TransCode Therapeutics(RNAZ) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS This section presents the unaudited financial statements for TransCode Therapeutics, Inc. for the periods ended June 30, 2025, and December 31, 2024, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes explaining the company's accounting policies, financial instruments, and significant events BALANCE SHEETS The balance sheets show a significant increase in total assets and a shift from a stockholders' deficit to positive equity, primarily driven by new equity issuances and the exercise of Series D warrants, while total liabilities decreased substantially due to the exercise of Series D warrant liabilities Balance Sheet Summary | Metric | June 30, 2025 (Unaudited) | December 31, 2024 | | :-------------------------------- | :-------------------------- | :------------------ | | Assets | | | | Cash | $7,374,815 | $5,811,064 | | Total current assets | $8,241,721 | $7,093,338 | | Total assets | $8,266,410 | $7,294,499 | | Liabilities and Stockholders' Equity (Deficit) | | | | Total current liabilities | $1,564,990 | $2,771,836 | | Warrant Liability - Series C | $553,714 | $517,871 | | Warrant Liability - Series D | $0 | $6,023,526 | | Total liabilities | $2,118,704 | $9,313,233 | | Total stockholders' equity (deficit) | $6,147,706 | $(2,018,734) | | Accumulated deficit | $(79,563,831) | $(63,201,916) | - On May 15, 2025, the Company effected a reverse stock split at a ratio of one share for every 28 shares previously held, retroactively adjusting all common stock share and per share data[17][20] STATEMENTS OF OPERATIONS The company reported increased net losses for the six months ended June 30, 2025, primarily due to a significant non-cash change in the fair value of warrant liabilities, despite reductions in operating expenses and an increase in grant income Statements of Operations Summary | 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 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $2,565,982 | $3,081,577 | $4,785,509 | $4,840,597 | | General and administrative | $1,655,152 | $2,032,339 | $2,606,804 | $3,562,301 | | Total operating expenses | $4,221,134 | $5,113,916 | $7,392,313 | $8,402,898 | | Operating loss | $(4,221,134) | $(5,113,916) | $(7,392,313) | $(8,402,898) | | Change in fair value of warrant liabilities | $(161,714) | $0 | $(9,396,636) | $0 | | Grant income | $153,685 | $0 | $501,529 | $27,057 | | Net loss attributable to common stockholders | $(4,276,502) | $(5,190,814) | $(16,361,915) | $(8,517,626) | | Net loss per share (basic and diluted) | $(5.13) | $(680.23) | $(32.45) | $(1,290.94) | - The significant increase in net loss for the six months ended June 30, 2025, was primarily driven by a $9.4 million non-cash change in the fair value of warrant liabilities[19] - Operating expenses decreased for both the three and six months ended June 30, 2025, compared to 2024, reflecting cost management efforts[19] STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) The company transitioned from a stockholders' deficit to positive equity by June 30, 2025, largely due to significant issuances of common stock and the exercise of Series D warrants, which substantially increased additional paid-in capital Stockholders' Equity (Deficit) Summary | Metric | December 31, 2024 | June 30, 2025 | | :-------------------------------- | :------------------ | :-------------------------- | | Common Stock (shares) | 36,753 | 833,683 | | Common Stock (amount) | $4 | $84 | | Additional Paid-In Capital | $61,183,178 | $85,711,453 | | Accumulated Deficit | $(63,201,916) | $(79,563,831) | | Total Stockholders' Equity (Deficit) | $(2,018,734) | $6,147,706 | - Issuances of common stock and exercise of Series D warrants contributed $8,854,797 and $15,384,319, respectively, to additional paid-in capital during the six months ended June 30, 2025[22] - The company's accumulated deficit increased to $79.6 million by June 30, 2025, reflecting ongoing net losses[22] STATEMENTS OF CASH FLOWS Cash used in operating activities increased for the six months ended June 30, 2025, compared to the prior year, but was offset by significant cash provided by financing activities, leading to a net increase in cash Cash Flow Summary | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(7,291,046) | $(6,276,995) | | Net cash used in investing activities | $0 | $(8,391) | | Net cash provided by financing activities | $8,854,797 | $6,872,339 | | Net change in cash | $1,563,751 | $586,953 | | Cash, end of period | $7,374,815 | $3,354,551 | - Net cash used in operating activities increased by approximately $1 million year-over-year, primarily due to the higher net loss, partially offset by non-cash adjustments like the change in fair value of warrant liabilities[25][213] - Financing activities provided $8.85 million in cash in 2025, up from $6.87 million in 2024, mainly from equity security sales[25][216] NOTES TO FINANCIAL STATEMENTS The notes provide detailed explanations of the company's financial position, operations, and cash flows, including its nature of business, significant accounting policies, fair value measurements, and commitments, highlighting its status as a clinical-stage biopharmaceutical company with ongoing losses and a need for additional capital (1) Nature of Business and Liquidity TransCode Therapeutics is a clinical-stage biopharmaceutical company focused on developing cancer drugs, primarily TTX-MC138. The company has not generated revenue, incurred substantial losses, and expects to require additional capital to fund operations beyond Q4 2025, raising substantial doubt about its ability to continue as a going concern - TransCode Therapeutics is a clinical-stage biopharmaceutical company developing innovative drugs for treating cancer, with TTX-MC138 as its lead therapeutic candidate[28] - The company has not generated revenues, achieved profitable operations, or positive cash flows from operations since inception[29] - Management believes existing cash of $7.4 