rvph20210930_10q.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


FORM 10-Q


 

(Mark One)

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

 

For the quarterly period ended September 30, 2021

 

OR

 

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

 

For the transition period from         to

 

Commission File Number: 001-38634


 

Reviva Pharmaceuticals Holdings, Inc.

(Exact name of registrant as specified in its charter)


 

Delaware

 

85-4306526

(State or Other Jurisdiction of

 

(I.R.S. Employer

Incorporation or Organization)

 

Identification No.)

   

19925 Stevens Creek Blvd., Suite 100

  

Cupertino, CA

 

95014

(Address of principal executive offices)

 

(Zip Code)

 

(408) 501-8881

(Registrants telephone number, including area code)

 

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

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

RVPH

The Nasdaq Capital Market

Warrants to purchase one share of Common Stock

RVPHW

The Nasdaq Capital Market


 

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

 

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

 

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

 

As of November 9, 2021, the number of outstanding shares of the registrant’s common stock, par value $0.0001 per share, was 13,982,286.

 



 

 

 

 

REVIVA PHARMACEUTICALS HOLDINGS, INC.

TABLE OF CONTENTS

 

   

Page

Part I Financial Information

 

Item 1.

Condensed Consolidated Balance Sheets as of September 30, 2021, and December 31, 2020 (unaudited)

F-1

 

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021, and 2020 (unaudited)

F-2

 

Condensed Consolidated Statement of Stockholders’ Equity for the three months ended September 30, 2021, and 2020 (unaudited)

F-3

 

Condensed Consolidated Statement of Stockholders’ Equity for the nine months ended September 30, 2021, and 2020 (unaudited)

F-4

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021, and 2020 (unaudited)

F-5

 

Notes to Condensed Consolidated Financial Statements (unaudited)

F-6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

2

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

9

Item 4.

Controls and Procedures

10

     

Part II Other Information

 

Item 1.

Legal Proceedings

11

Item 1A.

Risk Factors

11

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

11

Item 3.

Defaults Upon Senior Securities

11

Item 4.

Mine Safety Disclosures

11

Item 5.

Other Information

11

Item 6.

Exhibits

12

Signatures

13

 

1

 

 

REVIVA PHARMACEUTICALS HOLDINGS, INC.

 

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 

  

September 30,

  

December 31,

 
  

2021

  

2020

 
         

Assets

        

Cash

 $33,491,616  $8,760,462 

Prepaid expenses and other current assets

  402,316   1,816 

Total Assets

 $33,893,932  $8,762,278 
         

Liabilities and Stockholders' Equity

        
         

Liabilities

        

Accounts payable

 $420,783  $1,008,046 

Accrued expenses and other current liabilities

  552,917   324,697 

Total current liabilities

  973,700   1,332,743 

Warrant liabilities

  650,886   1,963,785 

Total Liabilities

  1,624,586   3,296,528 
         

Commitments and contingencies (Note 8)

          
         

Stockholders' equity

        

Common stock, par value of $0.0001; 115,000,000 shares authorized; 13,388,986 and 9,231,737 shares issued and outstanding as of September 30, 2021, and December 31, 2020, respectively

  1,338   923 

Additional paid-in capital

  95,415,024   63,774,920 

Accumulated deficit

  (63,147,016)  (58,310,093)

Total stockholders' equity

  32,269,346   5,465,750 

Total Liabilities and Stockholders' Equity

 $33,893,932  $8,762,278 

 

 

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

 

F-1

 

 

REVIVA PHARMACEUTICALS HOLDINGS, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three and Nine Months Ended September 30, 2021 and 2020

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2021

   

2020

   

2021

   

2020

 

Operating expenses

                               

Research and development

  $ 1,423,359     $ 955     $ 2,188,849     $ 295,150  

General and administrative

    1,053,481       511,336       3,951,021       1,612,803  

Total operating expenses

    2,476,840       512,291       6,139,870       1,907,953  

Loss from operations

    (2,476,840 )     (512,291 )     (6,139,870 )     (1,907,953 )

Other income (expense)

                               

Gain on remeasurement of warrant liabilities

    200,273             1,312,899        

Interest and other income (expense), net

    (547 )           (3,948 )     25,004  

Interest expense

          (146,250 )           (375,187 )

Total other income (expense), net

    199,726       (146,250 )     1,308,951       (350,183 )

Loss before provision for income taxes

    (2,277,114 )     (658,541 )     (4,830,919 )     (2,258,136 )

Provision for income taxes

    2,102       547       6,004       1,347  

Net loss

  $ (2,279,216 )   $ (659,088 )   $ (4,836,923 )   $ (2,259,483 )
                                 

Net loss per share:

                               

Basic and diluted

  $ (0.12 )   $ (0.24 )   $ (0.36 )   $ (0.82 )
                                 

Weighted average shares outstanding

                               

Basic and diluted

    18,455,586       2,775,127       13,554,548       2,770,623  

 

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

 

F-2

 

 

REVIVA PHARMACEUTICALS HOLDINGS, INC.

 

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT) (UNAUDITED)

For the Three Months Ended September 30, 2021 and 2020

 

                   

Additional

           

Total

 
   

Common Stock

   

Paid-In

   

Accumulated

   

Stockholders'

 

Three Months Ended September 30, 2021

 

Shares

   

Amount

   

Capital

   

Deficit

   

Equity (Deficit)

 

Balance at June 30, 2021

    13,388,986     $ 1,338     $ 95,387,434     $ (60,867,800 )   $ 34,520,972  

Stock-based compensation expense

                27,590             27,590  

Net loss

                      (2,279,216 )     (2,279,216 )

Balance at September 30, 2021

    13,388,986     $ 1,338     $ 95,415,024     $ (63,147,016 )   $ 32,269,346  

 

   

Series 1,2,3,4

Convertible

 Preferred Stock

   

Common Stock

    Additional

Paid-In

   

Accumulated

    Total

Stockholders'

Equity
 

Three Months Ended September 30, 2020

 

Shares

   

Amount

   

Shares

   

Amount

   

Capital

   

Deficit

   

(Deficit)

 

Balance at June 30, 2020

    1,597,585     $ 29,069,974       2,768,346     $ 618     $ 18,644,683     $ (56,127,100 )   $ (8,411,825 )

Issuance of common stock in lieu of deferred compensation

                38,992       25       424,075             424,100  

Net loss

                                  (659,088 )     (659,088 )

Balance at September 30, 2020

    1,597,585     $ 29,069,974       2,807,338     $ 643     $ 19,068,758     $ (56,786,188 )   $ (8,646,813 )

 

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

 

F-3

 

REVIVA PHARMACEUTICALS HOLDINGS, INC.

