# Genprex, Inc.: Form 10-Q for the period ended Sep 30, 2024 - Company: [Genprex, Inc.](/companies/gnpx.md) (CIK 1595248) - Form: 10-Q - Filed: 2024-11-13 - Accepted by EDGAR: Nov 13, 2024, 09:16 ET - Period: 2024-09-30 - Accession: 0001437749-24-034697 - Inline XBRL: yes - Main document: https://www.sec.gov/Archives/edgar/data/1595248/000143774924034697/gnpx20240930_10q.htm - All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1595248/000143774924034697/ ## Figures reported in this filing Standardized XBRL line items for the period ended 2024-09-30. | Line item | Period | Value | XBRL concept | | --- | --- | ---: | --- | | Research and development | 3 months, 2024-07-01 to 2024-09-30 | $2.8m | us-gaap:ResearchAndDevelopmentExpense | | Research and development | 9 months, 2024-01-01 to 2024-09-30 | $7.7m | us-gaap:ResearchAndDevelopmentExpense | | Operating income | 3 months, 2024-07-01 to 2024-09-30 | −$4.3m | us-gaap:OperatingIncomeLoss | | Operating income | 9 months, 2024-01-01 to 2024-09-30 | −$16.8m | us-gaap:OperatingIncomeLoss | | Net income | 3 months, 2024-07-01 to 2024-09-30 | −$4.3m | us-gaap:NetIncomeLoss | | Net income | 9 months, 2024-01-01 to 2024-09-30 | −$16.8m | us-gaap:NetIncomeLoss | | Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | −$1.23 | us-gaap:EarningsPerShareBasic | | Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | −$6.90 | us-gaap:EarningsPerShareBasic | | Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | −$13.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities | | Cash and equivalents | at 2024-09-30 | $1.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue | | Current assets | at 2024-09-30 | $1.9m | us-gaap:AssetsCurrent | | Total assets | at 2024-09-30 | $3.9m | us-gaap:Assets | | Current liabilities | at 2024-09-30 | $2.2m | us-gaap:LiabilitiesCurrent | | Shareholders' equity | at 2024-09-30 | $1.7m | us-gaap:StockholdersEquity | ## Management's discussion and analysis As filed, 46,389 characters. *You should read the following Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) together with our interim condensed financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, in this filing, and in our other SEC filings, as may be amended, supplemented or superseded from time to time by other reports we file with the SEC. All amounts in this report are in United States (“U.S.”) dollars, unless otherwise noted.* ### CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This Quarterly Report contains forward-looking statements that involve substantial risks and uncertainties. Unless the context requires otherwise, references to “Genprex,” the “Company,” “we,” “us” or “our” in this Quarterly Report refer to Genprex, Inc. Any statements in this Quarterly Report about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and are forward-looking statements. These statements are often, but not always, made through the use of words or phrases such as “believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan” and “would.” For example, statements concerning financial condition, possible or assumed future results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common stock and future management and organizational structure and statements about our current or future product candidates and their development, our beliefs regarding their preclinical or clinical profile or efficacy, and the regulatory approval process and pathway and the timing thereof, are all forward-looking statements. Forward-looking statements are not guarantees of performance. They involve known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statement. Any forward-looking statements are qualified in their entirety by reference to the risk factors discussed throughout this Quarterly Report. Some of the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include but are not limited to: - Market conditions; - ● ● ● Our capital position; Our ability to raise additional future financing and possible lack of financial and other resources, and our ability to continue to support and fund our pre-clinical and clinical development programs and growth of our business; Our ability to continue as a going concern; Our ability to maintain compliance with the continued listing requirements of The Nasdaq Capital Market and maintain the listing of our common stock; - Our ability to compete effectively and with larger and/or better-financed biotechnology and pharmaceutical companies; - Our uncertainty of developing marketable products; - Our ability to develop and commercialize our products; - Our ability to obtain regulatory approvals; - Our ability and third-parties’ ability to maintain and protect intellectual property rights; - The effects and ultimate impact of public health crises such as the coronavirus pandemic, or any other health epidemic, on our business, our clinical trials, our research programs, healthcare systems or the global economy as a whole; - The success of our clinical trials through all phases of clinical development, including the ability of our third-party suppliers or manufacturers to supply or manufacture our products on a timely, consistent basis in a manner sufficient and appropriate as is commensurate to meet our clinical trial timing, courses of treatment, and other requisite fulfillment considerations necessary to adequately advance our development programs; - Our ability to conduct and complete our clinical trials in accordance with projected timelines; - ● Any delays in regulatory review and approval of our current and future product candidates; The effects of any strategic research and development prioritization initiatives, and any other strategic alternatives or other efforts that we take or may take in the future that are aimed at optimizing and re-focusing our diabetes, oncology and/or other clinical development programs including prioritization of resources, and the extent to which we are able to implement such efforts and initiatives successfully to achieve the desired and intended results thereof; - Our dependence on third-party suppliers or manufacturers to supply or manufacture our key ingredients and/or raw materials, products and/or product components and successfully carry