

Form 10-Q

Components of Results of Operations

Operating Expenses

Research and Development Expenses

Research and development expenses consist primarily of costs incurred in connection with the development of our product candidates. We expense research and development costs to operations as incurred. These expenses include:

●

employee-related expenses, including salaries, related benefits and stock-based compensation, for employees engaged in research and development functions;

●

expenses incurred in connection with the clinical development of our product candidates, including under agreements with third parties, such as consultants and ~~Clinical Research Organizations (“CROs”);~~CROs;

●

the cost of manufacturing and storing drug products for use in our preclinical studies and clinical trials, including under agreements with third parties, such as consultants and Clinical Manufacturing Organizations (“CMOs”);

●

facilities, depreciation and other expenses, which include direct or allocated expenses for rent and maintenance of facilities and insurance;

●

costs related to compliance with regulatory requirements; and

●

payments made under third-party licensing agreements.

We recognize external development costs based on an evaluation of the progress toward completion of specific tasks using information provided to us by our service providers. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf, and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual costs. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. Such amounts are recognized as an expense when the goods have been delivered or the services have been performed, or when it is no longer expected that the goods will be delivered, or the services rendered.

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~~NeuroBo Pharmaceuticals, Inc.~~

~~Form 10-Q~~

Our direct research and development expenses consist primarily of external costs, such as fees paid to outside consultants, CROs, CMOs and research laboratories in connection with our clinical development, quality assurance and quality control processes, manufacturing, and clinical development activities. Our direct research and development expenses also include fees incurred under third-party license agreements. We use our employee and infrastructure resources across multiple research and development projects. We do not allocate employee costs and costs associated with our facilities, including depreciation or other indirect costs, to specific product candidates because these costs are deployed across multiple programs and, as such, are not separately classified. We use internal resources primarily to conduct manufacturing and clinical development activities. These employees work across multiple programs and, therefore, we do not track our costs by product candidate.

Clinical development activities are central to our business model. We do not believe that our historical costs are indicative of the future costs associated with these programs, nor do they represent the costs of other future programs we may initiate. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We have some control over the timing of these expenses, but costs may be difficult to control once clinical trials have commenced.

The successful development and commercialization of our product candidates are highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete

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NeuroBo Pharmaceuticals, Inc.

Form 10-Q

the preclinical and clinical development of any of our product candidates. Additionally, because of the risks inherent in novel treatment discovery and development, we cannot reasonably estimate or know:

●

the timing and progress of preclinical and clinical development activities;

●

the number and scope of clinical programs that we decide to pursue;

●

our ability to maintain our current development programs and to establish new ones;

●

establishing an appropriate safety profile with IND-enabling studies;

●

successful patient enrollment in, and the initiation and completion of, clinical trials;

●

the successful completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority;

●

the receipt of regulatory approvals from applicable regulatory authorities;

●

the timing, receipt and terms of any marketing approvals from applicable regulatory authorities;

●

our ability to establish new licensing or collaboration arrangements;

●

establishing agreements with third-party manufacturers for clinical supply for our clinical trials and commercial manufacturing, if any of our product candidates is approved;

●

development and timely delivery of clinical-grade and commercial-grade drug formulations that can be used in our clinical trials and for commercial launch;

●

obtaining, maintaining, defending and enforcing patent claims and other intellectual property rights;

●

launching commercial sales of our product candidates, if approved, whether alone or in collaboration with others;

●

maintaining a continued acceptable safety profile of the product candidates following commercialization; or

●

the effect of competing technological and market developments.

A change in the outcome of any of these variables with respect to the development of our product candidates could significantly change the costs and timing associated with the development of that product candidate.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related costs, including stock-based compensation, for personnel in executive, finance and administrative functions. General and administrative expenses also

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~~NeuroBo Pharmaceuticals, Inc.~~

~~Form 10-Q~~

include direct and allocated facility-related costs as well as professional fees for legal, patent, consulting, investor and public relations, accounting, and audit services.

We anticipate that our general and administrative expenses will increase in the future as a result of accounting, audit, legal, regulatory, compliance, and director and officer insurance costs as well as investor and public relations expenses associated with being a public company. ~~Some of these increases may be offset by decreased expenses associated with the change in strategy for NB-01 and Gemcabene.~~

Interest Income ~~(Expense), net~~

~~Interest Expense~~

Interest expense consists of the interest calculated at a rate of 5% per annum on the convertible notes issued by Private NeuroBo in February 2018 and debt discount amortization attributed to the underlying beneficial conversion features of the convertible notes. The convertible notes were converted into shares of common stock in connection with the Merger.

~~Interest Income~~

Interest income consists of bank interest earned on our cash and cash equivalents.