 

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT) (UNAUDITED)

For the Nine Months Ended September 30, 2021 and 2020

 

                   

Additional

           

Total

 
   

Common Stock

   

Paid-In

   

Accumulated

   

Stockholders'

 

Nine Months Ended September 30, 2021

 

Shares

   

Amount

   

Capital

   

Deficit

   

Equity (Deficit)

 

Balance at December 31, 2020

    9,231,737     $ 923     $ 63,774,920     $ (58,310,093 )   $ 5,465,750  

Issuance of Units in public offering, net

    4,133,400       413       31,497,050             31,497,463  

Common stock issued in connection with warrant exercises

    23,849       2       98,375             98,377  

Stock-based compensation expense

                44,679             44,679  

Net loss

                      (4,836,923 )     (4,836,923 )

Balance at September 30, 2021

    13,388,986     $ 1,338     $ 95,415,024     $ (63,147,016 )   $ 32,269,346  

 

   

Series 1,2,3,4

                                         
   

Convertible

Preferred Stock

   

Common Stock

    Additional 

Paid-In

   

Accumulated

   

Stockholders' 

Equity
 

Nine Months Ended September 30, 2020

 

Shares

   

Amount

   

Shares

   

Amount

   

Capital

   

Deficit

   

(Deficit)

 

Balance at December 31, 2019

    1,597,585     $ 29,069,974       2,768,346     $ 618     $ 18,644,683     $ (54,526,705 )   $ (6,811,430 )

Issuance of common stock in lieu of deferred compensation

                38,992       25       424,075             424,100  

Net loss

                                  (2,259,483 )     (2,259,483 )

Balance at September 30, 2020

    1,597,585     $ 29,069,974       2,807,338     $ 643     $ 19,068,758     $ (56,786,188 )   $ (8,646,813 )

 

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

 

F-4

 

 

REVIVA PHARMACEUTICALS HOLDINGS, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Nine Months Ended September 30, 2021, and 2020

 

   

Nine Months Ended September 30,

 
   

2021

   

2020

 

Cash flows from operating activities

               

Net loss

  $ (4,836,923 )   $ (2,259,483 )

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

               

Depreciation

          484  

Change in fair value of warrant liabilities

    (1,312,899 )     1,125,189  

Stock-based compensation expense

    44,679        

Changes in operating assets and liabilities:

               

Deferred cost

          (1,680,954 )

Prepaid expenses

    (302,123 )      

Accounts payable

    (587,263 )     1,236,556  

Accrued interest

          228,937  

Accrued expenses and other current liabilities

    228,220       218,236  

Net cash used in operating activities

    (6,766,309 )     (1,131,035 )

Cash flows from financing activities

               

Issuance of common stock in lieu of deferred compensation

          424,100  

Proceeds from issuance of Units in public offering, net

    31,497,463        

Proceeds from issuance of convertible promissory notes

          1,060,000  

Net cash provided by financing activities

    31,497,463       1,484,100  

Net increase (decrease) in cash

    24,731,154       353,065  

Cash, beginning of period

    8,760,462       193  

Cash, end of period

  $ 33,491,616     $ 353,258  
                 

Supplemental disclosures of cash flow information:

               

Cash paid for taxes

  $ 2,400     $  

Deferred offering costs included in accounts payable and other accrued expenses

  $     $  

 

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

 

F-5

 

REVIVA PHARMACEUTICALS HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

 

1.   ORGANIZATION AND NATURE OF OPERATIONS

 

On December 14, 2020, Reviva Pharmaceuticals Holdings, Inc. (the “Company”), a Delaware corporation and the successor by re-domiciliation to Tenzing Acquisition Corp. (“Tenzing”), a British Virgin Islands exempted company, Tenzing Merger Subsidiary Inc., a Delaware corporation and wholly-owned subsidiary of Tenzing (“Merger Sub”), and Reviva Pharmaceuticals, Inc., a Delaware corporation (together with its consolidated subsidiary), consummated a business combination (the “Business Combination”) through the merger of Merger Sub with and into Reviva Pharmaceuticals, Inc., contemplated by the previously announced Agreement and Plan of Merger, dated as of July 20, 2020 (the “Merger Agreement”), by and among Tenzing, Merger Sub, Reviva Pharmaceuticals, Inc., and the other parties thereto. Pursuant to the Merger Agreement, at the effective time of the Merger (the “Effective Time”), Merger Sub merged with and into Reviva Pharmaceuticals, Inc., with Reviva Pharmaceuticals, Inc. as the surviving company in the Merger and, after giving effect to such Merger, Reviva Pharmaceuticals, Inc. becoming a wholly-owned subsidiary of Reviva Pharmaceuticals Holdings, Inc. (together with its consolidated subsidiary).

 

Reviva Pharmaceuticals, Inc. was originally incorporated in the state of Delaware and commenced operations on May 1, 2006 and its Indian subsidiary, Reviva Pharmaceuticals India Pvt. Ltd. was incorporated in 2014. The Company is an emerging research based pharmaceutical company focused on developing a portfolio of internally discovered next generation safe and effective therapeutic drugs by using an integrated chemical genomics technology platform and proprietary chemistries. The Company is currently focused on developing drugs for the central nervous system (CNS), cardiovascular (CV), metabolic and inflammatory diseases.

 

 

 

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. Certain footnotes and other financial information normally required by accounting principles generally accepted in the United States of America, or GAAP, have been condensed or omitted in accordance with such rules and regulations. In management’s opinion, these condensed consolidated financial statements have been prepared on the same basis as our annual consolidated financial statements and notes thereto and include all adjustments, consisting of normal recurring items, considered necessary for the fair presentation. The operating results for the nine months ended September 30, 2021, are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

 

The condensed consolidated balance sheet as of December 31, 2020, has been derived from our audited financial statements at that date but does not include all disclosures and financial information required by GAAP for complete financial statements. The information included in the quarterly report on Form 10-Q should be read in conjunction with our consolidated financial statements and notes thereto for the year ended December 31, 2020, which were included in our annual report on Form 10-K/A, as filed with the Securities and Exchange Commission on May 7, 2021.

 

F- 6

 

Use of estimates

 

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts included in the financial statements and accompany notes thereto. Actual results could differ materially from those estimates.

 

Concentration of credit risk and other risks and uncertainties

 

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash. Substantially, all the Company’s cash is held in demand deposit form by one financial institution. The Company has not experienced any losses on its deposits of cash.

 

The Company is subject to all of the risks inherent in an early-stage company developing new pharmaceutical products. These risks include, but are not limited to, limited management resources, dependence upon medical acceptance of the product in development, regulatory approvals, successful clinical trials, availability and willingness of patients to participate in human trials, and competition in the pharmaceutical industry. The Company’s operating results may be materially affected by the foregoing factors.

