Genprex Inc

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Genprex, Inc.:

Opinion on the Financial Statements

We have audited the accompanying balance sheet of Genprex, Inc. (the “Company”) as of December 31, 2023, and the related statements of operations, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the 2023 financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt Regarding Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has an accumulated deficit at December 31, 2023 and, since inception, has suffered significant operating losses and negative cash flows from operations that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Revisions to 2022 Financial Statements

The financial statements of the Company as of and for the year ended December 31, 2022, before the effects of the adjustments to retrospectively apply the change in accounting related to the reverse stock split described in Notes 2 and 4 to the financial statements, were audited by other auditors whose report, dated March 31, 2023, expressed an unqualified opinion on those statements. We audited the adjustments to the 2022 financial statements to retrospectively apply the February 2, 2024, reverse stock split, as described in Notes 2 and 4 to the financial statements. In our opinion, such retrospective adjustments are appropriate and have been properly applied. However, we were not engaged to audit, review, or apply any other procedures to the 2022 financial statements of the Company other than with respect to the retrospective adjustments and procedures related to certain state and federal tax information as described in the following paragraph and, accordingly, we do not express an opinion or any other form of assurance on the 2022 financial statements taken as a whole.

The financial statements of the Company as of and for the year ended December 31, 2022, excluding the tabular federal and state income tax information for the 2022 financial statements disclosed in Note 8, were audited by other auditors whose report, dated March 31, 2023, expressed an unqualified opinion on those statements. We audited the tabular federal and state income tax information for the 2022 financial statements disclosed in Note 8. In our opinion, such information included in the table for 2022 is fairly stated, in all material respects, as of and for the year ended December 31, 2022. However, we were not engaged to audit, review, or apply any other procedures to the 2022 financial statements of the Company other than with respect to the tabular federal and state income tax information for the 2022 financial statements disclosed in Note 8 and procedures related to retroactive adjustments as a result of the reverse stock split as described in the preceding paragraph, and, accordingly, we do not express an opinion or any other form of assurance on the 2022 financial statements taken as a whole.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Accounting for Accrued Research and Development Costs

Critical Audit Matter Description

The Company records accrued expenses for estimated costs of research and development activities conducted by third-party service providers, which include the conduct of preclinical studies and clinical trials, and contract manufacturing activities. The Company records the estimated costs of research and development activities based upon the estimated amount of services provided and include the costs incurred but not yet invoiced within other accrued liabilities in the balance sheet and within research and development expense in the statement of operations. These costs can be a significant component of the Company’s research and development expenses.

The Company estimates the amount of work completed through discussions with internal personnel and external service providers as to the progress of the services and the agreed-upon fee to be paid for such services. The Company makes estimates in determining the accrued balance in each reporting period. Clinical trial related contracts vary in duration, and may be for a fixed amount, based on the achievement of certain contingent events or deliverables, a variable amount based on actual costs incurred, capped at a certain limit or contain a combination of these elements. Estimates include costs associated with services provided by contract organizations for preclinical and clinical development, and manufacturing of the Company’s product candidates. In the case of clinical trials, the Company relies on estimates of the progress of the clinical trials and related expenses incurred. As actual costs become known, the Company adjusts its accrued estimates.

We identified accrued research and development costs as a critical audit matter given the estimation involved in accounting for accrued research and development costs, as well as the material weakness identified by the Company in its internal controls over financial reporting. This required extensive audit effort related to the estimation of accrued research and development costs.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to accrued research and development costs included the following, among others: we obtained an understanding and evaluated the design and implementation of controls over the estimation of accrued preclinical studies, clinical trials and manufacturing expenses. We also read a sample of research, collaboration, and manufacturing agreements and contracts, as well as amendments thereto.

We also evaluated publicly available information (such as press releases and investor presentations) and board of directors’ materials regarding the status of preclinical studies, clinical trial and manufacturing activities. For a selection of agreements and contracts, we compared the amount of accrual at the end of the prior period to current year activity and evaluated the accuracy of the Company’s estimation methodology. For the selection of agreements, we obtained a written confirmation of the status of clinical trials and manufacturing from the Company’s third-party service providers. We also made selections of specific amounts recognized as research and development expense as well as those recognized as accrued expenses to evaluate management’s estimate of the vendor’s progress and performed additional procedures.

