Onconetix(ONCO) - 2025 Q2 - Quarterly Report

Cautionary Note Regarding Forward-Looking Statements This report contains forward-looking statements, primarily in "Risk Factors" and "Management's Discussion and Analysis," reflecting current expectations and views of future events. Actual results may differ materially due to known and unknown risks and uncertainties - This report contains forward-looking statements, primarily in "Risk Factors" and "Management's Discussion and Analysis," reflecting current expectations and views of future events. Actual results may differ materially due to known and unknown risks and uncertainties[9][11] - Forward-looking statements cover topics such as the Company's ability to approve the Merger, terms and timing of the Closing, expected benefits of the Merger, projected capitalization, management plans, operating expenses, potential adverse reactions to the Merger, business operations, relationships with third parties, competition, economic conditions, regulatory changes, projected financial position, cash burn rate, capital requirements, going concern ability, and commercialization of Proclarix[10][13] PART I. FINANCIAL INFORMATION This section presents Onconetix's unaudited condensed consolidated financial statements and management's discussion and analysis for the period ended June 30, 2025 Item 1. Condensed Consolidated Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements for Onconetix, Inc. for the period ended June 30, 2025, including balance sheets, statements of operations and comprehensive loss, statements of convertible preferred stock and stockholders' equity (deficit), and statements of cash flows, along with detailed notes explaining significant accounting policies, going concern issues, and specific financial line items Condensed Consolidated Balance Sheets The balance sheets show a decrease in total assets and liabilities, reflecting changes in goodwill and current obligations | Metric | June 30, 2025 | December 31, 2024 | Change | | :------------------------------------------------ | :------------ | :---------------- | :----- | | ASSETS | | | | | Total current assets | $930,531 | $950,267 | $(19,736) | | Goodwill | $18,123,296 | $27,048,973 | $(8,925,677) | | Total assets | $19,119,036 | $28,181,563 | $(9,062,527) | | LIABILITIES & EQUITY | | | | | Total current liabilities | $12,692,188 | $18,290,129 | $(5,597,941) | | Total liabilities | $12,765,832 | $18,571,008 | $(5,805,176) | | Series C Redeemable Preferred Stock | $443,443 | $1,067,928 | $(624,485) | | Total stockholders' equity | $5,909,761 | $8,542,627 | $(2,632,866) | | Total liabilities, convertible preferred stock, and stockholders' equity | $19,119,036 | $28,181,563 | $(9,062,527) | Condensed Consolidated Statements of Operations and Comprehensive Loss This statement details the company's revenue, expenses, and net loss for the three and six months ended June 30, 2025 and 2024 | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $106,494 | $704,848 | $208,124 | $1,405,281 | | Gross profit | $70,503 | $100,716 | $116,335 | $289,716 | | Total operating expenses | $2,005,921 | $13,715,735 | $14,622,582 | $24,986,725 | | Loss from operations | $(1,935,418) | $(13,615,019) | $(14,506,247) | $(24,697,009) | | Total other (expense) income | $(437,024) | $(640,917) | $3,587,920 | $(799,066) | | Net loss | $(2,372,442) | $(14,306,704) | $(10,918,327) | $(25,425,276) | | Net loss applicable to common stockholders | $(2,700,946) | $(14,306,704) | $(12,416,922) | $(25,425,276) | | Net loss per share, basic and diluted | $(4.76) | $(2,191.59) | $(31.67) | $(3,898.98) | | Total comprehensive loss | $(144,660) | $(14,230,110) | $(8,580,276) | $(30,185,148) | Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit) This statement outlines changes in equity components, including common stock, preferred stock, and accumulated deficit, over the reporting period - The statement details changes in stockholders' equity, including common stock, additional paid-in capital, treasury stock, accumulated deficit, and accumulated other comprehensive loss, reflecting transactions such as stock-based compensation, foreign currency translation adjustments, changes in pension benefit obligations, net loss, and issuance/redemption of preferred stock[21][22] Condensed Consolidated Statements of Cash Flows This statement summarizes cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(3,409,976) | $(8,431,591) | | Net cash provided by (used in) investing activities | $0 | $(22,284) | | Net cash provided by financing activities | $3,614,828 | $4,861,667 | | Effect of exchange rate changes on cash | $(567,837) | $(31,586) | | Net