Alaunos Therapeutics(TCRT) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Financial Statements (unaudited) This section presents the unaudited condensed financial statements, including balance sheets, statements of operations, changes in stockholders' equity, cash flows, and accompanying notes, providing a snapshot of the company's financial health and performance for the quarter ended March 31, 2025 Condensed Balance Sheets The condensed balance sheets show a decrease in the company's cash and cash equivalents, total current assets, and total stockholders' equity as of March 31, 2025, compared to December 31, 2024, while total current liabilities increased Balance Sheet Highlights (in thousands) | Metric | March 31, 2025 | December 31, 2024 | Change | | :-------------------------- | :------------- | :---------------- | :----- | | Cash and cash equivalents | $319 | $1,091 | $(772) | | Total current assets | $1,067 | $2,755 | $(1,688) | | Total assets | $2,120 | $2,755 | $(635) | | Total current liabilities | $1,062 | $692 | $370 | | Total stockholders' equity | $1,058 | $2,063 | $(1,005) | Condensed Statements of Operations For the three months ended March 31, 2025, the company reported a reduced net loss compared to the same period in 2024, driven by a significant decrease in general and administrative expenses, despite an increase in research and development costs Statements of Operations Highlights (in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change | | :-------------------------- | :-------------------------------- | :-------------------------------- | :----- | | Revenue | $2 | $1 | $1 | | Research and development | $347 | $126 | $221 | | General and administrative | $747 | $1,617 | $(870) | | Net loss | $(1,073) | $(1,682) | $609 | | Basic and diluted EPS | $(0.67) | $(1.05) | $0.38 | Condensed Statements of Changes in Stockholders' Equity The statements of changes in stockholders' equity reflect the impact of net loss and stock-based compensation on the company's equity position for the three months ended March 31, 2025 and 2024, showing a decrease in total equity over the period Changes in Stockholders' Equity (in thousands) | Metric | Balance at Jan 1, 2025 | Stock-based compensation | Net loss | Balance at Mar 31, 2025 | | :-------------------- | :--------------------- | :----------------------- | :------- | :---------------------- | | Total Stockholders' Equity | $2,063 | $68 | $(1,073) | $1,058 | Changes in Stockholders' Equity (in thousands) | Metric | Balance at Jan 1, 2024 | Stock-based compensation | Net loss | Balance at Mar 31, 2024 | | :-------------------- | :--------------------- | :----------------------- | :------- | :---------------------- | | Total Stockholders' Equity | $6,307 | $172 | $(1,682) | $4,797 | Condensed Statements of Cash Flows The condensed statements of cash flows indicate a significant reduction in net cash used in operating activities for the three months ended March 31, 2025, compared to the prior year, primarily due to a lower net loss Cash Flow Highlights (in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :----- | | Net cash flows from operating activities | $(772) | $(1,917) | $1,145 | | Net decrease in cash and cash equivalents | $(772) | $(1,917) | $1,145 | | Cash and cash equivalents, end of period | $319 | $4,145 | $(3,826) | Notes to Condensed Financial Statements (unaudited) These notes provide detailed explanations and disclosures for the condensed financial statements, covering the company's organization, liquidity and going concern issues, significant accounting policies, reverse stock splits, Nasdaq listing compliance, financing activities, commitments, stock-based compensation, warrants, segment information, and subsequent events - The company is a pre-clinical obesity and metabolic disorder and clinical-stage oncology-focused cell therapy company, currently focusing on developing novel small molecules for obesity therapeutics[32] - As of March 31, 2025, the company had approximately $0.3 million in cash and cash equivalents and an accumulated deficit of approximately $921.5 million, with cash resources anticipated to fund operations only into the second quarter of 2025, raising substantial doubt about its ability to continue as a going concern[35][36] - The company completed a 1-for-15 reverse stock split in January 2024 and an additional 1-for-10 reverse stock split in July 2024, retroactively adjusting all share and per share data[41][43] - On April 7, 2025, the company received a notice from Nasdaq regarding non-compliance with the $2.5 million stockholders' equity requirement, reporting $2.1 million as of December 31, 2024, and has 45 days to submit a compliance plan[44][45] - The Exclusive License Agreement with Precigen was terminated on October 4, 2024, following a strategic review, while the company continues to prosecute intellectual property for TCRs targeting driver mutations and the hunTR TCR discovery platform[50][51] Stock-Based Compensation Expense (in