Other ~~(Expense) Income,~~Expense, net

Other ~~(expense) income,~~expense, net reflects non-operating expenses associated mainly with realized foreign currency exchange gains and losses.

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NeuroBo Pharmaceuticals, Inc.

Form 10-Q

Results of Operations

The following table summarizes our operating results for the periods indicated:


	For the Three Months Ended						For the Six Months Ended						For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,						June 30,						June 30,
	2020		2019		Change		2020		2019		Change		2021		2020		Change		2021		2020		Change

		(in thousands)												(in thousands)
Operating expenses:
Research and development	$	674	$	948	$	(274)	$	2,826	$	2,748	$	78	$	2,012	$	674	$	1,338	$	3,155	$	2,826	$	329
General and administrative		1,718		939		779		4,315		1,590		2,725		1,914		1,718		196		4,101		4,315		(214)
Total operating expenses		2,392		1,887		505		7,141		4,338		2,803		3,926		2,392		1,534		7,256		7,141		115
Loss from operations		(2,392)		(1,887)		(505)		(7,141)		(4,338)		(2,803)		(3,926)		(2,392)		(1,534)		(7,256)		(7,141)		(115)
Interest income (expense), net		8		(14)		22		28		(27)		55
Interest income														5		8		(3)		11		28		(17)
Other expense, net		—		—		—		(1)		—		(1)		—		—		—		—		(1)		1
Loss before income taxes		(2,384)		(1,901)		(483)		(7,114)		(4,365)		(2,749)		(3,921)		(2,384)		(1,537)		(7,245)		(7,114)		(131)
Provision for income taxes		—		—		—		—		—		—		—		—		—		—		—		—
Net loss	$	(2,384)	$	(1,901)	$	(483)	$	(7,114)	$	(4,365)	$	(2,749)	$	(3,921)	$	(2,384)	$	(1,537)	$	(7,245)	$	(7,114)	$	(131)

Comparison of Three Months Ended June 30, ~~2020~~2021 and ~~2019~~2020

Research and Development Expenses

Research and development expenses were $2.0 million for the three months ended June 30, 2021 as compared to $0.7 million for the three months ended June 30, ~~2020 as~~2020. The $1.3 million increase in the second quarter of 2021 was primarily attributed to overall increase in research development activity in 2021 on a net basis when compared to ~~$0.9~~the comparable quarter in the prior year.

General and Administrative Expenses

General and administrative expenses were $1.9 million for the three months ended June 30, ~~2019. The $0.3 million decrease in the second quarter of 2020 was~~

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~~NeuroBo Pharmaceuticals, Inc.~~

~~Form 10-Q~~

~~primarily attributed~~2021, compared to the overall reduction of clinical trial activity given the determination in March 2020 to postpone Phase 3 clinical trials of NB-01. Research and development expenses during the three months ended June 30, 2020 and 2019 included stock-based compensation of $4,000 and $16,000, respectively.

~~General and Administrative Expenses~~

~~General and administrative expenses were~~ $1.7 million for the three months ended June 30, ~~2020, compared to $0.9 million for the three months ended June 30, 2019.~~2020. The increase of ~~$0.8~~ $0.2 million in the current period was primarily due to ~~operating as~~additional insurance premium costs of $0.1 million, payroll costs of $0.1 million and consulting costs of $0.1 million, offset in part by a ~~public company and to post-Merger support~~reduction of facility related costs ~~in the second quarter~~ of ~~2020~~$0.1 million when compared to the comparable ~~quarter~~period in the prior year. The cost increases in the current quarter included $0.1 million in audit and external accounting support, $0.4 million in director and officer insurance premiums, $0.2 million in board of director and other public company costs and $0.1 million of stock based compensation and miscellaneous net operational cost increases. Stock-based compensation costs during

Interest Income

Interest income for the three month periods ended June 30, ~~2020~~2021 and ~~2019 were $0.2 million and $63,000, respectively.~~

~~Interest Income (Expense), net~~

~~Interest income for the three month period ended June 30,~~ 2020 was $5,000 and $8,000, respectively, related to cash deposits. ~~The Company did not incur interest expenses during the second quarter of 2020 as there was no debt outstanding during the period.~~

Interest expense, net during the three month period ended June 30, 2019 included non-cash interest expense in connection with our convertible notes of $15,000 offset in part by interest income of less than $1,000 related to cash deposits. Non-cash interest expense during the three month period ended June 30, 2019 consisted of interest on principal in the amount of $7,000 and costs attributed to the underlying beneficial conversion features of the convertible notes in the form of discount amortization in the amount of $8,000.