decrease in cash | $(362,985) | $(3,623,794) | | Cash, end of period | $283,515 | $930,541 | Notes to Unaudited Condensed Financial Statements These notes provide detailed explanations of significant accounting policies, financial statement line items, and other relevant disclosures Note 1 — Organization and Basis of Presentation This note describes the company's business, recent acquisitions, and significant corporate actions like reverse stock splits - Onconetix, Inc. (formerly Blue Water Biotech, Inc. and Blue Water Vaccines Inc.) is a commercial-stage biotechnology company focused on men's health and oncology. The company acquired Proteomedix AG and its diagnostic product Proclarix in December 2023, and ENTADFI in April 2023, though commercialization of ENTADFI has been abandoned due to resource constraints and indebtedness[26][27][28][29] - The company underwent two reverse stock splits: one-for-forty (1:40) on September 24, 2024, and one-for-eighty-five (1:85) on June 13, 2025, retrospectively adjusted in financial statements[31][32] Note 2 — Going Concern and Management's Plans This note addresses the company's liquidity challenges and management's strategies to secure future funding - As of June 30, 2025, Onconetix had $0.3 million in cash, a working capital deficit of $11.8 million, and an accumulated deficit of $128.1 million, having used $3.4 million in cash for operations in the first six months of 2025. The current cash balance is insufficient to fund operations for the next twelve months, raising substantial doubt about the company's ability to continue as a going concern[38] - Management plans to fund operations through Proclarix revenue, equity/debt financings, and an existing Equity Financing Line of Credit (ELOC), but the ELOC's current maximum availability is insufficient. There are no other financing commitments, creating significant uncertainty about sustaining operations and expanding Proclarix commercialization[39] Note 3 — Summary of Significant Accounting Policies This note outlines the key accounting principles and methods used in preparing the financial statements, including revenue recognition and fair value measurements - The company operates in one segment: commercial, as of June 30, 2025, and December 31, 2024[43] | Description | Total (June 30, 2025) | Level 1 | Level 2 | Level 3 | | :------------------------ | :-------------------- | :------ | :------ | :------ | | Contingent warrant liability | $53,113 | $0 | $0 | $53,113 | | Total | $53,113 | $0 | $0 | $53,113 | | | | | | | | Description | Total (Dec 31, 2024) | Level 1 | Level 2 | Level 3 | | :------------------------ | :-------------------- | :------ | :------ | :------ | | Contingent warrant liability | $43,089 | $0 | $0 | $43,089 | | Subscription agreement liability – related party | $4,123,000 | $0 | $0 | $4,123,000 | | Total | $4,166,089 | $0 | $0 | $4,166,089 | - Revenue is generated from Development Services (time and materials basis, recognized over time) and Product Sales (Proclarix, recognized upon transfer to customer). For the three months ended June 30, 2025, revenue was $0.1 million, primarily from product sales in the European Union. For the six months ended June 30, 2025, revenue was $0.2 million, also mainly from product sales in the European Union[52][54][55][56][58] Note 4 — Balance Sheet Details This note provides detailed breakdowns of specific balance sheet accounts, including inventory, intangible assets, goodwill, and accrued expenses | Inventory Type | June 30, 2025 | December 31, 2024 | | :------------- | :------------ | :---------------- | | Raw materials | $103,711 | $57,446 | | Finished goods | $49,361 | $6,633 | | Total | $153,072 | $64,079 | - Intangible assets from ENTADFI and Proteomedix acquisitions (customer relationships, product rights, trade name) were fully impaired during the year ended December 31, 2024, resulting in a zero balance. Goodwill impairment losses of $0.6 million and $11.5 million were recognized for the three and six months ended June 30, 2025, respectively, due to declines in stock price and market capitalization[66][70] | Accrued Expense | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Accrued compensation | $62,743 | $186,956 | | Accrued research and development | $215,599 | $320,096 | | Accrued professional fees | $208,878 | $161,981 | | Accrued interest | $396,091 | $139,409 | | Total | $894,986 | $888,988 | Note 5 — Significant Agreements This note describes key contractual agreements, including terminated service agreements and licensing arrangements for Proclarix - The company terminated a Master Services Agreement for