million at June 30, 2025, is sufficient to fund operations into Q4 2025 but not for a full 12 months, indicating a need for additional capital and raising substantial doubt about its ability to continue as a going concern[30][33][36] (2) Summary of Significant Accounting Policies This section outlines the company's key accounting policies, including basis of presentation, use of estimates, loss per share calculation, cash management, fair value measurements, expensing of R&D costs, grant income recognition, share-based compensation, property and equipment depreciation, income taxes, emerging growth company status, reverse stock splits, collaboration agreements, leases, and warrant accounting, along with recent accounting pronouncements - R&D costs are expensed as incurred, including personnel, share-based compensation, materials, and third-party vendor costs[44] - Grant income is recognized as earned for specific R&D projects, with payments received in excess of earned income recorded as deferred grant income[48] - Warrants are classified as equity or liability based on specific terms and accounting guidance, with changes in fair value for liability-classified warrants recognized in the statements of operations[68][69] - The company is an 'emerging growth company' and has elected the extended transition period for complying with new or revised accounting standards[57] (3) Fair Value Measurements The company classifies fair value measurements into Level 1, 2, or 3, with warrant liabilities (Series C and D) being Level 3 due to significant unobservable inputs. The fair value of Series D warrants decreased to zero by June 30, 2025, due to exercise, while Series C warrants increased slightly - Warrant liabilities for the December 2, 2024 PIPE transaction are classified as Level 3 fair value measurements, using a Monte Carlo simulation model for valuation at December 31, 2024, and a Black-Scholes model at June 30, 2025[79][80] Warrant Liability Fair Value | Metric | December 31, 2024 | June 30, 2025 | | :-------------------------- | :------------------ | :-------------------------- | | Warrant Liability - Series C | $517,871 | $553,714 | | Warrant Liability - Series D | $6,023,526 | $0 | | Total Warrant Liability | $6,541,397 | $553,714 | - The fair value of Series D warrants decreased to zero by June 30, 2025, due to their exercise, while Series C warrants increased by $35,843[82] (4) Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets significantly decreased from December 31, 2024, to June 30, 2025, primarily due to reductions in amounts prepaid to contract manufacturers and research organizations, as well as insurance premiums and prepaid FICA Prepaid Expenses and Other Current Assets | Category | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :-------------- | :------------------ | | Prepaid operating expenses | $34,368 | $31,563 | | Contract manufacturers and research organizations | $241,513 | $517,484 | | Insurance premiums | $56,404 | $310,735 | | Prepaid FICA | $358,499 | $422,492 | | Total | $690,784 | $1,282,274 | (5) Property and Equipment Net property and equipment decreased by approximately 52% from December 31, 2024, to June 30, 2025, due to ongoing depreciation, with no new equipment purchases in the first half of 2025 Property and Equipment, Net | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :-------------- | :------------------ | | Laboratory and computer equipment | $362,387 | $362,387 | | Less accumulated depreciation | $(337,698) | $(310,813) | | Total property and equipment, net | $24,689 | $51,574 | - Depreciation expense for the six months ended June 30, 2025, was $26,885, a decrease from $64,517 in the same period of 2024[84] (6) Accounts Payable and Accrued Expenses Accounts payable and accrued expenses decreased significantly by approximately 42% from December 31, 2024, to June 30, 2025, primarily driven by reductions in professional and general consulting fees and R&D-related payables Accounts Payable and Accrued Expenses | Category | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :-------------- | :------------------ | | Professional and general consulting fees | $211,689 | $1,282,428 | | R&D-related – CMOs, CROs, supplies, equipment and consulting | $1,107,158 | $1,148,917 | | Payroll and benefits | $187,322 | $131,342 | | Total | $1,564,990 | $2,708,137 | - Outstanding payables to CROs or CMOs decreased from $997,074 at December 31, 2024, to $542,695 at June 30, 2025[86] (7) Grant Income Grant income increased substantially in the first half of 2025 due to a new $2 million Direct to Phase II SBIR Award received in September 2024 from the National Cancer Institute, supporting IND-enabling and clinical trial activities for TTX-MC138 - The company received a $1,999,972 Direct to Phase II SBIR Award in September 2024 to support IND-enabling and clinical trial activities for TTX-MC138 over two years[88] Grant Income | Period | Grant Income | | :----------------------------- | :------------- | | Three months ended June 30, 2025 | $153,685 | | Three months ended June 30, 2024 | $0 | | Six months ended June 30, 2025 | $501,529 | | Six months ended June 30, 2024 | $27,057 | (8) Commitments and Contingencies The company's commitments include an operating lease for office space, license agreements for intellectual property with Massachusetts General Hospital, and a collaboration agreement with MD Anderson Cancer Center, which was amended to focus solely on clinical trial participation, relieving the company of a $10 million funding obligation (a) Operating Lease The company terminated its sublease for laboratory and office space in Newton, Massachusetts, on January 31, 2025, and relocated to a short-term office rental space in Woburn, Massachusetts, resulting in significantly reduced rent expense - The company's sublease for 4,837 sq ft of lab and office space in Newton, MA, terminated on January 31, 2025[90] - Rent expense decreased from $38,480 for Q2 2024 to $11,715 for Q2 2025, and from $147,964 for H1 