 

 

 

3.   PUBLIC OFFERING

 

On June 1, 2021, the Company completed a public offering (the “Offering”) of Units (each, a “Unit”), with each Unit consisting of (a) one share of common stock (or pre-funded warrant to purchase one share of common stock in lieu thereof, with an exercise price of $0.0001 per share, each a “Pre-Funded Warrant”) and (b) one warrant to purchase 0.75 of a share of our common stock, with an exercise price of $4.125 per share (each, an “Investor Warrant”). Pursuant to the Offering, the Company sold 4,133,400 Units consisting of (a) one share of common stock and (b) one Investor Warrant (inclusive the underwriter’s overallotment option of 1,200,000 of such Units), and 5,066,600 Units consisting of (a) one Pre-Funded Warrant and (b) one Investor Warrant. The Units had no stand-alone rights and were not certificated or issued as stand-alone securities. Accordingly, as result of the sale of such Units in the Offering, the Company issued in aggregate 4,133,400 shares of common stock, Pre-Funded Warrants exercisable for 5,066,600 shares of common stock, and Investor Warrants exercisable for 6,900,000 shares of common stock. The offering price was $3.75 for each Unit consisting of (a) one share of common stock and (b) one Investor Warrant, and $3.7499 for each Unit consisting of (a) one Pre-Funded Warrant and (b) one Investor Warrant. Net proceeds from the Offering were approximately $31.5 million, after underwriter discounts, commissions, legal and accounting fees, and certain other costs of approximately $3.0 million.

 

 

 

4.   BUSINESS COMBINATION

 

On December 14, 2020, the Company consummated the Business Combination. Pursuant to the Merger Agreement, at the Effective Time, Merger Sub merged with and into Reviva Pharmaceuticals, Inc., with Reviva Pharmaceuticals, Inc. as the surviving company in the Merger and, after giving effect to such Merger, Reviva Pharmaceuticals, Inc. becoming a wholly-owned subsidiary of the Company (together with its consolidated subsidiary).

 

F- 7

 

Upon the closing of the Business Combination, all shares of Reviva Pharmaceuticals, Inc. common stock and preferred stock issued and outstanding immediately prior to the Business Combination converted into common stock of Reviva Pharmaceuticals Holdings, Inc., with a par value of $0.0001 per share at an exchange rate of 0.152268 for common stock and 0.414647 for preferred stock.  Each issued and outstanding warrant to acquire shares of Reviva Pharmaceuticals, Inc. common stock were assumed by Reviva Pharmaceuticals Holdings, Inc. and automatically converted into a warrant for Reviva Pharmaceuticals Holdings, Inc. common stock, with its price and number of shares adjusted based on the common stock exchange rate of 0.152268.  Each outstanding option to acquire Reviva Pharmaceuticals, Inc. common stock (all of which were vested at the date of the Business Combination), were assumed by Reviva Pharmaceuticals Holdings, Inc. and automatically converted into an option to acquire shares of Reviva Pharmaceuticals Holdings, Inc. common stock at the common stock exchange rate of 0.152268.

 

In addition to the merger consideration set forth above, the Reviva Pharmaceuticals, Inc. security holders also have a contingent right to receive up to an additional 1,000,000 shares of Reviva Pharmaceuticals Holdings, Inc. (the “Earnout Shares”) based on the stock price performance of the common stock and the achievement by the Company of certain clinical trial milestones during the three (3) year period following the Closing (the “Earnout Period”). In order to receive the Earnout Shares, during the Earnout Period, both:

 

 

the closing price of the Company’s common stock has to be equal to or greater than $15.00 per share for any 20 trading days within any 30 trading day period; and

 

 

the Company must receive positive data from (i) its first Phase 3 trial in Acute Schizophrenia and (ii) either a Phase 2 clinical trial in pulmonary arterial hypertension or idiopathic pulmonary fibrosis.

 

The Business Combination was accounted for as a reverse merger in accordance with GAAP. Under this method of accounting, Tenzing is treated as the “acquired” company for financial reporting purposes. This determination was primarily based on the holders of Reviva Pharmaceuticals, Inc. having a majority of the voting power of the post-combination company, Reviva Pharmaceuticals, Inc. senior management comprising substantially all of the senior management of the post-combination company, the relative size of Reviva compared to Tenzing, and Reviva Pharmaceuticals, Inc. operations comprising the ongoing operations of the post-combination company. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Reviva Pharmaceuticals, Inc. issuing stock for the net assets of Tenzing, accompanied by a recapitalization. The net assets of Tenzing are stated at historical cost, with no goodwill or other intangible assets recorded.

 

F- 8

 

The accompanying financial statements and related notes reflect the historical results of Reviva Pharmaceuticals, Inc. prior to the merger and do not include the historical results of Tenzing prior to the consummation of the Business Combination.

 

 

 

5.   LOSS PER SHARE

 

Loss per share calculations for all periods prior to the Business Combination have been retrospectively adjusted for the equivalent number of shares outstanding immediately after the Business Combination to effect the reverse recapitalization. Subsequent to the Business Combination, earnings per share will be calculated based on the weighted average shares of common stock then outstanding.

 

Basic and diluted net loss per share is computed by dividing the net loss for the period by the weighted average number of common stock outstanding during the period. The weighted average shares of common stock outstanding is based on the 9,231,737 shares of common stock outstanding immediately after the reverse recapitalization in connection with the Business Combination and assumes these shares have been outstanding as of the beginning of the earliest period presented.

 

For the three and nine months ended September 30, 2021, and 2020, the Company has excluded the potential effect of warrants to purchase shares of common stock totaling 13,883,732 and 1,603,403 shares respectively and the dilutive effect of outstanding stock options totaling 146,698, and 65,471 respectively in the calculation of diluted loss per share, as the effect would be anti-dilutive due to losses incurred. Additionally, 1,000,000 earn-out shares have been excluded as they are not considered issued for accounting purposes. 

 

 

 

6.   WARRANTS

 

As of September 30, 2021, there were public warrants outstanding to purchase an aggregate of 6,325,000 shares of common stock and private warrants outstanding to purchase an aggregate of 556,313 shares of common stock.

 

Each public warrant entitles the holder thereof to purchase one share of common stock at a price of $11.50 per share, subject to adjustment. No public warrants will be exercisable for cash unless we have an effective and current registration statement covering the issuance of the shares of common stock issuable upon exercise of the public warrants and a current prospectus relating to such shares of common stock.

 

F- 9

 

We may call the public warrants for redemption, in whole and not in part, at a price of $0.01 per warrant;

 

 

if, and only if, the reported last sale price of the common stock equals or exceeds $21.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations), for any 20 trading days within a 30 trading day period ending on the third trading business day prior to the notice of redemption to holders of the public warrants, and

 

 

if, and only if, there is a current registration statement in effect with respect to the issuance of the shares of Common Stock underlying such Public Warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of redemption

 

 

at any time while the public warrants are exercisable

 

 

upon not less than 30 days’ prior written notice of redemption to each warrant holder

 

The private warrants are substantially similar to the public warrants except such private warrants;

 

 

are exercisable for cash or on a cashless basis, at the holder’s option

 

 

cannot be redeemed by us, so long as they are still held by the initial purchasers or their affiliates.

 

 

The redemption price is to be calculated as the 10-day average trading price ending one trading business day prior to the notice of redemption.

 

In no event will the Company be required to net cash settle either the public or the private warrants.

 

The Company classified the private warrants pursuant to ASC 815 as derivative liabilities with subsequent changes in their fair values to be recognized in the consolidated financial statements at each reporting date. The Company calculated the fair value of the private warrants as of September 30, 2021 as $650,886 using Black-Scholes model. The key inputs used in the Black-Scholes calculation were, the risk-free interest rate, expected volatility, expected life, exercise price and stock price. The risk-free interest rate was estimated to be 0.80%, the expected volatility was estimated to be 69.1%, and the expected life was estimated to be 4.21 years. The exercise price was $11.50, and the stock price $4.07. Due to fair value changes during the three and nine months ended September 30, 2021, the Company recorded a gain on remeasurement of warrant liabilities of $200,273 and $1,312,899, respectively.

