Onconetix(ONCO) - 2024 Q2 - Quarterly Report

Liquidity and Cash Flow - Cash decreased from $4,554,335 to$930,541, reflecting a significant reduction in liquidity[5] - The company's cash balance as of June 30, 2024, was $0.9 million, down from$4.6 million at the beginning of the period[10] - The company expects its current cash balance to fund operations only until September 2024, raising substantial doubt about its ability to continue as a going concern[13] - Net cash used in operating activities for the six months ended June 30, 2024, was $8.4 million, compared to$6.2 million in the same period in 2023[10] - The company had a cash balance of approximately $0.9 million as of June 30, 2024, and$1.0 million as of August 22, 2024, with a working capital deficit of approximately $18.6 million and an accumulated deficit of approximately$82.2 million[113] - The company's current cash balance is only sufficient to fund operations into September 2024, raising substantial doubt about its ability to continue as a going concern within one year[113] - Net cash used in operating activities for the six months ended June 30, 2024, was approximately $8.4 million, primarily due to a net loss of approximately$25.4 million and non-cash impairments of goodwill and ENTADFI of approximately $15.5 million and$3.5 million, respectively[117] - Net cash provided by financing activities for the six months ended June 30, 2024, was approximately $4.9 million, primarily from the issuance of$5.7 million in notes payable[117] - Negative operating cash flows of $8.4 million for the six months ended June 30, 2024[128] - Cash balance of$0.9 million as of June 30, 2024, with a working capital deficit of $18.6 million[128] - The company estimates current cash balance sufficient only to fund operations into September 2024[129] Asset and Liability Changes - Accounts receivable increased from$149,731 to $171,313, indicating higher outstanding customer payments[5] - Inventories decreased from$364,052 to $160,272, suggesting improved inventory management[5] - Total current assets dropped from$5,838,271 to $2,035,448, highlighting a substantial decline in short-term resources[5] - Intangible assets decreased from$25,410,887 to $20,310,890, reflecting potential write-downs or amortization[5] - Goodwill reduced from$55,676,142 to $36,502,332, indicating possible impairment charges[5] - Total assets declined from$87,518,032 to $59,463,955, signaling a significant contraction in the company's asset base[5] - The company impaired$15.5 million of goodwill and $3.5 million of ENTADFI assets during the six months ended June 30, 2024[10] - Total intangible assets decreased from$25,447,699 as of December 31, 2023 to $20,735,171 as of June 30, 2024, primarily due to a$3,296,644 impairment on product rights for developed technology[25] - Accumulated amortization for intangible assets increased to $424,281 as of June 30, 2024, up from$36,812 at December 31, 2023[26] - Goodwill impairment charges totaled $10.3 million for the three months and$15.5 million for the six months ended June 30, 2024[29] - Total accrued expenses decreased to $1,438,872 as of June 30, 2024, from$2,199,867 at December 31, 2023[31] - The company has a working capital deficit of $18.6 million and an accumulated deficit of$82.2 million as of June 30, 2024[13] - The company's Series B Convertible Redeemable Preferred Stock could be redeemable for approximately $41.9 million if stockholder approval is not obtained by January 1, 2025[13] - The company's total current liabilities as of June 30, 2024, were approximately$20.6 million, including accounts payable of $3.2 million and accrued expenses of$1.4 million[133] - Current liabilities of $20.6 million as of June 30, 2024, including$15.0 million in notes payable primarily due to Veru[133] - $5.0 million of debt due in September 2024, with$10 million owed to Veru, $5 million of which is due on September 30, 2024[128][130] Revenue and Profitability - Revenue for Q2 2024 was$704,848, compared to no revenue in Q2 2023[7] - Gross profit for Q2 2024 was $100,716, compared to no gross profit in Q2 2023[7] - Net loss for Q2 2024 was$(14,306,704), compared to $(6,865,270) in Q2 2023[7] - Total operating expenses for Q2 2024 were$13,715,735, compared to $6,649,600 in Q2 2023[7] - Impairment of goodwill for Q2 2024 was$10,261,000, compared to no impairment in Q2 2023[7] - Total comprehensive loss for Q2 2024 was $(14,230,110), compared to$(6,865,270) in Q2 2023[7] - Revenue for the three months ended June 30, 2024 was $0.7 million, a 100$14.3 million, a 108.4% increase compared to the same period in 2023[99] - Revenue for the six months ended June 30, 2024 was $1.4 million, a 100$25.4 million, a 161.8% increase compared to the same period in 2023[105] - Net loss of $14.3 million and$25.4 million for the three and six months ended June 30, 2024, with an accumulated deficit of $82.2 million[128] - The company reported a net loss of$14.3 million for the three months ended June 30, 2024, and $25.4 