2024 to $57,278 for H1 2025[91] (b) License Agreements The company holds exclusive licenses for intellectual property from Massachusetts General Hospital, involving annual fees, milestone payments up to $1.55 million, and royalties on net sales. No milestone events had been achieved as of June 30, 2025 - The company licensed exclusive rights to intellectual property from Massachusetts General Hospital in November 2018, amended in November 2020 to include Patent Family 1 (nanoparticle technology) and Patent Family 2 (PD-L1 targeting)[93][98] - Milestone payments under the license agreement could total up to $1,550,000 upon achievement of specific clinical and regulatory events, with royalties of 3.0% for therapeutic products and 6.0% for diagnostic products[94][95][96] - As of June 30, 2025, no milestone events had been achieved, and accrued license payments were $14,868[95][102] (c) Collaboration Agreement The strategic collaboration agreement with MD Anderson Cancer Center was amended in late 2024, relieving the company of a $10 million funding obligation and focusing MD Anderson's role solely on participation in the company's Phase I/II clinical trial. Initial clinical trial expenses are being charged against a $250,000 prepaid amount - The collaboration agreement with MD Anderson Cancer Center was amended to focus solely on MD Anderson's participation in the company's Phase I/II clinical trial, removing the obligation to fund up to $10 million[103] - Initial clinical trial expenses of $138,439 for the six months ended June 30, 2025, were charged against a $250,000 initial payment made to MD Anderson[103] (d) Employment Agreements Executive officers have employment agreements providing severance payments upon certain terminations, with maximum aggregate severance payments of approximately $1,296,000 in the event of a Change of Control - Executive employment agreements include severance payments, with a maximum aggregate of approximately $1,296,000 in the event of a Change of Control[104] (e) Litigation The company is not currently a party to any legal proceedings that would have a material adverse effect on its business, except for disputed claims by an investment bank regarding fees - The company is not aware of any material legal claims or actions pending or threatened, except for disputed claims by an investment bank for fees[105] (f) Indemnification Agreements The company provides indemnification to vendors, business partners, and its directors and executive officers, with maximum potential payments often unlimited. No costs have been incurred to date, and no liabilities accrued as of June 30, 2025 - The company provides indemnification to various parties, including directors and officers, with potentially unlimited future payments, but has not incurred any costs or accrued liabilities related to these obligations[107] (g) Risks and Uncertainties Geopolitical events (e.g., wars in Ukraine and the Middle East) and major health issues (e.g., SARS-CoV-2) introduce significant uncertainties that could delay plans, increase operating expenses, and materially adversely affect the company's financial position, results of operations, or cash flows - Geopolitical events and health issues create high uncertainty, potentially delaying company plans, increasing operating expenses, and materially adversely affecting financial performance[108] (9) Stockholders' Equity (Deficit) The company's authorized common stock is 290,000,000 shares, with 833,683 shares outstanding at June 30, 2025. Recent equity financings in January, July, and December 2024, and March 2025, involved the issuance of common stock, pre-funded warrants, and various Series C and D warrants, significantly increasing outstanding shares and capital (a) Overview The company's authorized common stock is 290,000,000 shares, with 833,683 shares outstanding at June 30, 2025. Recent equity financings in January, July, and December 2024, and March 2025, involved the issuance of common stock, pre-funded warrants, and various Series C and D warrants, significantly increasing outstanding shares and capital - As of June 30, 2025, the company had 833,683 shares of common stock outstanding, compared to 36,753 shares at December 31, 2024, following multiple reverse stock splits[109] - The January 2024 Registered Direct Offering (RDO) raised approximately $6.1 million net proceeds, involving common stock, PFWs, and warrants[110] - The March 2025 Offering raised approximately $8.9 million net proceeds from the sale of 366,072 shares of common stock and accompanying warrants[114] (b) Common Stock Holders of common stock are entitled to one vote per share and receive dividends as declared by the Board, though no cash dividends have been paid. Upon liquidation, remaining assets are distributed to common stockholders, subject to preferred stock rights - No cash dividends were declared or paid on common stock during the six months ended June 30, 2025, or at any other time[115] - Common stockholders are entitled to one vote per share and receive remaining assets upon liquidation, subject to preferred stock rights[116][118] (10) Warrants The company has various outstanding warrants, including IPO Underwriter Warrants, Placement Agent Warrants from multiple offerings, Consultant Warrants, and Series A-1/A-2 Warrants. The Series C and D Warrants from the December 2024 PIPE transaction were initially classified as liabilities, but all Series D warrants were exercised in the first half of 2025 - The company has numerous outstanding warrants from various offerings and agreements, including IPO Underwriter Warrants, Placement Agent Warrants, and Series A-1/A-2 Warrants[119][120][121][122][123][124][125][126][128][130] - The Series C and Series D Warrants from the December 2024 PIPE transaction became exercisable on February 25, 2025, with Series D warrants including a cashless exchange provision[113][129] - All Series D warrants were exercised during the six months ended June 30, 2025, representing 425,895 shares