TransCode Therapeutics(RNAZ) - 2021 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited financial statements, management's analysis of financial condition and operations, market risk disclosures, and an assessment of internal controls and procedures Financial Statements The unaudited financial statements for the period ended September 30, 2021, reflect improved financial position post-IPO, with increased cash and equity, despite widened operating losses due to R&D and G&A expenses - The company completed its IPO on July 13, 2021, raising approximately $25.4 million in net proceeds from issuing 7,187,500 common shares[37] - The IPO led to the conversion of all outstanding convertible promissory notes and accrued interest into 1,068,135 common shares, eliminating this debt[37][97] Selected Balance Sheet Data (Unaudited) | Account | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $22,499,856 | $828,016 | | Total assets | $25,359,852 | $1,055,368 | | Total liabilities | $2,204,732 | $4,463,600 | | Total stockholders' equity (deficit) | $23,155,120 | $(3,408,232) | Statements of Operations Highlights (Unaudited) | Metric | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Research and development expense | $1,468,457 | $132,636 | | General and administrative expense | $1,696,444 | $214,967 | | Operating loss | $(3,164,901) | $(347,603) | | Net loss | $(4,044,140) | $(1,542,362) | | Net loss per share | $(0.58) | $(0.33) | Statements of Stockholders' Equity (Deficit) Statements of Cash Flows Notes to Financial Statements (Unaudited) Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's RNA therapeutics strategy, focusing on lead candidate TTX-MC138 and plans for a Phase 0 trial, while noting increased operating expenses and sufficient cash post-IPO to fund operations through December 2022 - The lead therapeutic candidate, TTX-MC138, targets microRNA-10b (miR-10b), a key driver of metastasis in various solid tumors[139] - The company is shifting TTX-MC138's First-in-Human clinical strategy to a microdosing Phase 0 trial, targeting eIND submission in the first half of 2022 for precise drug delivery data[144][145] - As of September 30, 2021, the company held $22.5 million in cash and equivalents, deemed sufficient to fund operations through December 2022[159][198] [Comparison of Operating Expenses (in thousands)] | Expense Category | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | Change | | :--- | :--- | :--- | :--- | | Research and development | $1,468 | $133 | +$1,335 | | General and administrative | $1,696 | $215 | +$1,481 | | Total operating expenses | $3,165 | $348 | +$2,817 | - Increased R&D expenses resulted from material purchases, compensation, license fees, and lab costs, while G&A expenses rose due to D&O insurance, compensation, and public company costs[188][189] Quantitative and Qualitative Disclosures About Market Risk The company's market risk exposure is limited, with minimal interest rate risk due to cash holdings and no debt post-IPO, and immaterial foreign currency risk primarily from Euro-denominated purchases - Primary market risk is interest income sensitivity on cash balances, but a 10% interest rate change would not materially affect results due to short-term instruments[233] - The company is not subject to interest rate risk from debt, as all convertible promissory notes converted to common stock upon IPO[234] - Foreign exchange rate sensitivity exists, primarily with the Euro for certain purchases, but a 5% change would not materially affect results[235] Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of September 30, 2021, due to an unremediated material weakness in internal control over financial reporting, with steps taken to mitigate cybersecurity risks - Disclosure controls and procedures were deemed ineffective as of September 30, 2021, due to an unremediated material weakness in internal control over financial reporting[240] - Following a July 2021 phishing attack, enhanced cybersecurity measures were implemented, including email screening, employee training, two-factor authentication, and revised payment verification[241] PART II. OTHER INFORMATION This section details the company's legal proceedings, comprehensive risk factors, and a list of exhibits filed with the quarterly report Legal Proceedings The company is not currently involved in any legal proceedings deemed to have a material adverse effect on its financial condition or operations - Management believes no pending claims or actions would materially adversely affect the company's results of operations or financial condition[242] Risk Factors The company faces significant risks including a history of losses, substantial funding needs for early-stage programs, high clinical development risks for TTX-MC138, reliance on third parties, intense competition, intellectual property challenges, and operational risks as a new public company with internal control weaknesses - The company has a history of significant losses, expects continued losses, and requires substantial additional funding to advance product candidates[244][250] - Business success is highly dependent on the early-stage lead candidate, TTX-MC138, which faces significant preclinical and clinical development risks and potential failure[270] - Reliance on third parties for manufacturing, preclinical studies, and clinical trials poses risks, as their failure to perform could significantly delay or prevent product development and commercialization[370][378] - Identified material weaknesses in internal control over financial reporting could hinder accurate or timely financial condition and results reporting[457] - Executive officers, directors, and principal stockholders hold significant influence, beneficially owning approximately 32.6% of outstanding common stock as of November 12, 2021, potentially limiting other shareholders' influence[446] Exhibits This section lists exhibits filed with the Quarterly Report on Form 10-Q, including corporate governance documents, officer certifications, and XBRL-formatted financial statements - The report includes key corporate governance documents and officer certifications required under the Securities Exchange Act of 1934[514]