 

F- 10

 

The exercise price and number of shares of common stock issuable on exercise of the warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or a recapitalization, reorganization, merger or consolidation.

 

Further, there were assumed warrants outstanding to purchase an aggregate of 126,268 shares of common stock. These warrants were classified as equity as of September 30, 2021, and December 31, 2020. The fair value of these warrants on the date of issuance was $1,279,182.

 

In connection with the Offering, the Company issued Pre-Funded Warrants exercisable for 5,066,600 shares of common stock. Total proceeds from the sale of Units including the Pre-Funded Warrants were approximately $19.0 million and the Pre-Funded Warrants are exercisable into one share of common stock at an exercise price of $0.0001 per share at any time after issuance. Additionally, in connection with the Offering, the Company issued Investor Warrants exercisable for 6,900,000 shares of common stock with an exercise price of $4.125 per share of common stock any time after issuance. The Investor Warrants expire on June 1, 2026. During the three and nine months ended September 30, 2021, Investor Warrants for 0 and 23,849 shares of common stock were exercised with proceeds of $0 and $98,377, respectively. The Company has determined that as the Pre-Funded Warrants and Investor Warrants were issued at fair value in a public offering of Units with no debt funding included in the offering, the Pre-Funded Warrants and Investor Warrants should be classified as equity.

 

 

 

7.   STOCK OPTION PLANS AND STOCK-BASED COMPENSATION

 

Stock-Based Compensation Expense

 

The Company records stock-based compensation expense in connection with the amortization of the fair value of stock options granted to employees, non-employee consultants and non-employee directors. During the three months ended September 30, 2021 and 2020, the Company recorded stock-based compensation of $27,590 and $0 respectively. During the nine months ended September 30, 2021, and 2020, the Company recorded stock-based compensation of $44,679 and $0 respectively. As of September 30, 2021, and 2020, the Company had unrecognized stock-based compensation expense of $220,676 and $0.

 

Determining Fair Value

 

Valuation and Recognition – The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes pricing model utilizes the following assumptions:

 

Expected Term – Expected life of an option award is the average length of time over which the Company expects employees will exercise their options, which is based on historical experience with similar grants.

 

Expected Volatility - Expected volatility is based on the Company’s historical stock volatility data over the expected term of the awards.

 

Risk-Free Interest Rate - The Company bases the risk-free interest rate on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent expected term.

 

Dividend Yield – The Company has not paid a dividend and does not anticipate paying a dividend in the foreseeable future.

 

The assumptions used in estimating the fair value of options granted in 2021 are summarized as follows:

 

Expected Term in years - 5.75 - 6.08

 

F- 11

 

Volatility - 91.4% - 92.2%

 

Risk-free interest rate – 0.95% - 1.10%

 

Dividend Yield – 0.00%

 

Activity under the stock plans for the nine months ending September 30, 2021, is as follows:

 

  

Shares available for Grant

  

Number of Options
Outstanding

  

Weighted Average Exercise price per share

 

Balance, January 1, 2020

  1,384,761   65,471  $16.86 

Granted

  81,227   81,227  $4.38 

Balance, September 30, 2021

  1,303,534   146,698  $9.95 

Vested, September 30, 2021

     65,471  $16.86 

Vested and expected to vest, September 30, 2021

     146,698  $9.95 

 

Options outstanding under the stock plans are as follows as of September 30, 2021:

 

 

Options
Outstanding

  

Weighted
average
remaining
contractual
life (years)

  

Options
Exercisable

  

Weighted
Average
Exercise
Prices

 
  48,724   1.10   48,724  $11.89 
  16,747   3.19   16,747  $31.33 
  65,227   9.54     $4.30 
  16,000   9.71     $4.73 
  146,698   6.03   65,471  $9.95 

 

 

 

8.   COMMITMENTS AND CONTINGENCIES

 

Clinical trials

 

Since 2010, the Company has entered into multiple clinical trial agreements with medical institutions in the United States, Europe and Asia for the purpose of enrolling patients into various clinical trials. The agreements are substantially similar by trial and include a detailed listing of the clinical trial services for which the Company will pay, how much will be paid for each service, a set-up charge (if any), Investigational Review Board fees, contractual term, and other provisions. The clinical trial services provided by each site generally include the screening of prospective patients and, for those patients to be enrolled in the study, administration of the Company’s investigation drug according to the trial protocol, any required hospitalization, ancillary medical supplies, and 2-week patient follow-up. Further, each agreement requires the Company to indemnify each respective clinical site against any and all liability, loss, or damage it may suffer as a result of third-party claims; the Company maintains general product liability insurance of not less than $5 million in conjunction with this indemnification. The agreements may be terminated upon 30 days’ written notice, subject to conditions of paying all liabilities incurred through the date of termination. Additionally, with each screened patient, the Company incurs expense with other entities engaged to provide independent review of patient medical records.

 

Indemnification

 

From time to time, in its normal course of business, the Company may indemnify other parties, with whom it enters into contractual relationships, including lessors and parties to other transactions with the Company. The Company may agree to hold other parties harmless against specific losses, such as those that could arise from a breach of representation, covenant or third-party infringement claims. It may not be possible to determine the maximum potential amount of liability under such indemnification obligations due to the unique facts and circumstances that are likely to be involved in each particular claim and indemnification provision. Historically, there have been no such indemnification claims. The Company has also indemnified its directors and executive officers, to the extent legally permissible, against all liabilities reasonably incurred in connection with any action in which such individual may be involved by reason of such individual being or having been a director or executive officer.

 

Operating Leases

 

The Company adopted ASC 842 to our existing lease on January 1, 2020. The Company has elected to apply the short-term lease exception to leases of one year or less. Presently, the Company has a single twelve-month lease on its Corporate Office located at 19925 Stevens Creek Blvd., Suite 100, Cupertino, CA 95014. The monthly lease payment is approximately $1,200 and the lease was renewed on February 1, 2021, for another 12-month term.

 

F-12

 

 

 

ITEM 2.    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

As a result of the completion of the Business Combination, the financial statements of Reviva Pharmaceuticals, Inc are now the financial statements of the Company. Prior to the Business Combination, the Company had no operating assets but, upon consummation of the Business Combination, the business and operating assets of Reviva Pharmaceuticals, Inc. acquired by the Company became the sole business and operating assets of the Company. Accordingly, the financial statements of Reviva Pharmaceuticals, Inc. and its respective subsidiary as they existed prior to the Business Combination and reflecting the sole business and operating assets of the Company going forward, are now the financial statements of the Company.