out a sustainable, reproducible and scalable manufacturing process in accordance with specifications or applicable regulations; - Our ability to control product development costs; - Our ability to attract and retain key employees; - Our ability to enter into new strategic collaborations, licensing or other arrangements; - Changes in government regulation affecting product candidates that could increase our development costs; - Our involvement in patent, trademark and other intellectual property litigation that could be expensive and divert management’s attention; - The possibility that there may be no market acceptance for our products; and - Changes in third-party reimbursement policies which could adversely affect potential future sales of any of our products that are approved for marketing. The foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forward-looking statements, which speak only as of the date of this Quarterly Report or the date of the document incorporated by reference into this Quarterly Report. Except as required by law, we assume no obligation and expressly disclaim any duty to update any forward-looking statement to reflect events or circumstances after the date of this Quarterly Report or to reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements contained in this Quarterly Report. All forward-looking statements are expressly qualified in their entirety by the cautionary statements contained in this section. ### Overview We are a clinical stage gene therapy company pioneering the development of gene-based therapies for large patient populations with unmet medical needs. Our oncology platform utilizes our systemic, non-viral Oncoprex® Delivery System which uses lipid-based nanoparticles in a lipoplex form to deliver tumor suppressor gene-expressing plasmids to cancer cells. The product is administered intravenously, where it is taken up by tumor cells that then express tumor suppressor proteins that were deficient in the tumor. Our diabetes technology is designed to work in Type 1 diabetes by transforming alpha cells in the pancreas into functional beta-like cells, which can produce insulin but may be distinct enough from beta cells to evade the body’s immune system. In Type 2 diabetes, our technology is believed to work by replenishing and rejuvenating exhausted beta cells that make insulin. #### Oncology Platform Our lead oncology drug candidate, Reqorsa® (*quaratusugene ozeplasmid*), previously referred to as GPX-001, is a gene therapy initially being developed in combination with prominent, approved cancer drugs to treat Non-Small Cell Lung Cancer (“NSCLC”) and Small Cell Lung Cancer (“SCLC”). REQORSA has multimodal effects on cancer cells. It harms the metabolism of cancer cells, which leads to reduced cancer cell growth. It also interrupts cell signaling pathways that cause replication and proliferation of cancer cells, re-establishes pathways for apoptosis, or programmed cell death, in cancer cells, and increases the immune response against cancer cells. In preclinical studies, REQORSA has been shown to be complementary with targeted drugs and immunotherapies. Our strategy is to develop REQORSA in combination with current approved therapies and we believe REQORSA’s unique attributes position it to provide treatments that improve on these current therapies for patients with NSCLC, SCLC, and possibly other cancers. The TUSC2 gene, which is the key component of REQORSA and plays a vital role in cancer suppression and normal cell metabolism, is one of a series of genes on the short arm of Chromosome 3 whose therapeutic use is covered by our exclusive worldwide licenses from The University of Texas MD Anderson Cancer Center (“MD Anderson”). We believe that our ONCOPREX Delivery System allows for the delivery of a number of cancer-fighting tumor suppressor genes, alone or in combination with other cancer therapies, to combat multiple types of cancer and we are in early stages of discovery programs to identify other cancer candidates. In August 2022, we entered into a three-year sponsored research agreement with MD Anderson to support further preclinical studies of TUSC2 and other tumor suppressor genes. Additionally, we are collaborating with MD Anderson to discover, develop and utilize biomarkers to select the patient population most likely to respond to REQORSA and enable decisions on progression of our drug candidates to the next phase of development. MD Anderson is currently analyzing biomarkers that would indicate lack of response in lung cancer that could enrich our population of responders in our clinical trials and enhance patient screening and enrollment in order to increase the likelihood of potential success of the Acclaim studies for the Company. *Acclaim-3*: We are currently enrolling and treating patients in the Phase 1 dose escalation portion of our Phase 1/2 Acclaim-3 clinical trial. The Acclaim-3 clinical trial uses a combination of REQORSA and Genentech, Inc.’s Tecentriq® (*atezolizumab*) as maintenance therapy in patients with extensive stage small cell lung cancer (“ES-SCLC”) who did not develop tumor progression after receiving Tecentriq and chemotherapy as initial standard treatment. Patients are treated with REQORSA and Tecentriq until disease progression or unacceptable toxicity is experienced. In January 2024, we opened the Phase 1 portion of the Acclaim-3 study for enrollment and enrolled and dosed the first patient in May 2024. In October 2024, the Company announced the completion of the 0.09 mg/kg dose group of the Phase 1 portion and that there were no dose limiting toxicities in this dose group. The Acclaim-3 Safety Review Committee therefore approved escalation to the highest dose group of 0.12 mg/kg, which will now be enrolled. We continue to anticipate completion of enrollment in the Phase 1 dose escalation portion of the study and to start the Phase 2 expansion portion of the study in the second half of 2024, dependent on the number of patients needed to be enrolled in the 0.12 mg/kg dose group. The first patient treated in the Phase 1 dose escalation portion of the Acclaim-3 trial experienced an initial positive response after enrollment and dosing commenced in May. The