Genelux (GNLX) - 2025 Q1 - Quarterly Report

PART I—FINANCIAL INFORMATION Item 1. Condensed Financial Statements Genelux's unaudited financial statements detail asset growth, reduced net loss, and cash increase from a public offering Condensed Balance Sheets | Metric | March 31, 2025 (Unaudited) (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :--------------------------- | :------------------ | | Cash and cash equivalents | $16,206 | $8,565 | | Short-term investments | $18,896 | $22,330 | | Total Current Assets | $35,945 | $31,548 | | Total Assets | $38,985 | $34,716 | | Total Current Liabilities | $7,689 | $6,903 | | Total Liabilities | $9,139 | $8,442 | | Total Shareholders' Equity | $29,846 | $26,274 | Condensed Statements of Operations | Metric | Three Months Ended March 31, 2025 (Unaudited) (in thousands) | Three Months Ended March 31, 2024 (Unaudited) (in thousands) | | :------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | | Revenues | $0 | $8 | | Research and development | $4,698 | $4,010 | | General and administrative | $3,118 | $4,113 | | Total operating expenses | $7,816 | $8,123 | | Loss from operations | $(7,816) | $(8,115) | | Total other income | $324 | $265 | | NET LOSS | $(7,492) | $(7,850) | | LOSS PER COMMON SHARE - BASIC AND DILUTED | $(0.21) | $(0.29) | | WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING | 34,926,075 | 26,849,737 | Condensed Statements of Comprehensive Loss | Metric | Three Months Ended March 31, 2025 (Unaudited) (in thousands) | Three Months Ended March 31, 2024 (Unaudited) (in thousands) | | :---------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net loss | $(7,492) | $(7,850) | | Net unrealized loss on short and long-term investments | $(35) | $(19) | | Comprehensive loss | $(7,527) | $(7,869) | Condensed Statements of Shareholders' Equity Total Shareholders' Equity increased from $26,274 thousand at December 31, 2024, to $29,846 thousand at March 31, 2025[23] The increase was primarily driven by $9,553 thousand from common stock issuance in a secondary public offering and $1,423 thousand from stock compensation, partially offset by a net loss of $7,492 thousand[23] Condensed Statements of Cash Flows | Cash Flow Activity | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :---------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(5,435) | $(4,354) | | Net cash provided by (used in) investing activities | $3,509 | $(1,691) | | Net cash provided by financing activities | $9,567 | $688 | | Net increase (decrease) in cash and cash equivalents | $7,641 | $(5,357) | | Cash and cash equivalents at the end of period | $16,206 | $4,061 | Notes to Condensed Financial Statements (Unaudited) NOTE 1 – BASIS OF PRESENTATION Genelux, a late clinical-stage biopharmaceutical company, faces going concern doubts despite sufficient short-term funding - Genelux Corporation is a late clinical-stage biopharmaceutical company focused on developing oncolytic viral immunotherapies for cancer[29] - The company's recurring losses from operations and cash usage raise substantial doubt about its ability to continue as a going concern, necessitating additional funds[31] - As of March 31, 2025, cash, cash equivalents, and short-term investments totaled $35,102 thousand, expected to fund operations for at least the next 12 months[32] NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This section outlines Genelux's key accounting policies, including revenue recognition, stock-based compensation, and potentially dilutive securities - No revenues were recognized during the three months ended March 31, 2025, compared to $8 thousand in the same period of 2024, related to a license agreement with ELIAS Animal Health, LLC[40] - Stock-based compensation fair value is estimated using the Black-Scholes option-pricing model and recognized as expense over the vesting period[48][49] | Potentially Dilutive Securities | March 31, 2025 | March 31, 2024 | | :------------------------------ | :------------- | :------------- | | Stock options | 5,491,921 | 5,118,920 | | Stock warrants | 8,017,975 | 397,975 | | Restricted stock units | 579,714 | 57,323 | | Total | 14,089,610 | 5,574,218 | NOTE 3 - FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES This note details the fair value measurements of financial assets, primarily cash equivalents and short-term investments, categorized by valuation input levels | Asset Type | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | Total (in thousands) | | :----------------------- | :------ | :------ | :------ | :------ | | Cash equivalents: | | | | | | Money market funds | $13,800 | $— | $— | $13,800 | | Short-term investments: | | | | | | US Government Agency bonds | $— | $4,958 | $— | $4,958 | | US Treasury bonds | $— | $13,938 | $— | $13,938 | | Total | $13,800 | $18,896 | $— | $32,696 | NOTE 4 – SHORT AND LONG-TERM INVESTMENTS This section provides details on the company's short and long-term investments, primarily US Government Agency and Treasury bonds | Investment Type | Amortized Cost (in thousands) | Gross Unrealized Gains (in thousands) | Gross Unrealized Losses (in thousands) | Credit Losses (in thousands) | Fair Value (in thousands) | | :------------------------ | :------------- | :--------------------- | :---------------------- | :------------ | :--------- | | US Government Agency bonds | $4,954 | $4 | $— | $— | $4,958 | | US Treasury bonds | $13,915 | $23 | $— | $— | $13,938 | | Total | $18,869 | $27 | $— | $— | $18,896 | - All available-for-sale securities consisted of investments that mature within one year as of March 