 

All statements other than statements of historical fact included in this section regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward- looking statements. When used in this section, words such as anticipate, believe, estimate, expect, intend and similar expressions, as they relate to our management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those contemplated by the forward- looking statements as a result of certain factors detailed herein. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This report on Form 10-Q contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “can,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “seek,” “estimate,” “continue,” “plan,” “point to,” “project,” “predict,” “could,” “intend,” “target,” “potential” and other similar words and expressions of the future.

 

There are a number of important factors that could cause the actual results to differ materially from those expressed in any forward-looking statement made by us. These factors include, but are not limited to:

 

 

our ability to maintain the listing of the common stock and warrants on the Nasdaq Capital Market;

 

 

our ability to grow and manage growth economically;

 

 

our ability to retain key executives and medical and science personnel;

 

 

the impact of the COVID-19 pandemic, and related responses of businesses and governments to the pandemic, on our operations and personnel, on commercial activity in the markets in which we operate and on our results of operations;

 

 

the possibility that our products in development succeed in or fail clinical trials or are not approved by the U.S. Food and Drug Administration or other applicable authorities;

 

 

the possibility that we could be forced to delay, reduce or eliminate its planned clinical trials or development programs;

 

 

our ability to obtain approval from regulatory agents in different jurisdictions for our current or future product candidates;

 

 

changes in applicable laws or regulations;

 

 

changes to our relationships within the pharmaceutical ecosystem;

 

 

our current and future capital requirements to support our development and commercialization efforts and our ability to satisfy our capital needs;

 

 

the accuracy of our estimates regarding expenses and capital requirements, including estimated costs of our clinical studies.

 

 

our limited operating history;

 

 

2

 

 

our history of operating losses in each year since inception and expectation that we will continue to incur operating losses for the foreseeable future;

 

 

the valuation of our private warrants could increase the volatility in our net income (loss);

 

 

changes in the markets that we target;

 

 

our ability to maintain or protect the validity of our patents and other intellectual property;

 

 

our exposure to any liability, protracted and costly litigation or reputational damage relating to data security;

 

 

our ability to develop and maintain effective internal controls; and

 

 

the possibility that we may be adversely affected by other economic, business, and/or competitive factors.

 

The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with that may cause our actual results to differ from those anticipated in such forward-looking statements. Please see “Risk Factors” for additional risks which could adversely impact our business and financial performance.

 

All forward-looking statements are expressly qualified in their entirety by this cautionary notice. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this report or the date of the document incorporated by reference into this report. We have no obligation, and expressly disclaims any obligation, to update, revise or correct any of the forward-looking statements, whether as a result of new information, future events or otherwise. We have expressed our expectations, beliefs and projections in good faith and believe they have a reasonable basis. However, we cannot assure you that our expectations, beliefs or projections will result or be achieved or accomplished.

 

Company Overview

 

We are a clinical-stage biopharmaceutical company that discovers, develops and seeks to commercialize next-generation therapeutics for diseases representing significant unmet medical needs and burden to society, patients, and their families. Our current pipeline focuses on the central nervous system, respiratory, and metabolic diseases. We use a chemical genomics driven technology platform and proprietary chemistry to develop new medicines. Our pipeline currently has two drug candidates, RP5063 (Brilaroxazine) and RP1208. Both are new chemical entities discovered in-house. We have been granted composition of matter patents for both RP5063 and R1208 in the United States (U.S.), Europe, and several other countries.

 

Our lead drug candidate, RP5063, is ready for continued clinical development for multiple neuropsychiatric indications. These include schizophrenia, bipolar disorder (BD), major depressive disorder (MDD), behavioral and psychotic symptoms, dementia or Alzheimer’s disease (BPSD), Parkinson’s disease psychosis (PDP), and attention deficit hyperactivity disorder (ADHD). Furthermore, RP5063 is also ready for clinical development for two respiratory indications — pulmonary arterial hypertension (PAH) and idiopathic pulmonary fibrosis (IPF). The U.S. Food and Drug Administration (FDA) has granted Orphan Drug designation to RP5063 for the treatment of PAH in November 2016 and IPF in April 2018. 

 

Our primary focus is to complete the clinical development of RP5063 for the treatment of acute and maintenance schizophrenia.

 

Subject to the receipt of additional financing, we may also continue the clinical development of RP5063 for the treatment of BD, MDD, BPSD, PDP, ADHD, PAH and IPF. Moreover, subject to the receipt of additional financing, we may also advance the development of our second drug candidate, RP1208, for the treatment of depression and obesity.

 

Impact of COVID-19

 

In response to the spread of COVID-19, we have taken temporary precautionary measures intended to help minimize the risk of the virus to our employees and community, including temporarily requiring employees to work remotely and suspending all non-essential travel for our employees.

 

As a result of the COVID-19 pandemic, we may experience disruptions that could adversely impact our business. The COVID-19 pandemic may negatively affect clinical site initiation, patient recruitment and enrollment, patient dosing, distribution of drug to clinical sites and clinical trial monitoring for our clinical trials. The COVID-19 pandemic may also negatively affect the operations of the third-party contract research organizations that we intend to rely upon to assist us in conducting our clinical trials and the contract manufacturers who manufacture our drug candidates.

 

3

 

We are continuing to assess the potential impact of the COVID-19 pandemic on our business and operations. For additional information on the various risks posed by the COVID-19 pandemic, refer to Part I—Item 1A—Risk Factors of our Annual Report on Form 10-K/A, as filed with the Securities and Exchange Commission (the “SEC”) on May 7, 2021.

 

Business Combination and Domestication

 

On December 14, 2020, Reviva Pharmaceuticals Holdings, Inc. (the “Company”), a Delaware corporation and the successor by re-domiciliation to Tenzing Acquisition Corp. (“Tenzing”), a British Virgin Islands exempted company, Tenzing Merger Subsidiary Inc., a Delaware corporation and wholly-owned subsidiary of Tenzing (“Merger Sub”), and Reviva Pharmaceuticals, Inc., a Delaware corporation (together with its consolidated subsidiary), consummated a business combination (the “Business Combination”) through the merger of Merger Sub with and into Reviva Pharmaceuticals, Inc., contemplated by the previously announced Agreement and Plan of Merger, dated as of July 20, 2020 (the “Merger Agreement”), by and among Tenzing, Merger Sub, Reviva Pharmaceuticals, Inc., and the other parties thereto. Pursuant to the Merger Agreement, at the effective time of the Merger (the “Effective Time”), Merger Sub merged with and into Reviva Pharmaceuticals, Inc., with Reviva Pharmaceuticals, Inc. as the surviving company in the Merger and, after giving effect to such Merger, Reviva Pharmaceuticals, Inc. becoming a wholly-owned subsidiary of Reviva Pharmaceuticals Holdings, Inc. (together with its consolidated subsidiary).

 

Old Reviva was incorporated in the state of Delaware on May 1, 2006 and its subsidiary, Reviva Pharmaceuticals India Pvt. Ltd., was incorporated on December 23, 2014. Tenzing was formed pursuant to the laws of the British Virgin Islands on March 20, 2018.