commercialization services in October 2023, resulting in a reduced termination fee of $0.9 million, which was settled during the six months ended June 30, 2025, recognizing a $0.9 million gain on forgiveness of accounts payable[74] - Proteomedix has an exclusive license agreement with LabCorp for the development and commercialization of Proclarix in the U.S., entitling Proteomedix to royalty payments (5-10% of net sales) and up to $2.5 million in milestone payments. As of June 30, 2025, commercial sales by LabCorp have not commenced[75][77][80] Note 6 — Notes Payable This note details the company's various debt obligations, including notes to Veru and Keystone Capital Partners, and their terms - Onconetix has two non-interest-bearing notes payable to Veru, each for $5.0 million, with maturity dates extended multiple times, most recently to August 14, 2025. Interest accrues at 10% per annum on unpaid principal balances[81][84][89][91][96][97][100] - A $5.0 million non-convertible debenture issued to a related party (PMX Investor) in January 2024 was converted into common stock and pre-funded warrants on September 24, 2024, with no outstanding balance as of December 31, 2024[101][105] - During the six months ended June 30, 2025, the Company obtained financing for D&O insurance premiums totaling approximately $0.5 million at 7.25% annual interest, resulting in a $0.2 million insurance financing note payable[107][108] - The Company issued three subordinated promissory notes to Keystone Capital Partners, LLC during the six months ended June 30, 2025, with original issue discounts, payable upon receipt of ELOC proceeds or specified maturity dates (November 2025, February 2026, March 2026)[110][115] Note 7 — Subscription Agreement This note explains the subscription agreement with a related party, including the make-whole provision and its settlement - A subscription agreement with a related party (PMX Investor) for 5,882 units (common stock and pre-funded warrants) closed on September 24, 2024. A make-whole provision, which required additional share issuance if the 270-day volume weighted average price was below $850, expired and was settled on June 24, 2025, resulting in the issuance of 241,514 common shares[111][112] - The subscription agreement was accounted for as a liability, with its fair value changing by approximately $3.1 million for the six months ended June 30, 2025, and settling to $0 as of June 30, 2025[113] Note 8 — Convertible Preferred Stock and Stockholders' Equity This note details the company's capital structure, including authorized shares, preferred stock conversions, and the Equity Line of Credit - The Company is authorized to issue 250,000,000 shares of common stock and 10,000,000 shares of preferred stock, both with a par value of $0.00001[117] - All 3,000 Series A Convertible Preferred Stock shares were converted into 1,679 common shares on September 24, 2024. All 2,696,729 Series B Convertible Preferred Stock shares were converted into 79,315 common shares on September 24, 2024, following stockholder approval[121][125] - As of June 30, 2025, 2,130 shares of Series C Preferred Stock remain outstanding with a carrying value of $0.44 million, after redemptions of $1.71 million during the six months ended June 30, 2025. These shares are accounted for as mezzanine equity due to a contingent redemption feature tied to ELOC sales[131][136] - The Company entered into an Equity Line of Credit (ELOC) Purchase Agreement on October 2, 2024, allowing it to sell up to $25.0 million of common stock to an institutional investor, with 30% of gross proceeds applied to Series C Preferred Stock redemption. During the six months ended June 30, 2025, the Company received $6.4 million under the ELOC[135][138] | Stock-Based Compensation Expense | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Selling, general and administrative | $30,982 | $42,663 | $60,238 | $96,449 | | Research and development | $0 | $(43,438) | $0 | $(44,574) | | Total | $30,982 | $(775) | $60,238 | $51,875 | Note 9 — Commitments and Contingencies This note outlines the company's lease obligations and confirms the absence of material legal proceedings - Proteomedix amended its office and lab lease in April 2024, then partially terminated it in May 2025, reducing leased premises. As of June 30, 2025, remaining leases resulted in a right-of-use asset and lease liability of approximately $21,400[162][163][164] - The Company is not currently a party to any material legal proceedings and has no further obligations pertaining to Registration Rights Agreements from prior private placements as of June 30, 2025[165][167] Note 10 — Related