Alaunos Therapeutics Inc

Organization

Overview

Alaunos Therapeutics, Inc., which is referred to herein as “Alaunos,” or the “Company,” is a pre-clinical obesity and metabolic disorder and clinical-stage oncology-focused cell therapy company with a current focus on developing small molecules that are expected to be efficacious against obesity and other metabolic disorders and was historically involved in the development of adoptive TCR therapies, designed to treat multiple solid tumor types in large cancer patient populations with unmet clinical needs. The Company is currently working to develop novel small molecule-based obesity therapeutics.

The Company’s operations to date have consisted primarily of conducting research and development and raising capital to fund those efforts.

As of March 31, 2025, there were 1,601,252 shares of common stock outstanding and an additional 71,792 shares of common stock reserved for issuance pursuant to outstanding stock options and warrants.

The accompanying condensed financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business.

Liquidity and Going Concern

The Company has operated at a loss since its inception in 2003 and has no recurring revenue from operations. The Company anticipates that losses will continue for the foreseeable future. As of March 31, 2025, the Company had approximately $0.3 million of cash and cash equivalents. The Company’s accumulated deficit at March 31, 2025 was approximately $921.5 million. Given its current development plans and cash management efforts, the Company anticipates cash resources will be sufficient to fund operations into the second quarter of 2025. The Company’s ability to continue operations after its current cash resources are exhausted depends on future events outside of the Company's control, including its ability to obtain additional financing or to achieve profitable results, as to which no assurances can be given. If adequate additional funds are not available when required, or if the Company is unsuccessful in entering into partnership agreements for further development of its product candidates, management may need to curtail its development efforts and planned operations to conserve cash until sufficient additional capital is raised. There can be no assurances that such a plan would be successful.

Based on the current cash forecast and the Company's dependence on its ability to obtain additional financing to fund its operations after the current resources are exhausted, about which there can be no certainty, management has determined that the Company's present capital resources will not be sufficient to fund its planned operations for at least one year from the issuance date of the condensed financial statements, and substantial doubt as to the Company's ability to continue as a going concern exists. This forecast of cash resources is forward-looking information that involves risks and uncertainties, and the actual amount of expenses could vary materially and adversely as a result of a number of factors.

Basis of Presentation

The accompanying unaudited interim condensed financial statements reflect all adjustments (which are normal and recurring) that are necessary for a fair presentation of the financial position of the Company and its results of operations and cash flows for the periods presented. The unaudited interim condensed financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 2024, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the SEC on March 31, 2025, or the Annual Report.

The results disclosed in the statements of operations for the three months ended March 31, 2025 are not necessarily indicative of the results to be expected for the full fiscal year 2025.

Use of Estimates

The preparation of condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting period. Although the Company regularly assesses these estimates, actual results could differ from those estimates. Changes in estimates are recorded in the period in which they become known.

Reverse Stock Splits

As previously disclosed, in January 2024, the Company completed a reverse stock split of the Company’s common stock at a ratio of 1-for-15 (the “First Reverse Split”). In connection therewith, Company decreased the number of authorized shares of common stock from 520,000,000 to 34,666,667. In July 2024, the Company completed an additional a reverse stock split of the Company’s common stock at a ratio of 1-for-10 (the “Second Reverse Split”) (together with the First Reverse Split, the “Reverse Splits”). In connection with the Second Reverse Split, the Company further decreased the number of authorized shares of common stock from 34,666,667 to 5,000,000.

No fractional shares were issued in connection with the Reverse Splits. Stockholders of record who would otherwise have been entitled to receive fractional shares as a result of the Reverse Splits received a cash payment in lieu thereof at a price equal to the fraction to which the stockholder would otherwise be entitled multiplied by the closing sales price per share of the common stock on the effective date of the Reverse Splits..

All share and per share data in the accompanying condensed financial statements and notes thereto have been retroactively adjusted for all periods presented to reflect the Reverse Splits as if it had occurred at the beginning of the earliest period presented.

Nasdaq Stockholders' Equity Deficiency Notice

On April 7, 2025, the Company received a notice (the “Notice”) from the Listing Qualifications staff of Nasdaq notifying the Company that the Company’s stockholders equity as reported in its Annual Report on Form 10-K for the period ended December 31, 2024 (the “2024 10-K”), did not satisfy the continued listing requirements under Nasdaq Listing Rule 5550(b)(1) for the Nasdaq Capital Market, which requires that a listed company’s stockholder equity be at least $2.5 million. In its 2024 Form 10-K, the Company reported stockholders’ equity of $2.1 million, and, as a result, does not currently satisfy Nasdaq Listing Rule 5550(b)(1).