 

The Business Combination was accounted for as a reverse merger in accordance with GAAP. Under this method of accounting, Tenzing was treated as the “acquired” company for financial reporting purposes. This determination was primarily based on the holders of Old Reviva expecting to have a majority of the voting power of the post-combination company, Old Reviva senior management comprising substantially all of the senior management of the post-combination company, the relative size of Old Reviva compared to Tenzing, and Old Reviva operations comprising the ongoing operations of the post-combination company. Accordingly, for accounting purposes, the Business Combination is treated as the equivalent of Old Reviva issuing stock for the net assets of Tenzing, accompanied by a recapitalization. The net assets of Tenzing were stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination are those of Old Reviva.

 

Financial Overview

 

We are a clinical-stage biopharmaceutical company and have not generated any revenues from the sale of products. We have never been profitable, and our accumulated deficit as of September 30, 2021, was $63.1 million. Our net loss for the nine months ended September 30, 2021, was approximately $4.8 million. We expect to incur significant expenses and increased operating losses for the next several years. We expect our expenses to increase in connection with our ongoing activities to research, develop and commercialize our product candidates. Furthermore, we expect to incur additional costs associated with operating as a public company. We will need to generate significant revenues to achieve profitability, and we may never do so.

 

We expect our expenses will increase substantially in connection with our ongoing activities, as we:

 

 

invest significantly to further research and develop, through clinical trials for RP5063 (Brilaroxazine) and pre-clinical research for RP1208, and seek regulatory approval for our product candidates RP5063 (Brilaroxazine) and RP1208;

   

 

 

identify and develop additional product candidates;

 

 

hire additional clinical, scientific and management personnel;

   

 

 

seek regulatory and marketing approvals for any product candidates that we may develop;

   

 

 

ultimately establish a sales, marketing and distribution infrastructure to commercialize any drugs for which we may obtain marketing approval;

   

 

 

maintain, expand and protect our intellectual property portfolio;

   

 

 

acquire or in-license other drugs and technologies; and

   

 

 

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

 

4

 

We have funded our operations to date primarily from the issuance and sale of our equity and convertible equity securities. As of September 30, 2021, we had cash of approximately $33.5 million. To fund our current operating plans, we will need to raise additional capital. Our existing cash will not be sufficient for us to complete development of our product candidates and, if applicable, to prepare for commercializing any product candidate that may receive approval. Accordingly, we will continue to require substantial additional capital beyond our existing cash to continue our clinical development and potential commercialization activities, however, we believe that our existing cash, will be sufficient to fund our current operating plans through at least December 2022. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our clinical development efforts. We will seek to fund our operations through public or private equity or debt financings or other sources, which may include collaborations with third parties. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.

 

Research and Development Expenses

 

We focus our resources on research and development activities, including the conduct of preclinical and clinical studies and product development and expense such costs as they are incurred. We have not historically tracked or recorded research and development expenses on a project-by-project basis, primarily because we use our employee and infrastructure resources across multiple research and development projects, and it is not practical for us to allocate such costs on a project-by-project basis. Our research and development expenses primarily consist of employee-related expenses, including deferred salaries, salaries, benefits and taxes for personnel in research and development functions.

 

The largest recurring component of our total operating expenses has historically been research and development activities. we expect our research and development expenses will increase for the next several years as we advance our development programs, pursues regulatory approval of our product candidates in the U.S. and other jurisdictions and prepare for potential commercialization, which would require a significant investment in costs related to contract manufacturing, inventory buildup and sales and marketing activities.

 

Our primary product candidates and their current status is as follows:

 

Drug Candidate

Indication

Status

RP5063

Schizophrenia

Phase 2 complete. We are currently focusing our efforts on initiating a pivotal Phase 3 study in acute schizophrenia.

RP5063

Bipolar Disorder

Phase 1 complete**

RP5063

Depression-MDD

Phase 1 complete**

RP5063

Alzheimer’s (AD-Psychosis/Behavior)

Phase 1 complete**

RP5063

Parkinson’s

Phase 1 complete**

RP5063

ADHD/ADD

Phase 1 complete**

RP5063

PAH

Phase 1 complete**

RP5063

IPF

Phase 1 complete**

RP1208

Depression

Completed pre-clinical development studies, including in vitro receptor binding studies, animal efficacy studies, and PK studies. Compound ready for IND enabling studies.

RP1208

Obesity

Completed pre-clinical development studies, including in vitro receptor binding studies and PK studies. Compound ready for animal efficacy studies.

 

5

 

** We completed the Phase 1 clinical study for RP5063 (Brilaroxazine) prior to starting the Phase 2 study in schizophrenia and schizoaffective disorder. We collected safety data for RP5063 (Brilaroxazine) in over 200 patients, including healthy subjects and patients with stable schizophrenia, acute schizophrenia and schizoaffective disorder. Generally, no separate Phase 1 study is required for conducting a Phase 2 study for an additional indication, provided the treatment doses in the Phase 2 study for an additional indication are within the range of doses tested in the previously completed Phase 1 study.

 

The successful development of our platform and product candidates is highly uncertain, and we may never succeed in achieving marketing approval for our product candidates RP5063 (Brilaroxazine), RP1208, or any future product candidates. We estimate that initial costs to conduct our Phase 3 clinical study for RP5063 could total approximately $21.0 million, with approximately $7.0 million payable over the course of calendar 2021, and approximately $10.0 million payable during calendar 2022, and approximately $4.0 million payable during calendar 2023. At this time, other than our estimates for conducting our Phase 3 clinical study for RP5063, we cannot reasonably estimate the nature, timing, or costs of the efforts necessary to finish developing any of our product candidates or the period in which material net cash, if any, from these product candidates may commence. This is due to the numerous risks and uncertainties associated with developing therapeutics, including the uncertainty of:

 

 

the scope, rate of progress, expense, and results of clinical trials;

 

 

the scope, rate of progress, and expense of process development and manufacturing;

 

 

preclinical and other research activities; and

 

 

the timing of regulatory approvals.

 

General Administrative Expenses

 

General and administrative expenses primarily consist of payroll and related costs for employees in executive, business development, finance, and administrative functions. Other significant general and administrative expenses include professional fees for accounting and legal services.

 

We expect general and administrative expenses to increase as we expand infrastructure and continue the development of our clinical programs. Other increases could potentially include increased costs for director and officer liability insurance, costs related to the hiring of additional personnel, and increased fees for directors, outside consultants, lawyers, and accountants. We expect to incur significant costs to comply with corporate governance, internal controls, and similar requirements applicable to public companies.

 

6

 

Critical Accounting Policies and Use of Estimates

 

Our critical accounting policies are disclosed in our Annual Report on Form 10-K/A for the year ended December 31, 2020, as filed with the SEC on May 7, 2021. Since the date of the Annual Report, there have been no material changes in our critical accounting policies.