million for the six months ended June 30, 2024[128] Impairments and Write-Downs - Impairment of goodwill for Q2 2024 was$10,261,000, compared to no impairment in Q2 2023[7] - The company impaired $15.5 million of goodwill and$3.5 million of ENTADFI assets during the six months ended June 30, 2024[10] - The company recorded an impairment charge of $1.2 million for the three months ended June 30, 2024, and$3.5 million for the six months ended June 30, 2024, related to the ENTADFI asset group[26] - Goodwill impairment charges totaled $10.3 million for the three months and$15.5 million for the six months ended June 30, 2024[29] - The company recorded a goodwill impairment loss of $10.3 million related to the PMX acquisition and a$1.2 million impairment loss on ENTADFI assets for the three months ended June 30, 2024[99][102] - The company recorded a goodwill impairment loss of $15.5 million related to the PMX acquisition and a$3.5 million impairment loss on ENTADFI assets for the six months ended June 30, 2024[105][109] Strategic Initiatives and Acquisitions - The company acquired Proteomedix AG and its diagnostic product Proclarix on December 15, 2023, to complement its prostate-related treatment portfolio[11] - The company paused commercialization of ENTADFI in Q1 2024 and is exploring strategic alternatives, including a potential sale of the assets[11] - The company plans to generate revenue from Proclarix sales and secure additional funding through equity or debt financings, though no commitments are currently in place[13] - The company recorded $0.7 million and$1.4 million of revenue from Proteomedix during the three and six months ended June 30, 2024, respectively[20] - Development services generated $0.7 million and$1.3 million of revenue during the three and six months ended June 30, 2024, respectively[20] - Proclarix product sales generated $0.1 million of revenue during the six months ended June 30, 2024, with no revenue in the three months ended June 30, 2024[20] - The company acquired ENTADFI for a total possible consideration of$100 million, with $20 million paid upfront and up to$80 million in milestone payments based on net sales[32] - The fair value of non-interest bearing notes payable issued for the ENTADFI acquisition was estimated at $12,947,000 using a discount rate of 8.2$19,026,771, including $6,000,000 at closing and$12,947,000 in fair value of notes payable[34] - WraSer acquisition includes $3.5 million cash at signing,$4.5 million cash at closing, and 1.0 million shares of common stock[36] - WraSer APA amendment reduces post-closing payment by $500,000 and staggers$4.5 million cash payment into $2.2 million at closing and$2.3 million in monthly installments[37] - Proteomedix acquisition involves issuance of 3,675,414 shares of common stock and 2,696,729 shares of Series B Convertible Preferred Stock[38] - Total consideration transferred for Proteomedix acquisition is approximately $65.1 million[40] - The company is focusing on commercializing Proclarix, a next-generation protein-based blood test for prostate cancer, in Europe[83] - The company halted its vaccine discovery and development programs in Q3 2023 and now operates solely in the commercial segment, dedicated to Proclarix[83] - Proclarix is CE-marked for sale in the European Union, with expected revenue generation by 2025[85] - The company has no internal manufacturing capabilities and relies on third-party suppliers, primarily single-source suppliers, for Proclarix production[85] - The company paused commercialization activities for ENTADFI during the first quarter of 2024 and is exploring strategic alternatives, including a potential sale of the ENTADFI assets[113] - The company is considering strategic options for ENTADFI, including a potential sale, and may abandon the assets if a sale is not consummated[135] Risks and Challenges - The company faces risks related to intellectual property disputes, which could lead to substantial costs[4] - Dependence on third parties for manufacturing, distribution, and sales poses operational risks[4] - Market acceptance and competition remain critical factors influencing future performance[4] - The company's ability to continue as a going concern is in substantial doubt, and it will require substantial additional funding to finance long-term operations[128][129] - The company's future capital requirements depend on factors such as commercialization costs, potential product liability lawsuits, and the costs of operating as a public company[129] - The company received a notice from Nasdaq on September 18, 2023, for non-compliance with the minimum bid price requirement of$1.00 per share, with a deadline to regain compliance by March 16, 2024, later extended to September 16, 2024[137] - On May 8, 2024, the company was notified by Nasdaq for failing to meet the minimum stockholders' equity requirement of $2,500,000, with reported equity of$1,404,476 as of December 31, 2023[137] - Nasdaq granted an extension until November 4, 2024, to regain