Party Transactions This note discloses transactions with related parties, including a subscription agreement and consulting services from a board member - The Company entered into a subscription agreement with the PMX Investor (a 5% stockholder) and issued a $5.0 million non-convertible debenture, which was later settled through the issuance of shares[169] - Dr. Thomas Meier, a board member, provides consulting services to Proteomedix through an affiliated firm, entitling him to 10% of success fees. No related expenses were recorded in Q2 2025[170] Note 11 — Income Taxes This note explains the company's income tax position, including net operating losses and valuation allowances - No income tax provision or benefit was recorded for the three and six months ended June 30, 2025. For the same periods in 2024, an income tax expense of $(51,000) and a benefit of $71,000 were recorded, respectively, related to foreign deferred taxes from the Proteomedix acquisition[174] - The Company has incurred net operating losses and recorded a full valuation allowance against its U.S. deferred tax assets due to uncertainty of realization. All deferred tax liabilities related to intangibles were reversed in 2024[175] Note 12 — Net Loss Per Share This note details the calculation of basic and diluted net loss per share, including excluded securities - Basic net loss per share is calculated by dividing net loss applicable to common shares by the weighted average number of common shares outstanding, including pre-funded warrants. The two-class method is used for participating securities[177][178] | Securities Excluded from Diluted Shares | As of June 30, 2025 | As of June 30, 2024 | | :-------------------------------------- | :------------------ | :------------------ | | Options to purchase shares of common stock | 162 | 332 | | Warrants | 13,818 | 2,323 | | Unvested shares of restricted stock | 231 | 31 | | Common stock issuable upon conversion of Series A Preferred Stock | 0 | 1,679 | | Common stock issuable upon conversion of Series C Redeemable Preferred Stock | 399,587 | 0 | | Total | 413,798 | 4,365 | Note 13 — Defined Benefit Plan This note provides information on Proteomedix's defined benefit pension plan, including actuarial assumptions and funded status - Proteomedix sponsors a defined benefit pension plan (Swiss Plan) for eligible employees. Significant actuarial assumptions for June 30, 2025, include a discount rate of 1.25%, expected long-term rate of return on plan assets of 1.25%, and a compensation increase rate of 1.50%[181] | Net Periodic Benefit Cost Component | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Service cost | $24,436 | $23,794 | $47,164 | $48,444 | | Interest cost | $3,451 | $7,293 | $9,443 | $14,851 | | Expected return on plan assets | $(5,695) | $409 | $(10,990) | $(23,086) | | Amortization of net (gain) | $(7,840) | $269 | $(15,131) | $(15,177) | | Settlement gains | $(487,485) | $0 | $(510,947) | $0 | | Total | $(473,133) | $31,765 | $(480,461) | $25,032 | | Funded Status | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Projected benefit obligation | $831,242 | $2,593,360 | | Fair value of plan assets | $757,598 | $2,312,481 | | Overfunded (underfunded) status | $(73,644) | $(280,879) | Note 14 – Segment Information This note clarifies that the company operates as a single commercial segment and provides revenue breakdown by geographic region - The Company operates and reports financial results as a single business segment, "commercial," consistent with how the CEO (Chief Operating Decision Maker) evaluates performance and allocates resources[190] | Geographic Region | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | United States | $0 | $0 | $0 | $65,522 | | United Kingdom | $2,281 | $0 | $9,096 | $10,666 | | Switzerland | $104,213 | $704,848 | $199,028 | $1,329,093 | | Total Revenue | $106,494 | $704,848 | $208,124 | $1,405,281 | Note 15 — Subsequent Events This note discloses significant events occurring after the reporting period, including the merger agreement with Ocuvex and recent financing activities - On July 16, 2025, Onconetix entered into a Merger Agreement with Ocuvex Therapeutics, Inc., where Ocuvex will become a wholly-owned subsidiary. Post-closing, Ocuvex stockholders are anticipated to own 90% of the combined company, and pre-closing Onconetix stockholders 10%, subject to adjustments[193][195] - The Merger is subject to customary conditions, including stockholder approvals, accuracy of representations, compliance with covenants, Nasdaq listing approval, and an effective registration statement. Ocuvex's closing is also conditional on restructuring