Form 10-Q - Quarterly report [Sections 13 or 15(d)]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-36818

TRACON Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)


Delaware		34-2037594
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

4350 La Jolla Village Drive, Suite 800, San Diego CA		92122
(Address of principal executive offices)		(Zip Code)

(858) 550-0780

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	TCON	OTCQB

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of outstanding shares of the registrant’s common stock as of August 8, 2024 was 3,407,564.

FORM 10-Q

TABLE OF CONTENTS


PART I FINANCIAL INFORMATION


Item 1.	Financial Statements	4
	Condensed Consolidated Balance Sheets	4
	Unaudited Condensed Consolidated Statements of Operations	5
	Unaudited Condensed Consolidated Statements of Stockholders’ Deficit	6
	Unaudited Condensed Consolidated Statements of Cash Flows	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.	Controls and Procedures	21

PART II OTHER INFORMATION

Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	24
Item 3.	Defaults Upon Senior Securities	25
Item 4.	Mine Safety Disclosures	25
Item 5.	Other Information	25
Item 6.	Exhibits	26

Signatures		27

CAUTIONARY STATEMENT

TRACON Pharmaceuticals, Inc. (TRACON or the Company), cautions that trading in the Company’s securities is highly speculative and poses substantial risks. Trading prices for the Company’s securities may bear little or no relationship to the actual value realized, if any, by holders of the Company’s securities. Accordingly, the Company urges extreme caution with respect to existing and future investments in its securities.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. The words “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

The forward-looking statements in this Quarterly Report on Form 10-Q include, among other things, statements about:

•

our plans and expectations regarding our planned Dissolution;

•

our anticipated uses of cash, cash runway and future cash position, including the availability, timing and amount of liquidating distributions, the amounts that will need to be set aside by us and the adequacy of such reserves to satisfy our obligations;

•

our inability to fund our planned operations and meet our obligations as they come due for the next twelve months;

•

the amount of proceeds that might be realized from the sale or other disposition of any of our remaining assets;

•

the timing and stockholder approval of our planned Dissolution;

•

the incurrence by the Company of expenses relating to the Dissolution;

•

the limitations on trading of our common stock prior to the Dissolution;

•

our ability to retain employees, consultants, advisors and other resources to carry out the Dissolution; and

•

our estimates regarding our results of operations, financial condition, liquidity and capital requirements.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2023, particularly in the “Risk Factors” section, that could cause actual results or events to differ materially from the forward-looking statements that we make. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TRACON Pharmaceuticals, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)


	June 30,			December 31,
	2024			2023
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	6,270		$	8,564
Prepaid and other assets		240			526
Total current assets		6,510			9,090
Property and equipment, net		30			37
Restricted cash		73			73
Other assets		787			905
Total assets	$	7,400		$	10,105
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	2,652		$	2,544
Accrued expenses		6,823			7,211
Accrued compensation and related expenses		416			427
Total current liabilities		9,891			10,182
Other long-term liabilities		598			732
Commitments and contingencies (Note 3)
Stockholders’ deficit:
Preferred stock, $0.001 par value, authorized shares — 10,000,000 at June 30, 2024 and December 31, 2023; issued and outstanding shares — none		—			—
Common stock, $0.001 par value; authorized shares — 60,000,000 at June 30, 2024 and December 31, 2023; issued and outstanding shares — 3,407,564 and 2,285,818 at June 30, 2024 and December 31, 2023, respectively		3			2
Additional paid-in capital		243,414			239,688
Accumulated deficit		(246,506	)		(240,499	)
Total stockholders’ deficit		(3,089	)		(809	)
Total liabilities and stockholders’ deficit	$	7,400		$	10,105

See accompanying notes.

TRACON Pharmaceuticals, Inc.

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023
Revenue	$	55		$	9,000		$	155		$	9,000
Operating expenses:
Research and development		1,350			3,488			3,228			8,457
General and administrative		1,617			1,916			3,051			4,260
Arbitration success fees		—			4,375			—			4,375
Total operating expenses		2,967			9,779			6,279			17,092
Loss from operations		(2,912	)		(779	)		(6,124	)		(8,092	)
Other income (expense):
Interest income (expense), net		75			(5,507	)		128			(6,695	)
Other expense		(2	)		—			(11	)		(3	)
Total other income (expense)		73			(5,507	)		117			(6,698	)
Net loss	$	(2,839	)	$	(6,286	)	$	(6,007	)	$	(14,790	)

Net loss per share, basic and diluted	$	(0.94	)	$	(3.94	)	$	(2.23	)	$	(10.36	)
Weighted-average shares outstanding, basic and diluted		3,008,090			1,595,892			2,698,454			1,427,579

See accompanying notes.

TRACON Pharmaceuticals, Inc.

Unaudited Condensed Consolidated Statements of Stockholders’ Deficit

(in thousands, except share data)



					Additional					Total
	Common Stock				Paid-in		Accumulated			Stockholders’
	Shares		Amount		Capital		Deficit			Deficit
Balance at December 31, 2023		2,285,818	$	2	$	239,688	$	(240,499	)	$	(809	)
Stock-based compensation expense		—		—		383		—			383
Issuance of common stock, net of offering costs		375,989		1		1,831		—			1,832
Net loss		—		—		—		(3,168	)		(3,168	)
Balance at March 31, 2024		2,661,807		3		241,902		(243,667	)		(1,762	)
Stock-based compensation expense		—		—		339		—			339
Issuance of common stock, net of offering costs		745,057		—		1,172		—			1,172
Issuance of common stock under equity plans		700		—		1		—			1
Net loss		—		—		—		(2,839	)		(2,839	)
Balance at June 30, 2024		3,407,564	$	3	$	243,414	$	(246,506	)	$	(3,089	)

					Additional					Total
	Common Stock				Paid-in		Accumulated			Stockholders’
	Shares		Amount		Capital		Deficit			Deficit
Balance at December 31, 2022		1,228,540	$	1	$	229,759	$	(236,911	)	$	(7,151	)
Stock-based compensation expense		—		—		484		—			484
Issuance of common stock and warrants, net of offering costs		45,146		—		4,099		—			4,099
Net loss		—		—		—		(8,504	)		(8,504	)
Balance at March 31, 2023		1,273,686		1		234,342		(245,415	)		(11,072	)
Stock-based compensation expense		—		—		502		—			502
Issuance of common stock, net of offering costs		128,510		—		1,074		—			1,074
Issuance of common stock under equity plans		1,580		—		43		—			43
Net loss		—		—		—		(6,286	)		(6,286	)
Balance at June 30, 2023		1,403,776	$	1	$	235,961	$	(251,701	)	$	(15,739	)

See accompanying notes.

TRACON Pharmaceuticals, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)



	Six Months Ended June 30,
	2024			2023
Cash flows from operating activities
Net loss	$	(6,007	)	$	(14,790	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Stock-based compensation		722			986
Depreciation and amortization		7			7
Noncash interest		—			88
Amortization of debt discount		—			6,656
Lease asset amortization and liability accretion, net		5			12
Changes in assets and liabilities:
Collaboration receivable		—			(9,000	)
Prepaid expenses and other assets		286			539
Accounts payable and accrued expenses		(314	)		5,074
Accrued compensation and related expenses		(11	)		(426	)
Net cash used in operating activities		(5,312	)		(10,854	)
Cash flows from financing activities
Repayment of long-term debt		—			(10,000	)
Proceeds from sale of common stock and warrants, net of offering costs		3,017			5,185
Proceeds from issuance of common stock under equity plans		1			43
Net cash provided by (used in) financing activities		3,018			(4,772	)
Change in cash, cash equivalents, and restricted cash		(2,294	)		(15,626	)
Cash, cash equivalents, and restricted cash at beginning of period		8,637			17,500
Cash, cash equivalents, and restricted cash at end of period	$	6,343		$	1,874

See accompanying notes.

TRACON Pharmaceuticals, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Organization and Summary of Significant Accounting Policies

Organization and Business

TRACON Pharmaceuticals, Inc. (TRACON or the Company) was incorporated in the state of Delaware on October 28, 2004. Until recently, TRACON was a biopharmaceutical company focused on the development and commercialization of novel targeted therapeutics for cancer, and utilized its cost efficient, contract research organization (CRO) independent product development platform to partner with other life science companies to develop and commercialize innovative products in the United States.

On July 1, 2024, TRACON announced the discontinuation of their last ongoing clinical trial in evafolimab and intent to explore strategic alternatives. On July 30, 2024, after completing a review of the strategic options available to the Company, the Company’s board of directors approved the dissolution and liquidation of the Company (the Dissolution), pursuant to a plan of complete liquidation and dissolution (Plan of Dissolution), subject to the approval of the Company’s stockholders, and implemented a reduction-in-force of all of its employees, including officers, which was completed on July 31, 2024. The Company intends to hold a special meeting of stockholders (Special Meeting) to seek stockholder approval of the Plan of Dissolution.

As previously disclosed, the Company was notified by the Nasdaq Stock Market LLC (“Nasdaq”) that the Company was not in compliance with Nasdaq’s listing standards. Due to such noncompliance, Nasdaq notified the Company that it would be subject to delisting. On June 11, 2024, the Company received a letter from Nasdaq stating that trading of its common stock would be suspended, which suspension was effective at the open of business on June 28, 2024. On July 19, 2024, Nasdaq filed a Form 25 with the SEC notifying the SEC of Nasdaq’s determination to remove the Company’s securities from listing on Nasdaq. The delisting was effective 10 days after the filing of the Form 25.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, TRACON Pharma Limited and TRACON Pharma International Limited, which were formed in September 2015 and January 2019, respectively, and are currently inactive. All significant intercompany accounts and transactions have been eliminated.