31, 2025 and 2024[57] NOTE 5 - PROPERTY AND EQUIPMENT This note details the net property and equipment, along with the depreciation expense for the quarter | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :------------- | :------------------ | | Property and equipment, net | $1,287 | $1,316 | | Depreciation expense (Q1) | $59 | $84 | NOTE 6 – ACCRUED PAYROLL AND PAYROLL TAXES This section presents the accrued payroll and payroll taxes at the end of the reporting periods | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :------------- | :------------------ | | Accrued payroll and payroll taxes | $664 | $1,004 | NOTE 7 – LEASE LIABILITIES This note provides information on the company's right-of-use assets, lease liabilities, and amortization expense | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------ | :------------- | :------------------ | | Right of use assets | $1,680 | $1,760 | | Lease liabilities | $1,787 | $1,868 | | Amortization of ROU assets (Q1) | $80 | $164 | NOTE 8 - SHAREHOLDERS' EQUITY This section details changes in shareholders' equity, including common stock issuances and stock option grants - As of March 31, 2025, there were 37,733,140 shares of common stock issued and outstanding, up from 34,728,140 shares at December 31, 2024[65] - In March 2025, the company completed an underwritten offering of 3,000,000 common shares at $3.50 per share, yielding $9,553 thousand in net proceeds[66] - A warrant to purchase 120,000 shares of common stock at $4.20 per share was issued to the underwriter, exercisable until March 25, 2030[67] - During Q1 2025, 275,000 stock options were granted under the Inducement Plan, and 2,679,069 shares were available for grant under the 2022 Plan[71][72] NOTE 9 - LEGAL MATTERS This note confirms the absence of material legal proceedings and the potential for future ordinary course legal involvement - The company is not currently subject to any material legal proceedings[83] - Future involvement in legal proceedings, claims, investigations, and government inquiries is possible in the ordinary course of business[83] NOTE 10 – SEGMENT INFORMATION This section clarifies that the company operates as a single reportable segment focused on oncolytic immunotherapies - The company operates and manages its business as one reportable and operating segment, focused on developing oncolytic immunotherapies for cancer[84] | Segment Expense | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Revenue | $0 | $8 | | Research and development, excluding salaries | $3,868 | $3,145 | | Stock-based compensation | $1,533 | $2,792 | | NET LOSS | $(7,492) | $(7,850) | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section reviews Genelux's financial condition and operational results, highlighting ongoing losses, funding needs, and recent developments Overview Genelux, a late clinical-stage biopharmaceutical company, faces significant operating losses and requires additional funding for its growth strategy - Genelux is a late clinical-stage biopharmaceutical company focused on developing oncolytic viral immunotherapies for aggressive and/or difficult-to-treat solid tumor types, with Olvi-Vec as its lead product candidate[87] - The company has incurred significant operating losses since inception, with a net loss of $7.5 million for Q1 2025 and an accumulated deficit of $258.9 million as of March 31, 2025[91] - Substantial additional funding is required to support continuing operations and growth strategy, expected to be financed through equity/debt offerings or collaborations[93] Recent Developments Recent developments include a successful public offering, progress in a Phase 2 clinical trial, and a key executive appointment - In March 2025, Genelux completed an underwritten public offering of 3,000,000 shares of common stock at $3.50 per share, generating $9.6 million in net proceeds[95] - The first patient was dosed in a US-based Phase 2 clinical trial for recurrent non-small cell lung cancer (NSCLC) in October 2024, with Newsoara BioPharma Co. Ltd. generally obligated to fund the trial[96] - Matthew Pulisic was appointed Chief Financial Officer, effective January 30, 2025[97] Components of Results of Operations This section details the components of Genelux's operating results, including revenues and increasing research and development and general and administrative expenses - No revenues were recognized in Q1 2025, compared to $0.008 million in Q1 2024, related to a license agreement[98] - Operating expenses consist of research and development (R&D) and general and administrative (G&A) expenses[99] - R&D expenses are expensed as incurred and are expected to increase significantly as product candidates advance through clinical development[100][104] - G&A expenses are anticipated to increase in the future due to business expansion and costs associated with operating as a public company[106] Results of Operations (Comparison of the Three Months Ended March 31, 2025 and 2024) This section compares the company's financial performance for the three months ended March 31, 2025, and 2024, highlighting changes in revenues, expenses, and net loss | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Revenues | $0 | $8 | | Research and development | $4,698 | $4,010 | | General and administrative | $3,118 | $4,113 | | Total operating expenses | $7,816 | $8,123 | | Net loss | $(7,492) | $(7,850) | - Research and development expenses increased by $0.7 million, primarily due to a $1.4 million increase in clinical and regulatory expenses for the Phase 3 On Prime Registration trial, partially