 

Results of Operations

 

Comparison of the three months ended September 30, 2021, and 2020:

 

The following table summarizes our results of operations for the three months ended September 30, 2021, and 2020:

 

   

Three Months Ended September 30,

   

Change

   

Change

 
   

2021

   

2020

    $    

%

 

Operating expenses

                               

Research and development

  $ 1,423,359     $ 955       1,422,404       148,943  

General and administrative

    1,053,481       511,336       542,145       106  

Loss from operations

    2,476,840       512,291                  

Gain on remeasurement of warrant liabilities

    200,273             200,273       100  

Interest and other income (expense), net

    (547 )           (547 )     100  

Interest expense

          (146,250 )     146,250       (100 )

Total other income (expense), net

    199,726       (146,250 )                

Loss before provision for income taxes

    (2,277,114 )     (658,541 )                

Provision for income taxes

    2,102       547       1,555       284  

Net loss

  $ (2,279,216 )   $ (659,088 )                

 

Research & Development expenses

 

We incurred approximately $1.4 million and $1,000 in research and development expenses for the three months ended September 30, 2021, and 2020, respectively. The increase of approximately $1,422,000, or 148,943%, was primarily attributable to higher drug development costs, salary expenditures and increased consulting costs. Our research and development expenses are expected to increase for the foreseeable future as we continue to advance our platform and product candidates.

 

General Administrative Expenses

 

We incurred approximately $1.1 million and $511,000 in general and administrative expenses for the three months ended September 30, 2021, and 2020, respectively. The increase of $542,000, or 106%, was primarily attributable to an increase in salaries by $214,000, increase in insurance costs by $344,000 as a result of increase in premiums as we are now a public company

 

Interest Expense

 

Interest expense for the three months ended September 30, 2021, and 2020 was approximately $0 and $146,000, respectively. The decrease was due to all investor notes being converted immediately prior to the Business Combination.

 

Gain on Remeasurement of Warrant Liabilities

 

The gain on remeasurement of warrant liabilities of approximately $200,000 for the three months ended September 30, 2021, resulted from the decrease in calculated fair value principally as a result of the decline in stock price from June 30, 2021.

 

7

 

Comparison of the nine months ended September 30, 2021, and 2020:

 

The following table summarizes our results of operations for the nine months ended September 30, 2021, and 2020:

 

   

Nine Months Ended September 30,

   

Change

   

Change

 
   

2021

   

2020

    $    

%

 

Operating expenses

                               

Research and development

  $ 2,188,849     $ 295,150       1,893,699       642  

General and administrative

    3,951,021       1,612,803       2,338,218       145  

Loss from operations

    6,139,870       1,907,953                  

Gain on remeasurement of warrant liabilities

    1,312,899             1,312,899       100  

Interest and other income (expense), net

    (3,948 )     25,004       (28,952 )     (116 )

Interest expense

          (375,187 )     375,187       (100 )

Total other income (expense), net

    1,308,951       (350,183 )                

Loss before provision for income taxes

    (4,830,919 )     (2,258,136 )                

Provision for income taxes

    6,004       1,347       4,657       346  

Net loss

  $ (4,836,923 )   $ (2,259,483 )                

 

Research & Development expenses

 

We incurred approximately $2.2 million and $295,000 in research and development expenses for the nine months ended September 30, 2021, and 2020, respectively. The increase of approximately $1,894,000 or 642%, was primarily attributable to higher drug development costs, salary expenditures and increased consulting costs. Our research and development expenses are expected to increase for the foreseeable future as we continue to advance our platform and product candidates.

 

General Administrative Expenses

 

We incurred approximately $4.0 million and $1.6 million in general and administrative expenses for the nine months ended September 30, 2021, and 2020, respectively. The increase of approximately $2.3 million, or 145%, was primarily attributable to $832,000 related to the increased use of consultants in connection with accounting and legal activities, increase in insurance costs by $1,031,000 as a result of increase in premiums as we are now a public company and $763,000 increase in salary and related expenses for new personnel. 

 

Interest Expense

 

Interest expense for the nine months ended September 30, 2021, and 2020 was approximately $0 and $375,000, respectively. The decrease was due to all investor notes being converted immediately prior to the Business Combination.

 

Gain on Remeasurement of Warrant Liabilities

 

The gain on remeasurement of warrant liabilities of approximately $1.3 million for the nine months ended September 30, 2021, resulted from the decrease in calculated fair value principally as a result of the decline in stock price from December 31, 2020.

 

Liquidity and Capital Resources

 

On June 1, 2021, we completed a public offering (the “Offering”) of Units (each, a “Unit”), with each Unit consisting of (a) one share of common stock (or pre-funded warrant to purchase one share of common stock in lieu thereof, with an exercise price of $0.0001 per share, each a “Pre-Funded Warrant”) and (b) one warrant to purchase 0.75 of a share of our common stock, with an exercise price of $4.125 per share (each, an “Investor Warrant”). Pursuant to the Offering, we sold 4,133,400 Units consisting of (a) one share of common stock and (b) one Investor Warrant (inclusive the underwriter’s overallotment option of 1,200,000 of such Units), and 5,066,600 Units consisting of (a) one Pre-Funded Warrant and (b) one Investor Warrant. The Units had no stand-alone rights and were not certificated or issued as stand-alone securities. Accordingly, as result of the sale of such Units in the Offering, we issued in aggregate 4,133,400 shares of common stock, Pre-Funded Warrants exercisable for 5,066,600 shares of common stock, and Investor Warrants exercisable for 6,900,000 shares of common stock. The offering price was $3.75 for each Unit consisting of (a) one share of common stock and (b) one Investor Warrant, and $3.7499 for each Unit consisting of (a) one Pre-Funded Warrant and (b) one Investor Warrant. Net proceeds from the Offering were approximately $31.5 million, after underwriter discounts, commissions, legal and accounting fees, and certain other costs of approximately $3.0 million

 

8

 

As of September 30, 2021, we had cash of approximately $33.5 million. We expect to continue to incur significant expenses and operating losses for the foreseeable future as we continue our research and preclinical and clinical development of our product candidates; expand the scope of our current studies for our product candidates; initiate additional preclinical, clinical or other studies for our product candidates; change or add additional manufacturers or suppliers; seek regulatory and marketing approvals for any of our product candidates that successfully complete clinical studies; seek to identify, evaluate and validate additional product candidates; acquire or in-license other product candidates and technologies; maintain, protect and expand our intellectual property portfolio; attract and retain skilled personnel; and experience any delays or encounter issues with any of the above.

 

Until such time as we can generate substantial product revenue, if ever, we expect to finance our cash needs through a combination of equity or debt financings and collaboration agreements. We do not currently have any committed external sources of capital.

 

To the extent that we raise additional capital through the future sale of equity or debt, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing stockholders.

 

If we raise additional funds through collaboration agreements in the future, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us.

 

If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

 

The table below sets forth selected cash flow data for the periods presented:

 

   

Nine Months Ended September 30,

   

Change

   

Change

 
   

2021

   

2020

    $    

%

 

Net cash provided by (used in)

                               

Operating activities

  $ (6,766,309 )   $ (1,131,035 )     (5,635,274 )     498  

Financing activities

    31,497,463       1,484,100       30,013,363       2,022  

Net increase in cash

  $ 24,731,154     $ 353,065                  

 

Net Cash Used in Operating Activities

 

Net cash used in operating activities for the nine months ended September 30, 2021, was approximately $6.8 million, consisting primarily of a net loss of approximately $4.8 million, a noncash gain related to the remeasurement of warrant liabilities of approximately $1.3 million and an increase in net operating assets of approximately $700,000. The increase in net operating assets was primarily due to increases in prepaid expenses and decreases in accounts payable, offset by increases in accrued expenses and other liabilities.