Basis of Presentation

As of June 30, 2024, the Company has devoted substantially all its efforts to product development, raising capital, and building infrastructure and has not realized revenues from its planned principal operations. The Company has incurred operating losses since inception. As of June 30, 2024, the Company had an accumulated deficit of $246.5 million. The Company anticipates that it will continue to incur net losses into the foreseeable future as it completes the planned Dissolution. At June 30, 2024, the Company had cash and cash equivalents of $6.3 million, of which $0.1 million is classified as restricted cash as it is pledged as collateral for the Company’s obligations under its corporate headquarters facility lease. The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business. However, based on the Company’s current working capital, anticipated operating expenses and net losses, and the uncertainties surrounding its ability to raise additional capital as needed, as discussed below, management believes that there is substantial doubt about its ability to continue as a going concern for a period of 12 months following the date that these unaudited condensed consolidated financial statements are issued. The unaudited condensed consolidated financial statements do not include any adjustments for the recovery and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. As further discussed in Note 5, Subsequent Events, on July 30, 2024, the Company’s board of directors approved the Dissolution of the Company pursuant to a Plan of Dissolution, subject to the approval of the Company’s stockholders.

Reverse Stock Split

On April 8, 2024, the Company filed an amendment to the Company’s amended and restated certificate of incorporation to effect a one-for-twenty reverse stock split of its common stock (the Reverse Stock Split). The Reverse Stock Split applied to all of the Company’s outstanding shares of common stock and therefore did not affect any stockholder’s relative ownership percentage. The total number of the Company’s authorized shares of common stock and preferred stock remained unchanged at 60,000,000 and 10,000,0000 shares, respectively, notwithstanding the Reverse Stock Split. The par value of the Company's common stock and preferred stock also remained unchanged as a result of the Reverse Stock Split. All of the Company’s stock options and warrants outstanding immediately prior to the Reverse Stock Split were proportionately adjusted. All share and price per share data for all periods presented in these unaudited condensed consolidated financial statements and notes thereto have been adjusted to give effect to the Reverse Stock Split, including retrospectively where applicable.

Unaudited Interim Financial Information

The unaudited condensed consolidated financial statements as of June 30, 2024, and for the three and six months ended June 30, 2024 and 2023, have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (SEC), and with accounting principles generally accepted in the United States (GAAP) applicable to interim financial statements. These unaudited condensed consolidated financial statements have been prepared on the same basis as the audited financial statements and include all adjustments, consisting of only normal recurring accruals, which in the opinion of management are necessary to present fairly the Company’s financial position as of the interim date and results of operations for the interim periods presented. Interim results are not necessarily indicative of results for a full year or future periods. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2023, included in its Annual Report on Form 10-K filed with the SEC on March 5, 2024.

Use of Estimates

The Company’s unaudited condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of the Company’s unaudited condensed consolidated financial statements requires it to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenue, and expenses. The most significant estimates in the Company’s unaudited condensed consolidated financial statements relate to expenses incurred for clinical trials. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions. The Company is not aware of any specific event or circumstance that would require an update to its estimates, judgments and assumptions or a revision of the carrying value of the Company’s assets or liabilities as of the date of this filing.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and highly liquid investments with original maturities of three months or less at the date of purchase. The carrying amounts approximate fair value due to the short maturities of these investments. Cash and cash equivalents include cash in readily available checking and money market funds.

Restricted Cash

Restricted cash consists of money market funds held by the Company’s financial institution as collateral for the Company’s obligations under its facility lease for the Company’s corporate headquarters in San Diego, California.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts and management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held.

Property and Equipment

Property and equipment is stated at cost and depreciated using the straight-line method over the estimated useful life of the related assets, which is generally five years. Leasehold improvements are amortized over the shorter of the lease term or estimated useful life of the related assets. Repairs and maintenance costs are charged to expense as incurred.

Leases

The Company determines if an arrangement contains a lease at inception. For arrangements where the Company is the lessee, operating leases are recorded as other assets, accounts payable and accrued expenses, and other long-term liabilities within the unaudited condensed consolidated balance sheets. The Company currently does not have any finance leases.

Operating lease right-of-use (ROU) assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. ROU assets also include any initial direct costs incurred and any lease payments made at or before the lease commencement date, less lease incentives received. The Company uses its incremental borrowing rate based on the information available at the commencement date in determining the lease liabilities as the Company’s leases generally do not provide an implicit rate. Lease terms may include options to extend or terminate when the Company is reasonably certain that the option will be exercised. Lease expense is recognized on a straight-line basis over the lease term.

Revenue Recognition

To date, the Company’s revenue has been derived from license and collaboration agreements. The terms of these arrangements included payments to the Company for the following: non-refundable, up-front license fees; development, regulatory and commercial milestone payments; payments for manufacturing supply services the Company provides through its contract manufacturers; and royalties on net sales of licensed products. In accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers (ASC 606), the Company performs the following five steps in determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of these agreements: (i) identification of the contract(s) with a customer; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including any constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when, or as, the Company satisfies each performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services transferred to the customer. Once a contract is determined to be within the scope of ASC 606, at contract inception the Company assesses the goods or services promised within the contract to determine those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when, or as, the performance obligation is satisfied.

As part of the accounting for these arrangements, the Company develops assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract. The Company uses key assumptions to determine the stand-alone selling price, which may include development timelines, reimbursement rates for personnel costs, discount rates, and probabilities of technical and regulatory success.

Licenses of intellectual property: If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other promised goods or services, the Company assesses the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Milestone Payments: At the inception of each arrangement that includes development, commercialization, and regulatory milestone payments, the Company evaluates whether the achievement of the milestones is considered probable and estimates the amount to be included in the transaction price using the most likely amount method. Performance milestone payments represent a form of variable consideration. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Achievement of milestones that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable until the approvals are achieved. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis and the Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, the Company re-evaluates the probability of achieving such milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.

Manufacturing Supply Services: Arrangements that include a promise for future supply of drug substance or drug product for either clinical development or commercial supply at the customer’s discretion are generally considered options. The Company assesses if these options provide a material right to the licensee and if so, they are accounted for as separate performance obligations at the outset of the arrangement.

Royalties: For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting from any of its out-licensing arrangements.

The Company receives payments from its collaborators based on billing schedules established in each contract. Up-front and other payments may require deferral of revenue recognition to a future period until the Company performs its obligations under its collaboration arrangements. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less.

Clinical Trial Expense Accruals

As part of the process of preparing the Company’s unaudited condensed consolidated financial statements, the Company is required to estimate expenses resulting from its obligations under contracts with vendors, clinical sites, and consultants in connection with conducting clinical trials. The financial terms of these contracts vary and may result in payment flows that do not match the periods over which materials or services are provided under such contracts.

The Company’s objective is to reflect the appropriate trial expenses in its unaudited condensed consolidated financial statements by recording those expenses in the period in which services are performed and efforts are expended. The Company accounts for these expenses according to the progress of the clinical trial as measured by patient progression and the timing of various aspects of the trial. The Company determines accrual estimates through discussion with the clinical sites and applicable personnel and outside service providers as to the progress or state of consummation of trials. During a clinical trial, the Company adjusts the clinical expense recognition if actual results differ from its estimates. The Company makes estimates of accrued expenses as of each balance sheet date based on the facts and circumstances known at that time. The Company’s clinical trial accruals are dependent upon accurate reporting by clinical sites and other third-party vendors. Although the Company does not expect its estimates to differ materially from amounts actually incurred, its understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low for any particular period. For the three and six months ended June 30, 2024 and 2023, there were no material adjustments to the Company’s prior period estimates of accrued expenses for clinical trials.

Research and Development Costs

Research and development costs, including license fees, are expensed as incurred.

Comprehensive Loss

Comprehensive loss is defined as a change in equity during a period from transactions and other events and circumstances from non-owner sources. Net loss and comprehensive loss were the same for all periods presented.

Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss by the weighted-average shares of common stock outstanding for the period, without consideration for common stock equivalents and adjusted for the weighted average number of shares of common stock outstanding that are subject to repurchase. Diluted net loss per share is calculated by dividing the net loss by the weighted-average number of common stock equivalents outstanding for the period determined using the treasury-stock method. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company’s net loss position.

Potentially dilutive securities not included in the calculation of diluted net loss per share because to do so would be anti-dilutive are as follows (in common stock equivalent shares):


	June 30,
	2024		2023
Warrants to purchase common stock		7,807		76,720
Common stock options		184,630		156,066
ESPP shares		279		3,458
		192,716		236,244

2. Financial Instruments and Fair Value Measurements

Cash equivalents, which are classified as equity securities, and restricted cash consisted of the following (in thousands):


	June 30, 2024								December 31, 2023
	Cost		Unrealized Gain		Unrealized (Loss)		Estimated Fair Value		Cost		Unrealized Gain		Unrealized (Loss)		Estimated Fair Value
Money market funds	$	6,126	$	—	$	—	$	6,126	$	3,689	$	—	$	—	$	3,689

Classified as:
Cash equivalents							$	6,053							$	3,616
Restricted cash								73								73
Total cash equivalents and restricted cash							$	6,126							$	3,689

As of June 30, 2024 and December 31, 2023, the Company had no investments.

The carrying amounts of cash and cash equivalents, prepaid and other assets, accounts payable and accrued liabilities are considered to be representative of their respective fair values because of the short-term nature of those instruments.

The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:


Level 1:	Observable inputs such as quoted prices in active markets.

Level 2:	Inputs, other than the quoted prices in active markets that are observable either directly or indirectly.

Level 3:	Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements.

None of the Company’s non-financial assets or liabilities are recorded at fair value on a non-recurring basis. No transfers between levels have occurred during the periods presented.