offset by a $0.6 million decrease in stock-related compensation[109] - General and administrative expenses decreased by $1.0 million, mainly due to a $0.7 million decrease in stock compensation expense[111] Liquidity and Capital Resources Genelux faces going concern doubts due to recurring losses but has sufficient cash and investments for the next 12 months, with future funding needs expected from external sources - Recurring losses from operations raise substantial doubt about the company's ability to continue as a going concern, as noted by the independent registered public accounting firm[113] - As of March 31, 2025, cash, cash equivalents, and short-term investments totaled $35.1 million, expected to fund operating expenses and capital expenditure requirements for at least the next 12 months[114] - Future cash needs are expected to be financed through public/private equity offerings, debt financings, or other capital sources like collaborations[114] Cash Flows This section summarizes the company's cash flow activities, highlighting a significant increase in financing cash due to a public offering | Cash Flow Activity | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :---------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(5,435) | $(4,354) | | Net cash provided by (used in) investing activities | $3,509 | $(1,691) | | Net cash provided by financing activities | $9,567 | $688 | | Net increase (decrease) in cash | $7,641 | $(5,357) | - Net cash provided by financing activities significantly increased in Q1 2025 due to proceeds from a secondary public offering[119] Equity Financings This section details the company's recent equity financing activities, including a public offering and the issuance of a warrant - In March 2025, the company completed an underwritten offering of 3,000,000 shares of common stock at $3.50 per share, generating $9.6 million in net proceeds[120] - A warrant to purchase 120,000 shares of common stock at an exercise price of $4.20 per share was issued to the underwriter[121] Funding Requirements Genelux anticipates significantly increased expenses for R&D and commercialization, necessitating substantial additional funding beyond the next 12 months - The company expects expenses to increase significantly for R&D, clinical trials, and commercialization, requiring substantial additional funding beyond the next 12 months[122][124] - Failure to raise additional capital could force delays, reductions, or termination of product development or commercialization efforts[122][127] - Future capital requirements depend on various factors including clinical trial costs, manufacturing, regulatory review, collaborations, and macroeconomic events[125] Critical Accounting Policies and Significant Judgments and Estimates Financial statement preparation involves significant estimates and judgments, particularly for prepaid R&D expenses and stock-based compensation valuation - Preparation of financial statements requires significant estimates and judgments, particularly for prepaid research and development expenses and stock-based compensation[128][129] - Estimates for prepaid R&D expenses are based on progress of specific tasks and vendor information, subject to adjustment if actual timing or effort varies[130][132] - Stock-based compensation fair value is estimated using the Black-Scholes option-pricing model, with assumptions for volatility, expected term, risk-free interest rate, and dividend yield[137] Off-Balance Sheet Arrangements This section confirms that the company had no off-balance sheet arrangements during the reported periods - The company did not have any off-balance sheet arrangements during the three months ended March 31, 2025 and 2024[139] Recent Accounting Pronouncements This section discusses the company's evaluation of recent accounting pronouncements, specifically ASU 2024-03 - The company is evaluating ASU 2024-03, which requires public business entities to disaggregate income statement expenses, effective for annual reporting periods beginning after December 15, 2026[152] Emerging Growth Company Status Genelux qualifies as an "emerging growth company" and "smaller reporting company," benefiting from reduced public company reporting requirements - Genelux is an "emerging growth company" and "smaller reporting company," allowing it to take advantage of reduced public company reporting requirements[141][148] - The company has irrevocably elected to "opt out" of the extended transition period for complying with new or revised financial accounting standards[141][147] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that the company does not have material market risks requiring quantitative and qualitative disclosures - The company states that this item is not applicable, indicating no material market risks requiring disclosure[142] Item 4. Control and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal control over financial reporting - Disclosure controls and procedures were deemed effective at a reasonable assurance level as of March 31, 2025[143] - There have been no material changes in internal control over financial reporting during the period covered by this Quarterly Report[145] PART II—OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any material legal proceedings but acknowledges the potential for future involvement in various types of legal claims - The company is not currently the subject of any material legal proceeding[83][147] - Future involvement in legal proceedings, claims, investigations, and government inquiries is possible, including