The Notice has no immediate effect on the Company’s listing on the Nasdaq Capital Market. In accordance with Nasdaq rules, the Company has 45 calendar days from the date of the notification to submit a plan to regain compliance with Nasdaq Listing Rule 5550(b)(1). The Company intends to submit a compliance plan within 45 days of the date of the notification to Nasdaq and is evaluating available options to resolve the deficiency and regain compliance. If the Company’s compliance plan is accepted, the Company may be granted up to 180 calendar days from April 7, 2025, to evidence compliance.

Financings

2022 Equity Distribution Agreement

On August 12, 2022, the Company entered into an Equity Distribution Agreement, or the Equity Distribution Agreement, with Piper Sandler & Co., or Piper Sandler, pursuant to which the Company can offer and sell, from time to time at its sole discretion, shares of its common stock having an aggregate offering price of up to $50.0 million through Piper Sandler as its sales agent in an "at the market offering." Piper Sandler will receive a commission of 3.0% of the gross proceeds of any common stock sold under the Equity Distribution Agreement. During thethree months ended March 31, 2025 and 2024, there wereno sales of the Company's common stock under the Equity Distribution Agreement.

Summary of Significant Accounting Policies

Certain of our accounting estimates are important to the portrayal of our financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently certain. Estimates are susceptible to material changes as a result of changes in facts and circumstances. Management believes that clinical trial expenses and other research and development expenses, collaboration agreements, fair value measurements of stock-based compensation, and income taxes are its most critical accounting estimates. Our accounting policies are discussed in detail in Note 3 – Summary of Significant Accounting Policies in our Annual Report on Form 10-K for the year ended December 31, 2024. There have been no material changes in those policies since the filing of our 2024 Annual Report.

Net earnings per share

Basic earnings per share of common stock is computed by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted earnings per share is computed using the weighted-average number of shares of common stock outstanding during the period, plus the dilutive effect of outstanding options and warrants, using the treasury stock method and the average market price of the Company's common stock during the applicable period, unless their effect on net earnings per share is antidilutive. The effect of computing diluted net loss per common share was antidilutive for any potentially issuable shares of common stock and, as such, have been excluded from the calculation. Such potentially dilutive shares of common stock consisted of the following as of March 31, 2025 and 2024:

Commitments and Contingencies

License Agreements

Exclusive License Agreement with Precigen

On April 3, 2023, the Company entered into the Amended and Restated Exclusive License Agreement with Precigen, or the A&R License Agreement, which restated and amended the parties' previous license agreement in full. Under the A&R License Agreement, the Company still had exclusive, worldwide rights to research, develop and commercialize TCR products designed for neoantigens or driver mutations for the treatment of cancer and non-exclusive rights to use non-driver mutation TCRs. On October 4, 2024, pursuant to Section 10.2 of the License Agreement, the Company duly notified Precigen of its full termination of all rights under the License Agreement.

The decision to terminate the A&R License Agreement was made after a thorough review of our strategic priorities and business objectives, including recognizing that the non-viral Sleeping Beauty gene transfer platform patent will expire in 2026. The Company continues to prosecute certain of the intellectual property underlying the TCRs targeting driver mutations such as KRAS, TP53 and EGFR, and the hunTR TCR discovery platform used in the discovery of our proprietary TCR library. The Company continues to explore strategic alternatives, including, but not limited to, an acquisition, merger, reverse merger, sale of assets, strategic partnerships, capital raises or other transactions.

License Agreement 2015 and 2019 Research and Development Agreement —The University of Texas MD Anderson Cancer Center

In 2015, the Company, together with Precigen, entered into a license agreement, or the MD Anderson License with MD Anderson (which Precigen subsequently assigned to PGEN). Pursuant to the MD Anderson License, the Company, together with Precigen, holds an exclusive, worldwide license to certain technologies owned and licensed by MD Anderson including technologies relating to novel CAR T-cell therapies, non-viral gene transfer systems, genetic modification and/or propagation of immune cells and other cellular therapy approaches, Natural Killer, or NK Cells, and TCRs.

In 2015, the Company, Precigen and MD Anderson entered into the 2015 R&D Agreement to formalize the scope and process for the transfer by MD Anderson, pursuant to the terms of the MD Anderson License, of certain existing research programs and related technology rights, as well as the terms and conditions for future collaborative research and development of new and ongoing research programs.