after reset adjustments[132] Outstanding Warrants | Description | Number of Shares | Exercise Price Per Share | | :-------------------------------- | :--------------- | :----------------------- | | IPO Underwriter Warrants | 1 | $3,696,000 | | February 2023 Placement Agent Warrants | 1 | $486,948 | | February 2023 Consultant Warrants | 1 | $369,600 | | June 2023 Series A-1 warrants | 55 | $348.35 | | June 2023 Series A-2 warrants | 55 | $348.35 | | June 2023 Placement Agent Warrants | 4 | $161,700.00 | | September 2023 Underwriter Warrants | 23 | $23,562.00 | | October 2023 Underwriter Overallotment Warrants | 1 | $23,562.00 | | December 2023 Placement Agent Warrants | 9 | $11,180.40 | | January 2024 Warrants | 6,745 | $1,127.28 | | January 2024 Warrants | 5,422 | $438.90 | | January 2024 Placement Agent Warrants | 386 | $1,409.10 | | July 2024 Placement Agent Warrants | 542 | $346.50 | | December 2024 Series C Warrants | 144,678 | $69.67 | | March 2025 Offering Warrants | 366,072 | $24.08 | | March 2025 Placement Agent Warrants | 18,304 | $29.96 | (11) Share-Based Compensation The company has two stock option and incentive plans (2020 and 2021 Plans) for granting equity awards. Share-based compensation expense decreased significantly in the first half of 2025 compared to 2024, with no options granted in the current period - The 2021 Plan allows for grants of equity awards to employees, directors, officers, and consultants, with 2,029 options outstanding at June 30, 2025[134][135][137] Share-Based Compensation Expense | Period | Share-Based Compensation Expense | | :----------------------------- | :------------------------------- | | Three months ended June 30, 2025 | $131,510 | | Three months ended June 30, 2024 | $1,143,595 | | Six months ended June 30, 2025 | $289,239 | | Six months ended June 30, 2024 | $1,326,747 | - No options were granted in the six months ended June 30, 2025[139] (12) Employee Stock Purchase Plan The company adopted an Employee Stock Purchase Plan (ESPP) in 2021, which allows eligible employees to purchase common stock, with the number of available shares increasing annually - The ESPP, adopted in 2021, allows eligible employees to purchase common stock, with the number of available shares increasing by approximately three shares annually[141] (13) Net Loss per Share The company reported net losses for both periods, resulting in basic and diluted net loss per share being the same due to the antidilutive effect of contingent securities. The net loss per share significantly decreased in 2025 compared to 2024, primarily due to a higher weighted-average common shares outstanding Net Loss per Share | 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 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss attributable to common stockholders | $(4,276,502) | $(5,190,814) | $(16,361,915) | $(8,517,626) | | Weighted-average common shares outstanding | 833,654 | 7,631 | 504,252 | 6,598 | | Net loss per share | $(5.13) | $(680.23) | $(32.45) | $(1,290.94) | - Basic and diluted net loss per share are identical because contingent securities were excluded due to their antidilutive effect[142] (14) Income Taxes The company reported no income tax benefit or expense for the six months ended June 30, 2025 and 2024, due to a full valuation allowance against its net deferred tax assets, reflecting historical net operating losses and uncertainty of realization - No income tax benefit or expense was recognized for the six months ended June 30, 2025 and 2024[145] - A full valuation allowance is maintained against net deferred tax assets due to historical net operating losses, indicating that realization of these assets is not more likely than not[145] (15) Segment Reporting The company operates as a single reportable business unit segment, RNA drug development, and one reportable country segment, the United States of America, as determined by its chief operating decision maker - The company operates in a single reportable segment: RNA drug development, with all long-lived assets located in the United States[147][148][149] (16) Subsequent Events The company evaluated subsequent events through August 14, 2025, and determined that no events warranted recognition or disclosure in the financial statements - No subsequent events requiring recognition or disclosure were identified through August 14, 2025[151] 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 operational results, detailing its business overview, therapeutic development, recent developments including clinical trials and financing, and a comprehensive analysis of operating expenses, other income/expense, cash flows, and liquidity, emphasizing the need for additional capital and ongoing cost management Company Overview TransCode Therapeutics is a biopharmaceutical company focused on oncology, developing RNA therapeutics using its proprietary TTX delivery mechanism. Its lead candidate, TTX-MC138, targets microRNA-10b for metastatic cancers, and the company commenced a Phase I/II clinical trial in Q3 2024 - TransCode is an oncology-focused biopharmaceutical company developing RNA therapeutics using its proprietary TTX delivery mechanism[153][155] - The lead therapeutic candidate, TTX-MC138, targets microRNA-10b, a regulator of metastatic cell viability in various cancers[153] - A Phase I/II clinical trial for TTX-MC138 commenced in Q3 2024, following an IND Study May Proceed notification from the FDA[153] Targeted Therapeutic Delivery Background The company's TTX platform is designed to overcome delivery challenges of RNA therapeutics by using a modular design with iron oxide nanoparticles, optimizing targeting and accumulation in tumors while minimizing issues faced by existing lipid-based platforms - RNA-based therapeutics offer high selectivity and applicability to undruggable targets, but delivery into cells has been a major challenge[156] - The TTX platform uses a modular design with tunable iron oxide nanoparticles to deliver therapeutic oligonucleotides, overcoming