PART I: FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements for Q1 2025, reporting a net loss of approximately $2.0 million and significant going concern doubts, alongside details of the subsequent merger agreement with LNHC, Inc Condensed Consolidated Financial Statements For Q1 2025, the company's financial position weakened with cash decreasing to $0.13 million and total liabilities increasing to $5.1 million, while the net loss improved to $1.97 million from $2.56 million year-over-year Condensed Consolidated Balance Sheets (Unaudited) | | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash | $131,317 | $513,443 | | Total Current Assets | $911,179 | $1,369,143 | | Liabilities and Stockholders' Deficit | | | | Total Current Liabilities | $5,107,013 | $4,083,197 | | Total Stockholders' Deficit | $(4,195,834) | $(2,714,054) | Condensed Consolidated Statements of Operations (Unaudited) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Total operating expenses | $1,833,977 | $1,933,982 | | Net Loss | $(1,967,611) | $(2,562,330) | | Net loss per common share - basic and diluted | $(0.32) | $(0.55) | Condensed Consolidated Statements of Cash Flows (Unaudited) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net Cash Used In Operating Activities | $(632,126) | $(1,991,893) | | Net Cash Provided By Financing Activities | $250,000 | $5,665,731 | | Net Change in Cash | $(382,126) | $3,673,838 | | Cash at End of Period | $131,317 | $3,770,229 | Notes to Condensed Consolidated Financial Statements These notes detail the company's NaV1.7-targeting pain therapeutics, significant liquidity issues leading to a going concern warning, related-party transactions, debt defaults, equity transactions, and the subsequent merger agreement with LNHC, Inc. including a $50.1 million PIPE financing - The company is a clinical-stage biotech focused on developing therapeutics targeting the NaV1.7 sodium ion-channel to alleviate pain23 - Management has substantial doubt about the company's ability to continue as a going concern for at least the next twelve months due to recurring losses and a working capital deficit of $4.2 million2829 - As of March 31, 2025, a promissory note for $1,455,416 with a professional advisor and a related-party note for $131,868 were in default5355 - On April 16, 2025, the company entered into a merger agreement with LNHC, Inc. (a subsidiary of Ligand Pharmaceuticals); post-merger, existing Channel securityholders are expected to own approximately 8.0% of the combined company9698 - Concurrent with the merger, a PIPE financing is expected to close, providing gross proceeds of approximately $50.1 million105 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This MD&A details the company's clinical programs and financial results, showing a reduced net loss in Q1 2025 due to lower R&D expenses, but highlights critical liquidity issues and the dependence on the planned merger with LNHC, Inc. and associated PIPE financing - The company's pipeline includes three main programs based on its proprietary NaV1.7 blocker molecule: CT2000 for eye pain, CT3000 for post-operative pain, and CC8464 for neuropathic pain113114124129 Results of Operations Comparison (Q1 2025 vs Q1 2024) | Expense Category | Q1 2025 | Q1 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | General and administrative | $1,090,049 | $787,561 | $302,488 | 38% | | Research and development | $194,298 | $466,606 | $(272,308) | (58)% | | Professional fees | $549,630 | $679,815 | $(130,185) | (19)% | | Total operating expenses | $1,833,977 | $1,933,982 | $(100,005) | (5)% | | Net loss | $(1,967,611) | $(2,562,330) | $594,719 | (23)% | - The decrease in R&D expenses was primarily due to a $221,227 reduction in Chemistry Manufacturing and Controls (CMC) fees; the increase in G&A was mainly from higher compensation and stock compensation expenses172173 - As of March 31, 2025, the company had only $0.1 million in cash and a working capital deficit of $4.2 million, raising substantial doubt about its ability to continue as a going concern169178 - The company's future is heavily dependent on the successful consummation of the merger with LNHC, Inc. and the related PIPE financing157166191 Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Channel Therapeutics is exempt from providing quantitative and qualitative disclosures about market risk - As a smaller reporting company, Channel Therapeutics is exempt from providing quantitative and qualitative disclosures about market risk212 Item 4. Controls and Procedures Management concluded that as of March 31, 2025, the company's disclosure controls and procedures were not effective due to identified material weaknesses including lack of segregation of duties, insufficient review, and inadequate IT controls - Disclosure controls and procedures were deemed "not effective" as of March 31, 2025214 - Material weaknesses identified include: (1) lack of segregation of duties, (2) insufficient levels of review for financial reporting, and (3) inadequate IT general controls223 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company reports no material legal proceedings, but discloses a demand letter from Parexel International seeking $682,551 plus interest on a promissory note with Chromocell Holdings, which Channel Therapeutics denies liability for - The company received a demand letter from Parexel International seeking payment of over $682,551 plus interest on a promissory note between Parexel and Chromocell Holdings; Channel Therapeutics denies any liability218 Item 1A. Risk Factors As a smaller reporting company, Channel Therapeutics is not required to include a discussion of risk factors in its Form 10-Q - As a smaller reporting company, Channel Therapeutics is not required to include a discussion of risk factors in its Form 10-Q219 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section discloses the issuance of 25,000 unregistered common shares to a vendor and an update on the stock repurchase plan, which was increased to $750,000 and extended to June 30, 2025, with no repurchases in Q1 2025 - On January 23, 2025, the company issued 25,000 unregistered shares of Common Stock to a vendor for services220 - The company's stock repurchase plan was amended to increase the authorized amount to $750,000 and extend the termination date to June 30, 2025; no shares were repurchased in Q1 2025224225 Item 3. Defaults Upon Senior Securities The company reports no defaults upon its senior securities for the period, noting that other notes payable defaults were disclosed in the financial statement notes - No defaults upon senior securities were reported226 Item 4. Mine Safety Disclosures This item is not applicable to the company's business - Not applicable227 Item 5. Other Information The company discloses two post-quarter financing events in May 2025: the issuance of a new unsecured promissory note for $325,000 and the extension of a prior bridge note's maturity date to September 30, 2025 - On May 8, 2025, the company issued a new unsecured promissory note for $325,000 with a maturity date of September 30, 2025228 - On May 12, 2025, the company amended its February Bridge Note to extend the maturity date from May 25, 2025, to September 30, 2025229 Item 6. Exhibits This section lists the exhibits filed with the 10-Q report, including the merger agreement with LNHC, Inc., the PIPE financing securities purchase agreement, lock-up agreements, new promissory notes, and officer certifications - Key exhibits filed include the Agreement and Plan of Merger with LNHC, Inc., the Securities Purchase Agreement for the PIPE financing, and new promissory note agreements from May 2025232
Chromocell Therapeutics(CHRO) - 2025 Q1 - Quarterly Report