As provided under the MD Anderson License, the Company provided funding for research and development activities in support of the research programs under the 2015 R&D Agreement. At various times, the Company amended the 2015 R&D Agreement to extend the term until December 31, 2026 and in 2019 entered into the 2019 R&D Agreement, pursuant to which the Company agreed to collaborate with respect to the TCR program. The Company didnot incur clinical costs from MD Anderson related to the these agreements for the three months ended March 31, 2025.

The 2019 R&D Agreement will terminate on December 31, 2026 and either party may terminate the 2019 R&D Agreement following written notice of a material breach. The 2019 R&D Agreement also contains customary provisions related to indemnification obligations, confidentiality and other matters.

In connection with the execution of the 2019 R&D Agreement, on October 22, 2019, the Company issued MD Anderson a warrant to purchase 22,222 shares of the Company's common stock, which is referred to as the MD Anderson Warrant. The MD Anderson Warrant has an initial exercise price of $1.50 per share, expires on December 31, 2026, and vests upon the occurrence of certain clinical milestones. As of March 31, 2025, the milestones have not been met.

Patent and Technology License Agreement—The University of Texas MD Anderson Cancer Center and the Texas A&M University System

On August 24, 2004, the Company entered into a patent and technology license agreement with MD Anderson and the Texas A&M University System, which the Company refers to, collectively, as the Licensors. Under this agreement, the Company was granted an exclusive, worldwide license to rights (including rights to U.S. and foreign patent and patent applications and related improvements and know-how) for the manufacture and commercialization of two classes of organic arsenicals (water- and lipid-based) for human and animal use. The class of water-based organic arsenicals includes darinaparsin.

Under the terms of the agreement, the Company may be required to make additional payments to the Licensors upon achievement of certain milestones in varying amounts which, on a cumulative basis could total up to an additional $4.5 million. In addition, the Licensors are entitled to receive royalty payments on sales from a licensed product and will also be entitled to receive a portion of any fees that the Company may receive from a possible sublicense under certain circumstances. During thethree months ended March 31, 2025 and 2024, the Company didnot incur any milestone expenses or royalty expenses on sales under this agreement.

Collaboration Agreement with Solasia Pharma K.K.

On March 7, 2011, the Company entered into a License and Collaboration Agreement with Solasia Pharma K. K., or Solasia, which was amended on July 31, 2014 to include an exclusive worldwide license and amended on October 14, 2021 to revise certain payment schedule details, or, as so amended, the Solasia License and Collaboration Agreement. Pursuant to the Solasia License and Collaboration Agreement, the Company granted Solasia an exclusive license to develop and commercialize darinaparsin in both intravenous and oral forms and related organic arsenic molecules, in all indications for human use.

As consideration for the license, the Company is eligible to receive from Solasia development- and sales-based milestones, a royalty on net sales of darinaparsin, once commercialized, and a percentage of any sublicense revenue generated by Solasia.

During the three months ended March 31, 2025, the Company didnot earn collaboration revenue and earned $2 thousand in royalty revenues on net sales under the Solasia License and Collaboration Agreement. During thethree months ended March 31, 2024, the Company didnot earn collaboration revenue and earned $1 thousand in royalty revenues on net sales under the Solasia License and Collaboration Agreement.

Insurance Contract

During the first quarter of 2025, the Company entered into an insurance arrangement whereby an insurance contract for certain risks which was previously paid in full began to be in force for a period of six years. Accordingly, the Company began amortizing the prepaid expense related to the contract. The Company has classified the prepaid contract between its current portion and long term portion. $746 is included in prepaid expenses and other current assets and $1,053 is included in prepaid expense and other assets in the accompanying condensed consolidated balance sheet as of March 31, 2025.

Stock-Based Compensation

The following table presents share-based compensation expense on all employee and non-employee awards included in the accompanying condensed statements of operations as follows:

The Company granted an aggregate of 12,000 stock options during thethree months ended March 31, 2025, with a weighted-average grant date fair value of $1.25 per share, and granted an aggregate of 40,000 stock options during thethree months ended March 31, 2024, with a weighted-average grant date fair value of $1.50 per share.

For thethree months ended March 31, 2025 and 2024, the fair value of stock options was estimated on the date of grant using a Black-Scholes option valuation model with the following assumptions:

Stock option activity under the Company’s stock option plans for thethree months ended March 31, 2025 was as follows:

At March 31, 2025, total unrecognized compensation costs related to unvested stock options outstanding amounted to $0.2 million. The cost is expected to be recognized over a weighted-average period of 1.47 years.

