TransCode Therapeutics, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. The interim financial statements are unaudited. TransCode is a preclinical-stage RNA oncology company; it reported no product revenue and had not begun clinical trials.
Financial performance and liquidity
Amounts below are in U.S. dollars. Revenue and profit margins are not meaningful because the company had no product sales and recorded operating losses.
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Research and development expense | $211,752 | $75,000 | $475,511 | $78,700 |
| General and administrative expense | $143,776 | $16,605 | $329,482 | $29,414 |
| Operating loss | $(355,528) | $(91,605) | $(804,993) | $(108,114) |
| Net income (loss) | $2,770,904 | $(127,198) | $(1,714,434) | $(168,458) |
| Basic EPS | $0.60 | $(0.03) | $(0.37) | $(0.04) |
- Q2 reported net income was driven chiefly by a $3.069 million noncash gain from the change in fair value of convertible-note derivative liabilities; operating activities remained loss-making. For the six-month period, the derivative remeasurement was an $867,000 expense.
- Six-month operating cash use was $598,152, compared with $106,644 in 2020. Investing cash use was $97,541, primarily for laboratory equipment; financing cash use was $52,756. Cash declined by $748,449 to $79,567 from $828,016 at December 31, 2020.
- At June 30, total assets were $1.522 million, current assets $540,219, current liabilities $1.533 million, and total liabilities $6.558 million. Stockholders’ deficit was $5.036 million. The filing reports gross convertible-note principal of $2.240 million and accrued interest of $247,285 before the subsequent IPO conversion.
- R&D and G&A rose substantially year over year. Management attributed R&D growth to materials, license and laboratory costs, intellectual-property development, and stock compensation; G&A growth largely reflected IPO-related professional services, investor relations, and stock compensation.
Material developments, outlook and risks
- IPO after quarter-end: On July 13, 2021, the company completed its IPO, selling 7,187,500 shares at $4.00 per share for $28.75 million gross and approximately $25.4 million net proceeds. Convertible notes and accrued interest converted into 1,068,135 common shares; a finder’s warrant exercise issued 12,763 shares. The IPO also included underwriter warrants for up to 312,500 shares at $5.00 per share.
- Funding outlook: Management estimated IPO proceeds, existing cash, and expected SBIR funding would support operations through December 2022; the notes state management believed available resources would fund at least the next 12 months. Both estimates rely on assumptions, and additional capital will be needed for development and commercialization. Future financing may dilute shareholders or impose restrictive terms.
- Development plans: The lead candidate, TTX-MC138, was in preclinical development. The company planned to submit an IND for a Phase 0 study in Q1 2022, intended to assess tumor delivery and target engagement, and expected to file a separate IND for a Phase I trial in the second half of 2022. These are forward-looking plans, not completed milestones. TTX-siPDL1 and TTX-siLIN28b were also described as pipeline candidates.
- Grant: A National Cancer Institute Fast-Track SBIR award was expected to provide $2,392,845 over three years for work with Massachusetts General Hospital. The company received $308,861 in first-year funding and recognized $57,051 as grant income by June 30; $251,810 remained deferred.
- Key risks: The company has a limited operating history, recurring losses, no product revenue, and dependence on TTX-MC138 and further financing. Clinical, regulatory, manufacturing, enrollment, third-party vendor, and COVID-19 disruptions could delay development. The company also highlighted limited foreign IP protection; patents covering TTX-MC138 were issued only in the U.S., with no foreign applications then pending.
- Controls and contingencies: Management concluded disclosure controls were ineffective as of June 30 due to unremediated material weaknesses involving the control environment and insufficient accounting personnel and segregation of duties. No pending legal actions were reported. A July 2021 phishing incident was not expected by management to materially affect the business or financial condition.
Investor verification priorities
- Confirm actual post-IPO cash, use of proceeds, and whether the stated runway through December 2022 remains achievable against spending and grant receipts.
- Track IND-enabling work and the timing, regulatory status, and execution of the planned TTX-MC138 Phase 0 and Phase I programs.
- Assess the composition and noncash nature of Q2 earnings, especially derivative-liability remeasurement, and compare operating cash burn with reported net loss.
- Monitor remediation and testing of the disclosed material weaknesses and any subsequent changes to disclosure-control effectiveness.
- Verify SBIR milestone progress and funding availability, as well as the status and geographic scope of licensed and owned intellectual-property protection.