The fair values of the Company’s assets and liabilities, which are measured at fair value on a recurring basis, were determined using the following inputs (in thousands):


			Fair Value Measurements at
			Reporting Date Using
			Quoted Prices in		Significant
			Active Markets		Other		Significant
			for Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
At June 30, 2024
Money market funds	$	6,126	$	—	$	6,126	$	—

At December 31, 2023
Money market funds	$	3,689	$	—	$	3,689	$	—

3. Commitments and Contingencies

License Agreements

The Company has entered into various license agreements pursuant to which the Company acquired licenses to certain intellectual property. The agreements generally required an upfront license fee and, in some cases, reimbursement of patent costs. Additionally, under each agreement, the Company may be required to pay annual maintenance fees, royalties, milestone payments and sublicensing fees. Each license agreement is generally cancelable by the Company, given appropriate prior written notice. At June 30, 2024, potential future milestone payments under these agreements totaled an aggregate of $9.6 million.

4. Stockholders’ Deficit

Equity Plan Activity

During the three and six months ended June 30, 2024, the Company issued no shares of common stock upon the exercise of outstanding stock options and no shares of common stock upon the vesting of restricted stock units. During the three and six months ended June 30, 2024, the Company issued 700 shares of common stock in connection with the employee stock purchase plan (the ESPP). During the year ended December 31, 2023, the Company issued no shares of common stock upon the exercise of outstanding stock options, no shares of common stock upon the vesting of restricted stock units, and 2,280 shares of common stock in connection with the ESPP.

Common Stock Warrants

As of June 30, 2024, the Company had the following outstanding warrants for the purchase of common stock:


Expiration	Number of shares		Exercise price
May 3, 2025		269	$	522.00
September 2, 2032		7,538	$	39.80
		7,807

During the three and six months ended June 30, 2024 and 2023, the Company issued no shares of its common stock upon the exercise of warrants.

Stock-Based Compensation Expense

The weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of the employee stock option grants were as follows:


	Three Months Ended			Six Months Ended
	June 30,			June 30,
	2023			2024			2023
Risk-free interest rate		3.7	%		4.2	%		3.5	%
Expected volatility		92.0	%		99.1	%		90.0	%
Expected term (in years)		5.5			6.3			6.2
Expected dividend yield		—	%		—	%		—	%

There were no employee stock option grants during the three months ended June 30, 2024.

Stock compensation expense for the ESPP was immaterial for the three and six months ended June 30, 2024 and 2023.

The allocation of stock-based compensation expense was as follows (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Research and development	$	143	$	235	$	291	$	462
General and administrative		196		267		431		524
	$	339	$	502	$	722	$	986

5. Subsequent Events

On July 30, 2024, the Company's board of directors approved the Plan of Dissolution that would, subject to stockholder approval, include the liquidation of our remaining assets, if any, satisfaction of our remaining obligations, including any related transaction expenses to the extent of cash or other assets available therefor, and making distributions to stockholders of available liquidation proceeds, if any, following an orderly wind down of the Company’s operations. In connection with the approval of the Plan of Dissolution, all the members of the board of directors and the then-Chief Executive Officer of the Company resigned and the board of directors approved a reduction in force of all of the Company’s employees effective on July 31, 2024. Affected employees were offered separation benefits, including severance payments along with temporary healthcare coverage assistance, resulting in a one-time charge and cash expenditure of approximately $1.7 million. The Company has elected and appointed Craig Jalbert, who is experienced in the dissolution and liquidation of companies, as the sole director and officer of the Company. The Company also intends to call a Special Meeting to seek approval of the Plan of Dissolution and has filed preliminary proxy materials relating to the Special Meeting with the Securities and Exchange Commission (the SEC). The Company will apply the liquidation basis of accounting beginning on the date that liquidation is imminent.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, timing of future events and future financial performance, includes forward-looking statements that are based upon current beliefs, plans and expectations and involve risks, uncertainties and assumptions. You should review the “Risk Factors” section of this Quarterly Report and in our Annual Report on Form 10-K for the year ended December 31, 2023 for a discussion of important factors that could cause our actual results and the timing of selected events to differ materially from those described in or implied by the forward-looking statements contained in this Quarterly Report. We undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this Quarterly Report or to reflect actual outcomes.

Overview

The purpose of the following discussion and analysis is to provide material information relevant to an assessment of our financial condition and results of operations from management’s perspective, including to describe and explain key trends, events and other factors that impacted our reported results and that are reasonably likely to impact our future performance.

As previously announced, on July 30, 2024, following the conclusion of our review of strategic alternatives, our board of directors approved the dissolution and liquidation of our Company (Dissolution), pursuant to a plan of complete liquidation and dissolution (Plan of Dissolution), which plan is subject to stockholder approval. On July 26, 2024, our board of directors also approved a reduction-in-force (Reduction in Force) of our employees effective on July 31, 2024, in connection with the planned wind down of our operations. Affected employees were offered separation benefits, including severance payments along with temporary healthcare coverage assistance. We expect to incur one-time charges and cash expenditures associated with the workforce reduction of approximately $1.7 million, primarily related to employee wages and severance payments, benefits and related termination costs.

The Plan of Dissolution contemplates an orderly wind down of our business and operations in accordance with the provisions of Delaware law. If our stockholders approve the Plan of Dissolution, we intend to file a Certificate of Dissolution with the Delaware Secretary of State dissolving the Company, satisfy or resolve our remaining liabilities and obligations (to the extent of cash or other assets available therefor), including but not limited to contingent liabilities and claims and costs associated with the dissolution and liquidation, make reasonable provisions for unknown claims and liabilities (to the extent of available cash or other assets therefor) and attempt to convert all of our remaining assets into cash or cash equivalents, and make distributions to our stockholders of cash available for distribution, if any, subject to applicable legal requirements. The proxy materials that we will file with the SEC and mail to our stockholders will contain more important information regarding the proposed Plan of Dissolution.

Pursuant to Delaware law, the Company will continue to exist for three years after the Certificate of Dissolution is filed or for such longer period as the Delaware Court of Chancery shall direct. If our stockholders approve the Dissolution, we will be authorized to cease operations, sell or otherwise dispose of our non-cash assets and dissolve the Company and its subsidiaries without further approval of the stockholders, unless required to obtain such approval under Delaware law.

If our stockholders do not approve the Dissolution, the Board of Directors will explore other alternatives to Dissolution, if any, available to the Company, including seeking voluntary dissolution at a later time with diminished assets or seeking bankruptcy protection.

As such, the following discussion and analysis of our business, financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and should also take into account our recent announcement regarding our planned Dissolution. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report includes forward-looking statements that involve risks and uncertainties, including risks associated with our planned Dissolution. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Quarterly Report, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.

Business

Until recently, we were a biopharmaceutical company focused on the development and commercialization of novel targeted therapeutics for cancer and utilized our cost efficient, contract research organization (CRO) independent product development platform to partner with other life science companies to develop and commercialize innovative products in the United States.

In December 2019, we entered into a collaboration and clinical trial agreement (the Envafolimab Collaboration Agreement) with 3D Medicines Co., Ltd. (3D Medicines) and Jiangsu Alphamab Biopharmaceuticals Co., Ltd. (Alphamab) for the development of envafolimab, also known as KN035, an investigational PD-L1 single-domain antibody (sdAb) administered by rapid subcutaneous injection for the treatment of sarcoma in North America. The ENVASARC Phase 2 pivotal trial (the ENVASARC trial) completed the enrollment of 82 evaluable patients at 600mg of envafolimab every three weeks in the sarcoma subtypes of undifferentiated pleomorphic sarcoma (UPS) and myxofibrosarcoma (MFS) in March 2024. Nine of 82 responses (11%) by blinded independent central review (BICR) were needed to satisfy the primary endpoint of the trial which is to statistically exceed the known 4% objective response rate (ORR) of Votrient® (pazopanib), the only U.S. Food and Drug Administration (FDA)-approved treatment for patients with refractory UPS or MFS. In July 2024, we announced the ENVASARC trial failed to meet its primary endpoint as the trial only demonstrated 4 responses out of 82 evaluable patients by BICR, which is lower than the primary endpoint of the study of an 11% ORR needed to support a biologics license application. Based on these data, we determined to terminate further development of envafolimab.

Our other clinical stage oncology product candidate is TRC102, which is a small molecule that has been studied in Phase 1 and Phase 2 trials for the treatment of mesothelioma, lung cancer, glioblastoma and solid tumors. We were also previously investigating YH001, a monospecific investigational cytotoxic T-lymphocyte-associated protein 4 (CTLA-4) antibody, that we licensed from Eucure (Beijing) Biopharma Co., Ltd. (Eucure) and Biocytogen Pharmaceuticals (Beijing) Co., Ltd. (Biocytogen) in October 2021. In connection, with the proposed Dissolution, we expect to terminate this license and cease any further development of YH001.

TRC102 is in clinical development to reverse resistance to specific chemotherapeutics by inhibiting DNA base excision repair (BER). In initial clinical trials of more than 100 patients, TRC102 has shown good tolerability and we believe promising anti-tumor activity in combination with alkylating and antimetabolite chemotherapy for the treatment of cancer patients. All current TRC102 trials are sponsored and funded by the NCI and we retain rights to all data generated under the clinical trials. In October 2020, we received orphan drug designation (ODD) from the FDA for TRC102 for the treatment of patients with malignant glioma, including glioblastoma. Based on data presented at the American Society of Clinical Oncology (ASCO) 2020 virtual meeting that the combination of chemoradiation and TRC102 produced objective responses in all 15 evaluable patients with advanced localized lung cancer treated in a Phase 1 trial, in January 2022, the NCI initiated a randomized Phase 2 trial of chemoradiation with or without TRC102, followed by consolidative durvalumab treatment. The primary objective is to improve the 56% one-year progression free survival (PFS) rate with current standard of care to 75% with current standard of care plus TRC102. The trial began enrollment in June 2022 and is expected to be complete in 2025. A poster on the Phase 2 trial of TRC102 with temozolomide (TMZ) in patients with granulosa cell ovarian cancer was presented by investigators at the National Cancer Institute (NCI) at the American Society of Clinical Oncology (ASCO) 2023 annual meeting held in June 2023. The authors concluded that TRC102 combined with TMZ was well tolerated in patients with granulosa cell ovarian cancer (GCOC). Durable disease control was observed in four of eight patients, which the authors considered as promising activity in this heavily pretreated GCOC cohort.