patient had a partial remission (“PR”), which is defined as at least a thirty percent (30%) decrease in tumor size, from the time the patient had a baseline CT scan after induction therapy and prior to the start of maintenance therapy to the time of the CT scan performed after two cycles of maintenance therapy. As the maintenance therapy consists of REQORSA and Tecentriq, and the patient had already received four cycles of Tecentriq during induction therapy and thus responses to Tecentriq would likely have occurred earlier, we believe this suggests that REQORSA may be providing clinical benefit. A follow-up CT scan, performed after four cycles of maintenance therapy (three months), confirmed that the patient still had a 30% decrease in tumor size in measurable lesions; however, one lesion not previously measurable had grown in size, thus leading to a conclusion of disease progression at three months. In June 2023, the United States Food and Drug Administration (“FDA”) granted Fast Track Designation for the Acclaim-3 treatment combination of REQORSA and Tecentriq as maintenance therapy in patients with ES-SCLC who did not develop tumor progression after receiving Tecentriq and chemotherapy as initial standard treatment. In August 2023, the FDA granted Orphan Drug Designation to REQORSA for the treatment of SCLC. *Acclaim-2*: The Acclaim-2 trial involved a combination of REQORSA and Merck & Co.’s Keytruda® (*pembrolizumab*) in patients with late-stage NSCLC whose disease has progressed after treatment with Keytruda. As previously announced in August 2024, based on a number of factors, including enrollment challenges and delays due to competition for investigators and eligible patients with numerous other trials involving the same patient population, we decided to cease enrollment of new patients in the Acclaim-2 trial to prioritize our resources and focus on the other two Acclaim trials in SCLC and NSCLC, respectively. The one patient continuing to receive REQORSA treatment in the Phase 1 dose escalation portion of the study will continue to be treated until disease progression. *Acclaim-1:* We are currently enrolling and treating patients in the Phase 2a expansion portion of our Phase 1/2 Acclaim-1 clinical trial. The Acclaim-1 trial uses a combination of REQORSA and AstraZeneca’s Tagrisso® (*osimertinib*) in patients with late-stage NSCLC that has activating epidermal growth factor receptor (“EGFR”) mutations and progression after treatment with Tagrisso. Following the May 2023 completion of the Phase 1 dose escalation portion of the study, the Acclaim-1 Safety Review Committee (“Acclaim-1 SRC”) approved advancement from the Phase 1 dose escalation portion to the Phase 2a expansion portion of the study. Based on a review of safety data which showed no dose limiting toxicities, the Acclaim-1 SRC determined the recommended Phase 2 dose of REQORSA to be 0.12 mg/kg. This was the highest dose level delivered in the Phase 1 portion of the study and is twice the highest dose level delivered in our prior clinical trial combining REQORSA with Tarceva® (*erlotinib*) for the treatment of late-stage lung cancer. There are still two patients originally enrolled in the Phase 1 dose escalation portion of the study who have had prolonged progression-free survival and continue to receive treatment with REQORSA and Tagrisso, one who attained a PR after the second course of REQORSA and Tagrisso and has maintained this response through 41 courses of treatment (approximately 30 months), and one with stable disease without disease progression through 26 courses of treatment (approximately 19 months) who is also continuing to receive REQORSA and Tagrisso treatment. We opened the Phase 2a expansion portion of the study and enrolled and dosed the first patient in January 2024. The initial trial design of the Phase 2a expansion portion of the study included two cohorts with half being patients who received only prior Tagrisso treatment and the other half being patients who received prior Tagrisso treatment and chemotherapy. However, as previously announced in August 2024, based on resource prioritization and to focus on the patients for whom REQORSA is most likely to show a benefit, we decided to limit our enrollment efforts moving forward to patients who received only prior Tagrisso treatment and cease enrollment of the second cohort (patients who received prior Tagrisso treatment and chemotherapy). The Phase 2a expansion portion of the trial with one cohort is now expected to enroll approximately 33 patients. The Phase 2b randomized portion of the study, in which patients progressing on prior Tagrisso treatment will be randomized 1:1 to either REQORSA and Tagrisso combination therapy or to platinum-based chemotherapy, will remain unchanged. There will be an interim analysis following the treatment of 19 patients in the Phase 2a portion of the Acclaim-1 study. We expect to complete the enrollment of the first 19 patients in the Phase 2a expansion portion of the study and conduct an interim analysis in the first half of 2025. The FDA has granted Fast Track Designation for the Acclaim-1 treatment combination of REQORSA and Tagrisso in NSCLC patients who have progressed after Tagrisso treatment. #### Diabetes Gene Therapy In diabetes, we have exclusively licensed from the University of Pittsburgh of the Commonwealth System of Higher Education (“University of Pittsburgh”) multiple technologies relating to the development of a gene therapy product for each of Type 1 and Type 2 diabetes. The same general novel approach is used in each of Type 1 and Type 2 diabetes whereby an adeno-associated virus (“AAV”) vector containing the Pdx1 and MafA genes is administered directly into the pancreatic duct. In humans, this can be done with a routine endoscopy procedure. Our diabetes product candidates are currently being evaluated and optimized in preclinical studies at the University of Pittsburgh. GPX-002 is being developed using the same construct for the treatment of both Type 1 diabetes and Type 2 diabetes. GPX-002 for Type 1 diabetes is designed to work by transforming alpha cells in the pancreas into functional beta-like cells, which can produce insulin but may be