~~Other Expense, net~~

~~Other expense, net incurred during the three month periods ended June 30, 2020 and 2019 was nominal.~~

Comparison of Six Months Ended June 30, ~~2020~~2021 and ~~2019~~2020

Research and Development Expenses

Research and development expenses were $3.2 million for the six months ended June 30, 2021 as compared to $2.8 million for the six months ended June 30, ~~2020 as compared to $2.7~~2020. The $0.3 million ~~for~~increase during the six months ended June 30, ~~2019. The $0.1 million increase in 2020~~2021 was primarily attributed to research and development costs associated for the development of ANA 001 in 2021 of approximately $1.8 million offset by CRO termination costs associated with the ~~determination in March 2020 to postpone~~ Phase 3 clinical trials of NB-01 in the amount of $0.7 million and to the further development of Gemcabene under the ~~Contingent Value Rights~~CVR Agreement in the amount of $0.8 million ~~offset largely by the overall reduction of clinical trial activity in 2020 when compared to~~that occurred during the comparable ~~period in the~~ prior ~~year. Research~~year period.

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General and ~~development~~Administrative Expenses

General and administrative expenses ~~during~~were $4.1 million for the six months ended June 30, ~~2020 and 2019 included stock-based compensation of $18,000 and $55,000, respectively.~~

~~General and Administrative Expenses~~

~~General and administrative expenses were~~2021, compared to $4.3 million for the six months ended June 30, ~~2020, compared to $1.6 million for the six months ended June 30, 2019.~~2020. The ~~increase~~decrease of ~~$2.7~~ $0.2 million was primarily due to ~~operating as~~ a ~~public company and to post-Merger support~~reduction in both legal costs in connection with the ~~first~~streamlining of our intellectual property portfolio in the amount of $0.3 million and ~~second quarters~~a reduction in facility and accounting costs of ~~2020~~$0.3 million when compared to the comparable ~~quarters~~prior year period, offset in ~~the prior year. The cost increases~~part by an increase in ~~2020 included $0.8~~payroll related costs of $0.1 million, ~~in legal~~insurance premium costs ~~$0.5~~of $0.2 million ~~in audit and external accounting support, $0.8 million in director and officer insurance premiums, $0.3 million in board of director~~ and other ~~public company~~operating costs ~~$0.2 million in stock-based compensation and~~of $0.1 million in ~~miscellaneous~~the current period when compared to the comparable prior year period.

Interest Income

Interest income for the six month periods ended June 30, 2021 and 2020 was $11,000 and $28,000, respectively, related to cash deposits.

Other Expense, net

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~~operational costs increases. Stock-based compensation costs~~ Other expense, net incurred during the six month periods ended June 30, ~~2020~~2021 and ~~2019 were $0.3 million and $0.1 million, respectively.~~

~~Interest Income (Expense), net~~

~~Interest income for the six month period ended June 30,~~ 2020 was ~~$28,000 related to cash deposits. The Company did not incur interest expenses during the six months ended June 30, 2020 as there was no debt outstanding during the period.~~nominal.

Interest expense, net during the six month period ended June 30, 2019 included non-cash interest expense in connection with our convertible notes of $29,000 offset in part by interest income of $2,000 related to cash deposits. Non-cash interest expense during the six month period ended June 30, 2019 consisted of interest on principal in the amount of $13,000 and costs attributed to the underlying beneficial conversion features of the convertible notes in the form of discount amortization in the amount of $16,000.

~~Other Expense, net~~

Other expense, net was $1,000 during the six month period ended June 30, 2020, compared to a nominal amount during the six month period ended June 30, 2019. The net change of $1,000 was due to a fluctuations in realized foreign currency exchange gains and losses period over period.

Liquidity and Capital Resources

~~Prior~~On January 21, 2021, the Company closed on a Securities Purchase Agreement (the “2021 Purchase Agreement”) with certain institutional and accredited investors, pursuant to which the ~~Merger,~~Company, in a private placement (“2021 Private ~~NeuroBo funded operations with proceeds from sales of preferred stock~~Placement”) agreed to issue and proceeds from the issuance of convertible debt. Prior to the Merger, Private NeuroBo received net proceeds of $40.9 million from sales of preferred stock and $0.5 million from the sales of convertible notes which were converted into shares of Private NeuroBo common stock, effective immediately prior to the closing of the Merger.

~~ln April 2018, Private NeuroBo issued~~sell an aggregate of ~~4,801,020~~2,500,000 shares of ~~Series A preferred~~the Company’s common stock ~~(as adjusted for the exchange ratio (“Exchange Ratio”) in connection with the Merger),~~ at a purchase price of ~~$3.50~~$4.00 per share, for aggregate gross consideration of approximately $16.8 million. On December 30, 2019, each share of Series A preferred stock then outstanding was converted into common stock in accordance with the terms of the Merger Agreement.