The following table summarizes key information regarding ongoing development of our clinical stage product candidates through our partnerships:


	Phase	Data Expected
TRC102
Lung Cancer	Randomized Phase 2	2025

We also developed a product development platform (PDP) that emphasizes capital efficiency. Prior to the Reduction in Force, our experienced clinical operations, data management, quality assurance, product development and regulatory affairs groups managed significant aspects of our clinical trials with internal resources. We used these internal resources to reduce the costs associated with utilizing CROs to conduct clinical trials. In our experience, this model has resulted in capital efficiencies and improved communication with clinical trial sites, which can expedite patient enrollment and improve the quality of patient data as compared to a CRO-managed model. We have leveraged this platform in all of our sponsored clinical trials, in addition to recently monetizing our platform independently by licensing our PDP to Inhibrx, Inc. (Inhibrx) in November 2023 for a $3.0 million upfront fee. We have also leveraged our PDP to diversify our product pipeline without payment of upfront license fees through license agreements with Eucure, a division of Biocytogen, 3D Medicines and Alphamab, and Janssen.

Financial Operations Overview

Since our inception in 2004, we have devoted substantially all of our resources to research and development efforts relating to our product candidates, including conducting clinical trials, in-licensing related intellectual property, providing general and administrative support for these operations, and protecting our intellectual property. To date, we have not generated any revenue from product sales and instead, have funded our operations from the sales of equity securities, payments received in connection with our collaboration agreements, and commercial bank debt. At June 30, 2024, we had cash and cash equivalents totaling $6.3 million, of which $0.1 million is pledged as collateral for our obligations under our corporate headquarters facility lease.

We do not own or operate, nor do we expect to own or operate, facilities for product manufacturing, storage, distribution or testing. We contract with third parties or our collaboration partners for the manufacture of our product candidates and we intend to continue to do so in the future.

We have incurred losses from operations in each year since our inception. Our net losses were $6.0 million and $14.8 million for the six months ended June 30, 2024 and 2023, respectively. At June 30, 2024, we had an accumulated deficit of $246.5 million.

We expect to continue to incur significant expenses and operating losses for the foreseeable future in connection with the Dissolution and the Reduction in Force. Our existing cash and cash equivalents as of June 30, 2024 will be used primarily for the payment and settlement of creditor and other claims against the Company, to fund the wind down of our operations, execute the Reduction in Force, and execute the Plan of Dissolution, as approved by our board of directors and subject to the approval of our stockholders.

License and Collaboration Agreements

Inhibrx License Agreement

In November 2023, we granted a non-exclusive and non-transferable license of our CRO-independent PDP to Inhibrx for the design, conduct and administration of clinical trials and related research and development activities, including activities relating to regulatory filings, submissions and approvals (the PDP License), for a nonrefundable upfront fee of $3.0 million. The PDP License allows Inhibrx to use our configuration documentation with a widely used software package in addition to use our validation and qualification of the software package, and our standard operation procedure documents, policies, work instructions, and clinical operation templates (the Licensed Technology). We also earned an additional $0.2 million during the six months ended June 30, 2024 upon the completion of training to Inhibrx.

Collaboration Agreement with 3D Medicines and Alphamab

In December 2019, we, 3D Medicines, and Alphamab entered into the Envafolimab Collaboration Agreement for the development of envafolimab, an investigational PD-L1 sdAb, or nanobody, administered by rapid subcutaneous injection, for the treatment of sarcoma in North America. Pursuant to the Envafolimab Collaboration Agreement, we were granted an exclusive license to develop and commercialize envafolimab for the treatment of sarcoma in North America. We were responsible for conducting and for the costs of any Phase 1, Phase 2, and Phase 3 or post-approval clinical trial in North America for envafolimab in the indications of refractory and first line treatment of sarcoma. 3D Medicines and Alphamab are responsible for conducting and will bear the costs of IND-enabling studies (other than those specific to the sarcoma indication) and the preparation of the chemistry, manufacturing and controls (CMC) activities sections of an IND application for envafolimab. 3D Medicines and Alphamab retained the right to develop envafolimab in all territories outside of North America as well as within North America for all indications other than sarcoma. The term of the Envafolimab Collaboration Agreement continues until the later of the date the parties cease further development and commercialization of envafolimab for sarcoma in North America or the expiration of all payment obligations.

Financial Operations Overview

Research and Development Expenses

Research and development expenses consist of costs associated with the preclinical and clinical development of product candidates. These costs consist primarily of:

•

salaries and employee-related expenses, including stock-based compensation and benefits for personnel in research and development functions;

•

costs incurred under clinical trial agreements with investigative sites;

•

costs to acquire preclinical study and clinical trial materials;

•

costs associated with conducting our preclinical, development and regulatory activities, including fees paid to third party professional consultants, service providers and our scientific advisory board;

•

payments related to licensed products and technologies; and

•

facilities, depreciation and other expenses, including allocated expenses for rent and maintenance of facilities.

Research and development costs, including third party costs reimbursed in connection with our collaboration agreements, are expensed as incurred. We account for nonrefundable advance payments for goods and services that will be used in future research and development activities as expenses when the service has been performed or when the goods have been received.

The following table summarizes our research and development expenses by product candidate for the periods indicated.



	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(in thousands)				(in thousands)
Third-party research and development expenses:
Envafolimab	$	422	$	2,139	$	1,258	$	4,233
YH001		66		504		147		1,926
TRC102		—		7.00		—		8.00
Total third-party research and development expenses		488		2,650		1,405		6,167
Unallocated expenses		862		838		1,823		2,290
Total research and development expenses	$	1,350	$	3,488	$	3,228	$	8,457

Unallocated expenses consist primarily of our internal personnel and facility related costs.

We expect our current level of research and development expenses to decrease with the termination of further development of envafolimab and the Company’s planned Dissolution.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related costs for employees in executive, finance and administration, corporate development and administrative support functions, including stock-based compensation expenses and benefits. Other significant general and administrative expenses include legal services, insurance, occupancy costs, accounting services, and the cost of various consultants.

We anticipate that our general and administrative expenses will decrease for the remainder of 2024 with the termination of further development of envafolimab and the Company’s planned Dissolution.

Other Income (Expense)

In 2024, other income primarily consists of interest income from our short-term cash equivalents. In 2023, other expense primarily consists of interest related to our arbitration financing agreement entered into in December 2022.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (GAAP). The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as the reported revenues and expenses during the reporting periods. These items are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates on our historical experience and on various other factors that we believe to be 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. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ materially from these estimates under different assumptions or conditions. There have been no material changes to our critical accounting policies and estimates from the information provided in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies Involving Management Estimates and Assumptions,” included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Results of Operations

Comparison of the Three Months Ended June 30, 2024 and 2023

The following table summarizes our results of operations for the three months ended June 30, 2024 and 2023:


	Three Months Ended
	June 30,
	2024		2023			Change
	(in thousands)
Revenue	$	55	$	9,000		$	(8,945	)
Research and development expenses		1,350		3,488			(2,138	)
General and administrative expenses		1,617		1,916			(299	)
Arbitration success fees		—		4,375
Total other income (expense)		73		(5,507	)		5,580

Revenue. Revenue was $0.1 million for the three months ended June 30, 2024 from the license of our CRO-independent PDP in November 2023 and $9.0 million for the three months ended June 30, 2023 from the termination of the TJ004309 Agreement.

Research and development expenses. Research and development expenses were $1.4 million and $3.5 million for the three months ended June 30, 2024 and 2023, respectively. The decrease of $2.1 million was primarily due to the completion of enrollment in the ENVASARC trial in March 2024. We expect our current level of research and development expenses to decrease with the termination of further development of envafolimab and the Company’s planned Dissolution.

General and administrative expenses. General and administrative expenses were $1.6 million and $1.9 million for the three months ended June 30, 2024 and 2023, respectively. The decrease of $0.3 million was primarily due to lower legal and corporate related expenses. We expect general and administrative expenses for the remainder of 2024 to decrease with the Company’s planned Dissolution.

Arbitration success fees. Arbitration success fees were $4.4 million for the three months ended June 30, 2023 and related to our legal fee arrangement with our attorneys from the I-Mab arbitration.

Total other income (expense). Total other income was $0.1 million for the three months ended June 30, 2024 and primarily related to interest income from our short-term cash equivalents. Total other expense was $5.5 million for the three months ended June 30, 2023 and was primarily due to interest related to the arbitration financing agreement entered into in December 2022.

Comparison of the Six Months Ended June 30, 2024 and 2023

The following table summarizes our results of operations for the six months ended June 30, 2024 and 2023:


	Six Months Ended
	June 30,
	2024		2023			Change
	(in thousands)
Revenue	$	155	$	9,000		$	(8,845	)
Research and development expenses		3,228		8,457			(5,229	)
General and administrative expenses		3,051		4,260			(1,209	)
Arbitration success fees		—		4,375			(4,375	)
Total other income (expense)		117		(6,698	)		6,815

Revenue. Revenue was $0.2 million for the six months ended June 30, 2024 from the license of our CRO-independent PDP in November 2023 and $9.0 million for the six months ended June 30, 2023 from the termination of the TJ004309 Agreement.

