Onconetix(ONCO) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements, detailing financial position, operational results, and cash flows, highlighting a net loss and working capital deficit Condensed Consolidated Balance Sheets Total assets decreased to $18.8 million due to a $10.9 million goodwill impairment, resulting in a $11.6 million working capital deficit Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash | $1,577 | $647 | | Total Current Assets | $2,421 | $950 | | Goodwill | $16,210 | $27,049 | | Total Assets | $18,776 | $28,182 | | Liabilities & Equity | | | | Notes Payable, net | $8,956 | $9,328 | | Total Current Liabilities | $14,039 | $18,290 | | Total Liabilities | $14,258 | $18,571 | | Total Stockholders' Equity | $3,993 | $8,543 | - Goodwill decreased from $27.0 million to $16.2 million due to an impairment loss of $10.9 million during the quarter[63][65] Condensed Consolidated Statements of Operations and Comprehensive Loss The company reported an $8.5 million net loss, impacted by a $10.9 million goodwill impairment, despite a $4.0 million increase in other income Q1 2025 vs. Q1 2024 Statement of Operations (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenue | $101.6 | $700.4 | | Gross Profit | $45.8 | $189.0 | | Impairment of goodwill | $10,918.0 | $5,192.0 | | Loss from operations | $(12,570.8) | $(11,082.0) | | Net Loss | $(8,545.9) | $(11,118.6) | | Net loss per share, basic and diluted | $(0.53) | $(20.08) | - A significant goodwill impairment of $10.9 million was recorded in Q1 2025, compared to $5.2 million in Q1 2024[17] - Total other income was $4.0 million in Q1 2025, primarily due to a $3.3 million change in fair value of a subscription agreement liability and a $0.9 million gain on forgiveness of accounts payable[17][68] Condensed Consolidated Statements of Cash Flows Net cash used in operations was $2.0 million, offset by $2.9 million from financing activities, resulting in a $0.9 million cash increase Q1 2025 vs. Q1 2024 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(1,999.7) | $(5,232.1) | | Net cash provided by (used in) investing activities | $0 | $(4.6) | | Net cash provided by financing activities | $2,870.3 | $5,205.1 | | Net increase (decrease) in cash | $930.7 | $(90.5) | - Financing activities in Q1 2025 included $5.0 million in proceeds from the issuance of common stock via the ELOC, offset by a $1.3 million payment for the redemption of Series C Preferred Stock[23] Notes to Unaudited Condensed Financial Statements The notes detail accounting policies, strategic shifts, debt agreements, equity financing, and material weaknesses in internal controls - Going Concern: The company has substantial doubt about its ability to continue as a going concern. As of March 31, 2025, cash was $1.6 million with a working capital deficit of $11.6 million. The current cash balance is insufficient to fund operations through June 2026 without additional financing[35][37] - Strategic Shift: The company has halted vaccine development and abandoned commercialization of ENTADFI to focus on its Proclarix diagnostic product for prostate cancer[28][186] - Debt and Forbearance: The company has two $5.0 million notes payable to Veru. It failed to repay the first note and entered into forbearance agreements, extending the due dates to June 30, 2025, with modified payment terms[75][77][84] - Financing: The company is utilizing a Common Stock Equity Line of Credit (ELOC) to raise capital. As of June 12, 2025, it had sold shares for gross proceeds of approximately $6.2 million under the agreement[122][178] - Subsequent Events: On April 8, 2025, the company announced a non-binding letter of intent for a potential business combination with Ocuvex Therapeutics. On June 11, 2025, it announced a 1-for-85 reverse stock split[177][181] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses financial condition, strategic focus on Proclarix, significant revenue decrease, and reiterates going concern doubt - The company has abandoned commercialization of ENTADFI due to the resources required and its cash runway, and is now focusing its efforts on commercializing Proclarix[186][188] - There is substantial doubt about the company's ability to continue as a going concern. The cash balance was approximately $0.4 million as of June 10, 2025, which is not sufficient to fund operations through the end of December 2025[248][284] Q1 2025 vs. Q1 2024 Results of Operations (in thousands) | Metric | Q1 2025 | Q1 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $101.6 | $700.4 | $(598.8) | (85.5)% | | Selling, general and administrative | $1,674.2 | $3,736.5 | $(2,062.2) | (55.2)% | | Impairment of goodwill | $10,918.0 | $5,192.0 | $5,726.0 | 110.3% | | Net loss | $(8,545.9) | $(11,118.6) | $2,572.7 | (23.1)% | - The decrease in SG&A expenses by $2.1 million was mainly due to a $0.8 million reduction in non-recurring professional fees related to the Proteomedix acquisition in 2024 and a $0.4 million decrease in payroll-related expenses[240] - Management plans to secure additional funding through equity or debt financing and utilize the ELOC, but acknowledges that funds available under the ELOC will not be sufficient to sustain operations[249] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Onconetix is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, Onconetix is not required to provide quantitative and qualitative disclosures about market risk[269] Item 4. Controls and Procedures Management concluded disclosure controls were ineffective due to material weaknesses in internal control over financial reporting - Management concluded that the Company's disclosure controls and procedures were not effective as of March 31, 2025[270] - Several material weaknesses were identified, including: - Inadequate segregation of duties - Ineffective risk assessment and monitoring - Insufficient accounting resources for complex transactions and timely reporting - Ineffective Information Technology General Controls (ITGCs) related to user access, change management, and data security[272] - A remediation plan is being implemented, focusing on improving the control environment, enhancing policies and procedures, implementing effective review controls, and ensuring proper segregation of duties[274] PART II. OTHER INFORMATION Item 1. Legal Proceedings Onconetix is not subject to any material legal proceedings or aware of any threatened material legal actions - The company is not currently subject to any material legal proceedings[280] Item 1A. Risk Factors Significant risks include a history of net losses, substantial doubt about going concern, urgent need for capital, and risks from the Ocuvex business combination - Going Concern and Financial Health: The company has a history of significant net losses ($8.5M for Q1 2025) and an accumulated deficit of $125.4M. There is substantial doubt about its ability to continue as a going concern, with a cash balance of only $0.4M as of June 10, 2025[282][284] - Debt to Veru: The company owes a significant amount to Veru (approximately $9.0 million) and may be unable to make timely payments, despite forbearance agreements. Failure to pay could lead to legal action, forced scale-back of operations, or bankruptcy[288][291] - Pending Ocuvex Business Combination: The potential merger with Ocuvex Therapeutics is subject to numerous risks, including failure to complete the transaction, assuming unanticipated liabilities, and incurring substantial non-recurring transaction costs[293][294][297] - Need for Capital: The company requires substantial additional funding to finance operations. Funds from the ELOC are not expected to be sufficient, and there is no assurance that other financing will be available on acceptable terms, if at all[286] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities were reported during the period that were not previously disclosed - There were no unregistered sales of equity securities that have not been previously reported on a Form 8-K[298] Item 5. Other Information A Certificate of Correction was filed to fix a scrivener's error regarding Series C Preferred Stock redemption terms - A Certificate of Correction was filed on June 12, 2025, to correct a scrivener's error in the Certificate of Designation for the Series C Convertible Preferred Stock, allowing for partial redemptions[302] Item 6. Exhibits This section provides an index of exhibits filed with the Quarterly Report on Form 10-Q, including corporate governance documents