~~ln August 2019, Private NeuroBo issued~~and warrants to purchase an aggregate of ~~3,463,593~~2,500,000 shares of ~~Series B preferred~~the Company’s common stock ~~(as adjusted for~~(the “2021 Warrants”), resulting in total gross proceeds to the ~~Exchange Ratio) at a purchase~~Company of $10.0 million, before deducting placement agent fees and offering expenses. The 2021 Warrants have an initial exercise price of $7.00 per share, for aggregate gross consideration of approximately $24.2 million. On December 30, 2019, each share of Series B preferred stock then outstanding was converted into common stock in accordance with the terms of the Merger Agreement.

On April 13, 2020, we entered into a Securities Purchase Agreement with an institutional investor, pursuant to which we sold in a registered direct offering (the “Registered Offering”) 750,000 shares of our common stock, at an offering price of $10.00$6.03 per share. The ~~Registered Offering resulted~~2021 Warrants are exercisable beginning six months following the date of issuance and will expire five and one-half years following such date. Issuance costs in ~~gross proceeds of $7.5 million, before deducting~~connection with the ~~placement agent’s fees and related offering expenses.~~2021 Private Placement were $0.9 million.

Since inception, we have experienced significant losses and incurred negative cash flows from operations. We expect to incur further losses over the next several years as we develop our business. We have spent, and expect to continue to spend, a substantial amount of funds in connection with implementing our business strategy.

We will need substantial additional funding to support our continuing operations and to pursue our business strategy and ~~in the meantime, we have reduced scientific activity, as described under “Overview – Reduced Scientific Activity; Repurposing of NB-01” above, and~~ we are carefully controlling expenses. InIn the first quarter of 2020, in connection with the reduced scientific activity, we directed our CRO partners and other vendors working on the Phase 3

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clinical trials of NB-01 to cease all work and have terminated our existing contract arrangements with each of them. ~~In accordance with ASC 450,~~ ~~Contingencies~~, we have determined that it is reasonably possible that a loss has occurred with respect to these invoiced amounts and estimate the range of loss as $0 to $1.1 million. Since no amount in this range is a better estimate than any other amount within the range, we have not accrued any liability arising from potential losses relating to these disputed termination charges.

As of June 30, ~~2020,~~2021, we had cash ~~and cash equivalents~~ of ~~$14.3~~$9.5 million. ~~Operating at such level of scientific activity, we expect that our cash, including the net proceeds from the Registered Offering, will be adequate to fund operations into the second quarter of 2021.~~

We will need to raise additional capital to fund continued operations at the current level through the ~~second~~first quarter of ~~2021~~2022 and beyond. Although we are exploring financing opportunities and carefully monitoring the capital markets, we do not yet have any commitments for additional financing and may not be successful in our efforts to raise additional funds. If we are unable to raise additional capital (which is not assured at this ~~time, particularly as a result of recent depressed capital market conditions)~~time), our long-term business plan may not be accomplished, and we may be forced to cease, reduce, or delay operations. We have some ability to reduce costs further in ~~2020 and~~ 2021, thereby potentially lengthening our operational window further into the ~~third~~second quarter of ~~2021.~~2022.

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Cash Flows

The following table summarizes our cash flows for the periods indicated:


	For the Six Months Ended				For the Six Months Ended
	June 30,				June 30,
	2020		2019		2021		2020

	(in thousands)				(in thousands)
Net cash used in operating activities	$	(6,462)	$	(2,416)	$	(9,728)	$	(6,462)
Net cash used in investing activities		(2)		(25)		(3)		(2)
Net cash provided by financing activities		6,858		24,175		9,164		6,858
Net increase in cash and restricted cash	$	394	$	21,734
Net (decrease) increase in cash					$	(567)	$	394

Operating Activities

During the six month period ended June 30, 2021, operating activities used $9.7 million of cash, primarily resulting from our net loss of $7.2 million and from a decrease in our accounts payable and accrued liabilities of approximately $2.6 million attributed to payments in connection with the 2020 Merger and the timing of vendor invoicing.

During the six month period ended June 30, 2020, operating activities used $6.5 million of cash, primarily resulting from our net loss of $7.1 million offset by non-cash expenses related to stock-based ~~compensation~~compensation. leases and depreciation in the aggregate of $0.4 million. Net cash provided by changes in our operating assets and liabilities for the six month period ended June 30, 2020 was $0.3 million which primarily consisted of an increase in accounts payable ~~and accrued expenses~~ of ~~$1.1~~$1.0 million, offset in part by an increase in prepaid expenses and other current assets of approximately $0.8 million. The increase in prepaid expenses and other current assets was primarily due to the payment of insurance premiums. The net increase in accounts payable and accrued expenses was primarily attributed to the timing of vendor invoicing and payments.

