Chromocell Therapeutics(CHRO) - 2024 Q2 - Quarterly Report

PART I: FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Unaudited Q2 2024 financials show increased net loss, improved cash from IPO, and substantial doubt about going concern Condensed Consolidated Balance Sheets Balance sheet as of June 30, 2024, shows increased cash and assets, reduced liabilities, and improved stockholders' deficit post-IPO Condensed Consolidated Balance Sheet Data (in USD) | Account | June 30, 2024 (Unaudited) | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash | $2,405,098 | $96,391 | | Total Current Assets | $2,603,600 | $96,391 | | Total Assets | $2,603,600 | $96,391 | | Liabilities & Stockholders' Deficit | | | | Total Current Liabilities | $2,786,121 | $6,540,943 | | Total Liabilities | $2,786,121 | $6,540,943 | | Total Stockholders' Deficit | $(182,521) | $(6,444,552) | | Total Liabilities and Stockholders' Deficit | $2,603,600 | $96,391 | Condensed Consolidated Statements of Operations The company reported increased net losses for both three and six months ended June 30, 2024, primarily due to higher operating expenses post-IPO Statement of Operations Highlights (in USD) | Period | Net Loss (2024) | Net Loss (2023) | Net Loss per Share (2024) | Net Loss per Share (2023) | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $(1,771,619) | $(953,347) | $(0.31) | $(0.95) | | Six Months Ended June 30 | $(4,333,949) | $(1,919,908) | $(0.83) | $(1.82) | - Total operating expenses for the six months ended June 30, 2024, were $3.70 million, a significant increase from $1.69 million in the prior-year period, primarily due to rises in general and administrative expenses and professional fees[8] Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) Stockholders' deficit significantly improved by June 30, 2024, primarily due to common stock issuance from the IPO and conversion of debt to equity - Key equity events in the first six months of 2024 included: issuing 1,100,000 shares for $5.97 million in cash from the IPO, converting all 600,000 Series A preferred shares, and converting notes payable totaling $1.36 million into common stock[13] Condensed Consolidated Statements of Cash Flows Net cash used in operations increased significantly, offset by substantial financing cash from the IPO, leading to a net cash increase Cash Flow Summary (Six Months Ended June 30) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net Cash Used In Operating Activities | $(4,944,308) | $(366,989) | | Net Cash Provided By Financing Activities | $7,253,015 | $393,808 | | Net Increase In Cash | $2,308,707 | $26,819 | | Cash at End of Period | $2,405,098 | $81,893 | - Financing activities in 2024 were dominated by $5.97 million in cash from the IPO and $1.59 million from new loans[17] Notes to Condensed Consolidated Financial Statements Notes detail business focus on pain therapeutics, substantial doubt about going concern, IPO specifics, equity changes, legal proceedings, and significant subsequent financing events - Business Focus: The company is a clinical-stage biotech focused on developing NaV1.7 blockers for pain, with two main programs: CC8464 for neuropathic pain and CT2000 for eye pain[19][20][21] - Going Concern: Management has concluded there is substantial doubt about the company's ability to continue as a going concern for the next twelve months due to a net loss of approximately $4.3 million for the six months ended June 30, 2024, and a working capital deficit[26][29] - IPO and Equity: The company completed its IPO on February 21, 2024, raising net proceeds of approximately $5.7 million. A 9-for-1 reverse stock split was effected on February 15, 2024[25][81][82] - Legal Proceedings: The company is involved in a legal dispute with its former CEO, Christian Kopfli, over termination and seeks damages. It also received a demand letter from Parexel for over $850,000, for which the company denies liability[105][107] - Subsequent Events: In July 2024, the company secured a $750,000 senior unsecured convertible note and entered into a committed equity financing facility for up to $30 million. In August 2024, a $250,000 stock repurchase plan was authorized[108][110][111] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's pain therapeutics pipeline, increased operating expenses and net loss, ongoing going concern issues, and future clinical development plans - The company is focused on developing NaV1.7 blockers for pain. Key programs are CC8464 for neuropathic pain (EM and iSFN) and CT2000 for eye pain. A dose escalation trial for CC8464 is planned for Q3 2024, with a Phase 2a POC study to follow in 2025[116][119][120] Comparison of Operating Results (Three Months Ended June 30) | Expense Category | 2024 | 2023 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | General & administrative | $1,209,874 | $537,876 | $671,998 | 125% | | Research & development | $12,955 | $49,955 | $(37,000) | (74)% | | Professional fees | $541,257 | $189,329 | $351,928 | 186% | | Total operating expenses | $1,764,086 | $777,160 | $986,926 | 127% | Comparison of Operating Results (Six Months Ended June 30) | Expense Category | 2024 | 2023 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | General & administrative | $1,997,435 | $1,015,506 | $981,929 | 97% | | Research & development | $479,561 | $236,072 | $243,489 | 103% | | Professional fees | $1,221,072 | $440,165 | $780,907 | 177% | | Total operating expenses | $3,698,068 | $1,691,743 | $2,006,325 | 119% | - Management states there is substantial doubt about the company's ability to continue as a going concern. Existing cash from the IPO is expected to fund operations through the end of 2024, but additional capital will be needed[134][155][157] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is not required to provide market risk disclosures as it qualifies as a smaller reporting company - The company is not required to provide disclosures about market risk as it qualifies as a smaller reporting company[171] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of June 30, 2024, due to identified material weaknesses including lack of segregation of duties and insufficient review - The CEO and CFO concluded that disclosure controls and procedures were not effective as of June 30, 2024[173] - Identified material weaknesses include: - Lack of segregation of duties due to limited resources - Lack of multiple levels of review for financial reporting - Lack of necessary internal IT infrastructure and reliance on third-party software[174] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in legal disputes with its former CEO and Parexel, while a complaint from the New Jersey EDA was dismissed - The company is in a legal dispute with its former CEO, Christian Kopfli, who is seeking $479,169 for what he claims was an improper termination. The company has sued him for breach of contract[177] - A complaint from the New Jersey Economic Development Authority (EDA) against 'Chromocell Corporation d/b/a Chromocell Therapeutics' was dismissed on May 24, 2024[178] - On July 31, 2024, the company received a demand from Parexel for approximately $682,551 in principal plus over $177,000 in interest on a promissory note between Parexel and Chromocell Holdings. The company denies liability[179] Item 1A. Risk Factors The company is not required to provide risk factor disclosures as it qualifies as a smaller reporting company - The company is not required to provide this disclosure as it is a smaller reporting company[180] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds - None[180] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - None[180] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[180] Item 5. Other Information Francis Knuettel II, the company's CEO and CFO, was appointed to the Board of Directors effective August 12, 2024 - Francis Knuettel II, the company's CEO and CFO, was appointed to the Board of Directors on August 12, 2024[181] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including recent financing agreements and officer certifications - The report includes exhibits such as a Convertible Note agreement, a Securities Purchase Agreement, a Common Stock Purchase Agreement, and certifications by the Principal Executive and Financial Officer[184]