distinct enough from beta cells to evade the body’s immune system. In a similar approach, GPX-002 for Type 2 diabetes (formerly known as GPX-003), where autoimmunity is not at play, is believed to work by replenishing and rejuvenating exhausted beta cells that make insulin. We finalized the components of the diabetes construct to take forward for nonclinical studies and in December 2023, we submitted a request to meet with the FDA to obtain their guidance on the nonclinical studies needed to file an Investigational New Drug (“IND”) application and initiate first-in-human studies. As a result of the FDA’s response, we will continue with our planned additional nonclinical studies before requesting regulatory guidance for the IND-enabling studies. We are currently working with the University of Pittsburgh on species analyses for the animal models as well as on other regulatory and clinical strategic planning and anticipate requesting further regulatory guidance from the FDA in the first half of 2025. In October 2023, we entered into a one-year extension to our August 2022 sponsored research agreement with the University of Pittsburgh for the use of GPX-002 in a non-human primate (“NHP”) model in Type 2 diabetes. The extension includes a revised research plan to encompass our most recent technologies to which we acquired exclusive rights from the University of Pittsburgh in July 2023. These include using a MafB promoter to drive expression of the Pdx1 and MafA transcription factors that can potentially be used for both Type 1 and Type 2 diabetes. Additionally, in September 2024, we announced that we are considering various strategic alternatives and opportunities to enhance stockholder value, including evaluating ways to optimize our clinical and research programs and operational strategies, such as our intention to potentially transfer our diabetes clinical development program and our diabetes gene therapy assets into a new, initially wholly-owned subsidiary (“NewCo”). NewCo would focus on developing and commercializing GPX-002. The spin-out, if completed as presently contemplated, would result in NewCo focusing on developing GPX-002, while Genprex would retain its oncology clinical development programs and other oncology pipeline assets. The potential formation and transfer of the clinical development program into the wholly-owned subsidiary is currently anticipated to occur by the end of 2024, subject to adequate financing, the satisfaction of customary conditions and final approval from the Genprex management and board of directors. ### Recently Issued Accounting Pronouncements A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed below and in Note 2 to our unaudited condensed financial statements appearing in this Quarterly Report on Form 10-Q. As of September 30, 2024, recently issued accounting pronouncements are not expected to have a significant effect on the Company’s financial condition, results of operations, or cash flows. In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The purpose of the amendment is to enable investors to better understand an entity’s overall performance and assess potential future cash flows. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the effect the amendments in ASU 2023-07 will have on its segment disclosures. In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which modifies the rules on income tax disclosures to require disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. The guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the effect the amendments in ASU 2023-09 will have on its tax disclosures. ### Critical Accounting Estimates Our unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles in the U.S. (“US GAAP”). The preparation of these unaudited condensed financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements, and the reported amounts of expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that the following accounting policies and estimates are the most critical to aid in fully understanding and evaluating our reported financial results, and they require our most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain. ### Research and Development Costs We record accrued expenses for costs invoiced from research and development activities conducted on our behalf by third-party service providers, which include the conduct of preclinical studies and clinical trials and contract research, manufacturing, and testing activities. We record the costs of research and development activities based upon the amount of services provided, and we include these costs in accrued liabilities in the unaudited condensed balance sheets and within research and development expense in the unaudited condensed statements of operations. These costs are a significant component of our research and development expenses. Purchased materials to be used in future research are valued at cost and capitalized and included in research and development supplies. We estimate the amount of work completed through discussions with internal personnel and external service providers as to the progress or stage of completion of the services and the agreed-upon fee to be paid for such services. We make significant judgments and estimates in determining the accrued balance in each reporting period. As actual costs become known, we adjust our accrued estimates. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed, the number of patients enrolled and the rate of patient enrollment in any of our clinical trials may vary from our estimates and could result in our reporting amounts that are too high or too low in any particular period. Our accrued expenses are dependent, in part, upon the receipt of timely and accurate reporting from contract research organizations (“CROs”) and other third-party service providers. ### Impairment of Long-Lived Assets Management evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be realizable or at a minimum annually during the fourth quarter of the year. