Chromocell Therapeutics(CHRO) - 2024 Q3 - Quarterly Report

PART I: FINANCIAL INFORMATION Item 1. Financial Statements Financial statements reflect significant cash and asset growth from IPO, substantial net losses, and a going concern warning Condensed Consolidated Balance Sheets As of September 30, 2024, cash and total assets significantly increased to $1.25 million and $2.14 million respectively, while total liabilities decreased, improving the stockholders' deficit to $(1.43) million Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash | $1,254,903 | $96,391 | | Total Current Assets | $2,139,888 | $96,391 | | Total Assets | $2,139,888 | $96,391 | | Liabilities & Stockholders' Deficit | | | | Accounts payable and accrued expenses | $1,279,487 | $4,620,925 | | Total Current Liabilities | $3,567,382 | $6,540,943 | | Total Liabilities | $3,567,382 | $6,540,943 | | Accumulated deficit | $(19,548,253) | $(13,519,649) | | Total Stockholders' Deficit | $(1,427,494) | $(6,444,552) | Condensed Consolidated Statements of Operations For the nine months ended September 30, 2024, net loss increased to $6.03 million due to higher operating expenses, while net loss per share improved to $(1.11) Operating Results for the Nine Months Ended September 30 (Unaudited) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | General and administrative expenses | $3,158,525 | $1,677,078 | | Research and development | $894,200 | $285,204 | | Total operating expenses | $5,746,401 | $2,983,469 | | Net Loss | $(6,028,604) | $(3,341,640) | | Net loss per common share | $(1.11) | $(3.24) | | Weighted average shares outstanding | 5,420,359 | 1,032,338 | Condensed Consolidated Statements of Changes in Stockholders' Deficit Stockholders' deficit improved from $(6.44) million to $(1.43) million primarily due to $5.97 million from common stock issuance, offset by a $6.03 million net loss - Key activities impacting stockholders' deficit in the first nine months of 2024 include the issuance of 1,100,000 shares of common stock for $5.97 million cash, conversion of preferred stock and notes, and stock-based compensation expense of approximately $1.27 million, offset by a net loss of $6.03 million[8][10] Condensed Consolidated Statements of Cash Flows Net cash used in operating activities increased to $5.12 million, largely offset by $6.28 million in financing activities from the IPO, resulting in a $1.16 million cash increase Cash Flow Summary for the Nine Months Ended September 30 (Unaudited) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net Cash Used In Operating Activities | $(5,122,219) | $(624,224) | | Net Cash Provided By Financing Activities | $6,280,731 | $591,936 | | Net Increase (Decrease) in Cash | $1,158,512 | $(32,288) | | Cash at Beginning of Period | $96,391 | $55,074 | | Cash at End of Period | $1,254,903 | $22,786 | Notes to Condensed Consolidated Financial Statements Notes detail the company's clinical-stage biotech focus, a "Going Concern" warning due to a $6.0 million net loss, IPO proceeds, legal proceedings, and subsequent corporate changes - The company is a clinical-stage biotech focused on developing pain therapeutics (CC8464, CT2000, CT3000) by targeting the NaV1.7 sodium ion-channel[11][12][13] - There is substantial doubt about the company's ability to continue as a going concern due to a net loss of approximately $6.0 million for the nine months ended Sep 30, 2024, and a working capital deficit of $1.4 million[21] - The company completed its IPO on February 21, 2024, raising approximately $5.7 million in net proceeds after deducting underwriting discounts and offering expenses[17][89] - On October 3, 2024, the company was awarded a default judgment against its former CEO, Christian Kopfli, and Chromocell Holdings, allowing it to reverse a $363,091 compensation accrual and recognize it as a gain[50][123] - Subsequent to the quarter end, the company approved a reincorporation merger from Delaware to Nevada and a name change to 'Channel Therapeutics Corporation', expected in Q4 2024[131] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's NaV1.7 pain therapeutics pipeline, increased net loss to $6.0 million due to higher R&D and G&A expenses, and the need for future funding beyond Q4 2024 - The company's pipeline includes three programs based on its proprietary molecule targeting NaV1.7: CC8464 (neuropathic pain), CT2000 (eye pain), and CT3000 (post-operative pain)[137][147][150] - Management states that existing cash, including net proceeds from the IPO, is sufficient to fund operations and capital expenses only through the end of 2024, highlighting a future funding requirement[190] Comparison of Operating Results for the Nine Months Ended September 30 | Metric | 2024 | 2023 | Change (%) | | :--- | :--- | :--- | :--- | | General and administrative expenses | $3,158,525 | $1,677,078 | +88% | | Research and development | $894,200 | $285,204 | +214% | | Net loss | $(6,028,604) | $(3,341,640) | +80% | - The increase in R&D expenses for the nine months ended Sep 30, 2024, was primarily driven by a $488,636 increase in Chemistry Manufacturing and Controls (CMC) services[173] - The company entered into a $30 million committed equity financing facility with Tikkun Capital LLC on July 26, 2024, to provide future funding[185] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Chromocell Therapeutics Corporation is not required to provide the information for this item - The company is not required to provide quantitative and qualitative disclosures about market risk as it qualifies as a smaller reporting company[209] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of September 30, 2024, due to material weaknesses in segregation of duties, review levels, and IT general controls - The CEO and CFO concluded that the company's disclosure controls and procedures were not effective as of September 30, 2024[211] - Material weaknesses identified include: - Lack of segregation of duties due to limited resources - Inability to provide multiple levels of review for financial reporting - Lack of necessary internal IT infrastructure and reliance on third-party software[212][213] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company won a default judgment against its former CEO, reversing a $363,091 accrual, and denies liability for a $850,000 promissory note demand from Parexel International - The company obtained a default judgment against former CEO Christian Kopfli and Chromocell Holdings on October 3, 2024, allowing it to remove a $363,091 compensation accrual and record it as a gain[218] - The company received a demand letter from Parexel International on July 31, 2024, seeking payment of over $850,000 related to a promissory note between Parexel and Chromocell Holdings, but the company denies liability as it is not a party to the note[219] Item 1A. Risk Factors As a smaller reporting company, Chromocell Therapeutics Corporation is not required to provide the information for this item - The company is not required to include risk factor disclosures as it is a smaller reporting company[220] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported unregistered equity sales to vendors and detailed its Q3 2024 stock repurchase activity of 86,196 shares for approximately $74,179, with the plan subsequently expanded to $750,000 - The company issued or agreed to issue shares and options to vendors for services in August and October 2024, claiming exemption from registration under the Securities Act[220][221][223] Share Repurchase Activity (Q3 2024) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | August 2024 | 58,642 | $0.82 | | September 2024 | 27,554 | $0.94 | | Total | 86,196 | $0.86 | - On August 5, 2024, the Board authorized a $250,000 stock repurchase plan, which was amended on October 22, 2024, to increase the total value to $750,000[224] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - None[225] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[225] Item 5. Other Information The company reported no other information for this item - None[225] Item 6. Exhibits The report lists several exhibits filed with the SEC, including an amendment to the 2023 Equity Incentive Plan, CEO/CFO certifications, and Interactive Data Files (XBRL) - Exhibits filed include: - 10.1: Second Amendment to the 2023 Equity Incentive Plan - 31.1: CEO/CFO Certification (Section 302) - 32.1: CEO/CFO Certification (Section 906) - 101 & 104: Interactive Data Files (Inline XBRL)[227]