10-Q: Raphael Pharma Reports Reduced Net Loss, Faces Funding Uncertainty

Raphael Pharmaceutical Inc. reported a reduced net loss for the second quarter of 2026, but continues to face significant financial challenges and substantial doubt regarding its ability to continue as a going concern.

Summary

• Raphael Pharmaceutical Inc. reported a net loss of $223,000 for the three months ended June 30, 2026, a decrease of 31% from $322,000 in the same period of 2025.
• For the six months ended June 30, 2026, the net loss was $452,000, a decrease of 40% from $751,000 in the prior year period.
• The company had no revenues in either the three-month or six-month periods.
• Research and development expenses decreased by 72% to $40,000 for the quarter and by 64% to $77,000 for the six months.
• General and administrative expenses also decreased by 9% to $159,000 for the quarter and by 35% to $345,000 for the six months.
• Cash and cash equivalents stood at $1,000 as of June 30, 2026.
• The company has an accumulated deficit of $10,620,000 as of June 30, 2026.
• Management has concluded that substantial doubt exists about the company's ability to continue as a going concern if additional funding is not secured.

Sentiment

Score: 2

Explanation: StockSavvy.ai views this as a negative sentiment due to the company's continued lack of revenue, significant accumulated deficit, and substantial doubt about its ability to continue as a going concern, despite progress in research and development.

Positives

• Reduced net loss for both the three-month and six-month periods ended June 30, 2026, compared to the same periods in 2025.
• Significant decrease in research and development expenses by 72% for the quarter and 64% for the six months.
• Decrease in general and administrative expenses by 9% for the quarter and 35% for the six months.
• Completion of a proof-of-concept clinical study for its lead rheumatoid arthritis (RA) product candidate, with promising results suggesting clinical potential.
• Launch of the RaphaWell brand for RA support in the U.S. as a dietary supplement.
• Filing of a provisional patent application for a formulation for treating neutrophil-dominant autoimmune diseases.
• The company's disclosure controls and procedures are considered effective at a reasonable assurance level.

Negatives

• No revenues generated in the reported periods.
• Significant accumulated deficit of $10,620,000 as of June 30, 2026.
• Cash and cash equivalents are extremely low at $1,000 as of June 30, 2026.
• Substantial doubt exists about the company's ability to continue as a going concern without additional financing.
• The company anticipates requiring approximately $1 million for R&D and $1 million for clinical development and operations over the next 12 months.
• Net cash used in operating activities was $44,000 for the six months ended June 30, 2026.
• Financing activities provided $0 cash for the six months ended June 30, 2026, compared to $240,000 in the prior year period.
• The company's current cash is not expected to be sufficient to fund projected cash requirements through the third quarter of 2026.

Risks

• Substantial doubt about the company's ability to continue as a going concern if additional financing is not obtained.
• The company has not yet generated revenues and expects to continue generating losses from development and clinical activities.
• Failure to secure additional financing could lead to delays in research, elimination of development plans, or cessation of operations.
• The company relies on third parties for manufacturing and commercialization, which introduces dependency and potential supply chain risks.
• Regulatory pathways for FDA and EMA approval are complex and uncertain, with no guarantee of approval.
• Clinical trials may not produce favorable results, impacting the progression of product candidates.
• The company's future capital requirements depend on numerous factors including R&D success, commercialization costs, and regulatory approvals.
• Economic weakness, inflation, or political instability in foreign economies could impact operations.

Future Outlook

The company anticipates requiring approximately $1 million for research and development activities and another $1 million for additional clinical development, commercialization preparation, and general operating costs over the next 12 months. Management believes current cash on hand is insufficient to fund projected operating requirements through the third quarter of 2026, raising substantial doubt about its ability to continue as a going concern.

Management Comments

• Management expects that the Company will continue to generate losses from the development, clinical development and regulatory activities of its product, which will result in negative cash flow from operating activity.
• This has led management to conclude that substantial doubt about the Companys ability to continue as a going concern exists in the event that additional funding does not occur.
• If such sufficient financing is not received timely, the Company will not have sufficient cash flows and liquidity to finance its business operations as currently contemplated and would then need to pursue a plan to license its assets, seek to be acquired by another entity, cease operations and/or seek bankruptcy protection.
• Our disclosure controls and procedures are effective at the reasonable assurance level as of June 30, 2026.

Industry Context

StockSavvy.ai notes that Raphael Pharmaceutical operates in the highly competitive and capital-intensive pharmaceutical sector, specifically focusing on cannabinoid-based therapies. The company's progress in clinical development for RA and autoimmune diseases aligns with a growing interest in alternative treatments, but its early-stage status and lack of revenue place it at a high-risk profile compared to established pharmaceutical giants.

Comparison to Industry Standards

• The company's net loss of $223,000 for the quarter and $452,000 for the six months is typical for early-stage pharmaceutical companies heavily invested in R&D, but the lack of revenue is a significant concern.
• The company's cash burn rate, while reduced, is still substantial relative to its minimal cash reserves, highlighting a critical need for funding that is common in this industry but requires careful management.
• The focus on purified CBG for RA and autoimmune diseases is a niche within the broader pharmaceutical market; success would depend on demonstrating clear efficacy and safety compared to existing treatments and other emerging therapies.
• The company's reliance on third-party manufacturers and distributors is standard practice in the industry, but requires robust oversight and strong partnership agreements.

Management Changes

Legal Proceedings

• No material changes to legal proceedings as previously described in the Annual Report on Form 10-K.

Related Party Transactions

• Short-term credit from a related party (a director) of $43,000 as of June 30, 2026.
• Payables to related party (Officers - CEO, CFO, CTO) of $1,310,000 as of June 30, 2026.
• Consulting services provided by related parties totaled $192,000 for the six months ended June 30, 2026.
• CFO fee paid to a related party was $72,000 for the six months ended June 30, 2026.
• CEO and CFO are guarantors for the repayment of the short-term loan from a director.

Stakeholder Impact

• Shareholders face significant risk due to the company's precarious financial situation and substantial doubt about its going concern status.
• Employees may be concerned about job security given the company's need for significant additional financing and potential for operational disruption.
• Creditors and suppliers may face uncertainty regarding timely payment due to the company's low cash reserves and ongoing losses.

Next Steps

• Continue investigating the product for the treatment of autoimmune diseases.
• Aim to develop a novel treatment for asthma.
• Submit an Investigational New Drug (IND) application to the FDA and MOH following the completion of the Study.
• Progress towards clinical treatments by ensuring the formula meets FDA standards and regulations.
• Seek approvals for product candidates from the FDA, EMA, and other governmental regulatory agencies.
• Enter into royalty agreements with GMP-approved manufacturers and distributors upon obtaining FDA approvals.
• Continue pre-clinical research to further investigate mechanisms and refine Raphaels Formula.

Key Dates

Recommendation

The company exhibits severe financial distress with no revenue, a substantial accumulated deficit, and explicit doubt about its ability to continue as a going concern. While there is progress in R&D, the immediate need for significant capital and the high risk of operational failure outweigh the potential long-term benefits of its product pipeline.

Keywords

pharmaceutical, cannabinoids, rheumatoid arthritis, CBG, clinical development, autoimmune diseases, R&D, going concern