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset are compared to the asset’s carrying value to determine if an impairment of such asset is necessary. The effect of any impairment would be to expense the difference between the fair value of such asset and its carrying value based upon discounted cash flows. ### Components of our Results of Operations and Financial Condition ### Operating expenses We classify our operating expenses into three categories: research and development, general and administrative, and depreciation. ***Research and development***. Research and development expenses consist primarily of: - costs incurred to conduct research, such as the discovery and development of our current and potential product candidates; - costs related to the production and storage of supplies for engineering purposes and storage and usage of clinical supplies, including waste created in the process of producing clinical materials, spoilage, and testing of clinical materials; - costs related to the use of contract manufacturers, manufacturing consultants, testing organizations, cold-storage facilities, and logistics service providers; - fees paid to clinical consultants, clinical trial sites and vendors, including CROs in conjunction with implementing and monitoring our clinical trials and acquiring and evaluating clinical trial data, including all related fees, such as patient screening fees, laboratory work, and statistical compilation and analysis; - costs related to compliance with drug development regulatory requirements; and - costs related to staffing and personnel associated with research and development activities, including wages, taxes, benefits, leases, overheads, supplies, and share-based compensation. We recognize all research and development costs as they are incurred. Clinical trial costs, contract manufacturing and other development costs incurred by third-parties are expensed as the contracted work is performed. We expect our research and development expenses to increase in the future as we (i) advance our current and future product candidates into and through clinical trials, (ii) transition some of our manufacturing activities to new vendors for a variety of reasons, such as to incorporate more advanced processes and scale production, including any additional work that has been or may be required to successfully adapt our process to these new processes, (iii) pursue regulatory approval of our current and potential product candidates in the U.S. and Europe, and (iv) expand our research programs to include new therapies and new therapy combinations. The process of conducting the necessary pre-clinical and clinical research to obtain regulatory approval is costly and time-consuming. The actual probability of success for our current and potential product candidates may be affected by a variety of factors including the quality of our current and potential product candidates, early clinical data, investment in our clinical program, competition, manufacturing capability and commercial viability, and limited contracted partners. We may never succeed in achieving regulatory approval for any of our current or future product candidates. As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of our product candidates, if at all. However, we continue to evaluate ways to optimize our clinical and research programs and operational strategies, as part of our ongoing prioritization initiative. Additionally, we are considering various strategic alternatives and opportunities to enhance stockholder value. ***General and administrative.*** General and administrative expense consists of personnel related costs, which include administrative and executive salaries, as well as the costs of professional services, such as accounting and legal, travel, facilities, information technology and other administrative expenses. We expect our general and administrative expense to increase in future periods due to the anticipated growth of our business and related infrastructure as well as accounting, insurance, investor relations, and other costs associated with being a public company. ***Depreciation.*** Depreciation expense consists of depreciation from our fixed assets consisting of our property, equipment, and furniture. We depreciate our assets over their estimated useful life. We estimate furniture and computer and office equipment to have a five-year life. ### Results of Operations ### Comparison of the Three and Nine Months Ended September 30, 2024, and 2023 The following summarizes our results of operations for the three and nine months ended September 30, 2024 and 2023. ### Research and Development Expense Research and Development (“R&D”) expense for the three months ended September 30, 2024 was $2,756,081, compared to $4,616,546 for the three months ended September 30, 2023, a decrease of $1,860,465, or 40%. This decrease was primarily due to (i) changes in CDMOs that significantly reduced manufacturing and R&D materials expense, and (ii) implementation of expense reduction strategies by leadership in the three months ended September 30, 2024, which reduced travel expenses and reduced headcount and associated overhead of R&D staff from 18 employees at September 30, 2023 to 13 employees at September 30, 2024. Research and Development (“R&D”) expense for the nine months ended September 30, 2024 was $7,696,982, compared to $13,903,611 for the nine months ended September 30, 2023, a decrease of $6,206,629, or 45%. This decrease was primarily due to (i) changes in CDMOs that significantly reduced manufacturing expense, (ii) a significant reduction in share-based compensation for R&D personnel due to the timing of equity awards, and (iii) implementation of expense reduction strategies by leadership in the nine months ended September 30, 2024, which reduced travel expenses and reduced headcount and associated overhead of R&D staff from 18 employees at September 30, 2023 to 13 employees at September 30, 2024. Additionally, the Company had a higher than normal manufacturing expense in the nine months ended September 30, 2023 due to the Company switching CDMOs that required both comparability and scaling of programs accordingly compared to the nine months ended September 30, 2024. ### General and Administrative Expense General and administrative (“G&A”) expense for the three months ended September 30, 2024 was $1,566,085, compared to $3,166,057 for the three