stability, efficiency, and immunogenicity issues of other platforms[157][158] TTX Delivery System The TTX nanocarrier, developed over 20 years, is designed to safely and effectively deliver therapeutic oligonucleotides to tumors and metastases. Its properties, including small hydrodynamic size, charge, and magnetic iron core, enable efficient accumulation, distribution, and uptake by cancer cells, differentiating it from liver-targeting competitive approaches - The TTX nanocarrier is designed to deliver therapeutic oligonucleotides to tumors and metastases without compromising integrity, a result of approximately 20 years of R&D[161][162] - TTX nanocarriers minimize early kidney and liver clearance, leading to a long circulation half-life and efficient accumulation in tumors, unlike lipid-based approaches that target the liver[162][163] - The magnetic iron core allows for MRI visibility and quantification of delivery, and its physicochemical properties facilitate rapid tumor uptake by exploiting cancer cells' high metabolic activity[164][165] Advancing new RNA therapies through a modular approach Research published in Cancer Nanotechnology demonstrated that radiolabeled TTX-MC138 accumulates in metastatic lesions, supporting its clinical evaluation. This microdosing PET-MRI approach offers advantages in early drug development by precisely quantifying drug delivery, assessing pharmacokinetics, and informing clinical trial designs - Research published in Cancer Nanotechnology in September 2021 showed that radiolabeled TTX-MC138 accumulates in metastatic lesions, supporting its clinical evaluation[166] - The microdosing PET-MRI approach allows for precise quantification of TTX-MC138 delivery, measurement of pharmacokinetics and biodistribution, and informs dosing and patient inclusion criteria for clinical trials[166][168][171] SBIR Awards The company received a Fast-Track SBIR Award in April 2021, which concluded in March 2024, successfully achieving aims related to miR-10b expression measurement, IND filing for TTX-MC138, and imaging uptake in breast cancer patients. A second Direct to Phase II SBIR Award of nearly $2 million was received in September 2024 to support ongoing clinical trial activities - A Fast-Track SBIR Award from the National Cancer Institute, totaling approximately $2.4 million, funded a research partnership with Massachusetts General Hospital from April 2021 to March 2024[169] - The company achieved all three aims of the 2021 SBIR: optimizing miR-10b measurement, filing an IND for TTX-MC138, and using imaging to determine uptake in metastatic breast cancer patients[170][171] - A second Direct to Phase II SBIR Award of $1,999,972 was received in September 2024 to support IND-enabling and clinical trial activities for TTX-MC138 over two years[171][173] Recent Developments Recent developments include the commencement of a Phase I/II clinical trial for TTX-MC138, a successful March 2025 equity financing raising $8.9 million, regaining compliance with Nasdaq listing rules, and further restructuring efforts to manage costs, including relocating operations and reducing headcount Phase 1 Clinical Trial The FDA approved the company's IND application for a Phase I/II clinical trial of TTX-MC138, which commenced in Q3 2024. Preliminary data from cohorts 1-4 show no significant safety or dose-limiting toxicities, with PK and PD data consistent with preclinical results - The FDA approved the IND application for a Phase I/II clinical trial of TTX-MC138 on April 15, 2024, with the trial commencing in Q3 2024 at MD Anderson and three other sites[174] - Preliminary data from Cohorts 1, 2, 3, and 4 indicate no significant safety or dose-limiting toxicities, and PK/PD data are consistent with preclinical and Phase 0 results[174] March 2025 Equity Financing On March 23, 2025, the company closed a registered direct offering, issuing 366,072 shares of common stock and accompanying warrants, generating approximately $8.9 million in gross proceeds - The March 2025 Offering closed on March 25, 2025, raising approximately $10 million in gross proceeds (approx. $8.9 million net) from the sale of 366,072 shares of common stock and warrants[175] - Common Warrants are exercisable from March 25, 2025, to March 25, 2030, at an exercise price of $24.08 per share[176] Nasdaq Listing As of June 2, 2025, the company was deemed in compliance with Nasdaq Listing Rule 5550(a)(2), which requires a minimum closing bid price of $1.00 per share, ensuring its continued listing on the Nasdaq - On June 2, 2025, the company regained compliance with Nasdaq Listing Rule 5550(a)(2) regarding the minimum $1.00 bid price, ensuring continued listing[177] Further Restructuring In an effort to manage costs, the company terminated its sublease, plans to conduct R&D with Michigan State University, reduced headcount to seven employees, and relocated business activities to short-term office rental space - The company terminated its sublease, plans R&D activities with Michigan State University, reduced headcount to seven employees, and relocated to short-term office space to manage costs[178] Financial Operations Overview Since inception, the company has focused on R&D and capital raising, incurring significant operating losses and generating no product revenue. It expects expenses to increase with clinical trials and product development, necessitating substantial additional funding, which may involve equity/debt sales or strategic partnerships, with a risk of total loss for investors if funding is not secured - The company has incurred significant operating losses since inception, with net losses of approximately $16.4 million and $8.5 million for the six months ended June 30, 2025 and 2024, respectively[180] - As of June 30, 2025, the accumulated deficit was approximately $79.6 million[180] - The company expects expenses and capital requirements to increase substantially with ongoing preclinical studies, clinical trials, and pipeline development, requiring substantial additional