~~During~~Investing Activities

Investing activities during the six ~~months~~month periods ended June 30, ~~2019, operating activities used $2.4 million of cash, primarily resulting from a net loss of $4.4 million , offset by non-cash expenses relating to stock-based compensation, interest~~2021 and ~~depreciation in the aggregate of $0.2 million. Net cash provided by changes in operating assets and liabilities for the six months ended June 30, 2019~~2020 amounted to ~~$1.8 million~~$3,000 and ~~consisted~~$2,000 in purchases of ~~a decrease in prepaid expenses~~property and other current assets of $0.9 million and a $0.9 million increase in accrued expenses and payables. The decrease in prepaid expenses and other current assets was primarily due to the expensing of prepaid amounts paid to CROs for clinical trial activities. The increase in accrued expenses was primarily due to increases in development costs for clinical trial activities and increases in bonus accruals.equipment, respectively.

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~~Investing~~Financing Activities

During the six month period ended June 30, ~~2020,~~2021, net cash ~~used in investing~~provided by financing activities was ~~$2,000. Investing activities during the period consisted of purchases of property and equipment. During the six months ended June 30, 2019, net cash used in investing activities was less than $0.1~~$9.2 million, consisting of ~~purchases~~proceeds of ~~property~~$9.1 million from the 2021 Private Placement, net of issuance costs, and ~~equipment.~~from the exercise of stock options of $72,000.

~~Financing Activities~~

During the six month period ended June 30, 2020, net cash provided by financing activities was $6.9 million, consisting of proceeds from the Registered Offering of $6.8 million, net of issuance costs, and from the exercise of stock options of $53,000. During the six months ended June 30, 2019, net cash provided by financing activities was $24.2 million, consisting entirely of net proceeds of $24.2 million from the sale by Private NeuroBo of Series B preferred stock in May and June 2019.

~~Funding Requirements~~

We expect to incur additional costs associated with operating as a public company. In addition, we expect our expenses to increase substantially over time in connection with our ongoing activities, particularly as we advance the preclinical activities and clinical trials of our product candidates. The timing and amount of our preclinical and clinical expenditures will depend largely on:

●

~~the availability of capital;~~

●

~~the scope, number, initiation, progress, timing, costs, design, duration, any potential delays, and results of clinical trials and nonclinical studies for our current or future product candidates;~~

●

~~the clinical development plans we establish for our product candidates;~~

●

~~the number and characteristics of product candidates and programs that we develop or may in-license;~~

●

the outcome, timing and cost of regulatory reviews, approvals or other actions to meet regulatory requirements established by the FDA and comparable foreign regulatory authorities, including the potential for the FDA or comparable foreign regulatory authorities to require that we perform more studies for our product candidates than those that we currently expect;

●

~~our ability to obtain marketing approval for our product candidates;~~

●

the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights covering our product candidates, including any such patent claims and intellectual property rights that we have licensed pursuant to the terms of our license agreement;

●

our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the cost of defending intellectual property disputes, including patent infringement actions brought by third parties against us or our product candidates;

●

~~the cost and timing of completion of commercial-scale outsourced manufacturing activities with respect to our product candidates;~~

●

our ability to establish and maintain licensing, collaboration or similar arrangements on favorable terms and whether and to what extent we retain development or commercialization responsibilities under any new licensing, collaboration or similar arrangement;

●

the cost of establishing sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval in regions where we choose to commercialize our products on our own;

●

~~the success of any other business, product or technology that we acquire or in which we invest;~~

●

~~the costs of acquiring, licensing or investing in businesses, product candidates and technologies; and~~

●

~~our need and ability to hire additional management and scientific and medical personnel.~~

We expect that, with current levels of scientific activity, our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements into the second quarter of 2021. We have based this

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~~estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.~~

Critical Accounting Policies and Estimates

Our financial statements are prepared in accordance with GAAP. These accounting principles require us to make estimates and judgments that can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenue and expense during the periods presented. We believe that the estimates and judgments upon which we rely are reasonably based upon information available to us at the time that we make these estimates and judgments. To the extent that there are material differences between these estimates and actual results, our financial results will be affected. The accounting policies that reflect our more significant estimates and

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judgments and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results are described in Note 2 — Summary of Significant Accounting Policies to our condensed consolidated financial statements included elsewhere in this report.

During the three and six months ended June 30, ~~2020,~~2021, there were no material changes to our critical accounting policies or estimates disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our ~~2019~~2020 Form 10-K filed on ~~March 30, 2020.~~April 15, 2021.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements as defined under the rules and regulations of the ~~Securities and Exchange Commission.~~SEC.

Recent Accounting Pronouncements

Refer to Note 2— Summary of Significant Accounting Policies to our condensed consolidated financial statements included elsewhere in this report for a discussion of recently issued accounting pronouncements.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information we are required to disclose in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive and financial officer, as appropriate, to allow timely decisions regarding required disclosure.

