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$NOVN DD Thread (1)

Title: A fundamental analysis covering the most important and valuable information about the recently published 10-Q report of Novan Inc. An in-depth discussion on certain formulations and developments in the area of equity financing and investor interest.

 $NOVN Disclosure: This thread is based on in-depth research. In this context, all of the formulations used herein in relation to the quarterly report are backed up by facts. Only thoughts going beyond this are to be regarded as highly speculative. No Investment Advice.
I. Summary of the financial overview

Let‘s start with a look at some numbers on the balance sheet: Total current assets have been increased significantly compared to December 31, 2019. With cash and cash equivalents in the amount of $43,072M we can see that $NOVN...
...has successfully raised capital through different financial options. (I‘ll go into this in more detail in the next chapter.)
In its consolidated financial statements, $NOVN clarifies how this initial financial situation will affect future operating business.
This statement indirectly suggests that the next phase of growth will be dedicated to investors and shareholders. It can be said in support that the term "increasing / maximizing shareholder value" has been used more frequently in recent weeks. $NOVN
Let’s pick up where we left off: Property and equipment, net has been reduced compared to December 31, 2019. As $NOVN stated back in July, 2020, they entered into a lease termination agreement with their landlord. The related facility asset groups were disposed.
This step points to two scenarios: Working cost-effectively during the COVID-19 pandemic or searching for new facilities because of a potential collaboration or partnership. The latter would assume that a more suitable facility will be financed by a strong business partner. $NOVN
The significant change in net debt compared to the previous year illustrates the company’s efforts to accumulate positive working capital. A turnaround in the balance sheets is thus recognizable and predictable. Total Assets (2019): 29,1M / Total Liabilities (2019): 52,88M. $NOVN
The financial strength of a company is essential, not only for advanced financial health of business transactions but also for a reputable ROI. Two indicators should therefore be taken into account: Total Revenue, Total Operating Expenses. Here too, $NOVN has made progress.
Lastly, let‘s take a look at capital movements over the past nine months. At this point the company is cash flow-positive and has enough capital resources to support their operational strategies at least until the fourth quarter of 2021. Marked areas are self-explanatory. $NOVN
II. Discussing financing activities, the birth of new financial strategies and Nasdaq listing requirements

(The following is only an abridged version of financial transactions that were included in the company’s financing activities during the course of the year.) $NOVN
$NOVN —> Financing activities:

March 2020 Public Offering:

- Underwriter: H.C. Wainwright

- Issuance and sale of 14M shares, pre-funded warrants to purchase 4,333,334 shares (Note: CMPO-Pre-Funded-Warrants) and common warrants to purchase 18,333,334 shares (firm warrants)...
$NOVN ...+ 30-day option to purchase up to 2,75M shares and/or common warrants to purchase up to 2,75M shares (...partially exercised on March 2 to purchase 1,498,602 shares and common warrants to purchase 2,75M shares (the option warrants, and together with the firm warrants,...
...the CMPO-Common-Warrants).

- Combined price to the public (each share of common stock and accompanying common warrants): $0.30 / Combined price to the public (each pre-funded warrant and accompanying common warrant): $0.2999.

- Public Offering closed on March 3, 2020. $NOVN
- $NOVN issued to designees of HC Wainwright, as underwriter, warrants to purchase up to 594,958 shares (the CMPO-UW-Warrants).

- Exercise price for CMPO Pre-Funded Warrants = $0.0001 per share.

- Exercise price for CMPO Common Warrants = $0.30 per share.

- Exercise price...
...for CMPO UW Warrants = $0.375 per share.

- Net proceeds from the offering and from the exercise of CMPO Common Warrants: $5,158M and $5,538M.

Most important aspect of this summary is the amount of exercised warrants throughout this year. We‘ll talk about this later. $NOVN
$NOVN March 2020 Registered Direct Offering:

- Underwriters: Several institutional and accredited investors.

- Issuance and sale of 10,55M shares and pre-funded warrants to purchase 8,054,652 shares (the RDO-Pre-Funded-Warrants).

- Purchase price for each share = $0.43
- Price for each pre-funded warrant = $0.4299.

- Offering closed on March 26, 2020.

- $NOVN also issued to the designees of HC Wainwright, as placement agent, warrants to purchase 558,140 shares (the RDO-PA-Warrants).

- Net proceeds from the offering = $7,225M.
- Exercise price for the RDO Pre-Funded Warrants = $0.0001 per share.

- Exercise price for the RDO PA Warrants = $0.5375 per share.

Again, all RDO Pre-Funded Warrants have been completely exercised. $NOVN
$NOVN After looking at these two types of offerings, there‘s still one very important investor to mention before we move on to Aspire CF.

- Joseph Moglia participated in the March 2020 Regist. Direct Offering and purchased 1M shares for $430,000. He‘s a greater than 5% Owner.
The presence of credible and reputable investors, interest groups in $NOVN proclaims a change in course for the company. It‘s one of the first signs that management is now dedicated to stakeholder engagement (Keyword: Aspire). This is a business turnaround in the making.
$NOVN The Aspire CF Common Stock Purchase Agreements (in chronological order and only for 2020) and what significance these have for regulatory processes:

- June 2020 Aspire CF PA: $20M worth of shares. Primary conditions: purchasing stock at the company’s request,...
...(Note: "June 2020 Purchase Notice") during the 30-month term, up to 300,000 shares per day (or by expanding the agreements accordingly, up to 2M shares per day) —> see "June 2020 Purchase Price" or "June 2020 VWAP Purchase Notice" for more information.

- $NOVN issued to...
...Aspire CF 1,449,275 Commitment Shares = valued at ~$848,000 and were recorded as non-cash costs of equity financing.

- As of September 30, 37,764,280 shares (AP = $0.53) were sold to Aspire. Total proceeds: $20M. The amount of sellable shares was exhausted under...
$NOVN ...this agreement. The June 2020 PA was then terminated and replaced by a new one, the July 2020 Aspire CSPA.

Before we are going to look at the next PA, I would like to add an essential detail: The funds withdrawn from these PAs will primarily be used to finance...(TBC)

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