Genprex(US:GNPX)2023-08-21 16:47PART I FINANCIAL INFORMATION This section covers unaudited financial statements, management's discussion, market risk, and internal controls Financial Statements (unaudited) This section presents the unaudited condensed financial statements, highlighting a decline in assets and increasing net losses, raising going concern doubts Condensed Balance Sheets The balance sheets show a significant decrease in cash and total assets, alongside a sharp decline in stockholders' equity Condensed Balance Sheet Data (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $9,955.7 | $20,954.1 | | Total current assets | $12,366.1 | $21,473.1 | | Total assets | $15,911.1 | $25,085.0 | | Liabilities & Equity | | | | Total current liabilities | $3,860.2 | $2,810.3 | | Total stockholders' equity | $12,050.9 | $22,274.7 | | Total liabilities and stockholders' equity | $15,911.1 | $25,085.0 | Condensed Statements of Operations The statements of operations reveal no revenue and widening net losses, primarily due to increased operating expenses Condensed Statements of Operations (in thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $3,976.9 | $2,926.9 | $9,287.1 | $4,967.2 | | General and administrative | $4,055.0 | $2,836.9 | $8,012.1 | $6,100.7 | | Operating loss | $(8,035.7) | $(5,770.4) | $(17,307.0) | $(11,081.1) | | Net loss | $(7,980.2) | $(5,764.6) | $(17,183.0) | $(11,074.5) | | Net loss per share | $(0.15) | $(0.12) | $(0.34) | $(0.23) | Condensed Statements of Cash Flows Cash flow statements indicate increased cash usage in operations, partially offset by financing activities, leading to a net cash decrease Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(15,039.5) | $(8,552.2) | | Net cash used in investing activities | $(39.6) | $(23.7) | | Net cash provided by financing activities | $4,080.8 | $0.0 | | Net decrease in cash and cash equivalents | $(10,998.4) | $(8,575.9) | | Cash and cash equivalents, end of period | $9,955.7 | $30,053.0 | Notes to Unaudited Condensed Financial Statements These notes provide details on the company's business, significant accounting policies, and the going concern uncertainty due to recurring losses - The company is a clinical-stage gene therapy company focusing on oncology (ONCOPREX® platform) and diabetes treatments23 - There is substantial doubt about the company's ability to continue as a going concern due to recurring losses and the need for additional financing to fund operations36 - Current cash and proceeds from a July 2023 offering are expected to fund operations into the third quarter of 202435 - In March 2023, the company completed a registered direct offering, raising net proceeds of approximately $3.6 million59 - Subsequent to the quarter end, in July 2023, the company completed another registered direct offering, raising net proceeds of approximately $6.7 million99 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's gene therapy programs, clinical trial progress, manufacturing delays, and the precarious liquidity position Overview This overview details the company's clinical-stage gene therapy programs, including ongoing trials and a noted manufacturing delay for REQORSA - The Acclaim-1 trial advanced to the Phase 2 expansion portion in May 2023, with the first patient expected to be dosed in Q4 2023110 - The Acclaim-2 trial is currently enrolling patients in the Phase 1 dose escalation portion, with completion expected in Q2 2024111 - The Acclaim-3 trial for small cell lung cancer (SCLC) is expected to dose its first patient in Q4 2023112 - A delay in the production of a new batch of REQORSA may delay patient treatment in ongoing trials and the start of new trial portions, with a new batch expected in Q4 202329113114 Results of Operations Operating expenses, including R&D and G&A, significantly increased, leading to a wider net loss for the three and six months ended June 30, 2023 Comparison of Operating Expenses (in thousands) | Expense Category | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | R&D Expense | $3,976.9 | $2,926.9 | $9,287.1 | $4,967.2 | | G&A Expense | $4,055.0 | $2,836.9 | $8,012.1 | $6,100.7 | | Net Loss | $(7,980.2) | $(5,764.6) | $(17,183.0) | $(11,074.5) | Liquidity and Capital Resources The company's liquidity is constrained, with current cash expected to fund operations only into Q3 2024, necessitating additional capital and raising going concern doubts - As of June 30, 2023, the company had $9.96 million in cash and cash equivalents148 - In July 2023, a registered direct offering raised approximately $6.7 million in net proceeds148 - Current cash is estimated to fund operations and clinical trials into the third quarter of 2024150 - Net cash used in operating activities increased by 76% to $15.0 million for the six months ended June 30, 2023, compared to the prior year period152 Quantitative and Qualitative Disclosures About Market Risk The company is a "smaller reporting company" as defined by the Exchange Act and is therefore not required to provide information for this item - As a "smaller reporting company," Genprex is exempt from providing quantitative and qualitative disclosures about market risk155 Controls and Procedures Management concluded that disclosure controls and procedures were ineffective due to material weaknesses, with remediation efforts underway - Disclosure controls and procedures were determined to be not effective as of June 30, 2023156 - Material weaknesses identified include a lack of segregation of duties and insufficient depth of in-house accounting personnel for complex transactions156157 - Remediation plans include implementing new accounting software, enhancing review procedures, forming a Disclosure Committee, and hiring additional staff159160 PART II OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, and exhibits Legal Proceedings The company is not currently aware of any legal proceedings or claims that would have a material adverse effect on its business, financial condition, or operating results - The company is not currently involved in any material legal proceedings166 Risk Factors As a "smaller reporting company," Genprex is not required to provide the information for this item - The company is not required to provide risk factor disclosures in this report as it qualifies as a "smaller reporting company"167 [Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECU RITIES%20AND%20USE%20OF%20PROCEEDS) The company issued 5,000 common shares for services rendered, relying on a Securities Act exemption for unregistered sales - On April 1, 2023, 5,000 shares of common stock were issued for services to the Chairman of the Scientific Advisory Board168 - The issuance was exempt from registration under Section 4(a)(2) of the Securities Act169 Defaults Upon Senior Securities There were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities during the reporting period170 Mine Safety Disclosures This item is not applicable to the company - This item is not applicable to the company171 Other Information There is no other information to report for this item - There is no other information to report for this item172 Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO as required by the Sarbanes-Oxley Act of 2002 and Inline XBRL documents