months ended September 30, 2023, a decrease of $1,599,972, or 51%. This decrease was primarily due to the implementation of expense reduction strategies by leadership in the nine months ended September 30, 2024, which significantly reduced travel expenses, the number of professional service providers and associated expenses, and reduced headcount and associated overhead of G&A staff from 13 employees at September 30, 2023 to 7 employees at September 30, 2024. General and administrative (“G&A”) expense for the nine months ended September 30, 2024 was $9,135,225, compared to $11,173,643 for the nine months ended September 30, 2023, a decrease of $2,038,418, or 18%. Despite one-time charges associated with the separation with a former Company executive and changes in accounting policies that resulted in a non-cash expense of approximately $800,000 due to reclassifying capitalized intellectual property, this slight decrease was primarily due to the implementation of expense reduction strategies by leadership in the nine months ended September 30, 2024, which significantly reduced travel expenses, the number of professional service providers and associated expenses, and reduced headcount and associated overhead of G&A staff from 13 employees at September 30, 2023 to 7 employees at September 30, 2024. **Interest Income.** Interest income was $8,080 and $51,391 for the three months ended September 30, 2024, and 2023, respectively, representing a decrease of $43,311. The decrease was primarily due to lower cash balances held in interest bearing accounts for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. Interest income was $58,851 and $175,413 for the nine months ended September 30, 2024, and 2023, respectively, representing a decrease of $116,562. The decrease was primarily due to lower cash balances held in interest bearing accounts for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. **Depreciation Expense.** Depreciation expense was $1,272 and $3,724 for the three months ended September 30, 2024, and 2023, respectively, representing a decrease of $2,452, or 66%. The change in depreciation expense for the three months ended September 30, 2024 was primarily due to the timing of purchases of computer equipment for new employees and changes to accounting policies related to depreciation. Depreciation expense was $6,230 and $11,578 for the nine months ended September 30, 2024, and 2023, respectively, representing a decrease of $5,348, or 46%. The change in depreciation expense for the nine months ended September 30, 2024 was primarily due to the timing of purchases of computer equipment for new employees and changes to accounting policies related to depreciation. **Net Loss.** We had a net loss of $4,315,987 and $7,748,243 for the three months ended September 30, 2024 and 2023, respectively, representing a decrease of $3,432,256, or 44%. The decrease in net loss between these periods was primarily due to the implementation of expense reduction strategies by leadership in the three months ended September 30, 2024, which reduced travel expenses, the number of professional service providers and associated expenses, and reduced headcount and associated overhead of overall Company staff from 31 employees at September 30, 2023 to 19 employees at September 30, 2024. We had a net loss of $16,780,701 and $24,931,209 for the nine months ended September 30, 2024, and 2023, respectively, representing a decrease of $8,150,508, or 33%. The decrease in net loss between these periods was primarily due to the implementation of expense reduction strategies by leadership in the nine months ended September 30, 2024, which reduced travel expenses, the number of professional service providers and associated expenses, and reduced headcount and associated overhead of overall Company staff from 31 employees at September 30, 2023 to 19 employees at September 30, 2024. ### Liquidity and Capital Resources From inception through September 30, 2024, we have never generated revenue from product sales and have incurred net losses in each year. As of September 30, 2024, we had an accumulated deficit of $150,468,981. We have funded our operations primarily through the sale and issuance of capital stock. For the year ended December 31, 2023, we (i) sold an aggregate of 1,342 shares of common stock for total net proceeds of $78,355 pursuant to our 2022 ATM Facility (defined below) as governed by the Equity Distribution Agreement (as further described below), (ii) issued 500 shares of common stock upon the exercise of options for gross proceeds of $5,960, and (iii) completed a registered direct offerings where we sold 280,883 shares of our common stock for net proceeds of approximately $10.5 million. During the nine months ended September 30, 2024, we (i) sold 2,318,450 shares of common stock for aggregate net proceeds of $2,117,752 pursuant to our 2023 ATM Facility (defined below), and (ii) completed a registered direct offering in which we sold (x) 165,000 shares of our common stock, (y) pre-funded warrants exercisable for up to an aggregate of 1,377,112 shares of our common stock (“March 2024 Pre-Funded Warrants”), and (z) warrants exercisable for up to an aggregate of 1,542,112 shares of our common stock (“March 2024 Common Warrants”), for net proceeds of approximately $5.8 million. In connection with the March 2024 registered direct offering, we amended certain existing warrants to reduce the exercise price and extend the term thereof. See also “Note 4 - Equity - Registered Direct Offerings” to our unaudited condensed financial statements included in this Quarterly Report on Form 10-Q. As of September 30, 2024, all of the 1,377,112 March 2024 Pre-Funded Warrants had been exercised for shares of common stock. On November 18, 2022, we entered into an Equity Distribution Agreement with JMP Securities, with respect to an at-the-market offering program (our “2022 ATM Facility”) under which we could offer and sell, from time to time at our sole discretion, shares of our common stock, having an aggregate offering price of up to $50.0 million. We agreed to pay JMP Securities a commission equal to three percent (3%) of the gross sales proceeds of any shares sold under