We designed and evaluate our disclosure controls and procedures recognizing that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance and not absolute assurance of achieving the desired control objectives. Also, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based, in part, upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

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Under the supervision of and with the participation of our management, including our principal executive and financial officer, we evaluated the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15(d)- 15(e) promulgated under the Exchange Act as of June 30, ~~2020.~~2021. Based on this evaluation, our Chief Executive Officer and ~~Principal~~Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of June 30, ~~2020~~2021 as a result of the material ~~weakness~~weaknesses described below and previously reported in our ~~2019~~2020 Form 10-K.

In connection with management’s assessment of the effectiveness of our internal control over financial reporting at the end of our last fiscal year, management identified a material ~~weakness~~weaknesses in our internal control over financial reporting related to accounting for clinical trial costs and accounting for mergers and acquisitions as

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of December 31, ~~2019,~~2020, which is in the process of being remediated as of June 30, ~~2020. The material weakness related to internal control deficiencies relating to accounting for clinical trial costs and related supply materials.~~2021. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Specifically, ~~for 2018 there were material correcting journal entries related to our accounting for the timing of clinical trial costs, and for 2019 and the six months ended June 30, 2020,~~ there were misstatements in clinical ~~prepaids~~accruals and expenses that were discovered during the ~~audit/review~~audit process for the year ended December 31, 2020 and would not have been detected by our internal control over financial ~~reporting.~~reporting, and management did not have effective controls to effectively assess the technical accounting related to the accounting for the asset acquisition as well as to identify erroneous inputs and assumptions used to value in-process research and development acquired pursuant to the 2020 Merger. See “Remediation Efforts to Address Material ~~Weakness”~~Weaknesses” below for steps we are taking to correct ~~this~~theses material ~~weakness.~~weaknesses.

Notwithstanding the identified material ~~weakness,~~weaknesses, management, including our ~~PEO~~principal executive officer and ~~PFO,~~principal financial officer, believes the consolidated financial statements included in this quarterly report fairly represent in all material respects our financial condition, results of operations and cash flows as of and for the periods presented in accordance with US. GAAP.

Changes in Internal Control Over Financial Reporting

Except as provided below under “Remediation Efforts to Address Material Weakness,” there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended June 30, ~~2020,~~2021, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Remediation Efforts to Address Material Weakness

We are in the process of remediating, but have not yet remediated, the material ~~weakness~~weaknesses described above. Under the oversight of the audit committee, management is developing a detailed plan and timetable for the implementation of appropriate remedial measures to address the material weakness. As of the date of this quarterly report, we have taken the following actions and are in the process of making the following changes in our internal control environment to help remediate the material weakness:

●

we are adding more experienced accounting personnel, including an outside consultant, directly responsible for the oversight of the accounting for clinical trial expenses including the identification of and accounting for contracts entered into related to clinical trials;

●

~~we are improving processes in the area of clinical site expense monitoring; and~~

●

we are retaining additional qualified outside consultants, where necessary, to advise on highly complex technical accounting ~~matters.~~matters; and

●

we will implement enhanced controls relative to the review and oversight of the accounting for clinical trial expenses as well as the review of technical accounting assessments and review of valuation processes.

Management may decide to take additional measures to remediate the material weakness as necessary.

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PART II — OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

From time to time, we may be involved in various claims and legal proceedings relating to claims arising out of our operations. We are not currently a party to any legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

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ITEM 1A.RISK FACTORS

Our business, financial condition, results of operations, and cash flows may be impacted by a number of factors, many of which are beyond our control, including those set forth in our ~~2019~~2020 Form 10-K, the occurrence of any one of which could have a material adverse effect on our actual results.

There have been no material changes to the Risk Factors previously disclosed in our ~~2019~~2020 Form ~~10-K, except as noted below.~~10-K.

We have determined to postpone the initiation of Phase 3 clinical trials of NB-01 under present circumstances and we have terminated all of our agreements with contract research organizations related to NB-01. We may not be able to successfully develop NB-01 pursuant to other alternatives, including as an orphan drug.

NB-01 has successfully completed two Phase 2 proof-of-concept clinical trials for PDN. However, in light of the present business environment including the impact of the COVID-19 disease that emerged in December 2019 as a global pandemic, we have determined that any attempt to conduct Phase 3 clinical trials for NB-01, as previously announced, would be difficult if not impossible in the short or medium term. To conserve financial resources, in the first quarter of 2020 we directed our contract research organization (“CRO”) partners and other vendors working on the Phase 3 clinical trials of NB-01, including Syneos Health, to cease all work and we gave notice of termination of our existing contract arrangements with each of them.