Research and development expenses. Research and development expenses were $3.2 million and $8.5 million for the six months ended June 30, 2024 and 2023, respectively. The decrease of $5.2 million was primarily due to envafolimab drug product purchased in 2023 for clinical trials and the completion of enrollment in the ENVASARC trial in March 2024. We expect our current level of research and development expenses to decrease with the termination of further development of envafolimab and the Company’s planned Dissolution.

General and administrative expenses. General and administrative expenses were $3.1 million and $4.3 million for the six months ended June 30, 2024 and 2023, respectively. The decrease of $1.2 million was primarily due to lower legal and corporate related expenses. We expect general and administrative expenses for the remainder of 2024 to decrease with the Company’s planned Dissolution.

Arbitration success fees. Arbitration success fees were $4.4 million for the six months ended June 30, 2023 and related to our legal fee arrangement with our attorneys from the I-Mab arbitration.

Total other income (expense). Total other income was $0.1 million for the six months ended June 30, 2024 and primarily related to interest income from our short-term cash equivalents. Total other expense was $6.7 million for the six months ended June 30, 2023 and was primarily due to interest related to the arbitration financing agreement entered into in December 2022.

Liquidity and Capital Resources

Our sources of liquidity include our cash and cash equivalents, which are insufficient to meet our obligations as they become due within one year from the date the unaudited condensed consolidated financial statements are issued. We have incurred losses and negative cash flows from operations since our inception. As of June 30, 2024, we had an accumulated deficit of $246.5 million, and we expect to continue to incur net losses for the foreseeable future.

Operating Lease Obligations

Our operating lease obligations relate to our corporate headquarters in San Diego, California, which expires in April 2027. As of June 30, 2024, future minimum lease payments under this lease were $0.3 million and $0.7 million for each of the next 12 and 24 months, respectively.

Other Obligations

We entered into contracts in the normal course of business with clinical trial sites and clinical supply manufacturing organizations and with vendors for preclinical safety and research studies, research supplies and other services and products for operating purposes. These contracts generally provide for termination on notice, and therefore are cancelable contracts.

Cash Flows

The following table summarizes our net cash flow activity for each of the periods set forth below:


	Six Months Ended
	June 30,
	2024			2023
	(in thousands)
Net cash provided by (used in):
Operating activities	$	(5,312	)	$	(10,854	)
Investing activities		—			—
Financing activities		3,018			(4,772	)
Change in cash, cash equivalents, and restricted cash	$	(2,294	)	$	(15,626	)

Operating activities. Net cash used in operating activities was $5.3 million and $10.9 million for the six months ended June 30, 2024 and 2023, respectively, and was primarily due to our net loss and changes in our working capital, partially offset by non-cash charges including stock-based compensation.

Financing activities. Net cash provided by financing activities was $3.0 million for the six months ended June 30, 2024 and primarily resulted from periodic issuances and sales of our common stock under the Sales Agreement with JonesTrading and LPC Purchase Agreement. Net cash used in financing activities was $4.8 million for the six months ended June 30, 2023 and primarily resulted from our repayment of $10.0 million to RGC under the RGC Loan Agreement, as amended, partially offset by $3.0 million in net proceeds from the March 2023 Private Placement and $2.2 million in periodic issuances and sales of our common stock under the LPC Purchase Agreement and Sales Agreement with JonesTrading.

Funding Requirements

At June 30, 2024, we had cash and cash equivalents totaling $6.3 million, of which $0.1 million is pledged as collateral for our obligations under our corporate headquarters facility lease. We expect to continue to incur significant expenses and operating losses for the foreseeable future in connection with the Dissolution and the Reduction in Force. Our existing cash and cash equivalents as of June 30, 2024 will be used primarily to fund the wind down of our operations, execute the Reduction in Force, and execute the Plan of Dissolution, as approved by our board of directors and subject to the approval of our stockholders. We intend to hold a Special Meeting to seek stockholder approval of the Plan of Dissolution.

Our existing cash and cash equivalents will not be sufficient to meet our obligations as they become due within one year from the date the unaudited condensed consolidated financial statements are issued.

Our forecast of the period of time through which our financial resources will be adequate to support the Dissolution and Reduction in Force is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. These uncertainties include, but are not limited to, the ultimate amount of our liabilities, the operating costs and amounts to be reserved for claims, obligations and provisions during the liquidation and winding-up process, the value (if any) of our rights to data generated in clinical trials of TRC102, the timing and costs to solicit stockholder approval of the Plan of Dissolution and the related timing to complete any related transactions. Any or all of these factors could adversely impact the Company’s anticipated cash resources in future periods.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As we are a “smaller reporting company”, as defined in Rule 12b-2 of the Exchange Act we are not required to provide the information required by this Item.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified and pursuant to the requirements of the Securities and Exchange Commission’s (SEC) rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer (who is also our principal executive officer and principal financial officer), to allow for timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rule 13a-15(b) promulgated under the Exchange Act, we carried out an evaluation, with the participation of our management, including our Chief Executive Officer and Chief Financial Officer (who is also our principal executive officer and principal financial officer), of the effectiveness of our disclosure controls and procedures as of June 30, 2024, the end of the period covered by this Quarterly Report. Based upon the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Subsequent to June 30, 2024, we implemented the Reduction in Force impacting Mr. Brown as our Chief Financial Officer and Dr. Theuer resigned as our Chief Executive Officer, each effective July 31, 2024. Also effective July 31, 2024, our then-board of directors appointed Mr. Jalbert as our Chief Executive Officer and Chief Financial Officer, including for the purposes of providing certifications regarding our disclosure controls and procedures. The workforce reduction and appointment of Mr. Jalbert resulted in necessary changes to our system of internal controls as Mr. Jalbert is performing control activities that he was not performing prior to the Reduction in Force. We expect changes in our system of internal controls over financial reporting in future periods as we align our control structure with the current workforce.

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are not currently a party to any material legal proceedings. From time to time, we may be involved in various claims and legal proceedings relating to claims arising out of our operations. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

ITEM 1A. RISK FACTORS

Certain factors may have a material adverse effect on our business, financial condition and results of operations, and you should carefully consider them. Accordingly, in evaluating our business, we encourage you to consider the following discussion of risk factors, in its entirety, together with the other information contained in this Quarterly Report and in our other public filings with the SEC, including in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC. The risks described below and in our other filings with the SEC are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results. If any of the risks actually occur, our business, financial condition, and/or results of operations could be negatively affected.

The announcement and implementation of the Reduction in Force of our employees and the Dissolution, whether or not such Dissolution is consummated, may adversely affect our business.

The announcement and implementation of the Reduction in Force of our employees in connection with the wind-down of our operations and the Dissolution, whether or not such Dissolution is consummated, may adversely affect the trading price of our common stock, our business and our relationships with third parties, including our partners and clinical research organizations.

We cannot assure you as to the amount of distributions, if any, to be made to our stockholders.

We cannot predict with certainty the amount of distributions, if any, to our stockholders. However, while there is some possibility that we may realize some value in the future from our rights to data generated in clinical trials of TRC102, based on the information currently available to us and if our stockholders approve the Dissolution, we expect as of the date of this report that there will not be any amounts available for distribution to our stockholders in the Dissolution. Uncertainties as to the ultimate amount of our liabilities, the operating costs and amounts to be reserved for claims, obligations and provisions during the liquidation and winding-up process, the value (if any) of our rights to data generated in clinical trials of TRC102 and the related timing to complete such transactions make it impossible to predict with certainty the actual amount, if any, that may ultimately be available for distribution to stockholders or the timing of any such distributions. Examples of uncertainties that could reduce the value of distributions to our stockholders include: unanticipated costs relating to the defense, satisfaction or settlement of lawsuits or other claims threatened against us or our directors or officers; amounts necessary to resolve claims of any creditors or other third parties; and delays in the liquidation and dissolution or other winding up process.

In addition, as we wind down, we will continue to incur expenses from operations, including directors’ and officers’ insurance; payments to service providers and any continuing employees or consultants; taxes; legal, accounting and consulting fees and expenses related to our filing obligations with the SEC, which will reduce any amounts available for distribution to our stockholders. As a result, there is no assurance that any amounts will be available to be distributed to our stockholders if the board of directors proceeds with the Dissolution, and, based on our current estimate, do not expect any amounts to be distributed to our stockholders. In addition, if our stockholders do not approve the Dissolution, we will not be able to proceed with the Dissolution and no liquidating distributions will be made in connection therewith.

The board of directors will determine, in its sole discretion, the timing of the distribution of any amounts to our stockholders in the Dissolution. We can provide no assurance as to if or when any such distribution will be made, and we cannot provide any assurance as to the amount to be paid to stockholders in any such distribution, if one is made. Based on our current estimates, we do not expect our stockholders to receive any distributions. To the extent funds are available for distribution to stockholders, the board of directors intends to seek to distribute such funds to our stockholders as quickly as possible, as permitted by the DGCL, and intends to take all reasonable actions to optimize the distributable value to our stockholders.

The amount of distributions, if any, to be made to our stockholders in connection with the Dissolution depends entirely on the success of TRC102, our only product candidate currently in clinical development. Even if the Phase 2 trial in TRC102 results in positive data and we are able to enter into arrangements with third parties to develop and/or commercialize TRC102 and thereby monetize or otherwise obtain value for the data, the cash or other assets we receive as consideration for the data may not be sufficient to allow us to make any distribution to stockholders. If the Phase 2 trial in TRC102 does not result in positive data or if we are unable to enter into arrangements with third parties to develop and/or commercialize TRC102 and thereby monetize or otherwise obtain value for the data, we do not expect that there will be any possibility of our making any distribution to stockholders.