Warrants

The following is a summary of the Company's warrant activity for thethree months ended March 31, 2025:

Segment Information

The Chief Operating Decision Maker (“CODM”) for the Company is the Chief Executive Officer (the "CEO"). The Company’s CEO reviews operating results on an aggregate basis and manages the Company’s operations as a whole for the purpose of evaluating financial performance and allocating resources. This decision-making process reflects the way in which financial information is regularly reviewed and used by the CODM to evaluate performance, set operational targets, forecast future financial results, and allocate resources. Accordingly, the Company has determined that it has a single reportable and operating segment related to biopharmaceutical research and development.

The Company’s CODM assesses financial performance and allocates resources based on operating results which are also reported on the accompanying condensed statements of operations. The measure of segment assets is reported on the balance sheet as total consolidated assets. The CODM utilizes consolidated operating results by comparing actual results against budgeted amounts. As part of this process, consolidated net loss is a critical performance measure used to evaluate the Company’s operating performance and guide strategic decisions and resource allocations, including additional investments in research and development.

Subsequent Events.

Subscription Agreement

On April 11, 2025, the Company entered into a Subscription Agreement (the “Agreement”), by and among the Company and Watermill Asset Management, pursuant to which the Company agreed to issue and sell, in a private offering to the Purchaser shares of Series A-1 Convertible Preferred Stock of the Company, par value of $0.001 per share (the “Series A-1 Preferred Stock”), at a price per share of $1,000 (the “Preferred Offering”) for an aggregate purchase price of $500,000. The Preferred Offering also relates to the offering of the shares of the Company's common stock (the "Common Stock") issuable upon the conversion of or otherwise pursuant to the terms of the Series A-1 Preferred Stock). The Preferred Offering closed on April 11, 2025.

Series A-1 Preferred Stock

On April 11, 2025, the Company filed with the Secretary of State of the State of Delaware the Certificate of Designation of Series A-1 Convertible Preferred Stock of the Company and designated 1,000 shares of Series A-1 Preferred Stock.

Under the terms of the Certificate of Designation, each share of Series A-1 Preferred Stock has a stated value of $1,000 per share and, when issued, the Series A-1 Preferred Stock will be fully paid and non-assessable. The holders of Series A-1 Preferred Stock will be entitled to receive dividends at a rate of 10% per annum, payable in shares of Series A-1 Preferred Stock. In addition, the holders of Series A-1 Preferred Stock, to the extent any other dividends or distributions are declared for holders of the Common Stock, the holders of Series A-1 Preferred Stock will be entitled to participate in such dividends or distributions on an as-converted basis. The holders of Series A-1 Preferred Stock are entitled to vote alongside holders of Common Stock on an as-converted basis on a 1:1 ratio as Common Stock, voting together as a single class, with respect to any and all matters presented to the stockholders of the Company for their action. Each holder of Series A-1 Preferred Stock shall be entitled to a number of votes equal to the number of shares of Common Stock into which such holder’s shares of Series A-1 Preferred Stock are convertible pursuant to the Certificate of Designation as of the record date of such vote or written consent (or as otherwise required by applicable law).

Each holder of Series A-1 Preferred Stock has the right to convert all or any portion of the outstanding Series A-1 Preferred Stock held by such holder along with the aggregate accrued or accumulated and unpaid dividends thereon, at any time at such holder’s option, into shares of Common Stock in accordance with the terms of the Certificate of Designation. The initial fixed “Conversion Price” shall be $2.76 per share for Series A-1 Preferred Stock, subject to proportional adjustments in accordance with the Certificate of Designation.

Director Compensation

On April 13, 2025, the Board of Directors of the Company elected to receive compensation in equity rather than in cash for their cumulative deferred board service fees. The total deferred board service fees amounted to $139,000, accrued from the third quarter of 2024 through the first quarter of 2025. In exchange for these deferred fees, the Company issued 38,269 shares of common stock, each with a par value of $0.001, having an aggregate fair value of $111,750. Additionally, the Company granted 10,904 fully vested stock options at an exercise price of $2.92 per share, with an aggregate fair value of $27,250.

Director Resignation

On April 15, 2025, Dr. Hofmeister resigned as a member of the Board of Directors of the Company with immediate effect. Dr. Hofmeister’s resignation was not the result of any disagreement on any matter relating to the Company’s operations, policies or practices.