We are currently re-evaluating alternatives to bring the NB-01 asset to the market through a different regulatory pathway. Development of NB-01 as an orphan drug is among the alternatives we are considering, and we may conduct feasibility studies to identify a rare disease relevant to NB-01. There is no assurance that we will be able to pursue this alternative for NB-01.

~~Our ability to successfully develop NB-01 as an orphan drug would be subject to the following additional risks, among others:~~

●

~~the results from different types of animal models could be inconsistent from the previous data we have;~~

●

~~a limited number of potential participants could make clinical trials for NB-01 difficult; and~~

●

~~disparate locations of a limited number of potential participants could make clinical trials difficult.~~

~~Our business is subject to risks arising from epidemic diseases, such as the COVID-19 pandemic.~~

The outbreak of COVID-19 disease, which has been declared by the World Health Organization to be a pandemic, has spread across the globe and is impacting worldwide economic activity. A pandemic, including COVID-19, or other public health epidemic poses the risk that we or our employees, contractors, suppliers, and other partners may be prevented from conducting business activities for an indefinite period of time, including due to spread of the disease within these groups or due to shutdowns that may be requested or mandated by governmental authorities.

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To date, except for the adjustments to scientific activity described under “Current Scientific Activity” above, the Company has not experienced any significant changes in our business that would have a significant negative impact on our consolidated statements of operations or cash flows.

The continued spread of COVID-19 and the measures taken by the governments of countries affected could disrupt the supply chain and the manufacture or shipment of both drug substance and finished drug product for our product candidates for preclinical testing and clinical trials and adversely impact our business, financial condition or results of operations. We often attend and present updates at various medical and investor conferences throughout the year. The COVID-19 pandemic has caused, and is likely to continue to cause, cancellations or reduced attendance of these conferences and we may need to seek alternate methods to present clinical updates and to engage with the medical and investment communities. The spread of COVID-19 may also slow potential enrollment of clinical trials and reduce the number of eligible patients for our clinical trials. The COVID-19 pandemic and mitigation measures may also have an adverse impact on global economic conditions which could have an adverse effect on our business and financial condition and our potential to conduct financings on terms acceptable to us, if at all. The extent to which the COVID-19 pandemic impacts our results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

~~Not applicable.~~

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.OTHER INFORMATION

WeWork Membership Agreement

On ~~June 7, 2020, we~~May 14, 2021, the Company entered into a ~~manufacturing and supply agreement~~new WeWork Membership Agreement (the ~~“Manufacturing and Supply~~“New Agreement”) with ~~Dong-A ST for the manufacturing and supply of NB-02 drug product and placebo for the purpose of research and development of NB-02, including but not limited~~200 Berkeley Street Tenant, LLC, an entity affiliated with WeWork, to ~~the use~~continue leasing certain office space situated in ~~the first NB-02 human clinical trial to be conducted by us. Under the terms~~Boston, MA. The term of the ~~Manufacturing~~Company’s prior WeWork Membership Agreement, dated November 11, 2020, expired on July 31, 2021.

The New Agreement, effective August 1, 2021, has a six month term and ~~Supply Agreement, upon receipt~~provides for rental costs of ~~a purchase order from us no later than 270 days~~approximately $3,000 per month, prior to the ~~requested delivery~~application of certain rent concessions granted by the landlord in the amount of approximately $2,000 over the six month term.

The foregoing summary of the New Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the New Agreement, a copy of which is filed as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 17, 2021 and is incorporated herein by reference.

Akash Bakshi Release Agreement

On August 13, 2021, the Company entered into a Release Agreement (the “Release Agreement”) with Akash Bakshi, Chief Operating Officer of the Company. Pursuant to the Release Agreement, the Company and Mr. Bakshi agreed that Mr. Bakshi’s employment with the Company will terminate as of December 31, 2021 or such earlier date ~~Dong-A ST~~as determined by the Company (the “Resignation Date”).

Under the Release Agreement, subject to non-revocation of a general release and waiver of claims in favor of the Company, the Company has agreed to ~~produce for us tablets~~pay Mr. Bakshi a total of $125,000 less required deductions and withholdings, paid in approximately equal monthly installments during the six-month period commencing within 30 days after the Resignation Date. In addition, the Company has agreed to pay 100% of the ~~NB-02 drug substance~~cost of premiums for continued health insurance coverage through the earliest of (i) six months following the first day of the month following the Resignation Date, (ii) the date Mr. Bakshi becomes eligible for health insurance benefits from a subsequent employer, or (iii) the cessation of Mr. Bakshi’s health continuation rights under COBRA.