those related to intellectual property, data privacy, and consumer protection[83][147] Item 1A. Risk Factors Genelux faces substantial risks in finance, development, manufacturing, commercialization, IP, and regulatory compliance Risks Related to our Financial Position and Need for Additional Capital Genelux has incurred significant operating losses and requires substantial additional financing, raising going concern doubts - Genelux has incurred significant operating losses since inception, with a net loss of $7.5 million for Q1 2025 and an accumulated deficit of $258.9 million as of March 31, 2025[149] - The company will require substantial additional financing to advance product candidates through development and commercialization, which may not be available on acceptable terms, or at all[153] - The independent registered public accounting firm has included a "going concern" explanatory paragraph, indicating substantial doubt about the company's ability to continue as a going concern[162] Risks Related to Product Discovery, Development and Regulatory Approval Product development faces risks including reliance on a single candidate, trial uncertainties, and potential adverse events impacting approval - The company currently has only one product candidate, Olvi-Vec, in clinical development; its failure could adversely affect the business and require discontinuing development of other candidates based on the same therapeutic approach[170][173] - The Phase 3 registration trial for Olvi-Vec in PRROC initiated enrollment in Q3 2022, with topline results anticipated in the first half of 2026[165] - Fast track designation for Olvi-Vec does not guarantee a faster development or regulatory review/approval process, nor does it increase the likelihood of marketing approval[194][195] - Serious adverse events or unexpected properties of product candidates identified during development or after approval could halt development, lead to refusal of regulatory approval, or revocation of marketing authorizations[200][202] Risks Related to Manufacturing Biopharmaceutical manufacturing is complex, highly regulated, and costly, posing risks from quality control, raw material shortages, and regulatory non-compliance - The manufacture of biopharmaceutical products, especially viral immunotherapies, is complex, time-consuming, highly regulated, and costly, posing risks related to quality control, raw material shortages, and product loss[241][245] - Changes in product candidate manufacturing or formulation, such as the new mammalian-cell-based production system, may result in additional costs or delays and require regulatory comparability assessments[246][247] - Failure to comply with stringent regulations (cGMP) or meet volume requirements could lead to delays in development and commercialization, or inability to meet demand[252][253] Risks Related to Reliance on Third Parties Reliance on third parties for supply, clinical trials, and collaborations introduces risks of disruption, non-compliance, and potential delays or termination - The company relies on third parties for raw material supply, quality testing, packaging, and distribution, with risks of supply disruption, non-compliance, and increased costs[256][257] - Reliance on third-party CROs and study sites for preclinical and clinical trials reduces control and poses risks of delays, non-compliance with regulatory requirements (GCP), and data integrity issues[259][260] - Collaborations, such as with Newsoara, carry risks including non-performance, insufficient funding, and potential termination, which could delay development and commercialization plans[270][271] Risks Related to Commercialization Commercialization success depends on market acceptance, competitive landscape, accurate market size estimates, and public perception of immuno-oncology - Successful commercialization of approved product candidates depends on effective market launch, marketing, sales, manufacturing, and achieving market acceptance by physicians, patients, and payors[280][297] - The company faces significant competition from major biopharmaceutical companies and other therapies in the cancer treatment market, including other oncolytic viral immunotherapies[282][284] - The size of the potential market for product candidates is difficult to estimate, and inaccurate assumptions could lead to smaller actual markets and adversely affect potential revenues[300] - Negative developments in the field of immuno-oncology or adverse events in clinical trials could damage public perception and demand for the company's oncolytic VACV platform and product candidates[301] Risks Related to Our Intellectual Property Commercial success hinges on robust intellectual property protection, which is uncertain and vulnerable to litigation, inadequate patent terms, and biosimilar competition - Commercial success depends on obtaining and maintaining patent and other intellectual property protection for technology and product candidates, which is highly uncertain and subject to litigation[304][305] - The patent portfolio as of December 31, 2024, includes 11 issued U.S. patents, 1 pending U.S. patent application, 9 issued foreign patents, and 7 pending foreign patent applications[308] - Patent terms may be inadequate to protect competitive position, and biological product candidates like Olvi-Vec may face biosimilar competition sooner than anticipated due to the Biologics Price Competition and Innovation Act (BPCIA)[332][334] - Third parties may initiate legal proceedings alleging infringement of their intellectual property