funding[180][182] Components of our results of operations This section details the components of the company's financial results, including the absence of product revenue, the nature of operating expenses (R&D and G&A), and other income/expense items like warrant liability changes and grant income. It provides a comparative analysis of these components for the three and six months ended June 30, 2025 and 2024, highlighting key changes and their drivers Revenue The company has not generated any revenue from product sales or other sources to date and does not anticipate doing so in the foreseeable future, with future revenue dependent on successful product development and regulatory approval - The company has not generated any revenue from product sales or other sources since inception and does not expect to in the foreseeable future[179][187] Operating expenses Operating expenses consist of R&D and G&A costs. R&D expenses, expensed as incurred, include preclinical, clinical, manufacturing, and personnel costs, and are expected to increase significantly with advanced clinical development. G&A expenses, including staffing, insurance, and professional fees, are also anticipated to rise to support R&D and public company operations - R&D expenses are expensed as incurred and include costs for preclinical and clinical development, manufacturing, CROs/CMOs, materials, licensing fees, and personnel[188][190] - R&D expenses are expected to increase substantially in the coming years due to additional manufacturing, clinical trials for TTX-MC138, and other development activities[191] - G&A expenses primarily cover staffing, insurance, professional fees (legal, patent, accounting), and corporate overhead, and are expected to increase to support R&D and public company operations[196][197] Other income (expense) Other income (expense) includes changes in the fair value of warrant liabilities, grant income, currency exchange gains/losses, and interest income/expense. Interest expense has decreased significantly since convertible promissory notes converted to common stock, while grant income has become a more notable component - Interest expense has significantly decreased as convertible promissory notes converted to common stock[200] - Grant income is recognized as earned from government and other grants, with no assurance of future awards or full funding[202] Results of operations (Comparison) For the six months ended June 30, 2025, the company experienced a larger net loss primarily due to a significant non-cash change in warrant liability fair value, despite reductions in R&D and G&A expenses and an increase in grant income Results of Operations (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (in thousands) | | :----------------------------------- | :------------------------------- | :------------------------------- | :-------------------- | :----------------------------- | :----------------------------- | :-------------------- | | Research and development | $2,566 | $3,081 | $(515) | $4,786 | $4,841 | $(55) | | General and administrative | $1,655 | $2,032 | $(377) | $2,607 | $3,562 | $(955) | | Total operating expenses | $4,221 | $5,113 | $(892) | $7,393 | $8,403 | $(1,010) | | Operating loss | $(4,221) | $(5,113) | $892 | $(7,393) | $(8,403) | $1,010 | | Change in fair value of warrant liability | $(162) | $0 | $(162) | $(9,397) | $0 | $(9,397) | | Grant income | $154 | $0 | $154 | $502 | $27 | $475 | | Net loss | $(4,276) | $(5,190) | $914 | $(16,362) | $(8,518) | $(7,844) | - R&D expenses decreased by $55 thousand for the six months ended June 30, 2025, primarily due to reduced compensation and material costs, partially offset by increased clinical trial spending[205] - G&A expenses decreased by $955 thousand for the six months ended June 30, 2025, mainly due to reductions in insurance, legal fees, and corporate taxes[206] - A $9.4 million expense from the change in fair value of warrant liability was recorded for the six months ended June 30, 2025, primarily due to the exercise of Series D warrants[207] - Grant income increased by $475 thousand for the six months ended June 30, 2025, driven by the new NIH grant awarded in September 2024[208] Cash flows (Comparison) Net cash used in operating activities increased to $7.3 million for the six months ended June 30, 2025, primarily due to a higher net loss, while net cash provided by financing activities increased to $8.9 million from equity sales Cash Flow Summary (in thousands) | Cash Flow Activity | Six months ended June 30, 2025 (in thousands) | Six months ended June 30, 2024 (in thousands) | | :-------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net cash used in operating activities | $(7,291) | $(6,277) | | Net cash used in investing activities | $0 | $(8) | | Net cash provided by financing activities | $8,855 | $6,872 | | Net change in cash | $1,564 | $587 | - Net cash used in operating activities increased by $1 million, reflecting a higher net loss partially offset by non-cash adjustments[213] - Net cash provided by financing activities increased by $2 million, primarily from the sale of equity securities[216] Liquidity and capital resources The company has funded operations through equity sales and grants, with $7.4 million cash at June 30, 2025, sufficient only into Q4 2025. Substantial additional funding is required for ongoing R&D, clinical trials, and potential commercialization, raising substantial doubt about its going concern ability. Failure to secure funding may lead to scaling back programs or restructuring, potentially resulting in a total loss for investors - The company has funded operations primarily through convertible promissory notes, IPO proceeds, other equity financings, and SBIR Awards, totaling approximately $71.3 million net cash proceeds through June 30, 2025[217] - Cash balance at June 30, 2025, was approximately $7.4 million, estimated to fund operations only into Q4 2025[218][220] - The company requires substantial additional capital for future R&D, clinical