thousands) | Expense Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----------------------- | :-------------------------------- | :-------------------------------- | | Research and development | $2 | $11 | | General and administrative | $66 | $161 | | Total | $68 | $172 | - On April 11, 2025, the company closed a private offering of Series A-1 Convertible Preferred Stock for an aggregate purchase price of $500,000 with Watermill Asset Management[72] - On April 13, 2025, the Board of Directors elected to receive $139,000 in equity compensation for deferred board service fees, resulting in the issuance of 38,269 common shares and the grant of 10,904 fully vested stock options[76] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, detailing the strategic shift towards an oral obesity program, the wind-down of TCR-T clinical trials, cost reduction efforts, and the critical need for additional financing, alongside a detailed analysis of revenue, expenses, and liquidity Overview The company announced a strategic reprioritization in August 2023, winding down its TCR-T Library Phase 1/2 Trial to focus on a small molecule oral obesity program and reduce costs. It continues to explore strategic alternatives and has incurred significant net losses since inception - On August 14, 2023, the company announced a strategic reprioritization, including winding down its TCR-T Library Phase 1/2 Trial and reducing its workforce to cut costs and extend cash runway[81] - The company continues to explore strategic alternatives such as acquisition, merger, sale of assets, strategic partnerships, or capital raises[81] - For the three months ended March 31, 2025, the company had a net loss of $1.6 million, and an accumulated deficit of approximately $921.5 million since its inception in 2003[82] 2024 Developments Key developments in 2024 include continued progress in the small molecule oral obesity program with in vitro testing, the wind-down of the TCR-T Library Phase 1/2 Trial despite encouraging results, ongoing exploration of strategic alternatives, and receipt of a Nasdaq deficiency notice regarding stockholders' equity Obesity Program The company is advancing its small molecule oral obesity program, aiming for a differentiated profile that does not rely on hormonal manipulation and preserves lean muscle mass. In vitro testing of ALN1001 and its derivatives began in Q4 2024, with results expected in Q2 2025, potentially leading to a proof-of-concept mouse study by Q3 2025 - The company is developing a small molecule oral obesity program aiming for a differentiated profile that does not rely on hormonal manipulation and preserves lean muscle mass[83] - In vitro testing of ALN1001 and its derivatives began in Q4 2024, with results expected in Q2 2025, to evaluate impact on lipid deposition and gene expression related to metabolic activity[83][84] - A proof-of-concept diet-induced obesity (DIO) mouse study is planned by Q3 2025, contingent on successful in vitro results and additional capital, before proceeding to IND-enabling studies[85] TCR-T Library Phase 1/2 Trial The TCR-T Library Phase 1/2 Trial, which treated eight patients with solid tumors, demonstrated that Sleeping Beauty TCR-T cells were generally well-tolerated and achieved an objective partial response in one patient and stable disease in six others, resulting in a 13% overall response rate and 87% disease control rate. Despite these encouraging results, further clinical development was halted in August 2023 due to substantial costs and the challenging financing environment - The TCR-T Library Phase 1/2 Trial treated eight patients with pancreatic, colorectal, and non-small cell lung cancer from 2022-2023[86] - The trial showed T-cells were generally well-tolerated with no dose-limiting toxicities (DLTs) or immune effector cell-associated neurotoxicity syndrome (ICANS); cytokine release syndrome (CRS) events were manageable[86] - One NSCLC patient achieved an objective partial response with six months progression-free survival, and six other patients achieved stable disease, resulting in a 13% overall response rate and 87% disease control rate[86] - Despite encouraging data, further clinical development of the TCR-T programs was halted in August 2023 due to substantial costs and the current financing environment[86] hunTR® Platform The company's hunTR TCR discovery platform has successfully identified multiple proprietary TCRs targeting driver mutations like KRAS and TP53, as well as TCRs restricted to additional HLAs, indicating potential for treating a large patient population - The hunTR TCR discovery platform has identified multiple proprietary TCRs targeting driver mutations (e.g., KRAS, TP53) and TCRs restricted to additional HLAs[87] - The hunTR library is believed to have the potential to treat a large patient population[87] Strategic Alternatives The company is actively exploring various strategic alternatives, including potential acquisition, merger, reverse merger, sale of assets, strategic partnerships, or capital raises, to enhance its business outlook - The company continues to explore