Onconetix's debt and the merger qualifying as a tax-free reorganization[199][202] - On July 16, 2025, Onconetix lowered the conversion price of Series C preferred stock to $3.50. As of August 13, 2025, 1,920 Series C shares had been converted into 547,051 common shares for approximately $1.9 million[205] - On August 6, 2025, the Company issued a $117,647 promissory note to Keystone Capital Partners, LLC, due March 6, 2026, or earlier upon sufficient ELOC proceeds. On August 7, 2025, the September Veru Note was amended, increasing the principal by $100,000 to $5.1 million and setting the maturity date to August 14, 2025[206][207] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. This section provides management's perspective on Onconetix's financial condition and operational results for the periods ended June 30, 2025, highlighting the company's strategic shift to commercializing Proclarix, the abandonment of ENTADFI, ongoing liquidity challenges, and the proposed merger with Ocuvex Therapeutics. It also details revenue, expense, and cash flow trends, along with critical accounting policies and future funding requirements Overview This overview introduces Onconetix's business focus on Proclarix, the abandonment of ENTADFI, and the proposed merger with Ocuvex Therapeutics - Onconetix is a commercial-stage biotechnology company focused on men's health and oncology, primarily through its Proclarix diagnostic product for prostate cancer, approved in the EU and anticipated for U.S. marketing via LabCorp[210][213] - The company has abandoned commercialization of ENTADFI due to resource constraints and indebtedness, fully impairing its assets by June 30, 2024, and is now focused solely on Proclarix[211][212][217] - On July 16, 2025, Onconetix entered into a Merger Agreement with Ocuvex Therapeutics, Inc., where Ocuvex stockholders are expected to own 90% of the combined company post-closing, and Onconetix stockholders 10%[219][222] - On June 13, 2025, the Company effected a one-for-eighty-five (1:85) reverse stock split, retrospectively adjusting all common stock and share-based awards[229] Components of Results of Operations This section defines the key categories of expenses and other income/expense that impact the company's financial performance - Selling, general, and administrative (SG&A) expenses include commercialization activities, payroll, professional fees, and acquisition-related costs, and are anticipated to decrease due to cost reduction efforts[256][257] - Research and development (R&D) expenses historically covered product candidate development, but the company halted vaccine programs in Q3 2023 and does not anticipate significant R&D expenses in the near future[258][260] - Other income (expense) comprises interest expense on notes payable, changes in fair value of financial instruments (subscription agreement liability, contingent warrant liability), and other financing-related costs[261] Results of Operations This section analyzes the company's financial performance by comparing revenue, expenses, and net loss across different reporting periods Comparison of the Three Months Ended June 30, 2025 and 2024 This section compares the company's financial performance for the second quarter of 2025 against the same period in 2024 | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | $ Change | % Change | | :------------------------------------ | :--------------------------- | :--------------------------- | :------- | :------- | | Revenue | $106,494 | $704,848 | $(598,354) | (84.9)% | | Cost of revenue | $35,991 | $604,132 | $(568,141) | (94.0)% | | Gross profit | $70,503 | $100,716 | $(30,213) | (30.0)% | | Selling, general and administrative | $1,523,591 | $2,221,275 | $(697,684) | (31.4)% | | Research and development | $(111,670) | $(3,680) | $(107,990) | (2934.5)% | | Impairment of ENTADFI assets | $0 | $1,237,140 | $(1,237,140) | (100.0)% | | Impairment of goodwill | $594,000 | $10,261,000 | $(9,667,000) | (94.2)% | | Loss from operations | $(1,935,418) | $(13,615,019) | $11,679,601 | 85.8% | | Total other expense | $(437,024) | $(640,917) | $203,893 | 31.8% | | Net loss | $(2,372,442) | $(14,306,704) | $11,934,262 | (83.4)% | - Revenue decreased by 84.9% to $0.1 million, primarily from Proteomedix product sales, while cost of revenue decreased by 94.0% due to lower sales and the prior year's ENTADFI inventory impairment[263] - Selling, general and administrative expenses decreased by $0.7 million (31.4%) due to a $0.5 million reduction in payroll-related expenses and a $0.2 million decline in miscellaneous expenses, reflecting cost-saving measures[264] - Goodwill impairment decreased