TransCode Therapeutics(RNAZ) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements Unaudited Q1 2023 financial statements detail a $4.8 million net loss, $1.6 million cash, a $0.2 million stockholders' deficit, and going concern uncertainty Balance Sheets The balance sheet as of March 31, 2023, shows reduced cash and assets, increased liabilities, and a $236,792 stockholders' deficit, down from $3.2 million equity Balance Sheet Summary (Unaudited) | Account | March 31, 2023 (USD) | December 31, 2022 (USD) | | :--- | :--- | :--- | | Assets | | | | Cash | $1,622,657 | $4,968,418 | | Total Current Assets | $4,346,623 | $7,379,405 | | Total Assets | $5,590,510 | $7,587,986 | | Liabilities & Equity | | | | Total Current Liabilities | $5,449,489 | $4,347,290 | | Total Liabilities | $5,827,302 | $4,347,290 | | Total Stockholders' Equity (Deficit) | ($236,792) | $3,240,696 | Statements of Operations Q1 2023 net loss increased to $4.8 million ($0.33/share) from $3.5 million ($0.27/share) in Q1 2022, driven by higher R&D and G&A expenses Statements of Operations Summary (Unaudited) | Account | Three Months Ended March 31, 2023 (USD) | Three Months Ended March 31, 2022 (USD) | | :--- | :--- | :--- | | Research and development | $2,591,350 | $1,881,576 | | General and administrative | $2,309,763 | $1,595,926 | | Operating loss | ($4,901,113) | ($3,477,502) | | Net loss | ($4,816,934) | ($3,470,070) | | Net loss per share | ($0.33) | ($0.27) | Statements of Stockholders' Equity (Deficit) Stockholders' equity shifted from $3.2 million at year-end 2022 to a $0.2 million deficit by March 31, 2023, due to a $4.8 million net loss, partially offset by $1.2 million from stock issuance - Stockholders' equity decreased from $3,240,696 at the end of 2022 to a deficit of ($236,792) at March 31, 2023[24] - This was mainly due to the net loss of $4,816,934, which was partially offset by $1,180,686 from the net issuance of common stock and $158,760 in share-based compensation[24] Statements of Cash Flows Q1 2023 saw $4.5 million net cash used in operations, a $3.3 million decrease in cash to $1.6 million, partially offset by $1.2 million from financing activities Cash Flow Summary (Unaudited) | Cash Flow Activity | Three Months Ended March 31, 2023 (USD) | Three Months Ended March 31, 2022 (USD) | | :--- | :--- | :--- | | Net cash used in operating activities | ($4,513,551) | ($3,948,566) | | Net cash used in investing activities | ($12,896) | ($30,657) | | Net cash provided by financing activities | $1,180,686 | $5,989 | | Net change in cash | ($3,345,761) | ($3,973,234) | | Cash, end of period | $1,622,657 | $16,852,626 | Notes to Financial Statements (Unaudited) Notes detail substantial doubt about going concern due to recurring losses and insufficient cash, alongside accounting policies, collaboration commitments, stock-based compensation, and recent equity financing - The company has concluded there is substantial doubt about its ability to continue as a going concern[34] - Current cash is sufficient to fund operations into the second quarter of 2023, but not for a full 12 months from the financial statement issuance date[34][38] - In February 2023, the company completed a registered direct offering (RDO) of 2,846,300 shares of common stock at $0.527 per share, generating net proceeds of approximately $1.2 million[104] - The company has a five-year strategic collaboration agreement with The University of Texas M. D. Anderson Cancer Center, with a commitment to fund up to $10 million over the term[95] - Subsequent to the quarter end, in April 2023, the company entered into a Common Stock Purchase Agreement with White Lion Capital to sell up to $1,081,307 in common stock[130] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the TTX oncology platform and TTX-MC138's FDA Phase 0 authorization, highlighting increased operating expenses and critical liquidity, with $1.6 million cash only sufficient into Q2 2023, raising going concern doubt - The company's lead therapeutic candidate, TTX-MC138, received authorization from the FDA in December 2022 to conduct a Phase 0 clinical trial[133] - The company received IRB approval in April 2023 to commence the trial[133] - Management states that cash of approximately $1.6 million at March 31, 2023, plus subsequent receipts, will be sufficient to fund operations into but not through the second quarter of 2023, raising substantial doubt about the company's ability to continue as a going concern[164][191] Comparison of Operating Expenses (Q1 2023 vs Q1 2022) | Expense Category | Q1 2023 (in thousands USD) | Q1 2022 (in thousands USD) | Change (in thousands USD) | | :--- | :--- | :--- | :--- | | Research and development | $2,591 | $1,882 | $709 | | General and administrative | $2,310 | $1,596 | $714 | | Total operating expenses | $4,901 | $3,478 | $1,423 | - The increase in R&D expenses was primarily due to increased consulting, purchased services, and personnel costs[184] - The increase in G&A expenses was mainly from higher personnel costs, legal and accounting services, and other public company costs[185] Quantitative and Qualitative Disclosures About Market Risk Primary market risks are interest rate sensitivity on cash and Euro-denominated foreign currency exchange, neither of which is expected to materially affect financial results due to current scale - The company's primary market risk exposures are interest rate sensitivity on cash holdings and foreign currency exchange risk, mainly from the Euro[223][225] - Management states that an immediate 10% change in interest rates or a 5% change in the Euro exchange rate would not materially affect the company's financial results[223][225] Controls and Procedures Disclosure controls and procedures were ineffective as of March 31, 2023, due to material weaknesses, with ongoing remediation efforts including hiring finance personnel and engaging consultants - Management concluded that the company's disclosure controls and procedures were not effective as of March 31, 2023, due to an existing material weakness[229] - Ongoing remediation efforts include hiring more finance and accounting personnel, documenting policies and procedures, and assessing significant accounting transactions with the help of an independent consulting firm engaged in September 2022[230][231][233] PART II. OTHER INFORMATION Legal Proceedings The company is not currently a party to any material legal proceedings, nor is it aware of any pending or threatened litigation with a material adverse effect - As of the reporting date, the company is not a party to any material legal proceedings[235] Risk Factors As a smaller reporting company, TransCode is not required to update its risk factors in this quarterly report on Form 10-Q - The company is not required to disclose information under this item as it qualifies as a smaller reporting company[236] Unregistered Sales of Equity Securities and Use of Proceeds In Q1 2023, the company issued unregistered warrants to a consultant for up to 250,000 common shares at $0.50 per share, exempt under Section 4(a)(2) - In Q1 2023, the company issued warrants to a consultant to purchase up to 250,000 shares of common stock at $0.50 per share[237] - The issuance was exempt from registration requirements[237] Defaults Upon Senior Securities No defaults upon senior securities were reported during the period - None[240] Mine Safety Disclosures This item is not applicable to the company's business - Not applicable[241] Other Information No other information required to be disclosed under this item was reported - None[242] Exhibits This section lists exhibits filed with Form 10-Q, including various agreements like the Placement Agent Warrant, Securities Purchase Agreement, Common Stock Purchase Agreement, and officer certifications - Exhibits filed with the report include the Form of Placement Agent Warrant, a Securities Purchase Agreement, the Common Stock Purchase Agreement with White Lion Capital LLC, and officer certifications[243][244]