trials, regulatory approvals, and potential commercialization, which raises substantial doubt about its ability to continue as a going concern[220] - Failure to raise additional funds could force the company to delay, scale back, or terminate development programs, or seek restructuring, potentially leading to a total loss for common stockholders[223][226] Contractual obligations and commitments As of June 30, 2025, the company had no future minimum lease payments under non-cancelable operating lease commitments. The collaboration agreement with MD Anderson Cancer Center was amended, relieving the company of a $10 million funding obligation, with initial clinical trial expenses charged against a prepaid amount - As of June 30, 2025, the company had no future minimum lease payments under non-cancelable operating lease commitments[227] - The collaboration agreement with MD Anderson Cancer Center was amended, relieving the company of a $10 million funding obligation, with initial clinical trial expenses of $138,439 for H1 2025 charged against a $250,000 prepaid amount[228] Critical accounting policies and significant judgments and estimates The company's critical accounting policies involve significant estimates and judgments, particularly for accrued R&D expenses, share-based compensation, and warrant accounting. These estimates are based on historical experience and current information, but actual results may vary - Critical accounting policies involve significant estimates and judgments, especially for accrued R&D expenses, share-based compensation, and warrant accounting[229][230] - Estimates for accrued R&D expenses rely on evaluating progress of specific tasks, milestones, and services provided by third-party vendors, with periodic adjustments[232][235] - Share-based compensation expense is measured at grant-date fair value and recognized over the vesting period, while warrant accounting classifies instruments as equity or liability based on specific terms and fair value assessments[236][239] Factors that May Affect Future Results Future results are subject to various risks and uncertainties, as detailed in the company's Annual Report on Form 10-K and other SEC filings, which should be reviewed for a comprehensive understanding of potential adverse effects - Future results are subject to important factors and risks detailed in the company's Annual Report on Form 10-K and other regulatory filings[269][244] Off-balance sheet arrangements The company did not have any off-balance sheet arrangements during the periods presented and does not currently have any - The company did not have any off-balance sheet arrangements during the periods presented and does not currently have any[245] Recently issued accounting pronouncements A description of recently issued accounting pronouncements that may affect the company's financial position and results of operations is disclosed in Note 2 to the financial statements - Details on recently issued accounting pronouncements are provided in Note 2 to the financial statements[246] Internal control over financial reporting The company identified material weaknesses in its internal control over financial reporting prior to its IPO, some of which remain unremediated. Remediation efforts are ongoing, including implementing new policies, hiring personnel, and enhancing software, but there is no assurance these will prevent future issues - Material weaknesses in internal control over financial reporting were identified prior to the IPO, and some remain unremediated[247] - Remediation efforts include implementing robust accounting policies, hiring finance personnel, and deploying new accounting software[261] - There is no assurance that remediation measures will be sufficient or prevent future material weaknesses[264] Emerging Growth Company and Smaller Reporting Company Status The company qualifies as an 'emerging growth company' and 'smaller reporting company,' allowing it to take advantage of certain exemptions from reporting requirements, including an extended transition period for new accounting standards - The company is an 'emerging growth company' (EGC) and 'smaller reporting company,' benefiting from exemptions in reporting requirements[248][252] - The company has elected the extended transition period for complying with new or revised accounting standards, which may affect comparability with other public companies[249][251] Information Technology Risks The company's data and computer systems face increasing threats from cyberattacks, including a phishing attack in July 2021. While mitigation steps are being taken, there is no assurance that these will prevent material adverse consequences - The company's systems are subject to cyber threats, including a phishing attack in July 2021[253] - Steps are being taken to mitigate cyberattack risks, but there is no assurance of effectiveness or prevention of material adverse effects[253] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The company is exposed to market risks primarily related to interest rate fluctuations on its cash balances and foreign currency exchange rate changes, particularly for the Euro. While current impacts are not material, future operations could be more affected by these fluctuations Interest rate risk The company's primary market risk exposure is interest income sensitivity from cash balances held in U.S. bank accounts. Due to the short-term nature of its holdings and no outstanding debt, a 10% change in interest rates is not expected to materially affect its financial position - Primary market risk is interest income sensitivity from cash balances in U.S. banks[254] - An immediate 10% change in interest rates is not expected to materially affect financial position due to short-term holdings and no outstanding debt[254][255] Foreign currency exchange risk The company is exposed to foreign currency exchange risk, primarily to the Euro, due to certain major purchases. A loss on foreign currency transactions of $74,675 was recognized