Our primary remaining assets are our rights to data generated in clinical trials of TRC102. Based on positive Phase 1 clinical trial data generated by us, NCI is currently conducting an ongoing Phase 2 clinical trial of TRC102 in lung cancer. If the data in the ongoing clinical trial of TRC102 is positive, we have no ability to independently further develop, seek regulatory approval for, or commercialize TRC102, will need to identify a third party with adequate financial and scientific resources to do so, and will need to enter into satisfactory sale or licensing arrangements whereby we sell or license our rights to the data to that third party in exchange for financial consideration, some of which consideration may be dependent on the third party successfully developing and/or commercializing TRC102. We may not be able to identify any such third party or enter into any such arrangements for many reasons, including TRC102’s relative lack of intellectual property protection, and any consideration we do receive in connection with any such arrangements may not be sufficient to allow us to make any distributions to stockholders, including because the third party is not successful in developing and/or commercializing TRC102. TRC102 will require substantial additional clinical development, manufacturing and regulatory approval before it may be commercialized, and achieving any such regulatory approval will take many years, require the expenditure of substantial resources, and be subject to extensive and rigorous review and regulation by numerous government authorities in the U.S. and in other countries where the third party may want to seek such regulatory approval. There can be no assurance that TRC102 will ever achieve regulatory approval.

If the Phase 2 trial in TRC102 does not result in positive data or if we are unable to enter into arrangements with third parties to develop and/or commercialize TRC102 and thereby monetize or otherwise obtain value for the data, there will not be any possibility of our making any distribution to stockholders.

We cannot predict the timing of the distributions, if any, to stockholders.

Our current intention is that, if the Plan of Dissolution is approved by our stockholders, a Certificate of Dissolution would be filed after such approval; however, the decision of whether or not to proceed with the Dissolution will be made by the board of directors in its sole discretion. No further stockholder approval would be required to effect the Dissolution. However, if the board of directors determines that the Dissolution is not in our best interest or the best interest of our stockholders, the board of directors may, in its sole discretion, abandon the Dissolution or may amend or modify the Plan of Dissolution to the extent permitted by Delaware law without the necessity of further stockholder approval. After the Certificate of Dissolution has been filed, revocation of the Dissolution would require stockholder approval under Delaware law.

Under Delaware law, before a dissolved corporation may make any distribution to its stockholders, it must pay or make reasonable provision to pay all of its claims and obligations, including all contingent, conditional or unmatured contractual claims known to the corporation. Furthermore, we may be subject to potential liabilities relating to litigation matters or indemnification obligations, if any, to third parties or to our current and former officers and directors. It might take significant time to resolve these matters, and as a result we are unable to predict the timing of distributions, if any are made, to our stockholders.

If our stockholders do not approve the Plan of Dissolution, our board of directors will seek other alternatives to dissolving the Company. We do not anticipate that any amounts available to our stockholders under those scenarios would exceed any amounts available in connection with the Dissolution.

On July 30, 2024, we issued a press release announcing that, in order to reduce our cash expenditures, our board of directors approved and our management implemented the Reduction in Force. On July 30, 2024, our board of directors approved the Dissolution of the Company through a Plan of Dissolution, subject to stockholder approval.

If our stockholders do not approve the Plan of Dissolution, our board of directors will explore alternatives to the Dissolution, if any, available to the Company, including seeking voluntary dissolution at a later time with diminished assets or seeking bankruptcy protection. Given that our primary remaining assets are limited to our rights to data generated in clinical trials of TRC102, we do not anticipate that any amounts available to our stockholders under those scenarios would exceed any amounts available in connection with the Dissolution.

We will continue to incur claims, liabilities and expenses and a delay in the consummation of the Dissolution will reduce the amount available for distribution to stockholders, if any.

Claims, liabilities and expenses from operations, such as operating costs, salaries, insurance, payroll and local taxes, legal, accounting and consulting fees and miscellaneous expenses, will continue to be incurred as we wind-up the business. These expenses will reduce the amount of assets available for ultimate distribution to our stockholders, if any.

Our stockholders may be liable to third parties for part or all of the amount received from us in our liquidating distributions if reserves are inadequate.

If the Dissolution becomes effective, we may establish a contingency reserve designed to satisfy any additional claims and obligations that may arise. Any contingency reserve may not be adequate to cover all of our claims and obligations. Under the DGCL, if we fail to create an adequate contingency reserve for payment of our expenses, claims and obligations, each stockholder could be held liable for payment to our creditors for claims brought prior to or after the expiration of the three year period after we file the Certificate of Dissolution with the Secretary of State, up to the lesser of (i) such stockholder’s pro rata share of amounts owed to creditors in excess of the contingency reserve and (ii) the amounts previously received by such stockholder in Dissolution from us and from any liquidating trust or trusts. Accordingly, in such event, a stockholder could be required to return part or all of the distributions previously made to such stockholder, if any, and a stockholder could receive nothing from us under the Plan of Dissolution. Moreover, if a stockholder has paid taxes on amounts previously received, a repayment of all or a portion of such amount could result in a situation in which a stockholder may incur a net tax cost if the repayment of the amount previously distributed does not cause a commensurate reduction in taxes payable in an amount equal to the amount of the taxes paid on amounts previously distributed.

We may be subject to securities or other litigation, which is expensive and could divert our attention.

We may be subject to securities class action or other litigation in connection with the Dissolution. Securities or other litigation against us could result in substantial costs and divert our management’s attention from completing the Dissolution, which could harm our business and increase our expenses, which could decrease the amount available for distribution to our stockholders, if any.

We may no longer be required to file reports with the SEC during the pendency of or following the consummation of the Dissolution.

We may file a notice terminating our reporting obligations under the Exchange Act during the pendency of or following the consummation of the Dissolution. Once effective, we may no longer be required to file any annual, quarterly or other current reports with the SEC. If we are no longer required to file reports with the SEC, stockholders will have very little public information available about us and our operations which will further affect the trading and liquidity of our common stock.

If we continue to be required to file reports with the SEC, we will incur costs and expenses relating to such reporting obligations.

If we continue to have obligations to file annual, quarterly and other current reports with the SEC during the pendency of or following the consummation of the Dissolution, we will have to incur costs and expenses to make such filings and to comply with the Exchange Act and the rules and regulations promulgated thereunder.

If we fail to retain the services of appropriate personnel, the Plan of Dissolution may not succeed.

The success of the Plan of Dissolution depends in large part upon our ability to retain the services of qualified personnel who will be charged with winding up our business following the Dissolution, subject to the board of directors’ continued oversight. The retention of qualified personnel may be particularly difficult under our current circumstances. There can be no assurance that we will be successful in retaining the services of such qualified personnel or that we will be able to retain the services of such qualified personnel for the amounts we are willing to pay for such services.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Recent Sales of Unregistered Securities

There were no sales of equity securities during the period covered by this report that were not registered under the Securities Act and were not previously reported in a Current Report on Form 8-K filed by us.

Purchases of Equity Securities by the Issue and Affiliated Purchasers

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS


Exhibit Number		Description of Document

3.1(1)		Amended and Restated Certificate of Incorporation.

3.2(2)		Certificate of Amendment to the Amended and Restated Certificate of Incorporation of TRACON Pharmaceuticals, Inc.

3.4(1)		Amended and Restated Bylaws.

10.1†(3)		Amended Non-Employee Director Compensation Policy.

31.1*		Certification of the Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934.

32.1*		Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(b) or 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.

101.INS		Inline XBRL Instance Document

101.SCH		Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents

104		The cover page for the Company’s Quarterly Report on Form 10-Q has been formatted in Inline XBRL and contained in Exhibit 101


*		Filed herewith.
(1)		Incorporated by reference to the Registrant’s Current Report on Form 8-K, filed with the SEC on February 4, 2015.
(2)		Incorporated by reference to the Registrant’s Current Report on Form 8-K, filed with the SEC on April 8, 2024.
(3)		Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 14, 2024.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	TRACON Pharmaceuticals, Inc.

Date: August 13, 2024	/s/ Craig R. Jalbert
	Craig R. Jalbert President and Chief Executive Officer (Principal Executive Officer and Principal Financial and Accounting Officer)

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Craig Jalbert, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2024 of TRACON Pharmaceuticals, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the then-serving audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: August 13, 2024	/s/ Craig Jalbert
	Craig Jalbert
	President and Chief Executive Officer (Principal Executive Officer and Principal Financial and Accounting Officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Craig Jalbert, President and Chief Executive Officer of TRACON Pharmaceuticals, Inc. (the “Registrant”), do hereby certify in accordance with Rule 13a-14(b) and 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1) this Quarterly Report on Form 10-Q of the Registrant for the period ended June 30, 2024, to which this certification is attached as an exhibit (the “Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.