compliance with the Minimum Stockholders' Equity Requirement, with potential delisting if compliance is not achieved[137] - The company's acquisition of Proteomedix triggered a "Change of Control" under Nasdaq Listing Rule 5110(a), requiring the company to satisfy initial listing criteria and complete the initial listing process[137] - The company submitted a plan to Nasdaq on June 24, 2024, to achieve compliance with Nasdaq Listing Rules, including releasing a portion of Exchange Shares and Conversion Shares from the Lock-Up Agreement[137] Internal Controls and Governance - The company's disclosure controls and procedures were not effective as of June 30, 2024, due to material weaknesses in internal control over financial reporting[123] - Material weaknesses identified in internal controls, including inadequate segregation of duties and insufficient IT controls, as of June 30, 2024[124] - The company identified material weaknesses in internal control over financial reporting, including inadequate segregation of duties and insufficient accounting resources[124] - The company's disclosure controls and procedures were not effective as of June 30, 2024, due to identified material weaknesses[123] - The company's credit card misuse by former executives and employees led to unauthorized personal expenses, contributing to material weaknesses in internal controls[124] Financing and Debt - The company received $5 million from the issuance of a note payable to a related party during the six months ended June 30, 2024[10] - The company issued a non-convertible debenture of$5.0 million to a related party with an interest rate of 4.0% per annum, extended to October 31, 2024[48] - The company recorded $0.2 million and$0.4 million of interest expense on the debenture for the three and six months ended June 30, 2024, respectively[48] - The company financed $0.7 million in insurance premiums with an annual interest rate of 7.79$78,000[50] - The company assumed a 100,000 CHF obligation related to the Proteomedix acquisition, recorded as a long-term note payable of approximately $111,000[51] - The company entered into a subscription agreement for 20 million units at$0.25 per unit, with a fair value of $886,000 as of June 30, 2024[52] - The company issued a$5.0 million non-convertible debenture with a 4.0% annual interest rate, extended to mature on October 31, 2024[123] - The company entered into a forbearance agreement with Veru, extending the maturity date of a $5.0 million debenture to October 31, 2024[85][86] - The company agreed to pay Veru 15$64,236,085[9] - The company has 22,848,876 shares of common stock issued and 22,331,477 shares outstanding as of June 30, 2024[57] - The company repurchased 25,032 and 57,670 shares of common stock during the three and six months ended June 30, 2023, respectively[58] - The company has an at-the-market offering agreement to sell up to $3.9 million of common stock, with no shares sold as of June 30, 2024[59] - The company has 7,899,661 outstanding warrants exercisable into common stock, with a fair value of$0.167 per share as of June 30, 2024[62] - The company increased the number of shares reserved for issuance under the 2022 Equity Incentive Plan to 3,150,000 in May 2023, with 1,488,180 shares available for issuance as of June 30, 2024[63] - The weighted average grant date fair value of stock options granted during the six months ended June 30, 2023 was $1.08, with aggregate fair values of$83,000 and $167,000 vested during the three and six months ended June 30, 2024, respectively[64] - Outstanding stock options decreased from 1,904,830 as of December 31, 2023 to 1,130,026 as of June 30, 2024, with a weighted average exercise price of$2.12 and a remaining contractual life of 4.2 years[65] - The company granted 487,500 restricted shares under the 2022 Plan in May 2023, with vesting schedules of 50% in January 2024, 25% in August 2024, and 25% in August 2025[66] - Nonvested restricted stock decreased from 256,580 shares as of December 31, 2023 to 106,250 shares as of June 30, 2024, with an average grant date fair value of $1.03[67] - Proteomedix extended the expiration date of 12,257 vested stock options to April 18, 2026, resulting in$18,000 of expense during the three and six months ended June 30, 2024[68] - Stock-based compensation expense for the six months ended June 30, 2024 was $51,875, compared to$458,359 for the same period in 2023[69] - The company entered into an inducement offer on July 11, 2024, resulting in the exercise of 7,458,642 shares of common stock at a reduced price of $0.15 per share, generating net proceeds of approximately$0.9 million[80] Expenses and Costs - Total operating expenses for Q2 2024 were $13,715,735, compared to$6,649,600 in Q2 2023[7] - The company expects increased selling, general, and administrative expenses due to efforts to commercialize Proclarix and integrate Proteomedix's operations[94] - Research and development expenses decreased by $0.9 million (100.4%) for the three months