the Equity Distribution Agreement, and also provided JMP Securities with customary indemnification and contribution rights. For the year ended December 31, 2023, we sold 1,342 shares of our common stock for net proceeds to us totaling $78,355. On December 12, 2023, we provided notice to JMP Securities of our termination of the 2022 ATM Facility. The termination of the Equity Distribution Agreement with JMP Securities was effective as of December 13, 2023. On December 13, 2023, we entered into an At The Market (“ATM”) Offering Agreement (the “Agreement”) with H.C. Wainwright & Co., LLC, serving as agent (the “Agent”) with respect to an at-the-market offering program (our “2023 ATM Facility”) under which we may offer and sell through the Agent, from time to time at our sole discretion, up to such number or dollar amount of shares of our common stock (the “Shares”) as registered on the prospectus supplement covering the 2023 ATM Facility offering, as may be amended or supplemented from time to time. We have agreed to pay the Agent a commission equal to three percent (3%) of the gross sales proceeds of any Shares sold through the Agent under the Agreement, and also have provided the Agent with customary indemnification and contribution rights. See also “Note 4 - Equity - At-The-Market Offering” to our unaudited condensed financial statements included in this Quarterly Report on Form 10-Q. As of September 30, 2024, we had $1,488,281 in cash and cash equivalents. We do not expect to generate revenue from product sales unless and until we successfully complete development of, obtain regulatory approval for and begin to commercialize one or more of our current or potential product candidates, which we expect will take a number of years and which is subject to significant uncertainty. Accordingly, we anticipate that we will need to raise additional capital to fund our future operations, which include conducting our Acclaim-1 and Acclaim-3 clinical trials (of which both are currently enrolling) and completing preclinical work for potential other oncology candidates and completing preclinical work and conducting clinical trials for our diabetes program. We expect to complete the enrollment of the first 19 patients in the Phase 2a expansion portion of the Acclaim-1 trial in the first half of 2025. We continue to anticipate completion of enrollment in the Phase 1 dose escalation portion of the Acclaim-3 clinical trial and to start the Phase 2 expansion portion of the trial in the second half of 2024, dependent on the number of patients needed to be enrolled in the 0.12 mg/kg dose group. Until such time as we can generate substantial revenue from product sales, if ever, we expect to finance our operating activities through a combination of equity offerings, drawdowns on our ATM pursuant to our Agreement with the Agent, and debt financings and we may seek to raise additional capital through strategic collaborations or transactions. However, we may be unable to raise additional funds or enter into such arrangements when needed on favorable terms, or at all, which would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our research and development programs or commercialization efforts or grant rights to others to develop or market product candidates that we would otherwise prefer to develop and market ourselves. Failure to receive additional funding could cause us to curtail or cease our operations. Furthermore, even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital due to favorable market conditions or strategic considerations. As a result of the Company's recurring losses from operations and the need for additional financing to fund its operating and capital requirements, there is uncertainty regarding the Company’s ability to maintain liquidity sufficient to operate its business effectively over the next 12 months, which raises substantial doubt as to the Company’s ability to continue as a going concern. Based on our current cash, we estimate that we will be able to fund our expenditure requirements for our current operations and planned clinical trial activities into December 2024. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently plan due to incorrect assumptions or due to a decision to expand our activities beyond those currently planned. We previously have experienced delays in engaging clinical sites as a result of disruptions at these clinical sites caused by the COVID-19 pandemic. We also have experienced delays in clinical trial enrollment as a result of competition for patients and additional time required in connection with transitions to new third party CDMOs and the manufacture of final drug product. Delays in the conduct of our trials could result in utilizing our capital resources sooner without advancing our clinical trials as anticipated. The following table sets forth the primary sources and uses of cash during the nine months ended September 30, 2024, and 2023: | | Nine Months Ended September 30, 2024 | 2023 | | --- | ---: | ---: | | Net cash used in operating activities | $(13,279,658) | $(19,774,740) | | Net cash provided by (used in) investing activities | 1,167 | (61,383) | | Net cash provided by financing activities | 8,029,143 | 10,593,373 | | Net decrease in cash and cash equivalents | $(5,249,348) | $(9,242,750) | #### Cash used in operating activities Net cash used in operating activities was $13,279,658 and $19,774,740 for the nine months ended September 30, 2024, and 2023, respectively, a decrease of $6,495,082, or 33%. This decrease was primarily due to the implementation of expense reduction strategies by Company leadership in the nine months ended September 30, 2024, which reduced travel expenses, the number of professional service providers and associated expenses, and reduced headcount and associated overheads of overall Company staff from 30 employees at September 30, 2023 to 19 employees at September 30, 2024. #### Cash provided by (used in) investing activities Net cash provided by investing activities was $1,167 for the nine months ended September 30, 2024, compared to net cash used in investing activities of $61,383 for the nine months ended September 30, 2023, or a net change of $62,550. This