Date: August 13, 2024	/s/ Craig Jalbert
	Craig Jalbert
	President and Chief Executive Officer (Principal Executive Officer and Principal Financial and Accounting Officer)

This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of TRACON Pharmaceuticals, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

Document and Entity Information - shares	6 Months Ended
Document and Entity Information - shares	Jun. 30, 2024	Aug. 08, 2024
Cover [Abstract]
Entity Registrant Name	TRACON Pharmaceuticals, Inc.
Entity Central Index Key	0001394319
Document Type	10-Q
Document Period End Date	Jun. 30, 2024
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Common Stock, Shares Outstanding		3,407,564
Document Fiscal Year Focus	2024
Document Fiscal Period Focus	Q2
Trading Symbol	TCON
Entity Shell Company	false
Entity File Number	001-36818
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	34-2037594
Title of 12(b) Security	Common Stock, par value $0.001 per share
Entity Address, Address Line One	4350 La Jolla Village Drive
Entity Address, Address Line Two	Suite 800
Entity Address, City or Town	San Diego
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92122
City Area Code	858
Local Phone Number	550-0780
Document Quarterly Report	true
Document Transition Report	false

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2024	Dec. 31, 2023
Current assets:
Cash and cash equivalents	$ 6,270	$ 8,564
Prepaid and other assets	240	526
Total current assets	6,510	9,090
Property and equipment, net	30	37
Restricted cash	73	73
Other assets	787	905
Total assets	7,400	10,105
Current liabilities:
Accounts payable	2,652	2,544
Accrued expenses	6,823	7,211
Accrued compensation and related expenses	416	427
Total current liabilities	9,891	10,182
Other long-term liabilities	598	732
Commitments and contingencies (Note 3)
Stockholders' deficit:
Preferred stock, $0.001 par value, authorized shares - 10,000,000 at June 30, 2024 and December 31, 2023; issued and outstanding shares - none
Common stock, $0.001 par value; authorized shares - 60,000,000 at June 30, 2024 and December 31, 2023; issued and outstanding shares - 3,407,564 and 2,285,818 at June 30, 2024 and December 31, 2023, respectively	3	2
Additional paid-in capital	243,414	239,688
Accumulated deficit	(246,506)	(240,499)
Total stockholders' deficit	(3,089)	(809)
Total liabilities and stockholders' deficit	$ 7,400	$ 10,105

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2024	Dec. 31, 2023
Statement of Financial Position [Abstract]
Preferred Stock, Par or Stated Value Per Share	$ 0.001	$ 0.001
Preferred Stock, Shares Authorized	10,000,000	10,000,000
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	60,000,000	60,000,000
Common stock, shares issued	3,407,564	2,285,818
Common stock, shares outstanding	3,407,564	2,285,818

Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
Income Statement [Abstract]
Revenue	$ 55	$ 9,000	$ 155	$ 9,000
Revenue, Product and Service [Extensible Enumeration]	us-gaap:CollaborativeArrangementMember		us-gaap:CollaborativeArrangementMember
Operating expenses:
Research and development	$ 1,350	3,488	$ 3,228	8,457
General and administrative	1,617	1,916	3,051	4,260
Arbitration success fees		4,375		4,375
Total operating expenses	2,967	9,779	6,279	17,092
Loss from operations	(2,912)	(779)	(6,124)	(8,092)
Other income (expense):
Interest income (expense), net	75	(5,507)	128	(6,695)
Other expense	(2)	0	(11)	(3)
Total other income (expense)	73	(5,507)	117	(6,698)
Net loss	$ (2,839)	$ (6,286)	$ (6,007)	$ (14,790)
Net loss per share, basic	$ (0.94)	$ (3.94)	$ (2.23)	$ (10.36)
Net loss per share, diluted	$ (0.94)	$ (3.94)	$ (2.23)	$ (10.36)
Weighted-average shares outstanding, basic	3,008,090	1,595,892	2,698,454	1,427,579
Weighted-average shares outstanding diluted	3,008,090	1,595,892	2,698,454	1,427,579

Condensed Consolidated Statements of Stockholders' Deficit - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Deficit
Balance at Dec. 31, 2022	$ (7,151)	$ 1	$ 229,759	$ (236,911)
Balance (in Shares) at Dec. 31, 2022		1,228,540
Increase (Decrease) in Shareholders' Equity (Deficit)
Stock-based compensation expense	484		484
Issuance of common stock and warrants, net of offering costs	4,099		4,099
Issuances of common stock and warrants, net of offering costs (in shares)		45,146
Net loss	(8,504)			(8,504)
Balance at Mar. 31, 2023	(11,072)	$ 1	234,342	(245,415)
Balance (in Shares) at Mar. 31, 2023		1,273,686
Balance at Dec. 31, 2022	(7,151)	$ 1	229,759	(236,911)
Balance (in Shares) at Dec. 31, 2022		1,228,540
Increase (Decrease) in Shareholders' Equity (Deficit)
Net loss	(14,790)
Balance at Jun. 30, 2023	$ (15,739)	$ 1	235,961	(251,701)
Balance (in Shares) at Jun. 30, 2023	1,403,776
Balance at Mar. 31, 2023	$ (11,072)	$ 1	234,342	(245,415)
Balance (in Shares) at Mar. 31, 2023		1,273,686
Increase (Decrease) in Shareholders' Equity (Deficit)
Stock-based compensation expense	502
Issuance of common stock, net of offering costs	1,074		1,074
Issuances of common stock, net of offering costs (in shares)		128,510
Issuance of common stock under equity plans	43		43
Issuance of common stock under equity plans (in shares)		1,580
Net loss	(6,286)			(6,286)
Balance at Jun. 30, 2023	$ (15,739)	$ 1	235,961	(251,701)
Balance (in Shares) at Jun. 30, 2023	1,403,776
Balance at Dec. 31, 2023	$ (809)	$ 2	239,688	(240,499)
Balance (in Shares) at Dec. 31, 2023		2,285,818
Increase (Decrease) in Shareholders' Equity (Deficit)
Stock-based compensation expense	383		383
Issuance of common stock, net of offering costs	1,832	$ 1	1,831
Issuances of common stock, net of offering costs (in shares)		375,989
Net loss	(3,168)			(3,168)
Balance at Mar. 31, 2024	(1,762)	$ 3	241,902	(243,667)
Balance (in Shares) at Mar. 31, 2024		2,661,807
Balance at Dec. 31, 2023	(809)	$ 2	239,688	(240,499)
Balance (in Shares) at Dec. 31, 2023		2,285,818
Increase (Decrease) in Shareholders' Equity (Deficit)
Net loss	(6,007)
Balance at Jun. 30, 2024	(3,089)	$ 3	243,414	(246,506)
Balance (in Shares) at Jun. 30, 2024		3,407,564
Balance at Mar. 31, 2024	(1,762)	$ 3	241,902	(243,667)
Balance (in Shares) at Mar. 31, 2024		2,661,807
Increase (Decrease) in Shareholders' Equity (Deficit)
Stock-based compensation expense	339		339
Issuance of common stock, net of offering costs	1,172		1,172
Issuances of common stock, net of offering costs (in shares)		745,057
Issuance of common stock under equity plans	1		1
Issuance of common stock under equity plans (in shares)		700
Net loss	(2,839)			(2,839)
Balance at Jun. 30, 2024	$ (3,089)	$ 3	$ 243,414	$ (246,506)
Balance (in Shares) at Jun. 30, 2024		3,407,564

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023
Cash flows from operating activities
Net loss	$ (6,007)	$ (14,790)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Stock-based compensation	722	986
Depreciation and amortization	7	7
Noncash interest		88
Amortization of debt discount		6,656
Lease asset amortization and liability accretion, net	5	12
Changes in assets and liabilities:
Collaboration receivable		(9,000)
Prepaid expenses and other assets	286	539
Accounts payable and accrued expenses	(314)	5,074
Accrued compensation and related expenses	(11)	(426)
Net cash used in operating activities	(5,312)	(10,854)
Cash flows from financing activities
Repayment of long-term debt		(10,000)
Proceeds from sale of common stock and warrants, net of offering costs	3,017	5,185
Proceeds from issuance of common stock under equity plans	1	43
Net cash provided by (used in) financing activities	3,018	(4,772)
Change in cash, cash equivalents, and restricted cash	(2,294)	(15,626)
Cash, cash equivalents, and restricted cash at beginning of period	8,637	17,500
Cash, cash equivalents, and restricted cash at end of period	$ 6,343	$ 1,874

Organization and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2024

Organization And Accounting Policies [Abstract]

Organization and Summary of Significant Accounting Policies

1. Organization and Summary of Significant Accounting Policies

Organization and Business

Basis of Presentation

Reverse Stock Split

Unaudited Interim Financial Information

Use of Estimates

Cash and Cash Equivalents

Restricted Cash

Concentration of Credit Risk

Property and Equipment

Leases

Revenue Recognition

Clinical Trial Expense Accruals

Research and Development Costs

Research and development costs, including license fees, are expensed as incurred.

Comprehensive Loss

Net Loss Per Share

Potentially dilutive securities not included in the calculation of diluted net loss per share because to do so would be anti-dilutive are as follows (in common stock equivalent shares):


	June 30,
	2024		2023
Warrants to purchase common stock		7,807		76,720
Common stock options		184,630		156,066
ESPP shares		279		3,458
		192,716		236,244

Financial Instruments and Fair Value Measurements

6 Months Ended

Jun. 30, 2024

Fair Value Disclosures [Abstract]

Financial Instruments and Fair Value Measurements

2. Financial Instruments and Fair Value Measurements

Cash equivalents, which are classified as equity securities, and restricted cash consisted of the following (in thousands):


	June 30, 2024								December 31, 2023
	Cost		Unrealized Gain		Unrealized (Loss)		Estimated Fair Value		Cost		Unrealized Gain		Unrealized (Loss)		Estimated Fair Value
Money market funds	$	6,126	$	—	$	—	$	6,126	$	3,689	$	—	$	—	$	3,689

Classified as:
Cash equivalents							$	6,053							$	3,616
Restricted cash								73								73
Total cash equivalents and restricted cash							$	6,126							$	3,689

As of June 30, 2024 and December 31, 2023, the Company had no investments.


Level 1:	Observable inputs such as quoted prices in active markets.

Level 2:	Inputs, other than the quoted prices in active markets that are observable either directly or indirectly.

Level 3:	Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements.

None of the Company’s non-financial assets or liabilities are recorded at fair value on a non-recurring basis. No transfers between levels have occurred during the periods presented.

The fair values of the Company’s assets and liabilities, which are measured at fair value on a recurring basis, were determined using the following inputs (in thousands):


			Fair Value Measurements at
			Reporting Date Using
			Quoted Prices in		Significant
			Active Markets		Other		Significant
			for Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
At June 30, 2024
Money market funds	$	6,126	$	—	$	6,126	$	—

At December 31, 2023
Money market funds	$	3,689	$	—	$	3,689	$	—

Commitments and Contingencies

6 Months Ended

Jun. 30, 2024

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

3. Commitments and Contingencies

License Agreements

Stockholders' Deficit

6 Months Ended

Jun. 30, 2024

Stockholders' Equity Note [Abstract]

Stockholders' Deficit

4. Stockholders’ Deficit

Equity Plan Activity

Common Stock Warrants

As of June 30, 2024, the Company had the following outstanding warrants for the purchase of common stock:


Expiration	Number of shares		Exercise price
May 3, 2025		269	$	522.00
September 2, 2032		7,538	$	39.80
		7,807

During the three and six months ended June 30, 2024 and 2023, the Company issued no shares of its common stock upon the exercise of warrants.