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The foregoing summary of the Release Agreement does not purport to be complete and placebos at a specified supply price. We are obligated to manufacture, or have manufactured, and supply to Dong-A the active pharmaceutical ingredients which are necessary to manufacture the NB-02 drug product. The Manufacturing and Supply Agreement has a five year term,is subject to, ~~earlier termination under certain circumstances.~~

and qualified in its entirety by, the full text of the Release Agreement, a copy of which is filed as Exhibit 10.2 to this Quarterly Report on Form 10-Q and is incorporated herein by reference. This disclosure is provided in lieu of disclosure in Item ~~1.01~~5.02 of Form 8-K, in accordance with SEC rules.

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ITEM 6. EXHIBITS

EXHIBIT NUMBER		DESCRIPTION OF DOCUMENT
~~4.1~~

10.1		~~Form of Placement Agent’s Warrant~~Membership Agreement by and between WeWork and NeuroBo Pharmaceuticals, Inc., dated May 14, 2021 (incorporated by reference to Exhibit ~~4.1~~10.4 to the ~~Company's Current~~Registrant’s Quarterly Report on Form ~~8-K,~~10-Q filed on ~~April 15, 2020)~~May 17, 2021).
~~10.1~~10.2*		~~Form of Securities Purchase~~Release Agreement ~~(incorporated~~ by ~~reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed on April 15, 2020).~~and between Akash Bakshi and NeuroBo Pharmaceuticals, Inc., dated August 13, 2021.
~~10.2~~31.1*		~~Dong-A ST CO., LTD. Manufacturing and Supply Agreement (NB-02 formerly DA-9803) dated June 7, 2020.~~
~~31.1~~		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a), as Adopted Pursuant to Section 302 of The Sarbanes Oxley Act of 2002.
~~32.1~~32.1*		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
~~101.INS~~101.INS*		Inline XBRL Instance Document
~~101.SCH~~101.SCH*		Inline XBRL Taxonomy Extension Schema Document
~~101.CAL~~101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document
~~101.DEF~~101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document
~~101.LAB~~101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document
~~101.PRE~~101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*		Filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Registrant: NeuroBo Pharmaceuticals, Inc.


SIGNATURE	TITLE	DATE

/s/ RICHARD KANG	President and Chief Executive Officer	August ~~11, 2020~~16, 2021
Richard Kang	(Principal Financial Officer and duly authorized to sign on behalf of the registrant)

4135


	Redeemable Convertible						Additional			Accumulated
	Preferred Stock			Common Stock			Paid–In			Other Comprehensive	Accumulated		Total
	Shares	Amount		Shares	Amount		Capital			(Loss) Income	Deficit		Equity (Deficit)
Balance at January 1, 2020	—	$	—	15,592,718	$	16	$	49,130	$	12	$	(36,866)	$	12,292
Exercise of stock options	—		—	84,589		—		53		—		—		53
Stock–based compensation	—		—	—		—		159		—		—		159
Foreign currency translation adjustment	—		—	—		—		—		(34)		—		(34)
Net loss	—		—	—		—		—		—		(4,730)		(4,730)
Balance at March 31, 2020	—		—	15,677,307		16		49,342		(22)		(41,596)		7,740
Issuance of common stock in connection with equity financing	—		—	750,000		1		7,499		—		—		7,500
Transaction costs in connection with equity financing	—		—	—		—		(984)		—		—		(984)
Stock–based compensation	—		—	—		—		171		—		—		171
Issuance of broker warrants in connection with equity financing	—		—	—		—		289		—		—		289
Foreign currency translation adjustment	—		—	—		—		—		6		—		6
Net loss	—		—	—		—		—		—		(2,384)		(2,384)
Balance at June 30, 2020	—	$	—	16,427,307	$	17	$	56,317	$	(16)	$	(43,980)	$	12,338


Balance at January 1, 2019	4,801,020	$	16,746	5,166,812	$	—	$	2,266	$	2	$	(15,554)	$	(13,286)
Stock-based compensation	—		—	—		—		60		—		—		60
Foreign currency translation adjustment	—		—	—		—		—		(2)		—		(2)
Net loss	—		—	—		—		—		—		(2,464)		(2,464)
Balance at March 31, 2019	4,801,020		16,746	5,166,812		—		2,326		—		(18,018)		(15,692)
Issuance of redeemable convertible preferred stock, net of issuance costs of $65	3,463,593		24,175	—		—		—		—		—		—
Stock-based compensation	—		—	—		—		79		—		—		79
Foreign currency translation adjustment	—		—	—		—		—		11		—		11
Net loss	—		—	—		—		—		—		(1,901)		(1,901)
Balance at June 30, 2019	8,264,613	$	40,921	5,166,812	$	—	$	2,405	$	11	$	(19,919)	$	(17,503)


	December 31,

2020 (period from July 1 to December 31)	$	129
2021		21
Total minimum payments	$	150