Accounting for Equity Financing and Warrant Issuances

Critical Audit Matter Description

The Company evaluates its equity issuances to determine if those contracts or embedded components of those contracts qualify as derivative instruments requiring separate recognition in the Company’s financial statements. As described in Note 4, on March 1, 2023, the Company completed a registered direct offering (“RDOs”), in which the Company sold to an accredited healthcare-focused institutional investor an aggregate of 95,239 shares of its common stock and warrants to purchase up to 95,239 shares of its common stock, at a combined offering price of $42.00 per share of common stock and accompanying warrant. On July 21, 2023, the Company completed another registered direct offering priced at the market under Nasdaq rules, in which the Company sold to accredited healthcare-focused institutional investors an aggregate of (i) 185,644 shares of its common stock, and (ii) warrants to purchase up to 185,644 shares of its common stock, at a combined offering price of $40.40 per share of common stock and accompanying warrant. Also, the Company agreed to issue to the Placement Agent warrants to purchase up to an aggregate of 11,140 shares of the Company’s common stock.

We identified the accounting for equity financing and warrant issuances as a critical audit matter because of the complexity in applying the accounting framework, as well as the material weakness identified by the Company in its internal controls over financial reporting. This required extensive audit effort related to application of accounting framework.

How the Critical Audit Matter Was Addressed in the Audit

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. These procedures included, among others, obtaining an understanding of, evaluating the design of the operating effectiveness of controls over management’s process for the accounting treatment, reading the agreements, and evaluating the accounting for the RDO warrant issuance. Testing management’s process included (i) evaluating the internal controls and application of the accounting framework used by management; (ii) testing the mathematical accuracy of management’s calculations; and (iii) testing the completeness and accuracy of the underlying data used. Professionals with specialized skill and knowledge were used to assist in (i) evaluating management’s application of the accounting framework and (ii) testing the mathematical accuracy of management’s calculation and conclusion related to the accounting classification of the 2023 RDO warrant issuances.

/s/WithumSmith+Brown, PC

We have served as the Company’s auditor since 2023.

East Brunswick, New Jersey

April 1, 2024

PCAOB ID Number 100

Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Stockholders of Genprex, Inc.

Austin, Texas

Opinion on the Financial Statements

We have audited, before (1) the effects of the adjustments to retrospectively apply the effects of the reverse stock split described in Note 2 – Summary of Significant Accounting Policies – Reverse Stock Split and Note 4 – Equity – Reverse Stock Split (Reverse Stock Split) and (2) the inclusion of tabular federal and state income tax information for the 2022 financial statements disclosed in Note 8 – Income Taxes, the accompanying balance sheet of Genprex, Inc. (the “Company”) at December 31, 2022, and the related statements of operations, changes in stockholders’ equity, and cash flows for the year ended December 31, 2022, and the related notes (collectively referred to as the financial statements). In our opinion, before (1) the effects of the adjustments to retrospectively apply the reverse stock split described in Note 2 – Summary of Significant Accounting Policies – Reverse Stock Split and Note 4 – Equity – Reverse Stock Split (Reverse Stock Split) and (2) the inclusion of tabular federal and state income tax information for the 2022 financial statements disclosed in Note 8 – Income Taxes, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as whole, and we are not, by communicating the critical matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of equity transactions

As described in the Equity Note to the financial statements, the Company has complex equity transactions including the use of stock options and warrants. The estimates that management used in calculating the price value depend on assumptions specific to the nature of the management service activities with regard to the amount of the price model.

The principal consideration for our determination surrounding equity transactions as a critical audit matter is the significant judgment by management when developing the valuation of options and warrants. This, in turn, led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the price model used to calculate equity transactions.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. These procedures included evaluating the use of the fair value-based method of accounting for stock-based compensation for options granted to employees, independent consultants and contractors. The Company measures options granted at fair value determined as of the grant date, and recognizes the expense over the periods in which the related services are rendered based on the terms and conditions of the awards. Evaluation of management’s assumptions related to the price model and evaluating whether assumptions used by management were reasonable considering the current and past performance of equity, the consistency, and whether these assumptions were consistent with evidence obtained in other areas of the audit.

/s/ Daszkal Bolton LLP

We served as the Company’s auditor from 2014 through March 2023.

Boca Raton, FL

March 31, 2023