Canton Strategic Holdings, Inc. annual report, FY2023

Filing summary: Tharimmune, Inc. (Nasdaq: THAR)

Entity note: The request names Canton Strategic Holdings, Inc., but the supplied filing identifies the registrant as Tharimmune, Inc. This summary covers Tharimmune’s Form 10-K for the fiscal year ended December 31, 2023, filed February 23, 2024.

Business context

Tharimmune is a clinical-stage biotechnology company with no approved products and no reported revenue. Its lead candidate, TH104, is a nalmefene buccal film being developed for chronic itching, initially in primary biliary cholangitis (PBC). Its early-stage oncology pipeline includes TH3215 (HER2/HER3 bispecific), TH0059 (HER2/HER3 bispecific ADC) and TH1940 (PD-1 Picobody). The company deprioritized HSB-1216.

Financial results and liquidity

Metric20232022Change
Revenue$0$0No revenue in either year
Research and development expense$3.56 million$2.28 millionUp $1.28 million, or 56.2%
General and administrative expense$5.90 million$4.60 millionUp $1.29 million, or 28.1%
Total operating expenses / operating loss$9.46 million$6.88 millionOperating expenses increased $2.57 million
Net loss$9.32 million$8.47 millionLoss increased $0.85 million, or 10.0%
Net cash used in operating activities$7.30 million$6.56 millionCash use increased $0.74 million
Cash at year-end$10.94 million$6.51 millionUp $4.42 million
Total liabilities$1.82 million$1.14 millionPrimarily current liabilities

Gross margin and operating margin are not meaningful because the company had no revenue. At December 31, 2023, total current assets were $10.95 million and current liabilities were $1.82 million. The balance sheet shows no debt balance at year-end; the company repaid its 2023 insurance premium financing during the year. Accumulated deficit was $24.70 million.

Financing activities provided $11.72 million of net cash in 2023. Public stock offerings raised capital, including a May offering and a November offering. The November offering included pre-funded warrants; all 8.175 million offering warrants and 1.0 million underwriter pre-funded warrants had been exercised by year-end. The filing reports 11,739,676 common shares outstanding as of February 20, 2024.

Material changes and unusual items

  • R&D spending rose with increased preclinical activity and licensing costs and a shift away from HSB-1216. G&A growth was driven notably by investor-relations and personnel costs.
  • 2022 interest expense included approximately $1.57 million of noncash debt-discount amortization associated with convertible notes converted at the IPO. This largely explains the sharp year-over-year reduction in interest expense.
  • The company changed its name from Hillstream BioPharma to Tharimmune in September 2023 and completed a 1-for-25 reverse stock split in November; reported historical share and per-share data were retrospectively adjusted.
  • Tharimmune licensed TH104 and TH103 from Avior. The agreement includes $24.25 million in potential development milestones, sales-based milestone fees, royalties and upfront/quarterly license fees.
  • The ABSI collaboration includes up to $8.25 million in potential milestone payments, royalties and other fees. The company also issued ABSI $250,000 of stock and reported $500,000 of milestone fees paid to ABSI in 2023, including the noncash stock grant.

Outlook, risks and contingencies

  • Management plans a U.S. TH104 Phase 1 pharmacokinetic bridging study, with topline results targeted for the second quarter of 2024. A Phase 2a PBC study was planned for the third quarter of 2024, subject to alignment with the FDA; a registrational trial was contemplated for 2025, depending on Phase 2 results and FDA discussions.
  • The filing gives differing timelines for oncology programs: one section anticipates TH0059 and TH1940 entering IND-enabling studies in 2025, while the MD&A says they may enter in 2024. TH3215 is expected to advance into IND-enabling work in 2024. These dates are plans, not assurances.
  • Management and the independent auditor concluded that substantial doubt exists about the company’s ability to continue as a going concern, principally because of recurring losses, negative operating cash flow and the need for substantial additional funding. The financial statements include no adjustments for a possible failure to continue as a going concern.
  • The company expects continued losses and negative cash flows and may need further equity, debt, grants or partnerships. Financing may be unavailable or dilutive; insufficient funds could delay or terminate development programs.
  • Key risks include clinical and regulatory failure or delay, patient enrollment, dependence on third-party manufacturers and CROs, sole-source ingredient supply, competition, intellectual-property disputes, reimbursement uncertainty and potential dilution. The company reported it had no product-liability insurance at the time described in the filing and intended to obtain coverage.
  • Management said disclosure controls and internal control over financial reporting were effective at year-end after remediation efforts. A material weakness had previously been identified involving segregation of duties and technical accounting review; the auditor did not provide an internal-control effectiveness attestation.
  • No legal proceedings were identified as expected to have a material adverse effect. A January 2024 insurance-premium financing agreement of $492,450 is disclosed as a subsequent event.

Most important facts for investors to verify

  • Confirm that Tharimmune, rather than Canton Strategic Holdings, is the intended company and filing.
  • Review cash burn, financing needs and the going-concern disclosure; the filing does not provide a definitive cash-runway estimate.
  • Track TH104 trial execution, FDA feedback and actual study results against the stated timelines.
  • Clarify the inconsistent 2024 versus 2025 IND-enabling timelines for TH0059 and TH1940.
  • Assess dilution and potential future share issuance, including the substantial equity financing completed in 2023 and the 2023 incentive plan’s 2.595 million shares available for future issuance.
  • Review license payment obligations, milestone conditions and royalties, especially the Avior and ABSI agreements.
  • Confirm continued remediation of the previously identified internal-control material weakness and monitor future financing and control disclosures.