Stock-Based Compensation Expense

The weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of the employee stock option grants were as follows:


	Three Months Ended			Six Months Ended
	June 30,			June 30,
	2023			2024			2023
Risk-free interest rate		3.7	%		4.2	%		3.5	%
Expected volatility		92.0	%		99.1	%		90.0	%
Expected term (in years)		5.5			6.3			6.2
Expected dividend yield		—	%		—	%		—	%

There were no employee stock option grants during the three months ended June 30, 2024.

Stock compensation expense for the ESPP was immaterial for the three and six months ended June 30, 2024 and 2023.

The allocation of stock-based compensation expense was as follows (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Research and development	$	143	$	235	$	291	$	462
General and administrative		196		267		431		524
	$	339	$	502	$	722	$	986

Subsequent Events

6 Months Ended

Jun. 30, 2024

Subsequent Events [Abstract]

Subsequent Events

5. Subsequent Events

Organization and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2024

Organization And Accounting Policies [Abstract]

Organization and Business

Basis of Presentation

Reverse Stock Split

Unaudited Interim Financial Information

Use of Estimates

Cash and Cash Equivalents

Restricted Cash

Concentration of Credit Risk

Property and Equipment

Leases

Revenue Recognition

Clinical Trial Expense Accruals

Research and Development Costs

Research and development costs, including license fees, are expensed as incurred.

Comprehensive Loss

Net Loss Per Share

Potentially dilutive securities not included in the calculation of diluted net loss per share because to do so would be anti-dilutive are as follows (in common stock equivalent shares):


	June 30,
	2024		2023
Warrants to purchase common stock		7,807		76,720
Common stock options		184,630		156,066
ESPP shares		279		3,458
		192,716		236,244

Organization and Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2024

Organization And Accounting Policies [Abstract]

Schedule of potentially dilutive securities not included in the calculation of diluted net loss per share

Potentially dilutive securities not included in the calculation of diluted net loss per share because to do so would be anti-dilutive are as follows (in common stock equivalent shares):


	June 30,
	2024		2023
Warrants to purchase common stock		7,807		76,720
Common stock options		184,630		156,066
ESPP shares		279		3,458
		192,716		236,244

Financial Instruments and Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2024

Fair Value Disclosures [Abstract]

Schedule of Available-for-sale Securities and Equity Securities

Cash equivalents, which are classified as equity securities, and restricted cash consisted of the following (in thousands):


	June 30, 2024								December 31, 2023
	Cost		Unrealized Gain		Unrealized (Loss)		Estimated Fair Value		Cost		Unrealized Gain		Unrealized (Loss)		Estimated Fair Value
Money market funds	$	6,126	$	—	$	—	$	6,126	$	3,689	$	—	$	—	$	3,689

Classified as:
Cash equivalents							$	6,053							$	3,616
Restricted cash								73								73
Total cash equivalents and restricted cash							$	6,126							$	3,689

Schedule of assets and liabilities measured at fair value on a recurring basis

The fair values of the Company’s assets and liabilities, which are measured at fair value on a recurring basis, were determined using the following inputs (in thousands):


			Fair Value Measurements at
			Reporting Date Using
			Quoted Prices in		Significant
			Active Markets		Other		Significant
			for Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
At June 30, 2024
Money market funds	$	6,126	$	—	$	6,126	$	—

At December 31, 2023
Money market funds	$	3,689	$	—	$	3,689	$	—

Stockholders' Deficit (Tables)

6 Months Ended

Jun. 30, 2024

Stockholders' Equity Note [Abstract]

Schedule of outstanding warrants for purchase of common stock issued

As of June 30, 2024, the Company had the following outstanding warrants for the purchase of common stock:


Expiration	Number of shares		Exercise price
May 3, 2025		269	$	522.00
September 2, 2032		7,538	$	39.80
		7,807

Summary of weighted-average assumptions used Black-Scholes option pricing model to determine the fair value

The weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of the employee stock option grants were as follows:


	Three Months Ended			Six Months Ended
	June 30,			June 30,
	2023			2024			2023
Risk-free interest rate		3.7	%		4.2	%		3.5	%
Expected volatility		92.0	%		99.1	%		90.0	%
Expected term (in years)		5.5			6.3			6.2
Expected dividend yield		—	%		—	%		—	%

Summary of allocation of stock-based compensation expense

The allocation of stock-based compensation expense was as follows (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Research and development	$	143	$	235	$	291	$	462
General and administrative		196		267		431		524
	$	339	$	502	$	722	$	986

Organization and Summary of Significant Accounting Policies - Additional Information (Details) $ in Thousands		6 Months Ended
	Apr. 08, 2024 shares	Jun. 30, 2024 USD ($) shares	Dec. 31, 2023 USD ($) shares
Basis of Presentation
Accumulated deficit		$ (246,506)	$ (240,499)
Cash, cash equivalents		6,300
Restricted cash		$ 73	$ 73
Reverse stock split, description		one-for-twenty reverse stock split of its common stock (the Reverse Stock Split)
Reverse stock split ratio	0.05
Common stock, shares authorized \| shares	60,000,000	60,000,000	60,000,000
Preferred stock, shares authorized \| shares	100,000,000	10,000,000	10,000,000
Estimated useful life		5 years

Organization and Summary of Significant Accounting Policies - Schedule of Potentially Dilutive Securities Not Included in the Calculation of Diluted Net Loss Per Share (Details) - shares	6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023
Antidilutive securities
Antidilutive securities	192,716	236,244
Warrants to Purchase Common Stock
Antidilutive securities
Antidilutive securities	7,807	76,720
Common Stock Options
Antidilutive securities
Antidilutive securities	184,630	156,066
ESPP Shares
Antidilutive securities
Antidilutive securities	279	3,458

Financial Instruments and Fair Value Measurements - Schedule of Available-for-sale Securities and Equity Securities (Details) - USD ($) $ in Thousands	Jun. 30, 2024	Dec. 31, 2023
Short-Term Investments, Cash Equivalents and Fair Value Measurements
Cash equivalents	$ 6,053	$ 3,616
Restricted cash	73	73
Total cash equivalents, restricted cash, and other assets	6,126	3,689
Money market funds
Short-Term Investments, Cash Equivalents and Fair Value Measurements
Cost	6,126	3,689
Estimated Fair Value	$ 6,126	$ 3,689

Financial Instruments and Fair Value Measurements - Additional Information (Details) - USD ($)	Jun. 30, 2024	Dec. 31, 2023
Fair Value Disclosures [Abstract]
Short-term investments	$ 0	$ 0
Amount of transfers between levels	$ 0	$ 0

Financial Instruments and Fair Value Measurements - Schedule of Assets and Liabilities Measured at Fair Value on a Recurring Basis (Details) - Recurring - Money market funds - USD ($) $ in Thousands	Jun. 30, 2024	Dec. 31, 2023
Assets:
Fair value, assets	$ 6,126	$ 3,689
Level 2
Assets:
Fair value, assets	$ 6,126	$ 3,689

Commitments and Contingencies - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2023	Jun. 30, 2024
Commitments and Contingencies
Arbitration success fees	$ 4,375	$ 4,375
Research and development arrangement
Commitments and Contingencies
Potential milestone payable			$ 9,600

Stockholders' Deficit - Additional Information (Details) - shares	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023	Dec. 31, 2023
Class Of Stock [Line Items]
Employee stock option grants during the period	0		0
Common Stock
Class Of Stock [Line Items]
Issuance of common stock upon exercise of pre funded warrants.	0	0	0	0
Common Stock \| Equity Plan Activity
Class Of Stock [Line Items]
Shares issued upon exercise of outstanding stock options	0		0		0
Shares issued in connection with employee stock purchase plan	700		700		2,280
Common Stock \| Equity Plan Activity \| Restricted Stock Units
Class Of Stock [Line Items]
Shares issued upon vesting of restricted stock units	0		0		0

Stockholders' Deficit - Schedule of Outstanding Warrants for Purchase of Common Stock Issued (Details)	Jun. 30, 2024 $ / shares shares
Class Of Stock [Line Items]
Conversion of warrants to purchase shares	7,807
May 3, 2025
Class Of Stock [Line Items]
Conversion of warrants to purchase shares	269
Exercise price (per share) \| $ / shares	$ 522.00
September 2, 2032
Class Of Stock [Line Items]
Conversion of warrants to purchase shares	7,538
Exercise price (per share) \| $ / shares	$ 39.80

Stockholders' Deficit - Summary of Weighted-Average Assumptions Fair Value of the Employee Stock Option Grants (Details) - Stock Option	3 Months Ended	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
Class Of Stock [Line Items]
Risk-free interest rate	3.70%	4.20%	3.50%
Expected volatility	92.00%	99.10%	90.00%
Expected term (in years)	5 years 6 months	6 years 3 months 18 days	6 years 2 months 12 days
Expected dividend yield	0.00%	0.00%	0.00%

Stockholders' Deficit - Summary of Allocation of Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2024	Jun. 30, 2023	Jun. 30, 2024	Jun. 30, 2023
Class Of Stock [Line Items]
Stock based compensation expense	$ 339	$ 502	$ 722	$ 986
Research and development
Class Of Stock [Line Items]
Stock based compensation expense	143	235	291	462
General and administrative
Class Of Stock [Line Items]
Stock based compensation expense	$ 196	$ 267	$ 431	$ 524