 

Net cash used in operating activities for the nine months ended September 30, 2020, was approximately $1.1 million, consisting primarily of a net loss of approximately $2.3 million, offset by a noncash expense of approximately $1.1 million related to the issuance of contingent warrants, and an increase in other net operating assets of approximately $3,000. The increase in net operating assets was due to increases in accounts payable, accrued interest and accrued expenses and other liabilities, offset by a decrease in deferred cost.

 

Net Cash Provided by Financing Activities

 

Net cash provided by financing activities for the nine months ended September 30, 2021, of approximately $31.5 million related to proceeds from the Offering. Net cash provided by financing activities for the nine months ended September 30, 2020, of approximately $353,000 related to proceeds from the issuance of convertible promissory notes of approximately $1.1 million and the issuance of common stock in lieu of deferred compensation of approximately $424,000.

 

Off-Balance Sheet Arrangements

 

We did not have during the periods presented, and do not currently have, any off-balance sheet arrangements, as defined under SEC rules.

 

JOBS Act Accounting Election

 

As an emerging growth company under the JOBS Act, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. We have elected not to opt out of such extended transition period. Accordingly, when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, will adopt the new or revised standard at the time private companies adopt the new or revised standard, unless early adoption is permitted by the standard, and we elect early adoption. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

 

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not Applicable.

 

9

 

ITEM 4.   CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the rules and regulations thereunder, 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 officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

As required by Rule 13a-15(b) under the Exchange Act, our management, under the supervision and with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2021. Based on such evaluation, our principal executive officer and principal financial officer have concluded that, as of September 30, 2021, due to the material weakness described below, our disclosure controls and procedures were not effective at the reasonable assurance level. 

 

Material Weaknesses

 

As discussed in our Annual Report on Form 10-K/A for the year ended December 31, 2020, as filed with the SEC on May 7, 2021, our management has determined that we have a material weakness in our internal control over financial reporting related to the lack of analysis for non-routine transactions and related disclosures. Refer to Part II, Item 9A, “Controls and Procedures,” in our Annual Report on Form 10-K/A for the year ended December 31, 2020, as filed with the SEC on May 7, 2021, for a discussion of the actions that we have previously undertaken and continue to undertake to remediate this material weakness.

 

Notwithstanding the material weakness, our Chief Executive Officer and Chief Financial Officer concluded that the condensed consolidated financial statements included in this report present fairly, in all material respects, our financial position, results of operations, and cash flows as of the dates and for the periods presented, in conformity with GAAP.

 

Changes in Internal Control Over Financial Reporting

 

Other than the changes intended to remediate the material weakness as discussed in Part II, Item 9A of our Annual Report on Form 10-K/A for the year ended December 31, 2020, as filed with the SEC on May 7, 2021, there were no changes in our internal controls over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

As we continue to evaluate and work to improve our internal control over financial reporting, we may take additional measures to address the material weakness or supplement or modify certain of the remediation measures described above.

 

Inherent Limitations on Effectiveness of Controls

 

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, 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 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 a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also 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; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

10

 

PART II Other Information

 

ITEM 1.    LEGAL PROCEEDINGS

 

We may, from time to time, become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that may be, individually or in the aggregate, material to us.

 

ITEM 1A.    RISK FACTORS

 

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K/A for the year ended December 31, 2020, as filed with the SEC on May 7, 2021, and in Part II, “Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, as filed with the SEC on August 16, 2021, which could materially affect our business, financial condition or future results. The risks described in such filings may not be the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial also may materially adversely affect the Company’s business, financial condition and/or operating results.

 

There were no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K/A for the year ended December 31, 2020, as filed with the SEC on May 7, 2021, or in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, as filed with the SEC on May 17, 2021.

 

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

 

There were no unregistered sales of equity securities during the period covered by this report.

 

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4.    MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5.    OTHER INFORMATION

 

None.

 

11

 

ITEM 6.    EXHIBITS

 

Exhibit
No.

 

Exhibit

     

31.1*

 

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a)

     

31.2*

 

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a)

     

32.1**

 

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350

     

101.INS*

 

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

 

101.SCH*

 

Inline XBRL Taxonomy Extension Schema Document

     

101.CAL*

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document

     

101.DEF*

 

Inline XBRL Taxonomy Extension Definition Linkbase Document

     

101.LAB*

 

Inline XBRL Taxonomy Extension Label Linkbase Document

     

101.PRE*

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document

     

104

 

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibits 101)

 

*

Filed herewith.

 

**

The certifications furnished in Exhibit 32.1 hereto are deemed to accompany this Annual Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.

 

12

 

SIGNATURES

 

Pursuant to the requirements of Section 13 and 15(d) 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.

 

 

Reviva Pharmaceuticals Holdings, Inc.

 

(Registrant)

   
   

Date: November 15, 2021

/s/ Laxminarayan Bhat

 

Laxminarayan Bhat

 

Chief Executive Officer

 

(Principal Executive Officer)

   

Date: November 15, 2021

/s/ Narayan Prabhu

 

Narayan Prabhu

 

Chief Financial Officer

 

(Principal Financial and Accounting Officer)

 

13
ex_305079.htm

Exhibit 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
Pursuant to

Securities Exchange Act Rules 13a-14(a) and 15d-14(a),

As Adopted Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

 

I, Laxminarayan Bhat, hereby certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of Reviva Pharmaceuticals Holdings, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Dated: November 15, 2021

 

 

/s/ Laxminarayan Bhat

 

Laxminarayan Bhat

 

Chief Executive Officer

 

(Principal Executive Officer)

 

 
ex_305080.htm

Exhibit 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
Pursuant to

Securities Exchange Act Rules 13a-14(a) and 15d-14(a),

As Adopted Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

 

I, Narayan Prabhu, hereby certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of Reviva Pharmaceuticals Holdings, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Dated: November 15, 2021

 

 

/s/ Narayan Prabhu

 

Narayan Prabhu

 

Chief Financial Officer

 

(Principal Financial and Accounting Officer)

 

 
ex_305081.htm

Exhibit 32.1

CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER

AND CHIEF FINANCIAL OFFICER

PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Reviva Pharmaceuticals Holdings, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Quarterly Report”), Laxminarayan Bhat, as Chief Executive Officer of the Company, and Narayan Prabhu, Chief Financial Officer of the Company, each hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), to his knowledge:

 

 

1.

The Quarterly Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

 

 

2.

The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

IN WITNESS WHEREOF, the undersigned have set their hands hereto as of the 15th day of November, 2021.

 

/s/ Laxminarayan Bhat

 

/s/ Narayan Prabhu

Laxminarayan Bhat

 

Narayan Prabhu

Chief Executive Officer

 

Chief Financial Officer

(Principal Executive Officer)

 

(Principal Financial and Accounting Officer)

 

This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

 

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.