rights, leading to substantial costs, diversion of resources, and potential loss of rights[316] Risks Related to Government Regulation Extensive and evolving healthcare, data privacy, and reimbursement regulations pose significant compliance risks and could impact product marketability and profitability - The company is subject to extensive federal and state healthcare laws, including fraud and abuse laws (e.g., Anti-Kickback Statute, False Claims Act, HIPAA), and non-compliance could lead to substantial penalties[341][342][343] - Sales of products depend on adequate coverage and reimbursement from third-party payors, and unfavorable policies or cost containment measures could limit revenue and profitability[345][347] - The company is subject to stringent and evolving U.S. and foreign data privacy and security laws (e.g., CCPA, GDPR), with actual or perceived failure to comply leading to regulatory investigations, litigation, and fines[367][370][378] - New legislation, such as the Inflation Reduction Act (IRA), and judicial decisions (e.g., Loper Bright Enterprises v. Raimondo) may increase compliance costs and adversely affect marketability and regulatory processes[237][352][357] Risks Related to Our Business and Operations Business operations face risks from dependence on key personnel, growth management challenges, macroeconomic conditions, cybersecurity threats, and tax limitations - The company is highly dependent on key personnel, including its President, CEO, and Chairman, and faces intense competition for qualified managerial, scientific, and medical talent[381][382] - Managing future growth, including expanding the organization and effectively managing outsourced activities, poses significant challenges and could disrupt operations[384][385] - Unfavorable market and economic conditions, international trade policies (tariffs, sanctions), and public health crises (pandemics) could materially and adversely affect preclinical studies, clinical trials, and financial results[390][396][398] - Compromised information technology systems or data, including from cyber-attacks or personnel error, could lead to regulatory investigations, litigation, fines, and business disruptions[400][402][410] - The company has significant net operating loss (NOL) carryforwards and research and development tax credits, but their utilization to reduce future tax payments may be limited or restricted by ownership changes or state laws[418][419] Risks Related to Our Common Stock The common stock's market price may be volatile, and future issuances could dilute existing stockholders, while organizational provisions may hinder acquisitions - The market price of the common stock may be volatile and fluctuate substantially due to various factors, including operating results, clinical trial outcomes, regulatory developments, and overall market conditions[430][432][434] - The company does not intend to pay dividends on its common stock, limiting returns to stock appreciation[436] - Principal stockholders and management own a significant percentage of the stock, enabling them to exert substantial control over matters subject to stockholder approval[437] - Future sales and issuances of common stock or rights to purchase common stock, including through equity incentive plans and public offerings, could result in additional dilution for existing stockholders[441][445] - Provisions in the company's organizational documents and Delaware law could make an acquisition more difficult and may prevent attempts by stockholders to replace or remove current management[449][450] General Risk Factors Operating as a public company increases costs and management time, and changes in accounting standards or tax laws could adversely affect financial results - Operating as a public company incurs significantly increased legal, accounting, and compliance costs, requiring substantial management time for new initiatives and corporate governance practices[456][457] - Failure to build adequate finance infrastructure and improve accounting systems and controls could impair the ability to produce accurate and timely financial statements, as required by the Sarbanes-Oxley Act[458][461] - Changes in financial accounting standards or tax laws could cause adverse and unexpected revenue fluctuations and affect reported results of operations[462][463] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports that there were no unregistered sales of equity securities during the period - No unregistered sales of equity securities occurred during the period[467] Item 3. Defaults Upon Senior Securities This section states that it is not applicable to the company - This item is not applicable[468] Item 4. Mine Safety Disclosures This section states that it is not applicable to the company - This item is not applicable[469] Item 5. Other Information This section reports that there is no other information to disclose - No other information to disclose[470] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including corporate governance documents, various warrant agreements, and officer certifications - Exhibits include Amended and Restated Certificate of Incorporation, Bylaws, various forms of Warrants to Purchase Common Stock, and Officer Certifications (31.1, 31.2, 32.1)[471][472][473] SIGNATURES The report is duly signed on behalf of Genelux Corporation by its President, CEO, Chairman, and Chief Financial Officer on May 6, 2025 - The report was signed by Thomas Zindrick, J.D. (President, CEO, and Chairman) and Matthew Pulisic (Chief Financial Officer) on May 6, 2025[475]