difference in period-over-period net cash provided by (used in) investing activities was primarily due to timing associated with filing and patent prosecution costs of our intellectual property. #### Cash provided by financing activities Net cash provided by financing activities was $8,029,143 and $10,593,373 during the nine months ended September 30, 2024, and 2023, respectively. This decrease of $2,564,230 was primarily due to differences in amounts raised by sales of our securities in capital raising activities conducted during the nine months ended September 30, 2024, and 2023, respectively. ## Market risk As filed, 164 characters. The Company is not required to provide the information called for by this Item as it is a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act. ## Controls and procedures As filed, 6,750 characters. ### Evaluation of Disclosure Controls and Procedures As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2024. The term “disclosure controls and procedures” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officer (currently the same person following the passing of Mr. Varner, the Company’s former President, Chief Executive Officer and Chairman of the Board, on May 7, 2024), as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, because of certain material weaknesses in our internal controls over financial reporting, our disclosure controls and procedures were not effective as of September 30, 2024. The material weaknesses relate to a lack of segregation of duties between accounting and other functions and the absence of sufficient depth of in-house accounting personnel with the ability to properly account for complex transactions. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions are performed by separate individuals. Our size and nature also do not allow for our accounting staff to have depth of expertise in all areas that might be desirable, such as expertise in accounting for a variety of complex transactions. Management evaluated the impact of our failure to maintain effective segregation of duties and sufficient depth of personnel on our assessment of our internal control over financial reporting and has concluded that these control deficiencies represent material weaknesses. In response to the material weaknesses described above, during the quarter ended September 30, 2024, we performed additional analysis and other post-closing procedures to ensure our financial statements were prepared in accordance with US GAAP. Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented. ### Remediation Plans Management is actively engaged in remediation efforts to address the material weaknesses identified in the management’s evaluation of internal controls and procedures. The remediation efforts, which have been or are in the process of being implemented, are intended to address the identified material weaknesses, and include: - new accounting software, processes, and workflows to further segregate duties among limited accounting staff; - specific review procedures, including the added involvement of our legal department to review certain accounting transactions following a given period in an effort to enhance accuracy of reporting; - specific review procedures, including the added involvement of our manufacturing staff to enhance controls associated with the tracking and reporting of inventory values in our supply chain; - a formal Disclosure Committee that has oversight responsibility for the accuracy and timeliness of disclosures made by us through controls and procedures and the monitoring of their integrity and effectiveness; - additional hiring of staff and development of accounting processes and policies to further segregate accounting responsibilities and increase the depth of our expertise in accounting for a variety of complex transactions; and - additional training, testing, and certification of key accounting, finance, IT, and legal team members. During the quarter ended September 30, 2024, we took actions to remediate the material weaknesses relating to our internal controls over financial reporting including: (i) continued evaluation and documentation of policies, processes, and controls, both manual and automated; (ii) evaluation and updates to software workflows to further segregate duties, enhance accuracy of vendor billing, and ensure transparency and oversight from vendor or project managers, department leaders, legal team members, and finance team members; and (iii) training related to general controls for information technology and security for key staff. As management continues to evaluate and work to improve its internal control over financial reporting, we may take additional measures to address control deficiencies, or we may modify certain of the remediation measures described above. While remediation efforts are active, management requires additional time to demonstrate the operating effectiveness of our remediation efforts. The material weaknesses cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. ### Changes in Internal Control over Financial Reporting Except as described above, there were no changes in our internal control over financial reporting during the quarter ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ### Inherent Limitations of Disclosure Controls and Internal Control over Financial Reporting Because of their inherent limitations, our disclosure controls and procedures and our internal control over financial reporting may not prevent material errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The effectiveness of our disclosure controls and procedures and our internal control over financial reporting is subject to risks, including that the controls may become inadequate because of changes in conditions or that the degree of compliance with our policies or procedures may deteriorate. ## Risk factors As filed, 164 characters. The Company is not required to provide the information called for by this Item as it is a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act. Filed Nov 13, 2024. Source: SEC EDGAR, the filing index for accession 0001437749-24-034697. Last ingested by Listed: Oct 28, 2026, 07:02 ET. No prices; not investment advice.