significantly to $0.6 million in Q2 2025 from $10.3 million in Q2 2024[267] Comparison of the Six months Ended June 30, 2025 and 2024 This section compares the company's financial performance for the first half of 2025 against the same period in 2024 | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | $ Change | % Change | | :------------------------------------ | :--------------------------- | :--------------------------- | :------- | :------- | | Revenue | $208,124 | $1,405,281 | $(1,197,157) | (85.2)% | | Cost of revenue | $91,789 | $1,115,565 | $(1,023,776) | (91.8)% | | Gross profit | $116,335 | $289,716 | $(173,381) | (59.8)% | | Selling, general and administrative | $3,197,797 | $5,957,725 | $(2,759,928) | (46.3)% | | Research and development | $(87,215) | $45,284 | $(132,499) | (292.6)% | | Impairment of ENTADFI assets | $0 | $3,530,716 | $(3,530,716) | (100.0)% | | Impairment of goodwill | $11,512,000 | $15,453,000 | $(3,941,000) | (25.5)% | | Loss from operations | $(14,506,247) | $(24,697,009) | $10,190,762 | 41.3% | | Total other income (expense) | $3,587,920 | $(799,066) | $4,386,986 | 549.0% | | Net loss | $(10,918,327) | $(25,425,276) | $14,506,949 | 57.1% | - Revenue for the six months ended June 30, 2025, was $0.2 million, down 85.2% from $1.4 million in 2024, primarily from Proteomedix product sales. Cost of revenue decreased by 91.8%[271] - Selling, general and administrative expenses decreased by $2.8 million (46.3%), driven by a $0.8 million reduction in professional fees related to the Proteomedix acquisition, a $0.5 million reduction in Proteomedix-specific professional fees, and an $0.8 million decrease in payroll-related expenses[273][274] - Other income (expense) increased by $4.4 million, primarily due to a $3.2 million increase in the fair value of the subscription agreement liability and a $0.9 million gain on forgiveness of accounts payable[278] Liquidity and Capital Resources This section assesses the company's current cash position, working capital, and ability to meet short-term and long-term financial obligations - As of June 30, 2025, the Company had $0.3 million in cash, a working capital deficit of $11.8 million, and an accumulated deficit of $128.1 million. Cash used in operating activities for the six months ended June 30, 2025, was $3.4 million[281][282] - The current cash balance is insufficient to fund operations for the next twelve months, raising substantial doubt about the Company's ability to continue as a going concern. Management plans to seek additional funding through Proclarix revenue, equity/debt financings, and the ELOC, but the ELOC's current availability is insufficient[282][283][284] Future Funding Requirements This section outlines the anticipated capital needs for commercialization, operations, and debt obligations, and factors influencing funding - Onconetix anticipates significant future expenses for Proclarix commercialization and will require substantial additional capital in the short-term to fund operations, satisfy obligations (including Veru payments), and support business activities[285][286] - Future funding will depend on factors such as commercialization costs, R&D timing and costs, regulatory approvals, strategic collaborations, potential lawsuits, personnel expenses, Proclarix revenue, and intellectual property costs[287][288] Cash Flows This section analyzes the changes in cash from operating, investing, and financing activities for the six-month periods | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(3,409,976) | $(8,431,591) | | Net cash provided by (used in) investing activities | $0 | $(22,284) | | Net cash provided by financing activities | $3,614,828 | $4,861,667 | | Net decrease in cash | $(362,985) | $(3,623,794) | - Net cash used in operating activities decreased from $8.4 million in H1 2024 to $3.4 million in H1 2025, primarily due to a lower net loss and significant non-cash adjustments like goodwill impairment and changes in subscription liability fair value[290][291] - Net cash provided by financing activities was $3.6 million in H1 2025, mainly from $6.4 million in ELOC proceeds and $0.5 million from notes payable, offset by $1.5 million in note payments and $1.7 million in Series C Preferred Stock redemptions[293] Legal Contingencies This section describes the company's policy for recording liabilities related to legal matters - The Company records a liability for legal matters when future losses are probable and estimable[295] Off-Balance Sheet Arrangements This section confirms the absence of any off-balance sheet arrangements during the reporting periods - The Company did not have any off-balance