for the six months ended June 30, 2025. While a 5% change in the Euro exchange rate is not currently deemed material, future operations could be more affected - Primary exposure to market risk is foreign exchange rate sensitivity to the Euro for major purchases[256] Foreign Currency Exchange Gain (Loss) | Period | Foreign Currency Exchange Gain (Loss) | | :----------------------------- | :------------------------------------ | | Three months ended June 30, 2025 | $(47,487) | | Six months ended June 30, 2025 | $(74,675) | - The company has not entered into foreign currency hedging contracts[257] ITEM 4. CONTROLS AND PROCEDURES Management concluded that the company's disclosure controls and procedures were not effective as of June 30, 2025, due to identified material weaknesses in internal control over financial reporting. Remediation efforts are ongoing, including implementing new policies, hiring personnel, and enhancing software, but their effectiveness over time is not assured Disclosure Controls and Procedures As of June 30, 2025, management, including the principal executive and financial officers, concluded that the company's disclosure controls and procedures were deemed not effective due to material weaknesses in internal control over financial reporting[260] Continuing Remediation Efforts The company is continuing remediation efforts to address material weaknesses, including implementing robust accounting policies, hiring additional finance personnel and consultants, and deploying new accounting and operating software. These efforts are ongoing, and their sufficiency to remediate weaknesses or prevent future ones is not guaranteed - Remediation efforts include implementing robust accounting policies, hiring additional finance and accounting personnel, and implementing new accounting and operating software[261] - An independent consulting firm was engaged in September 2022 to assist in improving control systems and procedures[263] - There is no assurance that current or future measures will be sufficient to remediate identified material weaknesses or prevent new ones[264] Changes in Internal Control over Financial Reporting Other than the ongoing remediation measures, there were no material changes in the company's internal control over financial reporting during the six months ended June 30, 2025 - No material changes in internal control over financial reporting occurred during the six months ended June 30, 2025, other than ongoing remediation efforts[265] PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The company is not currently a party to any legal proceedings that would materially adversely affect its business, operating results, or financial condition, except for disputed claims by an investment bank regarding fees - The company is not currently a party to any material legal proceedings, except for disputed claims by an investment bank for fees[268] ITEM 1A. RISK FACTORS This section highlights key risks that could materially affect the company's future results, including the potential for delisting from Nasdaq, substantial doubt about its ability to continue as a going concern without additional funding, adverse global economic conditions, and potential negative impacts from changes in U.S. tax law - The company faces a risk of delisting from the Nasdaq Capital Market, which would reduce liquidity, adversely affect stock value, and make capital raising more difficult[270] - Conditions raise substantial doubt about the company's ability to continue as a going concern, requiring additional funding beyond Q4 2025, with a risk of restructuring and total loss for investors if funds are not secured[272][273][274] - Adverse global conditions, including economic uncertainty and tariffs, may negatively affect financial results[275] - Changes in U.S. tax law, such as the capitalization and amortization of R&D expenses under Section 174 of the IRC, may materially adversely affect the company's business, cash flow, financial condition, or results of operations[276] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS The company reported no unregistered sales of equity securities and stated that the section on use of proceeds from its initial public offering is not applicable - No unregistered sales of equity securities occurred[278] - The section on use of proceeds from the initial public offering is not applicable[279] ITEM 3. DEFAULTS UPON SENIOR SECURITIES The company reported no defaults upon senior securities - No defaults upon senior securities were reported[281] ITEM 4. MINE SAFETY DISCLOSURES The company stated that mine safety disclosures are not applicable - Mine safety disclosures are not applicable to the company[282] ITEM 5. OTHER INFORMATION The company announced its 2025 annual meeting of stockholders for August 29, 2025, with a record date of July 11, 2025. Due to the change in meeting date, specific deadlines for stockholder proposals and director nominations were set for June 23, 2025 - The 2025 Annual Meeting of stockholders is scheduled for August 29, 2025, with a record date of July 11, 2025[283] - Stockholder proposals and director nominations for the 2025 Annual Meeting had a submission deadline of June 23, 2025, due to the change in meeting date[285][286][287] ITEM 6. EXHIBITS This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including various amendments to the Certificate of Incorporation and Bylaws, certifications from executive officers, and Inline XBRL documents - Exhibits include amendments to the Certificate of Incorporation and Bylaws, certifications from the principal executive and financial officers, and Inline XBRL documents[289] SIGNATURE The report was duly signed on August 14, 2025, by Thomas A. Fitzgerald, Interim Chief Executive Officer and Chief Financial Officer, who serves as the Principal Executive Officer and Principal Financial and Accounting Officer - The report was signed on August 14, 2025, by Thomas A. Fitzgerald, Interim Chief Executive Officer and Chief Financial Officer[296]