strategic alternatives, including acquisition, merger, reverse merger, sale of assets, strategic partnerships, or capital raises[88] Nasdaq Shareholders Equity Deficiency Notice On April 7, 2025, the company received a Nasdaq notice for failing to meet the $2.5 million stockholders' equity requirement, reporting $2.1 million as of December 31, 2024. The company has 45 days to submit a compliance plan to Nasdaq - On April 7, 2025, the company received a notice from Nasdaq for not satisfying the continued listing requirement of $2.5 million stockholders' equity, having reported $2.1 million as of December 31, 2024[89] - The company has 45 calendar days from the notification date to submit a plan to regain compliance with Nasdaq Listing Rule 5550(b)(1)[90] Results of Operations The company's results of operations for the three months ended March 31, 2025, show a slight increase in royalty revenue, a significant increase in research and development expenses due to obesity program consulting and wind-down activities, a substantial decrease in general and administrative expenses from cost-cutting, and reduced other income due to lower cash reserves Royalty Revenue Royalty revenue increased to $2 thousand for the three months ended March 31, 2025, from $1 thousand in the same period of 2024 Royalty Revenue (in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change | Change % | | :------- | :-------------------------------- | :-------------------------------- | :----- | :------- | | Revenue | $2 | $1 | $1 | 100% | Research and Development Expenses Research and development expenses increased by $0.2 million, or 175%, to $347 thousand for the three months ended March 31, 2025, compared to $126 thousand in the prior year, primarily due to regulatory writing for clinical wind-down activities and consulting fees for the obesity program Research and Development Expenses (in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change | Change % | | :-------------------------- | :-------------------------------- | :-------------------------------- | :----- | :------- | | Research and development expenses | $347 | $126 | $221 | 175% | - The increase in R&D expenses was primarily due to a $0.2 million increase in regulatory writing for wind-down clinical activities and consulting fees for the obesity program[93] General and Administrative Expenses General and administrative expenses decreased significantly by $0.9 million, or 54%, to $747 thousand for the three months ended March 31, 2025, compared to $1,617 thousand in the prior year, mainly due to lower employee-related expenses, consulting fees, insurance costs, filing fees, travel, and bank fees from downsized operations General and Administrative Expenses (in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change | Change % | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :----- | :------- | | General and administrative expenses | $747 | $1,617 | $(870) | (54)% | - The decrease was primarily due to a $0.1 million decrease in employee-related expenses, a $0.4 million decrease in consulting expenses, and a $0.4 million decrease in insurance costs, filing fees, travel, and bank fees due to downsized operations[95] Other Income Other income, net, decreased by $0.04 million, or 68%, to $19 thousand for the three months ended March 31, 2025, compared to $60 thousand in the prior year, primarily due to reduced interest income from lower cash reserves Other Income, Net (in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change | Change % | | :---------------- | :-------------------------------- | :-------------------------------- | :----- | :------- | | Other income, net | $19 | $60 | $(41) | (68)% | - The decrease in other income was primarily due to reduced interest income from lower cash reserves[96] Liquidity and Capital Resources The company has no product revenue and continues to incur significant losses, relying on financing to fund operations. Despite cost-cutting efforts, cash resources are only anticipated to last into Q2 2025, raising substantial doubt about its going concern ability. Recent capital raises include a $500,000 private offering of Series A-1 Preferred Stock in April 2025 Liquidity The company has not generated product revenue and has incurred significant net losses and negative cash flows since inception. Despite strategic reprioritization and cost reductions, current cash resources are only expected to fund operations into the second quarter of 2025, leading to substantial doubt about its ability to continue as a going concern without additional financing - The company has not generated any revenue from product sales and has incurred significant net losses and negative cash flows since its inception[97] - Current cash resources are anticipated to be sufficient to fund operations into the second quarter of 2025[99][101] - Management has determined that present capital resources are insufficient to fund planned operations for at least one year, raising substantial doubt about the company's ability to continue as a going