sheet arrangements during the periods presented[296] Recent Accounting Pronouncements Not Yet Adopted This section states that no new accounting pronouncements significantly affect the financial statements - There were no new accounting pronouncements issued since the Company's 2024 10-K filing that would significantly affect the condensed consolidated financial statements[62][297] Critical Accounting Policies and Estimates This section highlights the key accounting policies and estimates requiring significant management judgment in financial reporting - The preparation of financial statements requires management to make estimates and assumptions, with significant estimates relating to acquisitions, inventory valuation, intangible asset useful life and impairment, pension benefit obligations, related party subscription agreement liability, notes payable, and income taxes[42][298] - As of June 30, 2025, there have been no material changes to the critical accounting policies and estimates from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024[299] JOBS Act This section explains the company's status as an emerging growth company and the associated regulatory benefits under the JOBS Act - As an "emerging growth company" under the JOBS Act, Onconetix has elected to use the extended transition period for new accounting standards and benefits from reduced regulatory and reporting requirements, including exemptions from Section 404(b) of Sarbanes-Oxley and detailed executive compensation disclosures[300][301][302] 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 exempt from providing quantitative and qualitative disclosures about market risk[303] Item 4. Controls and Procedures. Management concluded that Onconetix's disclosure controls and procedures were not effective as of June 30, 2025, due to identified material weaknesses in internal control over financial reporting, including inadequate segregation of duties, ineffective risk assessment, and insufficient accounting resources. Remediation efforts are underway to address these deficiencies Evaluation of Disclosure Controls and Procedures This section presents management's conclusion on the effectiveness of the company's disclosure controls and procedures - Management, with CEO and CFO participation, concluded that the Company's disclosure controls and procedures were not effective as of June 30, 2025, due to material weaknesses[304] Material Weaknesses in Internal Control Over Financial Reporting This section details the specific deficiencies identified in the company's internal control over financial reporting - Identified material weaknesses include inadequate segregation of duties for cash disbursements, ineffective risk assessment and monitoring of accounting policies, insufficient controls over expense payment approval and reporting, inadequate internal controls for timely identification/approval/reporting of related party transactions, insufficient accounting resources, and ineffective IT general controls (user authentication, access privileges, data backup/recovery, monitoring)[306][307] Remediation of Material Weaknesses This section outlines management's plans and ongoing efforts to address and correct the identified material weaknesses - Management is reassessing and modifying controls to remediate material weaknesses, including improving change management, enhancing the control environment with formal policies, designing and implementing effective review/approval controls, and ensuring appropriate segregation of duties[308] Inherent Limitation on the Effectiveness of Internal Control Processes This section acknowledges that internal control systems provide reasonable, but not absolute, assurance and are subject to inherent limitations - The Interim CEO and CFO acknowledge that control systems provide only reasonable assurance, not absolute, and are subject to inherent limitations such as faulty judgments, simple errors, circumvention by individual acts or collusion, and management override[311] Changes in Internal Control over Financial Reporting This section confirms no material changes to internal control over financial reporting during the quarter ended June 30, 2025 - There were no changes in internal control over financial reporting during the fiscal quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[312] PART II. OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings Onconetix is not currently subject to any material legal proceedings, nor is it aware of any pending or threatened material legal proceedings against the company or its officers/directors - Onconetix is not currently involved in any material legal proceedings, nor is it aware of any threatened against the company or its officers/directors[314] Item 1A. Risk Factors This section outlines significant risks, including substantial doubt about Onconetix's ability to continue as a going concern due to recurring losses and insufficient capital, significant debt obligations to Veru, and various risks associated with the pending merger with Ocuvex Therapeutics, such as completion uncertainty, potential disruptions, and dilution for existing stockholders Risks Related to our Financial Position and Need for Capital This section details financial risks, including recurring losses, going concern issues, significant debt, and insufficient liquidity - Onconetix has incurred significant net losses ($10.9 million for H1 2025) and an accumulated deficit of $128.1 million as of June 30, 2025, with negative operating cash flows, indicating a highly speculative investment[316] - There is substantial doubt about the Company's ability to continue as a going concern, with only $0.3 million cash as of June 30, 2025, and $8.7 million in debt due within 12 months. Additional capital is required to fund operations and commercialize Proclarix[318][319][320][321] - The Company owes a significant amount to Veru (totaling $10 million, with maturity dates extended to August 14, 2025), which it may be unable to pay, potentially leading to legal action, bankruptcy, or forced scaling back of business plans[322] - Current liabilities are significant ($12.7 million as of June 30, 2025, including $2.6 million in accounts payable and $8.7 million in notes payable), far exceeding cash on hand ($0.3 million), posing a risk of inability to pay if creditors demand immediate payment[326] Risks Related to Pending Business Combination This section outlines risks associated with the proposed merger, including completion uncertainty, operational disruptions, and potential stockholder dilution - The completion of the merger with Ocuvex is uncertain and subject to various conditions, including stockholder approvals. Failure to close could result in Onconetix paying a termination fee and incurring significant expenses, harming its market price and future business[327][331][333] - The merger process could cause substantial disruptions, create uncertainty for employees and business relationships, and divert management attention from day-to-day operations[329] - The Merger Agreement restricts Onconetix from taking certain actions outside the ordinary course of business and includes "no-shop" provisions, which could deter alternative takeover proposals and potentially disadvantage Onconetix if the merger is not completed[330][338][339] - Onconetix expects to incur significant non-recurring transaction costs for the merger, which will be borne regardless of completion and could adversely affect financial condition[342] - If the merger is not completed, the Onconetix Board may pursue dissolution and liquidation, where the amount of cash available for distribution to stockholders would depend on timing and reserves for obligations, potentially leading to significant investment loss[344] - Post-merger, the combined company may issue additional securities, diluting existing stockholders' ownership and potentially reducing per-share financial measures[345] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There are no unregistered sales of equity securities or uses of proceeds that have not been previously reported in a Current Report on Form 8-K - No unregistered sales of equity securities or uses of proceeds have occurred that were not previously reported in a Current Report on Form 8-K[346] Item 3. Defaults Upon Senior Securities There are no defaults upon senior securities to report - No defaults upon senior securities[348] Item 4. Mine Safety Disclosures This item is not applicable to Onconetix - Not applicable[349] Item 5. Other Information There is no other information to report under this item - No other information to report[350] Item 6. Exhibits This section lists all exhibits filed as part of this Quarterly Report on Form 10-Q, including the Merger Agreement, corporate charter documents, various notes, lock-up agreements, and certifications - The exhibit index includes the Agreement and Plan of Merger, corporate charter documents, various promissory notes, lock-up agreements, conversion price reduction consent, and certifications[352][354] SIGNATURES This section contains the official signatures certifying the accuracy and completeness of the report - The report is signed by Karina M. Fedasz, Interim Chief Executive Officer and Interim Chief Financial Officer, on August 13, 2025[359]