concern[102] Sales of Series A-1 Preferred Stock On April 11, 2025, the company completed a private offering, issuing and selling Series A-1 Convertible Preferred Stock for an aggregate purchase price of $500,000 to Watermill Asset Management - On April 11, 2025, the company entered into a Subscription Agreement to issue and sell Series A-1 Convertible Preferred Stock for an aggregate purchase price of $500,000 in a private offering, which closed on the same day[103] Cash Flows Net cash used in operating activities significantly decreased to $0.8 million for the three months ended March 31, 2025, from $1.9 million in the prior year, primarily due to a reduced net loss Net Cash Flows (in thousands) | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----------------- | :-------------------------------- | :-------------------------------- | | Operating activities | $(772) | $(1,917) | | Investing activities | — | — | | Financing activities | — | — | | Net decrease | $(772) | $(1,917) | - The decrease in net cash used in operating activities was primarily related to changes in the company's net loss[104] Capital Resources The company terminated its Patent License with the NCI effective December 26, 2023, and continues to earn royalty revenue from Solasia Pharma K.K. for darinaparsin, which amounted to $2 thousand in Q1 2025 - The Patent License with the NCI for engineered T-cell therapies was terminated effective December 26, 2023[108] - Royalty revenue from Solasia Pharma K.K. for darinaparsin sales was $2 thousand for the three months ended March 31, 2025, an increase from $1 thousand in the prior year[109] Item 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, the registrant is not required to provide quantitative and qualitative disclosures about market risk - The company is a 'smaller reporting company' and is therefore not required to provide quantitative and qualitative disclosures about market risk[110] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective as of March 31, 2025. No material changes in internal control over financial reporting occurred during the three months ended March 31, 2025 - Management concluded that the company's disclosure controls and procedures were not effective as of March 31, 2025[111] - There were no material changes in internal control over financial reporting during the three months ended March 31, 2025[112] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any pending litigation that management believes would have a material adverse effect on its business, financial condition, results of operations, cash flows, or prospects - The company does not have any pending litigation that is reasonably likely to have a material adverse effect on its business, financial condition, results of operations, cash flows, or prospects[115] Item 1A. Risk Factors This section highlights significant risks and uncertainties that could materially and adversely affect the company's business, financial condition, and results of operations. Key new or substantively changed risks include the impact of changes to U.S. tariff and import/export regulations, potential delisting from Nasdaq due to stockholders' equity deficiency, and negative effects from the use of artificial intelligence by the company or its partners - New or substantively changed risk factors include potential adverse effects from changes to United States tariff and import/export regulations[116][117] - A significant risk is the potential delisting from the Nasdaq Capital Market if the company's plan for compliance with the $2.5 million stockholders' equity rule, following the April 7, 2025 notice, is not approved or successfully implemented[118][119] - The use of artificial intelligence (AI) by the company or its partners and vendors may have negative effects, including novel cybersecurity threats, fraud, regulatory noncompliance, ethical/social/reputational risks, operational disruptions, and competitive disadvantages[121] - Principal stockholders, executive officers, and directors have substantial control (3.45% beneficially owned as of March 31, 2025), which may prevent other stockholders from influencing significant corporate decisions and could harm the market price of common stock[120] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report for the period - None to report[122] Item 3. Defaults Upon Senior Securities This item is not applicable for the current reporting period - Not applicable[123] Item 4. Mine Safety Disclosures This item is not applicable for the current reporting period - Not applicable[124] Item 5. Other Information There is no other information to report for the period - None to report[124] Item 6. Exhibits This section lists the exhibits filed as part of this Quarterly Report on Form 10-Q, including corporate governance documents, certifications, and XBRL data - Exhibits include the Second Amended and Restated Certificate of Incorporation, Certificate of Designation of Series A-1 Convertible Preferred Stock, Amended and Restated Bylaws, and various certifications (31.1+, 32.1++)[126]